1-3 Pages 1st Part Syllabus

Pages 1-3 1st syllabus
obligations
compiled by : yollaine galias

Assuming that it is a real fact of knowledge by the defendants that the plaintiff, by virtue of having
been sent for by the former, attended a physician and rendered professional services to a
daughter-in-law of the said defendants during a difficult and laborious childbirth, in order to
decide the claim of the said physician regarding the recovery of his fees, it becomes necessary
to decide who is bound to pay the bill, whether the father and mother-in-law of the patient, or the
husband of the latter.
LAW ( ARTICLE 1158)

G.R. No. L-4089
January 12, 1909
ARTURO
vs.
MARCELO LAURON, ET AL., defendants-appellees.
PELAYO, plaintiff-appellant,
According to article 1089 of the Civil Code, obligations are created by law, by contracts, by quasicontracts, and by illicit acts and omissions or by those in which any kind of fault or negligence
occurs.
On the 23rd of November, 1906, Arturo Pelayo, a physician residing in Cebu, filed a complaint
against Marcelo Lauron and Juana Abella setting forth that on or about the 13th of October of
said year, at night, the plaintiff was called to the house of the defendants, situated in San Nicolas,
and that upon arrival he was requested by them to render medical assistance to their daughterin-law who was about to give birth to a child; that therefore, and after consultation with the
attending physician, Dr. Escao, it was found necessary, on account of the difficult birth, to
remove the fetus by means of forceps which operation was performed by the plaintiff, who also
had to remove the afterbirth, in which services he was occupied until the following morning, and
that afterwards, on the same day, he visited the patient several times; that the just and equitable
value of the services rendered by him was P500, which the defendants refuse to pay without
alleging any good reason therefor; that for said reason he prayed that the judgment be entered in
his favor as against the defendants, or any of them, for the sum of P500 and costs, together with
any other relief that might be deemed proper.
Obligations arising from law are not presumed. Those expressly determined in the code or in
special laws, etc., are the only demandable ones. Obligations arising from contracts have legal
force between the contracting parties and must be fulfilled in accordance with their stipulations.
(Arts. 1090 and 1091.)
The rendering of medical assistance in case of illness is comprised among the mutual obligations
to which the spouses are bound by way of mutual support. (Arts. 142 and 143.)
If every obligation consists in giving, doing or not doing something (art. 1088), and spouses are
mutually bound to support each other, there can be no question but that, when either of them by
reason of illness should be in need of medical assistance, the other is under the unavoidable
obligation to furnish the necessary services of a physician in order that health may be restored,
and he or she may be freed from the sickness by which life is jeopardized; the party bound to
furnish such support is therefore liable for all expenses, including the fees of the medical expert
for his professional services. This liability originates from the above-cited mutual obligation which
the law has expressly established between the married couple.
In answer to the complaint counsel for the defendants denied all of the allegation therein
contained and alleged as a special defense, that their daughter-in-law had died in consequence
of the said childbirth, and that when she was alive she lived with her husband independently and
in a separate house without any relation whatever with them, and that, if on the day when she
gave birth she was in the house of the defendants, her stay their was accidental and due to
fortuitous circumstances; therefore, he prayed that the defendants be absolved of the complaint
with costs against the plaintiff.
In the face of the above legal precepts it is unquestionable that the person bound to pay the fees
due to the plaintiff for the professional services that he rendered to the daughter-in-law of the
defendants during her childbirth, is the husband of the patient and not her father and mother- inlaw, the defendants herein. The fact that it was not the husband who called the plaintiff and
requested his assistance for his wife is no bar to the fulfillment of the said obligation, as the
defendants, in view of the imminent danger, to which the life of the patient was at that moment
exposed, considered that medical assistance was urgently needed, and the obligation of the
husband to furnish his wife in the indispensable services of a physician at such critical moments
is specially established by the law, as has been seen, and compliance therewith is unavoidable;
therefore, the plaintiff, who believes that he is entitled to recover his fees, must direct his action
against the husband who is under obligation to furnish medical assistance to his lawful wife in
such an emergency.
The plaintiff demurred to the above answer, and the court below sustained the demurrer,
directing the defendants, on the 23rd of January, 1907, to amend their answer. In compliance
with this order the defendants presented, on the same date, their amended answer, denying
each and every one of the allegations contained in the complaint, and requesting that the same
be dismissed with costs.
As a result of the evidence adduced by both parties, judgment was entered by the court below on
the 5th of April, 1907, whereby the defendants were absolved from the former complaint, on
account of the lack of sufficient evidence to establish a right of action against the defendants,
with costs against the plaintiff, who excepted to the said judgment and in addition moved for a
new trial on the ground that the judgment was contrary to law; the motion was overruled and the
plaintiff excepted and in due course presented the corresponding bill of exceptions. The motion
of the defendants requesting that the declaration contained in the judgment that the defendants
had demanded therefrom, for the reason that, according to the evidence, no such request had
been made, was also denied, and to the decision the defendants excepted.
From the foregoing it may readily be understood that it was improper to have brought an action
against the defendants simply because they were the parties who called the plaintiff and
requested him to assist the patient during her difficult confinement, and also, possibly, because
they were her father and mother-in-law and the sickness occurred in their house. The defendants
were not, nor are they now, under any obligation by virtue of any legal provision, to pay the fees
claimed, nor in consequence of any contract entered into between them and the plaintiff from
which such obligation might have arisen.
obligations
In applying the provisions of the Civil Code in an action for support, the supreme court of Spain,
while recognizing the validity and efficiency of a contract to furnish support wherein a person
bound himself to support another who was not his relative, established the rule that the law does
impose the obligation to pay for the support of a stranger, but as the liability arose out of a
contract, the stipulations of the agreement must be held. (Decision of May 11, 1897.)
required to certify the record to this court for review and that the order of attachment which had
been issued should be revoked and discharged. with costs. Upon the filing of said petition in this
court the usual order was entered requiring the defendants to show cause why the writ should
not issue. The response of the defendants, in the nature of a demurrer, was filed upon January
21, 1918; and the matter is now heard upon the pleadings thus presented.
Within the meaning of the law, the father and mother-in-law are strangers with respect to the
obligation that devolves upon the husband to provide support, among which is the furnishing of
medical assistance to his wife at the time of her confinement; and, on the other hand, it does not
appear that a contract existed between the defendants and the plaintiff physician, for which
reason it is obvious that the former can not be compelled to pay fees which they are under no
liability to pay because it does not appear that they consented to bind themselves.
The provision of law under which this attachment was issued requires that there should be
accuse of action arising upon contract, express or implied. The contention of the petitioner is that
the statutory action to recover money lost at gaming is that the statutory action to recover money
lost at gaming is no such an action as is contemplated in this provision, and he therefore insists
that the original complaint shows on its face that the remedy of attachment is not available in aid
thereof; that the Court of First Instance acted in excess of its jurisdiction in granting the writ of
attachment; that the petitioner has no plain, speedy, and adequate remedy by appeal or
otherwise; and that consequently the writ of certiorari supplies the appropriate remedy for his
relief.
The foregoing suffices to demonstrate that the first and second errors assigned to the judgment
below are unfounded, because, if the plaintiff has no right of action against the defendants, it is
needless to declare whether or not the use of forceps is a surgical operation.
The case presents the two following questions of law, either of which, if decided unfavorably to
the petitioner, will be fatal to his application:
Therefore, in view of the consideration hereinbefore set forth, it is our opinion that the judgment
appealed from should be affirmed with the costs against the appellant. So ordered.
G.R. No. L-13602
(1) Supposing that the Court of First Instance has granted an attachment for which there is no
statutory authority, can this court entertain the present petition and grant the desired relief?
April 6, 1918
(2) Is the statutory obligation to restore money won at gaming an obligation arising from
"contract, express or implied?"
LEUNG
BEN, plaintiff,
vs.
P. J. O'BRIEN, JAMES A OSTRAND and GEO. R. HARVEY, judges of First Instance of city
of Manila,defendants.
Upon December 12, 1917, an action was instituted in the Court of First Instance of the city of
Manila by P. J. O'Brien to recover of Leung Ben the sum of P15,000 alleged to have been lost by
the plaintiff to the defendant in a series of gambling, banking and percentage games conducted
ruing the two or three months prior to the institution of the suit. In his verified complaint the
plaintiff asked for an attachment, under section 424, and 412 (1) of the Code of Civil Procedure,
against the property of the defendant, on the ground that the latter was about to depart from the
Philippine islands with intent to defraud his creditors. This attachment was issued; and acting
under the authority thereof, the sheriff attached the sum of P15,000 which had been deposited by
the defendant with the International Banking Corporation.
We are of the opinion that the answer to the first question should be in the affirmative. Under
section 514 of the Code of Civil Procedure the Supreme Court has original jurisdiction by the writ
of certiorari over the proceedings of Courts of First Instance, wherever said courts have
exceeded their jurisdiction and there is no plaint, speedy, and adequate remedy. In the same
section, it is further declared that the proceedings in the Supreme Court in such cases hall be as
prescribed for Courts of First Instance in section 217-221, inclusive, of said Code. This Supreme
Court, so far as applicable, the provisions contained in those section to the same extent as if they
had been reproduced verbatim immediately after section 514. Turning to section 217, we find
that, in defining the conditions under which certiorari can be maintained in a Court of First
Instance substantially the same language is used as is the same remedy can be maintained in
the Supreme Court of First Instance, substantially the same language is used as is found in
section 514 relative to the conditions under which the same remedy can be maintained in the
Supreme Court, namely, when the inferior tribunal has exceeded its jurisdiction and there is no
appeal, nor any plain, speedy and adequate remedy. In using these expressions the author of the
Code of Civil Procedure merely adopted the language which, in American jurisdictions at least,
had long ago reached the stage of stereotyped formula.
The defendant thereupon appeared by his attorney and moved the court to quash the
attachment. Said motion having dismissed in the Court of First Instance, the petitioner, Leung
Ben, the defendant in that action, presented to this court, upon January 8, 1918 his petition for
the writ of certiorari directed against P. J. O'Brien and the judges of the Court of First Instance of
the city of Manila whose names are mentioned in the caption hereof. The prayer is that the
Honorable James A. Ostrand, as the judge having cognizance of the action in said court be
In section 220 of the same Code, we have a provision relative to the final proceedings
in certiorari, and herein it is stated that the court shall determine whether the inferior tribunal has
regularly pursued its authority it shall give judgment either affirming annulling, or modifying the
proceedings below, as the law requires. The expression, has not regularly pursued its authority
as here used, is suggestive, and we think it should be construed in connection with the other
expressions have exceeded their jurisdiction, as used in section 514, and has exceeded their
This is an application for a writ of certiorari, the purpose of which is to quash an attachment
issued from the Court of First Instance of the City of Manila under circumstances hereinbelow
stated.
obligations
jurisdiction as used in section 217. Taking the three together, it results in our opinion that any
irregular exercise of juridical power by a Court of First Instance, in excess of its lawful jurisdiction,
is remediable by the writ of certiorari, provided there is no other plain, speedy, and adequate
remedy; and in order to make out a case for the granting of the writ it is not necessary that the
court should have acted in the matter without any jurisdiction whatever. Indeed the repeated use
of expression excess of jurisdiction shows that the lawmaker contemplated the situation where a
court, having jurisdiction should irregularly transcend its authority as well as the situation where
the court is totally devoid of lawful power.
distinguish between the jurisdiction of the court in the main litigation and its jurisdiction to grant
an interlocutory injunction, for the latter is involved in the former. That the writ of certiorari can not
be used to reverse an order denying a motion for a preliminary injunction is of course not to cavil.
(Somes vs. Crossfield and Molina, 8 Phil. Rep., 284.)
But it will be said that the writ of certiorari is not available in this cae, because the petitioner is
protected by the attachment bond, and that he has a plain, speedy, and adequate remedy
appeal. This suggestion seems to be sufficiently answered in the case of Rocha &
Co vs. Crossfield and Figueras (6 Phil. Rep., 355), already referred to, and the earlier case there
cited. The remedy by appeal is not sufficiently speedy to meet the exigencies of the case. An
attachment is extremely violent, and its abuse may often result in infliction of damage which
could never be repaired by any pecuniary award at the final hearing. To postpone the granting of
the writ in such a case until the final hearing and to compel the petitioner to bring the case here
upon appeal merely in order to correct the action of the trial court in the matter of allowing the
attachment would seem both unjust and unnecessary.
It may be observed in this connection that the word jurisdiction as used in attachment cases, has
reference not only to the authority of the court to entertain the principal action but also to its
authority to issue the attachment, as dependent upon the existence of the statutory ground. (6 C.
J., 89.) This distinction between jurisdiction to issue the attachment as an ancillary remedy
incident to the principal litigation is of importance; as a court's jurisdiction over the main action
may be complete, and yet it may lack authority to grant an attachment as ancillary to such action.
This distinction between jurisdiction over the ancillary has been recognized by this court in
connection with actions involving the appointment of a receiver. Thus in Rocha &
Co. vs. Crossfield and Figueras (6 Phil. Rep., 355), a receiver had been appointed without legal
justification. It was held that the order making the appointment was beyond the jurisdiction of the
court; and though the court admittedly had jurisdiction of the main cause, the order was vacated
by this court upon application a writ of certiorari. (See Blanco vs. Ambler, 3 Phil. Rep., 358,
Blanco vs. Ambler and McMicking 3 Phil. Rep., 735, Yangco vs. Rohde, 1 Phil. Rep., 404.)
Passing to the problem propounded in the second question it may be observed that, upon
general principles,. recognize both the civil and common law, money lost in gaming and
voluntarily paid by the loser to the winner can not in the absence of statue, be recovered in a civil
action. But Act No. 1757 of the Philippine Commission, which defines and penalizes several
forms of gambling, contains numerous provisions recognizing the right to recover money lost in
gambling or in the playing of certain games (secs. 6, 7, 8, 9, 11). The original complaint in the
action in the Court of First Instance is not clear as to the particular section of Act No. 1757 under
which the action is brought, but it is alleged that the money was lost at gambling, banking, and
percentage game in which the defendant was banker. It must therefore be assumed that the
action is based upon the right of recovery given in Section 7 of said Act, which declares that an
action may be brought against the banker by any person losing money at a banking or
percentage game.
By parity of reasoning it must follow that when a court issues a writ of attachment for which there
is no statutory authority, it is acting irregularly and in excess of its jurisdiction, in the sense
necessary to justify the Supreme Court in granting relief by the writ of certiorari. In applying this
proposition it is of course necessary to take account of the difference between a ground of
attachment based on the nature of the action and a ground of attachment based on the acts or
the conditions of the defendant. Every complaint must show a cause of action some sort; and
when the statue declares that the attachment may issue in an action arising upon contract, the
express or implied, it announces a criterion which may be determined from an inspection of the
language of the complaint. The determination of this question is purely a matter of law. On the
other hand, when the stature declares that an attachment may be issued when the defendant is
about to depart from the Islands, a criterion is announced which is wholly foreign to the cause of
action; and the determination of it may involve a disputed question of fact which must be decided
by the court. In making this determination, the court obviously acts within its powers; and it would
be idle to suppose that the writ of certiorari would be available to reverse the action of a Court of
First Instance in determining the sufficiency of the proof on such a disputed point, and in granting
or refusing the attachment accordingly.
Is this a cause arising upon contract, express or implied, as this term is used in section 412 of
the Code of Civil Procedure? To begin the discussion, the English version of the Code of Civil
Procedure is controlling (sec. 15, Admin. Code, ed. of 1917). Furthermore it is universally
admitted to be proper in the interpretation of any statute, to consider its historical antecedents
and its juris prudential sources. The Code of Civil Procedure, as is well known, is an American
contribution to Philippine legislation. It therefore speaks the language of the common-law and for
the most part reflects its ideas. When the draftsman of this Code used the expression contract,
express or implied, he used a phrase that has been long current among writers on American and
English law; and it is therefore appropriate to resort to that system of law to discover the
appropriate to resort to that system of law to discover the meaning which the legislator intended
to convey by those meaning which the legislator intended to convey by those terms. We remark
in passing that the expression contrato tracito, used in the official translation of the Code of Civil
Procedure as the Spanish equivalent of implied contract, does not appear to render the full sense
of the English expression.
We should not be understood, in anything that has been said, as intending to infringe the doctrine
enunciated by this court in Herrera vs. Barretto and Joaquin (25 Phil. Rep., 245), when properly
applied. It was there held that we would not, upon application for a writ of certiorari, dissolve an
interlocutory mandatory injunction that had been issued in a Court of First Instance as an incident
in an action of mandamus. The issuance of an interlocutory injunction depends upon conditions
essentially different from those involved in the issuance of an attachment. The injunction is
designed primarily for the prevention of irreparable injury and the use of the remedy is in a great
measure dependent upon the exercise of discretion. Generally, it may be said that the exercise of
the injunctive powers is inherent in judicial authority; and ordinarily it would be impossible to
The English contract law, so far as relates to simple contracts is planted upon two foundations,
which are supplied by two very different conceptions of legal liability. These two conceptions are
revealed in the ideas respectively underlying (1) the common- law debt and (2) the assumptual
promise. In the early and formative stages of the common-law the only simple contract of which
the courts took account was the real contract or contract re, in which the contractual duty
obligations
imposed by law arises upon the delivery of a chattle, as in the mutuum, commodatum,depositum,
and the like; and the purely consensual agreements of the Roman Law found no congenial place
in the early common law system.
regardless, of the source of the duty or the manner in which it is create whether derived from
custom, statue or some consensual transaction depending upon the voluntary acts of the parties.
the form of contract known as the debt is of the most ancient lineage; and when reference is had
to historical antecedents, the right of the debt to be classed as a contract cannot be questioned.
Indeed when the new form of engagement consisting of the parol promise supported by a
consideration first appeared, it was looked upon as an upstart and its right to be considered a
true contract was questioned. It was long customary to refer to it exclusively as an assumpsit,
agreement, undertaking, or parol promise, in fact anything but a contract. Only in time did the
new form of engagement attain the dignity of being classed among true contract.
In course of time the idea underlying the contract re was extended so as to include from one
person to another under such circumstances as to constitute a justa cuas debendi. The obligation
thereby created was a debt. The constitutive element in this litigation is found in the fact that the
debtor has received something from the creditor, which he is bound by the obligation of law to
return or pay for. From an early day this element was denominated thequid pro quo, an ungainly
phrase coined by Mediaeval Latinity. The quid pro quo was primarily a materials or physical
object, and its constituted the recompense or equivalent acquired by the debtor. Upon the
passage of thequid pro quo from one party to the other, the law imposed that real contractual
duty peculiar to the debt. No one conversant with the early history of English law would ever
conceive of the debt as an obligation created by promise. It is the legal duty to pay or deliver a
sum certain of money or an ascertainable quantity of ponderable or measurable chattles.
The term implied takers us into shadowy domain of those obligations the theoretical classification
of which has engaged the attention of scholars from the time of Gaius until our own day and has
been a source of as much difficulty to the civilian as to the common-law jurist. There we are
concerned with those acts which make one person debtor to another without there having
intervened between them any true agreement tending to produce a legal bond (vinculum juris).
Of late years some American and English writers have adopted the term quasi-contract as
descriptive of these obligations or some of them; but the expression more commonly used is
implied contract.
The ordinary debt, as already stated, originates in a contract in which a quid pro quo passes to
the debtor at the time of the creation of the debt, but the term is equally applicable to duties
imposed by custom or statute, or by judgment of a court.
Upon examination of these obligations, from the view point of the common-law jurisprudence, it
will be found that they fall readily into two divisions according as they bear an analogy to the
common-law debt or to the common law assumpsit. To exhibit the scope of these different
classes of obligations is here impracticable. It is only necessary in this connection to observe that
the most conspicuous division is that which comprises duties in the nature of debt. The
characteristic feature of these obligations is that upon certain states of fact the law imposes an
obligation to pay a sum certain of money; and it is characteristic of this obligation that the money
in respect to which the duty is raised is conceived as being equivalent of something taken or
detained under circumstances giving rise to the duty to return or compensate therefore. The
proposition that no one shall be allowed to enrich himself unduly at the expense of another
embodies the general principle here lying at the basis of obligation. The right to recover money
improperly paid (repeticion de lo indebido) is also recognized as belong to this class of duties.
The existence of a debt supposes one person to have possession of thing (res) which
he owes and hence ought to turn over the owner. This obligation is the oldest conception of
contract with which the common law is familiar; and notwithstanding the centuries that have
rolled over Westminster Hall that conception remains as one of the fundamental bases of the
common-law contract.
Near the end of the fifteenth century there was evolved in England a new conception of
contractual liability, which embodied the idea of obligation resulting from promise and which
found expression in the common law assumpsit, or parol promise supported by a consideration.
The application of this novel conception had the effect of greatly extending the filed of contractual
liability and by this means rights of action came to be recognized which had been unknown
before. The action of assumpsit which was the instrument for giving effect to this obligation was
found to be a useful remedy; and presently this action came to be used for the enforcement of
common-law debts. The result was to give to our contract law the superficial appearance of being
based more or less exclusively upon the notion of the obligation of promise.
It will observed that according to the Civil Code obligations are supposed to be derived either
from (1) the law, (2) contracts and quasi-contracts, (3) illicit acts and omission, or (4) acts in
which some sort ob lame or negligence is present. This enumeration of sources of obligations
and the obligation imposed by law are different types. The learned Italian jurist, Jorge Giorgi,
criticises this assumption and says that the classification embodied in the code is theoretically
erroneous. His conclusion is that one or the other of these categories should have been
suppressed and merged in the other. (Giorgi, Teoria de las Obligaciones, Spanish ed., vol. 5 arts.
5, 7, 9.) The validity of this criticism is, we thin, self-evident; and it is of interest to note that the
common law makes no distinction between the two sources of liability. The obligations which in
the Code are indicated as quasi-contracts, as well as those arisingex lege, are in the common la
system, merged into the category of obligations imposed by law, and all are denominated implied
contracts.
An idea is widely entertained to the effect that all simple contracts recognized in the common-law
system are referable to a singly category. They all have their roots, so many of us imagine, in one
general notion of obligation; and of course the obligation of promise is supposed to supply this
general notion, being considered a sort ofmenstruum in which all other forms of contractual
obligation have been dissolved. This a mistake. The idea of contractual duty embodied in the
debt which was the first conception of contract liability revealed in the common law, has
remained, although it was detained to be in a measure obscured by the more modern conception
of obligation resulting from promise.
Many refinements, more or less illusory, have been attempted by various writers in distinguishing
different sorts of implied contracts, as for example, the contract implied as of fact and the
contract implied as of law. No explanation of these distinctions will be here attempted. Suffice it to
say that the term contract, express or implied, is used to by common-law jurists to include all
What has been said is intended to exhibit the fact that the duty to pay or deliver a sum certain of
money or an ascertainable quantity of ponderable or measurable chattles which is indicated
by them debt has ever been recognized, in the common-law system, as a true contract,
obligations
purely personal obligations other than those which have their source in delict, or tort. As to these
it may be said that, generally speaking, the law does not impose a contractual duty upon a
wrongdoer to compensate for injury done. It is true that in certain situations where a wrongdoer
unjustly acquired something at the expense of another, the law imposes on him a duty to
surrender his unjust acquisitions, and the injured party may here elect to sue upon this
contractual duty instead of suing upon the tort; but even here the distinction between the two
liabilities, in contract and in tort, is never lost to sight; and it is always recognized that the liability
arising out of the tort is delictual and not of a contractual or quasi-contractual nature.
The number of the quasi-contracts may be indefinite as may be the number of lawful facts, the
generations of the said obligations; but the Code, just as we shall see further on, in the
impracticableness of enumerating or including them all in a methodical and orderly classification,
has concerned itself with two only namely, the management of the affairs of other person and
the recovery of things improperly paid without attempting by this to exclude the others.
(Manresa, 2d ed., vol. 12, p. 549.)
It would indeed have been surprising if the authors of the Code, in the light of the jurisprudence
of more than a thousand years, should have arbitrarily assumed to limit the quasi-contract to two
obligations. The author from whom we have just quoted further observes that the two obligations
in question were selected for special treatment in the Code not only because they were the most
conspicuous of the quasi-contracts, but because they had not been the subject of consideration
in other parts of the Code. (Opus citat., 550.)
In the case now under consideration the duty of the defendant to refund the money which he won
from the plaintiff at gaming is a duty imposed by statute. It therefore arises ex lege. Furthermore,
it is a duty to return a certain sum which had passed from the plaintiff to the defendant. By all the
criteria which the common law supplies, this a duty in the nature of debt and is properly classified
as an implied contract. It is well- settled by the English authorities that money lost in gambling or
by lottery, if recoverable at all, can be recovered by the loser in an action of indebitatus
assumpsit for money had and received. (Clarke vs. Johnson. Lofft, 759; Mason vs. Waite, 17
Mass., 560; Burnham vs. Fisher, 25 Vt., 514.) This means that in the common law the duty to
return money won in this way is an implied contract, or quasi-contract.
It is well recognized among civilian jurists that the quasi- contractual obligations cover a wide
range. The Italian jurist, Jorge Giorgi, to whom we have already referred, considers under this
head, among other obligations, the following: payments made upon a future consideration which
is not realized or upon an existing consideration which fails; payments wrongfully made upon a
consideration which is contrary to law, or opposed to public policy; and payments made upon a
vicious consideration or obtained by illicit means (Giorgi, Teoria de las Obligaciones, vol. 5, art.
130.)
It is no argument to say in reply to this that the obligation here recognized is called an implied
contract merely because the remedy commonly used in suing upon ordinary contract can be here
used, or that the law adopted the fiction of promise in order to bring the obligation within the
scope of the action of assumpsit. Such statements fail to express the true import of the
phenomenon. Before the remedy was the idea; and the use of the remedy could not have been
approved if it had not been for historical antecedents which made the recognition of this remedy
at one logical and proper. Furthermore, it should not be forgotten that the question is not how this
duty but what sort of obligation did the author of the Code of Civil Procedure intend to describe
when he sued the term implied contract in section 412.
Im permitting the recovery of money lost at play, Act No. 1757 has introduced modifications in the
application of articles 1798, 180`, and 1305 of the Civil Code. The first two of these articles relate
to gambling contracts, while article 1305 treats of the nullity of contracts proceeding from a
vicious or illicit consideration. Taking all these provisions together, it must be apparent that the
obligation to return money lost at play has a decided affinity to contractual obligations; and we
believe that it could, without violence to the doctrines of the civil law, be held that such obligations
is an innominate quasi-contract. It is, however, unnecessary to place the decision on this ground.
In what has been said we have assumed that the obligation which is at the foundation of the
original action in the court below is not a quasi-contract, when judge by the principles of the civil
law. A few observations will show that this assumption is not by any means free from doubt. The
obligation in question certainly does not fall under the definition of either of the two-quasicontracts which are made the subject of special treatment in the Civil Code, for its does not arise
from a licit act as contemplated in article 1895. The obligation is clearly a creation of the positive
law a circumstance which brings it within the purview of article 1090, in relation with article,
1089; and it is also derived from an illicit act, namely, the playing of a prohibited game. It is thus
seen that the provisions of the Civil Code which might be consulted with a view to the correct
theoretical classification of this obligation are unsatisfactory and confusing.
From what has been said it follows that in our opinion the cause of action stated in the
complaints in the court below is based on a contract, express or implied and is therefore of such
nature that the court had authority to issue writ of attachment. The application for the writ
of certiorari must therefore be denied and the proceedings dismissed. So ordered.
Separate Opinions
MALCOLM, J., concurring:
The two obligations treated in the chapter devoted to quasi-contracts in the Civil Code are (1) the
obligation incident to the officious management of the affairs of other person (gestion de
negocios ajenos) and (2) the recovery of what has been improperly paid (cabro de lo indebido).
That the authors of the Civil Code selected these two obligations for special treatment does not
signify an intention to deny the possibility of the existence of other quasi-contractual obligations.
As is well said by the commentator Manresa.
As I finished reading the learned and interesting decision of the majority, the impression which
remained was that the court was enticed by the nice and unusual points presented to make a
hard case out of an easy one and unfortunately t do violence to the principles of certiorari. The
simple questions are : Di the Court of First Instance of city of Manila exceed its jurisdiction in
granting an attachments against the property of the defendant, now plaintiff? Has this defendant,
now become the plaintiff, any other plain, speedy and adequate remedy? The answer are found
in the decision of thinks court, in Herrera vs. Barretto and Joaquin ([1913], 25 Phil., 245), from
which I quote the following:
obligations
It has been repeatedly held by this court that a writ of certiorari will not be issued unless it clearly
appears that the court to which it is to be directed acted without or in excess of jurisdiction. It will
not be issued to cure errors in the proceedings or to correct erroneous conclusions of law or of
fact. If the court has jurisdiction. It will not be issued to cure errors in the proceedings to correct
jurisdiction of the subject matter and f the person, decisions upon all question pertaining to the
cause are decisions within its jurisdiction and, however irregular or erroneous they may be,
cannot be corrected by certiorari. The Code of Civil Procedure giving Courts of First Instance
general jurisdiction in actions for mandamus, it goes without saying that the Court of First
Instance had jurisdiction in the present case to resolve every question arising in such an action
and t decide every question presented to it which pertained to the cause. It has already been
held by this court, that while it is a power to be exercised only in extreme case, a Court of First
Instance has power to issue a mandatory injunction t stand until the final determination of the
action in which it is issued. While the issuance of the mandatory injunction in this particular case
may have been irregular and erroneous, a question concerning which we express no opinion,
nevertheless its issuance was within the jurisdiction of the court and its action is not reveiwable
on certiorari. It is not sufficient to say that it was issued wrongfully and without sufficient grounds
and in the absence of the other party. The question is, Did the court act with jurisdiction?
against the general proposition herein asserted. Those which relate to election contest are based
upon the principle that those proceedings, are special in their nature and must be strictly
followed, a material departure from the statute resulting a loss, or in an excess of jurisdiction. The
cases relating to receivers are based, in a measure, upon the principle the appointment of a
receiver being governed by the statute; and in part upon the theory that the appointment of a
receiver in an improper case is in substance a bankruptcy proceeding, the taking of which is
expressly prohibited by law. The case relative to the allowance of alimony pendente lite when the
answer denies the marriage is more difficult to distinguish. The reasons in support of the doctrine
laid down in that case are given the opinion in full and they seem to place the particular case to
which they refer in a class by itself.
It is not alight things that the lawmakers have abolished writs of error and with them certiorari and
prohibition, in so far as they were methods by which the mere errors of an inferior curt could be
corrected. As instruments to that end they no longer exist. Their place is no taken by the appeal.
So long as the inferior court retains jurisdiction its errors can be corrected only by that method.
The office of the writ of certiorari has been reduced to the correction of defects
of jurisdiction solely and cannot legally be used for any other purpose. It is truly an extra ordinary
remedy and in this jurisdiction, its use is restricted to truly extraordinary cases cases in which
the action of the inferior court is wholly void, where any further steps in the case would result in a
waste of time and money and would produce no result whatever; where the parties, or their
privies, would be utterly deceived; where a final judgment or decree would be nought but a snare
and a delusion, deciding nothing, protecting nobody, a juridical pretension, a recorded falsehood,
a standing menace. It is only to avoid such result as these that a writ of certiorari is issuable; and
even here an appeal will lie if the aggrieved party prefers to prosecute it.
It has been urged that the court exceeded its jurisdiction in requiring the municipal president t
issue the license, for the reason that he was not the proper person to issue it and that, if he was
the proper person, he had the right to exercise a discretion as to whom the license should be
issued. We do not believe that either of these questions goes to the jurisdiction of the court to
act. One of the fundamental question in a mandamusagainst a public officer is whether or not
that officer has the right to exercise discretion in the performance of the act which the plaintiff
asks him to perform. It is one of the essential determinations of the cause. To claim that the
resolution of that question may deprive the court of jurisdiction is to assert a novel proposition. It
is equivalent to the contention that a court has jurisdiction if he decides right but no jurisdiction if
he decides wrong. It may be stated generally that it is never necessary to decide the fundamental
questions of a cause to determine whether the court has jurisdiction. The question of jurisdiction
is preliminary and never touches the merits of the case. The determination of the fundamental
questions of a cause are merely the exercise of a jurisdiction already conceded. In the case at
bar no one denies the power, authority or jurisdiction of the Court of First Instance to take
cognizance of an action for mandamus and to decide very question which arises in that cause
and pertains thereto. The contention that the decision of one of those question, if wrong, destroys
jurisdiction involves an evident contradiction.
A full and thorough examination of all the decided cases in this court touching the question of
certiorari and prohibition fully supports the proposition already stated that, where a Court of First
Instance has jurisdiction of the subject matter and of the person, its decision of any question
pertaining to the cause, however, erroneous, cannot be reviewed by certiorari, but must be
corrected by appeal.
I see no reason to override the decision in Herrera vs. Barretto and Joaquin (supra). Accordingly,
I can do no better than to make the language of Justice Moreland my own. applying these
principles, it is self-evident that this court should no entertain the present petition and should not
grant the desired relief.
Jurisdiction is the authority to hear and determine a cause the right to act in a case. Since it is
the power to hear and determine, it does not depend either upon the regularity of the exercise of
that power or upon the rightfulness of the decision made. Jurisdiction should therefore be
distinguished from the exercise of jurisdiction. The authority to decide a case at all, and not the
decision rendered therein, is what makes up jurisdiction. Where there is jurisdiction of the person
and subject matter, as we have said before, the decision of all other questions arising in the case
an exercise of that jurisdiction.
FISHER, J., dissenting:

I am in full accord with the view that the remedy of certiorari may be invoked in such cases as
this, but I am constrained to dissent from the opinion of the majority as regards the meaning of
the term implied contract.
Section 412 of the code of Civil Procedure in connection with section 424, authorizes the
preliminary attachment of the property of the defendant: "(1) In an action for the recovery of
money or damages on a cause of action arising upon contract, express or implied, when the
defendant is about to depart from the Philippine Islands, with intent to defraud his creditors; (2) . .
.; (3) . . .; (4) . . .; (5) When the defendant has removed or disposed of his property, or is about to
do so, with intent to defraud his creditors."
Then follows an elaborate citation and discussion of American authorities, including a decision of
the United States Supreme Court and of the applicable Philippine cases. The decision continues"
The reasons givens in these cases last cited for the allowance of the writ of prohibition are
applicable only to the class of cases with which the decision deal and do not in any way militate
obligations
It is evident that the terms of paragraph five of the article cited are much broader than those of
the first paragraph. The fifth paragraph is not limited to action arising from contract, but is by its
terms applicable to actions brought for the purpose of enforcing extra-contractual rights as well
as contract rights. The limitation upon cases falling under paragraph five is to be found, not in the
character of the obligation for the enforcement for which the action is brought, but in the terms of
article 4265, which requires that the affidavit show that the amount due the plaintiff . . . is as
much as the sum for which the order is granted.
arbitrarily classified as contracts, so that they might be enforced by one of the formal actions of
the common law which legal tradition and practice has reserved for the enforcement of contract. I
cannot concur in this reasoning. I believe that when a technical juridical term of substantive law is
used in the adjective law of these islands, we should seek its meaning in our own substantive law
rather than in the law of America or of England. The code of Civil Procedure was not enacted to
establish rules of substantive law, but upon the assumption of the existence of these rules.
In the case of Cayce vs. Curtis (Dallam's Decisions Texas Reports, 403), it appears that the
legislature, at a time when that State still retained to a large extent the Spanish substantive civil
law, enacted a statue in which the word bonds is used. In litigation involving the construction of
that statute, one of the parties contended that the work bond should be given the technical
meaning which it had in the English Common Law. The court rejected this contention saying
That is to say, when application is made for a preliminary attachment upon the ground that the
plaintiff is about to dispose of his property with intent to defraud his creditors thus bringing the
case within the terms of paragraph five of the section it is not necessary to show that the
obligation in suit is contractual in its origin, but is sufficient to show that the breach of the
obligation, as shown by the facts stated in the complaint and affidavit, imposes upon the
defendant the obligation to pay a specific and definite sum. For example, if it is alleged in the
complaint that the defendant by negligence, has caused the destruction by fire of a building
belonging to plaintiff, and that such building was worth a certain sum of money, these facts would
show a definite basis upon which to authorize the granting of the writ. But if it were averred that
the defendant has published a libel concerning the plaintiff, to the injury of his feeling and
reputation, there is no definite basis upon which to grant an attachment, because the amount of
the damage suffered, being necessarily uncertain and indeterminate, cannot be ascertained
definitely until the trail has been completed.
On the first point it is urged by counsel for the appellant that the word bond used in the statute
being a common law term, we must refer to the common law for its legal signification; and that by
that law no instrument is a bond which is not under seal. The truth of the proposition that sealing
is an absolute requisite to the validity of a bond at common law is readily admitted; but the
applicability of that rule of the case under consideration is not perceived. This bond was taken at
a time when the common law afforded no rule of decision or practice in this country, and
consequently that law cannot be legitimately resorted to, even for the purpose for which it is
invoked by the counsel for the appellant, unless it be shown that the civil law had not term of
similar import for we regard it as a correct rule of construction, that where technical terms are
used in a statute they are to be referred for their signification to terms f similar import in the
system of laws which prevails in the country where the statues is passed, and not to another
system which is entirely foreign t the whole system of municipal regulations by which that country
is governed. (Martin's Reports, vol. 3, 185; 7 Martin [N. S.], 162.)"
But it appears that the legislature although it has seen fit to authorize a preliminary attachment in
aid of action of all kinds when the defendant is concealing his property with intent to defraud his
creditors, has provided is about to depart from the country with intent to defraud his creditos, the
writ will issue only when the action in aid of which it is sought arises from a contract express or
implied. If an attachment were permitted upon facts bringing the application with the first
paragraph of the section in support of action of any kind, whether the obligation sued upon is
contractual or not, then paragraph five would by construction be made absolutely identical with
paragraph one, and this would be in effect equivalent to the complete eliminated of the last two
lines of the first paragraph. It is a rule of statutory construction that effect should be given to all
parts of the statue, if possible. I can see no reason why the legislature should have limited cases
falling within the firs paragraph to action arising from contract and have refrained from imposing
this limitation with respect to cases falling within the terms of the fifth paragraph, but this should
have no effect upon us in applying the law. Whether there be a good reason for it or not the
distinction exists.
Consequently, I believe that in the interpretation of phase "contract, express or implied," we

should apply the rules of our own substantive law. The phrase in itself offers no difficulty. The
concept of the contract, under the Civil Code, as a legal relation of exclusively consensual origin,
offers no difficulty. Nor is any difficulty encountered in the gramatical sense of the words express
and "implied". Express according to the New International Dictionary is that which is directly and
distinctly stated; expressed, not merely implied or left to interference. Therefore, a contract
entered into by means of letters, in which the offer and the acceptance have been manifested by
appropriate words, would be an "express contract." The word "imply" according to the same
dictionary, is to involve in substance or essence, or by fair inference, or by construction of law,
when not expressly stated in words or signs; to contain by implication to include virtually.
Had the phrase express or implied not been used to qualify contract, there would be no doubt
whatever with regard to the meaning of the word. In the Spanish Civil law contract are always
consensual, and it would be impossible to define as a contract the judicial relation existing
between a person who has lost money at gaming and the winner of such money, simple because
the law imposes upon the winner the obligation of making restitution. An obligation of this kind,
far from being consensual in its origin, arises against the will of the debtor. To call such a relation
acontract is, from the standpoint of the civil law, a contradiction in terms.
Therefore, if I enter a tailor shop and order a suit of clothes, although nothing is said regarding
payment, it is an inference, both logical and legal, from my act that is my intention to pay the
reasonable value of the garments. The contract is implied, therefore, is that in which
the consent of the parties is implied.
But is said that as the phase express or implied has been used to qualify the word contract and
these words are found in statue which speaks the language of the common law, this implies the
introduction into our law of the concept of the implied contract of the English common-law, a
concept which embraces a certain class of obligation originating ex lege, which have been
The essence of consent is the agreement of the parties concerning that which is to constitute the
contract . . . . The forms of this agreement may vary according to whether it is expressed verbally
or in writing, by words or by acts. Leaving the other differences for consideration hereafter, we
Manresa, commenting upon article 1262 of the Civil Code, says:
obligations
will only refer now to those which exist between express consent and implied consent . . . . It is
unquestionable that implied consent manifested by act or conduct, produces a contract. . . .
Now, it is not be supposed that it was the intention of the Legislature in making use in the first
paragraph of article 412 of the phrase contract, express or implied to corrupt the logical simplicity
of our concept of obligations by importing into our law the antiquated fictions of the mediaeval
English common law. If one of the concepts of the term "implied contract" in the English common
law, namely, that in which consent is presume from the conduct of the debtor, harmonizes with
the concept of the contract in our law, why should we reject that meaning and hold that the
Legislature intended to use this phrase in the foreign and illogical sense of a contract arising
without consent? This is a civil law country. why should we be compelled to study the fictions of
the ancient English common law, in order to be informed as to the meaning of the word contract
in the law of the Philippine Islands? Much more reasonable to my mind was the conclusion of the
Texas court, under similar circumstances, to the effect to be referred for their signification to
terms of similar import in the system of laws which prevails in the country where the statue is
passed." (Cayce vs. Curtis, supra.)
If it were necessary to have recourse to the English common law for the purpose of ascertaining
the meaning of the phrase under consideration, we could find many decisions which gave it the
same meaning as that for which I contend.
An implied contract is where one party receives benefits from another party, under such
circumstances that the law presume a promise on the part of the party benefited to pay a
reasonable price for the same. (Jones vs. Tucker [Del.], 84 Atlantic, 1012.)
It is true that English courts have extended the concept of the term contract to include certain
obligations arising ex lege without consent, express or implied. True contracts created by implied
consent are designated in the English common law as contracts implied in the fact, while the socalled contracts in which the consent is a fiction of law are called contracts implied by law. But is
evident that the latter are not real contracts. They have been called contract arbitrarily by the
courts of England, and those of the Untied States in which the English common law is in force, in
order that certain actions arising ex lege may be enforced by the action of assumpsit. In the rigid
formulism of the English common law the substantive right had to be accommodated to the form
of action. As is stated in the monograph on the action of assumpsit in Ruling Case Law. (volume
2, 743)
My conclusion is that the phase contract, express or implied should be interpreted in the
grammatical sense of the words and limited to true contracts, consensual obligations arising
from consent, whether expressed in words, writing or signs, or presumed from conduct. As it is
evident that the defendant in the present case never promised, him in the gambling game in
question, his obligation to restor the amounts won, imposed by the law, is no contractual, but
purely extra-contractual and therefore the action brought not being one arising upon contract
express or implied, the plaintiff is not entitled to a preliminary attachment upon the averment that
the defendant is about to depart from the Philippine Islands with with intent t defraud his
creditors, no averment being made in the compliant or in the affidavit that the defendant has
removed or disposed of his property, or is about to depart with intent to defraud his creditors, so
as to bring the case within the terms of the fifth paragraph of section 412.
In theory it wan action to recover for the nonperformance f simple contracts, and the formula and
proceedings were constructed and carried on accordingly. . . . From the reign of Elizabeth this
action has been extended to almost every case where an obligation arises from natural
reason, . . . and it is now maintained in many cases which its principles do not comprehend and
where fictions and intendments are resorted to, to fit the actual cause of action to the theory of
the remedy. It is thus sanctioned where there has been no . . . real contract, but where some duty
is deemed sufficient to justify the court in imputing the promise to perform its, and hence
in bending the transaction to the form of action.
I am unable to agree with the contention of the application (Brief, p. 39) here that the phase in
question should be interpreted in such a way as to include all obligations, whether arising from
consent or ex lege, because that is equivalent to eliminating all distinction between the first and
the fifth paragraphs by practically striking out the first two lines of paragraph one. The Legislature
has deliberately established this distinction, and while we may be unable to see any reason why
it should have been made, it is our duty to apply and interpret the law, and we are not authorized
under the guise of interpretation to virtually repeal part of the statute.
In the ancient English common law procedure the form of the action was regarded as being
much more important than the substantive right to be enforced. If no form of action was found in
which the facts would fit, so much the worse for the facts! to avoid the injustices to which this
condition of affairs gave rise, the judges invented those fictions which permitted them to preserve
the appearance of conservatism and change the law without expressly admitting that they were
doing so. The indispensable averment, that they were doing so. The indispensable avernment
without which the action of assumpsit would not lie, was that the defendant promised to pay
plaintiff the amount demanded. (Sector vs. Holmes, 17 Vs., 566.) In true contracts, whether
express or implied, this promise in fact exists. In obligations arising ex lege there is no such
promise, and therefore the action of assumpsit could not be maintained, and therefore the action
of assumpsit could not be maintained, although by reason of its relative simplicity it was one of
the most favored forms of action. In order to permit the litigant to make use of this form of action
for the enforcement of ascertain classes of obligations arising ex lege, the judges invented
the fiction of the promise of the defendant to pay the amount of the obligation, and as this
fictitious promise give the appearance of consensuality to the legal relations of the parties, the
name of implied contract is given to that class of extra-contractual obligations enforcible by the
action of assumpsit.
Nor can it be said that the relations between the parties litigant constitute a quasi-contract. In the
first place, quasi- contracts are "lawful and purely voluntary acts by which the authors thereof
become obligated in favor of a third person. . . ." The act which gave rise to the obligation ex
lege relied upon by the plaintiff in the court below is illicit an unlawful gambling game. In the
second place, the first paragraph of section 412 of the Code of Civil Procedure does not
authorize an attachment in actions arising out of quasi contracts, but only in actions arising out
of contract, express or implied.
I am therefore of the opinion that the court below was without jurisdiction to issue that writ of
attachment and that the writ should be declared null and void.
CONTRACTS (art. 1159, 1305)
G.R. No. 13228
September 13, 1918

WILLIAM
vs.
IRA ABRAHAMSON, defendant-appellant.
obligations
OLLENDORFF, plaintiff-appellee,
business to that of the said party of the first part anywhere within the Philippine Islands for a
period of five years from this date.
Under the terms of this agreement defendant entered the employ of plaintiff and worked for him
until April, 1916, when defendant, on account of ill health, left plaintiff's employ and went to the
United States. While in plaintiff's establishment, and had full opportunity to acquaint himself with
plaintiff's business method and business connection. The duties performed by him were such as
to make it necessary that he should have this knowledge of plaintiff's business. Defendant had a
general knowledge of the Philippine embroidery business before his employment by plaintiff,
having been engaged in similar work for several years.
This is an appeal by defendant from a judgment of the Court of First Instance of Manila by which
he was enjoined for a term of five years, from September 10, 1915, from engaging in the
Philippine Islands in any business similar to or competitive with that of plaintiff.
The record discloses that plaintiff is and for a long time past has been engaged in the city of
Manila and elsewhere in the Philippine Islands in the business of manufacturing ladies
embroidered underwear for export. Plaintiff imports the material from which this underwear is
made and adopts decorative designs which are embroidered upon it by Filipino needle workers
from patterns selected and supplied by him. Most of the embroidery work is done in the homes of
the workers. The embroidered material is then returned to plaintiff's factory in Manila where it is
made into finished garments and prepared for export. The embroiderers employed by plaintiff are
under contract to work for plaintiff exclusively. Some fifteen thousand home workers and eight
hundred factory workers are engaged in this work for plaintiff, and some two and a half million
pesos are invested in his business.
Some months after his departure for the United States, defendant returned to Manila as the
manager of the Philippine Underwear Company, a corporation. This corporation does not
maintain a factory in the Philippine Islands, but send material and embroidery designs from New
York to its local representative here who employs Filipino needle workers to embroider the
designs and make up the garments in their homes. The only difference between plaintiff's
business and that of the firm by which the defendant is employed, is the method of doing the
finishing work -- the manufacture of the embroidered material into finished garments. Defendant
admits that both firms turn out the same class of goods and that they are exported to the same
market. It also clearly appears from the evidence that defendant has employed to work his form
some of the same workers employed by the plaintiff.
On September 10, 1915, plaintiff and defendant entered into a contract in the following terms:
Contract of agreement made and entered into this date by and between William Ollendorff, of
Manila, Philippine Islands, party of the first part, and Ira Abrahamson, of Manila, Philippine
Islands, party of the second part:
Shortly after defendant's return to Manila and the commencement by him of the discharge of the
duties of his position as local manager of the Philippine Embroidery Company, as local manager
of the Philippine Embroidery Company, plaintiff commenced this action, the principal purpose of
which is to prevent by injunction, any further breach of that part of defendant's contract of
employment by plaintiff, by which he agreed that he would not "enter into or engage himself
directly or indirectly . . . in a similar or competitive business to that of (plaintiff) anywhere within
the Philippine Islands for a period of five years . . ." from the date of the agreement. The lower
court granted a preliminary injunction, and upon trial the injunction was made perpetual.
The party of first part hereby agrees to employ the party of the second part, and the party of the
second part hereby obligates and binds himself to work for the party of the first part for a term of
two years from date commencing from the sixth of September, one thousand nine hundred and
fifteen and ending on the fifth day of September, one thousand nine hundred seventeen, at a
salary of fifty peso (50) per week payable at the end of each week.
Defendant, as appellant, argues that plaintiff failed to substantiate the averments of his
complaints to the effect that the business in which the defendant is employed is competitive with
that of plaintiff. The court below found from the evidence that the business was "very similar." We
have examined the evidence and rare of the opinion that the business in which defendant is
engaged is not only very similar to that of plaintiff, but that it is conducted in open competition
with that business within the meaning of the contract in question. Defendant himself expressly
admitted, on cross-examination, that the firm by which he is now employed puts out the same
class of foods as that which plaintiff is engaged in producing. When two concerns operate in the
same field, produce the same class of goods and dispose them in the same market, their
businesses are of necessity competitive. Defendant having engaged in the Philippine Islands in a
business directly competitive with that of plaintiff, within five years from the date of his contract of
employment by plaintiff, under the terms of which he expressly agreed that he would refrain form
doing that very thing, his conduct constitutes a breach of that agreement.
The party of the second part hereby obligates and binds himself to devote his entire time,
attention, energies and industry to the promotion of the furtherance of the business and interest
of the party of the first part and to perform during the term of this contract such duties as may be
assigned to him by the party of the first part, and failure by the said party of the second part to
comply with these conditions to the satisfaction of the party of the first shall entitle the party of the
first part to discharge and dismiss the said party of the second part from the employ of the party
of the first part.
It is mutually understood and agreed by the parties hereto that this contract, upon its termination,
may be extended for a like for a longer or a shorter period by the mutual consent of both
contracting parties.
The said party of the second part hereby further binds and obligates himself, his heirs,
successors and assigns, that he will not enter into or engage himself directly or indirectly, nor
permit any other person under his control to enter in or engage in a similar or competitive
Defendant argues that even assuming that there has been a breach of the agreement, the
judgment of the court below is nevertheless erroneous, contending that (1) the contract is void for
lack of mutuality; (2) that the contract is void as constituting an unreasonable restraint of trade;
obligations
(3) that plaintiff has failed to show that he has suffered any estimable pecuniary damage; and (4)
that even assuming that such damage as to warrant the court in restraining by injunction its
continuance.
upheld, but if it goes beyond this is declared void. This is the principle followed in such cases by
the Supreme Court of the United States. In the case of Gibbs vs. Consolidated Gas Co. of
Baltimore (130 U.S., 396) the court said:
The contention that the contract is void for lack of mutuality is based upon that part of the
agreement which authorizes plaintiff to discharge the defendant before the expiration of the
stipulated term, should defendant fail to comply with its conditions to plaintiff's satisfaction. It is
argued that by this contracts it was sought to impose upon defendant the absolute obligation of
rendering service, while reserving to plaintiff the right to rescind it at will. We are of the opinion
that this question is largely academic. It is admitted that defendant left plaintiff's employ at his
own request before the expiration of the stipulated terms of the contract. Had plaintiff sought to
discharge defendant without just cause, before the expiration of the term of the employment, it
might have been a serious question whether he could lawfully do so, notwithstanding the terms in
which the contract was drawn. (Civil Code, art. 1256.) But even assuming this particular clause of
the contract to be invalid, this would not necessarily affect the rest of the agreement. The
inclusion is an agreement of one or more pacts which are invalid does not of necessity invalidate
the whole contract.
The decision in Mitchel vs. Reynolds (1P. Wms. 181 [Smith's Leading Cases, Vol. 1, Pt. II, 508]),
is the foundation of rule in relation to the invalidity of contracts in restraint of trade; but as it was
made under a condition of things, and a state of society, different from those which now prevail,
the rule laid down is not regarded as inflexible, and has been considerably modified. Public
welfare is first considered, and if it be not involved, and the restraint upon one party is not greater
than protection to the other party requires, the contract may be sustained. The question is,
whether, under the particular circumstances of the case and the nature of the particular contract
involved in it, the contract is, or is not, unreasonable. (Rousillon vs. Rousillon, L. R. 14 Ch. Div.,
351; Leather Cloth Co. vs. Lorsont, L. R. 9 Eq., 345.)
Following this opinion, we adopt the modern rule that the validity of restraints upon trade or
employment is to be determined by the intrinsinc reasonableness of restriction in each case,
rather than by any fixed rule, and that such restrictions may be upheld when not contrary to
afford a fair and reasonable protection to the party in whose favor it is imposed.
We are of the opinion that the contract was not void as constituting an unreasonable restraint of
trade. We have been cited to no statutory expression of the legislative will to which such an
agreement is directly obnoxious. The rule in this jurisdiction is that the obligations created by
contracts have the force of law between the contracting parties and must be enforce in
accordance with their tenor. (Civil Code, art 1091.) The only limitation upon the freedom of
contractual agreement is that the pacts established shall not be contrary to "law, morals or public
order." (Civil Code, Art. 1255.) The industry of counsel has failed to discover any direct
expression of the legislative will which prohibits such a contract as that before us. It certainly is
not contrary to any recognized moral precept, and it therefore only remains to consider whether it
is contrary to "public order." This term, as correctly stated by Manresa (Commentaries, vol. 8, p.
606) "does not mean, as here used, the actual keeping of the public peace, but signifies the
public weal . . . that which is permanent, and essential in institutions . . . ." It is the equivalent, as
here used and as defined by Manresa, of the term "public policy" as used in the law of the United
States. Public policy has been defined as being that principle under which freedom of contract or
private dealing is restricted for the freedom of contract or private dealing is restricted for the good
of the community. (People's Bank vs. Dalton, 2 Okla., 476.) It is upon this theory that contracts
between private individuals which result in an unreasonable restraint of trade have frequently
being recognized by article 1255 of our Civil Code, the court of these Islands are vested with like
authority.
Examining the contract here in question from this stand point, it does not seem so with respect to
an employee whose duties are such as of necessity to give him an insight into the general scope
and details of his employers business. A business enterprise may and often does depend for its
success upon the owner's relations with other dealers, his skill in establishing favorable
connections, his methods of buying and selling -- a multitude of details, none vital if considered
alone, but which in the aggregate constitute the sum total of the advantages which the result of
the experience or individual aptitude and ability of the man or men by whom the business has
been built up. Failure or success may depend upon the possession of these intangible but all
important assets, and it is natural that their possessor should seek to keep them from falling into
the hands of his competitors. It is with this object in view that such restrictions as that now under
consideration are written into contracts of employment. Their purpose is the protection of the
employer, and if they do not go beyond what is reasonably necessary to effectuate this purpose
they should be upheld. We are of the opinion, and so hold, that in the light of the established
facts the restraint imposed upon defendant by his contract is not unreasonable. As was well said
in the case of Underwoodvs. Barker (68 Law J. Ch., 201). "If there is one thing more than another
which is essential to the trade and commerce of this country, it is the inviolability of contract
deliberately entered into; and to allow a person of mature age, and not imposed upon, to enter
into a contract, to obtain the benefit of it, and then to repudiate it and the obligation which he has
undertaken, is prima facie, at all events, contrary to the interest of any and every country . . . .
The public policy which allows a person to obtain employment on certain terms understood by
and agreed to by him, and to repudiate his contract, conflicts with, and must, to avail the
defendant, for some sufficient reason, prevail over, the manifest public policy, which, as a rule
holds him to his bond . . . .
In the nature of things, it is impossible to frame a general rule by which to determine in advance
the precise point at which the right of freedom of contract must yield to the superior interest of
community in keeping trade and commerce free from unreasonable restrictions. Originally the
English courts adopted the view that any agreement which imposed restrictions upon a man's
right to exercise his trade or calling was void as against public policy. (Cyc. vol. 9, p. 525.) In the
course of time this opinion was abandoned and the American and English courts adopted the
doctrine that where the restraint was unlimited as to space but unlimited as to time were valid. In
recent years there has been a tendency on the part of the courts of England and America to
discard these fixed rules and to decide each case according to its peculiar circumstances, and
make the validity of the restraint depend upon its reasonableness. If the restraint is no greater
than is reasonably necessary for the protection of the party in whose favor it is imposed it is
Having held that the contract is valid, we pass to a consideration of defendant's objections to its
enforcement by injunction.
It is contended that plaintiff has not proved that he has suffered any estimable pecuniary damage
by reason of defendant's breach of the contract, and that for that reason his action must fail. It is
10
obligations
further contended that in no event is it proper to enforce such a contract as this by injunction,
because it has not been alleged and proved that the continuance of the acts complained of will
cause plaintiff "irreparable damage." These objections can conveniently be considered together.
such constant and frequent recurrence that no fair or reasonable redress can be had therefor in a
court of law.
This definition was quoted with approval by the Supreme Court of the United States in the case
of Donovan vs.Pennsylvania Co., (199 U.S., 279), in which the injury complained of was
continuous in its nature.
The obligation imposed upon defendant by the particular clause of his contract now under
consideration is negative in character. Unless defendant voluntarily complies with his undertaking
there is no way by which the contract can be enforced except by the injunctive power of judicial
process. Such negative obligations have long been enforced by the courts in this manner. As
stated by High in his well-known work on Injunctions (vol. 2, pp. 877-878):
It is true, as held in the case of Liongson vs. Martinez (36 Phil. Rep., 948) that "an injunction
should never issue when an action for damages would adequately compensate the injuries
caused" But it frequently happens that the acts of the defendant, while constituting a very
substantial invasion of plaintiff's rights are of such a character that the damages which result
therefrom "cannot be measured by any certain pecuniary standard." (Eau Claire Water
Co. vs. City of Eau Claire, 127 Wis., 154.) The Civil Code (art. 1908) casts upon real estate
owners liability in damages for the emission, upon their premises, of excessive smoke, which
may be noxious to person or property. The injury caused by such a nuisance might bring about a
depreciation in the value of adjoining properties, but there is no "certain pecuniary standard" by
which such damages can be measured, and in that sense the threatened injury is "irreparable"
and may appropriately be restrained by injunction.
The remedy by injunction to prevent the violation of negative agreements, or contracts not to do
a particular thing, is closely akin to the remedy by way of specific performance of agreements of
an affirmative nature. In both cases the object sought is substantially one and the same, and by
enjoining the violation of a negative agreement the court of equity in effect decrees its specific
performance. (Lumley vs. Wagner, 1 DeGex, M. & G., 604.)
Where by the terms of a contract imposing a positive obligation the obligor is entitled to a specific
performance, it will not avail the defendant to show that plaintiff will suffer no pecuniary damage if
the contract is not performed. Upon like reasons, when the undertaking is negative in character
and defendant is violating the obligation imposed upon him the court may interfere without
requiring proof of actual damage. (High on Injunctions, par. 1135, citing Dickenson vs. Grand
Junction Canal Co., 15 Beav., 270.)
. . . If the nuisance is a continuing one, invading substantial rights of the complainant in such a
manner that he would thereby lose such rights entirely but for the assistance of a court of equity
he will entitled but for the assistance of a court of equity he will be entitled to an injunction upon a
proper showing, notwithstanding the fact the he might recover some damages in an action at law.
(Tise vs. Whitaker-Harvey Co., 144 N. C., 507.)
The admitted fact that plaintiff has failed to establish proof of pecuniary damage by reason of the
breach of the contract by defendant by the acts committed prior to the issuance of the preliminary
injunction is, of course, a bar or nay money judgment for damages for the breach of the contract,
but will not justify us in permitting defendant tocontinue to break his contract over plaintiff's
objection. The injury is a continuous one. The fact that the court may not be able to give
damages for that part of the breach of the contract which had already taken place when its aid
was invoked is no reason why it should countenance a continuance of such disregard of plaintiff's
rights.
The injury done the business of a merchant by illegal or unfair competition is exceedingly difficult
to measure. A diminution of the volume of a business may be due to so many different causes
that it is often impossible to demonstrate that it has in fact been caused by the illegal competition
of the defendant. This is frequently the case in suit for the infringement of trademark rights, in
which the courts may enjoin the continued use of the infringing mark, although unable to assess
damages for the past injury.
With respect to the contention that an injunction may only be granted to prevent irreparable
injury, the answer is that any continuing breach of a valid negative covenant is irreparable by the
ordinary process of courts of law. As stated by High, (vol. 2, p. 906) injunctive relief is granted in
cases like this "upon the ground that the parties cannot be placed in statu quo, and that damages
at law can afford no adequate compensation, the injury being a continuous one irreparable by the
ordinary process of courts of law."
The judgment of the trial court is affirmed with costs. So ordered.

THE
CITY
OF
CEBU, petitioner, vs.
DEDAMO, respondents.
SPOUSES
APOLONIO
and
BLASA
In its petition for review on certiorari under Rule 45 of the 1997 Rules of Civil Procedure,
petitioner City of Cebu assails the decision of 11 October 1999 of the Court of Appeals in CAG.R. CV No. 59204[1] affirming the judgment of 7 May 1996 of the Regional Trial Court, Branch
13, Cebu City, in Civil Case No. CEB-14632, a case for eminent domain, which fixed the
valuation of the land subject thereof on the basis of the recommendation of the commissioners
appointed by it.
In the case of Gilchrist vs. Cuddy (29 Phil. rep., 542), at page 552, this court said, citing with
approval the case of Wahle vs. Reinbach (76 Ill., 322):
By "irreparable injury" is not meant such injury as is beyond the possibility of repair, or beyond
possible compensation in damages, nor necessarily great injury or great damage, but that
species of injury, whether great or small, that ought not be submitted to on the one hand or
inflicted on the other; and, because it is so large on the one hand, or so small on the other, is of
The material operative facts are not disputed.
11
obligations
On 17 September 1993, petitioner City of Cebu filed in Civil Case No. CEB-14632 a complaint for
eminent domain against respondents spouses Apolonio and Blasa Dedamo. The petitioner
alleged therein that it needed the following parcels of land of respondents, to wit:
2. That the SECOND PARTY agrees to part with the ownership of the subject parcels of land in
favor of the FIRST PARTY provided the latter will pay just compensation for the same in the
amount determined by the court after due notice and hearing;
Lot No. 1527

Area----------------------------1,146 square meters
Tax Declaration---------------03472
Title No.-----------------------31833
Market value------------------P240,660.00
Assessed Value---------------P72,200.00
Lot No. 1528
Area--------------------------------------------------------793 square meters
Area sought to be-----------------------------------------478 square meters expropriated
Tax Declaration-------------------------------------------03450
Title No. ---------------------------------------------------31832
Market value for the whole lot--------------------------P1,666,530.00
Market value of the Area to be expropriated----------P100,380.00
Assessed Value--------------------------------------------P49,960.00
3. That in the meantime the SECOND PARTY agrees to receive the amount of ONE MILLION
SEVEN HUNDRED EIGHTY SIX THOUSAND FOUR HUNDRED PESOS (1,786,400.00) as
provisional payment for the subject parcels of land, without prejudice to the final valuation as
maybe determined by the court;
4. That the FIRST PARTY in the light of the issuance of the Writ of Possession Order dated
September 21, 1994 issued by the Honorable Court, agreed to take possession over that portion
of the lot sought to be expropriated where the house of the SECOND PARTY was located only
after fifteen (15) days upon the receipt of the SECOND PARTY of the amount of P1,786,400.00;
5. That the SECOND PARTY upon receipt of the aforesaid provisional amount, shall turn over to
the FIRST PARTY the title of the lot and within the lapse of the fifteen (15) days grace period will
voluntarily demolish their house and the other structure that may be located thereon at their own
expense;
for a public purpose, i.e., for the construction of a public road which shall serve as an
access/relief road of Gorordo Avenue to extend to the General Maxilum Avenue and the back of
Magellan International Hotel Roads in Cebu City. The lots are the most suitable site for the
purpose. The total area sought to be expropriated is 1,624 square meters with an assessed
value of P1,786,400. Petitioner deposited with the Philippine National Bank the amount
of P51,156 representing 15% of the fair market value of the property to enable the petitioner to
take immediate possession of the property pursuant to Section 19 of R.A. No. 7160.[2]
6. That the FIRST PARTY and the SECOND PARTY jointly petition the Honorable Court to
render judgment in said Civil Case No. CEB-14632 in accordance with this AGREEMENT;
7. That the judgment sought to be rendered under this agreement shall be followed by a
supplemental judgment fixing the just compensation for the property of the SECOND PARTY
after the Commissioners appointed by this Honorable Court to determine the same shall have
rendered their report and approved by the court.
Respondents, filed a motion to dismiss the complaint because the purpose for which their
property was to be expropriated was not for a public purpose but for benefit of a single private
entity, the Cebu Holdings, Inc. Petitioner could simply buy directly from them the property at its
fair market value if it wanted to, just like what it did with the neighboring lots. Besides, the price
offered was very low in light of the consideration of P20,000 per square meter, more or less,
which petitioner paid to the neighboring lots. Finally, respondents alleged that they have no other
land in Cebu City.
Pursuant to said agreement, the trial court appointed three commissioners to determine the just
compensation of the lots sought to be expropriated. The commissioners were Palermo M. Lugo,
who was nominated by petitioner and who was designated as Chairman; Alfredo Cisneros, who
was nominated by respondents; and Herbert E. Buot, who was designated by the trial court. The
parties agreed to their appointment.
Thereafter, the commissioners submitted their report, which contained their respective
assessments of and recommendation as to the valuation of the property.
A pre-trial was thereafter had.

On 23 August 1994, petitioner filed a motion for the issuance of a writ of possession pursuant to
Section 19 of R.A. No. 7160. The motion was granted by the trial court on 21 September 1994.[3]
On the basis of the commissioners report and after due deliberation thereon, the trial court
rendered its decision on 7 May 1996,[5] the decretal portion of which reads:
On 14 December 1994, the parties executed and submitted to the trial court an
Agreement[4] wherein they declared that they have partially settled the case and in consideration
thereof they agreed:
WHEREFORE, in view of the foregoing, judgment is hereby rendered in accordance with the
report of the commissioners.
1. That the SECOND PARTY hereby conforms to the intention to [sic] the FIRST PARTY in
expropriating their parcels of land in the above-cited case as for public purpose and for the
benefit of the general public;
Plaintiff is directed to pay Spouses Apolonio S. Dedamo and Blasa Dedamo the sum of pesos:
TWENTY FOUR MILLION EIGHT HUNDRED SIXTY-FIVE THOUSAND AND NINE HUNDRED
THIRTY (P24,865.930.00) representing the compensation mentioned in the Complaint.
12
obligations
Plaintiff and defendants are directed to pay the following commissioners fee;
1.
To Palermo Lugo
- P21,000.00
2.
To Herbert Buot
- P19,000.00
3.
To Alfredo Cisneros
- P19,000.00
the court; (2) petitioner did not interpose any serious objection to the commissioners report of
12 August 1996 fixing the just compensation of the 1,624-square meter lot at P20,826,339.50;
hence, it was estopped from attacking the report on which the decision was based; and (3) the
determined just compensation fixed is even lower than the actual value of the property at the
time of the actual taking in 1994.
Eminent domain is a fundamental State power that is inseparable from sovereignty. It is the
Governments right to appropriate, in the nature of a compulsory sale to the State, private
property for public use or purpose. [9] However, the Government must pay the owner thereof
just compensation as consideration therefor.
Without pronouncement as to cost.

SO ORDERED.
In the case at bar, the applicable law as to the point of reckoning for the determination of just
compensation is Section 19 of R.A. No. 7160, which expressly provides that just compensation
shall be determined as of the time of actual taking. The Section reads as follows:
Petitioner filed a motion for reconsideration on the ground that the commissioners report was
inaccurate since it included an area which was not subject to expropriation. More specifically,
it contended that Lot No. 1528 contains 793 square meters but the actual area to be
expropriated is only 478 square meters. The remaining 315 square meters is the subject of a
separate expropriation proceeding in Civil Case No. CEB-8348, then pending before Branch 9
of the Regional Trial Court of Cebu City.
SECTION 19. Eminent Domain. -- A local government unit may, through its chief executive
and acting pursuant to an ordinance, exercise the power of eminent domain for public use, or
purpose or welfare for the benefit of the poor and the landless, upon payment of just
compensation, pursuant to the provisions of the Constitution and pertinent laws: Provided,
however, That the power of eminent domain may not be exercised unless a valid and definite
offer has been previously made to the owner, and such offer was not accepted: Provided,
further, That the local government unit may immediately take possession of the property upon
the filing of the expropriation proceedings and upon making a deposit with the proper court of
at least fifteen percent (15%) of the fair market value of the property based on the current tax
declaration of the property to be expropriated: Provided finally, That, the amount to be paid for
the expropriated property shall be determined by the proper court, based on the fair market
value at the time of the taking of the property.
On 16 August 1996, the commissioners submitted an amended assessment for the 478 square
meters of Lot No. 1528 and fixed it at P12,824.10 per square meter, or in the amount
of P20,826,339.50. The assessment was approved as the just compensation thereof by the trial
court in its Order of 27 December 1996. [6] Accordingly, the dispositive portion of the decision
was amended to reflect the new valuation.
Petitioner elevated the case to the Court of Appeals, which docketed the case as CA-G.R. CV
No. 59204. Petitioner alleged that the lower court erred in fixing the amount of just
compensation atP20,826,339.50. The just compensation should be based on the prevailing
market price of the property at the commencement of the expropriation proceedings.
The petitioner has misread our ruling in The National Power Corp. vs. Court of Appeals. [10] We
did not categorically rule in that case that just compensation should be determined as of the
filing of the complaint. We explicitly stated therein that although the general rule in
determining just compensation in eminent domain is the value of the property as of the date of
the filing of the complaint, the rule admits of an exception: where this Court fixed the value of
the property as of the date it was taken and not at the date of the commencement of the
expropriation proceedings.
The petitioner did not convince the Court of Appeals. In its decision of 11 October 1999, [7] the
Court of Appeals affirmed in toto the decision of the trial court.
Still unsatisfied, petitioner filed with us the petition for review in the case at bar. It raises the
sole issue of whether just compensation should be determined as of the date of the filing of the
complaint. It asserts that it should be, which in this case should be 17 September 1993 and not
at the time the property was actually taken in 1994, pursuant to the decision in National
Power Corporation vs. Court of Appeals.[8]
Also, the trial court followed the then governing procedural law on the matter, which was
Section 5 of Rule 67 of the Rules of Court, which provided as follows:
SEC. 5. Ascertainment of compensation. -- Upon the entry of the order of condemnation, the
court shall appoint not more than three (3) competent and disinterested persons as
commissioners to ascertain and report to the court the just compensation for the property
sought to be taken. The order of appointment shall designate the time and place of the first
In their Comment, respondents maintain that the Court of Appeals did not err in affirming the
decision of the trial court because (1) the trial court decided the case on the basis of the
agreement of the parties that just compensation shall be fixed by commissioners appointed by
13
obligations
session of the hearing to be held by the commissioners and specify the time within which their
report is to be filed with the court.
juridical relation of quasi-contract to the end that no one shall be unjustly enriched or
benefited at the expense of another. (n) (TITLE XVII EXTRA-CONTRACTUAL
OBLIGATIONS, CHAPTER 1 Quasi-contracts)
More than anything else, the parties, by a solemn document freely and voluntarily agreed upon
by them, agreed to be bound by the report of the commission and approved by the trial
court. The agreement is a contract between the parties. It has the force of law between them
and should be complied with in good faith. Article 1159 and 1315 of the Civil Code explicitly
provides:
PDF (LOCSIN v. MEKENI)
Art. 1159. Obligations arising from contracts have the force of law between the contracting
parties and should be complied with in good faith.
Quasi-Contracts
A. Solutio Indebiti (2154-1163)
Article 2154. If something is received when there is no right to demand it, and it was unduly
delivered through mistake, the obligation to return it arises. (1895)
Article 2155. Payment by reason of a mistake in the construction or application of a doubtful
or difficult question of law may come within the scope of the preceding article. (n)
Article 2156. If the payer was in doubt whether the debt was due, he may recover if he
proves that it was not due. (n)
Article 2157. The responsibility of two or more payees, when there has been payment of
what is not due, is solidary. (n)
Article 2158. When the property delivered or money paid belongs to a third person, the
payee shall comply with the provisions of article 1984. (n)
Article 2159. Whoever in bad faith accepts an undue payment, shall pay legal interest if a
sum of money is involved, or shall be liable for fruits received or which should have been
received if the thing produces fruits.
He shall furthermore be answerable for any loss or impairment of the thing from any cause,
and for damages to the person who delivered the thing, until it is recovered. (1896a)
Article 2160. He who in good faith accepts an undue payment of a thing certain and
determinate shall only be responsible for the impairment or loss of the same or its
accessories and accessions insofar as he has thereby been benefited. If he has alienated it,
he shall return the price or assign the action to collect the sum. (1897)
Article 2161. As regards the reimbursement for improvements and expenses incurred by him
who unduly received the thing, the provisions of Title V of Book II shall govern. (1898)
Article 2162. He shall be exempt from the obligation to restore who, believing in good faith
that the payment was being made of a legitimate and subsisting claim, destroyed the
document, or allowed the action to prescribe, or gave up the pledges, or cancelled the
guaranties for his right. He who paid unduly may proceed only against the true debtor or the
guarantors with regard to whom the action is still effective. (1899)
Article 2163. It is presumed that there was a mistake in the payment if something which had
never been due or had already been paid was delivered; but he from whom the return is
claimed may prove that the delivery was made out of liberality or for any other just cause.
(1901)
Art. 1315. Contracts are perfected by mere consent, and from that moment the parties are
bound not only to the fulfillment of what has been expressly stipulated but also to all the
consequences which, according to their nature, may be in keeping with good faith, usage and
law.
Furthermore, during the hearing on 22 November 1996, petitioner did not interpose a serious
objection.[11] It is therefore too late for petitioner to question the valuation now without
violating the principle of equitable estoppel. Estoppel in pais arises when one, by his acts,
representations or admissions, or by his own silence when he ought to speak out, intentionally
or through culpable negligence, induces another to believe certain facts to exist and such other
rightfully relies and acts on such belief, so that he will be prejudiced if the former is permitted
to deny the existence of such facts.[12] Records show that petitioner consented to conform with
the valuation recommended by the commissioners. It cannot detract from its agreement now
and assail correctness of the commissioners assessment.
Finally, while Section 4, Rule 67 of the Rules of Court provides that just compensation shall be
determined at the time of the filing of the complaint for expropriation, [13]such law cannot
prevail over R.A. 7160, which is a substantive law.[14]
WHEREFORE, finding no reversible error in the assailed judgment of the Court of Appeals in
CA-G.R. CV No. 59204, the petition in this case is hereby DENIED.
No pronouncement as to costs.
SO ORDERED.
Quasi-contracts
c.1
Article 1160. Obligations derived from quasi-contracts shall be subject to the
provisions of Chapter 1, Title XVII, of this Book. (n)
c.2
Article 2142. Certain lawful, voluntary and unilateral acts give rise to the
G.R. No. 178031

VIRGINIA
vs.
14
August 28, 2013

M.
VENZON, Petitioner,
obligations
RURAL BANK OF BUENAVISTA (AGUSAN DEL NORTE), INC., represented by

LOURDESITA E. PARAJES,Respondent.
other party is a Rural Bank. Under the R.A. No. 720 as amended, (Rural Bank Act)
property worth exceeding P100,000.00 [sic] is exempt from the requirement of
publication. This may have been the reason why the foreclosure prosper [sic] without
the observance of the required publication. Moreover, neither in the said applicable
laws provide [sic] for the impairment of the extrajudicial foreclosure and the
subsequent sale to the public. The Court ruled in Bonnevie, et al. vs. CA, et al. that
Act No. 3135 as amended does not require personal notice to the mortgagor. In the
same view, lack of final demand or notice of redemption are [sic] not considered
indispensable requirements and failure to observe the same does not render the
extrajudicial foreclosure sale a nullity.10
Before us is a Petition for Review on Certiorari1 questioning the December 14, 2006
Resolution2 of the Court of Appeals (CA) in CA-G.R. SP No. 01341-MIN which
dismissed the Petition in said case, as well as its May 7, 2007 Resolution 3 denying
reconsideration thereof.
Factual Antecedents
On January 28, 2005, petitioner Virginia M. Venzon filed a Petition 4 to nullify
foreclosure proceedings and Tax Declaration Nos. 96-GR-06-003-7002-R and 96-GR06-7003-R issued in the name of respondent Rural Bank of Buenavista (Agusan del
Norte), Inc. The case5 was docketed as Civil Case No. 5535 and raffled to Branch 5 of
the Regional Trial Court (RTC) of Butuan City. Petitioner alleged that in 1983 she and
her late spouse, George F. Venzon, Sr., obtained a P5,000.00 loan from respondent
against a mortgage on their house and lot in Libertad, Butuan City, covered by Tax
Declaration Nos. 28289 and 42710 issued in their names, which were later on
replaced with Tax Declaration Nos. 96 GR-06-003-2884-R and 96 GR-06-003-2885-R;
that she was able to pay P2,300.00, thus leaving an outstanding balance of
only P2,370.00; that sometime in March 1987, she offered to pay the said balance in
full, but the latter refused to accept payment, and instead shoved petitioner away
from the bank premises; that in March 1987, respondent foreclosed on the mortgage,
and the property was sold at auction forP6,472.76 to respondent, being the highest
bidder; that the foreclosure proceedings are null and void for lack of notice and
publication of the sale, lack of sheriffs final deed of sale and notice of redemption
period; and that she paid respondent P6,000.00 on October 9, 1995, as evidenced by
respondents Official Receipt No. 4108486 issued on October 9, 1995.
In other words, the trial court meant that under the Rural Banks Act, the foreclosure
of mortgages covering loans granted by rural banks and executions of judgments
thereon involving real properties levied upon by a sheriff shall be exempt from
publication where the total amount of the loan, including interests due and unpaid,
does not exceedP10,000.00.11 Since petitioners outstanding obligation amounted to
just over P6,000.00 publication was not necessary.
Petitioner moved for reconsideration,12 but
Resolution,13 the trial court denied the same.
in
the
September
6,
2006
Ruling of the Court of Appeals

Petitioner went up to the CA via an original Petition for Certiorari. 14 On December 14,
2006, the CA issued the first assailed Resolution 15 dismissing the Petition. It held that
petitioners remedy should have been an appeal under Rule 41 of the Rules of Court
since the July 13, 2006 Resolution is a final order of dismissal. Petitioner received the
Resolution denying her Motion for Reconsideration on September 18, 2006; 16 but she
filed the Petition for Certiorari on October 25, 2006 when she should have interposed
an appeal on or before October 3, 2006. Having done so, her Petition may not even
be treated as an appeal for the same was belatedly filed.
In its Answer with Counterclaims, 7 respondent claimed that petitioner did not make
any payment on the loan; that petitioner never went to the bank in March 1987 to
settle her obligations in full; that petitioner was not shoved and driven away from its
premises; that the foreclosure proceedings were regularly done and all requirements
were complied with; that a certificate of sale was issued by the sheriff and duly
recorded in the Registry of Deeds; that petitioners claim that she paid P6,000.00 on
October 9, 1995 is utterly false; that petitioners cause of action has long prescribed
as the case was filed only in 2005 or 18 years after the foreclosure sale; and that
petitioner is guilty of laches. Respondent interposed its counterclaim for damages
and attorneys fees as well.
The CA added that the Petition does not provide a sufficient factual background of
the case as it merely alleges a chronology of the legal remedies she took before the
trial court which does not comply with the requirement under Section 3 of Rule 46. 17
Petitioner moved for reconsideration18 by submitting a rewritten Petition. However, in
a Resolution dated May 7, 2007, the CA denied the same, hence the present Petition.
Issues
In her Reply, petitioner insisted that the foreclosure proceedings were irregular and
that prescription and laches do not apply as the foreclosure proceedings are null and
void to begin with.
Petitioner submits the following assignment of errors:
Ruling of the Regional Trial Court
WITH DUE RESPECT, THE HONORABLE COURT OF APPEALS REVERSIBLY ERRED IN

DISMISSING THE PETITION FOR CERTIORARI THEREBY PREVENTING THE COURT FROM
FINDING OUT THAT ACTUALLY NO EXTRAJUDICIAL FORECLOSURE WAS CONDUCTED
BY THE OFFICE OF THE PROVINCIAL SHERIFF ON PETITIONERS PROPERTY AT THE
INSTANCE OF THE PRIVATE RESPONDENT.
On July 13, 2006, the trial court issued a Resolution dismissing Civil Case No. 5535.
It held that
The plaintiff, however, may have erroneously relied the [sic] mandatorily [sic]
requirement of the aforestated provision of law upon failure to consider that the
II
15
obligations
WITH DUE RESPECT, THE HONORABLE COURT OF APPEALS REVERSIBLY ERRED IN

NOT DISREGARDING TECHNICALITIES IN ORDER TO ADMINISTER SUBSTANTIAL
JUSTICE TO THE PETITIONER.19
covering the foreclosure proceedings. Besides, if petitioner insists that no foreclosure

proceedings took place, then she should not have filed an action to annul the same
since there was no foreclosure to begin with. She should have filed a different action.
Petitioners Arguments
However, petitioner is entitled to a return of the P6,000.00 she paid to respondent in

1995. While this may not be validly considered as a redemption of her property as
the payment was made long after the redemption period expired, respondent had no
right to receive the amount. In its Answer with Counterclaims in Civil Case No. 5535,
respondent simply alleged therein that
Petitioner claims that no extrajudicial foreclosure proceedings ever took place, citing
a February 2, 2005 Certification issued by the Office of the Clerk of Court of Butuan
City stating that the record pertaining to the foreclosure proceedings covering her
property "could not be found in spite of diligent efforts to find the same." 20 And
because no foreclosure proceedings took place, there could not have been notice and
publication of the sale, and no sheriffs certificate of sale. For this reason, she claims
that the CA erred in dismissing her case.
10. Defendant DENIES the allegations under paragraph 10 of the petition for being
utterly false, highly self-serving and patently speculative, the truth being -- Assumption cannot be had that there was an alleged foreclosure of the then
property of the petitioner for the truth of the matter is that a foreclosure proceeding
was duly conducted, which fact remains undisputable for so many years now.
Petitioner adds that, technicalities aside, a Petition for Certiorari is available to her in
order to prevent the denial of her substantial rights. She also argues that her
payment to respondent of the amount of P6,000.00 in 1995 should be considered as
a valid redemption of her property.
Without necessarily admitting that payment of P6,000.00 was made, the same
however could hardly and could never be considered as redemption price for the
following reasons ---
Respondents Arguments
The redemption period had long lapsed when the payment of P6,000.00 was
allegedly made. Thus, there is no point talking about redemption price when the
redemption period had long been gone at the time the alleged payment was made.
For its part, respondent merely validates the pronouncements of the CA by citing and
echoing the same, and holding petitioner to a strict observance of the rules for
perfecting an appeal within the reglementary period, as it claims they are necessary
for the orderly administration of justice, 21 as well as that which requires that only
questions of law may be raised in a Petition for Review on Certiorari.
Even x x x granting, without conceding, that the amount of P6,000.00 was a

redemption price, said amount, however, could not constitute as a legal redemption
price since the same was not enough to cover the entire redemption price as
mandated by the rules and laws.23 (Emphases supplied)
Our Ruling
The Court denies the Petition.
Interestingly, respondent did not deny being the issuer of Official Receipt No.
410848. Instead, it averred that petitioners payment to it of P6,000.00 was false and
self-serving, but in the same breath argued that, without necessarily admitting that
payment of P6,000.00 was made, the same cannot be considered as redemption
price.
The Court finds no error in the CAs treatment of the Petition for Certiorari. The trial
courts July 13, 2006 Resolution dismissing the case was indeed to be treated as a
final order, disposing of the issue of publication and notice of the foreclosure sale
which is the very core of petitioners cause of action in Civil Case No. 5535 and
declaring the same to be unnecessary pursuant to the Rural Banks Act, as
petitioners outstanding obligation did not exceedP10,000.00, and thus leaving
petitioner without basis to maintain her case. This constitutes a dismissal with the
character of finality. As such, petitioner should have availed of the remedy under
Rule 41, and not Rule 65.
By making such an ambiguous allegation in its Answer with Counterclaims,

respondent is deemed to have admitted receiving the amount of P6,000.00 from
petitioner as evidenced by Official Receipt No. 410848, which amount under the
circumstances it had no right to receive. "If an allegation is not specifically denied or
the denial is a negative pregnant, the allegation is deemed admitted." 24 "Where a
fact is alleged with some qualifying or modifying language, and the denial is
conjunctive, a negative pregnant exists, and only the qualification or modification is
denied, while the fact itself is admitted." 25 "A denial in the form of a negative
pregnant is an ambiguous pleading, since it cannot be ascertained whether it is the
fact or only the qualification that is intended to be denied." 26"Profession of ignorance
about a fact which is patently and necessarily within the pleader's knowledge, or
means of knowing as ineffectual, is no denial at all." 27 In fine, respondent failed to
refute petitioners claim of having paid the amount of P6,000.00.
The Court is not prepared to be lenient in petitioners case, either. Civil Case No.
5535 was instituted only in 2005, while the questioned foreclosure proceedings took
place way back in 1987. Petitioners long inaction and commission of a procedural
faux pas certainly cannot earn the sympathy of the Court.
Nor can the Court grant the Petition on the mere allegation that no foreclosure
proceedings ever took place. The February 2, 2005 Certification issued by the Office
of the Clerk of Court of Butuan City to the effect that the record of the foreclosure
proceedings could not be found is not sufficient ground to invalidate the proceedings
taken. Petitioner herself attached the Sheriffs Certificate of Sale 22 as Annex "A" of
her Petition in Civil Case No. 5535; this should belie the claim that no record exists
16
obligations
Since respondent was not entitled to receive the said amount, as it is deemed fully
paid from the foreclosure of petitioners property since its bid price at the auction
sale covered all that petitioner owed it by way of principal, interest, attorneys fees
and charges,28 it must return the same to petitioner. "If something is received when
there is no right to demand it, and it was unduly delivered through mistake, the
obligation to return it arises." 29 Moreover, pursuant to Circular No. 799, series of 2013
of the Bangko Sentral ng Pilipinas which took effect July 1, 2013, the amount
of P6,000.00 shall earn interest at the rate of 6% per annum computed from the
filing of the Petition in Civil Case No. 5535 up to its full satisfaction.
the persons herein mentioned prove that they observed all the diligence
of a good father of a family to prevent damage. (1903a)
ARTICLE 103.
Subsidiary Civil Liability of Other Persons. The subsidiary liability established in
the next preceding article shall also apply to employers, teachers, persons, and
corporations engaged in any kind of industry for felonies committed by their
servants, pupils, workmen, apprentices, or employees in the discharge of their
WHEREFORE, premises considered, the Petition is DENIED. The December 14, 2006
and May 7, 2007 Resolutions of the Court of Appeals in CA-G.R. SP No. 01341-MIN are
AFFIRMED.
duties.
DRA. LEILA A. DELA LLANA, Petitioners, v. REBECCA BIONG, DOING BUSINESS
UNDER THE NAME AND STYLE OF PONGKAY TRADING, Respondent.
However, respondent Rural Bank of Buenavista (Agusan del Norte), Inc. is ORDERED
to return to petitioner Virginia M. Venzon or her assigns the amount of P6,000.00,
with interest at the rate of 6% per annum computed from the filing of the Petition in
Civil Case No. 5535 up to its full satisfaction.
Every case essentially turns on two basic questions: questions of fact and questions
of law. Questions of fact are for the parties and their counsels to respond to, based
on what supporting facts the legal questions require; the court can only draw
conclusion from the facts or evidence adduced. When the facts are lacking because
of the deficiency of presented evidence, then the court can only draw one
conclusion: that the case must fail for lack of evidentiary support.
SO ORDERED.
Article 2180.
The obligation imposed by article 2176 is demandable not only for one's
own acts or omissions, but also for those of persons for whom one is
responsible.
The father and, in case of his death or incapacity, the mother, are
responsible for the damages caused by the minor children who live in
their company.
Guardians are liable for damages caused by the minors or
incapacitated persons who are under their authority and live in their
company.
The owners and managers of an establishment or enterprise are
likewise responsible for damages caused by their employees in the
service of the branches in which the latter are employed or on the
occasion of their functions.
Employers shall be liable for the damages caused by their
employees and household helpers acting within the scope of their
assigned tasks, even though the former are not engaged in any business
or industry.
The State is responsible in like manner when it acts through a
special agent; but not when the damage has been caused by the official
to whom the task done properly pertains, in which case what is provided
in article 2176 shall be applicable.
Lastly, teachers or heads of establishments of arts and trades
shall be liable for damages caused by their pupils and students or
apprentices, so long as they remain in their custody.
The responsibility treated of in this article shall cease when
The present case is one such case as Dra. Leila A. dela Llanas (petitioner) petition
for review oncertiorari1 challenging the February 11, 2008 decision 2 and the March
31, 2008 resolution3 of the Court of Appeals (CA) in CA-G.R. CV No. 89163.
The Factual Antecedents
On March 30, 2000, at around 11:00 p.m., Juan dela Llana was driving a 1997 Toyota
Corolla car along North Avenue, Quezon City. 4 His sister, Dra. dela Llana, was seated
at the front passenger seat while a certain Calimlim was at the backseat. 5 Juan
stopped the car across the Veterans Memorial Hospital when the signal light turned
red. A few seconds after the car halted, a dump truck containing gravel and sand
suddenly rammed the cars rear end, violently pushing the car forward. Due to the
impact, the cars rear end collapsed and its rear windshield was shattered. Glass
splinters flew, puncturing Dra. dela Llana. Apart from these minor wounds, Dra. dela
Llana did not appear to have suffered from any other visible physical injuries. 6
The traffic investigation report dated March 30, 2000 identified the truck driver as
Joel Primero. It stated that Joel was recklessly imprudent in driving the truck. 7 Joel
later revealed that his employer was respondent Rebecca Biong, doing business
under the name and style of Pongkay Trading and was engaged in a gravel and
sand
business.8
In the first week of May 2000, Dra. dela Llana began to feel mild to moderate pain on
the left side of her neck and shoulder. The pain became more intense as days passed
by. Her injury became more severe. Her health deteriorated to the extent that she
could no longer move her left arm. On June 9, 2000, she consulted with Dr. Rosalinda
17
obligations
Milla, a rehabilitation medicine specialist, to examine her condition. Dr. Milla told her
that she suffered from a whiplash injury, an injury caused by the compression of the
nerve running to her left arm and hand. Dr. Milla required her to undergo physical
therapy
to
alleviate
her
condition.
RTC Ruling
The RTC ruled in favor of Dra. dela Llana and held that the proximate cause of Dra.
dela Llanas whiplash injury to be Joels reckless driving. 21 It found that a whiplash
injury is an injury caused by the sudden jerking of the spine in the neck area. It
pointed out that the massive damage the car suffered only meant that the truck was
over-speeding. It maintained that Joel should have driven at a slower pace because
road visibility diminishes at night. He should have blown his horn and warned the car
that his brake was stuck and could have prevented the collision by swerving the
truck off the road. It also concluded that Joel was probably sleeping when the
collision occurred as Joel had been driving for fifteen hours on that fateful day.
Dra. dela Llanas condition did not improve despite three months of extensive
physical therapy.9 She then consulted other doctors, namely, Drs. Willie Lopez,
Leonor Cabral-Lim and Eric Flores, in search for a cure. Dr. Flores, a neuro-surgeon,
finally suggested that she undergo a cervical spine surgery to release the
compression of her nerve. On October 19, 2000, Dr. Flores operated on her spine and
neck, between the C5 and the C6 vertebrae. 10 The operation released the
impingement of the nerve, but incapacitated Dra. dela Llana from the practice of her
profession
since
June
2000
despite
the
surgery.11
The RTC further declared that Joels negligence gave rise to the presumption that
Rebecca did not exercise the diligence of a good father of a family in Joels selection
and supervision of Joel. Rebecca was vicariously liable because she was the employer
and she personally chose him to drive the truck. On the day of the collision, she
ordered him to deliver gravel and sand to Muoz Market, Quezon City. The Court
concluded that the three elements necessary to establish Rebeccas liability were
present: (1) that the employee was chosen by the employer, personally or through
another; (2) that the services were to be rendered in accordance with orders which
the employer had the authority to give at all times; and (3) that the illicit act of the
employee was on the occasion or by reason of the functions entrusted to him.
Dra. dela Llana, on October 16, 2000, demanded from Rebecca compensation for her
injuries, but Rebecca refused to pay.12 Thus, on May 8, 2001, Dra. dela Llana sued
Rebecca for damages before the Regional Trial Court of Quezon City (RTC). She
alleged that she lost the mobility of her arm as a result of the vehicular accident and
claimed P150,000.00 for her medical expenses (as of the filing of the complaint) and
an average monthly income of P30,000.00 since June 2000. She further prayed for
actual, moral, and exemplary damages as well as attorneys fees. 13
In defense, Rebecca maintained that Dra. dela Llana had no cause of action against
her as no reasonable relation existed between the vehicular accident and Dra. dela
Llanas injury. She pointed out that Dra. dela Llanas illness became manifest one
month and one week from the date of the vehicular accident. As a counterclaim, she
demanded the payment of attorneys fees and costs of the suit. 14
The RTC thus awarded Dra. dela Llana the amounts of P570,000.00 as actual
damages,
P250,000.00
as
moral
damages,
and
the
cost
of
the
suit.22chanroblesvirtualawlibrary
CA Ruling
At the trial, Dra. dela Llana presented herself as an ordinary witness15 and Joel as a
hostile witness.16Dra. dela Llana reiterated that she lost the mobility of her arm
because of the vehicular accident. To prove her claim, she identified and
authenticated a medical certificate dated November 20, 2000issued by Dr.
Milla. The medical certificate stated that Dra. dela Llana suffered from a whiplash
injury. It also chronicled her clinical history and physical examinations. 17 Meanwhile,
Joel testified that his truck hit the car because the trucks brakes got stuck. 18
In a decision dated February 11, 2008, the CA reversed the RTC ruling. It held that
Dra. dela Llana failed to establish a reasonable connection between the vehicular
accident
and
her
whiplash
injury
by
preponderance
of
evidence.
Citing Nutrimix Feeds Corp. v. Court of Appeals,23 it declared that courts will not
hesitate to rule in favor of the other party if there is no evidence or the evidence is
too slight to warrant an inference establishing the fact in issue. It noted that the
interval between the date of the collision and the date when Dra. dela Llana began to
suffer the symptoms of her illness was lengthy. It concluded that this interval raised
doubts on whether Joels reckless driving and the resulting collision in fact caused
Dra.
dela
Llanas
injury.
In defense, Rebecca testified that Dra. dela Llana was physically fit and strong when
they met several days after the vehicular accident. She also asserted that she
observed the diligence of a good father of a family in the selection and supervision of
Joel. She pointed out that she required Joel to submit a certification of good moral
character as well as barangay, police, and NBI clearances prior to his employment.
She also stressed that she only hired Primero after he successfully passed the driving
skills test conducted by Alberto Marcelo, a licensed driver-mechanic. 19
It also declared that courts cannot take judicial notice that vehicular accidents cause
whiplash injuries. It observed that Dra. dela Llana did not immediately visit a hospital
to check if she sustained internal injuries after the accident. Moreover, her failure to
present expert witnesses was fatal to her claim. It also gave no weight to the medical
certificate. The medical certificate did not explain how and why the vehicular
accident caused the injury.24chanroblesvirtualawlibrary
Alberto also took the witness stand. He testified that he checked the truck in the
morning of March 30, 2000. He affirmed that the truck was in good condition prior to
the vehicular accident. He opined that the cause of the vehicular accident was a
damaged compressor. According to him, the absence of air inside the tank damaged
the compressor. 20chanroblesvirtualawlibrary
The Petition
18
obligations

of Court. We can only review the presented evidence, by way of exception, when the
conflict exists in findings of the RTC and the CA. 27 We see this exceptional situation
here and thus accordingly examine the relevant evidence presented before the trial
court.
Dra. dela Llana points out in her petition before this Court that Nutrimix is
inapplicable in the present case. She stresses that Nutrimix involved the application
of Article 1561 and 1566 of the Civil Code, provisions governing hidden defects.
Furthermore, there was absolutely no evidence in Nutrimix that showed that
poisonous animal feeds were sold to the respondents in that case.
Dra. dela Llana failed to establish her case by preponderance of evidence
As opposed to the respondents in Nutrimix, Dra. dela Llana asserts that she has
established by preponderance of evidence that Joels negligent act was the
proximate cause of her whiplash injury.First, pictures of her damaged car show that
the collision was strong. She posits that it can be reasonably inferred from these
pictures that the massive impact resulted in her whiplash injury.Second, Dr. Milla
categorically stated in the medical certificate that Dra. dela Llana suffered from
whiplash injury. Third, her testimony that the vehicular accident caused the injury is
credible
because
she
was
a
surgeon.
Article 2176 of the Civil Code provides that [w]hoever by act or omission causes
damage to another, there being fault or negligence, is obliged to pay for the damage
done. Such fault or negligence, if there is no pre-existing contractual relation
between the parties, is a quasi-delict. Under this provision, the elements necessary
to establish a quasi-delict case are: (1) damages to the plaintiff; (2) negligence, by
act or omission, of the defendant or by some person for whose acts the defendant
must respond, was guilty; and (3) the connection of cause and effect between
such negligence and the damages. 28 These elements show that the source of
obligation in a quasi-delict case is the breach or omission of mutual duties that
civilized society imposes upon its members, or which arise from non-contractual
relations of certain members of society to others.29ChanRoblesVirtualawlibrary
Dra. dela Llana further asserts that the medical certificate has probative value. Citing
several cases, she posits that an uncorroborated medical certificate is credible if
uncontroverted.25 She points out that expert opinion is unnecessary if the opinion
merely relates to matters of common knowledge. She maintains that a judge is
qualified as an expert to determine the causation between Joels reckless driving and
her whiplash injury. Trial judges are aware of the fact that whiplash injuries are
common in vehicular collisions.
Based on these requisites, Dra. dela Llana must first establish by

preponderance of evidencethe three elements of quasi-delict before we
determine Rebeccas liability as Joels employer.She should show the chain of
causation between Joels reckless driving and her whiplash injury. Only after she has
laid this foundation can the presumption - that Rebecca did not exercise the
diligence of a good father of a family in the selection and supervision of Joel arise.30 Once negligence, the damages and the proximate causation are established,
this Court can then proceed with the application and the interpretation of the fifth
paragraph of Article 2180 of the Civil Code. 31 Under Article 2176 of the Civil Code, in
relation with the fifth paragraph of Article 2180, an action predicated on an
employees act or omission may be instituted against the employer who is held liable
for the negligent act or omission committed by his employee. 32 The rationale for
these graduated levels of analyses is that it is essentially the wrongful or negligent
act or omission itself which creates the vinculum juris in extra-contractual
obligations.33
The Respondents Position

In her Comment,26 Rebecca points out that Dra. dela Llana raises a factual issue
which is beyond the scope of a petition for review on certiorari under Rule 45 of the
Rules of Court. She maintains that the CAs findings of fact are final and conclusive.
Moreover, she stresses that Dra. dela Llanas arguments are not substantial to merit
this Courts consideration.
The Issue
In civil cases, a party who alleges a fact has the burden of proving it. He who
alleges has the burden of proving his allegation by preponderance of
evidence or greater weight of credible evidence. 34The reason for this rule is
that bare allegations, unsubstantiated by evidence, are not equivalent to proof. In
short,
mere
allegations
are
not
evidence.35
The sole issue for our consideration in this case is whether Joels reckless driving is
the proximate cause of Dra. dela Llanas whiplash injury.
Our Ruling
We
find
the
petition
unmeritorious.
In the present case, the burden of proving the proximate causation between Joels
negligence and Dra. dela Llanas whiplash injury rests on Dra. dela Llana. She must
establish by preponderance of evidence that Joels negligence, in its natural and
continuous sequence, unbroken by any efficient intervening cause, produced her
whiplash injury, and without which her whiplash injury would not have occurred. 36
The Supreme Court may review questions of fact in a petition for review
on certiorari when the findings of fact by the lower courts are conflicting
The issue before us involves a question of fact and this Court is not a trier of facts. As
a general rule, the CAs findings of fact are final and conclusive and this Court will
not review them on appeal. It is not the function of this Court to examine, review or
evaluate the evidence in a petition for review on certiorariunder Rule 45 of the Rules
Notably, Dra. dela Llana anchors her claim mainly on three pieces of evidence: (1)
the pictures of her damaged car, (2) the medical certificate dated November 20,
19
obligations
2000, and (3) her testimonial evidence. However, none of these pieces of evidence
show the causal relation between the vehicular accident and the whiplash injury. In
other words, Dra. dela Llana, during trial, did not adduce the factum
probans or the evidentiary facts by which the factum probandum or the
ultimate
fact
can
be
established,
as
fully
discussed
below.37ChanRoblesVirtualawlibrary
Court:
Witness:Her name is Dra. Rosalinda Milla. She is a Rehabilitation Medicine Specialist.
A. The pictures of the damaged car only demonstrate the impact of the
collision
Atty.
You mentioned that this Dra. Rosalinda Milla made or issued a
Yusingc medical certificate. What relation does this medical certificate,
o:
marked as Exhibit H have to do with that certificate, you said was
made by Dra. Milla?
Dra. dela Llana contends that the pictures of the damaged car show that the massive
impact of the collision caused her whiplash injury. We are not persuaded by this bare
claim. Her insistence that these pictures show the causation grossly belies common
logic. These pictures indeed demonstrate the impact of the collision. However, it is a
far-fetched assumption that the whiplash injury can also be inferred from these
pictures.
Witness:This is the medical certificate that Dra. Milla made out for me.
Atty.
Your Honor, this has been marked as Exhibit H.
Yusingc
o:
B. The medical certificate cannot be considered because it was not

admitted
in
evidence
Furthermore, the medical certificate, marked as Exhibit H during trial, should not
be considered in resolving this case for the reason that it was not admitted in
evidence by the RTC in an order dated September 23, 2004. 38 Thus, the CA erred in
even considering this documentary evidence in its resolution of the case. It is a basic
rule that evidence which has not been admitted cannot be validly considered by the
courts
in
arriving
at
their
judgments.
Atty.
What other medical services were done on you, Dra. dela Llana, as a result
Yusingc of that feeling, that pain that you felt in your left arm?
o:
Witness:Well, aside from the medications and physical therapy, a re-evaluation of my
condition after three months indicated that I needed surgery.
However, even if we consider the medical certificate in the disposition of this case,
the medical certificate has no probative value for being hearsay. It is a basic rule that
evidence, whether oral or documentary, is hearsay if its probative value is not based
on the personal knowledge of the witness but on the knowledge of another person
who is not on the witness stand.39 Hearsay evidence, whether objected to or not,
cannot be given credence40 except in very unusual circumstance that is not found in
the present case. Furthermore, admissibility of evidence should not be equated with
weight of evidence. The admissibility of evidence depends on its relevance and
competence, while the weight of evidence pertains to evidence already admitted and
its tendency to convince and persuade. Thus, a particular item of evidence may be
admissible, but its evidentiary weight depends on judicial evaluation within the
guidelines
provided
by
the
Rules
of
Court.41
Atty.
Did you undergo this surgery?
Yusingc
o:
Witness:So, on October 19, I underwent surgery on my neck, on my spine.
Atty.
And, what was the result of that surgical operation?
Yusingc
o:
Witness:Well, the operation was to relieve the compression on my nerve, which did
not resolve by the extensive and prolonged physical therapy that I
underwent for more than three months.42 (emphasis ours)
During trial, Dra. dela Llana testified:

Q:
Did your physician tell you, more or less, what was the reason why you were
feeling that pain in your left arm?
A:
Well, I got a certificate from her and in that certificate, she stated
that my condition was due to a compression of the nerve, which
supplied my left arm and my left hand.
By the way, what is the name of this physician, Dra.?
Evidently, it was Dr. Milla who had personal knowledge of the contents of the medical
certificate. However, she was not presented to testify in court and was not even able
to identify and affirm the contents of the medical certificate. Furthermore, Rebecca
was deprived of the opportunity to cross-examine Dr. Milla on the accuracy and
veracity
of
her
findings.
20
obligations
We also point out in this respect that the medical certificate nonetheless did not
explain the chain of causation in fact between Joels reckless driving and Dra. dela
Llanas whiplash injury. It did not categorically state that the whiplash injury was a
result of the vehicular accident. A perusal of the medical certificate shows that it only
attested to her medical condition, i.e., that she was suffering from whiplash injury.
However, the medical certificate failed to substantially relate the vehicular accident
to Dra. dela Llanas whiplash injury. Rather, the medical certificate
only chronicled her
medical
history
and
physical
examinations.
The Supreme Court cannot take judicial notice that vehicular accidents
cause
whiplash
injuries
Indeed, a perusal of the pieces of evidence presented by the parties before the trial
court shows thatDra. dela Llana did not present any testimonial or
documentary evidence that directly shows the causal relation between the
vehicular accident and Dra. dela Llanas injury. Her claim that Joels negligence
caused her whiplash injury was not established because of the deficiency of the
presented evidence during trial. We point out in this respect that courts cannot take
judicial notice that vehicular accidents cause whiplash injuries. This proposition is not
public knowledge, or is capable of unquestionable demonstration, or ought to be
known to judges because of their judicial functions.46 We have no expertise in the
field of medicine. Justices and judges are only tasked to apply and interpret the law
on the basis of the parties pieces of evidence and their corresponding legal
arguments.
C. Dra. dela Llanas opinion that Joels negligence caused her whiplash
injury
has
no
probative
value
Interestingly, the present case is peculiar in the sense that Dra. dela Llana, as the
plaintiff in this quasi-delict case, was the lone physician-witness during trial.
Significantly, she merely testified as anordinary witness before the trial court. Dra.
dela Llana essentially claimed in her testimony that Joels reckless driving caused her
whiplash
injury.
In sum, Dra. dela Llana miserably failed to establish her case by preponderance of
evidence. While we commiserate with her, our solemn duty to independently and
impartially assess the merits of the case binds us to rule against Dra. dela Llanas
favor. Her claim, unsupported by preponderance of evidence, is merely a bare
assertion
and
has
no
leg
to
stand
on.
Despite the fact that Dra. dela Llana is a physician and even assuming that she is an
expert in neurology, we cannot give weight to her opinion that Joels reckless driving
caused her whiplash injury without violating the rules on evidence.
Under the Rules of Court, there is a substantial difference between an ordinary
witness and an expert witness. The opinion of an ordinary witness may be received in
evidence regarding: (a) the identity of a person about whom he has adequate
knowledge; (b) a handwriting with which he has sufficient familiarity; and (c) the
mental sanity of a person with whom he is sufficiently acquainted. Furthermore, the
witness may also testify on his impressions of the emotion, behavior, condition or
appearance of a person.43 On the other hand, the opinion of an expert witness may
be received in evidence on a matter requiring special knowledge, skill, experience or
training
which
he
shown
to
possess. 44
WHEREFORE, premises considered, the assailed Decision dated February 11, 2008
and Resolution dated March 31, 2008 of the Court of Appeals are
hereby AFFIRMED and
the
petition
is
herebyDENIED for
lack
of
merit.chanRoblesvirtualLawlibrary
SO ORDERED.
G.R. No. 102007 September 2, 1994
PEOPLE
OF
THE
PHILIPPINES, plaintiff-appellee,
vs.
ROGELIO BAYOTAS y CORDOVA, accused-appellant.
However, courts do not immediately accord probative value to an admitted expert

testimony, much less to an unobjected ordinary testimony respecting special
knowledge. The reason is that the probative value of an expert testimony does not
lie in a simple exposition of the experts opinion. Rather, its weight lies in the
assistance that the expert witness may afford the courts by demonstrating the facts
which serve as a basis for his opinion and the reasons on which the logic of his
conclusions
is
founded.45
In Criminal Case No. C-3217 filed before Branch 16, RTC Roxas City, Rogelio Bayotas
y Cordova was charged with Rape and eventually convicted thereof on June 19, 1991
in a decision penned by Judge Manuel E. Autajay. Pending appeal of his conviction,
Bayotas
died
on
February
4,
1992
at
the National Bilibid Hospital due to cardio respiratory arrest secondary to hepatic
encephalopathy secondary to hipato carcinoma gastric malingering. Consequently,
the Supreme Court in its Resolution of May 20, 1992 dismissed the criminal aspect of
the appeal. However, it required the Solicitor General to file its comment with regard
to Bayotas' civil liability arising from his commission of the offense charged.
In the present case, Dra. dela Llanas medical opinion cannot be given probative
value for the reason that she was not presented as an expert witness. As an ordinary
witness, she was not competent to testify on the nature, and the cause and effects of
whiplash
injury.
Furthermore,
we
In his comment, the Solicitor General expressed his view that the death of accusedappellant did not extinguish his civil liability as a result of his commission of the
offense charged. The Solicitor General, relying on the case ofPeople
v. Sendaydiego 1 insists that the appeal should still be resolved for the purpose of
reviewing his conviction by the lower court on which the civil liability is based.
emphasize that Dra. dela Llana, during trial, nonetheless did not provide a medical
explanation on the nature as well as the cause and effects of whiplash injury in her
testimony.
21
obligations
Counsel for the accused-appellant, on the other hand, opposed the view of the
Solicitor General arguing that the death of the accused while judgment of conviction
is pending appeal extinguishes both his criminal and civil penalties. In support of his
position, said counsel invoked the ruling of the Court of Appeals in People v. Castillo
and Ocfemia 2 which held that the civil obligation in a criminal case takes root in the
criminal liability and, therefore, civil liability is extinguished if accused should die
before final judgment is rendered.
SENTENCIA FIRME. La sentencia que adquiere la fuerza de las definitivas por no

haberse utilizado por las partes litigantes recurso alguno contra ella dentro de los
terminos y plazos legales concedidos al efecto.
"Sentencia firme" really should be understood as one which is definite. Because, it is
only when judgment is such that, as Medina y Maranon puts it, the crime is
confirmed "en condena determinada;" or, in the words of Groizard, the guilt of the
accused becomes "una verdad legal." Prior thereto, should the accused die,
according to Viada, "no hay legalmente, en tal caso, ni reo, ni delito, ni
responsabilidad criminal de ninguna clase." And, as Judge Kapunan well explained,
when a defendant dies before judgment becomes executory, "there cannot be any
determination by final judgment whether or not the felony upon which the civil action
might arise exists," for the simple reason that "there is no party defendant." (I
Kapunan, Revised Penal Code, Annotated, p. 421. Senator Francisco holds the same
view. Francisco, Revised Penal Code, Book One, 2nd ed., pp. 859-860)
We are thus confronted with a single issue: Does death of the accused pending
appeal of his conviction extinguish his civil liability?
In the aforementioned case of People v. Castillo, this issue was settled in the
affirmative. This same issue posed therein was phrased thus: Does the death of
Alfredo Castillo affect both his criminal responsibility and his civil liability as a
consequence of the alleged crime?
It resolved this issue thru the following disquisition:
The legal import of the term "final judgment" is similarly reflected in the Revised
Penal Code. Articles 72 and 78 of that legal body mention the term "final judgment"
in the sense that it is already enforceable. This also brings to mind Section 7, Rule
116 of the Rules of Court which states that a judgment in a criminal case becomes
final "after the lapse of the period for perfecting an appeal or when the sentence has
been partially or totally satisfied or served, or the defendant has expressly waived in
writing his right to appeal."
Article 89 of the Revised Penal Code is the controlling statute. It reads, in part:
Art. 89. How criminal liability is totally extinguished. Criminal liability is totally
extinguished:
1. By the death of the convict, as to the personal penalties; and as to the pecuniary
penalties liability therefor is extinguished only when the death of the offender occurs
before final judgment;
By fair intendment, the legal precepts and opinions here collected funnel down to
one positive conclusion: The term final judgment employed in the Revised Penal
Code means judgment beyond recall. Really, as long as a judgment has not become
executory, it cannot be truthfully said that defendant is definitely guilty of the felony
charged against him.
With reference to Castillo's criminal liability, there is no question. The law is plain.
Statutory construction is unnecessary. Said liability is extinguished.
The civil liability, however, poses a problem. Such liability is extinguished only when
the death of the offender occurs before final judgment. Saddled upon us is the task
of ascertaining the legal import of the term "final judgment." Is it final judgment as
contradistinguished from an interlocutory order? Or, is it a judgment which is final
and executory?
Not that the meaning thus given to final judgment is without reason. For where, as in
this case, the right to institute a separate civil action is not reserved, the decision to
be rendered must, of necessity, cover "both the criminal and the civil aspects of the
case." People vs. Yusico (November 9, 1942), 2 O.G., No. 100, p. 964. See
also: People vs. Moll, 68 Phil., 626, 634; Francisco, Criminal Procedure, 1958 ed., Vol.
I, pp. 234, 236. Correctly, Judge Kapunan observed that as "the civil action is based
solely on the felony committed and of which the offender might be found guilty, the
death of the offender extinguishes the civil liability." I Kapunan, Revised Penal Code,
Annotated, supra.
We go to the genesis of the law. The legal precept contained in Article 89 of the
Revised Penal Code heretofore transcribed is lifted from Article 132 of the Spanish El
Codigo Penal de 1870 which, in part, recites:
La responsabilidad penal se extingue.
Here is the situation obtaining in the present case: Castillo's criminal liability is out.
His civil liability is sought to be enforced by reason of that criminal liability. But then,
if we dismiss, as we must, the criminal action and let the civil aspect remain, we will
be faced with the anomalous situation whereby we will be called upon to clamp civil
liability in a case where the source thereof criminal liability does not exist. And,
as
was
well
stated
in Bautista,
et
al. vs. Estrella,
et
al.,
CA-G.R.
No. 19226-R, September 1, 1958, "no party can be found and held criminally liable in
a civil suit," which solely would remain if we are to divorce it from the criminal
proceeding."
1. Por la muerte del reo en cuanto a las penas personales siempre, y respecto a las
pecuniarias, solo cuando a su fallecimiento no hubiere recaido sentencia firme.
xxx xxx xxx
The code of 1870 . . . it will be observed employs the term "sentencia firme." What is
"sentencia firme" under the old statute?
XXVIII Enciclopedia Juridica Espaola, p. 473, furnishes the ready answer: It says:
22
obligations
This ruling of the Court of Appeals in the Castillo case 3 was adopted by the Supreme
Court in the cases of People of the Philippines v. Bonifacio Alison, et al., 4 People of
the Philippines v. Jaime Jose, et al. 5 and People of the Philippines v.Satorre 6 by
dismissing the appeal in view of the death of the accused pending appeal of said
cases.
civil liability springs neither solely nor originally from the crime itself but from a civil
contract of purchase and sale. (Emphasis ours)
xxx xxx xxx
In the above case, the court was convinced that the civil liability of the accused who
was charged with estafa could likewise trace its genesis to Articles 19, 20 and 21 of
the Civil Code since said accused had swindled the first and second vendees of the
property subject matter of the contract of sale. It therefore concluded:
"Consequently, while the death of the accused herein extinguished his criminal
liability including fine, his civil liability based on the laws of human relations
remains."
As held by then Supreme Court Justice Fernando in the Alison case:

The death of accused-appellant Bonifacio Alison having been established, and
considering that there is as yet no final judgment in view of the pendency of the
appeal, the criminal and civil liability of the said accused-appellant Alison was
extinguished by his death (Art. 89, Revised Penal Code; Reyes' Criminal Law, 1971
Rev. Ed., p. 717, citing People v. Castillo and Ofemia C.A., 56 O.G. 4045);
consequently, the case against him should be dismissed.
Thus it allowed the appeal to proceed with respect to the civil liability of the accused,
notwithstanding the extinction of his criminal liability due to his death pending
appeal of his conviction.
On the other hand, this Court in the subsequent cases of Buenaventura Belamala
v. Marcelino Polinar 7 andLamberto Torrijos v. The Honorable Court of Appeals 8 ruled
differently. In the former, the issue decided by this court was: Whether the civil
liability of one accused of physical injuries who died before final judgment is
extinguished by his demise to the extent of barring any claim therefore against his
estate. It was the contention of the administrator-appellant therein that the death of
the accused prior to final judgment extinguished all criminal and civil liabilities
resulting from the offense, in view of Article 89, paragraph 1 of the Revised Penal
Code. However, this court ruled therein:
To further justify its decision to allow the civil liability to survive, the court relied on
the following ratiocination: Since Section 21, Rule 3 of the Rules of Court 9 requires
the dismissal of all money claims against the defendant whose death occurred prior
to the final judgment of the Court of First Instance (CFI), then it can be inferred that
actions for recovery of money may continue to be heard on appeal, when the death
of the defendant supervenes after the CFI had rendered its judgment. In such case,
explained this tribunal, "the name of the offended party shall be included in the title
of the case as plaintiff-appellee and the legal representative or the heirs of the
deceased-accused should be substituted as defendants-appellants."
We see no merit in the plea that the civil liability has been extinguished, in view of
the provisions of the Civil Code of the Philippines of 1950 (Rep. Act No. 386) that
became operative eighteen years after the revised Penal Code. As pointed out by the
Court below, Article 33 of the Civil Code establishes a civil action for damages on
account of physical injuries, entirely separate and distinct from the criminal action.
It is, thus, evident that as jurisprudence evolved from Castillo to Torrijos, the rule
established was that the survival of the civil liability depends on whether the same
can be predicated on sources of obligations other than delict. Stated differently, the
claim for civil liability is also extinguished together with the criminal action if it were
solely based thereon, i.e., civil liability ex delicto.
Art. 33. In cases of defamation, fraud, and physical injuries, a civil action for
damages, entirely separate and distinct from the criminal action, may be brought by
the injured party. Such civil action shall proceed independently of the criminal
prosecution, and shall require only a preponderance of evidence.
However, the Supreme Court in People v. Sendaydiego, et al. 10 departed from this
long-established principle of law. In this case, accused Sendaydiego was charged
with and convicted by the lower court of malversation thru falsification of public
documents. Sendaydiego's death supervened during the pendency of the appeal of
his conviction.
Assuming that for lack of express reservation, Belamala's civil action for damages
was to be considered instituted together with the criminal action still, since both
proceedings were terminated without final adjudication, the civil action of the
offended party under Article 33 may yet be enforced separately.
This court in an unprecedented move resolved to dismiss Sendaydiego's appeal but

only to the extent of his criminal liability. His civil liability was allowed to survive
although it was clear that such claim thereon was exclusively dependent on the
criminal action already extinguished. The legal import of such decision was for the
court to continue exercising appellate jurisdiction over the entire appeal, passing
upon the correctness of Sendaydiego's conviction despite dismissal of the criminal
action, for the purpose of determining if he is civilly liable. In doing so, this Court
issued a Resolution of July 8, 1977 stating thus:
In Torrijos, the Supreme Court held that:

xxx xxx xxx
It should be stressed that the extinction of civil liability follows the extinction of the
criminal liability under Article 89, only when the civil liability arises from the criminal
act as its only basis. Stated differently, where the civil liability does not exist
independently of the criminal responsibility, the extinction of the latter by
death, ipso facto extinguishes the former, provided, of course, that death supervenes
before final judgment. The said principle does not apply in instant case wherein the
The claim of complainant Province of Pangasinan for the civil liability survived
Sendaydiego because his death occurred after final judgment was rendered by the
Court of First Instance of Pangasinan, which convicted him of three complex crimes of
23
obligations
malversation through falsification and ordered him to indemnify the Province in the
total sum of P61,048.23 (should be P57,048.23).
When a separate civil action is brought to demand civil liability arising from a
criminal offense, and no criminal proceedings are instituted during the pendency of
the civil case, a preponderance of evidence shall likewise be sufficient to prove the
act complained of.
The civil action for the civil liability is deemed impliedly instituted with the criminal
action in the absence of express waiver or its reservation in a separate action (Sec.
1, Rule 111 of the Rules of Court). The civil action for the civil liability is separate and
distinct from the criminal action (People and Manuel vs. Coloma, 105 Phil. 1287; Roa
vs. De la Cruz, 107 Phil. 8).
Clearly, the text of Article 30 could not possibly lend support to the ruling
in Sendaydiego. Nowhere in its text is there a grant of authority to continue
exercising appellate jurisdiction over the accused's civil liability ex delicto when his
death supervenes during appeal. What Article 30 recognizes is an alternative and
separate civil action which may be brought to demand civil liability arising from a
criminal offense independently of any criminal action. In the event that no criminal
proceedings are instituted during the pendency of said civil case, the quantum of
evidence needed to prove the criminal act will have to be that which is compatible
with civil liability and that is, preponderance of evidence and not proof of guilt
beyond reasonable doubt. Citing or invoking Article 30 to justify the survival of the
civil action despite extinction of the criminal would in effect merely beg the question
of whether civil liability ex delictosurvives upon extinction of the criminal action due
to death of the accused during appeal of his conviction. This is because whether
asserted
in
the criminal action or in a separate civil action, civil liability ex delicto is extinguished
by the death of the accused while his conviction is on appeal. Article 89 of the
Revised Penal Code is clear on this matter:
When the action is for the recovery of money and the defendant dies before final
judgment in the Court of First Instance, it shall be dismissed to be prosecuted in the
manner especially provided in Rule 87 of the Rules of Court (Sec. 21, Rule 3 of the
Rules of Court).
The implication is that, if the defendant dies after a money judgment had been
rendered against him by the Court of First Instance, the action survives him. It may
be continued on appeal (Torrijos vs. Court of Appeals, L-40336, October 24, 1975; 67
SCRA 394).
The accountable public officer may still be civilly liable for the funds improperly
disbursed although he has no criminal liability (U.S. vs. Elvina, 24 Phil. 230; Philippine
National Bank vs. Tugab, 66 Phil. 583).
In view of the foregoing, notwithstanding the dismissal of the appeal of the deceased
Sendaydiego insofar as his criminal liability is concerned, the Court Resolved to
continue exercising appellate jurisdiction over his possible civil liability for the money
claims of the Province of Pangasinan arising from the alleged criminal acts
complained of, as if no criminal case had been instituted against him, thus making
applicable, in determining his civil liability, Article 30 of the Civil Code . . . and, for
that purpose, his counsel is directed to inform this Court within ten (10) days of the
names and addresses of the decedent's heirs or whether or not his estate is under
administration and has a duly appointed judicial administrator. Said heirs or
administrator will be substituted for the deceased insofar as the civil action for the
civil liability is concerned (Secs. 16 and 17, Rule 3, Rules of Court).
Art. 89. How criminal liability is totally extinguished. Criminal liability is totally
extinguished:
1. By the death of the convict, as to the personal penalties; and as to pecuniary
penalties, liability therefor is extinguished only when the death of the offender occurs
before final judgment;
xxx xxx xxx
However, the ruling in Sendaydiego deviated from the expressed intent of Article 89.
It allowed claims for civil liability ex delicto to survive by ipso facto treating the civil
action impliedly instituted with the criminal, as one filed under Article 30, as though
no criminal proceedings had been filed but merely a separate civil action. This had
the effect of converting such claims from one which is dependent on the outcome of
the criminal action to an entirely new and separate one, the prosecution of which
does not even necessitate the filing of criminal proceedings. 12 One would be hard
put to pinpoint the statutory authority for such a transformation. It is to be borne in
mind that in recovering civil liability ex delicto, the same has perforce to be
determined in the criminal action, rooted as it is in the court's pronouncement of the
guilt or innocence of the accused. This is but to render fealty to the intendment of
Article 100 of the Revised Penal Code which provides that "every person criminally
liable for a felony is also civilly liable." In such cases, extinction of the criminal action
due to death of the accused pending appeal inevitably signifies the concomitant
extinction of the civil liability.Mors Omnia Solvi. Death dissolves all things.
Succeeding cases 11 raising the identical issue have maintained adherence to our
ruling in Sendaydiego; in other words, they were a reaffirmance of our abandonment
of the settled rule that a civil liability solely anchored on the criminal (civil liability ex
delicto) is extinguished upon dismissal of the entire appeal due to the demise of the
accused.
But was it judicious to have abandoned this old ruling? A re-examination of our
decision in Sendaydiego impels us to revert to the old ruling.
To restate our resolution of July 8, 1977 in Sendaydiego: The resolution of the civil
action impliedly instituted in the criminal action can proceed irrespective of the
latter's extinction due to death of the accused pending appeal of his conviction,
pursuant to Article 30 of the Civil Code and Section 21, Rule 3 of the Revised Rules of
Court.
In sum, in pursuing recovery of civil liability arising from crime, the final
determination of the criminal liability is a condition precedent to the prosecution of
the civil action, such that when the criminal action is extinguished by the demise of
Article 30 of the Civil Code provides:
24
obligations
accused-appellant pending appeal thereof, said civil action cannot survive. The claim
for civil liability springs out of and is dependent upon facts which, if true, would
constitute a crime. Such civil liability is an inevitable consequence of the criminal
liability and is to be declared and enforced in the criminal proceeding. This is to be
distinguished from that which is contemplated under Article 30 of the Civil Code
which refers to the institution of a separate civil action that does not draw its life
from a criminal proceeding. The Sendaydiego resolution of July 8, 1977, however,
failed to take note of this fundamental distinction when it allowed the survival of the
civil action for the recovery of civil liability ex delicto by treating the same as a
separate civil action referred to under Article 30. Surely, it will take more than just a
summary judicial pronouncement to authorize the conversion of said civil action to
an independent one such as that contemplated under Article 30.
xxx xxx xxx
Ironically however, the main decision in Sendaydiego did not apply Article 30, the
resolution of July 8, 1977 notwithstanding. Thus, it was held in the main decision:
Said Section 21 of Rule 3 is a rule of civil procedure in ordinary civil actions. There is
neither authority nor justification for its application in criminal procedure to civil
actions instituted together with and as part of criminal actions. Nor is there any
authority in law for the summary conversion from the latter category of an ordinary
civil action upon the death of the offender. . . .
I
do
not,
however,
agree
with
the
justification
advanced
in
both Torrijos and Sendaydiego which, relying on the provisions of Section 21, Rule 3
of the Rules of Court, drew the strained implication therefrom that where the civil
liability instituted together with the criminal liabilities had already passed beyond the
judgment of the then Court of First Instance (now the Regional Trial Court), the Court
of Appeals can continue to exercise appellate jurisdiction thereover despite the
extinguishment of the component criminal liability of the deceased. This
pronouncement, which has been followed in the Court's judgments subsequent and
consonant to Torrijos and Sendaydiego, should be set aside and abandoned as being
clearly erroneous and unjustifiable.
Sendaydiego's appeal will be resolved only for the purpose of showing his criminal
liability which is the basis of the civil liability for which his estate would be liable. 13
In other words, the Court, in resolving the issue of his civil liability, concomitantly
made a determination on whether Sendaydiego, on the basis of evidenced adduced,
was indeed guilty beyond reasonable doubt of committing the offense charged. Thus,
it upheld Sendaydiego's conviction and pronounced the same as the source of his
civil liability. Consequently, although Article 30 was not applied in the final
determination of Sendaydiego's civil liability, there was a reopening of the criminal
action already extinguished which served as basis for Sendaydiego's civil liability. We
reiterate: Upon death of the accused pending appeal of his conviction, the criminal
action is extinguished inasmuch as there is no longer a defendant to stand as the
accused; the civil action instituted therein for recovery of civil liability ex
delicto is ipso facto extinguished, grounded as it is on the criminal.
Moreover, the civil action impliedly instituted in a criminal proceeding for recovery of
civil liability ex delicto can hardly be categorized as an ordinary money claim such as
that referred to in Sec. 21, Rule 3 enforceable before the estate of the deceased
accused.
Ordinary money claims referred to in Section 21, Rule 3 must be viewed in light of
the provisions of Section 5, Rule 86 involving claims against the estate, which
in Sendaydiego was held liable for Sendaydiego's civil liability. "What are
contemplated in Section 21 of Rule 3, in relation to Section 5 of Rule 86, 14 are
contractual money claims while the claims involved in civil liability ex delicto may
include even the restitution of personal or real property." 15 Section 5, Rule 86
provides an exclusive enumeration of what claims may be filed against the estate.
These are: funeral expenses, expenses for the last illness, judgments for money and
claim arising from contracts, expressed or implied. It is clear that money claims
arising from delict do not form part of this exclusive enumeration. Hence, there could
be no legal basis in (1) treating a civil action ex delicto as an ordinary contractual
money claim referred to in Section 21, Rule 3 of the Rules of Court and (2) allowing it
to survive by filing a claim therefor before the estate of the deceased accused.
Rather, it should be extinguished upon extinction of the criminal action engendered
by the death of the accused pending finality of his conviction.
Section 21, Rule 3 of the Rules of Court was also invoked to serve as another basis
for the Sendaydiego resolution of July 8, 1977. In citing Sec. 21, Rule 3 of the Rules of
Court, the Court made the inference that civil actions of the type involved
in Sendaydiego consist of money claims, the recovery of which may be continued on
appeal if defendant dies pending appeal of his conviction by holding his estate liable
therefor. Hence, the Court's conclusion:
"When the action is for the recovery of money" "and the defendant dies before final
judgment in the court of First Instance, it shall be dismissed to be prosecuted in the
manner especially provided" in Rule 87 of the Rules of Court (Sec. 21, Rule 3 of the
Rules of Court).
Accordingly, we rule: if the private offended party, upon extinction of the civil
liability ex delicto desires to recover damages from the same act or omission
complained of, he must subject to Section 1, Rule 111 16 (1985 Rules on Criminal
Procedure as amended) file a separate civil action, this time predicated not on the
felony previously charged but on other sources of obligation. The source of obligation
upon which the separate civil action is premised determines against whom the same
shall be enforced.
The implication is that, if the defendant dies after a money judgment had been
rendered against him by the Court of First Instance, the action survives him. It may
be continued on appeal.
Sadly, reliance on this provision of law is misplaced. From the standpoint of
procedural law, this course taken inSendaydiego cannot be sanctioned. As correctly
observed by Justice Regalado:
If the same act or omission complained of also arises from quasi-delict or may, by
provision of law, result in an injury to person or property (real or personal), the
25
obligations
separate civil action must be filed against the executor or administrator 17 of the
estate of the accused pursuant to Sec. 1, Rule 87 of the Rules of Court:
executor/administrator or the estate of the accused, depending on the source of

obligation upon which the same is based as explained above.
Sec. 1. Actions which may and which may not be brought against executor or
administrator. No action upon a claim for the recovery of money or debt or
interest thereon shall be commenced against the executor or administrator; but
actions to recover real or personal property, or an interest therein, from the estate,
or to enforce a lien thereon, and actions to recover damages for an injury to person
or property, real or personal, may be commenced against him.
4. Finally, the private offended party need not fear a forfeiture of his right to file this
separate civil action by prescription, in cases where during the prosecution of the
criminal action and prior to its extinction, the private-offended party instituted
together therewith the civil action. In such case, the statute of limitations on the civil
liability is deemed interrupted during the pendency of the criminal case, conformably
with provisions of Article 1155 21 of the Civil Code, that should thereby avoid any
apprehension on a possible privation of right by prescription. 22
This is in consonance with our ruling in Belamala 18 where we held that, in recovering
damages for injury to persons thru an independent civil action based on Article 33 of
the Civil Code, the same must be filed against the executor or administrator of the
estate of deceased accused and not against the estate under Sec. 5, Rule 86
because this rule explicitly limits the claim to those for funeral expenses, expenses
for the last sickness of the decedent, judgment for money and claims arising from
contract, express or implied. Contractual money claims, we stressed, refers only
to purely personal obligations other than those which have their source in delict or
tort.
Applying this set of rules to the case at bench, we hold that the death of appellant
Bayotas extinguished his criminal liability and the civil liability based solely on the
act complained of, i.e., rape. Consequently, the appeal is hereby dismissed without
qualification.
WHEREFORE, the appeal of the late Rogelio Bayotas is DISMISSED with costs de
oficio.
SO ORDERED.
Conversely, if the same act or omission complained of also arises from contract, the
separate civil action must be filed against the estate of the accused, pursuant to Sec.
5, Rule 86 of the Rules of Court.
G.R. No. 82562 April 11, 1997

LYDIA VILLEGAS, MA TERESITA VILLEGAS, ANTONIO VILLEGAS, JR., and
ANTONIETTE
VILLEGAS,petitioners,
vs.
THE COURT OF APPEALS, PEOPLE OF THE PHILIPPINES and ANTONIO V.
RAQUIZA, respondents.
From this lengthy disquisition, we summarize our ruling herein:

1. Death of the accused pending appeal of his conviction extinguishes his criminal
liability as well as the civil liability based solely thereon. As opined by Justice
Regalado, in this regard, "the death of the accused prior to final judgment terminates
his criminal liability and only the civil liability directly arising from and based solely
on the offense committed, i.e., civil liability ex delicto in senso strictiore."
G.R. No. 82592 April 11, 1997

ANTONIO
V.
RAQUIZA, petitioner,
vs.
COURT OF APPEALS, LYDIA A. VILLEGAS, ANTONIO VILLEGAS, JR., MA.
ANTONETTE VILLEGAS, MA. LYDIA VILLEGAS and ESTATE OF ANTONIO J.
VILLEGAS, respondents.
2. Corollarily, the claim for civil liability survives notwithstanding the death of
accused, if the same may also be predicated on a source of obligation other than
delict. 19 Article 1157 of the Civil Code enumerates these other sources of obligation
from which the civil liability may arise as a result of the same act or omission:
a) Law 20
This case originated from a libel suit filed by then Assemblyman Antonio V. Raquiza
against then Manila Mayor Antonio J. Villegas, who allegedly publicly imputed to him
acts constituting violations of the Anti-Graft and Corrupt Practices Act. He did this on
several occasions in August 1968 through (a) a speech before the Lion's Club of
Malasiqui, Pangasinan on August 10; (b) public statements in Manila on August 13
and in Davao on August 17, which was coupled with a radio-TV interview; and (c) a
public statement shortly prior to his appearance before the Senate Committee on
Public Works (the Committee) on August 20 to formally submit a letter-complaint
implicating Raquiza, among other government officials.
b) Contracts
c) Quasi-contracts
d) . . .
e) Quasi-delicts
3. Where the civil liability survives, as explained in Number 2 above, an action for
recovery therefor may be pursued but only by way of filing a separate civil action
and subject to Section 1, Rule 111 of the 1985 Rules on Criminal Procedure as
amended. This separate civil action may be enforced either against the
The Committee, however, observed that all the allegations in the complaint were
based mainly on the uncorroborated testimony of a certain Pedro U. Fernandez,
whose credibility turned out to be highly questionable. Villegas also failed to submit
26
obligations
the original copies of his documentary evidence. Thus, after thorough investigation,
Raquiza was cleared of all charges by the Committee. 1 All these acts of political
grandstanding received extensive media coverage.
On March 15, 1988, the Court of Appeals rendered a decision affirming the trial
court's judgment modified only with respect to the award of damages which was
reduced to P2 million representing P1.5 million, P300,000.00, and P200,000.00 in
moral exemplary and actual damages, respectively. Both parties elevated said
decision to this Court for review
On July 25, 1969, an information for libel was filed by the Office of the City Fiscal of
Manila with the then Court of First Instance of Manila against Villegas who denied the
charge. After losing in the 1971 elections, Villegas left for the United States where he
stayed until his death on November 16, 1984. Nevertheless, trial proceeded
on absentiaby the time of his death the in 1984, the prosecution had already rested
its case Two months after notice of his death, the court issued an order dismissing
the crimal aspect of the case but reserving the right to resolve its civil aspect. No
memorandum was ever filed in his behalf.
In their petition (G.R. No. 82562), the Heirs once again raise the very same issues
brought before the Court of Appeals, albeit reworded. On the other hand, petitioner
Requiza (G.R. No. 82592) questions the extensions of time to file appellant's brief
granted by the appellate court to the Heirs, as well as the drastic reduction in the
award of damages.
Judge Marcelo R. Obien 2 rendered judgment on March 7, 1985, the dispositive

portion of which was amended on March 26 to read as follows:
It is immediately apparent that the focal issue in these petitions is the effect of the
death of Villegas before the case was decided by the trial court. Stated otherwise,
did the death of the accused before final judgment extinguish his civil liability?
WHEREFORE, and in view of the foregoing considerations, judgment is hereby

rendered as follows:
Fortunately, this Court has already settled this issue with the promulgation of the
case of People v. Bayotas (G.R. No. 102007) on September 2, 1994, 4 viz.:
1. The dismissal of the criminal case against Antonio J. Vlllegas, on account of his
death on November 16, 1984. is hereby reiterated.
It is thus evident that as jurisprudence evolved from Castillo 5 to Torrijos, 6 the rule
established was thatthe survival of the civil liability depends on whether the same
can be predicated on sources of obligations other than delict. Stated differently, the
claim for civil liability is also extinguished together with the criminal action if it were
solely based thereon, i.e., civil liability ex delicto.
2. Ordenng the estate of Antonio J. Villegas, represented herein by his legal heirs,
namely: Lydia A Villegas, Ma. Teresita Villegas, Antonio Villegas, Jr., Ma. Anton(i)ette
Villegas, and Ma. Lydia Villegas (sic), to pay plaintiff Antonio V. Raquiza Two Hundred
Million Pesos (P200,000,000.00), itemized as follows:
xxx xxx xxx
a) One Hundred Fifty Million Pesos (P150.000.000.00) as moral damages:
(I)n recovering damages for injury to persons thru an independent civil action based
on Article 33 of the Civil Code, the same must be filed against the executor or
administrator of the estate of deceased accused (undet Sec. 1, Rule 87, infra.) and
not against the estate under Sec. 5, Rule 86 because this rule explicitly limits the
claim to those for funeral expenses, expenses for the last sickness of the decedent,
judgment for money and claims arising from contract, express or implied. 7
b) Two Hundred Thousand Pesos (P200.000.00) as actual damages:

c) Forty-nine Million Eight Hundred Thousand Pesos (P49,800,000.00) as exemplary
damages; and
d) The cost of suit.
SO ORDERED.
xxx xxx xxx
(Amendments underscored)
From this lengthy dlsquisition, we summarize our ruling herein:
The heirs of Villegas (the Heirs), through their father's counsel, Atty. Norberto,
Quisumbing appealed the decision on these three main grounds:
1 Death of the accused pending appeal of his conviction extinguishes his criminal
liability as well as the civil liability based solely thereon As opined by Justice
Regalado, in this regard, "the death of the accused prior to final judgment terminates
his criminal liability and only the civil liability directly arising from and based solely
on the offense committed, i.e., civil liability ex delicto in senso strictiore."
1. Whether the trial court, three months after notice of the death of the accused and
before his counsel could file a memorandum in his behalf, could velidly render
judgment in the case?
2 Corollarily the claim for civil liability survives notwithstanding the death of (the)
accused, if the same may also be predicated on a source of obligation other than
delict. Article 1157 of the Civil Code enumerates these other sources of obligation
from which the civil liability may arise as a result of the same act or omission:
2. Whether in the absence of formal substitution of parties, the trial court could
validly render judgment against the heirs and estate of a deceased accused?
3 Whether, under the facts of the instant case, deceased Villegas was liable for libel,
and assuming he was, whether the damages awarded by the trial court were just and
reasonable?
a) Law
b) Contracts
27
obligations
c) Quasi-contracts
Hence, logically, the court a quo should have dismissed both actions against Vilegas
which dismissal will not, however, bar Raquiza as the private offended party from
pursuing his claim for damages against the executor or administrator of the former's
estate, notwitnstanding the fact that he did not reserve the right to institute a civil
separate civil action based on Article 33 of the Civil Code.
d) x x x x x x x x x
e) Quasi-delicts
3. Where the civil liability survives, as explained in Number 2 above, an action for
recovery therefor may be pursued but only by way of filing a separate civil action
and subject to Section 1, Rule 111 of the 1985 Rules on Criminal Procedure as
amended. 8 This separate civil action may be enforced either against the
executor/administrator o(f) the estate of the accused, depending on the source of
obligation upon which the same is based as explained above.
It cannot be argued either that to follow Bayotas would result in further delay in this
protracted litigation. This is because the resolution of the civil aspect of the case
after the dismissal of the main criminal action by the trial court was technically
defective There was no proper substitution of parties, as correctly pointed out by the
Heirs and repeatedly put in issue by Atty. Quisumbing. What should have been
followed by the court a quo was the procedure laid down in the Rules of Court,
specifically, Section 17, Rule 3, in connection with Section 1, Rule 87. The pertinent
provisions state as follws:
4. Finally, the private offended party need not fear a forfeiture of his right to file this
separate civil action by prescription, in cases where during the prosecution of the
criminal action and prior to its extinction, the private offended party instituted
together therewith the civil action. In such case, the statute of limitations on the civil
liability is deemed interrupted during the pendency of the criminal case, conformably
with (the) provisions of Article 1155 of the Civil Code, that should thereby avoid any
apprehension on a possible privation of right by prescription. (Emphasis supplied).
Rule 3
Sec.17. Death of party. After a party dies and the claim is not there
extinguished, the court shall order upon proper notice the legal representative of the
deceased to appear and to be substituted for the deceased, within a period of thirty
(30) days, or within such time as may begranted. . . . The heirs of the deceased may
be allowed to be for the deceased, without requiring the appointment of an executor
or administrator and the court may appoint guardian ad litem for the minor heirs.
The source of Villegas' civil liability in the present case is the felonious act of libel he
allegedly committed. Yet, this act could also be deemed a quasi-delict within the
purview of Article 33 9 in relation to Article 1157 of the Civil Code. If the Court ruled
in Bayotas that the death of an accused during the pendency of his appeal
extinguishes not only his criminal but also his civil liability unless the latter can be
predicated on a source of obligation other than the act or omission complained of,
with more reason should it apply to the case at bar where the accused died shortly
after the prosecution had rested its case and before he was able to submit his
memorandum and all this before any decision could even be reached by the trial
court.
Rule 87
Sec. 1. Actions which may and which may not be brought against or executor or
administrator. No action upon a claim for the recovery of money or debt or
interest thereon shall be commenced against the executor or administrator; but
actions to recover real or personal property, or an interest therein, from the estate,
or to enforce a lien thereon, and actions to recover damages for an injury to
person or property, real or personal may be commenced against him.
The Bayotas ruling, however, makes the enforcement of a deceased accused's civil
liability dependent on two factors, namely, that it be pursued by filing a separate
civil action and that it be made subject to Section 1, Rule 111 of the 1985 Rules on
Criminal Procedure, as amended. Obviously, in the case at bar, the civil action was
deemed instituted with the criminal. There was no waiver of the civil action and no
reservation of the right to institute the same, nor was it instituted prior to the
criminal action. What then is the recourse of the private offended party in a criminal
case such as this which must be dismissed in accordance with the Bayotas doctrine,
where the civil action was impliedly instituted with it?
Accordingly, the Court sees no more necessity in resolving the other issues used by
both parties in these petitions.
WHEREFORE, the petition in G.R. No. 82562 is GRANTED and the petition in G.R. No.
82592 is DENIED. The decisions of the Court of Appeals in CA-G.R. CR No. 82186
dated March 15, 1988, and of the Manila Regional Trial Court, Branch 44, dated
March 7, 1985, as amended, are hereby REVERSED and SET ASIDE, without prejudice
to the right of the private offended party Antonio V. Raquiza, to file the appropriate
civil action for damages against the executor or administrator of the estate or the
heirs of the late Antonto J. Villegas in accordance with the foregoing procedure.
The answer is likewise provided in Bayatas, thus:

Assuming that for lack of express reservation,
to be considered instituted together with
proceedings were terminated without finals
offended party under Article 33 may yet
supplied)
Belamala's civil civil for damages was

the crinimal action still, since both
adjudication the civil action of the
be enforced separately 10(Emphasis
SO ORDERED.
G.R. No. 183204
January 13, 2014
THE
METROPOLITAN
BANK
AND
TRUST
vs.
ANA GRACE ROSALES AND YO YUK TO, Respondents.
28
COMPANY, Petitioner,
obligations
Bank deposits, which are in the nature of a simple loan or mutuum, 1 must be paid
upon demand by the depositor.2
Respondent Rosales, however, denied taking part in the fraudulent and unauthorized
withdrawal from the dollar account of Liu Chiu Fang. 27 Respondent Rosales claimed
that she did not go to the bank on February 5, 2003. 28Neither did she inform
Gutierrez that Liu Chiu Fang was going to close her account. 29 Respondent Rosales
further claimed that after Liu Chiu Fang opened an account with petitioner, she lost
track of her.30 Respondent Rosales version of the events that transpired thereafter is
as follows:
This Petition for Review on Certiorari3 under Rule 45 of the Rules of Court assails the
April 2, 2008 Decision4 and the May 30, 2008 Resolution 5 of he Court of Appeals CA)
in CA-G.R. CV No. 89086.
Factual Antecedents
On February 6, 2003, she received a call from Gutierrez informing her that Liu Chiu
Fang was at the bank to close her account. 31 At noon of the same day, respondent
Rosales went to the bank to make a transaction. 32 While she was transacting with the
teller, she caught a glimpse of a woman seated at the desk of the Branch Operating
Officer, Melinda Perez (Perez). 33 After completing her transaction, respondent Rosales
approached Perez who informed her that Liu Chiu Fang had closed her account and
had already left.34 Perez then gave a copy of the Withdrawal Clearance issued by the
PLRA to respondent Rosales. 35 On June 16, 2003, respondent Rosales received a call
from Liu Chiu Fang inquiring about the extension of her PLRA Visa and her dollar
account.36 It was only then that Liu Chiu Fang found out that her account had been
closed without her knowledge.37 Respondent Rosales then went to the bank to inform
Gutierrez and Perez of the unauthorized withdrawal. 38 On June 23, 2003, respondent
Rosales and Liu Chiu Fang went to the PLRA Office, where they were informed that
the Withdrawal Clearance was issued on the basis of a Special Power of Attorney
(SPA) executed by Liu Chiu Fang in favor of a certain Richard So. 39 Liu Chiu Fang,
however, denied executing the SPA.40 The following day, respondent Rosales, Liu Chiu
Fang, Gutierrez, and Perez met at the PLRA Office to discuss the unauthorized
withdrawal.41 During the conference, the bank officers assured Liu Chiu Fang that the
money would be returned to her.42
Petitioner Metropolitan Bank and Trust Company is a domestic banking corporation

duly organized and existing under the laws of the Philippines. 6 Respondent Ana Grace
Rosales (Rosales) is the owner of China Golden Bridge Travel Services, 7 a travel
agency.8 Respondent Yo Yuk To is the mother of respondent Rosales. 9
In 2000, respondents opened a Joint Peso Account10 with petitioners Pritil-Tondo
Branch.11 As of August 4, 2004, respondents Joint Peso Account showed a balance
of P2,515,693.52.12
In May 2002, respondent Rosales accompanied her client Liu Chiu Fang, a Taiwanese
National applying for a retirees visa from the Philippine Leisure and Retirement
Authority (PLRA), to petitioners branch in Escolta to open a savings account, as
required by the PLRA.13 Since Liu Chiu Fang could speak only in Mandarin, respondent
Rosales acted as an interpreter for her.14
On March 3, 2003, respondents opened with petitioners Pritil-Tondo Branch a Joint
Dollar Account15 with an initial deposit of US$14,000.00.16
On July 31, 2003, petitioner issued a "Hold Out" order against respondents
accounts.17
On December 15, 2003, the Office of the City Prosecutor of Manila issued a
Resolution dismissing the criminal case for lack of probable cause. 43 Unfazed,
petitioner moved for reconsideration.
On September 3, 2003, petitioner, through its Special Audit Department Head

Antonio Ivan Aguirre, filed before the Office of the Prosecutor of Manila a criminal
case for Estafa through False Pretences, Misrepresentation, Deceit, and Use of
Falsified Documents, docketed as I.S. No. 03I-25014, 18 against respondent
Rosales.19 Petitioner accused respondent Rosales and an unidentified woman as the
ones responsible for the unauthorized and fraudulent withdrawal of US$75,000.00
from Liu Chiu Fangs dollar account with petitioners Escolta Branch. 20Petitioner
alleged that on February 5, 2003, its branch in Escolta received from the PLRA a
Withdrawal Clearance for the dollar account of Liu Chiu Fang; 21 that in the afternoon
of the same day, respondent Rosales went to petitioners Escolta Branch to inform its
Branch Head, Celia A. Gutierrez (Gutierrez), that Liu Chiu Fang was going to withdraw
her dollar deposits in cash;22 that Gutierrez told respondent Rosales to come back the
following day because the bank did not have enough dollars; 23 that on February 6,
2003, respondent Rosales accompanied an unidentified impostor of Liu Chiu Fang to
the bank;24 that the impostor was able to withdraw Liu Chiu Fangs dollar deposit in
the amount of US$75,000.00;25 that on March 3, 2003, respondents opened a dollar
account with petitioner; and that the bank later discovered that the serial numbers of
the dollar notes deposited by respondents in the amount of US$11,800.00 were the
same as those withdrawn by the impostor. 26
On September 10, 2004, respondents filed before the Regional Trial Court (RTC) of
Manila a Complaint44 for Breach of Obligation and Contract with Damages, docketed
as Civil Case No. 04110895 and raffled to Branch 21, against petitioner. Respondents
alleged that they attempted several times to withdraw their deposits but were
unable to because petitioner had placed their accounts under "Hold Out" status. 45 No
explanation, however, was given by petitioner as to why it issued the "Hold Out"
order.46 Thus, they prayed that the "Hold Out" order be lifted and that they be
allowed to withdraw their deposits.47 They likewise prayed for actual, moral, and
exemplary damages, as well as attorneys fees. 48
Petitioner alleged that respondents have no cause of action because it has a valid
reason for issuing the "Hold Out" order.49 It averred that due to the fraudulent
scheme of respondent Rosales, it was compelled to reimburse Liu Chiu Fang the
amount of US$75,000.0050 and to file a criminal complaint for Estafa against
respondent Rosales.51
While the case for breach of contract was being tried, the City Prosecutor of Manila
issued a Resolution dated February 18, 2005, reversing the dismissal of the criminal
complaint.52 An Information, docketed as Criminal Case No. 05-236103, 53 was then
29
obligations
filed charging respondent Rosales with Estafa before Branch 14 of the RTC of
Manila.54
B. THE [CA] ERRED WHEN IT RULED THAT PETITIONERS EMPLOYEES WERE

NEGLIGENT IN RELEASING LIU CHIU FANGS FUNDS.
Ruling of the Regional Trial Court
C. THE [CA] ERRED IN AFFIRMING THE AWARD OF MORAL DAMAGES, EXEMPLARY

DAMAGES, AND ATTORNEYS FEES.63
55
On January 15, 2007, the RTC rendered a Decision finding petitioner liable for
damages for breach of contract.56The RTC ruled that it is the duty of petitioner to
release the deposit to respondents as the act of withdrawal of a bank deposit is an
act of demand by the creditor.57 The RTC also said that the recourse of petitioner is
against its negligent employees and not against respondents. 58 The dispositive
portion of the Decision reads:
Petitioner contends that the CA erred in not applying the "Hold Out" clause stipulated
in the Application and Agreement for Deposit Account. 64 It posits that the said clause
applies to any and all kinds of obligation as it does not distinguish between
obligations arising ex contractu or ex delictu. 65 Petitioner also contends that the fraud
committed by respondent Rosales was clearly established by evidence; 66 thus, it was
justified in issuing the "Hold-Out" order. 67 Petitioner likewise denies that its
employees were negligent in releasing the dollars. 68 It claims that it was the
deception employed by respondent Rosales that caused petitioners employees to
release Liu Chiu Fangs funds to the impostor. 69
WHEREFORE, premises considered, judgment is hereby rendered ordering

[petitioner] METROPOLITAN BANK & TRUST COMPANY to allow [respondents] ANA
GRACE ROSALES and YO YUK TO to withdraw their Savings and Time Deposits with
the agreed interest, actual damages of P50,000.00, moral damages of P50,000.00,
exemplary damages of P30,000.00 and 10% of the amount due [respondents] as and
for attorneys fees plus the cost of suit.
Lastly, petitioner puts in issue the award of moral and exemplary damages and
attorneys fees. It insists that respondents failed to prove that it acted in bad faith or
in a wanton, fraudulent, oppressive or malevolent manner.70
The counterclaim of [petitioner] is hereby DISMISSED for lack of merit.

SO ORDERED.59
Respondents Arguments
Ruling of the Court of Appeals
Respondents, on the other hand, argue that there is no legal basis for petitioner to
withhold their deposits because they have no monetary obligation to
petitioner.71 They insist that petitioner miserably failed to prove its accusations
against respondent Rosales.72 In fact, no documentary evidence was presented to
show that respondent Rosales participated in the unauthorized withdrawal. 73 They
also question the fact that the list of the serial numbers of the dollar notes
fraudulently withdrawn on February 6, 2003, was not signed or acknowledged by the
alleged impostor.74Respondents likewise maintain that what was established during
the trial was the negligence of petitioners employees as they allowed the withdrawal
of the funds without properly verifying the identity of the depositor. 75Furthermore,
respondents contend that their deposits are in the nature of a loan; thus, petitioner
had the obligation to return the deposits to them upon demand. 76 Failing to do so
makes petitioner liable to pay respondents moral and exemplary damages, as well as
attorneys fees.77
Aggrieved, petitioner appealed to the CA.

On April 2, 2008, the CA affirmed the ruling of the RTC but deleted the award of
actual damages because "the basis for [respondents] claim for such damages is the
professional fee that they paid to their legal counsel for [respondent] Rosales
defense against the criminal complaint of [petitioner] for estafa before the Office of
the City Prosecutor of Manila and not this case." 60 Thus, the CA disposed of the case
in this wise:
WHEREFORE, premises considered, the Decision dated January 15, 2007 of the RTC,
Branch 21, Manila in Civil Case No. 04-110895 is AFFIRMED with MODIFICATION that
the award of actual damages to [respondents] Rosales and Yo Yuk To is hereby
DELETED.
SO ORDERED.61
Our Ruling
Petitioner sought reconsideration but the same was denied by the CA in its May 30,
2008 Resolution.62
The Petition is bereft of merit.

At the outset, the relevant issues in this case are (1) whether petitioner breached its
contract with respondents, and (2) if so, whether it is liable for damages. The issue of
whether petitioners employees were negligent in allowing the withdrawal of Liu Chiu
Fangs dollar deposits has no bearing in the resolution of this case. Thus, we find no
need to discuss the same.
Issues
Hence, this recourse by petitioner raising the following issues:
A. THE [CA] ERRED IN RULING THAT THE "HOLD-OUT" PROVISION IN THE
APPLICATION AND AGREEMENT FOR DEPOSIT ACCOUNT DOES NOT APPLY IN THIS
CASE.
The "Hold Out" clause does not apply

to the instant case.
30
obligations
Petitioner claims that it did not breach its contract with respondents because it has a
valid reason for issuing the "Hold Out" order. Petitioner anchors its right to withhold
respondents deposits on the Application and Agreement for Deposit Account, which
reads:
Respondents
are
entitled
exemplary damages and attorneys fees.1wphi1
to
moral
and
Authority to Withhold, Sell and/or Set Off:
In cases of breach of contract, moral damages may be recovered only if the

defendant acted fraudulently or in bad faith, 80 or is "guilty of gross negligence
amounting to bad faith, or in wanton disregard of his contractual obligations." 81
The Bank is hereby authorized to withhold as security for any and all obligations with
the Bank, all monies, properties or securities of the Depositor now in or which may
hereafter come into the possession or under the control of the Bank, whether left
with the Bank for safekeeping or otherwise, or coming into the hands of the Bank in
any way, for so much thereof as will be sufficient to pay any or all obligations
incurred by Depositor under the Account or by reason of any other transactions
between the same parties now existing or hereafter contracted, to sell in any public
or private sale any of such properties or securities of Depositor, and to apply the
proceeds to the payment of any Depositors obligations heretofore mentioned.
In this case, a review of the circumstances surrounding the issuance of the "Hold
Out" order reveals that petitioner issued the "Hold Out" order in bad faith. First of all,
the order was issued without any legal basis. Second, petitioner did not inform
respondents of the reason for the "Hold Out." 82 Third, the order was issued prior to
the filing of the criminal complaint. Records show that the "Hold Out" order was
issued on July 31, 2003,83 while the criminal complaint was filed only on September
3, 2003.84 All these taken together lead us to conclude that petitioner acted in bad
faith when it breached its contract with respondents. As we see it then, respondents
are entitled to moral damages.
xxxx
As to the award of exemplary damages, Article 2229 85 of the Civil Code provides that
exemplary damages may be imposed "by way of example or correction for the public
good, in addition to the moral, temperate, liquidated or compensatory damages."
They are awarded only if the guilty party acted in a wanton, fraudulent, reckless,
oppressive or malevolent manner.86
JOINT ACCOUNT
xxxx
The Bank may, at any time in its discretion and with or without notice to all of the
Depositors, assert a lien on any balance of the Account and apply all or any part
thereof against any indebtedness, matured or unmatured, that may then be owing to
the Bank by any or all of the Depositors. It is understood that if said indebtedness is
only owing from any of the Depositors, then this provision constitutes the consent by
all of the depositors to have the Account answer for the said indebtedness to the
extent of the equal share of the debtor in the amount credited to the Account. 78
In this case, we find that petitioner indeed acted in a wanton, fraudulent, reckless,
oppressive or malevolent manner when it refused to release the deposits of
respondents without any legal basis. We need not belabor the fact that the banking
industry is impressed with public interest. 87 As such, "the highest degree of diligence
is expected, and high standards of integrity and performance are even required of
it."88 It must therefore "treat the accounts of its depositors with meticulous care and
always to have in mind the fiduciary nature of its relationship with them." 89 For failing
to do this, an award of exemplary damages is justified to set an example.
Petitioners reliance on the "Hold Out" clause in the Application and Agreement for
Deposit Account is misplaced.
The award of attorney's fees is likewise proper pursuant to paragraph 1, Article

220890 of the Civil Code.
The "Hold Out" clause applies only if there is a valid and existing obligation arising
from any of the sources of obligation enumerated in Article 1157 79 of the Civil Code,
to wit: law, contracts, quasi-contracts, delict, and quasi-delict. In this case, petitioner
failed to show that respondents have an obligation to it under any law, contract,
quasi-contract, delict, or quasi-delict. And although a criminal case was filed by
petitioner against respondent Rosales, this is not enough reason for petitioner to
issue a "Hold Out" order as the case is still pending and no final judgment of
conviction has been rendered against respondent Rosales. In fact, it is significant to
note that at the time petitioner issued the "Hold Out" order, the criminal complaint
had not yet been filed. Thus, considering that respondent Rosales is not liable under
any of the five sources of obligation, there was no legal basis for petitioner to issue
the "Hold Out" order. Accordingly, we agree with the findings of the RTC and the CA
that the "Hold Out" clause does not apply in the instant case.
In closing, it must be stressed that while we recognize that petitioner has the right to
protect itself from fraud or suspicions of fraud, the exercise of his right should be
done within the bounds of the law and in accordance with due process, and not in
bad faith or in a wanton disregard of its contractual obligation to respondents.
WHEREFORE, the Petition is hereby DENIED. The assailed April 2, 2008 Decision and
the May 30, 2008 Resolution of the Court of Appeals in CA-G.R. CV No. 89086 are
hereby AFFIRMED. SO ORDERED.
Obligation not to do (art. 1244, par.2 , 1168)
In view of the foregoing, we find that petitioner is guilty of breach of contract when it
unjustifiably refused to release respondents deposit despite demand. Having
breached its contract with respondents, petitioner is liable for damages.
G.R. No. 107737 October 1, 1999
31
obligations
JUAN L. PEREZ, LUIS KEH, CHARLIE LEE and ROSENDO G. TANSINSIN,

JR., petitioners,
vs.
COURT
OF
APPEALS,
LUIS
CRISOSTOMO
and
VICENTE
ASUNCION, respondents.
under the condition that for the first five-year period the annual rental would be
P150,000.00 and for the next five years, P175,000.00. Paragraph 5 of the lease
contract states that the lessee "cannot sublease" the fishpond "nor assign his rights
to anyone." 3
Private respondent Luis Crisostomo, who reached only the 5th grade, is a
businessman engaged in the operation of fishponds. On September 20, 1977, while
he was at his fishpond in Almazar, Hermosa, Bataan, his bosom friend named Ming
Cosim arrived with petitioner Charlie Lee. The two persuaded private respondent to
take over the operation of "Papaya Fishpond" as petitioner Lee and his partner,
petitioner Luis Keh, were allegedly losing money in its operation. Private respondent
having acceded to the proposal, sometime in December of that year, he and
petitioners Lee and Keh executed a written agreement denominated as "pakiao
buwis" whereby private respondent would take possession of the "Papaya Fishpond"
from January 6, 1978 to June 6, 1978 in consideration of the amount of P128,000.00
broken down as follows: P75,000.00 as rental, P50,000.00 for the value of milkfish in
the fishpond and P3,000 for labor expenses. Private respondent paid the P75,000.00
to petitioner Keh at the house of petitioner Lee in Sta. Cruz, Hagonoy, Bulacan in the
presence of Lee's wife, brother-in-law and other persons. He paid the balance to
petitioner Lee sometime in February or March 1978 because he was uncertain as to
the right of petitioners Keh and Lee to transfer possession over the fishpond to him.
Private respondent made that payment only after he had received a copy of a written
agreement dated January 9, 1978 4 whereby petitioner Keh ceded, conveyed and
transferred all his "rights and interests" over the fishpond to petitioner Lee, "up to
June 1985." From private respondent's point of view, that document assured him of
continuous possession of the property for as long as he paid the agreed rentals of
P150,000.00 until 1980 and P.175,000.00 until 1985.1wphi1.nt
GONZAGA-REYES, J.:
This is a petition for review on certiorari of the Decision 1 of the Court of Appeals
affirming the decision of the Regional Trial Court of Bulacan, Branch 9 2 that disposed
of Civil Case No. 5610-M (Luis Crisostomo v. Luis Keh, Juan Perez, Charlie Kee and
Atty. Rosendo G. Tansinsin, Jr.) as follows:
WHEREFORE, premises considered, judgment is hereby rendered:
a) directing defendant JUAN PEREZ to allow plaintiff LUIS CRISOSTOMO to occupy and
operate the "Papaya Fishpond" for a period of 5 1/2 years at the rental rates of
P150,000.00 for the first six months and P175,000.00 for the remaining five years
(the same rates provided for in Exh. 4);
b) ordering defendants LUIS KEH, CHARLIE LEE, JUAN PEREZ and Atty. ROSENDO
TANSINSIN, JR. to pay unto the plaintiff the amounts of P150,000.00 as actual
damages; P20,000.00 as moral damages; P20,000.00 as exemplary damages; and
P10,000.00 as attorney's fees, plus the costs of the suit;
c) directing the release, delivery or payment directly to plaintiff LUIS CRISOSTOMO of
the amounts of P128,572.00 and P123,993.85, including the interests which may
have already accrued thereon, deposited with the Paluwagan ng Bayan Savings Bank
(Paombong, Bulacan Branch) in the name of the Clerk of Court and/or Deputy Clerk
of Court Rodrigo C. Libunao under this Court's Order dated February 14, 1980;
however, the plaintiff is required to pay defendant Perez the corresponding rental on
the fishpond for the period June 1979-January 1980 based on the rate of
P150,000.00 per annum, deducting therefrom the amount of P21,428.00 already paid
to and received by then co-usufructuary Maria Perez (Exh. E);
For the operation of the fishpond from June 1978 to May 1979, private respondent,
accompanied by Ming Cosim and Ambrocio Cruz, paid the amount of P150,000.00 at
the Malabon, Metro Manila office of petitioner Keh. The following receipt was issued
to him:
RECEIPT
d) dismissing the defendants' separate counter-claims for damages, for lack of merit;
and
June 6, 1978
P150.000,00
e) dismissing the Pleading in Intervention Pro Interesse Suo filed by VICENTE

ASUNCION on the ground of lis pendens.
Received from Mr. LUIS KEH the sum of ONE HUNDRED FIFTY THOUSAND PESOS
(P150,000.00), Philippine Currency, as full payment of the yearly leased rental of the
Papaya Fishpond for the year beginning June 1978 and ending on May 1979. The next
payment shall be made on June 6, 1979.
SO ORDERED.
The facts upon which the Court of Appeals based its Decision are the following:
Said sum was paid in Producers Bank of the Philippines Check No. (illegible) 164595
dated June 6, 1978.
Along with Maria Perez, Fructuosa Perez, Victoria Perez, Apolonio Lorenzo and Vicente
Asuncion, petitioner Juan Perez is a usufructuary of a parcel of land popularly called
the "Papaya Fishpond." Covered by Transfer Certificate of Title No. 8498 of the
Registry of Deeds for the Province of Bulacan, the fishpond is located in Sto. Rosario,
Hagonoy, Bulacan and has an area of around 110 hectares. On June 5, 1975, the
usufructuaries entered into a contract leasing the fishpond to Luis Keh for a period of
five (5) years and renewable for another five (5) years by agreement of the parties,
Mr. Luis Keh has not transferred his rights over the fishpond to any person.
Caloocan City, June 6, 1978.
JUAN L. PEREZ ET AL.
32
obligations
By:
appointed period and that the net proceeds of the sale (P123,993.85 per the Report
dated March 4, 1980 of the deputy clerk of court) be deposited in the name of the
deputy clerk of court of Branch 6 of the then Court of First Instance of Bulacan with
the same branch of the Paluwagan ng Bayan Savings & Loan Association, Inc. and
which deposit shall not be withdrawn unless upon order of the court after hearing.
(Sgd.)
Rosendo G. Tansinsin, Jr.
CONFORME TO THE ABOVE:
The court approved that agreement on that same date.
(Sgd.)
Thereafter, the usufructuaries entered into a contract of lease with Vicente

Raymundo and Felipe Martinez for the six-year period of June 1, 1981 to May 30,
1987 in consideration of the annual rentals of P550,000.00 for the first two years and
P400,000.00 for the next four years. Upon expiration of that lease, the same property
was leased to Pat Laderas for P1 million a year.
LUIS KEH
Handwritten below that receipt but above the signature of petitioner Charlie Lee, are
the following: "Rec'd from Luis Crisostomo sum of one hundred fifty-four thousand
P154,000.00 for above payment. 5
The complaint was later amended to include petitioner Tansinsin, the alleged
administrator of the fishpond, as one of the defendants. 9 Except in the joint answer
that the defendants had filed, petitioners Keh and Lee did not appear before the
court. Neither did they testify.
Private respondent incurred expenses for repairs in and improvement of the fishpond
in the total amount of P486,562.65. 6 However, sometime in June 1979, petitioners
Tansinsin and Juan Perez, in the company of men bearing armalites, went to the
fishpond and presented private respondent with a letter dated June 7, 1979 showing
that petitioner Luis Keh had surrendered possession of the fishpond to the
usufructuaries.
In their defense, petitioners Juan Perez and Tansinsin presented evidence to prove
that they had negotiated for the lease of the property with Benito Keh in 1975.
However, they averred, for reasons unknown to petitioner Perez, in the contract of
lease that petitioner Tansinsin prepared, petitioner Luis Keh was named as lessee.
Petitioner Perez had never met Keh or Lee but according to petitioner Tansinsin,
petitioner Luis Keh was substituted for Benito Keh because the latter was
preoccupied with his other businesses. Sometime in 1979, petitioner Keh's agent
named Catalino Alcantara relayed to petitioner Perez, Keh's intention to surrender
possession of the fishpond to the usufructuaries. Because petitioner Perez demanded
that said intention should be made in writing, on June 5, 1979, Perez received from
Keh a letter to that effect.
Because of the threat to deprive him of earnings of around P700,000.00 that the
700,000 milkfish in the fishpond would yield, and the refusal of petitioners Keh, Juan
Perez and Lee to accept the rental for June 5, 1979 to June 6, 1980, private
respondent filed on June 14, 1979 with the then Court of First Instance of Bulacan an
action for injunction and damages. He prayed for the issuance of a restraining order
enjoining therein defendants Keh, Perez and Lee from entering the premises and
taking possession of the fishpond. He also prayed for actual damages of P50,000.00,
moral damages of P20,000.00, exemplary damages in an amount that the court
might award, and attorney's fees of P10,000.00. 7
When private respondent received a copy of that letter of petitioner Keh, he took the
position that petitioner Perez had no right to demand possession of the fishpond from
him because Perez had no contract with him. Private respondent was allowed four (4)
months within which to vacate the premises but he immediately filed the complaint
for injunction and damages. Thereafter, private respondent's counsel, Atty. Angel
Cruz and other persons tried to prevail upon petitioner Perez to allow private
respondent to occupy the property for three (3) more years. Petitioner Perez declined
that proposition.
That same day, June 14, 1979, the lower court granted the prayer for a restraining
order. On November 13, 1979, Crisostomo paid one of the usufructuaries, Maria
Perez (who died in 1984), the amount of P21,428.00 as her 1/7 share of the annual
rental of the fishpond for 1979-80. Maria Perez issued a notarized receipt for that
amount. 8
On January 11, 1980, the court lifted the restraining order thereby effectively
depriving private respondent of possession over the fishpond. On February 14, 1980,
the parties submitted a partial compromise agreement with the following
stipulations:
On September 6, 1989, the lower court rendered the aforesaid decision. It arrived at
the conclusion that the defendants therein "conspired with one another to exploit the
plaintiff's naivete and educational inadequacies and, in the process, to defraud him
by inducing him into taking possession of the "Papaya Fishpond" in their fond hope
that, as soon as the plaintiff applying his known expertise as a successful fishpond
operator shall have considerably improved the fishpond, they will regain
possession of the premises and offer the lease thereof to other interested parties at
much higher rental rates as laid bare by supervening realities." That conclusion was
founded on the following:
1. The amount of P128,572.00 that private respondent deposited as rental with the
Office of the Clerk of Court under O.R. No. 21630 dated November 15, 1979 be
withdrawn from that office and deposited with the Paluwagan ng Bayan Savings &
Loan Association, Inc. (Paombong, Bulacan branch) and which deposit shall not be
withdrawn unless authorized by the court; and
2. The plaintiff could personally harvest milkfish "with commercial value" in the
presence of Perez and under the supervision of the deputy clerk of court within the
33
obligations
1. The plaintiffs (private respondent Crisostomo's) testimony bears the "hallmarks of

truth: candid, straightforward and uncontrived." He had proven himself a "much
more credible witness than his opponents."
The lower court added:

Bluntly yet succinctly put, the foregoing circumstances when viewed collectively with
other cogent aspects of the instant case inexorably lead to the Court's wellconsidered view that the defendants tempted by the bright prospect of a lucrative
business coup embarked themselves in an egregious scheme to take undue
advantage of the gullibility of the plaintiff who, as borne by ensuing events, proved
himself an ideal victim to prey upon: pathetically unsuspecting yet only too eager to
invest his material resources and self-acquired technical know-how to redeem what
was then a dwindling business enterprise from total collapse. Plaintiffs impressive
performance, alas, only redounded ultimately to the supreme benefit exclusively of
the defendants. A classic case of "ako ang nagsaing, iba ang kumain!"
2. The notarized receipt of Maria Perez of her share as a usufructuary in the rental for
1979-80 is a "clear avowal of plaintiffs legitimate operation of the "Papaya Fishpond"
as assignee or transferee thereof." It was impossible for the other usufructuaries,
especially Juan Perez who was residing in the same locality and actively involved in
the "affairs of the fishpond," not to have known that plaintiff occupied the fishpond
for one and a half years as assignee of Keh and Lee. It was unbelievable that both
Tansinsin and Perez would only perceive the plaintiff as a mere encargado of Keh and
Lee.
3. The receipt whereby Tansinsin acknowledged payment of P150,000.00 as rental for
June 1978-May 1979 bears "tell-tale signs" of the conspiracy. Firstly, the statement
"Mr. Luis Keh has not transferred his rights over the fishpond to any person" is
entirely irrelevant to that receipt unless it was intended "to preempt plaintiff's claim
of rights and interests over the said property as either sub-lessee or
assignee." Secondly, Keh's having signified "Conforme to the above" is a gratuitous
notation as it actually indicates that the money came from the plaintiff. Thirdly, Atty.
Tansinsin's receipt of the amount for and in behalf of "JUAN L. PEREZ ET AL."
illustrates his "active and dominant role in the affairs" of the fishpond whether as
administrator thereof or as beneficiary of a share from its fruits.
The defendants elevated the case to the Court of Appeals which, as earlier
mentioned, affirmed the decision of the trial court and disposed of the appeal on
February 18, 1992 as follows:
WHEREFORE, in view of all the foregoing, judgment appealed from, is hereby
AFFIRMED.
However, intervenor-appellant is hereby declared co-usufructuary of the Papaya
fishpond, and is, therefore, entitled to all rights and interest due to the usufructuaries
of the said fishpond.
SO ORDERED.
4. Service upon plaintiff of Keh's letter surrendering possession of the fishpond

implied that defendants knew that plaintiff was in possession thereof. That they
resorted to the intimidating presence of armed men is proof that they expected the
plaintiff to refuse to give up possession of the property. These circumstances
"completely belie the protestations of Perez and Tansinsin of lack of knowledge of the
contract entered into" between the plaintiff, and Lee and Keh.
On the defendant-appellants' contention that the principle of res judicata should be

applied because the Court of Appeals had ruled on the issue of possession in CA-G.R.
No. 10415-R, a petition for certiorari and injunction with preliminary mandatory
injunction, the Court of Appeals held that said principle was unavailing. The petition
in CA-G.R. No. 10415-R involved a writ of injunction "which presupposes the
pendency of a principal or main action." Moreover, the decision in that case did not
resolve the issue of who should be in possession of the Papaya Fishpond as findings
of fact of the trial court cannot be reviewed in a certiorari proceeding.1wphi1.nt
5. The nonpresentation of Lee and Keh on the witness stand by Atty. Tansinsin "can
very well be construed as a smart maneuver to cover up the sinister cabal for
deception inferrable from the attendant facts and circumstances." In their joint
answer, Keh and Lee tried to relieve Perez of any liability in favor of the plaintiff. That
is understandable "because, should the Court disregard the reliance of Perez on the
prohibition against sub-lease or assignment of the "Papaya Fishpond", then all the
defendants shall have exposed themselves to unavoidable liability for the acts
complained of by the plaintiff."
The Court of Appeals ruled further that appellee Crisostomo "cannot be considered a
possessor in bad faith, considering that he took possession of the fishpond when
appellants Keh and Lee assigned to him appellant Keh's leasehold right." It held that
appellant Perez knew of the transfer of possession of the fishpond to appellee and
that the receipt evidencing payment of the 1978-1979 rental even bears an
expressed admission by Lee that the payment came from appellee Crisostomo.
6. Atty. Tansinsin was the common legal counsel of all the defendants and, by his
testimony, even the plaintiff. Atty. Tansinsin's denial that he was plaintiffs counsel
was his way of "deflecting plaintiffs imputations of professional improprieties against
him." Plaintiff must have assumed that Atty. Tansinsin was also his lawyer
considering that they were "on very friendly terms" and therefore Atty. Tansinsin
might have been instrumental in dispelling whatever fears plaintiff had entertained
as regards the business transactions involved.
Agreeing with the court a quo that "defendants-appellants employed fraud to the
damage and prejudice of plaintiff-appellee," the Court of Appeals held that appellants
should be held liable for damages. As regards the interventionpro interesse suo, the
appellate court ruled that the same should be allowed because, even if the litigation
would not be technically binding upon him, complications might arise that would
prejudice his rights. Pointing out that a usufruct may be transferred, assigned or
disposed of, the Court of Appeals ruled that the intervenor cannot be excluded as a
usufructuary because he had acquired his right as such from a sale in execution of
the share of Jorge Lorenzo, one of the usufructuaries of the fishpond.
7. The fact that the fishpond was subsequently rented out for astronomical amounts
is proof that the plaintiff had considerably improved the fishpond. 10
34
obligations
Herein petitioners filed a motion for the reconsideration of that Decision of the Court
of Appeals. They alleged that the Decision was premature because it was rendered
when they had not yet even received a copy of the intervenor's brief wherein
assignments of errors that directly affected their rights and interests were made.
They insisted that the principle of res judicata was applicable because in G.R. No.
64354, this Court upheld the Decision of the Court of Appeals in CA-G.R. No. 10415.
They added that appellee Crisostomo was guilty of forum shopping because the issue
of possession had been "squarely decided" in CA-G.R. No. 10415. They stressed that
the contract of lease between Keh and the usufructuaries prohibited subleasing of
the fishpond; that by the receipt dated June 6, 1978, it was Keh who paid the rental;
that appellee Crisostomo was a perjured witness because in the notebook showing
his expenses, the amount of P150,000.00 for rentals does not appear; that the term
of the contract had expired and there was no renewal thereof, and that the
consideration of P150,000.00 was grossly inadequate. They averred that the Court of
Appeals erred in awarding damages that were not prayed for in the second amended
complaint and that amounts not specified in the complaint were awarded as
damages. They disclaimed that Atty. Tansinsin was the administrator of the fishpond.
Petitioners assert that said Decision of the Court of Appeals which was in effect
upheld by this Court when it denied the petition for review on certiorari in G.R. No.
64354 (Luis Crisostomo v. Intermediate Appellate Court), 14 is "res judicata to the
issue of possession in this case." 15 However, as expressed in that quoted portion of
the Decision in CA-G.R. No. 10415, the issue of whether private respondent is an
assignee or a sub-lessee "is a finding of fact review of which is not proper in
a certiorari proceeding" or the proceeding in that case.
CA-G.R. No. 10415 was spawned by the lifting on January 11, 1980 of the restraining
order previously issued by the trial court on June 14, 1979. Private respondent filed a
special civil action of certiorari and injunction with preliminary mandatory injunction
and/or mandatory restraining order to question the order of January 11, 1980. Thus,
the issue in that petition was whether or not the trial court gravely abused its
discretion in lifting the restraining order. The statement in that Decision of the Court
of Appeals that a writ of preliminary injunction may be denied "if the party applying
for it has insufficient title or interest to sustain it and no claim to an ultimate relief
(is) sought" by no means resolved the issue of who is entitled to possess the
fishpond. In denying the petition for certiorari, the Court of Appeals was simply
saying that there was no reason to restore private respondent to the possession of
the fishpond pursuant to the restraining order that he had earlier obtained. The issue
of possession was collaterally discussed only to resolve the propriety of the lifting of
the restraining order based on evidence available at that time. Hence, there was no
judgment on the merits in the main case or in Civil Case No. 5610-M. Simply put, the
Decision in CA-G.R. No. 10415 involves an interlocutory order on the propriety of the
lifting of the restraining order and not a judgment on the merits of Civil Case No.
5610-M.
On October 30, 1992, the Court of Appeals denied the motion for reconsideration for
lack of merit. It ruled that the Decision was not prematurely promulgated
"considering that the intervention proceeding is solely between intervenor and
defendants-appellants, which is completely separable and has nothing to do with the
merits of the appeal."
In the instant petition for review on certiorari, petitioners raise six (6) grounds for
giving due course to it. 11 Those grounds may be distilled into the following: (a) the
applicability of the principle of res judicata; (b) the premature promulgation of the
Decision of the Court of Appeals, and (c) private respondent was not a sublesee of
the fishpond under the law.
For res judicata to apply, the following requisites must concur: (a) the former
judgment must be final; (b) the court which rendered it had jurisdiction over the
subject matter and the parties; (c) the judgment must be on the merits, and (d) there
must be between the first and second actions identity of parties, subject matter and
causes of action.16 The Decision in CA-G.R. No. 10415 having resolved only an
interlocutory matter, the principle of res judicata cannot be applied in this case.
There can be no res judicata where the previous order in question was not an order
or judgment determinative of an issue of fact pending before the court but was only
an interlocutory order because it required the parties to perform certain acts for final
adjudication. 17 In this case, the lifting of the restraining order paved the way for the
possession of the fishpond on the part of petitioners and/or their representatives
pending the resolution of the main action for injunction. In other words, the main
issue of whether or not private respondent may be considered a sublessee or a
transferee of the lease entitled to possess the fishpond under the circumstances of
the case had yet to be resolved when the restraining order was lifted.
In arguing that the principle of res judicata applies in this case, petitioners rely on
the portion of the Decision 12 of the Court of Appeals in CA-G.R. No. 10415 that
states:
We find no basis for declaring respondent Judge guilty of grave abuse of discretion on
this regard. The trial court's finding that petitioner does not appear entitled to any
contract or law to retain possession of the fishpond in question since he is neither an
assignee or sub-lessee and, therefore, merely a stranger to the contract of lease is a
finding of fact review of which is not proper in a certiorari proceedings. Not only is
petitioner not a party to the lease agreement over the fishpond in question but also
the very authority upon which he predicates his possession over the fishpond that
the leasehold right of Luis Keh had been assigned to him undoubtedly lacks basis
for the very contract between Luis Keh and the lessors expressly provides
Petitioners assail the Court of Appeals' Decision as "premature" and therefore null
and void, because prior to the promulgation of that Decision, private respondentintervenor Vicente Asuncion failed to furnish them with a copy of his brief the
assignment of errors of which allegedly "directly" affected their rights and
interests. 18 While it is true that petitioners were deprived of the opportunity to
contravene the allegations of the intervenor in his brief, that fact can not result in
the nullity of the Decision of the Court of Appeals. 19 Vicente Asuncion intervened pro
That the lessee cannot sub-lease above-described fishpond nor assign his rights to
anyone.
xxx xxx xxx
(Emphasis supplied by petitioners.)
13
35
obligations
interesse suo or "according to his interest." 20 Intervention pro interessse suo is a

mode of intervention in equity wherein a stranger desires to intervene for the
purpose of asserting a property right in the res, or thing, which is the subject matter
of the litigation, without becoming a formal plaintiff or defendant, and without
acquiring control over the course of a litigation, which is conceded to the main actors
therein. 21 In this case, intervenor Vicente Asuncion aimed to protect his right as a
usufructuary. Inasmuch as he has the same rights and interests as petitioner Juan
Perez, any judgment rendered in the latter's favor entitled him to assert his right as
such usufructuary against his co-usufructuary. Should said intervenor claim his share
in the usufruct, no rights of the petitioners other than those of Juan Perez would be
prejudiced thereby.
appeal. 27 This is precisely what happened in this case. On May 13, 1992, the Court of
Appeals issued a Resolution directing counsel for intervenor to furnish herein
petitioners with a copy of intervenor Vicente Asuncion's brief within a 10-day period.
It also granted petitioners an opportunity to file a reply-brief or memorandum and
the intervenor, a reply to said memorandum. 28That Resolution is proper under the
premises because, by the nature of an intervention pro interesse suo, it can proceed
independently of the main action. Thus, in the Resolution of October 30, 1992, in
resolving the issue of the alleged prematurity of its Decision, the Court of Appeals
held that "the proceeding is solely between intervenor and defendants-appellants,
which is completely separable and has nothing to do with the merits of the
appeal." 29
Worth noting is the fact that after the trial court had allowed Vicente Asuncion's
intervention pro interesse suo, petitioner Juan Perez filed a petition
for certiorari docketed as CA-G.R. No. 13519 to set aside the order denying his
motion to dismiss the pleading in intervention. In its Decision of January 27, 1988,
the Seventh Division of the Court of Appeals 22 denied the petition for certiorari for
lack of merit. It upheld the trial court's ruling to allow the intervention pro interesse
suo to protect Vicente Asuncion's right as a co-usufructuary in the distribution or
disposition of the amounts representing the rentals that were deposited with the
court. That Vicente Asuncion had filed Civil Case No. 8215-M seeking recovery of his
alleged share in the fruits of the Papaya Fishpond from 1978 would not be a reason
for the dismissal of the motion for intervention pursuant to Rule 16, Sec. 1 (e) of the
Rules of Court. 23 The Court of Appeals explained as follows:
At the hearing of Civil Case No. 5610-M, petitioner Juan Perez attempted to establish
the death on October 14, 1979 of Jorge Lorenzo, 30 the usufructuary from whom
Vicente Asuncion derived his right to intervene pro interesse suo. Since under Article
603 of the Civil Code a usufruct is extinguished "by the death of the usufructuary,
unless a contrary intention clearly appears," there is no basis by which to arrive at
the conclusion that the usufruct originally exercised by Jorge Lorenzo has indeed
been extinguished or, on the contrary, has survived Lorenzo's demise on account of
provisions in the document constituting the usufruct. That matter is best addressed
in Civil Case No. 8215-M wherein Vicente Asuncion seeks his share as a transferee of
the usufruct established for Jorge Lorenzo. All that is discussed here is the matter of
interventionpro interesse suo vis-a-vis the issue of prematurity of the Decision of the
Court of Appeals.
Indeed, if by means of intervention a stranger to a lawsuit is permitted to intervene

without thereby becoming a formal plaintiff or defendant (Joaquin v. Herrera, 37 Phil.
705, 723 [1918]), then there is in the case at bar no identity of parties to speak
of. Lis pendens as a ground for a motion to dismiss requires as a first element
identity of parties in the two cases.
Petitioners' principal argument against the Court of Appeals' Decision in favor of

private respondent Crisostomo is that he could not have been an assignee or sublessee of the fishpond because no contract authorized him to be so. Petitioners'
argument is anchored on factual issues that, however, have no room for discussion
before this Court. It is well-entrenched doctrine that questions of fact are not proper
subjects of appeal by certiorari under Rule 45 of the Rules of Court as this mode of
appeal is confined to questions of law. 31 Factual findings of the Court of Appeals are
conclusive on the parties and carry even more weight when said court affirms the
factual
findings
of
the
trial
court. 32 Accordingly, this review shall be limited to questions of law arising from the
facts as found by both the Court of Appeals and the trial court.
Nor is there an identity of relief sought. Civil Case No. 8295-M seeks an accounting of
the proceeds of the fishpond while Civil Case No. 5610-M is for injunction to prevent
the petitioner from retaking the fishpond from Luis Crisostomo. The herein private
respondent sought to intervene in the latter case simply to protect his right as
usufructuary in the money deposited in the court by the plaintiff Luis Crisostomo. We
hold that in allowing the intervention in this case the trial court acted with prudence
and exercised its discretion wisely. 24
Admittedly, the contract between the usufructuaries and petitioner Keh has a
provision barring the sublease of the fishpond. However, it was petitioner Keh himself
who violated that provision in offering the operation of the fishpond to private
respondent. Apparently on account of private respondent's apprehensions as regards
the right of petitioners Keh and Lee to transfer operation of the fishpond to him, on
January 9, 1978, petitioner Keh executed a document ceding and transferring his
rights and interests over the fishpond to petitioner Lee. That the same document
might have been a ruse to inveigle private respondent to agree to their proposal that
he operate the fishpond is of no moment. The fact is, petitioner Keh did transfer his
rights as a lessee to petitioner Lee in writing and that, by virtue of that document,
private respondent acceded to take over petitioner Keh's rights as a lessee of the
fishpond.
Unconvinced by the Court of Appeals' Decision in CA-G.R. SP No. 13519, petitioner

Juan Perez filed a petition for review on certiorari with this Court under G.R. No.
82096. On May 9, 1988, this Court denied the petition on the grounds that the issues
raised are factual and that there is no sufficient showing that the findings of the
respondent court are not supported by substantial evidence or that the court had
committed any reversible error in the questioned judgment. 25 The Resolution of the
Court dated May 9, 1988 became final and executory on August 26, 1988. 26
Moreover, granting that the intervention be considered as Vicente Asuncion's
"appeal," a litigant's failure to furnish his opponent with a copy of his appeal does not
suffice to warrant dismissal of that appeal. In such an instance, all that is needed is
for the court to order the litigant to furnish his opponent with a copy of his
36
obligations
Although no written contract to transfer operation of the fishpond to private

respondent was offered in evidence, 33the established facts further show that
petitioner Juan Perez and his counsel, petitioner Tansinsin, knew of and acquiesced to
that arrangement by their act of receiving from the private respondent the rental for
1978-79. By their act of receiving rental from private respondent through the
peculiarly written receipt dated June 6, 1978, petitioners Perez and Tansinsin were
put in estoppel to question private respondent's right to possess the fishpond as a
lessee. Estoppel in pais arises when one, by his acts, representations or admissions,
or by his own silence when he ought to speak out, intentionally or through culpable
negligence, induces another to believe certain facts to exist and such other rightfully
relies and acts on such belief, so that he will be prejudiced if the former is permitted
to deny the existence of such facts. 34
violated Article 21 of the Civil Code and therefore private respondent should be
entitled to an award of moral damages. Article 21 states that "(a)ny person who
wilfully causes loss or injury to another in a manner that is contrary to morals, good
customs or public policy shall compensate the latter for the damage." Exemplary
damages shall likewise be awarded pursuant to Article 2229 of the Civil
Code. 36 Because private respondent was compelled to litigate to protect his interest,
attorney's fees shall also be awarded. 37
WHEREFORE, in light of the foregoing premises, the decision of the Court of Appeals
is AFFIRMED insofar as it (a) directs the release to private respondent of the amounts
of P128,572.00 and P123,993.85 deposited with the Paluwagan ng Bayan Savings
Bank in Paombong, Bulacan and (b) requires private respondent Crisostomo to pay
petitioner Juan Perez the rental for the period June 1979 to January 1980 at the rate
of P150,000.00 per annum less the amount of P21,428.00 already paid to
usufructuary Maria Perez. It should, however, be subject to the MODIFICATIONS that:
Nevertheless, we hesitate to grant private respondent's prayer that he should be

restored to the possession of the fishpond as a consequence of his unjustified
ejectment therefrom. To restore possession of the fishpond to him would entail
violation of contractual obligations that the usufructuaries have entered into over
quite a long period of time now. Supervening events, such as the devaluation of the
peso as against the dollar as well as the addition of improvements in the fishpond
that the succeeding lessees could have introduced, have contributed to the increase
in rental value of the property. To place private respondent in the same position he
was in before the lifting of the restraining order in 1980 when he was deprived the
right to operate the fishpond under the contract that already expired in 1985 shall be
to sanction injustice and inequity. This Court, after all, may not supplant the right of
the usufructuaries to enter into contracts over the fishpond through this Decision.
Nonetheless, under the circumstances of the case, it is but proper that private
respondent should be properly compensated for the improvements he introduced in
the fishpond.1wphi1.nt
1. Petitioner Luis Keh shall pay private respondent Luis Crisostomo in the amount of
P486,562.25 with legal interest from the rendition of the judgment in Civil Case No.
5610-M or on September 6, 1989, and
2. Petitioners be made liable jointly and severally liable for moral damages of
P50,000.00, exemplary damages of P20,000 and attorney's fees of P10,000.00.
No costs.
SO ORDERED.
Non-waiver (art. 1171)
Art. 1168 of the Civil Code provides that when an obligation "consists in not doing
and the obligor does what has been forbidden him, it shall also be undone at his
expense." The lease contract prohibited petitioner Luis Keh, as lessee, from
subleasing the fishpond. In entering into the agreement for pakiao-buwis with private
respondent, not to mention the apparent artifice that was his written agreement with
petitioner Lee on January 9, 1978, petitioner Keh did exactly what was prohibited of
him under the contract to sublease the fishpond to a third party. That the
agreement for pakiao-buwis was actually a sublease is borne out by the fact that
private respondent paid petitioners Luis Keh and Juan Perez, through petitioner
Tansinsin the amount of annual rental agreed upon in the lease contract between the
usufructuaries and petitioner Keh. Petitioner Keh led private respondent to
unwittingly incur expenses to improve the operation of the fishpond. By operation of
law, therefore, petitioner Keh shall be liable to private respondent for the value of the
improvements he had made in the fishpond or for P486,562.65 with interest of six
percent (6%) per annum from the rendition of the decision of the trial court on
September 6, 1989. 35
G.R. No. 81551 April 27, 1989

PHILIPPINE
NATIONAL
CONSTRUCTION
CORPORATION, petitioner,
vs.
PHILIPPINE NATIONAL LABOR RELATIONS COMMISSION (THIRD DIVISION)
AND NICOLAS SACEDA,respondents.
Apolo, Anasco & Associates for petitioner.
The Solicitor General for public respondent.
Citizens Legal Assistance Office for private respondent.
GRIO-AQUINO, J.:
Assailed in this petition for certiorari is the resolution promulgated on November 16,
1987 by the NLRC in POEA CASE NO. (L) 84-07-660 affirming the decision of the POEA
Officer-In-Charge, Honesto Cueva, who granted private respondent Nicolas Saceda's
claims for stand-by pay and withheld allotments. The following undisputed facts were
lifted from the Solicitor General's Comment on the petition:
The law supports the awards of moral and exemplary damages in favor of private
respondent and against the petitioners. Their conspiratorial scheme to utilize private
respondent's expertise in the operation of fishponds to bail themselves out of
financial losses has been satisfactorily established to warrant a ruling that they
37
obligations
1. In the first week of December, 1981, petitioner Philippine National Construction

Corporation (hereinafter called PNCC), a duly registered construction company,
through its predecessor-in-interest Construction and Development Corporation of the
Philippines (CDCP), hired private respondent Nicolas L. Saceda as HT Driver I (Actg.
Scraper Operator) for its Suyallil North Port road project in the Kingdom of Saudi
Arabia. Respondent Saceda was hired at an hourly rate of US$1.55 for 24 months
contract period to be effective upon his departure. He left the Philippines on January
8, 1982.
As mentioned earlier, the NLRC affirmed the above decision of the POEA in toto.
In its petition for certiorari, the petitioner questions only the award of stand- by pay
to Saceda for being allegedly devoid of legal basis.
The petition has no merit.
The legal basis of the NLRC's award of "stand-by" pay to Saceda during the period
that he was made to wait while his employer worked for the ticketing, booking and
processing of his exit visa and travel documents for his return trip to the Philippines,
is the employment contract. Under the contract, the PNCC was obliged to notify the
employee "two months before the end of the term of the contract" whether his
contract would be extended or he would be repatriated. Within that two-month
period, the employer, which keeps in its possession the employee's passport and
travel documents for the duration of his employment, is supposed to work for the
ticketing and processing of the employee's travel documents so that he may
immediately return to the Philippines upon the expiration of his contract.
2. On January 8, 1984, private respondent Saceda completed his two (2) years
overseas contract. However, it was extended by petitioner up to January 27, 1984.
3. On February 9,1984,private respondent was dispatched to Jeddah, Saudi Arabia for
immediate repatriation to the Philippines. He was first booked for departure on
February 21, 1984.
4. However, private respondent refused to depart because he wanted to await the
final disposition on the complaint he filed against petitioner PNCC for payment of his
completion bonus, unused vacation/sick leave and unpaid wages from December 1,
1983 up to January 27, 1984. The decision of the Saudi labor authorities which was
favorable to private respondent was rendered on March 24, 1984. Private respondent
agreed to be repatriated on March 27, 1984, after petitioner PNCC paid him the
award granted by the Saudi labor authorities.
Petitioner alleged that it takes at least one month to have travel papers processed by
the Saudi Arabian authorities. Clearly, the two-month period stipulated in the
contract is more than enough for the purpose. Hence, petitioner alone is to blame for
its failure to obtain Saceda's travel papers within the two-month period before his
contract came to an end. Since it was through its fault that Saceda's departure was
delayed, it must give him stand-by pay.
5. Upon his arrival in the Philippines, private respondent Saceda found out that the
allotment representing 70% of his salary for the period November 16,1983 to January
15,1984, amounting to $408.00 was not paid by petitioner PNCC to bis designated
beneficiary in the Philippines. Despite repeated demands, petitioner failed to pay
said claim without justifiable reason.
The stand-by compensation which the employer is required to pay the employee
while the latter waits for his travel papers, is actually the damages caused to him by
the employer's delay in getting his travel papers ready. As correctly pointed out by
the Solicitor General in his Comment, the basis of the employer's liability for such
damages is Article 1170 of the Civil Code which provides:
6. On August l6,1984,private respondent Saceda filed a complaint with the Workers

Adjudication and Assistance Office, Philippine Overseas Employment Administration
(POEA), docketed as POEA Case No. L-84- 07-660, for non-payment of withheld
salary/allotment and stand-by pay corresponding to the period January 27, 1984 to
March 27,1984 in the sum of US$744.00. He claimed that he was not repatriated
soon upon the termination of his contract but was made to wait and remain Idle for
two months. (pp. 27-29, Rollo.)
Art. 1170. Those who in the performance of their obligations are guilty of fraud,
negligence, or delay, and those who in any manner contravene the tenor thereof, are
liable for damages.
As it was the petitioners obligation to get Saceda's travel documents ready for his
repatriation to the Philippines upon the termination of his overseas contract, the
petitioner must answer in damages for the delay in Saceda's departure which
compelled him to "stand-by," idle and jobless in a foreign land, while waiting for his
employer to hand him his ticket and travel papers for his trip home. The measure of
those damages is the income he could have earned if he were repatriated promptly
in order that he could work again in his country.
On April 30, 1986, Honesto Cueva, officer-in-charge of the POEA, rendered a decision,
the dispositive portion of which reads as follows:
WHEREFORE, in view of the foregoing considerations, this Office hereby ordered
herein respondent Philippine National Construction Corporation (PNCC) to pay herein
complainant Nicolas Saceda the peso equivalent based on the prevailing exchange
rate at the time of actual payment of the following amounts:
The fact that Saceda refused to depart on February 21, 1984 because he wanted to
wait for the outcome of the complaint which he filed against petitioner for the
payment of his completion bonus, unused vacation/sick leaves, and unpaid wages
from December 1, 1983 up to January 27, 1984 (when his extended contract of
employment expired) does not shift to him the blame for his delayed departure, for,
as it turned out, his suit was justified. The decision promulgated by the Saudi Labor
Authorities on March 24,1984 upheld his claims.
1. US$206.40 representing stand-by pay for the period covered from January 27,
1984 to February 21, 1984;
2. US$408.00 representing the withheld allotment within ten (10) calendar days upon
receipt of this DECISION." (Annex A, pp. 8, 13, Rollo.)
38
obligations
Since Saceda was compelled to litigate by reason of the petitioner's unjust refusal to
pay his valid and demandable claims, the petitioner is answerable for the damages
he suffered by having to stay on to see his case through. The petitioner should,
therefore, pay him stand-by compensation from January 28, 1984 up to March 27,
1984 when he was repatriated after the petitioner paid the judgment in his favor.
approximately three (3) inches in diameter near the bottom of one of the walls
closing out the width of the vault on one end and that for a certain length of time
(one hour, more or less), water drained out of the hole; that because of the aforesaid
discovery, plaintiffs-appellants became agitated and upset with concern that the
water which had collected inside the vault might have risen as it in fact did rise, to
the level of the coffin and flooded the same as well as the remains of the deceased
with ill effects thereto; that pursuant to an authority granted by the Municipal Court
of Paraaque, Metro Manila on September 14, 1978, plaintiffs-appellants with the
assistance of licensed morticians and certain personnel of defendant-appellant (sic)
caused the opening of the concrete vault on September 15, 1978; that upon opening
the vault, the following became apparent to the plaintiffs-appellants: (a) the interior
walls of the concrete vault showed evidence of total flooding; (b) the coffin was
entirely damaged by water, filth and silt causing the wooden parts to warp and
separate and to crack the viewing glass panel located directly above the head and
torso of the deceased; (c) the entire lining of the coffin, the clothing of the deceased,
and the exposed parts of the deceased's remains were damaged and soiled by the
action of the water and silt and were also coated with filth.
WHEREFORE, the petition is dismissed. As above modified, We affirm the decision of

the NLRC in POEA Case No. (L) 84-07-660, with costs against the petitioner.
SO ORDERED.
G.R. No. 98695 January 27, 1993
JUAN J. SYQUIA, CORAZON C. SYQUIA, CARLOTA C. SYQUIA, CARLOS C.
SYQUIA
and
ANTHONY
C.
SYQUIA, petitioners,
vs.
THE HONORABLE COURT OF APPEALS, and THE MANILA MEMORIAL PARK
CEMETERY, INC.,respondents.
Due to the alleged unlawful and malicious breach by the defendant-appellee of its
obligation to deliver a defect-free concrete vault designed to protect the remains of
the deceased and the coffin against the elements which resulted in the desecration
of deceased's grave and in the alternative, because of defendant-appellee's gross
negligence conformably to Article 2176 of the New Civil Code in failing to seal the
concrete vault, the complaint prayed that judgment be rendered ordering defendantappellee to pay plaintiffs-appellants P30,000.00 for actual damages, P500,000.00 for
moral damages, exemplary damages in the amount determined by the court, 20% of
defendant-appellee's total liability as attorney's fees, and expenses of litigation and
costs of suit. 2
Pacis & Reyes Law Offices for petitioners.

Augusto S. San Pedro & Ari-Ben C. Sebastian for private respondents.
CAMPOS, JR., J.:

Herein petitioners, Juan J. Syquia and Corazon C. Syquia, Carlota C. Syquia, Carlos C.
Syquia, and Anthony Syquia, were the parents and siblings, respectively, of the
deceased Vicente Juan Syquia. On March 5, 1979, they filed a complaint 1 in the then
Court of First Instance against herein private respondent, Manila Memorial Park
Cemetery, Inc. for recovery of damages arising from breach of contract and/or quasidelict. The trial court dismissed the complaint.
In dismissing the complaint, the trial court held that the contract between the parties
did not guarantee that the cement vault would be waterproof; that there could be no
quasi-delict because the defendant was not guilty of any fault or negligence, and
because there was a pre-existing contractual relation between the Syquias and
defendant Manila Memorial Park Cemetery, Inc.. The trial court also noted that the
father himself, Juan Syquia, chose the gravesite despite knowing that said area had
to be constantly sprinkled with water to keep the grass green and that water would
eventually seep through the vault. The trial court also accepted the explanation
given by defendant for boring a hole at the bottom side of the vault: "The hole had to
be bored through the concrete vault because if it has no hole the vault will (sic) float
and the grave would be filled with water and the digging would caved (sic) in the
earth, the earth would caved (sic) in the (sic) fill up the grave." 3
The antecedent facts, as gathered by the respondent Court, are as follows:

On March 5, 1979, Juan, Corazon, Carlota and Anthony all surnamed Syquia, plaintiffappellants herein, filed a complaint for damages against defendant-appellee, Manila
Memorial Park Cemetery, Inc.
The complaint alleged among others, that pursuant to a Deed of Sale (Contract No.
6885) dated August 27, 1969 and Interment Order No. 7106 dated July 21, 1978
executed between plaintiff-appellant Juan J. Syquia and defendant-appellee, the
former, father of deceased Vicente Juan J. Syquia authorized and instructed
defendant-appellee to inter the remains of deceased in the Manila Memorial Park
Cemetery in the morning of July 25, 1978 conformably and in accordance with
defendant-appellant's (sic) interment procedures; that on September 4, 1978,
preparatory to transferring the said remains to a newly purchased family plot also at
the Manila Memorial Park Cemetery, the concrete vault encasing the coffin of the
deceased was removed from its niche underground with the assistance of certain
employees of defendant-appellant (sic); that as the concrete vault was being raised
to the surface, plaintiffs-appellants discovered that the concrete vault had a hole
From this judgment, the Syquias appealed. They alleged that the trial court erred in
holding that the contract allowed the flooding of the vault; that there was no
desecration; that the boring of the hole was justifiable; and in not awarding
damages.
The Court of Appeals in the Decision 4 dated December 7, 1990 however, affirmed
the judgment of dismissal. Petitioner's motion for reconsideration was denied in a
Resolution dated April 25, 1991. 5
39
obligations

Perpetual Care" 6 on August 27, 1969. That agreement governed the relations of the
parties and defined their respective rights and obligations. Hence, had there been
actual negligence on the part of the Manila Memorial Park Cemetery, Inc., it would be
held liable not for a quasi-delict orculpa aquiliana, but for culpa contractual as
provided by Article 1170 of the Civil Code, to wit:
Unsatisfied with the respondent Court's decision, the Syquias filed the instant
petition. They allege herein that the Court of Appeals committed the following errors
when it:
1. held that the contract and the Rules and Resolutions of private respondent allowed
the flooding of the vault and the entrance thereto of filth and silt;
2. held that the act of boring a hole was justifiable and corollarily, when it held that
no act of desecration was committed;
Those who in the performance of their obligations are guilty of fraud, negligence, or
delay, and those who in any manner contravene the tenor thereof, are liable for
damages.
3. overlooked and refused to consider relevant, undisputed facts, such as those

which have been stipulated upon by the parties, testified to by private respondent's
witnesses, and admitted in the answer, which could have justified a different
conclusion;
The Manila Memorial Park Cemetery, Inc. bound itself to provide the concrete box to
be send in the interment. Rule 17 of the Rules and Regulations of private respondent
provides that:
4. held that there was no tort because of a pre-existing contract and the absence of
fault/negligence; and
Rule 17. Every earth interment shall be made enclosed in a concrete box, or in an
outer wall of stone, brick or concrete, the actual installment of which shall be made
by the employees of the Association. 7
5. did not award the P25,000.00 actual damages which was agreed upon by the
parties, moral and exemplary damages, and attorney's fees.
Pursuant to this above-mentioned Rule, a concrete vault was provided on July 27,
1978, the day before the interment, and was, on the same day, installed by private
respondent's employees in the grave which was dug earlier. After the burial, the
vault was covered by a cement lid.
At the bottom of the entire proceedings is the act of boring a hole by private
respondent on the vault of the deceased kin of the bereaved petitioners. The latter
allege that such act was either a breach of private respondent's contractual
obligation to provide a sealed vault, or, in the alternative, a negligent act which
constituted a quasi-delict. Nonetheless, petitioners claim that whatever kind of
negligence private respondent has committed, the latter is liable for desecrating the
grave of petitioners' dead.
Petitioners however claim that private respondent breached its contract with them as
the latter held out in the brochure it distributed that the . . . lot may hold single or
double internment (sic) underground in sealed concrete vault." 8 Petitioners claim
that the vault provided by private respondent was not sealed, that is, not waterproof.
Consequently, water seeped through the cement enclosure and damaged everything
inside it.
In the instant case, We are called upon to determine whether the Manila Memorial
Park Cemetery, Inc., breached its contract with petitioners; or, alternatively, whether
private respondent was guilty of a tort.
We do not agree. There was no stipulation in the Deed of Sale and Certificate of
Perpetual Care and in the Rules and Regulations of the Manila Memorial Park
Cemetery, Inc. that the vault would be waterproof. Private respondent's witness, Mr.
Dexter Heuschkel, explained that the term "sealed" meant "closed." 9 On the other
hand, the word "seal" is defined as . . . any of various closures or fastenings . . . that
cannot be opened without rupture and that serve as a check against tampering or
unauthorized opening." 10 The meaning that has been given by private respondent to
the word conforms with the cited dictionary definition. Moreover, it is also quite clear
that "sealed" cannot be equated with "waterproof". Well settled is the rule that when
the terms of the contract are clear and leave no doubt as to the intention of the
contracting parties, then the literal meaning of the stipulation shall
control. 11 Contracts should be interpreted according to their literal meaning and
should not be interpreted beyond their obvious intendment. 12 As ruled by the
respondent Court:
We understand the feelings of petitioners and empathize with them. Unfortunately,

however, We are more inclined to answer the foregoing questions in the negative.
There is not enough ground, both in fact and in law, to justify a reversal of the
decision of the respondent Court and to uphold the pleas of the petitioners.
With respect to herein petitioners' averment that private respondent has
committed culpa aquiliana, the Court of Appeals found no negligent act on the part
of private respondent to justify an award of damages against it. Although a preexisting contractual relation between the parties does not preclude the existence of
a culpa aquiliana, We find no reason to disregard the respondent's Court finding that
there was no negligence.
Art. 2176. Whoever by act or omission causes damage to another, there being fault
or negligence, is obliged to pay for the damage done. Such fault or negligence, if
there is no pre-existing contractual relation between the parties, is called a quasidelict . . . . (Emphasis supplied).
When plaintiff-appellant Juan J. Syquia affixed his signature to the Deed of Sale
(Exhibit "A") and the attached Rules and Regulations (Exhibit "1"), it can be assumed
that he has accepted defendant-appellee's undertaking to merely provide a concrete
vault. He can not now claim that said concrete vault must in addition, also be
waterproofed (sic). It is basic that the parties are bound by the terms of their
contract, which is the law between them (Rizal Commercial Banking Corporation vs.
In this case, it has been established that the Syquias and the Manila Memorial Park
Cemetery, Inc., entered into a contract entitled "Deed of Sale and Certificate of
40
obligations
Court of Appeals, et al. 178 SCRA 739). Where there is nothing in the contract which
is contrary to law, morals, good customs, public order, or public policy, the validity of
the contract must be sustained (Phil. American Insurance Co. vs. Judge Pineda, 175
SCRA 416). Consonant with this ruling, a contracting party cannot incur a liability
more than what is expressly specified in his undertaking. It cannot be extended by
implication, beyond the terms of the contract (Rizal Commercial Banking Corporation
vs. Court of Appeals, supra). And as a rule of evidence, where the terms of an
agreement are reduced to writing, the document itself, being constituted by the
parties as the expositor of their intentions, is the only instrument of evidence in
respect of that agreement which the law will recognize, so long as its (sic) exists for
the purpose of evidence (Starkie, Ev., pp. 648, 655, Kasheenath vs. Chundy, 5 W.R.
68 cited in Francisco, Revised Rules of Court in the Phil. p. 153, 1973 Ed.). And if the
terms of the contract are clear and leave no doubt upon the intention of the
contracting parties, the literal meaning of its stipulations shall control (Santos vs. CA,
et al., G. R. No. 83664, Nov. 13, 1989; Prudential Bank & Trust Co. vs. Community
Builders Co., Inc., 165 SCRA 285; Balatero vs. IAC, 154 SCRA 530). 13
Thus, finding no evidence of negligence on the part of private respondent, We find no

reason to award damages in favor of petitioners.
In the light of the foregoing facts, and construed in the language of the applicable
laws and jurisprudence, We are constrained to AFFIRM in toto the decision of the
respondent Court of Appeals dated December 7, 1990. No costs.
SO ORDERED.
G.R. No. 96505 July 1, 1993
LEGASPI
OIL
CO.,
INC., petitioner,
vs.
THE COURT OF APPEALS and BERNARD OSERAOS, respondent.
The petition for review on certiorari before us seeks to set aside the decision dated
March 23, 1990 of the Court of Appeals in CA-G.R. CV No. 05828, penned by the
Honorable Justice Abelardo Dayrit with whom Justices Javellana and Kalalo concurred,
which dismissed petitioner's complaint for damages (p. 48, Rollo).
We hold, therefore, that private respondent did not breach the tenor of its obligation
to the Syquias. While this may be so, can private respondent be liable for culpa
aquiliana for boring the hole on the vault? It cannot be denied that the hole made
possible the entry of more water and soil than was natural had there been no hole.
Petitioner does not dispute the facts of the case, as found by respondent Court of
Appeals. The findings of the respondent Court are thus adopted, to wit:
From the evidence presented by the plaintiff-appellee [now petitioner Legaspi Oil
Company, Inc.], it appears that defendant-appellant [now private respondent Bernard
Oseraos] acting through his authorized agents, had several transactions with
appellee Legaspi Oil Co. for the sale of copra to the latter. The price at which
appellant sells the copra varies from time to time, depending on the prevailing
market price when the contract is entered into. One of his authorized agents, Jose
Llover, had previous transactions with appellee for the sale and delivery of copra.
The records show that he concluded a sale for 70 tons of copra at P95.00 per 100
kilos on May 27, 1975 (Exhibit G-5) and another sale for 30 tons of P102.00 per 100
kilos on September 23, 1975 (Exhibit G-3). Subsequently, on November 6, 1975,
another designated agent signed a contract in behalf of appellant for the sale of 100
tons of copra at P79.00 per 100 kilos with the delivery terms of 25 days effective
December 15, 1975 (Exhibit G-2). At this point, it must be noted that the price of
copra had been fluctuating (going up and down), indicating its unsteady position in
the market.
The law defines negligence as the "omission of that diligence which is required by
the nature of the obligation and corresponds with the circumstances of the persons,
of the time and of the place." 14 In the absence of stipulation or legal provision
providing the contrary, the diligence to be observed in the performance of the
obligation is that which is expected of a good father of a family.
The circumstances surrounding the commission of the assailed act boring of the
hole negate the allegation of negligence. The reason for the act was explained by
Henry Flores, Interment Foreman, who said that:
Q It has been established in this particular case that a certain Vicente Juan Syquia
was interred on July 25, 1978 at the Paraaque Cemetery of the Manila Memorial
Park Cemetery, Inc., will you please tell the Hon. Court what or whether you have
participation in connection with said internment (sic)?
A A day before Juan (sic) Syquia was buried our personnel dug a grave. After digging
the next morning a vault was taken and placed in the grave and when the vault was
placed on the grave a hole was placed on the vault so that water could come into the
vault becauseit was raining heavily then because the vault has no hole the vault will
float and the grave would be filled with water and the digging would caved (sic) in
and the earth, the earth would (sic) caved in and fill up the grave. 15 (Emphasis ours)
On February 16, 1976, appellant's agent Jose Llover signed contract No. 3804 for the
sale of 100 tons of copra at P82.00 per 100 kilos with delivery terms of 20 days
effective March 8, 1976 (Exhibit G, for the plaintiff). As compared to appellant's
transaction on November 6, 1975, the current price agreed upon is slightly higher
than the last contract. In all these contracts though, the selling price had always
been stated as "total price" rather than per 100 kilos. However, the parties had
understood the same to be per 100 kilos in their previous transactions.
Except for the foreman's opinion that the concrete vault may float should there be a
heavy rainfall, from the above-mentioned explanation, private respondent has
exercised the diligence of a good father of a family in preventing the accumulation of
water inside the vault which would have resulted in the caving in of earth around the
grave filling the same with earth.
After the period to deliver had lapsed, appellant sold only 46,334 kilos of copra thus
leaving a balance of 53,666 kilos as per running account card (Exhibit "F").
Accordingly, demands were made upon appellant to deliver the balance with a final
warning embodied in a letter dated October 6, 1976, that failure to deliver will mean
41
obligations
cancellation of the contract, the balance to be purchased at open market and the
price differential to be charged against appellant. On October 22, 1976, since there
was still no compliance, appellee exercised its option under the contract and
purchased the undelivered balance from the open market at the prevailing price of
P168.00 per 100 kilos, or a price differential of P86.00 per 100 kilos, a net loss of
P46,152.76 chargeable against appellant.
of the Philippines, Vol. IV, p. 110). The conduct of private respondent clearly
manifests his deliberate fraudulent intent to evade his contractual obligation for the
price of copra had in the meantime more than doubled from P82.00 to P168 per 100
kilograms. Under Article 1170 of the Civil Code of the Philippines, those who in the
performance of their obligation are guilty of fraud, negligence, or delay, and those
who in any manner contravene the tenor thereof, are liable for damages. Pursuant to
said article, private respondent is liable for damages.
(pp. 43-44, Rollo)
The next point of inquiry, therefore, is the amount of damages which private
respondent is liable to pay petitioner. As aforementioned, on account of private
respondent's deliberate breach of his contractual obligation, petitioner was
compelled to buy the balance of 53,666 kilos of copra in the open market at the then
prevailing price of P168 per 100 kilograms thereby paying P46,152.76 more than he
would have paid had private respondent completed delivery of the copra as agreed
upon. Thus, private respondent is liable to pay respondent the amount of P46,152.76
as damages. In case of fraud, bad faith, malice, or wanton attitude, the guilty party is
liable for all damages which may be reasonably attributed to the non performance of
the obligation (Magat vs. Medialdea, 121 SCRA 418 [1983]). Article 1101 of the old
Civil Code, later to be reproduced as Article 1170 of our present Civil Code, was the
basis of our decision in an old case, Acme Films, Inc. vs. Theaters Supply Corporation,
(63 Phil, 657 [1936]), wherein we held:
On November 3, 1976, petitioner filed a complaint against private respondent for

breach of a contract and for damages.
After trial, the then Court of First Instance (now Regional Trial Court) of Albay in Civil
Case No. 5529 rendered a decision holding herein private respondent (then
defendant) Oseraos liable for damages in the amount of P48,152.76, attorney's fees
(P2,000), and litigation costs.
Oseraos appealed to respondent Court which thereafter rendered a reversal decision
on March 23, 1990, ordering the dismissal of the complaint.
Hence, the instant petition for review on certiorari.
The sole issued posed by the petition is whether or not private respondent Oseraos is
liable for damages arising from fraud or bad faith in deliberately breaching the
contract of sale entered into by the parties.
It is not denied that the plaintiff company failed to supply the defendant with the
cinematographic films which were the subject matter of the contracts entered into on
March 20, 1934 (Exhibits 1 and 2), and two films under the contract of March 24,
1934 (Exhibit 3), one of said films being a serial entitled "Whispering Shadow".
Guillermo Garcia Bosque testified that because the plaintiff company had failed to
supply said films, the defendants had to resort to the Universal Pictures Corporation
and ask for films to replace those which said plaintiff had failed to supply under the
contract, having had to pay therefor five per cent more than for those films
contracted with said plaintiff Acme Films, Inc., and that the total cost thereof,
including the printing of programs, posters paraded through the streets with bands of
music to announce the showing of the films which the plaintiff company failed to
supply, amount to from P400 to P550. The plaintiff company did not submit evidence
to rebut the testimony of said witness and the fact that the estimate of the expenses
is approximate does not make said estimate inadmissible. It was incumbent upon the
plaintiff company to submit evidence in rebuttal, or at least ascertain the amount of
the different items in cross-examination. There being no evidence to the contrary, it
is logical to admit that the defendant company spent at least the sum of P400.
After a review of the case, we believe and thus hold, that private respondent is guilty
of fraud in the performance of his obligation under the sales contract whereunder he
bound himself to deliver to petitioner 100 metric tons of copra within twenty (20)
days from March 8, 1976. However within the delivery period, Oseraos delivered only
46,334 kilograms of copra to petitioner, leaving an undelivered balance of 53,666
kilograms. Petitioner made repeated demands upon private respondent to comply
with his contractual undertaking to deliver the balance of 53,666 kilograms but
private respondent elected to ignore the same. In a letter dated October 6, 1976,
petitioner made a final demand with a warning that, should private respondent fail to
complete delivery of the balance of 53,666 kilograms of copra, petitioner would
purchase the balance at the open market and charge the price differential to private
respondent. Still private respondent failed to fulfill his contractual obligation to
deliver the remaining 53,666 kilograms of copra. On October 22, 1976, since there
was still no compliance by private respondent, petitioner exercised its right under the
contract and purchased 53,666 kilograms of copra, the undelivered balance, at the
open market at the then prevailing price of P168.00 per 100 kilograms, a price
differential of P86.00 per 100 kilograms or a total price differential of P46,152.76.
Inasmuch as the plaintiff company had failed to comply with a part of its booking
contract, and as the defendant company had suffered damages as a result thereof,
the former is liable to indemnify the damages caused to the latter, in accordance
with the provisions of Article 1101 of the Civil Code.
Under the foregoing undisputed circumstances, the actuality of private respondent's

fraud cannot be gainsaid. In general, fraud may be defined as the voluntary
execution of a wrongful act, or a wilfull omission, knowing and intending the effects
which naturally and necessarily arise from such act or omission; the fraud referred to
in Article 1170 of the Civil Code of the Philippines is the deliberate and intentional
evasion of the normal fulfillment of obligation; it is distinguished from negligence by
the presence of deliberate intent, which is lacking in the latter (Tolentino's Civil Code
(at page 663.)

WHEREFORE, the instant petition is hereby GRANTED. The decision of the respondent
Court of Appeals in CA-G.R. CV No. 05828 is ANNULLED and SET ASIDE and the
decision of the trial court in Civil Case No. 5529 REINSTATED, with costs against
private respondent.
42
obligations
SO ORDERED.
G.R. No. 190601
Executive Assistant Manager in charge of Food and Beverage. They nevertheless

filed a complaint for breach of contract and damages before the Regional Trial Court
(RTC) of Makati City.
February 7, 2011
SPOUSES LUIGI M. GUANIO and ANNA HERNANDEZ-GUANIO, Petitioners,

vs.
MAKATI SHANGRI-LA HOTEL and RESORT, INC., also doing business under
the name of SHANGRI-LA HOTEL MANILA, Respondent.
In its Answer, respondent claimed that petitioners requested a combination of king

prawns and salmon, hence, the price was increased to P1,200.00 per person, but
discounted at P1,150.00; that contrary to petitioners claim, Marquez and Alvarez
were present during the event, albeit they were not permanently stationed thereat
as there were three other hotel functions; that while there was a delay in the service
of the meals, the same was occasioned by the sudden increase of guests to 470 from
the guaranteed expected minimum number of guests of 350 to a maximum of 380,
as stated in the Banquet Event Order (BEO);2 and that Isaac Albacea, Banquet
Service Director, in fact relayed the delay in the service of the meals to petitioner
Luigis father, Gil Guanio.
DECISION
CARPIO MORALES, J.:
For their wedding reception on July 28, 2001, spouses Luigi M. Guanio and Anna
Hernandez-Guanio (petitioners) booked at the Shangri-la Hotel Makati (the hotel).
Prior to the event, Makati Shangri-La Hotel & Resort, Inc. (respondent) scheduled an
initial food tasting. Petitioners claim that they requested the hotel to prepare for
seven persons the two of them, their respective parents, and the wedding
coordinator. At the scheduled food tasting, however, respondent prepared for only
six.
Respecting the belated service of meals to some guests, respondent attributed it to

the insistence of petitioners wedding coordinator that certain guests be served first.
Petitioners initially chose a set menu which included black cod, king prawns and
angel hair pasta with wild mushroom sauce for the main course which cost P1,000.00
per person. They were, however, given an option in which salmon, instead of king
prawns, would be in the menu at P950.00 per person. They in fact partook of the
salmon.
By Decision of August 17, 2006, Branch 148 of the Makati RTC rendered judgment in
favor of petitioners, disposing as follows:
On Svenssons letter, respondent, denying it as an admission of liability, claimed that

it was meant to maintain goodwill to its customers.
WHEREFORE, premises considered, judgment is hereby rendered in favor of the

plaintiffs and against the defendant ordering the defendants to pay the plaintiff the
following:
Three days before the event, a final food tasting took place. Petitioners aver that the
salmon served was half the size of what they were served during the initial food
tasting; and when queried about it, the hotel quoted a much higher price (P1,200.00)
for the size that was initially served to them. The parties eventually agreed on a final
price P1,150 per person.
1) The amount of P350,000.00 by way of actual damages;

2) The amount of P250,000.00 for and as moral damages;
3) The amount of P100,000.00 as exemplary damages;
A day before the event or on July 27, 2001, the parties finalized and forged their
contract.1
4) The amount of P100,000.00 for and as attorneys fees.

With costs against the defendant.
Petitioners claim that during the reception, respondents representatives, Catering

Director Bea Marquez and Sales Manager Tessa Alvarez, did not show up despite
their assurance that they would; their guests complained of the delay in the service
of the dinner; certain items listed in the published menu were unavailable; the
hotels waiters were rude and unapologetic when confronted about the delay; and
despite Alvarezs promise that there would be no charge for the extension of the
reception beyond 12:00 midnight, they were billed and paid P8,000 per hour for the
three-hour extension of the event up to 4:00 A.M. the next day.
SO ORDERED.3
In finding for petitioners, the trial court relied heavily on the letter of Svensson which
is partly quoted below:
Upon receiving your comments on our service rendered during your reception here
with us, we are in fact, very distressed. Right from minor issues pappadums served in
the soup instead of the creutons, lack of valet parkers, hard rolls being too hard till a
major one slow service, rude and arrogant waiters, we have disappointed you in all
means.
Petitioners further claim that they brought wine and liquor in accordance with their
open bar arrangement, but these were not served to the guests who were forced to
pay for their drinks.
Indeed, we feel as strongly as you do that the services you received

were unacceptable and definitely not up to our standards. We understand that it is
our job to provide excellent service and in this instance, we have fallen short of your
Petitioners thus sent a letter-complaint to the Makati Shangri-la Hotel and Resort, Inc.
(respondent) and received an apologetic reply from Krister Svensson, the hotels
43
obligations
expectations. We ask you please to accept our profound apologies for causing such
discomfort and annoyance. 4 (underscoring supplied)
been performed, or his "reliance interest," which is his interest in being

reimbursed for loss caused by reliance on the contract by being put in as good a
position as he would have been in had the contract not been made; or
his "restitution interest," which is his interest in having restored to him any
benefit that he has conferred on the other party. Indeed, agreements can accomplish
little, either for their makers or for society, unless they are made the basis for action.
The effect of every infraction is to create a new duty, that is, to make RECOMPENSE
to the one who has been injured by the failure of another to observe his contractual
obligationunless he can show extenuating circumstances, like proof of his exercise
of due diligence x x x or of theattendance of fortuitous event, to excuse him
from his ensuing liability. (emphasis and underscoring in the original; capitalization
supplied)
The trial court observed that from "the tenor of the letter . . . the defendant[-herein
respondent] admits that the services the plaintiff[-herein petitioners] received were
unacceptable and definitely not up to their standards." 5
On appeal, the Court of Appeals, by Decision of July 27, 2009, 6 reversed the trial
courts decision, it holding that the proximate cause of petitioners injury was an
unexpected increase in their guests:
x x x Hence, the alleged damage or injury brought about by the confusion,
inconvenience and disarray during the wedding reception may not be attributed to
defendant-appellant Shangri-la.
The pertinent provisions of the Banquet and Meeting Services Contract between the
parties read:
We find that the said proximate cause, which is entirely attributable to plaintiffsappellants, set the chain of events which resulted in the alleged inconveniences, to
the plaintiffs-appellants. Given the circumstances that obtained, only the Sps. Guanio
may bear whatever consequential damages that they may have allegedly
suffered.7(underscoring supplied)
4.3 The ENGAGER shall be billed in accordance with the prescribed rate for the
minimum guaranteed number of persons contracted for, regardless of under
attendance or non-appearance of the expected number of guests, except where the
ENGAGER cancels the Function in accordance with its Letter of Confirmation with the
HOTEL. Should the attendance exceed the minimum guaranteed attendance, the
ENGAGER shall also be billed at the actual rate per cover in excess of the minimum
guaranteed attendance.
Petitioners motion for reconsideration having been denied by Resolution of

November 19, 2009, the present petition for review was filed.
The Court finds that since petitioners complaint arose from a contract, the doctrine
of proximate cause finds no application to it:
xxxx
4.5. The ENGAGER must inform the HOTEL at least forty eight (48) hours before the
scheduled date and time of the Function of any change in the minimum guaranteed
covers. In the absence of such notice, paragraph 4.3 shall apply in the event of under
attendance. In case the actual number of attendees exceed the minimum
guaranteed number
The doctrine of proximate cause is applicable only in actions for quasi-delicts, not in
actions involving breach of contract. x x x The doctrine is a device for imputing
liability to a person where there is no relation between him and another party. In
such a case, the obligation is created by law itself. But, where there is a pre-existing
contractual relation between the parties, it is the parties themselves who create the
obligation, and the function of the law is merely to regulate the relation thus
created.8 (emphasis and underscoring supplied)
by ten percent (10%), the HOTEL shall not in any way be held liable for any
damage or inconvenience which may be caused thereby. The ENGAGER
shall also undertake to advise the guests of the situation and take positive
steps to remedy the same.10 (emphasis, italics and underscoring supplied)
What applies in the present case is Article 1170 of the Civil Code which reads:
Art. 1170. Those who in the performance of their obligations are guilty of fraud,
negligence or delay, and those who in any manner contravene the tenor thereof, are
liable for damages.
RCPI v. Verchez, et al.
Breach of contract is defined as the failure without legal reason to comply with the
terms of a contract. It is also defined as the [f]ailure, without legal excuse, to perform
any promise which forms the whole or part of the contract.11
enlightens:
The appellate court, and even the trial court, observed that petitioners were remiss
in their obligation to inform respondent of the change in the expected number of
guests. The observation is reflected in the records of the case. Petitioners failure to
discharge such obligation thus excused, as the above-quoted paragraph 4.5 of the
parties contract provide, respondent from liability for "any damage or
inconvenience" occasioned thereby.
In culpa contractual x x x the mere proof of the existence of the contract and the
failure of its compliance justify, prima facie, a corresponding right of relief. The law,
recognizing the obligatory force of contracts, will not permit a party to be set free
from liability for any kind of misperformance of the contractual undertaking or a
contravention of the tenor thereof. A breach upon the contract confers upon the
injured party a valid cause for recovering that which may have been lost or
suffered. The remedy serves to preserve the interests of the promissee that may
include his"expectation interest," which is his interest in having the benefit of his
bargain by being put in as good a position as he would have been in had the contract
As for petitioners claim that respondent departed from its verbal agreement with
petitioners, the same fails, given that the written contract which the parties entered
into the day before the event, being the law between them.
44
obligations
Respecting the letter of Svensson on which the trial court heavily relied as admission
of respondents liability but which the appellate court brushed aside, the Court finds
the appellate courts stance in order. It is not uncommon in the hotel industry to
receive comments, criticisms or feedback on the service it delivers. It is also
customary for hotel management to try to smooth ruffled feathers to preserve
goodwill among its clientele.
A As I mentioned earlier, we proved that we did acknowledge the concern of the

client in this case and we did emphatize from the client and apologized, and at the
same time got back to them in whatever investigation we have.
Q You said that you apologized, what did you apologize for?
A Well, first of all it is a standard that we apologize, right? Being in the service
industry, it is a practice that we apologize if there is any inconvenience, so the
purpose for apologizing is mainly to show empathy and to ensure the client that we
are hearing them out and that we will do a better investigation and it is not in any
way that we are admitting any fault.14 (underscoring supplied)
Kalalo v. Luz holds:12

Statements which are not estoppels nor judicial admissions have no quality of
conclusiveness, and an opponent whose admissions have been offered against him
may offer any evidence which serves as an explanation for his former assertion of
what he now denies as a fact.
To the Court, the foregoing explanation of the hotels Banquet Director overcomes
any presumption of admission of breach which Svenssons letter might have
conveyed.
Respondents Catering Director, Bea Marquez, explained the hotels procedure on

receiving and processing complaints, viz:
The exculpatory clause notwithstanding, the Court notes that respondent could have
managed the "situation" better, it being held in high esteem in the hotel and service
industry. Given respondents vast experience, it is safe to presume that this is not its
first encounter with booked events exceeding the guaranteed cover. It is not
audacious to expect that certain measures have been placed in case this
predicament crops up. That regardless of these measures, respondent still received
complaints as in the present case, does not amuse.1avvphil
ATTY. CALMA:
Q You mentioned that the letter indicates an acknowledgement of the concern and
that there was-the first letter there was an acknowledgment of the concern and an
apology, not necessarily indicating that such or admitting fault?
A Yes.
If I may, Your Honor, that was the letter dated August 4, 2001, previously marked as
plaintiffs exhibits, Your Honor. What is the procedure of the hotel with respect to
customer concern?
Respondent admitted that three hotel functions coincided with petitioners reception.
To the Court, the delay in service might have been avoided or minimized if
respondent exercised prescience in scheduling events. No less than quality service
should be delivered especially in events which possibility of repetition is close to nil.
Petitioners are not expected to get married twice in their lifetimes.
A Upon receipt of the concern from the guest or client, we acknowledge receipt of
such concern, and as part of procedure in service industry particularly Makati
Shangri-la we apologize for whatever inconvenience but at the same time saying,
that of course, we would go through certain investigation and get back to them for
the feedback with whatever concern they may have.
In the present petition, under considerations of equity, the Court deems it just to
award the amount of P50,000.00 by way of nominal damages to petitioners, for the
discomfiture that they were subjected to during to the event. 15 The Court recognizes
that every person is entitled to respect of his dignity, personality, privacy and peace
of mind.16Respondents lack of prudence is an affront to this right.
Q Your Honor, I just like at this point mark the exhibits, Your Honor, the letter dated
August 4, 2001 identified by the witness, Your Honor, to be marked as Exhibit 14 and
the signature of Mr. Krister Svensson be marked as Exhibit 14-A. 13
WHEREFORE, the
Court
of
Appeals
Decision
dated
July
28,
2009
is PARTIALLY REVERSED. Respondent is, in light of the foregoing discussion,
ORDERED to pay the amount of P50,000.00 to petitioners by way of nominal
damages.
Q Is this the letter that you are referring to?
xxxx
SO ORDERED.
Q In your opinion, you just mentioned that there is a procedure that the hotel follows
with respect to the complaint, in your opinion was this procedure followed in this
particular concern?
Culpa Aquiliana v. Culpa Contractual
A Yes, maam.
G.R. No. 34840
Q What makes you say that this procedure was followed?
NARCISO
vs.
45
September 23, 1931

GUTIERREZ, plaintiff-appellee,
obligations
BONIFACIO GUTIERREZ, MARIA V. DE GUTIERREZ, MANUEL GUTIERREZ,

ABELARDO VELASCO, and SATURNINO CORTEZ, defendants-appellants.
and not the minor or the mother, would be liable for the damages caused
by the minor.
L.D.
Lockwood
for
San
Agustin
and
Ramon Diokno for appellee.
We are dealing with the civil law liability of parties for obligations which
arise from fault or negligence. At the same time, we believe that, as has
been done in other cases, we can take cognizance of the common law rule
on the same subject. In the United States, it is uniformly held that the head
of a house, the owner of an automobile, who maintains it for the general
use of his family is liable for its negligent operation by one of his children,
whom he designates or permits to run it, where the car is occupied and
being used at the time of the injury for the pleasure of other members of
the owner's family than the child driving it. The theory of the law is that
the running of the machine by a child to carry other members of the family
is within the scope of the owner's business, so that he is liable for the
negligence of the child because of the relationship of master and servant.
(Huddy On Automobiles, 6th ed., sec. 660; Missell vs. Hayes [1914], 91 Atl.,
322.) The liability of Saturnino Cortez, the owner of the truck, and of his
chauffeur Abelardo Velasco rests on a different basis, namely, that of
contract which, we think, has been sufficiently demonstrated by the
allegations of the complaint, not controverted, and the evidence. The
reason for this conclusion reaches to the findings of the trial court
concerning the position of the truck on the bridge, the speed in operating
the machine, and the lack of care employed by the chauffeur. While these
facts are not as clearly evidenced as are those which convict the other
defendant, we nevertheless hesitate to disregard the points emphasized by
the trial judge. In its broader aspects, the case is one of two drivers
approaching a narrow bridge from opposite directions, with neither being
willing to slow up and give the right of way to the other, with the inevitable
result of a collision and an accident.
appellants
Roxas
Velasco
and
Cortez.
for
other
appellants.
MALCOLM, J.:
This is an action brought by the plaintiff in the Court of First Instance of
Manila against the five defendants, to recover damages in the amount of
P10,000, for physical injuries suffered as a result of an automobile
accident. On judgment being rendered as prayed for by the plaintiff, both
sets of defendants appealed.
On February 2, 1930, a passenger truck and an automobile of private
ownership collided while attempting to pass each other on the Talon bridge
on the Manila South Road in the municipality of Las Pias, Province of
Rizal. The truck was driven by the chauffeur Abelardo Velasco, and was
owned by Saturnino Cortez. The automobile was being operated by
Bonifacio Gutierrez, a lad 18 years of age, and was owned by Bonifacio's
father and mother, Mr. and Mrs. Manuel Gutierrez. At the time of the
collision, the father was not in the car, but the mother, together will several
other members of the Gutierrez family, seven in all, were accommodated
therein. A passenger in the autobus, by the name of Narciso Gutierrez, was
en route from San Pablo, Laguna, to Manila. The collision between the bus
and the automobile resulted in Narciso Gutierrez suffering a fracture right
leg which required medical attendance for a considerable period of time,
and which even at the date of the trial appears not to have healed
properly.
The defendants Velasco and Cortez further contend that there existed
contributory negligence on the part of the plaintiff, consisting principally of
his keeping his foot outside the truck, which occasioned his injury. In this
connection, it is sufficient to state that, aside from the fact that the
defense of contributory negligence was not pleaded, the evidence bearing
out this theory of the case is contradictory in the extreme and leads us far
afield into speculative matters.
It is conceded that the collision was caused by negligence pure and simple.
The difference between the parties is that, while the plaintiff blames both
sets of defendants, the owner of the passenger truck blames the
automobile, and the owner of the automobile, in turn, blames the truck. We
have given close attention to these highly debatable points, and having
done so, a majority of the court are of the opinion that the findings of the
trial judge on all controversial questions of fact find sufficient support in
the record, and so should be maintained. With this general statement set
down, we turn to consider the respective legal obligations of the
defendants.
The last subject for consideration relates to the amount of the award. The
appellee suggests that the amount could justly be raised to P16,517, but
naturally is not serious in asking for this sum, since no appeal was taken by
him from the judgment. The other parties unite in challenging the award of
P10,000, as excessive. All facts considered, including actual expenditures
and damages for the injury to the leg of the plaintiff, which may cause him
permanent lameness, in connection with other adjudications of this court,
lead us to conclude that a total sum for the plaintiff of P5,000 would be fair
and reasonable. The difficulty in approximating the damages by monetary
compensation is well elucidated by the divergence of opinion among the
members of the court, three of whom have inclined to the view that P3,000
In amplification of so much of the above pronouncement as concerns the

Gutierrez family, it may be explained that the youth Bonifacio was in
incompetent chauffeur, that he was driving at an excessive rate of speed,
and that, on approaching the bridge and the truck, he lost his head and so
contributed by his negligence to the accident. The guaranty given by the
father at the time the son was granted a license to operate motor vehicles
made the father responsible for the acts of his son. Based on these facts,
pursuant to the provisions of article 1903 of the Civil Code, the father alone
46
obligations
would be amply sufficient, while a fourth member has argued that P7,500
would be none too much.
by the motorman. In this view the derailment of the car is supposed to be

due to casus fortuitos and not chargeable to the negligence of the
motorman.
In consonance with the foregoing rulings, the judgment appealed from will
be modified, and the plaintiff will have judgment in his favor against the
defendants Manuel Gutierrez, Abelardo Velasco, and Saturnino Cortez,
jointly and severally, for the sum of P5,000, and the costs of both
instances.
Avancea, C.J., Johnson,
Imperial, JJ., concur.
G.R. No. L-14335
Street,
Villamor,
Ostrand,
Romualdez,
Even supposing that the derailment of the car was due to the accidental
presence of such a stone as suggested, we do not think that the existence
of negligence is disproved. The motorman says that upon approaching the
switch he reduced the electrical energy to the point that the car barely
entered the switch under its own momentum, and this operation was
repeated as he passed out. Upon getting again on the straight tract he put
the control successively at points one, two, three and lastly at point four.
At the moment when the control was placed at point four he perceived that
the rear wheels were derailed and applied the brake; but at the same
instant the car struck the post, some 40 meters distant from the exit of the
switch. One of the defendant's witnesses stated in court that the rate of a
car propelled by electricity with the control at point "four" should be about
five or 6 miles per hour. There was some other evidence to the effect that
the car was behind schedule time and that it was being driven after leaving
the switch, at a higher rate than would ordinarily be indicated by the
control at point four. This inference is rendered more tenable by the
circumstance that the car was practically empty. On the whole, we are of
the opinion that the finding of negligence in the operation of the car must
be sustained, as not being clearly contrary to the evidence; not so much
because of excessive speed as because of the distance which the car was
allowed to run with the front wheels of the rear truck derailed. It seems to
us than an experienced and attentive motorman should have discovered
that something was wrong and would have stopped before he had driven
the car over the entire distance from the point where the wheels left the
track to the place where the post was struck.
and
January 28, 1920
MANUEL
DE
GUIA, plaintiff-appellant,
vs.
THE MANILA ELECTRIC RAILROAD & LIGHT COMPANY, defendant-appellant.
Sumulong and Estrada, Crossfield and O'Brien and Francisco A. Delgado for
plaintiff-appellant.
Lawrence and Ross for defendant-appellant.
STREET, J.:
This is an appeal prosecuted both by the plaintiff and the defendant from a
judgment of the Court of First Instance of the City of Manila, whereby the
plaintiff was awarded the sum of P6,100, with interest and costs, as
damages incurred by him in consequence of physical injuries sustained
while riding on one of the defendant's car.
The accident which gave rise to the litigation occurred on September 4,
1915, near the end of the street-car line in Caloocan, Rizal, a northern
suburb of the city of Manila. It appears that, at about 8 o'clock p.m., of the
date mentioned, the plaintiff Manuel de Guia, a physician residing in
Caloocan, boarded a car at the end of the line with the intention of coming
to the city. At about 30 meters from the starting point the car entered a
switch, the plaintiff remaining on the back platform holding the handle of
the right-hand door. Upon coming out of the switch, the small wheels of the
rear truck left the track, ran for a short distance along the macadam filling,
which was flush with the rails, and struck a concrete post at the left of the
tract. The post was shattered; and as the car stopped the plaintiff was
thrown against the door with some violence, receiving bruises and possibly
certain internal injuries, the extent of which is a subject of dispute.
The conclusion being accepted that there was negligence on the part of the
motorman in driving the car, it results that the company is liable for the
damage resulting to the plaintiff as a consequence of that negligence. The
plaintiff had boarded the car as a passenger for the city of Manila and the
company undertook to convey him for hire. The relation between the
parties was, therefore, of a contractual nature, and the duty of the carrier
is to be determined with reference to the principles of contract law, that is,
the company was bound to convey and deliver the plaintiff safely and
securely with reference to the degree of care which, under the
circumstances, is required by law and custom applicable to the case (art.
1258, Civil Code). Upon failure to comply with that obligation the company
incurred the liability defined in articles 1103-1107 of the Civil Code.
(Cangco vs. Manila Railroad Company, 38 Phil. Rep., 768; Manila Railroad
Company vs. Compaia Transatlantica, and Atlantic, Gulf & Pacific Co., 38
Phil. Rep., 875.)
The trial court found that the motorman of the derailed car was negligent
in having maintained too rapid a speed. This inference appears to be based
chiefly upon the results of the shock, involving the shattering of the post
and the bending of the kingpost of the car. It is insisted for the defendant
company that the derailment was due to the presence of a stone,
somewhat larger than a goose egg, which had become accidentally lodged
between the rails at the juncture of the switch and which was unobserved
From the nature of the liability thus incurred, it is clear that the defendant
company can not avail itself of the last paragraph of article 1903 of the
Civil Code, since that provision has reference to liability incurred by
negligence in the absence of contractual relation, that is, to the culpa
47
obligations
aquiliana of the civil law. It was therefore irrelevant for the defendant
company to prove, as it did, that the company had exercised due care in
the selection and instruction of the motorman who was in charge of its car
and that he was in fact an experienced and reliable servant.
the basis of recovery in a civil action. This element of damages must

therefore be eliminated. It goes without saying that damage of this
character could not, at the time of the accident, have been foreseen by the
delinquent party as a probable consequence of the injury inflicted a
circumstance which makes applicable article 1107 of the Civil Code, as
already expounded.
At this point, however, it should be observed that although in case like this
the defendant must answer for the consequences of the negligence of its
employee, the court has the power to moderate liability according to the
circumstances of the case (art. 1103, Civ. Code): Furthermore, we think it
obvious that an employer who has in fact displayed due diligence in
choosing and instructing his servants is entitled to be considered a debtor
in good faith, within the meaning of article 1107 of the same Code.
Construing these two provisions together, applying them to the facts of
this case, it results that the defendant's liability is limited to such damages
as might, at the time of the accident, have been reasonably foreseen as a
probable consequence of the physical injuries inflicted upon the plaintiff
and which were in fact a necessary result of those injuries. There is nothing
novel in this proposition, since both the civil and the common law are
agreed upon the point that the damages ordinarily recoverable for the
breach of a contractual obligation, against a person who has acted in good
faith, are such as can reasonably be foreseen at the time the obligation is
contracted. In Daywalt vs. Corporacion de PP. Agustinos Recoletos (39 Phil.,
587), we said: "The extent of the liability for the breach of a contract must
be determined in the light of the situation in existence at the time the
contract is made; and the damages ordinarily recoverable are in all events
limited to such as might be reasonably foreseen in the light of the facts
then known to the contracting parties."
The last element of damages to be considered is the item of the plaintiff's

doctor's bills, a subject which we momentarily pass for discussion further
on, since the controversy on this point can be more readily understood in
connection with the question raised by the plaintiff's appeal.
The plaintiff alleges in the complaint that the damages incurred by him as a
result of the injuries in question ascend to the amount of P40,000. Of this
amount the sum of P10,000 is supposed to represent the cost of medical
treatment and other expenses incident to the plaintiff's cure, while the
remainder (P30,000) represents the damage resulting from the character
of his injuries, which are supposedly such as to incapacitate him for the
exercise of the medical profession in the future. In support of these claims
the plaintiff introduced evidence, consisting of his own testimony and that
of numerous medical experts, tending to show that as a result of the
injuries in question he had developed infarct of the liver and traumatic
neurosis, accompanied by nervousness, vertigo, and other disturbing
symptoms of a serious and permanent character, it being claimed that
these manifestations of disorder rendered him liable to a host of other
dangerous diseases, such as pleuresy, tuberculosis, pneumonia, and
pulmonary gangrene, and that restoration to health could only be
accomplished, if at all, after long years of complete repose. The trial judge
did not take these pretensions very seriously, and, as already stated,
limited the damages to the three items of professional earnings, expenses
of medical treatment, and the loss of the appointment as medical
treatment, and the loss of the appointment as medical inspector in
Occidental Negros. As the appeal of the plaintiff opens the whole case upon
the question of damages, it is desirable to present a somewhat fuller
statement than that already given with respect to extent and character of
the injuries in question.
This brings us to consider the amount which may be awarded to the

plaintiff as damages. Upon this point the trial judge found that, as a result
of the physical and nervous derangement resulting from the accident, Dr.
De Guia was unable properly to attend to his professional labors for three
months and suspended his practice for that period. It was also proved by
the testimony of the plaintiff that his customary income, as a physician,
was about P300 per month. The trial judge accordingly allowed P900, as
damages for loss of professional earnings. This allowance is attacked upon
appeal by the defendant as excessive both as to the period and rate of
allowance. Upon examining the evidence we fell disinclined to disturb this
part of the judgment, though it must be conceded that the estimate of the
trial judge on this point was liberal enough to the plaintiff.
The plaintiff testified that, at the time the car struck against the concrete
post, he was standing on the rear platform, grasping the handle of the
right-hand door. The shock of the impact threw him forward, and the left
part of his chest struck against the door causing him to fall. In falling, the
plaintiff says, his head struck one of the seats and he became unconscious.
He was presently taken to his home which was only a short distance away,
where he was seen at about 10 o'clock p. m., by a physician in the
employment of the defendant company. This physician says that the
plaintiff was then walking about and apparently suffering somewhat from
bruises on his chest. He said nothing about his head being injured and
refused to go to a hospital. Later, during the same night Dr. Carmelo Basa
was called in to see the plaintiff. This physician says that he found Doctor
De Guia lying in bed and complaining of a severe pain in the side. During
Another item allowed by the trial judge consists of P3,900, which the
plaintiff is supposed to have lost by reason of his inability to accept a
position as district health officer in Occidental Negros. It appears in this
connection that Mr. Alunan, representative from Occidental Negros, had
asked Dr. Montinola, who supposedly had the authority to make the
appointment, to nominate the plaintiff to such position. The job was
supposed to be good for two years, with a salary of P1,600 per annum, and
possibility of outside practice worth P350. Accepting these suggestions as
true, it is evident that the damages thus incurred are too speculative to be
48
obligations
the visit of Doctor Basa the plaintiff several times spit up blood, a
manifestation no doubt due to the effects of the bruises received in his
side. The next day Doctor De Guia went into Manila to consult another
physician, Doctor Miciano, and during the course of a few weeks he called
into consultation other doctors who were introduced as witnesses in his
behalf at the trial of this case. According to the testimony of these
witnesses, as well as that of the plaintiff himself, the symptoms of physical
and nervous derangement in the plaintiff speedily developed in portentous
degree.
pulmonary region. The treatment for this malady was successful after two
months, but at the end of six months the same trouble recurred and
required further treatment. In October of the year 1916, or more than a
year after the accident in question occurred, Doctor Montes was called in
consultation with Doctor Guerrero to make an examination of the plaintiff.
Doctor Montes says that his charges altogether for services rendered to
the plaintiff amount to P350, of which the sum of P200 had been paid by
the plaintiff upon bills rendered from time to time. This physician speaks in
the most general terms with respect to the times and extent of the services
rendered; and it is by no means clear that those services which were
rendered many months, or year, after the accident had in fact any
necessary or legitimate relation to the injuries received by the plaintiff. In
view of the vagueness and uncertainty of the testimony relating to Doctor
Montes' services, we are of the opinion that the sum of P200, or the
amount actually paid to him by the plaintiff, represents the extent of the
plaintiff's obligation with respect to treatment for said injuries.
Other experts were introduced by the defendant whose testimony tended

to show that the plaintiff's injuries, considered in their physical effects,
were trivial and that the attendant nervous derangement, with its
complicated train of ailments, was merely simulated.
Upon this question the opposing medical experts ventilated a considerable
mass of professional learning with reference to the nature and effects of
the baffling disease known as traumatic neurosis, or traumatic hysteria a
topic which has been the occasion of much controversy in actions of this
character in the tribunals of Europe and America. The subject is one of
considerable interest from a medico-legal point of view, but we deem it
unnecessary in this opinion to enter upon a discussion of its voluminous
literature. It is enough to say that in our opinion the plaintiff's case for
large damages in respect to his supposed incapacitation for future
professional practice is not made out. Of course in this jurisdiction
damages can not be assessed in favor of the plaintiff as compensation for
the
physical
or
mental
pain
which
he
may
have
endured
(Marcelo vs. Velasco, 11 Phil. Rep. 287); and the evidence relating to the
injuries, both external and internal, received by him must be examined
chiefly in its bearing upon his material welfare, that is, in its results upon
his earning capacity and the expenses incurred in restoration to the usual
condition of health.
With regard to the obligation supposedly incurred by the plaintiff to three

other physicians, we are of the opinion that they are not a proper subject
of recovery in this action; and this for more than one reason. In the first
place, it does not appear that said physicians have in fact made charges for
those services with the intention of imposing obligations on the plaintiff to
pay for them. On the contrary it would seem that said services were
gratuitously rendered out of courtesy to the plaintiff as a member of the
medical profession. The suggestions made on the stand by these
physicians to the effect that their services were worth the amounts stated
by them are not sufficient to proved that the plaintiff had incurred the
obligation to pay those amounts. In the second place, we are convinced
that in employing so many physicians the plaintiff must have had in view of
the successful promotion of the issue of this lawsuit rather than the bona
fide purpose of effecting the cure of his injuries. In order to constitute a
proper element of recovery in an action of this character, the medical
service for which reimbursement is claimed should not only be such as to
have created a legal obligation upon the plaintiff but such as was
reasonably necessary in view of his actual condition. It can not be
permitted that a litigant should retain an unusual and unnecessary number
of professional experts with a view to the successful promotion of a lawsuit
and expect to recover against his adversary the entire expense thus
incurred. His claim for medical services must be limited to such
expenditures as were reasonably suited to the case.
The evidence before us shows that immediately after the accident in

question Doctor De Guia, sensing in the situation a possibility of profit,
devoted himself with great assiduity to the promotion of this litigation; and
with the aid of his own professional knowledge, supplemented by
suggestions obtained from his professional friends and associates, he
enveloped himself more or less unconsciously in an atmosphere of delusion
which rendered him incapable of appreciating at their true value the
symptoms of disorder which he developed. The trial court was in our
opinion fully justified in rejecting the exaggerated estimate of damages
thus created.
The second error assigned in the brief of the defendant company presents
a question of practice which, though not vital to the solution of this case, is
of sufficient general importance to merit notice. It appears that four of the
physicians examined as witnesses for the plaintiff had made written
statements at various dates certifying the results of their respective
examinations into the condition of the plaintiff. When these witnesses were
examined in court the identified their respective signatures to these
certificates and the trial judge, over the defendant's objection, admitted
the documents as primary evidence in the case. This was undoubtedly
We now pass to the consideration of the amount allowed to the plaintiff by

the trial judge as the expense incurred for medical service. In this
connection Doctor Montes testified that he was first called to see the
plaintiff upon September 14, 1915, when he found him suffering from
traumatic neurosis. Three months later he was called upon to treat the
same patient for an acute catarrhal condition, involving disturbance in the
49
obligations
erroneous. A document of this character is not primary evidence in any

sense, since it is fundamentally of a hearsay nature; and the only
legitimate use to which one of these certificates could be put, as evidence
for the plaintiff, was to allow the physician who issued it to refer thereto to
refresh his memory upon details which he might have forgotten.
In Zwangizer vs. Newman (83 N. Y. Supp., 1071) which was also an action to
recover damages for personal injury, it appeared that a physician, who had
been sent by one of the parties to examine the plaintiff, had made at the
time a written memorandum of the results of the examination; and it was
proposed to introduce this document in evidence at the trial. It was
excluded by the trial judge, and it was held upon appeal that this was
proper. Said the court: "There was no failure or exhaustion of the memory,
and no impeachment of the memorandum on cross-examination; and the
document was clearly incompetent as evidence in chief."
front perpendicular handspot, at the same time placing his left foot upon the
platform. However, before the plaintiff's position had become secure, and even
before his raised right foot had reached the flatform, the motorman applied the
power, with the result that the car gave a slight lurch forward. This sudden impulse
to the car caused the plaintiff's foot to slip, and his hand was jerked loose from the
handpost, He therefore fell to the ground, and his right foot was caught and crushed
by the moving car. The next day the member had to be amputated in the hospital.
The witness, Ciriaco Guevara, also stated that, as the plaintiff started to board the
car, he grasped the handpost on either side with both right and left hand. The latter
statement may possibly be incorrect as regards the use of his right hand by the
plaintiff, but we are of the opinion that the finding of the trial court to the effect that
the motorman slowed up slightly as the plaintiff was boarding the car that the
plaintiff's fall was due in part at lease to a sudden forward movement at the moment
when the plaintiff put his foot on the platform is supported by the evidence and
ought not to be disturbed by us.
It results from the foregoing that the judgment appealed from must be
modified by reducing the amount of the recovery to eleven hundred pesos
(1,100), with legal interest from November 8, 1916. As thus modified the
judgment is affirmed, without any special pronouncement as to costs of
this instance. So ordered.
G.R. No. L-29462
The motorman stated at the trial that he did not see the plaintiff attempting to board
the car; that he did not accelerate the speed of the car as claimed by the plaintiff's
witnesses; and that he in fact knew nothing of the incident until after the plaintiff had
been hurt and some one called to him to stop. We are not convinced of the complete
candor of this statement, for we are unable to see how a motorman operating this
car could have failed to see a person boarding the car under the circumstances
revealed in this case. It must be remembered that the front handpost which, as all
witness agree, was grasped by the plaintiff in attempting to board the car, was
immediately on the left side of the motorman.
March 7, 1929
IGNACIO
DEL
vs.
MANILA ELECTRIC CO., defendant-appellant.
PRADO, plaintiff-appellee,
With respect to the legal aspects of the case we may observe at the outset that there
is no obligation on the part of a street railway company to stop its cars to let on
intending passengers at other points than those appointed for stoppage. In fact it
would be impossible to operate a system of street cars if a company engage in this
business were required to stop any and everywhere to take on people who were too
indolent, or who imagine themselves to be in too great a hurry, to go to the proper
places for boarding the cars. Nevertheless, although the motorman of this car was
not bound to stop to let the plaintiff on, it was his duty to do act that would have the
effect of increasing the plaintiff's peril while he was attempting to board the car. The
premature acceleration of the car was, in our opinion, a breach of this duty.
This action was instituted in the Court of First Instance of Manila by Ignacio del Prado
to recover damages in the amount of P50,000 for personal injuries alleged to have
been caused by the negligence of te defendant, the Manila Electric Company, in the
operation of one of its street cars in the City of Manila. Upon hearing the cause the
trial court awarded to the plaintiff the sum of P10,000, as damages, with costs of
suit, and the defendant appealed.
The appellant, the Manila Electric Company, is engaged in operating street cars in
the City for the conveyance of passengers; and on the morning of November 18,
1925, one Teodorico Florenciano, as appellant's motorman, was in charge of car No.
74 running from east to west on R. Hidalgo Street, the scene of the accident being at
a point near the intersection of said street and Mendoza Street. After the car had
stopped at its appointed place for taking on and letting off passengers, just east of
the intersection, it resumed its course at a moderate speed under the guidance of
the motorman. The car had proceeded only a short distance, however, when the
plaintiff, Ignacio del Prado, ran across the street to catch the car, his approach being
made from the left. The car was of the kind having entrance and exist at either end,
and the movement of the plaintiff was so timed that he arrived at the front entrance
of the car at the moment when the car was passing.
The relation between a carrier of passengers for hire and its patrons is of a
contractual nature; and in failure on the part of the carrier to use due care in carrying
its passengers safely is a breach of duty (culpa contructual) under articles 1101,
1103 and 1104 of the Civil Code. Furthermore, the duty that the carrier of
passengers owes to its patrons extends to persons boarding the cars as well as to
those alighting therefrom. The case of Cangco vs. Manila Railroad Co. (38 Phil., 768),
supplies an instance of the violation of this duty with respect to a passenger who was
getting off of a train. In that case the plaintiff stepped off of a moving train, while it
was slowing down in a station, and at the time when it was too dark for him to see
clearly where he was putting his feet. The employees of the company had carelessly
left watermelons on the platform at the place where the plaintiff alighted, with the
result that his feet slipped and he fell under the car, where his right arm badly
injured. This court held that the railroad company was liable for breach positive duty
The testimony of the plaintiff and of Ciriaco Guevara, one of his witnesses, tends to
shows that the plaintiff, upon approaching the car, raised his hand as an indication to
the motorman of his desire to board the car, in response to which the motorman
eased up a little, without stopping. Upon this the plaintiff seized, with his hand, the
50
obligations
(culpa contractual), and the plaintiff was awarded damages in the amount of P2,500
for the loss of his arm. In the opinion in that case the distinction is clearly drawn
between a liability for negligence arising from breach of contructual duty and that
arising articles 1902 and 1903 of the Civil Code (culpa aquiliana).
Iowa, 872; 171 N. W., 167). The negligence of the plaintiff was, however, contributory
to the accident and must be considered as a mitigating circumstance.
With respect to the effect of this injury upon the plaintiff's earning power, we note
that, although he lost his foot, he is able to use an artificial member without great
inconvenience and his earning capacity has probably not been reduced by more than
30 per centum. In view of the precedents found in our decisions with respect to the
damages that ought to be awarded for the loss of limb, and more particularly Rakes
vs. Atlantic, Gulf and Pacific Co. (7 Phil., 359); Cangco vs. Manila Railroad Co. (38
Phil., 768); and Borromeo vs. Manila Electric Railroad and Light Co. (44 Phil., 165),
and in view of all the circumstances connected with the case, we are of the opinion
that the plaintiff will be adequately compensated by an award of P2,500.
The distiction between these two sorts of negligence is important in this jurisdiction,
for the reason that where liability arises from a mere tort (culpa aquiliana), not
involving a breach of positive obligation, an employer, or master, may exculpate
himself, under the last paragraph of article 1903 of the Civil Code, by providing that
he had exercised due degligence to prevent the damage; whereas this defense is not
available if the liability of the master arises from a breach of contrauctual duty
(culpa contractual). In the case bfore us the company pleaded as a special defense
that it had used all the deligence of a good father of a family to prevent the damage
suffered by the plaintiff; and to establish this contention the company introduced
testimony showing that due care had been used in training and instructing the
motorman in charge of this car in his art. But this proof is irrelevant in view of the
fact that the liability involved was derived from a breach of obligation under article
1101 of the Civil Code and related provisions. (Manila Railroad Co. vs. Compana
Transatlantica and Atlantic, Gulf & Pacific Co., 38 Phil., 875, 887; De Guia vs. Manila
Electric Railroad & Light Co., 40 Phil., 706, 710.)
It being understood, therefore, that the appealed judgment is modified by reducing

the recovery to the sum of P2,500, the judgment, as thus modified, is affirmed. So
ordered, with costs against the appellant.
Malcolm, Villamor, Ostrand, Romualdez and Villa-Real, JJ., concur.
Another practical difference between liability for negligence arising under 1902 of
the Civil Code and liability arising from negligence in the performance of a positive
duty, under article 1101 and related provisions of the Civil Code, is that, in dealing
with the latter form of negligence, the court is given a discretion to mitigate liability
according to the circumstances of the case (art 1103). No such general discretion is
given by the Code in dealing with liability arising under article 1902; although
possibly the same end is reached by courts in dealing with the latter form of liability
because of the latitude of the considerations pertinent to cases arising under this
article.
Separate Opinions
JOHNSON, J., dissenting:
This appeal presents a hard case, whichever way it is decided.
I read the entire record in this case before it was submitted to the second division for
decision. I was then theponente. I was then convinced, as I am now, after a reexamination of the record, that the judgment of the lower court should be revoked
for the following reasons:
As to the contributory negligence of the plaintiff, we are of the opinion that it should
be treated, as in Rakes vs. Atlantic, Gulf and Pacific Co. (7 Phil., 359), as a mitigating
circumstance under article 1103 of the Civil Code. It is obvious that the plaintiff's
negligence in attempting to board the moving car was not the proximate cause of
the injury. The direct and proximate cause of the injury was the act of appellant's
motorman in putting on the power prematurely. A person boarding a moving car
must be taken to assume the risk of injury from boarding the car under the
conditions open to his view, but he cannot fairly be held to assume the risk that the
motorman, having the situation in view, will increase his peril by accelerating the
speed of the car before he is planted safely on the platform. Again, the situation
before us is one where the negligent act of the company's servant succeeded the
negligent act of the plaintiff, and the negligence of the company must be considered
the proximate cause of the injury. The rule here applicable seems to be analogous to,
if not identical with that which is sometimes referred to as the doctrine of "the last
clear chance." In accordance with this doctrine, the contributory negligence of the
party injured will not defeat the action if it be shown that the defendant might, by
the exercise of reasonable care and prudence, have avoided the consequences of the
negligence of the injured party (20 R. C. L., p. 139; Carr vs. Interurban Ry. Co., 185
(a) That the motorman managed the car carefully and with ordinary prudence at the
moment the alleged accident occured;
(b) That the appellee acted with imprudence and lack of due care in attempting to
board a street car while the same was in motion; and
(c) That he contributed to his own injury, without any negligence or malice or
imprudence on the part of the defendant.
There is nothing in the record which even remotely justifies a contribution of
damages between the appellee and the appellant. The appellee should be required
to suffer the damages which he himself, through his own negligence, occasioned,
without any negligence, imprudence or malice on the part of the appellant.
Therefore, the judgment of the court a quo should be revoked, and the appellant
absolved from all liability under the complaint.
G.R. No. L-6291
51
April 29, 1954
obligations
THE SAN PEDRO BUS LINE, PAULINO DE LA CRUZ, and TEODOLO LACDAN,
doing business under the name of "THE SAN PEDRO BUS LINE," petitioners,
vs.
NICOLAS NAVARRO, and the HON. ASSOCIATE JUSTICES OF THE FIRST
DIVISION, COURT OF APPEALS,respondents.
whose favor it is rendered is entitled, even if the party has not demanded such relief
in his pleadings."
It is also urged by counsel for the petitioners that the finding of the Court of Appeals
that respondent Navarro is insane, is not supported by any evidence, and that on the
other hand, in the motion for new trial filed by the petitioners, accompanied by the
affidavits of Marcelo Legaspi and Ceferino Terello, respondent Navarro is shown not
to be insane, with the result that there is no basis for awarding the additional amount
of P5,000. However, apart from the fact that the finding of the Court of Appeals is
factual and therefore conclusive, the said sum was granted by the Court of Appeals,
not only for the resulting insanity of respondent Navarro but for his pain and
suffering in general; and we are not prepared to hold that the award is excessive as
compensation for moral damages.
Nicolas Navarro filed a complaint in the court of First Instance of Rizal against the
San Pedro Bus Line, Paulino de la Cruz and Teodulo Lacdan, doing business in the
name of the San Pedro Bus Line, alleging that the plaintiff, on April 21, 1943, rode as
a passenger in Manila bound bus No. TPU-7654 owned and operated by the
defendants; that while on its way the bus collided with another vehicle, causing
serious physical injuries to the plaintiff, with subsequent post-traumatic psychosis
which might incapacitate him for life; that as a result thereof the plaintiff suffered
damages, for actual medical and hospital expenses and loss of earning power, in the
total sum of P4,500 which the plaintiff sought to recover from the defendants. In
their answer the defendants admitted the occurrence of the accident and the injuries
received the plaintiff, but disclaimed responsibility for the accident. After trial, the
court dismissed the complaint on the ground that there was "no proof whatsoever of
the relation of the defendants San Pedro Bus Line and Paulino de la Cruz with the
damages claimed by the plaintiff." The plaintiff appealed to the Court of Appeals
which, on part of which reads as follows: "WHEREFORE, it appearing that the trial
court erred as charged, and that the facts and the lawfully warrant a recovery by the
appellant, the judgment appealed in the total sum of P9,500, with interests thereon
from the date this action was commenced. Costs are charged against the appellees."
The defendants have elevated the case by way of a petition for certiorari.
Wherefore, the decision complained of is affirmed, and it is so ordered with costs

against petitioners.
[G.R. No. 138569. September 11, 2003]
THE CONSOLIDATED BANK and TRUST CORPORATION, petitioner, vs. COURT
OF APPEALS and L.C. DIAZ and COMPANY, CPAs, respondents.
The Case
Before us is a petition for review of the Decision [1] of the Court of Appeals dated 27
October 1998 and its Resolution dated 11 May 1999. The assailed decision reversed
the Decision[2]of the Regional Trial Court of Manila, Branch 8, absolving petitioner
Consolidated Bank and Trust Corporation, now known as Solidbank Corporation
(Solidbank), of any liability. The questioned resolution of the appellate court
denied the motion for reconsideration of Solidbank but modified the decision by
deleting the award of exemplary damages, attorneys fees, expenses of litigation and
cost of suit.
It is contended for the herein petitioners that they cannot be held civilly liable to
respondents Nicolas Navarro, for the reason that the Court of First Instance of Rizal
had dismissed the criminal charge against petitioner Paulino de la Cruz, driver of the
bus involved in the accident, citing the case of Martinez vs. Barredo,* Off. Gaz., 4922.
In answer to this contention, it is enough to advert to the conclusion of the Court of
Appeals which is correct that the action was not based on tort or quasi delict,
but was one for breach of a carrier's contract, there being a clear distinction
between culpa as a source and creator of obligations (aquiliana) and culpa in the
performance of an already existing obligation (contractual). As already held in the
case of Castro vs. Acro Taxicab Co.** 46 Off. Gaz., 2023, "para que prosperase la
accion del demandante pidiendo indemnizacion de daos y perjuicios bastaba que
probase la existencia del contrato de pasaje esto es, que causo lesiones y daos en
el pasajero. De acuerdo con la doctrina enunciada, para el exito de la accion de
daos no era necesario que se probase la culpa, desuido a negligencia del chofer
que guiaba el taximetro No. 962." The case of Martinez vs. Barredo is not controlling,
since it referred to an action based on criminal negligence.
The Facts
Solidbank is a domestic banking corporation organized and existing under Philippine
laws. Private respondent L.C. Diaz and Company, CPAs (L.C. Diaz), is a
professional partnership engaged in the practice of accounting.
Sometime in March 1976, L.C. Diaz opened a savings account with Solidbank,
designated as Savings Account No. S/A 200-16872-6.
On 14 August 1991, L.C. Diaz through its cashier, Mercedes Macaraya (Macaraya),
filled up a savings (cash) deposit slip for P990 and a savings (checks) deposit slip
for P50. Macaraya instructed the messenger of L.C. Diaz, Ismael Calapre (Calapre),
to deposit the money with Solidbank. Macaraya also gave Calapre the Solidbank
passbook.
The other contention of the petitioners is that it was erroneous for the Court of
Appeals to award in favor of respondent Navarro damages in the amount of P9,500,
his claim in the complaint being only for P4,500. It appears, however, that the
complaint prayed for "such further relief as may be deemed just and equitable," and
this of course warranted the granting in the complaint. Indeed, under section 9, Rule
35, of the Rules of Court, "the judgment shall grant the relief to which the party in
Calapre went to Solidbank and presented to Teller No. 6 the two deposit slips and the
passbook. The teller acknowledged receipt of the deposit by returning to Calapre the
duplicate copies of the two deposit slips. Teller No. 6 stamped the deposit slips with
the words DUPLICATE and SAVING TELLER 6 SOLIDBANK HEAD OFFICE. Since the
52
obligations
transaction took time and Calapre had to make another deposit for L.C. Diaz with
Allied Bank, he left the passbook with Solidbank. Calapre then went to Allied
Bank. When Calapre returned to Solidbank to retrieve the passbook, Teller No. 6
informed him that somebody got the passbook. [3] Calapre went back to L.C. Diaz
and reported the incident to Macaraya.
On 11 May 1999, the Court of Appeals issued its Resolution denying the motion for
reconsideration of Solidbank. The appellate court, however, modified its decision by
deleting the award of exemplary damages and attorneys fees.
Macaraya immediately prepared a deposit slip in duplicate copies with a check

of P200,000. Macaraya, together with Calapre, went to Solidbank and presented to
Teller No. 6 the deposit slip and check. The teller stamped the words DUPLICATE
and SAVING TELLER 6 SOLIDBANK HEAD OFFICE on the duplicate copy of the
deposit slip. When Macaraya asked for the passbook, Teller No. 6 told Macaraya that
someone got the passbook but she could not remember to whom she gave the
passbook. When Macaraya asked Teller No. 6 if Calapre got the passbook, Teller No. 6
answered that someone shorter than Calapre got the passbook. Calapre was then
standing beside Macaraya.
In absolving Solidbank, the trial court applied the rules on savings account written on
the passbook. The rules state that possession of this book shall raise the
presumption of ownership and any payment or payments made by the bank upon
the production of the said book and entry therein of the withdrawal shall have the
same effect as if made to the depositor personally. [9]
The Ruling of the Trial Court
At the time of the withdrawal, a certain Noel Tamayo was not only in possession of
the passbook, he also presented a withdrawal slip with the signatures of the
authorized signatories of L.C. Diaz. The specimen signatures of these persons were
in the signature cards. The teller stamped the withdrawal slip with the words
Saving Teller No. 5. The teller then passed on the withdrawal slip to Genere Manuel
(Manuel) for authentication. Manuel verified the signatures on the withdrawal slip.
The withdrawal slip was then given to another officer who compared the signatures
on the withdrawal slip with the specimen on the signature cards. The trial court
concluded that Solidbank acted with care and observed the rules on savings account
when it allowed the withdrawal of P300,000 from the savings account of L.C. Diaz.
Teller No. 6 handed to Macaraya a deposit slip dated 14 August 1991 for the deposit
of a check for P90,000 drawn on Philippine Banking Corporation (PBC). This PBC
check of L.C. Diaz was a check that it had long closed. [4] PBC subsequently
dishonored the check because of insufficient funds and because the signature in the
check differed from PBCs specimen signature. Failing to get back the passbook,
Macaraya went back to her office and reported the matter to the Personnel Manager
of L.C. Diaz, Emmanuel Alvarez.
The trial court pointed out that the burden of proof now shifted to L.C. Diaz to prove
that the signatures on the withdrawal slip were forged. The trial court admonished
L.C. Diaz for not offering in evidence the National Bureau of Investigation (NBI)
report on the authenticity of the signatures on the withdrawal slip for P300,000. The
trial court believed that L.C. Diaz did not offer this evidence because it is derogatory
to its action.
The following day, 15 August 1991, L.C. Diaz through its Chief Executive Officer, Luis
C. Diaz (Diaz), called up Solidbank to stop any transaction using the same
passbook until L.C. Diaz could open a new account. [5] On the same day, Diaz formally
wrote Solidbank to make the same request. It was also on the same day that L.C.
Diaz learned of the unauthorized withdrawal the day before, 14 August 1991,
of P300,000 from its savings account. The withdrawal slip for the P300,000 bore the
signatures of the authorized signatories of L.C. Diaz, namely Diaz and Rustico L.
Murillo. The signatories, however, denied signing the withdrawal slip. A certain Noel
Tamayo received the P300,000.
Another provision of the rules on savings account states that the depositor must
keep the passbook under lock and key.[10] When another person presents the
passbook for withdrawal prior to Solidbanks receipt of the notice of loss of the
passbook, that person is considered as the owner of the passbook. The trial court
ruled that the passbook presented during the questioned transaction was now out of
the lock and key and presumptively ready for a business transaction. [11]
In an Information[6] dated 5 September 1991, L.C. Diaz charged its messenger,

Emerano Ilagan (Ilagan) and one Roscon Verdazola with Estafa through Falsification
of Commercial Document. The Regional Trial Court of Manila dismissed the criminal
case after the City Prosecutor filed a Motion to Dismiss on 4 August 1992.
Solidbank did not have any participation in the custody and care of the passbook.
The trial court believed that Solidbanks act of allowing the withdrawal of P300,000
was not the direct and proximate cause of the loss. The trial court held that L.C.
Diazs negligence caused the unauthorized withdrawal. Three facts establish L.C.
Diazs negligence: (1) the possession of the passbook by a person other than the
depositor L.C. Diaz; (2) the presentation of a signed withdrawal receipt by an
unauthorized person; and (3) the possession by an unauthorized person of a PBC
check long closed by L.C. Diaz, which check was deposited on the day of the
fraudulent withdrawal.
On 24 August 1992, L.C. Diaz through its counsel demanded from Solidbank the
return of its money. Solidbank refused.
On 25 August 1992, L.C. Diaz filed a Complaint [7] for Recovery of a Sum of Money
against Solidbank with the Regional Trial Court of Manila, Branch 8. After trial, the
trial court rendered on 28 December 1994 a decision absolving Solidbank and
dismissing the complaint.
L.C. Diaz then appealed[8] to the Court of Appeals. On 27 October 1998, the Court of
Appeals issued its Decision reversing the decision of the trial court.
The trial court debunked L.C. Diazs contention that Solidbank did not follow the
precautionary procedures observed by the two parties whenever L.C. Diaz withdrew
significant amounts from its account. L.C. Diaz claimed that a letter must
accompany withdrawals of more than P20,000. The letter must request Solidbank to
53
obligations
allow the withdrawal and convert the amount to a managers check. The bearer
must also have a letter authorizing him to withdraw the same amount. Another
person driving a car must accompany the bearer so that he would not walk from
Solidbank to the office in making the withdrawal. The trial court pointed out that L.C.
Diaz disregarded these precautions in its past withdrawal. On 16 July 1991, L.C. Diaz
withdrewP82,554 without any separate letter of authorization or any communication
with Solidbank that the money be converted into a managers check.
The appellate court ruled that while L.C. Diaz was also negligent in entrusting its
deposits to its messenger and its messenger in leaving the passbook with the
teller, Solidbank could not escape liability because of the doctrine of last clear
chance. Solidbank could have averted the injury suffered by L.C. Diaz had it called
up L.C. Diaz to verify the withdrawal.
The appellate court ruled that the degree of diligence required from Solidbank is
more than that of a good father of a family. The business and functions of banks are
affected with public interest. Banks are obligated to treat the accounts of their
depositors with meticulous care, always having in mind the fiduciary nature of their
relationship with their clients. The Court of Appeals found Solidbank remiss in its
duty, violating its fiduciary relationship with L.C. Diaz.
The trial court further justified the dismissal of the complaint by holding that the
case was a last ditch effort of L.C. Diaz to recover P300,000 after the dismissal of the
criminal case against Ilagan.
The dispositive portion of the decision of the trial court reads:
The dispositive portion of the decision of the Court of Appeals reads:
IN VIEW OF THE FOREGOING, judgment is hereby rendered DISMISSING the

complaint.
WHEREFORE, premises considered, the decision appealed from is hereby REVERSED

and a new one entered.
The Court further renders judgment in favor of defendant bank pursuant to its
counterclaim the amount of Thirty Thousand Pesos (P30,000.00) as attorneys fees.
1.
Ordering defendant-appellee Consolidated Bank and Trust Corporation to pay
plaintiff-appellant the sum of Three Hundred Thousand Pesos (P300,000.00), with
interest thereon at the rate of 12% per annum from the date of filing of the complaint
until paid, the sum of P20,000.00 as exemplary damages, and P20,000.00 as
attorneys fees and expenses of litigation as well as the cost of suit; and
With costs against plaintiff.

SO ORDERED.[12]
The Ruling of the Court of Appeals
2.
Ordering the dismissal of defendant-appellees counterclaim in the amount
of P30,000.00 as attorneys fees.
The Court of Appeals ruled that Solidbanks negligence was the proximate cause of
the unauthorized withdrawal of P300,000 from the savings account of L.C. Diaz. The
appellate court reached this conclusion after applying the provision of the Civil Code
on quasi-delict, to wit:
SO ORDERED.[13]
Acting on the motion for reconsideration of Solidbank, the appellate court affirmed its
decision but modified the award of damages. The appellate court deleted the award
of exemplary damages and attorneys fees. Invoking Article 2231 [14] of the Civil Code,
the appellate court ruled that exemplary damages could be granted if the defendant
acted with gross negligence. Since Solidbank was guilty of simple negligence only,
the award of exemplary damages was not justified. Consequently, the award of
attorneys fees was also disallowed pursuant to Article 2208 of the Civil Code. The
expenses of litigation and cost of suit were also not imposed on Solidbank.
Article 2176. Whoever by act or omission causes damage to another, there being
fault or negligence, is obliged to pay for the damage done. Such fault or negligence,
if there is no pre-existing contractual relation between the parties, is called a quasidelict and is governed by the provisions of this chapter.
The appellate court held that the three elements of a quasi-delict are present in
case, namely: (a) damages suffered by the plaintiff; (b) fault or negligence of
defendant, or some other person for whose acts he must respond; and (c)
connection of cause and effect between the fault or negligence of the defendant
the damage incurred by the plaintiff.
this
the
the
and
The dispositive portion of the Resolution reads as follows:

WHEREFORE, foregoing considered, our decision dated October 27, 1998 is affirmed
with modification by deleting the award of exemplary damages and attorneys fees,
expenses of litigation and cost of suit.
The Court of Appeals pointed out that the teller of Solidbank who received the
withdrawal slip for P300,000 allowed the withdrawal without making the necessary
inquiry. The appellate court stated that the teller, who was not presented by
Solidbank during trial, should have called up the depositor because the money to be
withdrawn was a significant amount. Had the teller called up L.C. Diaz, Solidbank
would have known that the withdrawal was unauthorized. The teller did not even
verify the identity of the impostor who made the withdrawal. Thus, the appellate
court found Solidbank liable for its negligence in the selection and supervision of its
employees.
SO ORDERED.[15]
Hence, this petition.
The Issues
Solidbank seeks the review of the decision and resolution of the Court of Appeals on
these grounds:
54
obligations
I.
THE COURT OF APPEALS ERRED IN HOLDING THAT PETITIONER BANK SHOULD
SUFFER THE LOSS BECAUSE ITS TELLER SHOULD HAVE FIRST CALLED PRIVATE
RESPONDENT BY TELEPHONE BEFORE IT ALLOWED THE WITHDRAWAL
OF P300,000.00 TO RESPONDENTS MESSENGER EMERANO ILAGAN, SINCE THERE IS
NO AGREEMENT BETWEEN THE PARTIES IN THE OPERATION OF THE SAVINGS
ACCOUNT, NOR IS THERE ANY BANKING LAW, WHICH MANDATES THAT A BANK
TELLER SHOULD FIRST CALL UP THE DEPOSITOR BEFORE ALLOWING A WITHDRAWAL
OF A BIG AMOUNT IN A SAVINGS ACCOUNT.
to pay the depositor on demand. The savings deposit agreement between the bank
and the depositor is the contract that determines the rights and obligations of the
parties.
The law imposes on banks high standards in view of the fiduciary nature of
banking. Section 2 of Republic Act No. 8791 (RA 8791), [18] which took effect on 13
June 2000, declares that the State recognizes the fiduciary nature of banking that
requires high standards of integrity and performance. [19] This new provision in the
general banking law, introduced in 2000, is a statutory affirmation of Supreme Court
decisions, starting with the 1990 case of Simex International v. Court of Appeals,
[20]
holding that the bank is under obligation to treat the accounts of its depositors
with meticulous care, always having in mind the fiduciary nature of their
relationship.[21]
II.
THE COURT OF APPEALS ERRED IN APPLYING THE DOCTRINE OF LAST CLEAR
CHANCE AND IN HOLDING THAT PETITIONER BANKS TELLER HAD THE LAST
OPPORTUNITY TO WITHHOLD THE WITHDRAWAL WHEN IT IS UNDISPUTED THAT THE
TWO SIGNATURES OF RESPONDENT ON THE WITHDRAWAL SLIP ARE GENUINE AND
PRIVATE RESPONDENTS PASSBOOK WAS DULY PRESENTED, AND CONTRARIWISE
RESPONDENT WAS NEGLIGENT IN THE SELECTION AND SUPERVISION OF ITS
MESSENGER EMERANO ILAGAN, AND IN THE SAFEKEEPING OF ITS CHECKS AND
OTHER FINANCIAL DOCUMENTS.
This fiduciary relationship means that the banks obligation to observe high
standards of integrity and performance is deemed written into every deposit
agreement between a bank and its depositor. The fiduciary nature of banking
requires banks to assume a degree of diligence higher than that of a good father of a
family. Article 1172 of the Civil Code states that the degree of diligence required of
an obligor is that prescribed by law or contract, and absent such stipulation then the
diligence of a good father of a family.[22] Section 2 of RA 8791 prescribes the statutory
diligence required from banks that banks must observe high standards of integrity
and performance in servicing their depositors. Although RA 8791 took effect almost
nine years after the unauthorized withdrawal of the P300,000 from L.C. Diazs
savings account, jurisprudence[23] at the time of the withdrawal already imposed on
banks the same high standard of diligence required under RA No. 8791.
III.
THE COURT OF APPEALS ERRED IN NOT FINDING THAT THE INSTANT CASE IS A
LAST DITCH EFFORT OF PRIVATE RESPONDENT TO RECOVER ITS P300,000.00 AFTER
FAILING IN ITS EFFORTS TO RECOVER THE SAME FROM ITS EMPLOYEE EMERANO
ILAGAN.
IV.
THE COURT OF APPEALS ERRED IN NOT MITIGATING THE DAMAGES AWARDED
AGAINST PETITIONER UNDER ARTICLE 2197 OF THE CIVIL CODE, NOTWITHSTANDING
ITS FINDING THAT PETITIONER BANKS NEGLIGENCE WAS ONLY CONTRIBUTORY. [16]
The Ruling of the Court
However, the fiduciary nature of a bank-depositor relationship does not convert the
contract between the bank and its depositors from a simple loan to a trust
agreement, whether express or implied. Failure by the bank to pay the depositor is
failure to pay a simple loan, and not a breach of trust. [24] The law simply imposes on
the bank a higher standard of integrity and performance in complying with its
obligations under the contract of simple loan, beyond those required of non-bank
debtors under a similar contract of simple loan.
The petition is partly meritorious.

Solidbanks Fiduciary Duty under the Law
The rulings of the trial court and the Court of Appeals conflict on the application of
the law. The trial court pinned the liability on L.C. Diaz based on the provisions of the
rules on savings account, a recognition of the contractual relationship between
Solidbank and L.C. Diaz, the latter being a depositor of the former. On the other
hand, the Court of Appeals applied the law on quasi-delict to determine who between
the two parties was ultimately negligent. The law on quasi-delict or culpa
aquiliana is generally applicable when there is no pre-existing contractual
relationship between the parties.
The fiduciary nature of banking does not convert a simple loan into a trust
agreement because banks do not accept deposits to enrich depositors but to earn
money for themselves. The law allows banks to offer the lowest possible interest
rate to depositors while charging the highest possible interest rate on their own
borrowers. The interest spread or differential belongs to the bank and not to the
depositors who are not cestui que trust of banks. If depositors are cestui que trust of
banks, then the interest spread or income belongs to the depositors, a situation that
Congress certainly did not intend in enacting Section 2 of RA 8791.
We hold that Solidbank is liable for breach of contract due to negligence, or culpa
contractual.
Solidbanks Breach of its Contractual Obligation
The contract between the bank and its depositor is governed by the provisions of the
Civil Code on simple loan.[17] Article 1980 of the Civil Code expressly provides that x
x x savings x x x deposits of money in banks and similar institutions shall be
governed by the provisions concerning simple loan. There is a debtor-creditor
relationship between the bank and its depositor. The bank is the debtor and the
depositor is the creditor. The depositor lends the bank money and the bank agrees
Article 1172 of the Civil Code provides that responsibility arising from negligence in
the performance of every kind of obligation is demandable. For breach of the
savings deposit agreement due to negligence, or culpa contractual, the bank is liable
to its depositor.
55
obligations
Calapre left the passbook with Solidbank because the transaction took time and he
had to go to Allied Bank for another transaction. The passbook was still in the hands
of the employees of Solidbank for the processing of the deposit when Calapre left
Solidbank. Solidbanks rules on savings account require that the deposit book
should be carefully guarded by the depositor and kept under lock and key, if
possible. When the passbook is in the possession of Solidbanks tellers during
withdrawals, the law imposes on Solidbank and its tellers an even higher degree of
diligence in safeguarding the passbook.
Another point of disagreement between the trial and appellate courts is the
proximate cause of the unauthorized withdrawal. The trial court believed that L.C.
Diazs negligence in not securing its passbook under lock and key was the proximate
cause that allowed the impostor to withdraw the P300,000. For the appellate court,
the proximate cause was the tellers negligence in processing the withdrawal without
first verifying with L.C. Diaz. We do not agree with either court.
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.[26] Proximate cause is determined by the facts of each case
upon mixed considerations of logic, common sense, policy and precedent. [27]
Likewise, Solidbanks tellers must exercise a high degree of diligence in insuring that
they return the passbook only to the depositor or his authorized representative. The
tellers know, or should know, that the rules on savings account provide that any
person in possession of the passbook is presumptively its owner. If the tellers give
the passbook to the wrong person, they would be clothing that person presumptive
ownership of the passbook, facilitating unauthorized withdrawals by that person. For
failing to return the passbook to Calapre, the authorized representative of L.C. Diaz,
Solidbank and Teller No. 6 presumptively failed to observe such high degree of
diligence in safeguarding the passbook, and in insuring its return to the party
authorized to receive the same.
L.C. Diaz was not at fault that the passbook landed in the hands of the
impostor. Solidbank was in possession of the passbook while it was processing the
deposit. After completion of the transaction, Solidbank had the contractual
obligation to return the passbook only to Calapre, the authorized representative of
L.C. Diaz. Solidbank failed to fulfill its contractual obligation because it gave the
passbook to another person.
Solidbanks failure to return the passbook to Calapre made possible the withdrawal of
the P300,000 by the impostor who took possession of the passbook. Under
Solidbanks rules on savings account, mere possession of the passbook raises the
presumption of ownership. It was the negligent act of Solidbanks Teller No. 6 that
gave the impostor presumptive ownership of the passbook. Had the passbook not
fallen into the hands of the impostor, the loss of P300,000 would not have happened.
Thus, the proximate cause of the unauthorized withdrawal was Solidbanks
negligence in not returning the passbook to Calapre.
In culpa contractual, once the plaintiff proves a breach of contract, there is a

presumption that the defendant was at fault or negligent. The burden is on the
defendant to prove that he was not at fault or negligent. In contrast, in culpa
aquiliana the plaintiff has the burden of proving that the defendant was negligent. In
the present case, L.C. Diaz has established that Solidbank breached its contractual
obligation to return the passbook only to the authorized representative of L.C.
Diaz. There is thus a presumption that Solidbank was at fault and its teller was
negligent in not returning the passbook to Calapre. The burden was on Solidbank to
prove that there was no negligence on its part or its employees.
We do not subscribe to the appellate courts theory that the proximate cause of the
unauthorized withdrawal was the tellers failure to call up L.C. Diaz to verify the
withdrawal. Solidbank did not have the duty to call up L.C. Diaz to confirm the
withdrawal. There is no arrangement between Solidbank and L.C. Diaz to this
effect. Even the agreement between Solidbank and L.C. Diaz pertaining to measures
that the parties must observe whenever withdrawals of large amounts are made
does not direct Solidbank to call up L.C. Diaz.
Solidbank failed to discharge its burden. Solidbank did not present to the trial court
Teller No. 6, the teller with whom Calapre left the passbook and who was supposed to
return the passbook to him. The record does not indicate that Teller No. 6 verified
the identity of the person who retrieved the passbook. Solidbank also failed to
adduce in evidence its standard procedure in verifying the identity of the person
retrieving the passbook, if there is such a procedure, and that Teller No. 6
implemented this procedure in the present case.
There is no law mandating banks to call up their clients whenever their

representatives withdraw significant amounts from their accounts. L.C. Diaz
therefore had the burden to prove that it is the usual practice of Solidbank to call up
its clients to verify a withdrawal of a large amount of money. L.C. Diaz failed to do
so.
Solidbank is bound by the negligence of its employees under the principle

of respondeat superior or command responsibility. The defense of exercising the
required diligence in the selection and supervision of employees is not a complete
defense in culpa contractual, unlike in culpa aquiliana.[25]
Teller No. 5 who processed the withdrawal could not have been put on guard to verify
the withdrawal. Prior to the withdrawal of P300,000, the impostor deposited with
Teller No. 6 the P90,000 PBC check, which later bounced. The impostor apparently
deposited a large amount of money to deflect suspicion from the withdrawal of a
much bigger amount of money. The appellate court thus erred when it imposed on
Solidbank the duty to call up L.C. Diaz to confirm the withdrawal when no law
requires this from banks and when the teller had no reason to be suspicious of the
transaction.
The bank must not only exercise high standards of integrity and performance, it
must also insure that its employees do likewise because this is the only way to insure
that the bank will comply with its fiduciary duty. Solidbank failed to present the teller
who had the duty to return to Calapre the passbook, and thus failed to prove that this
teller exercised the high standards of integrity and performance required of
Solidbanks employees.
Proximate Cause of the Unauthorized Withdrawal
56
obligations
Solidbank continues to foist the defense that Ilagan made the withdrawal. Solidbank
claims that since Ilagan was also a messenger of L.C. Diaz, he was familiar with its
teller so that there was no more need for the teller to verify the withdrawal.
Solidbank relies on the following statements in the Booking and Information Sheet of
Emerano Ilagan:
proper diligence in the selection and supervision of its employee, or if the plaintiff
was guilty of contributory negligence, then the courts may reduce the award of
damages. In this case, L.C. Diaz was guilty of contributory negligence in allowing a
withdrawal slip signed by its authorized signatories to fall into the hands of an
impostor. Thus, the liability of Solidbank should be reduced.
xxx Ilagan also had with him (before the withdrawal) a forged check of PBC and
indicated the amount of P90,000 which he deposited in favor of L.C. Diaz and
Company. After successfully withdrawing this large sum of money, accused Ilagan
gave alias Rey (Noel Tamayo) his share of the loot. Ilagan then hired a taxicab in the
amount of P1,000 to transport him (Ilagan) to his home province at Bauan,
Batangas. Ilagan extravagantly and lavishly spent his money but a big part of his loot
was wasted in cockfight and horse racing. Ilagan was apprehended and meekly
admitted his guilt.[28] (Emphasis supplied.)
In Philippine Bank of Commerce v. Court of Appeals,[33] where the Court held the
depositor guilty of contributory negligence, we allocated the damages between the
depositor and the bank on a 40-60 ratio. Applying the same ruling to this case, we
hold that L.C. Diaz must shoulder 40% of the actual damages awarded by the
appellate court. Solidbank must pay the other 60% of the actual damages.
WHEREFORE,
the
decision
of
the
Court
of
Appeals
is AFFIRMED with MODIFICATION. Petitioner Solidbank Corporation shall pay private
respondent L.C. Diaz and Company, CPAs only 60% of the actual damages awarded
by the Court of Appeals. The remaining 40% of the actual damages shall be borne
by private respondent L.C. Diaz and Company, CPAs. Proportionate costs.
L.C. Diaz refutes Solidbanks contention by pointing out that the person who
withdrew the P300,000 was a certain Noel Tamayo. Both the trial and appellate
courts stated that this Noel Tamayo presented the passbook with the withdrawal slip.
SO ORDERED.
We uphold the finding of the trial and appellate courts that a certain Noel Tamayo
withdrew the P300,000. The Court is not a trier of facts. We find no justifiable
reason to reverse the factual finding of the trial court and the Court of Appeals. The
tellers who processed the deposit of the P90,000 check and the withdrawal of
the P300,000 were not presented during trial to substantiate Solidbanks claim that
Ilagan deposited the check and made the questioned withdrawal. Moreover, the
entry quoted by Solidbank does not categorically state that Ilagan presented the
withdrawal slip and the passbook.
Standard of Care Required (1173,1744,1998-2002)
G.R. No. L-6913
November 21, 1913
THE
ROMAN
CATHOLIC
BISHOP
OF
JARO, plaintiff-appellee,
vs.
GREGORIO DE LA PEA, administrator of the estate of Father Agustin de la
Pea, defendant-appellant.
Doctrine of Last Clear Chance

The doctrine of last clear chance states that where both parties are negligent but the
negligent act of one is appreciably later than that of the other, or where it is
impossible to determine whose fault or negligence caused the loss, the one who had
the last clear opportunity to avoid the loss but failed to do so, is chargeable with the
loss.[29] Stated differently, the antecedent negligence of the plaintiff does not
preclude him from recovering damages caused by the supervening negligence of the
defendant, who had the last fair chance to prevent the impending harm by the
exercise of due diligence.[30]
J.
Lopez
Arroyo and Horrilleno, for appellee.
Vito,
for
appellant.
This is an appeal by the defendant from a judgment of the Court of First Instance of
Iloilo, awarding to the plaintiff the sum of P6,641, with interest at the legal rate from
the beginning of the action.
We do not apply the doctrine of last clear chance to the present case. Solidbank is
liable for breach of contract due to negligence in the performance of its contractual
obligation to L.C. Diaz. This is a case of culpa contractual, where neither the
contributory negligence of the plaintiff nor his last clear chance to avoid the loss,
would exonerate the defendant from liability. [31]Such contributory negligence or last
clear chance by the plaintiff merely serves to reduce the recovery of damages by the
plaintiff but does not exculpate the defendant from his breach of contract. [32]
It is established in this case that the plaintiff is the trustee of a charitable bequest
made for the construction of a leper hospital and that father Agustin de la Pea was
the duly authorized representative of the plaintiff to receive the legacy. The
defendant is the administrator of the estate of Father De la Pea.
In the year 1898 the books Father De la Pea, as trustee, showed that he had on
hand as such trustee the sum of P6,641, collected by him for the charitable purposes
aforesaid. In the same year he deposited in his personal account P19,000 in the
Hongkong and Shanghai Bank at Iloilo. Shortly thereafter and during the war of the
revolution, Father De la Pea was arrested by the military authorities as a political
prisoner, and while thus detained made an order on said bank in favor of the United
Mitigated Damages
Under Article 1172, liability (for culpa contractual) may be regulated by the courts,
according to the circumstances. This means that if the defendant exercised the
57
obligations
States Army officer under whose charge he then was for the sum thus deposited in
said bank. The arrest of Father De la Pea and the confiscation of the funds in the
bank were the result of the claim of the military authorities that he was an insurgent
and that the funds thus deposited had been collected by him for revolutionary
purposes. The money was taken from the bank by the military authorities by virtue of
such order, was confiscated and turned over to the Government.
The court, therefore, finds and declares that the money which is the subject matter
of this action was deposited by Father De la Pea in the Hongkong and Shanghai
Banking Corporation of Iloilo; that said money was forcibly taken from the bank by
the armed forces of the United States during the war of the insurrection; and that
said Father De la Pea was not responsible for its loss.
The judgment is therefore reversed, and it is decreed that the plaintiff shall take
nothing by his complaint.
While there is considerable dispute in the case over the question whether the P6,641
of trust funds was included in the P19,000 deposited as aforesaid, nevertheless, a
careful examination of the case leads us to the conclusion that said trust funds were
a part of the funds deposited and which were removed and confiscated by the
military authorities of the United States.
Arellano, C.J., Torres and Carson, JJ., concur.

Separate Opinions
TRENT, J., dissenting:
That branch of the law known in England and America as the law of trusts had no
exact counterpart in the Roman law and has none under the Spanish law. In this
jurisdiction, therefore, Father De la Pea's liability is determined by those portions of
the Civil Code which relate to obligations. (Book 4, Title 1.)
I dissent. Technically speaking, whether Father De la Pea was a trustee or an agent

of the plaintiff his books showed that in 1898 he had in his possession as trustee or
agent the sum of P6,641 belonging to the plaintiff as the head of the church. This
money was then clothed with all the immunities and protection with which the law
seeks to invest trust funds. But when De la Pea mixed this trust fund with his own
and deposited the whole in the bank to hispersonal account or credit, he by this act
stamped on the said fund his own private marks and unclothed it of all the protection
it had. If this money had been deposited in the name of De la Pea as trustee or
agent of the plaintiff, I think that it may be presumed that the military authorities
would not have confiscated it for the reason that they were looking for insurgent
funds only. Again, the plaintiff had no reason to suppose that De la Pea would
attempt to strip the fund of its identity, nor had he said or done anything which
tended to relieve De la Pea from the legal reponsibility which pertains to the care
and custody of trust funds.
Although the Civil Code states that "a person obliged to give something is also bound
to preserve it with the diligence pertaining to a good father of a family" (art. 1094), it
also provides, following the principle of the Roman law, major casus est, cui humana
infirmitas resistere non potest, that "no one shall be liable for events which could not
be foreseen, or which having been foreseen were inevitable, with the exception of
the cases expressly mentioned in the law or those in which the obligation so
declares." (Art. 1105.)
By placing the money in the bank and mixing it with his personal funds De la Pea
did not thereby assume an obligation different from that under which he would have
lain if such deposit had not been made, nor did he thereby make himself liable to
repay the money at all hazards. If the had been forcibly taken from his pocket or from
his house by the military forces of one of the combatants during a state of war, it is
clear that under the provisions of the Civil Code he would have been exempt from
responsibility. The fact that he placed the trust fund in the bank in his personal
account does not add to his responsibility. Such deposit did not make him a debtor
who must respond at all hazards.
The Supreme Court of the United States in the United State vs. Thomas (82 U. S.,
337), at page 343, said: "Trustees are only bound to exercise the same care and
solicitude with regard to the trust property which they would exercise with regard to
their own. Equity will not exact more of them. They are not liable for a loss by theft
without their fault. But this exemption ceases when they mix the trust-money with
their own, whereby it loses its identity, and they become mere debtors."
We do not enter into a discussion for the purpose of determining whether he acted
more or less negligently by depositing the money in the bank than he would if he had
left it in his home; or whether he was more or less negligent by depositing the money
in his personal account than he would have been if he had deposited it in a separate
account as trustee. We regard such discussion as substantially fruitless, inasmuch as
the precise question is not one of negligence. There was no law prohibiting him from
depositing it as he did and there was no law which changed his responsibility be
reason of the deposit. While it may be true that one who is under obligation to do or
give a thing is in duty bound, when he sees events approaching the results of which
will be dangerous to his trust, to take all reasonable means and measures to escape
or, if unavoidable, to temper the effects of those events, we do not feel constrained
to hold that, in choosing between two means equally legal, he is culpably negligent
in selecting one whereas he would not have been if he had selected the other.
If this proposition is sound and is applicable to cases arising in this jurisdiction, and I
entertain no doubt on this point, the liability of the estate of De la Pea cannot be
doubted. But this court in the majority opinion says: "The fact that he (Agustin de la
Pea) placed the trust fund in the bank in his personal account does not add to his
responsibility. Such deposit did not make him a debtor who must respond at all
hazards. . . . There was no law prohibiting him from depositing it as he did, and there
was no law which changed his responsibility, by reason of the deposit."
I assume that the court in using the language which appears in the latter part of the
above quotation meant to say that there was no statutory law regulating the
question. Questions of this character are not usually governed by statutory law. The
law is to be found in the very nature of the trust itself, and, as a general rule, the
courts say what facts are necessary to hold the trustee as a debtor.
58
obligations
If De la Pea, after depositing the trust fund in his personal account, had used this
money for speculative purposes, such as the buying and selling of sugar or other
products of the country, thereby becoming a debtor, there would have been no doubt
as to the liability of his estate. Whether he used this money for that purpose the
record is silent, but it will be noted that a considerable length of time intervened
from the time of the deposit until the funds were confiscated by the military
authorities. In fact the record shows that De la Pea deposited on June 27, 1898,
P5,259, on June 28 of that year P3,280, and on August 5 of the same year P6,000.
The record also shows that these funds were withdrawn and again deposited all
together on the 29th of May, 1900, this last deposit amounting to P18,970. These
facts strongly indicate that De la Pea had as a matter of fact been using the money
in violation of the trust imposed in him. lawph!1.net
On February 18, 1942, at the instance of the defendant who desired to move to
another house, the plaintiffs and the defendant, together with Leon Villena, among
others, went to the dug-out to take out the defendant's container and discovered, to
their consternation, that their money and things, except for a few papers, had been
lost.
If the doctrine announced in the majority opinion be followed in cases hereafter

arising in this jurisdiction trust funds will be placed in precarious condition. The
position of the trustee will cease to be one of trust.
The defendant and appellant contends that she deposited her money and jewelry
with the plaintiffs and that the plaintiffs, acknowledging liability for the loss of her
money and jewelry, offered to transfer their property under Transfer Certificate of
Title No. 666 and accordingly executed the document in question. On the other hand,
the plaintiffs deny the alleged deposit, deny knowledge of the loss of the defendant's
money and jewelry, and claim that their consent to the deed of transfer was obtained
through violence and intimidation.
C.A. No. 34
One day during the first week of April, 1942, the defendant reported the loss of her
money and jewels, causing the arrest and investigation of Leon Villena, two others
and the plaintiff Engracio Obejera, who where released shortly after, except Engracio
Obejera who was released only on April 19, 1942 after he, with his wife, had
consented to execute Exhibit Y which document was sought to be annulled by the
plaintiffs and appellees herein.
April 29, 1946
ENGRACIO
OBEJERA
and
vs.
IGA SY, defendant-appellant.
Pedro
Panganiban
Jose Mayo Librea for appellees.
MERCEDES
INTAK, plaintiffs-appellees,
for
After a careful consideration of the nine assignments of error and examination of the
evidence of this case, the contention of the defendant and appellant cannot be
sustained. The alleged deposit cannot be believed and is contrary to the ordinary
course of nature and the ordinary habits of life (section 69 [z], Rule 123, Rules of
Court). Leon Villena, the barrio lieutenant, policemen Ruperto Buenafe and Apolonio
Corpuz, and Mayor Berberabe were uniform in their testimony that in their
investigation of the case, the plaintiff Engracio Obejera admitted that he agreed to
keep and be responsible for the defendant's things. It appears, however, that Leon
Villena himself and his son Balbino participated in the hiding, and acknowledged
liability for the loss, of the defendant's things. Exhibit 1, apparently prepared for the
benefit of the defendant, reads as follows, "I, Mercedes Intak, wife of Engracio
Obejera who was the companion of chief Leon Villena and the latter's son Balbino
Villena in hiding (under ground) the money and jewels of Iga Sy ...," and mentions
nothing regarding the alleged deposit. And the deed of the transfer (Exhibit Y) states,
"... and we, on the other hand, the said Leon Villena and Balbino Villena, because we
are responsible for one-half of the money and jewels still unrecovered, I, Leon Villena,
promise to transfer to Engracio Obejera my four parcels of land ...." Now, if Leon
Villena and his son had taken part in the hiding of the defendant's money and jewelry
and acknowledged responsibility therefor, as evidenced by the said documents, then
his claim and the defendant's claim that Engracio Obejera alone agreed to keep and
be responsible for those things is false; and it follows that the same claim of
policemen Ruperto Buenafe and Apolonio Corpus and Mayor Berberabe are likewise
false.
appellant.
JARANILLA, J.:
By virtue of the appeal filed against the decision of the Court of First Instance of
Batangas annulling, on the ground of force and intimidation, the deed of transfer
executed on April 9, 1942 (Exhibit Y), whereby the plaintiffs and appellees agreed to
transfer to the defendant and appellant their property assessed at P2,230 in case
they failed to return to the defendant on December 31, 1942 the balance of P3,697
and pieces of jewelry worth P400 allegedly deposited with the plaintiffs on January 2,
1942, the above-entitled case was submitted to this court for review.
On December 13, 1941, plaintiffs and defendant sought refuge in the house of Leon
Villena, barrio lieutenant of Dalig, Batangas, Batangas, on account of the Japanese
invasion of the Philippines.
On January 2, 1942, news having spread that the Japanese forces were closing in and
were committing barbarous acts, which gripped the people in terror, plaintiffs and
defendant, after consultation with their host Leon Villena, decided to hide their things
and valuables in a dug-out belonging to Leon Villena about thirty meters away from
his house. The defendant placed in said dug-out her money allegedly amounting to
P5,021 and jewelry worth P400 in her own container; Leon Villena and his wife also
placed therein their own things; the plaintiffs also placed their things and money
allegedly amounting to P3,000. They did this at night and covered the dug-out with
palay belonging to Leon Villena and the defendant Iga Sy.
It should also be considered, in this connection, that the dug-out into which the
plaintiffs and the defendant hid their money and valuables belongs to Leon Villena;
that the plaintiffs and the defendant only sought refuge in his house; that neither the
plaintiffs nor the defendant had, therefore, control over, or absolute and exclusive
access, to the dug-out, as proved by the fact that when the defendant decided to
59
obligations
take her things with her because she was going to move to another house, two days
before the discovery of the loss, she asked their host Leon Villena to allow and help
her removed her things. Under these circumstances, it is hard to believe that plaintiff
Engracio Obejera would assume responsibility over the defendant's things hidden in
a place not belonging to him but to Leon Villena, in whose house they only sought
refuge and were like guests, and especially at a time when the confusion and fear
resulting from the Japanese invasion and fast advance so gripped everyone that
nobody could be sure of his own things and even of his life. The more natural
conclusion is that plaintiffs and defendant decided to hide their things in the dug-out
of their host Leon Villena, thinking it to be the safest place, and hoping, like many
and all others, in those horrible days, that they might recover them, if at all, after the
confusion and uncertainty. This, in case Leon Villena himself, as was the most natural
thing to happen, did not offer to his guests to take care of their things by hiding them
in his dug-out, for he and his son, as a matter of fact, took part in the safekeeping
and they even covered the dug-out afterwards with their own palay together with the
palay of the defendant; later he had to give his consent and actually accompanied
the plaintiffs and the defendant when the latter wanted to take out her things from
the dug-out; and then, after the discovery of the loss, he and his son admitted
liability for the loss of the defendant's things as evidenced by both Exhibits 1 and Y.
responsible for the wetting sustained by the goods and merchandise of the plaintiffs
therein as a result of the torrential rainfall.
It necessarily follows that the deed of transfer dated April 19, 1942 (Exhibit Y),
whereby the plaintiffs paid P500 to the defendant and further promised to transfer
their property under Transfer Certificate of Title No. 666 in case they failed to return
on December 31, 1942 the balance of the loss for which, as already stated, they
cannot be held liable, is null and void for lack of cause or consideration (article 1275,
Civil Code). This also applies to the document dated April 11, 1942, Exhibit 1.
But these two documents are also null and void upon the other ground that the
consent of the plaintiffs therein was obtained through duress and intimidation. The
continued detention of the plaintiff Engracio Obejera from April 11 to 19, 1942 by the
mayor and policemen of Batangas, in spite of the fact that they had not found any
evidence against the plaintiffs; the fact that the municipal policemen applied
continuous pressure on the plaintiffs to make good the loss, so that the plaintiff's
wife, accompanied by policeman Ruperto Buenafe, had to raise, with much difficulty,
the amount of P500 to secure the settlement of the case; the fact that Mayor Roman
L. Perez, although he never intended to keep the plaintiff Engracio Obejera in
detention as he did not believe him guilty at all and did not consider himself
empowered to order his detention, did not, nevertheless, release the plaintiff until he
and his wife consented to execute the deed of transfer, Exhibit Y, in spite of their
continuous protestations of innocence and supplications of mercy; and the fear
created in the minds of the plaintiffs that they would be delivered to the Japanese
soldiers and suffer cruel punishment, if not death, in their hands, unless they
executed the said deed of transfer, all show very clearly the irresistible force and
intimidation employed, in this case, to coerce the plaintiffs into executing the said
document, rendering it, therefore, null and void for lack of free consent (articles
1265, 1267, 1268, Civil Code).
Even if the defendant's theory of deposit were sustained, any obligation arising
therefrom was extinguished upon the loss, without the fault of the depositee and
under circumstances which at the time were inevitable (article 1182 in connection
with article 1766, and article 1105, Civil Code), of the things allegedly deposited. The
evidence of record, in this regard, uniformly shows that the plaintiffs were not in any
way responsible for the loss of the defendant's money and jewelry. Both Mayor
Roman L. Perez and Chief of Police Apolonio Corpus testified that they did not find
any evidence that the plaintiffs, who also lost their own valuables, could be in any
manner connected with the loss. Even the documents, Exhibits 1 and Y, so much
relied upon by the defendant and evidently prepared for her benefit, having been
written on the same typewriter, do not state any such connection.
In Jalbuena vs. Ledesma (8 Phil., 601, 605), we held:

In this instance the signing of an undertaking appears to have been insisted upon by
the judge in the presence and at the instance of the opposing party, and to have
been expressly made the condition of non-imprisonment, amid circumstances of
procedure quite unusual in courts of justice, in a tribunal convened under military
auspices and exercising extraordinary powers. So that there would be reason to say
that the consent of the surety was obtained by coercion, even if the judge had
jurisdiction over the case.
In the case of Lizares vs. Hernaez and Alunan (40 Phil., 981, 991), the Supreme Court
held:
In this bailment ordinary care and diligence are required of the bailee and he is not
liable for the inevitable loss or destruction of the chattel, not attributable to his fault.
If while the bailment continues, the chattel is destroyed, or stolen, or perishes,
without negligence on the bailee's part, the loss as in other hirings, falls upon the
owner, in accordance with the maxim res perit domino . . . .
In this connection, we reaffirm what we declared in Vales vs. Villa (35 Phil., 769, 789,
790), thus:
To the same effect are the cases of Crame Sy Panco vs. Gonzaga (10 Phil., 646, 648),
in which it was held that the death of the carabaos in that case being fortuitous, the
obligation of the defendants therein to return them was extinguished as a matter of
fact and of law; of Insular Government vs. Bingham (13 Phil., 558, 571), in which the
defendant therein was absolved from the obligation to deliver to the Government of
the Philippine Islands a revolver with ammunition which went down and were lost
when his boat was sunk in a storm through no fault of his or his crew; and of Yap Kim
Chuan vs. Tiaoqui (31 Phil., 433, 440), in which the defendant therein was held not
But when his sense, judgment, and his will rebel and he refuses absolutely to act as
requested, but is nevertheless overcome by force or intimidation to such an extent
that he becomes a mere automaton and acts mechanically only, a new element
enters, namely, a disappearance of the personality of the actor. He ceases to exist as
an independent entity with faculties and judgment, and in his place is substituted
another--the one exercising the force or making use of the intimidation. While his
hand signs, the will which moves it is another's. While a contract is made, it has, in
60
obligations
reality and in law, only one party to it; and, there being only one party, the one using
the force or the intimidation, it is unreasonable for lack of a second party.
WHEREFORE, the decision appealed from is hereby REVERSED. A new one is hereby
entered ordering the defendant Asiatic Integrated Corporation to pay the plaintiff
P221.90 actual medical expenses, P900.00 for the amount paid for the operation and
management of a school bus, P20,000.00 as moral damages due to pains, sufferings
and sleepless nights and P l0,000.00 as attorney's fees.
The contention that plaintiffs offered to transfer their property in acknowledgment of

their responsibility for the loss of her things appears groundless. Aside from the fact
that it cannot be believed, as already stated, that there was constituted in this case a
deposit, we are of the opinion that such an offer, made by way of compromise in
order that plaintiff Engracio Obejera might only escape continued detention and
grueling punishment or even death in the hands of the Japanese soldiers, for the
alleged loss for which he was not in any way criminally liable, is not an admission of
debt and is not admissible in evidence against the plaintiffs (section 9, Rule 123,
Rules of Court).
SO ORDERED. (p. 20, Rollo)

The findings of respondent Appellate Court are as follows:
The evidence of the plaintiff (petitioner herein) shows that in the morning of August
15, 1974 he, together with his neighbors, went to Sta. Ana public market to buy
"bagoong" at the time when the public market was flooded with ankle deep
rainwater. After purchasing the "bagoong" he turned around to return home but he
stepped on an uncovered opening which could not be seen because of the dirty
rainwater, causing a dirty and rusty four- inch nail, stuck inside the uncovered
opening, to pierce the left leg of plaintiff-petitioner penetrating to a depth of about
one and a half inches. After administering first aid treatment at a nearby drugstore,
his companions helped him hobble home. He felt ill and developed fever and he had
to be carried to Dr. Juanita Mascardo. Despite the medicine administered to him by
the latter, his left leg swelled with great pain. He was then rushed to the Veterans
Memorial Hospital where he had to be confined for twenty (20) days due to high
fever and severe pain.
An offer to compromise is not a confession of debt and is not admissible in evidence

(Code of Civ. Proc., section 346). In a criminal causes for theft (U. S. vs. Maqui, 27
Phil., Rep., 97) this court said that the weight both of authority and reason sustains
the rule which admits evidence of offers to compromise, in criminal cases, but
permits the accused to show that such offers were not made under the
consciousness of guilt, but merely to avoid the inconvenience of imprisonment or for
some other reason which would justify a claim by the accused that the offer to
compromise was not in truth an admission of his guilt and an attempt to avoid the
legal consequences which would ordinarily ensue therefrom. (United States vs. Torres
and Padilla, 34 Phil., 994, 999.) .
Upon his discharge from the hospital, he had to walk around with crutches for fifteen
(15) days. His injury prevented him from attending to the school buses he is
operating. As a result, he had to engage the services of one Bienvenido Valdez to
supervise his business for an aggregate compensation of nine hundred pesos
(P900.00). (Decision, AC-G.R. CV No. 01387, Rollo, pp. 13-20).
On account of its consensual character a compromise, to be valid and effective

requires in its performance meeting of the minds in a certain, spontaneous, and free
way with regard to a definite object or objects; and in case it be shown and proved
that there was error, deceit, violence, or intimidation the compromise would be null,
because the consent given therein is null and void through lack of the indispensable
requisites for its validity and effectiveness." (Hernandez vs. Barcelon, 23 Phil., 599,
608.) .
Petitioner sued for damages the City of Manila and the Asiatic Integrated Corporation
under whose administration the Sta. Ana Public Market had been placed by virtue of
a Management and Operating Contract (Rollo, p. 47).
Wherefore, the decision of the court a quo is hereby affirmed in toto with costs
against the defendant and appellant. So ordered.
The lower court decided in favor of respondents, the dispositive portion of the
decision reading:
G.R. No. 71049 May 29, 1987
WHEREFORE, judgment is hereby rendered in favor of the defendants and against

the plaintiff dismissing the complaint with costs against the plaintiff. For lack of
sufficient evidence, the counterclaims of the defendants are likewise dismissed.
(Decision, Civil Case No. 96390, Rollo, p. 42).
BERNARDINO
JIMENEZ, petitioner,
vs.
CITY OF MANILA and INTERMEDIATE APPELLATE COURT, respondents.
This is a petition for review on certiorari of: (1) the decision * of the Intermediate
Appellate Court in AC-G.R. No. 013887-CV Bernardino Jimenez v. Asiatic Integrated
Corporation and City of Manila, reversing the decision ** of the Court of First Instance
of Manila, Branch XXII in Civil Case No. 96390 between the same parties, but only
insofar as holding Asiatic Integrated Corporation solely liable for damages and
attorney's fees instead of making the City of Manila jointly and solidarily liable with it
as prayed for by the petitioner and (2) the resolution of the same Appellate Court
denying his Partial Motion for Reconsideration (Rollo, p. 2).
As above stated, on appeal, the Intermediate Appellate Court held the Asiatic
Integrated Corporation liable for damages but absolved respondent City of Manila.
Hence this petition.
The lone assignment of error raised in this petition is on whether or not the
Intermediate Appellate Court erred in not ruling that respondent City of Manila
should be jointly and severally liable with Asiatic Integrated Corporation for the
injuries petitioner suffered.
The dispositive portion of the Intermediate Appellate Court's decision is as follows:
61
obligations
In compliance with the resolution of July 1, 1985 of the First Division of this Court
(Rollo, p. 29) respondent City of Manila filed its comment on August 13, 1985 (Rollo,
p. 34) while petitioner filed its reply on August 21, 1985 (Reno, p. 51).
Provinces, cities and municipalities shall be liable for damages for the death of, or
injuries suffered by any person by reason of defective conditions of roads, streets,
bridges, public buildings and other public works under their control or supervision.
Thereafter, the Court in the resolution of September 11, 1985 (Rollo, p. 62) gave due
course to the petition and required both parties to submit simultaneous memoranda
constitutes a particular prescription making "provinces, cities and municipalities ...

liable for damages for the death of, or injury suffered by any person by reason"
specifically "of the defective condition of roads, streets, bridges, public buildings,
and other public works under their control or supervision." In other words, Art. 1, sec.
4, R.A. No. 409 refers to liability arising from negligence, in general, regardless of the
object, thereof, while Article 2189 of the Civil Code governs liability due to "defective
streets, public buildings and other public works" in particular and is therefore
decisive on this specific case.
Petitioner filed his memorandum on October 1, 1985 (Rollo, p. 65) while respondent
filed its memorandum on October 24, 1985 (Rollo, p. 82).
In the resolution of October 13, 1986, this case was transferred to the Second
Division of this Court, the same having been assigned to a member of said Division
(Rollo, p. 92).
In the same suit, the Supreme Court clarified further that under Article 2189 of the
Civil Code, it is not necessary for the liability therein established to attach, that the
defective public works belong to the province, city or municipality from which
responsibility is exacted. What said article requires is that the province, city or
municipality has either "control or supervision" over the public building in question.
The petition is impressed with merit.

As correctly found by the Intermediate Appellate Court, there is no doubt that the
plaintiff suffered injuries when he fell into a drainage opening without any cover in
the Sta. Ana Public Market. Defendants do not deny that plaintiff was in fact injured
although the Asiatic Integrated Corporation tries to minimize the extent of the
injuries, claiming that it was only a small puncture and that as a war veteran,
plaintiff's hospitalization at the War Veteran's Hospital was free. (Decision, AC-G.R.
CV No. 01387, Rollo, p. 6).
In the case at bar, there is no question that the Sta. Ana Public Market, despite the
Management and Operating Contract between respondent City and Asiatic Integrated
Corporation remained under the control of the former.
For one thing, said contract is explicit in this regard, when it provides:
Respondent City of Manila maintains that it cannot be held liable for the injuries
sustained by the petitioner because under the Management and Operating Contract,
Asiatic Integrated Corporation assumed all responsibility for damages which may be
suffered by third persons for any cause attributable to it.
II
That immediately after the execution of this contract, the SECOND PARTY shall start
the painting, cleaning, sanitizing and repair of the public markets and talipapas and
within ninety (90) days thereof, the SECOND PARTY shall submit a program of
improvement, development, rehabilitation and reconstruction of the city public
markets and talipapas subject to prior approval of the FIRST PARTY. (Rollo, p. 44)
It has also been argued that the City of Manila cannot be held liable under Article 1,
Section 4 of Republic Act No. 409 as amended (Revised Charter of Manila) which
provides:
The City shall not be liable or held for damages or injuries to persons or property
arising from the failure of the Mayor, the Municipal Board, or any other City Officer,
to enforce the provisions of this chapter, or any other law or ordinance, or from
negligence of said Mayor, Municipal Board, or any other officers while enforcing or
attempting to enforce said provisions.
xxx xxx xxx

VI
That all present personnel of the City public markets and talipapas shall be retained
by the SECOND PARTY as long as their services remain satisfactory and they shall be
extended the same rights and privileges as heretofore enjoyed by them. Provided,
however, that the SECOND PARTY shall have the right, subject to prior approval of
the FIRST PARTY to discharge any of the present employees for cause. (Rollo, p. 45).
This issue has been laid to rest in the case of City of Manila v. Teotico (22 SCRA 269272 [1968]) where the Supreme Court squarely ruled that Republic Act No. 409
establishes a general rule regulating the liability of the City of Manila for "damages
or injury to persons or property arising from the failure of city officers" to enforce the
provisions of said Act, "or any other law or ordinance or from negligence" of the City
"Mayor, Municipal Board, or other officers while enforcing or attempting to enforce
said provisions."
VII
That the SECOND PARTY may from time to time be required by the FIRST PARTY, or
his duly authorized representative or representatives, to report, on the activities and
operation of the City public markets and talipapas and the facilities and
conveniences installed therein, particularly as to their cost of construction, operation
and maintenance in connection with the stipulations contained in this Contract. (lbid)
Upon the other hand, Article 2189 of the Civil Code of the Philippines which provides
that:
62
obligations
The fact of supervision and control of the City over subject public market was
admitted by Mayor Ramon Bagatsing in his letter to Secretary of Finance Cesar Virata
which reads:
The contention of respondent City of Manila that petitioner should not have ventured
to go to Sta. Ana Public Market during a stormy weather is indeed untenable. As
observed by respondent Court of Appeals, it is an error for the trial court to attribute
the negligence to herein petitioner. More specifically stated, the findings of appellate
court are as follows:
These cases arose from the controversy over the Management and Operating
Contract entered into on December 28, 1972 by and between the City of Manila and
the Asiatic Integrated Corporation, whereby in consideration of a fixed service fee,
the City hired the services of the said corporation to undertake the physical
management, maintenance, rehabilitation and development of the City's public
markets and' Talipapas' subject to the control and supervision of the City.
... The trial court even chastised the plaintiff for going to market on a rainy day just
to buy bagoong. A customer in a store has the right to assume that the owner will
comply with his duty to keep the premises safe for customers. If he ventures to the
store on the basis of such assumption and is injured because the owner did not
comply with his duty, no negligence can be imputed to the customer. (Decision, ACG. R. CV No. 01387, Rollo, p. 19).
xxx xxx xxx

It is believed that there is nothing incongruous in the exercise of these powers vis-avis the existence of the contract, inasmuch as the City retains the power of
supervision and control over its public markets and talipapas under the terms of the
contract. (Exhibit "7-A") (Emphasis supplied.) (Rollo, p. 75).
As a defense against liability on the basis of a quasi-delict, one must have exercised
the diligence of a good father of a family. (Art. 1173 of the Civil Code).
There is no argument that it is the duty of the City of Manila to exercise reasonable
care to keep the public market reasonably safe for people frequenting the place for
their marketing needs.
In fact, the City of Manila employed a market master for the Sta. Ana Public Market
whose primary duty is to take direct supervision and control of that particular
market, more specifically, to check the safety of the place for the public.
While it may be conceded that the fulfillment of such duties is extremely difficult
during storms and floods, it must however, be admitted that ordinary precautions
could have been taken during good weather to minimize the dangers to life and limb
under those difficult circumstances.
Thus the Asst. Chief of the Market Division and Deputy Market Administrator of the
City of Manila testified as follows:
Court This market master is an employee of the City of Manila?
For instance, the drainage hole could have been placed under the stalls instead of on
the passage ways. Even more important is the fact, that the City should have seen to
it that the openings were covered. Sadly, the evidence indicates that long before
petitioner fell into the opening, it was already uncovered, and five (5) months after
the incident happened, the opening was still uncovered. (Rollo, pp. 57; 59).
Moreover, while there are findings that during floods the vendors remove the iron
grills to hasten the flow of water (Decision, AC-G.R. CV No. 0 1387; Rollo, p. 17),
there is no showing that such practice has ever been prohibited, much less penalized
by the City of Manila. Neither was it shown that any sign had been placed
thereabouts to warn passersby of the impending danger.
Mr. Ymson Yes, Your Honor.

Q What are his functions?
A Direct supervision and control over the market area assigned to him."(T.s.n.,pp. 4142, Hearing of May 20, 1977.)
xxx xxx xxx
Court As far as you know there is or is there any specific employee assigned with the
task of seeing to it that the Sta. Ana Market is safe for the public?
To recapitulate, it appears evident that the City of Manila is likewise liable for
damages under Article 2189 of the Civil Code, respondent City having retained
control and supervision over the Sta. Ana Public Market and as tort-feasor under
Article 2176 of the Civil Code on quasi-delicts
Mr. Ymson Actually, as I stated, Your Honor, that the Sta. Ana has its own market
master.The primary duty of that market master is to make the direct supervision and
control of that particular market, the check or verifying whether the place is safe for
public safety is vested in the market master. (T.s.n., pp. 2425, Hearing of July 27,
1977.) (Emphasis supplied.) (Rollo, p. 76).
Petitioner had the right to assume that there were no openings in the middle of the
passageways and if any, that they were adequately covered. Had the opening been
covered, petitioner could not have fallen into it. Thus the negligence of the City of
Manila is the proximate cause of the injury suffered, the City is therefore liable for
the injury suffered by the peti- 4 petitioner.
Finally, Section 30 (g) of the Local Tax Code as amended, provides:

The treasurer shall exercise direct and immediate supervision administration and
control over public markets and the personnel thereof, including those whose duties
concern the maintenance and upkeep of the market and ordinances and other
pertinent rules and regulations. (Emphasis supplied.) (Rollo, p. 76)
Respondent City of Manila and Asiatic Integrated Corporation being joint tort-feasors
are solidarily liable under Article 2194 of the Civil Code.
63
obligations
PREMISES CONSIDERED, the decision of the Court of Appeals is hereby MODIFIED,

making the City of Manila and the Asiatic Integrated Corporation solidarily liable to
pay the plaintiff P221.90 actual medical expenses, P900.00 for the amount paid for
the operation and management of the school bus, P20,000.00 as moral damages due
to pain, sufferings and sleepless nights and P10,000.00 as attorney's fees.
On September 3, 1982, Vicente Maosca was able to mortgage the same parcels of
land for P100,000.00 to a certain Attorney Manuel Magno, with the help of impostors
who misrepresented themselves as the spouses, Osmundo Canlas and Angelina
Canlas.5
On September 29, 1982, private respondent Vicente Maosca was granted a loan by
the respondent Asian Savings Bank (ASB) in the amount of P500,000.00, with the use
of subject parcels of land as security, and with the involvement of the same
impostors who again introduced themselves as the Canlas spouses. 6 When the loan it
extended was not paid, respondent bank extrajudicially foreclosed the mortgage.
SO ORDERED.
G.R. No. 112160
February 28, 2000
OSMUNDO
S.
CANLAS
and
ANGELINA
CANLAS, petitioner,
vs.
COURT OF APPEALS, ASIAN SAVINGS BANK, MAXIMO C. CONTRARES and
VICENTE MAOSCA,respondents.
On January 15, 1983, Osmundo Canlas wrote a letter informing the respondent bank
that the execution of subject mortgage over the two parcels of land in question was
without their (Canlas spouses) authority, and request that steps be taken to annul
and/or revoke the questioned mortgage. On January 18, 1983, petitioner Osmundo
Canlas also wrote the office of Sheriff Maximo O. Contreras, asking that the auction
sale scheduled on February 3, 1983 be cancelled or held in abeyance. But
respondents Maximo C. Contreras and Asian Savings Bank refused to heed petitioner
Canlas' stance and proceeded with the scheduled auction sale.7
At bar is a Petition for Review on Certiorari under Rule 45 of the Rules of Court,
seeking to review and set aside the Decision 1 of the Court of Appeals in CA-G.R. CV
No. 25242, which reversed the Decision 2 of Branch 59 of the Regional Trial Court of
Makati City in Civil Case No. M-028; the dispositive portion of which reads:
WHEREFORE, the decision appealed from is hereby REVERSED and SET ASIDE and a
new one is hereby entered DISMISSING the complaint of the spouses Osmundo and
Angelina Canlas. On the counterclaim of defendant Asian Savings Bank, the plaintiffs
Canlas spouses are hereby ordered to pay the defendant Asian Savings Bank the
amount of P50,000.00 as moral and exemplary damages, plus P15,000.00 as and for
attorney's fees.
Consequently, on February 3, 1983 the herein petitioners instituted the present case
for annulment of deed of real estate mortgage with prayer for the issuance of a writ
of preliminary injunction; and on May 23, 1983, the trial court issued an Order
restraining the respondent sheriff from issuing the corresponding Certificate of
Sheriff's Sale.8
With costs against appellees.
For failure to file his answer, despite several motions for extension of time for the
filing thereof, Vicente Maosca was declared in default.9
SO ORDERED.3
On June 1, 1989, the lower court a quo came out with a decision annulling subject
deed of mortgage and disposing, thus:
The facts that matter:
Premises considered, judgment is hereby rendered as follows.1wphi1.nt
Sometime in August, 1982, the petitioner, Osmundo S. Canlas, and private

respondent, Vicente Maosca, decided to venture in business and to raise the capital
needed therefor. The former then executed a Special Power of Attorney authorizing
the latter to mortgage two parcels of land situated in San Dionisio, (BF Homes)
Paranaque, Metro Manila, each lot with semi-concrete residential house existing
thereon, and respectively covered by Transfer Certificate of Title No. 54366 in his
(Osmundo's) name and Transfer Certificate of Title No. S-78498 in the name of his
wife Angelina Canlas.
1. Declaring the deed of real estate mortgage (Exhibit "L") involving the properties of
the plaintiffs as null and void;
2. Declaring the public auction sale conducted by the defendant Sheriff, involving the
same properties as illegal and without binding effect;
3. Ordering the defendants, jointly and severally, to pay the plaintiffs the sum of
P20,000.00 representing attorney's fees;
Subsequently, Osmundo Canlas agreed to sell the said parcels of land to Vicente
Maosca, for and in consideration of P850,000.00, P500,000.00 of which payable
within one week, and the balance of P350,000.00 to serve as his (Osmundo's)
investment in the business. Thus, Osmundo Canlas delivered to Vicente Maosca the
transfer certificates of title of the parcels of land involved. Vicente Maosca, as his
part of the transaction, issued two postdated checks in favor of Osmundo Canlas in
the amounts of P40,000.00 and P460,000.00, respectively, but it turned out that the
check covering the bigger amount was not sufficiently funded. 4
4. On defendant ASB's crossclaim: ordering the cross-defendant Vicente Maosca to

pay the defendant ASB the sum of P350,000.00, representing the amount which he
received as proceeds of the loan secured by the void mortgage, plus interest at the
legal rate, starting February 3, 1983, the date when the original complaint was filed,
until the amount is fully paid;
5. With costs against the defendants.
SO ORDERED.10
64
obligations
From such Decision below, Asian Savings Bank appealed to the Court of Appeals,
which handed down the assailed judgment of reversal, dated September 30, 1983, in
CA-G.R. CV No. 25242. Dissatisfied therewith, the petitioners found their way to this
Court via the present Petition; theorizing that:
In the case under consideration, from the evidence on hand it can be gleaned
unerringly that respondent bank did not observe the requisite diligence in
ascertaining or verifying the real identity of the couple who introduced themselves as
the spouses Osmundo Canlas and Angelina Canlas. It is worthy to note that not even
a single identification card was exhibited by the said impostors to show their true
identity; and yet, the bank acted on their representations simply on the basis of the
residence certificates bearing signatures which tended to match the signatures
affixed on a previous deed of mortgage to a certain Atty. Magno, covering the same
parcels of land in question. Felizado Mangubat, Assistant Vice President of Asian
Savings Bank, thus testified inter alia:
I
RESPONDENT COURT OF APPEALS ERRED IN HOLDING THAT THE MORTGAGE OF THE
PROPERTIES SUBJECT OF THIS CASE WAS VALID.
II
xxx
RESPONDENT COURT OF APPEALS ERRED IN HIOLDING THAT PETITIONERS ARE NOT

ENTITLED TO RELIEF BECAUSE THEY WERE NEGLIGENT AND THEREFORE MUST BEAR
THE LOSS.
xxx
xxx
Q:
According to you, the basis for your having recommended for the approval
of MANASCO's (sic) loan particularly that one involving the property of plaintiff in this
case, the spouses OSMUNDO CANLAS and ANGELINA CANLAS, the basis for such
approval was that according to you all the signatures and other things taken into
account matches with that of the document previously executed by the spouses
CANLAS?
III
RESPONDENT COURT OF APPEALS ERRED IN HOLDING THAT RESPONDENT ASB
EXERCISED DUE DILIGENCE IN GRANTING THE LOAN APPLICATION OF RESPONDENT.
Q:
That is the only basis for accepting the signature on the mortgage, the
basis for the recommendation of the approval of the loan are the financial statement
of MAOSCA?
IV
RESPONDENT COURT OF APPEALS ERRED IN HOLDING THAT RESPONDENT ASB DID
NOT ACT WITH BAD FAITH IN PROCEEDING WITH THE FORECLOSURE SALE OF THE
PROPERTIES.
A:
Yes; among others the signature and TAX Account Number, Residence
Certificate appearing on the previous loan executed by the spouses CANLAS, I am
referring to EXHIBIT 5, mortgage to ATTY. MAGNO, those were made the basis.
V
RESPONDENT COURT OF APPEALS ERRED IN AWARDING RESPONDENT ASB MORAL
DAMAGES.11
A:
That is just the basis of accepting the signature, because at that time the
loan have been approved already on the basis of the financial statement of the client
the Bank Statement. Wneh (sic) it was approved we have to base it on the Financial
statement of the client, the signatures were accepted only for the purpose of signing
the mortgage not for the approval, we don't (sic) approve loans on the signature.
The Petition is impressed with merit.

Art. 1173 of the Civil Code, provides:
ATTY. CLAROS:
Art. 1173. The fault or negligence of the obligor consist in the omission of that
diligence which is required by the nature of the obligation and corresponds with the
circumstances of the persons, of the time and of the place. When negligence shows
bad faith, the provisions of articles 1171 and 2201, paragraph 2, shall apply.
Would you agree that as part of ascertaining the identify of the parties particularly
the mortgage, you don't consider also the signature, the Residence Certificate, the
particular address of the parties involved.
If the law or contract does not state the diligence which is to be observed in the
performance, that which is expected of a good father of a family shall be required.
(1104)
A:
I think the question defers (sic) from what you asked a while ago.
Q:
Among others?
The degree of diligence required of banks is more than that of a good father of a
family;12 in keeping with their responsibility to exercise the necessary care and
prudence in dealing even on a registered or titled property. The business of a bank is
affected with public interest, holding in trust the money of the depositors, which
bank deposits the bank should guard against loss due to negligence or bad faith, by
reason of which the bank would be denied the protective mantle of the land
registration law, accorded only to purchasers or mortgagees for value and in good
faith.13
A:
We have to accept the signature on the basis of the other signatures given
to us it being a public instrument.
ATTY. CARLOS:
You mean to say the criteria of ascertaining the identity of the mortgagor does not
depend so much on the signature on the residence certificate they have presented.
65

A:
xxx
obligations
We have to accept that.

xxx
In ruling for respondent bank, the Court of Appeals concluded that the petitioner
Osmundo Canlas was a party to the fraudulent scheme of Maosca and therefore,
estopped from impugning the validity of subject deed of mortgage; ratiocinating
thus:
xxx
A:
We accepted the signature on the basis of the mortgage in favor of ATTY.
MAGNO duly notarized which I have been reiterrting (sic) entitled to full faith
considering that it is a public instrument.
xxx
What other requirement did you take into account in ascertaining the identification of
the parties particularly the mortgagor in this case.
Residence Certificate.
Q:
Is that all, is that the only requirement?
xxx
Thus, armed with the titles and the special power of attorney, Maosca went to the
defendant bank and applied for a loan. And when Maosca came over to the bank to
submit additional documents pertinent to his loan application, Osmundo Canlas was
with him, together with a certain Rogelio Viray. At that time, Osmundo Canlas was
introduced to the bank personnel as "Leonardo Rey".
ATTY. CARLOS:
A:
xxx
When he was introduced as "Leonardo Rey" for the first time Osmundo should have
corrected Maosca right away. But he did not. Instead, he even allowed Maosca to
avail of his (Osmundo's) membership privileges at the Metropolitan Club when
Maosca invited two officers of the defendant bank to a luncheon meeting which
Osmundo also attended. And during that meeting, Osmundo did not say who he
really is, but even let Maosca introduced him again as "Leonardo Rey", which all the
more indicates that he connived with Maosca in deceiving the defendant bank.
A:
We requested for others but they could not produce, and because they
presented to us the Residence Certificate which matches on the signature on the
Residence Certificate in favor of Atty. Magno.14
Evidently, the efforts exerted by the bank to verify the identity of the couple posing
as Osmundo Canlas and Angelina Canlas fell short of the responsibility of the bank to
observe more than the diligence of a good father of a family. The negligence of
respondent bank was magnified by the fact that the previous deed of mortgage
(which was used as the basis for checking the genuineness of the signatures of the
supposed Canlas spouses) did not bear the tax account number of the spouses, 15 as
well as the Community Tax Certificate of Angelina Canlas. 16 But such fact
notwithstanding, the bank did not require the impostors to submit additional proof of
their true identity.
Finally after the loan was finally approved, Osmundo accompanied Maosca to the
bank when the loan was released. At that time, a manger's check for P200,000.00
was issued in the name of Oscar Motorworks, which Osmundo admits he owns and
operates.
Collectively, the foregoing circumstances cannot but conjure to a single conclusion
that Osmundo active participated in the loan application of defendant Asian Savings
Bank, which culminated in his receiving a portion of the process thereof: 18
A meticulous and painstaking scrutiny of the Records on hand, reveals, however, that
the findings arrived at by the Court of Appeals are barren of any sustainable basis.
For instance, the execution of the deeds of mortgages constituted by Maosca on
subject pieces of property of petitioners were made possible not by the Special
Power of Attorney executed by Osmundo Canlas in favor of Maosca but through the
use of impostors who misrepresented themselves as the spouses Angelina Canlas
and Osmundo Canlas. It cannot be said therefore, that the petitioners authorized
Vicente Maosca to constitute the mortgage on their parcels of land.
Under the doctrine of last clear chance, which is applicable here, the respondent
bank must suffer the resulting loss. In essence, the doctrine of last clear chance is to
the effect that where both parties are negligent but the negligent act of one is
appreciably later in point of time than that of the other, or where it is impossible to
determine whose fault or negligence brought about the occurrence of the incident,
the one who had the last clear opportunity to avoid the impending harm but failed to
do so, is chargeable with the consequences arising therefrom. Stated differently, the
rule is that the antecedent negligence of a person does not preclude recovery of
damages caused by the supervening negligence of the latter, who had the last fair
chance to prevent the impending harm by the exercise of due diligence. 17
What is more, Osmundo Canlas was introduced as "Leonardo Rey" by Vicente

Maosca, only on the occasion of the luncheon meeting at the Metropolitan
Club.19 Thereat, the failure of Osmundo Canlas to rectify Maosca's
misrepresentations could not be taken as a fraudulent act. As well explained by the
former, he just did not want to embarrass Maosca, so that he waited for the end of
the meeting to correct Maosca.20
Assuming that Osmundo Canlas was negligent in giving Vicente Maosca the
opportunity to perpetrate the fraud, by entrusting to latter the owner's copy of the
transfer certificates of title of subject parcels of land, it cannot be denied that the
bank had the last clear chance to prevent the fraud, by the simple expedient of
faithfully complying with the requirements for banks to ascertain the identity of the
persons transacting with them.
Then, too, Osmundo Canlas recounted that during the said luncheon meeting, they
did not talk about the security or collateral for the loan of Maosca with ASB. 21 So
also, Mrs. Josefina Rojo, who was the Account Officer of Asian Savings Bank when
Maosca applied for subject loan, corroborated the testimony of Osmundo Canlas,
she testified:
For not observing the degree of diligence required of banking institutions, whose
business is impressed with public interest, respondent Asian Savings Bank has to
bear the loss sued upon.
66

xxx
xxx
obligations
xxx
Settled is the rule that a contract of mortgage must be constituted only by the
absolute owner on the property mortgaged; 26 a mortgage, constituted by an impostor
is void.27 Considering that it was established indubitably that the contract of
mortgage sued upon was entered into and signed by impostors who misrepresented
themselves as the spouses Osmundo Canlas and Angelina Canlas, the Court is of the
ineluctible conclusion and finding that subject contract of mortgage is a complete
nullity.
QUESTION:
Now could you please describe out the lunch conference at the
Metro Club in Makati?
ANSWER:
Mr. Mangubat, Mr. Maosca and I did not discuss with respect to the
loan application and discuss primarily his business.
xxx
xxx
QUESTION:
xxx
WHEREFORE, the Petition is GRANTED and the Decision of the Court of Appeals,
dated September 30, 1993, in CA-G.R. CV No. 25242 SET ASIDE. The Decision of
Branch 59 of the Regional Trial Court of Makati City in Civil Case No. M-028 is hereby
REINSTATED. No pronouncement as to costs.
So, what is the main topic of your discussion during the meeting?
ANSWER:
The main topic war then, about his business although, Mr. Leonardo
Rey, who actually turned out as Mr. Canlas, supplier of Mr. Maosca.
SO ORDERED.
QUESTION:
I see . . . other than the business of Mr. Maosca, were there any
other topic discussed?
ANSWER:
xxx
And what was the topic:
and
AURMELA
GANZON, petitioners,
IN REALITY, for the druggist, mistake is negligence and care is no

defense.1 Sa isang parmasyutika, ang pagkakamali ay kapabayaan at ang
pagkalinga ay hindi angkop na dipensa.
General Economy then.

xxx
October 17, 2008
MERCURY DRUG CORPORATION

vs.
RAUL DE LEON, respondents.
YES.
QUESTION:
ANSWER:
G.R. No. 165622
x x x22
Verily, Osmundo Canlas was left unaware of the illicit plan of Maosca, explaining
thus why he (Osmundo) did not bother to correct what Maosca misrepresented and
to assert ownership over the two parcels of land in question.
This is a petition for review on certiorari2 of two Resolutions3 of the Court

of Appeals (CA). The first Resolution granted respondents motion to
dismiss while the second denied petitioners motion for reconsideration.
Not only that; while it is true that Osmundo Canlas was with Vicente Maosca when
the latter submitted the documents needed for his loan application, and when the
check of P200,000.00 was released, the former did not know that the collateral used
by Maosca for the said loan were their (Canlas spouses') properties. Osmundo
happened to be with Maosca at the time because he wanted to make sure that
Maosca would make good his promise to pay the balance of the purchase price of
the said lots out of the proceeds of the loan. 23
The Facts
The receipt by Osmundo Canlas of the P200,000.00 check from ASB could not estop
him from assailing the validity of the mortgage because the said amount was in
payment of the parcels of land he sold to Maosca. 24
Aside from exchanging pleasantries, De Leon consulted Dr. Milla about his irritated
left eye.7 The latter prescribed the drugs "Cortisporin Opthalmic" and "Ceftin" to
relieve his eye problems.8 Before heading to work the following morning, De Leon
went to the Betterliving, Paraaque, branch of Mercury Drug Store Corporation to buy
the prescribed medicines.9 He showed his prescription to petitioner Aurmela Ganzon,
a pharmacist assistant.10Subsequently, he paid for and took the medicine handed
over by Ganzon.11
Respondent Raul T. De Leon was the presiding judge of Branch 258, Regional Trial
Court (RTC) in Paraaque.4 On October 17, 1999, he noticed that his left eye was
reddish. He also had difficulty reading.5 On the same evening, he met a friend for
dinner at the Foohyui Restaurant. The same friend happened to be a doctor, Dr.
Charles Milla, and had just arrived from abroad.6
What is decisively clear on record is that Maosca managed to keep Osmundo Canlas
uninformed of his (Maosca's) intention to use the parcels of land of the Canlas
spouses as security for the loan obtained from Asian Savings Bank. Since Vicente
Maosca showed Osmundo Canlas several certificates of title of lots which, according
to Maosca were the collaterals, Osmundo Canlas was confident that their
(Canlases') parcels of land were not involved in the loan transactions with the Asian
Savings Bank.25 Under the attendant facts and circumstances, Osmundo Canlas was
undoubtedly negligent, which negligence made them (petitioners) undeserving of an
award of attorney's fees.
At his chambers, De Leon requested his sheriff to assist him in using the eye
drops.12 As instructed, the sheriff applied 2-3 drops on respondents left
eye.13 Instead of relieving his irritation, respondent felt searing pain. 14 He
immediately rinsed the affected eye with water, but the pain did not subside. 15 Only
then did he discover that he was given the wrong medicine, "Cortisporin Otic
Solution."16
67
obligations
De Leon returned to the same Mercury Drug branch, with his left eye still red and
teary.17 When he confronted Ganzon why he was given ear drops, instead of the
prescribed eye drops,18 she did not apologize and instead brazenly replied that she
was unable to fully read the prescription.19 In fact, it was her supervisor who
apologized and informed De Leon that they do not have stock of the needed
Cortisporin Opthalmic.20
Due to defendants callous reaction to the mistake done by their employee which
forced plaintiff to litigate, Defendant (sic) Mercury Drug Store is to pay plaintiff
attorneys fees of P50,000.00 plus litigation expenses.
SO ORDERED.35
In ruling in favor of De Leon, the RTC ratiocinated:
De Leon wrote Mercury Drug, through its president, Ms. Vivian K. Askuna, about the
days incident.21 It did not merit any response.22 Instead, two sales persons went to
his office and informed him that their supervisor was busy with other
matters.23 Having been denied his simple desire for a written apology and
explanation,24 De Leon filed a complaint for damages against Mercury Drug. 25
The proximate cause of the ill fate of plaintiff was defendant Aurmila (sic) Ganzons
negligent exercise of said discretion. She gave a prescription drug to a customer who
did not have the proper form of prescription, she did not take a good look at said
prescription, she merely presumed plaintiff was looking for Cortisporin Otic Solution
because it was the only one available in the market and she further presumed that
by merely putting the drug by the counter wherein plaintiff looked at it, paid and took
the drug without any objection meant he understood what he was buying. 36
Mercury Drug denied that it was negligent and therefore liable for damages. 26 It
pointed out that the proximate cause of De Leons unfortunate experience was his
own negligence.27 He should have first read and checked to see if he had the right
eye solution before he used any on his eye. 28 He could have also requested his sheriff
to do the same before the latter applied the medicine on such a delicate part of his
body.29
The RTC ruled that although De Leon may have been negligent by failing to read the
medicines label or to instruct his sheriff to do so, Mercury Drug was first to be
negligent.37 Ganzon dispensed a drug without the requisite prescription. 38 Moreover,
she did so without fully reading what medicine was exactly being bought. 39 In fact,
she presumed that since what was available was the drug Cortisporin Otic Solution, it
was what De Leon was attempting to buy. 40 Said the court:
Also, Mercury Drug explained that there is no available medicine known as

"Cortisporin Opthalmic" in the Philippine market. 30 Furthermore, what was written on
the piece of paper De Leon presented to Ganzon was "Cortisporin
Solution."31 Accordingly, she gave him the only available "Cortisporin Solution" in the
market.
When the injury is caused by the negligence of a servant or employee, there

instantly arises a presumption of law that there was negligence on the part of the
employer or employer either in the selection of the servant or employee, or in the
supervision over him after the selection or both.
Moreover, even the piece of paper De Leon presented upon buying the medicine can
not be considered as proper prescription. 32 It lacked the required information
concerning the attending doctors name and license number. 33According to Ganzon,
she entertained De Leons purchase request only because he was a regular customer
of their branch.34
xxxx
The theory bases the responsibility of the master ultimately on his own negligence
and not on that of his servant.41
RTC Disposition
Dissatisfied with the RTC ruling, Mercury Drug and Ganzon elevated the matter to the
CA. Accordingly, they filed their respective briefs. Raising technical grounds, De Leon
moved for the appeals dismissal.
On April 30, 2003, the RTC rendered judgment in favor of respondent, the dispositive
portion of which reads:
CA Disposition
WHEREFORE, the court finds for the plaintiff.
On July 4, 2008, the CA issued a resolution which granted De Leons motion and
dismissed the appeal. Said the appellate court:
For pecuniary loss suffered, Mercury Drug Store is to pay ONE HUNDRED FIFTY-THREE
PESOS AND TWENTY-FIVE CENTAVOS (Php 153.25), the value of the medicine.
As pointed out by the plaintiff-appellee, the Statement of Facts, Statement of the

Case, Assignment of Errors/issues, Arguments/ Discussions in the Brief make no
references to the pages of the records. We find this procedural lapse justify the
dismissal of the appeal, pursuant to Section 1(f), Rule 50 of the 1997 Rules of Civil
Procedure x x x.42
As moral damages defendants is (sic) ordered to pay ONE HUNDRED THOUSAND

PESOS (Php 100,000.00).
To serve as a warning to those in the field of dispensing medicinal drugs discretion of
the highest degree is expected of them, Mercury Drug Store and defendant Aurmila
(sic) Ganzon are ordered to pay plaintiff the amount of THREE HUNDRED THOUSAND
PESOS (Php 300,000.00) as exemplary damages.
xxxx
"The premise that underlies all appeals is that they are merely rights which arise
form a statute; therefore, they must be exercised in the manner prescribed by law. It
68
obligations

In several cases,48 this Court stressed that the grounds for dismissal of an appeal
under Section 1 of Rule 50 49 are discretionary upon the appellate court. The very
wording of the rule uses the word "may" instead of "shall." This indicates that it is
only directory and not mandatory. 50 Sound discretion must be exercised in
consonance with the tenets of justice and fair play, keeping in mind the
circumstances obtaining in each case.51
is to this end that rules governing pleadings and practice before the appellate court
were imposed. These rules were designed to assist the appellate court in the
accomplishment of its tasks, and overall, to enhance the orderly administration of
justice."
xxxx
x x x If the statement of fact is unaccompanied by a page reference to the record, it
may be stricken or disregarded all together.43
The importance of an appellants brief cannot be gainsaid. Its purpose is two-fold: (1)
to present to the court in coherent and concise form the point and questions in
controversy; and (2) to assist the court in arriving at a just and proper conclusion. 52 It
is considered a vehicle of counsel to convey to the court the essential facts of a
clients case, a statement of the questions of law involved, the law to be applied, and
the application one desires of it by the court. 53
On October 5, 2004, the CA denied Mercury Drugs and Ganzons joint motion for
reconsideration. Although mindful that litigation is not a game of technicalities, 44 the
CA found no persuasive reasons to relax procedural rules in favor of Mercury Drug
and Ganzon.45 The CA opined:
The absence of page reference to the record is a ground for dismissal. It is a

requirement intended to ultimately aid the appellate court in arriving at a just and
proper conclusion of the case.54 However, as earlier discussed, such dismissal is not
mandatory, but discretionary on the part of the appellate court.
In the case under consideration, We find no faithful compliance on the part of the
movants that will call for the liberal application of the Rules. Section 1(f) of Rule 50 of
the 1997 Rules of Civil Procedure explicitly provides that an appeal may be dismissed
by the Court of Appeals, on its own motion or on that of the appellee, for want of
page references to the records as required in Section 13 of Rule 44 of the same
rules46
This Court has held that the failure to properly cite reference to the original records is
not a fatal procedural lapse.55 When citations found in the appellants brief enable
the court to expeditiously locate the portions of the record referred to, there is
substantial compliance with the requirements of Section 13(c), (d), and (f) of Rule
44.56
Issues
Petitioner has resorted to the present recourse and assigns to the CA the following
errors:
In De Leon v. CA,57 this Court ruled that the citations contained in the appellants
brief sufficiently enabled the appellate court to expeditiously locate the portions of
the record referred to. They were in substantial compliance with the rules. The Court
said:
I
THE HONORABLE COURT OF APPEALS ERRED IN DISMISSING PETITIONERS APPEAL
BASED ON THE CASES OF DE LIANA VS. CA (370 SCRA 349) AND HEIRS OF
PALOMINIQUE VS. CA (134 SCRA 331).
Nothing in the records indicate that it was exercised capriciously, whimsically, or with
a view of permitting injury upon a party litigant. For the same reasons, we hold that
the respondent Court of Appeals did not err when it did not dismiss the appeal based
on the allegation that appellants brief failed to comply with the internal rules of said
court.58
II
THE HONORABLE COURT OF APPEALS COMMITTED GRAVE ABUSE OF DISCRETION IN
DISMISSING PETITIONERS APPEAL DESPITE SUBSTANTIAL COMPLIANCE WITH
SECTION 1(F), RULE 60 AND SECTION 13, RULE 44 OF THE RULES OF COURT.
Similar to the instant case, the appellants brief in Yuchengco v. Court of

Appeals59 contained references to Exhibits and Transcript of Stenographic Notes and
attachments. These were found to have substantially complied with the requirements
of Section 13(c) and (d) of Rule 44.
III
THE HONORABLE COURT OF APPEALS ERRED WHEN IT FAVORED MERE TECHNICALITY
OVER SUBSTANTIAL JUSTICE WHICH WILL CERTAINLY CAUSE GRAVE INJUSTICE AND
GREAT PREJUDICE TO PETITIONER CONSIDERING THAT THE ASSAILED DECISION ON
APPEAL IS CLUSTERED WITH ERRORS AND IN CONTRAST with the DECISIONS OF THIS
HONORABLE SUPREME COURT.47 (Underscoring supplied)
x x x The Appellants brief may not have referred to the exact pages of the records,
however, the same is not fatal to their cause since the references they made enabled
the appellate court to expeditiously locate the portions referred to. x x x 60
It is true that in De Liano v. Court of Appeals,61 this Court held that a statement of
facts unaccompanied by a page reference to the record may be presumed to be
without support in the record and may be stricken or disregarded altogether.
However, the instant case is not on all fours with De Liano.
Our Ruling
The appeal succeeds in part.
Dismissal of an appeal under Rule 50 is discretionary.
69
obligations
In De Liano, the appellants brief lacked a Subject Index and a Table of Cases and
Authorities.62 Moreover, the Statement of the Case, Statements of Facts, and
Statements of Arguments had no page references to the record. 63When notified of
such defects, defendants-appellants failed to amend their brief to conform to the
rules.64 Instead, they continued to argue that their errors were harmless. 65 All these
omissions and non-compliance justified the dismissal of the appeal by the CA. 66
Smiths Admrx v. Middelton79 teaches Us that one holding himself out as competent
to handle drugs, having rightful access to them, and relied upon by those dealing
with him to exercise that high degree of caution and care called for by the peculiarly
dangerous nature of the business, cannot be heard to say that his mistake by which
he furnishes a customer the most deadly of drugs for those comparatively harmless,
is not in itself gross negligence.80
In the case under review, although there were no page references to the records,
Mercury Drug and Ganzon referred to the exhibits, TSN, and attachments of the case.
Despite its deficiencies, the brief is sufficient in form and substance as to apprise the
appellate court of the essential facts, nature of the case, the issues raised, and the
laws necessary for the disposition of the same.
In our own jurisdiction, United States v. Pineda 81 and Mercury Drug Corporation v.
Baking are illustrative.82 InPineda, the potassium chlorate demanded by complainant
had been intended for his race horses. When complainant mixed with water what he
thought and believed was potassium chlorate, but which turned out to be the
potently deadly barium chlorate, his race horses died of poisoning only a few hours
after.
Reliance on Heirs of Palomique v. Court of Appeals67 is likewise misplaced. In Heirs of

Palomique, the appellants brief did not at all contain a separate statement of
facts.68 This critical omission, together with the failure to make page references to
the record to support the factual allegations, justified the dismissal of the appeal. 69
The wisdom of such a decision is unquestionable. If the victims had been human
beings instead of horses, the damage and loss would have been irreparable. 83
In the more recent Mercury Drug, involving no less than the same petitioner
corporation, Sebastian Baking went to the Alabang branch of Mercury Drug 84 and
presented his prescription for Diamicron, which the pharmacist misread as
Dormicum.85 Baking was given a potent sleeping tablet, instead of medicines to
stabilize his blood sugar.86 On the third day of taking the wrong medicine, Baking
figured in a vehicular accident.87 He fell asleep while driving.88
Rules of procedure are intended to promote, not to defeat, substantial justice. They
should not be applied in a very rigid and technical sense. 70 For reasons of justice and
equity, this Court has allowed exceptions to the stringent rules governing
appeals.71 It has, in the past, refused to sacrifice justice for technicality. 72
However, brushing aside technicalities, petitioners are still liable. Mercury Drug and
Ganzon failed to exercise the highest degree of diligence expected of them.
This Court held that the proximate cause of the accident was the gross negligence of
the pharmacist who gave the wrong medicine to Baking. The Court said:
Denying that they were negligent, Mercury Drug and Ganzon pointed out that De
Leons own negligence was the proximate cause of his injury. They argued that any
injury would have been averted had De Leon exercised due diligence before applying
the medicine on his eye. Had he cautiously read the medicine bottle label, he would
have known that he had the wrong medicine.
x x x Considering that a fatal mistake could be a matter of life and death for a buying
patient, the said employee should have been very cautious in dispensing medicines.
She should have verified whether the medicine she gave respondent was indeed the
one prescribed by his physician. The care required must be commensurate with the
danger involved, and the skill employed must correspond with the superior
knowledge of the business which the law demands. 89
Mercury Drug and Ganzon can not exculpate themselves from any liability. As active
players in the field of dispensing medicines to the public, the highest degree of care
and diligence is expected of them. 73 Likewise, numerous decisions, both here and
abroad, have laid salutary rules for the protection of human life and human
health.74 In the United States case of Tombari v. Conners,75 it was ruled that the
profession of pharmacy demands care and skill, and druggists must exercise care of
a specially high degree, the highest degree of care known to practical men. In other
words, druggists must exercise the highest practicable degree of prudence and
vigilance, and the most exact and reliable safeguards consistent with the reasonable
conduct of the business, so that human life may not constantly be exposed to the
danger flowing from the substitution of deadly poisons for harmless medicines. 76
This Court once more reiterated that the profession of pharmacy demands great care
and skill. It reminded druggists to exercise the highest degree of care known to
practical men.
In cases where an injury is caused by the negligence of an employee, there instantly
arises a presumption of law that there has been negligence on the part of the
employer, either in the selection or supervision of ones employees. This
presumption may be rebutted by a clear showing that the employer has exercised
the care and diligence of a good father of the family. 90 Mercury Drug failed to
overcome such presumption.91
In Fleet v. Hollenkemp,77 the US Supreme Court ruled that a druggist that sells to a
purchaser or sends to a patient one drug for another or even one innocent drug,
calculated to produce a certain effect, in place of another sent for and designed to
produce a different effect, cannot escape responsibility, upon the alleged pretext that
it was an accidental or innocent mistake. His mistake, under the most favorable
aspect for himself, is negligence. And such mistake cannot be countenanced or
tolerated, as it is a mistake of the gravest kind and of the most disastrous effect. 78
Petitioners Mercury Drug and Ganzon have similarly failed to live up to high standard
of diligence expected of them as pharmacy professionals. They were grossly
negligent in dispensing ear drops instead of the prescribed eye drops to De Leon.
Worse, they have once again attempted to shift the blame to their victim by
underscoring his own failure to read the label.
70
obligations
As a buyer, De Leon relied on the expertise and experience of Mercury Drug and its
employees in dispensing to him the right medicine. 92 This Court has ruled that in the
purchase and sale of drugs, the buyer and seller do not stand at arms length. 93 There
exists an imperative duty on the seller or the druggist to take precaution to prevent
death or injury to any person who relies on ones absolute honesty and peculiar
learning.94 The Court emphasized:
It is generally recognized that the drugstore business is imbued with public interest.
This can not be more real for Mercury Drug, the countrys biggest drugstore chain.
This Court can not tolerate any form of negligence which can jeopardize the health
and safety of its loyal patrons. Moreover, this Court will not countenance the cavalier
manner it treated De Leon. Not only does a pharmacy owe a customer the duty of
reasonable care, but it is also duty-bound to accord one with respect.
x x x The nature of drugs is such that examination would not avail the purchaser
anything. It would be idle mockery for the customer to make an examination of a
compound of which he can know nothing. Consequently, it must be that the druggist
warrants that he will deliver the drug called for.95
WHEREFORE, the petition is PARTIALLY GRANTED. The Decisions of the CA and the
RTC in Paraaque City areAFFIRMED WITH MODIFICATION, in that the award of moral
and exemplary damages is reduced to P50,000.00 and P25,000.00, respectively.
SO ORDERED.
Mercury Drug and Ganzons defense that the latter gave the only available
Cortisporin solution in the market deserves scant consideration. Ganzon could have
easily verified whether the medicine she gave De Leon was, indeed, the prescribed
one or, at the very least, consulted her supervisor. Absent the required certainty in
the dispensation of the medicine, she could have refused De Leons purchase of the
drug.
G.R. No. 148582
January 16, 2002
FAR
EAST
BANK
AND
vs.
ESTRELLA O. QUERIMIT, respondent.
TRUST
COMPANY, petitioner,
This is a petition for review on certiorari seeking review of the decision, dated March
6, 2001, and resolution, dated June 19, 2001, of the Court of Appeals 1 in CA-G.R. CV
No. 67147, entitled "Estrella O. Querimit v. Far East Bank and Trust Company," which
affirmed with modification the decision of the Regional Trial Court, Branch 38,
Manila,2ordering petitioner Far East Bank and Trust Co. (FEBTC) to allow respondent
Estrella O. Querimit to withdraw her time deposit with the FEBTC.
The award of damages is proper and shall only be reduced considering the peculiar
facts of the case. Moral damages include physical suffering, mental anguish, fright,
serious anxiety, besmirched reputation, wounded feelings, moral shock, social
humiliation, and similar injury. Though incapable of pecuniary computation, moral
damages may be recovered if they are the proximate result of defendants wrongful
act or omission.96
The facts are as follows:
Moral damages are not intended to impose a penalty to the wrongdoer or to enrich
the claimant at the expense of defendant. 97 There is no hard and fast rule in
determining what would be a fair and reasonable amount of moral damages since
each case must be governed by its peculiar circumstances. 98 However, the award of
damages must be commensurate to the loss or injury suffered. 99
Respondent Estrella O. Querimit worked as internal auditor of the Philippine Savings

Bank (PSB) for 19 years, from 1963 to 1992. 3 On November 24, 1986, she opened a
dollar savings account in petitioner's Harrison Plaza branch, 4for which she was issued
four (4) Certificates of Deposit (Nos. 79028, 79029, 79030, and 79031), each
certificate representing the amount of $15,000.00, or a total amount of $60,000.00.
The certificates were to mature in 60 days, on January 23, 1987, and were payable to
bearer at 4.5% interest per annum. The certificates bore the word "accrued," which
meant that if they were not presented for encashment or pre-terminated prior to
maturity, the money deposited with accrued interest would be "rolled over" by the
bank and annual interest would accumulate automatically. 5 The petitioner bank's
manager assured respondent that her deposit would be renewed and earn interest
upon maturity even without the surrender of the certificates if these were not
indorsed and withdrawn.6Respondent kept her dollars in the bank so that they would
earn interest and so that she could use the fund after she retired. 7
Taking into consideration the attending facts of the case under review, We find the
amount awarded by the trial court to be excessive. Following the precedent case
of Mercury Drug, We reduce the amount from P100,000.00 toP50,000.00 only.100 In
addition, We also deem it necessary to reduce the award of exemplary damages from
the exorbitant amount of P300,000.00 to P25,000.00 only.
This Court explained the propriety of awarding exemplary damages in the
earlier Mercury Drug case:
x x x Article 2229 allows the grant of exemplary damages by way of example or
correction for the public good. As mentioned earlier, the drugstore business is
affected by public interest. Petitioner should have exerted utmost diligence in the
selection and supervision of its employees. On the part of the employee concerned,
she should have been extremely cautious in dispensing pharmaceutical products.
Due to the sensitive nature of its business, petitioner must at all times maintain a
high level of meticulousness. Therefore, an award of exemplary damages in the
amount of P25,000.00 is in order.101 (Emphasis supplied)
In 1989, respondent accompanied her husband Dominador Querimit to the United

States for medical treatment. She used her savings in the Bank of the Philippine
Islands (BPI) to pay for the trip and for her husband's medical expenses. 8 In January
1993, her husband died and Estrella returned to the Philippines. She went to
petitioner FEBTC to withdraw her deposit but, to her dismay, she was told that her
husband had withdrawn the money in deposit.9 Through counsel, respondent sent a
demand letter to petitioner FEBTC. In another letter, respondent reiterated her
request for updating and payment of the certificates of deposit, including interest
71
obligations
earned.10 As petitioner FEBTC refused respondent's demands, the latter filed a

complaint, joining in the action Edgardo F. Blanco, Branch Manager of FEBTC Harrison
Plaza Branch, and Octavio Espiritu, FEBTC President. 11
prove that the certificates of deposit had been paid out of its funds, since "the
evidence by the [respondent] stands unrebutted that the subject certificates of
deposit until now remain unindorsed, undelivered and unwithdrawn by [her]." 19 But
the Court of Appeals held that the individual defendants, Edgardo F. Blanco, FEBTCHarrison Plaza Branch Manager, and Octavio Espiritu, FEBTC President, could not be
held solidarily liable with the FEBTC because the latter has a personality separate
from its officers and stockholders.20
Petitioner FEBTC alleged that it had given respondent's late husband Dominador an
"accommodation" to allow him to withdraw Estrella's deposit. 12 Petitioner presented
certified true copies of documents showing that payment had been made, to wit:
1. Four FEBTC Harrison Plaza Branch Dollar Demand Drafts Nos. 886694903,
886694904, 886694905 and 886694906 for US$15,110.96 each, allegedly issued by
petitioner to respondent's husband Dominador after payment on the certificates of
deposit;13
Hence this appeal.

As stated by the Court of Appeals, the main issue in this case is whether the subject
certificates of deposit have already been paid by petitioner.21 Petitioner contends
that-
2. A letter of Alicia de Bustos, branch cashier of FEBTC at Harrison Plaza, dated

January 23, 1987, which was sent to Citibank, N.A., Citibank Center, Paseo de Roxas,
Makati, Metro Manila, informing the latter that FEBTC had issued the four drafts and
requesting Citibank New York to debit from petitioner's account $60,443.84, the
aggregate value of the four drafts;14
I. Petitioner is not liable to respondent for the value of the four (4) Certificates of
Deposit, including the interest thereon as well as moral and exemplary damages,
attorney's and appearance fees.
II. The aggregate value - both principal and interest earned at maturity - of the four
(4) certificates of deposit was already paid to or withdrawn at maturity by the late
Dominador Querimit who was the respondent's deceased husband.
3. "Citicorp Remittance Service: Daily Summary and Payment Report" dated January
23, 1987;15
4. Debit Ticket dated January 23, 1987, showing the debit of US$60,443.84 or its
equivalent at the time ofP1,240,912.04 from the FEBTC Harrison Plaza Branch; 16 and
III. Respondent is guilty of laches since the four (4) certificates of deposit were all
issued on 24 November 1986 but she attempted to withdraw their aggregate value
on 29 July 1996 only on or after the lapse of more than nine (9) years and eight (8)
months.
5. An Interbranch Transaction Ticket Register or Credit Ticket dated January 23, 1987
showing that US$60,443.84 or P1,240,912.04 was credited to petitioner's
International Operation Division (IOD).17
IV. Respondent is not liable to petitioner for attorney's fees. 22
On May 6, 2000, the trial court rendered judgment for respondent. The dispositive
portion of the decision stated:
After reviewing the records, we find the petition to be without merit.

First. Petitioner bank failed to prove that it had already paid Estrella Querimit, the
bearer and lawful holder of the subject certificates of deposit. The finding of the trial
court on this point, as affirmed by the Court of Appeals, is that petitioner did not pay
either respondent Estrella or her husband the amounts evidenced by the subject
certificates of deposit. This Court is not a trier of facts and generally does not weigh
anew the evidence already passed upon by the Court of Appeals. 23 The finding of
respondent court which shows that the subject certificates of deposit are still in the
possession of Estrella Querimit and have not been indorsed or delivered to petitioner
FEBTC is substantiated by the record and should therefore stand. 24
WHEREFORE, judgment is hereby rendered in favor of plaintiff [Estrella O. Querimit]

and against defendants [FEBTC et al.]:
1. ORDERING defendants to allow plaintiff to withdraw her U.S.$ Time Deposit of
$60,000.00 plus accrued interests;
2. ORDERING defendants to pay moral damages in the amount of P50,000.00;
3. ORDERING defendants to pay exemplary damages in the amount of P50,000.00;
A certificate of deposit is defined as a written acknowledgment by a bank or banker

of the receipt of a sum of money on deposit which the bank or banker promises to
pay to the depositor, to the order of the depositor, or to some other person or his
order, whereby the relation of debtor and creditor between the bank and the
depositor is created. The principles governing other types of bank deposits are
applicable to certificates of deposit,25 as are the rules governing promissory notes
when they contain an unconditional promise to pay a sum certain of money
absolutely.26 The principle that payment, in order to discharge a debt, must be made
to someone authorized to receive it is applicable to the payment of certificates of
deposit. Thus, a bank will be protected in making payment to the holder of a
4. ORDERING defendants to pay attorney's fees in the amount of P100,000.00

plus P10,000.00 per appearance of counsel; and
5. ORDERING defendants to pay the costs of the suit.
SO ORDERED.18
On May 15, 2000, petitioner appealed to the Court of Appeals which, on March 6,
2001, affirmed through its Fourteenth Division the decision of the trial court, with the
modification that FEBTC was declared solely liable for the amounts adjudged in the
decision of the trial court. The appeals court stated that petitioner FEBTC failed to
72
obligations
certificate indorsed by the payee, unless it has notice of the invalidity of the
indorsement or the holder's want of title. 27 A bank acts at its peril when it pays
deposits evidenced by a certificate of deposit, without its production and surrender
after proper indorsement.28 As a rule, one who pleads payment has the burden of
proving it. Even where the plaintiff must allege non-payment, the general rule is that
the burden rests on the defendant to prove payment, rather than on the plaintiff to
prove payment. The debtor has the burden of showing with legal certainty that the
obligation has been discharged by payment.29
In this case, it would be unjust to allow the doctrine of laches to defeat the right of
respondent to recover her savings which she deposited with the petitioner. She did
not withdraw her deposit even after the maturity date of the certificates of deposit
precisely because she wanted to set it aside for her retirement. She relied on the
bank's assurance, as reflected on the face of the instruments themselves, that
interest would "accrue" or accumulate annually even after their maturity. 38
Third. Respondent is entitled to moral damages because of the mental anguish and
humiliation she suffered as a result of the wrongful refusal of the FEBTC to pay her
even after she had delivered the certificates of deposit. 39 In addition, petitioner
FEBTC should pay respondent exemplary damages, which the trial court imposed by
way of example or correction for the public good. 40 Finally, respondent is entitled to
attorney's fees since petitioner's act or omission compelled her to incur expenses to
protect her interest, making such award just and equitable. 41 However, we find the
award of attorney's fees to be excessive and accordingly reduce it to P20,000.00.42
In this case, the certificates of deposit were clearly marked payable to "bearer,"
which means, to "[t]he person in possession of an instrument, document of title or
security payable to bearer or indorsed in blank." 30 Petitioner should not have paid
respondent's husband or any third party without requiring the surrender of the
certificates of deposit.
Petitioner claims that it did not demand the surrender of the subject certificates of
deposit since respondent's husband, Dominador Querimit, was one of the bank's
senior managers. But even long after respondent's husband had allegedly been paid
respondent's deposit and before his retirement from service, the FEBTC never
required him to deliver the certificates of deposit in question. 31 Moreover, the
accommodation given to respondent's husband was made in violation of the bank's
policies and procedures.32
WHEREFORE, premises considered, the present petition is hereby DENIED and the
Decision in CA-G.R. CV No. 67147 AFFIRMED, with the modification that the award of
attorney's fees is reduced to P20,000.00.
SO ORDERED.
G.R. No. 143403
Petitioner FEBTC thus failed to exercise that degree of diligence required by the
nature of its business.33 Because the business of banks is impressed with public
interest, the degree of diligence required of banks is more than that of a good father
of the family or of an ordinary business firm. The fiduciary nature of their relationship
with their depositors requires them to treat the accounts of their clients with the
highest degree of care.34 A bank is under obligation to treat the accounts of its
depositors with meticulous care whether such accounts consist only of a few hundred
pesos or of millions of pesos. Responsibility arising from negligence in the
performance of every kind of obligation is demandable. 35 Petitioner failed to prove
payment of the subject certificates of deposit issued to the respondent and,
therefore, remains liable for the value of the dollar deposits indicated thereon with
accrued interest.
January 22, 2003
FILONILA
O.
CRUZ, petitioner,
vs.
HON. CELSO D. GANGAN, DIR. MARCELINO HANOPOL, AUDITOR GLENDA
MANLAPAZ, AND THE COMMISSION ON AUDIT, respondents.
While we commend the Commission on Audit for its diligence in safeguarding State
properties, we nonetheless rule that a government employee who has not been
proven to be culpable or negligent should not be held accountable for the loss of a
cellular phone stolen from her while she was riding the Light Railway Transit (LRT).
On the other hand, the dogged persistence of petitioner in fighting for her rights,
honor, respect and dignity has not been lost on this Court. She has been true to her
calling as an educator and a role model for our young people.
Second. The equitable principle of laches is not sufficient to defeat the rights of
respondent over the subject certificates of deposit.
The Case
For review on certiorari under Rule 64 is Decision No. 2000-104 1 dated March 28,
2000, issued by the Commission on Audit (COA), requiring Dr. Filonila O. Cruz to pay
the book value of a lost government-issued Nokia 909 analog cellular phone. The
decretal portion of the Decision reads as follows:
Laches is the failure or neglect, for an unreasonable length of time, to do that which,
by exercising due diligence, could or should have been done earlier. It is negligence
or omission to assert a right within a reasonable time, warranting a presumption that
the party entitled to assert it either has abandoned it or declined to assert it. 36
"Premises considered, and conformably to the adverse recommendations of the

Director, NGAO II and the Auditor, TESDA-NCR in the letter and 2nd Indorsement
dated July 13, 1999 and February 26, 1999, respectively, it is regretted that the
instant request for relief is DENIED for want of merit. This being so, the herein
petitioner should be required to pay the book value of the lost government-issued
cellular phone."2
There is no absolute rule as to what constitutes laches or staleness of demand; each

case is to be determined according to its particular circumstances. The question of
laches is addressed to the sound discretion of the court and, being an equitable
doctrine, its application is controlled by equitable considerations. It cannot be used
to defeat justice or perpetrate fraud and injustice. Courts will not be guided or bound
strictly by the statute of limitations or the doctrine of laches when to do so, manifest
wrong or injustice would result.37
The Facts
73
obligations
On Friday afternoon of January 15, 1999, petitioner went to the Regional Office of the
Technological Education and Skills Development Authority (TESDA) in Taguig, Metro
Manila for consultation with the regional director.3 After the meeting, petitioner went
back to her official station in Caloocan City, where she was the then Camanava
district director of the TESDA, by boarding the Light Railway Transit (LRT) from Sen.
Gil Puyat Avenue to Monumento. On board the LRT, her handbag was slashed and its
contents stolen by an unidentified person. Among the items taken from her were her
wallet and the government-issued cellular phone, which is the subject of the instant
case. That same day, she reported the incident to police authorities who immediately
conducted an investigation. However, all efforts to locate the thief and to recover the
phone proved futile.
cellular phone, then, such negligence militates against the grant of herein request for
relief."5
Hence, this Petition.6
Issues
In her Memorandum, petitioner faults the COA with the following alleged errors:
I.
"The Commission Proper committed grave abuse of discretion amounting to excess
of jurisdiction in finding that petitioner failed to exercise that degree of diligence
required to prevent the loss of the government-issued cellular phone when she opted
to take the light railway transit (LRT) in going to her official station in CAMANAVA
District, Caloocan City Hall, Caloocan City[; and]
Three days after, on January 18, 1999, petitioner reported the theft to the regional
director of TESDA-NCR. She did so through a Memorandum, in which she requested
relief from accountability of the subject property. In a 1st Indorsement dated January
19, 1999, the regional director, in turn, indorsed the request to the resident auditor.
II.
Under a 2nd Indorsement dated February 26, 1999, the resident auditor 4 denied the
request of petitioner on the ground that the latter lacked the diligence required in the
custody of government properties. Thus, petitioner was ordered to pay the purchase
value of the cell phone (P3,988) and that of its case (P250), a total of P4,238. The
auditors action was sustained by the director of the National Government Audit
Office II (NGAO II). The matter was then elevated to the Commission on Audit.
"The Commission Proper committed grave abuse of discretion when it applied the
case of Nakpil vs. CA, 144 SCRA 596 and disregarded Article 1174 of the New Civil
Code in denying petitioners request for relief from accountability[.]" 7
In the main, the issues in this case are: (1) whether petitioner was negligent in the
care of the government-issued cellular phone, and (2) whether she should be held
accountable for its loss.
Ruling of the Commission on Audit
We note that in its Manifestation and Motion dated October 24, 2000, reiterated in a
similar pleading dated March 28, 2001, the Office of the Solicitor General (OSG) sided
with petitioner and prayed for the granting of the Petition. Hence, the COA was
herein represented by its general counsel, Atty. Santos M. Alquisalas.
On appeal, the COA found no sufficient justification to grant the request for relief
from accountability. It explained as follows:
"x x x While it may be true that the loss of the cellular phone in question was due to
robbery (bag slashing), this however, cannot be made as the basis in granting the
herein request for relief from accountability since the accountable officer, Dr. Cruz,
failed to exercise that degree of diligence required under the circumstances to
prevent/avoid the loss. When Dr. Cruz opted to take the LRT which undeniably, was
almost always packed and overcrowded and considering further the day and time
she boarded said train which was at about 2:00 to 2:30 P.M. of Friday, she exposed
herself to the danger and the possibility of losing things such as the subject cellular
phone to pickpockets. As an accountable officer, she was under obligation to exercise
proper degree of care and diligence in safeguarding the property, taking into account
what a reasonable and prudent man would have done under the circumstances. Dr.
Cruz could have reasonably foreseen the danger that would befall her and took
precautions against its mischievous result. Therefore, having been remiss in her
obligation in the keeping or use of the subject government issued cellular phone, she
has to answer for its loss as required under Section 105 of PD 1445. Additionally, to
be exempt from liability because of fortuitous event as invoked by petitioner Dr. Cruz
has no bearing to the case at bar considering that Article 1174 of the New Civil Code
which supports said contention applies only if the actor is free from any negligence
or misconduct by which the loss/damage may have been occasioned. Further, in
Nakpil vs. CA, 144 SCRA 596, one who creates a dangerous condition cannot escape
liability although an act of God may have intervened. Thus, there being a positive
showing of negligence on the part of the petitioner in the keeping of the subject
The Courts Ruling

The Petition is meritorious.
First
Required Degree of Diligence
Issue:
The crucial question to ask is whether petitioner should be deemed negligent when,
on that fateful afternoon, she opted to board the LRT where the cellular phone was
stolen.
We answer in the negative. Riding the LRT cannot per se be denounced as a
negligent act; more so under the circumstances in this case, in which petitioners
mode of transit was influenced by time and money considerations.
Petitioner boarded the LRT to be able to arrive in Caloocan in time for her 3:00 p.m.
meeting. Any prudent or rational person under similar circumstances can reasonably
be expected to do the same. Possession of a cellular phone would not and should not
hinder one from boarding an LRT coach as petitioner did. After all, whether she took a
bus or a jeepney, the risk of theft would have also been present. Because of her
74
obligations

under the law.16 It also stands to reason that P4,238 should now be refunded to her.
That was the amount she had to pay on June 3, 1999, upon her retirement from
government service at age 65.
relatively low position and pay, she was not expected to have her own vehicle or to
ride a taxicab. Neither had the government granted her the use of any vehicle.
"Negligence is the omission to do something which a reasonable man, guided upon
those considerations which ordinarily regulate the conduct of human affairs, would
do, or the doing of something which a prudent man and reasonable man would not
do.8
Her dogged persistence in pursuing this appeal has not been lost on this Court. We
agree that, in fighting for her rights, she must have spent more than the value of the
lost cellular phone. Hence, we can only applaud her for being true to her calling as
an educator and a role model for our young people. Honor, respect and dignity are
the values she has pursued. May her tribe increase!
"Negligence is want of care required by the circumstances.9

"The diligence with which the law requires the individual at all times to govern his
conduct varies with the nature of the situation in which he is placed, and the
importance of the act which he is to perform."10(Emphasis supplied)
WHEREFORE, the Petition is GRANTED. The assailed Decision of the Commission on

Audit is REVERSED andSET ASIDE. The request of Petitioner Filonila O. Cruz for relief
from accountability for the lost Nokia 909 analog cellular phone is GRANTED, and the
amount of P4,238 paid under Official Receipt No. 6606743 is ordered to
beREFUNDED to her upon finality of this Decision. No costs.
The Rules11 provide that property for official use and purpose shall be utilized with
the diligence of a good father of a family. Extra-ordinary measures are not called for
in taking care of a cellular phone while in transit. Placing it in a bag away from
covetous eyes and holding on to that bag, as done by petitioner, is ordinarily
sufficient care of a cellular phone while travelling on board the LRT. The records do
not show any specific act of negligence on her part. It is a settled rule that
negligence cannot be presumed; 12 it has to be proven. In the absence of any shred of
evidence thereof, respondents gravely abused their discretion in finding petitioner
negligent.
SO ORDERED.
G.R. No. 185891
CATHAY
PACIFIC
AIRWAYS, Petitioner,
vs.
JUANITA REYES, WILFREDO REYES, MICHAEL ROY REYES, SIXTA LAPUZ, and
SAMPAGUITA TRAVEL CORP., Respondents.
Granting that the presence or the absence of negligence is a factual matter, the
consistent ruling of this Court is that findings of fact of an administrative agency
must be respected, so long as they are supported by substantial evidence.13 But
lacking support, the factual finding of the COA on the existence of negligence cannot
stand on its own and is therefore not binding on the Court.
Assailed in this petition for review are the Decision 1 dated 22 October 2008 in CAG.R. CV. No. 86156 and the 6 January 2009 Resolution 2 in the same case of the Court
of Appeals.
This case started as a complaint for damages tiled by respondents against Cathay
Pacific Airways (Cathay Pacific) and Sampaguita Travel Corp. (Sampaguita Travel),
now joined as a respondent. The factual backdrop leading to the filing of the
complaint is as follows:
While we commend the Commission on Audit for its diligence in safeguarding State
properties, we nonetheless hold that a government employee who has not been
proven to be culpable or negligent should not be held accountable for the loss of a
cellular phone, which was stolen from her while she was riding on the LRT.
Second
Accountability
June 26, 2013
Sometime in March 1997, respondent Wilfredo Reyes (Wilfredo) made a travel

reservation with Sampaguita Travel for his familys trip to Adelaide, Australia
scheduled from 12 April 1997 to 4 May 1997. Upon booking and confirmation of their
flight schedule, Wilfredo paid for the airfare and was issued four (4) Cathay Pacific
round-trip airplane tickets for Manila-HongKong-Adelaide-HongKong-Manila with the
following record locators:
Issue:
The assailed COA Decision directly attributed the loss of the cellular phone to a
"robbery (bag slashing)." However, it denies the request of petitioner for relief from
accountability, because it found her to be negligent. Earlier, we have already ruled
that the finding of negligence had no factual or legal basis and was therefore invalid.
What now remains to be resolved is whether petitioner observed the proper
procedure for notifying the government of the loss.
Within thirty days of the loss,14 petitioner applied for relief from accountability. We
hold that such application be deemed as the notification of the loss of the subject
cellular phone. She has also done her part in proving that the loss was due to theft or
robbery. The resident auditor15 concerned and the COA itself have accepted that the
robbery or theft had actually taken place. Necessarily, in the absence of evidence
showing negligence on her part, credit for the loss of the cellular phone is proper
75
Name of Passenger
Reyes, Wilfredo
PNR OR RECORD LOCATOR NOS.3

J76TH
Reyes, Juanita
Reyes, Michael Roy
Lapuz, Sixta
HDWC3
H9VZF
HTFMG4
obligations
On 12 April 1997, Wilfredo, together with his wife Juanita Reyes (Juanita), son Michael
Roy Reyes (Michael) and mother-in-law Sixta Lapuz (Sixta), flew to Adelaide, Australia
without a hitch.
CX104/CX905 ADL/HKG/MNL 04 MAY on MK status, which was not a confirmed

booking. MK function is used for synchronizing records or for ticketing purposes only.
It does not purport to be a real booking. As a result, no booking was transmitted into
CPAs system.
One week before they were scheduled to fly back home, Wilfredo reconfirmed his
familys return flight with the Cathay Pacific office in Adelaide. They were advised
that the reservation was "still okay as scheduled."
2. PNR No. HTFMG

Agent: Sampaguita Travel Corp.
On the day of their scheduled departure from Adelaide, Wilfredo and his family
arrived at the airport on time. When the airport check-in counter opened, Wilfredo
was informed by a staff from Cathay Pacific that the Reyeses did not have confirmed
reservations, and only Sixtas flight booking was confirmed. Nevertheless, they were
allowed to board the flight to HongKong due to adamant pleas from Wilfredo. When
they arrived in HongKong, they were again informed of the same problem.
Unfortunately this time, the Reyeses were not allowed to board because the flight to
Manila was fully booked. Only Sixta was allowed to proceed to Manila from
HongKong. On the following day, the Reyeses were finally allowed to board the next
flight bound for Manila.
Party: Mrs. Sixta Lapuz

Itinerary: CX902/CX105 MNL/HKG/ADL 12 APR, CX104/CX907 ADL/HKG/MNL 04/05
MAY.
The above itinerary is the actual itinerary that the passenger has flown. However, for
the return sector, HKG/MNL, the original booking was on CX905 of 04 May. This
original booking was confirmed on 21 Mar. and ticketed on 11 Apr.
This booking was cancelled on 04 May at 9:03 p.m. when CX905 was almost
scheduled to leave at the behest of the passenger and she was re-booked on CX907
of 05 May at the same time.
Upon arriving in the Philippines, Wilfredo went to Sampaguita Travel to report the
incident. He was informed by Sampaguita Travel that it was actually Cathay Pacific
which cancelled their bookings.
3. PNR No. J9R6E
On 16 June 1997, respondents as passengers, through counsel, sent a letter to

Cathay Pacific advising the latter of the incident and demanding payment of
damages.
Agent: Rajah Travel Corp.
After a series of exchanges and with no resolution in sight, respondents filed a

Complaint for damages against Cathay Pacific and Sampaguita Travel and prayed for
the following relief: a) P1,000,000.00 as moral damages; b)P300,000.00 as actual
damages; c) P100,000.00 as exemplary damages; and d) P100,000.00 as attorneys
fees.5
Mr. Michael Roy Reyes, Mr. Wilfredo Reyes.
Party: Mrs. Julieta Gaspar, Mrs. Sixta Lapuz, Mrs. Juanita Reyes,
Itinerary: CX900 & CX902 MNL/HKG 12 APR, CX105 HKG/ADL 12 APR, CX104/CX905
ADL/HKG/MNL 04 MAY & 07 MAY
The party was confirmed initially on CX900/12 Apr, CX105/12 Apr, CX104/CX9095 07
May and on waiting list for CX902/12 Apr, CX104/CX905 04 May.
In its Answer, Cathay Pacific alleged that based on its computerized booking system,
several and confusing bookings were purportedly made under the names of
respondents through two (2) travel agencies, namely: Sampaguita Travel and Rajah
Travel Corporation. Cathay Pacific explained that only the following Passenger Name
Records (PNRs) appeared on its system: PNR No. H9V15, PNR No. HTFMG, PNR No.
J9R6E, PNR No. J76TH, and PNR No. H9VSE. Cathay Pacific went on to detail each and
every booking, to wit:
However, on 31 Mar., the booking was cancelled by the agent.

4. PNR No. J76TH
Party: Mr. W Reyes
1. PNR No. H9V15
Itinerary: CX104/CX905 ADL/HKG/MNL 04 MAY.
The booking on the above itinerary was confirmed initially. When the agent was
asked for the ticket number as the flight CX905 04 May was very critical, the agent
has inputted the ticket number on 10 Apr. but has removed the record on 11 April.
Since the booking was reflected as not ticketed, the booking was cancelled on 18
Apr. accordingly.
Party: Ms. J Reyes, Mr. M R Reyes, Mr. W Reyes

Itinerary: CX902/CX105 MNL/HKG/ADL 12 APR.
The itinerary listed above was confirmed booking. However, the itinerary did not
include booking for the return flights. From information retrieved from ABACUS (the
booking system used by agents), the agent has, on 10 April, added segments
This PNR was split from another PNR record, H9VSE.
76
obligations
5. PNR No. H9VSE
During the pre-trial, the parties agreed on the following stipulation of facts:
1. That the plaintiffs did not deal directly with Cathay Pacific Airways;
Party: Ms. R Lapuz, Mr. R Lapuz, Mr. A Samson, originally Mr. W Reyes was included in
this party as well
2. That the plaintiffs did not make their bookings directly with Cathay Pacific Airways;
3. That the plaintiffs did not purchase and did not get their tickets from Cathay
Pacific Airways;
Itinerary: CX104/CX905 ADL/HKG/MNL 04 MAY.

The booking was confirmed initially but were not ticketed by 11 Apr. and was
cancelled accordingly. However, the PNR of Mr. W Reyes who was originally included
in this party was split to a separate record of J76TH.6
4. That Cathay Pacific Airways has promptly replied to all communications sent by
the plaintiffs through their counsel;
5. That the plane tickets issued to plaintiffs were valid, which is why they were able
to depart from Manila to Adelaide, Australia and that the reason why they were not
able to board their return flight from Adelaide was because of the alleged
cancellation of their booking by Cathay Pacific Airways at Adelaide, save for that of
Sixta Lapuz whose booking was confirmed by Cathay Pacific Airways;
Cathay Pacific asserted that in the case of Wilfredo with PNR No. J76TH, no valid
ticket number was inputted within a prescribed period which means that no ticket
was sold. Thus, Cathay Pacific had the right to cancel the booking. Cathay Pacific
found that Sampaguita Travel initially inputted a ticket number for PNR No. J76TH and
had it cancelled the following day, while the PNR Nos. HDWC3 and HTFMG of Juanita
and Michael do not exist.
6. That several reservations and bookings for the plaintiffs were done by defendant
Sampaguita Travel Corporation through the computer reservation system and each of
such request was issued a PNR;
The Answer also contained a cross-claim against Sampaguita Travel and blamed the
same for the cancellation of respondents return flights. Cathay Pacific likewise
counterclaimed for payment of attorneys fees.
7. That, as a travel agent, defendant Sampaguita Travel Corporation merely acts as a

booking/sales/ticketing arm for airline companies and it has nothing to do with the
airline operations;
On the other hand, Sampaguita Travel, in its Answer, denied Cathay Pacifics claim
that it was the cause of the cancellation of the bookings. Sampaguita Travel
maintained that it made the necessary reservation with Cathay Pacific for
respondents trip to Adelaide. After getting confirmed bookings with Cathay Pacific,
Sampaguita Travel issued the corresponding tickets to respondents. Their confirmed
bookings were covered with the following PNRs:
PASSENGER NAME
PNR No.
Lapuz, Sixta
H9V15/ J76TH
Reyes, Wilfredo
H9V15/HDWC3
Reyes, Michael Roy
H9V15/H9VZF
Reyes, Juanita
HTFMG7
8. That in the travel industry, the practice of reconfirmation of return flights by

passengers is coursed or done directly with the airline company and not with the
travel agent, which has no participation, control or authority in making such
reconfirmations.
9. That in the travel industry, the practice of cancellation of flights is within the
control of the airline and not of the travel agent, unless the travel agent is requested
by the passengers to make such cancellations; and,
10. That defendant Cathay Pacific Airways has advertised that "there is no need to
confirm your flight when travelling with us", although Cathay Pacific Airways qualifies
the same to the effect that in some cases there is a need for reconfirmations. 8
After trial on the merits, the Regional Trial Court (RTC) rendered a Decision, 9 the
dispositive part of which reads:
WHEREFORE, premises considered, judgment is hereby rendered in favor of the
defendants and against the herein plaintiff. Accordingly, plaintiffs complaint is
hereby ordered DISMISSED for lack of merit. Defendants counterclaims and crossclaims are similarly ordered dismissed for lack of merit. No pronouncement as to
cost.10
Sampaguita Travel explained that the Reyeses had two (2) PNRs each because
confirmation from Cathay Pacific was made one flight segment at a time. Sampaguita
Travel asserted that it only issued the tickets after Cathay Pacific confirmed the
bookings. Furthermore, Sampaguita Travel exonerated itself from liability for
damages because respondents were claiming for damages arising from a breach of
contract of carriage. Sampaguita Travel likewise filed a cross-claim against Cathay
Pacific and a counterclaim for damages.
The trial court found that respondents were in possession of valid tickets but did not
have confirmed reservations for their return trip to Manila. Additionally, the trial court
observed that the several PNRs opened by Sampaguita Travel created confusion in
the bookings. The trial court however did not find any basis to establish liability on
77
obligations
the part of either Cathay Pacific or Sampaguita Travel considering that the
cancellation was not without any justified reason. Finally, the trial court denied the
claims for damages for being unsubstantiated.
Cathay Pacific adds, it exhibited good faith in accommodating the respondents

despite holding unconfirmed bookings.
Cathay Pacific also scores the Court of Appeals in basing the award of nominal
damages on the alleged asthmatic condition of passenger Michael and old age of
Sixta. Cathay Pacific points out that the records, including the testimonies of the
witnesses, did not make any mention of Michaels asthma. And Sixta was in fact
holding a confirmed booking but she refused to take her confirmed seat and instead
stayed in HongKong with the other respondents.
Respondents appealed to the Court of Appeals. On 22 October 2008, the Court of

Appeals ordered Cathay Pacific to pay P25,000.00 each to respondents as nominal
damages.
Upon denial of their motion for reconsideration, Cathay Pacific filed the instant
petition for review assigning the following as errors committed by the Court of
Appeals:
Cathay Pacific blames Sampaguita Travel for negligence in not ensuring that
respondents had confirmed bookings for their return trips.
A.
Lastly, assuming arguendo that the award of nominal damages is proper, Cathay
Pacific contends that the amount should be reduced to P5,000.00 for each passenger.
WHETHER OR NOT THE COURT OF APPEALS COMMITTED A CLEAR AND REVERSIBLE

ERROR IN HOLDING THAT CATHAY PACIFIC AIRWAYS IS LIABLE FOR NOMINAL
DAMAGES FOR ITS ALLEGED INITIAL BREACH OF CONTRACT WITH THE PASSENGERS
EVEN THOUGH CATHAY PACIFIC AIRWAYS WAS ABLE TO PROVE BEYOND REASONABLE
DOUBT THAT IT WAS NOT AT FAULT FOR THE PREDICAMENT OF THE RESPONDENT
PASSENGERS.
At the outset, it bears pointing out that respondent Sixta had no cause of action
against Cathay Pacific or Sampaguita Travel. The elements of a cause of action
consist of: (1) a right existing in favor of the plaintiff, (2) a duty on the part of the
defendant to respect the plaintiffs right, and (3) an act or omission of the defendant
in violation of such right. 12 As culled from the records, there has been no violation of
any right or breach of any duty on the part of Cathay Pacific and Sampaguita Travel.
As a holder of a valid booking, Sixta had the right to expect that she would fly on the
flight and on the date specified on her airplane ticket. Cathay Pacific met her
expectations and Sixta was indeed able to complete her flight without any trouble.
The absence of any violation to Sixtas right as passenger effectively deprived her of
any relief against either Cathay Pacific or Sampaguita Travel.
B.
ERROR IN RELYING ON MATTERS NOT PROVED DURING THE TRIAL AND NOT
SUPPORTED BY THE EVIDENCE AS BASIS FOR HOLDING CATHAY PACIFIC AIRWAYS
LIABLE FOR NOMINAL DAMAGES.
C.
With respect to the three remaining respondents, we rule as follows:

ERROR IN HOLDING CATHAY PACIFIC AIRWAYS LIABLE FOR NOMINAL DAMAGES TO
RESPONDENT SIXTA LAPUZ.
The determination of whether or not the award of damages is correct depends on the
nature of the respondents contractual relations with Cathay Pacific and Sampaguita
Travel. It is beyond dispute that respondents were holders of Cathay Pacific airplane
tickets and they made the booking through Sampaguita Travel.
D.
Respondents cause of action against Cathay Pacific stemmed from a breach of

contract of carriage. A contract of carriage is defined as one whereby a certain
person or association of persons obligate themselves to transport persons, things, or
news from one place to another for a fixed price. 13 Under Article 1732 of the Civil
Code, this "persons, corporations, firms, or associations engaged in the business of
carrying or transporting passengers or goods or both, by land, water, or air, for
compensation, offering their services to the public" is called a common carrier.

ERROR IN NOT HOLDING SAMPAGUITA TRAVEL CORP. LIABLE TO CATHAY PACIFIC
AIRWAYS FOR WHATEVER DAMAGES THAT THE AIRLINE COMPANY WOULD BE
ADJUDGED THE RESPONDENT PASSENGERS.
E.
ALTERNATIVELY, WHETHER OR NOT THE COURT OF APPEALS COMMITTED A CLEAR
AND REVERSIBLE ERROR WHEN IT FAILED TO APPLY THE DOCTRINE OF STARE
DECISIS IN FIXING THE AMOUNT OF NOMINAL DAMAGES TO BE AWARDED.11
Respondents entered into a contract of carriage with Cathay Pacific. As far as

respondents are concerned, they were holding valid and confirmed airplane tickets.
The ticket in itself is a valid written contract of carriage whereby for a consideration,
Cathay Pacific undertook to carry respondents in its airplane for a round-trip flight
from Manila to Adelaide, Australia and then back to Manila. In fact, Wilfredo called
the Cathay Pacific office in Adelaide one week before his return flight to re-confirm
his booking. He was even assured by a staff of Cathay Pacific that he does not need
to reconfirm his booking.
Cathay Pacific assails the award of nominal damages in favor of respondents on the
ground that its action of cancelling the flight bookings was justifiable. Cathay Pacific
reveals that upon investigation, the respondents had no confirmed bookings for their
return flights. Hence, it was not obligated to transport the respondents. In fact,
78
obligations
In its defense, Cathay Pacific posits that Wilfredos booking was cancelled because a
ticket number was not inputted by Sampaguita Travel, while bookings of Juanita and
Michael were not honored for being fictitious. Cathay Pacific clearly blames
Sampaguita Travel for not finalizing the bookings for the respondents return flights.
Respondents are not privy to whatever misunderstanding and confusion that may
have transpired in their bookings. On its face, the airplane ticket is a valid written
contract of carriage. This Court has held that when an airline issues a ticket to a
passenger confirmed on a particular flight, on a certain date, a contract of carriage
arises, and the passenger has every right to expect that he would fly on that flight
and on that date. If he does not, then the carrier opens itself to a suit for breach of
contract of carriage.14
reasonable care and caution which an ordinarily prudent person would have used in
the same situation? If not, then he is guilty of negligence. 16
There was indeed failure on the part of Sampaguita Travel to exercise due diligence
in performing its obligations under the contract of services. It was established by
Cathay Pacific, through the generation of the PNRs, that Sampaguita Travel failed to
input the correct ticket number for Wilfredos ticket. Cathay Pacific even asserted
that Sampaguita Travel made two fictitious bookings for Juanita and Michael.
The negligence of Sampaguita Travel renders it also liable for damages.
For one to be entitled to actual damages, it is necessary to prove the actual amount
of loss with a reasonable degree of certainty, premised upon competent proof and
the best evidence obtainable by the injured party. To justify an award of actual
damages, there must be competent proof of the actual amount of loss. Credence can
be given only to claims which are duly supported by receipts.17
As further elucidated by the Court of Appeals:

Now, Article 1370 of the Civil Code mandates that "if the terms of a contract are
clear and leave no doubt upon the intention of the contracting parties, the literal
meaning of its stipulations shall control." Under Section 9, Rule 130 of the Rules of
Court, once the terms of an agreement have been reduced to writing, it is deemed to
contain all the terms agreed upon by the parties and no evidence of such terms
other than the contents of the written agreement shall be admissible. The terms of
the agreement of appellants and appellee Cathay Pacific embodied in the tickets
issued by the latter to the former are plain appellee Cathay Pacific will transport
appellants to Adelaide, Australia from Manila via Hongkong on 12 April 1991 and
back to Manila from Adelaide, Australia also via Hongkong on 4 May 1997. In
addition, the tickets reveal that all appellants have confirmed bookings for their flight
to Adelaide, Australia and back to Manila as manifested by the words "Ok" indicated
therein. Arlene Ansay, appellee Cathay Pacifics Reservation Supervisor, validated
this fact in her testimony saying that the return flights of all appellants to the
Philippines on 4 May 1997 were confirmed as appearing on the tickets. Indubitably,
when appellee Cathay Pacific initially refused to transport appellants to the
Philippines on 4 May 1997 due to the latters lack of reservation, it has, in effect,
breached their contract of carriage. Appellants, however, were eventually
accommodated and transported by appellee Cathay Pacific to Manila.15
We echo the findings of the trial court that respondents failed to show proof of actual
damages. Wilfredo initially testified that he personally incurred losses amounting
to P300,000.00 which represents the amount of the contract that he was supposedly
scheduled to sign had his return trip not been cancelled. During the crossexamination however, it appears that the supposed contract-signing was a mere
formality and that an agreement had already been hatched beforehand. Hence, we
cannot fathom how said contract did not materialize because of Wilfredos absence,
and how Wilfredo incurred such losses when he himself admitted that he entered into
said contract on behalf of Parsons Engineering Consulting Firm, where he worked as
construction manager. Thus, if indeed there were losses, these were losses suffered
by the company and not by Wilfredo. Moreover, he did not present any documentary
evidence, such as the actual contract or affidavits from any of the parties to said
contract, to substantiate his claim of losses. With respect to the remaining
passengers, they likewise failed to present proof of the actual losses they suffered.
Under Article 2220 of the Civil Code of the Philippines, an award of moral damages,
in breaches of contract, is in order upon a showing that the defendant acted
fraudulently or in bad faith.18 What the law considers as bad faith which may furnish
the ground for an award of moral damages would be bad faith in securing the
contract and in the execution thereof, as well as in the enforcement of its terms, or
any other kind of deceit. In the same vein, to warrant the award of exemplary
damages, defendant must have acted in wanton, fraudulent, reckless, oppressive, or
malevolent manner.19
Cathay Pacific breached its contract of carriage with respondents when it disallowed
them to board the plane in Hong Kong going to Manila on the date reflected on their
tickets. Thus, Cathay Pacific opened itself to claims for compensatory, actual, moral
and exemplary damages, attorneys fees and costs of suit.
In contrast, the contractual relation between Sampaguita Travel and respondents is a
contract for services. The object of the contract is arranging and facilitating the
latters booking and ticketing. It was even Sampaguita Travel which issued the
tickets.
In the instant case, it was proven by Cathay Pacific that first, it extended all possible
accommodations to respondents.1wphi1 They were promptly informed of the
problem in their bookings while they were still at the Adelaide airport. Despite the
non-confirmation of their bookings, respondents were still allowed to board the
Adelaide to Hong Kong flight. Upon arriving in Hong Kong, they were again informed
that they could not be accommodated on the next flight because it was already fully
booked. They were however allowed to board the next available flight on the
following day. Second, upon receiving the complaint letter of respondents, Cathay
Pacific immediately addressed the complaint and gave an explanation on the
cancellation of their flight bookings.
Since the contract between the parties is an ordinary one for services, the standard
of care required of respondent is that of a good father of a family under Article 1173
of the Civil Code. This connotes reasonable care consistent with that which an
ordinarily prudent person would have observed when confronted with a similar
situation. The test to determine whether negligence attended the performance of an
obligation is: did the defendant in doing the alleged negligent act use that
79
obligations
The Court of Appeals is correct in stating that "what may be attributed to x x x

Cathay Pacific is negligence concerning the lapses in their process of confirming
passenger bookings and reservations, done through travel agencies. But this
negligence is not so gross so as to amount to bad faith." 20 Cathay Pacific was not
motivated by malice or bad faith in not allowing respondents to board on their return
flight to Manila. It is evident and was in fact proven by Cathay Pacific that its refusal
to honor the return flight bookings of respondents was due to the cancellation of one
booking and the two other bookings were not reflected on its computerized booking
system.
Based on the foregoing, Cathay Pacific and Sampaguita Travel are jointly and
solidarily liable for nominal damages awarded to respondents Wilfredo, Juanita and
Michael Roy.
Likewise, Sampaguita Travel cannot be held liable for moral damages. True,
Sampaguita Travel was negligent in the conduct of its booking and ticketing which
resulted in the cancellation of flights. But its actions were not proven to have been
tainted with malice or bad faith. Under these circumstances, respondents are not
entitled to moral and exemplary damages.1wphi1 With respect to attorneys fees,
we uphold the appellate courts finding on lack of factual and legal justification to
award attorneys fees.
Lapuz is DISMISSED for lack of cause of action.
WHEREFORE, the Petition is DENIED. The 22 October 2008 Decision of the Court of
Appeals is AFFIRMED with MODIFICATION that Sampaguita Travel is held to be
solidarily liable with Cathay Pacific in the payment of nominal damages of
~25,000.00 each for Wilfredo Reyes, Juanita Reyes, and Michael Rox Reyes. The
complaint of respondent Sixta
SO ORDERED.
G.R. No. 181163
ASIAN
vs.
PHILAM INSURANCE
Inc.), Respondent.
We however sustain the award of nominal damages in the amount of P25,000.00 to

only three of the four respondents who were aggrieved by the last-minute
cancellation of their flights. Nominal damages are recoverable where a legal right is
technically violated and must be vindicated against an invasion that has produced no
actual present loss of any kind or where there has been a breach of contract and no
substantial injury or actual damages whatsoever have been or can be shown. 21 Under
Article 2221 of the Civil Code, nominal damages may be awarded to a plaintiff whose
right has been violated or invaded by the defendant, for the purpose of vindicating or
recognizing that right, not for indemnifying the plaintiff for any loss suffered.
July 24, 2013

TERMINALS,
CO.,
INC.
(now
INC., Petitioner,
Chartis
Philippines
Insurance,
PHILAM INSURANCE CO., INC. (now Chartis

Inc.), Petitioner,
vs.
WESTWIND
SHIPPING
CORPORATION
and
INC., Respondents.
Philippines
Insurance,
x-----------------------x
G.R. No. 181262
Considering that the three respondents were denied boarding their return flight from
HongKong to Manila and that they had to wait in the airport overnight for their return
flight, they are deemed to have technically suffered injury. Nonetheless, they failed
to present proof of actual damages. Consequently, they should be compensated in
the form of nominal damages.
ASIAN
TERMINALS,
x-----------------------x
G.R. No. 181319
WESTWIND
SHIPPING
CORPORATION, Petitioner,
vs.
PHILAM INSURANCE CO., INC. (now Chartis Philippines Insurance, Inc.) and
ASIAN TERMINALS, INC.,Respondents.
The amount to be awarded as nominal damages shall be equal or at least

commensurate to the injury sustained by respondents considering the concept and
purpose of such damages. The amount of nominal damages to be awarded may also
depend on certain special reasons extant in the case.22
DECISION
The amount of such damages is addressed to the sound discretion of the court and
taking into account the relevant circumstances, 23 such as the failure of some
respondents to board the flight on schedule and the slight breach in the legal
obligations of the airline company to comply with the terms of the contract, i.e., the
airplane ticket and of the travel agency to make the correct bookings. We find the
award of P25,000.00 to the Reyeses correct and proper.
VILLARAMA, JR., J.:

Before us are three consolidated petitions for review on certiorari assailing the
Decision1 dated October 15, 2007 and the Resolution 2 dated January 11, 2008 of the
Court of Appeals (CA) which affirmed with modification the Decision 3 of the Regional
Trial Court (RTC) of Makati City, Branch 148, in Civil Case No. 96-062. The RTC had
ordered Westwind Shipping Corporation (Westwind) and Asian Terminals, Inc. (ATI) to
pay, jointly and severally, Philam Insurance Co., Inc. (Philam) the sum
of P633,957.15, with interest at 12% per annum from the date of judicial demand
and P158,989.28 as attorneys fees.
Cathay Pacific and Sampaguita Travel acted together in creating the confusion in the
bookings which led to the erroneous cancellation of respondents bookings. Their
negligence is the proximate cause of the technical injury sustained by respondents.
Therefore, they have become joint tortfeasors, whose responsibility for quasi-delict,
under Article 2194 of the Civil Code, is solidary.
80
obligations
The facts of the case follow:
The trial court observed that while the staff of ATI undertook the physical unloading
of the cargoes from the carrying vessel, Westwinds duty officer exercised full
supervision and control throughout the process. It held Westwind vicariously liable for
failing to prove that it exercised extraordinary diligence in the supervision of the ATI
stevedores who unloaded the cargoes from the vessel. However, the court absolved
R.F. Revilla Customs Brokerage, Inc. from liability in light of its finding that the
cargoes had been damaged before delivery to the consignee.
On April 15, 1995, Nichimen Corporation shipped to Universal Motors Corporation

(Universal Motors) 219 packages containing 120 units of brand new Nissan Pickup
Truck Double Cab 4x2 model, without engine, tires and batteries, on board the vessel
S/S "Calayan Iris" from Japan to Manila. The shipment, which had a declared value of
US$81,368 or P29,400,000, was insured with Philam against all risks under Marine
Policy No. 708-8006717-4.4
The trial court acknowledged the subrogation between Philam and Universal Motors
on the strength of the Subrogation Receipt dated November 15, 1995. It likewise
upheld Philams claim for the value of the alleged damaged vehicle parts contained
in Case Nos. 03-245-42K/1 and 03-245-51K or specifically for "7 pieces of Frame Axle
Sub Without Lower and Frame Assembly with Bush."14
The carrying vessel arrived at the port of Manila on April 20, 1995, and when the
shipment was unloaded by the staff of ATI, it was found that the package marked as
03-245-42K/1 was in bad order.5 The Turn Over Survey of Bad Order Cargoes 6 dated
April 21, 1995 identified two packages, labeled 03-245-42K/1 and 03/237/7CK/2, as
being dented and broken. Thereafter, the cargoes were stored for temporary
safekeeping inside CFS Warehouse in Pier No. 5.
Westwind filed a Motion for Reconsideration 15 which was, however, denied in an

Order16 dated October 26, 2000.
On May 11, 1995, the shipment was withdrawn by R.F. Revilla Customs Brokerage,
Inc., the authorized broker of Universal Motors, and delivered to the latters
warehouse in Mandaluyong City. Upon the request7 of Universal Motors, a bad order
survey was conducted on the cargoes and it was found that one Frame Axle Sub
without LWR was deeply dented on the buffle plate while six Frame Assembly with
Bush were deformed and misaligned.8 Owing to the extent of the damage to said
cargoes, Universal Motors declared them a total loss.
On appeal, the CA affirmed with modification the ruling of the RTC. In a Decision
dated October 15, 2007, the appellate court directed Westwind and ATI to pay
Philam, jointly and severally, the amount of P190,684.48 with interest at the rate of
12% per annum until fully paid, attorneys fees of P47,671 and litigation expenses.
The CA stressed that Philam may not modify its allegations by claiming in its
Appellees Brief17 that the six pieces of Frame Assembly with Bush, which were
purportedly damaged, were also inside Case No. 03-245-42K/1. The CA noted that in
its Complaint, Philam alleged that "one (1) pc. FRAME AXLE SUB W/O LWR from Case
No. 03-245-42K/1 was completely deformed and misaligned, and six (6) other pcs. of
FRAME ASSEMBLY WITH BUSH from Case No. 03-245-51K were likewise completely
deformed and misaligned."18
On August 4, 1995, Universal Motors filed a formal claim for damages in the amount
of P643,963.84 against Westwind,9 ATI10 and R.F. Revilla Customs Brokerage,
Inc.11 When Universal Motors demands remained unheeded, it sought reparation
from and was compensated in the sum of P633,957.15 by Philam. Accordingly,
Universal Motors issued a Subrogation Receipt 12 dated November 15, 1995 in favor of
Philam.
The appellate court accordingly affirmed Westwind and ATIs joint and solidary
liability for the damage to only one (1) unit of Frame Axle Sub without Lower inside
Case No. 03-245-42K/1. It also noted that when said cargo sustained damage, it was
not yet in the custody of the consignee or the person who had the right to receive it.
The CA pointed out that Westwinds duty to observe extraordinary diligence in the
care of the cargoes subsisted during unloading thereof by ATIs personnel since the
former exercised full control and supervision over the discharging operation.
On January 18, 1996, Philam, as subrogee of Universal Motors, filed a Complaint 13 for
damages against Westwind, ATI and R.F. Revilla Customs Brokerage, Inc. before the
RTC of Makati City, Branch 148.
On September 24, 1999, the RTC rendered judgment in favor of Philam and ordered
Westwind and ATI to pay Philam, jointly and severally, the sum of P633,957.15 with
interest at the rate of 12% per annum, P158,989.28 by way of attorneys fees and
expenses of litigation.
Similarly, the appellate court held ATI liable for the negligence of its employees who
carried out the offloading of cargoes from the ship to the pier. As regards the extent
of ATIs liability, the CA ruled that ATI cannot limit its liability to P5,000 per damaged
package. It explained that Section 7.01 19 of the Contract for Cargo Handling
Services20does not apply in this case since ATI was not yet in custody and control of
the cargoes when the Frame Axle Sub without Lower suffered damage.
The court a quo ruled that there was sufficient evidence to establish the respective
participation of Westwind and ATI in the discharge of and consequent damage to the
shipment. It found that the subject cargoes were compressed while being hoisted
using a cable that was too short and taut.
Citing Belgian Overseas Chartering and Shipping N.V. v. Philippine First Insurance Co.,
Inc.,21 the appellate court also held that Philams action for damages had not
prescribed notwithstanding the absence of a notice of claim.
All the parties moved for reconsideration, but their motions were denied in a
Resolution dated January 11, 2008. Thus, they each filed a petition for review on
81
obligations
certiorari which were consolidated together by this Court considering that all three
petitions assail the same CA decision and resolution and involve the same parties.
Petitioner Westwind denies joint liability with ATI for the value of the deformed Frame
Axle Sub without Lower in Case No. 03-245-42K/1. Westwind argues that the
evidence shows that ATI was already in actual custody of said case when the Frame
Axle Sub without Lower inside it was misaligned from being compressed by the tight
cable used to unload it. Accordingly, Westwind ceased to have responsibility over the
cargoes as provided in paragraph 4 of the Bill of Lading which provides that the
responsibility of the carrier shall cease when the goods are taken into the custody of
the arrastre.
Essentially, the issues posed by petitioner ATI in G.R. No. 181163, petitioner Philam
in G.R. No. 181262 and petitioner Westwind in G.R. No. 181319 can be summed up
into and resolved by addressing three questions: (1) Has Philams action for damages
prescribed? (2) Who between Westwind and ATI should be held liable for the
damaged cargoes? and (3) What is the extent of their liability?
Westwind contends that sole liability for the damage rests on ATI since it was the
latters stevedores who operated the ships gear to unload the cargoes. Westwind
reasons that ATI is an independent company, over whose employees and operations
it does not exercise control. Moreover, it was ATIs employees who selected and used
the wrong cable to lift the box containing the cargo which was damaged.
G.R. No. 181163

Petitioner ATI disowns liability for the damage to the Frame Axle Sub without Lower
inside Case No. 03-245-42K/1. It shifts the blame to Westwind, whom it charges with
negligence in the supervision of the stevedores who unloaded the cargoes. ATI
admits that the damage could have been averted had Westwind observed
extraordinary diligence in handling the goods. Even so, ATI suspects that Case No.
03-245-42K/1 is "weak and defective" 22 considering that it alone sustained damage
out of the 219 packages.
Westwind likewise believes that ATI is bound by its acceptance of the goods in good
order despite a finding that Case No. 03-245-42K/1 was partly torn and crumpled on
one side. Westwind also notes that the discovery that a piece of Frame Axle Sub
without Lower was completely deformed and misaligned came only on May 12, 1995
or 22 days after the cargoes were turned over to ATI and after the same had been
hauled by R.F. Revilla Customs Brokerage, Inc.
Notwithstanding, petitioner ATI submits that, at most, it can be held liable to pay
only P5,000 per package pursuant to its Contract for Cargo Handling Services. ATI
maintains that it was not properly notified of the actual value of the cargoes prior to
their discharge from the vessel.
Westwind further argues that the CA erred in holding it liable considering that
Philams cause of action has prescribed since the latter filed a formal claim with it
only on August 17, 1995 or four months after the cargoes arrived on April 20, 1995.
Westwind stresses that according to the provisions of clause 20, paragraph 2 24 of the
Bill of Lading as well as Article 36625 of the Code of Commerce, the consignee had
until April 20, 1995 within which to make a claim considering the readily apparent
nature of the damage, or until April 27, 1995 at the latest, if it is assumed that the
damage is not readily apparent.
G.R. No. 181262

Petitioner Philam supports the CA in holding both Westwind and ATI liable for the
deformed and misaligned Frame Axle Sub without Lower inside Case No. 03-24542K/1. It, however, faults the appellate court for disallowing its claim for the value of
six Chassis Frame Assembly which were likewise supposedly inside Case Nos. 03245-51K and 03-245-42K/1. As to the latter container, Philam anchors its claim on
the results of the Inspection/Survey Report 23 of Chartered Adjusters, Inc., which the
court received without objection from Westwind and ATI. Petitioner believes that with
the offer and consequent admission of evidence to the effect that Case No. 03-24542K/1 contains six pieces of dented Chassis Frame Assembly, Philams claim thereon
should be treated, in all respects, as if it has been raised in the pleadings. Thus,
Philam insists on the reinstatement of the trial courts award in its favor for the
payment of P633,957.15 plus legal interest, P158,989.28 as attorneys fees and
costs.
Lastly, petitioner Westwind contests the imposition of 12% interest on the award of
damages to Philam reckoned from the time of extrajudicial demand. Westwind
asserts that, at most, it can only be charged with 6% interest since the damages
claimed by Philam does not constitute a loan or forbearance of money.
The Courts Ruling
The three consolidated petitions before us call for a determination of who between
ATI and Westwind is liable for the damage suffered by the subject cargo and to what
extent. However, the resolution of the issues raised by the present petitions is
predicated on the appreciation of factual issues which is beyond the scope of a
petition for review on certiorari under Rule 45 of the 1997 Rules of Civil Procedure, as
amended. It is settled that in petitions for review on certiorari, only questions of law
may be put in issue. Questions of fact cannot be entertained.26
G.R. No. 181319
There is a question of law if the issue raised is capable of being resolved without
need of reviewing the probative value of the evidence. The resolution of the issue
must rest solely on what the law provides on the given set of circumstances. Once it
is clear that the issue invites a review of the evidence presented, the question posed
is one of fact. If the query requires a re-evaluation of the credibility of witnesses, or
82
obligations
the existence or relevance of surrounding circumstances and their relation to each

other, the issue in that query is factual.27
issued only on April 27, 1995 or 12 days after the shipment was loaded on and
transported via S/S "Calayan Iris."
In the present petitions, the resolution of the question as to who between Westwind
and ATI should be liable for the damages to the cargo and to what extent would have
this Court pass upon the evidence on record. But while it is not our duty to review,
examine and evaluate or weigh all over again the probative value of the evidence
presented,28the Court may nonetheless resolve questions of fact when the case falls
under any of the following exceptions:
The nature of documents as either public or private determines how the documents
may be presented as evidence in court. Public documents, as enumerated under
Section 19,33 Rule 132 of the Rules of Court, are self-authenticating and require no
further authentication in order to be presented as evidence in court. 34
In contrast, a private document is any other writing, deed or instrument executed by
a private person without the intervention of a notary or other person legally
authorized by which some disposition or agreement is proved or set forth. Lacking
the official or sovereign character of a public document, or the solemnities
prescribed by law, a private document requires authentication 35 in the manner
prescribed under Section 20, Rule 132 of the Rules:
(1) when the findings are grounded entirely on speculation, surmises, or conjectures;
(2) when the inference made is manifestly mistaken, absurd, or impossible; (3) when
there is grave abuse of discretion; (4) when the judgment is based on a
misapprehension of facts; (5) when the findings of fact are conflicting; (6) when in
making its findings the Court of Appeals went beyond the issues of the case, or its
findings are contrary to the admissions of both the appellant and the appellee; (7)
when the findings are contrary to those of the trial court; (8) when the findings are
conclusions without citation of specific evidence on which they are based; (9) when
the facts set forth in the petition as well as in the petitioners main and reply briefs
are not disputed by the respondent; and (10) when the findings of fact are premised
on the supposed absence of evidence and contradicted by the evidence on record. 29
SEC. 20. Proof of private document. Before any private document offered as
authentic is received in evidence, its due execution and authenticity must be proved
either:
(a) By anyone who saw the document executed or written; or
(b) By evidence of the genuineness of the signature or handwriting of the maker.
In the cases at bar, the fifth and seventh exceptions apply. While the CA affirmed the
joint liability of ATI and Westwind, it held them liable only for the value of one unit of
Frame Axle Sub without Lower inside Case No. 03-245-42K/1. The appellate court
disallowed the award of damages for the six pieces of Frame Assembly with Bush,
which petitioner Philam alleged, for the first time in its Appellees Brief, to be likewise
inside Case No. 03-245-42K/1. Lastly, the CA reduced the award of attorneys fees
to P47,671.
Any other private document need only be identified as that which it is claimed to be.
The requirement of authentication of a private document is excused only in four
instances, specifically: (a) when the document is an ancient one within the context of
Section 21,36 Rule 132 of the Rules; (b) when the genuineness and authenticity of the
actionable document have not been specifically denied under oath by the adverse
party; (c) when the genuineness and authenticity of the document have been
admitted; or (d) when the document is not being offered as genuine.37
Foremost, the Court holds that petitioner Philam has adequately established the
basis of its claim against petitioners ATI and Westwind. Philam, as insurer, was
subrogated to the rights of the consignee, Universal Motors Corporation, pursuant to
the Subrogation Receipt executed by the latter in favor of the former. The right of
subrogation accrues simply upon payment by the insurance company of the
insurance claim.30 Petitioner Philams action finds support in Article 2207 of the Civil
Code, which provides as follows:
Indubitably, Marine Certificate No. 708-8006717-4 and the Subrogation Receipt are
private documents which Philam and the consignee, respectively, issue in the pursuit
of their business. Since none of the exceptions to the requirement of authentication
of a private document obtains in these cases, said documents may not be admitted
in evidence for Philam without being properly authenticated.
Contrary to the contention of petitioners ATI and Westwind, however, Philam
presented its claims officer, Ricardo Ongchangco, Jr. to testify on the execution of the
Subrogation Receipt, as follows:
Art. 2207. If the plaintiffs property has been insured, and he has received indemnity
from the insurance company for the injury or loss arising out of the wrong or breach
of contract complained of, the insurance company shall be subrogated to the rights
of the insured against the wrongdoer or the person who has violated the contract. x x
x.
ATTY. PALACIOS
Q How were you able to get hold of this subrogation receipt?
In their respective comments 31 to Philams Formal Offer of Evidence,32 petitioners ATI

and Westwind objected to the admission of Marine Certificate No. 708-8006717-4
and the Subrogation Receipt as documentary exhibits "B" and "P," respectively.
Petitioner Westwind objects to the admission of both documents for being hearsay as
they were not authenticated by the persons who executed them. For the same
reason, petitioner ATI assails the admissibility of the Subrogation Receipt. As regards
Marine Certificate No. 708-8006717-4, ATI makes issue of the fact that the same was
A Because I personally delivered the claim check to consignee and have them
receive the said check.
Q I see. Therefore, what you are saying is that you personally delivered the claim
check of Universal Motors Corporation to that company and you have the
subrogation receipt signed by them personally?
83
obligations
A Yes, sir.
We have held that payment by the insurer to the insured operates as an equitable
assignment to the insurer of all the remedies that the insured may have against the
third party whose negligence or wrongful act caused the loss. The right of
subrogation is not dependent upon, nor does it grow out of, any privity of contract. It
accrues simply upon payment by the insurance company of the insurance claim. The
doctrine of subrogation has its roots in equity. It is designed to promote and
accomplish justice; and is the mode that equity adopts to compel the ultimate
payment of a debt by one who, in justice, equity, and good conscience, ought to
pay.41
Q And it was signed in your presence?

A Yes, sir.38
Indeed, all that the Rules require to establish the authenticity of a document is the
testimony of a person who saw the document executed or written. Thus, the trial
court did not err in admitting the Subrogation Receipt in evidence despite petitioners
ATI and Westwinds objections that it was not authenticated by the person who
signed it.
Neither do we find support in petitioner Westwinds contention that Philams right of

action has prescribed.
However, the same cannot be said about Marine Certificate No. 708-8006717-4
which Ongchangcho, Jr. merely identified in court. There is nothing in Ongchangco,
Jr.s testimony which indicates that he saw Philams authorized representative sign
said document, thus:
The Carriage of Goods by Sea Act (COGSA) or Public Act No. 521 of the 74th US
Congress, was accepted to be made applicable to all contracts for the carriage of
goods by sea to and from Philippine ports in foreign trade by virtue of
Commonwealth Act (C.A.) No. 65.42 Section 1 of C.A. No. 65 states:
ATTY. PALACIOS
Section 1. That the provisions of Public Act Numbered Five hundred and twenty-one
of the Seventy-fourth Congress of the United States, approved on April sixteenth,
nineteen hundred and thirty-six, be accepted, as it is hereby accepted to be made
applicable to all contracts for the carriage of goods by sea to and from Philippine
ports in foreign trade: Provided, That nothing in the Act shall be construed as
repealing any existing provision of the Code of Commerce which is now in force, or as
limiting its application.
Q Now, I am presenting to you a copy of this marine certificate 708-8006717-4

issued by Philam Insurance Company, Inc. to Universal Motors Corporation on April
15, 1995. Will you tell us what relation does it have to that policy risk claim
mentioned in that letter?
A This is a photocopy of the said policy issued by the consignee Universal Motors
Corporation.
The prescriptive period for filing an action for the loss or damage of the goods under
the COGSA is found in paragraph (6), Section 3, thus:
ATTY. PALACIOS
I see. May I request, if Your Honor please, that this marine risk policy of the plaintiff
as submitted by claimant Universal Motors Corporation be marked as Exhibit B.
(6) Unless notice of loss or damage and the general nature of such loss or damage
be given in writing to the carrier or his agent at the port of discharge before or at the
time of the removal of the goods into the custody of the person entitled to delivery
thereof under the contract of carriage, such removal shall be prima facie evidence of
the delivery by the carrier of the goods as described in the bill of lading. If the loss or
damage is not apparent, the notice must be given within three days of the delivery.
COURT
Mark it.39
As regards the issuance of Marine Certificate No. 708-8006717-4 after the fact of loss
occurred, suffice it to say that said document simply certifies the existence of an
open insurance policy in favor of the consignee. Hence, the reference to an "Open
Policy Number 9595093" in said certificate. The Court finds it completely absurd to
suppose that any insurance company, of sound business practice, would assume a
loss that has already been realized, when the profitability of its business rests
precisely on the non-happening of the risk insured against.
Said notice of loss or damage maybe endorsed upon the receipt for the goods given
by the person taking delivery thereof.
The notice in writing need not be given if the state of the goods has at the time of
their receipt been the subject of joint survey or inspection.
In any event the carrier and the ship shall be discharged from all liability in respect of
loss or damage unless suit is brought within one year after delivery of the goods or
the date when the goods should have been delivered: Provided, That if a notice of
loss or damage, either apparent or concealed, is not given as provided for in this
section, that fact shall not affect or prejudice the right of the shipper to bring suit
within one year after the delivery of the goods or the date when the goods should
have been delivered.
Yet, even with the exclusion of Marine Certificate No. 708-8006717-4, the
Subrogation Receipt, on its own, is adequate proof that petitioner Philam paid the
consignees claim on the damaged goods. Petitioners ATI and Westwind failed to offer
any evidence to controvert the same. In Malayan Insurance Co., Inc. v. Alberto, 40 the
Court explained the effect of payment by the insurer of the insurance claim in this
wise:
84

In the Bill of Lading 43 dated April 15,
(RCBC) is indicated as the consignee
party. These designations are in line
Letter of Credit No. I501054, which
Motors.
obligations
1995, Rizal Commercial Banking Corporation

while Universal Motors is listed as the notify
with the subject shipment being covered by
RCBC issued upon the request of Universal
It is undisputed that Steel Case No. 03-245-42K/1 was partly torn and crumpled on
one side while it was being unloaded from the carrying vessel. The damage to said
container was noted in the Bad Order Cargo Receipt 48dated April 20, 1995 and Turn
Over Survey of Bad Order Cargoes dated April 21, 1995. The Turn Over Survey of Bad
Order Cargoes indicates that said steel case was not opened at the time of survey
and was accepted by the arrastre in good order. Meanwhile, the Bad Order Cargo
Receipt bore a notation "B.O. not yet t/over to ATI." On the basis of these documents,
petitioner ATI claims that the contents of Steel Case No. 03-245-42K/1 were damaged
while in the custody of petitioner Westwind.
A letter of credit is a financial device developed by merchants as a convenient and

relatively safe mode of dealing with sales of goods to satisfy the seemingly
irreconcilable interests of a seller, who refuses to part with his goods before he is
paid, and a buyer, who wants to have control of his goods before paying. 44 However,
letters of credit are employed by the parties desiring to enter into commercial
transactions, not for the benefit of the issuing bank but mainly for the benefit of the
parties to the original transaction, 45 in these cases, Nichimen Corporation as the
seller and Universal Motors as the buyer. Hence, the latter, as the buyer of the
Nissan CKD parts, should be regarded as the person entitled to delivery of the goods.
Accordingly, for purposes of reckoning when notice of loss or damage should be
given to the carrier or its agent, the date of delivery to Universal Motors is
controlling.
We agree.
Common carriers, from the nature of their business and for reasons of public policy,
are bound to observe extraordinary diligence in the vigilance over the goods
transported by them. Subject to certain exceptions enumerated under Article
173449 of the Civil Code, common carriers are responsible for the loss, destruction, or
deterioration of the goods. The extraordinary responsibility of the common carrier
lasts from the time the goods are unconditionally placed in the possession of, and
received by the carrier for transportation until the same are delivered, actually or
constructively, by the carrier to the consignee, or to the person who has a right to
receive them.50
S/S "Calayan Iris" arrived at the port of Manila on April 20, 1995, and the subject
cargoes were discharged to the custody of ATI the next day. The goods were then
withdrawn from the CFS Warehouse on May 11, 1995 and the last of the packages
delivered to Universal Motors on May 17, 1995. Prior to this, the latter filed a Request
for Bad Order Survey46 on May 12,1995 following a joint inspection where it was
discovered that six pieces of Chassis Frame Assembly from two bundles were
deformed and one Front Axle Sub without Lower from a steel case was dented. Yet, it
was not until August 4, 1995 that Universal Motors filed a formal claim for damages
against petitioner Westwind.
The court a quo, however, found both petitioners Westwind and ATI, jointly and
severally, liable for the damage to the cargo. It observed that while the staff of ATI
undertook the physical unloading of the cargoes from the carrying vessel,
Westwinds duty officer exercised full supervision and control over the entire process.
The appellate court affirmed the solidary liability of Westwind and ATI, but only for
the damage to one Frame Axle Sub without Lower.
Upon a careful review of the records, the Court finds no reason to deviate from the
finding that petitioners Westwind and ATI are concurrently accountable for the
damage to the content of Steel Case No. 03-245-42K/1.
Even so, we have held in Insurance Company of North America v. Asian Terminals,
Inc. that a request for, and the result of a bad order examination, done within the
reglementary period for furnishing notice of loss or damage to the carrier or its
agent, serves the purpose of a claim. A claim is required to be filed within the
reglementary period to afford the carrier or depositary reasonable opportunity and
facilities to check the validity of the claims while facts are still fresh in the minds of
the persons who took part in the transaction and documents are still
available.47 Here, Universal Motors filed a request for bad order survey on May 12,
1995, even before all the packages could be unloaded to its warehouse.
Section 251 of the COGSA provides that under every contract of carriage of goods by
the sea, the carrier in relation to the loading, handling, stowage, carriage, custody,
care and discharge of such goods, shall be subject to the responsibilities and
liabilities and entitled to the rights and immunities set forth in the Act. Section 3
(2)52 thereof then states that among the carriers responsibilities are to properly load,
handle, stow, carry, keep, care for and discharge the goods carried. 53
Moreover, paragraph (6), Section 3 of the COGSA clearly states that failure to comply
with the notice requirement shall not affect or prejudice the right of the shipper to
bring suit within one year after delivery of the goods. Petitioner Philam, as subrogee
of Universal Motors, filed the Complaint for damages on January 18, 1996, just eight
months after all the packages were delivered to its possession on May 17, 1995.
Evidently, petitioner Philams action against petitioners Westwind and ATI was
seasonably filed.
At the trial, Westwinds Operation Assistant, Menandro G. Ramirez, testified on the

presence of a ship officer to supervise the unloading of the subject cargoes.
ATTY. LLAMAS
Q Having been present during the entire discharging operation, do you remember
who else were present at that time?
This brings us to the question that must be resolved in these consolidated petitions.
Who between Westwind and ATI should be liable for the damage to the cargo?
A Our surveyor and our checker the foreman of ATI.

Q Were there officials of the ship present also?
85
obligations
A Yes, sir there was an officer of the vessel on duty at that time. 54
the fact that 218 of the 219 packages were unloaded with the same sling unharmed
is telling of the inadequate care with which ATIs stevedore handled and discharged
Case No. 03-245-42K/1.
xxxx
Q Who selected the cable slink to be used?
With respect to petitioners ATI and Westwinds liability, we agree with the CA that the
same should be confined to the value of the one piece Frame Axle Sub without
Lower.
A ATI Operation.
Q Are you aware of how they made that selection?
In the Bad Order Inspection Report 62 prepared by Universal Motors, the latter referred
to Case No. 03-245-42K/1 as the source of said Frame Axle Sub without Lower which
suffered a deep dent on its buffle plate. Yet, it identified Case No. 03-245-51K as the
container which bore the six pieces Frame Assembly with Bush. Thus, in Philams
Complaint, it alleged that "the entire shipment showed one (1) pc. FRAME AXLE SUB
W/O LWR from Case No. 03-245-42K/1 was completely deformed and misaligned, and
six (6) other pcs. of FRAME ASSEMBLY WITH BUSH from Case No. 03-245-51K were
likewise completely deformed and misaligned." 63 Philam later claimed in its
Appellees Brief that the six pieces of Frame Assembly with Bush were also inside the
damaged Case No. 03-245-42K/1.
A Before the vessel arrived we issued a manifesto of the storage plan informing the
ATI of what type of cargo and equipment will be utilitized in discharging the cargo. 55
xxxx
Q You testified that it was the ATI foremen who select the cable slink to be used in
discharging, is that correct?
A Yes sir, because they are the one who select the slink and they know the kind of
cargoes because they inspected it before the discharge of said cargo.
However, there is nothing in the records to show conclusively that the six Frame
Assembly with Bush were likewise contained in and damaged inside Case No. 03245-42K/1. In the Inspection Survey Report of Chartered Adjusters, Inc., it mentioned
six pieces of chassis frame assembly with deformed body mounting bracket.
However, it merely noted the same as coming from two bundles with no identifying
marks.
Q Are you aware that the ship captain is consulted in the selection of the cable sling?
A Because the ship captain knows for a fact the equipment being utilized in the
discharge of the cargoes because before the ship leave the port of Japan the crew
already utilized the proper equipment fitted to the cargo. 56(Emphasis supplied.)
It is settled in maritime law jurisprudence that cargoes while being unloaded
generally remain under the custody of the carrier. 57 The Damage Survey Report58 of
the survey conducted by Phil. Navtech Services, Inc. from April 20-21, 1995 reveals
that Case No. 03-245-42K/1 was damaged by ATI stevedores due to overtightening of
a cable sling hold during discharge from the vessels hatch to the pier. Since the
damage to the cargo was incurred during the discharge of the shipment and while
under the supervision of the carrier, the latter is liable for the damage caused to the
cargo.
Lastly, we agree with petitioner Westwind that the CA erred in imposing an interest
rate of 12% on the award of damages. Under Article 2209 of the Civil Code, when an
obligation not constituting a loan or forbearance of money is breached, an interest on
the amount of damages awarded may be imposed at the discretion of the court at
the rate of 6% per annum. 64 In the similar case of Belgian Overseas Chartering and
Shipping NV v. Philippine First Insurance Co., lnc., 65 the Court reduced the rate of
interest on the damages awarded to the carrier therein to 6% from the time of the
filing of the complaint until the finality of the decision.
This is not to say, however, that petitioner ATI is without liability for the damaged
cargo.
WHEREFORE, the Court AFFIRMS with MODIFICATION the Decision dated October
15,2007 and the Resolution dated January 11, 2008 of the Court of Appeals in CAG.R. CV No. 69284 in that the interest rate on the award ofP190,684.48 is reduced to
6% per annum from the date of extrajudicial demand, until fully paid.
The functions of an arrastre operator involve the handling of cargo deposited on the
wharf or between the establishment of the consignee or shipper and the ships
tackle. Being the custodian of the goods discharged from a vessel, an arrastre
operators duty is to take good care of the goods and to turn them over to the party
entitled to their possession.59
With costs against the petitioners in G.R. No. 181163 and G.R. No. 181319,
respectively.
SO ORDERED.
Handling cargo is mainly the arrastre operators principal work so its

drivers/operators or employees should observe the standards and measures
necessary to prevent losses and damage to shipments under its custody. 60
While
liable
being
cable
G.R. No. 170942
August 28, 2013
COMSAVINGS
BANK
(NOW
GSIS
FAMILY
BANK), PETITIONER,
vs.
SPOUSES DANILO AND ESTRELLA CAPISTRANO, RESPONDENTS.
it is true that an arrastre operator and a carrier may not be held solidarily
at all times,61 the facts of these cases show that apart from ATIs stevedores
directly in charge of the physical unloading of the cargo, its foreman picked the
sling that was used to hoist the packages for transfer to the dock. Moreover,
DECISION
86
obligations
BERSAMIN, J.:
August 7, 1992
A banking institution serving as an originating bank for the Unified Home Lending
Program (UHLP) of the Government owes a duty to observe the highest degree of
diligence and a high standard of integrity and performance in all its transactions with
its clients because its business is imbued with public interest.
- P39,210.00
August 19, 1992
- P112,181.00
The Case
September 3, 1992
Comsavings Bank (now GSIS Family Bank) seeks the review and reversal of the
decision promulgated on November 30, 2005,1 whereby the Court of Appeals (CA)
affirmed with modifications the decision rendered on April 25, 2003 by the Regional
Trial Court (RTC), Branch 135, in Makati City finding it liable for damages to
respondents.2
- P53,565.00
October 9, 1992
- P24,779.253
Antecedents
In late September 1992, after Comsavings Bank had released the total
of P265,000.00 to GCB Builders as construction cost, respondents inquired from GCB
Builder when their house would be completed considering that their contract
stipulated a completion period of 75 days. Cruz-Bay gave various excuses for the
delay, such as the rainy season, but promised to finish the construction as soon as
possible. The year 1992 ended with the construction of the house unfinished. 4
Respondents were the owners of a residential lot with an area of 200 square meters
known as Lot 8 of Block 4 of the Infant Jesus Subdivision situated in Bacoor, Cavite,
and covered by Transfer Certificate of Title (TCT) No. 316885 of the Register of Deeds
of Cavite. Desirous of building their own house on the lot, they availed themselves of
the UHLP implemented by the National Home Mortgage Finance Corporation
(NHMFC). On May 28, 1992, they executed a construction contract with Carmencita
Cruz-Bay, the proprietor of GCB Builders, for the total contract price of P265,000.00
with the latter undertaking to complete the construction within 75 days. To finance
the construction, GCB Builders facilitated their loan application with Comsavings
Bank, an NHFMC-accredited originator. As proof of their qualifications to avail
themselves of a loan under the UHLP and to comply with the conditions prescribed
for the approval of their application, they submitted their record of employment, the
amount of their income, and a clearance from the Social Security System (SSS) to
the effect that they had no existing loans, among others. On May 28, 1992, they
executed in favor of GCB Builders a deed of assignment of the amount of
the P300,000.00 proceeds of the loan from Comsavings Bank.
In February 1993, respondents demanded the completion of the house. In reply,

Cruz-Bay told them to give the further amount of P25,000.00 to finish the
construction. They requested a breakdown of the amounts already spent in the
construction considering that the P303,450.00 that Comsavings Bank had been paid
by NHMFC on their loan had been more than the contract price of the contract.
Instead of furnishing them the requested breakdown, GCB Builders counsel sent a
demand letter for an additional construction cost of P52,511.59.
On May 30, 1993, respondents received a letter from NHMFC advising that they
should already start paying their monthly amortizations of P4,278.00 because their
loan had been released on April 20, 1993 directly to Comsavings Bank. On June 1,
1993, Estrella Capistrano went to the construction site and found to her dismay that
the house was still unfinished. She noted that there were no doorknobs; that the
toilet bath floor was not even constructed yet because the portion of the house was
still soil; that there were no toilet and bathroom fixtures; that the toilet and bath wall
tiles had no end-capping; that there were cracks on the wall plastering; that the
kitchen sink had no plumbing fixtures; and that the main door installed was a flushtype instead of the sliding door specified in the approved plans.
On July 2, 1992, Comsavings Bank informed respondent Estrella Capistrano that she
would have to sign various documents as part of the requirements for the release of
the loan. Among the documents was a certificate of house completion and
acceptance. On the same date, Comsavings Bank handed Estrella a letter addressed
to GCB Builders informing the latter that respondents had complied with the
preliminary requirements of the UHLP, and were qualified to avail themselves of the
loan amounting to P303,450.00 payable within 25 years at 16% per annum, subject
to the following terms and conditions, namely: the signing of mortgage documents,
100% completion of the construction of the housing unit, original certificate of
occupancy permit and certification of completion, and submission of house pictures
signed by the borrower at the back.
On July 5, 1993, respondents wrote to NHMFC protesting the demand for

amortization payments considering that they had not signed any certification of
completion and acceptance, and that even if there was such a certification of
completion and acceptance, it would have been forged.
On July 14, 1993, respondents again wrote to NHMFC requesting an ocular inspection
of the construction site.
On August 10, 1992, Comsavings Bank informed respondents of the approval of an

interim financing loan ofP260,000.00 payable within 180 days, which amount was to
be paid out of the proceeds of the loan from NHMFC. By October 9, 1992, GCB
Builders received from Comsavings Bank the total sum of P265,000.00 as
construction cost in four releases, to wit:
On November 11, 1993, Atty. Ruben C. Corona, the Manager of the Collateral
Verification & External Examination Department of NHMFC, informed the counsel of
87
obligations
respondents that the inspection of the construction site conducted on August 4, 1993
showed the following:
Decision of the RTC

On April 25, 2003, after trial, the RTC rendered a decision in favor of
respondents.9 Specifically, it found that although the proceeds of the loan had been
completely released, the construction of the house of respondents remained not
completed; that the house had remained in the possession of GCB Builders, which
had meanwhile leased it to another person; that GCB Builders did not comply with
the terms and conditions of the construction contract; and that NHMFC approved the
loan in the gross amount of P303,450.00, and released P289,000.00 of that amount
to Comsavings Bank on April 20, 1993. It concluded that respondents were entitled
to recover from all defendants actual damages of P25,000.00; moral damages for
their mental anguish and sleepless night in the amount of P200,000.00; exemplary
damages of P100,000.00; and P30,000.00 as attorneys fees. It ruled, however, that
only GCB Builders was liable for the monthly rental of P4,500.00 because GCB
Builders was alone in renting out the house; and that NHMFC was equally liable with
the other defendants by reason of its having released the loan proceeds to
Comsavings Bank without verifying whether the construction had already been
completed, thereby indicating that NHMFC had connived and confederated with its
co-defendants in the irregular release of the loan proceeds to Comsavings Bank.
1) That the subject unit is being occupied by tenant, a certain Mr. Mark Inanil;
2) That the toilet/bath and kitchen counter are not installed with Plumbing fixtures;
3) That there are no door knobs on bedroom and no handles on Kitchen cabinet;
4) That the toilet bath has no concrete flooring and the tiles has no end/corner
cappings; and
5) That there are hairline cracks on flooring.5
On July 12, 1993, respondents sued GCB Builders and Comsavings Bank for breach of
contract and damages,6praying that defendants be ordered jointly and severally
liable: (1) to finish the construction of the house according to the plans and
specifications agreed upon at the price stipulated in the construction contract; and
(2) to pay them P38,450.00 as the equivalent of the mortgage value in excess of the
contract price; P25,000.00 as actual damages for the expenses incurred by reason of
the breach of contract; P200,000.00 as moral damages;P30,000.00 as attorneys
fees; and P50,000.00 as exemplary damages.
The RTC disposed thusly:

WHEREFORE, judgment is hereby rendered ordering:
Respondents amended their complaint to implead NHMFC as ab additional

defendant. Aside from adopting the reliefs under the original complaint, they prayed
that NHMFC be directed to hold in abeyance its demand for amortization payment
until the case had been finally adjudged; that NHMFC, GCB Builders and Comsavings
Bank be ordered to pay moral and exemplary damages, and attorneys fees; and that
GCB Builders and Comsavings be directed to pay P4,500.00 as monthly rental from
the filing of the complaint until the house was turned-over and accepted by them. 7
Defendants GCB Builder, COMSAVINGS BANK, and NATIONAL HOUSING FINANCE

MORTGAGE CORPORATION (sic) jointly and severally:
1.1 To complete the construction of the house of plaintiff Spouses DANILO and
ESTRELLA CAPISTRANO within thirty 30 days;
1.2 To pay said plaintiffs:
In their respective answers,8 GCB Builders, Comsavings Bank and NHMFC asserted
that the complaint as amended stated no cause of action against them. On its part,
GCB Builders claimed that the construction of the house had been completed a long
time ago; that respondent had failed, despite demand, to occupy the house and to
pay a balance of P46,849.94 as of August 23, 1993; and that it had received
only P239,355.30 out of theP303,000.00 loan, inasmuch as the balance went to
interim interest, originator fee, service charge and other bank charges. Comsavings
Bank averred that respondents were estopped from assailing their signing of the
certificate of house acceptance/completion on July 2, 1992 considering that they had
the option not to pre-sign the certificate; and that it did not make any representation
as to the conditions and facilitation of the loan with NHMFC when it submitted the
certificate of house acceptance/completion to NHMFC after the completion of the
house on April 20, 1993 because such representations were normal and regular
requirements in loan processing of the conduit banks of NHMFC. Lastly, NHMFC
alleged that it administered the UHLP of the Government by granting financing to
qualified home borrowers through loan originators, like Comsavings Bank in this
case; and that respondents had applied and had been granted a housing loan, and,
as security, they had executed a loan and mortgage agreement and promissory note
for P303,450.00 dated July 2, 1992.
1.2.1 P25,000.00 in actual damages;

1.2.2 P200,000.00 in moral damages;
1.2.3 P100,000.00 in exemplary damages;
1.2.4 P30,000.00 as attorneys fees.
Defendant GCB Builder to pay the plaintiffs the amount of P4,500.00, as rentals from
the date of the filing of the Complaint until the construction of the house is
completed, turned over to and accepted by the plaintiffs;
Defendants NHMFC to hold in abeyance the collection of the amortizations until 30
days from the completion and acceptance by the plaintiffs of the house in question.
SO ORDERED.10
GCB Builders, Comsavings Bank and NHMFC appealed to the CA.
Decision of the CA
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obligations
GCB Builders assigned the following errors to the RTC, namely:
The Court a quo held appellant Comsavings Bank jointly and severally liable with
appellant GCB Builders since it likewise committed misrepresentations in obtaining
the mortgage loan from the NHMFC in the name of the appellees. We concur. The
records show that it was appellant Comsavings Bank which called up the appellee
Estrella Capistrano and had her sign various documents as part of the documentary
requirements for the release of the construction loan. One of these documents, was
the Certificate of House Completion and Acceptance, which, upon appellant Banks
representation was signed by the appellees even if the construction of the house had
not yet started. On July 2, 1992, Comsavings Bank informed appellant GCB Builders
that appellees had provisionally complied with the preliminary requirements under
the Unified Home Lending Program of appellant NHMFC and qualified for a loan in the
amount of P303,450.00 payable in twenty-five (25) years at an interest of 16% per
annum. One condition for the approval of the loan was "100% completion of the
construction of the housing unit located on the property described plus: Original
Certificate of Occupancy Permit and Certification of Completion and Submission of
House pictures signed at the back by the borrower. However, the loan documents
which appellant Bank submitted to appellant NHMFC were false. Appellant
Comsavings Bank in order to show that the construction of the subject house had
been completed, submitted a photograph of a toilet/bath with plumbing and fixtures
installed when in the truth, as admitted by appellant GCB Builders, the plumbing
fixtures had not (been) installed as the appellees were still indebted to GCB.
Comsavings Bank also submitted photographs of wall tiles of the toilet/bath showing
them to be brown or mustard, but the color of the wall tiles actually installed was
white per testimony of appellee Estrella Capistrano and corroborated by appellant
GCB Builders witness Leopoldo Arnaiz. The appellees complained to appellant
NHMFC that the house which they bought was unfinished on the basis of which
NHMFC conducted an inspection of the housing unit and found the complaint to be
true.
IN FINDING THAT THE HOUSE IN QUESTION WAS NOT COMPLETED.

IN FINDING THAT GCB BUILDERS DID NOT COMPLY WITH THE TERM AND CONDITIONS
OF THE CONSTRUCTION.
IN NOT FINDING THAT THE PLAINTIFFS ARE LIABLE TO PAY DEFENDANT GCB THE
AMOUNT OFP45,000.00.
IN RENDERING WITHOUT LEGAL AND FACTUAL BASIS THE DECISION, THE DISPOSTIVE
PORTION OF WHICH READS, AS FOLLOWS:
xxxx
IN NOT GRANTING THE RELIEFS PRAYED FOR IN THE COUNTERCLAIM;
IN NOT DISMISSING THE COMPLAINT.11
Comsavings Bank phrased its assignment of error thuswise:
I
THE TRIAL COURT ERRED IN HOLDING THAT DEFENDANT-APPELLANT COMSAVINGS
BANK IS JOINTLY AND SEVERALLY LIABLE WITH THE OTHER DEFENDANTSAPPELLANTS GCB BUILDERS AND NATIONAL HOME MORTGAGE FINANCE
CORPORATION TO PAY PLAINTIFFS-APPELLEES ACTUAL, MORAL AND EXEMPLARY
DAMAGES AS WELL AS ATTORNEYS FEES.12
NHMFC ascribes to the RTC the following errors, to wit:
I
By submitting false or forged documents to the NHMFC, appellant Comsavings Bank

violated the warranties contained in the purchase of the loan agreement with
appellant NHMFC. On the strength of such warranties, NHMFC issued Check No.
425824 in the amount of P1,382,806.63 that include the mortgage loan of the
appellees. It must be recalled that the agreement provided among others that "the
housing loan extended to the appellees would be released to and received by
Comsavings Bank, and the latter warrants the genuineness of all loan documents it
submitted to NHMFC. Incidentally, Carmencita B. Cruz, owner and proprietor of
appellant GCB Builders admitted that she is even not an accredited builder of
housing units under the Unified Home Lending Program (UHLP) of the NHMFC in the
area. Appellant Comsavings Bank in allowing appellant GCB Builders to participate in
the UHLP program undermined and defeated its real purpose, to help low income
families build their own homes, to the damage and prejudice of the appellees. 15
THE TRIAL COURT ERRED IN HOLDING THAT DEFENDANT-APPELLANT NATIONAL

HOME MORTGAGE FINANCE CORPORATION IS JOINTLY AND SEVERALLY LIABLE WITH
THE OTHER DEFENDANT-APPELLANTS GCB BUILDERS AND COMSAVINGS BANK TO
PAY PLAINTIFFS-APPELLEES ACTUAL, MORAL AND EXEMPLARY DAMAGES AS WELL AS
ATTORNEYS FEES.
II
THE TRIAL COURT ERRED IN HOLDING THAT DEFENDANT-APPELLANT NATIONAL
HOME MORTGAGE FINANCE CORPORATION SHOULD HOLD IN ABEYANCE THE
COLLECTION OF AMORTIZATION UNTIL 30 DAYS FROM THE COMPLETION AND
ACCEPTANCE BY THE PLAINTIFFS OF THE HOUSE IN QUESTION.13
xxxx
On November 30, 2005, the CA promulgated the appealed decision, 14 affirming the
RTC subject to the modification that NHMFC was absolved of liability, and that the
moral and exemplary damages were reduced, viz:
WHEREFORE, in view of all the foregoing, the decision appealed from is AFFIRMED
with MODIFICATIONS. The dispositive portion finding the NHMFC jointly and severally
liable with the other appellants for the payment of actual, moral and exemplary
damages, is hereby deleted; the awards of moral and exemplary damages are
xxxx
89
obligations
reduced to P100,000.00 and P50,000.00, respectively, and the amount of rentals to

be paid by GCB Builders is to be reckoned from August 4, 1993.
Instead, the liability of Comsavings Bank towards respondents was based on Article
20 and Article 1170 of the Civil Code, viz:
SO ORDERED.16
Article 20. Every person who, contrary to law, willfully or negligently causes damage
to another, shall indemnify the latter for the same.
Hence, this further appeal by Comsavings Bank.
Article 1170. Those who in the performance of their obligations are guilty of fraud,
negligence, or delay, and those who in any manner contravene the tenor thereof, are
liable for damages.
Issue
Comsavings Bank submits the lone issue of:
Based on the provisions, a banking institution like Comsavings Bank is obliged to

exercise the highest degree of diligence as well as high standards of integrity and
performance in all its transactions because its business is imbued with public
interest.20 As aptly declared in Philippine National Bank v. Pike: 21 "The stability of
banks largely depends on the confidence of the people in the honesty and efficiency
of banks."
WHETHER OR NOT THE COURT OF APPEALS ERRED IN FINDING PETITIONER BANK

JOINTLY AND SEVERALLY LIABLE WITH GCB BUILDERS TO PAY RESPONDENT ACTUAL,
MORAL AND EXEMPLARY DAMAGES, AS WELL AS ATTORNEYS FEES.17
Comsavings Bank insists on its non-liability, contending that it committed no
misrepresentation when it made respondents sign the certificate of house
acceptance/completion notwithstanding that the construction of the house had not
yet started; that they agreed to pre-sign the certificate, although they had the option
not to; that it made them sign the certificate to enable them to avoid the
inconvenience of returning back and forth just to sign the certificate; that it made
clear to them during the pre-signing that the certificate would be submitted to
NHMFC only after the completion of the house; that it submitted the certificate to
NHMFC after the completion of the construction of the house on April 23, 2003; that
they had thus been informed beforehand of the conditions in pre-signing the
certificate; that choosing to pre-sign the certificate estopped them from questioning
the procedural aspect of the documentation; and that the practice of pre-signing
documents was not expressly prohibited considering that they were not induced to
pre-sign the certificate.18
Gross negligence connotes want of care in the performance of ones duties; 22 it is a

negligence characterized by the want of even slight care, acting or omitting to act in
a situation where there is duty to act, not inadvertently but willfully and intentionally,
with a conscious indifference to consequences insofar as other persons may be
affected.23 It evinces a thoughtless disregard of consequences without exerting any
effort to avoid them.24
There is no question that Comsavings Bank was grossly negligent in its dealings with
respondents because it did not comply with its legal obligation to exercise the
required diligence and integrity. As a banking institution serving as an originator
under the UHLP and being the maker of the certificate of acceptance/completion, 25 it
was fully aware that the purpose of the signed certificate was to affirm that the
house had been completely constructed according to the approved plans and
specifications, and that respondents had thereby accepted the delivery of the
complete house. Given the purpose of the certificate, it should have desisted from
presenting the certificate to respondents for their signature without such conditions
having been fulfilled. Yet, it made respondents sign the certificate (through Estrella
Capistrano, both in her personal capacity and as the attorney-in-fact of her husband
Danilo Capistrano) despite the construction of the house not yet even starting. Its act
was irregular per se because it contravened the purpose of the certificate. Worse, the
pre-signing of the certificate was fraudulent because it was thereby enabled to gain
in the process the amount of P17,306.83 in the form of several deductions from the
proceeds of the loan on top of other benefits as an originator bank. 26 On the other
hand, respondents were prejudiced, considering that the construction of the house
was then still incomplete and was ultimately defective. Compounding their plight was
that NHMFC demanded payment of their monthly amortizations despite the noncompletion of the house. Had Comsavings Bank been fair towards them as its clients,
it should not have made them pre-sign the certificate until it had confirmed that the
construction of the house had been completed.
Ruling
The appeal has no merit.
1.
Comsaving Banks liability was not based on its purchase of loan agreement with
NHMFC but on Article 20 and Article 1170 of the Civil Code
The CA rightfully declared Comsavings Bank solidarily liable with GCB Builders for the
damages sustained by respondents. However, we point out that such liability did not
arise from Comsavings Banks breach of warranties under its purchase of loan
agreement with NHMFC. Under the purchase of loan agreement, it undertook, for
value received, to sell, transfer and deliver to NHMFC the loan agreements,
promissory notes and other supporting documents that it had entered into and
executed with respondents, and warranted the genuineness of the loan documents
and the "construction of the residential units." 19 Having made the warranties in favor
of NHMFC, it would be liable in case of breach of the warranties to NHMFC, not
respondents, eliminating breach of such warranties as a source of its liability towards
respondents.
Comsavings Bank asserts that it submitted the certificate to NHMFC after the
construction of the house had been completed on April 23, 2003. The assertion could
not be true, however, because Atty. Corona of NHMFC testified that he had inspected
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obligations
the house on August 4, 1993 and had found the construction to be incomplete and
defective.27
he and his wife experienced because of this suit were not easily probable. On her
part, Estrella was a mere housewife, but was the attorney-in-fact of Danilo in matters
concerning the loan transaction. With Danilo working abroad, she was alone in
overseeing the house construction and the progress of the present case. Given her
situation, she definitely experienced worries and sleepless nights. The award of
moral damages of P100,000.00 awarded by the CA as exemplary damages is
proper.1wphi1
Contrary to the claim of Comsavings Bank, the records contain no showing that
respondents had been given the option not to pre-sign the certificate of
acceptance/completion; that Comsavings Bank had made respondents sign the
certificate so that they would not be inconvenienced in going back and forth just to
sign the certificate; and that it made clear to them during the pre-signing that the
certificate would be submitted to NHMFC only after the completion of the house.
Felicisima M. Miranda, the loan officer of Comsavings Bank and its sole witness
during trial, did not attest to such option not to pre-sign. Also, Estrella Capistrano
(Estrella) mentioned nothing about it during the trial, testifying only that after signing
several documents, including the certificate, she was told by Comsavings Banks
personnel that the documents would be needed for the processing of the
loan.28 Clearly, the supposed option was Comsavings Banks lame justification for the
pre-signing of the certificate.
With respect to exemplary damages, the amount of P50,000.00 awarded by the CA

as exemplary damages is sustained. Relevantly, we have held that:
The law allows the grant of exemplary damages to set an example for the public
good. The business of a bank is affected with public interest; thus, it makes a sworn
profession of diligence and meticulousness in giving irreproachable service. For this
reason, the bank should guard against injury attributable to negligence or bad faith
on its part. The banking sector must at all times maintain a high level of
meticulousness. The grant of exemplary damages is justified by the initial
carelessness of petitioner, aggravated by its lack of promptness in repairing its
error.32
The submission of pictures of the fully-constructed house bearing the signatures of

respondents on the dorsal sides was a requirement for the release of the loan by
Comsavings Bank to GCB Builders, and for the Comsavings Banks reimbursement of
the loan from NHMFC.29 The signatures were ostensibly for authentication of the
pictures. In its compliance, GCB Builders submitted pictures of a different house sans
the signatures of respondents on the dorsal sides. 30 Ignoring the glaring irregularity,
Comsavings Bank accepted the unsigned (hence, unauthenticated) pictures, released
the loan to GCB Builders, and turned over the pictures to NHMFC for the
reimbursement of the loan. Had Comsavings Bank complied with its duty of
observing the highest degree of diligence, it would have checked first whether the
pictures carried the signatures of respondents on their dorsal sides, and whether the
house depicted on the pictures was really the house of respondents, before releasing
the proceeds of the loan to GCB Builders and before submitting the pictures to
NHMFC for the reimbursement. Again, this is an indication of Comsavings Banks
gross negligence.
However, the award of actual damages amounting to P25,000.00 is not warranted. To

justify an award for actual damages, there must be competent proof of the actual
amount of loss. Credence can be given only to claims duly supported by
receipts.33 Respondents did not submit any documentary proof, like receipts, to
support their claim for actual damages.
Nonetheless, it cannot be denied that they had suffered substantial losses. Article
2224 of the Civil Code allows the recovery of temperate damages when the court
finds that some pecuniary loss was suffered but its amount cannot be proved with
certainty. In lieu of actual damages, therefore, temperate damages of P25,000.00 are
awarded. Such amount, in our view, is reasonable under the circumstances.
Article 2208 of the Civil Code allows recovery of attorneys fees when exemplary
damages are awarded or where the plaintiff has incurred expenses to protect his
interest by reason of defendants act or omission. Considering that exemplary
damages were properly awarded here, and that respondents hired a private lawyer
to litigate its cause, we agree with the RTC and CA that the P30,000.00 allowed as
attorneys fees were appropriate and reasonable.
2.
Comsavings Bank is liable for damages
As to the damages that should be awarded to respondents, moral and exemplary
damages were warranted.
A defendant who did not appeal may be benefitted by the judgment in favor of the
other defendant who appealed. 34 Thus, the foregoing modifications as to the nature
and amount of damages inures to the benefit of GCB Builders although it did not
appeal the ruling of the CA.
Under Article 2219 of the Civil Code, moral damages may be recovered for the acts
or actions referred to in Article 20 of the Civil Code. Moral damages are meant to
compensate the claimant for any physical suffering, mental anguish, fright, serious
anxiety, besmirched reputation, wounded feelings, moral shock, social humiliation
and similar injuries unjustly caused.31
WHEREFORE, we AFFIRM the decision promulgated by the Court of Appeals on

November 30, 2005, subject to the MODIFICATIONS that Comsavings Bank and GCB
Builders are further ordered to pay, jointly and severally, to the Spouses Danilo and
Estrella Capistrano the following amounts: (1) P25,000.00 as temperate damages;
(2)P30,000.00 as attorneys fees; (3) interest of 6% per annum on all the amounts of
damages reckoned from the finality of this decision; and (4) the costs of suit.
In their amended complaint, respondents claimed that the acts of GCB Builders and
Comsavings Bank had caused them to suffer sleepless nights, worries and anxieties.
The claim was well founded. Danilo worked in Saudi Arabia in order to pay the loan
used for the construction of their family home. His anxiety and anguish over the
incomplete and defective construction of their house, as well as the inconvenience
91
obligations

1978,9 DBP thus demanded that Guaria Corporation expedite the completion of the
project, and warned that it would initiate foreclosure proceedings should Guaria
Corporation not do so.10
SO ORDERED.
G.R. No. 160758
January 15, 2014
DEVELOPMENT
BANK
vs.
GUARIA
AGRICULTURAL
CORPORATION, Respondent.
OF
THE
AND
PHILIPPINES, Petitioner,
REALTY
Unsatisfied with the non-action and objection of Guaria Corporation, DBP initiated
extrajudicial foreclosure proceedings. A notice of foreclosure sale was sent to
Guaria Corporation. The notice was eventually published, leading the clients and
patrons of Guaria Corporation to think that its business operation had slowed down,
and that its resort had already closed.11
DEVELOPMENT
The foreclosure of a mortgage prior to the mortgagor's default on the principal

obligation is premature, and should be undone for being void and ineffectual. The
mortgagee who has been meanwhile given possession of the mortgaged property by
virtue of a writ of possession issued to it as the purchaser at the foreclosure sale may
be required to restore the possession of the property to the mortgagor and to pay
reasonable rent for the use of the property during the intervening period.
On January 6, 1979, Guaria Corporation sued DBP in the RTC to demand specific
performance of the latter's obligations under the loan agreement, and to stop the
foreclosure of the mortgages (Civil Case No. 12707). 12However, DBP moved for the
dismissal of the complaint, stating that the mortgaged properties had already been
sold to satisfy the obligation of Guaria Corporation at a public auction held on
January 15, 1979 at the Costa Mario Resort Beach Resort in Oton, Iloilo. 13 Due to this,
Guaria Corporation amended the complaint on February 6, 1979 14 to seek the
nullification of the foreclosure proceedings and the cancellation of the certificate of
sale. DBP filed its answer on December 17, 1979, 15 and trial followed upon the
termination of the pre-trial without any agreement being reached by the parties. 16
The Case
In this appeal, Development Bank of the Philippines (DBP) seeks the reversal of the
adverse decision promulgated on March 26, 2003 in C.A.-G.R. CV No.
59491,1 whereby the Court of Appeals (CA) upheld the judgment rendered on January
6, 19982 by the Regional Trial Court, Branch 25, in Iloilo City (RTC) annulling the
extra-judicial foreclosure of the real estate and chattel mortgages at the instance of
DBP because the debtor-mortgagor, Guaria Agricultural and Realty Development
Corporation (Guaria Corporation), had not yet defaulted on its obligations in favor of
DBP.
In the meantime, DBP applied for the issuance of a writ of possession by the RTC. At
first, the RTC denied the application but later granted it upon DBP's motion for
reconsideration. Aggrieved, Guaria Corporation assailed the granting of the
application before the CA on certiorari (C.A.-G.R. No. 12670-SP entitled Guaria
Agricultural and Realty Development Corporation v. Development Bank of the
Philippines). After the CA dismissed the petition for certiorari, DBP sought the
implementation of the order for the issuance of the writ of possession. Over Guaria
Corporation's opposition, the RTC issued the writ of possession on June 16, 1982. 17
Antecedents
In July 1976, Guaria Corporation applied for a loan from DBP to finance the
development of its resort complex situated in Trapiche, Oton, Iloilo. The loan, in the
amount of P3,387,000.00, was approved on August 5, 1976. 3Guaria Corporation
executed a promissory note that would be due on November 3, 1988. 4 On October 5,
1976, Guaria Corporation executed a real estate mortgage over several real
properties in favor of DBP as security for the repayment of the loan. On May 17,
1977, Guaria Corporation executed a chattel mortgage over the personal properties
existing at the resort complex and those yet to be acquired out of the proceeds of
the loan, also to secure the performance of the obligation. 5 Prior to the release of the
loan, DBP required Guaria Corporation to put up a cash equity of P1,470,951.00 for
the construction of the buildings and other improvements on the resort complex.
Judgment of the RTC

On January 6, 1998, the RTC rendered its judgment in Civil Case No. 12707, disposing
as follows:
WHEREFORE, premises considered, the court hereby resolves that the extra-judicial
sales of the mortgaged properties of the plaintiff by the Office of the Provincial
Sheriff of Iloilo on January 15, 1979 are null and void, so with the consequent
issuance of certificates of sale to the defendant of said properties, the registration
thereof with the Registry of Deeds and the issuance of the transfer certificates of title
involving the real property in its name.
The loan was released in several instalments, and Guaria Corporation used the
proceeds to defray the cost of additional improvements in the resort complex. In all,
the amount released totalled P3,003,617.49, from which DBP withheld P148,102.98
as interest.6
It is also resolved that defendant give back to the plaintiff or its representative the
actual possession and enjoyment of all the properties foreclosed and possessed by it.
To pay the plaintiff the reasonable rental for the use of its beach resort during the
period starting from the time it (defendant) took over its occupation and use up to
the time possession is actually restored to the plaintiff.
Guaria Corporation demanded the release of the balance of the loan, but DBP
refused. Instead, DBP directly paid some suppliers of Guaria Corporation over the
latter's objection. DBP found upon inspection of the resort project, its developments
and improvements that Guaria Corporation had not completed the construction
works.7 In a letter dated February 27, 1978,8 and a telegram dated June 9,
And, on the part of the plaintiff, to pay the defendant the loan it obtained as soon as
it takes possession and management of the beach resort and resume its business
operation.
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obligations
Furthermore, defendant is ordered to pay plaintiff's attorney's fee of P50,000.00.

So ORDERED.
Hence, this appeal by DBP.
18
Issues
Decision of the CA
DBP submits the following issues for consideration, namely:
On appeal (C.A.-G.R. CV No. 59491), DBP challenged the judgment of the RTC, and
insisted that:
WHETHER OR NOT THE DECISION OF THE COURT OF APPEALS DATED MARCH 26,
2003 AND ITS RESOLUTION DATED OCTOBER 9, DENYING PETITIONER'S MOTION FOR
RECONSIDERATION WERE ISSUED IN ACCORDANCE WITH LAW, PREVAILING
JURISPRUDENTIAL DECISION AND SUPPORTED BY EVIDENCE;
I
THE TRIAL COURT ERRED AND COMMITTED REVERSIBLE ERROR IN DECLARING DBP'S
FORECLOSURE OF THE MORTGAGED PROPERTIES AS INVALID AND UNCALLED FOR.
WHETHER OR NOT THE HONORABLE COURT OF APPEALS ADHERED TO THE USUAL

COURSE OF JUDICIAL PROCEEDINGS IN DECIDING C.A.-G.R. CV NO. 59491 AND
THEREFORE IN ACCORDANCE WITH THE "LAW OF THE CASE DOCTRINE." 22
II
Ruling
THE TRIAL COURT GRIEVOUSLY ERRED IN HOLDING THE GROUNDS INVOKED BY DBP
TO JUSTIFY FORECLOSURE AS "NOT SUFFICIENT." ON THE CONTRARY, THE
MORTGAGE WAS FORECLOSED BY EXPRESS AUTHORITY OF PARAGRAPH NO. 4 OF THE
MORTGAGE CONTRACT AND SECTION 2 OF P.D. 385 IN ADDITION TO THE
QUESTIONED PAR. NO. 26 PRINTED AT THE BACK OF THE FIRST PAGE OF THE
MORTGAGE CONRACT.
The appeal lacks merit.

1.Findings
of
the
CA
were
evidence as well as by law and jurisprudence
supported
by
the
DBP submits that the loan had been granted under its supervised credit financing
scheme for the development of a beach resort, and the releases of the proceeds
would be subject to conditions that included the verification of the progress of works
in the project to forestall diversion of the loan proceeds; and that under Stipulation
No. 26 of the mortgage contract, further loan releases would be terminated and the
account would be considered due and demandable in the event of a deviation from
the purpose of the loan,23 including the failure to put up the required equity and the
diversion of the loan proceeds to other purposes. 24 It assails the declaration by the
CA that Guaria Corporation had not yet been in default in its obligations despite
violations of the terms of the mortgage contract securing the promissory note.
III
THE TRIAL COURT ERRED IN HOLDING THE SALES OF THE MORTGAGED PROPERTIES
TO DBP AS INVALID UNDER ARTICLES 2113 AND 2141 OF THE CIVIL CODE.
IV
THE TRIAL COURT GRAVELY ERRED AND COMMITTED [REVERSIBLE] ERROR IN
ORDERING DBP TO RETURN TO PLAINTIFF THE ACTUAL POSSESSION AND ENJOYMENT
OF ALL THE FORECLOSED PROPERTIES AND TO PAY PLAINTIFF REASONABLE RENTAL
FOR THE USE OF THE FORECLOSED BEACH RESORT.
Guaria Corporation counters that it did not violate the terms of the promissory note
and the mortgage contracts because DBP had fully collected the interest
notwithstanding that the principal obligation did not yet fall due and become
demandable.25
V
THE TRIAL COURT ERRED IN AWARDING ATTORNEY'S FEES AGAINST DBP WHICH
MERELY EXERCISED ITS RIGHTS UNDER THE MORTGAGE CONTRACT. 19
The submissions of DBP lack merit and substance.
In its decision promulgated on March 26, 2003, 20 however, the CA sustained the
RTC's judgment but deleted the award of attorney's fees, decreeing:
The agreement between DBP and Guaria Corporation was a loan. Under the law, a
loan requires the delivery of money or any other consumable object by one party to
another who acquires ownership thereof, on the condition that the same amount or
quality shall be paid.26 Loan is a reciprocal obligation, as it arises from the same
cause where one party is the creditor, and the other the debtor. 27 The obligation of
one party in a reciprocal obligation is dependent upon the obligation of the other,
and the performance should ideally be simultaneous. This means that in a loan, the
creditor should release the full loan amount and the debtor repays it when it
becomes due and demandable.28
WHEREFORE, in view of the foregoing, the Decision dated January 6, 1998, rendered
by the Regional Trial Court of Iloilo City, Branch 25 in Civil Case No. 12707 for
Specific Performance with Preliminary Injunction is hereby AFFIRMED with
MODIFICATION, in that the award for attorney's fees is deleted.
SO ORDERED.21
DBP timely filed a motion for reconsideration, but the CA denied its motion on
October 9, 2003.
In its assailed decision, the CA found and held thusly:
93
obligations
xxxx
Since the foreclosure proceedings were premature and unenforceable, it only follows
that appellee is still entitled to possession of the foreclosed properties. However,
appellant took possession of the same by virtue of a writ of possession issued in its
favor during the pendency of the case. Thus, the trial court correctly ruled when it
ordered appellant to return actual possession of the subject properties to appellee or
its representative and to pay appellee reasonable rents.
x x x It is undisputed that appellee obtained a loan from appellant, and as security,

executed real estate and chattel mortgages. However, it was never established that
appellee was already in default. Appellant, in a telegram to the appellee reminded
the latter to make good on its construction works, otherwise, it would foreclose the
mortgage it executed. It did not mention that appellee was already in default. The
records show that appellant did not make any demand for payment of the promissory
note. It appears that the basis of the foreclosure was not a default on the loan but
appellee's failure to complete the project in accordance with appellant's standards. In
fact, appellant refused to release the remaining balance of the approved loan after it
found that the improvements introduced by appellee were below appellant's
expectations.
However, the award for attorney's fees is deleted. As a rule, the award of attorney's
fees is the exception rather than the rule and counsel's fees are not to be awarded
every time a party wins a suit. Attorney's fees cannot be recovered as part of
damages because of the policy that no premium should be placed on the right to
litigate (Pimentel vs. Court of Appeals, et al., 307 SCRA 38). 29
xxxx
The loan agreement between the parties is a reciprocal obligation. Appellant in the
instant case bound itself to grant appellee the loan amount of P3,387,000.00
condition on appellee's payment of the amount when it falls due. Furthermore, the
loan was evidenced by the promissory note which was secured by real estate
mortgage over several properties and additional chattel mortgage. Reciprocal
obligations are those which arise from the same cause, and in which each party is a
debtor and a creditor of the other, such that the obligation of one is dependent upon
the obligation of the other (Areola vs. Court of Appeals, 236 SCRA 643). They are to
be performed simultaneously such that the performance of one is conditioned upon
the simultaneous fulfilment of the other (Jaime Ong vs. Court of Appeals, 310 SCRA
1). The promise of appellee to pay the loan upon due date as well as to execute
sufficient security for said loan by way of mortgage gave rise to a reciprocal
obligation on the part of appellant to release the entire approved loan amount. Thus,
appellees are entitled to receive the total loan amount as agreed upon and not an
incomplete amount.
We uphold the CA.

To start with, considering that the CA thereby affirmed the factual findings of the RTC,
the Court is bound to uphold such findings, for it is axiomatic that the trial court's
factual findings as affirmed by the CA are binding on appeal due to the Court not
being a trier of facts.
Secondly, by its failure to release the proceeds of the loan in their entirety, DBP had
no right yet to exact on Guaria Corporation the latter's compliance with its own
obligation under the loan. Indeed, if a party in a reciprocal contract like a loan does
not perform its obligation, the other party cannot be obliged to perform what is
expected of it while the other's obligation remains unfulfilled. 30 In other words, the
latter party does not incur delay.31
Still, DBP called upon Guaria Corporation to make good on the construction works
pursuant to the acceleration clause written in the mortgage contract (i.e., Stipulation
No. 26),32 or else it would foreclose the mortgages.
The appellant did not release the total amount of the approved loan. Appellant
therefore could not have made a demand for payment of the loan since it had yet to
fulfil its own obligation. Moreover, the fact that appellee was not yet in default
rendered the foreclosure proceedings premature and improper.
DBP's actuations were legally unfounded. It is true that loans are often secured by a
mortgage constituted on real or personal property to protect the creditor's interest in
case of the default of the debtor. By its nature, however, a mortgage remains an
accessory contract dependent on the principal obligation,33 such that enforcement of
the mortgage contract will depend on whether or not there has been a violation of
the principal obligation. While a creditor and a debtor could regulate the order in
which they should comply with their reciprocal obligations, it is presupposed that in a
loan the lender should perform its obligation - the release of the full loan amount before it could demand that the borrower repay the loaned amount. In other words,
Guaria Corporation would not incur in delay before DBP fully performed its
reciprocal obligation.34
The properties which stood as security for the loan were foreclosed without any
demand having been made on the principal obligation. For an obligation to become
due, there must generally be a demand. Default generally begins from the moment
the creditor demands the performance of the obligation. Without such demand,
judicial or extrajudicial, the effects of default will not arise (Namarco vs. Federation of
United Namarco Distributors, Inc., 49 SCRA 238; Borje vs. CFI of Misamis Occidental,
88 SCRA 576).
xxxx
Considering that it had yet to release the entire proceeds of the loan, DBP could not
yet make an effective demand for payment upon Guaria Corporation to perform its
obligation under the loan. According to Development Bank of the Philippines v.
Licuanan,35 it would only be when a demand to pay had been made and was
subsequently refused that a borrower could be considered in default, and the lender
could
obtain
the
right
to
collect
the
debt
or
to
foreclose
the
Appellant also admitted in its brief that it indeed failed to release the full amount of
the approved loan. As a consequence, the real estate mortgage of appellee becomes
unenforceable, as it cannot be entirely foreclosed to satisfy appellee's total debt to
appellant (Central Bank of the Philippines vs. Court of Appeals, 139 SCRA 46).
94
obligations
mortgage.1wphi1 Hence, Guaria Corporation would not be in default without the

demand.
long as the facts on which such decision was predicated continue to be the facts of
the case before the court.40
Assuming that DBP could already exact from the latter its compliance with the loan
agreement, the letter dated February 27, 1978 that DBP sent would still not be
regarded as a demand to render Guaria Corporation in default under the principal
contract because DBP was only thereby requesting the latter "to put up the
deficiency in the value of improvements." 36
The concept of law of the case is well explained in Mangold v. Bacon, 41 an American
case, thusly:
The general rule, nakedly and boldly put, is that legal conclusions announced on a
first appeal, whether on the general law or the law as applied to the concrete facts,
not only prescribe the duty and limit the power of the trial court to strict obedience
and conformity thereto, but they become and remain the law of the case in all other
steps below or above on subsequent appeal. The rule is grounded on convenience,
experience, and reason. Without the rule there would be no end to criticism,
reagitation, reexamination, and reformulation. In short, there would be endless
litigation. It would be intolerable if parties litigants were allowed to speculate on
changes in the personnel of a court, or on the chance of our rewriting propositions
once gravely ruled on solemn argument and handed down as the law of a given case.
An itch to reopen questions foreclosed on a first appeal would result in the
foolishness of the inquisitive youth who pulled up his corn to see how it grew. Courts
are allowed, if they so choose, to act like ordinary sensible persons. The
administration of justice is a practical affair. The rule is a practical and a good one of
frequent and beneficial use.
Under the circumstances, DBP's foreclosure of the mortgage and the sale of the
mortgaged properties at its instance were premature, and, therefore, void and
ineffectual.37
Being a banking institution, DBP owed it to Guaria Corporation to exercise the
highest degree of diligence, as well as to observe the high standards of integrity and
performance in all its transactions because its business was imbued with public
interest.38 The high standards were also necessary to ensure public confidence in the
banking system, for, according to Philippine National Bank v. Pike: 39 "The stability of
banks largely depends on the confidence of the people in the honesty and efficiency
of banks." Thus, DBP had to act with great care in applying the stipulations of its
agreement with Guaria Corporation, lest it erodes such public confidence. Yet, DBP
failed in its duty to exercise the highest degree of diligence by prematurely
foreclosing the mortgages and unwarrantedly causing the foreclosure sale of the
mortgaged properties despite Guaria Corporation not being yet in default. DBP
wrongly relied on Stipulation No. 26 as its basis to accelerate the obligation of
Guaria Corporation, for the stipulation was relevant to an Omnibus Agricultural
Loan, to Guaria Corporation's loan which was intended for a project other than
agricultural in nature.
The doctrine of law of the case simply means, therefore, that when an appellate
court has once declared the law in a case, its declaration continues to be the law of
that case even on a subsequent appeal, notwithstanding that the rule thus laid down
may have been reversed in other cases. 42 For practical considerations, indeed, once
the appellate court has issued a pronouncement on a point that was presented to it
with full opportunity to be heard having been accorded to the parties, the
pronouncement should be regarded as the law of the case and should not be
reopened on remand of the case to determine other issues of the case, like
damages.43 But the law of the case, as the name implies, concerns only legal
questions or issues thereby adjudicated in the former appeal.
Even so, Guaria Corporation did not elevate the actionability of DBP's negligence to
the CA, and did not also appeal the CA's deletion of the award of attorney's fees
allowed by the RTC.1wphi1 With the decision of the CA consequently becoming final
and immutable as to Guaria Corporation, we will not delve any further on DBP's
actionable actuations.
2.The
doctrine
did not apply herein
of
law
of
the
The foregoing understanding of the concept of the law of the case exposes DBP's
insistence to be unwarranted.
case
To start with, the ex parte proceeding on DBP's application for the issuance of the
writ of possession was entirely independent from the judicial demand for specific
performance herein. In fact, C.A.-G.R. No. 12670-SP, being the interlocutory appeal
concerning the issuance of the writ of possession while the main case was pending,
was not at all intertwined with any legal issue properly raised and litigated in C.A.G.R. CV No. 59491, which was the appeal to determine whether or not DBP's
foreclosure was valid and effectual. And, secondly, the ruling in C.A.-G.R. No. 12670SP did not settle any question of law involved herein because this case for specific
performance was not a continuation of C.A.-G.R. No. 12670-SP (which was limited to
the propriety of the issuance of the writ of possession in favor of DBP), and vice
versa.
DBP insists that the decision of the CA in C.A.-G.R. No. 12670-SP already constituted
the law of the case. Hence, the CA could not decide the appeal in C.A.-G.R. CV No.
59491 differently.
Guaria Corporation counters that the ruling in C.A.-G.R. No. 12670-SP did not
constitute the law of the case because C.A.-G.R. No. 12670-SP concerned the issue of
possession by DBP as the winning bidder in the foreclosure sale, and had no bearing
whatsoever to the legal issues presented in C.A.-G.R. CV No. 59491.
Law of the case has been defined as the opinion delivered on a former appeal, and
means, more specifically, that whatever is once irrevocably established as the
controlling legal rule of decision between the same parties in the same case
continues to be the law of the case, whether correct on general principles or not, so
95
obligations
3.
Guarifia
Corporation
is
legally
restoration
of
the
possession
of
and payment of reasonable rentals by DBP
entitled
to
the
resort
the cargo to Calamba Steel, the latter rejected its damaged portion, valued at
US$7,751.15, for being unfit for its intended purpose. 5
the
complex
Subsequently, on September 13, 2003, a second shipment of 28 steel sheets in coil,

weighing 215,817 kilograms, was made by Sumitomo through petitioners MV
Eastern Challenger V-10-S for transport and delivery again to Calamba Steel. 6 Insured
by Sumitomo against all risk with Mitsui, 7 the shipment had a declared value of
US$121,362.59. This second shipment arrived at the port of Manila on or about
September 23, 2003. However, upon unloading of the cargo from the said vessel, 11
coils were found damaged as evidenced by the Turn Over Survey of Bad Order Cargo
No. 67393. The possession of the said cargo was then transferred to ATI for
stevedoring, storage and safekeeping pending withdrawal thereof by Calamba Steel.
When ATI delivered the goods, Calamba Steel rejected the damaged portion thereof,
valued at US$7,677.12, the same being unfit for its intended purpose. 8
Having found and pronounced that the extrajudicial foreclosure by DBP was
premature, and that the ensuing foreclosure sale was void and ineffectual, the Court
affirms the order for the restoration of possession to Guarifia Corporation and the
payment of reasonable rentals for the use of the resort. The CA properly held that the
premature and invalid foreclosure had unjustly dispossessed Guarifia Corporation of
its properties. Consequently, the restoration of possession and the payment of
reasonable rentals were in accordance with Article 561 of the Civil Code, which
expressly states that one who recovers, according to law, possession unjustly lost
shall be deemed for all purposes which may redound to his benefit to have enjoyed it
without interruption.
Lastly, on September 29, 2003, Sumitomo again shipped 117 various steel sheets in
coil weighing 930,718 kilograms through petitioners vessel, MV Eastern Venus V-17S, again in favor of Calamba Steel.9 This third shipment had a declared value of
US$476,416.90 and was also insured by Sumitomo with Mitsui. The same arrived at
the port of Manila on or about October 11, 2003. Upon its discharge, six coils were
observed to be in bad condition. Thereafter, the possession of the cargo was turned
over to ATI for stevedoring, storage and safekeeping pending withdrawal thereof by
Calamba Steel. The damaged portion of the goods being unfit for its intended
purpose, Calamba Steel rejected the damaged portion, valued at US$14,782.05,
upon ATIs delivery of the third shipment.10
WHEREFORE, the Court AFFIRMS the decision promulgated on March 26, 2003; and
ORDERS the petitioner to pay the costs of suit.
SO ORDERED.
G.R. No. 193986
January 15, 2014
EASTERN
SHIPPING
vs.
BPI/MS INSURANCE CORP. and
LTD., Respondents.
LINES
MITSUI
SUM
INC., Petitioner,
TOMO
INSURANCE
CO.
Calamba Steel filed an insurance claim with Mitsui through the latters settling agent,
respondent BPI/MS Insurance Corporation (BPI/MS), and the former was paid the
sums of US$7,677.12, US$14,782.05 and US$7,751.15 for the damage suffered by all
three shipments or for the total amount of US$30,210.32. Correlatively, on August
31, 2004, as insurer and subrogee of Calamba Steel, Mitsui and BPI/MS filed a
Complaint for Damages against petitioner and ATI. 11
DECISION
VILLARAMA, JR., J.:
Before this Court is a petition 1 for review on certiorari under Rule 45 of the 1997
Rules of Civil Procedure, as amended, seeking the reversal of the Decision 2 of the
Court of Appeals (CA) in CA-G.R. CV No. 88361, which affirmed with modification the
Decision3 of the Regional Trial Court (RTC), of Makati City, Branch 138 in Civil Case
No. 04-1005.
As synthesized by the RTC in its decision, during the pre-trial conference of the case,
the following facts were established, viz:
1. The fact that there were shipments made on or about August 29, 2003, September
13, 2003 and September 29, 2003 by Sumitomo to Calamba Steel through
petitioners vessels;
The facts follow:

On August 29, 2003, Sumitomo Corporation (Sumitomo) shipped through MV Eastern
Challenger V-9-S, a vessel owned by petitioner Eastern Shipping Lines, Inc.
(petitioner), 31 various steel sheets in coil weighing 271,828 kilograms from
Yokohama, Japan for delivery in favor of the consignee Calamba Steel Center Inc.
(Calamba Steel).4The cargo had a declared value of US$125,417.26 and was insured
against all risk by Sumitomo with respondent Mitsui Sumitomo Insurance Co., Ltd.
(Mitsui). On or about September 6 2003, the shipment arrived at the port of Manila.
Upon unloading from the vessel, nine coils were observed to be in bad condition as
evidenced by the Turn Over Survey of Bad Order Cargo No. 67327. The cargo was
then turned over to Asian Terminals, Inc. (ATI) for stevedoring, storage and
safekeeping pending Calamba Steels withdrawal of the goods. When ATI delivered
2. The declared value of the said shipments and the fact that the shipments were
insured by respondents;
3. The shipments arrived at the port of Manila on or about September 6, 2003,
September 23, 2003 and October 11, 2003 respectively;
4. Respondents paid Calamba Steels total claim in the amount of US$30,210.32. 12
Trial on the merits ensued.
On September 17, 2006, the RTC rendered its Decision, 13 the dispositive portion of
which provides:
96
obligations
WHEREFORE, judgment is hereby rendered in favor of the plaintiff and against

defendants Eastern Shipping Lines, Inc. and Asian Terminals, Inc., jointly and
severally, ordering the latter to pay plaintiffs the following:
unqualifiedly executed by petitioners own surveyor, Rodrigo Victoria, together with

the representative of ATI. Respondents assert that petitioner would not have
executed such documents if the goods, as it claims, did not suffer any damage prior
to their turn-over to ATI. Lastly, respondents aver that petitioner, being a common
carrier is required by law to observe extraordinary diligence in the vigilance over the
goods it carries.22
1. Actual damages amounting to US$30,210.32 plus 6% legal interest thereon

commencing from the filing of this complaint, until the same is fully paid;
2. Attorneys fees in a sum equivalent to 25% of the amount claimed;
Simply put, the core issue in this case is whether the CA committed any reversible
error in finding that petitioner is solidarily liable with ATI on account of the damage
incurred by the goods.
3. Costs of suit. The defendants counterclaims and ATIs crossclaim are DISMISSED
for lack of merit.
The Court resolves the issue in the negative.
SO ORDERED.14
Well entrenched in this jurisdiction is the rule that factual questions may not be
raised before this Court in a petition for review on certiorari as this Court is not a trier
of facts. This is clearly stated in Section 1, Rule 45 of the 1997 Rules of Civil
Procedure, as amended, which provides:
Aggrieved, petitioner and ATI appealed to the CA. On July 9, 2010, the CA in its
assailed Decision affirmed with modification the RTCs findings and ruling, holding,
among others, that both petitioner and ATI were very negligent in the handling of the
subject cargoes. Pointing to the affidavit of Mario Manuel, Cargo Surveyor, the CA
found that "during the unloading operations, the steel coils were lifted from the
vessel but were not carefully laid on the ground. Some were even dropped while
still several inches from the ground while other coils bumped or hit one another at
the pier while being arranged by the stevedores and forklift operators of ATI and
[petitioner]." The CA added that such finding coincides with the factual findings of
the RTC that both petitioner and ATI were both negligent in handling the goods.
However, for failure of the RTC to state the justification for the award of attorneys
fees in the body of its decision, the CA accordingly deleted the same. 15 Petitioner
filed its Motion for Reconsideration16 which the CA, however, denied in its
Resolution17 dated October 6, 2010.
SECTION 1. Filing of petition with Supreme Court. A party desiring to appeal by

certiorari from a judgment or final order or resolution of the Court of Appeals, the
Sandiganbayan, the Regional Trial Court or other courts whenever authorized by law,
may file with the Supreme Court a verified petition for review on certiorari. The
petition shall raise only questions of law which must be distinctly set forth.
Thus, it is settled that in petitions for review on certiorari, only questions of law may
be put in issue. Questions of fact cannot be entertained. 23
A question of law exists when the doubt or controversy concerns the correct
application of law or jurisprudence to a certain set of facts, or when the issue does
not call for an examination of the probative value of the evidence presented, the
truth or falsehood of facts being admitted. A question of fact exists when the doubt
or difference arises as to the truth or falsehood of facts or when the query invites
calibration of the whole evidence considering mainly the credibility of the witnesses,
the existence and relevancy of specific surrounding circumstances as well as their
relation to each other and to the whole, and the probability of the situation. 24
Both petitioner and ATI filed their respective separate petitions for review on
certiorari before this Court.1wphi1 However, ATIs petition, docketed as G.R. No.
192905, was denied by this Court in our Resolution 18 dated October 6, 2010 for
failure of ATI to show any reversible error in the assailed CA decision and for failure of
ATI to submit proper verification. Said resolution had become final and executory on
March 22, 2011.19 Nevertheless, this Court in its Resolution 20 dated September 3,
2012, gave due course to this petition and directed the parties to file their respective
memoranda.
In this petition, the resolution of the question as to who between petitioner and ATI
should be liable for the damage to the goods is indubitably factual, and would clearly
impose upon this Court the task of reviewing, examining and evaluating or weighing
all over again the probative value of the evidence presented 25 something which is
not, as a rule, within the functions of this Court and within the office of a petition for
review on certiorari.
In its Memorandum,21 petitioner essentially avers that the CA erred in affirming the
decision of the RTC because the survey reports submitted by respondents
themselves as their own evidence and the pieces of evidence submitted by petitioner
clearly show that the cause of the damage was the rough handling of the goods by
ATI during the discharging operations. Petitioner attests that it had no participation
whatsoever in the discharging operations and that petitioner did not have a choice in
selecting the stevedore since ATI is the only arrastre operator mandated to conduct
discharging operations in the South Harbor. Thus, petitioner prays that it be absolved
from any liability relative to the damage incurred by the goods.
While it is true that the aforementioned rule admits of certain exceptions, 26 this Court
finds that none are applicable in this case. This Court finds no cogent reason to
disturb the factual findings of the RTC which were duly affirmed by the CA.
Unanimous with the CA, this Court gives credence and accords respect to the factual
findings of the RTC a special commercial court 27 which has expertise and
specialized knowledge on the subject matter 28 of maritime and admiralty
highlighting the solidary liability of both petitioner and ATI. The RTC judiciously found:
On the other hand, respondents counter, among others, that as found by both the
RTC and the CA, the goods suffered damage while still in the possession of petitioner
as evidenced by various Turn Over Surveys of Bad Order Cargoes which were
97
obligations
x x x The Turn Over Survey of Bad Order Cargoes (TOSBOC, for brevity) No. 67393
and Request for Bad Order Survey No. 57692 show that prior to the turn over of the
first shipment to the custody of ATI, eleven (11) of the twenty-eight (28) coils were
already found in bad order condition. Eight (8) of the said eleven coils were already
"partly dented/crumpled " and the remaining three (3) were found "partly dented,
scratches on inner hole, crumple (sic)". On the other hand, the TOSBOC No. 67457
and Request for Bad Order Survey No. 57777 also show that prior to the turn over of
the second shipment to the custody of ATI, a total of six (6) coils thereof were already
"partly dented on one side, crumpled/cover detach (sic)". These documents were
issued by ATI. The said TOSBOCs were jointly executed by ATI, vessels
representative and surveyor while the Requests for Bad Order Survey were jointly
executed by ATI, consignees representative and the Shed Supervisor. The
aforementioned documents were corroborated by the Damage Report dated 23
September 2003 and Turn Over Survey No. 15765 for the first shipment, Damage
Report dated 13 October 2003 and Turn Over Survey No. 15772 for the second
shipment and, two Damage Reports dated 6 September 2003 and Turn Over Survey
No. 15753 for the third shipment.
Verily, it is settled in maritime law jurisprudence that cargoes while being unloaded
generally remain under the custody of the carrier. 30 As hereinbefore found by the RTC
and affirmed by the CA based on the evidence presented, the goods were damaged
even before they were turned over to ATI. Such damage was even compounded by
the negligent acts of petitioner and ATI which both mishandled the goods during the
discharging operations. Thus, it bears stressing unto petitioner that common carriers,
from the nature of their business and for reasons of public policy, are bound to
observe extraordinary diligence in the vigilance over the goods transported by them.
Subject to certain exceptions enumerated under Article 1734 31 of the Civil Code,
common carriers are responsible for the loss, destruction, or deterioration of the
goods. The extraordinary responsibility of the common carrier lasts from the time the
goods are unconditionally placed in the possession of, and received by the carrier for
transportation until the same are delivered, actually or constructively, by the carrier
to the consignee, or to the person who has a right to receive them. 32 Owing to this
high degree of diligence required of them, common carriers, as a general rule, are
presumed to have been at fault or negligent if the goods they transported
deteriorated or got lost or destroyed. That is, unless they prove that they exercised
extraordinary diligence in transporting the goods. In order to avoid responsibility for
any loss or damage, therefore, they have the burden of proving that they observed
such high level of diligence.33 In this case, petitioner failed to hurdle such burden.
It was shown to this Court that a Request for Bad Order Survey is a document which
is requested by an interested party that incorporates therein the details of the
damage, if any, suffered by a shipped commodity. Also, a TOSBOC, usually issued by
the arrastre contractor (ATI in this case), is a form of certification that states therein
the bad order condition of a particular cargo, as found prior to its turn over to the
custody or possession of the said arrastre contractor.
In sum, petitioner failed to show any reversible error on the part of the CA in
affirming the ruling of the RTC as to warrant the modification, much less the reversal
of its assailed decision.
The said Damage Reports, Turn Over Survey Reports and Requests for Bad Order
Survey led the Court to conclude that before the subject shipments were turned over
to ATI, the said cargo were already in bad order condition due to damage sustained
during the sea voyage. Nevertheless, this Court cannot turn a blind eye to the fact
that there was also negligence on the part of the employees of ATI and [Eastern
Shipping Lines, Inc.] in the discharging of the cargo as observed by plaintiffs
witness, Mario Manuel, and [Eastern Shipping Lines, Inc.s] witness, Rodrigo Victoria.
WHEREFORE, the petition is DENIED. The Decision dated July 9, 2010 of the Court of
Appeals in CA-G.R. CV No. 88361 is hereby AFFIRMED.
In ascertaining the cause of the damage to the subject shipments, Mario Manuel
stated that the "coils were roughly handled during their discharging from the vessel
to the pier of (sic) ASIAN TERMINALS, INC. and even during the loading operations of
these coils from the pier to the trucks that will transport the coils to the consignees
warehouse. During the aforesaid operations, the employees and forklift operators of
EASTERN SHIPPING LINES and ASIAN TERMINALS, INC. were very negligent in the
handling of the subject cargoes. Specifically, "during unloading, the steel coils were
lifted from the vessel and not carefully laid on the ground, sometimes were even
dropped while still several inches from the ground. The tine (forklift blade) or the
portion that carries the coils used for the forklift is improper because it is pointed and
sharp and the centering of the tine to the coils were negligently done such that the
pointed and sharp tine touched and caused scratches, tears and dents to the coils.
Some of the coils were also dragged by the forklift instead of being carefully lifted
from one place to another. Some coils bump/hit one another at the pier while being
arranged by the stevedores/forklift operators of ASIAN TERMINALS, INC. and
EASTERN SHIPPING LINES.29 (Emphasis supplied.)
MACARIA ARGUELLES and the HEIRS OF

ARGUELLES, Petitioners,
vs.
MALARAYAT RURAL BANK, INC., Respondent.
With costs against the petitioner.

SO ORDERED.
G.R. No. 200468
March 19, 2014

THE
DECEASED
PETRONIO
DECISION
VILLARAMA, JR., J.:
Before us is a petition for review on certiorari assailing the Decision 1 dated December
19, 2011 and Resolution2dated February 6, 2012 of the Court of Appeals (CA) in CAG.R . CV No. 92555. The CA had reversed and set aside the July 29, 2008 Decision 3 of
the Regional Trial Court (RTC) Branch 86, of Taal, Batangas, in Civil Case No. 66.
The facts, as culled from the records, follow:
The late Fermina M. Guia was the registered owner of Lot 3, a parcel of agricultural
land in Barrio Pinagkurusan, Alitagtag, Batangas, with an area of 4,560 square
98
obligations
meters, as evidenced by Original Certificate of Title (OCT) No. P-12930 4 of the

Register of Deeds of Batangas. On December 1, 1990, Fermina M. Guia sold the
south portion of the land with an approximate area of 1,350 square meters to the
spouses Petronio and Macaria Arguelles. 5 Although the spouses Arguelles
immediately acquired possession of the land, the Deed of Sale was neither registered
with the Register of Deeds nor annotated on OCT No. P-12930. At the same time,
Fermina M. Guia ordered her son Eddie Guia and the latter's wife Teresita Guia to
subdivide the land covered by OCT No. P-12930 into three lots and to apply for the
issuance of separate titles therefor, to wit: Lot 3-A, Lot 3-B, and Lot 3-C. Thereafter,
she directed the delivery of the Transfer Certificate of Title (TCT) corresponding to Lot
3-C to the vendees of the unregistered sale or the spouses Arguelles. However,
despite their repeated demands, the spouses Arguelles claimed that they never
received the TCT corresponding to Lot 3-C from the spouses Guia.
nullity of the mortgage lien, the spouses Arguelles alleged ownership over the land
that had been mortgaged in favor of the respondent Malarayat Rural Bank. On
August 16, 1999, the respondent Malarayat Rural Bank filed an Answer with
Counterclaim and Cross-claim11 against cross-claim-defendant spouses Gui a wherein
it argued that the failure of the spouses Arguelles to register the Deed of Sale dated
December 1, 1990 was fatal to their claim of ownership.
Nevertheless, in accordance with the instructions of Fermina M. Guia, the spouses

Guia succeeded in cancelling OCT No. P-12930 on August 15, 1994 and in
subdividing the lot in the following manner:
2) setting aside the foreclosure sale had on December 6, 1999 and the corresponding
certificate of sale issued by this Court dated May 12, 2000;
Lot No.
TCT No.
On July 29, 2008, the RTC rendered a Decision, the dispositive portion of which reads
as follows:
WHEREFORE, premises considered judgment is hereby rendered:
1) declaring the mortgage made by the defendants spouses Eddie Guia and Teresita
Guia in favor of defendant Malarayat Rural Bank null and void;
3) ordering the Register of Deeds of the Province of Batangas to cancel the

annotation pertaining to the memorandum of encumbrances (entries no. 155686 and
155688) appearing in TCT No. T-839[4]4;
Registered Owner
3-A
T-83943
Fermina M. Guia
3-B
T-83945
Spouses Datingaling
3-C
T-83944
Fermina M. Guia6
4) ordering cross defendants spouses Eddie and Teresita Guia to pay the amount of
Php240,000.00 to cross claimant Malarayat Rural [B]ank corresponding to the total
amount of the loan obligation, with interest herein modified at 12% per annum
computed from default;
5) ordering defendants spouses Eddie and Teresita Guia to pay plaintiffs Arguelles
the amount of Php100,000.00 as moral damages. However, the prayer of the
plaintiffs to order the registration of the deed of sale in their favor as well as the
subsequent issuance of a new title in their names as the registered owners is denied
considering that there are other acts that the plaintiffs ought to do which are
administrative in nature, and are dependent upon compliance with certain
requirements pertaining to land acquisition and transfer.
On August 18, 1997, the spouses Guia obtained a loan in the amount of P240,000
from the respondent Malarayat Rural Banlc and secured the loan with a Deed of Real
Estate Mortgage7 over Lot 3-C. The loan and Real Estate Mortgage were made
pursuant to the Special Power of Attorney 8 purportedly executed by the registered
owner of Lot 3-C, Fermina M. Guia, in favor of the mortgagors, spouses Guia.
Moreover, the Real Estate
SO ORDERED.12
The RTC found that the spouses Guia were no longer the absolute owners of the land
described as Lot 3-C and covered by TCT No. T-83944 at the time they mortgaged the
same to the respondent Malarayat Rural Bank in view of the unregistered sale in
favor of the vendee spouses Arguelles. Thus, the RTC annulled the real estate
mortgage, the subsequent foreclosure sale, and the corresponding issuance of the
certificate of title. Moreover, the RTC declared that the respondent Malarayat Rural
Bank was not a mortgagee in good faith as it failed to exercise the exacting degree
of diligence required from banking institutions.
Mortgage and Special Power of Attorney were duly annotated in the memorandum of
encumbrances of TCT No. T-83944 covering Lot 3-C.
The spouses Arguelles alleged that it was only in 1997 or after seven years from the
date of the unregistered sale that they discovered from the Register of Deeds of
Batangas City the following facts: (1) subdivision of Lot 3 into Lots 3-A, 3-B, and 3-C;
(2) issuance of separate TCTs for each lot; and (3) the annotation of the Real Estate
Mortgage and Special Power of Attorney over Lot 3-C covered by TCT No. T-83944.
Two years thereafter, or on June 17, 1999, the spouses Arguelles registered their
adverse claim9 based on the unregistered sale dated December 1, 1990 over Lot 3-C.
On September 16, 2008, the respondent filed a notice of appeal with the CA.
On December 19, 2011, the CA reversed and set aside the decision of the court a
quo:
On July 22, 1999, the spouses Arguelles filed a complaint 10 for Annulment of
Mortgage and Cancellation of Mortgage Lien with Damages against the respondent
Malarayat Rural Banlc with the RTC, Branch 86, of Taal, Batangas. In asserting the
99
obligations
IN LIGHT OF THE FOREGOING, premises considered, the instant appeal is GRANTED.

Accordingly, the Decision of the RTC of Taal, Batangas, Branch 86 promulgated on
July 29, 2008 in Civil Case No. 66 is hereby REVERSED AND SET ASIDE and the
complaint below dismissed.
extensive investigation of the title of the registered owner. And since the respondent
Malarayat Rural Bank cannot be considered a mortgagee in good faith, petitioners
argued that the unregistered sale in their favor takes precedence over the duly
registered mortgage lien. On the other hand, respondent Malarayat Rural Bank
claimed that it exercised the required degree of diligence before granting the loan
application. In particular, it asserted the absence of any facts or circumstances that
can reasonably arouse suspicion in a prudent person. Thus, the respondent
Malarayat Rural Bank argued that it is a mortgagee in good faith with a better right
to the mortgaged land as compared to the vendees to the unregistered sale.
SO ORDERED.13
In granting the appeal, the CA held that because of the failure of the spouses
Arguelles to register their deed of sale, the unregistered sale could not affect the
respondent Malarayat Rural Bank. Thus, the respondent Malarayat Rural Bank has a
better right to the land mortgaged as compared to spouses Arguelles who were the
vendees in the unregistered sale. In addition, the CA found that the respondent
Malarayat Rural Bank was a mortgagee in good faith as it sufficiently demonstrated
due diligence in approving the loan application of the spouses Guia. Aggrieved, the
petitioners filed the instant petition raismg the following issues for resolution:
The petition is meritorious.

At the outset, we note that the issue of whether a mortgagee is in good faith
generally cannot be entertained in a petition filed under Rule 45 of the 1997 Rules of
Civil Procedure, as amended.15 This is because the ascertainment of good faith or the
lack thereof, and the determination of negligence are factual matters which lay
outside the scope of a petition for review on certiorari. 16 However, a recognized
exception to this rule is when the RTC and the CA have divergent findings of fact 17 as
in the case at bar. We find that the respondent Malarayat Rural Bank is not a
mortgagee in good faith. Therefore, the spouses Arguelles as the vendees to the
unregistered sale have a superior right to the mortgaged land.
A
THE COURT OF APPEALS ERRED IN HOLDING THAT THE DEED OF SALE EXECUTED BY
FERMINA GUIA IN FAVOR OF THE SPOUSES PETRONIO AND MACARIA ARGUELLES
CANNOT BE ENFORCED AGAINST APPELLANT BANK FOR NOT BEING REGISTERED
AND ANNOTATED IN THE CERTIFICATE OF TITLE, DESPITE THE FACT THAT THE BANK
HAD ACTUAL KNOWLEDGE THEREOF.
In Cavite Development Bank v. Spouses Lim,18 the Court explained the doctrine of
mortgagee in good faith, thus:
There is, however, a situation where, despite the fact that the mortgagor is not the
owner of the mortgaged property, his title being fraudulent, the mortgage contract
and any foreclosure sale arising therefrom are given effect by reason of public policy.
This is the doctrine of "mortgagee in good faith" based on the rule that all persons
dealing with the property covered by a Torrens Certificate of Title, as buyers or
mortgagees, are not required to go beyond what appears on the face of the title. The
public interest in upholding the indefeasibility of a certificate of title, as evidence of
lawful ownership of the land or of any encumbrance thereon, protects a buyer or
mortgagee who, in good faith, relied upon what appears on the face of the certificate
of title.
THE COURT OF APPEALS COMMITTED A MISTAKE IN FINDING THAT APPELLANT BANK

IS A MORTGAGEE IN GOOD FAITH NOTWITHSTANDING CONCLUSIVE EVIDENCE ON
RECORD THAT IT WAS GROSSLY NEGLIGENT IN NOT ASCERTAINING THE REAL
CONDITION OF THE PROPERTY IN THE POSSESSION OF THE SPOUSES ARGUELLES
BEFORE ACCEPTING IT AS COLLATERAL FOR THE LOAN APPLIED FOR BY A MERE
ATTORNEY-IN-FACT.
C
THE COURT OF APPEALS COMMITTED AN ERROR IN DECLARING APPELLANT BANK
HAS
BECOME
THE
ABSOLUTE
OWNER
OF
THE
SUBJECT
PROPERTY
NOTWITHSTANDING THE NULLITY OF THE REAL ESTATE MORTGAGE EXTRAJUDICIALL Y
FORECLOSED BY IT.
In Bank of Commerce v. Spouses San Pablo, Jr., 19 we declared that indeed, a

mortgagee has a right to rely in good faith on the certificate of title of the mortgagor
of the property offered as security, and in the absence of any sign that might arouse
suspicion, the mortgagee has no obligation to undertake further investigation.
However, in Bank of Commerce v. Spouses San Pablo, Jr., 20 we also ruled that "[i]n
cases where the mortgagee does not directly deal with the registered owner of real
property, the law requires that a higher degree of prudence be exercised by the
mortgagee." Specifically, we cited Abad v. Sps. Guimbci 21 where we held, "x x x While
one who buys from the registered owner does not need to look behind the certificate
of title, one who buys from one who is not the registered owner is expected to
examine not only the certificate of title but all factual circumstances necessary for
[one] to determine if there are any flaws in the title of the transferor, or in [the]
capacity to transfer the land. " Although the instant case does not involve a sale but
THE COURT OF APPEALS ERRED IN HOLDING THAT THE SPOUSES ARGUELLES DID
NOT PUT IN ISSUE THAT APPELLANT BANK HAD CONSTRUCTIVE NOTICE AND
POSSESSION OF THE SUBJECT LOT.14
In fine, the issue in this case is whether the respondent Malarayat Rural Bank is a
mortgagee in good faith who is entitled to protection on its mortgage lien.
Petitioners imputed negligence on the part of respondent Malarayat Rural Bank when
it approved the loan application of the spouses Guia. They pointed out that the bank
failed to conduct a thorough ocular inspection of the land mortgaged and an
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obligations
only a mortgage, the same rule applies inasmuch as the law itself includes a
mortgagee in the term "purchaser."
banking system is an indispensable institution in the modem world and plays a vital
role in the economic life of every civilized nation. Whether as mere passive entities
for the safekeeping and saving of money or as active instruments of business and
commerce, banks have become an ubiquitous presence among the people, who have
come to regard them with respect and even gratitude and, most of all, confidence.
Thus, where the mortgagor is not the registered owner of the property but is merely
an attorney-in-fact of the same, it is incumbent upon the mortgagee to exercise
greater care and a higher degree of prudence in dealing with such
mortgagor.22 Recently, in Land Bank of the Philippines v. Poblete, 23 we affirmed Bank
of Commerce v. Spouses San Pablo, Jr.:
In this case, we find that the respondent Malarayat Rural Bank fell short of the
required degree of diligence, prudence, and care in approving the loan application of
the spouses Guia.
Based on the evidence, Land Bank processed Maniego's loan application upon his
presentation of OCT No. P-12026, which was still under the name of Poblete. Land
Bank even ignored the fact that Kapantay previously used Poblete's title as collateral
in its loan account with Land Bank. In Bank of Commerce v. San Pablo, Jr., we held
that when "the person applying for the loan is other than the registered owner of the
real property being mortgaged, [such fact] should have already raised a red flag and
which should have induced the Bank xx x to make inquiries into and confirm x x x
[the] authority to mortgage x x x. A person who deliberately ignores a significant fact
that could create suspicion in an otherwise reasonable person is not an innocent
purchaser for value."
Respondent should have diligently conducted an investigation of the land offered as

collateral.1wphi1 Although the Report of Inspection and Credit Investigation found
at the dorsal portion of the Application for Agricultural Loan 29 proved that the
respondent Malarayat Rural Bank inspected the land, the respondent turned a blind
eye to the finding therein that the "lot is planted [with] sugarcane with annual yield
(crops) in the amount of P15,000."30
We disagree with respondent's stance that the mere planting and harvesting of
sugarcane cannot reasonably trigger suspicion that there is adverse possession over
the land offered as mortgage. Indeed, such fact should have immediately prompted
the respondent to conduct further inquiries, especially since the spouses Guia were
not the registered owners of the land being mortgaged. They merely derived the
authority to mortgage the lot from the Special Power of Attorney allegedly executed
by the late Fermina M. Guia. Hence, it was incumbent upon the respondent Malarayat
Rural Bank to be more cautious in dealing with the spouses Guia, and inquire further
regarding the identity and possible adverse claim of those in actual possession of the
property.
Moreover, in a long line of cases, we have consistently enjoined banks to exert a

higher degree of diligence, care, and prudence than individuals in handling real
estate transactions.
In Cruz v. Bancom Finance Corporation,24 we declared:
Respondent, however, is not an ordinary mortgagee; it is a mortgagee-bank. As such,
unlike private individuals, it is expected to exercise greater care and prudence in its
dealings, including those involving registered lands. A banking institution is expected
to exercise due diligence before entering into a mortgage contract. The
ascertainment of the status or condition of a property offered to it as security for a
loan must be a standard and indispensable part of its operations.
Pertinently, in Land Bank of the Philippines v. Poblete, 31 we ruled that "[w]here the
mortgagee acted with haste in granting the mortgage loan and did not ascertain the
ownership of the land being mortgaged, as well as the authority of the supposed
agent executing the mortgage, it cannot be considered an innocent mortgagee."
In Ursal v. Court of Appeals,25 we held that where the mortgagee is a bank, it cannot
rely merely on the certificate of title offered by the mortgagor in ascertaining the
status of mortgaged properties. Since its business is impressed with public interest,
the mortgagee-bank is duty-bound to be more cautious even in dealing with
registered lands.26Indeed, the rule that person dealing with registered lands can rely
solely on the certificate of title does not apply to banks. Thus, before approving a
loan application, it is a standard operating practice for these institutions to conduct
an ocular inspection of the property offered for mortgage and to verify the
genuineness of the title to determine the real owners thereof. The apparent purpose
of an ocular inspection is to protect the "true owner" of the property as well as
innocent third parties with a right, interest or claim thereon from a usurper who may
have acquired a fraudulent certificate of title thereto. 27
Since the subject land was not mortgaged by the owner thereof and since the
respondent Malarayat Rural Bank is not a mortgagee in good faith, said bank is not
entitled to protection under the law. The unregistered sale in favor of the spouses
Arguelles must prevail over the mortgage lien of respondent Malarayat Rural Bank.
In Metropolitan Bank and Trust Co. v. Cabilzo, 28 we explained the socio-economic role
of banks and the reason for bestowing public interest on the banking system:
SO ORDERED
WHEREFORE, the petition for review on certiorari is GRANTED. The Decision dated
December 19, 2011 and Resolution dated February 6, 2012 of the Court of Appeals in
CA-G.R. CV No. 92555 are REVERSED and SET ASIDE. The Decision dated July 29,
2008 of the Regional Trial Court, Branch 86, of Taal, Batangas, in Civil Case No. 66 is
REINSTATED and UPHELD.
No pronouncement as to costs.
G.R. No. 192123
We never fail to stress the remarkable significance of a banking institution to

commercial transactions, in particular, and to the country's economy in general. The
101
March 10, 2014

DR.
FERNANDO
P.
vs.
PEOPLE OF THE PHILIPPINES, Respondent.
obligations
SOLIDUM, Petitioner,
The case was initially filed in the Metropolitan Trial Court of Manila, but was
transferred to the RTC pursuant to Section 5 of Republic Act No. 8369 (The Family
Courts Act of 1997),15 where it was docketed as Criminal Case No. 01-190889.
This appeal is taken by a physician-anesthesiologist who has been pronounced guilty

of reckless imprudence resulting in serious physical injuries by the Regional Trial
Court (RTC) and the Court of Appeals (CA). He had been part of the team of
anesthesiologists during the surgical pull-through operation conducted on a threeyear old patient born with an imperforate anus.1
Judgment of the RTC
The antecedents are as follows:
WHEREFORE, premises considered, the Court finds accused DR. FERNANDO P.

SOLIDUM GUILTY beyond reasonable doubt as principal of the crime charged and is
hereby sentenced to suffer the indeterminate penalty of TWO (2) MONTHS and ONE
(1) DAY of arresto mayor as minimum to ONE (1) YEAR, ONE (1) MONTH and TEN (10)
DAYS of prision correccional as maximum and to indemnify, jointly and severally with
the Ospital ng Maynila, Dr. Anita So and Dr. Marichu Abella, private complainant Luz
Gercayo, the amount of P500,000.00 as moral damages and P100,000.00 as
exemplary damages and to pay the costs.
On July 19, 2004, the RTC rendered its judgment finding Dr. Solidum guilty beyond
reasonable doubt of reckless imprudence resulting to serious physical
injuries,16 decreeing:
Gerald Albert Gercayo (Gerald) was born on June 2, 1992 2 with an imperforate anus.
Two days after his birth, Gerald underwent colostomy, a surgical procedure to bring
one end of the large intestine out through the abdominal wall, 3 enabling him to
excrete through a colostomy bag attached to the side of his body. 4
On May 17, 1995, Gerald, then three years old, was admitted at the Ospital ng
Maynila for a pull-through operation. 5Dr. Leandro Resurreccion headed the surgical
team, and was assisted by Dr. Joselito Luceo, Dr. Donatella Valea and Dr. Joseph
Tibio. The anesthesiologists included Dr. Marichu Abella, Dr. Arnel Razon and
petitioner Dr. Fernando Solidum (Dr. Solidum). 6 During the operation, Gerald
experienced bradycardia,7 and went into a coma.8His coma lasted for two weeks, 9 but
he regained consciousness only after a month.10 He could no longer see, hear or
move.11
Accordingly, the bond posted by the accused for his provisional liberty is hereby
CANCELLED.
SO ORDERED.17
Upon motion of Dr. Anita So and Dr. Marichu Abella to reconsider their solidary
liability,18 the RTC excluded them from solidary liability as to the damages, modifying
its decision as follows:
Agitated by her sons helpless and unexpected condition, Ma. Luz Gercayo (Luz)
lodged a complaint for reckless imprudence resulting in serious physical injuries with
the City Prosecutors Office of Manila against the attending physicians. 12
WHEREFORE, premises considered, the Court finds accused Dr. Fernando Solidum,
guilty beyond reasonable doubt as principal of the crime charged and is hereby
sentenced to suffer the indeterminate penalty of two (2) months and one (1) day of
arresto mayor as minimum to one (1) year, one (1) month and ten (10) days of
prision correccional as maximum and to indemnify jointly and severally with Ospital
ng Maynila, private complainant Luz Gercayo the amount of P500,000.00 as moral
damages and P100,000 as exemplary damages and to pay the costs.
Upon a finding of probable cause, the City Prosecutors Office filed an information
solely against Dr. Solidum,13alleging:
That on or about May 17, 1995, in the City of Manila, Philippines, the said accused,
being then an anesthesiologist at the Ospital ng Maynila, Malate, this City, and as
such was tasked to administer the anesthesia on three-year old baby boy GERALD
ALBERT GERCAYO, represented by his mother, MA. LUZ GERCAYO, the former having
been born with an imperforate anus [no anal opening] and was to undergo an
operation for anal opening [pull through operation], did then and there willfully,
unlawfully and feloniously fail and neglect to use the care and diligence as the best
of his judgment would dictate under said circumstance, by failing to monitor and
regulate properly the levels of anesthesia administered to said GERALD ALBERT
GERCAYO and using 100% halothane and other anesthetic medications, causing as a
consequence of his said carelessness and negligence, said GERALD ALBERT GERCAYO
suffered a cardiac arrest and consequently a defect called hypoxic encephalopathy
meaning insufficient oxygen supply in the brain, thereby rendering said GERALD
ALBERT GERCAYO incapable of moving his body, seeing, speaking or hearing, to his
damage and prejudice.
Accordingly, the bond posted by the accused for his provisional liberty is hereby
cancelled.19
Decision of the CA
On January 20, 2010, the CA affirmed the conviction of Dr. Solidum, 20 pertinently
stating and ruling:
The case appears to be a textbook example of res ipsa loquitur.
xxxx
x x x [P]rior to the operation, the child was evaluated and found fit to undergo a
major operation. As noted by the OSG, the accused himself testified that preoperation tests were conducted to ensure that the child could withstand the surgery.
Except for his imperforate anus, the child was healthy. The tests and other
Contrary to law.14
102
obligations
procedures failed to reveal that he was suffering from any known ailment or disability
that could turn into a significant risk. There was not a hint that the nature of the
operation itself was a causative factor in the events that finally led to hypoxia.
THE HONORABLE COURT OF APPEALS ERRED IN AFFIRMING THE DECISION OF THE

LOWER COURT IN UPHOLDING THE PETITIONERS CONVICTION FOR THE CRIME
CHARGED BASED ON THE TRIAL COURTS OPINION, AND NOT ON THE BASIS OF THE
FACTS ESTABLISHED DURING THE TRIAL. ALSO, THERE IS A CLEAR
MISAPPREHENSION OF FACTS WHICH IF CORRECTED, WILL RESULT TO THE
ACQUITTAL OF THE PETITIONER. FURTHER, THE HONORABLE COURT ERRED IN
AFFIRMING THE SAID DECISION OF THE LOWER COURT, AS THIS BREACHES THE
CRIMINAL LAW PRINCIPLE THAT THE PROSECUTION MUST PROVE THE ALLEGATIONS
OF THE INFORMATION BEYOND REASONABLE DOUBT, AND NOT ON THE BASIS OF ITS
PRESUMPTIVE CONCLUSION.
In short, the lower court has been left with no reasonable hypothesis except to
attribute the accident to a failure in the proper administration of anesthesia, the
gravamen of the charge in this case. The High Court elucidates in Ramos vs. Court of
Appeals 321 SCRA 584
In cases where the res ipsa loquitur is applicable, the court is permitted to find a
physician negligent upon proper proof of injury to the patient, without the aid of
expert testimony, where the court from its fund of common knowledge can
determine the proper standard of care.
II.
THE HONORABLE COURT OF APPEALS ERRED IN APPLYING THE PRINCIPLE OF RES
IPSA LOQUITOR (sic) WHEN THE DEFENSE WAS ABLE TO PROVE THAT THERE IS NO
NEGLIGENCE ON THE PART OF THE PETITIONER, AND NO OVERDOSING IN THE
APPLICATION OF THE ANESTHETIC AGENT BECAUSE THERE WAS NO 100%
HALOTHANE ADMINISTERED TO THE CHILD, BUT ONLY ONE (1%) PERCENT AND THE
APPLICATION THEREOF, WAS REGULATED BY AN ANESTHESIA MACHINE. THUS, THE
APPLICATION OF THE PRINCIPLE OF RES IPSA LOQUITOR (sic) CONTRADICTED THE
ESTABLISHED FACTS AND THE LAW APPLICABLE IN THE CASE.
Where common knowledge and experience teach that a resulting injury would not
have occurred to the patient if due care had been exercised, an inference of
negligence may be drawn giving rise to an application of the doctrine of res ipsa
loquitur without medical evidence, which is ordinarily required to show not only what
occurred but how and why it occurred. When the doctrine is appropriate, all that the
patient must do is prove a nexus between the particular act or omission complained
of and the injury sustained while under the custody and management of the
defendant without need to produce expert medical testimony to establish the
standard of care. Resort to res ipsa loquitur is allowed because there is no other way,
under usual and ordinary conditions, by which the patient can obtain redress for
injury suffered by him.
III.
THE AWARD OF MORAL DAMAGES AND EXEMPLARY DAMAGES IS NOT JUSTIFIED
THERE BEING NO NEGLIGENCE ON THE PART OF THE PETITIONER. ASSUMING THAT
THE CHILD IS ENTITLED TO FINANCIAL CONSIDERATION, IT SHOULD BE ONLY AS A
FINANCIAL ASSISTANCE, BECAUSE THERE WAS NO NEGLIGENCE, AND NO
OVERDOSING OF ANESTHETIC AGENT AND AS SUCH, THE AWARD IS SO EXCESSIVE,
AND NO FACTUAL AND LEGAL BASIS.23
The lower court has found that such a nexus exists between the act complained of
and the injury sustained, and in line with the hornbook rules on evidence, we will
afford the factual findings of a trial court the respect they deserve in the absence of
a showing of arbitrariness or disregard of material facts that might affect the
disposition of the case. People v. Paraiso 349 SCRA 335.
To simplify, the following are the issues for resolution, namely: (a) whether or not the
doctrine of res ipsa loquitur was applicable herein; and (b) whether or not Dr.
Solidum was liable for criminal negligence.
The res ipsa loquitur test has been known to be applied in criminal cases. Although it
creates a presumption of negligence, it need not offend due process, as long as the
accused is afforded the opportunity to go forward with his own evidence and prove
that he has no criminal intent. It is in this light not inconsistent with the
constitutional presumption of innocence of an accused.
Ruling
The appeal is meritorious.
IN VIEW OF THE FOREGOING, the modified decision of the lower court is affirmed.
Applicability of the Doctrine of Res Ipsa Loquitur
SO ORDERED.21
Res ipsa loquitur is literally translated as "the thing or the transaction speaks for
itself." The doctrine res ipsa loquitur means that "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." 24 It is simply "a
recognition of the postulate that, as a matter of common knowledge and experience,
the very nature of certain types of occurrences may justify an inference of
negligence on the part of the person who controls the instrumentality causing the
injury in the absence of some explanation by the defendant who is charged with
Dr. Solidum filed a motion for reconsideration, but the CA denied his motion on May
7, 2010.22
Hence, this appeal.
Issues
Dr. Solidum avers that:
I.
103
obligations
negligence. It is grounded in the superior logic of ordinary human experience and on

the basis of such experience or common knowledge, negligence may be deduced
from the mere occurrence of the accident itself.
standard of care. Resort to res ipsa loquitur is allowed because there is no other way,
under usual and ordinary conditions, by which the patient can obtain redress for
injury suffered by him.
Hence, res ipsa loquitur is applied in conjunction with the doctrine of common
knowledge."25
Thus, courts of other jurisdictions have applied the doctrine in the following
situations: leaving of a foreign object in the body of the patient after an operation,
injuries sustained on a healthy part of the body which was not under, or in the area,
of treatment, removal of the wrong part of the body when another part was intended,
knocking out a tooth while a patients jaw was under anesthetic for the removal of
his tonsils, and loss of an eye while the patient plaintiff was under the influence of
anesthetic, during or following an operation for appendicitis, among others.
Jarcia, Jr. v. People26 has underscored that the doctrine is not a rule of substantive
law, but merely a mode of proof or a mere procedural convenience. The doctrine,
when applicable to the facts and circumstances of a given case, is not meant to and
does not dispense with the requirement of proof of culpable negligence against the
party charged. It merely determines and regulates what shall be prima facie
evidence thereof, and helps the plaintiff in proving a breach of the duty. The doctrine
can be invoked when and only when, under the circumstances involved, direct
evidence is absent and not readily available.27
Nevertheless, despite the fact that the scope of res ipsa loquitur has been
measurably enlarged, it does not automatically apply to all cases of medical
negligence as to mechanically shift the burden of proof to the defendant to show that
he is not guilty of the ascribed negligence. Res ipsa loquitur is not a rigid or ordinary
doctrine to be perfunctorily used but a rule to be cautiously applied, depending upon
the circumstances of each case. It is generally restricted to situations in malpractice
cases where a layman is able to say, as a matter of common knowledge and
observation, that the consequences of professional care were not as such as would
ordinarily have followed if due care had been exercised. A distinction must be made
between the failure to secure results, and the occurrence of something more unusual
and not ordinarily found if the service or treatment rendered followed the usual
procedure of those skilled in that particular practice. It must be conceded that the
doctrine of res ipsa loquitur can have no application in a suit against a physician or
surgeon which involves the merits of a diagnosis or of a scientific treatment. The
physician or surgeon is not required at his peril to explain why any particular
diagnosis was not correct, or why any particular scientific treatment did not produce
the desired result. Thus, res ipsa loquitur is not available in a malpractice suit if the
only showing is that the desired result of an operation or treatment was not
accomplished. The real question, therefore, is whether or not in the process of the
operation any extraordinary incident or unusual event outside of the routine
performance occurred which is beyond the regular scope of customary professional
activity in such operations, which, if unexplained would themselves reasonably speak
to the average man as the negligent cause or causes of the untoward consequence.
If there was such extraneous intervention, the doctrine of res ipsa loquitur may be
utilized and the defendant is called upon to explain the matter, by evidence of
exculpation, if he could.
The applicability of the doctrine of res ipsa loquitur in medical negligence cases was
significantly and exhaustively explained in Ramos v. Court of Appeals, 28 where the
Court said
Medical malpractice cases do not escape the application of this doctrine. Thus, res
ipsa loquitur has been applied when the circumstances attendant upon the harm are
themselves of such a character as to justify an inference of negligence as the cause
of that harm. The application of res ipsa loquitur in medical negligence cases
presents a question of law since it is a judicial function to determine whether a
certain set of circumstances does, as a matter of law, permit a given inference.
Although generally, expert medical testimony is relied upon in malpractice suits to
prove that a physician has done a negligent act or that he has deviated from the
standard medical procedure, when the doctrine of res ipsa loquitur is availed by the
plaintiff, the need for expert medical testimony is dispensed with because the injury
itself provides the proof of negligence. The reason is that the general rule on the
necessity of expert testimony applies only to such matters clearly within the domain
of medical science, and not to matters that are within the common knowledge of
mankind which may be testified to by anyone familiar with the facts. Ordinarily, only
physicians and surgeons of skill and experience are competent to testify as to
whether a patient has been treated or operated upon with a reasonable degree of
skill and care. However, testimony as to the statements and acts of physicians and
surgeons, external appearances, and manifest conditions which are observable by
any one may be given by non-expert witnesses. Hence, in cases where the res ipsa
loquitur is applicable, the court is permitted to find a physician negligent upon proper
proof of injury to the patient, without the aid of expert testimony, where the court
from its fund of common knowledge can determine the proper standard of care.
Where common knowledge and experience teach that a resulting injury would not
have occurred to the patient if due care had been exercised, an inference of
negligence may be drawn giving rise to an application of the doctrine of res ipsa
loquitur without medical evidence, which is ordinarily required to show not only what
occurred but how and why it occurred. When the doctrine is appropriate, all that the
patient must do is prove a nexus between the particular act or omission complained
of and the injury sustained while under the custody and management of the
defendant without need to produce expert medical testimony to establish the
In order to allow resort to the doctrine, therefore, the following essential requisites
must first be satisfied, to wit: (1) the accident was of a kind that does not ordinarily
occur unless someone is negligent; (2) the instrumentality or agency that caused the
injury was under the exclusive control of the person charged; and (3) the injury
suffered must not have been due to any voluntary action or contribution of the
person injured.29
The Court considers the application here of the doctrine of res ipsa loquitur
inappropriate. Although it should be conceded without difficulty that the second and
third elements were present, considering that the anesthetic agent and the
instruments were exclusively within the control of Dr. Solidum, and that the patient,
104
obligations
being then unconscious during the operation, could not have been guilty of
contributory negligence, the first element was undeniably wanting. Luz delivered
Gerald to the care, custody and control of his physicians for a pull-through operation.
Except for the imperforate anus, Gerald was then of sound body and mind at the
time of his submission to the physicians. Yet, he experienced bradycardia during the
operation, causing loss of his senses and rendering him immobile. Hypoxia, or the
insufficiency of oxygen supply to the brain that caused the slowing of the heart rate,
scientifically termed as bradycardia, would not ordinarily occur in the process of a
pull-through operation, or during the administration of anesthesia to the patient, but
such fact alone did not prove that the negligence of any of his attending physicians,
including the anesthesiologists, had caused the injury. In fact, the anesthesiologists
attending to him had sensed in the course of the operation that the lack of oxygen
could have been triggered by the vago-vagal reflex, prompting them to administer
atropine to the patient.30
negligent. There was no palpably negligent act. The common experience of mankind
does not suggest that death would not be expected without negligence. And there is
no expert medical testimony to create an inference that negligence caused the
injury.
Negligence of Dr. Solidum
In view of the inapplicability of the doctrine of res ipsa loquitur, the Court next
determines whether the CA correctly affirmed the conviction of Dr. Solidum for
criminal negligence.
Negligence is defined as the failure to observe for the protection of the interests of
another person that degree of care, precaution, and vigilance that the circumstances
justly demand, whereby such other person suffers injury. 32Reckless imprudence, on
the other hand, consists of voluntarily doing or failing to do, without malice, an act
from which material damage results by reason of an inexcusable lack of precaution
on the part of the person performing or failing to perform such act. 33
This conclusion is not unprecedented. It was similarly reached in Swanson v.

Brigham,31 relevant portions of the decision therein being as follows:
Dr. Solidums conviction by the RTC was primarily based on his failure to monitor and
properly regulate the level of anesthetic agent administered on Gerald by overdosing
at 100% halothane. In affirming the conviction, the CA observed:
On January 7, 1973, Dr. Brigham admitted 15-year-old Randall Swanson to a hospital

for the treatment of infectious mononucleosis. The patient's symptoms had included
a swollen throat and some breathing difficulty. Early in the morning of January 9 the
patient was restless, and at 1:30 a.m. Dr. Brigham examined the patient. His
inspection of the patient's air passage revealed that it was in satisfactory condition.
At 4:15 a.m. Dr. Brigham received a telephone call from the hospital, advising him
that the patient was having respiratory difficulty. The doctor ordered that oxygen be
administered and he prepared to leave for the hospital. Ten minutes later, 4:25 a.m.,
the hospital called a second time to advise the doctor that the patient was not
responding. The doctor ordered that a medicine be administered, and he departed
for the hospital. When he arrived, the physician who had been on call at the hospital
had begun attempts to revive the patient. Dr. Brigham joined him in the effort, but
the patient died.
On the witness stand, Dr. Vertido made a significant turnaround. He affirmed the
findings and conclusions in his report except for an observation which, to all intents
and purposes, has become the storm center of this dispute. He wanted to correct one
piece of information regarding the dosage of the anesthetic agent administered to
the child. He declared that he made a mistake in reporting a 100% halothane and
said that based on the records it should have been 100% oxygen.
The records he was relying on, as he explains, are the following:
(a) the anesthesia record A portion of the chart in the record was marked as Exhibit
1-A and 1-B to indicate the administration at intervals of the anesthetic agent.
The doctor who performed the autopsy concluded that the patient died between 4:25
a.m. and 4:30 a.m. of asphyxia, as a result of a sudden, acute closing of the air
passage. He also found that the air passage had been adequate to maintain life up to
2 or 3 minutes prior to death. He did not know what caused the air passage to
suddenly close.
(b) the clinical abstract A portion of this record that reads as follows was marked
Exhibit 3A. 3B Approximately 1 hour and 45 minutes through the operation, patient
was noted to have bradycardia (CR = 70) and ATSO4 0.2 mg was immediately
administered. However, the bradycardia persisted, the inhalational agent was shut
off, and the patient was ventilated with 100% oxygen and another dose of ATSO4 0.2
mg was given. However, the patient did not respond until no cardiac rate can be
auscultated and the surgeons were immediately told to stop the operation. The
patient was put on a supine position and CPR was initiated. Patient was given 1 amp
of epinephrine initially while continuously doing cardiac massage still with no
cardiac rate appreciated; another ampule of epinephrine was given and after 45
secs, patients vital signs returned to normal. The entire resuscitation lasted
approximately 3-5 mins. The surgeons were then told to proceed to the closure and
the childs vital signs throughout and until the end of surgery were: BP = 110/70; CR
= 116/min and RR = 20-22 cycles/min (on assisted ventilation).
xxxx
It is a rare occurrence when someone admitted to a hospital for the treatment of
infectious mononucleosis dies of asphyxiation. But that is not sufficient to invoke res
ipsa loquitur. The fact that the injury rarely occurs does not in itself prove that the
injury was probably caused by someone's negligence. Mason v. Ellsworth, 3 Wn. App.
298, 474 P.2d 909 (1970). Nor is a bad result by itself enough to warrant the
application of the doctrine. Nelson v. Murphy, 42 Wn.2d 737, 258 P.2d 472 (1953).
See 2 S. Speiser, The Negligence Case Res Ipsa Loquitur 24:10 (1972). The
evidence presented is insufficient to establish the first element necessary for
application of res ipsa loquitur doctrine. The acute closing of the patients air
passage and his resultant asphyxiation took place over a very short period of time.
Under these circumstances it would not be reasonable to infer that the physician was
Dr. Vertido points to the crucial passage in the clinical abstract that the patient was
ventilated with 100% oxygen and another dose of ATSO4 when the bradycardia
105
obligations
persisted, but for one reason or another, he read it as 100% halothane. He was asked
to read the anesthesia record on the percentage of the dosage indicated, but he
could only sheepishly note I cant understand the number. There are no clues in the
clinical abstract on the quantity of the anesthetic agent used. It only contains the
information that the anesthetic plan was to put the patient under general anesthesia
using a nonrebreathing system with halothane as the sole anesthetic agent and that
1 hour and 45 minutes after the operation began, bradycardia occurred after which
the inhalational agent was shut off and the patient administered with 100% oxygen.
It would be apparent that the 100% oxygen that Dr. Vertido said should be read in
lieu of 100% halothane was the pure oxygen introduced after something went amiss
in the operation and the halothane itself was reduced or shut off.
incontestable, and they can only be led to one conclusion if the application of
anesthesia was really closely monitored, the event could not have happened. 34
The Prosecution did not prove the elements of reckless imprudence beyond
reasonable doubt because the circumstances cited by the CA were insufficient to
establish that Dr. Solidum had been guilty of inexcusable lack of precaution in
monitoring the administration of the anesthetic agent to Gerald. The Court aptly
explained in Cruz v. Court of Appeals35 that:
Whether or not a physician has committed an "inexcusable lack of precaution" in the
treatment of his patient is to be determined according to the standard of care
observed by other members of the profession in good standing under similar
circumstances bearing in mind the advanced state of the profession at the time of
treatment or the present state of medical science. In the recent case of Leonila
Garcia-Rueda v. Wilfred L. Pacasio, et. al., this Court stated that in accepting a case,
a doctor in effect represents that, having the needed training and skill possessed by
physicians and surgeons practicing in the same field, he will employ such training,
care and skill in the treatment of his patients. He therefore has a duty to use at least
the same level of care that any other reasonably competent doctor would use to
treat a condition under the same circumstances. It is in this aspect of medical
malpractice that expert testimony is essential to establish not only the standard of
care of the profession but also that the physician's conduct in the treatment and care
falls below such standard. Further, inasmuch as the causes of the injuries involved in
malpractice actions are determinable only in the light of scientific knowledge, it has
been recognized that expert testimony is usually necessary to support the conclusion
as to causation.
The key question remains what was the quantity of halothane used before
bradycardia set in?
The implication of Dr. Vertidos admission is that there was no overdose of the
anesthetic agent, and the accused Dr. Solidum stakes his liberty and reputation on
this conclusion. He made the assurance that he gave his patient the utmost medical
care, never leaving the operating room except for a few minutes to answer the call of
nature but leaving behind the other members of his team Drs. Abella and Razon to
monitor the operation. He insisted that he administered only a point 1% not 100%
halothane, receiving corroboration from Dr. Abella whose initial MA in the record
should be enough to show that she assisted in the operation and was therefore
conversant of the things that happened. She revealed that they were using a
machine that closely monitored the concentration of the agent during the operation.
But most compelling is Dr. Solidums interpretation of the anesthesia record itself, as
he takes the bull by the horns, so to speak. In his affidavit, he says, reading from the
record, that the quantity of halothane used in the operation is one percent (1%)
delivered at time intervals of 15 minutes. He studiedly mentions the concentration
of halothane as reflected in the anesthesia record (Annex D of the complaintaffidavit) is only one percent (1%) The numbers indicated in 15 minute increments
for halothane is an indication that only 1% halothane is being delivered to the patient
Gerard Gercayo for his entire operation; The amount of halothane delivered in this
case which is only one percent cannot be summated because halothane is constantly
being rapidly eliminated by the body during the entire operation.
xxxx
In litigations involving medical negligence, the plaintiff has the burden of establishing
appellant's negligence and for a reasonable conclusion of negligence, there must be
proof of breach of duty on the part of the surgeon as well as a causal connection of
such breach and the resulting death of his patient. In Chan Lugay v. St Luke's
Hospital, Inc., where the attending physician was absolved of liability for the death of
the complainants wife and newborn baby, this Court held that:
"In order that there may be a recovery for an injury, however, it must be shown that
the injury for which recovery is sought must be the legitimate consequence of the
wrong done; the connection between the negligence and the injury must be a direct
and natural sequence of events, unbroken by intervening efficient causes. In other
words, the negligence must be the proximate cause of the injury. For, negligence, no
matter in what it consists, cannot create a right of action unless it is the proximate
cause of the injury complained of. And the proximate cause of an injury 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."
xxxx
In finding the accused guilty, despite these explanations, the RTC argued that the
volte-face of Dr. Vertido on the question of the dosage of the anesthetic used on the
child would not really validate the non-guilt of the anesthesiologist. Led to agree that
the halothane used was not 100% as initially believed, he was nonetheless unaware
of the implications of the change in his testimony. The court observed that Dr. Vertido
had described the condition of the child as hypoxia which is deprivation of oxygen, a
diagnosis supported by the results of the CT Scan. All the symptoms attributed to a
failing central nervous system such as stupor, loss of consciousness, decrease in
heart rate, loss of usual acuity and abnormal motor function, are manifestations of
this condition or syndrome. But why would there be deprivation of oxygen if 100%
oxygen to 1% halothane was used? Ultimately, to the court, whether oxygen or
halothane was the object of mistake, the detrimental effects of the operation are
An action upon medical negligence whether criminal, civil or administrative calls

for the plaintiff to prove by competent evidence each of the following four elements,
namely: (a) the duty owed by the physician to the patient, as created by the
physician-patient relationship, to act in accordance with the specific norms or
106
obligations
standards established by his profession; (b) the breach of the duty by the physicians
failing to act in accordance with the applicable standard of care; (3) the causation,
i.e., there must be a reasonably close and causal connection between the negligent
act or omission and the resulting injury; and (4) the damages suffered by the
patient.36
continuously being administered throughout, unfortunately, as later become

manifest, patient suffered permanent irreversible brain damage.
In view of the actuations of the anaesthesiologists and the administration of
anaesthesia, the committee find that the same were all in accordance with the
universally accepted standards of medical care and there is no evidence of any fault
or negligence on the part of the anaesthesiologists.
In the medical profession, specific norms or standards to protect the patient against
unreasonable risk, commonly referred to as standards of care, set the duty of the
physician to act in respect of the patient. Unfortunately, no clear definition of the
duty of a particular physician in a particular case exists. Because most medical
malpractice cases are highly technical, witnesses with special medical qualifications
must provide guidance by giving the knowledge necessary to render a fair and just
verdict. As a result, the standard of medical care of a prudent physician must be
determined from expert testimony in most cases; and in the case of a specialist (like
an anesthesiologist), the standard of care by which the specialist is judged is the
care and skill commonly possessed and exercised by similar specialists under similar
circumstances. The specialty standard of care may be higher than that required of
the general practitioner.37
Dr. Antonio Vertido, a Senior Medico-Legal Officer of the National Bureau of

Investigation, was also presented as a Prosecution witness, but his testimony
concentrated on the results of the physical examination he had conducted on Gerald,
as borne out by the following portions of his direct examination, to wit:
FISCAL CABARON Doctor, what do you mean by General Anesthetic Agent?
WITNESS General Anesthetic Agent is a substance used in the conduction of
Anesthesia and in this case, halothane was used as a sole anesthetic agent.
xxxx
The standard of care is an objective standard by which the conduct of a physician

sued for negligence or malpractice may be measured, and it does not depend,
therefore, on any individual physicians own knowledge either. In attempting to fix a
standard by which a court may determine whether the physician has properly
performed the requisite duty toward the patient, expert medical testimony from both
plaintiff and defense experts is required. The judge, as the trier of fact, ultimately
determines the standard of care, after listening to the testimony of all medical
experts.38
Q Now under paragraph two of page 1 of your report you mentioned that after one
hour and 45 minutes after the operation, the patient experienced a bradycardia or
slowing of heart rate, now as a doctor, would you be able to tell this Honorable Court
as to what cause of the slowing of heart rate as to Gerald Gercayo?
WITNESS Well honestly sir, I cannot give you the reason why there was a bradycardia
of time because is some reason one way or another that might caused bradycardia.
FISCAL CABARON What could be the possible reason?
Here, the Prosecution presented no witnesses with special medical qualifications in

anesthesia to provide guidance to the trial court on what standard of care was
applicable. It would consequently be truly difficult, if not impossible, to determine
whether the first three elements of a negligence and malpractice action were
attendant.
A Well bradycardia can be caused by anesthetic agent itself and that is a possibility,
were talking about possibility here.
Q What other possibility do you have in mind, doctor?
A Well, because it was an operation, anything can happen within that situation.
Although the Prosecution presented Dr. Benigno Sulit, Jr., an anesthesiologist himself
who served as the Chairman of the Committee on Ethics and Malpractice of the
Philippine Society of Anesthesiologists that investigated the complaint against Dr.
Solidum, his testimony mainly focused on how his Committee had conducted the
investigation.39 Even then, the report of his Committee was favorable to Dr.
Solidum,40 to wit:
FISCAL CABARON Now, this representation would like to ask you about the slowing of
heart rate, now what is the immediate cause of the slowing of the heart rate of a
person?
WITNESS Well, one of the more practical reason why there is slowing of the heart
rate is when you do a vagal reflex in the neck wherein the vagal receptors are
located at the lateral part of the neck, when you press that, you produce the slowing
of the heart rate that produce bradycardia.
Presented for review by this committee is the case of a 3 year old male who
underwent a pull-thru operation and was administered general anesthesia by a team
of anesthesia residents. The patient, at the time when the surgeons was
manipulating the recto-sigmoid and pulling it down in preparation for the
anastomosis, had bradycardia. The anesthesiologists, sensing that the cause thereof
was the triggering of the vago-vagal reflex, administered atropine to block it but
despite the administration of the drug in two doses, cardiac arrest ensued. As the
records show, prompt resuscitative measures were administered and spontaneous
cardiac function re-established in less than five (5) minutes and that oxygen was
Q I am pro[p]ounding to you another question doctor, what about the deficiency in

the supply of oxygen by the patient, would that also cause the slowing of the heart
rate?
A Well that is a possibility sir, I mean not as slowing of the heart rate, if there is a
hypoxia or there is a low oxygen level in the blood, the normal thing for the heart is
107
obligations
to pump or to do not a bradycardia but a to counter act the Hypoxia that is being
experienced by the patient
only so may we request that this portion, temporarily your Honor, we are marking
this anesthesia record as our Exhibit 1 and then this 1% Halothane also be bracketed
and the same be marked as our Exhibit "1-A".
(sic).
xxxx
xxxx
ATTY. COMIA Doctor, my attention was called also when you said that there are so
many factors that contributed to Hypoxia is that correct?
Q Now, you made mention also doctor that the use of general anesthesia using 100%
halothane and other anesthetic medications probably were contributory to the
production of hypoxia.
A Yes, sir in general sir.
WITNESS Yes, sir.
41
Q I remember doctor, according to you there are so many factors that contributed to
what you call hypoxia and according to you, when this Gerald suffered hypoxia, there
are other factors that might lead to this Hypoxia at the time of this operation is that
correct?
On cross-examination, Dr. Vertido expounded more specifically on his interpretation

of the anesthesia record and the factors that could have caused Gerald to experience
bradycardia, viz:
WITNESS The possibility is there, sir.
ATTY. COMIA I noticed in, may I see your report Doctor, page 3, will you kindly read to
this Honorable court your last paragraph and if you will affirm that as if it is correct?
Q And according to you, it might also be the result of such other, some or it might be
due to operations being conducted by the doctor at the time when the operation is
being done might also contribute to that hypoxia is that correct?
A "The use of General Anesthesia, that is using 100% Halothane probably will be
contributory to the production of Hypoxia and - - - -"
A That is a possibility also.
ATTY COMIA And do you affirm the figure you mentioned in this Court Doctor?
xxxx
WITNESS Based on the records, I know the - - Q 100%?
ATTY. COMIA How will you classify now the operation conducted to this Gerald,
Doctor?
A 100% based on the records.
WITNESS Well, that is a major operation sir.
Q I will show you doctor a clinical record. I am a lawyer I am not a doctor but will you
kindly look at this and tell me where is 100%, the word "one hundred" or 1-0-0, will
you kindly look at this Doctor, this Xerox copy if you can show to this Honorable
Court and even to this representation the word "one hundred" or 1-0-0 and then call
me.
Q In other words, when you say major operation conducted to this Gerald, there is a
possibility that this Gerald might [be] exposed to some risk is that correct?
A That is a possibility sir.
Q And which according to you that Gerald suffered hypoxia is that correct?
xxxx
A Yes, sir.
ATTY. COMIA Doctor tell this Honorable Court where is that 100, 1-0-0 and if there is,
you just call me and even the attention of the Presiding Judge of this Court. Okay,
you read one by one.
Q And that is one of the risk of that major operation is that correct?
A That is the risk sir.42
WITNESS Well, are you only asking 100%, sir?
WITNESS Im trying to look at the 100%, there is no 100% there sir.
At the continuation of his cross-examination, Dr. Vertido maintained that Geralds

operation for his imperforate anus, considered a major operation, had exposed him
to the risk of suffering the same condition. 43 He then corrected his earlier finding that
100% halothane had been administered on Gerald by saying that it should be 100%
oxygen.44
ATTY. COMIA Okay, that was good, so you Honor please, may we request also
temporarily, because this is just a xerox copy presented by the fiscal, that the
percentage here that the Halothane administered by Dr. Solidum to the patient is 1%
Dr. Solidum was criminally charged for "failing to monitor and regulate properly the
levels of anesthesia administered to said Gerald Albert Gercayo and using 100%
halothane
and
other
anesthetic
medications."45However,
the
foregoing
ATTY. COMIA Im asking you, just answer my question, did you see there 100% and
100 figures, tell me, yes or no?
108
obligations
circumstances, taken together, did not prove beyond reasonable doubt that Dr.
Solidum had been recklessly imprudent in administering the anesthetic agent to
Gerald. Indeed, Dr. Vertidos findings did not preclude the probability that other
factors related to Geralds major operation, which could or could not necessarily be
attributed to the administration of the anesthesia, had caused the hypoxia and had
then led Gerald to experience bradycardia. Dr. Vertido revealingly concluded in his
report, instead, that "although the anesthesiologist followed the normal routine and
precautionary procedures, still hypoxia and its corresponding side effects did
occur."46
been charged along with Dr. Solidum. The lower courts thereby acted capriciously
and whimsically, which rendered their judgment against Ospital ng Maynila void as
the product of grave abuse of discretion amounting to lack of jurisdiction.
Not surprisingly, the flawed decree raises other material concerns that the RTC and
the CA overlooked. We deem it important, then, to express the following observations
for the instruction of the Bench and Bar.
For one, Ospital ng Maynila was not at all a party in the proceedings. Hence, its
fundamental right to be heard was not respected from the outset. The R TC and the
CA should have been alert to this fundamental defect. Verily, no person can be
prejudiced by a ruling rendered in an action or proceeding in which he was not made
a party. Such a rule would enforce the constitutional guarantee of due process of law.
The existence of the probability about other factors causing the hypoxia has
engendered in the mind of the Court a reasonable doubt as to Dr. Solidums guilt,
and moves us to acquit him of the crime of reckless imprudence resulting to serious
physical injuries. "A reasonable doubt of guilt," according to United States v.
Youthsey:47
Moreover, Ospital ng Maynila could be held civilly liable only when subsidiary liability
would be properly enforceable pursuant to Article 103 of the Revised Penal Code. But
the subsidiary liability seems far-fetched here. The conditions for subsidiary liability
to attach to Ospital ng Maynila should first be complied with. Firstly, pursuant to
Article 103 of the Revised Penal Code, Ospital ng Maynila must be shown to be a
corporation "engaged in any kind of industry." The term industry means any
department or branch of art, occupation or business, especially one that employs
labor and capital, and is engaged in industry. 49 However, Ospital ng Maynila, being a
public hospital, was not engaged in industry conducted for profit but purely in
charitable and humanitarian work.50 Secondly, assuming that Ospital ng Maynila was
engaged in industry for profit, Dr. Solidum must be shown to be an employee of
Ospital ng Maynila acting in the discharge of his duties during the operation on
Gerald. Yet, he definitely was not such employee but a consultant of the hospital.
And, thirdly, assuming that civil liability was adjudged against Dr. Solidum as an
employee (which did not happen here), the execution against him was unsatisfied
due to his being insolvent.
x x x is a doubt growing reasonably out of evidence or the lack of it. It is not a

captious doubt; not a doubt engendered merely by sympathy for the unfortunate
position of the defendant, or a dislike to accept the responsibility of convicting a
fellow man. If, having weighed the evidence on both sides, you reach the conclusion
that the defendant is guilty, to that degree of certainty as would lead you to act on
the faith of it in the most important and crucial affairs of your life, you may properly
convict him. Proof beyond reasonable doubt is not proof to a mathematical
demonstration. It is not proof beyond the possibility of mistake.
We have to clarify that the acquittal of Dr. Solidum would not immediately exempt
him from civil liability.1wphi1 But we cannot now find and declare him civilly liable
because the circumstances that have been established here do not present the
factual and legal bases for validly doing so. His acquittal did not derive only from
reasonable doubt. There was really no firm and competent showing how the injury to
Gerard had been caused. That meant that the manner of administration of the
anesthesia by Dr. Solidum was not necessarily the cause of the hypoxia that caused
the bradycardia experienced by Gerard. Consequently, to adjudge Dr. Solidum civilly
liable would be to speculate on the cause of the hypoxia. We are not allowed to do
so, for civil liability must not rest on speculation but on competent evidence.
WHEREFORE, the Court GRANTS the petition for review on certiorari; REVERSES AND
SETS ASIDE the decision promulgated on January 20, 2010; ACQUITS Dr. Fernando P.
Solidum of the crime of reckless imprudence resulting to serious physical injuries;
and MAKES no pronouncement on costs of suit.
SO ORDERED.
Liability of Ospital ng Maynila

Although the result now reached has resolved the issue of civil liability, we have to
address the unusual decree of the RTC, as affirmed by the CA, of expressly holding
Ospital ng Maynila civilly liable jointly and severally with Dr. Solidum. The decree was
flawed in logic and in law.
In criminal prosecutions, the civil action for the recovery of civil liability that is
deemed instituted with the criminal action refers only to that arising from the offense
charged.48 It is puzzling, therefore, how the RTC and the CA could have adjudged
Ospital ng Maynila jointly and severally liable with Dr. Solidum for the damages
despite the obvious fact that Ospital ng Maynila, being an artificial entity, had not
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LAW ( ARTICLE 1158)

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FISHER, J., dissenting:

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Consequently, I believe that in the interpretation of phase "contract, express or implied," we

Manresa, commenting upon article 1262 of the Civil Code, says:

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The judgment of the trial court is affirmed with costs. So ordered.

The material operative facts are not disputed.

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Lot No. 1527

A pre-trial was thereafter had.

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Without pronouncement as to cost.

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PDF (LOCSIN v. MEKENI)

G.R. No. 178031

August 28, 2013

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RURAL BANK OF BUENAVISTA (AGUSAN DEL NORTE), INC., represented by

Ruling of the Court of Appeals

Petitioner submits the following assignment of errors:

Ruling of the Regional Trial Court

WITH DUE RESPECT, THE HONORABLE COURT OF APPEALS REVERSIBLY ERRED IN

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WITH DUE RESPECT, THE HONORABLE COURT OF APPEALS REVERSIBLY ERRED IN

covering the foreclosure proceedings. Besides, if petitioner insists that no foreclosure

However, petitioner is entitled to a return of the P6,000.00 she paid to respondent in

Even x x x granting, without conceding, that the amount of P6,000.00 was a

By making such an ambiguous allegation in its Answer with Counterclaims,

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Dra. dela Llana failed to establish her case by preponderance of evidence

Based on these requisites, Dra. dela Llana must first establish by

The Respondents Position