G.R. No. 156940 December 14, 2004 i. 168802 Oct. 10, 1990 3,650.

00
"However, his suppliers and business partners went back to him alleging that the checks he issued bounced
ASSOCIATED BANK (Now WESTMONT BANK), petitioner, for insufficiency of funds. Thereafter, TAN, thru his lawyer, informed the BANK to take positive steps
vs. regarding the matter for he has adequate and sufficient funds to pay the amount of the subject checks.
VICENTE HENRY TAN, respondent. Nonetheless, the BANK did not bother nor offer any apology regarding the incident. Consequently, TAN, as
plaintiff, filed a Complaint for Damages on December 19, 1990, with the Regional Trial Court of Cabanatuan
City, Third Judicial Region, docketed as Civil Case No. 892-AF, against the BANK, as defendant.
DECISION

PANGANIBAN, J.:
While banks are granted by law the right to debit the value of a dishonored check from a depositor’s account, they
must do so with the highest degree of care, so as not to prejudice the depositor unduly.
The Case
Before us is a Petition for Review1 under Rule 45 of the Rules of Court, assailing the January 27, 2003 Decision2 of the
Court of Appeals (CA) in CA-GR CV No. 56292. The CA disposed as follows:
"WHEREFORE, premises considered, the Decision dated December 3, 1996, of the Regional Trial Court of
Cabanatuan City, Third Judicial Region, Branch 26, in Civil Case No. 892-AF is hereby AFFIRMED. Costs
against the [petitioner]."3
The Facts
The CA narrated the antecedents as follows:
"In his [C]omplaint, [respondent] maintained that he ha[d] sufficient funds to pay the subject checks and
alleged that his suppliers decreased in number for lack of trust. As he has been in the business community
for quite a time and has established a good record of reputation and probity, plaintiff claimed that he
suffered embarrassment, humiliation, besmirched reputation, mental anxieties and sleepless nights
because of the said unfortunate incident. [Respondent] further averred that he continuously lost profits in
the amount of P250,000.00. [Respondent] therefore prayed for exemplary damages and that [petitioner]
be ordered to pay him the sum of P1,000,000.00 by way of moral damages, P250,000.00 as lost
profits, P50,000.00 as attorney’s fees plus 25% of the amount claimed including P1,000.00 per court
appearance.
"Meanwhile, [petitioner] filed a Motion to Dismiss on February 7, 1991, but the same was denied for lack
of merit in an Order dated March 7, 1991. Thereafter, [petitioner] BANK on March 20, 1991 filed its Answer
denying, among others, the allegations of [respondent] and alleged that no banking institution would give
an assurance to any of its client/depositor that the check deposited by him had already been cleared and
backed up by sufficient funds but it could only presume that the same has been honored by the drawee
bank in view of the lapse of time that ordinarily takes for a check to be cleared. For its part, [petitioner]
alleged that on October 2, 1990, it gave notice to the [respondent] as to the return of his UCPB check
deposit in the amount of P101,000.00, hence, on even date, [respondent] deposited the amount
of P50,000.00 to cover the returned check.

"By way of affirmative defense, [petitioner] averred that [respondent] had no cause of action against it and
"Vicente Henry Tan (hereafter TAN) is a businessman and a regular depositor-creditor of the Associated argued that it has all the right to debit the account of the [respondent] by reason of the dishonor of the
Bank (hereinafter referred to as the BANK). Sometime in September 1990, he deposited a postdated UCPB check deposited by the [respondent] which was withdrawn by him prior to its clearing. [Petitioner] further
check with the said BANK in the amount of P101,000.00 issued to him by a certain Willy Cheng from Tarlac. averred that it has no liability with respect to the clearing of deposited checks as the clearing is being
The check was duly entered in his bank record thereby making his balance in the amount of P297,000.00, undertaken by the Central Bank and in accepting [the] check deposit, it merely obligates itself as depositor’s
as of October 1, 1990, from his original deposit of P196,000.00. Allegedly, upon advice and instruction of collecting agent subject to actual payment by the drawee bank. [Petitioner] therefore prayed that
the BANK that the P101,000.00 check was already cleared and backed up by sufficient funds, TAN, on the [respondent] be ordered to pay it the amount of P1,000,000.00 by way of loss of goodwill, P7,000.00 as
same date, withdrew the sum of P240,000.00, leaving a balance of P57,793.45. A day after, TAN deposited acceptance fee plus P500.00 per appearance and by way of attorney’s fees.
the amount of P50,000.00 making his existing balance in the amount of P107,793.45, because he has issued
several checks to his business partners, to wit:
"Considering that Westmont Bank has taken over the management of the affairs/properties of the BANK,
[respondent] on October 10, 1996, filed an Amended Complaint reiterating substantially his allegations in
CHECK NUMBERS DATE AMOUNT the original complaint, except that the name of the previous defendant ASSOCIATED BANK is now
a. 138814 Sept. 29, 1990 P9,000.00 WESTMONT BANK.
b. 138804 Oct. 8, 1990 9,350.00
c. 138787 Sept. 30, 1990 6,360.00 "Trial ensured and thereafter, the court rendered its Decision dated December 3, 1996 in favor of the [respondent]
and against the [petitioner], ordering the latter to pay the [respondent] the sum of P100,000.00 by way of moral
d. 138847 Sept. 29, 1990 21,850.00 damages, P75,000.00 as exemplary damages, P25,000.00 as attorney’s fees, plus the costs of this suit. In making said
e. 167054 Sept. 29, 1990 4,093.40 ruling, it was shown that [respondent] was not officially informed about the debiting of the P101,000.00 [from] his
f. 138792 ` Sept. 29, 1990 3,546.00 existing balance and that the BANK merely allowed the [respondent] to use the fund prior to clearing merely for
accommodation because the BANK considered him as one of its valued clients. The trial court ruled that the bank
g. 138774 Oct. 2, 1990 6,600.00 manager was negligent in handling the particular checking account of the [respondent] stating that such lapses caused
h. 167072 Oct. 10, 1990 9,908.00 all the inconveniences to the [respondent]. The trial court also took into consideration that [respondent’s] mother was
originally maintaining with the x x x BANK [a] current account as well as [a] time deposit, but [o]n one occasion,
although his mother made a deposit, the same was not credited in her favor but in the name of another."4
Petitioner appealed to the CA on the issues of whether it was within its rights, as collecting bank, to debit the account
of its client for a dishonored check; and whether it had informed respondent about the dishonor prior to debiting his
account.
Ruling of the Court of Appeals
Affirming the trial court, the CA ruled that the bank should not have authorized the withdrawal of the value of the
deposited check prior to its clearing. Having done so, contrary to its obligation to treat respondent’s account with
meticulous care, the bank violated its own policy. It thereby took upon itself the obligation to officially inform
respondent of the status of his account before unilaterally debiting the amount of P101,000. Without such notice, it
is estopped from blaming him for failing to fund his account.
The CA opined that, had the P101,000 not been debited, respondent would have had sufficient funds for the postdated
checks he had issued. Thus, the supposed accommodation accorded by petitioner to him is the proximate cause of his
business woes and shame, for which it is liable for damages.
Because of the bank’s negligence, the CA awarded respondent moral damages of P100,000. It also granted him
exemplary damages of P75,000 and attorney’s fees of P25,000.
Hence this Petition.5
Issue
In its Memorandum, petitioner raises the sole issue of "whether or not the petitioner, which is acting as a collecting
bank, has the right to debit the account of its client for a check deposit which was dishonored by the drawee bank."6
The Court’s Ruling
The Petition has no merit.
Sole Issue:
Debit of Depositor’s Account
Petitioner-bank contends that its rights and obligations under the present set of facts were misappreciated by the CA.
It insists that its right to debit the amount of the dishonored check from the account of respondent is clear and
unmistakable. Even assuming that it did not give him notice that the check had been dishonored, such right remains
immediately enforceable.
In particular, petitioner argues that the check deposit slip accomplished by respondent on September 17, 1990,
expressly stipulated that the bank was obligating itself merely as the depositor’s collecting agent and -- until such time
as actual payment would be made to it -- it was reserving the right to charge against the depositor’s account any
amount previously credited. Respondent was allowed to withdraw the amount of the check prior to clearing, merely
as an act of accommodation, it added.
At the outset, we stress that the trial court’s factual findings that were affirmed by the CA are not subject to review
by this Court.7 As petitioner itself takes no issue with those findings, we need only to determine the legal consequence,
based on the established facts.
Right of Setoff
A bank generally has a right of setoff over the deposits therein for the payment of any withdrawals on the part of a
depositor.8 The right of a collecting bank to debit a client’s account for the value of a dishonored check that has
previously been credited has fairly been established by jurisprudence. To begin with, Article 1980 of the Civil Code
provides that "[f]ixed, savings, and current deposits of money in banks and similar institutions shall be governed by
the provisions concerning simple loan."
Hence, the relationship between banks and depositors has been held to be that of creditor and debtor.9 Thus, legal
compensation under Article 127810 of the Civil Code may take place "when all the requisites mentioned in Article 1279
are present,"11 as follows:
"(1) That each one of the obligors be bound principally, and that he be at the same time a principal creditor
of the other;
(2) That both debts consist in a sum of money, or if the things due are consumable, they be of the same
kind, and also of the same quality if the latter has been stated;
(3) That the two debts be due;
(4) That they be liquidated and demandable;
(5) That over neither of them there be any retention or controversy, commenced by third persons and
communicated in due time to the debtor."12
Nonetheless, the real issue here is not so much the right of petitioner to debit respondent’s account but, rather, the
manner in which it exercised such right. The Court has held that even while the right of setoff is conceded, separate is
the question of whether that remedy has properly been exercised.13
The liability of petitioner in this case ultimately revolves around the issue of whether it properly exercised its right of
setoff. The determination thereof hinges, in turn, on the bank’s role and obligations, first, as respondent’s depositary
bank; and second, as collecting agent for the check in question.
Obligation as
Depositary Bank
In BPI v. Casa Montessori,14 the Court has emphasized that the banking business is impressed with public interest.
"Consequently, the highest degree of diligence is expected, and high standards of integrity and performance are even
required of it. By the nature of its functions, a bank is under obligation to treat the accounts of its depositors with
meticulous care."15
Also affirming this long standing doctrine, Philippine Bank of Commerce v. Court of Appeals16 has held that "the degree
of diligence required of banks is more than that of a good father of a family where the fiduciary nature of their
relationship with their depositors is concerned."17 Indeed, the banking business is vested with the trust and confidence
of the public; hence the "appropriate standard of diligence must be very high, if not the highest, degree of
diligence."18 The standard applies, regardless of whether the account consists of only a few hundred pesos or of
millions.19
The fiduciary nature of banking, previously imposed by case law,20 is now enshrined in Republic Act No. 8791 or the
General Banking Law of 2000. Section 2 of the law specifically says that the State recognizes the "fiduciary nature of
banking that requires high standards of integrity and performance."
Did petitioner treat respondent’s account with the highest degree of care? From all indications, it did not.
It is undisputed -- nay, even admitted -- that purportedly as an act of accommodation to a valued client, petitioner
allowed the withdrawal of the face value of the deposited check prior to its clearing. That act certainly disregarded
the clearance requirement of the banking system. Such a practice is unusual, because a check is not legal tender or
money;21 and its value can properly be transferred to a depositor’s account only after the check has been cleared by
the drawee bank.22
Under ordinary banking practice, after receiving a check deposit, a bank either immediately credit the amount to a
depositor’s account; or infuse value to that account only after the drawee bank shall have paid such amount.23 Before
the check shall have been cleared for deposit, the collecting bank can only "assume" at its own risk -- as herein
petitioner did -- that the check would be cleared and paid out.
Reasonable business practice and prudence, moreover, dictated that petitioner should not have authorized the
withdrawal by respondent of P240,000 on October 1, 1990, as this amount was over and above his outstanding cleared
balance of P196,793.45.24 Hence, the lower courts correctly appreciated the evidence in his favor.
highest degree of diligence in the selection and supervision of their employees.31 Jurisprudence has established that
the lack of diligence of a servant is imputed to the negligence of the employer, when the negligent or wrongful act of
the former proximately results in an injury to a third person;32 in this case, the depositor.
The manager of the bank’s Cabanatuan branch, Consorcia Santiago, categorically admitted that she and the employees
under her control had breached bank policies. They admittedly breached those policies when, without clearance from
the drawee bank in Baguio, they allowed respondent to withdraw on October 1, 1990, the amount of the check
deposited. Santiago testified that respondent "was not officially informed about the debiting of the P101,000 from his
existing balance of P170,000 on October 2, 1990 x x x."33
Being the branch manager, Santiago clearly acted within the scope of her authority in authorizing the withdrawal and
the subsequent debiting without notice. Accordingly, what remains to be determined is whether her actions
proximately caused respondent’s injury. Proximate cause is that which -- in a natural and continuous sequence,
unbroken by any efficient intervening cause --produces the injury, and without which the result would not have
occurred.34
Let us go back to the facts as they unfolded. It is undeniable that the bank’s premature authorization of the withdrawal
by respondent on October 1, 1990, triggered -- in rapid succession and in a natural sequence -- the debiting of his
account, the fall of his account balance to insufficient levels, and the subsequent dishonor of his own checks for lack
of funds. The CA correctly noted thus:
"x x x [T]he depositor x x x withdrew his money upon the advice by [petitioner] that his money was already
cleared. Without such advice, [respondent] would not have withdrawn the sum of P240,000.00. Therefore,
it cannot be denied that it was [petitioner’s] fault which allowed [respondent] to withdraw a huge sum
which he believed was already his.

"To emphasize, it is beyond cavil that [respondent] had sufficient funds for the check. Had the P101,000.00
Obligation as
not [been] debited, the subject checks would not have been dishonored. Hence, we can say that
Collecting Agent
[respondent’s] injury arose from the dishonor of his well-funded checks. x x x."35

Indeed, the bank deposit slip expressed this reservation:

Aggravating matters, petitioner failed to show that it had immediately and duly informed respondent of the debiting
of his account. Nonetheless, it argues that the giving of notice was discernible from his act of depositing P50,000 on
"In receiving items on deposit, this Bank obligates itself only as the Depositor’s Collecting agent, assuming October 2, 1990, to augment his account and allow the debiting. This argument deserves short shrift.
no responsibility beyond carefulness in selecting correspondents, and until such time as actual payments
shall have come to its possession, this Bank reserves the right to charge back to the Depositor’s account
First, notice was proper and ought to be expected. By the bank manager’s account, respondent was considered a
any amounts previously credited whether or not the deposited item is returned. x x x."25
"valued client" whose checks had always been sufficiently funded from 1987 to 1990,36 until the October imbroglio.
Thus, he deserved nothing less than an official notice of the precarious condition of his account.
However, this reservation is not enough to insulate the bank from any liability. In the past, we have expressed doubt
about the binding force of such conditions unilaterally imposed by a bank without the consent of the depositor. 26 It is
Second, under the provisions of the Negotiable Instruments Law regarding the liability of a general indorser37 and the
indeed arguable that "in signing the deposit slip, the depositor does so only to identify himself and not to agree to the
procedure for a notice of dishonor,38 it was incumbent on the bank to give proper notice to respondent. In Gullas v.
conditions set forth at the back of the deposit slip."27
National Bank,39 the Court emphasized:

Further, by the express terms of the stipulation, petitioner took upon itself certain obligations as respondent’s agent,
"x x x [A] general indorser of a negotiable instrument engages that if the instrument – the check in this case
consonant with the well-settled rule that the relationship between the payee or holder of a commercial paper and the
– is dishonored and the necessary proceedings for its dishonor are duly taken, he will pay the amount
collecting bank is that of principal and agent.28 Under Article 190929 of the Civil Code, such bank could be held liable
thereof to the holder (Sec. 66) It has been held by a long line of authorities that notice of dishonor is
not only for fraud, but also for negligence.
necessary to charge an indorser and that the right of action against him does not accrue until the notice is
given.
As a general rule, a bank is liable for the wrongful or tortuous acts and declarations of its officers or agents within the
course and scope of their employment.30 Due to the very nature of their business, banks are expected to exercise the
 "x x x. The fact we believe is undeniable that prior to the mailing of notice of dishonor, and without waiting
for any action by Gullas, the bank made use of the money standing in his account to make good for the
treasury warrant. At this point recall that Gullas was merely an indorser and had issued checks in good faith.
As to a depositor who has funds sufficient to meet payment of a check drawn by him in favor of a third
party, it has been held that he has a right of action against the bank for its refusal to pay such a check in
the absence of notice to him that the bank has applied the funds so deposited in extinguishment of past due
claims held against him. (Callahan vs. Bank of Anderson [1904], 2 Ann. Cas., 203.) However this may be, as
to an indorser the situation is different, and notice should actually have been given him in order that he
might protect his interests."40

Third, regarding the deposit of P50,000 made by respondent on October 2, 1990, we fully subscribe to the CA’s
observations that it was not unusual for a well-reputed businessman like him, who "ordinarily takes note of the
amount of money he takes and releases," to immediately deposit money in his current account to answer for the
postdated checks he had issued.41

Damages

Inasmuch as petitioner does not contest the basis for the award of damages and attorney’s fees, we will no longer
address these matters.

WHEREFORE, the Petition is DENIED and the assailed Decision AFFIRMED. Costs against petitioner.

SO ORDERED.
G.R. No. 115324 February 19, 2003 Private respondent referred the matter to a lawyer, who made a written demand upon Doronilla for the return of his
client’s money. Doronilla issued another check for ₱212,000.00 in private respondent’s favor but the check was again
dishonored for insufficiency of funds.7
PRODUCERS BANK OF THE PHILIPPINES (now FIRST INTERNATIONAL BANK), petitioner,
vs.
HON. COURT OF APPEALS AND FRANKLIN VIVES, respondents. Private respondent instituted an action for recovery of sum of money in the Regional Trial Court (RTC) in Pasig, Metro
Manila against Doronilla, Sanchez, Dumagpi and petitioner. The case was docketed as Civil Case No. 44485. He also
filed criminal actions against Doronilla, Sanchez and Dumagpi in the RTC. However, Sanchez passed away on March
DECISION
16, 1985 while the case was pending before the trial court. On October 3, 1995, the RTC of Pasig, Branch 157,
promulgated its Decision in Civil Case No. 44485, the dispositive portion of which reads:
CALLEJO, SR., J.:
IN VIEW OF THE FOREGOING, judgment is hereby rendered sentencing defendants Arturo J. Doronila, Estrella Dumagpi
This is a petition for review on certiorari of the Decision1 of the Court of Appeals dated June 25, 1991 in CA-G.R. CV and Producers Bank of the Philippines to pay plaintiff Franklin Vives jointly and severally –
No. 11791 and of its Resolution2 dated May 5, 1994, denying the motion for reconsideration of said decision filed by
petitioner Producers Bank of the Philippines.
(a) the amount of ₱200,000.00, representing the money deposited, with interest at the legal rate from the
filing of the complaint until the same is fully paid;
Sometime in 1979, private respondent Franklin Vives was asked by his neighbor and friend Angeles Sanchez to help
her friend and townmate, Col. Arturo Doronilla, in incorporating his business, the Sterela Marketing and Services
(b) the sum of ₱50,000.00 for moral damages and a similar amount for exemplary damages;
("Sterela" for brevity). Specifically, Sanchez asked private respondent to deposit in a bank a certain amount of money
in the bank account of Sterela for purposes of its incorporation. She assured private respondent that he could
withdraw his money from said account within a month’s time. Private respondent asked Sanchez to bring Doronilla to (c) the amount of ₱40,000.00 for attorney’s fees; and
their house so that they could discuss Sanchez’s request.3
(d) the costs of the suit.
On May 9, 1979, private respondent, Sanchez, Doronilla and a certain Estrella Dumagpi, Doronilla’s private secretary,
met and discussed the matter. Thereafter, relying on the assurances and representations of Sanchez and Doronilla,
SO ORDERED.8
private respondent issued a check in the amount of Two Hundred Thousand Pesos (₱200,000.00) in favor of Sterela.
Private respondent instructed his wife, Mrs. Inocencia Vives, to accompany Doronilla and Sanchez in opening a savings
account in the name of Sterela in the Buendia, Makati branch of Producers Bank of the Philippines. However, only Petitioner appealed the trial court’s decision to the Court of Appeals. In its Decision dated June 25, 1991, the appellate
Sanchez, Mrs. Vives and Dumagpi went to the bank to deposit the check. They had with them an authorization letter court affirmed in toto the decision of the RTC.9 It likewise denied with finality petitioner’s motion for reconsideration
from Doronilla authorizing Sanchez and her companions, "in coordination with Mr. Rufo Atienza," to open an account in its Resolution dated May 5, 1994.10
for Sterela Marketing Services in the amount of ₱200,000.00. In opening the account, the authorized signatories were
Inocencia Vives and/or Angeles Sanchez. A passbook for Savings Account No. 10-1567 was thereafter issued to Mrs. On June 30, 1994, petitioner filed the present petition, arguing that –
Vives.4

I.
Subsequently, private respondent learned that Sterela was no longer holding office in the address previously given to
him. Alarmed, he and his wife went to the Bank to verify if their money was still intact. The bank manager referred
them to Mr. Rufo Atienza, the assistant manager, who informed them that part of the money in Savings Account No. THE HONORABLE COURT OF APPEALS ERRED IN UPHOLDING THAT THE TRANSACTION BETWEEN THE DEFENDANT
10-1567 had been withdrawn by Doronilla, and that only ₱90,000.00 remained therein. He likewise told them that DORONILLA AND RESPONDENT VIVES WAS ONE OF SIMPLE LOAN AND NOT ACCOMMODATION;
Mrs. Vives could not withdraw said remaining amount because it had to answer for some postdated checks issued by
Doronilla. According to Atienza, after Mrs. Vives and Sanchez opened Savings Account No. 10-1567, Doronilla opened II.
Current Account No. 10-0320 for Sterela and authorized the Bank to debit Savings Account No. 10-1567 for the
amounts necessary to cover overdrawings in Current Account No. 10-0320. In opening said current account, Sterela,
through Doronilla, obtained a loan of ₱175,000.00 from the Bank. To cover payment thereof, Doronilla issued three THE HONORABLE COURT OF APPEALS ERRED IN UPHOLDING THAT PETITIONER’S BANK MANAGER, MR. RUFO ATIENZA,
postdated checks, all of which were dishonored. Atienza also said that Doronilla could assign or withdraw the money CONNIVED WITH THE OTHER DEFENDANTS IN DEFRAUDING PETITIONER (Sic. Should be PRIVATE RESPONDENT) AND
in Savings Account No. 10-1567 because he was the sole proprietor of Sterela.5 AS A CONSEQUENCE, THE PETITIONER SHOULD BE HELD LIABLE UNDER THE PRINCIPLE OF NATURAL JUSTICE;

Private respondent tried to get in touch with Doronilla through Sanchez. On June 29, 1979, he received a letter from
Doronilla, assuring him that his money was intact and would be returned to him. On August 13, 1979, Doronilla issued
a postdated check for Two Hundred Twelve Thousand Pesos (₱212,000.00) in favor of private respondent. However,
upon presentment thereof by private respondent to the drawee bank, the check was dishonored. Doronilla requested
private respondent to present the same check on September 15, 1979 but when the latter presented the check, it was
again dishonored.6
III.
THE HONORABLE COURT OF APPEALS ERRED IN ADOPTING THE ENTIRE RECORDS OF THE REGIONAL TRIAL COURT AND
AFFIRMING THE JUDGMENT APPEALED FROM, AS THE FINDINGS OF THE REGIONAL TRIAL COURT WERE BASED ON A
MISAPPREHENSION OF FACTS;
IV. to deposit said amount in the account of Sterela so that a certification can be issued to the effect that Sterela had
sufficient funds for purposes of its incorporation but at the same time, he retained some degree of control over his
money through his wife who was made a signatory to the savings account and in whose possession the savings account
THE HONORABLE COURT OF APPEALS ERRED IN DECLARING THAT THE CITED DECISION IN SALUDARES VS. MARTINEZ,
passbook was given.22
29 SCRA 745, UPHOLDING THE LIABILITY OF AN EMPLOYER FOR ACTS COMMITTED BY AN EMPLOYEE IS APPLICABLE;

V.
THE HONORABLE COURT OF APPEALS ERRED IN UPHOLDING THE DECISION OF THE LOWER COURT THAT HEREIN
PETITIONER BANK IS JOINTLY AND SEVERALLY LIABLE WITH THE OTHER DEFENDANTS FOR THE AMOUNT OF
P200,000.00 REPRESENTING THE SAVINGS ACCOUNT DEPOSIT, P50,000.00 FOR MORAL DAMAGES, P50,000.00 FOR
EXEMPLARY DAMAGES, P40,000.00 FOR ATTORNEY’S FEES AND THE COSTS OF SUIT.11
He likewise asserts that the trial court did not err in finding that petitioner, Atienza’s employer, is liable for the return
of his money. He insists that Atienza, petitioner’s assistant manager, connived with Doronilla in defrauding private
respondent since it was Atienza who facilitated the opening of Sterela’s current account three days after Mrs. Vives
and Sanchez opened a savings account with petitioner for said company, as well as the approval of the authority to
debit Sterela’s savings account to cover any overdrawings in its current account.23
There is no merit in the petition.

Private respondent filed his Comment on September 23, 1994. Petitioner filed its Reply thereto on September 25,
At the outset, it must be emphasized that only questions of law may be raised in a petition for review filed with this
1995. The Court then required private respondent to submit a rejoinder to the reply. However, said rejoinder was filed
Court. The Court has repeatedly held that it is not its function to analyze and weigh all over again the evidence
only on April 21, 1997, due to petitioner’s delay in furnishing private respondent with copy of the reply 12 and several
presented by the parties during trial.24 The Court’s jurisdiction is in principle limited to reviewing errors of law that
substitutions of counsel on the part of private respondent.13 On January 17, 2001, the Court resolved to give due course
might have been committed by the Court of Appeals.25 Moreover, factual findings of courts, when adopted and
to the petition and required the parties to submit their respective memoranda.14 Petitioner filed its memorandum on
confirmed by the Court of Appeals, are final and conclusive on this Court unless these findings are not supported by
April 16, 2001 while private respondent submitted his memorandum on March 22, 2001.
the evidence on record.26 There is no showing of any misapprehension of facts on the part of the Court of Appeals in
the case at bar that would require this Court to review and overturn the factual findings of that court, especially since
Petitioner contends that the transaction between private respondent and Doronilla is a simple loan (mutuum) since the conclusions of fact of the Court of Appeals and the trial court are not only consistent but are also amply supported
all the elements of a mutuum are present: first, what was delivered by private respondent to Doronilla was money, a by the evidence on record.
consumable thing; and second, the transaction was onerous as Doronilla was obliged to pay interest, as evidenced by
the check issued by Doronilla in the amount of ₱212,000.00, or ₱12,000 more than what private respondent deposited
No error was committed by the Court of Appeals when it ruled that the transaction between private respondent and
in Sterela’s bank account.15 Moreover, the fact that private respondent sued his good friend Sanchez for his failure to
Doronilla was a commodatum and not a mutuum. A circumspect examination of the records reveals that the
recover his money from Doronilla shows that the transaction was not merely gratuitous but "had a business angle" to
transaction between them was a commodatum. Article 1933 of the Civil Code distinguishes between the two kinds of
it. Hence, petitioner argues that it cannot be held liable for the return of private respondent’s ₱200,000.00 because it
loans in this wise:
is not privy to the transaction between the latter and Doronilla.16

By the contract of loan, one of the parties delivers to another, either something not consumable so that the latter may
It argues further that petitioner’s Assistant Manager, Mr. Rufo Atienza, could not be faulted for allowing Doronilla to
use the same for a certain time and return it, in which case the contract is called a commodatum; or money or other
withdraw from the savings account of Sterela since the latter was the sole proprietor of said company. Petitioner
consumable thing, upon the condition that the same amount of the same kind and quality shall be paid, in which case
asserts that Doronilla’s May 8, 1979 letter addressed to the bank, authorizing Mrs. Vives and Sanchez to open a savings
the contract is simply called a loan or mutuum.
account for Sterela, did not contain any authorization for these two to withdraw from said account. Hence, the
authority to withdraw therefrom remained exclusively with Doronilla, who was the sole proprietor of Sterela, and who
alone had legal title to the savings account.17 Petitioner points out that no evidence other than the testimonies of Commodatum is essentially gratuitous.
private respondent and Mrs. Vives was presented during trial to prove that private respondent deposited his
₱200,000.00 in Sterela’s account for purposes of its incorporation.18 Hence, petitioner should not be held liable for
Simple loan may be gratuitous or with a stipulation to pay interest.
allowing Doronilla to withdraw from Sterela’s savings account.1a\^/phi1.net

In commodatum, the bailor retains the ownership of the thing loaned, while in simple loan, ownership passes to the
Petitioner also asserts that the Court of Appeals erred in affirming the trial court’s decision since the findings of fact
borrower.
therein were not accord with the evidence presented by petitioner during trial to prove that the transaction between
private respondent and Doronilla was a mutuum, and that it committed no wrong in allowing Doronilla to withdraw
from Sterela’s savings account.19 The foregoing provision seems to imply that if the subject of the contract is a consumable thing, such as money, the
contract would be a mutuum. However, there are some instances where a commodatum may have for its object a
consumable thing. Article 1936 of the Civil Code provides:
Finally, petitioner claims that since there is no wrongful act or omission on its part, it is not liable for the actual damages
suffered by private respondent, and neither may it be held liable for moral and exemplary damages as well as
attorney’s fees.20 Consumable goods may be the subject of commodatum if the purpose of the contract is not the consumption of the
object, as when it is merely for exhibition.
Private respondent, on the other hand, argues that the transaction between him and Doronilla is not a mutuum but
an accommodation,21 since he did not actually part with the ownership of his ₱200,000.00 and in fact asked his wife
Thus, if consumable goods are loaned only for purposes of exhibition, or when the intention of the parties is to lend
consumable goods and to have the very same goods returned at the end of the period agreed upon, the loan is a
commodatum and not a mutuum.
The rule is that the intention of the parties thereto shall be accorded primordial consideration in determining the
actual character of a contract.27 In case of doubt, the contemporaneous and subsequent acts of the parties shall be
considered in such determination.28
As correctly pointed out by both the Court of Appeals and the trial court, the evidence shows that private respondent
agreed to deposit his money in the savings account of Sterela specifically for the purpose of making it appear "that
said firm had sufficient capitalization for incorporation, with the promise that the amount shall be returned within
thirty (30) days."29 Private respondent merely "accommodated" Doronilla by lending his money without consideration,
as a favor to his good friend Sanchez. It was however clear to the parties to the transaction that the money would not
be removed from Sterela’s savings account and would be returned to private respondent after thirty (30) days.
Doronilla’s attempts to return to private respondent the amount of ₱200,000.00 which the latter deposited in Sterela’s
account together with an additional ₱12,000.00, allegedly representing interest on the mutuum, did not convert the
transaction from a commodatum into a mutuum because such was not the intent of the parties and because the
additional ₱12,000.00 corresponds to the fruits of the lending of the ₱200,000.00. Article 1935 of the Civil Code
expressly states that "[t]he bailee in commodatum acquires the use of the thing loaned but not its fruits." Hence, it
was only proper for Doronilla to remit to private respondent the interest accruing to the latter’s money deposited with
petitioner.
Neither does the Court agree with petitioner’s contention that it is not solidarily liable for the return of private
respondent’s money because it was not privy to the transaction between Doronilla and private respondent. The nature
of said transaction, that is, whether it is a mutuum or a commodatum, has no bearing on the question of petitioner’s
liability for the return of private respondent’s money because the factual circumstances of the case clearly show that
petitioner, through its employee Mr. Atienza, was partly responsible for the loss of private respondent’s money and is
liable for its restitution.
Petitioner’s rules for savings deposits written on the passbook it issued Mrs. Vives on behalf of Sterela for Savings
Account No. 10-1567 expressly states that—
"2. Deposits and withdrawals must be made by the depositor personally or upon his written authority duly
authenticated, and neither a deposit nor a withdrawal will be permitted except upon the production of the depositor
savings bank book in which will be entered by the Bank the amount deposited or withdrawn."30
Said rule notwithstanding, Doronilla was permitted by petitioner, through Atienza, the Assistant Branch Manager for
the Buendia Branch of petitioner, to withdraw therefrom even without presenting the passbook (which Atienza very
well knew was in the possession of Mrs. Vives), not just once, but several times. Both the Court of Appeals and the
trial court found that Atienza allowed said withdrawals because he was party to Doronilla’s "scheme" of defrauding
private respondent:
XXX
But the scheme could not have been executed successfully without the knowledge, help and cooperation of Rufo
Atienza, assistant manager and cashier of the Makati (Buendia) branch of the defendant bank. Indeed, the evidence
indicates that Atienza had not only facilitated the commission of the fraud but he likewise helped in devising the means
by which it can be done in such manner as to make it appear that the transaction was in accordance with banking
procedure.
To begin with, the deposit was made in defendant’s Buendia branch precisely because Atienza was a key officer
therein. The records show that plaintiff had suggested that the ₱200,000.00 be deposited in his bank, the Manila
Banking Corporation, but Doronilla and Dumagpi insisted that it must be in defendant’s branch in Makati for "it will be
easier for them to get a certification". In fact before he was introduced to plaintiff, Doronilla had already prepared a
letter addressed to the Buendia branch manager authorizing Angeles B. Sanchez and company to open a savings
account for Sterela in the amount of ₱200,000.00, as "per coordination with Mr. Rufo Atienza, Assistant Manager of
the Bank x x x" (Exh. 1). This is a clear manifestation that the other defendants had been in consultation with Atienza
from the inception of the scheme. Significantly, there were testimonies and admission that Atienza is the brother-in-
law of a certain Romeo Mirasol, a friend and business associate of Doronilla.1awphi1.nét
Then there is the matter of the ownership of the fund. Because of the "coordination" between Doronilla and Atienza,
the latter knew before hand that the money deposited did not belong to Doronilla nor to Sterela. Aside from such
foreknowledge, he was explicitly told by Inocencia Vives that the money belonged to her and her husband and the
deposit was merely to accommodate Doronilla. Atienza even declared that the money came from Mrs. Vives.
Although the savings account was in the name of Sterela, the bank records disclose that the only ones empowered to
withdraw the same were Inocencia Vives and Angeles B. Sanchez. In the signature card pertaining to this account (Exh.
J), the authorized signatories were Inocencia Vives &/or Angeles B. Sanchez. Atienza stated that it is the usual banking
procedure that withdrawals of savings deposits could only be made by persons whose authorized signatures are in the
signature cards on file with the bank. He, however, said that this procedure was not followed here because Sterela
was owned by Doronilla. He explained that Doronilla had the full authority to withdraw by virtue of such ownership.
The Court is not inclined to agree with Atienza. In the first place, he was all the time aware that the money came from
Vives and did not belong to Sterela. He was also told by Mrs. Vives that they were only accommodating Doronilla so
that a certification can be issued to the effect that Sterela had a deposit of so much amount to be sued in the
incorporation of the firm. In the second place, the signature of Doronilla was not authorized in so far as that account
is concerned inasmuch as he had not signed the signature card provided by the bank whenever a deposit is opened.
In the third place, neither Mrs. Vives nor Sanchez had given Doronilla the authority to withdraw.
Moreover, the transfer of fund was done without the passbook having been presented. It is an accepted practice that
whenever a withdrawal is made in a savings deposit, the bank requires the presentation of the passbook. In this case,
such recognized practice was dispensed with. The transfer from the savings account to the current account was
without the submission of the passbook which Atienza had given to Mrs. Vives. Instead, it was made to appear in a
certification signed by Estrella Dumagpi that a duplicate passbook was issued to Sterela because the original passbook
had been surrendered to the Makati branch in view of a loan accommodation assigning the savings account (Exh. C).
Atienza, who undoubtedly had a hand in the execution of this certification, was aware that the contents of the same
are not true. He knew that the passbook was in the hands of Mrs. Vives for he was the one who gave it to her. Besides,
as assistant manager of the branch and the bank official servicing the savings and current accounts in question, he also
was aware that the original passbook was never surrendered. He was also cognizant that Estrella Dumagpi was not
among those authorized to withdraw so her certification had no effect whatsoever.
The circumstance surrounding the opening of the current account also demonstrate that Atienza’s active participation
in the perpetration of the fraud and deception that caused the loss. The records indicate that this account was opened
three days later after the ₱200,000.00 was deposited. In spite of his disclaimer, the Court believes that Atienza was
mindful and posted regarding the opening of the current account considering that Doronilla was all the while in
"coordination" with him. That it was he who facilitated the approval of the authority to debit the savings account to
cover any overdrawings in the current account (Exh. 2) is not hard to comprehend.
Clearly Atienza had committed wrongful acts that had resulted to the loss subject of this case. x x x.31

Under Article 2180 of the Civil Code, employers shall be held primarily and solidarily liable for damages caused by their
employees acting within the scope of their assigned tasks. To hold the employer liable under this provision, it must be
shown that an employer-employee relationship exists, and that the employee was acting within the scope of his
assigned task when the act complained of was committed.32 Case law in the United States of America has it that a
corporation that entrusts a general duty to its employee is responsible to the injured party for damages flowing from
the employee’s wrongful act done in the course of his general authority, even though in doing such act, the employee
may have failed in its duty to the employer and disobeyed the latter’s instructions.33

There is no dispute that Atienza was an employee of petitioner. Furthermore, petitioner did not deny that Atienza was
acting within the scope of his authority as Assistant Branch Manager when he assisted Doronilla in withdrawing funds
from Sterela’s Savings Account No. 10-1567, in which account private respondent’s money was deposited, and in
transferring the money withdrawn to Sterela’s Current Account with petitioner. Atienza’s acts of helping Doronilla, a
customer of the petitioner, were obviously done in furtherance of petitioner’s interests34 even though in the process,
Atienza violated some of petitioner’s rules such as those stipulated in its savings account passbook.35 It was established
that the transfer of funds from Sterela’s savings account to its current account could not have been accomplished by
Doronilla without the invaluable assistance of Atienza, and that it was their connivance which was the cause of private
respondent’s loss.

The foregoing shows that the Court of Appeals correctly held that under Article 2180 of the Civil Code, petitioner is
liable for private respondent’s loss and is solidarily liable with Doronilla and Dumagpi for the return of the ₱200,000.00
since it is clear that petitioner failed to prove that it exercised due diligence to prevent the unauthorized withdrawals
from Sterela’s savings account, and that it was not negligent in the selection and supervision of Atienza. Accordingly,
no error was committed by the appellate court in the award of actual, moral and exemplary damages, attorney’s fees
and costs of suit to private respondent.

WHEREFORE, the petition is hereby DENIED. The assailed Decision and Resolution of the Court of Appeals are
AFFIRMED.

SO ORDERED.
G.R. No. 179096 February 06, 2013 In its July 31, 2007 resolution,8 the CA denied the petitioner’s motion for reconsideration. Hence, the petitioner’s
JOSEPH GOYANKO, JR., as administrator of the Estate of Joseph Goyanko, Sr., Petitioner, present recourse.
vs.
UNITED COCONUT PLANTERS BANK, MANGO AVENUE BRANCH, Respondent.
The Petition
DECISION
BRION, J.:
The petitioner argues in his petition that: first, an express trust was created, as clearly shown by PALII’s March 28,
1996 and November 15, 1996 letters.9 Citing jurisprudence, the petitioner emphasizes that from the established
We resolve the petition for review on certiorari1
filed by petitioner Joseph Goyanko, Jr., administrator of the Estate of
definition of a trust,10 PALII is clearly the trustor as it created the trust; UCPB is the trustee as it is the party in whom
Joseph Goyanko, Sr., to nullify the decision2 dated February 20, 2007 and the resolution3 dated July 31, 2007 of the
confidence is reposed as regards the property for the benefit of another; and the HEIRS are the beneficiaries as they
Court of Appeals (CA) in CA-G.R. CV. No. 00257 affirming the decision4 of the Regional Trial Court of Cebu City, Branch
are the persons for whose benefit the trust is created.11 Also, quoting Development Bank of the Philippines v.
16(RTC) in Civil Case No. CEB-22277. The RTC dismissed the petitioner’s complaint for recovery of sum money against
Commission on Audit,12 the petitioner argues that the naming of the cestui que trust is not necessary as it suffices that
United Coconut Planters Bank, Mango Avenue Branch (UCPB).
they are adequately certain or identifiable.13

The Factual Antecedents

In 1995, the late Joseph Goyanko, Sr. (Goyanko) invested Two Million Pesos (P2,000,000.00) with Philippine Asia
Lending Investors, Inc. family, represented by the petitioner, and his illegitimate family presented conflicting claims to
PALII for the release of the investment. Pending the investigation of the conflicting claims, PALII deposited the
proceeds of the investment with UCPB on October 29, 19965 under the name "Phil Asia: ITF (In Trust For) The Heirs of
Joseph Goyanko, Sr." (ACCOUNT). On September 27, 1997, the deposit under the ACCOUNT was P1,509,318.76.
On December 11, 1997, UCPB allowed PALII to withdraw One Million Five Hundred Thousand Pesos (P1,500,000.00)
from the Account, leaving a balance of only P9,318.76. When UCPB refused the demand to restore the amount
withdrawn plus legal interest from December 11, 1997, the petitioner filed a complaint before the RTC. In its answer
to the complaint, UCPB admitted, among others, the opening of the ACCOUNT under the name "ITF (In Trust For) The
Heirs of Joseph Goyanko, Sr.," (ITF HEIRS) and the withdrawal on December 11, 1997.
The RTC Ruling
In its August 27, 2003 decision, the RTC dismissed the petitioner’s complaint and awarded UCPB attorney’s fees,
litigation expenses and the costs of the suit.6 The RTC did not consider the words "ITF HEIRS" sufficient to charge UCPB
with knowledge of any trust relation between PALII and Goyanko’s heirs (HEIRS). It concluded that UCPB merely
performed its duty as a depository bank in allowing PALII to withdraw from the ACCOUNT, as the contract of deposit
was officially only between PALII, in its own capacity, and UCPB. The petitioner appealed his case to the CA.
The CA’s Ruling
Before the CA, the petitioner maintained that by opening the ACCOUNT, PALII established a trust by which it was the
"trustee" and the HEIRS are the "trustors-beneficiaries;" thus, UCPB should be liable for allowing the withdrawal.
The CA partially granted the petitioner’s appeal. It affirmed the August 27, 2003 decision of the RTC, but deleted the
award of attorney’s fees and litigation expenses. The CA held that no express trust was created between the HEIRS
and PALII. For a trust to be established, the law requires, among others, a competent trustor and trustee and a clear
intention to create a trust, which were absent in this case. Quoting the RTC with approval, the CA noted that the
contract of deposit was only between PALII in its own capacity and UCPB, and the words "ITF HEIRS" were insufficient
to establish the existence of a trust. The CA concluded that as no trust existed, expressly or impliedly, UCPB is not
liable for the amount withdrawn.7
Second, UCPB was negligent and in bad faith in allowing the withdrawal and in failing to inquire into the nature of the
ACCOUNT.14 The petitioner maintains that the surrounding facts, the testimony of UCPB’s witness, and UCPB’s own
records showed that: (1) UCPB was aware of the trust relation between PALII and the HEIRS; and (2) PALII held the
ACCOUNT in a trust capacity. Finally, the CA erred in affirming the RTC’s dismissal of his case for lack of cause of action.
The petitioner insists that since an express trust clearly exists, UCPB, the trustee, should not have allowed the
withdrawal.
The Case for UCPB
UCPB posits, in defense, that the ACCOUNT involves an ordinary deposit contract between PALII and UCPB only, which
created a debtor-creditor relationship obligating UCPB to return the proceeds to the account holder-PALII. Thus, it was
not negligent in handling the ACCOUNT when it allowed the withdrawal. The mere designation of the ACCOUNT as
"ITF" is insufficient to establish the existence of an express trust or charge it with knowledge of the relation between
PALII and the HEIRS.
UCPB also argues that the petitioner changed the theory of his case. Before the CA, the petitioner argued that the
HEIRS are the trustors-beneficiaries, and PALII is the trustee. Here, the petitioner maintains that PALII is the trustor,
UCPB is the trustee, and the HEIRS are the beneficiaries. Contrary to the petitioner’s assertion, the records failed to
show that PALII and UCPB executed a trust agreement, and PALII’s letters made it clear that PALII, on its own, intended
to turn-over the proceeds of the ACCOUNT to its rightful owners.
The Court’s Ruling
The issue before us is whether UCPB should be held liable for the amount withdrawn because a trust agreement
existed between PALII and UCPB, in favor of the HEIRS, when PALII opened the ACCOUNT with UCPB.
We rule in the negative.
We first address the procedural issues. We stress the settled rule that a petition for review on certiorari under Rule 45
of the Rules of Court resolves only questions of law, not questions of fact.15 A question, to be one of law, must not
examine the probative value of the evidence presented by the parties;16 otherwise, the question is one of
fact.17 Whether an express trust exists in this case is a question of fact whose resolution is not proper in a petition
under Rule 45. Reinforcing this is the equally settled rule that factual findings of the lower tribunals are conclusive on
the parties and are not generally reviewable by this Court,18 especially when, as here, the CA affirmed these findings.
The plain reason is that this Court is not a trier of facts.19 While this Court has, at times, permitted exceptions from the
restriction,20 we find that none of these exceptions obtain in the present case.
Second, we find that the petitioner changed the theory of his case. The petitioner argued before the lower courts that
an express trust exists between PALII as the trustee and the HEIRS as the trustor-beneficiary.21 The petitioner now
asserts that the express trust exists between PALII as the trustor and UCPB as the trustee, with the HEIRS as the
beneficiaries.22 At this stage of the case, such change of theory is simply not allowed as it violates basic rules of fair
play, justice and due process. Our rulings are clear - "a party who deliberately adopts a certain theory upon which the
case was decided by the lower court will not be permitted to change [it] on appeal";23 otherwise, the lower courts will
effectively be deprived of the opportunity to decide the merits of the case fairly.24 Besides, courts of justice are devoid
of jurisdiction to resolve a question not in issue.25 For these reasons, the petition must fail. Independently of these,
the petition must still be denied.
No express trust exists; UCPB exercised the required diligence in handling the ACCOUNT; petitioner has no cause of
action against UCPB
A trust, either express or implied,26 is the fiduciary relationship "x x x between one person having an equitable
ownership of property and another person owning the legal title to such property, the equitable ownership of the
former entitling him to the performance of certain duties and the exercise of certain powers by the latter."27 Express
or direct trusts are created by the direct and positive acts of the trustor or of the parties. 28 No written words are
required to create an express trust. This is clear from Article 1444 of the Civil Code, 29 but, the creation of an express
trust must be firmly shown; it cannot be assumed from loose and vague declarations or circumstances capable of other
interpretations.30
In Rizal Surety & Insurance Co. v. CA,31 we laid down the requirements before an express trust will be recognized:
Basically, these elements include a competent trustor and trustee, an ascertainable trust res, and sufficiently certain
beneficiaries. xxx each of the above elements is required to be established, and, if any one of them is missing, it is
fatal to the trusts (sic). Furthermore, there must be a present and complete disposition of the trust property,
notwithstanding that the enjoyment in the beneficiary will take place in the future. It is essential, too, that the
purpose be an active one to prevent trust from being executed into a legal estate or interest, and one that is not in
contravention of some prohibition of statute or rule of public policy. There must also be some power of
administration other than a mere duty to perform a contract although the contract is for a thirdparty beneficiary. A
declaration of terms is essential, and these must be stated with reasonable certainty in order that the trustee may
administer, and that the court, if called upon so to do, may enforce, the trust. [emphasis ours]
UCPB’s records and the testimony of UCPB’s witness34 likewise lead us to the same conclusion. While the words "ITF
HEIRS" may have created the impression that a trust account was created, a closer scrutiny reveals that it is an ordinary
savings account.35 We give credence to UCPB’s explanation that the word "ITF" was merely used to distinguish the
ACCOUNT from PALII’s other accounts with UCPB. A trust can be created without using the word "trust" or "trustee,"
but the mere use of these words does not automatically reveal an intention to create a trust.36 If at all, these words
showed a trustee-beneficiary relationship between PALII and the HEIRS.
Contrary to the petitioner’s position, UCPB did not become a trustee by the mere opening of the
ACCOUNT.1âwphi1 While this may seem to be the case, by reason of the fiduciary nature of the bank’s relationship
with its depositors,37 this fiduciary relationship does not "convert the contract between the bank and its depositors
from a simple loan to a trust agreement, whether express or implied."38 It simply means that the bank is obliged to
observe "high standards of integrity and performance" in complying with its obligations under the contract of simple
loan.39 Per Article 1980 of the Civil Code,40 a creditor-debtor relationship exists between the bank and its
depositor.41 The savings deposit agreement is between the bank and the depositor;42 by receiving the deposit, the
bank impliedly agrees to pay upon demand and only upon the depositor’s order.43
Since the records and the petitioner’s own admission showed that the ACCOUNT was opened by PALII, UCPB’s receipt
of the deposit signified that it agreed to pay PALII upon its demand and only upon its order. Thus, when UCPB allowed
PALII to withdraw from the ACCOUNT, it was merely performing its contractual obligation under their savings deposit
agreement. No negligence or bad faith44 can be imputed to UCPB for this action. As far as UCPB was concerned, PALII
is the account holder and not the HEIRS. As we held in Falton Iron Works Co. v. China Banking Corporation.45 the bank’s
duty is to its creditor-depositor and not to third persons. Third persons, like the HEIRS here, who may have a right to
the money deposited, cannot hold the bank responsible unless there is a court order or garnishment.46 The petitioner’s
recourse is to go before a court of competent jurisdiction to prove his valid right over the money deposited.
In these lights, we find the third assignment of error mooted. A cause of action requires that there be a right existing
in favor of the plaintiff, the defendant’s obligation to respect that right, and an act or omission of the defendant in
breach of that right.47 We reiterate that UCPB’s obligation was towards PALII as its creditor-depositor. While the HEIRS
may have a valid claim over the proceeds of the investment, the obligation to turn-over those proceeds lies with PALII.
Since no trust exists the petitioner’s complaint was correctly dismissed and the CA did not commit any reversible error
in affirming the RTC decision. One final note, the burden to prove the existence of an express trust lies with the
petitioner.48 For his failure to discharge this burden, the petition must fail.

WHEREFORE, in view of these considerations, we hereby DENY the petition and AFFIRM the decision dated February
Under these standards, we hold that no express trust was created. First, while an ascertainable trust res and
20, 2007 and the resolution dated July 31, 2007 of the Court of Appeals in CA-G.R. CV. No. 00257. Costs against the
sufficiently certain beneficiaries may exist, a competent trustor and trustee do not. Second, UCPB, as trustee of the
petitioner.
ACCOUNT, was never under any equitable duty to deal with or given any power of administration over it. On the
contrary, it was PALII that undertook the duty to hold the title to the ACCOUNT for the benefit of the HEIRS. Third,
PALII, as the trustor, did not have the right to the beneficial enjoyment of the ACCOUNT. Finally, the terms by which SO ORDERED:
UCPB is to administer the ACCOUNT was not shown with reasonable certainty. While we agree with the petitioner that
a trust’s beneficiaries need not be particularly identified for a trust to exist, the intention to create an express trust
must first be firmly established, along with the other elements laid above; absent these, no express trust exists.

Contrary to the petitioner’s contention, PALII’s letters and UCPB’s records established UCPB’s participation as a mere
depositary of the proceeds of the investment. In the March 28, 1996 letter, PALII manifested its intention to pursue
an active role in and up to the turnover of those proceeds to their rightful owners,32 while in the November 15, 1996
letter, PALII begged the petitioner to trust it with the safekeeping of the investment proceeds and documents. 33 Had
it been PALII’s intention to create a trust in favor of the HEIRS, it would have relinquished any right or claim over the
proceeds in UCPB’s favor as the trustee. As matters stand, PALII never did.
G.R. No. 136202 January 25, 2007 WHEREFORE, premises considered, judgment is hereby rendered in favor of the plaintiff [private respondent Salazar]
and against the defendant [petitioner BPI] and ordering the latter to pay as follows:
BANK OF THE PHILIPPINE ISLANDS, Petitioner,
vs. 1. The amount of P267,707.70 with 12% interest thereon from September 16, 1991 until the said amount
COURT OF APPEALS, ANNABELLE A. SALAZAR, and JULIO R. TEMPLONUEVO, Respondents is fully paid;

DECISION 2. The amount of P30,000.00 as and for actual damages;

AZCUNA, J.: 3. The amount of P50,000.00 as and for moral damages;

This is a petition for review under Rule 45 of the Rules of Court seeking the reversal of the Decision 1 dated April 3, 4. The amount of P50,000.00 as and for exemplary damages;
1998, and the Resolution2 dated November 9, 1998, of the Court of Appeals in CA-G.R. CV No. 42241.
5. The amount of P30,000.00 as and for attorney’s fees; and
The facts3 are as follows:
6. Costs of suit.
A.A. Salazar Construction and Engineering Services filed an action for a sum of money with damages against herein
petitioner Bank of the Philippine Islands (BPI) on December 5, 1991 before Branch 156 of the Regional Trial Court (RTC)
The counterclaim is hereby ordered DISMISSED for lack of factual basis.
of Pasig City. The complaint was later amended by substituting the name of Annabelle A. Salazar as the real party in
interest in place of A.A. Salazar Construction and Engineering Services. Private respondent Salazar prayed for the
recovery of the amount of Two Hundred Sixty-Seven Thousand, Seven Hundred Seven Pesos and Seventy Centavos The third-party complaint [filed by petitioner] is hereby likewise ordered DISMISSED for lack of merit.
(P267,707.70) debited by petitioner BPI from her account. She likewise prayed for damages and attorney’s fees.
Third-party defendant’s [i.e., private respondent Templonuevo’s] counterclaim is hereby likewise DISMISSED for lack
Petitioner BPI, in its answer, alleged that on August 31, 1991, Julio R. Templonuevo, third-party defendant and herein of factual basis.
also a private respondent, demanded from the former payment of the amount of Two Hundred Sixty-Seven Thousand,
Six Hundred Ninety-Two Pesos and Fifty Centavos (P267,692.50) representing the aggregate value of three (3) checks, SO ORDERED.4
which were allegedly payable to him, but which were deposited with the petitioner bank to private respondent
Salazar’s account (Account No. 0203-1187-67) without his knowledge and corresponding endorsement.
On appeal, the Court of Appeals (CA) affirmed the decision of the RTC and held that respondent Salazar was entitled
to the proceeds of the three (3) checks notwithstanding the lack of endorsement thereon by the payee. The CA
Accepting that Templonuevo’s claim was a valid one, petitioner BPI froze Account No. 0201-0588-48 of A.A. Salazar concluded that Salazar and Templonuevo had previously agreed that the checks payable to JRT Construction and
and Construction and Engineering Services, instead of Account No. 0203-1187-67 where the checks were deposited, Trading5 actually belonged to Salazar and would be deposited to her account, with petitioner acquiescing to the
since this account was already closed by private respondent Salazar or had an insufficient balance. arrangement.6

Private respondent Salazar was advised to settle the matter with Templonuevo but they did not arrive at any Petitioner therefore filed this petition on these grounds:
settlement. As it appeared that private respondent Salazar was not entitled to the funds represented by the checks
which were deposited and accepted for deposit, petitioner BPI decided to debit the amount of P267,707.70 from her
Account No. 0201-0588-48 and the sum of P267,692.50 was paid to Templonuevo by means of a cashier’s check. The I.
difference between the value of the checks (P267,692.50) and the amount actually debited from her account
(P267,707.70) represented bank charges in connection with the issuance of a cashier’s check to Templonuevo. The Court of Appeals committed reversible error in misinterpreting Section 49 of the Negotiable Instruments Law and
Section 3 (r and s) of Rule 131 of the New Rules on Evidence.
In the answer to the third-party complaint, private respondent Templonuevo admitted the payment to him
of P267,692.50 and argued that said payment was to correct the malicious deposit made by private respondent Salazar II.
to her private account, and that petitioner bank’s negligence and tolerance regarding the matter was violative of the
primary and ordinary rules of banking. He likewise contended that the debiting or taking of the reimbursed amount
from the account of private respondent Salazar by petitioner BPI was a matter exclusively between said parties and The Court of Appeals committed reversible error in NOT applying the provisions of Articles 22, 1278 and 1290 of the
may be pursuant to banking rules and regulations, but did not in any way affect him. The debiting from another Civil Code in favor of BPI.
account of private respondent Salazar, considering that her other account was effectively closed, was not his concern.
III.
After trial, the RTC rendered a decision, the dispositive portion of which reads thus:
The Court of Appeals committed a reversible error in holding, based on a misapprehension of facts, that the account
from which BPI debited the amount of P267,707.70 belonged to a corporation with a separate and distinct personality.
IV.
The Court of Appeals committed a reversible error in holding, based entirely on speculations, surmises or conjectures,
that there was an agreement between SALAZAR and TEMPLONUEVO that checks payable to TEMPLONUEVO may be
deposited by SALAZAR to her personal account and that BPI was privy to this agreement.
V.
The Court of Appeals committed reversible error in holding, based entirely on speculation, surmises or conjectures,
that SALAZAR suffered great damage and prejudice and that her business standing was eroded.
VI.
The Court of Appeals erred in affirming instead of reversing the decision of the lower court against BPI and dismissing
SALAZAR’s complaint.
VII.
The Honorable Court erred in affirming the decision of the lower court dismissing the third-party complaint of BPI.7
The issues center on the propriety of the deductions made by petitioner from private respondent Salazar’s account.
Stated otherwise, does a collecting bank, over the objections of its depositor, have the authority to withdraw
unilaterally from such depositor’s account the amount it had previously paid upon certain unendorsed order
instruments deposited by the depositor to another account that she later closed?
Petitioner argues thus:
1. There is no presumption in law that a check payable to order, when found in the possession of a person
who is neither a payee nor the indorsee thereof, has been lawfully transferred for value. Hence, the CA
should not have presumed that Salazar was a transferee for value within the contemplation of Section 49
of the Negotiable Instruments Law,8 as the latter applies only to a holder defined under Section 191of the
same.9
2. Salazar failed to adduce sufficient evidence to prove that her possession of the three checks was lawful
despite her allegations that these checks were deposited pursuant to a prior internal arrangement with
Templonuevo and that petitioner was privy to the arrangement.
3. The CA should have applied the Civil Code provisions on legal compensation because in deducting the
subject amount from Salazar’s account, petitioner was merely rectifying the undue payment it made upon
the checks and exercising its prerogative to alter or modify an erroneous credit entry in the regular course
of its business.
4. The debit of the amount from the account of A.A. Salazar Construction and Engineering Services was
proper even though the value of the checks had been originally credited to the personal account of Salazar
because A.A. Salazar Construction and Engineering Services, an unincorporated single proprietorship, had
no separate and distinct personality from Salazar.
5. Assuming the deduction from Salazar’s account was improper, the CA should not have dismissed
petitioner’s third-party complaint against Templonuevo because the latter would have the legal duty to
return to petitioner the proceeds of the checks which he previously received from it.
6. There was no factual basis for the award of damages to Salazar.
The petition is partly meritorious.
First, the issue raised by petitioner requires an inquiry into the factual findings made by the CA. The CA’s conclusion
that the deductions from the bank account of A.A. Salazar Construction and Engineering Services were improper
stemmed from its finding that there was no ineffective payment to Salazar which would call for the exercise of
petitioner’s right to set off against the former’s bank deposits. This finding, in turn, was drawn from the pleadings of
the parties, the evidence adduced during trial and upon the admissions and stipulations of fact made during the pre-
trial, most significantly the following:
(a) That Salazar previously had in her possession the following checks:
(1) Solid Bank Check No. CB766556 dated January 30, 1990 in the amount of P57,712.50;
(2) Solid Bank Check No. CB898978 dated July 31, 1990 in the amount of P55,180.00; and,
(3) Equitable Banking Corporation Check No. 32380638 dated August 28, 1990 for the amount
of P154,800.00;
(b) That these checks which had an aggregate amount of P267,692.50 were payable to the order of JRT
Construction and Trading, the name and style under which Templonuevo does business;
(c) That despite the lack of endorsement of the designated payee upon such checks, Salazar was able to
deposit the checks in her personal savings account with petitioner and encash the same;
(d) That petitioner accepted and paid the checks on three (3) separate occasions over a span of eight
months in 1990; and
(e) That Templonuevo only protested the purportedly unauthorized encashment of the checks after the
lapse of one year from the date of the last check.10
Petitioner concedes that when it credited the value of the checks to the account of private respondent Salazar, it made
a mistake because it failed to notice the lack of endorsement thereon by the designated payee. The CA, however, did
not lend credence to this claim and concluded that petitioner’s actions were deliberate, in view of its admission that
the "mistake" was committed three times on three separate occasions, indicating acquiescence to the internal
arrangement between Salazar and Templonuevo. The CA explained thus:
It was quite apparent that the three checks which appellee Salazar deposited were not indorsed. Three times she
deposited them to her account and three times the amounts borne by these checks were credited to the same. And
in those separate occasions, the bank did not return the checks to her so that she could have them indorsed. Neither
did the bank question her as to why she was depositing the checks to her account considering that she was not the
payee thereof, thus allowing us to come to the conclusion that defendant-appellant BPI was fully aware that the
proceeds of the three checks belong to appellee.
For if the bank was not privy to the agreement between Salazar and Templonuevo, it is most unlikely that appellant
BPI (or any bank for that matter) would have accepted the checks for deposit on three separate times nary any
question. Banks are most finicky over accepting checks for deposit without the corresponding indorsement by their
payee. In fact, they hesitate to accept indorsed checks for deposit if the depositor is not one they know very well.11
The CA likewise sustained Salazar’s position that she received the checks from Templonuevo pursuant to an internal
arrangement between them, ratiocinating as follows:
Transfer without indorsement; effect of- Where the holder of an instrument payable to his order transfers it for value
without indorsing it, the transfer vests in the transferee such title as the transferor had therein, and the transferee
acquires in addition, the right to have the indorsement of the transferor. But for the purpose of determining whether
the transferee is a holder in due course, the negotiation takes effect as of the time when the indorsement is actually
made. 17
It bears stressing that the above transaction is an equitable assignment and the transferee acquires the instrument
subject to defenses and equities available among prior parties. Thus, if the transferor had legal title, the transferee
acquires such title and, in addition, the right to have the indorsement of the transferor and also the right, as holder of
the legal title, to maintain legal action against the maker or acceptor or other party liable to the transferor. The
underlying premise of this provision, however, is that a valid transfer of ownership of the negotiable instrument in
question has taken place.

Transferees in this situation do not enjoy the presumption of ownership in favor of holders since they are neither
If there was indeed no arrangement between Templonuevo and the plaintiff over the three questioned checks, it
payees nor indorsees of such instruments. The weight of authority is that the mere possession of a negotiable
baffles us why it was only on August 31, 1991 or more than a year after the third and last check was deposited that he
instrument does not in itself conclusively establish either the right of the possessor to receive payment, or of the right
demanded for the refund of the total amount of P267,692.50.
of one who has made payment to be discharged from liability. Thus, something more than mere possession by persons
who are not payees or indorsers of the instrument is necessary to authorize payment to them in the absence of any
A prudent man knowing that payment is due him would have demanded payment by his debtor from the moment the other facts from which the authority to receive payment may be inferred.18
same became due and demandable. More so if the sum involved runs in hundreds of thousand of pesos. By and large,
every person, at the very moment he learns that he was deprived of a thing which rightfully belongs to him, would
The CA and the trial court surmised that the subject checks belonged to private respondent Salazar based on the pre-
have created a big fuss. He would not have waited for a year within which to do so. It is most inconceivable that
trial stipulation that Templonuevo incurred a one-year delay in demanding reimbursement for the proceeds of the
Templonuevo did not do this.12
same. To the Court’s mind, however, such period of delay is not of such unreasonable length as to estop Templonuevo
from asserting ownership over the checks especially considering that it was readily apparent on the face of the
Generally, only questions of law may be raised in an appeal by certiorari under Rule 45 of the Rules of Court.13 Factual instruments19 that these were crossed checks.
findings of the CA are entitled to great weight and respect, especially when the CA affirms the factual findings of the
trial court.14 Such questions on whether certain items of evidence should be accorded probative value or weight, or
In State Investment House v. IAC,20 the Court enumerated the effects of crossing a check, thus: (1) that the check may
rejected as feeble or spurious, or whether or not the proofs on one side or the other are clear and convincing and
not be encashed but only deposited in the bank; (2) that the check may be negotiated only once - to one who has an
adequate to establish a proposition in issue, are questions of fact. The same holds true for questions on whether or
account with a bank; and (3) that the act of crossing the check serves as a warning to the holder that the check has
not the body of proofs presented by a party, weighed and analyzed in relation to contrary evidence submitted by the
been issued for a definite purpose so that such holder must inquire if the check has been received pursuant to that
adverse party may be said to be strong, clear and convincing, or whether or not inconsistencies in the body of proofs
purpose.
of a party are of such gravity as to justify refusing to give said proofs weight – all these are issues of fact which are not
reviewable by the Court.15
Thus, even if the delay in the demand for reimbursement is taken in conjunction with Salazar’s possession of the
checks, it cannot be said that the presumption of ownership in Templonuevo’s favor as the designated payee therein
This rule, however, is not absolute and admits of certain exceptions, namely: a) when the conclusion is a finding
was sufficiently overcome. This is consistent with the principle that if instruments payable to named payees or to their
grounded entirely on speculations, surmises, or conjectures; b) when the inference made is manifestly mistaken,
order have not been indorsed in blank, only such payees or their indorsees can be holders and entitled to receive
absurd, or impossible; c) when there is a grave abuse of discretion; d) when the judgment is based on a
payment in their own right.21
misapprehension of facts; e) when the findings of fact are conflicting; f) when the CA, in making its findings, went
beyond the issues of the case and the same are contrary to the admissions of both appellant and appellee; g) when
the findings of the CA are contrary to those of the trial court; h) when the findings of fact are conclusions without The presumption under Section 131(s) of the Rules of Court stating that a negotiable instrument was given for a
citation of specific evidence on which they are based; i) when the finding of fact of the CA is premised on the supposed sufficient consideration will not inure to the benefit of Salazar because the term "given" does not pertain merely to a
absence of evidence but is contradicted by the evidence on record; and j) when the CA manifestly overlooked certain transfer of physical possession of the instrument. The phrase "given or indorsed" in the context of a negotiable
relevant facts not disputed by the parties and which, if properly considered, would justify a different conclusion.16 instrument refers to the manner in which such instrument may be negotiated. Negotiable instruments are negotiated
by "transfer to one person or another in such a manner as to constitute the transferee the holder thereof. If payable
to bearer it is negotiated by delivery. If payable to order it is negotiated by the indorsement completed by
In the present case, the records do not support the finding made by the CA and the trial court that a prior arrangement
delivery."22 The present case involves checks payable to order. Not being a payee or indorsee of the checks, private
existed between Salazar and Templonuevo regarding the transfer of ownership of the checks. This fact is crucial as
respondent Salazar could not be a holder thereof.
Salazar’s entitlement to the value of the instruments is based on the assumption that she is a transferee within the
contemplation of Section 49 of the Negotiable Instruments Law.
It is an exception to the general rule for a payee of an order instrument to transfer the instrument without
indorsement. Precisely because the situation is abnormal, it is but fair to the maker and to prior holders to require
Section 49 of the Negotiable Instruments Law contemplates a situation whereby the payee or indorsee delivers a
possessors to prove without the aid of an initial presumption in their favor, that they came into possession by virtue
negotiable instrument for value without indorsing it, thus:
of a legitimate transaction with the last holder.23 Salazar failed to discharge this burden, and the return of the check
proceeds to Templonuevo was therefore warranted under the circumstances despite the fact that Templonuevo may
not have clearly demonstrated that he never authorized Salazar to deposit the checks or to encash the same.
Noteworthy also is the fact that petitioner stamped on the back of the checks the words: "All prior endorsements
and/or lack of endorsements guaranteed," thereby making the assurance that it had ascertained the genuineness of
all prior endorsements. Having assumed the liability of a general indorser, petitioner’s liability to the designated payee
cannot be denied.
Consequently, petitioner, as the collecting bank, had the right to debit Salazar’s account for the value of the checks it
previously credited in her favor. It is of no moment that the account debited by petitioner was different from the
original account to which the proceeds of the check were credited because both admittedly belonged to Salazar, the
former being the account of the sole proprietorship which had no separate and distinct personality from her, and the
latter being her personal account.
The right of set-off was explained in Associated Bank v. Tan:24
A bank generally has a right of set-off over the deposits therein for the payment of any withdrawals on the part of a
depositor. The right of a collecting bank to debit a client's account for the value of a dishonored check that has
previously been credited has fairly been established by jurisprudence. To begin with, Article 1980 of the Civil Code
provides that "[f]ixed, savings, and current deposits of money in banks and similar institutions shall be governed by
the provisions concerning simple loan."
Hence, the relationship between banks and depositors has been held to be that of creditor and debtor. Thus, legal
compensation under Article 1278 of the Civil Code may take place "when all the requisites mentioned in Article 1279
are present," as follows:
(1) That each one of the obligors be bound principally, and that he be at the same time a principal creditor
of the other;
(2) That both debts consist in a sum of money, or if the things due are consumable, they be of the same
kind, and also of the same quality if the latter has been stated;
(3) That the two debts be due;
(4) That they be liquidated and demandable;
(5) That over neither of them there be any retention or controversy, commenced by third persons and
communicated in due time to the debtor.
While, however, it is conceded that petitioner had the right of set-off over the amount it paid to Templonuevo against
the deposit of Salazar, the issue of whether it acted judiciously is an entirely different matter.25 As businesses affected
with public interest, and because of the nature of their functions, banks are under obligation to treat the accounts of
their depositors with meticulous care, always having in mind the fiduciary nature of their relationship.26 In this regard,
petitioner was clearly remiss in its duty to private respondent Salazar as its depositor.
To begin with, the irregularity appeared plainly on the face of the checks. Despite the obvious lack of indorsement
thereon, petitioner permitted the encashment of these checks three times on three separate occasions. This negates
petitioner’s claim that it merely made a mistake in crediting the value of the checks to Salazar’s account and instead
bolsters the conclusion of the CA that petitioner recognized Salazar’s claim of ownership of checks and acted
deliberately in paying the same, contrary to ordinary banking policy and practice. It must be emphasized that the law
imposes a duty of diligence on the collecting bank to scrutinize checks deposited with it, for the purpose of determining
their genuineness and regularity. The collecting bank, being primarily engaged in banking, holds itself out to the public
as the expert on this field, and the law thus holds it to a high standard of conduct.27 The taking and collection of a
check without the proper indorsement amount to a conversion of the check by the bank.28
More importantly, however, solely upon the prompting of Templonuevo, and with full knowledge of the brewing
dispute between Salazar and Templonuevo, petitioner debited the account held in the name of the sole proprietorship
of Salazar without even serving due notice upon her. This ran contrary to petitioner’s assurances to private respondent
Salazar that the account would remain untouched, pending the resolution of the controversy between her and
Templonuevo.29 In this connection, the CA cited the letter dated September 5, 1991 of Mr. Manuel Ablan, Senior
Manager of petitioner bank’s Pasig/Ortigas branch, to private respondent Salazar informing her that her account had
been frozen, thus:
From the tenor of the letter of Manuel Ablan, it is safe to conclude that Account No. 0201-0588-48 will remain frozen
or untouched until herein [Salazar] has settled matters with Templonuevo. But, in an unexpected move, in less than
two weeks (eleven days to be precise) from the time that letter was written, [petitioner] bank issued a cashier’s check
in the name of Julio R. Templonuevo of the J.R.T. Construction and Trading for the sum of P267,692.50 (Exhibit "8")
and debited said amount from Ms. Arcilla’s account No. 0201-0588-48 which was supposed to be frozen or controlled.
Such a move by BPI is, to Our minds, a clear case of negligence, if not a fraudulent, wanton and reckless disregard of
the right of its depositor.
The records further bear out the fact that respondent Salazar had issued several checks drawn against the account of
A.A. Salazar Construction and Engineering Services prior to any notice of deduction being served. The CA sustained
private respondent Salazar’s claim of damages in this regard:
The act of the bank in freezing and later debiting the amount of P267,692.50 from the account of A.A. Salazar
Construction and Engineering Services caused plaintiff-appellee great damage and prejudice particularly when she had
already issued checks drawn against the said account. As can be expected, the said checks bounced. To prove this,
plaintiff-appellee presented as exhibits photocopies of checks dated September 8, 1991, October 28, 1991, and
November 14, 1991 (Exhibits "D", "E" and "F" respectively)30
These checks, it must be emphasized, were subsequently dishonored, thereby causing private respondent Salazar
undue embarrassment and inflicting damage to her standing in the business community. Under the circumstances,
she was clearly not given the opportunity to protect her interest when petitioner unilaterally withdrew the above
amount from her account without informing her that it had already done so.
For the above reasons, the Court finds no reason to disturb the award of damages granted by the CA against petitioner.
This whole incident would have been avoided had petitioner adhered to the standard of diligence expected of one
engaged in the banking business. A depositor has the right to recover reasonable moral damages even if the bank’s
negligence may not have been attended with malice and bad faith, if the former suffered mental anguish, serious
anxiety, embarrassment and humiliation.31 Moral damages are not meant to enrich a complainant at the expense of
defendant. It is only intended to alleviate the moral suffering she has undergone. The award of exemplary damages is
justified, on the other hand, when the acts of the bank are attended by malice, bad faith or gross negligence. The
award of reasonable attorney’s fees is proper where exemplary damages are awarded. It is proper where depositors
are compelled to litigate to protect their interest.32
WHEREFORE, the petition is partially GRANTED. The assailed Decision dated April 3, 1998 and Resolution dated April
3, 1998 rendered by the Court of Appeals in CA-G.R. CV No. 42241 are MODIFIED insofar as it ordered petitioner Bank
of the Philippine Islands to return the amount of Two Hundred Sixty-seven Thousand Seven Hundred and Seven and
70/100 Pesos (P267,707.70) to respondent Annabelle A. Salazar, which portion is REVERSED and SET ASIDE. In all
other respects, the same are AFFIRMED.

No costs.

SO ORDERED.
G.R. No. 171845 October 10, 2012
SPOUSES GODFREY and GERARDINA SERFINO, Petitioners,
vs.
FAR EAST BANK AND TRUST COMPANY, INC., now BANK OF THE PHILIPPINE ISLANDS, Respondent.
DECISION
BRION, J.:
Before the Court is a petition for review on certiorari, 1 filed under Rule 45 of the Rules of Court, assailing the
decision2 dated February 23, 2006 of the Regional Trial Court (RTC) of Bacolod City, Branch 41, in Civil Case No. 95-
9344.
FACTUAL ANTECEDENTS
The present case traces its roots to the compromise judgment dated October 24, 19953 of the RTC of Bacolod City,
Branch 47, in Civil Case No. 95-9880. Civil Case No. 95-9880 was an action for collection of sum of money instituted by
the petitioner spouses Godfrey and Gerardina Serfino (collectively, spouses Serfino) against the spouses Domingo and
Magdalena Cortez (collectively, spouses Cortez). By way of settlement, the spouses Serfino and the spouses Cortez
executed a compromise agreement on October 20, 1995, in which the spouses Cortez acknowledged their
indebtedness to the spouses Serfino in the amount of ₱ 108,245.71. To satisfy the debt, Magdalena bound herself "to
pay in full the judgment debt out of her retirement benefits[.]"4 Payment of the debt shall be made one (1) week
after Magdalena has received her retirement benefits from the Government Service Insurance System (GSIS). In case
of default, the debt may be executed against any of the properties of the spouses Cortez that is subject to execution,
upon motion of the spouses Serfino.5 After finding that the compromise agreement was not contrary to law, morals,
good custom, public order or public policy, the RTC approved the entirety of the parties’ agreement and issued a
compromise judgment based thereon.6 The debt was later reduced to ₱ 155,000.00 from ₱ 197,000.00 (including
interest), with the promise that the spouses Cortez would pay in full the judgment debt not later than April 23, 1996.7
No payment was made as promised. Instead, Godfrey discovered that Magdalena deposited her retirement benefits
in the savings account of her daughter-in-law, Grace Cortez, with the respondent, Far East Bank and Trust Company,
Inc. (FEBTC). As of April 23, 1996, Grace’s savings account with FEBTC amounted to ₱ 245,830.37, the entire deposit
coming from Magdalena’s retirement benefits.8 That same day, the spouses Serfino’s counsel sent two letters to
FEBTC informing the bank that the deposit in Grace’s name was owned by the spouses Serfino by virtue of an
assignment made in their favor by the spouses Cortez. The letter requested FEBTC to prevent the delivery of the
deposit to either Grace or the spouses Cortez until its actual ownership has been resolved in court.
On April 25, 1996, the spouses Serfino instituted Civil Case No. 95- 9344 against the spouses Cortez, Grace and her
husband, Dante Cortez, and FEBTC for the recovery of money on deposit and the payment of damages, with a prayer
for preliminary attachment.
On April 26, 1996, Grace withdrew ₱ 150,000.00 from her savings account with FEBTC. On the same day, the spouses
Serfino sent another letter to FEBTC informing it of the pending action; attached to the letter was a copy of the
complaint filed as Civil Case No. 95-9344.
During the pendency of Civil Case No. 95-9344, the spouses Cortez manifested that they were turning over the balance
of the deposit in FEBTC (amounting to ₱ 54,534.00) to the spouses Serfino as partial payment of their obligation under
the compromise judgment. The RTC issued an order dated July 30, 1997, authorizing FEBTC to turn over the balance
of the deposit to the spouses Serfino.
On February 23, 2006, the RTC issued the assailed decision (a) finding the spouses Cortez, Grace and Dante liable for
fraudulently diverting the amount due the spouses Serfino, but (b) absolving FEBTC from any liability for allowing
Grace to withdraw the deposit. The RTC declared that FEBTC was not a party to the compromise judgment; FEBTC
was thus not chargeable with notice of the parties’ agreement, as there was no valid court order or processes requiring
it to withhold payment of the deposit. Given the nature of bank deposits, FEBTC was primarily bound by its contract
of loan with Grace. There was, therefore, no legal justification for the bank to refuse payment of the account,
notwithstanding the claim of the spouses Serfino as stated in their three letters.
THE PARTIES’ ARGUMENTS
The spouses Serfino appealed the RTC’s ruling absolving FEBTC from liability for allowing the withdrawal of the
deposit. They allege that the RTC cited no legal basis for declaring that only a court order or process can justify the
withholding of the deposit in Grace’s name. Since FEBTC was informed of their adverse claim after they sent three
letters, they claim that:
Upon receipt of a notice of adverse claim in proper form, it becomes the duty of the bank to: 1. Withhold payment of
the deposit until there is a reasonable opportunity to institute legal proceedings to contest ownership; and 2) give
prompt notice of the adverse claim to the depositor. The bank may be held liable to the adverse claimant if it disregards
the notice of adverse claim and pays the depositor.
When the bank has reasonable notice of a bona fide claim that money deposited with it is the property of another
than the depositor, it should withhold payment until there is reasonable opportunity to institute legal proceedings to
contest the ownership.9 (emphases and underscoring supplied)
Aside from the three letters, FEBTC should be deemed bound by the compromise judgment, since Article 1625 of the
Civil Code states that an assignment of credit binds third persons if it appears in a public instrument.10 They conclude
that FEBTC, having been notified of their adverse claim, should not have allowed Grace to withdraw the deposit.
While they acknowledged that bank deposits are governed by the Civil Code provisions on loan, the spouses Serfino
allege that the provisions on voluntary deposits should apply by analogy in this case, particularly Article 1988 of the
Civil Code, which states:
Article 1988. The thing deposited must be returned to the depositor upon demand, even though a specified period or
time for such return may have been fixed.
This provision shall not apply when the thing is judicially attached while in the depositary’s possession, or should he
have been notified of the opposition of a third person to the return or the removal of the thing deposited. In these
cases, the depositary must immediately inform the depositor of the attachment or opposition.
Based on Article 1988 of the Civil Code, the depository is not obliged to return the thing to the depositor if notified of
a third party’s adverse claim.
By allowing Grace to withdraw the deposit that is due them under the compromise judgment, the spouses Serfino
claim that FEBTC committed an actionable wrong that entitles them to the payment of actual and moral damages.
FEBTC, on the other hand, insists on the correctness of the RTC ruling. It claims that it is not bound by the compromise
judgment, but only by its contract of loan with its depositor. As a loan, the bank deposit is owned by the bank; hence,
the spouses Serfino’s claim of ownership over it is erroneous.
Based on these arguments, the case essentially involves a determination of the obligation of banks to a third party
who claims rights over a bank deposit standing in the name of another.
THE COURT’S RULING
We find the petition unmeritorious and see no reason to reverse the RTC’s ruling.
Claim for actual damages not
meritorious because there could be
no pecuniary loss that should be
compensated if there was no
assignment of credit
The spouses Serfino’s claim for damages against FEBTC is premised on their claim of ownership of the deposit with
FEBTC. The deposit consists of Magdalena’s retirement benefits, which the spouses Serfino claim to have been
assigned to them under the compromise judgment. That the retirement benefits were deposited in Grace’s savings
account with FEBTC supposedly did not divest them of ownership of the amount, as "the money already belongs to
the [spouses Serfino] having been absolutely assigned to them and constructively delivered by virtue of the x x x public
instrument[.]"11 By virtue of the assignment of credit, the spouses Serfino claim ownership of the deposit, and they
posit that FEBTC was duty bound to protect their right by preventing the withdrawal of the deposit since the bank had
been notified of the assignment and of their claim.
We find no basis to support the spouses Serfino’s claim of ownership of the deposit.
"An assignment of credit is an agreement by virtue of which the owner of a credit, known as the assignor, by a legal
cause, such as sale, dation in payment, exchange or donation, and without the consent of the debtor, transfers his
credit and accessory rights to another, known as the assignee, who acquires the power to enforce it to the same extent
as the assignor could enforce it against the debtor. It may be in the form of sale, but at times it may constitute
a dation in payment, such as when a debtor, in order to obtain a release from his debt, assigns to his creditor a credit
he has against a third person."12 As a dation in payment, the assignment of credit operates as a mode of
extinguishing the obligation;13 the delivery and transmission of ownership of a thing (in this case, the credit due from
a third person) by the debtor to the creditor is accepted as the equivalent of the performance of the obligation. 14
The terms of the compromise judgment, however, did not convey an intent to equate the assignment of Magdalena’s
retirement benefits (the credit) as the equivalent of the payment of the debt due the spouses Serfino (the obligation).
There was actually no assignment of credit; if at all, the compromise judgment merely identified the fund from which
payment for the judgment debt would be sourced:
(c) That before the plaintiffs file a motion for execution of the decision or order based [on this] Compromise
Agreement, the defendant, Magdalena Cortez undertake[s] and bind[s] herself to pay in full the judgment debt out
of her retirement benefits as Local [T]reasury Operation Officer in the City of Bacolod, Philippines, upon which full
payment, the plaintiffs waive, abandon and relinquish absolutely any of their claims for attorney’s fees stipulated in
the Promissory Note (Annex "A" to the Complaint).15 [emphasis ours]
Only when Magdalena has received and turned over to the spouses Serfino the portion of her retirement benefits
corresponding to the debt due would the debt be deemed paid.
In Aquitey v. Tibong,16 the issue raised was whether the obligation to pay the loan was extinguished by the execution
of the deeds of assignment. The Court ruled in the affirmative, given that, in the deeds involved, the respondent (the
debtor) assigned to the petitioner (the creditor) her credits "to make good" the balance of her obligation; the parties
agreed to relieve the respondent of her obligation to pay the balance of her account, and for the petitioner to collect
the same from the respondent’s debtors.17 The Court concluded that the respondent’s obligation to pay the balance
of her accounts with the petitioner was extinguished, pro tanto, by the deeds of assignment of credit executed by the
respondent in favor of the petitioner.18
In the present case, the judgment debt was not extinguished by the mere designation in the compromise judgment
of Magdalena’s retirement benefits as the fund from which payment shall be sourced. That the compromise
agreement authorizes recourse in case of default on other executable properties of the spouses Cortez, to satisfy the
judgment debt, further supports our conclusion that there was no assignment of Magdalena’s credit with the GSIS
that would have extinguished the obligation.
The compromise judgment in this case also did not give the supposed assignees, the spouses Serfino, the power to
enforce Magdalena’s credit against the GSIS. In fact, the spouses Serfino are prohibited from enforcing their claim until
after the lapse of one (1) week from Magdalena’s receipt of her retirement benefits:
(d) That the plaintiffs shall refrain from having the judgment based upon this Compromise Agreement executed until
after one (1) week from receipt by the defendant, Magdalena Cortez of her retirement benefits from the [GSIS] but
fails to pay within the said period the defendants’ judgment debt in this case, in which case [this] Compromise
Agreement [may be] executed upon any property of the defendants that are subject to execution upon motion by the
plaintiffs.19
An assignment of credit not only entitles the assignee to the credit itself, but also gives him the power to enforce it as
against the debtor of the assignor.
Since no valid assignment of credit took place, the spouses Serfino cannot validly claim ownership of the retirement
benefits that were deposited with FEBTC. Without ownership rights over the amount, they suffered no pecuniary
loss that has to be compensated by actual damages. The grant of actual damages presupposes that the claimant
suffered a duly proven pecuniary loss.20
Claim for moral damages not
meritorious because no duty exists
on the part of the bank to protect
interest of third person claiming
deposit in the name of another
Under Article 2219 of the Civil Code, moral damages are recoverable for acts referred to in Article 21 of the Civil
Code.21 Article 21 of the Civil Code, in conjunction with Article 19 of the Civil Code, is part of the cause of action known
in this jurisdiction as "abuse of rights." The elements of abuse of rights are: (a) there is a legal right or duty; (b)
exercised in bad faith; and (c) for the sole intent of prejudicing or injuring another.1âwphi1
The spouses Serfino invoke American common law that imposes a duty upon a bank receiving a notice of adverse
claim to the fund in a depositor’s account to freeze the account for a reasonable length of time, sufficient to allow
the adverse claimant to institute legal proceedings to enforce his right to the fund.22 In other words, the bank has a
duty not to release the deposits unreasonably early after a third party makes known his adverse claim to the bank
deposit. Acknowledging that no such duty is imposed by law in this jurisdiction, the spouses Serfino ask the Court to
adopt this foreign rule.23

To adopt the foreign rule, however, goes beyond the power of this Court to promulgate rules governing pleading,
practice and procedure in all courts.24 The rule reflects a matter of policy that is better addressed by the other
branches of government, particularly, the Bangko Sentral ng Pilipinas, which is the agency that supervises the
operations and activities of banks, and which has the power to issue "rules of conduct or the establishment of
standards of operation for uniform application to all institutions or functions covered[.]"25 To adopt this rule will have
significant implications on the banking industry and practices, as the American experience has shown. Recognizing
that the rule imposing duty on banks to freeze the deposit upon notice of adverse claim adopts a policy adverse to the
bank and its functions, and opens it to liability to both the depositor and the adverse claimant,26 many American states
have since adopted adverse claim statutes that shifted or, at least, equalized the burden. Essentially, these statutes
do not impose a duty on banks to freeze the deposit upon a mere notice of adverse claim; they first require either a
court order or an indemnity bond.27

In the absence of a law or a rule binding on the Court, it has no option but to uphold the existing policy that recognizes
the fiduciary nature of banking. It likewise rejects the adoption of a judicially-imposed rule giving third parties with
unverified claims against the deposit of another a better right over the deposit. As current laws provide, the bank’s
contractual relations are with its depositor, not with the third party;28 "a bank is under obligation to treat the accounts
of its depositors with meticulous care and always to have in mind the fiduciary nature of its relationship with
them."29 In the absence of any positive duty of the bank to an adverse claimant, there could be no breach that entitles
the latter to moral damages.

WHEREFORE, in view of the foregoing, the petition for review on certiorari is DENIED, and the decision dated February
23, 2006 of the Regional Trial Court of Bacolod City, Branch 41, in Civil Case No. 95-9344 is AFFIRMED. Costs against
the petitioners.

SO ORDERED.

G.R. No. 179419 January 12, 2011

DURBAN APARTMENTS CORPORATION, doing business under the name and style of City Garden Hotel, Petitioner,
vs.
PIONEER INSURANCE AND SURETY CORPORATION, Respondent.
DECISION
NACHURA, J.:
For review is the Decision1 of the Court of Appeals (CA) in CA-G.R. CV No. 86869, which affirmed the decision2 of the
Regional Trial Court (RTC), Branch 66, Makati City, in Civil Case No. 03-857, holding petitioner Durban Apartments
Corporation solely liable to respondent Pioneer Insurance and Surety Corporation for the loss of Jeffrey See’s (See’s)
vehicle.
The facts, as found by the CA, are simple.
On July 22, 2003, [respondent] Pioneer Insurance and Surety Corporation x x x, by right of subrogation, filed [with the
RTC of Makati City] a Complaint for Recovery of Damages against [petitioner] Durban Apartments Corporation, doing
business under the name and style of City Garden Hotel, and [defendant before the RTC] Vicente Justimbaste x x x.
[Respondent averred] that: it is the insurer for loss and damage of Jeffrey S. See’s [the insured’s] 2001 Suzuki Grand
Vitara x x x with Plate No. XBH-510 under Policy No. MC-CV-HO-01-0003846-00-D in the amount of ₱1,175,000.00; on
April 30, 2002, See arrived and checked in at the City Garden Hotel in Makati corner Kalayaan Avenues, Makati City
before midnight, and its parking attendant, defendant x x x Justimbaste got the key to said Vitara from See to park it[.
O]n May 1, 2002, at about 1:00 o’clock in the morning, See was awakened in his room by [a] telephone call from the
Hotel Chief Security Officer who informed him that his Vitara was carnapped while it was parked unattended at the
parking area of Equitable PCI Bank along Makati Avenue between the hours of 12:00 [a.m.] and 1:00 [a.m.]; See went
to see the Hotel Chief Security Officer, thereafter reported the incident to the Operations Division of the Makati City
Police Anti-Carnapping Unit, and a flash alarm was issued; the Makati City Police Anti-Carnapping Unit investigated
Hotel Security Officer, Ernesto T. Horlador, Jr. x x x and defendant x x x Justimbaste; See gave his Sinumpaang Salaysay
to the police investigator, and filed a Complaint Sheet with the PNP Traffic Management Group in Camp Crame,
Quezon City; the Vitara has not yet been recovered since July 23, 2002 as evidenced by a Certification of Non- Recovery
issued by the PNP TMG; it paid the ₱1,163,250.00 money claim of See and mortgagee ABN AMRO Savings Bank, Inc.
as indemnity for the loss of the Vitara; the Vitara was lost due to the negligence of [petitioner] Durban Apartments
and [defendant] Justimbaste because it was discovered during the investigation that this was the second time that a
similar incident of carnapping happened in the valet parking service of [petitioner] Durban Apartments and no
necessary precautions were taken to prevent its repetition; [petitioner] Durban Apartments was wanting in due
diligence in the selection and supervision of its employees particularly defendant x x x Justimbaste; and defendant x x
x Justimbaste and [petitioner] Durban Apartments failed and refused to pay its valid, just, and lawful claim despite
written demands.
Upon service of Summons, [petitioner] Durban Apartments and [defendant] Justimbaste filed their Answer with
Compulsory Counterclaim alleging that: See did not check in at its hotel, on the contrary, he was a guest of a certain
Ching Montero x x x; defendant x x x Justimbaste did not get the ignition key of See’s Vitara, on the contrary, it was
See who requested a parking attendant to park the Vitara at any available parking space, and it was parked at the
Equitable Bank parking area, which was within See’s view, while he and Montero were waiting in front of the hotel;
they made a written denial of the demand of [respondent] Pioneer Insurance for want of legal basis; valet parking
services are provided by the hotel for the convenience of its customers looking for a parking space near the hotel
premises; it is a special privilege that it gave to Montero and See; it does not include responsibility for any losses or
damages to motor vehicles and its accessories in the parking area; and the same holds true even if it was See himself
who parked his Vitara within the premises of the hotel as evidenced by the valet parking customer’s claim stub issued
to him; the carnapper was able to open the Vitara without using the key given earlier to the parking attendant and
subsequently turned over to See after the Vitara was stolen; defendant x x x Justimbaste saw the Vitara speeding away
from the place where it was parked; he tried to run after it, and blocked its possible path but to no avail; and See was
duly and immediately informed of the carnapping of his Vitara; the matter was reported to the nearest police precinct;
and defendant x x x Justimbaste, and Horlador submitted themselves to police investigation.
During the pre-trial conference on November 28, 2003, counsel for [respondent] Pioneer Insurance was present. Atty.
Monina Lee x x x, counsel of record of [petitioner] Durban Apartments and Justimbaste was absent, instead, a certain
Atty. Nestor Mejia appeared for [petitioner] Durban Apartments and Justimbaste, but did not file their pre-trial brief.
On November 5, 2004, the lower court granted the motion of [respondent] Pioneer Insurance, despite the opposition
of [petitioner] Durban Apartments and Justimbaste, and allowed [respondent] Pioneer Insurance to present its
evidence ex parte before the Branch Clerk of Court.
See testified that: on April 30, 2002, at about 11:30 in the evening, he drove his Vitara and stopped in front of City
Garden Hotel in Makati Avenue, Makati City; a parking attendant, whom he had later known to be defendant x x x
Justimbaste, approached and asked for his ignition key, told him that the latter would park the Vitara for him in front
of the hotel, and issued him a valet parking customer’s claim stub; he and Montero, thereafter, checked in at the said
hotel; on May 1, 2002, at around 1:00 in the morning, the Hotel Security Officer whom he later knew to be Horlador
called his attention to the fact that his Vitara was carnapped while it was parked at the parking lot of Equitable PCI
Bank which is in front of the hotel; his Vitara was insured with [respondent] Pioneer Insurance; he together with
Horlador and defendant x x x Justimbaste went to Precinct 19 of the Makati City Police to report the carnapping
incident, and a police officer came accompanied them to the Anti-Carnapping Unit of the said station for investigation,
taking of their sworn statements, and flashing of a voice alarm; he likewise reported the said incident in PNP TMG in
Camp Crame where another alarm was issued; he filed his claim with [respondent] Pioneer Insurance, and a
representative of the latter, who is also an adjuster of Vesper Insurance Adjusters-Appraisers [Vesper], investigated
the incident; and [respondent] Pioneer Insurance required him to sign a Release of Claim and Subrogation Receipt,
and finally paid him the sum of ₱1,163,250.00 for his claim.
Ricardo F. Red testified that: he is a claims evaluator of [petitioner] Pioneer Insurance tasked, among others, with the
receipt of claims and documents from the insured, investigation of the said claim, inspection of damages, taking of
pictures of insured unit, and monitoring of the processing of the claim until its payment; he monitored the processing
of See’s claim when the latter reported the incident to [respondent] Pioneer Insurance; [respondent] Pioneer
Insurance assigned the case to Vesper who verified See’s report, conducted an investigation, obtained the necessary
documents for the processing of the claim, and tendered a settlement check to See; they evaluated the case upon
receipt of the subrogation documents and the adjuster’s report, and eventually recommended for its settlement for
the sum of ₱1,163,250.00 which was accepted by See; the matter was referred and forwarded to their counsel, R.B.
Sarajan & Associates, who prepared and sent demand letters to [petitioner] Durban Apartments and [defendant]
Justimbaste, who did not pay [respondent] Pioneer Insurance notwithstanding their receipt of the demand letters;
and the services of R.B. Sarajan & Associates were engaged, for ₱100,000.00 as attorney’s fees plus ₱3,000.00 per
court appearance, to prosecute the claims of [respondent] Pioneer Insurance against [petitioner] Durban Apartments
and Justimbaste before the lower court.
Ferdinand Cacnio testified that: he is an adjuster of Vesper; [respondent] Pioneer Insurance assigned to Vesper the
investigation of See’s case, and he was the one actually assigned to investigate it; he conducted his investigation of
the matter by interviewing See, going to the City Garden Hotel, required subrogation documents from See, and verified
the authenticity of the same; he learned that it is the standard procedure of the said hotel as regards its valet parking
service to assist their guests as soon as they get to the lobby entrance, park the cars for their guests, and place the
ignition keys in their safety key box; considering that the hotel has only twelve (12) available parking slots, it has an
agreement with Equitable PCI Bank permitting the hotel to use the parking space of the bank at night; he also learned
that a Hyundai Starex van was carnapped at the said place barely a month before the occurrence of this incident
because Liberty Insurance assigned the said incident to Vespers, and Horlador and defendant x x x Justimbaste
admitted the occurrence of the same in their sworn statements before the Anti-Carnapping Unit of the Makati City
Police; upon verification with the PNP TMG [Unit] in Camp Crame, he learned that See’s Vitara has not yet been
recovered; upon evaluation, Vesper recommended to [respondent] Pioneer Insurance to settle See’s claim for
₱1,045,750.00; See contested the recommendation of Vesper by reasoning out that the 10% depreciation should not
be applied in this case considering the fact that the Vitara was used for barely eight (8) months prior to its loss; and
[respondent] Pioneer Insurance acceded to See’s contention, tendered the sum of ₱1,163,250.00 as settlement, the
former accepted it, and signed a release of claim and subrogation receipt.
The lower court denied the Motion to Admit Pre-Trial Brief and Motion for Reconsideration field by [petitioner] Durban
Apartments and Justimbaste in its Orders dated May 4, 2005 and October 20, 2005, respectively, for being devoid of
merit.3
Thereafter, on January 27, 2006, the RTC rendered a decision, disposing, as follows:
WHEREFORE, judgment is hereby rendered ordering [petitioner Durban Apartments Corporation] to pay [respondent
Pioneer Insurance and Surety Corporation] the sum of ₱1,163,250.00 with legal interest thereon from July 22, 2003
until the obligation is fully paid and attorney’s fees and litigation expenses amounting to ₱120,000.00.
SO ORDERED.4
On appeal, the appellate court affirmed the decision of the trial court, viz.:
WHEREFORE, premises considered, the Decision dated January 27, 2006 of the RTC, Branch 66, Makati City in Civil
Case No. 03-857 is hereby AFFIRMED insofar as it holds [petitioner] Durban Apartments Corporation solely liable to
[respondent] Pioneer Insurance and Surety Corporation for the loss of Jeffrey See’s Suzuki Grand Vitara.
SO ORDERED.5
Hence, this recourse by petitioner.
The issues for our resolution are:
1. Whether the lower courts erred in declaring petitioner as in default for failure to appear at the pre-trial
conference and to file a pre-trial brief;
2. Corollary thereto, whether the trial court correctly allowed respondent to present evidence ex-parte;
3. Whether petitioner is liable to respondent for attorney’s fees in the amount of ₱120,000.00; and
4. Ultimately, whether petitioner is liable to respondent for the loss of See’s vehicle.
The petition must fail.
We are in complete accord with the common ruling of the lower courts that petitioner was in default for failure to
appear at the pre-trial conference and to file a pre-trial brief, and thus, correctly allowed respondent to present
evidence ex-parte. Likewise, the lower courts did not err in holding petitioner liable for the loss of See’s vehicle.
Well-entrenched in jurisprudence is the rule that factual findings of the trial court, especially when affirmed by the
appellate court, are accorded the highest degree of respect and are considered conclusive between the parties.6 A
review of such findings by this Court is not warranted except upon a showing of highly meritorious circumstances,
such as: (1) when the findings of a trial court are grounded entirely on speculation, surmises, or conjectures; (2) when
a lower court’s inference from its factual findings is manifestly mistaken, absurd, or impossible; (3) when there is grave
abuse of discretion in the appreciation of facts; (4) when the findings of the appellate court go beyond the issues of
the case, or fail to notice certain relevant facts which, if properly considered, will justify a different conclusion; (5)
when there is a misappreciation of facts; (6) when the findings of fact are conclusions without mention of the specific
evidence on which they are based, are premised on the absence of evidence, or are contradicted by evidence on
record.7 None of the foregoing exceptions permitting a reversal of the assailed decision exists in this instance.
Petitioner urges us, however, that "strong [and] compelling reason[s]" such as the prevention of miscarriage of justice
warrant a suspension of the rules and excuse its and its counsel’s non-appearance during the pre-trial conference and
their failure to file a pre-trial brief.
We are not persuaded.
Rule 18 of the Rules of Court leaves no room for equivocation; appearance of parties and their counsel at the pre-trial
conference, along with the filing of a corresponding pre-trial brief, is mandatory, nay, their duty. Thus, Section 4 and
Section 6 thereof provide:
SEC. 4. Appearance of parties.–It shall be the duty of the parties and their counsel to appear at the pre-trial. The non-
appearance of a party may be excused only if a valid cause is shown therefor or if a representative shall appear in his
behalf fully authorized in writing to enter into an amicable settlement, to submit to alternative modes of dispute
resolution, and to enter into stipulations or admissions of facts and documents.
SEC. 6. Pre-trial brief.–The parties shall file with the court and serve on the adverse party, in such manner as shall
ensure their receipt thereof at least three (3) days before the date of the pre-trial, their respective pre-trial briefs
which shall contain, among others:
xxxx
Failure to file the pre-trial brief shall have the same effect as failure to appear at the pre-trial.
Contrary to the foregoing rules, petitioner and its counsel of record were not present at the scheduled pre-trial
conference. Worse, they did not file a pre-trial brief. Their non-appearance cannot be excused as Section 4, in relation
to Section 6, allows only two exceptions: (1) a valid excuse; and (2) appearance of a representative on behalf of a party
who is fully authorized in writing to enter into an amicable settlement, to submit to alternative modes of dispute
resolution, and to enter into stipulations or admissions of facts and documents.
Petitioner is adamant and harps on the fact that November 28, 2003 was merely the first scheduled date for the pre-
trial conference, and a certain Atty. Mejia appeared on its behalf. However, its assertion is belied by its own admission
that, on said date, this Atty. Mejia "did not have in his possession the Special Power of Attorney issued by petitioner’s
Board of Directors."
As pointed out by the CA, petitioner, through Atty. Lee, received the notice of pre-trial on October 27, 2003, thirty-
two (32) days prior to the scheduled conference. In that span of time, Atty. Lee, who was charged with the duty of
notifying petitioner of the scheduled pre-trial conference,8 petitioner, and Atty. Mejia should have discussed which
lawyer would appear at the pre-trial conference with petitioner, armed with the appropriate authority therefor. Sadly,
petitioner failed to comply with not just one rule; it also did not proffer a reason why it likewise failed to file a pre-trial Article 1962, in relation to Article 1998, of the Civil Code defines a contract of deposit and a necessary deposit made
brief. In all, petitioner has not shown any persuasive reason why it should be exempt from abiding by the rules. by persons in hotels or inns:

The appearance of Atty. Mejia at the pre-trial conference, without a pre-trial brief and with only his bare allegation Art. 1962. A deposit is constituted from the moment a person receives a thing belonging to another, with the obligation
that he is counsel for petitioner, was correctly rejected by the trial court. Accordingly, the trial court, as affirmed by of safely keeping it and returning the same. If the safekeeping of the thing delivered is not the principal purpose of the
the appellate court, did not err in allowing respondent to present evidence ex-parte. contract, there is no deposit but some other contract.

Former Chief Justice Andres R. Narvasa’s words continue to resonate, thus: Art. 1998. The deposit of effects made by travelers in hotels or inns shall also be regarded as necessary.1avvphi1 The
keepers of hotels or inns shall be responsible for them as depositaries, provided that notice was given to them, or to
their employees, of the effects brought by the guests and that, on the part of the latter, they take the precautions
Everyone knows that a pre-trial in civil actions is mandatory, and has been so since January 1, 1964. Yet to this day its
which said hotel-keepers or their substitutes advised relative to the care and vigilance of their effects.
place in the scheme of things is not fully appreciated, and it receives but perfunctory treatment in many courts. Some
courts consider it a mere technicality, serving no useful purpose save perhaps, occasionally to furnish ground for non-
suiting the plaintiff, or declaring a defendant in default, or, wistfully, to bring about a compromise. The pre-trial device Plainly, from the facts found by the lower courts, the insured See deposited his vehicle for safekeeping with petitioner,
is not thus put to full use. Hence, it has failed in the main to accomplish the chief objective for it: the simplification, through the latter’s employee, Justimbaste. In turn, Justimbaste issued a claim stub to See. Thus, the contract of
abbreviation and expedition of the trial, if not indeed its dispensation. This is a great pity, because the objective is deposit was perfected from See’s delivery, when he handed over to Justimbaste the keys to his vehicle, which
attainable, and with not much difficulty, if the device were more intelligently and extensively handled. Justimbaste received with the obligation of safely keeping and returning it. Ultimately, petitioner is liable for the loss
of See’s vehicle.
xxxx
Lastly, petitioner assails the lower courts’ award of attorney’s fees to respondent in the amount of ₱120,000.00.
Petitioner claims that the award is not substantiated by the evidence on record.
Consistently with the mandatory character of the pre-trial, the Rules oblige not only the lawyers but the parties as well
to appear for this purpose before the Court, and when a party "fails to appear at a pre-trial conference (he) may be
non-suited or considered as in default." The obligation "to appear" denotes not simply the personal appearance, or We disagree.
the mere physical presentation by a party of one’s self, but connotes as importantly, preparedness to go into the
different subject assigned by law to a pre-trial. And in those instances where a party may not himself be present at
While it is a sound policy not to set a premium on the right to litigate, 12 we find that respondent is entitled to
the pre-trial, and another person substitutes for him, or his lawyer undertakes to appear not only as an attorney but
reasonable attorney’s fees. Attorney’s fees may be awarded when a party is compelled to litigate or incur expenses to
in substitution of the client’s person, it is imperative for that representative of the lawyer to have "special authority"
protect its interest,13 or when the court deems it just and equitable.14 In this case, petitioner refused to answer for the
to make such substantive agreements as only the client otherwise has capacity to make. That "special authority"
loss of See’s vehicle, which was deposited with it for safekeeping. This refusal constrained respondent, the insurer of
should ordinarily be in writing or at the very least be "duly established by evidence other than the self-serving assertion
See, and subrogated to the latter’s right, to litigate and incur expenses. However, we reduce the award of ₱120,000.00
of counsel (or the proclaimed representative) himself." Without that special authority, the lawyer or representative
to ₱60,000.00 in view of the simplicity of the issues involved in this case.
cannot be deemed capacitated to appear in place of the party; hence, it will be considered that the latter has failed to
put in an appearance at all, and he [must] therefore "be non-suited or considered as in default," notwithstanding his
lawyer’s or delegate’s presence.9 WHEREFORE, the petition is DENIED. The Decision of the Court of Appeals in CA-G.R. CV No. 86869 is AFFIRMED with
the MODIFICATION that the award of attorney’s fees is reduced to ₱60,000.00. Costs against petitioner.
We are not unmindful that defendant’s (petitioner’s) preclusion from presenting evidence during trial does not
automatically result in a judgment in favor of plaintiff (respondent). The plaintiff must still substantiate the allegations SO ORDERED.
in its complaint.10 Otherwise, it would be inutile to continue with the plaintiff’s presentation of evidence each time
the defendant is declared in default.

In this case, respondent substantiated the allegations in its complaint, i.e., a contract of necessary deposit existed
between the insured See and petitioner. On this score, we find no error in the following disquisition of the appellate
court:

[The] records also reveal that upon arrival at the City Garden Hotel, See gave notice to the doorman and parking
attendant of the said hotel, x x x Justimbaste, about his Vitara when he entrusted its ignition key to the latter. x x x G.R. No. 189998 August 29, 2012
Justimbaste issued a valet parking customer claim stub to See, parked the Vitara at the Equitable PCI Bank parking
area, and placed the ignition key inside a safety key box while See proceeded to the hotel lobby to check in. The MAKATI SHANGRI-LA HOTEL AND RESORT, INC., Petitioner,
Equitable PCI Bank parking area became an annex of City Garden Hotel when the management of the said bank allowed vs.
the parking of the vehicles of hotel guests thereat in the evening after banking hours.11 ELLEN JOHANNE HARPER, JONATHAN CHRISTOPHER HARPER, and RIGOBERTO GILLERA, Respondents.
DECISION with electrical and packaging tapes, and his hands and feet tied with a white rope. The body was identified to be that
of hotel guest Christian Fredrik Harper.
BERSAMIN, J.:
Mendoza subsequently viewed the closed circuit television (CCTV) tapes, from which he found that Harper had entered
his room at 12:14 a.m. of November 6, 1999, and had been followed into the room at 12:17 a.m. by a woman; that
The hotel owner is liable for civil damages to the surviving heirs of its hotel guest whom strangers murder inside his
another person, a Caucasian male, had entered Harper’s room at 2:48 a.m.; that the woman had left the room at
hotel room.
around 5:33 a.m.; and that the Caucasian male had come out at 5:46 a.m.

The Case
Petitioner, the owner and operator of the 5-star Shangri-La Hotel in Makati City (Shangri-La Hotel), appeals the
decision promulgated on October 21, 2009,1 whereby the Court of Appeals (CA) affirmed with modification the
judgment rendered on October 25, 2005 by the Regional Trial Court (RTC) in Quezon City holding petitioner liable for
damages for the murder of Christian Fredrik Harper, a Norwegian national.2 Respondents Ellen Johanne Harper and
Jonathan Christopher Harper are the widow and son of Christian Harper, while respondent Rigoberto Gillera is their
authorized representative in the Philippines.
Antecedents
On November 10, 1999, SPO1 Ramoncito Ocampo, Jr. interviewed Lumba about the incident in the Alexis Jewelry
Shop. During the interview, Lumba confirmed that the person who had attempted to purchase the Cartier lady’s watch
on November 6, 1999 had been the person whose picture was on the passport issued under the name of Christian
Fredrik Harper and the Caucasian male seen on the CCTV tapes entering Harper’s hotel room.
Sr. Insp. Danilo Javier of the Criminal Investigation Division of the Makati City Police reflected in his Progress Report
No. 25 that the police investigation showed that Harper’s passport, credit cards, laptop and an undetermined amount
of cash had been missing from the crime scene; and that he had learned during the follow-up investigation about an
unidentified Caucasian male’s attempt to purchase a Cartier lady’s watch from the Alexis Jewelry Store in Glorietta,
Ayala Center, Makati City with the use of one of Harper’s credit cards.

In the first week of November 1999, Christian Harper came to Manila on a business trip as the Business Development On August 30, 2002, respondents commenced this suit in the RTC to recover various damages from
Manager for Asia of ALSTOM Power Norway AS, an engineering firm with worldwide operations. He checked in at the petitioner,6 pertinently alleging:
Shangri-La Hotel and was billeted at Room 1428. He was due to check out on November 6, 1999. In the early morning
of that date, however, he was murdered inside his hotel room by still unidentified malefactors. He was then 30 years
xxx
old.

7. The deceased was to check out and leave the hotel on November 6, 1999, but in the early morning of said date,
How the crime was discovered was a story in itself. A routine verification call from the American Express Card Company
while he was in his hotel room, he was stabbed to death by an (sic) still unidentified male who had succeeded to
to cardholder Harper’s residence in Oslo, Norway (i.e., Bygdoy Terasse 16, 0287 Oslo, Norway) led to the discovery. It
intrude into his room.
appears that at around 11:00 am of November 6, 1999, a Caucasian male of about 30–32 years in age, 5’4" in height,
clad in maroon long sleeves, black denims and black shoes, entered the Alexis Jewelry Store in Glorietta, Ayala Center,
Makati City and expressed interest in purchasing a Cartier lady’s watch valued at ₱ 320,000.00 with the use of two 8. The murderer succeeded to trespass into the area of the hotel’s private rooms area and into the room of the said
Mastercard credit cards and an American Express credit card issued in the name of Harper. But the customer’s deceased on account of the hotel’s gross negligence in providing the most basic security system of its guests, the lack
difficulty in answering the queries phoned in by a credit card representative sufficiently aroused the suspicion of of which owing to the acts or omissions of its employees was the immediate cause of the tragic death of said deceased.
saleslady Anna Liza Lumba (Lumba), who asked for the customer’s passport upon suggestion of the credit card
representative to put the credit cards on hold. Probably sensing trouble for himself, the customer hurriedly left the
xxx
store, and left the three credit cards and the passport behind.

10. Defendant has prided itself to be among the top hotel chains in the East claiming to provide excellent service,
In the meanwhile, Harper’s family in Norway must have called him at his hotel room to inform him about the attempt
comfort and security for its guests for which reason ABB Alstom executives and their guests have invariably chosen
to use his American Express card. Not getting any response from the room, his family requested Raymond Alarcon,
this hotel to stay.7
the Duty Manager of the Shangri-La Hotel, to check on Harper’s room. Alarcon and a security personnel went to Room
1428 at 11:27 a.m., and were shocked to discover Harper’s lifeless body on the bed.
xxx
Col. Rodrigo de Guzman (de Guzman), the hotel’s Security Manager, initially investigated the murder. In his incident
report, he concluded from the several empty bottles of wine in the trash can and the number of cigarette butts in the Ruling of the RTC
toilet bowl that Harper and his visitors had drunk that much and smoked that many cigarettes the night before.3
On October 25, 2005, the RTC rendered judgment after trial,8 viz:
The police investigation actually commenced only upon the arrival in the hotel of the team of PO3 Carmelito
Mendoza4 and SPO4 Roberto Hizon. Mendoza entered Harper’s room in the company of De Guzman, Alarcon, Gami WHEREFORE, finding the defendant hotel to be remiss in its duties and thus liable for the death of Christian Harper,
Holazo (the hotel’s Executive Assistant Manager), Norge Rosales (the hotel’s Executive Housekeeper), and Melvin this Court orders the defendant to pay plaintiffs the amount of:
Imperial (a security personnel of the hotel). They found Harper’s body on the bed covered with a blanket, and only the
back of the head could be seen. Lifting the blanket, Mendoza saw that the victim’s eyes and mouth had been bound
 PhP 43,901,055.00 as and by way of actual and compensatory damages; WHEREFORE, the assailed Decision of the Regional Trial Court dated October 25, 2005 is
hereby AFFIRMED with MODIFICATION. Accordingly, defendant-appellant is ordered to pay plaintiffs-appellees the
amounts of ₱ 52,078,702.50, as actual and compensatory damages; ₱ 25,000.00, as temperate damages; ₱ 250,000.00,
PhP 739,075.00 representing the expenses of transporting the remains of Harper to Oslo, Norway;
as attorney’s fees; and to pay the costs of the suit.

PhP 250,000.00 attorney’s fees;

SO ORDERED.10

and to pay the cost of suit.

Issues

SO ORDERED.
Petitioner still seeks the review of the judgment of the CA, submitting the following issues for consideration and
determination, namely:
Ruling of the CA
I.
Petitioner appealed, assigning to the RTC the following errors, to wit:
WHETHER OR NOT THE PLAINTIFFS-APPELLEES WERE ABLE TO PROVE WITH COMPETENT EVIDENCE THE AFFIRMATIVE
I ALLEGATIONS IN THE COMPLAINT THAT THEY ARE THE WIDOW AND SON OF MR. CHRISTIAN HARPER.

THE TRIAL COURT ERRED IN RULING THAT THE PLAINTIFFS-APPELLEES ARE THE HEIRS OF THE LATE CHRISTIAN HARPER, II.
AS THERE IS NO COMPETENT EVIDENCE ON RECORD SUPPORTING SUCH RULING.
WHETHER OR NOT THE APPELLEES WERE ABLE TO PROVE WITH COMPETENT EVIDENCE THE AFFIRMATIVE
II ALLEGATIONS IN THE COMPLAINT THAT THERE WAS NEGLIGENCE ON THE PART OF THE APPELLANT AND ITS SAID
NEGLIGENCE WAS THE PROXIMATE CAUSE OF THE DEATH OF MR. CHRISTIAN HARPER.
THE TRIAL COURT ERRED IN RULING THAT THE DEFENDANT-APPELLANT’SNEGLIGENCE WAS THE PROXIMATE CAUSE
OF THE DEATH OF MR. HARPER, OR IN NOT RULING THAT IT WAS MR. CHRISTIAN HARPER’S OWN NEGLIGENCE WHICH III.
WAS THE SOLE, PROXIMATE CAUSE OF HIS DEATH.
WHETHER OR NOT THE PROXIMATE CAUSE OF THE DEATH OF MR. CHRISTIAN HARPER WAS HIS OWN NEGLIGENCE.
III
Ruling
THE TRIAL COURT ERRED IN AWARDING TO THE PLAINTIFFS-APPELLEES THE AMOUNTOF PH₱ 43,901,055.00,
REPRESENTING THE ALLEGED LOST EARNING OF THE LATE CHRISTIAN HARPER, THERE BEING NO COMPETENT PROOF
The appeal lacks merit.
OF THE EARNING OF MR. HARPER DURING HIS LIFETIME AND OF THE ALLEGATION THAT THE PLAINTIFFS-APPELLEES
ARE MR. HARPER’S HEIRS.
I.
Requirements for authentication of documents
IV
establishing respondents’ legal relationship
with the victim as his heirs were complied with
THE TRIAL COURT ERRED IN AWARDING TO THE PLAINTIFFS-APPELLEES THE AMOUNT OF PH₱ 739,075.00,
REPRESENTING THE ALLEGED COST OF TRANSPORTING THE REMAINS OF MR. CHRISTIAN HARPER TO OSLO, NORWAY,
As to the first issue, the CA pertinently held as follows:
THERE BEING NO PROOF ON RECORD THAT IT WAS PLAINTIFFS-APPELLEES WHO PAID FOR SAID COST.

The documentary evidence that plaintiffs-appellees offered relative to their heirship consisted of the following –
V

1. Exhibit "Q" - Birth Certificate of Jonathan Christopher Harper, son of Christian Fredrik Harper and Ellen
THE TRIAL COURT ERRED IN AWARDING ATTORNEY’S FEES AND COST OF SUIT TO THE PLAINTIFFS-APPELLEES, THERE
Johanne Harper;
BEING NO PROOF ON RECORD SUPPORTING SUCH AWARD.

2. Exhibit "Q-1" - Marriage Certificate of Ellen Johanne Clausen and Christian Fredrik Harper;
On October 21, 2009, the CA affirmed the judgment of the RTC with modification,9 as follows:
 3. Exhibit "R" - Birth Certificate of Christian Fredrick Harper, son of Christopher Shaun Harper and Eva
Harper; and
4. Exhibit "R-1" - Certificate from the Oslo Probate Court stating that Ellen Harper was married to the
deceased, Christian Fredrick Harper and listed Ellen Harper and Jonathan Christopher Harper as the heirs
of Christian Fredrik Harper.
Defendant-appellant points out that plaintiffs-appellees committed several mistakes as regards the above
documentary exhibits, resultantly making them incompetent evidence, to wit, (a) none of the plaintiffs-appellees or
any of the witnesses who testified for the plaintiffs gave evidence that Ellen Johanne Harper and Jonathan Christopher
Harper are the widow and son of the deceased Christian Fredrik Harper; (b) Exhibit "Q" was labeled as Certificate of
Marriage in plaintiffs-appellees’ Formal Offer of Evidence, when it appears to be the Birth Certificate of the late
Christian Harper; (c) Exhibit "Q-1" is a translation of the Marriage Certificate of Ellen Johanne Harper and Christian
Fredrik Harper, the original of which was not produced in court, much less, offered in evidence. Being a mere
translation, it cannot be a competent evidence of the alleged fact that Ellen Johanne Harper is the widow of Christian
Fredrik Harper, pursuant to the Best Evidence Rule. Even assuming that it is an original Marriage Certificate, it is not a
public document that is admissible without the need of being identified or authenticated on the witness stand by a
witness, as it appears to be a document issued by the Vicar of the Parish of Ullern and, hence, a private document; (d)
Exhibit "R" was labeled as Probate Court Certificate in plaintiffs-appellees’ Formal Offer of Evidence, when it appears
to be the Birth Certificate of the deceased, Christian Fredrik Harper; and (e) Exhibit "R-1" is a translation of the
supposed Probate Court Certificate, the original of which was not produced in court, much less, offered in evidence.
Being a mere translation, it is an incompetent evidence of the alleged fact that plaintiffs-appellees are the heirs of
Christian Fredrik Harper, pursuant to the Best Evidence Rule.
Defendant-appellant further adds that Exhibits "Q-1" and "R-1" were not duly attested by the legal custodians (by the
Vicar of the Parish of Ullern for Exhibit "Q-1" and by the Judge or Clerk of the Probate Court for Exhibit "R-1") as
required under Sections 24 and 25, Rule 132 of the Revised Rules of Court. Likewise, the said documents are not
accompanied by a certificate that such officer has the custody as also required under Section 24 of Rule 132.
Consequently, defendant-appellant asseverates that Exhibits "Q-1" and "R-1" as private documents, which were not
duly authenticated on the witness stand by a competent witness, are essentially hearsay in nature that have no
probative value. Therefore, it is obvious that plaintiffs-appellees failed to prove that they are the widow and son of
the late Christian Harper.
Plaintiffs-appellees make the following counter arguments, viz, (a) Exhibit "Q-1", the Marriage Certificate of Ellen
Johanne Harper and Christian Fredrik Harper, was issued by the Office of the Vicar of Ullern with a statement that
"this certificate is a transcript from the Register of Marriage of Ullern Church." The contents of Exhibit "Q-1" were
translated by the Government of the Kingdom of Norway, through its authorized translator, into English and
authenticated by the Royal Ministry of Foreign Affairs of Norway, which in turn, was also authenticated by the Consul,
Embassy of the Republic of the Philippines in Stockholm, Sweden; (b) Exhibit "Q", the Birth Certificate of Jonathan
Christopher Harper, was issued and signed by the Registrar of the Kingdom of Norway, as authenticated by the Royal
Ministry of Foreign Affairs of Norway, whose signature was also authenticated by the Consul, Embassy of the Republic
of the Philippines in Stockholm, Sweden; and (c) Exhibit "R-1", the Probate Court Certificate was also authenticated by
the Royal Ministry of Foreign Affairs of Norway, whose signature was also authenticated by the Consul, Embassy of
the Republic of the Philippines in Stockholm, Sweden.
They further argue that since Exhibit "Q-1", Marriage Certificate, was issued by the vicar or parish priest, the legal
custodian of parish records, it is considered as an exception to the hearsay rule. As for Exhibit "R-1", the Probate Court
Certificate, while the document is indeed a translation of the certificate, it is an official certification, duly confirmed
by the Government of the Kingdom of Norway; its contents were lifted by the Government Authorized Translator from
the official record and thus, a written official act of a foreign sovereign country.
WE rule for plaintiffs-appellees.
The Revised Rules of Court provides that public documents may be evidenced by a copy attested by the officer having
the legal custody of the record. The attestation must state, in substance, that the copy is a correct copy of the original,
or a specific part thereof, as the case may be. The attestation must be under the official seal of the attesting officer, if
there be any, or if he be the clerk of a court having a seal, under the seal of such court.
If the record is not kept in the Philippines, the attested copy must be accompanied with a certificate that such officer
has the custody. If the office in which the record is kept is in a foreign country, the certificate may be made by a
secretary of the embassy or legation, consul general, consul, vice consul, or consular agent or by any officer in the
foreign service of the Philippines stationed in the foreign country in which the record is kept, and authenticated by
the seal of his office.
The documents involved in this case are all kept in Norway. These documents have been authenticated by the Royal
Norwegian Ministry of Foreign Affairs; they bear the official seal of the Ministry and signature of one, Tanja Sorlie. The
documents are accompanied by an Authentication by the Consul, Embassy of the Republic of the Philippines in
Stockholm, Sweden to the effect that, Tanja Sorlie is duly authorized to legalize official documents for the Ministry.
Exhibits "Q" and "R" are extracts of the register of births of both Jonathan Christopher Harper and the late Christian
Fredrik Harper, respectively, wherein the former explicitly declares that Jonathan Christopher is the son of Christian
Fredrik and Ellen Johanne Harper. Said documents bear the signature of the keeper, Y. Ayse B. Nordal with the official
seal of the Office of the Registrar of Oslo, and the authentication of Tanja Sorlie of the Royal Ministry of Foreign Affairs,
Oslo, which were further authenticated by Philippine Consul Marian Jocelyn R. Tirol. In addition, the latter states that
said documents are the birth certificates of Jonathan Christopher Harper and Christian Fredrik Harper issued by the
Registrar Office of Oslo, Norway on March 23, 2004.
Exhibits "Q-1", on the other hand, is the Marriage Certificate of Christian Fredrik Harper and Ellen Johanne Harper
issued by the vicar of the Parish of Ullern while Exhibit "R-1" is the Probate Court Certificate from the Oslo Probate
Court, naming Ellen Johanne Harper and Jonathan Christopher Harper as the heirs of the deceased Christian Fredrik
Harper. The documents are certified true translations into English of the transcript of the said marriage certificate and
the probate court certificate. They were likewise signed by the authorized government translator of Oslo with the seal
of his office; attested by Tanja Sorlie and further certified by our own Consul.
In view of the foregoing, WE conclude that plaintiffs-appellees had substantially complied with the requirements set
forth under the rules. WE would also like to stress that plaintiffs-appellees herein are residing overseas and are
litigating locally through their representative. While they are not excused from complying with our rules, WE must
take into account the attendant reality that these overseas litigants communicate with their representative and
counsel via long distance communication. Add to this is the fact that compliance with the requirements on attestation
and authentication or certification is no easy process and completion thereof may vary depending on different factors
such as the location of the requesting party from the consulate and the office of the record custodian, the volume of
transactions in said offices and even the mode of sending these documents to the Philippines. With these
circumstances under consideration, to OUR minds, there is every reason for an equitable and relaxed application of
the rules on the issuance of the required attestation from the custodian of the documents to plaintiffs-appellees’
situation. Besides, these questioned documents were duly signed by the officers having custody of the same.11
Petitioner assails the CA’s ruling that respondents substantially complied with the rules on the authentication of the
proofs of marriage and filiation set by Section 24 and Section 25 of Rule 132 of the Rules of Court when they presented
Exhibit Q, Exhibit Q-1, Exhibit R and Exhibit R-1, because the legal custodian did not duly attest that Exhibit Q-1 and
Exhibit R-1 were the correct copies of the originals on file, and because no certification accompanied the documents
stating that "such officer has custody of the originals." It contends that respondents did not competently prove their
being Harper’s surviving heirs by reason of such documents being hearsay and incompetent.
Petitioner’s challenge against respondents’ documentary evidence on marriage and heirship is not well-taken.
Section 24 and Section 25 of Rule 132 provide:
Section 24. Proof of official record. — The record of public documents referred to in paragraph (a) of Section 19, when
admissible for any purpose, may be evidenced by an official publication thereof or by a copy attested by the officer
having the legal custody of the record, or by his deputy, and accompanied, if the record is not kept in the Philippines,
with a certificate that such officer has the custody. If the office in which the record is kept is in a foreign country, the
certificate may be made by a secretary of the embassy or legation, consul general, consul, vice consul, or consular
agent or by any officer in the foreign service of the Philippines stationed in the foreign country in which the record is
kept, and authenticated by the seal of his office.
Section 25. What attestation of copy must state. — Whenever a copy of a document or record is attested for the
purpose of evidence, the attestation must state, in substance, that the copy is a correct copy of the original, or a
specific part thereof, as the case may be. The attestation must be under the official seal of the attesting officer, if there
be any, or if he be the clerk of a court having a seal, under the seal of such court.
Although Exhibit Q,12 Exhibit Q-1,13 Exhibit R14 and Exhibit R-115 were not attested by the officer having the legal custody
of the record or by his deputy in the manner required in Section 25 of Rule 132, and said documents did not comply
with the requirement under Section 24 of Rule 132 to the effect that if the record was not kept in the Philippines a
certificate of the person having custody must accompany the copy of the document that was duly attested stating that
such person had custody of the documents, the deviation was not enough reason to reject the utility of the documents
for the purposes they were intended to serve.
Exhibit Q and Exhibit R were extracts from the registry of births of Oslo, Norway issued on March 23, 2004 and signed
by Y. Ayse B. Nordal, Registrar, and corresponded to respondent Jonathan Christopher Harper and victim Christian
Fredrik Harper, respectively.16 Exhibit Q explicitly stated that Jonathan was the son of Christian Fredrik Harper and
Ellen Johanne Harper, while Exhibit R attested to the birth of Christian Fredrik Harper on December 4, 1968. Exhibit Q
and Exhibit R were authenticated on March 29, 2004 by the signatures of Tanja Sorlie of the Royal Ministry of Foreign
Affairs of Norway as well as by the official seal of that office. In turn, Consul Marian Jocelyn R. Tirol of the Philippine
Consulate in Stockholm, Sweden authenticated the signatures of Tanja Sorlie and the official seal of the Royal Ministry
of Foreign Affairs of Norway on Exhibit Q and Exhibit R, explicitly certifying to the authority of Tanja Sorlie "to legalize
official documents for the Royal Ministry of Foreign Affairs of Norway."17
Exhibit Q-1,18 the Marriage Certificate of Ellen Johanne Clausen Harper and Christian Fredrik Harper, contained the
following data, namely: (a) the parties were married on June 29, 1996 in Ullern Church; and (b) the certificate was
issued by the Office of the Vicar of Ullern on June 29, 1996.
Exhibit Q-1 was similarly authenticated by the signature of Tanja Sorlie of the Royal Ministry of Foreign Affairs of
Norway, with the official seal of that office. Philippine Consul Tirol again expressly certified to the capacity of Sorlie
"to legalize official documents for the Royal Ministry of Foreign Affairs of Norway," 19 and further certified that the
document was a true translation into English of a transcript of a Marriage Certificate issued to Christian Frederik Harper
and Ellen Johanne Clausen by the Vicar of the Parish of Ullern on June 29, 1996.
Exhibit R-1,20 a Probate Court certificate issued by the Oslo Probate Court on February 18, 2000 through Morten
Bolstad, its Senior Executive Officer, was also authenticated by the signature of Tanja Sorlie and with the official seal
of the Royal Ministry of Foreign Affairs of Norway. As with the other documents, Philippine Consul Tirol explicitly
certified to the capacity of Sorlie "to legalize official documents for the Royal Ministry of Foreign Affairs of Norway,"
and further certified that the document was a true translation into English of the Oslo Probate Court certificate issued
on February 18, 2000 to the effect that Christian Fredrik Harper, born on December 4, 1968, had reportedly died on
November 6, 1999.21
The Oslo Probate Court certificate recited that both Ellen Johanne Harper and Christopher S. Harper were Harper’s
heirs, to wit:
The above names surviving spouse has accepted responsibility for the commitments of the deceased in accordance
with the provisions of Section 78 of the Probate Court Act (Norway), and the above substitute guardian has agreed to
the private division of the estate.
The following heir and substitute guardian will undertake the private division of the estate:
Ellen Johanne Harper
Christopher S. Harper
This probate court certificate relates to the entire estate.
Oslo Probate Court, 18 February 2000.22
The official participation in the authentication process of Tanja Sorlie of the Royal Ministry of Foreign Affairs of Norway
and the attachment of the official seal of that office on each authentication indicated that Exhibit Q, Exhibit R, Exhibit
Q-1 and Exhibit R-1 were documents of a public nature in Norway, not merely private documents. It cannot be denied
that based on Philippine Consul Tirol’s official authentication, Tanja Sorlie was "on the date of signing, duly authorized
to legalize official documents for the Royal Ministry of Foreign Affairs of Norway." Without a showing to the contrary
by petitioner, Exhibit Q, Exhibit R, Exhibit Q-1 and Exhibit R-1 should be presumed to be themselves official documents
under Norwegian law, and admissible as prima facie evidence of the truth of their contents under Philippine law.
At the minimum, Exhibit Q, Exhibit R, Exhibit Q-1 and Exhibit R-1 substantially met the requirements of Section 24 and
Section 25 of Rule 132 as a condition for their admission as evidence in default of a showing by petitioner that the
authentication process was tainted with bad faith. Consequently, the objective of ensuring the authenticity of the
documents prior to their admission as evidence was substantially achieved. In Constantino-David v. Pangandaman-
Gania,23 the Court has said that substantial compliance, by its very nature, is actually inadequate observance of the
requirements of a rule or regulation that are waived under equitable circumstances in order to facilitate the
administration of justice, there being no damage or injury caused by such flawed compliance.
The Court has further said in Constantino-David v. Pangandaman-Gania that the focus in every inquiry on whether or
not to accept substantial compliance is always on the presence of equitable conditions to administer justice effectively
and efficiently without damage or injury to the spirit of the legal obligation.24 There are, indeed, such equitable
conditions attendant here, the foremost of which is that respondents had gone to great lengths to submit the
documents. As the CA observed, respondents’ compliance with the requirements on attestation and authentication
of the documents had not been easy; they had to contend with many difficulties (such as the distance of Oslo, their
place of residence, from Stockholm, Sweden, where the Philippine Consulate had its office; the volume of transactions
in the offices concerned; and the safe transmission of the documents to the Philippines).25 Their submission of the
documents should be presumed to be in good faith because they did so in due course. It would be inequitable if the
sincerity of respondents in obtaining and submitting the documents despite the difficulties was ignored.
The principle of substantial compliance recognizes that exigencies and situations do occasionally demand some
flexibility in the rigid application of the rules of procedure and the laws.26 That rules of procedure may be mandatory
in form and application does not forbid a showing of substantial compliance under justifiable circumstances, 27 because
substantial compliance does not equate to a disregard of basic rules. For sure, substantial compliance and strict
adherence are not always incompatible and do not always clash in discord. The power of the Court to suspend its own
rules or to except any particular case from the operation of the rules whenever the purposes of justice require the
suspension cannot be challenged.28 In the interest of substantial justice, even procedural rules of the most mandatory
character in terms of compliance are frequently relaxed. Similarly, the procedural rules should definitely be liberally
construed if strict adherence to their letter will result in absurdity and in manifest injustice, or where the merits of a
party’s cause are apparent and outweigh considerations of non-compliance with certain formal requirements.29 It is
more in accord with justice that a party-litigant is given the fullest opportunity to establish the merits of his claim or
defense than for him to lose his life, liberty, honor or property on mere technicalities. Truly, the rules of procedure
are intended to promote substantial justice, not to defeat it, and should not be applied in a very rigid and technical
sense.30
Petitioner urges the Court to resolve the apparent conflict between the rulings in Heirs of Pedro Cabais v. Court of
Appeals31 (Cabais) and in Heirs of Ignacio Conti v. Court of Appeals32 (Conti) establishing filiation through a baptismal
certificate.33
Petitioner’s urging is not warranted, both because there is no conflict between the rulings in Cabais and Conti, and
because neither Cabais nor Conti is relevant herein.
In Cabais, the main issue was whether or not the CA correctly affirmed the decision of the RTC that had relied mainly
on the baptismal certificate of Felipa C. Buesa to establish the parentage and filiation of Pedro Cabais. The Court held
that the petition was meritorious, stating:
A birth certificate, being a public document, offers prima facie evidence of filiation and a high degree of proof is
needed to overthrow the presumption of truth contained in such public document. This is pursuant to the rule that
entries in official records made in the performance of his duty by a public officer are prima facie evidence of the facts
therein stated. The evidentiary nature of such document must, therefore, be sustained in the absence of strong,
complete and conclusive proof of its falsity or nullity.
On the contrary, a baptismal certificate is a private document, which, being hearsay, is not a conclusive proof of
filiation. It does not have the same probative value as a record of birth, an official or public document. In US v.
Evangelista, this Court held that church registers of births, marriages, and deaths made subsequent to the
promulgation of General Orders No. 68 and the passage of Act No. 190 are no longer public writings, nor are they kept
by duly authorized public officials. Thus, in this jurisdiction, a certificate of baptism such as the one herein controversy
is no longer regarded with the same evidentiary value as official records of birth. Moreover, on this score,
jurisprudence is consistent and uniform in ruling that the canonical certificate of baptism is not sufficient to prove
recognition.34
The Court sustained the Cabais petitioners’ stance that the RTC had apparently erred in relying on the baptismal
certificate to establish filiation, stressing the baptismal certificate’s limited evidentiary value as proof of filiation
inferior to that of a birth certificate; and declaring that the baptismal certificate did not attest to the veracity of the
statements regarding the kinsfolk of the one baptized. Nevertheless, the Court ultimately ruled that it was
respondents’ failure to present the birth certificate, more than anything else, that lost them their case, stating that:
"The unjustified failure to present the birth certificate instead of the baptismal certificate now under consideration or
to otherwise prove filiation by any other means recognized by law weigh heavily against respondents."35
In Conti, the Court affirmed the rulings of the trial court and the CA to the effect that the Conti respondents were able
to prove by preponderance of evidence their being the collateral heirs of deceased Lourdes Sampayo. The Conti
petitioners disagreed, arguing that baptismal certificates did not prove the filiation of collateral relatives of the
deceased. Agreeing with the CA, the Court said:
We are not persuaded. Altogether, the documentary and testimonial evidence submitted xxx are competent and
adequate proofs that private respondents are collateral heirs of Lourdes Sampayo.
xxx
Under Art. 172 of the Family Code, the filiation of legitimate children shall be proved by any other means allowed by
the Rules of Court and special laws, in the absence of a record of birth or a parent’s admission of such legitimate
filiation in a public or private document duly signed by the parent. Such other proof of one’s filiation may be a
baptismal certificate, a judicial admission, a family Bible in which his name has been entered, common reputation
respecting his pedigree, admission by silence, the testimonies of witnesses and other kinds of proof admissible under
Rule 130 of the Rules of Court. By analogy, this method of proving filiation may also be utilized in the instant case.
Public documents are the written official acts, or records of the official act of the sovereign authority, official bodies
and tribunals, and public officers, whether of the Philippines, or a foreign country. The baptismal certificates presented
in evidence by private respondents are public documents. Parish priests continue to be the legal custodians of the
parish records and are authorized to issue true copies, in the form of certificates, of the entries contained therein.
The admissibility of baptismal certificates offered by Lydia S. Reyes, absent the testimony of the officiating priest or
the official recorder, was settled in People v. Ritter, citing U.S. v. de Vera (28 Phil. 105 1914, thus:
.... The entries made in the Registry Book may be considered as entries made in the course of business under Section
43 of Rule 130, which is an exception to the hearsay rule. The baptisms administered by the church are one of its
transactions in the exercise of ecclesiastical duties and recorded in the book of the church during this course of its
business.
It may be argued that baptismal certificates are evidence only of the administration of the sacrament, but in this case,
there were four (4) baptismal certificates which, when taken together, uniformly show that Lourdes, Josefina,
Remedios and Luis had the same set of parents, as indicated therein. Corroborated by the undisputed testimony of
Adelaida Sampayo that with the demise of Lourdes and her brothers Manuel, Luis and sister Remedios, the only sibling
left was Josefina Sampayo Reyes, such baptismal certificates have acquired evidentiary weight to prove filiation.36
Obviously, Conti did not treat a baptismal certificate, standing alone, as sufficient to prove filiation; on the
contrary, Conti expressly held that a baptismal certificate had evidentiary value to prove filiation if considered
alongside other evidence of filiation. As such, a baptismal certificate alone is not sufficient to resolve a disputed
filiation.
Unlike Cabais and Conti, this case has respondents presenting several documents, like the birth certificates of Harper
and respondent Jonathan Harper, the marriage certificate of Harper and Ellen Johanne Harper, and the probate court
certificate, all of which were presumably regarded as public documents under the laws of Norway. Such documentary
evidence sufficed to competently establish the relationship and filiation under the standards of our Rules of Court.
II
Petitioner was liable due to its own negligence
Petitioner argues that respondents failed to prove its negligence; that Harper’s own negligence in allowing the killers
into his hotel room was the proximate cause of his own death; and that hotels were not insurers of the safety of their
guests.
The CA resolved petitioner’s arguments thuswise:
Defendant-appellant contends that the pivotal issue is whether or not it had committed negligence and corollarily,
whether its negligence was the immediate cause of the death of Christian Harper. In its defense, defendant-appellant
mainly avers that it is equipped with adequate security system as follows: (1) keycards or vingcards for opening the
guest rooms, (2) two CCTV monitoring cameras on each floor of the hotel and (3) roving guards with handheld radios,
the number of which depends on the occupancy rate of the hotel. Likewise, it reiterates that the proximate cause of
Christian Harper’s death was his own negligence in inviting to his room the two (2) still unidentified suspects.
Plaintiffs-appellees in their Brief refute, in that, the liability of defendant-appellant is based upon the fact that it was
in a better situation than the injured person, Christian Harper, to foresee and prevent the happening of the injurious
occurrence. They maintain that there is no dispute that even prior to the untimely demise of Christian Harper,
defendant-appellant was duly forewarned of its security lapses as pointed out by its Chief Security Officer, Col. Rodrigo
De Guzman, who recommended that one roving guard be assigned on each floor of the hotel considering the length
and shape of the corridors. They posit that defendant-appellant’s inaction constitutes negligence.
This Court finds for plaintiffs-appellees.
As the action is predicated on negligence, the relevant law is Article 2176 of the Civil Code, which states that –
"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 was no pre-existing contractual relation between the parties, is called
quasi-delict and is governed by the provisions of this chapter."
Negligence is defined as the omission to do something which a reasonable man, guided by those considerations which
ordinarily regulate the conduct of human affairs, would do, or the doing of something which a prudent and reasonable
man would not do. The Supreme Court likewise ruled that negligence is want of care required by the circumstances.
It is a relative or comparative, not an absolute, term and its application depends upon the situation of the parties and
the degree of care and vigilance which the circumstances reasonably require. In determining whether or not there is
negligence on the part of the parties in a given situation, jurisprudence has laid down the following test: Did defendant,
in doing the alleged negligent act, use that reasonable care and caution which an ordinarily prudent person would
have used in the same situation? If not, the person is guilty of negligence. The law, in effect, adopts the standard
supposed to be supplied by the imaginary conduct of the discreet pater familias of the Roman law.
The test of negligence is objective. WE measure the act or omission of the tortfeasor with a perspective as that of an
ordinary reasonable person who is similarly situated. The test, as applied to the extant case, is whether or not
defendant-appellant, under the attendant circumstances, used that reasonable care and caution which an ordinary
reasonable person would have used in the same situation.
WE rule in the negative.
In finding defendant-appellant remiss in its duty of exercising the required reasonable care under the circumstances,
the court a quo reasoned-out, to wit:
"Of the witnesses presented by plaintiffs to prove its (sic) case, the only one with competence to testify on the issue
of adequacy or inadequacy of security is Col. Rodrigo De Guzman who was then the Chief Security Officer of defendant
hotel for the year 1999. He is a retired police officer and had vast experience in security jobs. He was likewise a member
of the elite Presidential Security Group.
He testified that upon taking over the job as the chief of the security force of the hotel, he made an assessment of the
security situation. Col. De Guzman was not satisfied with the security set-up and told the hotel management of his
desire to improve it. In his testimony, De Guzman testified that at the time he took over, he noticed that there were
few guards in the elevated portion of the hotel where the rooms were located. The existing security scheme then was
one guard for 3 or 4 floors. He likewise testified that he recommended to the hotel management that at least one
guard must be assigned per floor especially considering that the hotel has a long "L-shaped" hallway, such that one
cannot see both ends of the hallway. He further opined that "even one guard in that hallway is not enough because
of the blind portion of the hallway."
On cross-examination, Col. De Guzman testified that the security of the hotel was adequate at the time the crime
occurred because the hotel was not fully booked. He qualified his testimony on direct in that his recommendation of
one guard per floor is the "ideal" set-up when the hotel is fully-booked.
Be that as it may, it must be noted that Col. De Guzman also testified that the reason why the hotel management
disapproved his recommendation was that the hotel was not doing well. It is for this reason that the hotel management
did not heed the recommendation of Col. De Guzman, no matter how sound the recommendation was, and whether
the hotel is fully-booked or not. It was a business judgment call on the part of the defendant.
Plaintiffs anchor its (sic) case on our law on quasi-delicts.
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 quasi-delict.
Liability on the part of the defendant is based upon the fact that he was in a better situation than the injured person
to foresee and prevent the happening of the injurious occurrence.
There is no dispute that even prior to the untimely demise of Mr. Harper, defendant was duly forewarned of the
security lapses in the hotel. Col. De Guzman was particularly concerned with the security of the private areas where
the guest rooms are. He wanted not just one roving guard in every three or four floors. He insisted there must be at
least one in each floor considering the length and the shape of the corridors. The trained eyes of a security officer was
(sic) looking at that deadly scenario resulting from that wide security breach as that which befell Christian Harper.
The theory of the defense that the malefactor/s was/were known to Harper or was/were visitors of Harper and that
there was a shindig among [the] three deserves scant consideration.
The NBI Biology Report (Exh. "C" & "D") and the Toxicology Report (Exh. "E") belie the defense theory of a joyous party
between and among Harper and the unidentified malefactor/s. Based on the Biology Report, Harper was found
negative of prohibited and regulated drugs. The Toxicology Report likewise revealed that the deceased was negative
of the presence of alcohol in his blood.
The defense even suggests that the malefactor/s gained entry into the private room of Harper either because Harper
allowed them entry by giving them access to the vingcard or because Harper allowed them entry by opening the door
for them, the usual gesture of a room occupant to his visitors.
While defendant’s theory may be true, it is more likely, under the circumstances obtaining that the malefactor/s
gained entry into his room by simply knocking at Harper’s door and the latter opening it probably thinking it was hotel
personnel, without an inkling that criminal/s could be in the premises.
The latter theory is more attuned to the dictates of reason. If indeed the female "visitor" is known to or a visitor of
Harper, she should have entered the the room together with Harper. It is quite unlikely that a supposed "visitor" would
wait three minutes to be with a guest when he/she could go with the guest directly to the room. The interval of three
minutes in Harper’s entry and that of the alleged female visitor belies the "theory of acquaintanceship". It is most
likely that the female "visitor" was the one who opened the door to the male "visitor", undoubtedly, a co-conspirator.
In any case, the ghastly incident could have been prevented had there been adequate security in each of the hotel
floors. This, coupled with the earlier recommendation of Col. De Guzman to the hotel management to act on the
security lapses of the hotel, raises the presumption that the crime was foreseeable.
Clearly, defendant’s inaction constitutes negligence or want of the reasonable care demanded of it in that particular
situation.
In a case, the Supreme Court defined negligence as:
The failure to observe for the protection of the interests of another person that degree of care, precaution and
vigilance, which the circumstances justly demand, whereby such person suffers injury.
Negligence is want of care required by the circumstances. It is a relative or comparative, not an absolute term, and its
application depends upon the situation of the parties, and the degree of care and vigilance which the circumstances
reasonably impose. Where the danger is great, a high degree of care is necessary.
Moreover, in applying the premises liability rule in the instant case as it is applied in some jurisdiction (sic) in the
United States, it is enough that guests are injured while inside the hotel premises to make the hotelkeeper liable. With
great caution should the liability of the hotelkeeper be enforced when a guest died inside the hotel premises.
It also bears stressing that there were prior incidents that occurred in the hotel which should have forewarned the
hotel management of the security lapses of the hotel. As testified to by Col. De Guzman, "there were ‘minor’ incidents"
(loss of items) before the happening of the instant case.
These "minor" incidents may be of little significance to the hotel, yet relative to the instant case, it speaks volume.
This should have served as a caveat that the hotel security has lapses.
Makati Shangri-La Hotel, to stress, is a five-star hotel. The "reasonable care" that it must exercise for the safety and
comfort of its guests should be commensurate with the grade and quality of the accommodation it offers. If there is
such a thing as "five-star hotel security", the guests at Makati Shangri-La surely deserves just that!
When one registers (as) a guest of a hotel, he makes the establishment the guardian of his life and his personal
belongings during his stay. It is a standard procedure of the management of the hotel to screen visitors who call on
their guests at their rooms. The murder of Harper could have been avoided had the security guards of the Shangri-La
Hotel in Makati dutifully observed this standard procedure."
WE concur.
Well settled is the doctrine that "the findings of fact by the trial court are accorded great respect by appellate courts
and should not be disturbed on appeal unless the trial court has overlooked, ignored, or disregarded some fact or
circumstances of sufficient weight or significance which, if considered, would alter the situation." After a conscientious
sifting of the records, defendant-appellant fails to convince US to deviate from this doctrine.
It could be gleaned from findings of the trial court that its conclusion of negligence on the part of defendant-appellant
is grounded mainly on the latter’s inadequate hotel security, more particularly on the failure to deploy sufficient
security personnel or roving guards at the time the ghastly incident happened.
A review of the testimony of Col. De Guzman reveals that on direct examination he testified that at the time he
assumed his position as Chief Security Officer of defendant-appellant, during the early part of 1999 to the early part
of 2000, he noticed that some of the floors of the hotel were being guarded by a few guards, for instance, 3 or 4 floors
by one guard only on a roving manner. He then made a recommendation that the ideal-set up for an effective security
should be one guard for every floor, considering that the hotel is L-shaped and the ends of the hallways cannot be
seen. At the time he made the recommendation, the same was denied, but it was later on considered and approved
on December 1999 because of the Centennial Celebration.
On cross-examination, Col. De Guzman confirmed that after he took over as Chief Security Officer, the number of
security guards was increased during the first part of December or about the last week of November, and before the
incident happened, the security was adequate. He also qualified that as to his direct testimony on "ideal-set up", he
was referring to one guard for every floor if the hotel is fully booked. At the time he made his recommendation in the
early part of 1999, it was disapproved as the hotel was not doing well and it was not fully booked so the existing
security was adequate enough. He further explained that his advice was observed only in the late November 1999 or
the early part of December 1999.
It could be inferred from the foregoing declarations of the former Chief Security Officer of defendant-appellant that
the latter was negligent in providing adequate security due its guests. With confidence, it was repeatedly claimed by
defendant-appellant that it is a five-star hotel. Unfortunately, the record failed to show that at the time of the death
of Christian Harper, it was exercising reasonable care to protect its guests from harm and danger by providing sufficient
security commensurate to it being one of the finest hotels in the country. In so concluding, WE are reminded of the
Supreme Court’s enunciation that the hotel business like the common carrier’s business is imbued with public interest.
Catering to the public, hotelkeepers are bound to provide not only lodging for hotel guests but also security to their
persons and belongings. The twin duty constitutes the essence of the business.
It is clear from the testimony of Col. De Guzman that his recommendation was initially denied due to the fact that the
business was then not doing well. The "one guard, one floor" recommended policy, although ideal when the hotel is
fully-booked, was observed only later in November 1999 or in the early part of December 1999, or needless to state,
after the murder of Christian Harper. The apparent security lapses of defendant-appellant were further shown when
the male culprit who entered Christian Harper’s room was never checked by any of the guards when he came inside
the hotel. As per interview conducted by the initial investigator, PO3 Cornelio Valiente to the guards, they admitted
that nobody know that said man entered the hotel and it was only through the monitor that they became aware of
his entry. It was even evidenced by the CCTV that before he walked to the room of the late Christian Harper, said male
suspect even looked at the monitoring camera. Such act of the man showing wariness, added to the fact that his entry
to the hotel was unnoticed, at an unholy hour, should have aroused suspicion on the part of the roving guard in the
said floor, had there been any. Unluckily for Christian Harper, there was none at that time.
Proximate cause is defined as 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. More
comprehensively, proximate cause is that cause acting first and producing the injury, either immediately or by setting
other events in motion, all constituting a natural and continuous chain of events, each having a close causal connection
with its immediate predecessor, the final event in the chain immediately effecting the injury as natural and probable None of the exceptional circumstances obtains herein. Accordingly, the Court cannot depart from or disturb the factual
result of the cause which first acted, under such circumstances that the person responsible for the first event should, findings on negligence of petitioner made by both the RTC and the CA.39
as an ordinarily prudent and intelligent person, have reasonable ground to expect at the moment of his act or default
that an injury to some person might probably result therefrom.
Even so, the Court agrees with the CA that petitioner failed to provide the basic and adequate security measures
expected of a five-star hotel; and that its omission was the proximate cause of Harper’s death.
Defendant-appellant’s contention that it was Christian Harper’s own negligence in allowing the malefactors to his
room that was the proximate cause of his death, is untenable. To reiterate, defendant-appellant is engaged in a
The testimony of Col. De Guzman revealed that the management practice prior to the murder of Harper had been to
business imbued with public interest, ergo, it is bound to provide adequate security to its guests. As previously
deploy only one security or roving guard for every three or four floors of the building; that such ratio had not been
discussed, defendant-appellant failed to exercise such reasonable care expected of it under the circumstances. Such
enough considering the L-shape configuration of the hotel that rendered the hallways not visible from one or the other
negligence is the proximate cause which set the chain of events that led to the eventual demise of its guest. Had there
end; and that he had recommended to management to post a guard for each floor, but his recommendation had been
been reasonable security precautions, the same could have saved Christian Harper from a brutal death.
disapproved because the hotel "was not doing well" at that particular time.40

The Court concurs entirely with the findings and conclusions of the CA, which the Court regards to be thorough and
Probably realizing that his testimony had weakened petitioner’s position in the case, Col. De Guzman soon clarified on
supported by the records of the trial. Moreover, the Court cannot now review and pass upon the uniform findings of
cross-examination that petitioner had seen no need at the time of the incident to augment the number of guards due
negligence by the CA and the RTC because doing so would require the Court to delve into and revisit the factual bases
to the hotel being then only half-booked. Here is how his testimony went:
for the finding of negligence, something fully contrary to its character as not a trier of facts. In that regard, the factual
findings of the trial court that are supported by the evidence on record, especially when affirmed by the CA, are
conclusive on the Court.37 Consequently, the Court will not review unless there are exceptional circumstances for doing ATTY MOLINA:
so, such as the following: I just forgot one more point, Your Honor please. Was there ever a time, Mr. Witness, that your recommendation to
post a guard in every floor ever considered and approved by the hotel?
A: Yes, Sir.
(a) When the findings are grounded entirely on speculation, surmises or conjectures;
Q: When was this?
A: That was on December 1999 because of the Centennial Celebration when the hotel accepted so many guests
(b) When the inference made is manifestly mistaken, absurd or impossible; wherein most of the rooms were fully booked and I recommended that all the hallways should be guarded by one
guard.41
xxx
(c) When there is grave abuse of discretion;
ATTY COSICO:
Q: So at that time that you made your recommendation, the hotel was half-filled.
(d) When the judgment is based on a misapprehension of facts; A: Maybe.
Q: And even if the hotel is half-filled, your recommendation is that each floor shall be maintained by one security guard
(e) When the findings of facts are conflicting; per floors?
A: Yes sir.
Q: Would you agree with me that even if the hotel is half-filled, there is no need to increase the guards because there
(f) When in making its findings the Court of Appeals went beyond the issues of the case, or its findings are contrary to were only few customers?
the admissions of both the appellant and the appellee; A: I think so.
Q: So you will agree with me that each floor should be maintained by one security guard if the rooms are filled up or
(g) When the findings are contrary to the trial court; occupied?
A: Yes sir.
Q: Now, you even testified that from January 1999 to November 1999 thereof, only minor incidents were involved?
(h) When the findings are conclusions without citation of specific evidence on which they are based; A: Yes sir.
Q: So it would be correct to say that the security at that time in February was adequate?
(i) When the facts set forth in the petition as well as in the petitioner’s main and reply briefs are not disputed by the A: I believe so.
respondent; Q: Even up to November when the incident happened for that same reason, security was adequate?
A: Yes, before the incident.
Q: Now, you testified on direct that the hotel posted one guard each floor?
(j) When the findings of fact are premised on the supposed absence of evidence and contradicted by the evidence on
A: Yes sir.
record; and
Q: And it was your own recommendation?
A: Yes, because we are expecting that the hotel will be filled up.
(k) When the Court of Appeals manifestly overlooked certain relevant facts not disputed by the parties, which, if Q: In fact, the hotel was fully booked?
properly considered, would justify a different conclusion.38 A: Yes sir.42
Petitioner would thereby have the Court believe that Col. De Guzman’s initial recommendation had been rebuffed due
to the hotel being only half-booked; that there had been no urgency to adopt a one-guard-per-floor policy because
security had been adequate at that time; and that he actually meant by his statement that "the hotel was not doing
well" that the hotel was only half-booked.

We are not convinced.

The hotel business is imbued with public interest. Catering to the public, hotelkeepers are bound to provide not only
lodging for their guests but also security to the persons and belongings of their guests. The twin duty constitutes the
essence of the business.43 Applying by analogy Article 2000,44 Article 200145 and Article 200246 of the Civil Code (all of
which concerned the hotelkeepers’ degree of care and responsibility as to the personal effects of their guests), we
hold that there is much greater reason to apply the same if not greater degree of care and responsibility when the
lives and personal safety of their guests are involved. Otherwise, the hotelkeepers would simply stand idly by as
strangers have unrestricted access to all the hotel rooms on the pretense of being visitors of the guests, without being
held liable should anything untoward befall the unwary guests. That would be absurd, something that no good law
would ever envision.
[ G.R. NO. 126780, February 17, 2005 ]
In fine, the Court sees no reversible-error on the part of the CA. YHT REALTY CORPORATION, ERLINDA LAINEZ AND ANICIA PAYAM, PETITIONERS, VS. THE COURT OF APPEALS AND
MAURICE MCLOUGHLIN, RESPONDENTS.

WHEREFORE, the Court AFFIRMS the judgment of the Court of Appeals; and ORDERS petitioner to pay the costs of DECISION
suit. TINGA, J.:

SO ORDERED. The primary question of interest before this Court is the only legal issue in the case: It is whether a hotel may evade
liability for the loss of items left with it for safekeeping by its guests, by having these guests execute written waivers
holding the establishment or its employees free from blame for such loss in light of Article 2003 of the Civil Code
which voids such waivers.

Before this Court is a Rule 45 petition for review of the Decision[1] dated 19 October 1995 of the Court of Appeals
which affirmed the Decision[2] dated 16 December 1991 of the Regional Trial Court (RTC), Branch 13, of Manila,
finding YHT Realty Corporation, Brunhilda Mata-Tan (Tan), Erlinda Lainez (Lainez) and Anicia Payam (Payam) jointly
and solidarily liable for damages in an action filed by Maurice McLoughlin (McLoughlin) for the loss of his American
and Australian dollars deposited in the safety deposit box of Tropicana Copacabana Apartment Hotel, owned and
operated by YHT Realty Corporation.

The factual backdrop of the case follow.

Private respondent McLoughlin, an Australian businessman-philanthropist, used to stay at Sheraton Hotel during his
trips to the Philippines prior to 1984 when he met Tan. Tan befriended McLoughlin by showing him around,
introducing him to important people, accompanying him in visiting impoverished street children and assisting him in
buying gifts for the children and in distributing the same to charitable institutions for poor children. Tan convinced
McLoughlin to transfer from Sheraton Hotel to Tropicana where Lainez, Payam and Danilo Lopez were employed.
Lopez served as manager of the hotel while Lainez and Payam had custody of the keys for the safety deposit boxes of
Tropicana. Tan took care of McLoughlin’s booking at the Tropicana where he started staying during his trips to the
Philippines from December 1984 to September 1987.[3]

On 30 October 1987, McLoughlin arrived from Australia and registered with Tropicana. He rented a safety deposit
box as it was his practice to rent a safety deposit box every time he registered at Tropicana in previous trips. As a
tourist, McLoughlin was aware of the procedure observed by Tropicana relative to its safety deposit boxes. The
safety deposit box could only be opened through the use of two keys, one of which is given to the registered guest,
and the other remaining in the possession of the management of the hotel. When a registered guest wished to open
his safety deposit box, he alone could personally request the management who then would assign one of its
employees to accompany the guest and assist him in opening the safety deposit box with the two keys.[4]
McLoughlin allegedly placed the following in his safety deposit box: Fifteen Thousand US Dollars (US$15,000.00)
which he placed in two envelopes, one envelope containing Ten Thousand US Dollars (US$10,000.00) and the other
envelope Five Thousand US Dollars (US$5,000.00); Ten Thousand Australian Dollars (AUS$10,000.00) which he also
placed in another envelope; two (2) other envelopes containing letters and credit cards; two (2) bankbooks; and a
checkbook, arranged side by side inside the safety deposit box.[5]
On 12 December 1987, before leaving for a brief trip to Hongkong, McLoughlin opened his safety deposit box with
his key and with the key of the management and took therefrom the envelope containing Five Thousand US Dollars
(US$5,000.00), the envelope containing Ten Thousand Australian Dollars (AUS$10,000.00), his passports and his
credit cards.[6] McLoughlin left the other items in the box as he did not check out of his room at the Tropicana during
his short visit to Hongkong. When he arrived in Hongkong, he opened the envelope which contained Five Thousand
US Dollars (US$5,000.00) and discovered upon counting that only Three Thousand US Dollars (US$3,000.00) were
enclosed therein.[7] Since he had no idea whether somebody else had tampered with his safety deposit box, he
thought that it was just a result of bad accounting since he did not spend anything from that envelope.[8]
After returning to Manila, he checked out of Tropicana on 18 December 1987 and left for Australia. When he arrived
in Australia, he discovered that the envelope with Ten Thousand US Dollars (US$10,000.00) was short of Five
Thousand US Dollars (US$5,000). He also noticed that the jewelry which he bought in Hongkong and stored in the
safety deposit box upon his return to Tropicana was likewise missing, except for a diamond bracelet.[9]
When McLoughlin came back to the Philippines on 4 April 1988, he asked Lainez if some money and/or jewelry
which he had lost were found and returned to her or to the management. However, Lainez told him that no one in
the hotel found such things and none were turned over to the management. He again registered at Tropicana and
rented a safety deposit box. He placed therein one (1) envelope containing Fifteen Thousand US Dollars
(US$15,000.00), another envelope containing Ten Thousand Australian Dollars (AUS$10,000.00) and other envelopes
containing his traveling papers/documents. On 16 April 1988, McLoughlin requested Lainez and Payam to open his
safety deposit box. He noticed that in the envelope containing Fifteen Thousand US Dollars (US$15,000.00), Two
Thousand US Dollars (US$2,000.00) were missing and in the envelope previously containing Ten Thousand Australian
Dollars (AUS$10,000.00), Four Thousand Five Hundred Australian Dollars (AUS$4,500.00) were missing.[10]
When McLoughlin discovered the loss, he immediately confronted Lainez and Payam who admitted that Tan opened
the safety deposit box with the key assigned to him.[11] McLoughlin went up to his room where Tan was staying and
confronted her. Tan admitted that she had stolen McLoughlin’s key and was able to open the safety deposit box with
the assistance of Lopez, Payam and Lainez.[12] Lopez also told McLoughlin that Tan stole the key assigned to
McLoughlin while the latter was asleep.[13]
McLoughlin requested the management for an investigation of the incident. Lopez got in touch with Tan and
arranged for a meeting with the police and McLoughlin. When the police did not arrive, Lopez and Tan went to the
room of McLoughlin at Tropicana and thereat, Lopez wrote on a piece of paper a promissory note dated 21 April
1988. The promissory note reads as follows:
I promise to pay Mr. Maurice McLoughlin the amount of AUS$4,000.00 and US$2,000.00 or its equivalent in
Philippine currency on or before May 5, 1988.[14]
Lopez requested Tan to sign the promissory note which the latter did and Lopez also signed as a witness. Despite the
execution of promissory note by Tan, McLoughlin insisted that it must be the hotel who must assume responsibility
for the loss he suffered. However, Lopez refused to accept the responsibility relying on the conditions for renting the
safety deposit box entitled “Undertaking For the Use Of Safety Deposit Box,”[15] specifically paragraphs (2) and (4)
thereof, to wit:
2. To release and hold free and blameless TROPICANA APARTMENT HOTEL from any liability arising from any
loss in the contents and/or use of the said deposit box for any cause whatsoever, including but not
limited to the presentation or use thereof by any other person should the key be lost;
...
4. To return the key and execute the RELEASE in favor of TROPICANA APARTMENT HOTEL upon giving up the
use of the box.[16]
On 17 May 1988, McLoughlin went back to Australia and he consulted his lawyers as to the validity of the
abovementioned stipulations. They opined that the stipulations are void for being violative of universal hotel
practices and customs. His lawyers prepared a letter dated 30 May 1988 which was signed by McLoughlin and sent
to President Corazon Aquino.[17] The Office of the President referred the letter to the Department of Justice (DOJ)
which forwarded the same to the Western Police District (WPD).[18]
After receiving a copy of the indorsement in Australia, McLoughlin came to the Philippines and registered again as a
hotel guest of Tropicana. McLoughlin went to MalacaHang to follow up on his letter but he was instructed to go to
the DOJ. The DOJ directed him to proceed to the WPD for documentation. But McLoughlin went back to Australia as
he had an urgent business matter to attend to.
For several times, McLoughlin left for Australia to attend to his business and came back to the Philippines to follow
up on his letter to the President but he failed to obtain any concrete assistance.[19]
McLoughlin left again for Australia and upon his return to the Philippines on 25 August 1989 to pursue his claims
against petitioners, the WPD conducted an investigation which resulted in the preparation of an affidavit which was
forwarded to the Manila City Fiscal’s Office. Said affidavit became the basis of preliminary investigation. However,
McLoughlin left again for Australia without receiving the notice of the hearing on 24 November 1989. Thus, the case
at the Fiscal’s Office was dismissed for failure to prosecute. Mcloughlin requested the reinstatement of the criminal
charge for theft. In the meantime, McLoughlin and his lawyers wrote letters of demand to those having
responsibility to pay the damage. Then he left again for Australia.
Upon his return on 22 October 1990, he registered at the Echelon Towers at Malate, Manila. Meetings were held
between McLoughlin and his lawyer which resulted to the filing of a complaint for damages on 3 December 1990
against YHT Realty Corporation, Lopez, Lainez, Payam and Tan (defendants) for the loss of McLoughlin’s money
which was discovered on 16 April 1988. After filing the complaint, McLoughlin left again for Australia to attend to an
urgent business matter. Tan and Lopez, however, were not served with summons, and trial proceeded with only
Lainez, Payam and YHT Realty Corporation as defendants.
After defendants had filed their Pre-Trial Brief admitting that they had previously allowed and assisted Tan to open
the safety deposit box, McLoughlin filed an Amended/Supplemental Complaint[20] dated 10 June 1991 which included
another incident of loss of money and jewelry in the safety deposit box rented by McLoughlin in the same hotel
which took place prior to 16 April 1988.[21] The trial court admitted the Amended/Supplemental Complaint.
During the trial of the case, McLoughlin had been in and out of the country to attend to urgent business in Australia,
and while staying in the Philippines to attend the hearing, he incurred expenses for hotel bills, airfare and other
transportation expenses, long distance calls to Australia, Meralco power expenses, and expenses for food and
maintenance, among others.[22]
After trial, the RTC of Manila rendered judgment in favor of McLoughlin, the dispositive portion of which reads:
WHEREFORE, above premises considered, judgment is hereby rendered by this Court in favor of plaintiff and against
the defendants, to wit:
1. Ordering defendants, jointly and severally, to pay plaintiff the sum of US$11,400.00 or its
equivalent in Philippine Currency of P342,000.00, more or less, and the sum of AUS$4,500.00
or its equivalent in Philippine Currency of P99,000.00, or a total of P441,000.00, more or less,
with 12% interest from April 16 1988 until said amount has been paid to plaintiff (Item 1,
Exhibit CC);
 2. Ordering defendants, jointly and severally to pay plaintiff the sum of P3,674,238.00 as actual
and consequential damages arising from the loss of his Australian and American dollars and 2) P308,880.80, representing the peso value for the air fares from Sidney [sic] to Manila and back for a total of
jewelries complained against and in prosecuting his claim and rights administratively and eleven (11) trips;
judicially (Items II, III, IV, V, VI, VII, VIII, and IX, Exh. “CC”);
3) One-half of P336,207.05 or P168,103.52 representing payment to Tropicana Apartment Hotel;
3. Ordering defendants, jointly and severally, to pay plaintiff the sum of P500,000.00 as moral
damages (Item X, Exh. “CC”); 4) One-half of P152,683.57 or P76,341.785 representing payment to Echelon Tower;

4. Ordering defendants, jointly and severally, to pay plaintiff the sum of P350,000.00 as 5) One-half of P179,863.20 or P89,931.60 for the taxi xxx transportation from the residence to Sidney [sic] Airport
exemplary damages (Item XI, Exh. “CC”); and from MIA to the hotel here in Manila, for the eleven (11) trips;

5. And ordering defendants, jointly and severally, to pay litigation expenses in the sum of 6) One-half of P7,801.94 or P3,900.97 representing Meralco power expenses;
P200,000.00 (Item XII, Exh. “CC”);
7) One-half of P356,400.00 or P178,000.00 representing expenses for food and maintenance;
6. Ordering defendants, jointly and severally, to pay plaintiff the sum of P200,000.00 as
attorney’s fees, and a fee of P3,000.00 for every appearance; and 8) P50,000.00 for moral damages;

7. Plus costs of suit. 9) P10,000.00 as exemplary damages; and

10) P200,000 representing attorney’s fees.

SO ORDERED.[23]
The trial court found that McLoughlin’s allegations as to the fact of loss and as to the amount of money he lost were
With costs.
sufficiently shown by his direct and straightforward manner of testifying in court and found him to be credible and
worthy of belief as it was established that McLoughlin’s money, kept in Tropicana’s safety deposit box, was taken by
SO ORDERED.[29]
Tan without McLoughlin’s consent. The taking was effected through the use of the master key which was in the
Unperturbed, YHT Realty Corporation, Lainez and Payam went to this Court in this appeal by certiorari.
possession of the management. Payam and Lainez allowed Tan to use the master key without authority from
McLoughlin. The trial court added that if McLoughlin had not lost his dollars, he would not have gone through the
Petitioners submit for resolution by this Court the following issues: (a) whether the appellate court’s conclusion on
trouble and personal inconvenience of seeking aid and assistance from the Office of the President, DOJ, police
the alleged prior existence and subsequent loss of the subject money and jewelry is supported by the evidence on
authorities and the City Fiscal’s Office in his desire to recover his losses from the hotel management and Tan.[24]
record; (b) whether the finding of gross negligence on the part of petitioners in the performance of their duties as
innkeepers is supported by the evidence on record; (c) whether the “Undertaking For The Use of Safety Deposit Box”
As regards the loss of Seven Thousand US Dollars (US$7,000.00) and jewelry worth approximately One Thousand
admittedly executed by private respondent is null and void; and (d) whether the damages awarded to private
Two Hundred US Dollars (US$1,200.00) which allegedly occurred during his stay at Tropicana previous to 4 April
respondent, as well as the amounts thereof, are proper under the circumstances.[30]
1988, no claim was made by McLoughlin for such losses in his complaint dated 21 November 1990 because he was
not sure how they were lost and who the responsible persons were. But considering the admission of the defendants
The petition is devoid of merit.
in their pre-trial brief that on three previous occasions they allowed Tan to open the box, the trial court opined that
it was logical and reasonable to presume that his personal assets consisting of Seven Thousand US Dollars
It is worthy of note that the thrust of Rule 45 is the resolution only of questions of law and any peripheral factual
(US$7,000.00) and jewelry were taken by Tan from the safety deposit box without McLoughlin’s consent through the
question addressed to this Court is beyond the bounds of this mode of review.
cooperation of Payam and Lainez.[25]
Petitioners point out that the evidence on record is insufficient to prove the fact of prior existence of the dollars and
The trial court also found that defendants acted with gross negligence in the performance and exercise of their
the jewelry which had been lost while deposited in the safety deposit boxes of Tropicana, the basis of the trial court
duties and obligations as innkeepers and were therefore liable to answer for the losses incurred by McLoughlin. [26]
and the appellate court being the sole testimony of McLoughlin as to the contents thereof. Likewise, petitioners
dispute the finding of gross negligence on their part as not supported by the evidence on record.
Moreover, the trial court ruled that paragraphs (2) and (4) of the “Undertaking For The Use Of Safety Deposit Box”
are not valid for being contrary to the express mandate of Article 2003 of the New Civil Code and against public
We are not persuaded. We adhere to the findings of the trial court as affirmed by the appellate court that the fact of
policy.[27] Thus, there being fraud or wanton conduct on the part of defendants, they should be responsible for all
loss was established by the credible testimony in open court by McLoughlin. Such findings are factual and therefore
damages which may be attributed to the non-performance of their contractual obligations.[28]
beyond the ambit of the present petition.
The Court of Appeals affirmed the disquisitions made by the lower court except as to the amount of damages
The trial court had the occasion to observe the demeanor of McLoughlin while testifying which reflected the veracity
awarded. The decretal text of the appellate court’s decision reads:
of the facts testified to by him. On this score, we give full credence to the appreciation of testimonial evidence by
THE FOREGOING CONSIDERED, the appealed Decision is hereby AFFIRMED but modified as follows:
the trial court especially if what is at issue is the credibility of the witness. The oft-repeated principle is that where
the credibility of a witness is an issue, the established rule is that great respect is accorded to the evaluation of the
The appellants are directed jointly and severally to pay the plaintiff/appellee the following amounts:
credibility of witnesses by the trial court.[31] The trial court is in the best position to assess the credibility of witnesses
and their testimonies because of its unique opportunity to observe the witnesses firsthand and note their demeanor,
1) P153,200.00 representing the peso equivalent of US$2,000.00 and AUS$4,500.00;
conduct and attitude under grilling examination.[32]
We are also not impressed by petitioners’ argument that the finding of gross negligence by the lower court as
affirmed by the appellate court is not supported by evidence. The evidence reveals that two keys are required to
open the safety deposit boxes of Tropicana. One key is assigned to the guest while the other remains in the
possession of the management. If the guest desires to open his safety deposit box, he must request the
management for the other key to open the same. In other words, the guest alone cannot open the safety deposit
box without the assistance of the management or its employees. With more reason that access to the safety deposit
box should be denied if the one requesting for the opening of the safety deposit box is a stranger. Thus, in case of
loss of any item deposited in the safety deposit box, it is inevitable to conclude that the management had at least a
hand in the consummation of the taking, unless the reason for the loss is force majeure.
Noteworthy is the fact that Payam and Lainez, who were employees of Tropicana, had custody of the master key of
the management when the loss took place. In fact, they even admitted that they assisted Tan on three separate
occasions in opening McLoughlin’s safety deposit box.[33] This only proves that Tropicana had prior knowledge that a
person aside from the registered guest had access to the safety deposit box. Yet the management failed to notify
McLoughlin of the incident and waited for him to discover the taking before it disclosed the matter to him.
Therefore, Tropicana should be held responsible for the damage suffered by McLoughlin by reason of the negligence
of its employees.
The management should have guarded against the occurrence of this incident considering that Payam admitted in
open court that she assisted Tan three times in opening the safety deposit box of McLoughlin at around 6:30 A.M. to
7:30 A.M. while the latter was still asleep.[34] In light of the circumstances surrounding this case, it is undeniable that
without the acquiescence of the employees of Tropicana to the opening of the safety deposit box, the loss of
McLoughlin’s money could and should have been avoided.
The management contends, however, that McLoughlin, by his act, made its employees believe that Tan was his
spouse for she was always with him most of the time. The evidence on record, however, is bereft of any showing
that McLoughlin introduced Tan to the management as his wife. Such an inference from the act of McLoughlin will
not exculpate the petitioners from liability in the absence of any showing that he made the management believe
that Tan was his wife or was duly authorized to have access to the safety deposit box. Mere close companionship
and intimacy are not enough to warrant such conclusion considering that what is involved in the instant case is the
very safety of McLoughlin’s deposit. If only petitioners exercised due diligence in taking care of McLoughlin’s safety
deposit box, they should have confronted him as to his relationship with Tan considering that the latter had been
observed opening McLoughlin’s safety deposit box a number of times at the early hours of the morning. Tan’s acts
should have prompted the management to investigate her relationship with McLoughlin. Then, petitioners would
have exercised due diligence required of them. Failure to do so warrants the conclusion that the management had
been remiss in complying with the obligations imposed upon hotel-keepers under the law.
Under Article 1170 of the New Civil Code, those who, in the performance of their obligations, are guilty of
negligence, are liable for damages. As to who shall bear the burden of paying damages, Article 2180, paragraph (4)
of the same Code provides that 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. Also, this Court has ruled that if an employee is found negligent, it is presumed that the
employer was negligent in selecting and/or supervising him for it is hard for the victim to prove the negligence of
such employer.[35] Thus, given the fact that the loss of McLoughlin’s money was consummated through the
negligence of Tropicana’s employees in allowing Tan to open the safety deposit box without the guest’s consent,
both the assisting employees and YHT Realty Corporation itself, as owner and operator of Tropicana, should be held
solidarily liable pursuant to Article 2193.[36]
The issue of whether the “Undertaking For The Use of Safety Deposit Box” executed by McLoughlin is tainted with
nullity presents a legal question appropriate for resolution in this petition. Notably, both the trial court and the
appellate court found the same to be null and void. We find no reason to reverse their common conclusion. Article
2003 is controlling, thus:
Art. 2003. The hotel-keeper cannot free himself from responsibility by posting notices to the effect that he is not
liable for the articles brought by the guest. Any stipulation between the hotel-keeper and the guest whereby the
responsibility of the former as set forth in Articles 1998 to 2001[37] is suppressed or diminished shall be void.
Article 2003 was incorporated in the New Civil Code as an expression of public policy precisely to apply to situations
such as that presented in this case. The hotel business like the common carrier’s business is imbued with public
interest. Catering to the public, hotelkeepers are bound to provide not only lodging for hotel guests and security to
their persons and belongings. The twin duty constitutes the essence of the business. The law in turn does not allow
such duty to the public to be negated or diluted by any contrary stipulation in so-called “undertakings” that
ordinarily appear in prepared forms imposed by hotel keepers on guests for their signature.
In an early case,[38] the Court of Appeals through its then Presiding Justice (later Associate Justice of the Court) Jose
P. Bengzon, ruled that to hold hotelkeepers or innkeeper liable for the effects of their guests, it is not necessary that
they be actually delivered to the innkeepers or their employees. It is enough that such effects are within the hotel or
inn.[39] With greater reason should the liability of the hotelkeeper be enforced when the missing items are taken
without the guest’s knowledge and consent from a safety deposit box provided by the hotel itself, as in this case.
Paragraphs (2) and (4) of the “undertaking” manifestly contravene Article 2003 of the New Civil Code for they allow
Tropicana to be released from liability arising from any loss in the contents and/or use of the safety deposit box
for any cause whatsoever.[40] Evidently, the undertaking was intended to bar any claim against Tropicana for any loss
of the contents of the safety deposit box whether or not negligence was incurred by Tropicana or its employees. The
New Civil Code is explicit that the responsibility of the hotel-keeper shall extend to loss of, or injury to, the personal
property of the guests even if caused by servants or employees of the keepers of hotels or inns as well as by
strangers, except as it may proceed from any force majeure.[41] It is the loss through force majeure that may spare
the hotel-keeper from liability. In the case at bar, there is no showing that the act of the thief or robber was done
with the use of arms or through an irresistible force to qualify the same as force majeure.[42]
Petitioners likewise anchor their defense on Article 2002[43] which exempts the hotel-keeper from liability if the loss
is due to the acts of his guest, his family, or visitors. Even a cursory reading of the provision would lead us to reject
petitioners’ contention. The justification they raise would render nugatory the public interest sought to be protected
by the provision. What if the negligence of the employer or its employees facilitated the consummation of a crime
committed by the registered guest’s relatives or visitor? Should the law exculpate the hotel from liability since the
loss was due to the act of the visitor of the registered guest of the hotel? Hence, this provision presupposes that the
hotel-keeper is not guilty of concurrent negligence or has not contributed in any degree to the occurrence of the
loss. A depositary is not responsible for the loss of goods by theft, unless his actionable negligence contributes to the
loss.[44]
In the case at bar, the responsibility of securing the safety deposit box was shared not only by the guest himself but
also by the management since two keys are necessary to open the safety deposit box. Without the assistance of
hotel employees, the loss would not have occurred. Thus, Tropicana was guilty of concurrent negligence in allowing
Tan, who was not the registered guest, to open the safety deposit box of McLoughlin, even assuming that the latter
was also guilty of negligence in allowing another person to use his key. To rule otherwise would result in
undermining the safety of the safety deposit boxes in hotels for the management will be given imprimatur to allow
any person, under the pretense of being a family member or a visitor of the guest, to have access to the safety
deposit box without fear of any liability that will attach thereafter in case such person turns out to be a complete
stranger. This will allow the hotel to evade responsibility for any liability incurred by its employees in conspiracy with
the guest’s relatives and visitors.
Petitioners contend that McLoughlin’s case was mounted on the theory of contract, but the trial court and the
appellate court upheld the grant of the claims of the latter on the basis of tort.[45] There is nothing anomalous in how
the lower courts decided the controversy for this Court has pronounced a jurisprudential rule that tort liability can
exist even if there are already contractual relations. The act that breaks the contract may also be tort.[46]
As to damages awarded to McLoughlin, we see no reason to modify the amounts awarded by the appellate court for
the same were based on facts and law. It is within the province of lower courts to settle factual issues such as the
proper amount of damages awarded and such finding is binding upon this Court especially if sufficiently proven by
evidence and not unconscionable or excessive. Thus, the appellate court correctly awarded McLoughlin Two
Thousand US Dollars (US$2,000.00) and Four Thousand Five Hundred Australian dollars (AUS$4,500.00) or their peso
equivalent at the time of payment,[47] being the amounts duly proven by evidence.[48] The alleged loss that took place
prior to 16 April 1988 was not considered since the amounts alleged to have been taken were not sufficiently
established by evidence. The appellate court also correctly awarded the sum of P308,880.80, representing the peso
value for the air fares from Sydney to Manila and back for a total of eleven (11) trips;[49] one-half of P336,207.05 or
P168,103.52 representing payment to Tropicana;[50] one-half of P152,683.57 or P76,341.785 representing payment
to Echelon Tower;[51] one-half of P179,863.20 or P89,931.60 for the taxi or transportation expenses from
McLoughlin’s residence to Sydney Airport and from MIA to the hotel here in Manila, for the eleven (11) trips;[52] one-
half of P7,801.94 or P3,900.97 representing Meralco power expenses;[53] one-half of P356,400.00 or P178,000.00
representing expenses for food and maintenance.[54]

The amount of P50,000.00 for moral damages is reasonable. Although trial courts are given discretion to determine
the amount of moral damages, the appellate court may modify or change the amount awarded when it is palpably
and scandalously excessive. Moral damages are not intended to enrich a complainant at the expense of a defendant.
They are awarded only to enable the injured party to obtain means, diversion or amusements that will serve to
alleviate the moral suffering he has undergone, by reason of defendants’ culpable action.[55]

The awards of P10,000.00 as exemplary damages and P200,000.00 representing attorney’s fees are likewise
sustained.

WHEREFORE, foregoing premises considered, the Decision of the Court of Appeals dated 19 October 1995 is hereby
AFFIRMED. Petitioners are directed, jointly and severally, to pay private respondent the following amounts:
(1) US$2,000.00 and AUS$4,500.00 or their peso equivalent at the time of payment;

(2) P308,880.80, representing the peso value for the air fares from Sydney to Manila and back for a total of eleven
(11) trips;

(3) One-half of P336,207.05 or P168,103.52 representing payment to Tropicana Copacabana Apartment Hotel;

(4) One-half of P152,683.57 or P76,341.785 representing payment to Echelon Tower;

(5) One-half of P179,863.20 or P89,931.60 for the taxi or transportation expense from McLoughlin’s residence to
Sydney Airport and from MIA to the hotel here in Manila, for the eleven (11) trips;

(6) One-half of P7,801.94 or P3,900.97 representing Meralco power expenses;

(7) One-half of P356,400.00 or P178,200.00 representing expenses for food and maintenance;

(8) P50,000.00 for moral damages;

(9) P10,000.00 as exemplary damages; and

(10) P200,000 representing attorney’s fees.

With costs.

SO ORDERED.