[G.R. NO.
160709 : February 23, 2005] On the claim of Joel Castillon, the evidence shows that he is not the real owner of the
NELEN LAMBERT, assisted by her husband, GLENROY ALOYSUIS
LAMBERT, Petitioners, v. HEIRS OF RAY CASTILLON, Represented by MARILOU
T. CASTILLON and SERGIO LABANG, Respondents.
DECISION
YNARES-SANTIAGO, J.:
This is a Petition for Review under Rule 45 of the Rules of Court seeking the reversal
of the decision1 of the Court of Appeals dated October 21, 2002 in CA-G.R. CV No.
43734, which affirmed the June 29, 1993 decision of the Regional Trial Court of Iligan
City, Branch 06, in Civil Case No. 06-2086.
In the evening of January 13, 1991, Ray Castillon visited the house of his brother Joel
Castillon at Tambo, Iligan City and borrowed his motorcycle. He then invited his
friend, Sergio Labang, to roam around Iligan City. Ray drove the motorcycle with
Sergio as the backrider.2
At around past 10:00 p.m., after eating supper at Hona's Restaurant and imbibing a
bottle of beer, they traversed the highway towards Tambo at a high speed. Upon
reaching Brgy. Sto. Rosario, they figured in an accident with a Tamaraw jeepney,
owned by petitioner Nelen Lambert and driven by Reynaldo Gamot, which was
traveling on the same direction but made a sudden left turn. The incident resulted in
the instantaneous death of Ray and injuries to Sergio.3
Respondents, the heirs of Ray Castillon, thus filed an action for damages with prayer
for preliminary attachment against the petitioner Nelen Lambert. The complaint was
docketed as Civil Case No. 06-2086 of the RTC of Iligan City, Branch 06.4 The
complaint was subsequently amended to include the claim by Joel Castillon for the
damages caused to the motorcycle.5 ςηαñrοblεš νιr†υαl lαω lιbrαrÿ
On June 29, 1993, after a full-blown trial, the court a quo rendered a decision in favor
of herein private respondents but reduced petitioner's liability by 20% in view of the
contributory negligence of Ray. The dispositive portion of the decision reads:
WHEREFORE, judgment is hereby rendered in favor of the plaintiffs and against the
defendants, directing the latter, jointly and severally, to pay the former the following:
1. The sum of SIX HUNDRED THIRTY-THREE THOUSAND AND NINETY-ONE
(P633,091) PESOS, representing loss of support, death indemnity, funeral and
related expenses, moral damages and attorney's fees and
2. Costs of the suit.
For lack of merit, defendants' counterclaim is dismissed.
motorcycle. He is not the real party in interest. Accordingly, his complaint is
dismissed.
On the third-party complaint, the third-party defendant Zenith Insurance Corporation
is ordered to pay the sum of P16,500.00 directly to the plaintiffs. This sum, if paid,
should be deducted from the amount adjudged in par. 1 above.
SO ORDERED.6
The Court of Appeals affirmed the decision of the trial court. 7 Hence the present
petition, based on the following arguments:
1. The Honorable Court of Appeals committed serious error of law and grave abuse of
discretion when it did not apply the ruling of this Honorable Court in the case of
Philippine Rabbit Bus Lines v. The Honorable Intermediate Appellate Court and
Casiano Pascua, Et. Al., [189 SCRA 168, August 30, 1990], as reiterated recently in
the case of Edna A. Raynera v. Freddie Hiceta and Jimmy Orpilla [306 SCRA 102,
April 21, 1999], in which this Honorable Court enunciated that drivers of vehicles "who
bump the rear of another vehicle" are presumed to be the cause of the accident.
2. The erroneous conclusion of the Honorable Trial Court as affirmed by the
Honorable Court of Appeals that the act of tailgating, at high speed, constitutes
contributory negligence only, is contrary to the rulings of this Honorable Court in the
case of Sanitary Steam Laundry, INC. v. The Honorable Court of Appeals [300 SCRA
20, December 10, 1998] and the case of Edna A. Raynera v. Freddie Hiceta and
Jimmy Orpilla [306 SCRA 102, April 21, 1999].
3. The Honorable Court of Appeals grossly erred in its conclusion that petitioner's
driver was negligent, without taking into consideration the presumptions enunciated
by this Honorable Court in the case of Philippine Rabbit Bus Lines v. The Honorable
Intermediate Appellate Court and Casiano Pascua, Et. Al., [189 SCRA 168, August
30, 1990], and the case of Edna A. Raynera v. Freddie Hiceta and Jimmy Orpilla [306
SCRA 102, April 21, 1999].
4. As an alternative relief, petitioner most respectfully assigns as error the Honorable
Trial Court's computation as to the loss of earning capacity of Ray Castillon. Such
computation is contrary to the formula enunciated by this Honorable Court in the case
of Villa Rey Transit, Inc. v. The Honorable Court of Appeals [31 SCRA 511 (1970)].
5. The Honorable Trial Court's award of moral damages is contrary to the
pronunciation of this Honorable Court in the case of Ace Haulers Corporation v. The
Honorable Court of Appeals and Abiva [338 SCRA 572, August 23, 2000], wherein
the award of moral damages was disallowed absent any evidence of bad faith or ill-
motive.8
Petitioner insists that the negligence of Ray Castillon was the proximate cause of his
unfortunate death and therefore she is not liable for damages.
In Petitions for Review on Certiorari under Rule 45 of the Rules of Court, only
questions of law may be put into issue. Questions of fact cannot be entertained. The
finding of negligence by the Court of Appeals is a question of fact which we cannot
pass upon as it would entail going into factual matters on which the finding of
negligence was based. As a rule, factual findings of the trial court, especially those
affirmed by the Court of Appeals, are conclusive on this Court when supported by the
evidence on record.9
Our examination of the records shows that both the trial court and the Court of
Appeals carefully considered the factual backdrop of the case. No cogent reason
exists for disturbing the following findings of the trial court, which the Court of Appeals
affirmed:
'To the mind of the court, this is exactly what happened. When Reynaldo Gamot was
approaching the side road, he slightly veered to the right for his allowance. Ray
Castillon, who was following closely behind, instinctively veered to the left but it was
also the moment when Reynaldo Gamot sharply turned to the left towards the side
road. At this juncture both were moving obliquely to the
left.ςηαñrοblεš νιr†υαl lαω lιbrαrÿ
Thus the motorcycle sliced into the side of the jeepney throwing the driver forward so
that his forehead hit the angle bar on the left front door of the jeepney even as the
motorcycle shot forward and the jeepney veered back to the right and sped away.
The testimonies of the witnesses Frias, Opada, Labang and Sumile show that he did
not stop even for a second, or less before making the left turn. On the contrary, he
slightly veered to the right immediately followed by the abrupt and sudden turn to the
left in order to enter the side road. It is apparent that Reynaldo Gamot did not keep a
lookout for vehicles or persons following him before proceeding to turn left. He failed
to take into account the possibility that others may be following him. He did not
employ the necessary precaution to see to it that the road was clear. 10
Clearly, the abrupt and sudden left turn by Reynaldo, without first establishing his
right of way, was the proximate cause of the mishap which claimed the life of Ray and
injured Sergio. Proximate cause is defined as that which, in the natural and
continuous sequence, unbroken by any efficient, intervening cause, produces the
injury, and without which the result would not have occurred.11 The cause of the
collision is traceable to the negligent act of Reynaldo for, as the trial court correctly
held, without that left turn executed with no precaution, the mishap in all probability
would not have happened.12
Petitioner misunderstood our ruling in Raynera v. Hiceta.13 That case also involved a
motorcycle crashing into the left rear portion of another vehicle, and we declared
therein that drivers of vehicles "who bump the rear of another vehicle" are presumed
to be "the cause of the accident, unless contradicted by other
evidence".14 In Raynera, the death of the victim was solely attributable to his own
negligence in bumping the rear of the trailer truck which was traveling ahead of him at
20 to 30 kilometers per hour. Raynera, being the driver of the rear vehicle, had full
control of the situation as he was in a position to observe the vehicle in front of him.
The trailer truck therein did not make a sudden left turn as in the case at bar. Thus,
the theory that drivers of vehicles "who bump the rear of another vehicle" are
presumed to be the cause of the accident is, as in this case, sufficiently contradicted
by evidence, which is the sudden left turn made by Reynaldo which proximately
caused the collision.
While we agree with the trial court that Ray was likewise guilty of contributory
negligence as defined under Article 2179 of the Civil Code, we find it equitable to
increase the ratio of apportionment of damages on account of the victim's negligence.
Article 2179 reads as follows:
When the plaintiff's negligence was the immediate and proximate cause of his injury,
he cannot recover damages. But if his negligence was only contributory, the
immediate and proximate cause of the injury being the defendant's lack of due care,
the plaintiff may recover damages, but the courts shall mitigate the damages to be
awarded.
The underlying precept on contributory negligence is that a plaintiff who is partly
responsible for his own injury should not be entitled to recover damages in full but
must bear the consequences of his own negligence. The defendant must thus be held
liable only for the damages actually caused by his negligence.15 The determination of
the mitigation of the defendant's liability varies depending on the circumstances of
each case. The Court had sustained a mitigation of 50% in Rakes v. AG &
P;16 20% in Phoenix Construction, Inc. v. Intermediate Appellate Court17 and LBC Air
Cargo, Inc. v. Court of Appeals;18 and 40% in Bank of the Philippine Islands v. Court
of Appeals19and Philippine Bank of Commerce v. Court of
Appeals.20 ςηαñrοblεš νιr†υαl lαω lιbrαrÿ
In the case at bar, it was established that Ray, at the time of the mishap: (1) was
driving the motorcycle at a high speed; (2) was tailgating the Tamaraw jeepney; (3)
has imbibed one or two bottles of beer; and (4) was not wearing a protective
helmet.21 These circumstances, although not constituting the proximate cause of his
demise and injury to Sergio, contributed to the same result. The contribution of these
circumstances are all considered and determined in terms of percentages of the total
cause. Hence, pursuant to Rakes v. AG & P, the heirs of Ray Castillon shall recover
damages only up to 50% of the award. In other words, 50% of the damage shall be
borne by the private respondents; the remaining 50% shall be paid by the petitioner.
Anent the award of loss of earning capacity, we agree with the petitioner that the trial
court erred in the computation of the net earnings.
In considering the earning capacity of the victim as an element of damages, the
following factors are considered in determining the compensable amount of lost
earnings: (1) the number of years for which the victim would otherwise have lived;
and (2) the rate of loss sustained by the heirs of the deceased. Jurisprudence
provides that the first factor, i.e., life expectancy, is computed by applying the formula
(2/3 x [80 - age at death]) adopted in the American Expectancy Table of Mortality or
the Actuarial Combined Experience Table of Mortality. As to the second factor, it is
computed by multiplying the life expectancy by the net earnings of the deceased, i.e.,
the total earnings less expenses necessary in the creation of such earnings or income
and less living and other incidental expenses. The net earning is ordinarily
computed at fifty percent (50%) of the gross earnings. Thus, the formula used by
this Court in computing loss of earning capacity is: Net Earning Capacity = [2/3 x (80
- age at time of death) x (gross annual income - reasonable and necessary
living expenses)].22
It was established that Ray was 35 at the time of his death and was earning a gross
annual income of P31,876.00 as a driver at the Mindanao State University. In arriving
at the net earnings, the trial court deducted from the gross annual income the annual
living expenses in the amount of P9,672.00, broken down as follows: P20.00 a day for
travel or P520.00 per month; P60.00 a month for cigarettes; P26.00 for drinks; and
other personal expenses like clothing, toiletries, etc. estimated at P200.00 per
month.23 The amount of P9,672.00, however, appears unrealistic, and constitutes
only 30.34% of the gross earnings. It even includes expenses for cigarettes which by
no means can be classified as a necessary expense. Using the cited formula with the
net earnings computed at 50% of the gross earnings, a detailed computation is as
follows:
ςηαñrοblεš νιr†υαl lαω lιbrαrÿ
permanent physical disability not caused by the defendant, had no earning capacity at
the time of his death;
(2) If the deceased was obliged to give support according to the provisions of article
291, the recipient who is not an heir called to the decedent's inheritance by the law of
testate or intestate succession, may demand support from the person causing the
death, for a period of not exceeding five years, the exact duration to be fixed by the
court;
(3) The spouse, legitimate and illegitimate descendants and ascendants of the
deceased may demand moral damages for mental anguish by reason of the death of
the deceased.
However, the amount has been gradually increased through the years. At present,
prevailing jurisprudence fixes the amount at P50,000.00.26
Paragraph 3 of the same provision also serves as the basis for the award of moral
damages in quasi-delict. The reason for the grant of moral damages has been
explained, thus:

= LIFE EXPECTANCY x GROSS - LIVING

NET EARNING 'the award of moral damages is aimed at a restoration, within the limits possible, of
[2/3 (80-age at the time ANNUAL EXPENSES
CAPACITY (X) the spiritual status quo ante; and therefore, it must be proportionate to the suffering
of death)] INCOME (GAI) (50% of GAI)
inflicted. The intensity of the pain experienced by the relatives of the victim is
-50% x proportionate to the intensity of affection for him and bears no relation whatsoever
X = [2/3 (80-35)] x [P31,876.00 with the wealth or means of the offender.27
P31,876.00]

X = [2/3 (45)]
X = 30
X = P478,140.00
x [P31,876.00 - P15,938.00] While it is true that there can be no exact or uniform rule for measuring the value of
human life and the measure of damages cannot be arrived at by a precise
x 15,938.00 mathematical calculation,28 we hold that the trial court's award of moral damages of
P50,000.00 for the death of Ray Castillon is in accord with the prevailing
jurisprudence.29

We sustain the awards of P33,215.00 as funeral and burial expenses being supported
with receipts;24 P50,000.00 as death indemnity; and P50,000.00 as moral damages.
However, the award of P20,000.00 as attorney's fees must be deleted for lack of
basis.
With respect to attorney's fees, it is well settled that the same should not be awarded
in the absence of stipulation except under the instances enumerated in Article 2208 of
the Civil Code. The trial court did not indicate the basis for its award. As we have held
in Rizal Surety and Insurance Company v. Court of Appeals:30

The indemnity for death caused by a quasi-delict used to be pegged at
P3,000.00,25 based on Article 2206 of the Civil Code, which reads:
ART. 2206. The amount of damages for death caused by a crime or quasi-delict shall
be at least three thousand pesos, even though there may have been mitigating
circumstances. In addition:
"Article 2208 of the Civil Code allows attorney's fess to be awarded by a court when
its claimant is compelled to litigate with third persons or to incur expenses to protect
his interest by reason of an unjustified act or omission of the party from whom it is
sought.ςηαñrοblεš νιr†υαl lαω lιbrαrÿ
While judicial discretion is here extant, an award thereof demands, nevertheless, a
factual, legal or equitable justification.ςηαñrοblεš νιr†υαl lαω lιbrαrÿ

(1) The defendant shall be liable for the loss of the earning capacity of the deceased,
and the indemnity shall be paid to the heirs of the latter; such indemnity shall in every
case be assessed and awarded by the court, unless the deceased on account of
The matter cannot and should not be left to speculation and conjecture (Mirasol v. De
la Cruz, 84 SCRA 337; Stronghold Insurance Company, Inc. v. Court of Appeals, 173
SCRA 619).
In the case at bench, the records do not show enough basis for sustaining the award
for attorney's fees and to adjudge its payment by petitioner' "

Likewise, this Court held in Stronghold Insurance Company, Inc. v. Court of

Appeals that:

"In Abrogar v. Intermediate Appellate Court [G.R. NO. 67970, January 15, 1988, 157
SCRA 57] the Court had occasion to state that '[t]he reason for the award of
attorney's fees must be stated in the text of the court's decision, otherwise, if it is
stated only in the dispositive portion of the decision, the same must be disallowed on
appeal. ''ςηαñrοblεš νιr†υαl lαω lιbrαrÿ

WHEREFORE, in view of the foregoing, the petition is DENIED. The assailed

decision of the Court of Appeals is AFFIRMED with the MODIFICATION that the net
earnings is computed at 50% of the gross annual income to conform with the
prevailing jurisprudence, and the FURTHER MODIFICATION that petitioner NELEN
LAMBERT is ordered to pay the heirs of Ray Castillon only 50% of the damages
herein awarded, except attorney's fees which is DELETED for lack of basis.

SO ORDERED.
 [G.R. No. 112160. February 28, 2000.]
OSMUNDO S. CANLAS and ANGELINA CANLAS, Petitioner, v. COURT OF
APPEALS, ASIAN SAVINGS BANK, MAXIMO C. CONTRERAS and VICENTE
MAÑOSCA, Respondents.
DECISION
PURISIMA, J.:
At bar is a Petition for Review on Certiorari under Rule 45 of the Rules of Court,
seeking to review and set aside the Decision 1 of the Court of Appeals in CA-G.R. CV
No. 25242, which reversed the Decision 2 of Branch 59 of the Regional Trial Court of
Makati City in Civil Case No. M-028; the dispositive portion of which
reads:jgc:chanrobles.com.ph
"WHEREFORE, the decision appealed from is hereby REVERSED and SET ASIDE
and a new one is hereby entered DISMISSING the complaint of the spouses
Osmundo and Angelina Canlas. On the counterclaim of defendant Asian Savings
Bank, the plaintiffs Canlas spouses are hereby ordered to pay the defendant Asian
Savings Bank the amount of P50,000.00 as moral and exemplary damages plus
P15,000.00 as and for attorney’s fees.chanrobles virtuallawlibrary:red
With costs against appellees.
SO ORDERED." 3
The facts that matter:chanrob1es virtual 1aw library
Sometime in August, 1982, the petitioner, Osmundo S. Canlas, and private
respondent, Vicente Mañosca, decided to venture in business and to raise the capital
needed therefor. The former then executed a Special Power of Attorney authorizing
the latter to mortgage two parcels of land situated in San Dionisio, (BF Homes)
Parañaque, Metro Manila, each lot with semi-concrete residential house existing
thereon, and respectively covered by Transfer Certificate of Title No. 54366 in his
(Osmundo’s) name and Transfer Certificate of Title No. S-78498 in the name of his
wife Angelina Canlas.chanrobles virtual lawlibrary
Subsequently, Osmundo Canlas agreed to sell the said parcels of land to Vicente
Mañosca, for and in consideration of P850,000.00, P500,000.00 of which payable
within one week, and the balance of P350,000.00 to serve as his (Osmundo’s)
investment in the business. Thus, Osmundo Canlas delivered to Vicente Mañosca the
transfer certificates of title of the parcels of land involved. Vicente Mañosca, as his
part of the transaction, issued two postdated checks in favor of Osmundo Canlas in
the amounts of P40,000.00 and P460,000.00, respectively, but it turned out that the
check covering the bigger amount was not sufficiently funded. 4
On September 3, 1982, Vicente Mañosca was able to mortgage the same parcels of
land for P100,000.00 to a certain Attorney Manuel Magno, with the help of impostors
who misrepresented themselves as the spouses, Osmundo Canlas and Angelina
Canlas. 5
On September 29, 1982, private respondent Vicente Mañosca was granted a loan by
the respondent Asian Savings Bank (ASB) in the amount of P500,000.00, with the
use of subject parcels of land as security, and with the involvement of the same
impostors who again introduced themselves as the Canlas spouses. 6 When the loan
it extended was not paid, respondent bank extrajudicially foreclosed the
mortgage.chanrobles.com : chanrobles.com.ph
On January 15, 1983, Osmundo Canlas wrote a letter informing the respondent bank
that the execution of subject mortgage over the two parcels of land in question was
without their (Canlas spouses) authority, and request that steps be taken to annul
and/or revoke the questioned mortgage. On January 18, 1983, petitioner Osmundo
Canlas also wrote the office of Sheriff Maximo C. Contreras, asking that the auction
sale scheduled on February 3, 1983 be canceled or held in abeyance. But
respondents Maximo C. Contreras and Asian Savings Bank refused to heed petitioner
Canlas’ stance and proceeded with the scheduled auction sale. 7
Consequently, on February 3, 1983 the herein petitioners instituted the present case
for annulment of deed of real estate mortgage with prayer for the issuance of a writ of
preliminary injunction; and on May 23, 1983, the trial court issued an Order
restraining the respondent sheriff from issuing the corresponding Certificate of
Sheriff’s Sale. 8
For failure to file his answer, despite several motions for extension of time for the
filing thereof, Vicente Mañosca was declared in default. 9
On June 1, 1989, the lower court a quo came out with a decision annulling subject
deed of mortgage and disposing, thus:jgc:chanrobles.com.ph
"Premises considered, judgment is hereby rendered as follows:chanrob1es virtual
1aw library
1. Declaring the deed of real estate mortgage (Exhibit ‘L’) involving the properties of
the plaintiffs as null and void;
2. Declaring the public auction sale conducted by the defendant Sheriff, involving the
same properties as illegal and without binding effect;
3. Ordering the defendants, jointly and severally, to pay the plaintiff’s the sum of
P20,000.00 representing attorney’s fees;
4. On defendant ASB’s crossclaim: ordering the cross-defendant Vicente Mañosca to
pay the defendant ASB the sum of P350,000 00, representing the amount which he
received as proceeds of the loan secured by the void mortgage, plus interest at the
legal rate, starting February 3, 1983, the date when the original complaint was filed,
until the amount is fully paid;chanroblesvirtuallawlibrary
5. With costs against the defendants.
SO ORDERED." 10
From such Decision below, Asian Savings Bank appealed to the Court of Appeals,
which handed down the assailed judgment of reversal, dated September 30, 1983, in
CA-G.R. CV No. 25242. Dissatisfied therewith, the petitioners found their way to this
Court via the present Petition; theorizing that:chanrobles.com : chanrobles.com.ph
"I
RESPONDENT COURT OF APPEALS ERRED IN HOLDING THAT THE
MORTGAGE OF THE PROPERTIES SUBJECT OF THIS CASE WAS VALID.
II
RESPONDENT COURT OF APPEALS ERRED IN HOLDING THAT PETITIONERS
ARE NOT ENTITLED TO RELIEF BECAUSE THEY WERE NEGLIGENT AND
THEREFORE MUST BEAR THE LOSS.
III
RESPONDENT COURT OF APPEALS ERRED IN HOLDING THAT RESPONDENT
ASB EXERCISED DUE DILIGENCE IN GRANTING THE LOAN APPLICATION OF
RESPONDENT.
IV
RESPONDENT COURT OF APPEALS ERRED IN HOLDING THAT RESPONDENT
ASB DID NOT ACT WITH BAD FAITH IN PROCEEDING WITH THE
FORECLOSURE SALE OF THE PROPERTIES.chanrobles.com : chanrobles.com.ph
V
RESPONDENT COURT OF APPEALS ERRED IN AWARDING RESPONDENT ASB
MORAL DAMAGES." 11
The Petition is impressed with merit.
Article 1173 of the Civil Code provides:jgc:chanrobles.com.ph
"ARTICLE 1173. The fault or negligence of the obligor consist in the omission of that
diligence which is required by the nature of the obligation and corresponds with the
circumstances of the persons, of the time and of the place. When negligence shows
bad faith, the provisions of articles 1171 and 2201, paragraph 2, shall
apply.chanroblesvirtuallawlibrary
If the law or contract does not state the diligence which is to be observed in the
performance, that which is expected of a good father of a family shall be
required.(1104)"
The degree of diligence required of banks is more than that of a good father of a
family; 12 in keeping with their responsibility to exercise the necessary care and
prudence in dealing even on a registered or titled property. The business of a bank is
affected with public interest, holding in trust the money of the depositors, which bank
deposits the bank should guard against loss due to negligence or bad faith, by reason
of which the bank would be denied the protective mantle of the land registration law,
accorded only to purchasers or mortgagees for value and in good faith. 13
In the case under consideration, from the evidence on hand it can be gleaned
unerringly that respondent bank did not observe the requisite diligence in ascertaining
or verifying the real identity of the couple who introduced themselves as the spouses
Osmundo Canlas and Angelina Canlas. It is worthy to note that not even a single
identification card was exhibited by the said impostors to show their true identity; and
yet, the bank acted on their representations simply on the basis of the residence
certificates bearing signatures which tended to match the signatures affixed on a
previous deed of mortgage to a certain Atty. Magno, covering the same parcels of
land in question. Felizado Mangubat, Assistant Vice President of Asian Savings Bank,
thus testified inter alia:chanrobles.com : virtual law library
x x x
Q: According to you, the basis for your having recommended for the approval of
MANASCO’s (sic) loan particularly that one involving the property of plaintiff in this
case, the spouses OSMUNDO CANLAS and ANGELINA CANLAS, the basis for such
approval was that according to you all the signatures and other things taken into
account matches with that of the document previously executed by the spouses
CANLAS?
A: That is the only basis for accepting the signature on the mortgage, the basis for the
recommendation of the approval of the loan are the financial statement of
MAÑOSCA?
A: Yes, among others the signature and TAX Account Number, Residence Certificate
appearing on the previous loan executed by the spouses CANLAS, I am referring to
EXHIBIT 5, mortgage to ATTY MAGNO, those were made the basis.
A: That is just the basis of accepting the signature, because at that time the loan have
been approved already on the basis of the financial statement of the client the Bank
Statement. When (sic) it was approved we have to base it on the Financial statement
of the client, the signatures were accepted only for the purpose of signing the
mortgage not for the approval, we don’t (sic) approve loans on the
signaturechanrobles virtual lawlibrary
ATTY. CLAROS:chanrob1es virtual 1aw library
Would you agree that as part of ascertaining the identity of the parties particularly the
mortgage, you don’t consider also the signature, the Residence Certificate, the
particular address of the parties involvedchanrobles virtual lawlibrary
A: I think the question defers (sic) from what you asked a while ago.

Q: Among others?
A: We have to accept the signature on the basis of the other signatures given to us it
being a public instrument.
ATTY CARLOS:chanrob1es virtual 1aw library
You mean to say the criteria of ascertaining the identity of the mortgagor does not
depend so much on the signature on the residence certificate they have
presentedchanrobles virtual lawlibrary
A: We have to accept that.
x x x In ruling for respondent bank, the Court of Appeals concluded that the petitioner
A: We accepted the signature on the basis of the mortgage in favor of ATTY. MAGNO
duly notarized which I have been reiterating (sic) entitled to full faith considering that it
is a public instrument.
ATTY CARLOS:chanrob1es virtual 1aw library
What other requirement did you take into account in ascertaining the identification of
the parties particularly the mortgage in this case?
A: Residence Certificate.
Q: Is that all, is that the only requirement?
A: We requested for others but they could not produce, and because they presented
to us the Residence Certificate which matches on the signature on the Residence
Certificate in favor of Atty. Magno." 14
Evidently, the efforts exerted by the bank to verify the identity of the couple posing as
Osmundo Canlas and Angelina Canlas fell short of the responsibility of the bank to
observe more than the diligence of a good father of a family. The negligence of
respondent bank was magnified by the fact that the previous deed of mortgage (which
was used as the basis for checking the genuineness of the signatures of the
supposed Canlas spouses) did not bear the tax account number of the spouses, 15
as well as the Community Tax Certificate of Angelina Canlas 16 But such fact
notwithstanding, the bank did not require the impostors to submit additional proof of
their true identity.chanrobles virtuallawlibrary
Under the doctrine of last clear chance, which is applicable here, the respondent bank
must suffer the resulting loss. In essence, the doctrine of last clear chance is to the
effect that where both parties are negligent but the negligent act of one is appreciably
later in point of time than that of the other, or where it is impossible to determine
whose fault or negligence brought about the occurrence of the incident, the one who
had the last clear opportunity to avoid the impending harm but failed to do so, is
chargeable with the consequences arising therefrom. Stated differently, the rule is
that the antecedent negligence of a person does not preclude recovery of damages
caused by the supervening negligence of the latter, who had the last fair chance to
prevent the impending harm by the exercise of due diligence. 17
Assuming that Osmundo Canlas was negligent in giving Vicente Mañosca the
opportunity to perpetrate the fraud, by entrusting to latter the owner’s copy of the
transfer certificates of title of subject parcels of land, it cannot be denied that the bank
had the last clear chance to prevent the fraud, by the simple expedient of faithfully
complying with the requirements for banks to ascertain the identity of the persons
transacting with them.chanrobles.com : red
For not observing the degree of diligence required of banking institutions, whose
business is impressed with public interest, respondent Asian Savings Bank has to
bear the loss sued upon.
Osmundo Canlas was a party to the fraudulent scheme of Mañosca and therefore,
estopped from impugning the validity of subject deed of mortgage; ratiocinating
thus:jgc:chanrobles.com.ph
"x x x
Thus, armed with the titles and the special power of attorney, Mañosca went to the
defendant bank and applied for a loan. And when Mañosca came over to the bank to
submit additional documents pertinent to his loan application, Osmundo Canlas was
with him, together with a certain Rogelio Viray. At that time, Osmundo Canlas was
introduced to the bank personnel as ‘Leonardo Rey ‘chanrobles.com : virtual law
library
When he was introduced as ‘Leonardo Rey’ for the first time Osmundo should have
corrected Mañosca right away. But he did not. Instead, he even allowed Mañosca to
avail of his (Osmundo’s) membership privileges at the Metropolitan Club when
Mañosca invited two officers of the defendant bank to a luncheon meeting which
Osmundo also attended. And during that meeting, Osmundo did not say who he really
is, but even let Mañosca introduced him again as ‘Leonardo Rey’, which all the more
indicates that he connived with Mañosca in deceiving the defendant bank.
Finally, after the loan was finally approved, Osmundo accompanied Mañosca to the
bank when the loan was released. At that time, a manager’s check for P200,000.00
was issued in the name of Oscar Motorworks, which Osmundo admits he owns and
operates.chanroblesvirtuallawlibrary
Collectively, the foregoing circumstances cannot but conjure to a single conclusion
that Osmundo actively participated in the loan application of defendant Asian Savings
Bank, which culminated in his receiving a portion of the process thereof." 18
A meticulous and painstaking scrutiny of the Records on hand, reveals, however, that
the findings arrived at by the Court of Appeals are barren of any sustainable basis.
For instance, the execution of the deeds of mortgages constituted by Mañosca on
subject pieces of property of petitioners were made possible not by the Special Power
of Attorney executed by Osmundo Canlas in favor of Mañosca but through the use of
impostors who misrepresented themselves as the spouses Angelina Canlas and
Osmundo Canlas. It cannot be said therefore, that the petitioners authorized Vicente
Mañosca to constitute the mortgage on their parcels of land.chanrobles.com :
chanrobles.com.ph
What is more, Osmundo Canlas was introduced as "Leonardo Rey" by Vicente
Mañosca, only on the occasion of the luncheon meeting at the Metropolitan Club. 19
Thereat, the failure of Osmundo Canlas to rectify Mañosca’s misrepresentations
could not be taken as a fraudulent act. As well explained by the former, he just did not
want to embarrass Mañosca, so that he waited for the end of the meeting to correct
Mañosca. 20
Then, too, Osmundo Canlas recounted that during the said luncheon meeting, they
did not talk about the security or collateral for the loan of Mañosca with ASB. 21 So
also, Mrs. Josefina Rojo, who was the Account Officer of Asian Savings Bank when
Mañosca applied for subject loan, corroborated the testimony of Osmundo Canlas,
she testified:chanroblesvirtual|awlibrary
"x x x
happened to be with Mañosca at the time because he wanted to make sure that
Mañosca would make good his promise to pay the balance of the purchase price of
the said lots out of the proceeds of the loan. 23
The receipt by Osmundo Canlas of the P200,000.00 check from ASB could not stop
him from assailing the validity of the mortgage because the said amount was in
payment of the parcels of land he sold to Mañosca. 24
What is decisively clear on record is that Mañosca managed to keep Osmundo
Canlas uninformed of his (Mañosca’s) intention to use the parcels of land of the
Canlas spouses as security for the loan obtained from Asian Savings Bank. Since
Vicente Mañosca showed Osmundo Canlas several certificates of title of lots which,
according to Mañosca were the collaterals, Osmundo Canlas was confident that their
(Canlases’) parcels of land were not involved in the loan transactions with the Asian
Savings Bank. 25 Under the attendant facts and circumstances, Osmundo Canlas
was undoubtedly negligent, which negligence made them (petitioners) undeserving of
an award of attorney’s fees.chanrobles.com : chanrobles.com.ph

Q: Now could you please describe out the lunch conference at the Metro Club in Settled is the rule that a contract of mortgage must be constituted only by the
Makati? absolute owner on the property mortgaged; 26 a mortgage, constituted by an
impostor is void. 27 Considering that it was established indubitably that the contract of
A: Mr Mangubat, Mr Mañosca and I did not discuss with respect to the loan mortgage sued upon was entered into and signed by impostors who misrepresented
application and discuss primarily his business. themselves as the spouses Osmundo Canlas and Angelina Canlas, the Court is of
the ineluctible conclusion and finding that subject contract of mortgage is a complete
x x x nullity.

Q: So, what is the main topic of your discussion during the meeting?
A: The main topic was then, about his business although, Mr. Leonardo Rey, who
actually turned out as Mr. Canlas, supplier of Mr. Mañosca.
Q: I see. . . other than the business of Mr. Mañosca, were there any other topic
discussed?
WHEREFORE, the Petition is GRANTED and the Decision of the Court of Appeals,
dated September 30, 1993, in CA-G.R. CV No. 25242 SET ASIDE. The Decision of
Branch 59 of the Regional Trial Court of Makati City in Civil Case No. M-028 is hereby
REINSTATED. No pronouncement as to costs.chanrobles.com : chanrobles.com.ph
SO ORDERED.

A: YES

Q: And what was the topic?

A: General Economy then.

x x x" 22

Verily, Osmundo Canlas was left unaware of the illicit plan of Mañosca, explaining
thus why he (Osmundo) did not bother to correct what Mañosca misrepresented and
to assert ownership over the two parcels of land in question.chanrobles virtual
lawlibrary

Not only that, while it is true that Osmundo Canlas was with Vicente Mañosca when
the latter submitted the documents needed for his loan application, and when the
check of P200,000.00 was released, the former did not know that the collateral used
by Mañosca for the said loan were their (Canlas spouses’) properties. Osmundo
 G.R. No. 175540, April 14, 2014
DR. FILOTEO A. ALANO, Petitioner, v. ZENAIDA MAGUD–LOGMAO, Respondent.
DECISION
PERALTA, J.:
This deals with the Petition for Review on Certiorari under Rule 45 of the Rules of
Court praying that the Decision1 of the Court of Appeals (CA), dated March 31, 2006,
adjudging petitioner liable for damages, and the Resolution 2 dated November 22,
2006, denying petitioner’s motion for reconsideration thereof, be reversed and set
aside.
The CA’s narration of facts is accurate, to wit:
Plaintiff–appellee Zenaida Magud–Logmao is the mother of deceased Arnelito
Logmao. Defendant–appellant Dr. Filoteo Alano is the Executive Director of the
National Kidney Institute (NKI).
At around 9:50 in the evening of March 1, 1988, Arnelito Logmao, then eighteen (18)
years old, was brought to the East Avenue Medical Center (EAMC) in Quezon City by
two sidewalk vendors, who allegedly saw the former fall from the overpass near the
Farmers’ Market in Cubao, Quezon City. The patient’s data sheet identified the
patient as Angelito Lugmoso of Boni Avenue, Mandaluyong. However, the clinical
abstract prepared by Dr. Paterno F. Cabrera, the surgical resident on–duty at the
Emergency Room of EAMC, stated that the patient is Angelito [Logmao]. Dr. Cabrera
reported that [Logmao] was drowsy with alcoholic breath, was conscious and
coherent; that the skull x–ray showed no fracture; that at around 4:00 o’clock in the
morning of March 2, 1988, [Logmao] developed generalized seizures and was
managed by the neuro–surgery resident on–duty; that the condition of [Logmao]
progressively deteriorated and he was intubated and ambu–bagging support was
provided; that admission to the Intensive Care Unit (ICU) and mechanical ventilator
support became necessary, but there was no vacancy at the ICU and all the ventilator
units were being used by other patients; that a resident physician of NKI, who was
rotating at EAMC, suggested that [Logmao] be transferred to NKI; and that after
arrangements were made, [Logmao] was transferred to NKI at 10:10 in the morning.
At the NKI, the name Angelito [Logmao] was recorded as Angelito
Lugmoso. Lugmoso was immediately attended to and given the necessary medical
treatment. As Lugmoso had no relatives around, Jennifer B. Misa, Transplant
Coordinator, was asked to locate his family by enlisting police and media
assistance. Dr. Enrique T. Ona, Chairman of the Department of Surgery, observed
that the severity of the brain injury of Lugmoso manifested symptoms of brain
death. He requested the Laboratory Section to conduct a tissue typing and tissue
cross–matching examination, so that should Lugmoso expire despite the necessary
medical care and management and he would be found to be a suitable organ donor
and his family would consent to organ donation, the organs thus donated could be
detached and transplanted promptly to any compatible beneficiary.
Jennifer Misa verified on the same day, March 2, 1988, from EAMC the identity of
Lugmoso and, upon her request, she was furnished by EAMC a copy of the patient’s
date sheet which bears the name Angelito Lugmoso, with address at Boni Avenue,
Mandaluyong. She then contacted several radio and television stations to request for
air time for the purpose of locating the family of Angelito Lugmoso of Boni Avenue,
Mandaluyong, who was confined at NKI for severe head injury after allegedly falling
from the Cubao overpass, as well as Police Station No. 5, Eastern Police District,
whose area of jurisdiction includes Boni Avenue, Mandaluyong, for assistance in
locating the relatives of Angelito Lugmoso. Certifications were issued by Channel 4,
ABS–CBN and GMA attesting that the request made by the NKI on March 2, 1988 to
air its appeal to locate the family and relatives of Angelito Lugmoso of Boni Avenue,
Mandaluyong was accommodated. A Certification was likewise issued by Police
Station No. 5, Eastern Police District, Mandaluyong attesting to the fact that on March
2, 1988, at about 6:00 p.m., Jennifer Misa requested for assistance to immediately
locate the family and relatives of Angelito Lugmoso and that she followed up her
request until March 9, 1988.
On March 3, 1988, at about 7:00 o’clock in the morning, Dr. Ona was informed that
Lugmoso had been pronounced brain dead by Dr. Abdias V. Aquino, a neurologist,
and by Dr. Antonio Rafael, a neurosurgeon and attending physician of Lugmoso, and
that a repeat electroencephalogram (EEG) was in progress to confirm the diagnosis
of brain death. Two hours later, Dr. Ona was informed that the EEG recording
exhibited a flat tracing, thereby confirming that Lugmoso was brain dead. Upon
learning that Lugmoso was a suitable organ donor and that some NKI patients
awaiting organ donation had blood and tissue types compatible with Lugmoso, Dr.
Ona inquired from Jennifer Misa whether the relatives of Lugmoso had been located
so that the necessary consent for organ donation could be obtained. As the
extensive search for the relatives of Lugmoso yielded no positive result and time
being of the essence in the success of organ transplantation, Dr. Ona requested Dr.
Filoteo A. Alano, Executive Director of NKI, to authorize the removal of specific
organs from the body of Lugmoso for transplantation purposes. Dr. Ona likewise
instructed Dr. Rose Marie Rosete–Liquete to secure permission for the planned organ
retrieval and transplantation from the Medico–Legal Office of the National Bureau of
Investigation (NBI), on the assumption that the incident which lead to the brain injury
and death of Lugmoso was a medico legal case.
On March 3, 1988, Dr. Alano issued to Dr. Ona a Memorandum, which reads as
follows:
This is in connection with the use of the human organs or any portion or portions of
the human body of the deceased patient, identified as a certain Mr. Angelito Lugmoso
who was brought to the National Kidney Institute on March 2, 1988 from the East
Avenue Medical Center.
As shown by the medical records, the said patient died on March 3, 1988 at 9:10 in
the morning due to craniocerebral injury. Please make certain that your Department
has exerted all reasonable efforts to locate the relatives or next of kin of the said
deceased patient such as appeal through the radios and television as well as through
police and other government agencies and that the NBI [Medico–Legal] Section has
been notified and is aware of the case.
If all the above has been complied with, in accordance with the provisions of Republic
Act No. 349 as amended and P.D. 856, permission and/or authority is hereby given to
the Department of Surgery to retrieve and remove the kidneys, pancreas, liver and
heart of the said deceased patient and to transplant the said organs to any
compatible patient who maybe in need of said organs to live and survive.
A Certification dated March 10, 1988 was issued by Dr. Maximo Reyes, Medico–
Legal Officer of the NBI, stating that he received a telephone call from Dr. Liquete on
March 3, 1988 at 9:15 a.m. regarding the case of Lugmoso, who was declared brain
dead; that despite efforts to locate the latter’s relatives, no one responded; that Dr.
Liquete sought from him a second opinion for organ retrieval for donation purposes
even in the absence of consent from the family of the deceased; and that he verbally
agreed to organ retrieval.
At 3:45 in the afternoon of March 3, 1988, a medical team, composed of Dr. Enrique
Ona, as principal surgeon, Drs. Manuel Chua–Chiaco, Jr., Rose Marie Rosete–
Liquete, Aurea Ambrosio, Ludivino de Guzman, Mary Litonjua, Jaime Velasquez,
Ricardo Fernando, and Myrna Mendoza, removed the heart, kidneys, pancreas, liver
and spleen of Lugmoso. The medical team then transplanted a kidney and the
pancreas of Lugmoso to Lee Tan Hoc and the other kidney of Lugmoso to Alexis
Ambustan. The transplant operation was completed at around 11:00 o’clock in the
evening of March 3, 1988.
On March 4, 1988, Dr. Antonio R. Paraiso, Head of the Cadaver Organ Retrieval
Effort (CORE) program of NKI, made arrangements with La Funeraria Oro for the
embalmment of the cadaver of Lugmoso good for a period of fifteen (15) days to
afford NKI more time to continue searching for the relatives of the latter. On the same
day, Roberto Ortega, Funeral Consultant of La Funeraria Oro, sent a request for
autopsy to the NBI. The Autopsy Report and Certification of Post–Mortem
Examination issued by the NBI stated that the cause of death of Lugmoso was
intracranial hemorrhage secondary to skull fracture.
On March 11, 1988, the NKI issued a press release announcing its successful double
organ transplantation. Aida Doromal, a cousin of plaintiff, heard the news aired on
television that the donor was an eighteen (18) year old boy whose remains were at La
Funeraria Oro in Quezon City. As the name of the donor sounded like Arnelito
Logmao, Aida informed plaintiff of the news report.
It appears that on March 3, 1988, Arlen Logmao, a brother of Arnelito, who was then
a resident of 17–C San Pedro Street, Mandaluyong, reported to Police Station No. 5,
Eastern Police District, Mandaluyong that the latter did not return home after seeing a
movie in Cubao, Quezon City, as evidenced by a Certification issued by said Station;
and that the relatives of Arnelito were likewise informed that the latter was
missing. Upon receiving the news from Aida, plaintiff and her other children went to
La Funeraria Oro, where they saw Arnelito inside a cheap casket.
On April 29, 1988, plaintiff filed with the court a quo a complaint for damages against
Dr. Emmanuel Lenon, Taurean Protectors Agency, represented by its Proprietor,
Celso Santiago, National Kidney Institute, represented by its Director, Dr. Filoteo A.
Alano, Jennifer Misa, Dr. Maximo Reyes, Dr. Enrique T. Ona, Dr. Manuel Chua–
Chiaco, Jr., Dr. Rose Marie O. Rosete–Liquete, Dr. Aurea Z. Ambrosio, Dr. Ludivino
de Guzman, Dr. Mary Litonjua, Dr. Jaime Velasquez, Dr. Ricardo Fernando, Dr.
Myrna Mendoza, Lee Tan Koc, Alexis Ambustan, Dr. Antonio R. Paraiso, La
Funeraria Oro, Inc., represented by its President, German E. Ortega, Roberto Ortega
alias Bobby Ortega, Dr. Mariano B. Cueva, Jr., John Doe, Peter Doe, and Alex Doe in
connection with the death of her son
Arnelito. Plaintiff alleged that defendants conspired to remove the
organs of Arnelito while the latter was still alive and that they concealed his true
identity.
On January 17, 2000, the court a quo rendered judgment finding only Dr. Filoteo
Alano liable for damages to plaintiff and dismissing the complaint against the other
defendants for lack of legal basis.3
After finding petitioner liable for a quasi–delict, the Regional Trial Court of Quezon
City (RTC) ordered petitioner to pay respondent P188,740.90 as actual damages;
P500,000.00 as moral damages; P500,000.00 as exemplary damages; P300,000.00
as attorney’s fees; and costs of suit. Petitioner appealed to the CA.
On March 31, 2006, the CA issued its Decision, the dispositive portion of which reads
as follows:chanRoblesvirtualLawlibrary
WHEREFORE, the Decision appealed from is AFFIRMED,
with MODIFICATION by DELETING the award of P188,740.90 as actual damages
and REDUCING the award of moral damages to P250,000.00, the award of
exemplary damages to P200,000.00 and the award of attorney’s fees to P100,000.00.
SO ORDERED.4
Petitioner then elevated the matter to this Court via a petition for review on certiorari,
where the following issues are presented for resolution:chanRoblesvirtualLawlibrary
A. WHETHER THE COURT OF APPEALS DISREGARDED EXISTING
JURISPRUDENCE PRONOUNCED BY THIS HONORABLE SUPREME COURT IN
HOLDING PETITIONER DR. FILOTEO ALANO LIABLE FOR MORAL AND
EXEMPLARY DAMAGES AND ATTORNEY'S FEES DESPITE THE FACT THAT
THE ACT OF THE PETITIONER IS NOT THE PROXIMATE CAUSE NOR IS THERE
ANY FINDING THAT THE ACT OF THE PETITIONER WAS THE PROXIMATE
CAUSE OF THE INJURY OR DAMAGE ALLEGEDLY SUSTAINED BY
RESPONDENT ZENAIDA MAGUD–LOGMAO.
B. WHETHER THE COURT OF APPEALS GRAVELY ERRED IN REFUSING
AND/OR FAILING TO DECLARE THAT PETITIONER DR. ALANO ACTED IN GOOD
FAITH AND PURSUANT TO LAW WHEN HE ISSUED THE AUTHORIZATION TO
REMOVE AND RETRIEVE THE ORGANS OF ANGELITO LUGMOSO (LATER
IDENTIFIED TO BE IN FACT ARNELITO LOGMAO) CONSIDERING THAT NO
NEGLIGENCE CAN BE ATTRIBUTED OR IMPUTED ON HIM IN HIS
PERFORMANCE OF AN ACT MANDATED BY LAW.
C. WHETHER THE COURT OF APPEALS GRAVELY ERRED IN AWARDING
RESPONDENT ZENAIDA MAGUD–LOGMAO MORAL AND EXEMPLARY
DAMAGES AND ATTORNEY'S FEES THAT ARE NOT IN ACCORDANCE WITH
AND ARE CONTRARY TO ESTABLISHED JURISPRUDENCE.5
The first two issues boil down to the question of whether respondent’s sufferings were
brought about by petitioner’s alleged negligence in granting authorization for the
removal or retrieval of the internal organs of respondent’s son who had been declared
brain dead.
Petitioner maintains that when he gave authorization for the removal of some of the
internal organs to be transplanted to other patients, he did so in accordance with the
letter of the law, Republic Act (R.A.) No. 349, as amended by Presidential Decree
(P.D.) 856, i.e., giving his subordinates instructions to exert all reasonable efforts to
locate the relatives or next of kin of respondent’s son. In fact, announcements were
made through radio and television, the assistance of police authorities was sought,
and the NBI Medico–Legal Section was notified. Thus, petitioner insists that he
should not be held responsible for any damage allegedly suffered by respondent due
to the death of her son and the removal of her son’s internal organs for transplant
purposes.
The appellate court affirmed the trial court’s finding that there was negligence on
petitioner’s part when he failed to ensure that reasonable time had elapsed to locate
the relatives of the deceased before giving the authorization to remove said
deceased’s internal organs for transplant purposes. However, a close examination of
the records of this case would reveal that this case falls under one of the exceptions
to the general rule that factual findings of the trial court, when affirmed by the
appellate court, are binding on this Court. There are some important circumstances
that the lower courts failed to consider in ascertaining whether it was the actions of
petitioner that brought about the sufferings of respondent.6
The Memorandum dated March 3, 1988 issued by petitioner, stated
thus:chanRoblesvirtualLawlibrary
As shown by the medical records, the said patient died on March 3, 1988 at 9:10 in
the morning due to craniocerebral injury. Please make certain that your
Department has exerted all reasonable efforts to locate the relatives or next–of–
kin of the said deceased patient, such as appeal through the radios and television,
as well as through police and other government agencies and that the NBI [Medico–
Legal] Section has been notified and is aware of the case.
If all the above has been complied with, in accordance with the provisions of
Republic Act No. 349 as amended and P.D. 856, permission and/or authority is
hereby given to the Department of Surgery to retrieve and remove the kidneys,
pancreas, liver and heart of the said deceased patient and to transplant the said
organs to any compatible patient who maybe in need of said organs to live and
survive.7
A careful reading of the above shows that petitioner instructed his subordinates to
“make certain” that “all reasonable efforts” are exerted to locate the patient’s next of
kin, even enumerating ways in which to ensure that notices of the death of the patient
would reach said relatives. It also clearly stated that permission or authorization to
retrieve and remove the internal organs of the deceased was being given ONLY IF
the provisions of the applicable law had been complied with. Such instructions reveal
that petitioner acted prudently by directing his subordinates to exhaust all reasonable
means of locating the relatives of the deceased. He could not have made his
directives any clearer. He even specifically mentioned that permission is only
being granted IF the Department of Surgery has complied with all the requirements
of the law. Verily, petitioner could not have been faulted for having full confidence in
the ability of the doctors in the Department of Surgery to comprehend the instructions,
obeying all his directives, and acting only in accordance with the requirements of the
law.
Furthermore, as found by the lower courts from the records of the case, the doctors
and personnel of NKI disseminated notices of the death of respondent’s son to the
media and sought the assistance of the appropriate police authorities as early as
March 2, 1988, even before petitioner issued the Memorandum. Prior to performing
the procedure for retrieval of the deceased’s internal organs, the doctors concerned
also the sought the opinion and approval of the Medico–Legal Officer of the NBI.
Thus, there can be no cavil that petitioner employed reasonable means to
disseminate notifications intended to reach the relatives of the deceased. The only
question that remains pertains to the sufficiency of time allowed for notices to reach
the relatives of the deceased.
If respondent failed to immediately receive notice of her son’s death because the
notices did not properly state the name or identity of the deceased, fault cannot be
laid at petitioner’s door. The trial and appellate courts found that it was the EAMC,
who had the opportunity to ascertain the name of the deceased, who recorded the
wrong information regarding the deceased’s identity to NKI. The NKI could not have
obtained the information about his name from the patient, because as found by the
lower courts, the deceased was already unconscious by the time he was brought to
the NKI.
Ultimately, it is respondent’s failure to adduce adequate evidence that doomed this
case. As stated in Otero v. Tan,8 “[i]n civil cases, it is a basic rule that the party
making allegations has the burden of proving them by a preponderance of
evidence. The parties must rely on the strength of their own evidence and not upon
the weakness of the defense offered by their opponent.”9 Here, there is to proof that,
indeed, the period of around 24 hours from the time notices were disseminated,
cannot be considered as reasonable under the circumstances. They failed to present
any expert witness to prove that given the medical technology and knowledge at that
time in the 1980’s, the doctors could or should have waited longer before harvesting
the internal organs for transplantation.
Verily, the Court cannot, in conscience, agree with the lower court. Finding petitioner
liable for damages is improper. It should be emphasized that the internal organs of
the deceased were removed only after he had been declared brain dead; thus, the
emotional pain suffered by respondent due to the death of her son cannot in any way
be attributed to petitioner. Neither can the Court find evidence on record to show that
respondent’s emotional suffering at the sight of the pitiful state in which she found her
son’s lifeless body be categorically attributed to petitioner’s conduct.
WHEREFORE, the petition is GRANTED. The Decision of the Court of Appeals,
dated March 31, 2006, is REVERSED and SET ASIDE. The complaint against
petitioner is hereby DISMISSED.
SO ORDERED.
 [G.R. NO. 126780 : February 17, 2005]
YHT REALTY CORPORATION, ERLINDA LAINEZ and ANICIA
PAYAM, Petitioners, v. THE COURT OF APPEALS and MAURICE
McLOUGHLIN, Respondents.
DECISION
TINGA, J.:
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 Decision1 dated 19 October
1995 of the Court of Appeals which affirmed the Decision2 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.7Since 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
Malacaňang 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 Complaint20 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 jewelries complained against and in prosecuting his claim and
rights administratively and judicially (Items II, III, IV, V, VI, VII, VIII, and IX, Exh.
"CC");
3. Ordering defendants, jointly and severally, to pay plaintiff the sum of P500,000.00
as moral damages (Item X, Exh. "CC");
4. Ordering defendants, jointly and severally, to pay plaintiff the sum of P350,000.00
as exemplary damages (Item XI, Exh. "CC");
5. And ordering defendants, jointly and severally, to pay litigation expenses in the
sum of P200,000.00 (Item XII, Exh. "CC");
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; andcralawlibrary
7. Plus costs of suit.
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 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 Tan without McLoughlin's consent. The taking was effected through the
use of the master key which was in the 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 trouble and personal inconvenience of seeking aid and assistance from
the Office of the President, DOJ, police authorities and the City Fiscal's Office in his
desire to recover his losses from the hotel management and Tan.24
As regards the loss of Seven Thousand US Dollars (US$7,000.00) and jewelry worth
approximately One Thousand Two Hundred US Dollars (US$1,200.00) which
allegedly occurred during his stay at Tropicana previous to 4 April 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 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 (US$7,000.00) and jewelry were taken by Tan from the safety
deposit box without McLoughlin's consent through the cooperation of Payam and
Lainez.25
The trial court also found that defendants acted with gross negligence in the
performance and exercise of their duties and obligations as innkeepers and were
therefore liable to answer for the losses incurred by McLoughlin.26
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 policy.27 Thus, there being fraud
or wanton conduct on the part of defendants, they should be responsible for all
damages which may be attributed to the non-performance of their contractual
obligations.28
The Court of Appeals affirmed the disquisitions made by the lower court except as to
the amount of damages awarded. The decretal text of the appellate court's decision
reads:
THE FOREGOING CONSIDERED, the appealed Decision is hereby AFFIRMED but
modified as follows:
The appellants are directed jointly and severally to pay the plaintiff/appellee the
following amounts:
1) P153,200.00 representing the peso equivalent of US$2,000.00 and AUS$4,500.00;
2) P308,880.80, representing the peso value for the air fares from Sidney [sic] 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
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 xxx transportation from the
residence to Sidney [sic] 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 P178,000.00 representing expenses for food and
maintenance;
8) P50,000.00 for moral damages;
9) P10,000.00 as exemplary damages; andcralawlibrary
10) P200,000 representing attorney's fees.
With costs.
SO ORDERED.29
Unperturbed, YHT Realty Corporation, Lainez and Payam went to this Court in this
appeal by certiorari.
Petitioners submit for resolution by this Court the following issues: (a) whether the
appellate court's conclusion on the alleged prior existence and subsequent loss of the
subject money and jewelry is supported by the evidence on 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" admittedly executed by private respondent is null
and void; and (d) whether the damages awarded to private respondent, as well as the
amounts thereof, are proper under the circumstances. 30
The petition is devoid of merit.
It is worthy of note that the thrust of Rule 45 is the resolution only of questions of law
and any peripheral factual question addressed to this Court is beyond the bounds of
this mode of review.
Petitioners point out that the evidence on record is insufficient to prove the fact of
prior existence of the dollars and the jewelry which had been lost while deposited in
the safety deposit boxes of Tropicana, the basis of the trial court 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.
We are not persuaded.ςηαñrοblεš νιr†υαl lαω lιbrαrÿ
We adhere to the findings of the trial court as affirmed by the appellate court that the
fact of loss was established by the credible testimony in open court by McLoughlin.
Such findings are factual and therefore beyond the ambit of the present
petition.ςηαñrοblεš νιr†υαl lαω lιbrαrÿ
The trial court had the occasion to observe the demeanor of McLoughlin while
testifying which reflected the veracity of the facts testified to by him. On this score, we
give full credence to the appreciation of testimonial evidence by 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 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, 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 200137 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 200243 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.ςηαñrοblεš νιr†υαl lαω lιbrαrÿ
Moral damages are not intended to enrich a complainant at the expense of a
defendant.ςηαñrοblεš νιr†υαl lαω lιbrαrÿ

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.
G.R. No. 118664 August 7, 1998
JAPAN AIRLINES, petitioner,
vs.
THE COURT OF APPEALS, ENRIQUE AGANA., MARIA ANGELA NINA AGANA,
ADALIA B. FRANCISCO and JOSE MIRANDA, respondents. ROMERO, J.:
Before us is an appeal by certiorari filed by petitioner Japan Airlines, Inc. (JAL)
seeking the reversal of the decision of the Court of Appeals, 1 which affirmed with
modification the award of damages made by the trial court in favor of herein private
respondents Enrique Agana, Maria Angela Nina Agana, Adelia Francisco and Jose
Miranda.
On June 13, 1991, private respondent Jose Miranda boarded JAL flight No. JL 001 in
San Francisco, California bound for Manila. Likewise, on the same day private
respondents Enrique Agana, Maria Angela Nina Agana and Adelia Francisco left Los
Angeles, California for Manila via JAL flight No. JL 061. As an incentive for travelling
on the said airline, both flights were to make an overnight stopover at Narita, Japan,
at the airlines' expense, thereafter proceeding to Manila the following day.
Upon arrival at Narita, Japan on June 14, 1991, private respondents were billeted at
Hotel Nikko Narita for the night. The next day, private respondents, on the final leg of
their journey, went to the airport to take their flight to Manila. However, due to the Mt.
Pinatubo eruption, unrelenting ashfall blanketed Ninoy Aquino International Airport
(NAIA), rendering it inaccessible to airline traffic. Hence, private respondents' trip to
Manila was cancelled indefinitely.
To accommodate the needs of its stranded passengers, JAL rebooked all the Manila-
bound passengers on flight No. 741 due to depart on June 16, 1991 and also paid for
the hotel expenses for their unexpected overnight stay. On June 16, 1991, much to
the dismay of the private respondents, their long anticipated flight to Manila was again
cancelled due to NAIA's indefinite closure. At this point, JAL informed the private
respondents that it would no longer defray their hotel and accommodation expense
during their stay in Narita.
Since NAIA was only reopened to airline traffic on June 22, 1991, private respondents
were forced to pay for their accommodations and meal expenses from their personal
funds from June 16 to June 21, 1991. Their unexpected stay in Narita ended on June
22, 1991 when they arrived in Manila on board JL flight No. 741.
Obviously, still reeling from the experience, private respondents, on July 25, 1991,
commenced an action for damages against JAL before the Regional Trial Court of
Quezon City, Branch 104. 2 To support their claim, private respondents asserted that
JAL failed to live up to its duty to provide care and comfort to its stranded passengers
when it refused to pay for their hotel and accommodation expenses from June 16 to
21, 1991 at Narita, Japan. In other words, they insisted that JAL was obligated to
shoulder their expenses as long as they were still stranded in Narita. On the other
hand, JAL denied this allegation and averred that airline passengers have no vested
right to these amenities in case a flight is cancelled due to "force majeure."
On June 18, 1992, the trial court rendered its judgment in favor of private respondents
holding JAL liable for damages, viz.:
WHEREFORE, judgment is rendered in favor of plaintiffs ordering
the defendant Japan Airlines to pay the plaintiffs Enrique Agana,
Adalia B. Francisco and Maria Angela Nina Agana the sum of One
million Two Hundred forty-six Thousand Nine Hundred Thirty-Six
Pesos (P1,246,936.00) and Jose Miranda the sum of Three
Hundred Twenty Thousand Six Hundred sixteen and 31/100
(P320,616.31) as actual, moral and exemplary damages and pay
attorney's fees in the amount of Two Hundred Thousand Pesos
(P200,000.00), and to pay the costs of suit.
Undaunted, JAL appealed the decision before the Court of Appeals, which, however,
with the exception of lowering the damages awarded affirmed the trial court's
finding, 3 thus:
Thus, the award of moral damages should be as it is hereby
reduced to P200,000.00 for each of the plaintiffs, the exemplary
damages to P300,000.00 and the attorney's fees to P100,000.00
plus the costs.
WHEREFORE, with the foregoing Modification, the judgment
appealed from is hereby AFFIRMED in all other respects.
JAL filed a motion for reconsideration which proved futile and
unavailing. 4
Failing in its bid to reconsider the decision, JAL has now filed this instant petition.
The issue to be resolved is whether JAL, as a common carrier has the obligation to
shoulder the hotel and meal expenses of its stranded passengers until they have
reached their final destination, even if the delay were caused by "force majeure."
To begin with, there is no dispute that the Mt. Pinatubo eruption prevented JAL from
proceeding to Manila on schedule. Likewise, private respondents concede that such
event can be considered as "force majeure" since their delayed arrival in Manila was
not imputable to JAL. 5
However, private respondents contend that while JAL cannot be held responsible for
the delayed arrival in Manila, it was nevertheless liable for their living expenses during
their unexpected stay in Narita since airlines have the obligation to ensure the comfort
and convenience of its passengers. While we sympathize with the private
respondents' plight, we are unable to accept this contention.
We are not unmindful of the fact that in a plethora of cases we have consistently ruled
that a contract to transport passengers is quite different in kind, and degree from any
other contractual relation. It is safe to conclude that it is a relationship imbued with
public interest. Failure on the part of the common carrier to live up to the exacting
standards of care and diligence renders it liable for any damages that may be
sustained by its passengers. However, this is not to say that common carriers are
absolutely responsible for all injuries or damages even if the same were caused by a
fortuitous event. To rule otherwise would render the defense of "force majeure," as an
exception from any liability, illusory and ineffective.
Accordingly, there is no question that when a party is unable to fulfill his obligation
because of "force majeure," the general rule is that he cannot be held liable for
damages for non-performance.6 Corollarily, when JAL was prevented from resuming
its flight to Manila due to the effects of Mt. Pinatubo eruption, whatever losses or
damages in the form of hotel and meal expenses the stranded passengers incurred,
cannot be charged to JAL. Yet it is undeniable that JAL assumed the hotel expenses
of respondents for their unexpected overnight stay on June 15, 1991.
Admittedly, to be stranded for almost a week in a foreign land was an exasperating
experience for the private respondents. To be sure, they underwent distress and
anxiety during their unanticipated stay in Narita, but their predicament was not due to
the fault or negligence of JAL but the closure of NAIA to international flights. Indeed,
to hold JAL, in the absence of bad faith or negligence, liable for the amenities of its
stranded passengers by reason of a fortuitous event is too much of a burden to
assume.
Furthermore, it has been held that airline passengers must take such risks incident to
the mode of travel. 7 In this regard, adverse weather conditions or extreme climatic
changes are some of the perils involved in air travel, the consequences of which the
passenger must assume or expect. After all, common carriers are not the insurer of
all risks. 8
Paradoxically, the Court of Appeals, despite the presence of "force majeure," still
ruled against JAL relying in our decision in PAL v. Court of Appeals, 9 thus:
The position taken by PAL in this case clearly illustrates its failure
to grasp the exacting standard required by law. Undisputably, PAL's
diversion of its flight due to inclement weather was a fortuitous
event. Nonetheless, such occurrence did not terminate PAL's
contract with its passengers. Being in the business of air carriage
and the sole one to operate in the country, PAL is deemed
equipped to deal with situations as in the case at bar. What we said
in one case once again must be stressed, i.e., the relation of carrier
and passenger continues until the latter has been landed at the port
of destination and has left the carrier's premises. Hence, PAL
necessarily would still have to exercise extraordinary diligence in
safeguarding the comfort, convenience and safety of its stranded
passengers until they have reached their final destination. On this
score, PAL grossly failed considering the then ongoing battle
between government forces and Muslim rebels in Cotabato City
and the fact that the private respondent was a stranger to the place.
The reliance is misplaced. The factual background of the PAL case is different from
the instant petition. In that case there was indeed a fortuitous event resulting in the
diversion of the PAL flight. However, the unforeseen diversion was worsened when
"private respondents (passenger) was left at the airport and could not even hitch a
ride in a Ford Fiera loaded with PAL personnel," 10 not to mention the apparent
apathy of the PAL station manager as to the predicament of the stranded
passengers. 11 In light of these circumstances, we held that if the fortuitous event was
accompanied by neglect and malfeasance by the carrier's employees, an action for
damages against the carrier is permissible. Unfortunately, for private respondents,
none of these conditions are present in the instant petition.
We are not prepared, however, to completely absolve petitioner JAL from any liability.
It must be noted that private respondents bought tickets from the United States with
Manila as their final destination. While JAL was no longer required to defray private
respondents' living expenses during their stay in Narita on account of the fortuitous
event, JAL had the duty to make the necessary arrangements to transport private
respondents on the first available connecting flight to Manila. Petitioner JAL reneged
on its obligation to look after the comfort and convenience of its passengers when it
declassified private respondents from "transit passengers" to "new passengers" as a
result of which private respondents were obliged to make the necessary
arrangements themselves for the next flight to Manila. Private respondents were
placed on the waiting list from June 20 to June 24. To assure themselves of a seat on
an available flight, they were compelled to stay in the airport the whole day of June
22, 1991 and it was only at 8:00 p.m. of the aforesaid date that they were advised that
they could be accommodated in said flight which flew at about 9:00 a.m. the next day.
We are not oblivious to the fact that the cancellation of JAL flights to Manila from June
15 to June 21, 1991 caused considerable disruption in passenger booking and
reservation. In fact, it would be unreasonable to expect, considering NAIA's closure,
that JAL flight operations would be normal on the days affected. Nevertheless, this
does not excuse JAL from its obligation to make the necessary arrangements to
transport private respondents on its first available flight to Manila. After all, it had a
contract to transport private respondents from the United States to Manila as their
final destination.
Consequently, the award of nominal damages is in order. Nominal damages are
adjudicated in order that a right of a plaintiff, which has been violated or invaded by
the defendant, may be vindicated or recognized and not for the purpose of
indemnifying any loss suffered by him. 12 The court may award nominal damages in
every obligation arising from any source enumerated in article 1157, or in every case
where any property right has been invaded. 13
WHEREFORE, in view of the foregoing, the decision of the Court of Appeals dated
December 22, 1993 is hereby MODIFIED. The award of actual, moral and exemplary
damages is hereby DELETED. Petitioner JAL is ordered to pay each of the private
respondents nominal damages in the sum of P100,000.00 each including attorney' s
fees of P50,000.00 plus costs.
SO ORDERED.
G.R. No. 119107 March 18, 2005
JOSE V. LAGON, Petitioner,
vs.
HONORABLE COURT OF APPEALS and MENANDRO V. LAPUZ, respondents.
DECISION
CORONA, J.:
On June 23, 1982, petitioner Jose Lagon purchased from the estate of Bai Tonina
Sepi, through an intestate court,1two parcels of land located at Tacurong, Sultan
Kudarat. A few months after the sale, private respondent Menandro Lapuz filed a
complaint for torts and damages against petitioner before the Regional Trial Court
(RTC) of Sultan Kudarat.
In the complaint, private respondent, as then plaintiff, claimed that he entered into a
contract of lease with the late Bai Tonina Sepi Mengelen Guiabar over three parcels
of land (the "property") in Sultan Kudarat, Maguindanao beginning 1964. One of the
provisions agreed upon was for private respondent to put up commercial buildings
which would, in turn, be leased to new tenants. The rentals to be paid by those
tenants would answer for the rent private respondent was obligated to pay Bai Tonina
Sepi for the lease of the land. In 1974, the lease contract ended but since the
construction of the commercial buildings had yet to be completed, the lease contract
was allegedly renewed.
When Bai Tonina Sepi died, private respondent started remitting his rent to the court-
appointed administrator of her estate. But when the administrator advised him to stop
collecting rentals from the tenants of the buildings he constructed, he discovered that
petitioner, representing himself as the new owner of the property, had been collecting
rentals from the tenants. He thus filed a complaint against the latter, accusing
petitioner of inducing the heirs of Bai Tonina Sepi to sell the property to him, thereby
violating his leasehold rights over it.
In his answer to the complaint, petitioner denied that he induced the heirs of Bai
Tonina to sell the property to him, contending that the heirs were in dire need of
money to pay off the obligations of the deceased. He also denied interfering with
private respondent's leasehold rights as there was no lease contract covering the
property when he purchased it; that his personal investigation and inquiry revealed no
claims or encumbrances on the subject lots.
Petitioner claimed that before he bought the property, he went to Atty. Benjamin
Fajardo, the lawyer who allegedly notarized the lease contract between private
respondent and Bai Tonina Sepi, to verify if the parties indeed renewed the lease
contract after it expired in 1974. Petitioner averred that Atty. Fajardo showed him four
copies of the lease renewal but these were all unsigned. To refute the existence of a
lease contract, petitioner presented in court a certification from the Office of the Clerk
of Court confirming that no record of any lease contract notarized by Atty. Fajardo
had been entered into their files. Petitioner added that he only learned of the alleged
lease contract when he was informed that private respondent was collecting rent from
the tenants of the building.
Finding the complaint for tortuous interference to be unwarranted, petitioner filed his
counterclaim and prayed for the payment of actual and moral damages.
On July 29, 1986, the court a quo found for private respondent (plaintiff below):
ACCORDINGLY, judgment is hereby rendered in favor of the plaintiff:
1. Declaring the "Contract of Lease" executed by Bai Tonina Sepi Mangelen
Guiabar in favor of the plaintiff on November 6, 1974 (Exh. "A" and "A-1")
over Lot No. 6395, Pls-73. Lot No 6396. Pls.-73. Lot No. 6399. 3ls-73, and
Lot no.9777-A. CSD-11-000076-D (Lot No. 3-A. 40124), all situated along
Ledesma St., Tacurong, Sultan Kudarat, which document was notarized by
Atty. Benjamin S. Fajardo, Sr. and entered into his notarial register as Doc.
No. 619. Page No. 24. Book No. II. Series of 1974, to be authentic and
genuine and as such valid and binding for a period of ten (10) years
specified thereon from November 1, 1974 up to October 31, 1984;
2. Declaring the plaintiff as the lawful owner of the commercial buildings
found on the aforesaid lots and he is entitled to their possession and the
collection (of rentals) of the said commercial buildings within the period
covered by this "Contract of Lease" in his favor;
3. Ordering the defendant to pay to the plaintiff the following:
a) Rentals of the commercial buildings on the lots covered by the
"Contract of Lease" in favor of the plaintiff for the period from
October 1, 1978 up to October 31, 1984, including accrued
interests in the total amount of Five Hundred Six Thousand Eight
Hundred Five Pesos and Fifty Six Centavos (P506, 850.56), the
same to continue to bear interest at the legal rate of 12% per
annum until the whole amount is fully paid by the defendant to the
plaintiff;
b) Moral damages in the amount of One Million Sixty Two
Thousand Five Hundred Pesos (P1,062,500.00);
c) Actual or compensatory damages in the amount of Three
Hundred Twelve Thousand Five Hundred Pesos (P312, 500.00);
d) Exemplary or corrective damages in the amount of One Hundred
Eighty Thousand Five Hundred Pesos (P187,500.00)
e) Temperate or moderate damages in the amount of Sixty Two
Thousand Five Hundred Pesos (P62,500.00);
 f) Nominal damages in the amount of Sixty Two Thousand Five
Hundred Pesos (P62,500.00);
g) Attorney's fees in the amount of One Hundred Twenty Five
Thousand Pesos (P125,000.00);
h) Expenses of litigation in the amount of Sixty Two Thousand Five
Hundred Pesos (P62,500.00);
i) Interest on the moral damages, actual or compensatory damages
temperate or moderate damages, nominal damages, attorney's
fees and expenses of litigation in the amounts as specified
hereinabove from May 24, 1982 up to June 27, 1986, in the total
amount of Nine Hundred Thousand Pesos (P900,000.00); all of
which will continue to bear interests at a legal rate of 12% per
annum until the whole amounts are fully paid by the defendants to
the plaintiffs;
4. For failure of the defendant to deposit with this Court all the rentals he had
collected from the thirteen (13) tenants or occupants of the commercial
buildings in question, the plaintiff is hereby restored to the possession of his
commercial buildings for a period of seventy-three (73) months which is the
equivalent of the total period for which he was prevented from collecting the
rentals from the tenants or occupants of his commercial buildings from
October 1, 1978 up to October 31, 1984, and for this purpose a Writ of
Preliminary Injunction is hereby issued, but the plaintiff is likewise ordered to
pay to the defendant the monthly rental of Seven Hundred Pesos (P700.00)
every end of the month for the entire period of seventy three (73) months.
This portion of the judgment should be considered as a mere alternative
should the defendant fail to pay the amount of Five Hundred Five Pesos and
Fifty Six Centavos (P506,805.56) hereinabove specified;
5. Dismissing the counterclaim interposed by the defendant for lack of merit;
6. With costs against the defendant.2
Petitioner appealed the judgment to the Court of Appeals. 3
In a decision dated
January 31, 1995,4 the appellate court modified the assailed judgment of the trial
court as follows:
a) The award for moral damages, compensatory damages, exemplary
damages, temperate or moderate damages, and nominal damages as well
as expenses of litigation in the amount of P62,500.00 and interests under
paragraph 3-a(a), (b), (c), (d), (e), (f), (g), (h), and (i) are deleted;
b) The award for attorney's fees is reduced to P30,000.00;
c) Paragraphs 1,2,5 and 6 are AFFIRMED;
d) Additionally, the defendant is hereby ordered to pay to the plaintiff by way
of actual damages the sum of P178,425.00 representing the amount of
rentals he collected from the period of October 1978 to August 1983, and
minus the amount of P42,700.00 representing rentals due the defendant
computed at P700.00 per month for the period from August 1978 to August
1983, with interest thereon at the rate until the same is fully paid;
e) Paragraph 4 is deleted.5
Before the appellate court, petitioner disclaimed knowledge of any lease contract
between the late Bai Tonina Sepi and private respondent. On the other hand, private
respondent insisted that it was impossible for petitioner not to know about the contract
since the latter was aware that he was collecting rentals from the tenants of the
building. While the appellate court disbelieved the contentions of both parties, it
nevertheless held that, for petitioner to become liable for damages, he must have
known of the lease contract and must have also acted with malice or bad faith when
he bought the subject parcels of land.
Via this petition for review, petitioner cites the following reasons why the Court should
rule in his favor:
1. The Honorable Court of Appeals seriously erred in holding that petitioner
is liable for interference of contractual relation under Article 1314 of the New
Civil Code;
2. The Honorable Court of Appeals erred in not holding that private
respondent is precluded from recovering, if at all, because of laches;
3. The Honorable Court of Appeals erred in holding petitioner liable for
actual damages and attorney's fees, and;
4. The Honorable Court of Appeals erred in dismissing petitioner's
counterclaims.6
Article 1314 of the Civil Code provides that any third person who induces another to
violate his contract shall be liable for damages to the other contracting party. The tort
recognized in that provision is known as interference with contractual relations. 7 The
interference is penalized because it violates the property rights of a party in a contract
to reap the benefits that should result therefrom.8
The core issue here is whether the purchase by petitioner of the subject property,
during the supposed existence of private respondent's lease contract with the late Bai
Tonina Sepi, constituted tortuous interference for which petitioner should be held
liable for damages.
The Court, in the case of So Ping Bun v. Court of Appeals,9 laid down the elements of
tortuous interference with contractual relations: (a) existence of a valid contract; (b)
knowledge on the part of the third person of the existence of the contract and (c)
interference of the third person without legal justification or excuse. In that case,
petitioner So Ping Bun occupied the premises which the corporation of his
grandfather was leasing from private respondent, without the knowledge and
permission of the corporation. The corporation, prevented from using the premises for
its business, sued So Ping Bun for tortuous interference.
As regards the first element, the existence of a valid contract must be duly
established. To prove this, private respondent presented in court a notarized copy of
the purported lease renewal.10 While the contract appeared as duly notarized, the
notarization thereof, however, only proved its due execution and delivery but not the
veracity of its contents. Nonetheless, after undergoing the rigid scrutiny of petitioner's
counsel and after the trial court declared it to be valid and subsisting, the notarized
copy of the lease contract presented in court appeared to be incontestable proof that
private respondent and the late Bai Tonina Sepi actually renewed their lease contract.
Settled is the rule that until overcome by clear, strong and convincing evidence, a
notarized document continues to be prima facie evidence of the facts that gave rise to
its execution and delivery.11
The second element, on the other hand, requires that there be knowledge on the part
of the interferer that the contract exists. Knowledge of the subsistence of the contract
is an essential element to state a cause of action for tortuous interference.12 A
defendant in such a case cannot be made liable for interfering with a contract he is
unaware of.13 While it is not necessary to prove actual knowledge, he must
nonetheless be aware of the facts which, if followed by a reasonable inquiry, will lead
to a complete disclosure of the contractual relations and rights of the parties in the
contract.14
In this case, petitioner claims that he had no knowledge of the lease contract. His
sellers (the heirs of Bai Tonina Sepi) likewise allegedly did not inform him of any
existing lease contract.
After a careful perusal of the records, we find the contention of petitioner meritorious.
He conducted his own personal investigation and inquiry, and unearthed no
suspicious circumstance that would have made a cautious man probe deeper and
watch out for any conflicting claim over the property. An examination of the entire
property's title bore no indication of the leasehold interest of private respondent. Even
the registry of property had no record of the same.15
Assuming ex gratia argumenti that petitioner knew of the contract, such knowledge
alone was not sufficient to make him liable for tortuous interference. Which brings us
to the third element. According to our ruling in So Ping Bun, petitioner may be held
liable only when there was no legal justification or excuse for his action 16 or when his
conduct was stirred by a wrongful motive. To sustain a case for tortuous interference,
the defendant must have acted with malice17 or must have been driven by purely
impious reasons to injure the plaintiff. In other words, his act of interference cannot be
justified.18
Furthermore, the records do not support the allegation of private respondent that
petitioner induced the heirs of Bai Tonina Sepi to sell the property to him. The word
"induce" refers to situations where a person causes another to choose one course of
conduct by persuasion or intimidation.19 The records show that the decision of the
heirs of the late Bai Tonina Sepi to sell the property was completely of their own
volition and that petitioner did absolutely nothing to influence their judgment. Private
respondent himself did not proffer any evidence to support his claim. In short, even
assuming that private respondent was able to prove the renewal of his lease contract
with Bai Tonina Sepi, the fact was that he was unable to prove malice or bad faith on
the part of petitioner in purchasing the property. Therefore, the claim of tortuous
interference was never established.
In So Ping Bun, the Court discussed whether interference can be justified at all if the
interferer acts for the sole purpose of furthering a personal financial interest, but
without malice or bad faith. As the Court explained it:
x x x, as a general rule, justification for interfering with the business relations
of another exists where the actor's motive is to benefit himself. Such
justification does not exist where the actor's motive is to cause harm to the
other. Added to this, some authorities believe that it is not necessary that the
interferer's interest outweigh that of the party whose rights are invaded, and
that an individual acts under an economic interest that is substantial, not
merely de minimis, such that wrongful and malicious motives are negatived,
for he acts in self-protection. Moreover, justification for protecting one's
financial position should not be made to depend on a comparison of his
economic interest in the subject matter with that of the others. It is sufficient
if the impetus of his conduct lies in a proper business interest rather than in
wrongful motives.20
The foregoing disquisition applies squarely to the case at bar. In our view, petitioner's
purchase of the subject property was merely an advancement of his financial or
economic interests, absent any proof that he was enthused by improper motives. In
the very early case of Gilchrist v. Cuddy,21 the Court declared that a person is not a
malicious interferer if his conduct is impelled by a proper business interest. In other
words, a financial or profit motivation will not necessarily make a person an officious
interferer liable for damages as long as there is no malice or bad faith involved.
In sum, we rule that, inasmuch as not all three elements to hold petitioner liable for
tortuous interference are present, petitioner cannot be made to answer for private
respondent's losses.
This case is one of damnun absque injuria or damage without injury. "Injury" is the
legal invasion of a legal right while "damage" is the hurt, loss or harm which results
from the injury.22 In BPI Express Card Corporation v. Court of Appeals,,23 the Court
turned down the claim for damages of a cardholder whose credit card had been
cancelled by petitioner corporation after several defaults in payment. We held there
that there can be damage without injury where the loss or harm is not the result of a
violation of a legal duty. In that instance, the consequences must be borne by the
injured person alone since the law affords no remedy for damages resulting from an
act which does not amount to legal injury or wrong.24 Indeed, lack of malice in the
conduct complained of precludes recovery of damages.25
With respect to the attorney's fees awarded by the appellate court to private
respondent, we rule that it cannot be recovered under the circumstances. According
to Article 2208 of the Civil Code, attorney's fees may be awarded only when it has
been stipulated upon or under the instances provided therein.26 Likewise, being in the
concept of actual damages, the award for attorney's fees must have clear, factual and
legal bases27 which, in this case, do not exist.

Regarding the dismissal of petitioner's counterclaim for actual and moral damages,
the appellate court affirmed the assailed order of the trial court because it found no
basis to grant the amount of damages prayed for by petitioner. We find no reason to
reverse the trial court and the Court of Appeals. Actual damages are those awarded
in satisfaction of, or in recompense for, loss or injury sustained. To be recoverable,
they must not only be capable of proof but must actually be proved with a reasonable
degree of certainty.28 Petitioner was unable to prove that he suffered loss or injury,
hence, his claim for actual damages must fail. Moreover, petitioner's prayer for moral
damages was not warranted as moral damages should result from the wrongful act of
a person. The worries and anxieties suffered by a party hailed to court litigation are
not compensable.29

With the foregoing discussion, we no longer deem it necessary to delve into the issue
of laches.

WHEREFORE, premises considered, the petition is hereby GRANTED. The assailed

decision of the Court of Appeals is hereby REVERSED and SET ASIDE.

No costs.

SO ORDERED.