G.R. No.

143008           June 10, 2002

SMITH BELL DODWELL SHIPPING AGENCY CORPORATION, petitioner,

vs.
CATALINO BORJA and INTERNATIONAL TO WAGE AND TRANSPORT CORPORATION, respondents.

PANGANIBAN, J.:

The owner or the person in possession and control of a vessel is liable for all natural and proximate damages
caused to persons and property by reason of negligence in its management or navigation. The liability for the loss of
the earning capacity of the deceased is fixed by taking into account the net income of the victim at the time of death
-- of the incident in this case -- and that person's probable life expectancy.
1âwphi1.nêt

The Case

Before us is a Petition for Review on Certiorari under Rule 45 of the Rules of Court, challenging the March 6, 2000
Decision1 and the April 25, 2000 Resolution2 of the Court of Appeals3 (CA) in CA-GR CV No. 57470. The assailed
Decision disposed as follows:

"WHEREFORE, premises considered, the instant appeal is hereby DENIED. The questioned decision of the
lower court is hereby AFFIRMED in toto. No pronouncement as to costs."4

Reconsideration was denied in the assailed Resolution.

The Facts

The facts of the case are set forth by the CA as follows:

"It appears that on September 23, 1987, Smith Bell [herein petitioner] filed a written request with the Bureau
of Customs for the attendance of the latter's inspection team on vessel M/T King Family which was due to
arrive at the port of Manila on September 24, 1987.

"Said vessel contained 750 metric tons of alkyl benzene and methyl methacrylate monomer.

"On the same day, Supervising Customs Inspector Manuel Ma. D. Nalgan instructed [Respondent Catalino
Borja] to board said vessel and perform his duties as inspector upon the vessel's arrival until its departure.
At that time, [Borja] was a customs inspector of the Bureau of Customs receiving a salary of P31,188.25 per
annum.

"At about 11 o'clock in the morning on September 24, 1987, while M/T King Family was unloading chemicals
unto two (2) barges [--] ITTC 101 and CLC-1002 [--] owned by [Respondent] ITTC, a sudden explosion
occurred setting the vessels afire. Upon hearing the explosion, [Borja], who was at that time inside the cabin
preparing reports, ran outside to check what happened. Again, another explosion was heard.

"Seeing the fire and fearing for his life, [Borja] hurriedly jumped over board to save himself. However, the
[water] [was] likewise on fire due mainly to the spilled chemicals. Despite the tremendous heat, [Borja] swam
his way for one (1) hour until he was rescued by the people living in the squatters' area and sent to San
Juan De Dios Hospital.

"After weeks of intensive care at the hospital, his attending physician diagnosed [Borja] to be permanently
disabled due to the incident. [Borja] made demands against Smith Bell and ITTC for the damages caused by
the explosion. However, both denied liabilities and attributed to each other negligence." 5

The trial court6 (RTC) ruled in favor of Respondent Borja and held petitioner liable for damages and loss of income.
The RTC disposed as follows:

"WHEREFORE, premises considered, judgment is hereby rendered ordering [Petitioner] Smith Bell Dodwell
[S]hipping Agency Corporation to pay [Borja]:

1. The amount of P495,360.00 as actual damages for loss of earning capacity:

2. The amount of P100,000.00 for moral damages; and

3. The amount of P50,000.00 for and as reasonable attorney's fees.

1
 "The cross-claim of [Petitioner] Smith Bell Dodwell Shipping Agency Corporation against co-defendant
International Towage and Transport Corporation and the latter's counterclaim against [Borja] and cross-
claim with compulsory counterclaim against Smith Bell are hereby ordered dismissed." 7

Ruling of the Court of Appeals

Affirming the trial court, the CA rejected the plea of petitioner that it be exonerated from liability for Respondent
Borja's injuries. Contrary to the claim of petitioner that no physical evidence was shown to prove that the explosion
had originated from its vessel, the CA held that the fire had originated from M/T King Family. This conclusion was
amply supported by the testimonies of Borja and Eulogio Laurente (the eyewitness of International Towage and
Transport Corporation or ITTC) as well as by the investigation conducted by the Special Board of Marine Inquiry and
affirmed by the secretary of the Department of National Defense. On the other hand, the RTC, which the CA
sustained, had not given probative value to the evidence of petitioner, whose sole eyewitness had not shown up for
cross-examination.

Hence, this Petition.8

The Issues

In its Memorandum,9 petitioner raises the following issues:

"1. Whether petitioner should be held liable for the injuries of Respondent Catalino Borja.

"2. Whether Respondent ITTC should be held liable for the injuries of Respondent Catalino Borja.

"3. Assuming without admitting that Respondent Catalino Borja is entitled to damages, whether Respondent
Borja is entitled to the amount of damages awarded to him by the trial court." 10

Simply put, these issues can be summed up in these two questions: (1) Who, if any, is liable for Borja's injuries? (2)
What is the proper amount of liability?

This Court's Ruling

The Petition is partly meritorious.

First Issue:
Responsibility for Injuries

Petitioner avers that both lower courts labored under a misapprehension of the facts. It claims that the documents
adduced in the RTC conclusively revealed that the explosion that caused the fire on M/T King Family had originated
from the barge ITTC-101, a conclusion based on three grounds. First, the Survey Report (Exh. "10") dated October
21, 1987 submitted by the Admiral Surveyors and Adjusters, Inc., showed that no part of M/T King Family sustained
any sharp or violent damage that would otherwise be observed if indeed an explosion had occurred on it. On the
other hand, the fact that the vessel sustained cracks on its shell plating was noted in two Survey Reports from
Greutzman Divers Underwater Specialist, dated October 6, 1987 (Exh. "11"), and during the underwater inspection
on the sunken barge ITTC-101.

Second, external fire damage on the hull of M/T King Family indicated that the fire had started from outside the
vessel and from ITTC-101. The port side of the vessel to which the ITTC barge was tied was completely gutted by
fire, while the starboard side to which the barge CLC-1002 was tied sustained only slight fire damage.

Third, testimonial evidence proved that the explosion came from the barge of the ITTC and not from its vessel.
Security Guard Vivencio Estrella testified that he had seen the sudden explosion of monomer on the barge with fire
that went up to about 60 meters. Third Mate Choi Seong Hwan and Second Mate Nam Bang Choun of M/T King
Family narrated that while they were discharging the chemicals, they saw and heard an explosion from the
barge ITTC-101. Chief Security Guard Reynaldo Patron, in turn, testified that he was 7 to 10 meters away from the
barge when he heard the explosion from the port side of M/T King Family and saw the barge already on fire.

We are not persuaded. Both the RTC and the CA ruled that the fire and the explosion had originated from
petitioner's vessel. Said the trial court:

"The attempts of [Petitioner] Smith Bell to shift the blame on x x x ITTC were all for naught. First, the
testimony of its alleged eyewitness was stricken off the record for his failure to appear for cross-examination
(p. 361, Record). Second, the documents offered to prove that the fire originated from barge ITTC-101 were
all denied admission by the [c]ourt for being, in effect, hearsay (pp. 335 and 362). x x x Thus, there is

2
 nothing in the record to support [petitioner's] contention that the fire and explosion originated from barge
ITTC-101."11

We find no cogent reason to overturn these factual findings. Nothing is more settled in jurisprudence than that this
Court is bound by the factual findings of the Court of Appeals when these are supported by substantial evidence
and are not under any of the exceptions in Fuentes v. Court of Appeals;12  more so, when such findings affirm those
of the trial court.13 Verily, this Court reviews only issues of law.

Negligence is conduct that creates undue risk of harm to another. It is the failure to observe that degree of care,
precaution and vigilance that the circumstances justly demand, whereby that other person suffers
injury.14 Petitioner's vessel was carrying chemical cargo -- alkyl benzene and methyl methacrylate monomer. 15 While
knowing that their vessel was carrying dangerous inflammable chemicals, its officers and crew failed to take all the
necessary precautions to prevent an accident. Petitioner was, therefore, negligent.

The three elements of quasi delict are: (a) damages suffered by the plaintiff, (b) fault or negligence of the defendant,
and (c) the connection of cause and effect between the fault or negligence of the defendant and the damages
inflicted on the plaintiff.16 All these elements were established in this case. Knowing fully well that it was carrying
dangerous chemicals, petitioner was negligent in not taking all the necessary precautions in transporting the cargo.

As a result of the fire and the explosion during the unloading of the chemicals from petitioner's vessel, Respondent
Borja suffered the following damage: and injuries: "(1) chemical burns of the face and arms; (2) inhalation of fumes
from burning chemicals; (3) exposure to the elements [while] floating in sea water for about three (3) hours; (4)
homonymous hemianopsia or blurring of the right eye [which was of] possible toxic origin; and (5) [c]erebral infract
with neo-vascularization, left occipital region with right sided headache and the blurring of vision of right eye." 17

Hence, the owner or the person in possession and control of a vessel and the vessel are liable for all natural and
proximate damage caused to persons and property by reason of negligent management or navigation. 18

Second Issue:
Amount of Liability

Petitioner insists that Borja is not entitled to the full amount of damages awarded by the lower courts. It disputes the
use of his gross earning as basis for the computation of the award for loss of earning capacity. Both courts, in
computing the value of such loss, used the remaining years of the victim as a government employee and the
amount he had been receiving per annum at the time of the incident.

Counsel for Respondent Borja, on the other hand, claims that petitioner had no cause to complain, because the
miscomputation had ironically been in its favor. The multiplier used in the computation was erroneously based on
the remaining years in government service, instead of the life expectancy, of the victim. Borja's counsel also points
out that the award was based on the former's meager salary in 1987, or about 23 years ago when the foreign
exchange was still P14 to $1. Hence, the questioned award is consistent with the primary purpose of giving what is
just, moral and legally due the victim as the aggrieved party.

Both parties have a point. In determining the reasonableness of the damages awarded under Article 1764 in
conjunction with Article 2206 of the Civil Code, the factors to be considered are: (1) life expectancy (considering the
health of the victim and the mortality table which is deemed conclusive) and loss of earning capacity; (b) pecuniary
loss, loss of support and service; and (c) moral and mental sufferings. 19 The loss of earning capacity is based mainly
on the number of years remaining in the person's expected life span. In turn, this number is the basis of the
damages that shall be computed and the rate at which the loss sustained by the heirs shall be fixed. 20

The formula for the computation of loss of earning capacity is as follows: 21

Net earning capacity       =       Life expectancy x [Gross Annual Income - Living Expenses (50% of gross
annual income)], where life expectancy       =       2/3 (80 - the age of the deceased).22

Petitioner is correct in arguing that it is net income (or gross income less living expenses) which is to be used in the
computation of the award for loss of income. Villa Rey Transit v. Court of Appeals23 explained that "the amount
recoverable is not the loss of the entire earning, but rather the loss of that portion of the earnings which the
beneficiary would have received." Hence, in fixing the amount of the said damages, the necessary expenses of the
deceased should be deducted from his earnings.

In other words, only net earnings, not gross earnings, are to be considered; that is, the total of the earnings less
expenses necessary in the creation of such earnings or income, less living and other incidental expenses. When
there is no showing that the living expenses constituted a smaller percentage of the gross income, we fix the living
expenses at half of the gross income. To hold that one would have used only a small part of the income, with the
larger part going to the support of one's children, would be conjectural and unreasonable. 24

3
Counsel for Respondent Borja is also correct in saying that life expectancy should not be based on the retirement
age of government employees, which is pegged at 65. In Negros Navigation Co, Inc. v. CA,25 the Court resolved that
in calculating the life expectancy of an individual for the purpose of determining loss of earning capacity under
Article 2206(1) of the Civil Code, it is assumed that the deceased would have earned income even after retirement
from a particular job.
1âwphi1.nêt

Respondent Borja should not be situated differently just because he was a government employee. Private
employees, given the retirement packages provided by their companies, usually retire earlier than government
employees; yet, the life expectancy of the former is not pegged at 65 years.

Petitioner avers that Respondent Borja died nine years after the incident and, hence, his life expectancy of 80 years
should yield to the reality that he was only 59 when he actually died.

We disagree. The Court uses the American Experience/Expectancy Table of Mortality or the Actuarial or Combined
Experience Table of Mortality, which consistently pegs the life span of the average Filipino at 80 years, from which it
extrapolates the estimated income to be earned by the deceased had he or she not been killed. 26

Respondent Borja's demise earlier than the estimated life span is of no moment. For purposes of determining loss of
earning capacity, life expectancy remains at 80. Otherwise, the computation of loss of earning capacity will never
become final, being always subject to the eventuality of the victim's death. The computation should not change even
if Borja lived beyond 80 years. Fair is fair.

Based on the foregoing discussion, the award for loss of earning capacity should be computed as follows:

Loss of earning = [2 (80-50)] x [(P2,752x12)-16,512]

capacity        3

= P330,240

Having been duly proven, the moral damages and attorney's fees awarded are justified under the Civil Code's
Article 2219, paragraph 2; and Article 2208, paragraph 11, respectively.

WHEREFORE, the Petition is PARTLY GRANTED. The assailed Decision is AFFIRMED with the

following MODIFICATIONS: petitioner is ordered to pay the heirs of the victim damages in the amount of P320,240
as loss of earning capacity, moral damages in the amount of P100,000, plus another P50,000 as attorney's fees.
Costs against petitioner.

SO ORDERED.

G.R. No. L-12219            March 15, 1918

AMADO PICART, plaintiff-appellant,
vs.
FRANK SMITH, JR., defendant-appellee.

Alejo Mabanag for appellant.

G. E. Campbell for appellee.

STREET, J.:

In this action the plaintiff, Amado Picart, seeks to recover of the defendant, Frank Smith, jr., the sum of P31,000, as
damages alleged to have been caused by an automobile driven by the defendant. From a judgment of the Court of
First Instance of the Province of La Union absolving the defendant from liability the plaintiff has appealed.

The occurrence which gave rise to the institution of this action took place on December 12, 1912, on the Carlatan
Bridge, at San Fernando, La Union. It appears that upon the occasion in question the plaintiff was riding on his pony
over said bridge. Before he had gotten half way across, the defendant approached from the opposite direction in an
automobile, going at the rate of about ten or twelve miles per hour. As the defendant neared the bridge he saw a
horseman on it and blew his horn to give warning of his approach. He continued his course and after he had taken
the bridge he gave two more successive blasts, as it appeared to him that the man on horseback before him was
not observing the rule of the road.

4
The plaintiff, it appears, saw the automobile coming and heard the warning signals. However, being perturbed by
the novelty of the apparition or the rapidity of the approach, he pulled the pony closely up against the railing on the
right side of the bridge instead of going to the left. He says that the reason he did this was that he thought he did not
have sufficient time to get over to the other side. The bridge is shown to have a length of about 75 meters and a
width of 4.80 meters. As the automobile approached, the defendant guided it toward his left, that being the proper
side of the road for the machine. In so doing the defendant assumed that the horseman would move to the other
side. The pony had not as yet exhibited fright, and the rider had made no sign for the automobile to stop. Seeing
that the pony was apparently quiet, the defendant, instead of veering to the right while yet some distance away or
slowing down, continued to approach directly toward the horse without diminution of speed. When he had gotten
quite near, there being then no possibility of the horse getting across to the other side, the defendant quickly turned
his car sufficiently to the right to escape hitting the horse alongside of the railing where it as then standing; but in so
doing the automobile passed in such close proximity to the animal that it became frightened and turned its body
across the bridge with its head toward the railing. In so doing, it as struck on the hock of the left hind leg by the
flange of the car and the limb was broken. The horse fell and its rider was thrown off with some violence. From the
evidence adduced in the case we believe that when the accident occurred the free space where the pony stood
between the automobile and the railing of the bridge was probably less than one and one half meters. As a result of
its injuries the horse died. The plaintiff received contusions which caused temporary unconsciousness and required
medical attention for several days.

The question presented for decision is whether or not the defendant in maneuvering his car in the manner above
described was guilty of negligence such as gives rise to a civil obligation to repair the damage done; and we are of
the opinion that he is so liable. As the defendant started across the bridge, he had the right to assume that the horse
and the rider would pass over to the proper side; but as he moved toward the center of the bridge it was
demonstrated to his eyes that this would not be done; and he must in a moment have perceived that it was too late
for the horse to cross with safety in front of the moving vehicle. In the nature of things this change of situation
occurred while the automobile was yet some distance away; and from this moment it was not longer within the
power of the plaintiff to escape being run down by going to a place of greater safety. The control of the situation had
then passed entirely to the defendant; and it was his duty either to bring his car to an immediate stop or, seeing that
there were no other persons on the bridge, to take the other side and pass sufficiently far away from the horse to
avoid the danger of collision. Instead of doing this, the defendant ran straight on until he was almost upon the horse.
He was, we think, deceived into doing this by the fact that the horse had not yet exhibited fright. But in view of the
known nature of horses, there was an appreciable risk that, if the animal in question was unacquainted with
automobiles, he might get exited and jump under the conditions which here confronted him. When the defendant
exposed the horse and rider to this danger he was, in our opinion, negligent in the eye of the law.

The test by which to determine the existence of negligence in a particular case may be stated as follows: Did the
defendant in doing the alleged negligent act use that person would have used in the same situation? If not, then he
is guilty of negligence. The law here in effect adopts the standard supposed to be supplied by the imaginary conduct
of the discreet paterfamilias of the Roman law. The existence of negligence in a given case is not determined by
reference to the personal judgment of the actor in the situation before him. The law considers what would be
reckless, blameworthy, or negligent in the man of ordinary intelligence and prudence and determines liability by that.

The question as to what would constitute the conduct of a prudent man in a given situation must of course be
always determined in the light of human experience and in view of the facts involved in the particular case. Abstract
speculations cannot here be of much value but this much can be profitably said: Reasonable men govern their
conduct by the circumstances which are before them or known to them. They are not, and are not supposed to be,
omniscient of the future. Hence they can be expected to take care only when there is something before them to
suggest or warn of danger. Could a prudent man, in the case under consideration, foresee harm as a result of the
course actually pursued? If so, it was the duty of the actor to take precautions to guard against that harm.
Reasonable foresight of harm, followed by ignoring of the suggestion born of this prevision, is always necessary
before negligence can be held to exist. Stated in these terms, the proper criterion for determining the existence of
negligence in a given case is this: Conduct is said to be negligent when a prudent man in the position of the
tortfeasor would have foreseen that an effect harmful to another was sufficiently probable to warrant his foregoing
conduct or guarding against its consequences.

Applying this test to the conduct of the defendant in the present case we think that negligence is clearly established.
A prudent man, placed in the position of the defendant, would in our opinion, have recognized that the course which
he was pursuing was fraught with risk, and would therefore have foreseen harm to the horse and the rider as
reasonable consequence of that course. Under these circumstances the law imposed on the defendant the duty to
guard against the threatened harm.

It goes without saying that the plaintiff himself was not free from fault, for he was guilty of antecedent negligence in
planting himself on the wrong side of the road. But as we have already stated, the defendant was also negligent;
and in such case the problem always is to discover which agent is immediately and directly responsible. It will be
noted that the negligent acts of the two parties were not contemporaneous, since the negligence of the defendant
succeeded the negligence of the plaintiff by an appreciable interval. Under these circumstances the law is that the
person who has the last fair chance to avoid the impending harm and fails to do so is chargeable with the
consequences, without reference to the prior negligence of the other party.
5
The decision in the case of Rkes vs. Atlantic, Gulf and Pacific Co. (7 Phil. Rep., 359) should perhaps be mentioned
in this connection. This Court there held that while contributory negligence on the part of the person injured did not
constitute a bar to recovery, it could be received in evidence to reduce the damages which would otherwise have
been assessed wholly against the other party. The defendant company had there employed the plaintiff, as a
laborer, to assist in transporting iron rails from a barge in Manila harbor to the company's yards located not far
away. The rails were conveyed upon cars which were hauled along a narrow track. At certain spot near the water's
edge the track gave way by reason of the combined effect of the weight of the car and the insecurity of the road
bed. The car was in consequence upset; the rails slid off; and the plaintiff's leg was caught and broken. It appeared
in evidence that the accident was due to the effects of the typhoon which had dislodged one of the supports of the
track. The court found that the defendant company was negligent in having failed to repair the bed of the track and
also that the plaintiff was, at the moment of the accident, guilty of contributory negligence in walking at the side of
the car instead of being in front or behind. It was held that while the defendant was liable to the plaintiff by reason of
its negligence in having failed to keep the track in proper repair nevertheless the amount of the damages should be
reduced on account of the contributory negligence in the plaintiff. As will be seen the defendant's negligence in that
case consisted in an omission only. The liability of the company arose from its responsibility for the dangerous
condition of its track. In a case like the one now before us, where the defendant was actually present and operating
the automobile which caused the damage, we do not feel constrained to attempt to weigh the negligence of the
respective parties in order to apportion the damage according to the degree of their relative fault. It is enough to say
that the negligence of the defendant was in this case the immediate and determining cause of the accident and that
the antecedent negligence of the plaintiff was a more remote factor in the case.

A point of minor importance in the case is indicated in the special defense pleaded in the defendant's answer, to the
effect that the subject matter of the action had been previously adjudicated in the court of a justice of the peace. In
this connection it appears that soon after the accident in question occurred, the plaintiff caused criminal proceedings
to be instituted before a justice of the peace charging the defendant with the infliction of serious injuries (lesiones
graves). At the preliminary investigation the defendant was discharged by the magistrate and the proceedings were
dismissed. Conceding that the acquittal of the defendant at the trial upon the merits in a criminal prosecution for the
offense mentioned would be res adjudicata upon the question of his civil liability arising from negligence -- a point
upon which it is unnecessary to express an opinion -- the action of the justice of the peace in dismissing the criminal
proceeding upon the preliminary hearing can have no effect. (See U. S. vs. Banzuela and Banzuela, 31 Phil. Rep.,
564.)

From what has been said it results that the judgment of the lower court must be reversed, and judgment is her
rendered that the plaintiff recover of the defendant the sum of two hundred pesos (P200), with costs of other
instances. The sum here awarded is estimated to include the value of the horse, medical expenses of the plaintiff,
the loss or damage occasioned to articles of his apparel, and lawful interest on the whole to the date of this
recovery. The other damages claimed by the plaintiff are remote or otherwise of such character as not to be
recoverable. So ordered.

G.R. No. 175350               June 13, 2012

EQUITABLE BANKING CORPORATION, INC. Petitioner,

vs.
SPECIAL STEEL PRODUCTS, and AUGUSTO L. PARDO, Respondents.

DECISION

DEL CASTILLO, J.:

A crossed check with the notation "account payee only" can only be deposited in the named payee’s account. It is
gross negligence for a bank to ignore this rule solely on the basis of a third party’s oral representations of having a
good title thereto.

Before the Court is a Petition for Review on Certiorari of the October 13, 2006 Decision of the Court of Appeals (CA)
in CA-G.R. CV No. 62425. The dispositive portion of the assailed Decision reads:

WHEREFORE, premises considered, the May 4, 1998 Decision of the Regional Trial Court of Pasig City, Branch
168, in Civil Case No. 63561, is hereby AFFIRMED.

SO ORDERED. 1

Factual Antecedents

6
Respondent Special Steel Products, Inc. (SSPI) is a private domestic corporation selling steel products. Its co-
respondent Augusto L. Pardo (Pardo) is SSPI’s President and majority stockholder. 2

International Copra Export Corporation (Interco) is its regular customer. 3

Jose Isidoro Uy, alias Jolly Uy (Uy), is an Interco employee, in charge of the purchasing department, and the son-in-
4 

law of its majority stockholder. 5

Petitioner Equitable Banking Corporation (Equitable or bank) is a private domestic corporation engaged in
banking and is the depository bank of Interco and of Uy.
6 

In 1991, SSPI sold welding electrodes to Interco, as evidenced by the following sales invoices:

Sales Invoice No. 65042 dated February 14, 1991 for ₱325,976.34 7

Sales Invoice No. 65842 dated April 11, 1991 for ₱345,412.80 8

Sales Invoice No. 65843 dated April 11, 1991 for ₱313,845.84 9

The due dates for these invoices were March 16, 1991 (for the first sales invoice) and May 11, 1991 (for the others).
The invoices provided that Interco would pay interest at the rate of 36% per annum in case of delay.

In payment for the above welding electrodes, Interco issued three checks payable to the order of SSPI on July 10,
1991, July 16, 1991, and July 29, 1991. Each check was crossed with the notation "account payee only" and was
10  11  12 

drawn against Equitable. The records do not identify the signatory for these three checks, or explain how Uy,
Interco’s purchasing officer, came into possession of these checks.

The records only disclose that Uy presented each crossed check to Equitable on the day of its issuance and claimed
that he had good title thereto. He demanded the deposit of the checks in his personal accounts in Equitable,
13 

Account No. 18841-2 and Account No. 03474-0. 14

Equitable acceded to Uy’s demands on the assumption that Uy, as the son-in-law of Interco’s majority
stockholder, was acting pursuant to Interco’s orders. The bank also relied on Uy’s status as a valued client. Thus,
15  16 

Equitable accepted the checks for deposit in Uy’s personal accounts and stamped "ALL PRIOR ENDORSEMENT
17 

AND/OR LACK OF ENDORSEMENT GUARANTEED" on their dorsal portion. Uy promptly withdrew the proceeds
18 

of the checks.

In October 1991, SSPI reminded Interco of the unpaid welding electrodes, amounting to ₱985,234.98. It reiterated
19 

its demand on January 14, 1992. SSPI explained its immediate need for payment as it was experiencing some
20 

financial crisis of its own. Interco replied that it had already issued three checks payable to SSPI and drawn against
Equitable. SSPI denied receipt of these checks.

On August 6, 1992, SSPI requested information from Equitable regarding the three checks. The bank refused to
give any information invoking the confidentiality of deposits. 21

The records do not disclose the circumstances surrounding Interco’s and SSPI’s eventual discovery of Uy’s scheme.
Nevertheless, it was determined that Uy, not SSPI, received the proceeds of the three checks that were payable to
SSPI. Thus, on June 30, 1993 (twenty-three months after the issuance of the three checks), Interco finally paid the
value of the three checks to SSPI, plus a portion of the accrued interests. Interco refused to pay the entire accrued
interest of ₱767,345.64 on the ground that it was not responsible for the delay. Thus, SSPI was unable to collect
₱437,040.35 (at the contracted rate of 36% per annum) in interest income. 22

SSPI and its president, Pardo, filed a complaint for damages with application for a writ of preliminary attachment
against Uy and Equitable Bank. The complaint alleged that the three crossed checks, all payable to the order of
SSPI and with the notation "account payee only," could be deposited and encashed by SSPI only. However, due to
Uy’s fraudulent representations, and Equitable’s indispensable connivance or gross negligence, the restrictive
nature of the checks was ignored and the checks were deposited in Uy’s account. Had the defendants not diverted
the three checks in July 1991, the plaintiffs could have used them in their business and earned money from them.
Thus, the plaintiffs prayed for an award of actual damages consisting of the unrealized interest income from the
proceeds of the checks for the two-year period that the defendants withheld the proceeds from them (from July 1991
up to June 1993). 23

In his personal capacity, Pardo claimed an award of ₱3 million as moral damages from the defendants. He allegedly
suffered hypertension, anxiety, and sleepless nights for fear that the government would charge him for tax evasion
or money laundering. He maintained that defendants’ actions amounted to money laundering and that it unfairly
implicated his company in the scheme. As for his fear of tax evasion, Pardo explained that the Bureau of Internal

7
Revenue might notice a discrepancy between the financial reports of Interco (which might have reported the checks
as SSPI’s income in 1991) and those of SSPI (which reported the income only in 1993). Since Uy and Equitable
were responsible for Pardo’s worries, they should compensate him jointly and severally therefor. 24

SSPI and Pardo also prayed for exemplary damages and attorney’s fees. 25

In support of their application for preliminary attachment, the plaintiffs alleged that the defendants are guilty of fraud
in incurring the obligation upon which the action was brought and that there is no sufficient security for the claim
sought to be enforced in this action. 26

The trial court granted plaintiffs’ application. It issued the writ of preliminary attachment on September 20,
27 

1993, upon the filing of plaintiffs’ bond for ₱500,000.00. The sheriff served and implemented the writ against the
28 

personal properties of both defendants. 29

Upon Equitable’s motion and filing of a counter-bond, however, the trial court eventually discharged the
attachment against it.
30  31

Equitable then argued for the dismissal of the complaint for lack of cause of action. It maintained that interest
income is due only when it is expressly stipulated in writing. Since Equitable and SSPI did not enter into any
contract, Equitable is not liable for damages, in the form of unobtained interest income, to SSPI. Moreover, SSPI’s
32 

acceptance of Interco’s payment on the sales invoices is a waiver or extinction of SSPI’s cause of action based on
the three checks. 33

Equitable further argued that it is not liable to SSPI because it accepted the three crossed checks in good
faith. Equitable averred that, due to Uy’s close relations with the drawer of the checks, the bank had basis to
34 

assume that the drawer authorized Uy to countermand the original order stated in the check (that it can only be
deposited in the named payee’s account). Since only Uy is responsible for the fraudulent conversion of the checks,
he should reimburse Equitable for any amounts that it may be made liable to plaintiffs. 35

The bank counter-claimed that SSPI is liable to it in damages for the wrongful and malicious attachment of
Equitable’s personal properties. The bank maintained that SSPI knew that the allegation of fraud against the bank is
a falsehood. Further, the bank is financially capable to meet the plaintiffs’ claim should the latter receive a favorable
judgment. SSPI was aware that the preliminary attachment against the bank was unnecessary, and intended only to
humiliate or destroy the bank’s reputation. 36

Meanwhile, Uy answered that the checks were negotiated to him; that he is a holder for value of the checks and that
he has a good title thereto. He did not, however, explain how he obtained the checks, from whom he obtained his
37 

title, and the value for which he received them. During trial, Uy did not present any evidence but adopted Equitable’s
evidence as his own.

Ruling of the Regional Trial Court  38

The RTC clarified that SSPI’s cause of action against Uy and Equitable is for quasi-delict. SSPI is not seeking to
enforce payment on the undelivered checks from the defendants, but to recover the damage that it sustained from
the wrongful non-delivery of the checks. 39

The crossed checks belonged solely to the payee named therein, SSPI. Since SSPI did not authorize anyone to
receive payment in its behalf, Uy clearly had no title to the checks and Equitable had no right to accept the said
checks from Uy. Equitable was negligent in permitting Uy to deposit the checks in his account without verifying Uy’s
right to endorse the crossed checks. The court reiterated that banks have the duty to scrutinize the checks
deposited with it, for a determination of their genuineness and regularity. The law holds banks to a high standard
because banks hold themselves out to the public as experts in the field. Thus, the trial court found Equitable’s
explanation regarding Uy’s close relations with the drawer unacceptable. 40

Uy’s conversion of the checks and Equitable’s negligence make them liable to compensate SSPI for the actual
damage it sustained. This damage consists of the income that SSPI failed to realize during the delay. The trial court
41 

then equated this unrealized income with the interest income that SSPI failed to collect from Interco. Thus, it ordered
Uy and Equitable to pay, jointly and severally, the amount of ₱437,040.35 to SSPI as actual damages. 42

It also ordered the defendants to pay exemplary damages of ₱500,000.00, attorney’s fees amounting to
₱200,000.00, as well as costs of suit. 43

The trial court likewise found merit in Pardo’s claim for moral damages. It found that Pardo suffered anxiety,
sleepless nights, and hypertension in fear that he would face criminal prosecution. The trial court awarded Pardo the
amount of ₱3 million in moral damages. 44

8
The dispositive portion of the trial court’s Decision reads:

WHEREFORE, judgment is hereby rendered in favor of plaintiffs Special Steel Products, Inc., and Augusto L. Pardo
and against defendants Equitable Banking Corporation [and] Jose Isidoro Uy, alias "Jolly Uy," ordering defendants
to jointly and severally pay plaintiffs the following:

1. ₱437,040.35 as actual damages;

2. ₱3,000,000.00 as moral damages to Augusto L. Pardo;

3. ₱500,000.00 as exemplary damages;

4. ₱200,000.00 as attorney’s fees; and

5. Costs of suit.

Defendant EBC’s counterclaim is hereby DISMISSED for lack of factual and legal basis.

Likewise, the crossclaim filed by defendant EBC against defendant Jose Isidoro Uy and the crossclaim filed by
defendant Jose Isidoro Uy against defendant EBC are hereby DISMISSED for lack of factual and legal basis.

SO ORDERED.

Pasig City, May 4, 1998. 45

The trial court denied Equitable’s motion for reconsideration in its Order dated November 19, 1998. 46

Only Equitable appealed to the CA, reiterating its defenses below.

47 

Appealed Ruling of the Court of Appeals 48

The appellate court found no merit in Equitable’s appeal.

It affirmed the trial court’s ruling that SSPI had a cause of action for quasi-delict against Equitable. The CA noted
49 

that the three checks presented by Uy to Equitable were crossed checks, and strictly made payable to SSPI only.
This means that the checks could only be deposited in the account of the named payee. Thus, the CA found that
50 

Equitable had the responsibility of ensuring that the crossed checks are deposited in SSPI’s account only. Equitable
violated this duty when it allowed the deposit of the crossed checks in Uy’s account.51

The CA found factual and legal basis to affirm the trial court’s award of moral damages in favor of Pardo. 52

It likewise affirmed the award of exemplary damages and attorney’s fees in favor of SSPI. 53

Issues

1. Whether SSPI has a cause of action against Equitable for quasi-delict;

2. Whether SSPI can recover, as actual damages, the stipulated 36% per annum interest from Equitable;

3. Whether speculative fears and imagined scenarios, which cause sleepless nights, may be the basis for the award
of moral damages; and

4. Whether the attachment of Equitable’s personal properties was wrongful.

Our Ruling

SSPI’s cause of action

This case involves a complaint for damages based on quasi-delict. SSPI asserts that it did not receive prompt
payment from Interco in July 1991 because of Uy’s wilful and illegal conversion of the checks payable to SSPI, and
of Equitable’s gross negligence, which facilitated Uy’s actions. The combined actions of the defendants deprived
SSPI of interest income on the said moneys from July 1991 until June 1993. Thus, SSPI claims damages in the form
of interest income for the said period from the parties who wilfully or negligently withheld its money from it.

9
Equitable argues that SSPI cannot assert a right against the bank based on the undelivered checks. It cites
54 

provisions from the Negotiable Instruments Law and the case of Development Bank of Rizal v. Sima Wei to argue 55 

that a payee, who did not receive the check, cannot require the drawee bank to pay it the sum stated on the checks.

Equitable’s argument is misplaced and beside the point. SSPI’s cause of action is not based on the three checks.
SSPI does not ask Equitable or Uy to deliver to it the proceeds of the checks as the rightful payee. SSPI does not
assert a right based on the undelivered checks or for breach of contract. Instead, it asserts a cause of action based
on quasi-delict. A quasi-delict is an act or omission, there being fault or negligence, which causes damage to
another. Quasi-delicts exist even without a contractual relation between the parties. The courts below correctly ruled
that SSPI has a cause of action for quasi-delict against Equitable.

The checks that Interco issued in favor of SSPI were all crossed, made payable to SSPI’s order, and contained the
notation "account payee only." This creates a reasonable expectation that the payee alone would receive the
proceeds of the checks and that diversion of the checks would be averted. This expectation arises from the
accepted banking practice that crossed checks are intended for deposit in the named payee’s account only and no
other. At the very least, the nature of crossed checks should place a bank on notice that it should exercise more
56 

caution or expend more than a cursory inquiry, to ascertain whether the payee on the check has authorized the
holder to deposit the same in a different account. It is well to remember that "[t]he banking system has become an
indispensable institution in the modern world and plays a vital role in the economic life of every civilized society.
Whether as mere passive entities for the safe-keeping and saving of money or as active instruments of business
and commerce, banks have attained an [sic] ubiquitous presence among the people, who have come to regard
them with respect and even gratitude and, above all, trust and confidence. In this connection, it is important that
banks should guard against injury attributable to negligence or bad faith on its part. As repeatedly emphasized,
since the banking business is impressed with public interest, the trust and confidence of the public in it is of
paramount importance. Consequently, the highest degree of diligence is expected, and high standards of integrity
and performance are required of it." 57

Equitable did not observe the required degree of diligence expected of a banking institution under the existing
factual circumstances.

The fact that a person, other than the named payee of the crossed check, was presenting it for deposit should have
put the bank on guard. It should have verified if the payee (SSPI) authorized the holder (Uy) to present the same in
its behalf, or indorsed it to him. Considering however, that the named payee does not have an account with
Equitable (hence, the latter has no specimen signature of SSPI by which to judge the genuineness of its
indorsement to Uy), the bank knowingly assumed the risk of relying solely on Uy’s word that he had a good title to
the three checks. Such misplaced reliance on empty words is tantamount to gross negligence, which is the
"absence of or failure to exercise even slight care or diligence, or the entire absence of care, evincing a thoughtless
disregard of consequences without exerting any effort to avoid them." 58

Equitable contends that its knowledge that Uy is the son-in-law of the majority stockholder of the drawer, Interco,
made it safe to assume that the drawer authorized Uy to countermand the order appearing on the check. In other
words, Equitable theorizes that Interco reconsidered its original order and decided to give the proceeds of the
checks to Uy. That the bank arrived at this conclusion without anything on the face of the checks to support it is
59 

demonstrative of its lack of caution. It is troubling that Equitable proceeded with the transaction based only on its
knowledge that Uy had close relations with Interco. The bank did not even make inquiries with the drawer, Interco
(whom the bank considered a "valued client"), to verify Uy’s representation. The banking system is placed in peril
when bankers act out of blind faith and empty promises, without requiring proof of the assertions and without
making the appropriate inquiries. Had it only exercised due diligence, Equitable could have saved both Interco and
the named payee, SSPI, from the trouble that the bank’s mislaid trust wrought for them.

Equitable’s pretension that there is nothing under the circumstances that rendered Uy’s title to the checks
questionable is outrageous. These are crossed checks, whose manner of discharge, in banking practice, is
restrictive and specific. Uy’s name does not appear anywhere on the crossed checks. Equitable, not knowing the
named payee on the check, had no way of verifying for itself the alleged genuineness of the indorsement to Uy. The
checks bear nothing on their face that supports the belief that the drawer gave the checks to Uy. Uy’s relationship to
Interco’s majority stockholder will not justify disregarding what is clearly ordered on the checks.

Actual damages

For its role in the conversion of the checks, which deprived SSPI of the use thereof, Equitable is solidarily liable with
Uy to compensate SSPI for the damages it suffered.

Among the compensable damages are actual damages, which encompass the value of the loss sustained by the
plaintiff, and the profits that the plaintiff failed to obtain. Interest payments, which SSPI claims, fall under the second
60 

category of actual damages.

10
SSPI computed its claim for interest payments based on the interest rate stipulated in its contract with Interco. It
explained that the stipulated interest rate is the actual interest income it had failed to obtain from Interco due to the
defendants’ tortious conduct.

The Court finds the application of the stipulated interest rate erroneous.

SSPI did not recover interest payments at the stipulated rate from Interco because it agreed that the delay was not
Interco’s fault, but that of the defendants’. If that is the case, then Interco is not in delay (at least not after issuance
of the checks) and the stipulated interest payments in their contract did not become operational. If Interco is not
liable to pay for the 36% per annum interest rate, then SSPI did not lose that income. SSPI cannot lose something
that it was not entitled to in the first place. Thus, SSPI’s claim that it was entitled to interest income at the rate
stipulated in its contract with Interco, as a measure of its actual damage, is fallacious.

More importantly, the provisions of a contract generally take effect only among the parties, their assigns and
heirs. SSPI cannot invoke the contractual stipulation on interest payments against Equitable because it is neither a
61 

party to the contract, nor an assignee or an heir to the contracting parties.

Nevertheless, it is clear that defendants’ actions deprived SSPI of the present use of its money for a period of two
years. SSPI is therefore entitled to obtain from the tortfeasors the profits that it failed to obtain from July 1991 to
June 1993. SSPI should recover interest at the legal rate of 6% per annum, this being an award for damages based
62 

on quasi-delict and not for a loan or forbearance of money.

Moral damages

Both the trial and appellate courts awarded Pardo ₱3 million in moral damages. Pardo claimed that he was
frightened, anguished, and seriously anxious that the government would prosecute him for money laundering and
tax evasion because of defendants’ actions. In other words, he was worried about the repercussions that
63 

defendants’ actions would have on him.

Equitable argues that Pardo’s fears are all imagined and should not be compensated. The bank points out that none
of Pardo’s fears panned out. 64

Moral damages are recoverable only when they are the proximate result of the defendant’s wrongful act or
omission. Both the trial and appellate courts found that Pardo indeed suffered as a result of the diversion of the
65 

three checks. It does not matter that the things he was worried and anxious about did not eventually materialize. It is
rare for a person, who is beset with mounting problems, to sift through his emotions and distinguish which fears or
anxieties he should or should not bother with. So long as the injured party’s moral sufferings are the result of the
defendants’ actions, he may recover moral damages.

The Court, however, finds the award of ₱3 million excessive. Moral damages are given not to punish the defendant
but only to give the plaintiff the means to assuage his sufferings with diversions and recreation. We find that the
66 

award of ₱50,000.00 as moral damages is reasonable under the circumstances.

67 

Equitable to recover amounts from Uy

Equitable then insists on the allowance of their cross-claim against Uy. The bank argues that it was Uy who was
enriched by the entire scheme and should reimburse Equitable for whatever amounts the Court might order it to pay
in damages to SSPI. 68

Equitable is correct. There is unjust enrichment when (1) a person is unjustly benefited, and (2) such benefit is
derived at the expense of or with damages to another. In the instant case, the fraudulent scheme concocted by Uy
69 

allowed him to improperly receive the proceeds of the three crossed checks and enjoy the profits from these
proceeds during the entire time that it was withheld from SSPI. Equitable, through its gross negligence and mislaid
trust on Uy, became an unwitting instrument in Uy’s scheme. Equitable’s fault renders it solidarily liable with Uy,
insofar as respondents are concerned. Nevertheless, as between Equitable and Uy, Equitable should be allowed to
recover from Uy whatever amounts Equitable may be made to pay under the judgment. It is clear that Equitable did
not profit in Uy’s scheme. Disallowing Equitable’s cross-claim against Uy is tantamount to allowing Uy to unjustly
enrich himself at the expense of Equitable. For this reason, the Court allows Equitable’s cross-claim against Uy.

Preliminary attachment

Equitable next assails as error the trial court’s dismissal of its counter-claim for wrongful preliminary attachment. It
maintains that, contrary to SSPI’s allegation in its application for the writ, there is no showing whatsoever that
Equitable was guilty of fraud in allowing Uy to deposit the checks. Thus, the trial court should not have issued the
writ of preliminary attachment in favor of SSPI. The wrongful attachment compelled Equitable to incur expenses for

11
a counter-bond, amounting to ₱30,204.26, and caused it to sustain damage, amounting to ₱5 million, to its goodwill
and business credit. 70

SSPI submitted the following affidavit in support of its application for a writ of preliminary attachment:

I, Augusto L. Pardo, of legal age, under oath hereby depose and declare:

1. I am one of the plaintiffs in the above-entitled case; the other plaintiff is our family corporation, Special
Steel Products, Inc., of which I am the president and majority stockholder; I caused the preparation of the
foregoing Complaint, the allegations of which I have read, and which I hereby affirm to be true and correct
out of my own personal knowledge;

2. The corporation and I have a sufficient cause of action against defendants Isidoro Uy alias Jolly Uy and
Equitable Banking Corporation, who are guilty of fraud in incurring the obligation upon which this action is
brought, as particularly alleged in the Complaint, which allegations I hereby adopt and reproduce herein;

3. There is no sufficient security for our claim in this action and that the amount due us is as much as the
sum for which the order is granted above all legal counterclaims;

4. We are ready and able to put up a bond executed to the defendants in an amount to be fixed by the
Court[,] conditioned on the payment of all costs[,] which may be adjudged to defendants[,] and all
damages[,] which they may sustain by reason of the attachment of the court, should [the court] finally
adjudge that we are not entitled thereto. 71

The complaint (to which the supporting affidavit refers) cites the following factual circumstances to justify
SSPI’s application:

6. x x x Yet, notwithstanding the fact that SPECIAL STEEL did not open an account with EQUITABLE BANK
as already alleged, thru its connivance with defendant UY in his fraudulent scheme to defraud SPECIAL
STEEL, or at least thru its gross negligence EQUITABLE BANK consented to or allowed the opening of
Account No. 18841-2 at its head office and Account No. 03474-0 at its Ermita Branch in the name of
SPECIAL STEEL without the latter’s knowledge, let alone authority or consent, but obviously on the bases of
spurious or falsified documents submitted by UY or under his authority, which documents EQUITABLE
BANK did not bother to verify or check their authenticity with SPECIAL STEEL. 72

xxxx

9. On August 6, 1992, plaintiffs, thru counsel, wrote EQUITABLE BANK about the fraudulent transactions
involving the aforesaid checks, which could not have been perpetrated without its indispensable participation
and cooperation, or gross negligence, and therein solicited its cooperation in securing information as to the
anomalous and irregular opening of the false accounts maintained in SPECIAL STEEL’s name, but
EQUITABLE BANK malevolently shirking from its responsibility to prevent the further perpetration of fraud,
conveniently, albeit unjustifiably, invoked the confidentiality of the deposits and refused to give any
information, and accordingly denied SPECIAL STEEL’s valid request, thereby knowingly shielding the
identity of the ma[le]factors involved [in] the unlawful and fraudulent transactions.73

The above affidavit and the allegations of the complaint are bereft of specific and definite allegations of fraud
against Equitable that would justify the attachment of its properties. In fact, SSPI admits its uncertainty whether
Equitable’s participation in the transactions involved fraud or was a result of its negligence. Despite such uncertainty
with respect to Equitable’s participation, SSPI applied for and obtained a preliminary attachment of Equitable’s
properties on the ground of fraud. We believe that such preliminary attachment was wrongful. "[A] writ of preliminary
attachment is too harsh a provisional remedy to be issued based on mere abstractions of fraud. Rather, the rules
require that for the writ to issue, there must be a recitation of clear and concrete factual circumstances manifesting
that the debtor practiced fraud upon the creditor at the time of the execution of their agreement in that said debtor
had a preconceived plan or intention not to pay the creditor." No proof was adduced tending to show that Equitable
74 

had a preconceived plan not to pay SSPI or had knowingly participated in Uy’s scheme.

That the plaintiffs eventually obtained a judgment in their favor does not detract from the wrongfulness of the
preliminary attachment.  While "the evidence warrants [a] judgment in favor of [the] applicant, the proofs may
1âwphi1

nevertheless also establish that said applicant’s proffered ground for attachment was inexistent or specious, and
hence, the writ should not have issued at all x x x." 75

For such wrongful preliminary attachment, plaintiffs may be held liable for damages. However, Equitable is entitled
only to such damages as its evidence would allow, for the wrongfulness of an attachment does not automatically
76 

warrant the award of damages. The debtor still has the burden of proving the nature and extent of the injury that it
suffered by reason of the wrongful attachment. 77

12
The Court has gone over the records and found that Equitable has duly proved its claim for, and is entitled to
recover, actual damages. In order to lift the wrongful attachment of Equitable’s properties, the bank was compelled
to pay the total amount of ₱30,204.26 in premiums for a counter-bond. However, Equitable failed to prove that it
78 

sustained damage to its "goodwill and business credit" in consequence of the alleged wrongful attachment. There
was no proof of Equitable’s contention that respondents’ actions caused it public embarrassment and a bank run.

WHEREFORE, premises considered, the Petition is PARTIALLY GRANTED. The assailed October 13, 2006
Decision of the Court of Appeals in CA-G.R. CV No. 62425 is MODIFIED by:

1. REDUCING the award of actual damages to respondents to the rate of 6% per annum of the value of the
three checks from July 1991 to June 1993 or a period of twenty-three months;

2. REDUCING the award of moral damages in favor of Augusto L. Pardo from ₱3,000,000.00 to ₱
50,000.00; and

3. REVERSING the dismissal of Equitable Banking Corporation’s cross-claim against Jose Isidoro Uy, alias
Jolly Uy. Jolly Uy is hereby ORDERED to REIMBURSE Equitable Banking Corporation the amounts that the
latter will pay to respondents.

Additionally, the Court hereby REVERSES the dismissal of Equitable Banking Corporation’s counterclaim for
damages against Special Steel Products, Inc. This Court ORDERS Special Steel Products, Inc. to PAY Equitable
Banking Corporation actual damages in the total amount of ₱30,204.36, for the wrongful preliminary attachment of
its properties.

The rest of the assailed Decision is AFFIRMED.

SO ORDERED.

G.R. No. L-33722 July 29, 1988

FEDERICO YLARDE and ADELAIDA DORONIO petitioners,

vs.
EDGARDO AQUINO, MAURO SORIANO and COURT OF APPEALS, respondents.

Buenaventura C. Evangelista for petitioners.

Modesto V. Cabanela for respondent Edgardo Aquino.

Manuel P. Pastor for respondent Mauro Soriano.

GANCAYCO, J.:

In this petition for review on certiorari seeking the reversal of the decision of the Court of Appeals in CA-G.R. No. 36390-R entitled "Federico Ylarde, et al. vs.
Edgardo Aquino, et al.," a case which originated from the Court of First Instance of Pangasinan, We are again caned upon determine the responsibility of the
principals and teachers towards their students or pupils.

In 1963, private respondent Mariano Soriano was the principal of the Gabaldon Primary School, a public educational
institution located in Tayug, Pangasinan-Private respondent Edgardo Aquino was a teacher therein. At that time, the
school was fittered with several concrete blocks which were remnants of the old school shop that was destroyed in
World War II. Realizing that the huge stones were serious hazards to the schoolchildren, another teacher by the
name of Sergio Banez started burying them one by one as early as 1962. In fact, he was able to bury ten of these
blocks all by himself.

Deciding to help his colleague, private respondent Edgardo Aquino gathered eighteen of his male pupils, aged ten
to eleven, after class dismissal on October 7, 1963. Being their teacher-in-charge, he ordered them to dig beside a
one-ton concrete block in order to make a hole wherein the stone can be buried. The work was left unfinished. The
following day, also after classes, private respondent Aquino called four of the original eighteen pupils to continue the
digging. These four pupils — Reynaldo Alonso, Francisco Alcantara, Ismael Abaga and Novelito Ylarde, dug until
the excavation was one meter and forty centimeters deep. At this point, private respondent Aquino alone continued
digging while the pupils remained inside the pit throwing out the loose soil that was brought about by the digging.

13
When the depth was right enough to accommodate the concrete block, private respondent Aquino and his four
pupils got out of the hole. Then, said private respondent left the children to level the loose soil around the open hole
while he went to see Banez who was about thirty meters away. Private respondent wanted to borrow from Banez
the key to the school workroom where he could get some rope. Before leaving. , private respondent Aquino
allegedly told the children "not to touch the stone."

A few minutes after private respondent Aquino left, three of the four kids, Alonso, Alcantara and Ylarde, playfully
jumped into the pit. Then, without any warning at all, the remaining Abaga jumped on top of the concrete block
causing it to slide down towards the opening. Alonso and Alcantara were able to scramble out of the excavation on
time but unfortunately fo Ylarde, the concrete block caught him before he could get out, pinning him to the wall in a
standing position. As a result thereof, Ylarde sustained the following injuries:

1. Contusion with hematoma, left inguinal region and suprapubic region.

2. Contusion with ecchymosis entire scrotal region.

3. Lacerated wound, left lateral aspect of penile skin with phimosis

4. Abrasion, gluteal region, bilateral.

5. Intraperitoneal and extrapertitoneal extravasation of blood and urine about 2 liters.

6. Fracture, simple, symphesis pubis

7. Ruptured (macerated) urinary bladder with body of bladder almost entirely separated from its
neck.

REMARKS:

1. Above were incurred by crushing injury.

2. Prognosis very poor.

(Sgd.) MELQUIADES A. BRAVO

Physician on Duty.  1

Three days later, Novelito Ylarde died.

Ylarde's parents, petitioners in this case, filed a suit for damages against both private respondents Aquino and
Soriano. The lower court dismissed the complaint on the following grounds: (1) that the digging done by the pupils is
in line with their course called Work Education; (2) that Aquino exercised the utmost diligence of a very cautious
person; and (3) that the demise of Ylarde was due to his own reckless imprudence.  2

On appeal, the Court of Appeals affirmed the Decision of the lower court.

Petitioners base their action against private respondent Aquino on Article 2176 of the Civil Code for his alleged
negligence that caused their son's death while the complaint against respondent Soriano as the head of school is
founded on Article 2180 of the same Code.

Article 2176 of the Civil Code provides:

Art. 2176. Whoever by act or omission causes damage to another, there being fault or negligence, is
obliged to pay for the damage done. Such fault or negligence, if there is no pre- existing contractual
relation between the parties, is called a quasi-delict and is governed by the provisions of this
Chapter.

On the other hand, the applicable provision of Article 2180 states:

Art. 2180. x x x

xxx xxx xxx

Lastly, teachers or heads of establishments of arts and trades shall be liable for damages caused by
their pupils and students or apprentices, so long as they remain in their custody.  3

14
The issue to be resolved is whether or not under the cited provisions, both private respondents can be held liable for
damages.

As regards the principal, We hold that he cannot be made responsible for the death of the child Ylarde, he being the
head of an academic school and not a school of arts and trades. This is in line with Our ruling in Amadora vs. Court
of Appeals,   wherein this Court thoroughly discussed the doctrine that under Article 2180 of the Civil Code, it is only
4

the teacher and not the head of an academic school who should be answerable for torts committed by their
students. This Court went on to say that in a school of arts and trades, it is only the head of the school who can be
held liable. In the same case, We explained:

After an exhaustive examination of the problem, the Court has come to the conclusion that the
provision in question should apply to all schools, academic as well as non-academic. Where the
school is academic rather than technical or vocational in nature, responsibility for the tort committed
by the student will attach to the teacher in charge of such student, following the first part of the
provision. This is the general rule. In the case of establishments of arts and trades, it is the head
thereof, and only he, who shall be held liable as an exception to the general rule. In other words,
teachers in general shall be liable for the acts of their students except where the school is technical
in nature, in which case it is the head thereof who shall be answerable. Following the canon
of reddendo singula sinquilis 'teachers' should apply to the words "pupils and students' and 'heads of
establishments of arts and trades to the word "apprentices."

Hence, applying the said doctrine to this case, We rule that private respondent Soriano, as principal, cannot be held
liable for the reason that the school he heads is an academic school and not a school of arts and trades. Besides,
as clearly admitted by private respondent Aquino, private respondent Soriano did not give any instruction regarding
the digging.

From the foregoing, it can be easily seen that private respondent Aquino can be held liable under Article 2180 of the
Civil Code as the teacher-in-charge of the children for being negligent in his supervision over them and his failure to
take the necessary precautions to prevent any injury on their persons. However, as earlier pointed out, petitioners
base the alleged liability of private respondent Aquino on Article 2176 which is separate and distinct from that
provided for in Article 2180.

With this in mind, the question We need to answer is this: Were there acts and omissions on the part of private
respondent Aquino amounting to fault or negligence which have direct causal relation to the death of his pupil
Ylarde? Our answer is in the affirmative. He is liable for damages.

From a review of the record of this case, it is very clear that private respondent Aquino acted with fault and gross
negligence when he: (1) failed to avail himself of services of adult manual laborers and instead utilized his pupils
aged ten to eleven to make an excavation near the one-ton concrete stone which he knew to be a very hazardous
task; (2) required the children to remain inside the pit even after they had finished digging, knowing that the huge
block was lying nearby and could be easily pushed or kicked aside by any pupil who by chance may go to the
perilous area; (3) ordered them to level the soil around the excavation when it was so apparent that the huge stone
was at the brink of falling; (4) went to a place where he would not be able to check on the children's safety; and (5)
left the children close to the excavation, an obviously attractive nuisance.

The negligent act of private respondent Aquino in leaving his pupils in such a dangerous site has a direct causal
connection to the death of the child Ylarde. Left by themselves, it was but natural for the children to play around.
Tired from the strenuous digging, they just had to amuse themselves with whatever they found. Driven by their
playful and adventurous instincts and not knowing the risk they were facing three of them jumped into the hole while
the other one jumped on the stone. Since the stone was so heavy and the soil was loose from the digging, it was
also a natural consequence that the stone would fall into the hole beside it, causing injury on the unfortunate child
caught by its heavy weight. Everything that occurred was the natural and probable effect of the negligent acts of
private respondent Aquino. Needless to say, the child Ylarde would not have died were it not for the unsafe situation
created by private respondent Aquino which exposed the lives of all the pupils concerned to real danger.

We cannot agree with the finding of the lower court that the injuries which resulted in the death of the child Ylarde
were caused by his own reckless imprudence, It should be remembered that he was only ten years old at the time of
the incident, As such, he is expected to be playful and daring. His actuations were natural to a boy his age. Going
back to the facts, it was not only him but the three of them who jumped into the hole while the remaining boy jumped
on the block. From this, it is clear that he only did what any other ten-year old child would do in the same situation.

In ruling that the child Ylarde was imprudent, it is evident that the lower court did not consider his age and maturity.
This should not be the case. The degree of care required to be exercised must vary with the capacity of the person
endangered to care for himself. A minor should not be held to the same degree of care as an adult, but his conduct
should be judged according to the average conduct of persons of his age and experience.   The standard of conduct
5

to which a child must conform for his own protection is that degree of care ordinarily exercised by children of the

15
same age, capacity, discretion, knowledge and experience under the same or similar circumstances.   Bearing this
6

in mind, We cannot charge the child Ylarde with reckless imprudence.

The court is not persuaded that the digging done by the pupils can pass as part of their Work Education. A single
glance at the picture showing the excavation and the huge concrete block   would reveal a dangerous site requiring
7

the attendance of strong, mature laborers and not ten-year old grade-four pupils. We cannot comprehend why the
lower court saw it otherwise when private respondent Aquino himself admitted that there were no instructions from
the principal requiring what the pupils were told to do. Nor was there any showing that it was included in the lesson
plan for their Work Education. Even the Court of Appeals made mention of the fact that respondent Aquino decided
all by himself to help his co-teacher Banez bury the concrete remnants of the old school shop.   Furthermore, the
8

excavation should not be placed in the category of school gardening, planting trees, and the like as these
undertakings do not expose the children to any risk that could result in death or physical injuries.

The contention that private respondent Aquino exercised the utmost diligence of a very cautious person is certainly
without cogent basis. A reasonably prudent person would have foreseen that bringing children to an excavation site,
and more so, leaving them there all by themselves, may result in an accident. An ordinarily careful human being
would not assume that a simple warning "not to touch the stone" is sufficient to cast away all the serious danger that
a huge concrete block adjacent to an excavation would present to the children. Moreover, a teacher who stands
in loco parentis to his pupils would have made sure that the children are protected from all harm in his company.

We close by categorically stating that a truly careful and cautious person would have acted in all contrast to the way
private respondent Aquino did. Were it not for his gross negligence, the unfortunate incident would not have
occurred and the child Ylarde would probably be alive today, a grown- man of thirty-five. Due to his failure to take
the necessary precautions to avoid the hazard, Ylarde's parents suffered great anguish all these years.

WHEREFORE, in view of the foregoing, the petition is hereby GRANTED and the questioned judgment of the
respondent court is REVERSED and SET ASIDE and another judgment is hereby rendered ordering private
respondent Edagardo Aquino to pay petitioners the following:

(1) Indemnity for the death of Child Ylarde P30,000.00

(2) Exemplary damages 10,000.00

(3) Moral damages 20,000.00

SO ORDERED.

G.R. No. 193577               September 7, 2011

ANTONIO FRANCISCO, substituted by his heirs: NELIA E.S. FRANCISCO, EMILIA F. BERTIZ, REBECCA E.S.
FRANCISCO, ANTONIO E.S. FRANCISCO, JR., SOCORRO F. FONTANILLA, and JOVITO E.S.
FRANCISCO, Petitioners,
vs.
CHEMICAL BULK CARRIERS, INCORPORATED, Respondent.

DECISION

CARPIO, J.:

The Case

This is a petition for review1 of the 31 May 2010 Decision2 and 31 August 2010 Resolution3 of the Court of Appeals in
CA G.R. CV No. 63591. In its 31 May 2010 Decision, the Court of Appeals set aside the 21 August 1998
Decision4 of the Regional Trial of Pasig City, Branch 71 (trial court), and ordered petitioner Antonio Francisco
(Francisco) to pay respondent Chemical Bulk Carriers, Incorporated (CBCI) ₱1,119,905 as actual damages. In its 31
August 2010 Resolution, the Court of Appeals denied Francisco’s motion for reconsideration.

The Facts

Since 1965, Francisco was the owner and manager of a Caltex station in Teresa, Rizal. Sometime in March 1993,
four persons, including Gregorio Bacsa (Bacsa), came to Francisco’s Caltex station and introduced themselves as
employees of CBCI. Bacsa offered to sell to Francisco a certain quantity of CBCI’s diesel fuel.
16
After checking Bacsa’s identification card, Francisco agreed to purchase CBCI’s diesel fuel. Francisco imposed the
following conditions for the purchase: (1) that Petron Corporation (Petron) should deliver the diesel fuel to Francisco
at his business address which should be properly indicated in Petron’s invoice; (2) that the delivery tank is sealed;
and (3) that Bacsa should issue a separate receipt to Francisco.

The deliveries started on 5 April 1993 and lasted for ten months, or up to 25 January 1994. 5 There were 17
deliveries to Francisco and all his conditions were complied with.

In February 1996, CBCI sent a demand letter to Francisco regarding the diesel fuel delivered to him but which had
been paid for by CBCI.6 CBCI demanded that Francisco pay CBCI ₱1,053,527 for the diesel fuel or CBCI would file
a complaint against him in court. Francisco rejected CBCI’s demand.

On 16 April 1996, CBCI filed a complaint for sum of money and damages against Francisco and other unnamed
defendants.7 According to CBCI, Petron, on various dates, sold diesel fuel to CBCI but these were delivered to and
received by Francisco. Francisco then sold the diesel fuel to third persons from whom he received payment. CBCI
alleged that Francisco acquired possession of the diesel fuel without authority from CBCI and deprived CBCI of the
use of the diesel fuel it had paid for. CBCI demanded payment from Francisco but he refused to pay. CBCI argued
that Francisco should have known that since only Petron, Shell and Caltex are authorized to sell and distribute
petroleum products in the Philippines, the diesel fuel came from illegitimate, if not illegal or criminal, acts. CBCI
asserted that Francisco violated Articles 19,8 20,9 21,10 and 2211 of the Civil Code and that he should be held liable. In
the alternative, CBCI claimed that Francisco, in receiving CBCI’s diesel fuel, entered into an innominate contract
of do ut des (I give and you give) with CBCI for which Francisco is obligated to pay CBCI ₱1,119,905, the value of
the diesel fuel. CBCI also prayed for exemplary damages, attorney’s fees and other expenses of litigation.

On 20 May 1996, Francisco filed a Motion to Dismiss on the ground of forum shopping. 12 CBCI filed its
Opposition.13 In an Order dated 15 November 1996, the trial court denied Francisco’s motion. 14

Thereafter, Francisco filed his Answer.15 Francisco explained that he operates the Caltex station with the help of his
family because, in February 1978, he completely lost his eyesight due to sickness. Francisco claimed that he asked
Jovito, his son, to look into and verify the identity of Bacsa, who introduced himself as a radio operator and
confidential secretary of a certain Mr. Inawat (Inawat), CBCI’s manager for operations. Francisco said he was
satisfied with the proof presented by Bacsa. When asked to explain why CBCI was selling its fuel, Bacsa allegedly
replied that CBCI was in immediate need of cash for the salary of its daily paid workers and for petty cash.
Francisco maintained that Bacsa assured him that the diesel fuel was not stolen property and that CBCI enjoyed a
big credit line with Petron. Francisco agreed to purchase the diesel fuel offered by Bacsa on the following
conditions:

1) Defendant [Francisco] will not accept any delivery if it is not company (Petron) delivered, with his name
and address as shipping point properly printed and indicated in the invoice of Petron, and that the product
on the delivery tank is sealed; [and]

2) Although the original invoice is sufficient evidence of delivery and payment, under ordinary course of
business, defendant still required Mr. Bacsa to issue a separate receipt duly signed by him acknowledging
receipt of the amount stated in the invoice, for and in behalf of CBCI.16

During the first delivery on 5 April 1993, Francisco asked one of his sons to verify whether the delivery truck’s tank
was properly sealed and whether Petron issued the invoice. Francisco said all his conditions were complied with.
There were 17 deliveries made from 5 April 1993 to 25 January 1994 and each delivery was for 10,000 liters of
diesel fuel at ₱65,865.17 Francisco maintained that he acquired the diesel fuel in good faith and for value. Francisco
also filed a counterclaim for exemplary damages, moral damages and attorney’s fees.

In its 21 August 1998 Decision, the trial court ruled in Francisco’s favor and dismissed CBCI’s complaint. The
dispositive portion of the trial court’s 21 August 1998 Decision reads:

WHEREFORE, Judgment is hereby rendered:

1. Dismissing the complaint dated March 13, 1996 with costs.

2. Ordering plaintiff (CBCI), on the counterclaim, to pay defendant the amount of ₱100,000.00 as moral
damages and ₱50,000.00 as and by way of attorney’s fees.

SO ORDERED.18

CBCI appealed to the Court of Appeals.19 CBCI argued that Francisco acquired the diesel fuel from Petron without
legal ground because Bacsa was not authorized to deliver and sell CBCI’s diesel fuel. CBCI added that Francisco

17
acted in bad faith because he should have inquired further whether Bacsa’s sale of CBCI’s diesel fuel was
legitimate.

In its 31 May 2010 Decision, the Court of Appeals set aside the trial court’s 21 August 1998 Decision and ruled in
CBCI’s favor. The dispositive portion of the Court of Appeals’ 31 May 2010 Decision reads:

IN VIEW OF THE FOREGOING, the assailed decision is hereby REVERSED and SET ASIDE. Antonio Francisco is
ordered to pay Chemical Bulk Carriers, Incorporated the amount of ₱1,119,905.00 as actual damages.

SO ORDERED.20

On 15 January 2001, Francisco died. 21 Francisco’s heirs, namely: Nelia E.S. Francisco, Emilia F. Bertiz, Rebecca
E.S. Francisco, Antonio E.S. Francisco, Jr., Socorro F. Fontanilla, and Jovito E.S. Francisco (heirs of Francisco)
filed a motion for substitution.22 The heirs of Francisco also filed a motion for reconsideration. 23 In its 31 August 2010
Resolution, the Court of Appeals granted the motion for substitution but denied the motion for reconsideration.

Hence, this petition.

The Ruling of the Trial Court

The trial court ruled that Francisco was not liable for damages in favor of CBCI because the 17 deliveries were
covered by original and genuine invoices. The trial court declared that Bacsa, as confidential secretary of Inawat,
was CBCI’s authorized representative who received Francisco’s full payment for the diesel fuel. The trial court
stated that if Bacsa was not authorized, CBCI should have sued Bacsa and not Francisco. The trial court also
considered Francisco a buyer in good faith who paid in full for the merchandise without notice that some other
person had a right to or interest in such diesel fuel. The trial court pointed out that good faith affords protection to a
purchaser for value. Finally, since CBCI was bound by the acts of Bacsa, the trial court ruled that CBCI is liable to
pay damages to Francisco.

The Ruling of the Court of Appeals

The Court of Appeals set aside the trial court’s 21 August 1998 Decision and ruled that Bacsa’s act of selling the
diesel fuel to Francisco was his personal act and, even if Bacsa connived with Inawat, the sale does not bind CBCI.

The Court of Appeals declared that since Francisco had been in the business of selling petroleum products for a
considerable number of years, his blindness was not a hindrance for him to transact business with other people.
With his condition and experience, Francisco should have verified whether CBCI was indeed selling diesel fuel and
if it had given Bacsa authority to do so. Moreover, the Court of Appeals stated that Francisco cannot feign good faith
since he had doubts as to the authority of Bacsa yet he did not seek confirmation from CBCI and contented himself
with an improvised receipt. Francisco’s failure to verify Bacsa’s authority showed that he had an ulterior motive. The
receipts issued by Bacsa also showed his lack of authority because it was on a plain sheet of bond paper with no
letterhead or any indication that it came from CBCI. The Court of Appeals ruled that Francisco cannot invoke
estoppel because he was at fault for choosing to ignore the tell-tale signs of petroleum diversion and for not
exercising prudence.

The Court of Appeals also ruled that CBCI was unlawfully deprived of the diesel fuel which, as indicated in the
invoices, CBCI had already paid for. Therefore, CBCI had the right to recover the diesel fuel or its value from
Francisco. Since the diesel fuel can no longer be returned, the Court of Appeals ordered Francisco to give back the
actual amount paid by CBCI for the diesel fuel.

The Issues

The heirs of Francisco raise the following issues:

I. WHETHER THE COURT OF APPEALS ERRED IN NOT FINDING THAT DEFENDANT ANTONIO
FRANCISCO EXERCISED THE REQUIRED DILIGENCE OF A BLIND PERSON IN THE CONDUCT OF
HIS BUSINESS; and

II. WHETHER ON THE BASIS OF THE FACTUAL FINDINGS OF THE COURT OF APPEALS AND THE
TRIAL COURT AND ADMITTED FACTS, IT CAN BE CONCLUDED THAT THE PLAINTIFF APPROVED
EXPRESSLY OR TACITLY THE TRANSACTIONS.24

The Ruling of the Court

The petition has no merit.

18
 Required Diligence of a Blind Person

The heirs of Francisco argue that the Court of Appeals erred when it ruled that Francisco was liable to CBCI
because he failed to exercise the diligence of a good father of a family when he bought the diesel fuel. They argue
that since Francisco was blind, the standard of conduct that was required of him was that of a reasonable person
under like disability. Moreover, they insist that Francisco exercised due care in purchasing the diesel fuel by doing
the following: (1) Francisco asked his son to check the identity of Bacsa; (2) Francisco required direct delivery from
Petron; (3) Francisco required that he be named as the consignee in the invoice; and (4) Francisco required
separate receipts from Bacsa to evidence actual payment.

Standard of conduct is the level of expected conduct that is required by the nature of the obligation and
corresponding to the circumstances of the person, time and place. 25 The most common standard of conduct is that
of a good father of a family or that of a reasonably prudent person. 26 To determine the diligence which must be
required of all persons, we use as basis the abstract average standard corresponding to a normal orderly person. 27

However, one who is physically disabled is required to use the same degree of care that a reasonably careful
person who has the same physical disability would use. 28 Physical handicaps and infirmities, such as blindness or
deafness, are treated as part of the circumstances under which a reasonable person must act. Thus, the standard of
conduct for a blind person becomes that of a reasonable person who is blind.

We note that Francisco, despite being blind, had been managing and operating the Caltex station for 15 years and
this was not a hindrance for him to transact business until this time. In this instance, however, we rule that Francisco
failed to exercise the standard of conduct expected of a reasonable person who is blind. First, Francisco merely
relied on the identification card of Bacsa to determine if he was authorized by CBCI. Francisco did not do any other
background check on the identity and authority of Bacsa. Second, Francisco already expressed his misgivings about
the diesel fuel, fearing that they might be stolen property, 29 yet he did not verify with CBCI the authority of Bacsa to
sell the diesel fuel. Third, Francisco relied on the receipts issued by Bacsa which were typewritten on a half sheet of
plain bond paper.30 If Francisco exercised reasonable diligence, he should have asked for an official receipt issued
by CBCI. Fourth, the delivery to Francisco, as indicated in Petron’s invoice, does not show that CBCI authorized
Bacsa to sell the diesel fuel to Francisco. Clearly, Francisco failed to exercise the standard of conduct expected of a
reasonable person who is blind.

Express or Tacit Approval of the Transaction

The heirs of Francisco argue that CBCI approved expressly or tacitly the transactions. According to them, there was
apparent authority for Bacsa to enter into the transactions. They argue that even if the agent has exceeded his
authority, the principal is solidarily liable with the agent if the former allowed the later to act as though he had full
powers.31 They insist CBCI was not unlawfully deprived of its property because Inawat gave Bacsa the authority to
sell the diesel fuel and that CBCI is bound by such action. Lastly, they argue that CBCI should be considered in
estoppel for failure to act during the ten month period that deliveries were being made to Francisco.

The general principle is that a seller without title cannot transfer a better title than he has. 32 Only the owner of the
goods or one authorized by the owner to sell can transfer title to the buyer. 33 Therefore, a person can sell only what
he owns or is authorized to sell and the buyer can, as a consequence, acquire no more than what the seller can
legally transfer.34

Moreover, the owner of the goods who has been unlawfully deprived of it may recover it even from a purchaser in
good faith.35 Thus, the purchaser of property which has been stolen from the owner has been held to acquire no title
to it even though he purchased for value and in good faith.

The exception from the general principle is the doctrine of estoppel where the owner of the goods is precluded from
denying the seller’s authority to sell.36 But in order that there may be estoppel, the owner must, by word or conduct,
have caused or allowed it to appear that title or authority to sell is with the seller and the buyer must have been
misled to his damage.37  1avvphi1

In this case, it is clear that Bacsa was not the owner of the diesel fuel.  Francisco was aware of this but he claimed
1âwphi1

that Bacsa was authorized by CBCI to sell the diesel fuel. However, Francisco’s claim that Bacsa was authorized is
not supported by any evidence except his self-serving testimony. First, Francisco did not even confirm with CBCI if it
was indeed selling its diesel fuel since it is not one of the oil companies known in the market to be selling petroleum
products. This fact alone should have put Francisco on guard. Second, it does not appear that CBCI, by some direct
and equivocal act, has clothed Bacsa with the indicia of ownership or apparent authority to sell CBCI’s diesel fuel.
Francisco did not state if the identification card presented by Bacsa indicated that he was CBCI’s agent or a mere
employee. Third, the receipt issued by Bacsa was typewritten on a half sheet of plain bond paper. There was no
letterhead or any indication that it came from CBCI. We agree with the Court of Appeals that this was a personal
receipt issued by Bacsa and not an official receipt issued by CBCI. Consequently, CBCI is not precluded by its
conduct from denying Bacsa’s authority to sell. CBCI did not hold out Bacsa or allow Bacsa to appear as the owner
or one with apparent authority to dispose of the diesel fuel.
19
Clearly, Bacsa cannot transfer title to Francisco as Bacsa was not the owner of the diesel fuel nor was he authorized
by CBCI to sell its diesel fuel. CBCI did not commit any act to clothe Bacsa with apparent authority to sell the diesel
fuel that would have misled Francisco. Francisco, therefore, did not acquire any title over the diesel fuel. Since CBCI
was unlawfully deprived of its property, it may recover from Francisco, even if Francisco pleads good faith.

WHEREFORE, we DENY the petition. We AFFIRM the 31 May 2010 Decision and 31 August 2010 Resolution of
the Court of Appeals.

SO ORDERED.

G.R. No. 156940             December 14, 2004

ASSOCIATED BANK (Now WESTMONT BANK), petitioner,

vs.
VICENTE HENRY TAN, respondent.

DECISION

PANGANIBAN, J.:

While banks are granted by law the right to debit the value of a dishonored check from a depositor’s account, they
must do so with the highest degree of care, so as not to prejudice the depositor unduly.

The Case

Before us is a Petition for Review under Rule 45 of the Rules of Court, assailing the January 27, 2003 Decision of
1  2 

the Court of Appeals (CA) in CA-GR CV No. 56292. The CA disposed as follows:

"WHEREFORE, premises considered, the Decision dated December 3, 1996, of the Regional Trial Court of
Cabanatuan City, Third Judicial Region, Branch 26, in Civil Case No. 892-AF is hereby AFFIRMED. Costs
against the [petitioner]."
3

The Facts

The CA narrated the antecedents as follows:

"Vicente Henry Tan (hereafter TAN) is a businessman and a regular depositor-creditor of the Associated
Bank (hereinafter referred to as the BANK). Sometime in September 1990, he deposited a postdated UCPB
check with the said BANK in the amount of P101,000.00 issued to him by a certain Willy Cheng from Tarlac.
The check was duly entered in his bank record thereby making his balance in the amount of P297,000.00,
as of October 1, 1990, from his original deposit of P196,000.00. Allegedly, upon advice and instruction of the
BANK that the P101,000.00 check was already cleared and backed up by sufficient funds, TAN, on the
same date, withdrew the sum of P240,000.00, leaving a balance of P57,793.45. A day after, TAN deposited
the amount of P50,000.00 making his existing balance in the amount of P107,793.45, because he has
issued several checks to his business partners, to wit:

CHECK NUMBERS DATE AMOUNT

a. 138814 Sept. 29, 1990 P9,000.00
b. 138804 Oct. 8, 1990 9,350.00
c. 138787 Sept. 30, 1990 6,360.00
d. 138847 Sept. 29, 1990 21,850.00
e. 167054 Sept. 29, 1990 4,093.40
f. 138792 ` Sept. 29, 1990 3,546.00
g. 138774 Oct. 2, 1990 6,600.00
20
 h. 167072 Oct. 10, 1990 9,908.00
i. 168802 Oct. 10, 1990 3,650.00

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

"In his [C]omplaint, [respondent] maintained that he ha[d] sufficient funds to pay the subject checks and
alleged that his suppliers decreased in number for lack of trust. As he has been in the business community
for quite a time and has established a good record of reputation and probity, plaintiff claimed that he suffered
embarrassment, humiliation, besmirched reputation, mental anxieties and sleepless nights because of the
said unfortunate incident. [Respondent] further averred that he continuously lost profits in the amount
of P250,000.00. [Respondent] therefore prayed for exemplary damages and that [petitioner] be ordered to
pay him the sum of P1,000,000.00 by way of moral damages, P250,000.00 as lost profits, P50,000.00 as
attorney’s fees plus 25% of the amount claimed including P1,000.00 per court appearance.

"Meanwhile, [petitioner] filed a Motion to Dismiss on February 7, 1991, but the same was denied for lack of
merit in an Order dated March 7, 1991. Thereafter, [petitioner] BANK on March 20, 1991 filed its Answer
denying, among others, the allegations of [respondent] and alleged that no banking institution would give an
assurance to any of its client/depositor that the check deposited by him had already been cleared and
backed up by sufficient funds but it could only presume that the same has been honored by the drawee bank
in view of the lapse of time that ordinarily takes for a check to be cleared. For its part, [petitioner] alleged that
on October 2, 1990, it gave notice to the [respondent] as to the return of his UCPB check deposit in the
amount of P101,000.00, hence, on even date, [respondent] deposited the amount of P50,000.00 to cover
the returned check.

"By way of affirmative defense, [petitioner] averred that [respondent] had no cause of action against it and
argued that it has all the right to debit the account of the [respondent] by reason of the dishonor of the check
deposited by the [respondent] which was withdrawn by him prior to its clearing. [Petitioner] further averred
that it has no liability with respect to the clearing of deposited checks as the clearing is being undertaken by
the Central Bank and in accepting [the] check deposit, it merely obligates itself as depositor’s collecting
agent subject to actual payment by the drawee bank. [Petitioner] therefore prayed that [respondent] be
ordered to pay it the amount of P1,000,000.00 by way of loss of goodwill, P7,000.00 as acceptance fee
plus P500.00 per appearance and by way of attorney’s fees.

"Considering that Westmont Bank has taken over the management of the affairs/properties of the BANK,
[respondent] on October 10, 1996, filed an Amended Complaint reiterating substantially his allegations in the
original complaint, except that the name of the previous defendant ASSOCIATED BANK is now
WESTMONT BANK.

"Trial ensured and thereafter, the court rendered its Decision dated December 3, 1996 in favor of the [respondent]
and against the [petitioner], ordering the latter to pay the [respondent] the sum of P100,000.00 by way of moral
damages, P75,000.00 as exemplary damages, P25,000.00 as attorney’s fees, plus the costs of this suit. In making
said ruling, it was shown that [respondent] was not officially informed about the debiting of the P101,000.00 [from]
his existing balance and that the BANK merely allowed the [respondent] to use the fund prior to clearing merely for
accommodation because the BANK considered him as one of its valued clients. The trial court ruled that the bank
manager was negligent in handling the particular checking account of the [respondent] stating that such lapses
caused all the inconveniences to the [respondent]. The trial court also took into consideration that [respondent’s]
mother was originally maintaining with the x x x BANK [a] current account as well as [a] time deposit, but [o]n one
occasion, although his mother made a deposit, the same was not credited in her favor but in the name of another." 4

Petitioner appealed to the CA on the issues of whether it was within its rights, as collecting bank, to debit the
account of its client for a dishonored check; and whether it had informed respondent about the dishonor prior to
debiting his account.

Ruling of the Court of Appeals

Affirming the trial court, the CA ruled that the bank should not have authorized the withdrawal of the value of the
deposited check prior to its clearing. Having done so, contrary to its obligation to treat respondent’s account with
meticulous care, the bank violated its own policy. It thereby took upon itself the obligation to officially inform
respondent of the status of his account before unilaterally debiting the amount of P101,000. Without such notice, it
is estopped from blaming him for failing to fund his account.

21
The CA opined that, had the P101,000 not been debited, respondent would have had sufficient funds for the
postdated checks he had issued. Thus, the supposed accommodation accorded by petitioner to him is the
proximate cause of his business woes and shame, for which it is liable for damages.

Because of the bank’s negligence, the CA awarded respondent moral damages of P100,000. It also granted him
exemplary damages of P75,000 and attorney’s fees of P25,000.

Hence this Petition. 5

Issue

In its Memorandum, petitioner raises the sole issue of "whether or not the petitioner, which is acting as a collecting
bank, has the right to debit the account of its client for a check deposit which was dishonored by the drawee bank." 6

The Court’s Ruling

The Petition has no merit.

Sole Issue:

Debit of Depositor’s Account

Petitioner-bank contends that its rights and obligations under the present set of facts were misappreciated by the
CA. It insists that its right to debit the amount of the dishonored check from the account of respondent is clear and
unmistakable. Even assuming that it did not give him notice that the check had been dishonored, such right remains
immediately enforceable.

In particular, petitioner argues that the check deposit slip accomplished by respondent on September 17, 1990,
expressly stipulated that the bank was obligating itself merely as the depositor’s collecting agent and -- until such
time as actual payment would be made to it -- it was reserving the right to charge against the depositor’s account
any amount previously credited. Respondent was allowed to withdraw the amount of the check prior to clearing,
merely as an act of accommodation, it added.

At the outset, we stress that the trial court’s factual findings that were affirmed by the CA are not subject to review
by this Court. As petitioner itself takes no issue with those findings, we need only to determine the legal
7 

consequence, based on the established facts.

Right of Setoff

A bank generally has a right of setoff over the deposits therein for the payment of any withdrawals on the part of a
depositor. The right of a collecting bank to debit a client’s account for the value of a dishonored check that has
8 

previously been credited has fairly been established by jurisprudence. To begin with, Article 1980 of the Civil Code
provides that "[f]ixed, savings, and current deposits of money in banks and similar institutions shall be governed by
the provisions concerning simple loan."

Hence, the relationship between banks and depositors has been held to be that of creditor and debtor. Thus, legal
9 

compensation under Article 1278 of the Civil Code may take place "when all the requisites mentioned in Article
10 

1279 are present," as follows:

11 

"(1) That each one of the obligors be bound principally, and that he be at the same time a principal creditor
of the other;

(2) That both debts consist in a sum of money, or if the things due are consumable, they be of the same
kind, and also of the same quality if the latter has been stated;

(3) That the two debts be due;

(4) That they be liquidated and demandable;

(5) That over neither of them there be any retention or controversy, commenced by third persons and
communicated in due time to the debtor." 12

Nonetheless, the real issue here is not so much the right of petitioner to debit respondent’s account but, rather, the
manner in which it exercised such right. The Court has held that even while the right of setoff is conceded, separate
is the question of whether that remedy has properly been exercised. 13

22
The liability of petitioner in this case ultimately revolves around the issue of whether it properly exercised its right of
setoff. The determination thereof hinges, in turn, on the bank’s role and obligations, first, as respondent’s depositary
bank; and second, as collecting agent for the check in question.

Obligation as
Depositary Bank

In BPI v. Casa Montessori, the Court has emphasized that the banking business is impressed with public interest.
14 

"Consequently, the highest degree of diligence is expected, and high standards of integrity and performance are
even required of it. By the nature of its functions, a bank is under obligation to treat the accounts of its depositors
with meticulous care." 15

Also affirming this long standing doctrine, Philippine Bank of Commerce v. Court of Appeals has held that "the
16 

degree of diligence required of banks is more than that of a good father of a family where the fiduciary nature of
their relationship with their depositors is concerned." Indeed, the banking business is vested with the trust and
17 

confidence of the public; hence the "appropriate standard of diligence must be very high, if not the highest, degree
of diligence." The standard applies, regardless of whether the account consists of only a few hundred pesos or of
18 

millions.
19

The fiduciary nature of banking, previously imposed by case law, is now enshrined in Republic Act No. 8791 or the
20 

General Banking Law of 2000. Section 2 of the law specifically says that the State recognizes the "fiduciary nature
of banking that requires high standards of integrity and performance."

Did petitioner treat respondent’s account with the highest degree of care? From all indications, it did not.

It is undisputed -- nay, even admitted -- that purportedly as an act of accommodation to a valued client, petitioner
allowed the withdrawal of the face value of the deposited check prior to its clearing. That act certainly disregarded
the clearance requirement of the banking system. Such a practice is unusual, because a check is not legal tender or
money; and its value can properly be transferred to a depositor’s account only after the check has been cleared by
21 

the drawee bank. 22

Under ordinary banking practice, after receiving a check deposit, a bank either immediately credit the amount to a
depositor’s account; or infuse value to that account only after the drawee bank shall have paid such amount. Before23 

the check shall have been cleared for deposit, the collecting bank can only "assume" at its own risk -- as herein
petitioner did -- that the check would be cleared and paid out.

Reasonable business practice and prudence, moreover, dictated that petitioner should not have authorized the
withdrawal by respondent of P240,000 on October 1, 1990, as this amount was over and above his outstanding
cleared balance of P196,793.45. Hence, the lower courts correctly appreciated the evidence in his favor.
24 

Obligation as
Collecting Agent

Indeed, the bank deposit slip expressed this reservation:

"In receiving items on deposit, this Bank obligates itself only as the Depositor’s Collecting agent, assuming
no responsibility beyond carefulness in selecting correspondents, and until such time as actual payments
shall have come to its possession, this Bank reserves the right to charge back to the Depositor’s account
any amounts previously credited whether or not the deposited item is returned. x x x." 25

However, this reservation is not enough to insulate the bank from any liability. In the past, we have expressed doubt
about the binding force of such conditions unilaterally imposed by a bank without the consent of the depositor. It is 26 

indeed arguable that "in signing the deposit slip, the depositor does so only to identify himself and not to agree to
the conditions set forth at the back of the deposit slip." 27

Further, by the express terms of the stipulation, petitioner took upon itself certain obligations as respondent’s agent,
consonant with the well-settled rule that the relationship between the payee or holder of a commercial paper and the
collecting bank is that of principal and agent. Under Article 1909 of the Civil Code, such bank could be held liable
28  29 

not only for fraud, but also for negligence.

As a general rule, a bank is liable for the wrongful or tortuous acts and declarations of its officers or agents within
the course and scope of their employment. Due to the very nature of their business, banks are expected to exercise
30 

the highest degree of diligence in the selection and supervision of their employees. Jurisprudence has established
31 

that the lack of diligence of a servant is imputed to the negligence of the employer, when the negligent or wrongful
act of the former proximately results in an injury to a third person; in this case, the depositor.
32 

23
The manager of the bank’s Cabanatuan branch, Consorcia Santiago, categorically admitted that she and the
employees under her control had breached bank policies. They admittedly breached those policies when, without
clearance from the drawee bank in Baguio, they allowed respondent to withdraw on October 1, 1990, the amount of
the check deposited. Santiago testified that respondent "was not officially informed about the debiting of
the P101,000 from his existing balance of P170,000 on October 2, 1990 x x x." 33

Being the branch manager, Santiago clearly acted within the scope of her authority in authorizing the withdrawal
and the subsequent debiting without notice. Accordingly, what remains to be determined is whether her actions
proximately caused respondent’s injury. Proximate cause is that which -- in a natural and continuous sequence,
unbroken by any efficient intervening cause --produces the injury, and without which the result would not have
occurred.34

Let us go back to the facts as they unfolded. It is undeniable that the bank’s premature authorization of the
withdrawal by respondent on October 1, 1990, triggered -- in rapid succession and in a natural sequence -- the
debiting of his account, the fall of his account balance to insufficient levels, and the subsequent dishonor of his own
checks for lack of funds. The CA correctly noted thus:

"x x x [T]he depositor x x x withdrew his money upon the advice by [petitioner] that his money was already
cleared. Without such advice, [respondent] would not have withdrawn the sum of P240,000.00. Therefore, it
cannot be denied that it was [petitioner’s] fault which allowed [respondent] to withdraw a huge sum which he
believed was already his.

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

Aggravating matters, petitioner failed to show that it had immediately and duly informed respondent of the debiting
of his account. Nonetheless, it argues that the giving of notice was discernible from his act of depositing P50,000 on
October 2, 1990, to augment his account and allow the debiting. This argument deserves short shrift.

First, notice was proper and ought to be expected. By the bank manager’s account, respondent was considered a
"valued client" whose checks had always been sufficiently funded from 1987 to 1990, until the October imbroglio.
36 

Thus, he deserved nothing less than an official notice of the precarious condition of his account.

Second, under the provisions of the Negotiable Instruments Law regarding the liability of a general indorser and the
37 

procedure for a notice of dishonor, it was incumbent on the bank to give proper notice to respondent. In Gullas v.
38 

National Bank, the Court emphasized:

39 

"x x x [A] general indorser of a negotiable instrument engages that if the instrument – the check in this case
– is dishonored and the necessary proceedings for its dishonor are duly taken, he will pay the amount
thereof to the holder (Sec. 66) It has been held by a long line of authorities that notice of dishonor is
necessary to charge an indorser and that the right of action against him does not accrue until the notice is
given.

"x x x. The fact we believe is undeniable that prior to the mailing of notice of dishonor, and without waiting
for any action by Gullas, the bank made use of the money standing in his account to make good for the
treasury warrant. At this point recall that Gullas was merely an indorser and had issued checks in good faith.
As to a depositor who has funds sufficient to meet payment of a check drawn by him in favor of a third party,
it has been held that he has a right of action against the bank for its refusal to pay such a check in the
absence of notice to him that the bank has applied the funds so deposited in extinguishment of past due
claims held against him. (Callahan vs. Bank of Anderson [1904], 2 Ann. Cas., 203.) However this may be,
as to an indorser the situation is different, and notice should actually have been given him in order that he
might protect his interests." 40

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

Damages

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

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

24
SO ORDERED.

G.R. No. 169467               February 25, 2010

ALFREDO P. PACIS and CLEOPATRA D. PACIS, Petitioners,

vs.
JEROME JOVANNE MORALES, Respondent.

DECISION

CARPIO, J.:

The Case

This petition for review1 assails the 11 May 2005 Decision2 and the 19 August 2005 Resolution of the Court of
Appeals in CA-G.R. CV No. 60669.

The Facts

On 17 January 1995, petitioners Alfredo P. Pacis and Cleopatra D. Pacis (petitioners) filed with the trial court a civil
case for damages against respondent Jerome Jovanne Morales (respondent). Petitioners are the parents of Alfred
Dennis Pacis, Jr. (Alfred), a 17-year old student who died in a shooting incident inside the Top Gun Firearms and
Ammunitions Store (gun store) in Baguio City. Respondent is the owner of the gun store.

The facts as found by the trial court are as follows:

On January 19, 1991, Alfred Dennis Pacis, then 17 years old and a first year student at the Baguio Colleges
Foundation taking up BS Computer Science, died due to a gunshot wound in the head which he sustained while he
was at the Top Gun Firearm[s] and Ammunition[s] Store located at Upper Mabini Street, Baguio City. The gun store
was owned and operated by defendant Jerome Jovanne Morales.

With Alfred Pacis at the time of the shooting were Aristedes Matibag and Jason Herbolario. They were sales agents
of the defendant, and at that particular time, the caretakers of the gun store.

The bullet which killed Alfred Dennis Pacis was fired from a gun brought in by a customer of the gun store for repair.

The gun, an AMT Automag II Cal. 22 Rimfire Magnum with Serial No. SN-H34194 (Exhibit "Q"), was left by
defendant Morales in a drawer of a table located inside the gun store.

Defendant Morales was in Manila at the time. His employee Armando Jarnague, who was the regular caretaker of
the gun store was also not around. He left earlier and requested sales agents Matibag and Herbolario to look after
the gun store while he and defendant Morales were away. Jarnague entrusted to Matibag and Herbolario a bunch of
keys used in the gun store which included the key to the drawer where the fatal gun was kept.

It appears that Matibag and Herbolario later brought out the gun from the drawer and placed it on top of the table.
Attracted by the sight of the gun, the young Alfred Dennis Pacis got hold of the same. Matibag asked Alfred Dennis
Pacis to return the gun. The latter followed and handed the gun to Matibag. It went off, the bullet hitting the young
Alfred in the head.

A criminal case for homicide was filed against Matibag before branch VII of this Court. Matibag, however, was
acquitted of the charge against him because of the exempting circumstance of "accident" under Art. 12, par. 4 of the
Revised Penal Code.

By agreement of the parties, the evidence adduced in the criminal case for homicide against Matibag was
reproduced and adopted by them as part of their evidence in the instant case. 3

On 8 April 1998, the trial court rendered its decision in favor of petitioners. The dispositive portion of the decision
reads:

WHEREFORE, premises considered, judgment is hereby rendered in favor of the plaintiffs [Spouses Alfredo P.
Pacis and Cleopatra D. Pacis] and against the defendant [Jerome Jovanne Morales] ordering the defendant to pay
plaintiffs —

25
 (1) ₱30,000.00 as indemnity for the death of Alfred Pacis;

(2) ₱29,437.65 as actual damages for the hospitalization and burial expenses incurred by the plaintiffs;

(3) ₱100,000.00 as compensatory damages;

(4) ₱100,000.00 as moral damages;

(5) ₱50,000.00 as attorney’s fees.

SO ORDERED.4

Respondent appealed to the Court of Appeals. In its Decision 5 dated 11 May 2005, the Court of Appeals reversed
the trial court’s Decision and absolved respondent from civil liability under Article 2180 of the Civil Code. 6

Petitioners filed a motion for reconsideration, which the Court of Appeals denied in its Resolution dated 19 August
2005.

Hence, this petition.

The Trial Court’s Ruling

The trial court held respondent civilly liable for the death of Alfred under Article 2180 in relation to Article 2176 of the
Civil Code.7 The trial court held that the accidental shooting of Alfred which caused his death was partly due to the
negligence of respondent’s employee Aristedes Matibag (Matibag). Matibag and Jason Herbolario (Herbolario) were
employees of respondent even if they were only paid on a commission basis. Under the Civil Code, respondent is
liable for the damages caused by Matibag on the occasion of the performance of his duties, unless respondent
proved that he observed the diligence of a good father of a family to prevent the damage. The trial court held that
respondent failed to observe the required diligence when he left the key to the drawer containing the loaded
defective gun without instructing his employees to be careful in handling the loaded gun.

The Court of Appeals’ Ruling

The Court of Appeals held that respondent cannot be held civilly liable since there was no employer-employee
relationship between respondent and Matibag. The Court of Appeals found that Matibag was not under the control
of respondent with respect to the means and methods in the performance of his work. There can be no employer-
employee relationship where the element of control is absent. Thus, Article 2180 of the Civil Code does not apply in
this case and respondent cannot be held liable.

Furthermore, the Court of Appeals ruled that even if respondent is considered an employer of Matibag, still
respondent cannot be held liable since no negligence can be attributed to him. As explained by the Court of
Appeals:

Granting arguendo that an employer-employee relationship existed between Aristedes Matibag and the defendant-
appellant, we find that no negligence can be attributed to him.

Negligence is best exemplified in the case of Picart vs. Smith (37 Phil. 809). The test of negligence is this:

"x x x. Could a prudent man, in the position of the person to whom negligence is attributed, foresee harm to the
person injured as a reasonable consequence of the course about to be pursued? If so, the law imposes a duty on
the actor to refrain from that course or take precaution against its mischievous results, and the failure to do so
constitutes negligence. x x x."

Defendant-appellant maintains that he is not guilty of negligence and lack of due care as he did not fail to observe
the diligence of a good father of a family. He submits that he kept the firearm in one of his table drawers, which he
locked and such is already an indication that he took the necessary diligence and care that the said gun would not
be accessible to anyone. He puts [sic] that his store is engaged in selling firearms and ammunitions. Such items
which are per se dangerous are kept in a place which is properly secured in order that the persons coming into the
gun store would not be able to take hold of it unless it is done intentionally, such as when a customer is interested to
purchase any of the firearms, ammunitions and other related items, in which case, he may be allowed to handle the
same.

We agree. Much as We sympathize with the family of the deceased, defendant-appellant is not to be blamed. He
exercised due diligence in keeping his loaded gun while he was on a business trip in Manila. He placed it inside the
drawer and locked it. It was taken away without his knowledge and authority. Whatever happened to the deceased
was purely accidental.8
26
 The Issues

Petitioners raise the following issues:

I. THE APPELLATE COURT COMMITTED SERIOUS ERROR IN RENDERING THE DECISION AND
RESOLUTION IN QUESTION IN DISREGARD OF LAW AND JURISPRUDENCE BY REVERSING THE ORDER
OF THE REGIONAL TRIAL COURT (BRANCH 59) OF BAGUIO CITY NOTWITHSTANDING CLEAR, AUTHENTIC
RECORDS AND TESTIMONIES PRESENTED DURING THE TRIAL WHICH NEGATE AND CONTRADICT ITS
FINDINGS.

II. THE APPELLATE COURT COMMITTED GRAVE, REVERSIBLE ERROR IN RENDERING THE DECISION AND
RESOLUTION IN QUESTION BY DEPARTING FROM THE ACCEPTED AND USUAL COURSE OF JUDICIAL
PROCEEDINGS THEREBY IGNORING THE FACTUAL FINDINGS OF THE REGIONAL TRIAL COURT (BRANCH
59) OF BAGUIO CITY SHOWING PETITIONER’S CLEAR RIGHTS TO THE AWARD OF DAMAGES. 9

The Ruling of the Court

We find the petition meritorious.

This case for damages arose out of the accidental shooting of petitioners’ son. Under Article 1161 10 of the Civil
Code, petitioners may enforce their claim for damages based on the civil liability arising from the crime under Article
10011 of the Revised Penal Code or they may opt to file an independent civil action for damages under the Civil
Code. In this case, instead of enforcing their claim for damages in the homicide case filed against Matibag,
petitioners opted to file an independent civil action for damages against respondent whom they alleged was
Matibag’s employer. Petitioners based their claim for damages under Articles 2176 and 2180 of the Civil Code.

Unlike the subsidiary liability of the employer under Article 103 12 of the Revised Penal Code,13 the liability of the
employer, or any person for that matter, under Article 2176 of the Civil Code is primary and direct, based on a
person’s own negligence. Article 2176 states:

Art. 2176. Whoever by act or omission causes damage to another, there being fault or negligence, is obliged to pay
for the damage done. Such fault or negligence, if there is no pre-existing contractual relation between the parties, is
called quasi-delict and is governed by the provisions of this Chapter.

This case involves the accidental discharge of a firearm inside a gun store.  Under PNP Circular No. 9, entitled the
1avvphi1

"Policy on Firearms and Ammunition Dealership/Repair," a person who is in the business of purchasing and selling
of firearms and ammunition must maintain basic security and safety requirements of a gun dealer, otherwise his
License to Operate Dealership will be suspended or canceled. 14

Indeed, a higher degree of care is required of someone who has in his possession or under his control an
instrumentality extremely dangerous in character, such as dangerous weapons or substances. Such person in
possession or control of dangerous instrumentalities has the duty to take exceptional precautions to prevent any
injury being done thereby.15 Unlike the ordinary affairs of life or business which involve little or no risk, a business
dealing with dangerous weapons requires the exercise of a higher degree of care.

As a gun store owner, respondent is presumed to be knowledgeable about firearms safety and should have known
never to keep a loaded weapon in his store to avoid unreasonable risk of harm or injury to others. Respondent has
the duty to ensure that all the guns in his store are not loaded. Firearms should be stored unloaded and separate
from ammunition when the firearms are not needed for ready-access defensive use. 16 With more reason, guns
accepted by the store for repair should not be loaded precisely because they are defective and may cause an
accidental discharge such as what happened in this case. Respondent was clearly negligent when he accepted the
gun for repair and placed it inside the drawer without ensuring first that it was not loaded. In the first place, the
defective gun should have been stored in a vault. Before accepting the defective gun for repair, respondent should
have made sure that it was not loaded to prevent any untoward accident. Indeed, respondent should never accept a
firearm from another person, until the cylinder or action is open and he has personally checked that the weapon is
completely unloaded.17 For failing to insure that the gun was not loaded, respondent himself was negligent.
Furthermore, it was not shown in this case whether respondent had a License to Repair which authorizes him to
repair defective firearms to restore its original composition or enhance or upgrade firearms. 18

Clearly, respondent did not exercise the degree of care and diligence required of a good father of a family, much
less the degree of care required of someone dealing with dangerous weapons, as would exempt him from liability in
this case.

WHEREFORE, we GRANT the petition. We SET ASIDE the 11 May 2005 Decision and the 19 August 2005
Resolution of the Court of Appeals in CA-G.R. CV No. 60669. We REINSTATE the trial court’s Decision dated 8
April 1998.

27
SO ORDERED.

G.R. No. 143380. April 11, 2005

OLIMPIO PANGONOROM and METRO MANILA TRANSIT CORPORATION, Petitioners,

vs.
PEOPLE OF THE PHILIPPINES, Respondents.

DECISION

CARPIO, J.:

The Case

This is a petition for review to annul the Decision dated 29 November 1999 of the Court of Appeals in CA-G.R. CR
1  2 

No. 14764, as well as its Resolution dated 5 May 2000 denying the motion for reconsideration. The Court of
3 

Appeals affirmed in toto the 5 February 1993 Decision of the Regional Trial Court of Quezon City, Branch 79 in
4 

Criminal Case No. Q-90-11397.

The Charge

On 21 March 1990, Assistant City Prosecutor Rosario U. Barias filed an Information charging Olimpio Pangonorom
("Olimpio") with reckless imprudence resulting in damage to property with multiple slight physical injuries, committed
as follows:

That on or about the 10th day of July, 1989, in Quezon City, Philippines and within the jurisdiction of this Honorable
Court, the abovenamed accused, being then the driver and person in charge of a motor vehicle (MMTC-passenger
bus) with plate No. NVJ-999 TB Pil. ’89, did, then and there unlawfully and feloniously drive, manage and operate
the same along E. de los Santos Ave., Quezon Avenue – this City, in a careless, reckless and imprudent manner, by
then and there driving the same without due regard to traffic laws and regulations and without taking the necessary
precautions to prevent accident to person and damage to property, causing by such carelessness, recklessness and
imprudence said motor vehicle so driven by him to strike and collide with an [I]suzu [G]emini car with plate No. NAR-
865 L Pil. ’89, belonging to Mary Berba and driven by Carlos Berba y Remulla, thereby causing damages in the total
amount of ₱42,600.00, Philippine Currency; as a consequence thereof said Carlos Berba sustained physical injuries
for a period of less than nine (9) days and incapacitated him from performing his customary labor for the same
period of time and also his passengers namely: Mary Berba y Matti and Amelia Berba y Mendoza sustained physical
injuries for a period of less than nine (9) days and incapacitated them from performing their customary labor for the
same period of time, thereafter, abandoned said offended parties without aiding them, to the damage and prejudice
of the said offended parties in such amount as may be awarded to them under the provisions of the Civil Code.

CONTRARY TO LAW. 5

Arraignment and Plea

When arraigned on 26 June 1990, Olimpio, with the assistance of counsel, entered a plea of not guilty. 6

The Trial

The prosecution presented five witnesses: (1) Carlos R. Berba; (2) Mary M. Berba; (3) Amelia Berba; (4) Edward
Campos; and (5) Enrico B. Estupigan.

On the other hand, the defense presented three witnesses: (1) Olimpio himself; (2) Milagros Garbo; and (3) Nenita
Amado.

The facts, as summarized by the trial court, are as follows:

The evidence of the prosecution shows that on July 10, 1989 at around 9:00 P.M. Carlos R. Berba was driving an
Isuzu Gemini car bearing Plate No. NAR-865 L Pil. ’89 belonging to his mother Mary Berba. With him inside the car
were his mother Mary Berba who was seated in front beside him and his auntie Amelia Berba who was at the back
seat. They were cruising along EDSA coming from the direction of Makati and headed towards the intersection of
EDSA and Quezon Boulevard but upon nearing 680 Appliances along EDSA, Quezon City, their car was bumped
from behind by MMTC Passenger Bus bearing Plate No. NVJ-999 TB Pil. ’89 driven by herein accused Olimpio
Pangonorom thereby causing damages to their car which was estimated at ₱42,600.00 (Exhs. F, F-1). The front and
rear portions of their car incurred damages because by reason of the strong impact at the rear portion of their car, it
28
was pushed forward and bumped the car in front of it, then it rested near the island. The bus driven by the accused
still travelled a distance of 20 meters from the point of impact. The accused left his bus but they came to know his
name is Olimpio Pangonorom. Their car was a total wreck as shown in its photographs (Exhs. B and C).

Carlos Berba noticed this bus following them closely at Nepa Q-Mart up to the point of collision. His car was running
along the second lane of EDSA from the island. The MMTC bus driven by the accused was running very fast, kept
on switching lane until it finally occupied the second lane and bumped his car. Carlos Berba sustained cuts on his
shoulder and back because of broken glasses and was treated at East Avenue Medical Center. He incurred
₱1,000.00 for medication (Exhs. G to G-3). Mary Berba sustained contusion, hematoma and abrasion (Exh. H).
Amelia Berba sustained abrasion on his right elbow (Exh. K). Both were also treated at East Avenue Medical
Center.

Edward Campos and Enrico Bantique Estupigan, passengers of MMTC Bus driven by the accused explained that
their bus was running at 70-80 kph when it swerved to the right to avoid hitting a van stranded at the left side of the
island but in the process it hit and bumped an Isuzu Gemini car in front of it. The rear portion of the Isuzu Gemini car
was smashed and the front part was also damaged as it hit the Lancer car running ahead. The bus driver, herein
accused, fled from the scene.

It was a rainy day, road was slippery, the rain had just stopped but was still drizzling.

The defense on the other hand presented accused Olimpio Pangonorom, Milagros Garbo, Nenita Amado and
documents marked as Exhs. 1 to 15 with sub-markings.

Accused Olimpio Pangonorom testified that he was a driver since 1976, having worked as a truck driver in
Mindanao, then employed as driver of Silangan Transit up to 1981 and from 1981 up to the present is a driver of
Metro Manila Transit. He is a holder of professional driver’s license with OR No. 15160307 (Exhs. 1, 1-A). On July
10, 1989 he drove MMTC bus from Monumento to Baclaran and vice-versa. He was driving MMTC bus between
7:00 – 8:00 P.M. along EDSA headed towards Monumento when upon reaching infront of 680 Appliances his bus
was involved in a vehicular accident. It was drizzling, his bus was running at a speed of 70 kph along the third lane
of EDSA going to Monumento and an Isuzu Gemini car ahead of him was on his left side running along the second
lane of EDSA at a distance of 30 meters away. When the car was at a distance of 20 meters away and before
reaching the stalled vehicle, it swerved to the right without signal light, so he blew his horn, stepped on his brakes,
but since the street was downgrade, it was raining and slippery, his brakes failed to control his bus, thus hit and
bumped the Isuzu Gemini car. He identified the Isuzu Gemini car and damages sustained by the car in the
photograph marked as Exh. C. His bus slided after he applied his brakes because the street was slippery. He
reported at their garage after the accident, left his vehicle and went back at the scene with a wrecker. The
passengers of the Isuzu car were brought to the hospital.

The training officer of MMTC, Milagros Garbo, testified on the procedure of the company in hiring an applicant driver
and the requirements to be submitted by the applicant. An applicant for a driver of MMTC as what had been done to
the accused before he was admitted as company driver of MMTC must pass an interview, seminars, written
examination, actual driving test, psycho-physical test, road test, line familiarization test, defensive driving seminar,
driver’s familiarization seminar, and traffic rules and environment seminar. Documents they required to be submitted
by an applicant driver were NBI Clearance, Residence Certificate, Professional Driver’s License, and Official
Receipts of payment of required fees for driver’s license (Exhs. 1 to 15).

The internal control relative to the supervision of their drivers was explained by witness Nenita Amado, a transport
supervisor of MMTC. She supervises and gives instructions and recommendations on bus rules and regulations to
their drivers. They have ten (10) comptrollers, thirty-six (36) dispatchers, seven (7) field supervisors, sixty (60)
inspectors and four (4) service wreckers who helped in the supervision of the drivers and conductors of MMTC.
They have centralized radio that monitor the activities of their drivers during their travel. Her instructions to the
drivers were to avoid accident, obey traffic rules and regulations and to be courteous to passengers. 7

On 5 February 1993, the trial court rendered its Decision with the following dispositive portion:

PREMISES CONSIDERED, the Court finds accused Olimpio Pangonorom guilty beyond reasonable doubt of the
crime of reckless imprudence resulting in multiple slight physical injuries and sentences him to suffer an
imprisonment of thirty (30) days of arresto menor, to indemnify the offended parties of the damages incurred by their
Isuzu Gemini car in the sum of ₱42,600.00 and to reimburse the medical expenses of Carlos R. Berba in the sum of
₱182.50, Amelia Berba in the sum of P217.50 and Mary Berba in the sum of ₱45.00.

SO ORDERED. 8

Petitioners appealed the trial court’s decision to the Court of Appeals. 9

The Ruling of the Court of Appeals

29
The Court of Appeals ruled that the finding that Olimpio drove the passenger bus in a negligent manner, considering
the circumstances of weather and road condition, is a finding of fact of the trial court that is entitled to respect. The
Court of Appeals stated that it is a settled rule that factual findings of trial courts are accorded great respect unless it
can be shown that they overlooked some circumstances of substance which, if considered, will probably alter the
result. The Court of Appeals held that no such circumstance was overlooked in this case.

The Court of Appeals ruled that even if it were true, as Olimpio claimed, that the car Carlos Berba ("Carlos") was
then driving occupied Olimpio’s lane while the car was 20 meters away, it is a safe distance for a vehicle to switch
lanes. The Court of Appeals held that if only Olimpio did not drive very fast and considered that the street was
downgrade and slippery, he could have easily avoided the accident by applying his brakes.

The Court of Appeals also ruled that the testimonies of Edward Campos ("Edward") and Enrico Bantigue, who were
passengers of the MMTC bus, are worthy of credence. The Court of Appeals stated that they are neutral witnesses
who had no motive to testify against Olimpio. They testified that: (1) the MMTC bus was running at 70-80 kilometers
per hour; (2) the bus swerved to the right to avoid hitting a van stranded at the left side of the island; and (3) in the
process, the bus hit and bumped the Gemini car ahead of it. Edward further testified that Olimpio earlier overtook
another bus. Edward stated that it was for this reason that the MMTC bus went into the lane where the stalled van
was located. The Court of Appeals held that the MMTC bus was the one switching lanes.

The dispositive portion of the decision of the Court of Appeals reads:

WHEREFORE, the judgment herein appealed from is hereby AFFIRMED in toto.

SO ORDERED. 10

On 28 December 1999, petitioners filed with the Court of Appeals a motion for reconsideration of the assailed
decision. Petitioners asserted that the Court of Appeals erred in finding Olimpio negligent in driving the subject bus.
Petitioners also asserted that Carlos was the one switching lanes and was therefore the one negligent in driving his
car. Petitioners stated that the Court of Appeals erred in not holding that the MMTC was not subsidiarily liable for
Olimpio’s civil liability in the instant case. Petitioners stated that the testimonies of witnesses Milagros Garbo and
Nenita Amado, as well as Exhibits 1 to 15, proved that the MMTC exercised due diligence in the selection and
supervision of its drivers.
11

On 5 May 2000, the Court of Appeals issued a Resolution denying the motion for reconsideration. With the assailed
12 

decision having "amply discussed, considered and ruled upon" the issues that petitioners raised in their motion for
reconsideration, the Court of Appeals held that there was no cogent reason for it to reverse the assailed decision.
The Court of Appeals also held that the MMTC was already estopped in assailing the trial court’s decision
considering that the MMTC never appealed the decision within the reglementary period.

The Issues

Petitioners have presented the following for our consideration:

1. The Court of Appeals gravely abused its discretion in sustaining the trial court’s findings of facts instead of
considering certain facts and circumstance raised by petitioners that properly cast an element of reasonable doubt.

2. Whether Estoppel applies to MMTC. 13

The Ruling of the Court

The petition is without merit.

In criminal cases, an appeal throws the entire case wide open for review and the reviewing tribunal can correct
errors, though unassigned in the appealed judgment, or even reverse the trial court’s decision based on grounds
other than those that the parties raised as errors. 14

Petitioners fault the Court of Appeals for having sustained the trial court’s findings of fact. Petitioners assert that the
Court of Appeals failed to consider certain circumstances that would warrant a reversal of the factual findings of the
trial court.

Petitioners claim that Carlos’ negligence in switching lanes to avoid hitting a stranded van caused the collision.
Petitioners assert that Carlos was negligent because he transferred to the lane where Olimpio was then driving
along without first blinking his signal light and with his car only 20 meters away from the bus. This being so,
petitioners assert that they should not be held responsible for Carlos’ negligence.

30
Petitioners’ assertions have no merit. The issue of whether a person is negligent is a question of fact. Findings of
15 

fact of the Court of Appeals, when they affirm the findings of fact of the trial court, are binding on this Court, unless
the findings of the trial and appellate courts are palpably unsupported by the evidence on record or unless the
judgment itself is based on misapprehension of facts. We hold that the Court of Appeals committed no reversible
16 

error in upholding the factual findings of the trial court.

Article 365 of the Revised Penal Code states that reckless imprudence consists in voluntarily, but without malice,
doing or failing to do an act from which material damage results by reason of inexcusable lack of precaution on the
part of the person performing or failing to perform such act, taking into consideration (1) his employment or
occupation; (2) his degree of intelligence; (3) his physical condition; and (4) other circumstances regarding persons,
time and place.

Olimpio is a professional driver who has been in the employ of the MMTC since 1984. As a public utility driver,
17 

Olimpio should have as his primary concern the safety not only of himself or of his passengers, but, also the safety
of his fellow motorists. Considering that it had just rained, it was still drizzling and the road was slippery when the
subject incident took place, Olimpio should have been more cautious and prudent in driving his passenger bus.
18 

Based on Olimpio’s testimonial admission, he was driving at 70 kilometers per hour. He testified he was familiar with
the road. Therefore, he ought to have known the downhill slope coming from the Nepa-Q Mart. As the bus was
19  20 

moving downhill, Olimpio should have slowed down since a downhill drive would naturally cause his vehicle to
accelerate. However, instead of slowing down, Olimpio admitted he was "running very fast." Thus, Olimpio testified:

Atty. ANTONIO:

Q It was nighttime Mr. Witness, will you tell us whether you were able to see this vehicle you were following?

A Yes, sir.

Q Will you tell us how did you notice this vehicle?

A Because I saw its tail light, sir.

Q Before this vehicle you were following reached the place where this stalled vehicle was, do you know where was
this vehicle proceeded?

FISCAL:

I think he is incompetent, Your Honor.

COURT:

Sustained.

Atty. ANTONIO:

Q Before your vehicle reached the place where this stalled vehicle was, what did you notice if any?

A I noticed that the vehicle I was following Isuzu Gemini before reaching the stalled vehicle suddenly swerved to the
right and I was already approaching, sir.

Q Before this Isuzu Gemini car you were following suddenly swerved to the right, how far were you?

A About twenty (20) meters, sir. It suddenly swerved to the right and I was running very fast because it was
downward.

Q And when you noticed this Isuzu Gemini suddenly swerved to the right, what if any did you do?

A I blew my horn and stepped on my brakes, sir. Considering that it was raining and slippery I cannot control.

Q And after your were not able to control your vehicle despite the precaution you made, what happened?

A I bumped him, sir. (Emphasis supplied)

21 

The only conclusion that we can draw from the factual circumstances is that Olimpio was negligent. He was hurrying
to his destination and driving faster than he should have. The fact that after Olimpio stepped on the brake, the bus
31
still traveled a distance of 20 meters before it finally stopped, and the car, after it was hit, was thrown 10 to 15
meters away, only prove that Olimpio’s bus was running very fast.
22 

Olimpio’s claim that Carlos suddenly transferred to his lane to avoid hitting a van stranded at the left side of the
island could hardly carry the day for him. Olimpio says that the distance between the car and the bus before the car
allegedly swerved to the bus’ lane was 20 meters. Therefore, at that point, Olimpio still had the opportunity to avoid
the collision by slowing down or by stepping on the brake. However, what Olimpio did was to continue running very
fast.

Another telling proof of Olimpio’s negligence is the testimony of Edward, a passenger of the MMTC bus who was
seated at the right front seat nearest to the door of the bus. Edward recounted the incident, thus:
23 

Q You said that there was a van parked which the Metro Manila Transit tried to avoid. Where was that van parked?

A It was stranded above the middle island of the road, sir.

COURT:

Q When you said of the road you are referring to EDSA?

A Yes, Your Honor.

FISCAL:

Q So when it swerved to avoid hitting the parked van, what happened?

A It was too late, sir, when he noticed that there was a car slowly cruising EDSA so when he swerved he
was very fast so it was too late to avoid the car. He just braked, the road was slippery so he could not swerve
because the bus might turn over.

xxx

Q Mr. Witness, did you notice this stalled vehicle before you reached the place where it was stalled?

A No, sir.

Q Even when the lights of the Metro Manila Transit were on, you did not notice it?

A Actually, sir, he was overtaking another bus so that’s why he did not notice this stalled van.

Q Who was overtaking another bus?

A MMTC bus, sir, because it stopped at the MMC office near Timog and then it overtook another moving bus. He
went to the left side overtaking that bus.

xxx

Atty. ANTONIO:

Q Are you a driver?

A Yes, sir.

Q And if circumstances similar to that incident that happened, it would be prudent for you to swerve also, is it not?

A At that condition, sir, I’d rather brake than swerve, it is slippery.

Q Mr. Witness, will you tell how far was this MMTC bus when it swerved in relation to the place where the stalled
vehicle was?

A I guess, sir, it was a few seconds before too late because when it swerved the bus was already tilting, so it
is a matter of seconds.

Atty. ANTONIO:

32
Q It was a matter of seconds?

A Yes, sir.

Q So if you were in this position stopping would not be sufficient precautionary measure, was it not?

A Before that, sir, he overtook that bus so if he did not overtake that bus he would have seen the parked van.
Being a driver myself the way he overtook was dangerous, it was so close that you could not see the other
lane.

xxx

Q Will you please explain Mr. Witness, how this MMTC bus hit the car when you claimed that the car was running
ahead of the bus?

A There was this stalled van and there was this bus, now this was the Gemini car, this slowed down to avoid also
the stalled van, it swerved so the bus was here running very fast and then noticed the van so it swerved also and
the Gemini here was of course slowed down to avoid that van, the bus was still running fast then after swerving it
was too late for him to notice that there was this car running slowly by the bus, he stepped on the brake.

Q Do you mean to say Mr. Witness, that both the Isuzu vehicle and the MMTC bus were running on the same
course?

A Yes, sir. (Emphasis supplied).

24 

Edward’s declarations that "the bus was running very fast" and that Olimpio did not see the stranded van because
he earlier overtook another bus are clear and categorical. There is no evidence of any ill or improper motive on
Edward’s part that would discredit his testimony. He was not in any way related to the complainants. Neither was the
defense able to show that some form of consideration induced Edward to testify for the prosecution. The defense
did not even try to rebut Edward’s testimony.

When there is nothing to indicate that a witness was actuated by improper motives, his positive and categorical
declarations on the witness stand under solemn oath deserve full faith and credit. 25

Petitioners likewise fault the Court of Appeals for having ruled that the MMTC is already estopped from assailing the
trial court’s decision considering that the MMTC "never appealed the same within the reglementary period."

We have carefully gone over the records of this case and found that when petitioners filed their Notice of Appeal
with the trial court on 8 March 1993, the MMTC already appealed the civil aspect of this case. We quote petitioners’
Notice of Appeal:

The ACCUSED and his employer, Metro Manila Transit Corporation, by their undersigned counsel, unto this
Honorable Court, most respectfully give notice that they are appealing, as they hereby appeal, the Decision dated
February 5, 1993, which was received on February 23, 1993, to the Court of Appeals on the ground that the
Decision is contrary to the facts, law and settled jurisprudence.

Metro Manila Transit Corporation likewise interposes an appeal with respect to the civil aspect of this case because
of its subsidiary liability as employer of the accused under the Revised Penal Code. 26

It is therefore not correct for the Court of Appeals to state in its Resolution dated 5 May 2000 that the MMTC failed
27 

to appeal seasonably the issue of its alleged "non-subsidiary liability" as Olimpio’s employer.
28 

However, due diligence in the selection and supervision of employees is not a defense in the present case. The law
involved in the present case is Article 103 of the Revised Penal Code, in relation to Articles 100 and 102 of the
29  30 

same Code, which reads thus:

Art. 103. Subsidiary civil liability of other persons. — The subsidiary liability established in the next preceding article
shall also apply to employers, teachers, persons, and corporations engaged in any kind of industry for felonies
committed by their servants, pupils, workmen, apprentices, or employees in the discharge of their duties.

Pursuant to Article 103, an employer may be subsidiarily liable for the employee’s civil liability in a criminal action
when there is adequate evidence establishing (1) that he is indeed the employer of the convicted employee; (2) that
he is engaged in some kind of industry; (3) that the employee committed the offense in the discharge of his duties;
and (4) that the execution against the employee has not been satisfied due to insolvency. 31

33
The provisions of the Revised Penal Code on subsidiary liability – Articles 102 and 103 – are deemed written into
the judgments in cases to which they are applicable. Thus, in the dispositive portion of its decision, the trial court
need not expressly pronounce the subsidiary liability of the employer. 32

The subsidiary liability of the employer arises only after conviction of the employee in the criminal action. In the
33 

present case, there exists an employer-employee relationship between petitioners, the MMTC is engaged in the
transportation industry, and Olimpio has been adjudged guilty of a wrongful act and found to have committed the
34 

offense in the discharge of his duties. However, there is no proof here of Olimpio’s insolvency. The judgment of
35 

conviction against Olimpio has not attained finality. This being so, no writ of execution can issue against him to
satisfy his civil liability. Only after proof of the accused-employee’s insolvency may the subsidiary liability of his
employer be enforced. 36

In short, there is as yet no occasion to speak of enforcing the employer’s subsidiary civil liability unless it appears
that the accused-employee’s primary liability cannot in the first instance be satisfied because of insolvency. This fact
cannot be known until some time after the verdict of conviction shall have become final. And even if it appears prima
facie that execution against the employee cannot be satisfied, execution against the employer will not issue as a
matter of course. The procedure for the enforcement of a judgment will have to be followed. Once the judgment of
37 

conviction against Olimpio becomes final and executory, and after the writ of execution issued against him is
returned unsatisfied because of his insolvency, only then can a subsidiary writ of execution be issued against the
MMTC after a hearing set for that precise purpose. It is still too early to hold the MMTC subsidiarily liable with its
accused-employee considering that there is no proof yet of Olimpio’s insolvency.

WHEREFORE, we DENY the instant petition. The Decision dated 29 November 1999 of the Court of Appeals in CA-
G.R. CR No. 14764 finding petitioner Olimpio Pangonorom GUILTY beyond reasonable doubt of reckless
imprudence resulting in multiple slight physical injuries, as well as its Resolution dated 5 May 2000 denying the
motion for reconsideration, are AFFIRMED. No pronouncement as to costs.

SO ORDERED.

G.R. No. 162467               May 8, 2009

MINDANAO TERMINAL AND BROKERAGE SERVICE, INC. Petitioner,

vs.
PHOENIX ASSURANCE COMPANY OF NEW YORK/MCGEE & CO., INC., Respondent.

DECISION

TINGA, J.:

Before us is a petition for review on certiorari1 under Rule 45 of the 1997 Rules of Civil Procedure of the 29 October
20032 Decision of the Court of Appeals and the 26 February 2004 Resolution 3 of the same court denying petitioner’s
motion for reconsideration.

The facts of the case are not disputed.

Del Monte Philippines, Inc. (Del Monte) contracted petitioner Mindanao Terminal and Brokerage Service, Inc.
(Mindanao Terminal), a stevedoring company, to load and stow a shipment of 146,288 cartons of fresh green
Philippine bananas and 15,202 cartons of fresh pineapples belonging to Del Monte Fresh Produce International, Inc.
(Del Monte Produce) into the cargo hold of the vessel M/V Mistrau. The vessel was docked at the port of Davao City
and the goods were to be transported by it to the port of Inchon, Korea in favor of consignee Taegu Industries, Inc.
Del Monte Produce insured the shipment under an "open cargo policy" with private respondent Phoenix Assurance
Company of New York (Phoenix), a non-life insurance company, and private respondent McGee & Co. Inc.
(McGee), the underwriting manager/agent of Phoenix. 4

Mindanao Terminal loaded and stowed the cargoes aboard the M/V Mistrau. The vessel set sail from the port of
Davao City and arrived at the port of Inchon, Korea. It was then discovered upon discharge that some of the cargo
was in bad condition. The Marine Cargo Damage Surveyor of Incok Loss and Average Adjuster of Korea, through its
representative Byeong Yong Ahn (Byeong), surveyed the extent of the damage of the shipment. In a survey report,
it was stated that 16,069 cartons of the banana shipment and 2,185 cartons of the pineapple shipment were so
damaged that they no longer had commercial value. 5

Del Monte Produce filed a claim under the open cargo policy for the damages to its shipment. McGee’s Marine
Claims Insurance Adjuster evaluated the claim and recommended that payment in the amount of $210,266.43 be

34
made. A check for the recommended amount was sent to Del Monte Produce; the latter then issued a subrogation
receipt6 to Phoenix and McGee.

Phoenix and McGee instituted an action for damages 7 against Mindanao Terminal in the Regional Trial Court (RTC)
of Davao City, Branch 12. After trial, the RTC,8 in a decision dated 20 October 1999, held that the only participation
of Mindanao Terminal was to load the cargoes on board the M/V Mistrau under the direction and supervision of the
ship’s officers, who would not have accepted the cargoes on board the vessel and signed the foreman’s report
unless they were properly arranged and tightly secured to withstand voyage across the open seas. Accordingly,
Mindanao Terminal cannot be held liable for whatever happened to the cargoes after it had loaded and stowed
them. Moreover, citing the survey report, it was found by the RTC that the cargoes were damaged on account of a
typhoon which M/V Mistrau had encountered during the voyage. It was further held that Phoenix and McGee had no
cause of action against Mindanao Terminal because the latter, whose services were contracted by Del Monte, a
distinct corporation from Del Monte Produce, had no contract with the assured Del Monte Produce. The RTC
dismissed the complaint and awarded the counterclaim of Mindanao Terminal in the amount of ₱83,945.80 as
actual damages and ₱100,000.00 as attorney’s fees.9 The actual damages were awarded as reimbursement for the
expenses incurred by Mindanao Terminal’s lawyer in attending the hearings in the case wherein he had to travel all
the way from Metro Manila to Davao City.

Phoenix and McGee appealed to the Court of Appeals. The appellate court reversed and set aside 10 the decision of
the RTC in its 29 October 2003 decision. The same court ordered Mindanao Terminal to pay Phoenix and McGee
"the total amount of $210,265.45 plus legal interest from the filing of the complaint until fully paid and attorney’s fees
of 20% of the claim."11 It sustained Phoenix’s and McGee’s argument that the damage in the cargoes was the result
of improper stowage by Mindanao Terminal. It imposed on Mindanao Terminal, as the stevedore of the cargo, the
duty to exercise extraordinary diligence in loading and stowing the cargoes. It further held that even with the
absence of a contractual relationship between Mindanao Terminal and Del Monte Produce, the cause of action of
Phoenix and McGee could be based on quasi-delict under Article 2176 of the Civil Code. 12

Mindanao Terminal filed a motion for reconsideration,13 which the Court of Appeals denied in its 26 February
200414 resolution. Hence, the present petition for review.

Mindanao Terminal raises two issues in the case at bar, namely: whether it was careless and negligent in the
loading and stowage of the cargoes onboard M/V Mistrau making it liable for damages; and, whether Phoenix and
McGee has a cause of action against Mindanao Terminal under Article 2176 of the Civil Code on quasi-delict. To
resolve the petition, three questions have to be answered: first, whether Phoenix and McGee have a cause of action
against Mindanao Terminal; second, whether Mindanao Terminal, as a stevedoring company, is under obligation to
observe the same extraordinary degree of diligence in the conduct of its business as required by law for common
carriers15 and warehousemen;16 and third, whether Mindanao Terminal observed the degree of diligence required by
law of a stevedoring company.

We agree with the Court of Appeals that the complaint filed by Phoenix and McGee against Mindanao Terminal,
from which the present case has arisen, states a cause of action. The present action is based on quasi-delict,
arising from the negligent and careless loading and stowing of the cargoes belonging to Del Monte Produce. Even
assuming that both Phoenix and McGee have only been subrogated in the rights of Del Monte Produce, who is not
a party to the contract of service between Mindanao Terminal and Del Monte, still the insurance carriers may have a
cause of action in light of the Court’s consistent ruling that the act that breaks the contract may be also a tort. 17 In
fine, a liability for tort may arise even under a contract, where tort is that which breaches the contract 18 . In the
present case, Phoenix and McGee are not suing for damages for injuries arising from the breach of the contract of
service but from the alleged negligent manner by which Mindanao Terminal handled the cargoes belonging to Del
Monte Produce. Despite the absence of contractual relationship between Del Monte Produce and Mindanao
Terminal, the allegation of negligence on the part of the defendant should be sufficient to establish a cause of action
arising from quasi-delict.19

The resolution of the two remaining issues is determinative of the ultimate result of this case.

Article 1173 of the Civil Code is very clear that if the law or contract does not state the degree of diligence which is
to be observed in the performance of an obligation then that which is expected of a good father of a family or
ordinary diligence shall be required. Mindanao Terminal, a stevedoring company which was charged with the
loading and stowing the cargoes of Del Monte Produce aboard M/V Mistrau, had acted merely as a labor provider in
the case at bar. There is no specific provision of law that imposes a higher degree of diligence than ordinary
diligence for a stevedoring company or one who is charged only with the loading and stowing of cargoes. It was
neither alleged nor proven by Phoenix and McGee that Mindanao Terminal was bound by contractual stipulation to
observe a higher degree of diligence than that required of a good father of a family. We therefore conclude that
following Article 1173, Mindanao Terminal was required to observe ordinary diligence only in loading and stowing
the cargoes of Del Monte Produce aboard M/V Mistrau.

imposing a higher degree of diligence,21 on Mindanao Terminal in loading and stowing the cargoes. The case
of Summa Insurance Corporation v. CA, which involved the issue of whether an arrastre operator is legally liable for

35
the loss of a shipment in its custody and the extent of its liability, is inapplicable to the factual circumstances of the
case at bar. Therein, a vessel owned by the National Galleon Shipping Corporation (NGSC) arrived at Pier 3, South
Harbor, Manila, carrying a shipment consigned to the order of Caterpillar Far East Ltd. with Semirara Coal
Corporation (Semirara) as "notify party." The shipment, including a bundle of PC 8 U blades, was discharged from
the vessel to the custody of the private respondent, the exclusive arrastre operator at the South Harbor. Accordingly,
three good-order cargo receipts were issued by NGSC, duly signed by the ship's checker and a representative of
private respondent. When Semirara inspected the shipment at house, it discovered that the bundle of PC8U blades
was missing. From those facts, the Court observed:

x x x The relationship therefore between the consignee and the arrastre operator must be examined. This
relationship is much akin to that existing between the consignee or owner of shipped goods and the common
carrier, or that between a depositor and a warehouseman [22 ]. In the performance of its obligations, an arrastre
operator should observe the same degree of diligence as that required of a common carrier and a
warehouseman as enunciated under Article 1733 of the Civil Code and Section 3(b) of the Warehouse Receipts
Law, respectively. Being the custodian of the goods discharged from a vessel, an arrastre operator's duty is
to take good care of the goods and to turn them over to the party entitled to their possession. (Emphasis
supplied)23

There is a distinction between an arrastre and a stevedore. 24 Arrastre, a Spanish word which refers to hauling of
cargo, comprehends the handling of cargo on the wharf or between the establishment of the consignee or shipper
and the ship's tackle. The responsibility of the arrastre operator lasts until the delivery of the cargo to the consignee.
The service is usually performed by longshoremen. On the other hand, stevedoring refers to the handling of the
cargo in the holds of the vessel or between the ship's tackle and the holds of the vessel. The responsibility of the
stevedore ends upon the loading and stowing of the cargo in the vessel. 1avvphi1

It is not disputed that Mindanao Terminal was performing purely stevedoring function while the private respondent in
the Summa case was performing arrastre function. In the present case, Mindanao Terminal, as a stevedore, was
only charged with the loading and stowing of the cargoes from the pier to the ship’s cargo hold; it was never the
custodian of the shipment of Del Monte Produce. A stevedore is not a common carrier for it does not transport
goods or passengers; it is not akin to a warehouseman for it does not store goods for profit. The loading and
stowing of cargoes would not have a far reaching public ramification as that of a common carrier and a
warehouseman; the public is adequately protected by our laws on contract and on quasi-delict. The public policy
considerations in legally imposing upon a common carrier or a warehouseman a higher degree of diligence is not
present in a stevedoring outfit which mainly provides labor in loading and stowing of cargoes for its clients.

In the third issue, Phoenix and McGee failed to prove by preponderance of evidence 25 that Mindanao Terminal had
acted negligently. Where the evidence on an issue of fact is in equipoise or there is any doubt on which side the
evidence preponderates the party having the burden of proof fails upon that issue. That is to say, if the evidence
touching a disputed fact is equally balanced, or if it does not produce a just, rational belief of its existence, or if it
leaves the mind in a state of perplexity, the party holding the affirmative as to such fact must fail. 26
1avvphi1

We adopt the findings27 of the RTC,28 which are not disputed by Phoenix and McGee. The Court of Appeals did not
make any new findings of fact when it reversed the decision of the trial court. The only participation of Mindanao
Terminal was to load the cargoes on board M/V Mistrau.29 It was not disputed by Phoenix and McGee that the
materials, such as ropes, pallets, and cardboards, used in lashing and rigging the cargoes were all provided by M/V
Mistrau and these materials meets industry standard. 30

It was further established that Mindanao Terminal loaded and stowed the cargoes of Del Monte Produce aboard
the M/V Mistrau in accordance with the stowage plan, a guide for the area assignments of the goods in the vessel’s
hold, prepared by Del Monte Produce and the officers of M/V Mistrau.31 The loading and stowing was done under
the direction and supervision of the ship officers. The vessel’s officer would order the closing of the hatches only if
the loading was done correctly after a final inspection. 32 The said ship officers would not have accepted the cargoes
on board the vessel if they were not properly arranged and tightly secured to withstand the voyage in open seas.
They would order the stevedore to rectify any error in its loading and stowing. A foreman’s report, as proof of work
done on board the vessel, was prepared by the checkers of Mindanao Terminal and concurred in by the Chief
Officer of M/V Mistrau after they were satisfied that the cargoes were properly loaded. 33

Phoenix and McGee relied heavily on the deposition of Byeong Yong Ahn 34 and on the survey report35 of the damage
to the cargoes. Byeong, whose testimony was refreshed by the survey report, 36 found that the cause of the damage
was improper stowage37 due to the manner the cargoes were arranged such that there were no spaces between
cartons, the use of cardboards as support system, and the use of small rope to tie the cartons together but not by
the negligent conduct of Mindanao Terminal in loading and stowing the cargoes. As admitted by Phoenix and
McGee in their Comment38 before us, the latter is merely a stevedoring company which was tasked by Del Monte to
load and stow the shipments of fresh banana and pineapple of Del Monte Produce aboard the M/V Mistrau. How
and where it should load and stow a shipment in a vessel is wholly dependent on the shipper and the officers of the
vessel. In other words, the work of the stevedore was under the supervision of the shipper and officers of the vessel.
Even the materials used for stowage, such as ropes, pallets, and cardboards, are provided for by the vessel. Even
the survey report found that it was because of the boisterous stormy weather due to the typhoon Seth, as
36
encountered by M/V Mistrau during its voyage, which caused the shipments in the cargo hold to collapse, shift and
bruise in extensive extent.39 Even the deposition of Byeong was not supported by the conclusion in the survey report
that:

CAUSE OF DAMAGE

xxx

From the above facts and our survey results, we are of the opinion that damage occurred aboard the carrying vessel
during sea transit, being caused by ship’s heavy rolling and pitching under boisterous weather while proceeding
from 1600 hrs on 7th October to 0700 hrs on 12th October, 1994  as described in the sea protest.40

As it is clear that Mindanao Terminal had duly exercised the required degree of diligence in loading and stowing the
cargoes, which is the ordinary diligence of a good father of a family, the grant of the petition is in order.

However, the Court finds no basis for the award of attorney’s fees in favor of petitioner.  None of the circumstances
lawphil.net

enumerated in Article 2208 of the Civil Code exists. The present case is clearly not an unfounded civil action against
the plaintiff as there is no showing that it was instituted for the mere purpose of vexation or injury. It is not sound
public policy to set a premium to the right to litigate where such right is exercised in good faith, even if
erroneously.41 Likewise, the RTC erred in awarding ₱83,945.80 actual damages to Mindanao Terminal. Although
actual expenses were incurred by Mindanao Terminal in relation to the trial of this case in Davao City, the lawyer of
Mindanao Terminal incurred expenses for plane fare, hotel accommodations and food, as well as other
miscellaneous expenses, as he attended the trials coming all the way from Manila. But there is no showing that
Phoenix and McGee made a false claim against Mindanao Terminal resulting in the protracted trial of the case
necessitating the incurrence of expenditures. 42

WHEREFORE, the petition is GRANTED. The decision of the Court of Appeals in CA-G.R. CV No. 66121 is SET
ASIDE and the decision of the Regional Trial Court of Davao City, Branch 12 in Civil Case No. 25,311.97 is
hereby REINSTATED MINUS the awards of ₱100,000.00 as attorney’s fees and ₱83,945.80 as actual damages.

SO ORDERED.

G.R. No. 206709, February 06, 2019

VDM TRADING, INC. AND SPOUSES LUIS AND NENA DOMINGO, REPRESENTED BY THEIR
ATTORNEY-IN-FACT, ATTY. F. WILLIAM L. VILLAREAL, PETITIONERS, v. LEONITA
CARUNGCONG AND WACK WACK TWIN TOWERS CONDOMINIUM ASSOCIATION, INC.,
RESPONDENTS.

DECISION

CAGUIOA, J.:

Before the Court is a Petition for Review on Certiorari1 (Petition) under Rule 45 of the Rules of Court
filed by petitioners VDM Trading, Inc. (petitioner VDM) and Spouses Luis and Nena Domingo
(collectively referred to as the petitioners Sps. Domingo), assailing the Decision 2 dated July 13, 2012
(assailed Decision) and Resolution3 dated March 20, 2013 (assailed Resolution) of the Court of
Appeals (CA) Eleventh Division in CA-G.R. CV No. 89479.

The Facts and Antecedent Proceedings

As narrated by the CA in the assailed Decision and as culled from the records of the instant case, the
essential facts and antecedent proceedings of the case are as follows:

On August 21, 2002, petitioner VDM and the petitioners Sps. Domingo filed before the Regional Trial
Court of Mandaluyong City, Branch 213 (RTC) a Complaint for Damages 4 (Complaint) against
respondents Leonita Carungcong (respondent Carungcong), Wack Wack Twin Towers Condominium
Association, Inc. (respondent Wack Wack), and Hak Yek Tan (Tan).
37
In the said Complaint, it was alleged that petitioner VDM is the owner of Unit 2208B-1 (the Unit)
located at Wack Wack Twin Towers Condominium (the Condominium) at Wack Wack Road,
Mandaluyong City. Petitioner Nena Domingo (petitioner Nena), the majority stockholder of petitioner
VDM, and her husband, petitioner Luis Domingo (petitioner Luis), are the actual occupants of the
Unit.

Sometime in December 1998, while the petitioners Sps. Domingo were in the United States,
petitioner Nena's sister, Nancy Lagman-Castillo (Lagman-Castillo), discovered that soapy water was
heavily penetrating through the ceiling of the Unit. With the leak persisting for several days, Lagman-
Castillo reported the matter with the petitioners Sps. Domingo's counsel and attorney-in-fact, Atty.
William Villareal (Atty. Villareal), as well as respondent Wack Wack's building administrator.

On December 10, 1998, Atty. Villareal allegedly met with respondent Wack Wack's Acting Property
Manager, Arlene Cruz (Cruz), who supposedly revealed that she previously conducted an inspection
on the Unit and found that the strong leak apparently came from Unit 2308B-1, which is located
directly above the Unit. Unit 2308B-1 is owned by respondent Carungcong, but was being leased by
Tan at that time. Cruz allegedly explained that Unit 2308B-1's balcony, which was being utilized as a
laundry area, had unauthorized piping and plumbing works installed therein, which were in violation
of respondent Wack Wack's rules and regulations, as well as the building's original plans.

Atty. Villareal conducted his own inspection of the Unit in the presence of Lagman-Castillo and Cruz,
and noted damages on the following: (1) ceilings and walls, including the wall paper and panel
board; (2) cabinets and other improvements on the wall; (3) narra flooring, which showed warping
and permanent discoloration; (4) bed, mattress, sheets, and covers; (5) curtains, which showed
signs of shrinking and deterioration; (6) personal clothing, articles of personal use, and important
documents inside the cabinet; and (7) miscellaneous damages.
For this reason, on behalf of the petitioners Sps. Domingo, Atty. Villareal sent a letter 5 dated
December 16, 1998, demanding that respondents Wack Wack and Carungcong make restoration
works and/or pay for the damages caused upon the Unit.

When no action was taken by respondents Wack Wack and Carungcong after the lapse of a
considerable length of time, Atty. Villareal allegedly sent another letter 6 dated September 1, 1999 to
respondents Wack Wack, Carungcong, and Tan, as well as Golden Dragon Real Estate Corporation
(Golden Dragon), the developer of the Condominium, demanding that repairs be made on the Unit.

Subsequently, repair works on the Unit were referred to M. Laher Construction (M. Laher) for a
quotation. In its letter7 dated September 1, 2000 addressed to petitioner Luis, M. Laher stated that
the estimated cost in repairing the Unit's balcony, master bedroom, dining and living room, and the
children's room amounted to P490,635.00. Afterwards, several demand letters 8 were sent by the
counsel of the petitioners Sps. Domingo to respondents Wack Wack, Carungcong, Tan, and Golden
Dragon for the payment of the amount quoted by M. Laher, but to no avail.

Hence, the petitioners Sps. Domingo were constrained to file their Complaint. As stated in the
Complaint, the cause of action against Tan is based on the supposed "unauthorized installation of
plumbing in the balcony of Unit 2308-B1 and x x x unauthorized conversion of said balcony into a
laundry/wash area"9 undertaken by Tan. As regards, respondent Carungcong, she was being held
solidarity liable with respondent Tan as the registered owner of Unit 2308-B1, allegedly failing in her
responsibility of ensuring that Tan is complying with all of the rules and regulations of respondent
Wack Wack.10 With respect to respondent Wack Wack, the cause of action was based on the latter's
alleged act of being "utterly negligent in failing to enforce and implement the Association's Rules and
Regulations prohibiting illegal or unauthorized constructions, additions, or alteration by tenants to
their units."11

The petitioners Sps. Domingo prayed for the award of P490,635.00 as actual damages, P300,000.00
as exemplary damages, and P40,000.00 as attorney's fees, litigation expenses, and costs of suit.

Summonses were served upon all the respondents, except Tan who was no longer residing at the
given address.

Subsequently, respondent Wack Wack filed an Answer with Counterclaim and Crossclaim 12 against
respondent Carungcong and Tan. It was respondent Wack Wack's contention that the responsibility of
enforcing and monitoring the policies on the use and occupancy of condominium units lied solely with
Golden Dragon, as embodied in the Amended Master Deed with Declaration of Restrictions of Wack
Wack Twin Towers (Amended Master Deed).13 As stipulated therein, Golden Dragon had the duty to

38
orient the unit owners of the Condominium on the prohibitions and restrictions regarding the
construction, repair, or alteration of any structure within the units. On the other hand, respondent
Wack Wack's obligation was limited to the implementation of the house rules and regulations
affecting only the common and limited areas of the Condominium.

In its crossclaim, respondent Wack Wack alleged that if there was indeed any damage caused on the
Unit, it would have been due to Tan's wrongdoing and the failure of respondent Carungcong to
diligently and regularly monitor the former's activities.

For her part, respondent Carungcong filed her Answer with Third Party Complaint 14 against Golden
Dragon and its specialty contractor, Stalwart Builders Corporation (Stalwart). Respondent
Carungcong argued that the soapy water which seeped through the ceiling of the Unit did not come
from the balcony of her unit, Unit 2308B-1. Also, the installation of piping and plumbing works done
by Stalwart was done with the permission and approval of Golden Dragon. She countered that if
there was any defect in the plumbing works, the damages on the Unit should be assessed against
Golden Dragon and Stalwart.

Summonses were not served upon Golden Dragon and Stalwart as they were no longer holding office
in the addresses supplied by respondent Carungcong. 15 As such, the RTC did not tackle anymore the
Third Party Complaint.

The Ruling of the RTC

On December 19, 2006, the RTC rendered its Decision 16 granting the Complaint against respondent
Carungcong, the dispositive portion of which reads:
WHEREFORE, in view of the foregoing[,] judgment is hereby rendered granting the [C]omplaint
against [respondent] Carungcong, and ordering the said [respondent] to pay [petitioner] the
following amounts:

(1) Php 490,635.00 as actual damages;

(2) Php 100,000.00 as legal fees.

SO ORDERED.17
The petitioners VDM and Sps. Domingo filed their Motion for Partial Reconsideration 18 dated January
10, 2007, praying that respondent Wack Wack be held solidarity liable with respondent Carungcong
pursuant to the provisions of the Amended Master Deed.

Respondent Carungcong likewise moved for a reconsideration19 of the RTC's Decision, maintaining
that the petitioners VDM and Sps. Domingo's causes of action should be directed and litigated against
Golden Dragon instead.

In its Order20 dated July 18, 2007, the RTC modified its Decision and held that respondent Wack
Wack is solidarity liable with respondent Carungcong for the award of damages granted to the
petitioners. Meanwhile, the Motion for Reconsideration filed by respondent Carungcong was denied
for lack of merit.

Hence, respondents Carungcong and Wack Wack appealed the RTC's Decision and Order before the
CA.

The Ruling of the CA

In the assailed Decision, the CA granted the appeal of respondents Carungcong and Wack Wack,
reversing the RTC's Decision dated December 19, 2006 and Order dated July 18,2007. The
dispositive portion of the assailed Decision reads:
WHEREFORE, the appeal is GRANTED. The appealed Decision and Order are REVERSED and SET
ASIDE. The complaint for damages is hereby DISMISSED.

SO ORDERED.21
In sum, the CA found that the records are bereft of any evidence showing that the damage to the
petitioners' Unit was caused by the plumbing works done on the balcony of Unit 2308B-1. Further,
the CA took cognizance of an already settled case previously initiated by the petitioners before the
Housing and Land Use Regulatory Board (HLURB) concerning the Unit. The said case decided by the
HLURB found that water leakage in the Unit was caused by the defective and substandard

39
construction of the Unit by Golden Dragon, and not the plumbing works on the balcony of Unit
2308B-1.

The petitioners filed their Motion for Reconsideration of the assailed Decision on August 17, 2012,
which was denied by the CA in the assailed Resolution.

Hence, this appeal via Petition for Review on Certiorari under Rule 45 of the Rules of Court. 22

On October 30, 2013, respondent Carungcong filed her Comments [To The Petition for Review on
Certiorari under Rule 45]23 dated October 24, 2013. In response, on November 29, 2013, the
petitioners filed their Omnibus Motion and Reply Ad Cautelam (To Respondent Leonita
Carungcong's Comments)24 dated November 28, 2013. In their Omnibus Motion, the petitioners
prayed that the counsel of respondent Carungcong, i.e., Atty. Adriano I. Gaddi, be ordered to show
cause for the late filling of respondent Carungcong's Comment. In a Resolution 25 dated January 27,
2014, the Court denied the petitioners' Omnibus Motion.

After having been fined a sum of P1,000.00 by the Court in its Resolution 26 dated February 16, 2015
for failing to file a comment on the instant Petition within the required period, on May 13, 2015,
respondent Wack Wack filed its Comment27 [on the Petition for Review on Certiorari dated 28 May
2013] dated May 11, 2015.

Issue

Stripped to its core, the central issued to be decided by the Court is whether the CA erred in
reversing the RTC's Decision dated December 19, 2006 and Order dated July 18, 2007, thus
dismissing the petitioners' Complaint for Damages against respondents Carungcong and Wack Wack.

The Court's Ruling

The instant Petition is denied for lack of merit.

First and foremost, it must be stressed that the instant Petition centers on the petitioners' contention
that the CA's assailed Decision and Resolution "are based on a misapprehension of facts." 28 The
instant Petition then proceeds to reiterate the contents of the testimony of their sole witness, Atty.
Villareal, and the various documents he produced, arguing that the evidence on record allegedly
establish the fact that the proximate cause of the damage to the Unit is the plumbing works made on
the balcony of Unit 2308B-1 owned by respondent Carungcong.

Simply stated, the instant Petition raises pure questions of fact.

A question of facts exists when the doubt or difference arises as to the truth or falsehood of facts or
when the query invites calibration of the whole evidence considering mainly the credibility of the
witnesses, the existence and relevancy of specific surrounding circumstances as well as their relation
to each other and to the whole, and the probability of the situation. 29 That is precisely what the
petitioners are asking the Court to do - to reassess, reexamine, and recalibrate the evidence on
record.

A catena of cases has consistently held that questions of fact cannot be raised in an appeal via
certiorari before the Court and are not proper for its consideration. 30 The Court is not a trier of facts.
It is not the Court's function to examine and weigh all over again the evidence presented in the
proceedings below.31

For this reason alone, the instant Petition warrants dismissal.

Nonetheless, after a careful review of the records of the instant case, the Court finds no cogent
reason to reverse the CA's holding that the petitioners' Complaint for Damages against the
respondents should be dismissed.

By alleging that damage was caused to their property by virtue of the respondents' individual and
collective fault and/or negligence, the petitioners' cause of action is anchored on quasi-delict.

According to Article 2176 of the Civil Code, whoever by act or omission causes damage to another,
there being fault or negligence, is obliged to pay for the damage done. Such fault or negligence, if
there is no pre-existing contractual relation between the parties, is called a quasi-delict.

40
A quasi-delict has the following elements: a) the damage suffered by the plaintiff; b) the act or
omission of the defendant supposedly constituting fault or negligence; and c) the causal
connection between the act and the damage sustained by the plaintiff, or proximate cause.32

A perusal of the evidence on record shows that the foregoing elements of a quasi-delict are absent
insofar as respondents Carungcong and Wack Wack are concerned.

The full extent of the damage caused to the petitioners' Unit was not sufficiently proven.

Aside from the purely self-serving testimony of Atty. Villareal, the sole witness of the petitioners who
is also the petitioners' counsel, there was no sufficient evidence presented to show the extent of the
damage caused to the Unit.

As correctly found by the CA, the photographs offered into evidence by the petitioners merely depict
a wet bed, wet floor, and wet cabinet apparently taken from one room only, i.e., the master
bedroom. The CA was correct in its assessment that "[n]o photographs were presented to prove that
the other rooms of Unit 2208B-1 were also damaged by the leak." 33

The petitioners maintain that the letter-quotation from M. Laher, a private document, proves the foil
extent of the damage caused to the Unit.

Such contention is erroneous.

As a prerequisite to its admission in evidence, the identity and authenticity of a private document
must be properly laid and reasonably established. According to Section 20, Rule 132 of the Rules of
Court, the identification and authentication of a private document may only be proven by either: (1)
a person who saw the execution of the document, or (2) a person who has knowledge and can testify
as to the genuineness of the signature or handwriting of the maker.

In the instant case, with Atty. Villareal having not seen the execution of the document, and having
no personal knowledge whatsoever as regards the execution of the document, the letter-quotation
from M. Laher was not deemed to have been properly identified and authenticated, thus making it
inadmissible in evidence. The petitioners should have instead presented a witness from M. Laher who
actually executed the letter-quotation, or any other witness who saw the actual execution of the
document or can testify as to the signatures and handwritings found on the document. Therefore, the
petitioners cannot rely on M. Laher's letter-quotation to prove their claims for damages.

The petitioners also heavily rely on the handwritten report of the petitioners' sister, Lagman-Castillo,
which purportedly show the extent and location of the damage caused to the Unit.

Atty. Villareal's testimony on the observations contained in the handwritten report of Lagman-Castillo
is inadmissible. Atty. Villareal is not competent to testify on the veracity of the observations
contained in the said handwritten report because he may only testify to those facts which he has
personal knowledge, and derived from his own perception. Simply stated, as to the contents of the
handwritten report of Lagman-Castillo, Atty. Villareal's testimony is hearsay. The petitioners should
have instead presented Lagman-Castillo herself to testify on her own observations, which was not
done.

The petitioners argue that the presentation of Lagman-Castillo was not needed anymore due to
certain stipulations made by the respondents. But it must be stressed that the stipulations of the
respondents regarding the handwritten report of Lagman-Castillo were merely limited to: (1) the
authorship of the said report, (2) the fact that the photographs attached in the said report were
taken by Lagman-Castillo, and (3) the fact that Lagman-Castillo is the sister of petitioner Nena.
There was no stipulation made as to the accuracy and veracity of the contents of the handwritten
report. Hence, it was still incumbent upon the petitioners to present Lagman-Castillo to prove the
truthfulness of the contents of her handwritten report.

The petitioners also argue that the principle of admission of silence applies vis-a-vis Lagman-
Castillo's handwritten report because the respondents supposedly failed to issue a response to the
said report. The argument is not convincing. As correctly cited by respondent Wack Wack in its
Comment, jurisprudence holds that the rule on admission by silence applies to adverse statements in
writing if the party was carrying on a mutual correspondence with the declarant. However, if there
was no such mutual correspondence, the rule is relaxed on the theory that while the party would
have immediately reacted by a denial if the statements were orally made in his presence, such
prompt response can generally not be expected if the party still has to resort to a written reply. 34

41
In the case at hand, it is not disputed that Lagman-Castillo's handwritten report was not addressed
to the respondents. Instead, the report was addressed to Atty. Villareal. Hence, the rule on admission
on silence is negated.

Aside from the foregoing, the petitioners likewise rely on the supposed statements made by Cruz, the
Acting Property Manager of respondent Wack Wack, who supposedly intimated that the strong leak
apparently came from Unit 2308B-1, which is located directly above the Unit. However, it must be
emphasized that Cruz herself was not presented as a witness. Atty. Villareal was not competent to
testify as to the truth of Cruz's supposed observations and findings because, to reiterate, Atty.
Villareal may only testify to those facts which he has personal knowledge, and derived from his own
perception. Hearsay evidence such as this, whether objected to or not, cannot be given credence for
it has no probative value.35

Lastly, the petitioners cite the various demand letters as evidence of the supposed damage caused to
their Unit. It goes without saying that these letters are self-serving documents that deserve scant
consideration in the determination of damages. As previously held by the Court, one cannot make
evidence for himself by writing a letter containing the statements that he wishes to prove. He does
not make the letter evidence by sending it to the party against whom he wishes to prove the facts
stated therein.36

Fault or negligence on the part of respondents Carungcong and Wack Wack was not proven.

As regards the second element of a quasi-delict, a careful perusal of the evidence on record shows
that the petitioners failed to present even a shred of evidence that there was fault or negligence on
the part of the respondents Carungcong and Wack Wack.

The Court has held that in a cause of action based on quasi-delict, the negligence or fault should be
clearly established as it is the basis of the action. The burden of proof is thus placed on the plaintiff,
as it is the duty of a party to present evidence on the facts in issue necessary to establish his claim
or defense by the amount of evidence required by law. Therefore, if the plaintiff alleged in his
complaint that he was damaged because of the negligent acts of the defendant, he has the burden of
proving such negligence.37

Applying the foregoing in the instant case, the burden of proving fault or negligence was clearly not
discharged by the petitioners.

As to the supposed fault or negligence of respondent Carungcong, while it is undisputed that

plumbing works were done on the balcony of the unit owned by respondent Carungcong, there is no
evidence presented that suggests that such plumbing works were illegally or negligently made. The
petitioners could not even point out what specific rule or regulation was supposedly violated by
respondent Carungcong or her lessee, Tan, in undertaking the plumbing works. There was no proof
offered showing that such plumbing works were even prohibited, disallowed, or undertaken in a
negligent manner.

The closest piece of evidence presented that remotely suggests some negligence or wrongdoing on
the part of respondent Carungcong or her lessee, Tan, was the supposed statements made by
respondent Wack Wack's Acting Property Manager, Cruz. However, as already explained, as Atty.
Villareal's testimony on Cruz's statements is pure hearsay, the veracity of Cruz's findings was not
sufficiently proven.

With respect to the supposed negligence on the part of respondent Wack Wack, the petitioners do
not even dispute that under the Amended Master Deed, respondent Wack Wack holds title over and
exercises maintenance and supervision only with respect to the common areas. It is also not disputed
that the maintenance and repair of the condominium units shall be made solely on the account of the
unit owners, with each unit owner being "responsible for all the damages to any other Units and/or to
any portion of the Projects resulting from his failure to effect the required maintenance and repairs of
his unit."38

Proximate cause between the supposed damage caused and the plumbing works undertaken was not
established.

To constitute quasi-delict, the alleged fault or negligence committed by the defendant must be the
proximate cause of the damage or injury suffered by the plaintiff.

42
Proximate cause is that cause which, in natural and continuous sequence, unbroken by any efficient
intervening cause, produces the injury and without which the result would not have occurred. 39

Stated in simple terms, it must be proven that the supposed fault or negligence committed by the
respondents, i.e., the undertaking of plumbing works on Unit 2308B-1, was the cause of the damage
to the Unit.

Such was not proven by the petitioners.

First, as correctly observed by the CA, the claim that a supposed leak in the plumbing works located
in the balcony of Unit 2308B-1 caused the leakage of soapy water in various parts of the Unit,
including the various bedrooms inside the Unit, is highly doubtful and illogical. As noted by the CA,
the subject plumbing works are isolated in the balcony area of Unit 2308B-1. The petitioners do not
dispute that the said area is separated from the other areas of the unit and sealed off by a wall and
beam. Hence, if a leakage in the plumbing works on the balcony of Unit 2308B-1 indeed occurred, it
is highly improbable that such leak would spread to a wide area of the Unit.

Second, aside from the unsubstantiated self-serving testimony of Atty. Villareal, there was no
evidence presented to show that the supposed widespread leak of soapy water in the various parts of
the Unit was caused by plumbing works on the balcony of Unit 2308B-1. No witness or document
establishing a causal link between the plumbing works and the damage to the Unit was offered. The
petitioners could have utilized assessors or technical experts on building and plumbing works to
personally examine and assess the damage caused to the Unit to provide some substantiation to the
claim of proximate cause. However, no such witness was presented. The petitioners relied solely on
the testimony of their own counsel, Atty. Villareal. Proximate cause cannot be established by the
mere say-so of a self-serving witness.

Lastly, the fact that the plumbing works done in Unit 2308B-1 was not the cause of the damage
suffered by the petitioners' Unit is further supported by the factual finding of the CA that a case
before the HLURB was previously filed by the petitioners against Golden Dragon. In this complaint,
which was offered in evidence by the petitioners themselves, the latter alleged that in 1996, way
before the installation of the subject plumbing works in Unit 2308B-1, they had already discovered
water leaks in the Unit which damaged the interiors thereof. It was the petitioners' allegation that the
water leakage in the Unit was made possible due to Golden Dragon's delivery of a "defective and/or
substandard unit."40 In fact, the CA noted that the HLURB issued a Decision dated July 9, 2009
holding Golden Dragon liable for the water leakage suffered by the petitioners. It is of no coincidence
that the award for actual damages granted to the petitioners is similar to the award for actual
damages sought by the petitioners in the instant case.41

The petitioners attempt to downplay the aforesaid complaint that was lodged and subsequently
settled by the HLURB by arguing that the said complaint was offered for a different purpose, i.e., to
prove that Golden Dragon previously refused to execute a Deed of Absolute Sale covering the Unit.
Such argument fails to convince. As correctly held by the CA, as the said HLURB complaint was
formally offered by the petitioners, thus forming part of the records of the case, "this Court shall not
close its eyes" to the contents of the said document. 42 Section 24, Rule 132 merely states that the
court shall consider no evidence which has not been formally offered, and that the purpose for which
the evidence is offered must be specified. There is nothing in the Rules of Court which limits the
appreciation of the court to the specified purpose for which the evidence was offered.

All in all, with the petitioners failing to prove the existence of the elements of a quasi-delict in the
instant case, the CA committed no reversible error that warrants the Court's exercise of its
discretionary appellate power.

WHEREFORE, the appeal is hereby DENIED. The Decision dated July 13, 2012 and Resolution dated
March 20, 2013 rendered by the Court of Appeals, Eleventh Division in CA-G.R. CV No. 89479
are AFFIRMED.

SO ORDERED.

PLDT vs. CA

43
Facts: On July, 30, 1968, respondent spouses Esteban had their jeep ran over a sand of earth and fell into an open trench,
an excavation allegedly undertaken by PLDT for the installation of its underground conduit system. Respondent Antonio
Esteban failed to notice the open trench which was left uncovered because of the creeping darkness and the lack of
warning light or signs. Respondent spouses suffered physical injuries and their jeeps windshield was shattered. PLDT
alleged that the respondents were negligent and that it should be the independent contractor L.R. Barte and Company
which undertook said conduit system to be the one liable.The latter claimed to have complied with its contract and had
installed necessary barricades.

Issue: WON PLDT and L.R. Barte and Co. are liable.

Ruling: Private Respondent´s negligence was not merely contributory but goes to the very cause of the accident, hence he
has no right to recover damages for the injuries which he and his wife suffered. Private respondent cannot recover
notwithstanding the negligence he imputes on PLDT considering that he had ¨the last clear chance¨, to avoid the injury.
One who claims damages for the negligence of another has the burden of proof to show existence of such fault or
negligence causative thereof.

Layugan vs. IAC; Torts- vicarious liability of owner of a truck

7/15/2013
0 Comments
 

G.R. No. 73998                 November 14, 1988

Facts:
Pedro T. Layugan filed an action for damages against Godofredo Isidro, alleging that while at
Baretbet, Bagabag, Nueva Vizcaya, the Plaintiff and a companion were repairing the tire of their
cargo truck which was parked along the right side of the National Highway; that defendant's truck,
driven recklessly by Daniel Serrano bumped the plaintiff, that as a result, plaintiff was injured and
hospitalized where he incurred and will incur more expenses as he recuperates from said injuries;
Plaintiff's right leg was amputated and that because of said injuries he would be deprived of a
lifetime income.
To free themselves from liability, defendants Isidro [owner] and Serrano [driver] averred that he
knows his responsibilities as a driver and further contends that it was the negligence of plaintiff that
was the proximate cause of the accident. They alleged that plaintiff parked his truck in a manner
which occupied a part of the highway and he did not even put a warning sign.

Subsequently, a third-party complaint was filed by the defendant against his insurer, the Travellers
Multi Indemnity Corporation; that the third-party plaintiff [Isidro], without admitting his liability to
the plaintiff, claimed that the third-party defendant [Travellers] is liable to the former for
contribution, indemnity and subrogation by virtue of their insurance contract which covers the
insurer's liability for damages arising from death, bodily injuries and damage to property.  The
Insurance company argued that it is only liable for the amount agreed in the policy and the
complaint was premature since no claim was made to it.

The RTC  ruled in favor of the Petitioners. The CA reversed the decision, stating that it is the
petitioners who were negligent since they did not exercise caution  by putting warning signs that
their truck is park on the shoulder of the highway.

44
Issue:
Whether or not Isidro is liable as employer of Serrano.

Ruling:
Yes!

The SC held that the CA erroneously appreciated the evidence. It was proven that the petitioner
placed a warning sign within 3 to 4 meters from their truck in the form of a lighted kerosene
lamp. The existence of this warning sings was corroborated by Serrano, respondent's driver, and
further stated that when he saw a parked truck, he kept on stepping on the brake pedal but it did not
function.  Thus despite this warning signs, the truck recklessly driven by Serrano and owned by
Respondent Isidro bumped the truck of petitioner.

The private respondent is sued under Art. 2176 in relation to Art. 2180, paragraph 5, of the Civil
Code. In the latter, when an injury is caused by the negligence of a servant or employee there
instantly arises a presumption of law that there was negligence on the part of the master or
employer either in the selection of the servant or employee, or in supervision over him after
selection, or both. Such presumption is juris tantum and not juris et de jure and consequently, may
be rebutted. If follows necessarily that if the employer shows to the satisfaction of the court that in
the selection and in the supervision he has exercised the care and diligence of a good father of a
family, the presumption is overcome and he is relieved from liability. In disclaiming liability for
the incident, the private respondent stresses that the negligence of his employee has already been
adequately overcome by his driver's statement that he knew his responsibilities as a driver and that
the truck owner used to instruct him to be careful in driving. 

We do not agree with the private respondent in his submission. In the first place, it is clear that the
driver did not know his responsibilities because he apparently did not check his vehicle before he
took it on the road. If he did he could have discovered earlier that the brake fluid pipe on the right
was cut, and could have repaired it and thus the accident could have been avoided. Moveover, to
our mind, the fact that the private respondent used to intruct his driver to be careful in his driving,
that the driver was licensed, and the fact that he had no record of any accident, as found by the
respondent court, are not sufficient to destroy the finding of negligence of the Regional Trial Court
given the facts established at the trial. The private respondent or his mechanic, who must be
competent, should have conducted a thorough inspection of his vehicle before allowing his driver
to drive it.

In the light of the circumstances obtaining in the case, we hold that Isidro failed to prove that the
diligence of a good father of a family in the supervision of his employees which would exculpate
him from solidary liability with his driver to the petitioner. But even if we concede that the
diligence of a good father of a family was observed by Isidro in the supervision of his driver, there
is not an iota of evidence on record of the observance by Isidro of the same quantum of diligence in
the supervision of his mechanic, if any, who would be directly in charge in maintaining the road
worthiness of his (Isidro's) truck. But that is not all. There is paucity of proof that Isidro exercised
the diligence of a good father of a family in the selection of his driver, Daniel Serrano, as well as in
the selection of his mechanic, if any, in order to insure the safe operation of his truck and thus
prevent damage to others. Accordingly, the responsibility of Isidro as employer treated in Article
2180, paragraph 5, of the Civil Code has not ceased.

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PSI VS AGANA (GR NO. 126297 JANUARY 31, 2007)
Professional Services Inc. vs Agana
GR No. 126297 January 31, 2007

Facts: On April 4, 1984, Natividad Agana was rushed to the Medical City General Hospital because of difficulty of bowel movement
and bloody anal discharge. After a series of medical examinations, Dr. Miguel Ampil diagnosed her to be suffering from Cancer of the
sigmoid. On April 11, 1984, Dr. Ampil assisted by the medical staff of the Medical City Hospital performed an Anterior resection
surgery on Natividad. He found that the malignancy on her sigmoid area had spread on her left ovary, necessitating the removal of
certain portions of it. Thus, Dr. Ampil obtained the consent of Natividad’s husband, Enrique Agana, to permit Dr. Juan Fuentes to
perform hysterectomy on her. After Dr. Fuentes had completed the hysterectomy, Dr. Ampil took over, completed the operation and
closed the incision after searching for the missing 2 gauzes as indicated by the assisting nurses but failed to locate it. After a couple of
days, Natividad complained of excruciating pains in her anal region but Dr. Ampil said it is a natural consequence of the
operation/surgery and recommended that she consult an oncologist to examine the cancerous nodes which were not removed during
the operation. Natividad and her husband went to the US to seek further treatment and she was declared free from cancer. A piece of
gauze portruding from Natividad’s vagina was found by her daughter which was then removed by hand by Dr. Ampil and assured that
the pains will vanished. However, it didn’t. The pains intensified prompting Natividad to seek treatment at the Polymedic General
Hospital. While confined there, Dr. Ramon Guttierez detected the presence of another foreign object in her vagina – a foul smelling
gauze measuring 1.5 inches in width which badly infected her vagina. A recto-vaginal fistula had forced stool to excrete through her
vagina. Another surgical operation was needed to remedy the damage.

Issue: Whether or not Dr. Ampil and Fuentes are liable for medical malpractice and the PSI for damages due to the negligence of the
said doctors.

Held: Yes. No. Yes. An operation requiring the placing of sponges in the incision is not complete until the sponges are properly
removed and it is settled that the leaving of sponges or other foreign substances in the wound after the incision has been closed is at
least prima facie negligence by the operating surgeon. To put it simply, such act is considered so inconsistent with due care as to raise
inference of negligence. There are even legions of authorities to the effect that such act is negligence per se.

This is a clear case of medical malpractice or more appropriately, medical negligence. To successfully pursue this kind of case, a
patient must only prove that a health care provider either failed to do something which a reasonably prudent health care provider
would have done, or that he did something that a reasonably prudent provider would not have done; and that failure or action caused
injury to the patient. Simply puts the elements are duty, breach, injury, and proximate causation. Dr. Ampil, as the lead surgeon, had
the duty to remove all foreign objects, such as gauzes, from Natividad’s body before closure of the incision. When he failed to do so, it
was his duty to inform Natividad about it. Dr. Ampil breached both duties. Such breach caused injury to Natividad, necessitating her
further examination by American doctors and another surgery. That Dr. Ampil’s negligence is the proximate cause of Natividad’s
injury could be traced from his act of closing the incision despite the information given by the attending nurses that 2 pieces of gauze
were still missing. That they were later on extracted from Natividad’s vagina established the causal link between Dr. Ampil’s
negligence and the injury. And what further aggravated such injury was his deliberate concealment of this missing gauzes from the
knowledge of Natividad and her family.

The requisites for the applicability of the doctrine of res ipsa liquitor are:

1. Occurrence of an injury;
2. The thing which caused the injury was under the control and management of the defendant;
3. The occurrence was such that in the ordinary course of things would not have happened if those who had control or
management used proper care, and;
4. The absence of explanation by the defendant

Of the foregoing, the most instrumental is the “Control and management of the thing which caused the injury.”

Under the “Captain of the ship” rule, the operating surgeon is the person in complete charge of the surgery room and all personnel
connected with the operation.

The knowledge of any of the staff of Medical City constitutes knowledge of PSI.

The doctrine of corporate responsibility, has the duty to see that it meets the standards of responsibilities for the care of patients. Such
duty includes the proper supervision of the members of its medical staff. The hospital accordingly has the duty to make a reasonable
effort to monitor and over see the treatment prescribed and administered by the physician practicing in its premises.

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FGU INSURANCE CORPORATION v. G.P. SARMIENTO TRUCKING CORPORATION, GR No. 141910,
2002-08-06
Facts:
G.P. Sarmiento Trucking Corporation (GPS) undertook to deliver on 18 June 1994 thirty (30) units of
Condura S.D. white refrigerators aboard one of its Isuzu truck... from the plant site of Concepcion
Industries, Inc.,... to the Central Luzon Appliances in Dagupan City
While the truck was traversing the north diversion road along McArthur highway in Barangay Anupol,
Bamban, Tarlac, it collided with an unidentified truck, causing it to fall into a deep canal, resulting in...
damage to the cargoes.
FGU Insurance Corporation (FGU), an insurer of the shipment, paid to Concepcion Industries, Inc., the
value of the covered cargoes in the sum of P204,450.00. FGU,... Concepcion Industries, Inc., sought
reimbursement of... the amount it had paid to the latter from GPS.
FGU filed a complaint for damages and breach of contract of carriage against GPS and its driver Lambert
Eroles with the Regional Trial Court, Branch 66, of Makati City. In its... answer, respondents asserted that
GPS was the exclusive hauler only of Concepcion Industries, Inc., since 1988, and it was not so engaged in
business as a common carrier. Respondents further claimed that the cause of damage was purely
accidental.
FGU presented its evidence, establishing the extent of damage to the cargoes and the amount it had paid
to the assured. GPS, instead of submitting its evidence, filed with leave of court a motion to dismiss the
complaint by way of demurrer... to evidence on the ground that petitioner had failed to prove that it was a
common carrier.
The trial court, in its order of 30 April 1996,[1] granted the motion to dismiss
The subsequent motion for reconsideration having been denied,[3] plaintiff interposed an appeal to the
Court of Appeals, contending that the trial court had erred (a) in holding that the appellee corporation was
not a common carrier defined under the law... and existing jurisprudence; and (b) in dismissing the
complaint on a demurrer to evidence
The Court of Appeals rejected the appeal of petitioner and ruled in favor of GPS
Issues:
WHETHER RESPONDENT GPS MAY BE CONSIDERED AS A COMMON CARRIER AS DEFINED UNDER
THE LAW AND EXISTING JURISPRUDENCE.
II
WHETHER RESPONDENT GPS, EITHER AS A COMMON CARRIER OR A PRIVATE CARRIER, MAY BE
PRESUMED TO HAVE BEEN NEGLIGENT WHEN THE GOODS IT UNDERTOOK TO TRANSPORT
SAFELY WERE SUBSEQUENTLY DAMAGED WHILE IN ITS PROTECTIVE CUSTODY AND POSSESSION.
III
WHETHER THE DOCTRINE OF RES IPSA LOQUITUR IS APPLICABLE IN THE INSTANT CASE
Ruling:
Given accepted standards, GPS scarcely falls within the term "common carrier."
Respondent trucking corporation recognizes the existence of a contract of carriage between it and
petitioner's assured, and admits that the cargoes it has assumed to deliver have been lost or damaged
while in its custody. In such a situation, a default on, or failure of... compliance with, the obligation in this
case, the delivery of the goods in its custody to the place of destination - gives rise to a presumption of
lack of care and corresponding liability on the part of the contractual obligor the burden being on him to
establish otherwise. GPS... has failed to do so.
the truck driver, whose liability in a civil action is predicated on culpa acquiliana,... while he admittedly can
be said to have been in control and management of the vehicle which figured in the accident, it is not
equally shown, however, that the accident could have been exclusively due to his negligence, a matter that
can allow, forthwith, res ipsa... loquitur to work against him
Principles:
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Common carriers are persons, corporations, firms or associations engaged in the business of carrying or
transporting passengers or goods or both, by land, water, or air, for hire or compensation, offering their
services to the public,[8] whether to the public in general or to a limited clientele in particular, but never on
an exclusive basis.
The true test of a common carrier is the carriage of passengers or goods, providing space for those who
opt to avail themselves of... its transportation service for a fee.
In culpa contractual, upon which the action of petitioner rests as being the subrogee of Concepcion
Industries, Inc., the mere proof of the existence of the contract and the failure of its compliance justify,
prima facie, a corresponding right of relief.[11] The law, recognizing the obligatory force of contracts,[12]
will not permit a party to be set free from liability for any kind of misperformance of the contractual
undertaking or a contravention of the tenor thereof.[
Respondent driver, on the other hand, without concrete proof of his negligence or fault, may not himself
be ordered to pay petitioner. The driver, not being a party to the contract of carriage between petitioner's
principal and defendant, may not be held liable under the... agreement. A contract can only bind the parties
who have entered into it or their successors who have assumed their personality or their juridical position.
Consonantly with the axiom res inter alios acta aliis neque nocet prodest,... such contract can neither favor
nor prejudice a third person. Petitioner's civil action against the driver can only be based on culpa aquiliana,
which, unlike culpa contractual, would require the claimant for damages to prove negligence or fault on the
part of the... defendant
A word in passing. Res ipsa loquitur, a doctrine being invoked by petitioner, holds a defendant liable where
the thing which caused the injury complained of is shown to be under the latter's management and the
accident is such that, in the ordinary course of things,... cannot be expected to happen if those who have
its management or control use proper care. It affords reasonable evidence, in the absence of explanation
by the defendant, that the accident arose from want of care.
it is regarded as a mode of proof, or a mere procedural convenience since it furnishes a substitute for, and
relieves the plaintiff of, the burden of producing specific proof of negligence. The maxim simply... places on
the defendant the burden of going forward with the proof.
Nevertheless, the requirement that responsible causes other than those due to defendant's conduct must
first be eliminated, for the doctrine to apply, should be understood as being confined only to cases of pure
(non-contractual) tort since... obviously the presumption of negligence in culpa contractual, as previously
so pointed out, immediately attaches by a failure of the covenant or its tenor.

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