2.

DEPOSIT
A. Associated Bank v Tan
While banks are granted by law the right to debit the
value of a dishonored check from a depositors
account, they must do so with the highest degree of
care, so as not to prejudice the depositor unduly.
The Case
Before us is a Petition for Review1 under Rule 45 of
the Rules of Court, assailing the January 27, 2003
Decision2of 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:
"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 attorneys 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
ofP50,000.00 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 depositors 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
attorneys 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 attorneys
fees, plus the costs of this suit. In making said ruling,
it was shown that [respondent] was not officially
informed about the debiting of theP101,000.00 [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 [respondents]
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
respondents account with meticulous care, the bank
violated its own policy. It thereby took upon itself the
obligation to officially inform respondent of the status
of his account before unilaterally debiting the amount
of P101,000. Without such notice, it is estopped from
blaming him for failing to fund his account.
The CA opined that, had the P101,000 not been
debited, respondent would have had sufficient funds
for the postdated checks he had issued. Thus, the
supposed accommodation accorded by petitioner to
him is the proximate cause of his business woes and
shame, for which it is liable for damages.
Because of the banks negligence, the CA awarded
respondent moral damages of P100,000. It also
granted him exemplary damages of P75,000 and
attorneys 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 Courts Ruling
The Petition has no merit.
Sole Issue:
Debit of Depositors 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 depositors collecting
agent and -- until such time as actual payment would
be made to it -- it was reserving the right to charge
against the depositors 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 courts factual
findings that were affirmed by the CA are not subject
to review by this Court.7 As petitioner itself takes no
issue with those findings, we need only to determine
the legal consequence, based on the established
facts.
Right of Setof
A bank generally has a right of setoff over the
deposits therein for the payment of any withdrawals
on the part of a depositor.8 The right of a collecting
bank to debit a clients account for the value of a
dishonored check that has previously been credited
has fairly been established by jurisprudence. To begin
with, Article 1980 of the Civil Code provides that
"[f]ixed, savings, and current deposits of money in
banks and similar institutions shall be governed by
the provisions concerning simple loan."
Hence, the relationship between banks and
depositors has been held to be that of creditor and
debtor.9 Thus, legal compensation under Article
127810 of the Civil Code may take place "when all the
requisites mentioned in Article 1279 are present,"11 as
follows:

"(1) That each one of the obligors be bound

principally, and that he be at the same time a
principal creditor of the other;
(2) That both debts consist in a sum of
money, or if the things due are consumable,
they be of the same kind, and also of the
same quality if the latter has been stated;
(3) That the two debts be due;
(4) That they be liquidated and demandable;
(5) That over neither of them there be any
retention or controversy, commenced by third
persons and communicated in due time to the
debtor."12
Nonetheless, the real issue here is not so much the
right of petitioner to debit respondents account but,
rather, the manner in which it exercised such right.
The Court has held that even while the right of setoff
is conceded, separate is the question of whether that
remedy has properly been exercised.13
The liability of petitioner in this case ultimately
revolves around the issue of whether it properly
exercised its right of setoff. The determination thereof
hinges, in turn, on the banks role and
obligations, first, as respondents depositary bank;
and second, as collecting agent for the check in
question.
Obligation as
Depositary Bank
In BPI v. Casa Montessori,14 the Court has emphasized
that the banking business is impressed with public
interest. "Consequently, the highest degree of
diligence is expected, and high standards of integrity
and performance are even required of it. By the
nature of its functions, a bank is under obligation to
treat the accounts of its depositors with meticulous
care."15
Also affirming this long standing doctrine, Philippine
Bank of Commerce v. Court of Appeals16 has held that
"the degree of diligence required of banks is more
than that of a good father of a family where the
fiduciary nature of their relationship with their
depositors is concerned."17 Indeed, the banking
business is vested with the trust and confidence of
the public; hence the "appropriate standard of
diligence must be very high, if not the highest,
degree of diligence."18 The standard applies,
regardless of whether the account consists of only a
few hundred pesos or of millions.19
The fiduciary nature of banking, previously imposed
by case law,20 is now enshrined in Republic Act No.
8791 or the General Banking Law of 2000. Section 2
of the law specifically says that the State recognizes

the "fiduciary nature of banking that requires high

standards of integrity and performance."
Did petitioner treat respondents account with the
highest degree of care? From all indications, it did
not.
It is undisputed -- nay, even admitted -- that
purportedly as an act of accommodation to a valued
client, petitioner allowed the withdrawal of the face
value of the deposited check prior to its clearing. That
act certainly disregarded the clearance requirement
of the banking system. Such a practice is unusual,
because a check is not legal tender or money;21 and
its value can properly be transferred to a depositors
account only after the check has been cleared by the
drawee bank.22
Under ordinary banking practice, after receiving a
check deposit, a bank either immediately credit the
amount to a depositors account; or infuse value to
that account only after the drawee bank shall have
paid such amount.23Before the check shall have been
cleared for deposit, the collecting bank can only
"assume" at its own risk -- as herein petitioner did -that the check would be cleared and paid out.
Reasonable business practice and prudence,
moreover, dictated that petitioner should not have
authorized the withdrawal by respondent of P240,000
on October 1, 1990, as this amount was over and
above his outstanding cleared balance
of P196,793.45.24 Hence, the lower courts correctly
appreciated the evidence in his favor.
Obligation as
Collecting Agent
Indeed, the bank deposit slip expressed this
reservation:
"In receiving items on deposit, this Bank
obligates itself only as the Depositors
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 Depositors 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.26 It is 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
respondents 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.28 Under Article 190929 of the
Civil Code, such bank could be held liable 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.30 Due to the very nature of their
business, banks are expected to exercise the highest
degree of diligence in the selection and supervision of
their employees.31 Jurisprudence has established that
the lack of diligence of a servant is imputed to the
negligence of the employer, when the negligent or
wrongful act of the former proximately results in an
injury to a third person;32 in this case, the depositor.
The manager of the banks 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
theP101,000 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 respondents
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 banks 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
[petitioners] 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

[respondents] 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
depositingP50,000 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 managers account, respondent was
considered a "valued client" whose checks had
always been sufficiently funded from 1987 to
1990,36 until the October imbroglio. Thus, he deserved
nothing less than an official notice of the precarious
condition of his account.
Second, under the provisions of the Negotiable
Instruments Law regarding the liability of a general
indorser37 and the procedure for a notice of
dishonor,38 it was incumbent on the bank to give
proper notice to respondent. InGullas v. National
Bank,39 the Court emphasized:
"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 CAs 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

representations of Sanchez and Doronilla, private

respondent issued a check in the amount of Two

Damages

Hundred Thousand Pesos (P200,000.00) in favor of

Inasmuch as petitioner does not contest the basis for

the award of damages and attorneys fees, we will no
longer address these matters.

Sterela. Private respondent instructed his wife, Mrs.

WHEREFORE, the Petition is DENIED and the

assailed Decision AFFIRMED. Costs against petitioner.

in opening a savings account in the name of Sterela

Inocencia Vives, to accompany Doronilla and Sanchez

in the Buendia, Makati branch of Producers Bank of

SO ORDERED.

the Philippines. However, only Sanchez, Mrs. Vives

B. Producers Bank v Ca

and Dumagpi went to the bank to deposit the check.

This is a petition for review on certiorari of the

They had with them an authorization letter from

Decision1 of the Court of Appeals dated June 25, 1991

Doronilla authorizing Sanchez and her companions,

in CA-G.R. CV No. 11791 and of its Resolution 2 dated

"in coordination with Mr. Rufo Atienza," to open an

May 5, 1994, denying the motion for reconsideration

account for Sterela Marketing Services in the amount

of said decision filed by petitioner Producers Bank of

of P200,000.00.

the Philippines.

authorized signatories were Inocencia Vives and/or

In

opening

the

account,

the

Angeles Sanchez. A passbook for Savings Account No.

Sometime in 1979, private respondent Franklin Vives

10-1567 was thereafter issued to Mrs. Vives.4

was asked by his neighbor and friend Angeles

Sanchez to help her friend and townmate, Col. Arturo

Subsequently,

Doronilla, in incorporating his business, the Sterela

Sterela was no longer holding office in the address

Marketing

brevity).

previously given to him. Alarmed, he and his wife

Specifically, Sanchez asked private respondent to

went to the Bank to verify if their money was still

deposit in a bank a certain amount of money in the

intact. The bank manager referred them to Mr. Rufo

bank

its

Atienza, the assistant manager, who informed them

incorporation. She assured private respondent that he

that part of the money in Savings Account No. 10-

could withdraw his money from said account within a

1567 had been withdrawn by Doronilla, and that

months time. Private respondent asked Sanchez to

only P90,000.00 remained therein. He likewise told

bring Doronilla to their house so that they could

them that Mrs. Vives could not withdraw said

discuss Sanchezs request.3

remaining amount because it had to answer for some

and

account

Services

of

Sterela

("Sterela"

for

for

purposes

of

private

respondent

learned

that

postdated checks issued by Doronilla. According to

On May 9, 1979, private respondent, Sanchez,
Doronilla and a certain Estrella Dumagpi, Doronillas
private secretary, met and discussed the matter.
Thereafter,

relying

on

the

assurances

and

Atienza, after Mrs. Vives and Sanchez opened Savings

Account

No.

10-1567,

Doronilla

opened

Current

Account No. 10-0320 for Sterela and authorized the

Bank to debit Savings Account No. 10-1567 for the

amounts necessary to cover overdrawings in Current

against Doronilla, Sanchez and Dumagpi in the RTC.

Account

current

However, Sanchez passed away on March 16, 1985

account, Sterela, through Doronilla, obtained a loan

while the case was pending before the trial court. On

of P175,000.00 from the Bank. To cover payment

October 3, 1995, the RTC of Pasig, Branch 157,

thereof, Doronilla issued three postdated checks, all

promulgated its Decision in Civil Case No. 44485, the

of which were dishonored. Atienza also said that

dispositive portion of which reads:

No.

10-0320.

In

opening

said

Doronilla could assign or withdraw the money in

Savings Account No. 10-1567 because he was the

IN VIEW OF THE FOREGOING, judgment is hereby

rendered sentencing defendants Arturo J. Doronila,

sole proprietor of Sterela.5

Estrella

Dumagpi

and

Producers

Bank

of

the

Private respondent tried to get in touch with Doronilla

Philippines to pay plaintiff Franklin Vives jointly and

through Sanchez. On June 29, 1979, he received a

severally

letter from Doronilla, assuring him that his money

(a) the amount of P200,000.00, representing

was intact and would be returned to him. On August

the money deposited, with interest at the

13, 1979, Doronilla issued a postdated check for Two

legal rate from the filing of the complaint until

Hundred Twelve Thousand Pesos (P212,000.00) in

favor

of

private

respondent.

However,

the same is fully paid;

upon

presentment thereof by private respondent to the

(b) the sum of P50,000.00 for moral damages

drawee bank, the check was dishonored. Doronilla

and a similar amount for exemplary damages;

requested private respondent to present the same

check on September 15, 1979 but when the latter

(c) the amount of P40,000.00 for attorneys

presented the check, it was again dishonored.6

fees; and

Private respondent referred the matter to a lawyer,

(d) the costs of the suit.

who made a written demand upon Doronilla for the

return of his clients money. Doronilla issued another
check for P212,000.00 in private respondents favor
but the check was again dishonored for insufficiency
of funds.

Petitioner appealed the trial courts decision to the

Court of Appeals. In its Decision dated June 25, 1991,

the appellate court affirmed in toto the decision of the

Private respondent instituted an action for recovery of

sum of money in the Regional Trial Court (RTC) in
Pasig,

SO ORDERED.8

Metro

Manila

against

Doronilla,

Sanchez,

Dumagpi and petitioner. The case was docketed as

Civil Case No. 44485. He also filed criminal actions

RTC.9 It

likewise

denied

with

finality

petitioners

motion for reconsideration in its Resolution dated May

5, 1994.10

On June 30, 1994, petitioner filed the present petition,

THE SAVINGS ACCOUNT DEPOSIT, P50,000.00 FOR

arguing that

MORAL

DAMAGES,

P50,000.00

FOR

EXEMPLARY

DAMAGES, P40,000.00 FOR ATTORNEYS FEES AND

I.THE HONORABLE COURT OF APPEALS ERRED IN

THE COSTS OF SUIT.11

UPHOLDING THAT THE TRANSACTION BETWEEN THE

DEFENDANT DORONILLA AND RESPONDENT VIVES

Private respondent filed his Comment on September

WAS

23,

ONE

OF

SIMPLE

LOAN

AND

NOT

ACCOMMODATION;

1994.

Petitioner

filed

its

Reply thereto

on

September 25, 1995. The Court then required private

respondent to submit a rejoinder to the reply.

II.THE HONORABLE COURT OF APPEALS ERRED IN

UPHOLDING THAT PETITIONERS BANK MANAGER, MR.
RUFO

ATIENZA,

DEFENDANTS
Should

be

IN

CONNIVED

WITH

DEFRAUDING

PRIVATE

THE

OTHER

PETITIONER

RESPONDENT)

AND

(Sic.
AS

CONSEQUENCE, THE PETITIONER SHOULD BE HELD

LIABLE UNDER THE PRINCIPLE OF NATURAL JUSTICE;

ADOPTING THE ENTIRE RECORDS OF THE REGIONAL

COURT

AND

APPEALED

FROM,

REGIONAL

TRIAL

AFFIRMING
AS

THE

COURT

THE

JUDGMENT

FINDINGS

WERE

BASED

OF

THE

ON

MISAPPREHENSION OF FACTS;

DECLARING THAT THE CITED DECISION IN SALUDARES

MARTINEZ, 29

SCRA

745, UPHOLDING

respondent with copy of the reply 12 and several

substitutions of counsel on the part of private
respondent.13 On January 17, 2001, the Court resolved
to give due course to the petition and required the
to

submit

their

respective

memoranda.14 Petitioner filed its memorandum on

April 16, 2001 while private respondent submitted his
memorandum on March 22, 2001.

Petitioner contends that the transaction between

private respondent and Doronilla is a simple loan
(mutuum) since all the elements of a mutuum are

IV.THE HONORABLE COURT OF APPEALS ERRED IN

VS.

1997, due to petitioners delay in furnishing private

parties

III.THE HONORABLE COURT OF APPEALS ERRED IN

TRIAL

However, said rejoinder was filed only on April 21,

THE

LIABILITY OF AN EMPLOYER FOR ACTS COMMITTED BY

AN EMPLOYEE IS APPLICABLE;

present:

first,

what

was

delivered

by

private

respondent to Doronilla was money, a consumable

thing; and second, the transaction was onerous as
Doronilla was obliged to pay interest, as evidenced by
the

check

issued

by

Doronilla

in

the

amount

of P212,000.00, or P12,000 more than what private

V.THE HONORABLE COURT OF APPEALS ERRED IN

respondent

deposited

in

Sterelas

bank

UPHOLDING THE DECISION OF THE LOWER COURT

account.15 Moreover, the fact that private respondent

THAT HEREIN PETITIONER BANK IS JOINTLY AND

sued his good friend Sanchez for his failure to recover

SEVERALLY LIABLE WITH THE OTHER DEFENDANTS

his money from Doronilla shows that the transaction

FOR THE AMOUNT OF P200,000.00 REPRESENTING

was not merely gratuitous but "had a business angle"

to it. Hence, petitioner argues that it cannot be held

Finally, petitioner claims that since there is no

liable

private

wrongful act or omission on its part, it is not liable for

respondents P200,000.00 because it is not privy to

the actual damages suffered by private respondent,

the transaction between the latter and Doronilla.16

and neither may it be held liable for moral and

for

the

return

of

exemplary damages as well as attorneys fees.20

It argues further that petitioners Assistant Manager,
Mr. Rufo Atienza, could not be faulted for allowing

Private respondent, on the other hand, argues that

Doronilla to withdraw from the savings account of

the transaction between him and Doronilla is not a

Sterela since the latter was the sole proprietor of said

mutuum but an accommodation,21 since he did not

company. Petitioner asserts that Doronillas May 8,

actually part with the ownership of his P200,000.00

1979 letter addressed to the bank, authorizing Mrs.

and in fact asked his wife to deposit said amount in

Vives and Sanchez to open a savings account for

the account of Sterela so that a certification can be

Sterela, did not contain any authorization for these

issued to the effect that Sterela had sufficient funds

two to withdraw from said account. Hence, the

for purposes of its incorporation but at the same time,

authority to withdraw therefrom remained exclusively

he retained some degree of control over his money

with Doronilla, who was the sole proprietor of Sterela,

through his wife who was made a signatory to the

and who alone had legal title to the savings

savings account and in whose possession the savings

account.17 Petitioner points out that no evidence other

account passbook was given.22

than the testimonies of private respondent and Mrs.

Vives was presented during trial to prove that private
respondent deposited his P200,000.00 in Sterelas
account for purposes of its incorporation. 18 Hence,
petitioner should not be held liable for allowing
Doronilla

to

withdraw

from

Sterelas

savings

account.1a\^/phi1.net

He likewise asserts that the trial court did not err in

finding that petitioner, Atienzas employer, is liable
for the return of his money. He insists that Atienza,
petitioners

assistant

manager,

connived

with

Doronilla in defrauding private respondent since it

was Atienza who facilitated the opening of Sterelas
current account three days after Mrs. Vives and

Petitioner also asserts that the Court of Appeals erred

Sanchez opened a savings account with petitioner for

in affirming the trial courts decision since the

said company, as well as the approval of the authority

findings of fact therein were not accord with the

to debit Sterelas savings account to cover any

evidence presented by petitioner during trial to prove

overdrawings in its current account.23

that the transaction between private respondent and

Doronilla was a mutuum, and that it committed no
wrong in allowing Doronilla to withdraw from Sterelas
savings account.

There is no merit in the petition.

At the outset, it must be emphasized that only

19

questions of law may be raised in a petition for review

filed with this Court. The Court has repeatedly held

kind and quality shall be paid, in which case the

that it is not its function to analyze and weigh all over

contract is simply called a loan or mutuum.

again the evidence presented by the parties during

trial.24 The Courts jurisdiction is in principle limited to
reviewing errors of law that might have been
committed by the Court of Appeals. 25 Moreover,
factual

findings

of

courts,

when

adopted

Commodatum is essentially gratuitous.

Simple loan may be gratuitous or with a stipulation to

pay interest.

and

confirmed by the Court of Appeals, are final and

In commodatum, the bailor retains the ownership of

conclusive on this Court unless these findings are not

the thing loaned, while in simple loan, ownership

supported by the evidence on record. 26 There is no

passes to the borrower.

showing of any misapprehension of facts on the part

of the Court of Appeals in the case at bar that would
require this Court to review and overturn the factual
findings of that court, especially since the conclusions
of fact of the Court of Appeals and the trial court are
not only consistent but are also amply supported by

No error was committed by the Court of Appeals

when it ruled that the transaction between private
respondent and Doronilla was a commodatum and
not a mutuum. A circumspect examination of the
records reveals that the transaction between them
was a commodatum. Article 1933 of the Civil Code
distinguishes between the two kinds of loans in this
wise:

money, the contract would be a mutuum. However,

there are some instances where a commodatum may
have for its object a consumable thing. Article 1936 of

Consumable

goods

may

be

the

subject

of

commodatum if the purpose of the contract is not the

consumption of the object, as when it is merely for
exhibition.

Thus, if consumable goods are loaned only for

purposes of exhibition, or when the intention of the
parties is to lend consumable goods and to have the
very same goods returned at the end of the period

By the contract of loan, one of the parties delivers to

another, either something not consumable so that the
latter may use the same for a certain time and return
in

subject of the contract is a consumable thing, such as

the Civil Code provides:

the evidence on record.

it,

The foregoing provision seems to imply that if the

which

case

the

contract

is

called

commodatum; or money or other consumable thing,

upon the condition that the same amount of the same

agreed upon, the loan is a commodatum and not a

mutuum.

The rule is that the intention of the parties thereto

shall

be

accorded

primordial

consideration

in

determining the actual character of a contract. 27 In

case of doubt, the contemporaneous and subsequent

acts of the parties shall be considered in such

Neither

does

the

Court

agree

with

petitioners

determination.28

contention that it is not solidarily liable for the return

of private respondents money because it was not

As correctly pointed out by both the Court of Appeals

and the trial court, the evidence shows that private
respondent agreed to deposit his money in the
savings account of Sterela specifically for the purpose
of making it appear "that said firm had sufficient
capitalization for incorporation, with the promise that
the amount shall be returned within thirty (30)
days."

29

Private respondent merely "accommodated"

Doronilla by lending his money without consideration,

privy to the transaction between Doronilla and private

respondent. The nature of said transaction, that is,
whether it is a mutuum or a commodatum, has no
bearing on the question of petitioners liability for the
return of private respondents money because the
factual circumstances of the case clearly show that
petitioner, through its employee Mr. Atienza, was
partly responsible for the loss of private respondents
money and is liable for its restitution.

as a favor to his good friend Sanchez. It was however

clear to the parties to the transaction that the money

Petitioners rules for savings deposits written on the

would not be removed from Sterelas savings account

passbook it issued Mrs. Vives on behalf of Sterela for

and would be returned to private respondent after

Savings Account No. 10-1567 expressly states that

thirty (30) days.

"2. Deposits and withdrawals must be made by the
Doronillas attempts to return to private respondent

depositor personally or upon his written authority

the amount of P200,000.00 which the latter deposited

duly authenticated, and neither a deposit nor a

in

withdrawal

Sterelas

account

together

with

an

will

be

permitted

except

upon

the

additional P12,000.00, allegedly representing interest

production of the depositor savings bank book in

on the mutuum, did not convert the transaction from

which will be entered by the Bank the amount

a commodatum into a mutuum because such was not

deposited or withdrawn."30

the

intent

of

the

parties

and

because

the

additional P12,000.00 corresponds to the fruits of the

lending of the P200,000.00. Article 1935 of the Civil
Code

expressly

states

that

"[t]he

bailee

in

commodatum acquires the use of the thing loaned

but not its fruits." Hence, it was only proper for
Doronilla to remit to private respondent the interest
accruing
petitioner.

to

the

latters

money

deposited

with

Said rule notwithstanding, Doronilla was permitted by

petitioner, through Atienza, the Assistant Branch
Manager for the Buendia Branch of petitioner, to
withdraw therefrom even without presenting the
passbook (which Atienza very well knew was in the
possession of Mrs. Vives), not just once, but several
times. Both the Court of Appeals and the trial court
found that Atienza allowed said withdrawals because
he was party to Doronillas "scheme" of defrauding
private respondent:

XXX

Then there is the matter of the ownership of the fund.

Because of the "coordination" between Doronilla and

But the scheme could not have been executed

successfully

without

the

knowledge,

help

and

cooperation of Rufo Atienza, assistant manager and

cashier of the Makati (Buendia) branch of the
defendant bank. Indeed, the evidence indicates that
Atienza had not only facilitated the commission of the
fraud but he likewise helped in devising the means by

Atienza, the latter knew before hand that the money

deposited did not belong to Doronilla nor to Sterela.
Aside from such foreknowledge, he was explicitly told
by Inocencia Vives that the money belonged to her
and her husband and the deposit was merely to
accommodate Doronilla. Atienza even declared that
the money came from Mrs. Vives.

which it can be done in such manner as to make it

appear that the transaction was in accordance with

Although the savings account was in the name of

banking procedure.

Sterela, the bank records disclose that the only ones

empowered to withdraw the same were Inocencia

To begin with, the deposit was made in defendants

Buendia branch precisely because Atienza was a key
officer therein. The records show that plaintiff had
suggested that the P200,000.00 be deposited in his
bank, the Manila Banking Corporation, but Doronilla
and Dumagpi insisted that it must be in defendants
branch in Makati for "it will be easier for them to get a
certification". In fact before he was introduced to
plaintiff, Doronilla had already prepared a letter
addressed

to

the

Buendia

branch

manager

authorizing Angeles B. Sanchez and company to open

a

savings

account

for

Sterela

in

the

amount

of P200,000.00, as "per coordination with Mr. Rufo

Atienza, Assistant Manager of the Bank x x x" (Exh.
1). This is a clear manifestation that the other
defendants had been in consultation with Atienza
from the inception of the scheme. Significantly, there
were testimonies and admission that Atienza is the
brother-in-law of a certain Romeo Mirasol, a friend
and business associate of Doronilla.1awphi1.nt

Vives and Angeles B. Sanchez. In the signature card

pertaining to this account (Exh. J), the authorized
signatories were Inocencia Vives &/or Angeles B.
Sanchez. Atienza stated that it is the usual banking
procedure that withdrawals of savings deposits could
only

be

made

by

persons

whose

authorized

signatures are in the signature cards on file with the

bank. He, however, said that this procedure was not
followed

here

because

Sterela

was

owned

by

Doronilla. He explained that Doronilla had the full

authority to withdraw by virtue of such ownership.
The Court is not inclined to agree with Atienza. In the
first place, he was all the time aware that the money
came from Vives and did not belong to Sterela. He
was also told by Mrs. Vives that they were only
accommodating Doronilla so that a certification can
be issued to the effect that Sterela had a deposit of
so much amount to be sued in the incorporation of
the firm. In the second place, the signature of
Doronilla was not authorized in so far as that account
is concerned inasmuch as he had not signed the

signature card provided by the bank whenever a

and deception that caused the loss. The records

deposit is opened. In the third place, neither Mrs.

indicate that this account was opened three days

Vives nor Sanchez had given Doronilla the authority

later after the P200,000.00 was deposited. In spite of

to withdraw.

his disclaimer, the Court believes that Atienza was

mindful and posted regarding the opening of the

Moreover, the transfer of fund was done without the

passbook having been presented. It is an accepted
practice that whenever a withdrawal is made in a
savings deposit, the bank requires the presentation of
the passbook. In this case, such recognized practice

current account considering that Doronilla was all the

while in "coordination" with him. That it was he who
facilitated the approval of the authority to debit the
savings account to cover any overdrawings in the
current account (Exh. 2) is not hard to comprehend.

was dispensed with. The transfer from the savings

account to the current account was without the

Clearly Atienza had committed wrongful acts that had

submission of the passbook which Atienza had given

resulted to the loss subject of this case. x x x. 31

to Mrs. Vives. Instead, it was made to appear in a

certification signed by Estrella Dumagpi that a
duplicate passbook was issued to Sterela because the
original passbook had been surrendered to the Makati
branch in view of a loan accommodation assigning
the

savings

account

(Exh.

C).

Atienza,

who

undoubtedly had a hand in the execution of this

certification, was aware that the contents of the same
are not true. He knew that the passbook was in the
hands of Mrs. Vives for he was the one who gave it to
her. Besides, as assistant manager of the branch and
the bank official servicing the savings and current
accounts in question, he also was aware that the
original passbook was never surrendered. He was also
cognizant that Estrella Dumagpi was not among those
authorized to withdraw so her certification had no
effect whatsoever.

The circumstance surrounding the opening of the

current account also demonstrate that Atienzas
active participation in the perpetration of the fraud

Under Article 2180 of the Civil Code, employers shall

be held primarily and solidarily liable for damages
caused by their employees acting within the scope of
their assigned tasks. To hold the employer liable
under this provision, it must be shown that an
employer-employee relationship exists, and that the
employee was acting within the scope of his assigned
task

when

the

act

complained

of

was

committed.32 Case law in the United States of America

has it that a corporation that entrusts a general duty
to its employee is responsible to the injured party for
damages flowing from the employees wrongful act
done in the course of his general authority, even
though in doing such act, the employee may have
failed in its duty to the employer and disobeyed the
latters instructions.33

There is no dispute that Atienza was an employee of

petitioner. Furthermore, petitioner did not deny that
Atienza was acting within the scope of his authority
as Assistant Branch Manager when he assisted

Doronilla in withdrawing funds from Sterelas Savings

C. Goyanko v UCPB

Account No. 10-1567, in which account private

We resolve the petition for review on certiorari1 filed

respondents

by petitioner Joseph Goyanko, Jr., administrator of the

money

was

deposited,

and

in

transferring the money withdrawn to Sterelas Current

Estate

Account with petitioner. Atienzas acts of helping

decision2 dated

Doronilla,

were

resolution3 dated July 31, 2007 of the Court of

obviously

done

petitioners

Appeals (CA) in CA-G.R. CV. No. 00257 affirming the

interests

customer

the

petitioner,

furtherance

process,

20,

to

2007

nullify

the

and

the

Branch 16(RTC) in Civil Case No. CEB-22277. The RTC

stipulated in its savings account passbook. 35 It was

dismissed the petitioners complaint for recovery of

established that the transfer of funds from Sterelas

sum money against United Coconut Planters Bank,

savings account to its current account could not have

Mango Avenue Branch (UCPB).

by

the

February

Sr.,

violated some of petitioners rules such as those

accomplished

in

Goyanko,

decision4 of the Regional Trial Court of Cebu City,

been

though

of

Joseph

Atienza

34

even

in

of

of

Doronilla

without

the

invaluable assistance of Atienza, and that it was their

connivance

which

was

the

cause

of

The Factual Antecedents

private
In 1995, the late Joseph Goyanko, Sr. (Goyanko)

respondents loss.
invested Two Million Pesos (P2,000,000.00) with
The foregoing shows that the Court of Appeals

Philippine

correctly held that under Article 2180 of the Civil

represented by the petitioner, and his illegitimate

Code, petitioner is liable for private respondents loss

family presented conflicting claims to PALII for the

and is solidarily liable with Doronilla and Dumagpi for

release of the investment. Pending the investigation

the return of theP200,000.00 since it is clear that

of the conflicting claims, PALII deposited the proceeds

petitioner failed to prove that it exercised due

of

diligence to prevent the unauthorized withdrawals

19965 under the name "Phil Asia: ITF (In Trust For) The

from Sterelas savings account, and that it was not

Heirs

negligent in the selection and supervision of Atienza.

September 27, 1997, the deposit under the ACCOUNT

Accordingly, no error was committed by the appellate

was P1,509,318.76.

the

Asia

Lending

investment

of

Joseph

with

Investors,

UCPB

Goyanko,

on

Inc.

family,

October

Sr." (ACCOUNT).

29,

On

court in the award of actual, moral and exemplary

On December 11, 1997, UCPB allowed PALII to
damages, attorneys fees and costs of suit to private
withdraw One Million Five Hundred Thousand Pesos
respondent.
(P1,500,000.00) from the Account, leaving a balance
WHEREFORE, the petition is hereby DENIED. The

of only P9,318.76. When UCPB refused the demand to

assailed Decision and Resolution of the Court of

restore the amount withdrawn plus legal interest from

Appeals are AFFIRMED.

December 11, 1997, the petitioner filed a complaint

before the RTC. In its answer to the complaint, UCPB

create a trust, which were absent in this case.

admitted,

the

Quoting the RTC with approval, the CA noted that the

ACCOUNT under the name "ITF (In Trust For) The

contract of deposit was only between PALII in its own

Heirs of Joseph Goyanko, Sr.," (ITF HEIRS) and the

capacity and UCPB, and the words "ITF HEIRS" were

withdrawal on December 11, 1997.

insufficient to establish the existence of a trust. The

among

others,

the

opening

of

CA concluded that as no trust existed, expressly or

The RTC Ruling

impliedly,

In its August 27, 2003 decision, the RTC dismissed the

petitioners complaint and awarded UCPB attorneys
fees,

litigation

expenses

and the

costs

of

the

suit.6 The RTC did not consider the words "ITF HEIRS"

UCPB

is

not

liable

for

the

amount

withdrawn.7

In its July 31, 2007 resolution, 8 the CA denied the

petitioners motion for reconsideration. Hence, the
petitioners present recourse.

sufficient to charge UCPB with knowledge of any trust

relation between PALII and Goyankos heirs (HEIRS). It

The Petition

concluded that UCPB merely performed its duty as a

depository bank in allowing PALII to withdraw from
the ACCOUNT, as the contract of deposit was officially
only between PALII, in its own capacity, and UCPB.
The petitioner appealed his case to the CA.

The petitioner argues in his petition that: first, an

express trust was created, as clearly shown by PALIIs
March

28,

1996

letters.9 Citing

and

November

jurisprudence,

15,

the

1996

petitioner

emphasizes that from the established definition of a

The CAs Ruling

trust,10 PALII is clearly the trustor as it created the

trust; UCPB is the trustee as it is the party in whom

Before the CA, the petitioner maintained that by

opening the ACCOUNT, PALII established a trust
by which it was the "trustee" and the HEIRS are
the "trustors-beneficiaries;" thus, UCPB should be
liable for allowing the withdrawal.

The CA partially granted the petitioners appeal. It

affirmed the August 27, 2003 decision of the RTC, but
deleted the award of attorneys fees and litigation
expenses. The CA held that no express trust was
created between the HEIRS and PALII. For a trust to
be established, the law requires, among others, a
competent trustor and trustee and a clear intention to

confidence is reposed as regards the property for the

benefit

of

another;

and

the

HEIRS

are

the

beneficiaries as they are the persons for whose

benefit

the

trust

is

created.11 Also,

quoting Development Bank of the Philippines

v.

Commission on Audit,12 the petitioner argues that the

naming of the cestui que trust is not necessary as it
suffices

that

they

are

adequately

certain

or

identifiable.13

Second, UCPB was negligent and in bad faith in

allowing the withdrawal and in failing to inquire into
the

nature

of

the

ACCOUNT.14 The

petitioner

maintains that the surrounding facts, the testimony of

The Courts Ruling

UCPBs witness, and UCPBs own records showed

that: (1) UCPB was aware of the trust relation
between PALII and the HEIRS; and (2) PALII held the
ACCOUNT in a trust capacity. Finally, the CA erred in
affirming the RTCs dismissal of his case for lack of
cause of action. The petitioner insists that since an
express trust clearly exists, UCPB, the trustee, should

The issue before us is whether UCPB should be held

liable for the amount withdrawn because a trust
agreement existed between PALII and UCPB, in favor
of the HEIRS, when PALII opened the ACCOUNT with
UCPB.

We rule in the negative.

not have allowed the withdrawal.

We first address the procedural issues. We stress the
The Case for UCPB

settled

UCPB posits, in defense, that the ACCOUNT involves

an ordinary deposit contract between PALII and UCPB
only, which created a debtor-creditor relationship
obligating UCPB to return the proceeds to the account
holder-PALII. Thus, it was not negligent in handling
the ACCOUNT when it allowed the withdrawal. The
mere designation of the ACCOUNT

as "ITF" is

insufficient to establish the existence of an express

trust or charge it with knowledge of the relation

rule

that

petition

for

review

on certiorari under Rule 45 of the Rules of Court

resolves only questions of law, not questions of
fact.15 A question, to be one of law, must not examine
the probative value of the evidence presented by the
parties;16 otherwise,

the

question

is

one

of

fact.17 Whether an express trust exists in this case is a

question of fact whose resolution is not proper in a
petition under Rule 45. Reinforcing this is the equally
settled rule that factual findings of the lower tribunals
are conclusive on the parties and are not generally

between PALII and the HEIRS.

reviewable by this Court,18 especially when, as here,

UCPB also argues that the petitioner changed the

the CA affirmed these findings. The plain reason is

theory of his case. Before the CA, the petitioner

that this Court is not a trier of facts. 19 While this Court

argued that the HEIRS are the trustors-beneficiaries,

has,

and PALII is the trustee. Here, the petitioner maintains

restriction,20 we find that none of these exceptions

that PALII is the trustor, UCPB is the trustee, and the

obtain in the present case.

HEIRS

are

the

beneficiaries.

Contrary

to

times,

permitted

exceptions

from

the

the

petitioners assertion, the records failed to show that

PALII and UCPB executed a trust agreement, and
PALIIs letters made it clear that PALII, on its own,
intended to turn-over the proceeds of the ACCOUNT
to its rightful owners.

at

Second, we find that the petitioner changed the

theory of his case. The petitioner argued before the
lower courts that an express trust exists between
PALII as the trustee and the HEIRS as the trustorbeneficiary.21 The petitioner now asserts that the
express trust exists between PALII as the trustor and

UCPB

as

the

trustee,

with

the

HEIRS

as

the

In Rizal Surety & Insurance Co. v. CA,31 we laid down

beneficiaries.22 At this stage of the case, such change

the requirements before an express trust will be

of theory is simply not allowed as it violates basic

recognized:

rules of fair play, justice and due process. Our rulings

are clear - "a party who deliberately adopts a certain
theory upon which the case was decided by the lower
court will not be permitted to change [it] on
appeal";23otherwise, the lower courts will effectively
be deprived of the opportunity to decide the merits of
the case fairly.24Besides, courts of justice are devoid
of jurisdiction to resolve a question not in issue. 25 For
these reasons, the petition must fail. Independently of

Basically, these elements include a competent

trustor and trustee, an ascertainable trust res,
and sufficiently certain beneficiaries. xxx each
of

the

above

elements

is

required

to

be

established, and, if any one of them is missing,

it is fatal to the trusts (sic). Furthermore, there
must be a present and complete disposition of
the trust property, notwithstanding that the
enjoyment in the beneficiary will take place in

these, the petition must still be denied.

the future. It is essential, too, that the purpose be

No express trust exists; UCPB exercised the

an active one to prevent trust from being executed

required diligence in handling the ACCOUNT;

into a legal estate or interest, and one that is not in

petitioner has no cause of action against UCPB

contravention of some prohibition of statute or rule of

public policy. There must also be some power of

A trust, either express or implied,26 is the fiduciary

relationship "x x x between one person having an
equitable ownership of property and another person
owning the legal title to such property, the equitable
ownership

of

the

former

entitling

him

to

the

performance of certain duties and the exercise of

certain powers by the latter." Express or direct trusts

administration

other

than

mere

duty

to

perform a contract although the contract is for

a thirdparty beneficiary. A declaration of terms
is essential, and these must be stated with
reasonable certainty in order that the trustee
may administer, and that the court, if called upon

27

so to do, may enforce, the trust. [emphasis ours]

are created by the direct and positive acts of the

trustor or of the parties.28 No written words are

Under these standards, we hold that no express trust

required to create an express trust. This is clear from

was

Article 1444 of the Civil Code,29 but, the creation of an

trust res and sufficiently certain beneficiaries may

express trust must be firmly shown; it cannot be

exist,

assumed from loose and vague declarations or

not. Second, UCPB, as trustee of the ACCOUNT, was

circumstances capable of other interpretations.30

never under any equitable duty to deal with or given

created. First,

competent

while

trustor

an

and

ascertainable

trustee

do

any power of administration over it. On the contrary,

it was PALII that undertook the duty to hold the title

to the ACCOUNT for the benefit of the HEIRS.Third,

A trust can be created without using the word "trust"

PALII, as the trustor, did not have the right to the

or "trustee," but the mere use of these words does

beneficial enjoyment of the ACCOUNT. Finally, the

not automatically reveal an intention to create a

terms by which UCPB is to administer the ACCOUNT

trust.36If at all, these words showed a trustee-

was not shown with reasonable certainty. While we

beneficiary relationship between PALII and the HEIRS.

agree with the petitioner that a trusts beneficiaries

need not be particularly identified for a trust to
exist, the intention to create an express trust
must first be firmly established, along with the
other elements laid above; absent these, no express

Contrary to the petitioners position, UCPB did not

become a trustee by the mere opening of the
ACCOUNT.1wphi1While this may seem to be the
case, by reason of the fiduciary nature of the banks
relationship

trust exists.

with

its

depositors,37 this

fiduciary

relationship does not "convert the contract between

Contrary to the petitioners contention, PALIIs letters

the bank and its depositors from a simple loan to a

and UCPBs records established UCPBs participation

trust agreement, whether express or implied." 38 It

as a mere depositary of the proceeds of the

simply means that the bank is obliged to observe

investment. In the March 28, 1996 letter, PALII

"high standards of integrity and performance" in

manifested its intention to pursue an active role in

complying with its obligations under the contract of

and up to the turnover of those proceeds to their

simple loan.39 Per Article 1980 of the Civil Code,40 a

rightful owners,32 while in the November 15, 1996

creditor-debtor relationship exists between the bank

letter, PALII begged the petitioner to trust it with the

and its depositor.41 The savings deposit agreement is

safekeeping

and

between the bank and the depositor; 42 by receiving

documents.33 Had it been PALIIs intention to create a

the deposit, the bank impliedly agrees to pay upon

trust in favor of the HEIRS, it would have relinquished

demand and only upon the depositors order.43

of

the

investment

proceeds

any right or claim over the proceeds in UCPBs favor

as the trustee. As matters stand, PALII never did.

Since the records and the petitioners own admission

showed that the ACCOUNT was opened by PALII,

UCPBs

records

and

the

testimony

of

UCPBs

UCPBs receipt of the deposit signified that it agreed

witness34 likewise lead us to the same conclusion.

to pay PALII upon its demand and only upon its order.

While the words "ITF HEIRS" may have created the

Thus, when UCPB allowed PALII to withdraw from the

impression that a trust account was created, a closer

ACCOUNT, it was merely performing its contractual

scrutiny reveals that it is an ordinary savings

obligation under their savings deposit agreement. No

account.35 We give credence to UCPBs explanation

negligence or bad faith44 can be imputed to UCPB for

that the word "ITF" was merely used to distinguish

this action. As far as UCPB was concerned, PALII is the

the ACCOUNT from PALIIs other accounts with UCPB.

account holder and not the HEIRS. As we held

in Falton

Banking

This is a petition for review under Rule 45 of the Rules

Corporation.45 the banks duty is to its creditor-

of Court seeking the reversal of the Decision 1 dated

depositor and not to third persons. Third persons, like

April 3, 1998, and the Resolution2 dated November 9,

the HEIRS here, who may have a right to the money

1998, of the Court of Appeals in CA-G.R. CV No.

deposited, cannot hold the bank responsible unless

42241.

there

is

Iron

Works

court

Co.

order

v.

or

China

garnishment.46 The

petitioners recourse is to go before a court of

competent jurisdiction to prove his valid right over
the money deposited.

mooted. A cause of action requires that there be a

right existing in favor of the plaintiff, the defendants
obligation to respect that right, and an act or
of

right.47 We

the

defendant

reiterate

that

in

UCPBs

breach

of

that

obligation

was

towards PALII as its creditor-depositor. While the

HEIRS may have a valid claim over the proceeds of
the investment, the obligation to turn-over those
proceeds lies with PALII. Since no trust exists the
petitioners complaint was correctly dismissed and
the CA did not commit any reversible error in
affirming the RTC decision. One final note, the burden
to prove the existence of an express trust lies with
the petitioner.48 For his failure to discharge this
burden, the petition must fail.

WHEREFORE, in view of these considerations, we

hereby DENY the petition and AFFIRM the decision
dated February 20, 2007 and the resolution dated July
31, 2007 of the Court of Appeals in CA-G.R. CV. No.
00257. Costs against the petitioner.

D. BPI v Ca

A.A. Salazar Construction and Engineering Services

filed an action for a sum of money with damages

In these lights, we find the third assignment of error

omission

The facts3 are as follows:

against herein petitioner Bank of the Philippine

Islands (BPI) on December 5, 1991 before Branch 156
of the Regional Trial Court (RTC) of Pasig City. The
complaint was later amended by substituting the
name of Annabelle A. Salazar as the real party in
interest in place of A.A. Salazar Construction and
Engineering Services. Private respondent Salazar
prayed for the recovery of the amount of Two
Hundred

Sixty-Seven

Thousand,

Seven

Hundred

Seven Pesos and Seventy Centavos (P267,707.70)

debited by petitioner BPI from her account. She
likewise prayed for damages and attorneys fees.

Petitioner BPI, in its answer, alleged that on August

31, 1991, Julio R. Templonuevo, third-party defendant
and herein also a private respondent, demanded from
the former payment of the amount of Two Hundred
Sixty-Seven Thousand, Six Hundred Ninety-Two Pesos
and Fifty Centavos (P267,692.50) representing the
aggregate value of three (3) checks, which were
allegedly payable to him, but which were deposited
with the petitioner bank to private respondent
Salazars

account

without

his

endorsement.

(Account

knowledge

No.

0203-1187-67)

and

corresponding

Accepting that Templonuevos claim was a valid one,

and

may

be

pursuant

to

banking

rules

and

petitioner BPI froze Account No. 0201-0588-48 of A.A.

regulations, but did not in any way affect him. The

Salazar and Construction and Engineering Services,

debiting from another account of private respondent

instead of Account No. 0203-1187-67 where the

Salazar, considering that her other account was

checks were deposited, since this account was

effectively closed, was not his concern.

already closed by private respondent Salazar or had

After

an insufficient balance.

trial,

the

RTC

rendered

decision,

the

dispositive portion of which reads thus:

Private respondent Salazar was advised to settle the
matter with Templonuevo but they did not arrive at
any

settlement.

As

it

appeared

that

private

respondent Salazar was not entitled to the funds

represented by the checks which were deposited and
accepted for deposit, petitioner BPI decided to debit
the amount ofP267,707.70 from her Account No.
0201-0588-48 and the sum of P267,692.50 was paid
to Templonuevo by means of a cashiers check. The
difference

between

the

value

of

the

WHEREFORE,

premises

considered,

judgment

is

hereby rendered in favor of the plaintiff [private

respondent

Salazar]

and

against

the

defendant

[petitioner BPI] and ordering the latter to pay as

follows:

1. The amount of P267,707.70 with 12%

interest thereon from September 16, 1991
until the said amount is fully paid;

checks

(P267,692.50) and the amount actually debited from

2. The amount of P30,000.00 as and for

her account (P267,707.70) represented bank charges

actual damages;

in connection with the issuance of a cashiers check

to Templonuevo.

3. The amount of P50,000.00 as and for moral

damages;

In the answer to the third-party complaint, private

respondent Templonuevo admitted the payment to
him ofP267,692.50 and argued that said payment
was to correct the malicious deposit made by private
respondent Salazar to her private account, and that

4. The amount of P50,000.00 as and for

exemplary damages;

5. The amount of P30,000.00 as and for

attorneys fees; and

petitioner banks negligence and tolerance regarding

the matter was violative of the primary and ordinary

6. Costs of suit.

rules of banking. He likewise contended that the

debiting or taking of the reimbursed amount from the
account of private respondent Salazar by petitioner
BPI was a matter exclusively between said parties

The counterclaim is hereby ordered DISMISSED for

lack of factual basis.

The third-party complaint [filed by petitioner] is

of P267,707.70 belonged to a corporation with a

hereby likewise ordered DISMISSED for lack of merit.

separate and distinct personality.

Third-party

IV.The Court of Appeals committed a reversible error

defendants

Templonuevos]

[i.e.,

counterclaim

private
is

respondent

hereby

likewise

DISMISSED for lack of factual basis.

in holding, based entirely on speculations, surmises

or conjectures, that there was an agreement between
SALAZAR and TEMPLONUEVO that checks payable to

SO ORDERED.4

TEMPLONUEVO may be deposited by SALAZAR to her

On appeal, the Court of Appeals (CA) affirmed the

decision of the RTC and held that respondent Salazar
was entitled to the proceeds of the three (3) checks
notwithstanding the lack of endorsement thereon by
the payee. The CA concluded that Salazar and
Templonuevo had previously agreed that the checks
payable to JRT Construction and Trading actually

personal account and that BPI was privy to this

agreement.

V.The Court of Appeals committed reversible error in

holding, based entirely on speculation, surmises or
conjectures, that SALAZAR suffered great damage
and prejudice and that her business standing was

eroded.

belonged to Salazar and would be deposited to her

account,

with

petitioner

acquiescing

to

the

arrangement.6

VI.The Court of Appeals erred in affirming instead of

reversing the decision of the lower court against BPI
and dismissing SALAZARs complaint.

Petitioner therefore filed

this

petition on

these

grounds:

VII.The

Honorable

Court

erred

in

affirming

the

decision of the lower court dismissing the third-party

I.The Court of Appeals committed reversible error in
misinterpreting

Section

49

of

the

complaint of BPI.7

Negotiable

Instruments Law and Section 3 (r and s) of Rule 131

The issues center on the propriety of the deductions

of the New Rules on Evidence.

made by petitioner from private respondent Salazars

account. Stated otherwise, does a collecting bank,

II.The Court of Appeals committed reversible error in

NOT applying the provisions of Articles 22, 1278 and
1290 of the Civil Code in favor of BPI.

III.The Court of Appeals committed a reversible error

in holding, based on a misapprehension of facts, that
the account from which BPI debited the amount

over

the objections

authority

to

of its

withdraw

depositor,

unilaterally

have the
from

such

depositors account the amount it had previously paid

upon certain unendorsed order instruments deposited
by the depositor to another account that she later
closed?

Petitioner argues thus:

1. There is no presumption in law that a check

proprietorship, had no separate and distinct

payable

personality from Salazar.

to

order,

when

found

in

the

possession of a person who is neither a payee

nor the indorsee thereof, has been lawfully
transferred for value. Hence, the CA should
not have presumed that Salazar was a
transferee for value within the contemplation
of Section 49 of the Negotiable Instruments
Law,8 as the latter applies only to a holder

5. Assuming the deduction from Salazars

account was improper, the CA should not
have

dismissed

petitioners

third-party

complaint against Templonuevo because the

latter would have the legal duty to return to
petitioner the proceeds of the checks which
he previously received from it.

defined under Section 191of the same.9

2. Salazar failed to adduce sufficient evidence

to prove that her possession of the three
checks was lawful despite her allegations that

6. There was no factual basis for the award of

damages to Salazar.

The petition is partly meritorious.

these checks were deposited pursuant to a

prior internal arrangement with Templonuevo

First, the issue raised by petitioner requires an inquiry

and

into the factual findings made by the CA. The CAs

that

petitioner

was

privy

to

the

arrangement.

conclusion that the deductions from the bank account

of A.A. Salazar Construction and Engineering Services

3. The CA should have applied the Civil Code

provisions on legal compensation because in
deducting the subject amount from Salazars
account, petitioner was merely rectifying the
undue payment it made upon the checks and
exercising its prerogative to alter or modify an
erroneous credit entry in the regular course of
its business.

were improper stemmed from its finding that there

was no ineffective payment to Salazar which would
call for the exercise of petitioners right to set off
against the formers bank deposits. This finding, in
turn, was drawn from the pleadings of the parties, the
evidence

adduced

during

trial

and

upon

the

admissions and stipulations of fact made during the

pre-trial, most significantly the following:

4. The debit of the amount from the account

of A.A. Salazar Construction and Engineering

(a)

That

Salazar

previously

had

in

her

possession the following checks:

Services was proper even though the value of

the checks had been originally credited to the

(1) Solid Bank Check No. CB766556

personal account of Salazar because A.A.

dated January 30, 1990 in the amount

Salazar

of P57,712.50;

Services,

Construction
an

and

Engineering

unincorporated

single

(2) Solid Bank Check No. CB898978

deliberate, in view of its admission that the "mistake"

dated July 31, 1990 in the amount

was

of P55,180.00; and,

occasions, indicating acquiescence to the internal

committed

three

times

on

three

separate

arrangement between Salazar and Templonuevo. The

(3)

Equitable

Banking

Corporation

CA explained thus:

Check No. 32380638 dated August

28,

1990

for

the

amount

ofP154,800.00;

It was quite apparent that the three checks which

appellee Salazar deposited were not indorsed. Three
times she deposited them to her account and three

(b)

That

aggregate

these

checks

amount

which

had

of P267,692.50

an
were

payable to the order of JRT Construction and

Trading, the name and style under which
Templonuevo does business;

(c) That despite the lack of endorsement of

the designated payee upon such checks,
Salazar was able to deposit the checks in her
personal savings account with petitioner and
encash the same;

(d) That petitioner accepted and paid the

checks on three (3) separate occasions over a
span of eight months in 1990; and

times the amounts borne by these checks were

credited

to

the

same.

And

in

those

separate

occasions, the bank did not return the checks to her

so that she could have them indorsed. Neither did the
bank question her as to why she was depositing the
checks to her account considering that she was not
the payee thereof, thus allowing us to come to the
conclusion that defendant-appellant BPI was fully
aware that the proceeds of the three checks belong to
appellee.

For if the bank was not privy to the agreement

between Salazar and Templonuevo, it is most unlikely
that appellant BPI (or any bank for that matter) would
have accepted the checks for deposit on three

(e) That Templonuevo only protested the

separate times nary any question. Banks are most

purportedly unauthorized encashment of the

finicky over accepting checks for deposit without the

checks after the lapse of one year from the

corresponding indorsement by their payee. In fact,

date of the last check.10

they hesitate to accept indorsed checks for deposit if

the depositor is not one they know very well.11

Petitioner concedes that when it credited the value of

the checks to the account of private respondent

The CA likewise sustained Salazars position that she

Salazar, it made a mistake because it failed to notice

received the checks from Templonuevo pursuant to

the lack of endorsement thereon by the designated

an internal arrangement between them, ratiocinating

payee. The CA, however, did not lend credence to this

as follows:

claim and concluded that petitioners actions were

If

there

was

Templonuevo

indeed
and

the

no

arrangement

plaintiff

over

between

the

three

questioned checks, it baffles us why it was only on

such gravity as to justify refusing to give said proofs

weight all these are issues of fact which are not
reviewable by the Court.15

August 31, 1991 or more than a year after the third

and last check was deposited that he demanded for
the refund of the total amount of P267,692.50.

This rule, however, is not absolute and admits of

certain exceptions, namely: a) when the conclusion is
a finding grounded entirely on speculations, surmises,

A prudent man knowing that payment is due him

or conjectures; b) when the inference made is

would have demanded payment by his debtor from

manifestly mistaken, absurd, or impossible; c) when

the moment the same became due and demandable.

there is a grave abuse of discretion; d) when the

More so if the sum involved runs in hundreds of

judgment is based on a misapprehension of facts; e)

thousand of pesos. By and large, every person, at the

when the findings of fact are conflicting; f) when the

very moment he learns that he was deprived of a

CA, in making its findings, went beyond the issues of

thing which rightfully belongs to him, would have

the case and the same are contrary to the admissions

created a big fuss. He would not have waited for a

of both appellant and appellee; g) when the findings

year within which to do so. It is most inconceivable

of the CA are contrary to those of the trial court; h)

that Templonuevo did not do this.12

when the findings of fact are conclusions without

citation of specific evidence on which they are based;

Generally, only questions of law may be raised in an

appeal by certiorari under Rule 45 of the Rules of
Court. Factual findings of the CA are entitled to great

i) when the finding of fact of the CA is premised on

the supposed absence of evidence but is contradicted

13

weight and respect, especially when the CA affirms

the factual findings of the trial court. 14 Such questions
on whether certain items of evidence should be

by the evidence on record; and j) when the CA

manifestly overlooked certain relevant facts not
disputed by the parties and which, if properly
considered, would justify a different conclusion.16

accorded probative value or weight, or rejected as

feeble or spurious, or whether or not the proofs on

In the present case, the records do not support the

one side or the other are clear and convincing and

finding made by the CA and the trial court that a prior

adequate to establish a proposition in issue, are

arrangement

questions of fact. The same holds true for questions

Templonuevo regarding the transfer of ownership of

on whether or not the body of proofs presented by a

the

party, weighed and analyzed in relation to contrary

entitlement to the value of the instruments is based

evidence submitted by the adverse party may be said

on the assumption that she is a transferee within the

to be strong, clear and convincing, or whether or not

contemplation

inconsistencies in the body of proofs of a party are of

Instruments Law.

checks.

existed

This

of

between

fact

Section

is

Salazar

crucial

49

of

as

the

and

Salazars

Negotiable

Section

49

of

the

Negotiable

Instruments

Law

who has made payment to be discharged from

contemplates a situation whereby the payee or

liability. Thus, something more than mere possession

indorsee delivers a negotiable instrument for value

by persons who are not payees or indorsers of the

without indorsing it, thus:

instrument is necessary to authorize payment to

them in the absence of any other facts from which

Transfer without indorsement; effect of- Where the

the authority to receive payment may be inferred.18

holder of an instrument payable to his order transfers

it for value without indorsing it, the transfer vests in

The CA and the trial court surmised that the subject

the transferee such title as the transferor had therein,

checks belonged to private respondent Salazar based

and the transferee acquires in addition, the right to

on the pre-trial stipulation that Templonuevo incurred

have the indorsement of the transferor. But for the

a one-year delay in demanding reimbursement for the

purpose of determining whether the transferee is a

proceeds of the same. To the Courts mind, however,

holder in due course, the negotiation takes effect as

such period of delay is not of such unreasonable

of the time when the indorsement is actually made.

length as to estop Templonuevo from asserting

17

ownership over the checks especially considering that

It bears stressing that the above transaction is an
equitable assignment and the transferee acquires the

it

was

readily

apparent

on

the

face

of

the

instruments19 that these were crossed checks.

instrument subject to defenses and equities available

among prior parties. Thus, if the transferor had legal

In State

Investment

House

v.

IAC,20 the

Court

title, the transferee acquires such title and, in

enumerated the effects of crossing a check, thus: (1)

addition, the right to have the indorsement of the

that the check may not be encashed but only

transferor and also the right, as holder of the legal

deposited in the bank; (2) that the check may be

title, to maintain legal action against the maker or

negotiated only once - to one who has an account

acceptor or other party liable to the transferor. The

with a bank; and (3) that the act of crossing the check

underlying premise of this provision, however, is that

serves as a warning to the holder that the check has

a valid transfer of ownership of the negotiable

been issued for a definite purpose so that such holder

instrument in question has taken place.

must inquire if the check has been received pursuant

to that purpose.

Transferees

in

this

situation

do

not

enjoy

the

presumption of ownership in favor of holders since

Thus,

even

if

they are neither payees nor indorsees of such

reimbursement is taken in conjunction with Salazars

instruments. The weight of authority is that the mere

possession of the checks, it cannot be said that the

possession of a negotiable instrument does not in

presumption of ownership in Templonuevos favor as

itself conclusively establish either the right of the

the

possessor to receive payment, or of the right of one

overcome. This is consistent with the principle that if

designated

the

delay

payee

in

therein

the

was

demand

for

sufficiently

instruments payable to named payees or to their

Templonuevo may not have clearly demonstrated that

order have not been indorsed in blank, only such

he never authorized Salazar to deposit the checks or

payees or their indorsees can be holders and entitled

to encash the same. Noteworthy also is the fact that

to receive payment in their own right.21

petitioner stamped on the back of the checks the

words:

The presumption under Section 131(s) of the Rules of

Court stating that a negotiable instrument was given
for a sufficient consideration will not inure to the
benefit of Salazar because the term "given" does not
pertain merely to a transfer of physical possession of

"All

endorsements

prior

endorsements

guaranteed,"

and/or

thereby

lack

making

of
the

assurance that it had ascertained the genuineness of

all prior endorsements. Having assumed the liability
of a general indorser, petitioners liability to the
designated payee cannot be denied.

the instrument. The phrase "given or indorsed" in the

context of a negotiable instrument refers to the

Consequently, petitioner, as the collecting bank, had

manner in which such instrument may be negotiated.

the right to debit Salazars account for the value of

Negotiable instruments are negotiated by "transfer to

the checks it previously credited in her favor. It is of

one person or another in such a manner as to

no moment that the account debited by petitioner

constitute

If

was different from the original account to which the

payable to bearer it is negotiated by delivery. If

proceeds of the check were credited because both

payable to order it is negotiated by the indorsement

admittedly belonged to Salazar, the former being the

completed by delivery."22 The present case involves

account of the sole proprietorship which had no

checks

separate and distinct personality from her, and the

the

transferee

payable

to

the holderthereof.

order.

a payee or indorsee of

the

Not

checks,

being
private

latter being her personal account.

respondent Salazar could not be a holder thereof.

The right of set-off was explained in Associated Bank
It is an exception to the general rule for a payee of an

v. Tan:24

order instrument to transfer the instrument without

indorsement.

Precisely

because

the

situation

is

abnormal, it is but fair to the maker and to prior

holders to require possessors to prove without the aid
of an initial presumption in their favor, that they
came into possession by virtue of a legitimate
transaction with the last holder.23 Salazar failed to
discharge this burden, and the return of the check
proceeds to Templonuevo was therefore warranted
under

the

circumstances

despite

the

fact

that

A bank generally has a right of set-off over the

deposits therein for the payment of any withdrawals
on the part of a depositor. The right of a collecting
bank to debit a client's account for the value of a
dishonored check that has previously been credited
has fairly been established by jurisprudence. To begin
with, Article 1980 of the Civil Code provides that
"[f]ixed, savings, and current deposits of money in
banks and similar institutions shall be governed by
the provisions concerning simple loan."

Hence,

the

relationship

between

banks

and

To begin with, the irregularity appeared plainly on the

depositors has been held to be that of creditor and

face of the checks. Despite the obvious lack of

debtor. Thus, legal compensation under Article 1278

indorsement

of the Civil Code may take place "when all the

encashment of these checks three times on three

requisites mentioned in Article 1279 are present," as

separate occasions. This negates petitioners claim

follows:

that it merely made a mistake in crediting the value

thereon,

petitioner

permitted

the

of the checks to Salazars account and instead

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

bolsters the conclusion of the CA that petitioner

recognized Salazars claim of ownership of checks
and acted deliberately in paying the same, contrary

(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

to ordinary banking policy and practice. It must be

emphasized that the law imposes a duty of diligence
on the collecting bank to scrutinize checks deposited
with

same quality if the latter has been stated;

it,

for

the

purpose

of

determining

their

genuineness and regularity. The collecting bank,

(3) That the two debts be due;

being primarily engaged in banking, holds itself out to

the public as the expert on this field, and the law thus

(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.

of

set-off

and

over

the

amount

it

paid

to

Templonuevo against the deposit of Salazar, the issue

of whether it acted judiciously is an entirely different
matter.25 As businesses affected with public interest,
and because of the nature of their functions, banks
are under obligation to treat the accounts of their
depositors with meticulous care, always having in
mind the fiduciary nature of their relationship. 26 In
this regard, petitioner was clearly remiss in its duty to
private respondent Salazar as its depositor.

collection

of

check

without

the

proper

indorsement amount to a conversion of the check by

the bank.28

More

While, however, it is conceded that petitioner had the

right

holds it to a high standard of conduct. 27 The taking

importantly,

however,

solely

upon

the

prompting of Templonuevo, and with full knowledge of

the

brewing

dispute

between

Salazar

and

Templonuevo, petitioner debited the account held in

the name of the sole proprietorship of Salazar without
even serving due notice upon her. This ran contrary
to petitioners assurances to private respondent
Salazar that the account would remain untouched,
pending the resolution of the controversy between
her and Templonuevo.29 In this connection, the CA
cited the letter dated September 5, 1991 of Mr.
Manuel Ablan, Senior Manager of petitioner banks

Pasig/Ortigas branch, to private respondent Salazar

November 14, 1991 (Exhibits "D", "E" and "F"

informing her that her account had been frozen, thus:

respectively)30

From the tenor of the letter of Manuel Ablan, it is safe

These

to conclude that Account No. 0201-0588-48 will

subsequently dishonored, thereby causing private

remain frozen or untouched until herein [Salazar] has

respondent

settled

an

inflicting damage to her standing in the business

unexpected move, in less than two weeks (eleven

community. Under the circumstances, she was clearly

days to be precise) from the time that letter was

not given the opportunity to protect her interest when

written, [petitioner] bank issued a cashiers check in

petitioner unilaterally withdrew the above amount

the name of Julio R. Templonuevo of the J.R.T.

from her account without informing her that it had

Construction and Trading for the sum ofP267,692.50

already done so.

matters

with

Templonuevo.

But,

in

checks,

it

must

Salazar

be

undue

emphasized,

were

embarrassment

and

(Exhibit "8") and debited said amount from Ms.

Arcillas

account

No.

0201-0588-48

which

was

supposed to be frozen or controlled. Such a move by

BPI is, to Our minds, a clear case of negligence, if not
a fraudulent, wanton and reckless disregard of the

For the above reasons, the Court finds no reason to

disturb the award of damages granted by the CA
against petitioner. This whole incident would have
been avoided had petitioner adhered to the standard
of diligence expected of one engaged in the banking

right of its depositor.

business. A depositor has the right to recover

The records further bear out the fact that respondent

reasonable

Salazar had issued several checks drawn against the

negligence may not have been attended with malice

account of A.A. Salazar Construction and Engineering

and bad faith, if the former suffered mental anguish,

Services prior to any notice of deduction being

serious

served.

humiliation.31 Moral damages are not meant to enrich

The

CA

sustained

private

respondent

Salazars claim of damages in this regard:

moral

damages

anxiety,

even

if

the

embarrassment

banks

and

a complainant at the expense of defendant. It is only

intended to alleviate the moral suffering she has

The act of the bank in freezing and later debiting the

amount of P267,692.50 from the account of A.A.
Salazar

Construction

and

Engineering

Services

caused plaintiff-appellee great damage and prejudice

particularly when she had already issued checks
drawn against the said account. As can be expected,
the said checks bounced. To prove this, plaintiffappellee presented as exhibits photocopies of checks
dated September 8, 1991, October 28, 1991, and

undergone. The award of exemplary damages is

justified, on the other hand, when the acts of the
bank are attended by malice, bad faith or gross
negligence. The award of reasonable attorneys fees
is proper where exemplary damages are awarded. It
is proper where depositors are compelled to litigate to
protect their interest.32

WHEREFORE,

the

petition

is

Magdalena bound herself "to pay in full the

partially GRANTED. The assailed Decision dated April

judgment

3, 1998 and Resolution dated April 3, 1998 rendered

benefits[.]"4 Payment of the debt shall be made one

by the Court of Appeals in CA-G.R. CV No. 42241

(1) week after Magdalena has received her retirement

are MODIFIED insofar as it ordered petitioner Bank of

benefits from the Government Service Insurance

the Philippine Islands to return the amount of Two

System (GSIS). In case of default, the debt may be

Hundred Sixty-seven Thousand Seven Hundred and

executed against any of the properties of the spouses

Seven and 70/100 Pesos (P267,707.70) to respondent

Cortez that is subject to execution, upon motion of

Annabelle

the

A.

Salazar,

which

portion

debt

spouses

out

of

her

Serfino.5 After

retirement

finding

that

the

isREVERSED and SET ASIDE. In all other respects,

compromise agreement was not contrary to law,

the same are AFFIRMED.

morals, good custom, public order or public policy,

the

D. Serfino v Fareast Bank

Before

the

on certiorari,

Court
1

is

RTC

approved

the

entirety

of

the

parties

agreement and issued a compromise judgment based

petition

for

review

filed under Rule 45 of the Rules of

thereon.6 The debt was later reduced to P 155,000.00

from P 197,000.00

(including

interest),

with

the

Court, assailing the decision dated February 23, 2006

promise that the spouses Cortez would pay in full the

of the Regional Trial Court (RTC) of Bacolod City,

judgment debt not later than April 23, 1996.7

Branch 41, in Civil Case No. 95-9344.

No payment was made as promised. Instead, Godfrey
FACTUAL ANTECEDENTS

discovered that Magdalena deposited her retirement

benefits in the savings account of her daughter-in-

The present case traces its roots to the compromise

law, Grace Cortez, with the respondent, Far East Bank
judgment dated October 24, 19953 of the RTC of
and Trust Company, Inc. (FEBTC). As of April 23, 1996,
Bacolod City, Branch 47, in Civil Case No. 95-9880.
Graces

savings

account

with

FEBTC

amounted

Civil Case No. 95-9880 was an action for collection of

to P245,830.37,

the

entire

deposit

coming

from

sum of money instituted by the petitioner spouses

Magdalenas retirement benefits.8 That same day, the
Godfrey and Gerardina Serfino (collectively, spouses
spouses Serfinos counsel sent two letters to
Serfino) against the spouses Domingo and Magdalena
FEBTC informing the bank that the deposit in
Cortez

(collectively, spouses

Cortez).

By

way

of
Graces

name

was

owned

by

the

spouses

settlement, the spouses Serfino and the spouses

Serfino by virtue of an assignment made in
Cortez executed a compromise agreement on October
their favor by the spouses Cortez. The letter
20, 1995, in which the spouses Cortez acknowledged
requested FEBTC to prevent the delivery of the
their indebtedness to the spouses Serfino in the
deposit to either Grace or the spouses Cortez until its
amount

of P 108,245.71.

To

satisfy

the

debt,
actual ownership has been resolved in court.

On April 25, 1996, the spouses Serfino instituted Civil

therefore, no legal justification for the bank to refuse

Case No. 95- 9344 against the spouses Cortez, Grace

payment of the account, notwithstanding the claim of

and her husband, Dante Cortez, and FEBTC for

the spouses Serfino as stated in their three letters.

the recovery of money on deposit and the

payment of damages, with a prayer for preliminary
attachment.

On April 26, 1996, Grace withdrew P 150,000.00

from her savings account with FEBTC. On the
same day, the spouses Serfino sent another letter to
FEBTC informing it of the pending action; attached to
the letter was a copy of the complaint filed as Civil
Case No. 95-9344.

THE PARTIES ARGUMENTS

The spouses Serfino appealed the RTCs ruling

absolving FEBTC from liability for allowing the
withdrawal of the deposit. They allege that the
RTC cited no legal basis for declaring that only a court
order or process can justify the withholding of the
deposit in Graces name. Since FEBTC was informed
of their adverse claim after they sent three letters,
they claim that:

During the pendency of Civil Case No. 95-9344, the

spouses Cortez manifested that they were turning
over the balance of the deposit in FEBTC (amounting
to P 54,534.00) to the spouses Serfino as partial
payment of their obligation under the compromise
judgment. The RTC issued an order dated July 30,
1997, authorizing FEBTC to turn over the balance of
the deposit to the spouses Serfino.

Upon receipt of a notice of adverse claim in proper

form, it becomes the duty of the bank to: 1.
Withhold payment of the deposit until there is a
reasonable opportunity to institute legal proceedings
to contest ownership; and 2) give prompt notice of
the adverse claim to the depositor. The bank may be
held liable to the adverse claimant if it disregards the
notice of adverse claim and pays the depositor.

On February 23, 2006, the RTC issued the assailed

decision (a) finding the spouses Cortez, Grace and
Dante liable for fraudulently diverting the amount due
the spouses Serfino, but (b) absolving FEBTC from
any liability for allowing Grace to withdraw the
deposit. The RTC declared that FEBTC was not a
party to the compromise judgment; FEBTC was thus
not chargeable with notice of the parties agreement,
as there was no valid court order or processes
requiring it to withhold payment of the deposit. Given
the nature of bank deposits, FEBTC was primarily
bound by its contract of loan with Grace. There was,

When the bank has reasonable notice of a bona

fide claim that money deposited with it is the
property of another than the depositor, it should
withhold

payment

until

there

is

reasonable

opportunity to institute legal proceedings to contest

the

ownership.9(emphases

and

underscoring

supplied)

Aside from the three letters, FEBTC should be deemed

bound by the compromise judgment, since Article
1625 of the Civil Code states that an assignment of

credit binds third persons if it appears in a public

compromise judgment, but only by its contract of loan

instrument.10 They conclude that FEBTC, having been

with its depositor. As a loan, the bank deposit is

notified of their adverse claim, should not have

owned by the bank; hence, the spouses Serfinos

allowed Grace to withdraw the deposit.

claim of ownership over it is erroneous.

While they acknowledged that bank deposits are

Based on these arguments, the case essentially

governed by the Civil Code provisions on loan, the

involves a determination of the obligation of banks

spouses

to a third party who claims rights over a bank

Serfino

allege

that

the

provisions

on

voluntary deposits should apply by analogy in this

deposit standing in the name of another.

case, particularly Article 1988 of the Civil Code, which

THE COURTS RULING

states:

Article 1988. The thing deposited must be returned to

the depositor upon demand, even though a specified
period or time for such return may have been fixed.

This provision shall not apply when the thing is

judicially

attached

while

in

the

depositarys

possession, or should he have been notified of

the opposition of a third person to the return or
the removal of the thing deposited. In these
cases, the depositary must immediately inform the
depositor of the attachment or opposition.

Based on Article 1988 of

the Civil Code,

We find the petition unmeritorious and see no reason

to reverse the RTCs ruling.

Claim for actual damages not

meritorious because there could be
no pecuniary loss that should be
compensated if there was no
assignment of credit

The spouses Serfinos claim for damages against

FEBTC is premised on their claim of ownership of the
deposit

the

depository is not obliged to return the thing to the

depositor if notified of a third partys adverse claim.

with

FEBTC.

The

deposit

consists

of

Magdalenas retirement benefits, which the spouses

Serfino claim to have been assigned to them under
the

compromise

judgment.

That

the

retirement

benefits were deposited in Graces savings account

By allowing Grace to withdraw the deposit that is due

with FEBTC supposedly did not divest them of

them under the compromise judgment, the spouses

ownership of the amount, as "the money already

Serfino

belongs

claim

that

FEBTC

committed

an

to

the

[spouses

actionable wrong that entitles them to the

absolutely

assigned

payment of actual and moral damages.

delivered

by

virtue

instrument[.]"11 By
FEBTC, on the other hand, insists on the correctness
of the RTC ruling. It claims that it is not bound by the

to

Serfino]

them
of

virtue

and

the
of

having

been

constructively
x

public

the assignment

of

credit, the spouses Serfino claim ownership of the

deposit, and they posit that FEBTC was duty bound to

payment

protect their right by preventing the withdrawal of the

sourced:

for

the

judgment

debt

would

be

deposit since the bank had been notified of the

(c) That before the plaintiffs file a motion for

assignment and of their claim.

execution of the decision or order based [on this]

We

find

no

basis

to

support

the spouses

Serfinos claim of ownership of the deposit.

Compromise
Magdalena

Agreement, the
Cortez

defendant,

undertake[s]

and

bind[s]

herself to pay in full the judgment debt out of

"An assignment of credit is an agreement by virtue of
which the owner of a credit, known as the assignor,
by a legal cause, such as sale, dation in payment,
exchange or donation, and without the consent of the
debtor, transfers his credit and accessory rights to
another, known as the assignee, who acquires the

her

retirement

benefits as

Local

[T]reasury

Operation Officer in the City of Bacolod, Philippines,

upon

which

full

payment,

the

plaintiffs

waive,

abandon and relinquish absolutely any of their claims

for attorneys fees stipulated in the Promissory Note
(Annex "A" to the Complaint).15 [emphasis ours]

power to enforce it to the same extent as the

assignor could enforce it against the debtor. It may be

Only when Magdalena has received and turned over

in the form of sale, but at times it may constitute

to the spouses Serfino the portion of her retirement

a dation in payment, such as when a debtor, in

benefits corresponding to the debt due would the

order to obtain a release from his debt, assigns

debt be deemed paid.

to his creditor a credit he has against a third

person."12 As a dation in payment, the assignment
of credit operates as a mode of extinguishing
the obligation;13 the delivery and transmission of
ownership of a thing (in this case, the credit due from
a third person) by the debtor to the creditor is
accepted as the equivalent of the performance of the
obligation.14

In Aquitey v. Tibong,16 the issue raised was whether

the obligation to pay the loan was extinguished by
the execution of the deeds of assignment. The Court
ruled in the affirmative, given that, in the deeds
involved, the respondent (the debtor) assigned to the
petitioner (the creditor) her credits "to make good"
the balance of her obligation; the parties agreed to
relieve the respondent of her obligation to pay the

The terms of the compromise judgment, however, did

balance of her account, and for the petitioner to

not convey an intent to equate the assignment of

collect the same from the respondents debtors. 17 The

Magdalenas retirement benefits (the credit) as the

Court concluded that the respondents obligation to

equivalent of the payment of the debt due the

pay the balance of her accounts with the petitioner

spouses Serfino (the obligation). There was actually

was

no assignment of credit; if at all, the compromise

assignment of credit executed by the respondent in

judgment merely identified the fund from which

favor of the petitioner.18

extinguished, pro

tanto,

by

the

deeds

of

In the present case, the judgment debt was not

Since no valid assignment of credit took place, the

extinguished

spouses Serfino cannot validly claim ownership of the

by

the mere

designation in

the

compromise judgment of Magdalenas retirement

retirement

benefits

that

were

benefits as the fund from which payment shall be

FEBTC. Without

sourced. That the compromise agreement authorizes

amount, they suffered no pecuniary loss that

recourse in case of default on other executable

has to be compensated by actual damages. The

properties of the spouses Cortez, to satisfy the

grant of actual damages

judgment debt, further supports our conclusion that

claimant suffered a duly proven pecuniary loss.20

ownership

deposited

rights

with

over

presupposes

the

that the

there was no assignment of Magdalenas credit with

the GSIS that would have extinguished the obligation.

Claim for moral damages not

meritorious because no duty exists

The compromise judgment in this case also did not

on the part of the bank to protect

give the supposed assignees, the spouses Serfino, the

interest of third person claiming

power to enforce Magdalenas credit against the GSIS.

deposit in the name of another

In fact, the spouses Serfino are prohibited from

enforcing their claim until after the lapse of one (1)
week from Magdalenas receipt of her retirement

Under Article 2219 of the Civil Code, moral damages

are recoverable for acts referred to in Article 21 of the
Civil

benefits:

Code.21 Article

21

of

the

Civil

Code,

in

conjunction with Article 19 of the Civil Code, is part of

(d) That the plaintiffs shall refrain from having the

the cause of action known in this jurisdiction as

judgment based upon this Compromise Agreement

"abuse of rights." The elements of abuse of rights are:

executed until after one (1) week from receipt by the

(a) there is a legal right or duty; (b) exercised in

defendant,

bad faith; and (c) for the sole intent of prejudicing or

Magdalena

Cortez

of

her

retirement

benefits from the [GSIS] but fails to pay within the

injuring another.1wphi1

said period the defendants judgment debt in this

case, in which case [this] Compromise Agreement
[may

be]

executed

upon

any

property

of

the

defendants that are subject to execution upon motion

by the plaintiffs.19

The spouses Serfino invoke American common law

that imposes a duty upon a bank receiving a
notice of adverse claim to the fund in a
depositors account to freeze the account for a
reasonable length of time, sufficient to allow

An assignment of credit not only entitles the assignee

the

adverse

claimant

to

institute

legal

to the credit itself, but also gives him the power to

proceedings to enforce his right to the fund.22In

enforce it as against the debtor of the assignor.

other words, the bank has a duty not to release the

deposits unreasonably early after a third party makes
known his adverse claim to the bank deposit.

Acknowledging that no such duty is imposed by law in

deposit of another a better right over the deposit. As

this jurisdiction, the spouses Serfino ask the Court to

current laws provide, the banks contractual relations

adopt this foreign rule.23

are with its depositor, not with the third party; 28 "a
bank is under obligation to treat the accounts of its

To adopt the foreign rule, however, goes beyond the

power of this Court to promulgate rules governing
pleading, practice and procedure in all courts.

24

The

rule reflects a matter of policy that is better

addressed

by

the

other

branches

of

depositors with meticulous care and always to have in

mind the fiduciary nature of its relationship with
them."29 In the absence of any positive duty of the
bank to an adverse claimant, there could be no
breach that entitles the latter to moral damages.

government, particularly, the Bangko Sentral ng

Pilipinas, which is the agency that supervises the

WHEREFORE, in view of the foregoing, the petition

operations and activities of banks, and which has the

for review on certiorari is DENIED, and the decision

power to issue "rules of conduct or the establishment

dated February 23, 2006 of the Regional Trial Court of

of standards of operation for uniform application to all

Bacolod City, Branch 41, in Civil Case No. 95-9344

institutions or functions covered[.]"25 To adopt this

isAFFIRMED. Costs against the petitioners.

rule will have significant implications on the banking

industry and practices, as the American experience
has shown. Recognizing that the rule imposing duty
on banks to freeze the deposit upon notice of adverse

E. Durban apartments v Pioneer

claim adopts a policy adverse to the bank and its

For review is the Decision1 of the Court of Appeals

functions, and opens it to liability to both the

(CA) in CA-G.R. CV No. 86869, which affirmed the

depositor and the adverse claimant, 26 many American

decision2of the Regional Trial Court (RTC), Branch 66,

states have since adopted adverse claim statutes that

Makati City,

shifted or, at least, equalized the burden. Essentially,

petitioner

these statutes do not impose a duty on banks to

liable to respondent Pioneer Insurance and Surety

freeze the deposit upon a mere notice of adverse

Corporation for the loss of Jeffrey Sees (Sees)

claim; they first require either a court order or an

vehicle.

indemnity bond.

in Civil Case No. 03-857, holding

Durban

Apartments

Corporation

solely

27

The facts, as found by the CA, are simple.

In the absence of a law or a rule binding on the Court,
it has no option but to uphold the existing policy that

On July 22, 2003, [respondent] Pioneer Insurance and

recognizes the fiduciary nature of banking. It likewise

Surety Corporation x x x, by right of subrogation, filed

rejects the adoption of a judicially-imposed rule giving

[with the RTC of Makati City] a Complaint for Recovery

third parties with unverified claims against the

of Damages against [petitioner] Durban Apartments

Corporation, doing business under the name and

[petitioner]

style of City Garden Hotel, and [defendant before the

Justimbaste because it was discovered during the

RTC] Vicente Justimbaste x x x. [Respondent averred]

investigation that this was the second time that a

that: it is the insurer for loss and damage of Jeffrey S.

similar incident of carnapping happened in the valet

Sees [the insureds] 2001 Suzuki Grand Vitara x x x

parking service of [petitioner] Durban Apartments

with Plate No. XBH-510 under Policy No. MC-CV-HO-

and no necessary precautions were taken to prevent

01-0003846-00-D in the amount of P1,175,000.00; on

its repetition; [petitioner] Durban Apartments was

April 30, 2002, See arrived and checked in at the City

wanting

Garden Hotel in Makati corner Kalayaan Avenues,

supervision of its employees particularly defendant x

Makati

parking

x x Justimbaste; and defendant x x x Justimbaste and

attendant, defendant x x x Justimbaste got the key to

[petitioner] Durban Apartments failed and refused to

said Vitara from See to park it[. O]n May 1, 2002, at

pay its valid, just, and lawful claim despite written

about 1:00 oclock in the morning, See was awakened

demands.

City

before

midnight,

and

its

Durban

in due

Apartments

and

[defendant]

diligence in the selection

and

in his room by [a] telephone call from the Hotel Chief

Security Officer who informed him that his Vitara was
carnapped while it was parked unattended at the
parking area of Equitable PCI Bank along Makati
Avenue between the hours of 12:00 [a.m.] and 1:00
[a.m.]; See went to see the Hotel Chief Security
Officer,

thereafter reported

the incident

to the

Operations Division of the Makati City Police AntiCarnapping Unit, and a flash alarm was issued; the
Makati City Police Anti-Carnapping Unit investigated
Hotel Security Officer, Ernesto T. Horlador, Jr. x x x
and defendant x x x Justimbaste; See gave his
Sinumpaang Salaysay to the police investigator, and
filed

Complaint

Sheet

with

the

PNP

Traffic

Management Group in Camp Crame, Quezon City; the

Vitara has not yet been recovered since July 23, 2002
as evidenced by a Certification of Non- Recovery
issued by the PNP TMG; it paid the P1,163,250.00
money claim of See and mortgagee ABN AMRO
Savings Bank, Inc. as indemnity for the loss of the
Vitara; the Vitara was lost due to the negligence of

Upon

service

of

Summons,

[petitioner]

Durban

Apartments and [defendant] Justimbaste filed their

Answer with Compulsory Counterclaim alleging that:
See did not check in at its hotel, on the contrary, he
was a guest of a certain Ching Montero x x x;
defendant x x x Justimbaste did not get the ignition
key of Sees Vitara, on the contrary, it was See who
requested a parking attendant to park the Vitara at
any available parking space, and it was parked at the
Equitable Bank parking area, which was within Sees
view, while he and Montero were waiting in front of
the hotel; they made a written denial of the demand
of [respondent] Pioneer Insurance for want of legal
basis; valet parking services are provided by the hotel
for the convenience of its customers looking for a
parking space near the hotel premises; it is a special
privilege that it gave to Montero and See; it does not
include responsibility for any losses or damages to
motor vehicles and its accessories in the parking
area; and the same holds true even if it was See

himself who parked his Vitara within the premises of

for his ignition key, told him that the latter would park

the

parking

the Vitara for him in front of the hotel, and issued him

customers claim stub issued to him; the carnapper

a valet parking customers claim stub; he and

was able to open the Vitara without using the key

Montero, thereafter, checked in at the said hotel; on

given

and

May 1, 2002, at around 1:00 in the morning, the Hotel

subsequently turned over to See after the Vitara was

Security Officer whom he later knew to be Horlador

stolen; defendant x x x Justimbaste saw the Vitara

called his attention to the fact that his Vitara was

speeding away from the place where it was parked;

carnapped while it was parked at the parking lot of

he tried to run after it, and blocked its possible path

Equitable PCI Bank which is in front of the hotel; his

but to no avail; and See was duly and immediately

Vitara

informed of the carnapping of his Vitara; the matter

Insurance; he together with Horlador and defendant x

was reported to the nearest police precinct; and

x x Justimbaste went to Precinct 19 of the Makati City

defendant x x x Justimbaste, and Horlador submitted

Police to report the carnapping incident, and a police

themselves to police investigation.

officer

hotel

as

earlier

evidenced

to

the

by

the

parking

valet

attendant

was

came

insured

with

accompanied

[respondent]

them

to

Pioneer

the

Anti-

Carnapping Unit of the said station for investigation,

During the pre-trial conference on November 28,
2003, counsel for [respondent] Pioneer Insurance was
present. Atty. Monina Lee x x x, counsel of record of
[petitioner] Durban Apartments and Justimbaste was
absent, instead, a certain Atty. Nestor Mejia appeared
for [petitioner] Durban Apartments and Justimbaste,
but did not file their pre-trial brief.

motion of [respondent] Pioneer Insurance, despite the

opposition of [petitioner] Durban Apartments and
and

allowed

[respondent]

voice alarm; he likewise reported the said incident in

PNP TMG in Camp Crame where another alarm was
issued; he filed his claim with [respondent] Pioneer
Insurance, and a representative of the latter, who is
also an adjuster of Vesper Insurance AdjustersAppraisers [Vesper], investigated the incident; and

On November 5, 2004, the lower court granted the

Justimbaste,

taking of their sworn statements, and flashing of a

Pioneer

Insurance to present its evidence ex parte before the

Branch Clerk of Court.

See testified that: on April 30, 2002, at about 11:30 in

the evening, he drove his Vitara and stopped in front
of City Garden Hotel in Makati Avenue, Makati City; a
parking attendant, whom he had later known to be
defendant x x x Justimbaste, approached and asked

[respondent] Pioneer Insurance required him to sign a

Release of Claim and Subrogation Receipt, and finally
paid him the sum of P1,163,250.00 for his claim.

Ricardo F. Red testified that: he is a claims evaluator

of [petitioner] Pioneer Insurance tasked, among
others, with the receipt of claims and documents from
the insured, investigation of the said claim, inspection
of damages, taking of pictures of insured unit, and
monitoring of the processing of the claim until its
payment; he monitored the processing of Sees claim
when the latter reported the incident to [respondent]

Pioneer Insurance; [respondent] Pioneer Insurance

only twelve (12) available parking slots, it has an

assigned the case to Vesper who verified Sees report,

agreement with Equitable PCI Bank permitting the

conducted an investigation, obtained the necessary

hotel to use the parking space of the bank at night;

documents for the processing of the claim, and

he also learned that a Hyundai Starex van was

tendered a settlement check to See; they evaluated

carnapped at the said place barely a month before

the case upon receipt of the subrogation documents

the occurrence of this incident because Liberty

and

Insurance assigned the said incident to Vespers, and

the

adjusters

recommended

for

and

settlement

eventually
sum

Horlador and defendant x x x Justimbaste admitted

of P1,163,250.00 which was accepted by See; the

the occurrence of the same in their sworn statements

matter was referred and forwarded to their counsel,

before the Anti-Carnapping Unit of the Makati City

R.B. Sarajan & Associates, who prepared and sent

Police; upon verification with the PNP TMG [Unit] in

demand letters to [petitioner] Durban Apartments

Camp Crame, he learned that Sees Vitara has not yet

and

been

[defendant]

its

report,

Justimbaste,

for

who

the

did

not

pay

recovered;

upon

evaluation,

Vesper

[respondent] Pioneer Insurance notwithstanding their

recommended to [respondent] Pioneer Insurance to

receipt of the demand letters; and the services of R.B.

settle Sees claim for P1,045,750.00; See contested

Sarajan & Associates were engaged, for P100,000.00

the recommendation of Vesper by reasoning out that

as

court

the 10% depreciation should not be applied in this

appearance, to prosecute the claims of [respondent]

case considering the fact that the Vitara was used for

Pioneer

barely eight (8) months prior to its loss; and

attorneys

fees

Insurance

plus P3,000.00

against

per

[petitioner]

Durban

Apartments and Justimbaste before the lower court.

[respondent] Pioneer Insurance acceded to Sees

contention, tendered the sum of P1,163,250.00 as

Ferdinand Cacnio testified that: he is an adjuster of

Vesper; [respondent] Pioneer Insurance assigned to

settlement, the former accepted it, and signed a

release of claim and subrogation receipt.

Vesper the investigation of Sees case, and he was

the one actually assigned to investigate it; he

The lower court denied the Motion to Admit Pre-Trial

conducted

Brief

his

investigation

of

the

matter

by

and

Motion

for

Reconsideration

field

by

interviewing See, going to the City Garden Hotel,

[petitioner] Durban Apartments and Justimbaste in its

required

Orders dated May 4, 2005 and October 20, 2005,

subrogation

documents

from

See,

and

verified the authenticity of the same; he learned that

respectively, for being devoid of merit.3

it is the standard procedure of the said hotel as

regards its valet parking service to assist their guests
as soon as they get to the lobby entrance, park the
cars for their guests, and place the ignition keys in
their safety key box; considering that the hotel has

Thereafter, on January 27, 2006, the RTC rendered a

decision, disposing, as follows:

WHEREFORE, judgment is hereby rendered ordering

[petitioner Durban Apartments Corporation] to pay

[respondent

Pioneer

Insurance

and

Surety

4. Ultimately, whether petitioner is liable to

Corporation] the sum of P1,163,250.00 with legal

interest

thereon

from

July

22,

2003

until

respondent for the loss of Sees vehicle.

the

obligation is fully paid and attorneys fees and

litigation expenses amounting toP120,000.00.

The petition must fail.

We are in complete accord with the common ruling of

the lower courts that petitioner was in default for

SO ORDERED.4

failure to appear at the pre-trial conference and to file

On appeal, the appellate court affirmed the decision

pre-trial

brief,

and

thus,

correctly

allowed

of the trial court, viz.:

respondent to present evidence ex-parte. Likewise,

the lower courts did not err in holding petitioner liable

WHEREFORE,

premises

considered,

the

Decision

for the loss of Sees vehicle.

dated January 27, 2006 of the RTC, Branch 66, Makati

City in Civil Case No. 03-857 is hereby AFFIRMED

Well-entrenched in jurisprudence is the rule that

insofar as it holds [petitioner] Durban Apartments

factual findings of the trial court, especially when

Corporation solely liable to [respondent] Pioneer

affirmed by the appellate court, are accorded the

Insurance and Surety Corporation for the loss of

highest

Jeffrey Sees Suzuki Grand Vitara.

conclusive between the parties.6A review of such

degree

of

respect

and

are

considered

findings by this Court is not warranted except upon a

SO ORDERED.

showing of highly meritorious circumstances, such as:

(1) when the findings of a trial court are grounded

Hence, this recourse by petitioner.

entirely on speculation, surmises, or conjectures; (2)

The issues for our resolution are:

when a lower courts inference from its factual

findings is manifestly mistaken, absurd, or impossible;

1. Whether the lower courts erred in declaring

petitioner as in default for failure to appear at
the pre-trial conference and to file a pre-trial
brief;

(3) when there is grave abuse of discretion in the

appreciation of facts; (4) when the findings of the
appellate court go beyond the issues of the case, or
fail to notice certain relevant facts which, if properly

2. Corollary thereto, whether the trial court

correctly

allowed

respondent

to

present

considered, will justify a different conclusion; (5)

when there is a misappreciation of facts; (6) when the
findings of fact are conclusions without mention of

evidence ex-parte;

the specific evidence on which they are based, are

3. Whether petitioner is liable to respondent

premised

for

contradicted by evidence on record.7 None of the

attorneys

fees

of P120,000.00; and

in

the

amount

on

the

absence

of

evidence,

or

are

foregoing exceptions permitting a reversal of the

Failure to file the pre-trial brief shall have the same

assailed decision exists in this instance.

effect as failure to appear at the pre-trial.

Petitioner urges us, however, that "strong [and]

Contrary to the foregoing rules, petitioner and its

compelling reason[s]" such as the prevention of

counsel of record were not present at the scheduled

miscarriage of justice warrant a suspension of the

pre-trial conference. Worse, they did not file a pre-

rules and excuse its and its counsels non-appearance

trial brief. Their non-appearance cannot be excused

during the pre-trial conference and their failure to file

as Section 4, in relation to Section 6, allows only two

a pre-trial brief.

exceptions: (1) a valid excuse; and (2) appearance of

a representative on behalf of a party who is fully

We are not persuaded.

authorized in writing to enter into an amicable

Rule 18 of the Rules of Court leaves no room for

equivocation; appearance of parties and their counsel
at the pre-trial conference, along with the filing of a
corresponding pre-trial brief, is mandatory, nay, their
duty. Thus, Section 4 and Section 6 thereof provide:

the parties and their counsel to appear at the pretrial. The non-appearance of a party may be excused
only if a valid cause is shown therefor or if a
shall

appear

in

his

behalf

fully

authorized in writing to enter into an amicable

settlement, to submit to alternative modes of dispute
resolution,

and

to

enter

into

stipulations

or

admissions of facts and documents.

SEC. 6. Pre-trial brief.The parties shall file with the

court and serve on the adverse party, in such manner
as shall ensure their receipt thereof at least three (3)
days before the date of the pre-trial, their respective
pre-trial briefs which shall contain, among others:

resolution,

and

to

enter

into

stipulations

or

admissions of facts and documents.

Petitioner is adamant and harps on the fact that

November 28, 2003 was merely the first scheduled

SEC. 4. Appearance of parties.It shall be the duty of

representative

settlement, to submit to alternative modes of dispute

date for the pre-trial conference, and a certain Atty.

Mejia appeared on its behalf. However, its assertion is
belied by its own admission that, on said date, this
Atty. Mejia "did not have in his possession the Special
Power of Attorney issued by petitioners Board of
Directors."

As pointed out by the CA, petitioner, through Atty.

Lee, received the notice of pre-trial on October 27,
2003, thirty-two (32) days prior to the scheduled
conference. In that span of time, Atty. Lee, who was
charged with the duty of notifying petitioner of the
scheduled pre-trial conference,8 petitioner, and Atty.
Mejia should have discussed which lawyer would
appear at the pre-trial conference with petitioner,
armed with the appropriate authority therefor. Sadly,

xxxx

petitioner failed to comply with not just one rule; it

also did not proffer a reason why it likewise failed to

file a pre-trial brief. In all, petitioner has not shown

Consistently with the mandatory character of the pre-

any persuasive reason why it should be exempt from

trial, the Rules oblige not only the lawyers but the

abiding by the rules.

parties as well to appear for this purpose before the

Court, and when a party "fails to appear at a pre-trial

The appearance of

Atty.

Mejia at

the pre-trial

conference, without a pre-trial brief and with only his

bare allegation that he is counsel for petitioner, was
correctly rejected by the trial court. Accordingly, the
trial court, as affirmed by the appellate court, did not
err in allowing respondent to present evidence exparte.

Former Chief Justice Andres R. Narvasas words

continue to resonate, thus:

conference (he) may be non-suited or considered as

in default." The obligation "to appear" denotes not
simply the personal appearance, or the mere physical
presentation by a party of ones self, but connotes as
importantly, preparedness to go into the different
subject assigned by law to a pre-trial. And in those
instances where a party may not himself be present
at the pre-trial, and another person substitutes for
him, or his lawyer undertakes to appear not only as
an attorney but in substitution of the clients person,

Everyone knows that a pre-trial in civil actions is

it is imperative for that representative of the lawyer

mandatory, and has been so since January 1, 1964.

to have "special authority" to make such substantive

Yet to this day its place in the scheme of things is not

agreements as only the client otherwise has capacity

fully appreciated, and it receives but perfunctory

to make. That "special authority" should ordinarily be

treatment in many courts. Some courts consider it a

in writing or at the very least be "duly established by

mere technicality, serving no useful purpose save

evidence other than the self-serving assertion of

perhaps, occasionally to furnish ground for non-

counsel (or the proclaimed representative) himself."

suiting the plaintiff, or declaring a defendant in

Without

default, or, wistfully, to bring about a compromise.

representative cannot be deemed capacitated to

The pre-trial device is not thus put to full use. Hence,

appear in place of the party; hence, it will be

it has failed in the main to accomplish the chief

considered that the latter has failed to put in an

objective for it: the simplification, abbreviation and

appearance at all, and he [must] therefore "be non-

expedition of the trial, if not indeed its dispensation.

suited or considered as in default," notwithstanding

This is a great pity, because the objective is

his lawyers or delegates presence.9

that

special

authority,

the

lawyer

or

attainable, and with not much difficulty, if the device

were more intelligently and extensively handled.

We are not unmindful that defendants (petitioners)

preclusion from presenting evidence during trial does

xxxx

not automatically result in a judgment in favor of

plaintiff

(respondent).

substantiate

the

The

plaintiff

allegations

must
in

still
its

complaint.10 Otherwise, it would be inutile to continue

Art. 1998. The deposit of effects made by travelers in

with the plaintiffs presentation of evidence each time

hotels

the defendant is declared in default.

necessary.1avvphi1 The keepers of hotels or inns

shall

In this case, respondent substantiated the allegations

in its complaint, i.e., a contract of necessary deposit
existed between the insured See and petitioner. On
this

score,

we

find

no

error

in

the

following

disquisition of the appellate court:

[The] records also reveal that upon arrival at the City

Garden Hotel, See gave notice to the doorman and
parking attendant of the said hotel, x x x Justimbaste,
about his Vitara when he entrusted its ignition key to
the latter. x x x Justimbaste issued a valet parking
customer claim stub to See, parked the Vitara at the
Equitable PCI Bank parking area, and placed the
ignition key inside a safety key box while See
proceeded to the hotel lobby to check in. The
Equitable PCI Bank parking area became an annex of
City Garden Hotel when the management of the said

or

be

inns

shall

responsible

for

also

be

them

as

regarded

as

depositaries,

provided that notice was given to them, or to their

employees, of the effects brought by the guests and
that, on the part of the latter, they take the
precautions

which

said

hotel-keepers

or

their

substitutes advised relative to the care and vigilance

of their effects.

Plainly, from the facts found by the lower courts, the

insured See deposited his vehicle for safekeeping
with

petitioner,

through

the

latters

employee,

Justimbaste. In turn, Justimbaste issued a claim stub

to See. Thus, the contract of deposit was perfected
from Sees delivery, when he handed over to
Justimbaste the keys to his vehicle, which Justimbaste
received with the obligation of safely keeping and
returning it. Ultimately, petitioner is liable for the loss
of Sees vehicle.

bank allowed the parking of the vehicles of hotel

guests thereat in the evening after banking hours.11

Lastly, petitioner assails the lower courts award of

attorneys

Article 1962, in relation to Article 1998, of the Civil

Code defines a contract of deposit and a necessary

fees

to

respondent

in

the

amount

of P120,000.00. Petitioner claims that the award is

not substantiated by the evidence on record.

deposit made by persons in hotels or inns:

We disagree.
Art. 1962. A deposit is constituted from the moment a
person receives a thing belonging to another, with

While it is a sound policy not to set a premium on the

the obligation of safely keeping it and returning the

right to litigate,12 we find that respondent is entitled

same. If the safekeeping of the thing delivered is not

to reasonable attorneys fees. Attorneys fees may be

the principal purpose of the contract, there is no

awarded when a party is compelled to litigate or incur

deposit but some other contract.

expenses to protect its interest, 13 or when the court

deems it just and equitable. 14 In this case, petitioner

refused to answer for the loss of Sees vehicle, which

Petitioner, the owner and operator of the 5-star

was deposited with it for safekeeping. This refusal

Shangri-La Hotel in Makati City (Shangri-La Hotel),

constrained respondent, the insurer of See, and

appeals the decision promulgated on October 21,

subrogated to the latters right, to litigate and incur

2009,1 whereby the Court of Appeals (CA) affirmed

expenses.

award

with modification the judgment rendered on October

of P120,000.00 to P60,000.00 in view of the simplicity

25, 2005 by the Regional Trial Court (RTC) in Quezon

of the issues involved in this case.

City holding petitioner liable for damages for the

However,

we

reduce

the

murder of Christian Fredrik Harper, a Norwegian

WHEREFORE, the petition is DENIED. The Decision of
the Court of Appeals in CA-G.R. CV No. 86869 is
AFFIRMED with the MODIFICATION that the award of
attorneys

fees

is

reduced

to P60,000.00.

Costs

against petitioner.

SO ORDERED.

F. Makati Shangrila v Harper

national.2 Respondents Ellen Johanne Harper and

Jonathan Christopher Harper are the widow and son
of Christian Harper, while respondent Rigoberto
Gillera is their authorized representative in the
Philippines.

Antecedents

In the first week of November 1999, Christian Harper

The hotel owner is liable for civil damages to the

came to Manila on a business trip as the Business

surviving heirs of its hotel guest whom strangers

Development Manager for Asia of ALSTOM Power

murder inside his hotel room.

Norway AS, an engineering firm with worldwide

operations. He checked in at the Shangri-La Hotel and

The Case
was billeted at Room 1428. He was due to check out
on November 6, 1999. In the early morning of that
date, however, he was murdered inside his hotel
room by still unidentified malefactors. He was then 30
years old.

How the crime was discovered was a story in itself. A

routine verification call from the American Express
Card Company to cardholder Harpers residence in
Oslo, Norway (i.e., Bygdoy Terasse 16, 0287 Oslo,
Norway) led to the discovery. It appears that at
around 11:00 am of November 6, 1999, a Caucasian
male of about 3032 years in age, 54" in height, clad
in maroon long sleeves, black denims and black

shoes, entered the Alexis Jewelry Store in Glorietta,

Carmelito

Ayala Center, Makati City and expressed interest in

Mendoza entered Harpers room in the company of

purchasing

valued

De Guzman, Alarcon, Gami Holazo (the hotels

atP 320,000.00 with the use of two Mastercard credit

Executive Assistant Manager), Norge Rosales (the

cards and an American Express credit card issued in

hotels Executive Housekeeper), and Melvin Imperial

the name of Harper. But the customers difficulty in

(a security personnel of the hotel). They found

answering the queries phoned in by a credit card

Harpers body on the bed covered with a blanket, and

representative sufficiently aroused the suspicion of

only the back of the head could be seen. Lifting the

saleslady Anna Liza Lumba (Lumba), who asked for

blanket, Mendoza saw that the victims eyes and

the customers passport upon suggestion of the credit

mouth had been bound with electrical and packaging

card representative to put the credit cards on hold.

tapes, and his hands and feet tied with a white rope.

Probably sensing trouble for himself, the customer

The body was identified to be that of hotel guest

hurriedly left the store, and left the three credit cards

Christian Fredrik Harper.

Cartier

ladys

watch

Mendoza4 and

SPO4

Roberto

Hizon.

and the passport behind.

Mendoza subsequently viewed the closed circuit
In the meanwhile, Harpers family in Norway must

television (CCTV) tapes, from which he found that

have called him at his hotel room to inform him about

Harper had entered his room at 12:14 a.m. of

the attempt to use his American Express card. Not

November 6, 1999, and had been followed into the

getting any response from the room, his family

room at 12:17 a.m. by a woman; that another person,

requested Raymond Alarcon, the Duty Manager of the

a Caucasian male, had entered Harpers room at 2:48

Shangri-La Hotel, to check on Harpers room. Alarcon

a.m.; that the woman had left the room at around

and a security personnel went to Room 1428 at 11:27

5:33 a.m.; and that the Caucasian male had come out

a.m., and were shocked to discover Harpers lifeless

at 5:46 a.m.

body on the bed.

On November 10, 1999, SPO1 Ramoncito Ocampo, Jr.
Col. Rodrigo de Guzman (de Guzman), the hotels

interviewed Lumba about the incident in the Alexis

Security Manager, initially investigated the murder. In

Jewelry Shop. During the interview, Lumba confirmed

his incident report, he concluded from the several

that the person who had attempted to purchase the

empty bottles of wine in the trash can and the

Cartier ladys watch on November 6, 1999 had been

number of cigarette butts in the toilet bowl that

the person whose picture was on the passport issued

Harper and his visitors had drunk that much and

under the name of Christian Fredrik Harper and the

smoked that many cigarettes the night before. 3

Caucasian male seen on the CCTV tapes entering

Harpers hotel room.

The police investigation actually commenced only

upon the arrival in the hotel of the team of PO3

Sr. Insp. Danilo Javier of the Criminal Investigation

service, comfort and security for its guests for which

Division of the Makati City Police reflected in his

reason ABB Alstom executives and their guests have

Progress Report No. 25 that the police investigation

invariably chosen this hotel to stay.7

showed that Harpers passport, credit cards, laptop

and an undetermined amount of cash had been
missing from the crime scene; and that he had

xxx

Ruling of the RTC

learned during the follow-up investigation about an

unidentified Caucasian males attempt to purchase a

On October 25, 2005, the RTC rendered judgment

Cartier ladys watch from the Alexis Jewelry Store in

after trial,8 viz:

Glorietta, Ayala Center, Makati City with the use of

one of Harpers credit cards.

WHEREFORE, finding the defendant hotel to be remiss

in its duties and thus liable for the death of Christian

On August 30, 2002, respondents commenced this

Harper, this Court orders the defendant to pay

suit in the RTC to recover various damages from

plaintiffs the amount of:

petitioner,6pertinently alleging:
PhP 43,901,055.00 as and by way of actual
xxx

and compensatory damages;

7. The deceased was to check out and leave the hotel

PhP 739,075.00 representing the expenses of

on November 6, 1999, but in the early morning of

transporting the remains of Harper to Oslo,

said date, while he was in his hotel room, he was

Norway;

stabbed to death by an (sic) still unidentified male

who had succeeded to intrude into his room.

8. The murderer succeeded to trespass into the area

of the hotels private rooms area and into the room of

PhP 250,000.00 attorneys fees;

and to pay the cost of suit.

SO ORDERED.

the said deceased on account of the hotels gross

negligence in providing the most basic security

Ruling of the CA

system of its guests, the lack of which owing to the

acts or omissions of its employees was the immediate
cause of the tragic death of said deceased.

xxx

Petitioner

appealed,

assigning

to

the

RTC

the

following errors, to wit:

I.THE TRIAL COURT ERRED IN RULING THAT THE

PLAINTIFFS-APPELLEES ARE THE HEIRS OF THE LATE

10. Defendant has prided itself to be among the top

CHRISTIAN HARPER, AS THERE IS NO COMPETENT

hotel chains in the East claiming to provide excellent

EVIDENCE ON RECORD SUPPORTING SUCH RULING.

II.THE TRIAL COURT ERRED IN RULING THAT THE

defendant-appellant is ordered to pay plaintiffs-

DEFENDANT-APPELLANTSNEGLIGENCE

appellees the amounts of P 52,078,702.50, as actual

WAS

THE

PROXIMATE CAUSE OF THE DEATH OF MR. HARPER,

and

compensatory

damages; P 25,000.00,

OR IN NOT RULING THAT IT WAS MR. CHRISTIAN

temperate

HARPERS OWN NEGLIGENCE WHICH WAS THE SOLE,

fees; and to pay the costs of the suit.

damages; P 250,000.00,

as

as

attorneys

PROXIMATE CAUSE OF HIS DEATH.

SO ORDERED.10
III.THE TRIAL COURT ERRED IN AWARDING TO THE
PLAINTIFFS-APPELLEES
PHP 43,901,055.00,

THE

AMOUNTOF

REPRESENTING

THE

ALLEGED

LOST EARNING OF THE LATE CHRISTIAN HARPER,

THERE

BEING

NO

COMPETENT

PROOF

OF

THE

Issues

Petitioner still seeks the review of the judgment of the

CA, submitting the following issues for consideration
and determination, namely:

EARNING OF MR. HARPER DURING HIS LIFETIME AND

OF THE ALLEGATION THAT THE PLAINTIFFS-APPELLEES

I.WHETHER

OR

NOT

THE

PLAINTIFFS-APPELLEES

ARE MR. HARPERS HEIRS.

WERE ABLE TO PROVE WITH COMPETENT EVIDENCE

THE AFFIRMATIVE ALLEGATIONS IN THE COMPLAINT

IV.THE TRIAL COURT ERRED IN AWARDING TO THE

PLAINTIFFS-APPELLEES

THE

AMOUNT

OF

THAT THEY ARE THE WIDOW AND SON OF MR.

CHRISTIAN HARPER.

PHP 739,075.00, REPRESENTING THE ALLEGED COST

OF TRANSPORTING THE REMAINS OF MR. CHRISTIAN

II.WHETHER OR NOT THE APPELLEES WERE ABLE TO

HARPER TO OSLO, NORWAY, THERE BEING NO PROOF

PROVE

ON RECORD THAT IT WAS PLAINTIFFS-APPELLEES

AFFIRMATIVE ALLEGATIONS IN THE COMPLAINT THAT

WHO PAID FOR SAID COST.

THERE WAS NEGLIGENCE ON THE PART OF THE

WITH

COMPETENT

EVIDENCE

THE

APPELLANT AND ITS SAID NEGLIGENCE WAS THE

V.THE

TRIAL

COURT

ERRED

IN

AWARDING

ATTORNEYS FEES AND COST OF SUIT TO THE

PROXIMATE CAUSE OF THE DEATH OF MR. CHRISTIAN

HARPER.

PLAINTIFFS-APPELLEES, THERE BEING NO PROOF ON

RECORD SUPPORTING SUCH AWARD.

III.WHETHER OR NOT THE PROXIMATE CAUSE OF THE

DEATH OF MR. CHRISTIAN HARPER WAS HIS OWN

On October 21, 2009, the CA affirmed the judgment

NEGLIGENCE.

of the RTC with modification, as follows:

9

Ruling
WHEREFORE, the assailed Decision of the Regional
Trial

Court

dated

October

25,

2005

is

herebyAFFIRMED with MODIFICATION. Accordingly,

The appeal lacks merit.

I.Requirements for authentication of documents

the widow and son of the deceased Christian Fredrik

establishing respondents legal relationship

Harper; (b) Exhibit "Q" was labeled as Certificate of

with the victim as his heirs were complied with

Marriage

in

plaintiffs-appellees

Formal

Offer

of

Evidence, when it appears to be the Birth Certificate

As to the first issue, the CA pertinently held as
follows:

of the late Christian Harper; (c) Exhibit "Q-1" is a

translation of the Marriage Certificate of Ellen Johanne

The documentary evidence that plaintiffs-appellees

offered relative to their heirship consisted of the

Harper and Christian Fredrik Harper, the original of

which was not produced in court, much less, offered
in evidence. Being a mere translation, it cannot be a

following

competent evidence of the alleged fact that Ellen

1. Exhibit "Q" - Birth Certificate of Jonathan

Johanne Harper is the widow of Christian Fredrik

Christopher Harper, son of Christian Fredrik

Harper, pursuant to the Best Evidence Rule. Even

Harper and Ellen Johanne Harper;

assuming that it is an original Marriage Certificate, it

is not a public document that is admissible without

2. Exhibit "Q-1" - Marriage Certificate of Ellen

Johanne Clausen and Christian Fredrik Harper;

3. Exhibit "R" - Birth Certificate of Christian

Fredrick Harper, son of Christopher Shaun

the need of being identified or authenticated on the

witness stand by a witness, as it appears to be a
document issued by the Vicar of the Parish of Ullern
and, hence, a private document; (d) Exhibit "R" was
labeled as Probate Court Certificate in plaintiffs-

Harper and Eva Harper; and

appellees Formal Offer of Evidence, when it appears

4. Exhibit "R-1" - Certificate from the Oslo

to be the Birth Certificate of the deceased, Christian

Probate Court stating that Ellen Harper was

Fredrik Harper; and (e) Exhibit "R-1" is a translation of

married to the deceased, Christian Fredrick

the supposed Probate Court Certificate, the original of

Harper and listed Ellen Harper and Jonathan

which was not produced in court, much less, offered

Christopher Harper as the heirs of Christian

in evidence. Being a mere translation, it is an

Fredrik Harper.

incompetent

evidence

of

the

alleged

fact

that

plaintiffs-appellees are the heirs of Christian Fredrik

Defendant-appellant

points

out

that

plaintiffs-

Harper, pursuant to the Best Evidence Rule.

appellees committed several mistakes as regards the

above documentary exhibits, resultantly making them

Defendant-appellant further adds that Exhibits "Q-1"

incompetent evidence, to wit, (a) none of the

and "R-1" were not duly attested by the legal

plaintiffs-appellees or any of the witnesses who

custodians (by the Vicar of the Parish of Ullern for

testified for the plaintiffs gave evidence that Ellen

Exhibit "Q-1" and by the Judge or Clerk of the Probate

Johanne Harper and Jonathan Christopher Harper are

Court for Exhibit "R-1") as required under Sections 24

and 25, Rule 132 of the Revised Rules of Court.

authenticated by the Consul, Embassy of the Republic

Likewise, the said documents are not accompanied by

of the Philippines in Stockholm, Sweden.

a certificate that such officer has the custody as also

required under Section 24 of Rule 132. Consequently,
defendant-appellant asseverates that Exhibits "Q-1"
and "R-1" as private documents, which were not duly
authenticated on the witness stand by a competent
witness, are essentially hearsay in nature that have
no probative value. Therefore, it is obvious that
plaintiffs-appellees failed to prove that they are the

They further argue that since Exhibit "Q-1", Marriage

Certificate, was issued by the vicar or parish priest,
the legal custodian of parish records, it is considered
as an exception to the hearsay rule. As for Exhibit "R1", the Probate Court Certificate, while the document
is indeed a translation of the certificate, it is an
official

certification,

duly

confirmed

by

the

Government of the Kingdom of Norway; its contents

widow and son of the late Christian Harper.

were lifted by the Government Authorized Translator

Plaintiffs-appellees

make

the

following

counter

arguments, viz, (a) Exhibit "Q-1", the Marriage

from the official record and thus, a written official act

of a foreign sovereign country.

Certificate of Ellen Johanne Harper and Christian

Fredrik Harper, was issued by the Office of the Vicar
of Ullern with a statement that "this certificate is a
transcript from the Register of Marriage of Ullern
Church."

The

contents

of

Exhibit

"Q-1"

were

translated by the Government of the Kingdom of

Norway, through its authorized translator, into English
and authenticated by the Royal Ministry of Foreign
Affairs

of

Norway,

which

in

turn,

was

also

authenticated by the Consul, Embassy of the Republic

of the Philippines in Stockholm, Sweden; (b) Exhibit

WE rule for plaintiffs-appellees.

The Revised Rules of Court provides that public

documents may be evidenced by a copy attested by
the officer having the legal custody of the record. The
attestation must state, in substance, that the copy is
a correct copy of the original, or a specific part
thereof, as the case may be. The attestation must be
under the official seal of the attesting officer, if there
be any, or if he be the clerk of a court having a seal,
under the seal of such court.

"Q", the Birth Certificate of Jonathan Christopher

Harper, was issued and signed by the Registrar of the

If the record is not kept in the Philippines, the

Kingdom of Norway, as authenticated by the Royal

attested copy must be accompanied with a certificate

Ministry of Foreign Affairs of Norway, whose signature

that such officer has the custody. If the office in which

was also authenticated by the Consul, Embassy of the

the record is kept is in a foreign country, the

Republic of the Philippines in Stockholm, Sweden; and

certificate may be made by a secretary of the

(c) Exhibit "R-1", the Probate Court Certificate was

embassy or legation, consul general, consul, vice

also authenticated by the Royal Ministry of Foreign

consul, or consular agent or by any officer in the

Affairs

foreign service of the Philippines stationed in the

of

Norway,

whose

signature

was

also

foreign country in which the record is kept, and

Certificate from the Oslo Probate Court, naming Ellen

authenticated by the seal of his office.

Johanne Harper and Jonathan Christopher Harper as

the heirs of the deceased Christian Fredrik Harper.

The documents involved in this case are all kept in

Norway. These documents have been authenticated
by the Royal Norwegian Ministry of Foreign Affairs;
they bear the official seal of the Ministry and
signature of one, Tanja Sorlie. The documents are
accompanied by an Authentication by the Consul,
Embassy

of

the Republic of

the

Philippines

in

The documents are certified true translations into

English of

the

transcript of

the

said marriage

certificate and the probate court certificate. They

were likewise signed by the authorized government
translator of Oslo with the seal of his office; attested
by Tanja Sorlie and further certified by our own
Consul.

Stockholm, Sweden to the effect that, Tanja Sorlie is

duly authorized to legalize official documents for the

In view of the foregoing, WE conclude that plaintiffs-

Ministry.

appellees

had

substantially

complied

with

the

requirements set forth under the rules. WE would also

Exhibits "Q" and "R" are extracts of the register of
births of both Jonathan Christopher Harper and the
late Christian Fredrik Harper, respectively, wherein
the

former

explicitly

declares

that

Jonathan

Christopher is the son of Christian Fredrik and Ellen

Johanne Harper. Said documents bear the signature of
the keeper, Y. Ayse B. Nordal with the official seal of
the

Office

of

the

Registrar

of

Oslo,

and

the

authentication of Tanja Sorlie of the Royal Ministry of

Foreign

Affairs,

Oslo,

which

were

further

authenticated by Philippine Consul Marian Jocelyn R.

Tirol.

In

addition,

the

latter

states

that

said

documents are the birth certificates of Jonathan

Christopher Harper and Christian Fredrik Harper
issued by the Registrar Office of Oslo, Norway on
March 23, 2004.

Exhibits "Q-1", on the other hand, is the Marriage

Certificate of Christian Fredrik Harper and Ellen
Johanne Harper issued by the vicar of the Parish of
Ullern while Exhibit "R-1" is the Probate Court

like to stress that plaintiffs-appellees herein are

residing overseas and are litigating locally through
their representative. While they are not excused from
complying with our rules, WE must take into account
the attendant reality that these overseas litigants
communicate with their representative and counsel
via long distance communication. Add to this is the
fact that compliance with the requirements on
attestation and authentication or certification is no
easy process and completion thereof may vary
depending on different factors such as the location of
the requesting party from the consulate and the office
of the record custodian, the volume of transactions in
said offices and even the mode of sending these
documents

to

the

Philippines.

With

these

circumstances under consideration, to OUR minds,

there is every reason for an equitable and relaxed
application of the rules on the issuance of the
required

attestation

from

the

custodian

of

the

documents to plaintiffs-appellees situation. Besides,

these questioned documents were duly signed by the

vice consul, or consular agent or by any officer in the

officers having custody of the same.11

foreign service of the Philippines stationed in the

foreign country in which the record is kept, and

Petitioner assails the CAs ruling that respondents

substantially

complied

with

the

rules

on

authenticated by the seal of his office.

the

authentication of the proofs of marriage and filiation

Section 25. What attestation of copy must state.

set by Section 24 and Section 25 of Rule 132 of the

Whenever a copy of a document or record is attested

Rules of Court when they presented Exhibit Q, Exhibit

for the purpose of evidence, the attestation must

Q-1, Exhibit R and Exhibit R-1, because the legal

state, in substance, that the copy is a correct copy of

custodian did not duly attest that Exhibit Q-1 and

the original, or a specific part thereof, as the case

Exhibit R-1 were the correct copies of the originals on

may be. The attestation must be under the official

file, and because no certification accompanied the

seal of the attesting officer, if there be any, or if he be

documents stating that "such officer has custody of

the clerk of a court having a seal, under the seal of

the originals." It contends that respondents did not

such court.

competently prove their being Harpers surviving

heirs by reason of such documents being hearsay and

Although Exhibit Q,12 Exhibit Q-1,13 Exhibit R14 and

Exhibit R-115 were not attested by the officer having

incompetent.

the legal custody of the record or by his deputy in the

Petitioners

challenge

against

respondents

manner required in Section 25 of Rule 132, and said

documentary evidence on marriage and heirship is

documents did not comply with the requirement

not well-taken.

under Section 24 of Rule 132 to the effect that if the

record was not kept in the Philippines a certificate of

Section 24 and Section 25 of Rule 132 provide:

Section 24. Proof of official record. The record of

public documents referred to in paragraph (a) of
Section 19, when admissible for any purpose, may be
evidenced by an official publication thereof or by a
copy attested by the officer having the legal custody
of the record, or by his deputy, and accompanied, if
the record is not kept in the Philippines, with a
certificate that such officer has the custody. If the
office in which the record is kept is in a foreign
country, the certificate may be made by a secretary
of the embassy or legation, consul general, consul,

the person having custody must accompany the copy

of the document that was duly attested stating that
such person had custody of the documents, the
deviation was not enough reason to reject the utility
of the documents for the purposes they were
intended to serve.

Exhibit Q and Exhibit R were extracts from the

registry of births of Oslo, Norway issued on March 23,
2004 and signed by Y. Ayse B. Nordal, Registrar, and
corresponded to respondent Jonathan Christopher
Harper

and

victim

Christian

Fredrik

Harper,

respectively.16 Exhibit Q explicitly stated that Jonathan

was the son of Christian Fredrik Harper and Ellen

Exhibit R-1,20 a Probate Court certificate issued by the

Johanne Harper, while Exhibit R attested to the birth

Oslo Probate Court on February 18, 2000 through

of Christian Fredrik Harper on December 4, 1968.

Morten Bolstad, its Senior Executive Officer, was also

Exhibit Q and Exhibit R were authenticated on March

authenticated by the signature of Tanja Sorlie and

29, 2004 by the signatures of Tanja Sorlie of the Royal

with the official seal of the Royal Ministry of Foreign

Ministry of Foreign Affairs of Norway as well as by the

Affairs of Norway. As with the other documents,

official seal of that office. In turn, Consul Marian

Philippine Consul Tirol explicitly certified to the

Jocelyn

in

capacity of Sorlie "to legalize official documents for

Stockholm, Sweden authenticated the signatures of

the Royal Ministry of Foreign Affairs of Norway," and

Tanja Sorlie and the official seal of the Royal Ministry

further certified that the document was a true

of Foreign Affairs of Norway on Exhibit Q and Exhibit

translation into English of the Oslo Probate Court

R, explicitly certifying to the authority of Tanja Sorlie

certificate issued on February 18, 2000 to the effect

"to legalize official documents for the Royal Ministry

that Christian Fredrik Harper, born on December 4,

of Foreign Affairs of Norway."17

1968, had reportedly died on November 6, 1999.21

Exhibit Q-1,18 the Marriage Certificate of Ellen Johanne

The Oslo Probate Court certificate recited that both

Clausen

Ellen Johanne Harper and Christopher S. Harper were

R.

Tirol

Harper

of

the

and

Philippine

Christian

Consulate

Fredrik

Harper,

contained the following data, namely: (a) the parties

Harpers heirs, to wit:

were married on June 29, 1996 in Ullern Church; and

(b) the certificate was issued by the Office of the

The above names surviving spouse has accepted

responsibility for the commitments of the deceased in

Vicar of Ullern on June 29, 1996.

accordance with the provisions of Section 78 of the

Exhibit Q-1 was

similarly authenticated by the

Probate Court Act (Norway), and the above substitute

signature of Tanja Sorlie of the Royal Ministry of

guardian has agreed to the private division of the

Foreign Affairs of Norway, with the official seal of that

estate.

office. Philippine Consul Tirol again expressly certified

to

the

capacity

of

Sorlie

"to

legalize

official

documents for the Royal Ministry of Foreign Affairs of

Norway,"19 and further certified that the document
was a true translation into English of a transcript of a

The following heir and substitute guardian will

undertake the private division of the estate:

Ellen

Johanne

Harper

Christopher S. Harper

Marriage Certificate issued to Christian Frederik

Harper and Ellen Johanne Clausen by the Vicar of the

This probate court certificate relates to the entire

Parish of Ullern on June 29, 1996.

estate.

Oslo Probate Court, 18 February 2000.22

The official participation in the authentication process

The Court has further said in Constantino-David v.

of Tanja Sorlie of the Royal Ministry of Foreign Affairs

Pangandaman-Gania that the focus in every inquiry

of Norway and the attachment of the official seal of

on whether or not to accept substantial compliance is

that office on each authentication indicated that

always on the presence of equitable conditions to

Exhibit Q, Exhibit R, Exhibit Q-1 and Exhibit R-1 were

administer justice effectively and efficiently without

documents of a public nature in Norway, not merely

damage

private documents. It cannot be denied that based on

obligation.24 There

Philippine Consul Tirols official authentication, Tanja

conditions attendant here, the foremost of which is

Sorlie was "on the date of signing, duly authorized to

that respondents had gone to great lengths to submit

legalize official documents for the Royal Ministry of

the documents. As the CA observed, respondents

Foreign Affairs of Norway." Without a showing to the

compliance with the requirements on attestation and

contrary by petitioner, Exhibit Q, Exhibit R, Exhibit Q-

authentication of the documents had not been easy;

1 and Exhibit R-1 should be presumed to be

they had to contend with many difficulties (such as

themselves official documents under Norwegian law,

the distance of Oslo, their place of residence, from

and admissible as prima facie evidence of the truth of

Stockholm, Sweden, where the Philippine Consulate

their contents under Philippine law.

had its office; the volume of transactions in the

or

injury

to
are,

the

spirit

indeed,

of

the

such

legal

equitable

offices concerned; and the safe transmission of the

At the minimum, Exhibit Q, Exhibit R, Exhibit Q-1 and
Exhibit R-1 substantially met the requirements of
Section 24 and Section 25 of Rule 132 as a condition
for their admission as evidence in default of a
showing by petitioner that the authentication process
was

tainted

objective

of

with

bad

ensuring

faith.
the

Consequently,

authenticity

of

the

documents to the Philippines). 25 Their submission of

the documents should be presumed to be in good
faith because they did so in due course. It would be
inequitable if the sincerity of respondents in obtaining
and submitting the documents despite the difficulties
was ignored.

the

documents prior to their admission as evidence was

The principle of substantial compliance recognizes

substantially

that

achieved.

Pangandaman-Gania,23 the

In Constantino-David

situations

do

occasionally

substantial compliance, by its very nature, is actually

rules of procedure and the laws. 26 That rules of

inadequate observance of the requirements of a rule

procedure may be mandatory in form and application

or

equitable

does not forbid a showing of substantial compliance

circumstances in order to facilitate the administration

under justifiable circumstances,27 because substantial

of justice, there being no damage or injury caused by

compliance does not equate to a disregard of basic

such flawed compliance.

rules. For sure, substantial compliance and strict

are

waived

under

said

and

demand some flexibility in the rigid application of the

that

has

exigencies

that

regulation

Court

v.

adherence are not always incompatible and do not

always clash in discord. The power of the Court to

Buesa to establish the parentage and filiation of Pedro

suspend its own rules or to except any particular case

Cabais.

from the operation of the rules whenever the

meritorious, stating:

The

Court

held

that

the

petition

was

purposes of justice require the suspension cannot be

challenged.28 In the interest of substantial justice,
even

procedural

rules

of

the

most

mandatory

character in terms of compliance are frequently

relaxed.

Similarly,

the

procedural

rules

should

definitely be liberally construed if strict adherence to

their letter will result in absurdity and in manifest
injustice, or where the merits of a partys cause are
apparent

and

outweigh

considerations

of

non-

compliance with certain formal requirements.29 It is

more in accord with justice that a party-litigant is
given the fullest opportunity to establish the merits of
his claim or defense than for him to lose his life,
liberty, honor or property on mere technicalities.
Truly, the rules of procedure are intended to promote
substantial justice, not to defeat it, and should not be
applied in a very rigid and technical sense.

birth

certificate,

being

public

document,

offers prima facie evidence of filiation and a high

degree

of

proof

is

of

truth

presumption

needed

to

contained

overthrow
in

such

the

public

document. This is pursuant to the rule that entries in

official records made in the performance of his duty
by a public officer are prima facie evidence of the
facts therein stated. The evidentiary nature of such
document must, therefore, be sustained in the
absence of strong, complete and conclusive proof of
its falsity or nullity.

On the contrary, a baptismal certificate is a private

document, which, being hearsay, is not a conclusive
proof of filiation. It does not have the same probative
value as a record of birth, an official or public

30

document. In US v. Evangelista, this Court held that

Petitioner urges the Court to resolve the apparent

conflict between the rulings in Heirs of Pedro Cabais
v. Court of Appeals31 (Cabais) and in Heirs of Ignacio
Conti v. Court of Appeals32 (Conti) establishing filiation

church registers of births, marriages, and deaths

made subsequent to the promulgation of General
Orders No. 68 and the passage of Act No. 190 are no
longer public writings, nor are they kept by duly
authorized public officials. Thus, in this jurisdiction, a

through a baptismal certificate.33

certificate

of

baptism

such

as

the

one

herein

Petitioners urging is not warranted, both because

controversy is no longer regarded with the same

there

evidentiary

is

no

conflict

in Cabais and Conti,

between

the

and

rulings
because

neither Cabais nor Conti is relevant herein.

value

as

official

records

of

birth.

Moreover, on this score, jurisprudence is consistent

and uniform in ruling that the canonical certificate of
baptism is not sufficient to prove recognition.34

In Cabais, the main issue was whether or not the CA

correctly affirmed the decision of the RTC that had

The Court sustained the Cabais petitioners stance

relied mainly on the baptismal certificate of Felipa C.

that the RTC had apparently erred in relying on the

baptismal certificate to establish filiation, stressing

admission of such legitimate filiation in a public or

the baptismal certificates limited evidentiary value

private document duly signed by the parent. Such

as proof of filiation inferior to that of a birth

other proof of ones filiation may be a baptismal

certificate;

certificate, a judicial admission, a family Bible in

and

declaring

that

the

baptismal

certificate did not attest to the veracity of the

which

statements

one

reputation respecting his pedigree, admission by

baptized. Nevertheless, the Court ultimately ruled

silence, the testimonies of witnesses and other kinds

that it was respondents failure to present the birth

of proof admissible under Rule 130 of the Rules of

certificate, more than anything else, that lost them

Court. By analogy, this method of proving filiation

their case, stating that: "The unjustified failure to

may also be utilized in the instant case.

regarding

the

kinsfolk

of

the

his

name

has

been

entered,

common

present the birth certificate instead of the baptismal

certificate now under consideration or to otherwise
prove filiation by any other means recognized by law

Public documents are the written official acts, or

records of the official act of the sovereign authority,
official bodies and tribunals, and public officers,

weigh heavily against respondents."35

whether of the Philippines, or a foreign country. The

In Conti, the Court affirmed the rulings of the trial

baptismal certificates

court and the CA to the effect that the Conti

private respondents are public documents. Parish

respondents were able to prove by preponderance of

priests continue to be the legal custodians of the

evidence their being the collateral heirs of deceased

parish records and are authorized to issue true

Lourdes Sampayo. The Conti petitioners disagreed,

copies, in the form of certificates, of the entries

arguing that baptismal certificates did not prove the

contained therein.

filiation of collateral relatives

presented

in

evidence

by

of the deceased.
The admissibility of baptismal certificates offered by

Agreeing with the CA, the Court said:

Lydia S. Reyes, absent the testimony of the officiating

We are not persuaded. Altogether, the documentary

priest or the official recorder, was settled in People v.

and

Ritter, citing U.S. v. de Vera (28 Phil. 105 1914, thus:

testimonial

competent

and

evidence

submitted

adequate

proofs

that

xxx

are

private

respondents are collateral heirs of Lourdes Sampayo.

.... The entries made in the Registry Book may be

considered as entries made in the course of business

xxx

under Section 43 of Rule 130, which is an exception

to the hearsay rule. The baptisms administered by

Under Art. 172 of the Family Code, the filiation of

legitimate children shall be proved by any other
means allowed by the Rules of Court and special laws,
in the absence of a record of birth or a parents

the church are one of its transactions in the exercise

of ecclesiastical duties and recorded in the book of
the church during this course of its business.

It may be argued that baptismal certificates are

Petitioner argues that respondents failed to prove its

evidence only of the administration of the sacrament,

negligence; that Harpers own negligence in allowing

but in this case, there were four (4) baptismal

the killers into his hotel room was the proximate

certificates which, when taken together, uniformly

cause of his own death; and that hotels were not

show that Lourdes, Josefina, Remedios and Luis had

insurers of the safety of their guests.

the same set of parents, as indicated therein.

Corroborated

by

the

undisputed

testimony

of

Adelaida Sampayo that with the demise of Lourdes

and her brothers Manuel, Luis and sister Remedios,
the only sibling left was Josefina Sampayo Reyes,
such baptismal certificates have acquired evidentiary
weight to prove filiation.

The CA resolved petitioners arguments thuswise:

Defendant-appellant contends that the pivotal issue is

whether or not it had committed negligence and
corollarily, whether its negligence was the immediate
cause of the death of Christian Harper. In its defense,

36

defendant-appellant mainly avers that it is equipped

Obviously, Conti did not treat a baptismal certificate,

standing alone, as sufficient to prove filiation; on the
contrary,Conti expressly

held

that

baptismal

certificate had evidentiary value to prove filiation

if considered alongside other evidence of filiation. As
such, a baptismal certificate alone is not sufficient to

with

adequate

security

system

as

follows:

(1)

keycards or vingcards for opening the guest rooms,

(2) two CCTV monitoring cameras on each floor of the
hotel and (3) roving guards with handheld radios, the
number of which depends on the occupancy rate of
the hotel. Likewise, it reiterates that the proximate
cause of Christian Harpers death was his own

resolve a disputed filiation.

negligence in inviting to his room the two (2) still

Unlike Cabais and Conti, this case has respondents
presenting

several

certificates

of

documents,

Harper

and

like

the

respondent

birth

Jonathan

Harper, the marriage certificate of Harper and Ellen

Johanne Harper, and the probate court certificate, all
of

which

were

documents
documentary

presumably

under

the

evidence

laws

regarded
of

sufficed

as

Norway.
to

unidentified suspects.

public
Such

competently

establish the relationship and filiation under the

Plaintiffs-appellees in their Brief refute, in that, the

liability of defendant-appellant is based upon the fact
that it was in a better situation than the injured
person, Christian Harper, to foresee and prevent the
happening of the injurious occurrence. They maintain
that there is no dispute that even prior to the
untimely demise of Christian Harper, defendantappellant was duly forewarned of its security lapses

standards of our Rules of Court.

as pointed out by its Chief Security Officer, Col.

II.

Petitioner

negligence

was

liable

due

to

its

own

Rodrigo De Guzman, who recommended that one

roving guard be assigned on each floor of the hotel
considering the length and shape of the corridors.

They

posit

that

defendant-appellants

inaction

constitutes negligence.

conduct of the discreet pater familias of the Roman

law.

This Court finds for plaintiffs-appellees.

The test of negligence is objective. WE measure the

act or omission of the tortfeasor with a perspective as

As the action is predicated on negligence, the

relevant law is Article 2176 of the Civil Code, which
states that

another, there being fault or negligence, is obliged to

pay for the damage done. Such fault or negligence, if
was

situated. The test, as applied to the extant case, is

whether

"Whoever by act or omission causes damage to

there

that of an ordinary reasonable person who is similarly

no

pre-existing

contractual

relation

or

not

defendant-appellant,

under

the

attendant circumstances, used that reasonable care

and caution which an ordinary reasonable person
would have used in the same situation.

WE rule in the negative.

between the parties, is called quasi-delict and is

governed by the provisions of this chapter."

In finding defendant-appellant remiss in its duty of

exercising the required reasonable care under the

Negligence

is

defined

as

the

omission

to

do

circumstances, the court a quo reasoned-out, to wit:

something which a reasonable man, guided by those

considerations which ordinarily regulate the conduct

"Of the witnesses presented by plaintiffs to prove its

of human affairs, would do, or the doing of something

(sic) case, the only one with competence to testify on

which a prudent and reasonable man would not do.

the issue of adequacy or inadequacy of security is

The Supreme Court likewise ruled that negligence is

Col. Rodrigo De Guzman who was then the Chief

want of care required by the circumstances. It is a

Security Officer of defendant hotel for the year 1999.

relative or comparative, not an absolute, term and its

He is a retired police officer and had vast experience

application depends upon the situation of the parties

in security jobs. He was likewise a member of the

and the degree of care and vigilance which the

elite Presidential Security Group.

circumstances reasonably require. In determining

whether or not there is negligence on the part of the
parties in a given situation, jurisprudence has laid
down the following test: Did defendant, in doing the
alleged negligent act, use that reasonable care and
caution which an ordinarily prudent person would
have used in the same situation? If not, the person is
guilty of negligence. The law, in effect, adopts the
standard supposed to be supplied by the imaginary

He testified that upon taking over the job as the chief

of the security force of the hotel, he made an
assessment of the security situation. Col. De Guzman
was not satisfied with the security set-up and told the
hotel management of his desire to improve it. In his
testimony, De Guzman testified that at the time he
took over, he noticed that there were few guards in
the elevated portion of the hotel where the rooms

were located. The existing security scheme then was

Liability on the part of the defendant is based upon

one guard for 3 or 4 floors. He likewise testified that

the fact that he was in a better situation than the

he recommended to the hotel management that at

injured person to foresee and prevent the happening

least one guard must be assigned per floor especially

of the injurious occurrence.

considering that the hotel has a long "L-shaped"

hallway, such that one cannot see both ends of the
hallway. He further opined that "even one guard in
that hallway is not enough because of the blind

There is no dispute that even prior to the untimely

demise of Mr. Harper, defendant was duly forewarned
of the security lapses in the hotel. Col. De Guzman
was particularly concerned with the security of the

portion of the hallway."

private areas where the guest rooms are. He wanted

On cross-examination, Col. De Guzman testified that

not just one roving guard in every three or four floors.

the security of the hotel was adequate at the time the

He insisted there must be at least one in each floor

crime occurred because the hotel was not fully

considering the length and the shape of the corridors.

booked. He qualified his testimony on direct in that

The trained eyes of a security officer was (sic) looking

his recommendation of one guard per floor is the

at that deadly scenario resulting from that wide

"ideal" set-up when the hotel is fully-booked.

security breach as that which befell Christian Harper.

Be that as it may, it must be noted that Col. De

The theory of the defense that the malefactor/s

Guzman also testified that the reason why the hotel

was/were known to Harper or was/were visitors of

management disapproved his recommendation was

Harper and that there was a shindig among [the]

that the hotel was not doing well. It is for this reason

three deserves scant consideration.

that

the

hotel

management

did

not

heed

the

recommendation of Col. De Guzman, no matter how

sound the recommendation was, and whether the
hotel is fully-booked or not. It was a business
judgment call on the part of the defendant.

The NBI Biology Report (Exh. "C" & "D") and the
Toxicology Report (Exh. "E") belie the defense theory
of a joyous party between and among Harper and the
unidentified

malefactor/s.

Based

on

the

Biology

Report, Harper was found negative of prohibited and

Plaintiffs anchor its (sic) case on our law on quasi-

regulated

drugs.

The Toxicology

Report

likewise

delicts.

revealed that the deceased was negative of the

presence of alcohol in his blood.

Article 2176. Whoever by act or omission causes

damage to another, there being fault or negligence, is

The defense even suggests that the malefactor/s

obliged to pay for the damage done. Such fault or

gained entry into the private room of Harper either

negligence, if there is no pre-existing contractual

because Harper allowed them entry by giving them

relation between the parties, is called quasi-delict.

access to the vingcard or because Harper allowed

them entry by opening the door for them, the usual

In a case, the Supreme Court defined negligence as:

gesture of a room occupant to his visitors.

The failure to observe for the protection of the
While defendants theory may be true, it is more

interests of another person that degree of care,

likely, under the circumstances obtaining that the

precaution and vigilance, which the circumstances

malefactor/s gained entry into his room by simply

justly demand, whereby such person suffers injury.

knocking at Harpers door and the latter opening it

probably thinking it was hotel personnel, without an
inkling that criminal/s could be in the premises.

Negligence

is

want

of

care

required

by

the

circumstances. It is a relative or comparative, not an

absolute term, and its application depends upon the

The latter theory is more attuned to the dictates of

situation of the parties, and the degree of care and

reason. If indeed the female "visitor" is known to or a

vigilance

visitor of Harper, she should have entered the the

impose. Where the danger is great, a high degree of

room together with Harper. It is quite unlikely that a

care is necessary.

which

the

circumstances

reasonably

supposed "visitor" would wait three minutes to be

with a guest when he/she could go with the guest
directly to the room. The interval of three minutes in
Harpers entry and that of the alleged female visitor
belies the "theory of acquaintanceship". It is most
likely that the female "visitor" was the one who
opened the door to the male "visitor", undoubtedly, a
co-conspirator.

In any case, the ghastly incident could have been

prevented had there been adequate security in each
of the hotel floors. This, coupled with the earlier
recommendation of Col. De Guzman to the hotel
management to act on the security lapses of the
hotel, raises the presumption that the crime was
foreseeable.

Clearly, defendants inaction constitutes negligence

or want of the reasonable care demanded of it in that
particular situation.

Moreover, in applying the premises liability rule in the

instant case as it is applied in some jurisdiction (sic)
in the United States, it is enough that guests are
injured while inside the hotel premises to make the
hotelkeeper liable. With great caution should the
liability of the hotelkeeper be enforced when a guest
died inside the hotel premises.

It also bears stressing that there were prior incidents

that

occurred

in

the

hotel

which

should

have

forewarned the hotel management of the security

lapses of the hotel. As testified to by Col. De Guzman,
"there were minor incidents" (loss of items) before
the happening of the instant case.

These "minor" incidents may be of little significance

to the hotel, yet relative to the instant case, it speaks
volume. This should have served as a caveat that the
hotel security has lapses.

Makati Shangri-La Hotel, to stress, is a five-star hotel.

It could be gleaned from findings of the trial court

The "reasonable care" that it must exercise for the

that its conclusion of negligence on the part of

safety

defendant-appellant

and

comfort

of

its

guests

should

be

is

grounded

mainly

on

the

commensurate with the grade and quality of the

latters inadequate hotel security, more particularly

accommodation it offers. If there is such a thing as

on the failure to deploy sufficient security personnel

"five-star

or roving guards at the time the ghastly incident

hotel

security",

the

guests

at

Makati

Shangri-La surely deserves just that!

happened.

When one registers (as) a guest of a hotel, he makes

A review of the testimony of Col. De Guzman reveals

the establishment the guardian of his life and his

that on direct examination he testified that at the

personal belongings during his stay. It is a standard

time he assumed his position as Chief Security Officer

procedure of the management of the hotel to screen

of defendant-appellant, during the early part of 1999

visitors who call on their guests at their rooms. The

to the early part of 2000, he noticed that some of the

murder of Harper could have been avoided had the

floors of the hotel were being guarded by a few

security guards of the Shangri-La Hotel in Makati

guards, for instance, 3 or 4 floors by one guard only

dutifully observed this standard procedure."

on a roving manner. He then made a recommendation

that the ideal-set up for an effective security should

WE concur.

be one guard for every floor, considering that the

Well settled is the doctrine that "the findings of fact

by the trial court are accorded great respect by
appellate courts and should not be disturbed on
appeal unless the trial court has overlooked, ignored,
or

disregarded

some

fact

or

circumstances

of

sufficient weight or significance which, if considered,

would alter the situation." After a conscientious sifting
of the records, defendant-appellant fails to convince
US to deviate from this doctrine.

hotel is L-shaped and the ends of the hallways cannot

be seen. At the time he made the recommendation,
the same was denied, but it was later on considered
and approved on December 1999 because of the
Centennial Celebration.

On cross-examination, Col. De Guzman confirmed

that after he took over as Chief Security Officer, the
number of security guards was increased during the
first part of December or about the last week of
November, and before the incident happened, the
security was adequate. He also qualified that as to his
direct testimony on "ideal-set up", he was referring to
one guard for every floor if the hotel is fully booked.
At the time he made his recommendation in the early
part of 1999, it was disapproved as the hotel was not

doing well and it was not fully booked so the existing

room was never checked by any of the guards when

security was adequate enough. He further explained

he came inside the hotel. As per interview conducted

that his advice was observed only in the late

by the initial investigator, PO3 Cornelio Valiente to the

November 1999 or the early part of December 1999.

guards, they admitted that nobody know that said

man entered the hotel and it was only through the

It could be inferred from the foregoing declarations of

the former Chief Security Officer of defendantappellant that the latter was negligent in providing
adequate security due its guests. With confidence, it
was repeatedly claimed by defendant-appellant that
it is a five-star hotel. Unfortunately, the record failed
to show that at the time of the death of Christian
Harper, it was exercising reasonable care to protect
its guests from harm and danger by providing
sufficient security commensurate to it being one of

monitor that they became aware of his entry. It was

even evidenced by the CCTV that before he walked to
the room of the late Christian Harper, said male
suspect even looked at the monitoring camera. Such
act of the man showing wariness, added to the fact
that his entry to the hotel was unnoticed, at an
unholy hour, should have aroused suspicion on the
part of the roving guard in the said floor, had there
been any. Unluckily for Christian Harper, there was
none at that time.

the finest hotels in the country. In so concluding, WE

are reminded of the Supreme Courts enunciation that

Proximate cause is defined as that cause, which, in

the hotel business like the common carriers business

natural and continuous sequence, unbroken by any

is imbued with public interest. Catering to the public,

efficient intervening cause, produces, the injury, and

hotelkeepers are bound to provide not only lodging

without which the result would not have occurred.

for hotel guests but also security to their persons and

More comprehensively, proximate cause is that cause

belongings. The twin duty constitutes the essence of

acting

the business.

immediately or by setting other events in motion, all

first

and

producing

the

injury,

either

constituting a natural and continuous chain of events,

It is clear from the testimony of Col. De Guzman that
his recommendation was initially denied due to the
fact that the business was then not doing well. The
"one guard, one floor" recommended policy, although
ideal when the hotel is fully-booked, was observed
only later in November 1999 or in the early part of
December 1999, or needless to state, after the
murder of Christian Harper. The apparent security
lapses of defendant-appellant were further shown
when the male culprit who entered Christian Harpers

each having a close causal connection with its

immediate predecessor, the final event in the chain
immediately effecting the injury as natural and
probable result of the cause which first acted, under
such circumstances that the person responsible for
the first event should, as an ordinarily prudent and
intelligent person, have reasonable ground to expect
at the moment of his act or default that an injury to
some person might probably result therefrom.

Defendant-appellants contention that it was Christian

(c) When there is grave abuse of discretion;

Harpers own negligence in allowing the malefactors

to his room that was the proximate cause of his
death, is untenable. To reiterate, defendant-appellant
is engaged in a business imbued with public interest,

(d) When

the

judgment

is

based

on

misapprehension of facts;

(e) When the findings of facts are conflicting;

ergo, it is bound to provide adequate security to its

guests. As previously discussed, defendant-appellant

(f) When in making its findings the Court of Appeals

failed to exercise such reasonable care expected of it

went beyond the issues of the case, or its findings are

under the circumstances. Such negligence is the

contrary to the admissions of both the appellant and

proximate cause which set the chain of events that

the appellee;

led to the eventual demise of its guest. Had there

been reasonable security precautions, the same could
have saved Christian Harper from a brutal death.

(g) When the findings are contrary to the trial court;

(h) When the findings are conclusions without citation

The Court concurs entirely with the findings and

conclusions of the CA, which the Court regards to be
thorough and supported by the records of the trial.
Moreover, the Court cannot now review and pass

of specific evidence on which they are based;

(i) When the facts set forth in the petition as well as

in the petitioners main and reply briefs are not
disputed by the respondent;

upon the uniform findings of negligence by the CA

and the RTC because doing so would require the

(j) When the findings of fact are premised on the

Court to delve into and revisit the factual bases for

supposed absence of evidence and contradicted by

the finding of negligence, something fully contrary to

the evidence on record; and

its character as not a trier of facts. In that regard, the

factual findings of the trial court that are supported
by the evidence on record, especially when affirmed
by

the

CA,

are

Court.37 Consequently,

conclusive

on

the

the Court will not review

unless there are exceptional circumstances for doing

so, such as the following:

(a) When the findings are grounded entirely on

speculation, surmises or conjectures;

(b) When the inference made is manifestly mistaken,

absurd or impossible;

(k) When the Court of Appeals manifestly overlooked

certain relevant facts not disputed by the parties,
which, if properly considered, would justify a different
conclusion.38

None

of

the

exceptional

circumstances

obtains

herein. Accordingly, the Court cannot depart from or

disturb

the

factual

findings

on

negligence

of

petitioner made by both the RTC and the CA.39

Even so, the Court agrees with the CA that petitioner

failed to provide the basic and adequate security

measures expected of a five-star hotel; and that its

provide not only lodging for their guests but also

omission was the proximate cause of Harpers death.

security to the persons and belongings of their

guests. The twin duty constitutes the essence of the

The testimony of Col. De Guzman revealed that the

management practice prior to the murder of Harper
had been to deploy only one security or roving guard
for every three or four floors of the building; that such
ratio had not been enough considering the L-shape
configuration of the hotel that rendered the hallways
not visible from one or the other end; and that he had
recommended to management to post a guard for
each

floor,

but

his

recommendation

had

been

disapproved because the hotel "was not doing well"

at that particular time.

business.43 Applying by analogy Article 2000,44 Article

200145 and Article 200246of the Civil Code (all of which
concerned the hotelkeepers degree of care and
responsibility as to the personal effects of their
guests), we hold that there is much greater reason to
apply the same if not greater degree of care and
responsibility when the lives and personal safety of
their guests are involved. Otherwise, the hotelkeepers
would simply stand idly by as strangers have
unrestricted access to all the hotel rooms on the

40

Probably realizing that his testimony had weakened

petitioners position in the case, Col. De Guzman soon
clarified on cross-examination that petitioner had
seen no need at the time of the incident to augment
the number of guards due to the hotel being then

pretense of being visitors of the guests, without being

held liable should anything untoward befall the
unwary guests. That would be absurd, something that
no good law would ever envision.

In fine, the Court sees no reversible-error on

the part of the CA.

only half-booked. Here is how his testimony went:

WHEREFORE, the Court AFFIRMS the judgment of
Petitioner would thereby have the Court believe that
Col. De Guzmans initial recommendation had been

the Court of Appeals; and ORDERS petitioner to pay

the costs of suit.

rebuffed due to the hotel being only half-booked; that

there had been no urgency to adopt a one-guard-per-

G. YHT Realty v Ca

floor policy because security had been adequate at

The primary question of interest before this Court is

that time; and that he actually meant by his

the only legal issue in the case: It is whether a hotel

statement that "the hotel was not doing well" that the

may evade liability for the loss of items left with it for

hotel was only half-booked.

safekeeping by its guests, by having these guests

execute written waivers holding the establishment or

We are not convinced.

its employees free from blame for such loss in light of
The hotel business is imbued with public interest.

Article 2003 of the Civil Code which voids such

Catering to the public, hotelkeepers are bound to

waivers.

Before this Court is a Rule 45 petition for review of

safety deposit box as it was his practice to rent a

the Decision1 dated 19 October 1995 of the Court of

safety deposit box every time he registered at

Appeals

16

Tropicana in previous trips. As a tourist, McLoughlin

December 1991 of the Regional Trial Court (RTC),

was aware of the procedure observed by Tropicana

Branch 13, of Manila, finding YHT Realty Corporation,

relative to its safety deposit boxes. The safety deposit

Brunhilda Mata-Tan (Tan), Erlinda Lainez (Lainez) and

box could only be opened through the use of two

Anicia Payam (Payam) jointly and solidarily liable for

keys, one of which is given to the registered guest,

damages in an action filed by Maurice McLoughlin

and the other remaining in the possession of the

(McLoughlin) for the loss of his American and

management of the hotel. When a registered guest

Australian dollars deposited in the safety deposit box

wished to open his safety deposit box, he alone could

of Tropicana Copacabana Apartment Hotel, owned

personally request the management who then would

and operated by YHT Realty Corporation.

assign one of its employees to accompany the guest

which

affirmed

the Decision2 dated

and assist him in opening the safety deposit box with

The factual backdrop of the case follow.

Private

respondent

McLoughlin,

the two keys.4

an

Australian

businessman-philanthropist, used to stay at Sheraton

Hotel during his trips to the Philippines prior to 1984
when he met Tan. Tan befriended McLoughlin by
showing him around, introducing him to important
people, accompanying him in visiting impoverished
street children and assisting him in buying gifts for
the children and in distributing the same to charitable
institutions

for

McLoughlin

to

poor
transfer

children.
from

Tan

Sheraton

convinced
Hotel

to

Tropicana where Lainez, Payam and Danilo Lopez

McLoughlin allegedly placed the following in his

safety deposit box: Fifteen Thousand US Dollars
(US$15,000.00) which he placed in two envelopes,
one envelope containing Ten Thousand US Dollars
(US$10,000.00)

and

the

other

envelope

Five

Thousand US Dollars (US$5,000.00); Ten Thousand

Australian Dollars (AUS$10,000.00) which he also
placed in another envelope; two (2) other envelopes
containing

letters

and

credit

cards;

two

(2)

bankbooks; and a checkbook, arranged side by side

inside the safety deposit box. 5

were employed. Lopez served as manager of the

hotel while Lainez and Payam had custody of the keys

On 12 December 1987, before leaving for a brief trip

for the safety deposit boxes of Tropicana. Tan took

to Hongkong, McLoughlin opened his safety deposit

care of McLoughlin's booking at the Tropicana where

box with his key and with the key of the management

he started staying during his trips to the Philippines

and took therefrom the envelope containing Five

from December 1984 to September 1987.3

Thousand US Dollars (US$5,000.00), the envelope

containing

On

30

October

1987,

McLoughlin

arrived

from

Australia and registered with Tropicana. He rented a

Ten

(AUS$10,000.00),

Thousand
his

Australian

passports

and

his

Dollars
credit

cards.6 McLoughlin left the other items in the box as

McLoughlin requested Lainez and Payam to open his

he did not check out of his room at the Tropicana

safety deposit box. He noticed that in the envelope

during his short visit to Hongkong. When he arrived in

containing

Hongkong, he opened the envelope which contained

(US$15,000.00),

Five

and

(US$2,000.00) were missing and in the envelope

discovered upon counting that only Three Thousand

previously containing Ten Thousand Australian Dollars

US

(AUS$10,000.00),

Thousand

Dollars

US

Dollars

(US$5,000.00)

(US$3,000.00)

were

enclosed

therein.7 Since he had no idea whether somebody

Fifteen
Two

Four

Thousand
Thousand

Thousand

US

Dollars

US

Five

Dollars

Hundred

Australian Dollars (AUS$4,500.00) were missing. 10

else had tampered with his safety deposit box, he

thought that it was just a result of bad accounting
since he did not spend anything from that envelope. 8

When McLoughlin discovered the loss, he immediately

confronted Lainez and Payam who admitted that Tan
opened the safety deposit box with the key assigned

After returning to Manila, he checked out of Tropicana

to him.11 McLoughlin went up to his room where Tan

on 18 December 1987 and left for Australia. When he

was staying and confronted her. Tan admitted that

arrived in Australia, he discovered that the envelope

she had stolen McLoughlin's key and was able to open

with Ten Thousand US Dollars (US$10,000.00) was

the safety deposit box with the assistance of Lopez,

short of Five Thousand US Dollars (US$5,000). He also

Payam and Lainez.12 Lopez also told McLoughlin that

noticed that the jewelry which he bought in Hongkong

Tan stole the key assigned to McLoughlin while the

and stored in the safety deposit box upon his return

latter was asleep.13

to Tropicana was likewise missing, except for a

McLoughlin

diamond bracelet.9

requested

the

management

for

an

investigation of the incident. Lopez got in touch with

When McLoughlin came back to the Philippines on 4

Tan and arranged for a meeting with the police and

April 1988, he asked Lainez if some money and/or

McLoughlin. When the police did not arrive, Lopez and

jewelry which he had lost were found and returned to

Tan went to the room of McLoughlin at Tropicana and

her or to the management. However, Lainez told him

thereat, Lopez wrote on a piece of paper a promissory

that no one in the hotel found such things and none

note dated 21 April 1988. The promissory note reads

were turned over to the management. He again

as follows:

registered at Tropicana and rented a safety deposit

box. He placed therein one (1) envelope containing
Fifteen Thousand US Dollars (US$15,000.00), another
envelope containing Ten Thousand Australian Dollars
(AUS$10,000.00) and other envelopes containing his
traveling

papers/documents.

On

16

April

1988,

I promise to pay Mr. Maurice McLoughlin the amount

of AUS$4,000.00 and US$2,000.00 or its equivalent in
Philippine currency on or before May 5, 1988.14

Lopez requested Tan to sign the promissory note

which the latter did and Lopez also signed as a

witness. Despite the execution of promissory note by

After receiving a copy of the indorsement in Australia,

Tan, McLoughlin insisted that it must be the hotel who

McLoughlin came to the Philippines and registered

must assume responsibility for the loss he suffered.

again as a hotel guest of Tropicana. McLoughlin went

However, Lopez refused to accept the responsibility

to Malacaang to follow up on his letter but he was

relying on the conditions for renting the safety

instructed to go to the DOJ. The DOJ directed him to

deposit box entitled "Undertaking For the Use Of

proceed

Safety Deposit Box,"15specifically paragraphs (2) and

McLoughlin went back to Australia as he had an

(4) thereof, to wit:

urgent business matter to attend to.

2. To release and hold free and blameless TROPICANA

For several times, McLoughlin left for Australia to

APARTMENT HOTEL from any liability arising from any

attend to his business and came back to the

loss in the contents and/or use of the said deposit box

Philippines to follow up on his letter to the President

for any cause whatsoever, including but not limited to

but he failed to obtain any concrete assistance.19

to

the

WPD

for

documentation.

But

the presentation or use thereof by any other person

McLoughlin left again for Australia and upon his

should the key be lost;

return to the Philippines on 25 August 1989 to pursue

...

his claims against petitioners, the WPD conducted an

investigation which resulted in the preparation of an

4. To return the key and execute the RELEASE in favor

of TROPICANA APARTMENT HOTEL upon giving up the
use of the box.

preliminary investigation. However, McLoughlin left

and he consulted his lawyers as to the validity of the

abovementioned stipulations. They opined that the
stipulations are void for being violative of universal
hotel practices and customs. His lawyers prepared a
letter dated 30 May 1988 which was signed by
and

sent

to

President

Corazon

Aquino.17 The Office of the President referred the

letter to the Department of Justice (DOJ) which
forwarded the same to the Western Police District
(WPD).18

Fiscal's Office. Said affidavit became the basis of

16

On 17 May 1988, McLoughlin went back to Australia

McLoughlin

affidavit which was forwarded to the Manila City

again for Australia without receiving the notice of the

hearing on 24 November 1989. Thus, the case at the
Fiscal's Office was dismissed for failure to prosecute.
Mcloughlin
criminal

requested

charge

for

the

reinstatement

theft.

In

the

of

the

meantime,

McLoughlin and his lawyers wrote letters of demand

to those having responsibility to pay the damage.
Then he left again for Australia.

Upon his return on 22 October 1990, he registered at

the Echelon Towers at Malate, Manila. Meetings were
held between McLoughlin and his lawyer which
resulted to the filing of a complaint for damages on 3
December 1990 against YHT Realty Corporation,

Lopez, Lainez, Payam and Tan (defendants) for the

1. Ordering defendants, jointly and severally,

loss of McLoughlin's money which was discovered on

to pay plaintiff the sum of US$11,400.00 or its

16 April 1988. After filing the complaint, McLoughlin

equivalent

left again for Australia to attend to an urgent business

of P342,000.00, more or less, and the sum of

matter. Tan and Lopez, however, were not served with

AUS$4,500.00 or its equivalent in Philippine

summons, and trial proceeded with only Lainez,

Currency

Payam and YHT Realty Corporation as defendants.

of P441,000.00,

in

Philippine

of P99,000.00,
more

or

Currency

or
less,

total

with

12%

interest from April 16 1988 until said amount

After

defendants

had

filed

their

Pre-Trial

Brief

has been paid to plaintiff (Item 1, Exhibit CC);

admitting that they had previously allowed and

assisted

Tan

McLoughlin

to

open

filed

Complaint20 dated

box,

2. Ordering defendants, jointly and severally

an Amended/Supplemental

to pay plaintiff the sum of P3,674,238.00 as

1991

deposit

actual and consequential damages arising

another incident of loss of money and jewelry in the

from the loss of his Australian and American

safety deposit box rented by McLoughlin in the same

dollars and jewelries complained against and

hotel which took place prior to 16 April 1988. 21 The

in

trial

administratively and judicially (Items II, III, IV,

admitted

June

safety

included

court

10

the

which

the Amended/Supplemental

prosecuting

his

claim

and

rights

Complaint.

V, VI, VII, VIII, and IX, Exh. "CC");

During the trial of the case, McLoughlin had been in

3. Ordering defendants, jointly and severally,

and out of the country to attend to urgent business in

to pay plaintiff the sum of P500,000.00 as

Australia, and while staying in the Philippines to

moral damages (Item X, Exh. "CC");

attend the hearing, he incurred expenses for hotel

bills, airfare and other transportation expenses, long
distance calls to Australia, Meralco power expenses,
and expenses for food and maintenance, among
others.22

After trial, the RTC of Manila rendered judgment in

favor of McLoughlin, the dispositive portion of which
reads:

WHEREFORE, above premises considered, judgment

is hereby rendered by this Court in favor of plaintiff
and against the defendants, to wit:

4. Ordering defendants, jointly and severally,

to pay plaintiff the sum of P350,000.00 as
exemplary damages (Item XI, Exh. "CC");

5.

And

ordering

defendants,

jointly

and

severally, to pay litigation expenses in the

sum of P200,000.00 (Item XII, Exh. "CC");

6. Ordering defendants, jointly and severally,

to pay plaintiff the sum of P200,000.00 as
attorney's fees, and a fee of P3,000.00 for
every appearance; and

7. Plus costs of suit.

personal assets consisting of Seven Thousand US

Dollars (US$7,000.00) and jewelry were taken by Tan

SO ORDERED.

23

from the safety deposit box without McLoughlin's

The trial court found that McLoughlin's allegations as

to the fact of loss and as to the amount of money he
lost were sufficiently shown by his direct and
straightforward manner of testifying in court and
found him to be credible and worthy of belief as it
was established that McLoughlin's money, kept in
Tropicana's safety deposit box, was taken by Tan
without

McLoughlin's

consent.

The

taking

consent through the cooperation of Payam and

Lainez.25

The trial court also found that defendants acted with

gross negligence in the performance and exercise of
their duties and obligations as innkeepers and were
therefore liable to answer for the losses incurred by
McLoughlin.26

was

effected through the use of the master key which was

Moreover, the trial court ruled that paragraphs (2)

in the possession of the management. Payam and

and (4) of the "Undertaking For The Use Of Safety

Lainez allowed Tan to use the master key without

Deposit Box" are not valid for being contrary to the

authority from McLoughlin. The trial court added that

express mandate of Article 2003 of the New Civil

if McLoughlin had not lost his dollars, he would not

Code and against public policy.27 Thus, there being

have

personal

fraud or wanton conduct on the part of defendants,

inconvenience of seeking aid and assistance from the

they should be responsible for all damages which

Office of the President, DOJ, police authorities and the

may be attributed to the non-performance of their

City Fiscal's Office in his desire to recover his losses

contractual obligations.28

gone

through

the

trouble

and

from the hotel management and Tan.24

The Court of Appeals affirmed the disquisitions made
As regards the loss of Seven Thousand US Dollars

by the lower court except as to the amount of

(US$7,000.00) and jewelry worth approximately One

damages awarded. The decretal text of the appellate

Thousand Two Hundred US Dollars (US$1,200.00)

court's decision reads:

which allegedly occurred during his stay at Tropicana

previous to 4 April 1988, no claim was made by
McLoughlin for such losses in his complaint dated 21
November 1990 because he was not sure how they
were lost and who the responsible persons were. But

THE FOREGOING CONSIDERED, the appealed Decision

is hereby AFFIRMED but modified as follows:

The appellants are directed jointly and severally to

pay the plaintiff/appellee the following amounts:

considering the admission of the defendants in their

pre-trial brief that on three previous occasions they

1) P153,200.00

allowed Tan to open the box, the trial court opined

equivalent

that it was logical and reasonable to presume that his

AUS$4,500.00;

representing
of

the

US$2,000.00

peso
and

2) P308,880.80, representing the peso value

conclusion

on

the

alleged

prior

existence

and

for the air fares from Sidney [sic] to Manila

subsequent loss of the subject money and jewelry is

and back for a total of eleven (11) trips;

supported by the evidence on record; (b) whether the

finding of gross negligence on the part of petitioners

3) One-half of P336,207.05 or P168,103.52

representing payment to Tropicana Apartment
Hotel;

in the performance of their duties as innkeepers is

supported by the evidence on record; (c) whether the
"Undertaking For The Use of Safety Deposit Box"

4) One-half of P152,683.57 or P76,341.785

admittedly executed by private respondent is null and

void; and (d) whether the damages awarded to

representing payment to Echelon Tower;

private respondent, as well as the amounts thereof,

5) One-half of P179,863.20 or P89,931.60 for

are proper under the circumstances.30

the taxi xxx transportation from the residence

to Sidney [sic] Airport and from MIA to the
hotel here in Manila, for the eleven (11) trips;

6)

One-half

of P7,801.94

or P3,900.97

The petition is devoid of merit.

It is worthy of note that the thrust of Rule 45 is the

resolution only of questions of law and any peripheral
factual question addressed to this Court is beyond the

representing Meralco power expenses;

bounds of this mode of review.

7) One-half of P356,400.00 or P178,000.00
representing

expenses

for

food

and

maintenance;

Petitioners point out that the evidence on record is

insufficient to prove the fact of prior existence of the
dollars and the jewelry which had been lost while

8) P50,000.00 for moral damages;

deposited in the safety deposit boxes of Tropicana,

the basis of the trial court and the appellate court

9) P10,000.00 as exemplary damages; and

10) P200,000 representing attorney's fees.

being the sole testimony of McLoughlin as to the

contents thereof. Likewise, petitioners dispute the
finding of gross negligence on their part as not

With costs.

supported by the evidence on record.

SO ORDERED.29

We are not persuaded.l^vvphi1.net We adhere to the

findings of the trial court as affirmed by the appellate

Unperturbed, YHT Realty Corporation, Lainez and

Payam went to this Court in this appeal by certiorari.

Petitioners submit for resolution by this Court the

following issues: (a) whether the appellate court's

court that the fact of loss was established by the

credible testimony in open court by McLoughlin. Such
findings are factual and therefore beyond the ambit of
the present petition.1awphi1.nt

The trial court had the occasion to observe the

consummation of the taking, unless the reason for the

demeanor

loss is force majeure.

of

McLoughlin

while

testifying

which

reflected the veracity of the facts testified to by him.

On

this

score,

we

give

full

credence

to

the

appreciation of testimonial evidence by the trial court

especially if what is at issue is the credibility of the
witness. The oft-repeated principle is that where the
credibility of a witness is an issue, the established
rule

is

that

great

respect

is

accorded

to

the

evaluation of the credibility of witnesses by the trial

court.31 The trial court is in the best position to assess
the credibility of witnesses and their testimonies
because of its unique opportunity to observe the
witnesses firsthand and note their demeanor, conduct

Noteworthy is the fact that Payam and Lainez, who

were employees of Tropicana, had custody of the
master key of the management when the loss took
place. In fact, they even admitted that they assisted
Tan

three

separate

occasions

in

opening

McLoughlin's safety deposit box. 33 This only proves

that Tropicana had prior knowledge that a person
aside from the registered guest had access to the
safety deposit box. Yet the management failed to
notify McLoughlin of the incident and waited for him
to discover the taking before it disclosed the matter
to

and attitude under grilling examination.32

on

him.

Therefore,

Tropicana

should

be

held

responsible for the damage suffered by McLoughlin by

We are also not impressed by petitioners' argument

reason of the negligence of its employees.

that the finding of gross negligence by the lower

court as affirmed by the appellate court is not
supported by evidence. The evidence reveals that two
keys are required to open the safety deposit boxes of
Tropicana. One key is assigned to the guest while the
other remains in the possession of the management.
If the guest desires to open his safety deposit box, he
must request the management for the other key to
open the same. In other words, the guest alone
cannot open the safety deposit box without the
assistance of the management or its employees. With
more reason that access to the safety deposit box
should be denied if the one requesting for the
opening of the safety deposit box is a stranger. Thus,
in case of loss of any item deposited in the safety
deposit box, it is inevitable to conclude that the
management

had

at

least

hand

in

the

The management should have guarded against the

occurrence of this incident considering that Payam
admitted in open court that she assisted Tan three
times in opening the safety deposit box of McLoughlin
at around 6:30 A.M. to 7:30 A.M. while the latter was
still asleep.34 In light of the circumstances surrounding
this

case,

it

is

undeniable

that

without

the

acquiescence of the employees of Tropicana to the

opening of the safety deposit box, the loss of
McLoughlin's money could and should have been
avoided.

The

management

contends,

however,

that

McLoughlin, by his act, made its employees believe

that Tan was his spouse for she was always with him
most of the time. The evidence on record, however, is
bereft of any showing that McLoughlin introduced Tan

to the management as his wife. Such an inference

that the employer was negligent in selecting and/or

from the act of McLoughlin will not exculpate the

supervising him for it is hard for the victim to prove

petitioners from liability in the absence of any

the negligence of such employer. 35 Thus, given the

showing that he made the management believe that

fact that the loss

Tan was his wife or was duly authorized to have

consummated through the negligence of Tropicana's

access

close

employees in allowing Tan to open the safety deposit

companionship and intimacy are not enough to

box without the guest's consent, both the assisting

warrant such conclusion considering that what is

employees and YHT Realty Corporation itself, as

involved in the instant case is the very safety of

owner and operator of Tropicana, should be held

McLoughlin's deposit. If only petitioners exercised due

solidarily liable pursuant to Article 2193.36

to

the

safety

deposit

box.

Mere

of

McLoughlin's money was

diligence in taking care of McLoughlin's safety deposit

box, they should have confronted him as to his
relationship with Tan considering that the latter had
been observed opening McLoughlin's safety deposit
box a number of times at the early hours of the
morning. Tan's acts

should have prompted the

management to investigate her relationship with

McLoughlin. Then, petitioners would have exercised
due diligence required of them. Failure to do so
warrants the conclusion that the management had
been

remiss

in

complying

with

the

obligations

imposed upon hotel-keepers under the law.

Under Article 1170 of the New Civil Code, those who,

in the performance of their obligations, are guilty of
negligence, are liable for damages. As to who shall
bear the burden of paying damages, Article 2180,
paragraph (4) of the same Code provides that
the owners and managers of an establishment or
enterprise are likewise responsible for damages
caused by their employees in the service of the
branches in which the latter are employed or on the
occasion of their functions. Also, this Court has ruled
that if an employee is found negligent, it is presumed

The issue of whether the "Undertaking For The Use of

Safety Deposit Box" executed by McLoughlin is
tainted

with

nullity

presents

legal

question

appropriate for resolution in this petition. Notably,

both the trial court and the appellate court found the
same to be null and void. We find no reason to
reverse their common conclusion. Article 2003 is
controlling, thus:

Art. 2003. The hotel-keeper cannot free himself from

responsibility by posting notices to the effect that he
is not liable for the articles brought by the guest. Any
stipulation between the hotel-keeper and the guest
whereby the responsibility of the former as set forth
in Articles 1998 to 200137 is suppressed or diminished
shall be void.

Article 2003 was incorporated in the New Civil Code

as an expression of public policy precisely to apply to
situations such as that presented in this case. The
hotel business like the common carrier's business is
imbued with public interest. Catering to the public,
hotelkeepers are bound to provide not only lodging
for hotel guests and security to their persons and

belongings. The twin duty constitutes the essence of

except as it may proceed from any force majeure.41 It

the business. The law in turn does not allow such duty

is the loss through force majeure that may spare the

to the public to be negated or diluted by any contrary

hotel-keeper from liability. In the case at bar, there is

stipulation in so-called "undertakings" that ordinarily

no showing that the act of the thief or robber was

appear in prepared forms imposed by hotel keepers

done with the use of arms or through an irresistible

on guests for their signature.

force to qualify the same as force majeure.42

In an early case,38 the Court of Appeals through its

Petitioners likewise anchor their defense on Article

then Presiding Justice (later Associate Justice of the

200243 which exempts the hotel-keeper from liability if

Court)

hold

the loss is due to the acts of his guest, his family, or

hotelkeepers or innkeeper liable for the effects of

visitors. Even a cursory reading of the provision would

their guests, it is not necessary that they be actually

lead

delivered to the innkeepers or their employees. It is

justification they raise would render nugatory the

enough that such effects are within the hotel or

public

inn.39 With greater reason should the liability of the

provision. What if the negligence of the employer or

hotelkeeper be enforced when the missing items are

its employees facilitated the consummation of a

taken without the guest's knowledge and consent

crime committed by the registered guest's relatives

from a safety deposit box provided by the hotel itself,

or visitor? Should the law exculpate the hotel from

as in this case.

liability since the loss was due to the act of the visitor

Jose

P.

Bengzon,

ruled

that

to

us

to

reject

interest

petitioners'

sought

to

be

contention.

protected

by

The

the

of the registered guest of the hotel? Hence, this

Paragraphs

(2)

and

(4)

of

the

"undertaking"

manifestly contravene Article 2003 of the New Civil

Code for they allow Tropicana to be released from
liability arising from any loss in the contents and/or
use

of

the

whatsoever.

40

safety
Evidently,

deposit
the

box

for any cause

undertaking

was

provision presupposes that the hotel-keeper is not

guilty of concurrent negligence or has not contributed
in any degree to the occurrence of the loss. A
depositary is not responsible for the loss of goods by
theft, unless his actionable negligence contributes to
the loss.44

intended to bar any claim against Tropicana for any

loss of the contents of the safety deposit box whether

In the case at bar, the responsibility of securing the

or not negligence was incurred by Tropicana or its

safety deposit box was shared not only by the guest

employees. The New Civil Code is explicit that the

himself but also by the management since two keys

responsibility of the hotel-keeper shall extend to loss

are necessary to open the safety deposit box. Without

of, or injury to, the personal property of the guests

the assistance of hotel employees, the loss would not

even if caused by servants or employees of the

have

keepers of hotels or inns as well as by strangers,

concurrent negligence in allowing Tan, who was not

occurred.

Thus,

Tropicana

was

guilty

of

the registered guest, to open the safety deposit box

Dollars

of McLoughlin, even assuming that the latter was also

Hundred Australian dollars (AUS$4,500.00) or their

guilty of negligence in allowing another person to use

peso equivalent at the time of payment, 47 being the

his key. To rule otherwise would result in undermining

amounts duly proven by evidence.48The alleged loss

the safety of the safety deposit boxes in hotels for the

that took place prior to 16 April 1988 was not

management will be given imprimatur to allow any

considered since the amounts alleged to have been

person, under the pretense of being a family member

taken were not sufficiently established by evidence.

or a visitor of the guest, to have access to the safety

The appellate court also correctly awarded the sum

deposit box without fear of any liability that will

ofP308,880.80, representing the peso value for the air

attach thereafter in case such person turns out to be

fares from Sydney to Manila and back for a total of

a complete stranger. This will allow the hotel to evade

eleven

responsibility

or P168,103.52

for

any

liability

incurred

by

its

(US$2,000.00)

(11)

and

Four

trips;49 one-half

Thousand

Five

of P336,207.05

representing

payment

employees in conspiracy with the guest's relatives

Tropicana;50 one-half

and visitors.

representing payment to Echelon Tower; 51 one-half

of P179,863.20

Petitioners

contend

that

McLoughlin's

case

was

mounted on the theory of contract, but the trial court

and the appellate court upheld the grant of the claims
of the latter on the basis of tort.

45

There is nothing

anomalous in how the lower courts decided the

controversy

for

this

Court

has

pronounced

jurisprudential rule that tort liability can exist even if

ofP152,683.57

to

or P89,931.60

or P76,341.785

for

the

taxi

or

transportation expenses from McLoughlin's residence

to Sydney Airport and from MIA to the hotel here in
Manila,

for

of P7,801.94
power

the

eleven

or P3,900.97

(11)

trips; 52 one-half

representing

expenses;53 one-half

Meralco

of P356,400.00

or P178,000.00 representing expenses for food and

maintenance.54

there are already contractual relations. The act that

breaks the contract may also be tort.46

The amount of P50,000.00 for moral damages is

reasonable. Although trial courts are given discretion

As to damages awarded to McLoughlin, we see no

reason to modify the amounts awarded by the
appellate court for the same were based on facts and
law. It is within the province of lower courts to settle
factual issues such as the proper amount of damages
awarded and such finding is binding upon this Court
especially if sufficiently proven by evidence and not
unconscionable or excessive. Thus, the appellate
court correctly awarded McLoughlin Two Thousand US

to determine the amount of moral damages, the

appellate court may modify or change the amount
awarded

when

it

is

palpably

excessive.l^vvphi1.net Moral

and

scandalously

damages

are

not

intended to enrich a complainant at the expense of a

defendant.l^vvphi1.net They are awarded only to
enable the injured party to obtain means, diversion or
amusements that will serve to alleviate the moral

suffering he has undergone, by reason of defendants'

(4) One-half of P152,683.57 or P76,341.785

culpable action.55

representing payment to Echelon Tower;

The awards of P10,000.00 as exemplary damages

(5) One-half of P179,863.20 or P89,931.60 for

and P200,000.00 representing attorney's fees are

the

likewise sustained.

McLoughlin's residence to Sydney Airport and

taxi

or transportation

expense

from

from MIA to the hotel here in Manila, for the

WHEREFORE,

foregoing

premises

considered,

eleven (11) trips;

the Decision of the Court of Appeals dated 19 October

1995 is hereby AFFIRMED. Petitioners are directed,

(6)

One-half

of P7,801.94

or P3,900.97

jointly and severally, to pay private respondent the

representing Meralco power expenses;

following amounts:
(7) One-half of P356,400.00 or P178,200.00
(1) US$2,000.00 and AUS$4,500.00 or their

representing

expenses

for

food

peso equivalent at the time of payment;

maintenance;

(2) P308,880.80, representing the peso value

(8) P50,000.00 for moral damages;

and

for the air fares from Sydney to Manila and

(9) P10,000.00 as exemplary damages; and

back for a total of eleven (11) trips;

(3) One-half of P336,207.05 or P168,103.52

representing

payment

Copacabana Apartment Hotel;

to

Tropicana

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