Republic of the Philippines

SUPREME COURT
Manila
SECOND DIVISION
G.R. No. L-62050 November 25, 1983
JOSE "PEPITO" TIMONER, petitioner,
vs.
THE PEOPLE OF THE PHILIPPINES AND THE HONORABLE COURT OF
APPEALS, IV DIVISION, respondents.
Marciano C. Dating, Jr. and Jose & Fuentebella for petitioner.
The Solicitor General for respondents.

ESCOLIN, J.:+.wph!1
Petition for review of the affirmance in toto by the Court of Appeals, now the
Intermediate Appellate Court, of the judgment of conviction handed down by
the then Municipal Court of Daet, Camarines Norte, in Criminal Case No.
4281, entitled People of the Philippines vs. Jose Timoner, finding petitioner
guilty of the crime of grave coercion, as follows: t.hqw
WHEREFORE this Court finds the accused JOSE 'PEPITO'
TIMONER guilty beyond reasonable doubt of the crime of
Grave Coercion as penalized under Art. 286 in the Revised
Penal Code, and hereby sentences the said accused
pursuant to the provision of Rule 64, Par. 3, to suffer SIX
MONTHS OF IMPRISONMENT OF ARRESTO MAYOR IN
ITS MAXIMUM PERIOD, to pay a fine of P300.00 and to pay
the offended party in the amount of P5,000.00 as damages,
without subsidiary liability in case of insolvency. The other
accused SAMUEL MORENA and ERNESTO QUIBRAL are
hereby ordered ACQUITTED.
The salient facts are not disputed. At about 10:00 in the evening of December
13, 1971, petitioner, then Mayor of Daet, Camarines Norte, accompanied by
two uniformed policemen, Samuel Morena and Ernesto Quibral, and six

laborers, arrived in front of the stalls along Maharlika highway, the main
thoroughfare of the same town. Upon orders of petitioner, these laborers
proceeded to nail together rough lumber slabs to fence off the stalls which
protruded into the sidewalk of the Maharlika highway. Among the structures
thus barricaded were the barbershop of Pascual Dayaon, the complaining
witness and the store belonging to one Lourdes Pia-Rebustillos. These
establishments had been recommended for closure by the Municipal Health
Officer, Dra. Alegre, for non-compliance with certain health and sanitation
requirements.
Thereafter, petitioner filed a complaint in the Court of First Instance of
Camarines Norte against Lourdes Pia-Rebustillos and others for judicial
abatement of their stalls. The complaint, docketed as Civil Case No. 2257,
alleged that these stalls constituted public nuisances as well as
nuisances per se. Dayaon was never able to reopen his barbershop
business.
Subsequently, petitioner and the two policemen, Morena and Quibral, were
charged with the offense of grave coercion before the Municipal Court of
Daet. As already noted, the said court exonerated the two policemen, but
convicted petitioner of the crime charged as principal by inducement.
On appeal, the Court of Appeals affirmed in full the judgment of the trial court.
Hence, the present recourse.
Petitioner contends that the sealing off of complainant Dayaon's barbershop
was done in abatement of a public nuisance and, therefore, under lawful
authority.
We find merit in this contention. Unquestionably, the barbershop in question
did constitute a public nuisance as defined under Article Nos. 694 and 695 of
the Civil Code, to wit: t.hqw
ART. 694. A nuisance is any act, omission, establishment,
business, condition of property, or anything else which:
(1) Injures or endangers the health or safety of others; or
(2) Annoys or offends the senses; or
(3) Shocks, defies or disregards decency or morality; or

(4) Obstructs or interferes with the free passage of any

public highway or street, or any body of water; or
(5) Hinders or impairs the use of property.
ART. 695. Nuisance is either public or private. A public
nuisance affects a community or neighborhood or any
considerable number of persons, although the extent of the
annoyance, danger or damage upon individuals may be
unequal A private nuisance is one that is not included in the
foregoing definition.

... IN VIEW OF THE FOREGOING, the Court hereby

declares that the structures subject of this complaint as well
as those occupied by the impleaded defendants are
nuisances per se and therefore orders the defendants to
demolish the stall and vacate the premises immediately ...
But even without this judicial pronouncement, petitioner could not have been
faulted for having fenced off said barbershop. Paragraph 3, Article 699 of the
Civil Code authorizes the abatement of a public nuisance without judicial
proceedings. t.hqw
ART. 699. The remedies against a public nuisance are:

The barbershop occupied a portion of the sidewalk of the poblacion's main

thoroughfare and had been recommended for closure by the Municipal
Health Officer. In fact, the Court of First Instance of Camarines Norte, in its
decision in Civil Case No. 2257, declared said barbershop as a
nuisance per-se. Thus: t.hqw
Under the facts of the case, as well as the law in point, there
is no semblance of any legality or right that exists in favor of
the defendants to build a stall and conduct their business in
a sidewalk, especially in a highway where it does not only
constitute a menace to the health of the general public
passing through the street and also of the unsanitary
condition that is bred therein as well as the unsightly and
ugly structures in the said place. Moreover, even if it is
claimed and pretended that there was a license, permit or
toleration of the defendants' makeshift store and living
quarters for a number of years does not lend legality to an
act which is a nuisance per se. Such nuisance affects the
community or neighborhood or any considerable number of
persons and the general public which posed a danger to the
people in general passing and using that place, for in
addition, this is an annoyance to the public by the invasion of
its rights the fact that it is in a public place and annoying
to all who come within its sphere [Baltazar vs. Carolina
Midland, Ry, Co., 54 S.C. 242, 32 SB 258, cited in 11
Tolentino's Civil Code of the Philippines, p. 375; Kapisanan
Lingkod ng Bayan, Inc. vs. Lacson, CA-G.R. No. 27260R,
March 25, 1964; 61 O.G. 2487].
xxx xxx xxx

[l] A prosecution under the Penal Code or any local

ordinance; or
[2] A civil action; or
[3] Abatement, without judicial proceedings.
In the case at bar, petitioner, as mayor of the town, merely implemented the
aforesaid recommendation of the Municipal Health Officer. Having then acted
in good faith in the performance of his duty, petitioner incurred no criminal
liability.
Grave coercion is committed when "a person who, without authority of law,
shall by means of violence, prevent another from doing something not
prohibited by law or compel to do something against his will, either it be right
or wrong." 1 The three elements of grave coercion are: [1] that any person be
prevented by another from doing something not prohibited by law, or
compelled to do something against his will, be it right or wrong; [2] that the
prevention or compulsion be effected by violence, either by material force or
such display of it as would produce intimidation and control the will of the
offended party, and [3] that the person who restrained the will and liberty of
another had no right to do so, or, in other words, that the restraint was not
made under authority of law or in the exercise of a lawful right. 2
The third element being absent in the case at bar, petitioner cannot be held
guilty of grave coercion.

WHEREFORE, the decision of the Court of Appeals in CA G.R. No. 19534CR, is hereby set aside and petitioner is acquitted of the crime charged.
Costs de oficio.

copy of a deposit slip indicating the list of checks deposited by Frias. But it
did not include the missing check. The deposit slip bore the stamp mark
"teller no. 7" instead of "teller no. 8" who previously received the checks.

SO ORDERED.1wph1.t
Makasiar (Chairman), Aquino, Concepcion, Jr., Guerrero, Abad Santos and
De Castro, JJ., concur. Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 167346

Immediately, respondents notified petitioner of the problem. Petitioner

showed respondent Peter Tan a duplicate

April 2, 2007

SOLIDBANK CORPORATION/ METROPOLITAN BANK AND TRUST

COMPANY,* Petitioner,
vs.
SPOUSES PETER and SUSAN TAN, Respondents.
DECISION

Still later, respondent Peter Tan learned from Metrobank (where he

maintained an account) that Metrobank check no. 403954 had cleared after it
was inexplicably deposited by a certain Dolores Lagsac in Premier Bank in
San Pedro, Laguna. Respondents demanded that petitioner pay the amount
of the check but it refused, hence, they filed a case for collection of a sum of
money in the RTC of Manila, Branch 31.
In its answer, petitioner averred that the deposit slips Frias used when she
deposited the checks were spurious. Petitioner accused respondents of
engaging in a scheme to illegally exact money from it. It added that, contrary
to the claim of respondents, it was "teller no. 7" who received the deposit
slips and, although respondents insisted that Frias deposited ten checks,
only nine checks were actually received by said teller. By way of
counterclaim, it sought payment of P1,000,000 as actual and moral damages
and P500,000 as exemplary damages.

CORONA, J.:

After trial, the RTC found petitioner liable to respondents:

Assailed in this petition for review by certiorari under Rule 45 of the Rules of
Court are the decision1 and resolution2 of the Court of Appeals (CA) dated
November 26, 2004 and March 1, 2005, respectively, in CA-G.R. CV No.
58618,3 affirming the decision of the Regional Trial Court (RTC) of Manila,
Branch 31.4

Upon examination of the oral, as well as of the documentary evidence which

the parties presented at the trial in support of their respective contentions,
and after taking into consideration all the circumstances of the case, this
Court believes that the loss of Metrobank Check No. 403954 in the sum
of P250,000.00 was due to the fault of [petitioner][It] retained the original
copy of the [deposit slip marked by "Teller No. 7"]. There is a presumption in
law that evidence willfully suppressed would be adverse if produced.

On December 2, 1991, respondents representative, Remigia Frias,

deposited with petitioner ten checks worthP455,962. Grace Neri, petitioners
teller no. 8 in its Juan Luna, Manila Branch, received two deposit slips for the
checks, an original and a duplicate. Neri verified the checks and their
amounts in the deposit slips then returned the duplicate copy to Frias and
kept the original copy for petitioner.
In accordance with the usual practice between petitioner and respondents,
the latters passbook was left with petitioner for the recording of the deposits
on the banks ledger. Later, respondents retrieved the passbook and
discovered that one of the checks, Metropolitan Bank and Trust Company
(Metrobank) check no. 403954, payable to cash in the sum of P250,000 was
not posted therein.

Art. 1173 of the Civil Code states that "the fault or negligence of the obligor
consists in the omission of that diligence which is required by the nature of
the obligation and corresponds with the circumstances of the person of the
time and of the place"; and that "if the law or contract does not state the
diligence which is to be observed in the performance, the same as expected
of a good father of a family shall be required."
For failure to comply with its obligation, [petitioner] is presumed to have
been at fault or to have acted negligently unless they prove that they observe
extraordinary diligence as prescribed in Arts. 1733 and 1735 of the Civil Code
(Art. 1756)

xxx xxx xxx

WHEREFORE, premises considered, judgment is hereby rendered in favor of
[respondents], ordering [petitioner] to pay the sum of P250,000, with legal
interest from the time the complaint [for collection of a sum of money] was
filed until satisfied; P25,000.00 moral damages; P25,000.00 exemplary
damages plus 20% of the amount due [respondents] as and for attorneys
fees. With costs.
SO ORDERED.5
Petitioner appealed to the CA which affirmed in toto the RTCs assailed
decision:
Serious doubt [was] engendered by the fact that [petitioner] did not present
the original of the deposit slip marked with "Teller No. 7" and on which the
entry as to Metrobank Check No. 403954 did not appear. Even the most
cursory look at the handwriting thereon reveal[ed] a very marked difference
with that in the other deposit slips filled up [by Frias] on December 2, 1991.
Said circumstances spawn[ed] the belief thus, the said deposit slip was
prepared by [petitioner] itself to cover up for the lost check. 6
Petitioner filed a motion for reconsideration but the CA dismissed it. Hence,
this appeal.1a\^/phi1.net
Before us, petitioner faults the CA for upholding the RTC decision. Petitioner
argues that: (1) the findings of the RTC and the CA were not supported by
the evidence and records of the case; (2) the award of damages in favor of
respondents was unwarranted and (3) the application by the RTC, as
affirmed by the CA, of the provisions of the Civil Code on common carriers to
the instant case was erroneous.7
The petition must fail.
On the first issue, petitioner contends that the lower courts erred in finding it
negligent for the loss of the subject check. According to petitioner, the fact
that the check was deposited in Premier Bank affirmed its claim that it did not
receive the check.
At the outset, the Court stresses that it accords respect to the factual findings
of the trial court and, unless it overlooked substantial matters that would alter
the outcome of the case, this Court will not disturb such findings. 8We
meticulously reviewed the records of the case and found no reason to
deviate from the rule. Moreover, since the CA affirmed these findings on
appeal, they are final and conclusive on us.9 We therefore sustain the RTCs

and CAs findings that petitioner was indeed negligent and responsible for
respondents lost check.
On the issue of damages, petitioner argues that the moral and exemplary
damages awarded by the lower courts had no legal basis. For the award of
moral damages to stand, petitioner avers that respondents should have
proven the existence of bad faith by clear and convincing evidence.
According to petitioner, simple negligence cannot be a basis for its award. It
insists that the award of exemplary damages is justified only when the act
complained of was done in a wanton, fraudulent and oppressive manner.10
We disagree.
While petitioner may argue that simple negligence does not warrant the
award of moral damages, it nonetheless cannot insist that that was all it was
guilty of. It refused to produce the original copy of the deposit slip which
could have proven its claim that it did not receive respondents missing
check. Thus, in suppressing the best evidence that could have bolstered its
claim and confirmed its innocence, the presumption now arises that it
withheld the same for fraudulent purposes.11
Moreover, in presenting a false deposit slip in its attempt to feign innocence,
petitioners bad faith was apparent and unmistakable. Bad faith imports a
dishonest purpose or some moral obliquity or conscious doing of a wrong
that partakes of the nature of fraud.12
As to the award of exemplary damages, the law allows it by way of example
for the public good. The business of banking is impressed with public interest
and great reliance is made on the banks sworn profession of diligence and
meticulousness in giving irreproachable service.13 For petitioners failure to
carry out its responsibility and to account for respondents lost check, we hold
that the lower courts did not err in awarding exemplary damages to the latter.
On the last issue, we hold that the trial court did not commit any
error.1awphi1.nt A cursory reading of its decision reveals that it anchored its
conclusion that petitioner was negligent on Article 1173 of the Civil Code. 14
In citing the different provisions of the Civil Code on common carriers, 15 the
trial court merely made reference to the kind of diligence that petitioner
should have performed under the circumstances. In other words, like a
common carrier whose business is also imbued with public interest, petitioner
should have exercised extraordinary diligence to negate its liability to
respondents.

Assuming arguendo that the trial court indeed used the provisions on
common carriers to pin down liability on petitioner, still we see no reason to
strike down the RTC and CA rulings on this ground alone.

Pursuant to Section 13, Article VIII of the Constitution, I certify that the
conclusions in the above decision had been reached in consultation before
the case was assigned to the writer of the opinion of the Courts Division.

In one case,16 the Court did not hesitate to apply the doctrine of last clear
chance (commonly used in transportation laws involving common carriers) to
a banking transaction where it adjudged the bank responsible for the
encashment of a forged check. There, we enunciated that the degree of
diligence required of banks is more than that of a good father of a family in
keeping with their responsibility to exercise the necessary care and prudence
in handling their clients money.

REYNATO S. PUNO
Chief Justice

We find no compelling reason to disallow the application of the provisions on

common carriers to this case if only to emphasize the fact that banking
institutions (like petitioner) have the duty to exercise the highest degree of
diligence when transacting with the public. By the nature of their business,
they are required to observe the highest standards of integrity and
performance, and utmost assiduousness as well.17
WHEREFORE, the assailed decision and resolution of the Court of Appeals
dated November 26, 2004 and March 1, 2005, respectively, in CA-G.R. CV
No. 58618 are hereby AFFIRMED. Accordingly, the petition is DENIED.
Costs against petitioner.
SO ORDERED.
RENATO C. CORONA
Associate Justice
WE CONCUR:
REYNATO S. PUNO
Chief Justice
Chairperson
ANGELINA SANDOVALGUTIERREZ
Associate Justice

ADOLFO S. AZCUNA
Asscociate Justice

CANCIO C. GARCIA
Associate Justice
CERTIFICATION

For review is the Decision1 dated March 16, 2004 as modified by the
Resolution2 dated July 22, 2004 of the Court of Appeals (CA) in CA-G.R. CV
No. 69113, which affirmed with modifications the Decision 3 dated May 31,
2000 of the Regional Trial Court (RTC) of Quezon City, Branch 85 in Civil
Case No. 98-35332.
The factual antecedents:
Sometime in 1996, Mortimer F. Cordero, Vice-President of Pamana
Marketing Corporation (Pamana), ventured into the business of marketing
inter-island passenger vessels. After contacting various overseas fast ferry
manufacturers from all over the world, he came to meet Tony Robinson, an
Australian national based in Brisbane, Australia, who is the Managing
Director of Aluminium Fast Ferries Australia (AFFA).

Republic of the Philippines

SUPREME COURT
Manila
FIRST DIVISION
G.R. No. 164703

May 4, 2010

ALLAN C. GO, doing business under the name and style "ACG Express
Liner," Petitioner,
vs.
MORTIMER F. CORDERO, Respondent.
x - - - - - - - - - - - - - - - - - - - - - - -x
G.R. No. 164747
MORTIMER F. CORDERO, Petitioner,
vs.
ALLAN C. GO, doing business under the name and style "ACG Express
Liner," FELIPE M. LANDICHO and VINCENT D. TECSON, Respondents.
DECISION
VILLARAMA, JR., J.:

Between June and August 1997, Robinson signed documents appointing

Cordero as the exclusive distributor of AFFA catamaran and other fast ferry
vessels in the Philippines. As such exclusive distributor, Cordero offered for
sale to prospective buyers the 25-meter Aluminium Passenger catamaran
known as the SEACAT 25.4
After negotiations with Felipe Landicho and Vincent Tecson, lawyers of Allan
C. Go who is the owner/operator of ACG Express Liner of Cebu City, a single
proprietorship, Cordero was able to close a deal for the purchase of two (2)
SEACAT 25 as evidenced by the Memorandum of Agreement dated August
7, 1997.5 Accordingly, the parties executed Shipbuilding Contract No. 7825
for one (1) high-speed catamaran (SEACAT 25) for the price of
US$1,465,512.00.6 Per agreement between Robinson and Cordero, the latter
shall receive commissions totalling US$328,742.00, or 22.43% of the
purchase price, from the sale of each vessel.7
Cordero made two (2) trips to the AFFA Shipyard in Brisbane, Australia, and
on one (1) occasion even accompanied Go and his family and Landicho, to
monitor the progress of the building of the vessel. He shouldered all the
expenses for airfare, food, hotel accommodations, transportation and
entertainment during these trips. He also spent for long distance telephone
calls to communicate regularly with Robinson, Go, Tecson and Landicho.
However, Cordero later discovered that Go was dealing directly with
Robinson when he was informed by Dennis Padua of Wartsila Philippines
that Go was canvassing for a second catamaran engine from their company
which provided the ship engine for the first SEACAT 25. Padua told Cordero
that Go instructed him to fax the requested quotation of the second engine to
the Park Royal Hotel in Brisbane where Go was then staying. Cordero tried
to contact Go and Landicho to confirm the matter but they were nowhere to

be found, while Robinson refused to answer his calls. Cordero immediately

flew to Brisbane to clarify matters with Robinson, only to find out that Go and
Landicho were already there in Brisbane negotiating for the sale of the
second SEACAT 25. Despite repeated follow-up calls, no explanation was
given by Robinson, Go, Landicho and Tecson who even made Cordero
believe there would be no further sale between AFFA and ACG Express
Liner.
In a handwritten letter dated June 24, 1998, Cordero informed Go that such
act of dealing directly with Robinson violated his exclusive distributorship and
demanded that they respect the same, without prejudice to legal action
against him and Robinson should they fail to heed the same. 8 Corderos
lawyer, Atty. Ernesto A. Tabujara, Jr. of ACCRA law firm, also wrote ACG
Express Liner assailing the fraudulent actuations and misrepresentations
committed by Go in connivance with his lawyers (Landicho and Tecson) in
breach of Corderos exclusive distributorship appointment. 9
Having been apprised of Corderos demand letter, Thyne & Macartney, the
lawyer of AFFA and Robinson, faxed a letter to ACCRA law firm asserting that
the appointment of Cordero as AFFAs distributor was for the purpose of one
(1) transaction only, that is, the purchase of a high-speed catamaran vessel
by ACG Express Liner in August 1997. The letter further stated that Cordero
was offered the exclusive distributorship, the terms of which were contained
in a draft agreement which Cordero allegedly failed to return to AFFA within a
reasonable time, and which offer is already being revoked by AFFA. 10
As to the response of Go, Landicho and Tecson to his demand letter, Cordero
testified before the trial court that on the same day, Landicho, acting on
behalf of Go, talked to him over the telephone and offered to amicably settle
their dispute. Tecson and Landicho offered to convince Go to honor his
exclusive distributorship with AFFA and to purchase all vessels for ACG
Express Liner through him for the next three (3) years. In an effort to
amicably settle the matter, Landicho, acting in behalf of Go, set up a meeting
with Cordero on June 29, 1998 between 9:30 p.m. to 10:30 p.m. at the
Mactan Island Resort Hotel lobby. On said date, however, only Landicho and
Tecson came and no reason was given for Gos absence. Tecson and
Landicho proposed that they will convince Go to pay him US$1,500,000.00
on the condition that they will get a cut of 20%. And so it was agreed between
him, Landicho and Tecson that the latter would give him a weekly status
report and that the matter will be settled in three (3) to four (4) weeks and
neither party will file an action against each other until a final report on the
proposed settlement. No such report was made by either Tecson or Landicho
who, it turned out, had no intention to do so and were just buying time as the
catamaran vessel was due to arrive from Australia. Cordero then filed a
complaint with the Bureau of Customs (BOC) to prohibit the entry of SEACAT
25 from Australia based on misdeclaration and undervaluation.

Consequently, an Alert Order was issued by Acting BOC Commissioner

Nelson Tan for the vessel which in fact arrived on July 17, 1998. Cordero
claimed that Go and Robinson had conspired to undervalue the vessel by
around US$500,000.00.11
On August 21, 1998, Cordero instituted Civil Case No. 98-35332 seeking to
hold Robinson, Go, Tecson and Landicho liable jointly and solidarily for
conniving and conspiring together in violating his exclusive distributorship in
bad faith and wanton disregard of his rights, thus depriving him of his due
commissions (balance of unpaid commission from the sale of the first vessel
in the amount of US$31,522.01 and unpaid commission for the sale of the
second vessel in the amount of US$328,742.00) and causing him actual,
moral and exemplary damages, including P800,000.00 representing
expenses for airplane travel to Australia, telecommunications bills and
entertainment, on account of AFFAs untimely cancellation of the exclusive
distributorship agreement. Cordero also prayed for the award of moral and
exemplary damages, as well as attorneys fees and litigation expenses. 12
Robinson filed a motion to dismiss grounded on lack of jurisdiction over his
person and failure to state a cause of action, asserting that there was no act
committed in violation of the distributorship agreement. Said motion was
denied by the trial court on December 20, 1999. Robinson was likewise
declared in default for failure to file his answer within the period granted by
the trial court.13 As for Go and Tecson, their motion to dismiss based on
failure to state a cause of action was likewise denied by the trial court on
February 26, 1999.14 Subsequently, they filed their Answer denying that they
have anything to do with the termination by AFFA of Corderos authority as
exclusive distributor in the Philippines. On the contrary, they averred it was
Cordero who stopped communicating with Go in connection with the
purchase of the first vessel from AFFA and was not doing his part in making
progress status reports and airing the clients grievances to his principal,
AFFA, such that Go engaged the services of Landicho to fly to Australia and
attend to the documents needed for shipment of the vessel to the Philippines.
As to the inquiry for the Philippine price for a Wartsila ship engine for AFFAs
other on-going vessel construction, this was merely requested by Robinson
but which Cordero misinterpreted as indication that Go was buying a second
vessel. Moreover, Landicho and Tecson had no transaction whatsoever with
Cordero who had no document to show any such shipbuilding contract. As to
the supposed meeting to settle their dispute, this was due to the malicious
demand of Cordero to be given US$3,000,000 as otherwise he will expose in
the media the alleged undervaluation of the vessel with the BOC. In any
case, Cordero no longer had cause of action for his commission for the sale
of the second vessel under the memorandum of agreement dated August 7,
1997 considering the termination of his authority by AFFAs lawyers on June
26, 1998.15

Pre-trial was reset twice to afford the parties opportunity to reach a

settlement. However, on motion filed by Cordero through counsel, the trial
court reconsidered the resetting of the pre-trial to another date for the third
time as requested by Go, Tecson and Landicho, in view of the latters failure
to appear at the pre-trial conference on January 7, 2000 despite due notice.
The trial court further confirmed that said defendants misled the trial court in
moving for continuance during the pre-trial conference held on December 10,
1999, purportedly to go abroad for the holiday season when in truth a HoldDeparture Order had been issued against them.16 Accordingly, plaintiff
Cordero was allowed to present his evidence ex parte.
Corderos testimony regarding his transaction with defendants Go, Landicho
and Tecson, and the latters offer of settlement, was corroborated by his
counsel who also took the witness stand. Further, documentary evidence
including photographs taken of the June 29, 1998 meeting with Landicho,
Tecson and Atty. Tabujara at Shangri-las Mactan Island Resort, photographs
taken in Brisbane showing Cordero, Go with his family, Robinson and
Landicho, and also various documents, communications, vouchers and bank
transmittals were presented to prove that: (1) Cordero was properly
authorized and actually transacted in behalf of AFFA as exclusive distributor
in the Philippines; (2) Cordero spent considerable sums of money in
pursuance of the contract with Go and ACG Express Liner; and (3) AFFA
through Robinson paid Cordero his commissions from each scheduled
payment made by Go for the first SEACAT 25 purchased from AFFA pursuant
to Shipbuilding Contract No. 7825.17
On May 31, 2000, the trial court rendered its decision, the dispositive portion
of which reads as follows:
WHEREFORE, PREMISES CONSIDERED, judgment is hereby rendered in
favor of Plaintiff and against defendants Allan C. Go, Tony Robinson, Felipe
Landicho, and Vincent Tecson. As prayed for, defendants are hereby ordered
to pay Plaintiff jointly and solidarily, the following:
1. On the First Cause of Action, the sum total of SIXTEEN MILLION
TWO HUNDRED NINETY ONE THOUSAND THREE HUNDRED
FIFTY TWO AND FORTY THREE CENTAVOS (P16,291,352.43) as
actual damages with legal interest from 25 June 1998 until fully paid;
2. On the Second Cause of Action, the sum of ONE MILLION
PESOS (P1,000,000.00) as moral damages;
3. On the Third Cause of Action, the sum of ONE MILLION PESOS
(P1,000,000.00) as exemplary damages; and

4. On the Fourth Cause of Action, the sum of ONE MILLION PESOS

(P1,000,000.00) as attorneys fees;
Costs against the defendants.
SO ORDERED.18
Go, Robinson, Landicho and Tecson filed a motion for new trial, claiming that
they have been unduly prejudiced by the negligence of their counsel who
was allegedly unaware that the pre-trial conference on January 28, 2000 did
not push through for the reason that Cordero was then allowed to present his
evidence ex-parte, as he had assumed that the said ex-parte hearing was
being conducted only against Robinson who was earlier declared in
default.19 In its Order dated July 28, 2000, the trial court denied the motion for
new trial.20 In the same order, Corderos motion for execution pending appeal
was granted. Defendants moved to reconsider the said order insofar as it
granted the motion for execution pending appeal. 21 On August 8, 2000, they
filed a notice of appeal.22
On August 18, 2000, the trial court denied the motion for reconsideration and
on August 21, 2000, the writ of execution pending appeal was
issued.23 Meanwhile, the notice of appeal was denied for failure to pay the
appellate court docket fee within the prescribed period. 24 Defendants filed a
motion for reconsideration and to transmit the case records to the CA. 25
On September 29, 2000, the CA issued a temporary restraining order at the
instance of defendants in the certiorari case they filed with said court
docketed as CA-G.R. SP No. 60354 questioning the execution orders issued
by the trial court. Consequently, as requested by the defendants, the trial
court recalled and set aside its November 6, 2000 Order granting the exparte motion for release of garnished funds, cancelled the scheduled public
auction sale of levied real properties, and denied the ex-parte Motion for
Break-Open Order and Ex-Parte Motion for Encashment of Check filed by
Cordero.26 On November 29, 2000, the trial court reconsidered its Order
dated August 21, 2000 denying due course to the notice of appeal and
forthwith directed the transmittal of the records to the CA. 27
On January 29, 2001, the CA rendered judgment granting the petition for
certiorari in CA-G.R. SP No. 60354 and setting aside the trial courts orders
of execution pending appeal. Cordero appealed the said judgment in a
petition for review filed with this Court which was eventually denied under our
Decision dated September 17, 2002.28
On March 16, 2004, the CA in CA-G.R. CV No. 69113 affirmed the trial court
(1) in allowing Cordero to present his evidence ex-parte after the unjustified

failure of appellants (Go, Tecson and Landicho) to appear at the pre-trial

conference despite due notice; (2) in finding that it was Cordero and not
Pamana who was appointed by AFFA as the exclusive distributor in the
Philippines of its SEACAT 25 and other fast ferry vessels, which is not limited
to the sale of one (1) such catamaran to Go on August 7, 1997; and (3) in
finding that Cordero is entitled to a commission per vessel sold for AFFA
through his efforts in the amount equivalent to 22.43% of the price of each
vessel or US$328,742.00, and with payments of US$297,219.91 having been
made to Cordero, there remained a balance of US$31,522.09 still due to him.
The CA sustained the trial court in ruling that Cordero is entitled to damages
for the breach of his exclusive distributorship agreement with AFFA.
However, it held that Cordero is entitled only to commission for the sale of the
first catamaran obtained through his efforts with the remaining unpaid sum of
US$31,522.09 or P1,355,449.90 (on the basis of US$1.00=P43.00 rate) with
interest at 6% per annum from the time of the filing of the complaint until the
same is fully paid. As to the P800,000.00 representing expenses incurred by
Cordero for transportation, phone bills, entertainment, food and lodging, the
CA declared there was no basis for such award, the same being the logical
and necessary consequences of the exclusive distributorship agreement
which are normal in the field of sales and distribution, and the expenditures
having redounded to the benefit of the distributor (Cordero).
On the amounts awarded by the trial court as moral and exemplary damages,
as well as attorneys fees, the CA reduced the same
to P500,000.00, P300,000.00 and P50,000.00, respectively. Appellants were
held solidarily liable pursuant to the provisions of Article 1207 in relation to
Articles 19, 20, 21 and 22 of the New Civil Code. The CA further ruled that no
error was committed by the trial court in denying their motion for new trial,
which said court found to be pro forma and did not raise any substantial
matter as to warrant the conduct of another trial.
By Resolution dated July 22, 2004, the CA denied the motions for
reconsideration respectively filed by the appellants and appellee, and
affirmed the Decision dated March 16, 2004 with the sole modification that
the legal interest of 6% per annum shall start to run from June 24, 1998 until
the finality of the decision, and the rate of 12% interest per annum shall apply
once the decision becomes final and executory until the judgment has been
satisfied.
The case before us is a consolidation of the petitions for review under Rule
45 separately filed by Go (G.R. No. 164703) and Cordero (G.R. No. 164747)
in which petitioners raised the following arguments:
G.R. No. 164703

(Petitioner Go)
I. THE HONORABLE COURT OF APPEALS DISREGARDED THE RULES
OF COURT AND PERTINENT JURISPRUDENCE AND ACTED WITH
GRAVE ABUSE OF DISCRETION IN NOT RULING THAT THE
RESPONDENT IS NOT THE REAL PARTY-IN-INTEREST AND IN NOT
DISMISSING THE INSTANT CASE ON THE GROUND OF LACK OF
CAUSE OF ACTION;
II. THE HONORABLE COURT OF APPEALS IGNORED THE LAW AND
JURISPRUDENCE AND ACTED WITH GRAVE ABUSE OF DISCRETION IN
HOLDING HEREIN PETITIONER RESPONSIBLE FOR THE BREACH IN
THE ALLEGED EXCLUSIVE DISTRIBUTORSHIP AGREEMENT WITH
ALUMINIUM FAST FERRIES AUSTRALIA;
III. THE HONORABLE APPELLATE COURT MISAPPLIED THE LAW AND
ACTED WITH GRAVE ABUSE OF DISCRETION IN FINDING PETITIONER
LIABLE IN SOLIDUM WITH THE CO-DEFENDANTS WITH RESPECT TO
THE CLAIMS OF RESPONDENT;
IV. THE HONORABLE COURT OF APPEALS MISAPPLIED LAW AND
JURISPRUDENCE AND GRAVELY ABUSED ITS DISCRETION WHEN IT
FOUND PETITIONER LIABLE FOR UNPAID COMMISSIONS, DAMAGES,
ATTORNEYS FEES, AND LITIGATION EXPENSES; and
V. THE HONORABLE APPELLATE COURT ACTED CONTRARY TO LAW
AND JURISPRUDENCE AND GRAVELY ABUSED ITS DISCRETION WHEN
IT EFFECTIVELY DEPRIVED HEREIN PETITIONER OF HIS RIGHT TO
DUE PROCESS BY AFFIRMING THE LOWER COURTS DENIAL OF
PETITIONERS MOTION FOR NEW TRIAL.29
G.R. No. 164747
(Petitioner Cordero)
I.
THE COURT OF APPEALS ERRED IN NOT SUSTAINING THE JUDGMENT
OF THE TRIAL COURT AWARDING PETITIONER ACTUAL DAMAGES FOR
HIS COMMISSION FOR THE SALE OF THE SECOND VESSEL, SINCE
THERE IS SUFFICIENT EVIDENCE ON RECORD WHICH PROVES THAT
THERE WAS A SECOND SALE OF A VESSEL.

A. THE MEMORANDUM OF AGREEMENT DATED 7 AUGUST 1997

PROVIDES THAT RESPONDENT GO WAS CONTRACTUALLY BOUND TO
BUY TWO (2) VESSELS FROM AFFA.
B. RESPONDENT GOS POSITION PAPER AND COUNTERAFFIDAVIT/POSITION PAPER THAT WERE FILED BEFORE THE BUREAU
OF CUSTOMS, ADMITS UNDER OATH THAT HE HAD INDEED
PURCHASED A SECOND VESSEL FROM AFFA.
C. RESPONDENTS ADMITTED IN THEIR PRE-TRIAL BRIEF THAT THEY
HAD PURCHASED A SECOND VESSEL.
II.
THE COURT OF APPEALS ERRED IN RULING THAT PETITIONER IS NOT
ENTITLED TO HIS COMMISSIONS FOR THE PURCHASE OF A SECOND
VESSEL, SINCE IT WAS PETITIONERS EFFORTS WHICH ACTUALLY
FACILITATED AND SET-UP THE TRANSACTION FOR RESPONDENTS.
III.
THE COURT OF APPEALS ERRED IN NOT IMPOSING THE PROPER
LEGAL INTEREST RATE ON RESPONDENTS UNPAID OBLIGATION
WHICH SHOULD BE TWELVE PERCENT (12%) FROM THE TIME OF THE
BREACH OF THE OBLIGATION.
IV.
THE COURT OF APPEALS ERRED IN NOT SUSTAINING THE ORIGINAL
AMOUNT OF CONSEQUENTIAL DAMAGES AWARDED TO PETITIONER
BY THE TRIAL COURT CONSIDERING THE BAD FAITH AND
FRAUDULENT CONDUCT OF RESPONDENTS IN MISAPPROPRIATING
THE MONEY OF PETITIONER.30
The controversy boils down to two (2) main issues: (1) whether petitioner
Cordero has the legal personality to sue the respondents for breach of
contract; and (2) whether the respondents may be held liable for damages to
Cordero for his unpaid commissions and termination of his exclusive
distributorship appointment by the principal, AFFA.
I. Real Party-in-Interest
First, on the issue of whether the case had been filed by the real party-ininterest as required by Section 2, Rule 3 of the Rules of Court, which defines

such party as the one (1) to be benefited or injured by the judgment in the
suit, or the party entitled to the avails of the suit. The purposes of this
provision are: 1) to prevent the prosecution of actions by persons without any
right, title or interest in the case; 2) to require that the actual party entitled to
legal relief be the one to prosecute the action; 3) to avoid a multiplicity of
suits; and 4) to discourage litigation and keep it within certain bounds,
pursuant to sound public policy.31 A case is dismissible for lack of personality
to sue upon proof that the plaintiff is not the real party-in-interest, hence
grounded on failure to state a cause of action.32
On this issue, we agree with the CA in ruling that it was Cordero and not
Pamana who is the exclusive distributor of AFFA in the Philippines as shown
by the Certification dated June 1, 1997 issued by Tony Robinson. 33 Petitioner
Go mentions the following documents also signed by respondent Robinson
which state that "Pamana Marketing Corporation represented by Mr.
Mortimer F. Cordero" was actually the exclusive distributor: (1) letter dated 1
June 199734; (2) certification dated 5 August 199735; and (3) letter dated 5
August 1997 addressed to petitioner Cordero concerning "commissions to be
paid to Pamana Marketing Corporation."36 Such apparent inconsistency in
naming AFFAs exclusive distributor in the Philippines is of no moment. For
all intents and purposes, Robinson and AFFA dealt only with Cordero who
alone made decisions in the performance of the exclusive distributorship, as
with other clients to whom he had similarly offered AFFAs fast ferry vessels.
Moreover, the stipulated commissions from each progress payments made
by Go were directly paid by Robinson to Cordero.37Respondents Landicho
and Tecson were only too aware of Corderos authority as the person who
was appointed and acted as exclusive distributor of AFFA, which can be
gleaned from their act of immediately furnishing him with copies of bank
transmittals everytime Go remits payment to Robinson, who in turn transfers
a portion of funds received to the bank account of Cordero in the Philippines
as his commission. Out of these partial payments of his commission, Cordero
would still give Landicho and Tecson their respective "commission," or "cuts"
from his own commission. Respondents Landicho and Tecson failed to refute
the evidence submitted by Cordero consisting of receipts signed by them.
Said amounts were apart from the earlier expenses shouldered by Cordero
for Landichos airline tickets, transportation, food and hotel accommodations
for the trip to Australia.38
Moreover, petitioner Go, Landicho and Tecson never raised petitioner
Corderos lack of personality to sue on behalf of Pamana, 39 and did so only
before the CA when they contended that it is Pamana and not Cordero, who
was appointed and acted as exclusive distributor for AFFA. 40 It was Robinson
who argued in support of his motion to dismiss that as far as said defendant
is concerned, the real party plaintiff appears to be Pamana, against the real
party defendant which is AFFA.41 As already mentioned, the trial court denied
the motion to dismiss filed by Robinson.

We find no error committed by the trial court in overruling Robinsons

objection over the improper resort to summons by publication upon a foreign
national like him and in an action in personam, notwithstanding that he raised
it in a special appearance specifically raising the issue of lack of jurisdiction
over his person. Courts acquire jurisdiction over the plaintiffs upon the filing
of the complaint, while jurisdiction over the defendants in a civil case is
acquired either through the service of summons upon them in the manner
required by law or through their voluntary appearance in court and their
submission to its authority.42 A party who makes a special appearance in
court challenging the jurisdiction of said court based on the ground of invalid
service of summons is not deemed to have submitted himself to the
jurisdiction of the court.43
In this case, however, although the Motion to Dismiss filed by Robinson
specifically stated as one (1) of the grounds the lack of "personal jurisdiction,"
it must be noted that he had earlier filed a Motion for Time to file an
appropriate responsive pleading even beyond the time provided in the
summons by publication.44 Such motion did not state that it was a conditional
appearance entered to question the regularity of the service of summons, but
an appearance submitting to the jurisdiction of the court by acknowledging
the summons by publication issued by the court and praying for additional
time to file a responsive pleading. Consequently, Robinson having
acknowledged the summons by publication and also having invoked the
jurisdiction of the trial court to secure affirmative relief in his motion for
additional time, he effectively submitted voluntarily to the trial courts
jurisdiction. He is now estopped from asserting otherwise, even before this
Court.45
II. Breach of Exclusive Distributorship, Contractual Interference and
Respondents Liability for Damages
In Yu v. Court of Appeals,46 this Court ruled that the right to perform an
exclusive distributorship agreement and to reap the profits resulting from
such performance are proprietary rights which a party may protect. Thus,
injunction is the appropriate remedy to prevent a wrongful interference with
contracts by strangers to such contracts where the legal remedy is
insufficient and the resulting injury is irreparable. In that case, the former
dealer of the same goods purchased the merchandise from the manufacturer
in England through a trading firm in West Germany and sold these in the
Philippines. We held that the rights granted to the petitioner under the
exclusive distributorship agreement may not be diminished nor rendered
illusory by the expedient act of utilizing or interposing a person or firm to
obtain goods for which the exclusive distributorship was conceptualized, at
the expense of the sole authorized distributor.47

In the case at bar, it was established that petitioner Cordero was not paid the
balance of his commission by respondent Robinson. From the time petitioner
Go and respondent Landicho directly dealt with respondent Robinson in
Brisbane, and ceased communicating through petitioner Cordero as the
exclusive distributor of AFFA in the Philippines, Cordero was no longer
informed of payments remitted to AFFA in Brisbane. In other words, Cordero
had clearly been cut off from the transaction until the arrival of the first
SEACAT 25 which was sold through his efforts. When Cordero complained to
Go, Robinson, Landicho and Tecson about their acts prejudicial to his rights
and demanded that they respect his exclusive distributorship, Go simply let
his lawyers led by Landicho and Tecson handle the matter and tried to settle
it by promising to pay a certain amount and to purchase high-speed
catamarans through Cordero. However, Cordero was not paid anything and
worse, AFFA through its lawyer in Australia even terminated his exclusive
dealership insisting that his services were engaged for only one (1)
transaction, that is, the purchase of the first SEACAT 25 in August 1997.
Petitioner Go argues that unlike in Yu v. Court of Appeals 48 there is no
conclusive proof adduced by petitioner Cordero that they actually purchased
a second SEACAT 25 directly from AFFA and hence there was no violation of
the exclusive distributorship agreement. Further, he contends that the CA
gravely abused its discretion in holding them solidarily liable to Cordero,
relying on Articles 1207, 19 and 21 of the Civil Code despite absence of
evidence, documentary or testimonial, showing that they conspired to defeat
the very purpose of the exclusive distributorship agreement. 49
We find that contrary to the claims of petitioner Cordero, there was indeed no
sufficient evidence that respondents actually purchased a second SEACAT
25 directly from AFFA. But this circumstance will not absolve respondents
from liability for invading Corderos rights under the exclusive distributorship.
Respondents clearly acted in bad faith in bypassing Cordero as they
completed the remaining payments to AFFA without advising him and
furnishing him with copies of the bank transmittals as they previously did, and
directly dealt with AFFA through Robinson regarding arrangements for the
arrival of the first SEACAT 25 in Manila and negotiations for the purchase of
the second vessel pursuant to the Memorandum of Agreement which
Cordero signed in behalf of AFFA. As a result of respondents actuations,
Cordero incurred losses as he was not paid the balance of his commission
from the sale of the first vessel and his exclusive distributorship revoked by
AFFA.
Petitioner Go contends that the trial and appellate courts erred in holding
them solidarily liable for Corderos unpaid commission, which is the sole
obligation of the principal AFFA. It was Robinson on behalf of AFFA who, in
the letter dated August 5, 1997 addressed to Cordero, undertook to pay
commission payments to Pamana on a staggered progress payment plan in

the form of percentage of the commission per payment. AFFA explicitly

committed that it will, "upon receipt of progress payments, pay to Pamana
their full commission by telegraphic transfer to an account nominated by
Pamana within one to two days of [AFFA] receiving such
payments."50Petitioner Go further maintains that he had not in any way
violated or caused the termination of the exclusive distributorship agreement
between Cordero and AFFA; he had also paid in full the first and only vessel
he purchased from AFFA.51
While it is true that a third person cannot possibly be sued for breach of
contract because only parties can breach contractual provisions, a
contracting party may sue a third person not for breach but for inducing
another to commit such breach.
Article 1314 of the Civil Code provides:
Art. 1314. Any third person who induces another to violate his contract shall
be liable for damages to the other contracting party.
The elements of tort interference are: (1) existence of a valid contract; (2)
knowledge on the part of the third person of the existence of a contract; and
(3) interference of the third person is without legal justification. 52
The presence of the first and second elements is not disputed. Through the
letters issued by Robinson attesting that Cordero is the exclusive distributor
of AFFA in the Philippines, respondents were clearly aware of the contract
between Cordero and AFFA represented by Robinson. In fact, evidence on
record showed that respondents initially dealt with and recognized Cordero
as such exclusive dealer of AFFA high-speed catamaran vessels in the
Philippines. In that capacity as exclusive distributor, petitioner Go entered
into the Memorandum of Agreement and Shipbuilding Contract No. 7825 with
Cordero in behalf of AFFA.
As to the third element, our ruling in the case of So Ping Bun v. Court of
Appeals53 is instructive, to wit:
A duty which the law of torts is concerned with is respect for the property of
others, and a cause of action ex delicto may be predicated upon an unlawful
interference by one person of the enjoyment by the other of his private
property. This may pertain to a situation where a third person induces a party
to renege on or violate his undertaking under a contract. In the case before
us, petitioners Trendsetter Marketing asked DCCSI to execute lease
contracts in its favor, and as a result petitioner deprived respondent
corporation of the latters property right. Clearly, and as correctly viewed by

the appellate court, the three elements of tort interference above-mentioned

are present in the instant case.
Authorities debate on whether interference may be justified where the
defendant acts for the sole purpose of furthering his own financial or
economic interest. One view is that, as a general rule, justification for
interfering with the business relations of another exists where the actors
motive is to benefit himself. Such justification does not exist where his sole
motive is to cause harm to the other. Added to this, some authorities believe
that it is not necessary that the interferers interest outweigh that of the party
whose rights are invaded, and that an individual acts under an economic
interest that is substantial, not merely de minimis, such that wrongful and
malicious motives are negatived, for he acts in self-protection. Moreover,
justification for protecting ones financial position should not be made to
depend on a comparison of his economic interest in the subject matter with
that of others. It is sufficient if the impetus of his conduct lies in a proper
business interest rather than in wrongful motives.
As early as Gilchrist vs. Cuddy, we held that where there was no malice in
the interference of a contract, and the impulse behind ones conduct lies in a
proper business interest rather than in wrongful motives, a party cannot be a
malicious interferer. Where the alleged interferer is financially interested, and
such interest motivates his conduct, it cannot be said that he is an officious or
malicious intermeddler.
In the instant case, it is clear that petitioner So Ping Bun prevailed upon
DCCSI to lease the warehouse to his enterprise at the expense of
respondent corporation. Though petitioner took interest in the property of
respondent corporation and benefited from it, nothing on record imputes
deliberate wrongful motives or malice in him.
xxx
While we do not encourage tort interferers seeking their economic interest to
intrude into existing contracts at the expense of others, however, we find that
the conduct herein complained of did not transcend the limits forbidding an
obligatory award for damages in the absence of any malice. The business
desire is there to make some gain to the detriment of the contracting parties.
Lack of malice, however, precludes damages. But it does not relieve
petitioner of the legal liability for entering into contracts and causing breach of
existing ones. The respondent appellate court correctly confirmed the
permanent injunction and nullification of the lease contracts between DCCSI
and Trendsetter Marketing, without awarding damages. The injunction saved
the respondents from further damage or injury caused by petitioners
interference.54 [emphasis supplied.]

Malice connotes ill will or spite, and speaks not in response to duty. It implies
an intention to do ulterior and unjustifiable harm. Malice is bad faith or bad
motive.55 In the case of Lagon v. Court of Appeals,56 we held that to sustain a
case for tortuous interference, the defendant must have acted with malice or
must have been driven by purely impure reasons to injure the plaintiff; in
other words, his act of interference cannot be justified. We further explained
that the word "induce" refers to situations where a person causes another to
choose one course of conduct by persuasion or intimidation. As to the
allegation of private respondent in said case that petitioner induced the heirs
of the late Bai Tonina Sepi to sell the property to petitioner despite an alleged
renewal of the original lease contract with the deceased landowner, we ruled
as follows:
Assuming ex gratia argumenti that petitioner knew of the contract, such
knowledge alone was not sufficient to make him liable for tortuous
interference. x x x
Furthermore, the records do not support the allegation of private respondent
that petitioner induced the heirs of Bai Tonina Sepi to sell the property to him.
The word "induce" refers to situations where a person causes another to
choose one course of conduct by persuasion or intimidation. The records
show that the decision of the heirs of the late Bai Tonina Sepi to sell the
property was completely of their own volition and that petitioner did
absolutely nothing to influence their judgment. Private respondent himself did
not proffer any evidence to support his claim. In short, even assuming that
private respondent was able to prove the renewal of his lease contract with
Bai Tonina Sepi, the fact was that he was unable to prove malice or bad faith
on the part of petitioner in purchasing the property. Therefore, the claim of
tortuous interference was never established.57
In their Answer, respondents denied having anything to do with the unpaid
balance of the commission due to Cordero and the eventual termination of
his exclusive distributorship by AFFA. They gave a different version of the
events that transpired following the signing of Shipbuilding Contract No.
7825. According to them, several builder-competitors still entered the picture
after the said contract for the purchase of one (1) SEACAT 25 was sent to
Brisbane in July 1997 for authentication, adding that the contract was to be
effective on August 7, 1997, the time when their funds was to become
available. Go admitted he called the attention of AFFA if it can compete with
the prices of other builders, and upon mutual agreement, AFFA agreed to
give them a discounted price under the following terms and conditions: (1)
that the contract price be lowered; (2) that Go will obtain another vessel; (3)
that to secure compliance of such conditions, Go must make an advance
payment for the building of the second vessel; and (4) that the payment
scheme formerly agreed upon as stipulated in the first contract shall still be
the basis and used as the guiding factor in remitting money for the building of

the first vessel. This led to the signing of another contract superseding the
first one (1), still to be dated 07 August 1997. Attached to the answer were
photocopies of the second contract stating a lower purchase price
(US$1,150,000.00) and facsimile transmission of AFFA to Go confirming the
transaction.58
As to the cessation of communication with Cordero, Go averred it was
Cordero who was nowhere to be contacted at the time the shipbuilding
progress did not turn good as promised, and it was always Landicho and
Tecson who, after several attempts, were able to locate him only to obtain
unsatisfactory reports such that it was Go who would still call up Robinson
regarding any progress status report, lacking documents for MARINA, etc.,
and go to Australia for ocular inspection. Hence, in May 1998 on the
scheduled launching of the ship in Australia, Go engaged the services of
Landicho who went to Australia to see to it that all documents needed for the
shipment of the vessel to the Philippines would be in order. It was also during
this time that Robinsons request for inquiry on the Philippine price of a
Wartsila engine for AFFAs then on-going vessel construction, was
misinterpreted by Cordero as indicating that Go was buying a second
vessel.59
We find these allegations unconvincing and a mere afterthought as these
were the very same averments contained in the Position Paper for the
Importer dated October 9, 1998, which was submitted by Go on behalf of
ACG Express Liner in connection with the complaint-affidavit filed by Cordero
before the BOC-SGS Appeals Committee relative to the shipment valuation
of the first SEACAT 25 purchased from AFFA.60 It appears that the purported
second contract superseding the original Shipbuilding Contract No. 7825 and
stating a lower price of US$1,150,000.00 (not US$1,465,512.00) was only
presented before the BOC to show that the vessel imported into the
Philippines was not undervalued by almost US$500,000.00. Cordero
vehemently denied there was such modification of the contract and accused
respondents of resorting to falsified documents, including the facsimile
transmission of AFFA supposedly confirming the said sale for only
US$1,150,000.00. Incidentally, another document filed in said BOC case, the
Counter-Affidavit/Position Paper for the Importer dated November 16,
1998,61 states in paragraph 8 under the Antecedent facts thereof, that -8. As elsewhere stated, the total remittances made by herein Importer to
AFFA does not alone represent the purchase price for Seacat 25. It includes
advance payment for the acquisition of another vessel as part of the deal due
to the discounted price.62
which even gives credence to the claim of Cordero that respondents
negotiated for the sale of the second vessel and that the nonpayment of the
remaining two (2) instalments of his commission for the sale of the first

SEACAT 25 was a result of Go and Landichos directly dealing with

Robinson, obviously to obtain a lower price for the second vessel at the
expense of Cordero.

speed catamarans from AFFA, to the prejudice of Cordero as the duly

appointed exclusive distributor, is further proscribed by Article 19 of the Civil
Code:

The act of Go, Landicho and Tecson in inducing Robinson and AFFA to enter
into another contract directly with ACG Express Liner to obtain a lower price
for the second vessel resulted in AFFAs breach of its contractual obligation
to pay in full the commission due to Cordero and unceremonious termination
of Corderos appointment as exclusive distributor. Following our
pronouncement in Gilchrist v. Cuddy (supra), such act may not be deemed
malicious if impelled by a proper business interest rather than in wrongful
motives. The attendant circumstances, however, demonstrated that
respondents transgressed the bounds of permissible financial interest to
benefit themselves at the expense of Cordero. Respondents furtively went
directly to Robinson after Cordero had worked hard to close the deal for them
to purchase from AFFA two (2) SEACAT 25, closely monitored the progress
of building the first vessel sold, attended to their concerns and spent no
measly sum for the trip to Australia with Go, Landicho and Gos family
members. But what is appalling is the fact that even as Go, Landicho and
Tecson secretly negotiated with Robinson for the purchase of a second
vessel, Landicho and Tecson continued to demand and receive from Cordero
their "commission" or "cut" from Corderos earned commission from the sale
of the first SEACAT 25.

Art. 19. Every person must, in the exercise of his rights and in the
performance of his duties, act with justice, give everyone his due, and
observe honesty and good faith.

Cordero was practically excluded from the transaction when Go, Robinson,
Tecson and Landicho suddenly ceased communicating with him, without
giving him any explanation. While there was nothing objectionable in
negotiating for a lower price in the second purchase of SEACAT 25, which is
not prohibited by the Memorandum of Agreement, Go, Robinson, Tecson and
Landicho clearly connived not only in ensuring that Cordero would have no
participation in the contract for sale of the second SEACAT 25, but also that
Cordero would not be paid the balance of his commission from the sale of the
first SEACAT 25. This, despite their knowledge that it was commission
already earned by and due to Cordero. Thus, the trial and appellate courts
correctly ruled that the actuations of Go, Robinson, Tecson and Landicho
were without legal justification and intended solely to prejudice Cordero.

Art. 21. Any person who willfully causes loss or injury to another in a manner
that is contrary to morals, good customs or public policy shall compensate
the latter for the damage.

The existence of malice, ill will or bad faith is a factual matter. As a rule,
findings of fact of the trial court, when affirmed by the appellate court, are
conclusive on this Court.63 We see no compelling reason to reverse the
findings of the RTC and the CA that respondents acted in bad faith and in
utter disregard of the rights of Cordero under the exclusive distributorship
agreement.
The failure of Robinson, Go, Tecson and Landico to act with fairness,
honesty and good faith in securing better terms for the purchase of high-

As we have expounded in another case:

Elsewhere, we explained that when "a right is exercised in a manner which
does not conform with the norms enshrined in Article 19 and results in
damage to another, a legal wrong is thereby committed for which the
wrongdoer must be responsible." The object of this article, therefore, is to set
certain standards which must be observed not only in the exercise of ones
rights but also in the performance of ones duties. These standards are the
following: act with justice, give everyone his due and observe honesty and
good faith. Its antithesis, necessarily, is any act evincing bad faith or intent to
injure. Its elements are the following: (1) There is a legal right or duty; (2)
which is exercised in bad faith; (3) for the sole intent of prejudicing or injuring
another. When Article 19 is violated, an action for damages is proper under
Articles 20 or 21 of the Civil Code. Article 20 pertains to damages arising
from a violation of law x x x. Article 21, on the other hand, states:

Article 21 refers to acts contra bonus mores and has the following elements:
(1) There is an act which is legal; (2) but which is contrary to morals, good
custom, public order, or public policy; and (3) it is done with intent to injure.
A common theme runs through Articles 19 and 21, and that is, the act
complained of must be intentional.64
Petitioner Gos argument that he, Landicho and Tecson cannot be held liable
solidarily with Robinson for actual, moral and exemplary damages, as well as
attorneys fees awarded to Cordero since no law or contract provided for
solidary obligation in these cases, is equally bereft of merit. Conformably with
Article 2194 of the Civil Code, the responsibility of two or more persons who
are liable for the quasi-delict is solidary.65 In Lafarge Cement Philippines, Inc.
v. Continental Cement Corporation,66 we held:

[O]bligations arising from tort are, by their nature, always solidary. We have
assiduously maintained this legal principle as early as 1912 in Worcester v.
Ocampo, in which we held:
x x x The difficulty in the contention of the appellants is that they fail to
recognize that the basis of the present action is tort. They fail to recognize
the universal doctrine that each joint tort feasor is not only individually liable
for the tort in which he participates, but is also jointly liable with his tort
feasors. x x x
It may be stated as a general rule that joint tort feasors are all the persons
who command, instigate, promote, encourage, advise, countenance,
cooperate in, aid or abet the commission of a tort, or who approve of it after it
is done, if done for their benefit. They are each liable as principals, to the
same extent and in the same manner as if they had performed the wrongful
act themselves. x x x
Joint tort feasors are jointly and severally liable for the tort which they
commit.1avvphi1 The persons injured may sue all of them or any number
less than all. Each is liable for the whole damages caused by all, and all
together are jointly liable for the whole damage. It is no defense for one sued
alone, that the others who participated in the wrongful act are not joined with
him as defendants; nor is it any excuse for him that his participation in the tort
was insignificant as compared to that of the others. x x x
Joint tort feasors are not liable pro rata. The damages can not be
apportioned among them, except among themselves. They cannot insist
upon an apportionment, for the purpose of each paying an aliquot part. They
are jointly and severally liable for the whole amount. x x x
A payment in full for the damage done, by one of the joint tort feasors, of
course satisfies any claim which might exist against the others. There can be
but satisfaction. The release of one of the joint tort feasors by agreement
generally operates to discharge all. x x x
Of course, the court during trial may find that some of the alleged tort feasors
are liable and that others are not liable. The courts may release some for lack
of evidence while condemning others of the alleged tort feasors. And this is
true even though they are charged jointly and severally.67 [emphasis
supplied.]
The rule is that the defendant found guilty of interference with contractual
relations cannot be held liable for more than the amount for which the party
who was inducted to break the contract can be held liable. 68 Respondents
Go, Landicho and Tecson were therefore correctly held liable for the balance

of petitioner Corderos commission from the sale of the first SEACAT 25, in
the amount of US$31,522.09 or its peso equivalent, which AFFA/Robinson
did not pay in violation of the exclusive distributorship agreement, with
interest at the rate of 6% per annum from June 24, 1998 until the same is
fully paid.
Respondents having acted in bad faith, moral damages may be recovered
under Article 2219 of the Civil Code.69On the other hand, the requirements of
an award of exemplary damages are: (1) they may be imposed by way of
example in addition to compensatory damages, and only after the claimants
right to them has been established; (2) that they cannot be recovered as a
matter of right, their determination depending upon the amount of
compensatory damages that may be awarded to the claimant; and (3) the act
must be accompanied by bad faith or done in a wanton, fraudulent,
oppressive or malevolent manner.70 The award of exemplary damages is thus
in order. However, we find the sums awarded by the trial court as moral and
exemplary damages as reduced by the CA, still excessive under the
circumstances.
Moral damages are meant to compensate and alleviate the physical
suffering, mental anguish, fright, serious anxiety, besmirched reputation,
wounded feelings, moral shock, social humiliation, and similar injuries
unjustly caused. Although incapable of pecuniary estimation, the amount
must somehow be proportional to and in approximation of the suffering
inflicted. Moral damages are not punitive in nature and were never intended
to enrich the claimant at the expense of the defendant. There is no hard-andfast rule in determining what would be a fair and reasonable amount of moral
damages, since each case must be governed by its own peculiar facts. Trial
courts are given discretion in determining the amount, with the limitation that
it "should not be palpably and scandalously excessive." Indeed, it must be
commensurate to the loss or injury suffered.71
We believe that the amounts of P300,000.00 and P200,000.00 as moral and
exemplary damages, respectively, would be sufficient and reasonable.
Because exemplary damages are awarded, attorneys fees may also be
awarded in consonance with Article 2208 (1).72 We affirm the appellate
courts award of attorneys fees in the amount of P50,000.00.
WHEREFORE, the petitions are DENIED. The Decision dated March 16,
2004 as modified by the Resolution dated July 22, 2004 of the Court of
Appeals in CA-G.R. CV No. 69113 are hereby AFFIRMED with
MODIFICATION in that the awards of moral and exemplary damages are
hereby reduced to P300,000.00 andP200,000.00, respectively.
With costs against the petitioner in G.R. No. 164703.

SO ORDERED.
MARTIN S. VILLARAMA, JR.
Associate Justice
WE CONCUR:
REYNATO S. PUNO
Chief Justice
Chairperson
CONCHITA CARPIO MORALES
Associate Justice

TERESITA J. LEONARDO-DE
CASTRO
Associate Justice

LUCAS P. BERSAMIN
Associate Justice
C E R T I F I C AT I O N
Pursuant to Section 13, Article VIII of the 1987 Constitution, I certify that the
conclusions in the above Decision had been reached in consultation before
the case was assigned to the writer of the opinion of the Courts Division.
REYNATO S. PUNO
Chief Justice

The facts, as found by the Court of Appeals, are as follows:

"Claiming damages for the death of their only son, Sherwin Carpitanos,
spouses William Carpitanos and Lucia Carpitanos filed on June 9, 1995 a
case against James Daniel II and his parents, James Daniel Sr. and Guada
Daniel, the vehicle owner, Vivencio Villanueva and St. Marys Academy
before the Regional Trial Court of Dipolog City.
"On 20 February 1997, Branch 6 of the Regional Trial Court of Dipolog City
rendered its decision the dispositive portion of which reads as follows:
"WHEREFORE, PREMISES CONSIDERED, judgment is hereby rendered in
the following manner:

G.R. No. 143363

Republic of the Philippines

SUPREME COURT
Manila

1. Defendant St. Marys Academy of Dipolog City, is hereby ordered to pay

plaintiffs William Carpitanos and Luisa Carpitanos, the following sums of
money:

FIRST DIVISION

a. FIFTY THOUSAND PESOS (P50,000.00) indemnity for the loss of life of

Sherwin S. Carpitanos;

February 6, 2002

ST. MARY'S ACADEMY, petitioner,

vs.
WILLIAM CARPITANOS and LUCIA S. CARPITANOS, GUADA DANIEL,
JAMES DANIEL II, JAMES DANIEL, SR., and VIVENCIO
VILLANUEVA, respondents.
DECISION
PARDO, J.:
The Case
The case is an appeal via certiorari from the decision1 of the Court of Appeals
as well as the resolution denying reconsideration, holding petitioner liable for
damages arising from an accident that resulted in the death of a student who
had joined a campaign to visit the public schools in Dipolog City to solicit
enrollment.
The Facts

b. FORTY THOUSAND PESOS (P40,000.00) actual damages incurred by

plaintiffs for burial and related expenses;
c. TEN THOUSAND PESOS (P10,000.00) for attorneys fees;
d. FIVE HUNDRED THOUSAND PESOS (P500,000.00) for moral damages;
and to pay costs.
2. Their liability being only subsidiary, defendants James Daniel, Sr. and
Guada Daniel are hereby ordered to pay herein plaintiffs the amount of
damages above-stated in the event of insolvency of principal obligor St.
Marys Academy of Dipolog City;
3. Defendant James Daniel II, being a minor at the time of the commission of
the tort and who was under special parental authority of defendant St. Marys
Academy, is ABSOLVED from paying the above-stated damages, same
being adjudged against defendants St. Marys Academy, and subsidiarily,
against his parents;

4. Defendant Vivencio Villanueva is hereby ABSOLVED of any liability. His

counterclaim not being in order as earlier discussed in this decision, is
hereby DISMISSED.
IT IS SO ORDERED." (Decision, pp. 32-33; Records, pp. 205-206)."
"From the records it appears that from 13 to 20 February 1995, defendantappellant St. Marys Academy of Dipolog City conducted an enrollment drive
for the school year 1995-1996. A facet of the enrollment campaign was the
visitation of schools from where prospective enrollees were studying. As a
student of St. Marys Academy, Sherwin Carpitanos was part of the
campaigning group. Accordingly, on the fateful day, Sherwin, along with other
high school students were riding in a Mitsubishi jeep owned by defendant
Vivencio Villanueva on their way to Larayan Elementary School, Larayan,
Dapitan City. The jeep was driven by James Daniel II then 15 years old and a
student of the same school. Allegedly, the latter drove the jeep in a reckless
manner and as a result the jeep turned turtle.
"Sherwin Carpitanos died as a result of the injuries he sustained from the
accident."2
In due time, petitioner St. Marys academy appealed the decision to the Court
of Appeals.3
On February 29, 2000, the Court of Appeals promulgated a decision reducing
the actual damages to P25,000.00 but otherwise affirming the decision a
quo, in toto.4
On February 29, 2000, petitioner St. Marys Academy filed a motion for
reconsideration of the decision. However, on May 22, 2000, the Court of
Appeals denied the motion.5
Hence, this appeal.6
The Issues
1) Whether the Court of Appeals erred in holding the petitioner liable
for damages for the death of Sherwin Carpitanos.
2) Whether the Court of Appeals erred in affirming the award of moral
damages against the petitioner.

The Courts Ruling

We reverse the decision of the Court of Appeals.
The Court of Appeals held petitioner St. Marys Academy liable for the death
of Sherwin Carpitanos under Articles 2187 and 2198 of the Family Code,
pointing out that petitioner was negligent in allowing a minor to drive and in
not having a teacher accompany the minor students in the jeep.
Under Article 218 of the Family Code, the following shall have special
parental authority over a minor child while under their supervision, instruction
or custody: (1) the school, its administrators and teachers; or (2) the
individual, entity or institution engaged in child care. This special parental
authority and responsibility applies to all authorized activities, whether inside
or outside the premises of the school, entity or institution. Thus, such
authority and responsibility applies to field trips, excursions and other affairs
of the pupils and students outside the school premises whenever authorized
by the school or its teachers.9
Under Article 219 of the Family Code, if the person under custody is a minor,
those exercising special parental authority are principally and solidarily liable
for damages caused by the acts or omissions of the unemancipated minor
while under their supervision, instruction, or custody.10
However, for petitioner to be liable, there must be a finding that the act or
omission considered as negligent was the proximate cause of the injury
caused because the negligence must have a causal connection to the
accident.11
"In order that there may be a recovery for an injury, however, it must be
shown that the injury for which recovery is sought must be the legitimate
consequence of the wrong done; the connection between the negligence and
the injury must be a direct and natural sequence of events, unbroken by
intervening efficient causes. In other words, the negligence must be the
proximate cause of the injury. For, negligence, no matter in what it consists,
cannot create a right of action unless it is the proximate cause of the injury
complained of. And the proximate cause of an injury is that cause, which, in
natural and continuous sequence, unbroken by any efficient intervening
cause, produces the injury, and without which the result would not have
occurred."12

In this case, the respondents failed to show that the negligence of petitioner
was the proximate cause of the death of the victim.
Respondents Daniel spouses and Villanueva admitted that the immediate
cause of the accident was not the negligence of petitioner or the reckless
driving of James Daniel II, but the detachment of the steering wheel guide of
the jeep.
In their comment to the petition, respondents Daniel spouses and Villanueva
admitted the documentary exhibits establishing that the cause of the accident
was the detachment of the steering wheel guide of the jeep. Hence, the
cause of the accident was not the recklessness of James Daniel II but the
mechanical defect in the jeep of Vivencio Villanueva. Respondents, including
the spouses Carpitanos, parents of the deceased Sherwin Carpitanos, did
not dispute the report and testimony of the traffic investigator who stated that
the cause of the accident was the detachment of the steering wheel guide
that caused the jeep to turn turtle.
Significantly, respondents did not present any evidence to show that the
proximate cause of the accident was the negligence of the school authorities,
or the reckless driving of James Daniel II. Hence, the respondents reliance
on Article 219 of the Family Code that "those given the authority and
responsibility under the preceding Article shall be principally and solidarily
liable for damages caused by acts or omissions of the unemancipated minor"
was unfounded.
Further, there was no evidence that petitioner school allowed the minor
James Daniel II to drive the jeep of respondent Vivencio Villanueva. It was
Ched Villanueva, grandson of respondent Vivencio Villanueva, who had
possession and control of the jeep. He was driving the vehicle and he
allowed James Daniel II, a minor, to drive the jeep at the time of the accident.
Hence, liability for the accident, whether caused by the negligence of the
minor driver or mechanical detachment of the steering wheel guide of the
jeep, must be pinned on the minors parents primarily. The negligence of
petitioner St. Marys Academy was only a remote cause of the accident.
Between the remote cause and the injury, there intervened the negligence of
the minors parents or the detachment of the steering wheel guide of the
jeep.

"The proximate cause of an injury is that cause, which, in natural and

continuous sequence, unbroken by any efficient intervening cause, produces
the injury, and without which the result would not have occurred." 13
Considering that the negligence of the minor driver or the detachment of the
steering wheel guide of the jeep owned by respondent Villanueva was an
event over which petitioner St. Marys Academy had no control, and which
was the proximate cause of the accident, petitioner may not be held liable for
the death resulting from such accident.
Consequently, we find that petitioner likewise cannot be held liable for moral
damages in the amount of P500,000.00 awarded by the trial court and
affirmed by the Court of Appeals.
Though incapable of pecuniary computation, moral damages may be
recovered if they are the proximate result of the defendants wrongful act or
omission.14 In this case, the proximate cause of the accident was not
attributable to petitioner.
For the reason that petitioner was not directly liable for the accident, the
decision of the Court of Appeals ordering petitioner to pay death indemnity to
respondent Carpitanos must be deleted. Moreover, the grant of attorneys
fees as part of damages is the exception rather than the rule. 15 The power of
the court to award attorneys fees under Article 2208 of the Civil Code
demands factual, legal and equitable justification. 16 Thus, the grant of
attorneys fees against the petitioner is likewise deleted.
Incidentally, there was no question that the registered owner of the vehicle
was respondent Villanueva. He never denied and in fact admitted this
fact.1wphi1 We have held that the registered owner of any vehicle, even if
not used for public service, would primarily be responsible to the public or to
third persons for injuries caused the latter while the vehicle was being driven
on the highways or streets."17 Hence, with the overwhelming evidence
presented by petitioner and the respondent Daniel spouses that the accident
occurred because of the detachment of the steering wheel guide of the jeep,
it is not the school, but the registered owner of the vehicle who shall be held
responsible for damages for the death of Sherwin Carpitanos.
The Fallo
WHEREFORE, the Court REVERSES and SETS ASIDE the decision of the
Court of Appeals18 and that of the trial court.19 The Court remands the case to

the trial court for determination of the liability of defendants, excluding

petitioner St. Marys Academy, Dipolog City.
No costs.
SO ORDERED.
Davide, Jr., C.J., (Chairman), Kapunan, and Ynares-Santiago, JJ., concur.
Puno, J., in the result.

The primary question of interest before this Court is the only legal issue
in the case: It is whether a hotel may evade liability for the loss of items left
with it for safekeeping by its guests, by having these guests execute written
waivers holding the establishment or its employees free from blame for such
loss in light of Article 2003 of the Civil Code which voids such waivers.
Before this Court is a Rule 45 petition for review of the Decision[1] dated
19 October 1995 of the Court of Appeals which affirmed the Decision[2] dated
16 December 1991 of the Regional Trial Court (RTC), Branch 13, of Manila,
finding YHT Realty Corporation, Brunhilda Mata-Tan (Tan), Erlinda Lainez
(Lainez) and Anicia Payam (Payam) jointly and solidarily liable for damages
in an action filed by Maurice McLoughlin (McLoughlin) for the loss of his
American and Australian dollars deposited in the safety deposit box of
Tropicana Copacabana Apartment Hotel, owned and operated by YHT Realty
Corporation.
The factual backdrop of the case follow.

SECOND DIVISION
[G.R. No. 126780. February 17, 2005]
YHT

REALTY CORPORATION, ERLINDA LAINEZ and ANICIA

PAYAM, petitioners, vs. THE COURT OF APPEALS and
MAURICE McLOUGHLIN,respondents.
DECISION

TINGA, J.:

Private respondent McLoughlin, an Australian businessmanphilanthropist, used to stay at Sheraton Hotel during his trips to the
Philippines prior to 1984 when he met Tan. Tan befriended McLoughlin by
showing him around, introducing him to important people, accompanying him
in visiting impoverished street children and assisting him in buying gifts for
the children and in distributing the same to charitable institutions for poor
children. Tan convinced McLoughlin to transfer from Sheraton Hotel to
Tropicana where Lainez, Payam and Danilo Lopez were employed. Lopez
served as manager of the hotel while Lainez and Payam had custody of the
keys for the safety deposit boxes of Tropicana. Tan took care of McLoughlins
booking at the Tropicana where he started staying during his trips to the
Philippines from December 1984 to September 1987.[3]
On 30 October 1987, McLoughlin arrived from Australia and registered
with Tropicana. He rented a safety deposit box as it was his practice to rent a
safety deposit box every time he registered at Tropicana in previous trips. As
a tourist, McLoughlin was aware of the procedure observed by Tropicana
relative to its safety deposit boxes. The safety deposit box could only be
opened through the use of two keys, one of which is given to the registered
guest, and the other remaining in the possession of the management of the
hotel. When a registered guest wished to open his safety deposit box, he
alone could personally request the management who then would assign one
of its employees to accompany the guest and assist him in opening the
safety deposit box with the two keys.[4]

McLoughlin allegedly placed the following in his safety deposit box:

Fifteen Thousand US Dollars (US$15,000.00) which he placed in two
envelopes, one envelope containing Ten Thousand US Dollars
(US$10,000.00) and the other envelope Five Thousand US Dollars
(US$5,000.00); Ten Thousand Australian Dollars (AUS$10,000.00) which he
also placed in another envelope; two (2) other envelopes containing letters
and credit cards; two (2) bankbooks; and a checkbook, arranged side by side
inside the safety deposit box.[5]
On 12 December 1987, before leaving for a brief trip to Hongkong,
McLoughlin opened his safety deposit box with his key and with the key of
the management and took therefrom the envelope containing Five Thousand
US Dollars (US$5,000.00), the envelope containing Ten Thousand Australian
Dollars (AUS$10,000.00), his passports and his credit cards. [6] McLoughlin
left the other items in the box as he did not check out of his room at the
Tropicana during his short visit to Hongkong. When he arrived in Hongkong,
he opened the envelope which contained Five Thousand US Dollars
(US$5,000.00) and discovered upon counting that only Three Thousand US
Dollars (US$3,000.00) were enclosed therein.[7] Since he had no idea
whether somebody else had tampered with his safety deposit box, he thought
that it was just a result of bad accounting since he did not spend anything
from that envelope.[8]
After returning to Manila, he checked out of Tropicana on 18 December
1987 and left for Australia. When he arrived in Australia, he discovered that
the envelope with Ten Thousand US Dollars (US$10,000.00) was short of
Five Thousand US Dollars (US$5,000). He also noticed that the jewelry
which he bought in Hongkong and stored in the safety deposit box upon his
return to Tropicana was likewise missing, except for a diamond bracelet. [9]
When McLoughlin came back to the Philippines on 4 April 1988, he
asked Lainez if some money and/or jewelry which he had lost were found
and returned to her or to the management. However, Lainez told him that no
one in the hotel found such things and none were turned over to the
management. He again registered at Tropicana and rented a safety deposit
box. He placed therein one (1) envelope containing Fifteen Thousand US
Dollars (US$15,000.00), another envelope containing Ten Thousand
Australian Dollars (AUS$10,000.00) and other envelopes containing his
traveling papers/documents. On 16 April 1988, McLoughlin requested Lainez
and Payam to open his safety deposit box. He noticed that in the envelope
containing Fifteen Thousand US Dollars (US$15,000.00), Two Thousand US
Dollars (US$2,000.00) were missing and in the envelope previously

containing Ten Thousand Australian Dollars (AUS$10,000.00), Four

Thousand Five Hundred Australian Dollars (AUS$4,500.00) were missing. [10]
When McLoughlin discovered the loss, he immediately confronted
Lainez and Payam who admitted that Tan opened the safety deposit box with
the key assigned to him.[11] McLoughlin went up to his room where Tan was
staying and confronted her. Tan admitted that she had stolen McLoughlins
key and was able to open the safety deposit box with the assistance of
Lopez, Payam and Lainez.[12] Lopez also told McLoughlin that Tan stole the
key assigned to McLoughlin while the latter was asleep. [13]
McLoughlin requested the management for an investigation of the
incident. Lopez got in touch with Tan and arranged for a meeting with the
police and McLoughlin. When the police did not arrive, Lopez and Tan went
to the room of McLoughlin at Tropicana and thereat, Lopez wrote on a piece
of paper a promissory note dated 21 April 1988. The promissory note reads
as follows:
I promise to pay Mr. Maurice McLoughlin the amount of AUS$4,000.00 and
US$2,000.00 or its equivalent in Philippine currency on or before May 5, 1988.[14]
Lopez requested Tan to sign the promissory note which the latter did
and Lopez also signed as a witness. Despite the execution of promissory
note by Tan, McLoughlin insisted that it must be the hotel who must assume
responsibility for the loss he suffered. However, Lopez refused to accept the
responsibility relying on the conditions for renting the safety deposit box
entitled Undertaking For the Use Of Safety Deposit Box,[15] specifically
paragraphs (2) and (4) thereof, to wit:
2. To release and hold free and blameless TROPICANA APARTMENT
HOTEL from any liability arising from any loss in the contents and/or use
of the said deposit box for any cause whatsoever, including but not limited
to the presentation or use thereof by any other person should the key be
lost;
...
4. To return the key and execute the RELEASE in favor of TROPICANA
APARTMENT HOTEL upon giving up the use of the box.[16]
On 17 May 1988, McLoughlin went back to Australia and he consulted
his lawyers as to the validity of the abovementioned stipulations. They opined

that the stipulations are void for being violative of universal hotel practices
and customs. His lawyers prepared a letter dated 30 May 1988 which was
signed by McLoughlin and sent to President Corazon Aquino. [17] The Office of
the President referred the letter to the Department of Justice (DOJ) which
forwarded the same to the Western Police District (WPD). [18]
After receiving a copy of the indorsement in Australia, McLoughlin came
to the Philippines and registered again as a hotel guest of Tropicana.
McLoughlin went to Malacaang to follow up on his letter but he was
instructed to go to the DOJ. The DOJ directed him to proceed to the WPD for
documentation. But McLoughlin went back to Australia as he had an urgent
business matter to attend to.
For several times, McLoughlin left for Australia to attend to his business
and came back to the Philippines to follow up on his letter to the President
but he failed to obtain any concrete assistance.[19]
McLoughlin left again for Australia and upon his return to the Philippines
on 25 August 1989 to pursue his claims against petitioners, the WPD
conducted an investigation which resulted in the preparation of an affidavit
which was forwarded to the Manila City Fiscals Office. Said affidavit became
the basis of preliminary investigation. However, McLoughlin left again for
Australia without receiving the notice of the hearing on 24 November 1989.
Thus, the case at the Fiscals Office was dismissed for failure to prosecute.
Mcloughlin requested the reinstatement of the criminal charge for theft. In the
meantime, McLoughlin and his lawyers wrote letters of demand to those
having responsibility to pay the damage. Then he left again for Australia.
Upon his return on 22 October 1990, he registered at the Echelon
Towers at Malate, Manila. Meetings were held between McLoughlin and his
lawyer which resulted to the filing of a complaint for damages on 3 December
1990 against YHT Realty Corporation, Lopez, Lainez, Payam and Tan
(defendants) for the loss of McLoughlins money which was discovered on 16
April 1988. After filing the complaint, McLoughlin left again for Australia to
attend to an urgent business matter. Tan and Lopez, however, were not
served with summons, and trial proceeded with only Lainez, Payam and YHT
Realty Corporation as defendants.
After defendants had filed their Pre-Trial Brief admitting that they had
previously allowed and assisted Tan to open the safety deposit box,
McLoughlin filed an Amended/Supplemental Complaint[20] dated 10 June
1991 which included another incident of loss of money and jewelry in the

safety deposit box rented by McLoughlin in the same hotel which took place
prior to 16 April 1988.[21] The trial court admitted the Amended/Supplemental
Complaint.
During the trial of the case, McLoughlin had been in and out of the
country to attend to urgent business in Australia, and while staying in the
Philippines to attend the hearing, he incurred expenses for hotel bills, airfare
and other transportation expenses, long distance calls to Australia, Meralco
power expenses, and expenses for food and maintenance, among others. [22]
After trial, the RTC of Manila rendered judgment in favor of McLoughlin,
the dispositive portion of which reads:
WHEREFORE, above premises considered, judgment is hereby rendered by this
Court in favor of plaintiff and against the defendants, to wit:
1. Ordering defendants, jointly and severally, to pay plaintiff the
sum of US$11,400.00 or its equivalent in Philippine Currency
of P342,000.00, more or less, and the sum of AUS$4,500.00
or its equivalent in Philippine Currency of P99,000.00, or a
total of P441,000.00, more or less, with 12% interest from April
16 1988 until said amount has been paid to plaintiff (Item 1,
Exhibit CC);
2. Ordering defendants, jointly and severally to pay plaintiff the sum
of P3,674,238.00 as actual and consequential damages
arising from the loss of his Australian and American dollars and
jewelries complained against and in prosecuting his claim and
rights administratively and judicially (Items II, III, IV, V, VI, VII,
VIII, and IX, Exh. CC);
3. Ordering defendants, jointly and severally, to pay plaintiff the
sum of P500,000.00 as moral damages (Item X, Exh. CC);
4. Ordering defendants, jointly and severally, to pay plaintiff the
sum of P350,000.00 as exemplary damages (Item XI, Exh.
CC);
5. And ordering defendants, jointly and severally, to pay litigation
expenses in the sum of P200,000.00 (Item XII, Exh. CC);

6. Ordering defendants, jointly and severally, to pay plaintiff the

sum of P200,000.00 as attorneys fees, and a fee of P3,000.00
for every appearance; and
7. Plus costs of suit.
SO ORDERED.[23]
The trial court found that McLoughlins 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 McLoughlins money, kept in
Tropicanas safety deposit box, was taken by Tan without McLoughlins
consent. The taking was effected through the use of the master key which
was in the possession of the management. Payam and Lainez allowed Tan to
use the master key without authority from McLoughlin. The trial court added
that if McLoughlin had not lost his dollars, he would not have gone through
the trouble and personal inconvenience of seeking aid and assistance from
the Office of the President, DOJ, police authorities and the City Fiscals Office
in his desire to recover his losses from the hotel management and Tan. [24]
As regards the loss of Seven Thousand US Dollars (US$7,000.00) and
jewelry worth approximately One Thousand Two Hundred US Dollars
(US$1,200.00) which allegedly occurred during his stay at Tropicana
previous to 4 April 1988, no claim was made by McLoughlin for such losses
in his complaint dated 21 November 1990 because he was not sure how they
were lost and who the responsible persons were. But considering the
admission of the defendants in their pre-trial brief that on three previous
occasions they allowed Tan to open the box, the trial court opined that it was
logical and reasonable to presume that his personal assets consisting of
Seven Thousand US Dollars (US$7,000.00) and jewelry were taken by Tan
from the safety deposit box without McLoughlins consent through the
cooperation of Payam and Lainez.[25]
The trial court also found that defendants acted with gross negligence in
the performance and exercise of their duties and obligations as innkeepers
and were therefore liable to answer for the losses incurred by McLoughlin. [26]

Moreover, the trial court ruled that paragraphs (2) and (4) of
the Undertaking For The Use Of Safety Deposit Box are not valid for being
contrary to the express mandate of Article 2003 of the New Civil Code and
against public policy.[27] Thus, there being fraud or wanton conduct on the part
of defendants, they should be responsible for all damages which may be
attributed to the non-performance of their contractual obligations. [28]
The Court of Appeals affirmed the disquisitions made by the lower court
except as to the amount of damages awarded. The decretal text of the
appellate courts decision reads:
THE FOREGOING CONSIDERED, the appealed Decision is hereby AFFIRMED
but modified as follows:
The appellants are directed jointly and severally to pay the plaintiff/appellee the
following amounts:
1) P153,200.00 representing the peso equivalent of US$2,000.00 and
AUS$4,500.00;
2) P308,880.80, representing the peso value for the air fares from Sidney
[sic] to Manila and back for a total of eleven (11) trips;
3) One-half of P336,207.05 or P168,103.52 representing payment to
Tropicana Apartment Hotel;
4) One-half of P152,683.57 or P76,341.785 representing payment to
Echelon Tower;
5) One-half of P179,863.20 or P89,931.60 for the taxi xxx transportation
from the residence to Sidney [sic] Airport and from MIA to the
hotel here in Manila, for the eleven (11) trips;
6) One-half of P7,801.94 or P3,900.97 representing Meralco power
expenses;
7) One-half of P356,400.00 or P178,000.00 representing expenses for
food and maintenance;
8) P50,000.00 for moral damages;
9) P10,000.00 as exemplary damages; and

10) P200,000 representing attorneys fees.

With costs.
SO ORDERED.[29]
Unperturbed, YHT Realty Corporation, Lainez and Payam went to this
Court in this appeal by certiorari.
Petitioners submit for resolution by this Court the following issues: (a)
whether the appellate courts conclusion on the alleged prior existence and
subsequent loss of the subject money and jewelry is supported by the
evidence on record; (b) whether the finding of gross negligence on the part of
petitioners in the performance of their duties as innkeepers is supported by
the evidence on record; (c) whether the Undertaking For The Use of Safety
Deposit Box admittedly executed by private respondent is null and void; and
(d) whether the damages awarded to private respondent, as well as the
amounts thereof, are proper under the circumstances.[30]
The petition is devoid of merit.
It is worthy of note that the thrust of Rule 45 is the resolution only of
questions of law and any peripheral factual question addressed to this Court
is beyond the bounds of this mode of review.
Petitioners point out that the evidence on record is insufficient to prove
the fact of prior existence of the dollars and the jewelry which had been lost
while deposited in the safety deposit boxes of Tropicana, the basis of the trial
court and the appellate court being the sole testimony of McLoughlin as to
the contents thereof. Likewise, petitioners dispute the finding of gross
negligence on their part as not supported by the evidence on record.
We are not persuaded. We adhere to the findings of the trial court as
affirmed by the appellate court that the fact of loss was established by the
credible testimony in open court by McLoughlin. Such findings are factual
and therefore beyond the ambit of the present petition.
The trial court had the occasion to observe the demeanor of McLoughlin
while testifying which reflected the veracity of the facts testified to by him. On
this score, we give full credence to the appreciation of testimonial evidence
by the trial court especially if what is at issue is the credibility of the witness.
The oft-repeated principle is that where the credibility of a witness is an

issue, the established rule is that great respect is accorded to the evaluation
of the credibility of witnesses by the trial court. [31] The trial court is in the best
position to assess the credibility of witnesses and their testimonies because
of its unique opportunity to observe the witnesses firsthand and note their
demeanor, conduct and attitude under grilling examination. [32]
We are also not impressed by petitioners argument that the finding of
gross negligence by the lower court as affirmed by the appellate court is not
supported by evidence. The evidence reveals that two keys are required to
open the safety deposit boxes of Tropicana. One key is assigned to the guest
while the other remains in the possession of the management. If the guest
desires to open his safety deposit box, he must request the management for
the other key to open the same. In other words, the guest alone cannot open
the safety deposit box without the assistance of the management or its
employees. With more reason that access to the safety deposit box should
be denied if the one requesting for the opening of the safety deposit box is a
stranger. Thus, in case of loss of any item deposited in the safety deposit
box, it is inevitable to conclude that the management had at least a hand in
the consummation of the taking, unless the reason for the loss is force
majeure.
Noteworthy is the fact that Payam and Lainez, who were employees of
Tropicana, had custody of the master key of the management when the loss
took place. In fact, they even admitted that they assisted Tan on three
separate occasions in opening McLoughlins safety deposit box. [33] This only
proves that Tropicana had prior knowledge that a person aside from the
registered guest had access to the safety deposit box. Yet the management
failed to notify McLoughlin of the incident and waited for him to discover the
taking before it disclosed the matter to him. Therefore, Tropicana should be
held responsible for the damage suffered by McLoughlin by reason of the
negligence of its employees.
The management should have guarded against the occurrence of this
incident considering that Payam admitted in open court that she assisted Tan
three times in opening the safety deposit box of McLoughlin at around 6:30
A.M. to 7:30 A.M. while the latter was still asleep. [34] In light of the
circumstances surrounding this case, it is undeniable that without the
acquiescence of the employees of Tropicana to the opening of the safety
deposit box, the loss of McLoughlins money could and should have been
avoided.
The management contends, however, that McLoughlin, by his act, made
its employees believe that Tan was his spouse for she was always with him

most of the time. The evidence on record, however, is bereft of any showing
that McLoughlin introduced Tan to the management as his wife. Such an
inference from the act of McLoughlin will not exculpate the petitioners from
liability in the absence of any showing that he made the management believe
that Tan was his wife or was duly authorized to have access to the safety
deposit box. Mere close companionship and intimacy are not enough to
warrant such conclusion considering that what is involved in the instant case
is the very safety of McLoughlins deposit. If only petitioners exercised due
diligence in taking care of McLoughlins safety deposit box, they should have
confronted him as to his relationship with Tan considering that the latter had
been observed opening McLoughlins safety deposit box a number of times at
the early hours of the morning. Tans acts should have prompted the
management to investigate her relationship with McLoughlin. Then,
petitioners would have exercised due diligence required of them. Failure to
do so warrants the conclusion that the management had been remiss in
complying with the obligations imposed upon hotel-keepers under the law.
Under Article 1170 of the New Civil Code, those who, in the performance
of their obligations, are guilty of negligence, are liable for damages. As to
who shall bear the burden of paying damages, Article 2180, paragraph (4) of
the same Code provides that the owners and managers of an establishment
or enterprise are likewise responsible for damages caused by their
employees in the service of the branches in which the latter are employed or
on the occasion of their functions. Also, this Court has ruled that if an
employee is found negligent, it is presumed that the employer was negligent
in selecting and/or supervising him for it is hard for the victim to prove the
negligence of such employer.[35] Thus, given the fact that the loss of
McLoughlins money was consummated through the negligence of Tropicanas
employees in allowing Tan to open the safety deposit box without the guests
consent, both the assisting employees and YHT Realty Corporation itself, as
owner and operator of Tropicana, should be held solidarily liable pursuant to
Article 2193.[36]
The issue of whether the Undertaking For The Use of Safety Deposit
Box executed by McLoughlin is tainted with nullity presents a legal question
appropriate for resolution in this petition. Notably, both the trial court and the
appellate court found the same to be null and void. We find no reason to
reverse their common conclusion. Article 2003 is controlling, thus:

Art. 2003. The hotel-keeper cannot free himself from responsibility by posting
notices to the effect that he is not liable for the articles brought by the guest. Any
stipulation between the hotel-keeper and the guest whereby the responsibility of the
former as set forth in Articles 1998 to 2001[37] is suppressed or diminished shall be
void.
Article 2003 was incorporated in the New Civil Code as an expression of
public policy precisely to apply to situations such as that presented in this
case. The hotel business like the common carriers business is imbued with
public interest. Catering to the public, hotelkeepers are bound to provide not
only lodging for hotel guests and security to their persons and belongings.
The twin duty constitutes the essence of the business. The law in turn does
not allow such duty to the public to be negated or diluted by any contrary
stipulation in so-called undertakings that ordinarily appear in prepared forms
imposed by hotel keepers on guests for their signature.
In an early case,[38] the Court of Appeals through its then Presiding
Justice (later Associate Justice of the Court) Jose P. Bengzon, ruled that to
hold hotelkeepers or innkeeper liable for the effects of their guests, it is not
necessary that they be actually delivered to the innkeepers or their
employees. It is enough that such effects are within the hotel or inn. [39] With
greater reason should the liability of the hotelkeeper be enforced when the
missing items are taken without the guests knowledge and consent from a
safety deposit box provided by the hotel itself, as in this case.
Paragraphs (2) and (4) of the undertaking manifestly contravene Article
2003 of the New Civil Code for they allow Tropicana to be released from
liability arising from any loss in the contents and/or use of the safety deposit
box for any cause whatsoever.[40] Evidently, the undertaking was intended to
bar any claim against Tropicana for any loss of the contents of the safety
deposit box whether or not negligence was incurred by Tropicana or its
employees. The New Civil Code is explicit that the responsibility of the hotelkeeper shall extend to loss of, or injury to, the personal property of the guests
even if caused by servants or employees of the keepers of hotels or inns as
well as by strangers, except as it may proceed from any force majeure.[41] It is
the loss through force majeure that may spare the hotel-keeper from liability.
In the case at bar, there is no showing that the act of the thief or robber was
done with the use of arms or through an irresistible force to qualify the same
as force majeure.[42]
Petitioners likewise anchor their defense on Article 2002 [43] which
exempts the hotel-keeper from liability if the loss is due to the acts of his
guest, his family, or visitors. Even a cursory reading of the provision would

lead us to reject petitioners contention. The justification they raise would

render nugatory the public interest sought to be protected by the provision.
What if the negligence of the employer or its employees facilitated the
consummation of a crime committed by the registered guests relatives or
visitor? Should the law exculpate the hotel from liability since the loss was
due to the act of the visitor of the registered guest of the hotel? Hence, this
provision presupposes that the hotel-keeper is not guilty of concurrent
negligence or has not contributed in any degree to the occurrence of the loss.
A depositary is not responsible for the loss of goods by theft, unless his
actionable negligence contributes to the loss.[44]
In the case at bar, the responsibility of securing the safety deposit box
was shared not only by the guest himself but also by the management since
two keys are necessary to open the safety deposit box. Without the
assistance of hotel employees, the loss would not have occurred. Thus,
Tropicana was guilty of concurrent negligence in allowing Tan, who was not
the registered guest, to open the safety deposit box of McLoughlin, even
assuming that the latter was also guilty of negligence in allowing another
person to use his key. To rule otherwise would result in undermining the
safety of the safety deposit boxes in hotels for the management will be given
imprimatur to allow any person, under the pretense of being a family member
or a visitor of the guest, to have access to the safety deposit box without fear
of any liability that will attach thereafter in case such person turns out to be a
complete stranger. This will allow the hotel to evade responsibility for any
liability incurred by its employees in conspiracy with the guests relatives and
visitors.
Petitioners contend that McLoughlins case was mounted on the theory
of contract, but the trial court and the appellate court upheld the grant of the
claims of the latter on the basis of tort. [45] There is nothing anomalous in how
the lower courts decided the controversy for this Court has pronounced a
jurisprudential rule that tort liability can exist even if there are already
contractual relations. The act that breaks the contract may also be tort. [46]
As to damages awarded to McLoughlin, we see no reason to modify the
amounts awarded by the appellate court for the same were based on facts
and law. It is within the province of lower courts to settle factual issues such
as the proper amount of damages awarded and such finding is binding upon
this Court especially if sufficiently proven by evidence and not
unconscionable or excessive. Thus, the appellate court correctly awarded
McLoughlin Two Thousand US Dollars (US$2,000.00) and Four Thousand
Five Hundred Australian dollars (AUS$4,500.00) or their peso equivalent at
the time of payment,[47] being the amounts duly proven by evidence. [48] The

alleged loss that took place prior to 16 April 1988 was not considered since
the amounts alleged to have been taken were not sufficiently established by
evidence. The appellate court also correctly awarded the sum
of P308,880.80, representing the peso value for the air fares from Sydney to
Manila and back for a total of eleven (11) trips; [49] one-half of P336,207.05
or P168,103.52
representing
payment
to
Tropicana; [50] one-half
ofP152,683.57 or P76,341.785 representing payment to Echelon Tower;
[51]
one-half of P179,863.20 or P89,931.60 for the taxi or transportation
expenses from McLoughlins residence to Sydney Airport and from MIA to the
hotel here in Manila, for the eleven (11) trips; [52] one-half of P7,801.94
or P3,900.97
representing
Meralco
power
expenses; [53] one-half
of P356,400.00 or P178,000.00 representing expenses for food and
maintenance.[54]
The amount of P50,000.00 for moral damages is reasonable. Although
trial courts are given discretion to determine the amount of moral damages,
the appellate court may modify or change the amount awarded when it is
palpably and scandalously excessive. Moral damages are not intended to
enrich a complainant at the expense of a defendant. They are awarded only
to enable the injured party to obtain means, diversion or amusements that
will serve to alleviate the moral suffering he has undergone, by reason of
defendants culpable action.[55]
The awards of P10,000.00 as exemplary damages and P200,000.00
representing attorneys fees are likewise sustained.
WHEREFORE, foregoing premises considered, the Decision of the
Court of Appeals dated 19 October 1995 is hereby AFFIRMED. Petitioners
are directed, jointly and severally, to pay private respondent the following
amounts:
(1) US$2,000.00 and AUS$4,500.00 or their peso equivalent at the time of
payment;
(2) P308,880.80, representing the peso value for the air fares from Sydney to
Manila and back for a total of eleven (11) trips;
(3) One-half of P336,207.05 or P168,103.52 representing payment to
Tropicana Copacabana Apartment Hotel;
(4) One-half of P152,683.57 or P76,341.785 representing payment to Echelon
Tower;

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

expense from McLoughlins residence to Sydney Airport and from
MIA to the hotel here in Manila, for the eleven (11) trips;
(6) One-half of P7,801.94 or P3,900.97 representing Meralco power
expenses;
(7) One-half of P356,400.00 or P178,200.00 representing expenses for food
and maintenance;
(8) P50,000.00 for moral damages;
(9) P10,000.00 as exemplary damages; and
(10) P200,000 representing attorneys fees.
With costs.
SO ORDERED.
Puno, (Chairman), Callejo, Sr., and Chico-Nazario, JJ., concur.
Austria-Martinez, J., no part.