G.R. No.

116100 February 9, 1996

SPOUSES CRISTINO and BRIGIDA CUSTODIO and SPOUSES LITO and MARIA CRISTINA SANTOS,petitioners,
vs.
COURT OF APPEALS, HEIRS OF PACIFICO C. MABASA and REGIONAL TRIAL COURT OF PASIG, METRO MANILA, BRANCH 181, respondents.
DECISION
REGALADO, J.:
This petition for review on certiorari assails the decision of respondent Court of Appeals in CA-G.R. CV No. 29115, promulgated on November 10, 1993, which
affirmed with modification the decision of the trial court, as well as its resolution dated July 8, 1994 denying petitioner's motion for reconsideration.1
On August 26, 1982, Civil Case No. 47466 for the grant of an easement of right of way was filed by Pacifico Mabasa against Cristino Custodio, Brigida R. Custodio,
Rosalina R. Morato, Lito Santos and Maria Cristina C. Santos before the Regional Trial Court of Pasig and assigned to Branch 22 thereof. 2
The generative facts of the case, as synthesized by the trial court and adopted by the Court of Appeals, are as follows:
Perusing the record, this Court finds that the original plaintiff Pacifico Mabasa died during the pendency of this case and was substituted by Ofelia Mabasa,
his surviving spouse [and children].
The plaintiff owns a parcel of land with a two-door apartment erected thereon situated at Interior P. Burgos St., Palingon, Tipas, Tagig, Metro Manila. The
plaintiff was able to acquire said property through a contract of sale with spouses Mamerto Rayos and Teodora Quintero as vendors last September 1981.
Said property may be described to be surrounded by other immovables pertaining to defendants herein. Taking P. Burgos Street as the point of reference, on
the left side, going to plaintiff's property, the row of houses will be as follows: That of defendants Cristino and Brigido Custodio, then that of Lito and Maria
Cristina Santos and then that of Ofelia Mabasa. On the right side (is) that of defendant Rosalina Morato and then a Septic Tank (Exhibit "D"). As an access to
P. Burgos Street from plaintiff's property, there are two possible passageways. The first passageway is approximately one meter wide and is about 20 meters
distan(t) from Mabasa's residence to P. Burgos Street. Such path is passing in between the previously mentioned row of houses. The second passageway is
about 3 meters in width and length from plaintiff Mabasa's residence to P. Burgos Street; it is about 26 meters. In passing thru said passageway, a less than a
meter wide path through the septic tank and with 5-6 meters in length, has to be traversed.
When said property was purchased by Mabasa, there were tenants occupying the remises and who were acknowledged by plaintiff Mabasa as
tenants. However, sometime in February, 1982, one of said tenants vacated the apartment and when plaintiff Mabasa went to see the premises, he saw that
there had been built an adobe fence in the first passageway making it narrower in width. Said adobe fence was first constructed by defendants Santoses
along their property which is also along the first passageway. Defendant Morato constructed her adobe fence and even extended said fence in such a way that
the entire passageway was enclosed. (Exhibit "1-Santoses and Custodios, Exh. "D" for plaintiff, Exhs. "1-C", "1-D" and "1-E") And it was then that the
remaining tenants of said apartment vacated the area. Defendant Ma. Cristina Santos testified that she constructed said fence because there was an incident
when her daughter was dragged by a bicycle pedalled by a son of one of the tenants in said apartment along the first passageway. She also mentioned some
other inconveniences of having (at) the front of her house a pathway such as when some of the tenants were drunk and would bang their doors and windows.
Some of their footwear were even lost. . . .3 (Emphasis in original text; corrections in parentheses supplied)
On February 27, 1990, a decision was rendered by the TRIAL COURT, with this dispositive part:
Accordingly, judgment is hereby rendered as follows:
1) Ordering defendants Custodios and Santoses to give plaintiff permanent access ingress and egress, to the public street;
2) Ordering the plaintiff to pay defendants Custodios and Santoses the sum of Eight Thousand Pesos (P8,000) as indemnity for the permanent use of the
passageway.
The parties to shoulder their respective litigation expenses. 4
Not satisfied therewith, therein plaintiff represented by his heirs, herein private respondents, went to the COURT OF APPEALS raising the sole issue of whether or not
the lower court erred in not awarding damages in their favor. On November 10, 1993, as earlier stated, the Court of Appeals rendered its decision affirming the
judgment of the trial court with modification, the decretal portion of which disposes as follows:
WHEREFORE, the appealed decision of the lower court is hereby AFFIRMED WITH MODIFICATION only insofar as the herein grant of damages to
plaintiffs-appellants. The Court hereby orders defendants-appellees to pay plaintiffs-appellants the sum of Sixty Five Thousand (P65,000) Pesos as Actual
Damages, Thirty Thousand (P30,000) Pesos as Moral Damages, and Ten Thousand (P10,000) Pesos as Exemplary Damages. The rest of the appealed
decision is affirmed to all respects.5
On July 8, 1994, the COURT OF APPEALS DENIED PETITIONER'S MOTION FOR RECONSIDERATION.6 Petitioners then took the present recourse to us,
raising two ISSUES, namely, whether or not the grant of right of way to herein private respondents is proper, and whether or not the award of damages is in order.
With respect to the first issue, herein petitioners are already barred from raising the same. Petitioners did not appeal from the decision of the court a quo granting
private respondents the right of way, hence they are presumed to be satisfied with the adjudication therein. With the finality of the judgment of the trial court as to
petitioners, the issue of propriety of the grant of right of way has already been laid to rest.
For failure to appeal the decision of the trial court to the Court of Appeals, petitioners cannot obtain any affirmative relief other than those granted in the decision of the
trial court. That decision of the court below has become final as against them and can no longer be reviewed, much less reversed, by this Court. The rule in this
jurisdiction is that whenever an appeal is taken in a civil case, an appellee who has not himself appealed may not obtain from the appellate court any affirmative relief
other than what was granted in the decision of the lower court. The appellee can only advance any argument that he may deem necessary to defeat the appellant's claim
or to uphold the decision that is being disputed, and he can assign errors in his brief if such is required to strengthen the views expressed by the court a quo. These
assigned errors, in turn, may be considered by the appellate court solely to maintain the appealed decision on other grounds, but not for the purpose of reversing or
modifying the judgment in the appellee's favor and giving him other affirmative reliefs. 7
However, with respect to the second issue, we agree with petitioners that the Court of Appeals erred in awarding damages in favor of private respondents. The award of
damages has no substantial legal basis. A reading of the decision of the Court of Appeals will show that the award of damages was based solely on the fact that the
original plaintiff, Pacifico Mabasa, incurred losses in the form of unrealized rentals when the tenants vacated the leased premises by reason of the closure of the
passageway.
However, the mere fact that the plaintiff suffered losses does not give rise to a right to recover damages. To warrant the recovery of damages, there must be both a right
of action for a legal wrong inflicted by the defendant, and damage resulting to the plaintiff therefrom. Wrong without damage, or damage without wrong, does not
constitute a cause of action, since damages are merely part of the remedy allowed for the injury caused by a breach or wrong.8
There is a material distinction between damages and injury. Injury is the illegal invasion of a legal right; damage is the loss, hurt, or harm which results from the
injury; and damages are the recompense or compensation awarded for the damage suffered. Thus, there can be damage without injury in those instances in which the
loss or harm was not the result of a violation of a legal duty. These situations are often called DAMNUM ABSQUE INJURIA.9
In order that a plaintiff may maintain an action for the injuries of which he complains, he must establish that such injuries resulted from a breach of duty which the
defendant owed to the plaintiff a concurrence of injury to the plaintiff and legal responsibility by the person causing it.10 The underlying basis for the award of tort
damages is the premise that an individual was injured in contemplation of law. Thus, there must first be the breach of some duty and the imposition of liability for that
breach before damages may be awarded; it is not sufficient to state that there should be tort liability merely because the plaintiff suffered some pain and suffering. 11
Many accidents occur and many injuries are inflicted by acts or omissions which cause damage or loss to another but which violate no legal duty to such other person,
and consequently create no cause of action in his favor. In such cases, the consequences must be borne by the injured person alone. The law affords no remedy for
damages resulting from an act which does not amount to a legal injury or wrong.12

1
In other words, in order that the law will give redress for an act causing damage, that act must be not only hurtful, but wrongful. There must be damnum et injuria.13 If,
as may happen in many cases, a person sustains actual damage, that is, harm or loss to his person or property, without sustaining any legal injury, that is, an act or
omission which the law does not deem an injury, the damage is regarded as damnum absque injuria.14
In the case at bar, although there was damage, there was no legal injury. Contrary to the claim of private respondents, petitioners could not be said to have violated the
principle of abuse of right. In order that the principle of abuse of right provided in Article 21 of the Civil Code can be applied, it is essential that the following
requisites concur: (1) The defendant should have acted in a manner that is contrary to morals, good customs or public policy; (2) The acts should be willful;
and (3) There was damage or injury to the plaintiff.15
The act of petitioners in constructing a fence within their lot is a valid exercise of their right as owners, hence not contrary to morals, good customs or public policy. The
law recognizes in the owner the right to enjoy and dispose of a thing, without other limitations than those established by law.16 It is within the right of petitioners, as
owners, to enclose and fence their property. Article 430 of the Civil Code provides that "(e)very owner may enclose or fence his land or tenements by means of walls,
ditches, live or dead hedges, or by any other means without detriment to servitudes constituted thereon."
At the time of the construction of the fence, the lot was not subject to any servitudes. There was no easement of way existing in favor of private respondents, either by
law or by contract. The fact that private respondents had no existing right over the said passageway is confirmed by the very decision of the trial court granting a
compulsory right of way in their favor after payment of just compensation. It was only that decision which gave private respondents the right to use the said passageway
after payment of the compensation and imposed a corresponding duty on petitioners not to interfere in the exercise of said right.
Hence, prior to said decision, petitioners had an absolute right over their property and their act of fencing and enclosing the same was an act which they may lawfully
perform in the employment and exercise of said right. To repeat, whatever injury or damage may have been sustained by private respondents by reason of the rightful
use of the said land by petitioners is damnum absque injuria.17
A person has a right to the natural use and enjoyment of his own property, according to his pleasure, for all the purposes to which such property is usually applied. As a
general rule, therefore, there is no cause of action for acts done by one person upon his own property in a lawful and proper manner, although such acts incidentally
cause damage or an unavoidable loss to another, as such damage or loss is damnum absque injuria. 18 When the owner of property makes use thereof in the general and
ordinary manner in which the property is used, such as fencing or enclosing the same as in this case, nobody can complain of having been injured, because the
incovenience arising from said use can be considered as a mere consequence of community life. 19
The proper exercise of a lawful right cannot constitute a legal wrong for which an action will lie, 20 although the act may result in damage to another, for no legal right
has been invaded. 21 One may use any lawful means to accomplish a lawful purpose and though the means adopted may cause damage to another, no cause of action
arises in the latter's favor. An injury or damage occasioned thereby is damnum absque injuria. The courts can give no redress for hardship to an individual resulting
from action reasonably calculated to achieve a lawful means. 22
WHEREFORE, under the compulsion of the foregoing premises, the appealed decision of respondent Court of Appeals is hereby REVERSED and SET ASIDE and
the judgment of the trial court is correspondingly REINSTATED.
Romero and Puno, JJ., concur.
Mendoza, J., took no part.

Civil Law Torts and Damages Damnum Absque Injuria Actionable Wrong
Pacifico Mabasa owns a property behind the properties of spouses Cristino and Brigida Custodio and spouses Lito and Ma. Cristina Santos. The passageway leading to
Mabasas house passes through the properties of the Custodios and the Santoses.
Sometime in 1981, the spouses Lito and Ma. Cristina Santos built a fence around their property. This effectively deprived Mabasa passage to his house. Mabasa then
sued the Custodios and the Santoses to compel them to grant his right of way with damages. Mabasa claims that he lost tenants because of the blockade done by the
families in front. The trial court ruled in favor of Mabasa. It ordered the Custodios and the Santoses to give Mabasa a permanent easement and right of way and for
Mabasa to pay just compensation. The Santoses and the Custodios appealed. The Court of Appeals affirmed the decision of the trial court. However, the CA modified
the ruling by awarding damages in favor of Mabasa (Actual damages: P65k, Moral damages: P30k, Exemplary damages: P10k).
ISSUE: Whether or not the grant of damages by the CA is proper.
HELD: No. The award is not proper. This is an instance of damnum absque injuria.
There is a material distinction between damages and injury. Injury is the illegal invasion of a legal right; damage is the loss, hurt, or harm which results from the injury;
and damages are the recompense or compensation awarded for the damage suffered. Thus, there can be damage without injury in those instances in which the loss or
harm was not the result of a violation of a legal duty.
In this case, it is true that Mabasa may have incurred losses (damage) when his tenants left because of the fence made by the Santoses. However, when Santos built the
fence, he was well within his right. He built the fence inside his property. There was no existing easement agreement, either by contract or by operation of law, on his
property. Hence, Santos has all the right to build the fence. It was only after the judgment in the trial court that the easement was created which was even conditioned on
the payment of Mabasa of the just compensation. Santos did not commit a legal injury against Mabasa when he built the fence, therefore, there is no actionable wrong
as basis for the award of damages. In this case, the damage has to be borne by Mabasa.

G.R. No. 157314 July 29, 2005

FAR EAST BANK AND TRUST COMPANY, NOW BANK OF THE PHILIPPINE ISLANDS, Petitioners,
vs.
THEMISTOCLES PACILAN, JR., Respondent.
DECISION
CALLEJO, SR., J.:
Before the Court is the petition for review on certiorari filed by Far East Bank and Trust Company (now Bank of the Philippines Islands) seeking the reversal of the
Decision1 dated August 30, 2002 of the Court of Appeals (CA) in CA-G.R. CV No. 36627 which ordered it, together with its branch accountant, Roger Villadelgado, to
pay respondent Themistocles Pacilan, Jr.2 the total sum of P100,000.00 as moral and exemplary damages. The assailed decision affirmed with modification that of the
Regional Trial Court (RTC) of Negros Occidental, Bacolod City, Branch 54, in Civil Case No. 4908. Likewise sought to be reversed and set aside is the Resolution
dated January 17, 2003 of the appellate court, denying petitioner banks motion for reconsideration.
The case stemmed from the following undisputed facts:
Respondent Pacilan opened a current account with petitioner banks Bacolod Branch on May 23, 1980. His account was denominated as Current Account No. 53208
(0052-00407-4). The respondent had since then issued several postdated checks to different payees drawn against the said account. Sometime in March 1988, the
respondent issued Check No. 2434886 in the amount of P680.00 and the same was presented for payment to petitioner bank on April 4, 1988.
Upon its presentment on the said date, Check No. 2434886 was dishonored by petitioner bank. The next day, or on April 5, 1988, the respondent deposited to his current
account the amount of P800.00. The said amount was accepted by petitioner bank; hence, increasing the balance of the respondents deposit to P1,051.43.
Subsequently, when the respondent verified with petitioner bank about the dishonor of Check No. 2434866, he discovered that his current account was closed on the
ground that it was "improperly handled." The records of petitioner bank disclosed that between the period of March 30,
1988 and April 5, 1988, the respondent issued four checks, to wit: Check No. 2480416 for P6,000.00; Check No. 2480419 for P50.00; Check No. 2434880 for P680.00
and; Check No. 2434886 for P680.00, or a total amount ofP7,410.00. At the time, however, the respondents current account with petitioner bank only had a deposit
ofP6,981.43. Thus, the total amount of the checks presented for payment on April 4, 1988 exceeded the balance of the respondents deposit in his account. For this
reason, petitioner bank, through its branch accountant, Villadelgado, closed the respondents current account effective the evening of April 4, 1988 as it then had an
overdraft of P428.57. As a consequence of the overdraft, Check No. 2434886 was dishonored.
2
On April 18, 1988, the respondent wrote to petitioner bank complaining that the closure of his account was unjustified. When he did not receive a reply from petitioner
bank, the RESPONDENT FILED WITH THE RTC of Negros Occidental, Bacolod City, Branch 54, a complaint for damages against petitioner bank and
Villadelgado. The case was docketed as Civil Case No. 4908. The respondent, as complainant therein, alleged that the closure of his current account by petitioner bank
was unjustified because on the first banking hour of April 5, 1988, he already deposited an amount sufficient to fund his checks. The respondent pointed out that Check
No. 2434886, in particular, was delivered to petitioner bank at the close of banking hours on April 4, 1988 and, following normal banking procedure, it
(petitioner bank) had until the last clearing hour of the following day, or on April 5, 1988, to honor the check or return it, if not funded. In disregard of this banking
procedure and practice, however, petitioner bank hastily closed the respondents current account and dishonored his Check No. 2434886.
The respondent further alleged that prior to the closure of his current account, he had issued several other postdated checks. The petitioner banks act of closing his
current account allegedly preempted the deposits that he intended to make to fund those checks. Further, the petitioner banks act exposed him to criminal prosecution
for violation of Batas Pambansa Blg. 22.
According to the respondent, the indecent haste that attended the closure of his account was patently malicious and intended to embarrass him. He claimed that he is a
Cashier of Prudential Bank and Trust Company, whose branch office is located just across that of petitioner bank, and a prominent and respected leader both in the civic
and banking communities. The alleged malicious acts of petitioner bank besmirched the respondents reputation and caused him "social humiliation, wounded feelings,
insurmountable worries and sleepless nights" entitling him to an award of damages.
In their answer, petitioner bank and Villadelgado maintained that the respondents current account was subject to petitioner banks Rules and Regulations Governing the
Establishment and Operation of Regular Demand
Deposits which provide that "the Bank reserves the right to close an account if the depositor frequently draws checks against insufficient funds and/or uncollected
deposits" and that "the Bank reserves the right at any time to return checks of the depositor which are drawn against insufficient funds or for any reason." 3
They showed that the respondent had improperly and irregularly handled his current account. For example, in 1986, the respondents account was overdrawn 156 times,
in 1987, 117 times and in 1988, 26 times. In all these instances, the account was overdrawn due to the issuance of checks against insufficient funds. The respondent had
also signed several checks with a different signature from the specimen on file for dubious reasons.
When the respondent made the deposit on April 5, 1988, it was obviously to cover for issuances made the previous day against an insufficiently funded account. When
his Check No. 2434886 was presented for payment on April 4, 1988, he had already incurred an overdraft; hence, petitioner bank rightfully dishonored the same for
insufficiency of funds.
After due proceedings, THE COURT A QUO rendered judgment in favor of the respondent as it ordered the petitioner bank and Villadelgado, jointly and severally, to
pay the respondent the amounts of P100,000.00 as moral damages and P50,000.00 as exemplary damages and costs of suit. In so ruling, the court a quo also cited
petitioner banks rules and regulations which state that "a charge of P10.00 shall be levied against the depositor for any check that is taken up as a returned item due to
insufficiency of funds on the date of receipt from the clearing office even if said check is honored and/or covered by sufficient deposit the following banking day." The
same rules and regulations also provide that "a check returned for insufficiency of funds for any reason of similar import may be subsequently recleared for one more
time only, subject to the same charges."
According to the court a quo, following these rules and regulations, the respondent, as depositor, had the right to put up sufficient funds for a check that was taken as a
returned item for insufficient funds the day following the receipt of said check from the clearing office. In fact, the said check could still be recleared for one more time.
In previous instances, petitioner bank notified the respondent when he incurred an overdraft and he would then deposit sufficient funds the following day to cover the
overdraft. Petitioner bank thus acted unjustifiably when it immediately closed the respondents account on April 4, 1988 and deprived him of the opportunity to reclear
his check or deposit sufficient funds therefor the following day.
As a result of the closure of his current account, several of the respondents checks were subsequently dishonored and because of this, the respondent was humiliated,
embarrassed and lost his credit standing in the business community. The court a quo further ratiocinated that even granting arguendo that petitioner bank had the right
to close the respondents account, the manner which attended the closure constituted an abuse of the
said right. Citing Article 19 of the Civil Code of the Philippines which states that "[e]very 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" and Article 20 thereof which states that "[e]very person who, contrary to law, wilfully or
negligently causes damage to another, shall indemnify the latter for the same," the court a quo adjudged petitioner bank of acting in bad faith. It held that, under the
foregoing circumstances, the respondent is entitled to an award of moral and exemplary damages.
The decretal portion of the court a quos decision reads:
WHEREFORE, PREMISES CONSIDERED, judgment is hereby rendered:
1. Ordering the defendants [petitioner bank and Villadelgado], jointly and severally, to pay plaintiff [the respondent] the sum of P100,000.00 as moral damages;
2. Ordering the defendants, jointly and severally, to pay plaintiff the sum of P50,000.00 as exemplary damages plus costs and expenses of the suit; and
3. Dismissing [the] defendants counterclaim for lack of merit.
SO ORDERED.4
On appeal, the CA rendered the Decision dated August 30, 2002, affirming with modification the decision of the court a quo.
The appellate court substantially affirmed the factual findings of the court a quo as it held that petitioner bank unjustifiably closed the respondents account
notwithstanding that its own rules and regulations
allow that a check returned for insufficiency of funds or any reason of similar import, may be subsequently recleared for one more time, subject to standard charges.
Like the court a quo, the appellate court observed that in several instances in previous years, petitioner bank would inform the respondent when he incurred an overdraft
and allowed him to make a timely deposit to fund the checks that were initially dishonored for insufficiency of funds. However, on April 4, 1988, petitioner bank
immediately closed the respondents account without even notifying him that he had incurred an overdraft. Even when they had already closed his account on April 4,
1988, petitioner bank still accepted the deposit that the respondent made on April 5, 1988, supposedly to cover his checks.
Echoing the reasoning of the court a quo, the CA declared that even as it may be conceded that petitioner bank had reserved the right to close an account for repeated
overdrafts by the respondent, the exercise of that right must never be despotic or arbitrary. That petitioner bank chose to close the account outright and return the check,
even after accepting a deposit sufficient to cover the said check, is contrary to its duty to handle the respondents account with utmost fidelity. The exercise of the right
is not absolute and good faith, at least, is required. The manner by which petitioner bank closed the account of the respondent runs afoul of Article 19 of the Civil Code
which enjoins every person, in the exercise of his rights, "to give every one his due, and observe honesty and good faith."

The CA concluded that petitioner banks precipitate and imprudent closure of the respondents account had caused him, a respected officer of several civic and banking
associations, serious anxiety and humiliation. It had, likewise, tainted his credit standing. Consequently, the award of damages is warranted. The CA, however, reduced
the amount of damages awarded by the court a quo as it found the same to be excessive:
We, however, find excessive the amount of damages awarded by the RTC. In our view the reduced amount ofP75,000.00 as moral damages and P25,000.00 as
exemplary damages are in order. Awards for damages are not meant to enrich the plaintiff-appellee [the respondent] at the expense of defendants-appellants [the
petitioners], but to obviate the moral suffering he has undergone. The award is aimed at the restoration, within limits possible, of the status quo ante, and should be
proportionate to the suffering inflicted.5
The dispositive portion of the assailed CA decision reads:
WHEREFORE, the decision appealed from is hereby AFFIRMED, subject to the MODIFICATION that the award of moral damages is reduced to P75,000.00 and the
award of exemplary damages reduced to P25,000.00.
SO ORDERED.6
Petitioner bank sought the reconsideration of the said decision but in the assailed Resolution dated January 17, 2003, the appellate court denied its motion. Hence, the
recourse to this Court.
3
Petitioner bank maintains that, in closing the account of the respondent in the evening of April 4, 1988, it acted in good faith and in accordance with the rules and
regulations governing the operation of a regular demand deposit which reserves to the bank "the right to close an account if the depositor frequently draws checks
against insufficient funds and/or uncollected deposits." The same rules and regulations also provide that "the depositor is not entitled, as a matter of right, to overdraw
on this deposit and the bank reserves the right at any time to return checks of the depositor which are drawn against insufficient funds or for any reason."
It cites the numerous instances that the respondent had overdrawn his account and those instances where he deliberately signed checks using a signature different from
the specimen on file. Based on these facts, petitioner bank was constrained to close the respondents account for improper and irregular handling and returned his Check
No. 2434886 which was presented to the bank for payment on April 4, 1988.
Petitioner bank further posits that there is no law or rule which gives the respondent a legal right to make good his check or to deposit the corresponding amount to
cover said check within 24 hours after the same is dishonored or returned by the bank for having been drawn against insufficient funds. It vigorously denies having
violated Article 19 of the Civil Code as it insists that it acted in good faith and in accordance with the pertinent banking rules and regulations.
THE PETITION IS IMPRESSED WITH MERIT.
A perusal of the respective decisions of the court a quo and the appellate court show that the award of damages in the respondents favor was anchored mainly on
Article 19 of the Civil Code which, quoted anew below, reads:
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.
THE ELEMENTS OF ABUSE OF RIGHTS ARE THE FOLLOWING: (a) the existence of a legal right or duty; (b) which is exercised in bad faith; and (c) for the
sole intent of prejudicing or injuring another.7 Malice or bad faith is at the core of the said provision.8 The law always presumes good faith and any person who seeks to
be awarded damages due to acts of another has the burden of proving that the latter acted in bad faith or with ill-motive. 9 Good faith refers to the state of the mind which
is manifested by the acts of the individual concerned. It consists of the intention to abstain from taking an unconscionable and unscrupulous advantage of another. 10 Bad
faith does not simply connote bad judgment or simple negligence, dishonest purpose or some moral obliquity and conscious doing of a wrong, a breach of known duty
due to some motives or interest or ill-will that partakes of the nature of fraud.11Malice 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.12
Undoubtedly, petitioner bank has the right to close the account of the respondent based on the following provisions of its Rules and Regulations Governing the
Establishment and Operation of Regular Demand Deposits:
10) The Bank reserves the right to close an account if the depositor frequently draws checks against insufficient funds and/or uncollected deposits.

12)
However, it is clearly understood that the depositor is not entitled, as a matter of right, to overdraw on this deposit and the bank reserves the right at any time to return
checks of the depositor which are drawn against insufficient funds or for any other reason.
The facts, as found by the court a quo and the appellate court, do not establish that, in the exercise of this right, petitioner bank committed an abuse thereof.
Specifically, the second and third elements for abuse of rights are not attendant in the present case. The evidence presented by petitioner bank negates the existence of
bad faith or malice on its part in closing the respondents account on April 4, 1988 because on the said date the same was already overdrawn. The respondent issued four
checks, all due on April 4, 1988, amounting to P7,410.00 when the balance of his current account deposit was only P6,981.43. Thus, he incurred an overdraft of P428.57
which resulted in the dishonor of his Check No. 2434886. Further, petitioner bank showed that in 1986, the current account of the respondent was overdrawn 156 times
due to his issuance of checks against insufficient funds.13 In 1987, the said account was overdrawn 117 times for the same
reason.14 Again, in 1988, 26 times.15 There were also several instances when the respondent issued checks deliberately using a signature different from his specimen
signature on file with petitioner bank.16 All these circumstances taken together justified the petitioner banks closure of the respondents account on April 4, 1988 for
"improper handling."
It is observed that nowhere under its rules and regulations is petitioner bank required to notify the respondent, or any depositor for that matter, of the closure of the
account for frequently drawing checks against insufficient funds. No malice or bad faith could be imputed on petitioner bank for so acting since the records bear out that
the respondent had indeed been improperly and irregularly handling his account not just a few times but hundreds of times. Under the circumstances, petitioner bank
could not be faulted for exercising its right in accordance with the express rules and regulations governing the current accounts of its depositors. Upon the opening of
his account, the respondent had agreed to be bound by these terms and conditions.
Neither the fact that petitioner bank accepted the deposit made by the respondent the day following the closure of his account constitutes bad faith or malice on the part
of petitioner bank. The same could be characterized as simple negligence by its personnel. Said act, by itself, is not constitutive of bad faith.
The respondent had thus failed to discharge his burden of proving bad faith on the part of petitioner bank or that it was motivated by ill-will or spite in closing his
account on April 4, 1988 and in inadvertently accepting his deposit on April 5, 1988.
Further, it has not been shown that these acts were done by petitioner bank with the sole intention of prejudicing and injuring the respondent. It is conceded that the
respondent may have suffered damages as a result of the closure of his current account. However, there is a material distinction between damages and injury. The Court
had the occasion to explain the distinction between damages and injury in this wise:
Injury is the illegal invasion of a legal right; damage is the loss, hurt or harm which results from the injury; and damages are the recompense or compensation
awarded for the damage suffered. Thus, there can be damage without injury in those instances in which the loss or harm was not the result of a violation of a legal duty.
In such cases, the consequences must be borne by the injured person alone, the law affords no remedy for damages resulting from an act which does not amount to a
legal injury or wrong. These situations are often called damnum absque injuria.
In other words, in order that a plaintiff may maintain an action for the injuries of which he complains, he must establish that such injuries resulted from a breach of duty
which the defendant owed to the plaintiff a concurrence of injury to the plaintiff and legal responsibility by the person causing it. The underlying basis for the award
of tort damages is the premise that the individual was injured in contemplation of law. Thus, there must first be a breach of some duty and the imposition of liability for
that breach before damages may be awarded; and the breach of such duty should be the proximate cause of the injury. 17
Whatever damages the respondent may have suffered as a consequence, e.g., dishonor of his other insufficiently funded checks, would have to be borne by him alone. It
was the respondents repeated improper
and irregular handling of his account which constrained petitioner bank to close the same in accordance with the rules and regulations governing its depositors current
accounts. The respondents case is clearly one of damnum absque injuria.
WHEREFORE, the petition is GRANTED. The Decision dated August 30, 2002 and Resolution dated January 17, 2003 of the Court of Appeals in CA-G.R. CV No.
36627 are REVERSED AND SET ASIDE.
SO ORDERED.

Facts:
1. Pacilan maintains a current account with petitioner bank (now BPI). He issued several postdated checks, the last one being check no. 2434886 amounting to P680.
The said check was presented to petitioner bank for payment on April 4, 1988 but was dishonored. It appeared that the account of Pacilan has been closed on the
evening of April 4 on the ground that it was 'improperly handled'.

2. It appeared that the plaintiff issued four checks from March 30 - April 4, 1988 amounting in total to P7,410, on one hand, his funds in the bank only amounted to
P6,981.43, thus an overdraft of P 428.57 resulted therefrom. Consequently, the last check was dishonored despite the fact that plaintiff deposited the amount the
following day.

4
3. Pacilan wrote a complaint to the bank but after the bank did not reply, he filed an action for damages against it and the employee (Villadelgado) who closed the
account. The plaintiff alleged that the immediate closure of his account was malicious and intended to embarrass him.

4. The lower court ruled in favor of the plaintiff and awarded actual damages (P100,000) and exemplary damages (P50,000). The bank appealed, but the CA affirmed
the lower court's decision with modifications and held that the closure of the bank of plaintiff's account despite its rules and regulation allowing a re-clearing of a check
returned for insufficiency of funds, is patently malicious and unjustifiable. Hence, this appeal.

5. The petitioner contended that in closing the account, it acted in good faith and in accordance with the pertinent banking rules and regulations governing the
operations of a regular demand deposit, allowing it to close an account if the depositor frequently draws checks against insufficient funds or uncollected deposits.

Issue: Whether or not the petitioner is liable for damages

NO. The award of damages under Art. 19 of the Civil Code is unjustifiable. The petitioner has the right to close the account of plaintiff based on the rules and
regulations on regular demand deposits. The facts do not show that the petitioner abused its rights in the exercise of its duties. The evidence negates the existence of bad
faith and malice on the part of the petitioner bank, which are the second and third elements necessary to prove an abuse of right in violation of Art. 19.

The records also showed that indeed plaintiff has mishandled his account by issuing checks previously against insufficient funds not just once, but more than a hundred
times.

Moreover, the acceptance by the bank of the deposit the day after the closure of the account cannot be considered as bad faith nor done with malice but a mere simple
negligence of its personnel.

As a result, whatever damage the plaintiff has suffered (by virtue of the subsequent dishonor of the other checks he issued) should be borne by him alone as these was
the result of his own act in irregularly handling his account.

G.R. No. L-68102 July 16, 1992

GEORGE MCKEE and ARACELI KOH MCKEE, petitioners,
vs.
INTERMEDIATE APPELLATE COURT, JAIME TAYAG and ROSALINDA MANALO, respondents.
G.R. No. L-68103 July 16, 1992
CARMEN DAYRIT KOH, LETICIA KOH, JULIETA KOH TUQUERO, ARACELI KOH MCKEE, ANTONIO KOH and ELIZABETH KOH
TURLA, petitioners,
vs.
INTERMEDIATE APPELLATE COURT, JAIME TAYAG and ROSALINDA MANALO, respondents.

DAVIDE, JR., J.:

Petitioners urge this Court to review and reverse the Resolution of the Court of Appeals in C.A.-G.R. CV Nos. 69040-41, promulgated on 3 April 1984, which set aside
its previous Decision dated 29 November 1983 reversing the Decision of the trial court which dismissed petitioners' complaints in Civil Case No. 4477 and Civil Case
No. 4478 of the then Court of First Instance (now Regional Trial Court) of Pampanga entitled "Carmen Dayrit Koh, Leticia Koh, Julieta Koh Tuquero, Araceli Koh
McKee and Elizabeth Koh Turla vs. Jaime Tayag and Rosalinda Manalo," and "George McKee and Araceli Koh McKee vs. Jaime Tayag and Rosalinda Manalo,"
respectively, and granted the private respondents' counterclaim for moral damages, attorney's fees and litigation expenses.
The said civil cases for damages based on quasi-delict were filed as a result of a vehicular accident which led to the deaths of Jose Koh, Kim Koh McKee and Loida
Bondoc and caused physical injuries to George Koh McKee, Christopher Koh McKee and petitioner Araceli Koh McKee.
Petitioners in G.R. No. 68102, parents of the minors George Koh McKee, Christopher Koh McKee and the deceased Kim Koh McKee, were the plaintiffs in Civil Case
No. 4478, while petitioner Carmen Dayrit Koh and her co-petitioners in G.R. No. 68103, who are the wife and children, respectively, of the late Jose Koh, were the
plaintiffs in Civil Case No. 4477. Upon the other hand, private respondents are the owners of the cargo truck which figured in the mishap; a certain Ruben Galang was
the driver of the truck at the time of the accident.
The antecedent facts are not disputed.
Between nine and ten o'clock in the morning of 8 January 1977, in Pulong Pulo Bridge along MacArthur Highway, between Angeles City and San Fernando, Pampanga,
a head-on-collision took place between an International cargo truck, Loadstar, with Plate No. RF912-T Philippines '76 owned by private respondents, and driven by
Ruben Galang, and a Ford Escort car bearing Plate No. S2-850 Pampanga '76 driven by Jose Koh. The collision resulted in the deaths of Jose Koh, Kim Koh McKee
and Loida Bondoc, and physical injuries to George Koh McKee, Christopher Koh McKee and Araceli Koh McKee, all passengers of the Ford Escort.
Jose Koh was the father of petitioner Araceli Koh McKee, the mother of minors George, Christopher and Kim Koh McKee. Loida Bondoc, on the other hand, was the
baby sitter of one and a half year old Kim. At the time of the collision, Kim was seated on the lap of Loida Bondoc who was at the front passenger's seat of the car while
Araceli and her two (2) sons were seated at the car's back seat.
Immediately before the collision, the cargo truck, which was loaded with two hundred (200) cavans of rice weighing about 10,000 kilos, was traveling southward from
Angeles City to San Fernando Pampanga, and was bound for Manila. The Ford Escort, on the other hand, was on its way to Angeles City from San Fernando. When the
northbound car was about (10) meters away from the southern approach of the bridge, two (2) boys suddenly darted from the right side of the road and into the lane of
the car. The boys were moving back and forth, unsure of whether to cross all the way to the other side or turn back. Jose Koh blew the horn of the car, swerved to the
left and entered the lane of the truck; he then switched on the headlights of the car, applied the brakes and thereafter attempted to return to his lane. Before he could do
so, his car collided with the truck. The collision occurred in the lane of the truck, which was the opposite lane, on the said bridge.
The incident was immediately reported to the police station in Angeles City; consequently, a team of police officers was forthwith dispatched to conduct an on the spot
investigation. In the sketch 1 prepared by the investigating officers, the bridge is described to be sixty (60) "footsteps" long and fourteen (14) "footsteps" wide seven
(7) "footsteps" from the center line to the inner edge of the side walk on both sides. 2 Pulong Pulo Bridge, which spans a dry brook, is made of concrete with soft
shoulders and concrete railings on both sides about three (3) feet high.
The sketch of the investigating officer discloses that the right rear portion of the cargo truck was two (2) "footsteps" from the edge of the right sidewalk, while its left
front portion was touching the center line of the bridge, with the smashed front side of the car resting on its front bumper. The truck was about sixteen (16) "footsteps"
away from the northern end of the bridge while the car was about thirty-six (36) "footsteps" from the opposite end. Skid marks produced by the right front tire of the
truck measured nine (9) "footsteps", while skid marks produced by the left front tire measured five (5) "footsteps." The two (2) rear tires of the truck, however,
produced no skid marks.
In his statement to the investigating police officers immediately after the accident, Galang admitted that he was traveling at thirty (30) miles (48 kilometers) per hour.
As a consequence of the collision, two (2) cases, Civil Case No. 4477 and No. 4478, were filed on 31 January 1977 before the then Court of First Instance of Pampanga
and were raffled to Branch III and Branch V of the said court, respectively. In the first, herein petitioners in G.R. No. 68103 prayed for the award of P12,000.00 as
indemnity for the death of Jose Koh, P150,000.00 as moral damages, P60,000.00 as exemplary damages, P10,000.00 for litigation expenses, P6,000.00 for burial
expenses, P3,650.00 for the burial lot and P9,500.00 for the tomb, plus attorney's fees. 3 In the second case, petitioners in G.R. No. 68102 prayed for the following: (a)
5
in connection with the death of Kim McKee, the sum of P12,000.00 as death benefit, P3,150.00 for funeral services, P3,650.00 for the cemetery lot, P3,000.00 for the
tomb, P50,000.00 as moral damages, P10,000.00 as exemplary damages and P2,000.00 as miscellaneous damages; (b) in the case of Araceli Koh McKee, in connection
with the serious physical injuries suffered, the sum of P100,000.00 as moral damages, P20,000.00 as exemplary damages, P12,000.00 for loss of earnings, P5,000.00 for
the hospitalization expenses up to the date of the filing of the complaint; and (c) with respect to George McKee, Jr., in connection with the serious physical injuries
suffered, the sum of P50,000.00 as moral damages, P20,000.00 as exemplary damages and the following medical expenses: P3,400 payable to the Medical Center,
P3,500.00 payable to the St. Francis Medical Center, P5,175.00 payable to the Clark Air Base Hospital, and miscellaneous expenses amounting to P5,000.00. They also
sought an award of attorney's fees amounting to 25% of the total award plus traveling and hotel expenses, with costs. 4
On 1 March 1977, an Information charging Ruben Galang with the crime of "Reckless Imprudence Resulting to (sic) Multiple Homicide and Physical Injuries and
Damage to Property" was filed with the trial court. It was docketed as Criminal Case No. 3751 and was raffled to Branch V of the court, the same Branch where Civil
Case No. 4478 was assigned. 5
In their Answer with Counterclaim in Civil Case No. 4477, private respondents asserted that it was the Ford Escort car which "invaded and bumped (sic) the lane of the
truck driven by Ruben Galang and, as counterclaim, prayed for the award of P15,000.00 as attorney's fees, P20,000.00 as actual and liquidated damages, P100,000.00 as
moral damages and P30,000.00 as business losses. 6 In Civil Case No. 4478, private respondents first filed a motion to dismiss on grounds of pendency of another action
(Civil Case No. 4477) and failure to implead an indispensable party, Ruben Galang, the truck driver; they also filed a motion to consolidate the case with Civil Case No.
4477 pending before Branch III of the same court, which was opposed by the plaintiffs. 7 Both motions were denied by Branch V, then presided over by Judge Ignacio
Capulong. Thereupon, private respondents filed their Answer with Counter-claim 8 wherein they alleged that Jose Koh was the person "at fault having approached the
lane of the truck driven by Ruben Galang, . . . which was on the right lane going towards Manila and at a moderate speed observing all traffic rules and regulations
applicable under the circumstances then prevailing;" in their counterclaim, they prayed for an award of damages as may be determined by the court after due hearing,
and the sums of P10,000.00 as attorney's fees and P5,000.00 as expenses of litigation.
Petitioners filed their Answers to the Counterclaims in both cases.
To expedite the proceedings, the plaintiffs in Civil Case No. 4478 filed on 27 March 1978 a motion to adopt the testimonies of witnesses taken during the hearing of
Criminal Case No. 3751, which private respondents opposed and which the court denied. 9 Petitioners subsequently moved to reconsider the order denying the motion
for consolidation, 10 which Judge Capulong granted in the Order of 5 September 1978; he then directed that Civil Case No. 4478 be consolidated with Civil Case No.
4477 in Branch III of the court then presided over by Judge Mario Castaeda, Jr.
Left then with Branch V of the trial court was Criminal Case No. 3751.
In the civil cases, the plaintiffs presented as witnesses Araceli Koh McKee, Fernando Nuag, Col. Robert Fitzgerald, Primitivo Parel, Eugenio Tanhueco, Carmen Koh
and Antonio Koh, 11 and offered several documentary exhibits. Upon the other hand, private respondents presented as witnesses Ruben Galang, Zenaida Soliman, Jaime
Tayag and Roman Dayrit. 12
In the criminal case, the prosecution presented as witnesses Mrs. Araceli McKee, Salud Samia, Pfc. Fernando Nuag, Dr. Ramon Panlilio, Dr. Robert Fitzgerald, Dr.
Roberto Yuson, Dr. Hector, Ulanday, Pfc. Benigno de Leon, Marina Bolos, Primitivo Parel, Rogelio Pineda, Benito Caraan and Eugenio Tanhueco, and offered several
documentary exhibits. 13 Upon the other hand, the defense presented the accused Ruben Galang, Luciano Punzalan, Zenaida Soliman and Roman Dayrit, and offered
documentary exhibits. 14
On 1 October 1980, Judge Capulong rendered a decision against the accused Ruben Galang in the aforesaid criminal case. The dispositive portion of the decision reads
as follows:
WHEREFORE, in view of the foregoing, judgment is hereby rendered finding the accused Ruben Galang guilty beyond reasonable doubt of the
crime charged in the information and after applying the provisions of Article 365 of the Revised Penal Code and indeterminate sentence law, this
Court, imposes upon said accused Ruben Galang the penalty of six (6) months of arresto mayor as minimum to two (2) years, four (4) months
and one (1) day of prision correccional as maximum; the accused is further sentenced to pay and indemnify the heirs of Loida Bondoc the
amount of P12,000.00 as indemnity for her death; to reimburse the heirs of Loida Bondoc the amount of P2,000.00 representing the funeral
expenses; to pay the heirs of Loida Bondoc the amount of P20,000.00 representing her loss of income; to indemnify and pay the heirs of the
deceased Jose Koh the value of the car in the amount of P53,910.95, and to pay the costs. 15
The aforecited decision was promulgated only on 17 November 1980; on the same day, counsel for petitioners filed with Branch III of the court where the two (2)
civil cases were pending a manifestation to that effect and attached thereto a copy of the decision. 16
Upon the other hand, Judge Mario Castaeda, Jr. dismissed the two (2) civil cases on 12 November 1980 and awarded the private respondents moral damages,
exemplary damages and attorney's fees. 17 The dispositive portion of the said decision reads as follows:
WHEREFORE, finding the preponderance of evidence to be in favor of the defendants and against the plaintiffs, these cases are hereby ordered
DISMISSED with costs against the plaintiffs. The defendants had proven their counter-claim, thru evidences (sic) presented and unrebutted.
Hence, they are hereby awarded moral and exemplary damages in the amount of P100,000.00 plus attorney's fee of P15,000.00 and litigation
expenses for (sic) P2,000.00. The actual damages claimed for (sic) by the defendants is (sic) hereby dismissing for lack of proof to that effect
(sic). 18
A copy of the decision was sent by registered mail to the petitioners on 28 November 1980 and was received on 2 December 1980. 19
Accused Ruben Galang appealed the judgment of conviction to the Court of Appeals. The appeal was docketed as C.A.-G.R. Blg. 24764-CR and was assigned to the
court's Third Division. Plaintiffs in Civil Cases Nos. 4477 and 4478 likewise separately appealed the 12 November 1980 decision to the appellate court. The appeals
were docketed as C.A.-G.R. No. 69041-R and C.A.-G.R. No. 69040-R, respectively, and were assigned to the Fourth Civil Cases Division.
On 4 October 1982, the respondent Court promulgated its decision 20 in C.A.-G.R. Blg. 24764-CR affirming the conviction of Galang. 21 The dispositive portion of the
decision reads:
DAHIL DITO, ang hatol na paksa ng naritong paghahabol ay Aming pinagtitibay sa kanyang kabuuan. Ang naghahabol pa rin ang
pinagbabayad ng gugol ng paghahabol.
A motion for reconsideration of the decision was denied by the respondent Court in its Kapasiyahan promulgated on 25 November 1982. 22 A petition for its
review 23 was filed with this Court; said petition was subsequently denied. A motion for its reconsideration was denied with finality in the Resolution of 20 April 1983. 24
On 29 November 1983, respondent Court, by then known as the Intermediate Appellate Court, promulgated its consolidated decision in A.C.-G.R. CV Nos. 69040 and
69041, 25 the dispositive portion of which reads:
WHEREFORE, the decision appealed from it hereby reversed and set aside and another one is rendered, ordering defendants-appellees to pay
plaintiffs-appellants as follows:
For the death of Jose Koh:
P 50,000.00 as moral damages
P 12,000.00 as death indemnity
P 16,000.00 for the lot and tomb (Exhs. U and U-1)
P 4,000.00 expenses for holding a wake (p. 9, tsn April 19, 1979)
P 950.00 for the casket (Exh. M)
P 375.00 for the vault services (Exhs. V and V-1)
For the death of Kim Koh McKee:
P 50,000.00 as moral damages
P 12,000.00 as death indemnity
P 1,000.00 for the purchase of the burial lot (Exh. M)
6
 P 950.00 for funeral services (Exh. M-1)
P 375.00 for vault services (Exhs. V and V-1)
For the physical injuries suffered by George Koh McKee:
P 25,000.00 as moral damages
P 672.00 for Clark Field Hospital (Exh. E)
P 4,384.00 paid to Angeles Medical Clinic (Exhs. D, D-1 and
D-2)
P 1,555.00 paid to St. Francis Medical Center (Exhs. B and B-1)
For the physical injuries suffered by Araceli Koh McKee:
P 25,000.00 as moral damages
P 1,055.00 paid to St. Francis Medical Center (Exhs. G and
G-1)
P 75.00 paid to St. Francis Medical Center (Exhs. G-2 and G-3)
P 428.00 to Carmelite General Hospital (Exh. F)
P 114.20 to Muoz Clinic (Exh. MM)
For the physical injuries suffered by Christopher Koh McKee:
P 10,000.00 as moral damages
P 1,231.10 to St. Francis Medical Center (Exhs. L and L-1)
P 321.95 to F.C.E.A. Hospital (Exhs. G and D-1)
In addition, We award P10,000.00 as counsel (sic) fees in Civil Case No. 4477 and another P10,000.00; as counsel (sic) fees in Civil Case No.
4478.
No pronouncement as to costs.
SO ORDERED. 26
The decision is anchored principally on the respondent Court's findings that it was Ruben Galang's inattentiveness or reckless imprudence which caused the accident.
The appellate court further said that the law presumes negligence on the part of the defendants (private respondents), as employers of Galang, in the selection and
supervision of the latter; it was further asserted that these defendants did not allege in their Answers the defense of having exercised the diligence of a good father of a
family in selecting and supervising the said employee. 27 This conclusion of reckless imprudence is based on the following findings of fact:
In the face of these diametrically opposed judicial positions, the determinative issue in this appeal is posited in the fourth assigned error as
follows:
IV
THE TRIAL COURT ERRED WHEN IT HELD THE (sic) DRIVER OF THE TRUCK STOPPED HIS TRUCK BLEW HIS HORN SWITCHED
ON HIS HEADLIGHTS AND COULD NOT SWERVE TO THE RIGHT.
Supportive of plaintiffs' version, principal witness Araceli Koh McKee testified thus:
Q What happened after that, as you approached the bridge?
A When we were approaching the bridge, two (2) boys tried to cross the right lane on the right side of the highway going to
San Fernando. My father, who is (sic) the driver of the car tried to avoid the two (2) boys who were crossing, he blew his
horn and swerved to the left to avoid hitting the two (2) boys. We noticed the truck, he switched on the headlights to warn
the truck driver, to slow down to give us the right of way to come back to our right lane.
Q Did the truck slow down?
A No, sir, it did not, just (sic) continued on its way.
Q What happened after that?
A After avoiding the two (2) boys, the car tried to go back to the right lane since the truck is (sic) coming, my father
stepped on the brakes and all what (sic) I heard is the sound of impact (sic), sir. (tsn, pp. 5-6, July 22, 1977); or (Exhibit
"O" in these Civil Cases).
xxx xxx xxx
Q Mrs. how did you know that the truck driven by the herein accused, Ruben Galang did not reduce its speed before the
actual impact of collision (sic) as you narrated in this Exhibit "1," how did you know (sic)?
A It just kept on coming, sir. If only he reduced his speed, we could have got (sic) back to our right lane on side (sic) of the
highway, sir. (tsn. pp. 33-34 July 22, 1977) or (Exhibit "O" in these Civil Cases) (pp. 30-31, Appellants' Brief).
Plaintiffs' version was successfully corroborated to Our satisfaction by the following facts and circumstances:
1. An impartial eye-witness to the mishap, Eugenio Tanhueco, declared that the truck stopped only when it had already collided with the car:
xxx xxx xxx
Tanhueco repeated the same testimony during the hearing in the criminal case:
xxx xxx xxx
Tanhueco could (sic) not be tagged as an accommodation witness because he was one of the first to arrive at the scene of the accident. As a matter
of fact, he brought one of the injured passengers to the hospital.
We are not prepared to accord faith and credit to defendants' witnesses, Zenaida Soliman, a passenger of the truck, and Roman Dayrit, who
supposedly lived across the street.
Regarding Soliman, experience has shown that in the ordinary course of events people usually take the side of the person with whom they are
associated at the time of the accident, because, as a general rule, they do not wish to be identified with the person who was at fault. Thus an
imaginary bond is unconsciously created among the several persons within the same group (People vs. Vivencio, CA-G.R. No. 00310-CR, Jan.
31, 1962).
With respect to Dayrit, We can not help suspecting (sic) that he is an accommodation witness. He did not go to the succor of the injured persons.
He said he wanted to call the police authorities about the mishap, but his phone had no dial tone. Be this (sic) as it may, the trial court in the
criminal case acted correctly in refusing to believe Dayrit.
2. Exhibit 2, the statement of Galang, does not include the claim that Galang stopped his truck at a safe distance from the car, according to
plaintiffs (p. 25, Appellants' Brief). This contention of appellants was completely passed sub-silencio or was not refuted by appellees in their
brief. Exhibit 2 is one of the exhibits not included in the record. According to the Table of Contents submitted by the court below, said Exhibit 2
was not submitted by defendants-appellees. In this light, it is not far-fetched to surmise that Galang's claim that he stopped was an eleventh-hour
desperate attempt to exculpate himself from imprisonment and damages.
3. Galang divulged that he stopped after seeing the car about 10 meters away:
ATTY. SOTTO:
Q Do I understand from your testimony that inspite of the fact that you admitted that the road is straight and you may be
able to (sic) see 500-1000 meters away from you any vehicle, you first saw that car only about ten (10) meters away from
you for the first time?
7
 xxx xxx xxx
A I noticed it, sir, that it was about ten (10) meters away.
ATTY. SOTTO:
Q So, for clarification, you clarify and state under your oath that you have (sic) not noticed it before that ten (10) meters?
(Tsn. 3 to 5, Sept. 18, 1979). (p. 16, Appellants' Brief)
Galang's testimony substantiate (sic) Tanhueco's statement that Galang stopped only because of the impact. At ten (10) meters away, with the
truck running at 30 miles per hour, as revealed in Galang's affidavit (Exh. 2; p. 25, Appellants' brief), it is well-nigh impossible to avoid a
collision on a bridge.
5. Galang's truck stopped because of the collision, and not because he waited for Jose Koh to return to his proper lane. The police investigator,
Pfc. Fernando L. Nuag, stated that he found skid marks under the truck but there were not (sic) skid marks behind the truck (pp. 19-20, t.s.n.,
Nov. 3, 1978). The presence of skid marks show (sic) that the truck was speeding. Since the skid marks were found under the truck and none were
found at the rear of the truck, the reasonable conclusion is that the skid marks under the truck were caused by the truck's front wheels when the
trucks (sic) suddenly stopped seconds before the mishap in an endeavor to avoid the same. But, as aforesaid, Galang saw the car at barely 10
meters away, a very short distance to avoid a collision, and in his futile endeavor to avoid the collision he abruptly stepped on his brakes but the
smashup happened just the same.
For the inattentiveness or reckless imprudence of Galang, the law presumes negligence on the part of the defendants in the selection of their
driver or in the supervision over him. Appellees did not allege such defense of having exercised the duties of a good father of a family in the
selection and supervision of their employees in their answers. They did not even adduce evidence that they did in fact have methods of selection
and programs of supervision. The inattentiveness or negligence of Galang was the proximate cause of the mishap. If Galang's attention was on the
highway, he would have sighted the car earlier or at a very safe distance than (sic) 10 meters. He proceeded to cross the bridge, and tried to stop
when a collision was already inevitable, because at the time that he entered the bridge his attention was not riveted to the road in front of him.
On the question of damages, the claims of appellants were amply proven, but the items must be reduced. 28
A motion for reconsideration alleging improper appreciation of the facts was subsequently filed by private respondents on the basis of which the respondent Court, in its
Resolution of 3 April 1984, 29 reconsidered and set aside its 29 November 1983 decision and affirmed in toto the trial court's judgment of 12 November 1980. A motion
to reconsider this Resolution was denied by the respondent Court on 4 July 1984. 30
Hence, this petition.
Petitioners allege that respondent Court:
I
. . . COMMITTED A VERY SERIOUS AND GRAVE ERROR WHEN IT TOTALLY REVERSED ITS DECISION BY MERELY BASING IT
FROM (sic) A MERE "PRESUMPTION," TOTALLY DISREGARDING THE PRIVATE RESPONDENTS' DRIVER'S ADMISSIONS AND
CONFESSIONS, WHO EXCLUSIVELY COMMITTED THE PROXIMATE CAUSE OF THE ACCIDENT (sic), FURTHER, IT ALSO
DISREGARDED THE EVIDENCE ADDUCED AND FOUND IN THE RECORDS; THEREFORE, RESPONDENT COURT'S
RESOLUTIONS (ANNEXES A and B, PETITION) ARE CLEARLY ERRONEOUS, PURELY BASED ON SPECULATIONS, CONJECTURES
AND WITHOUT SURE FOUNDATION IN THE EVIDENCE.
II
. . . GRAVELY ABUSED ITS DISCRETION AND ERRED WHEN IN EFFECT IT DISREGARDED A DOCTRINE LAID DOWN BY THIS
HONORABLE COURT BY STATING AMONG OTHERS, "IT CANNOT CATEGORICALLY ADOPT THE FINDINGS OF GUILT IN THE
CRIMINAL CASE WHERE THE DRIVER OF THE TRUCK INVOLVED IN THE ACCIDENT WAS INDICTED.
III
. . . PATENTLY COMMITTED GRAVE ABUSE OF DISCRETION AND MADE A MISLEADING PRONOUNCEMENT, WHEN IT HELD:
"IT IS THUS INCUMBENT UPON THE PLAINTIFFS-APPELLANTS (APPELLEES WRONGLY MENTIONED IN THE RESOLUTION) TO
PROVE THEIR ALLEGATIONS THAT THE PROXIMATE CAUSE OF THE ACCIDENT WAS THE NEGLIGENCE OF PRIVATE
RESPONDENTS' DRIVER.
IV
. . . COMMITTED ANOTHER GRIEVIOUS (sic) ERROR; COMMITTED GRAVE ABUSE OF DISCRETION AND CITED ANOTHER CASE
WHICH IS CLEARLY INAPPLICABLE TO THESE CASES.
V
. . . COMMITTED A PATENT ERROR AND GRAVELY ABUSED ITS DISCRETION IN ADOPTING THE FINDINGS OF THE TRIAL
COURT WHICH ARE CLEARLY ERRONEOUS AND CONTRARY TO THE EVIDENCE FOUND IN THE RECORDS, SPECIALLY THEY
(sic) ARE CONTRARY TO THE ADMITTED FACTS AND JUDICIAL ADMISSIONS MADE BY THE PRIVATE RESPONDENTS' DRIVER.
VI
. . . EXCEEDED ITS JURISDICTION, COMMITTED GRAVE ABUSE OF DISCRETION AND GRAVELY ERRED WHEN IT AWARDED
DAMAGES TO THE PRIVATE RESPONDENTS WHEN SAID AWARD IS NOT SUPPORTED BY EVIDENCE, IN THE RECORDS, AND
SAID AWARD IS NOT ALLOWED BY LAW AND THE CONSISTENT DECISIONS OF THIS HONORABLE COURT.
VII
. . . EXCEEDED ITS JURISDICTION, COMMITTED GRAVE ABUSE OF DISCRETION AND GRAVELY ERRED WHEN IT
ERRONEOUSLY SET ASIDE ITS DECISION AWARDING DAMAGES TO PETITIONERS WHICH IS CLEARLY IN ACCORDANCE
WITH THE EVIDENCE, THE LAW AND JURISPRUDENCE RELATIVE TO THE AWARD OF DAMAGES. 31
In the Resolution of 12 September 1984, We required private respondents to Comment on the petition. 32 After the said Comment 33 was filed, petitioners submitted a
Reply 34 thereto; this Court then gave due course to the instant petitions and required petitioners to file their Brief, 35 which they accordingly complied with.
There is merit in the petition. Before We take on the main task of dissecting the arguments and counter-arguments, some observations on the procedural vicissitudes of
these cases are in order.
Civil Cases Nos. 4477 and 4478, which were for the recovery of civil liability arising from a quasi-delict under Article 2176 in relation to Article 2180 of the Civil
Code, were filed ahead of Criminal Case No. 3751. Civil Case No. 4478 was eventually consolidated with Civil Case No. 4477 for joint trial in Branch III of the trial
court. The records do not indicate any attempt on the part of the parties, and it may therefore be reasonably concluded that none was made, to consolidate Criminal Case
No. 3751 with the civil cases, or vice-versa. The parties may have then believed, and understandably so, since by then no specific provision of law or ruling of this
Court expressly allowed such a consolidation, that an independent civil action, authorized under Article 33 in relation to Article 2177 of the Civil Code, such as the civil
cases in this case, cannot be consolidated with the criminal case. Indeed, such consolidation could have been farthest from their minds as Article 33 itself expressly
provides that the "civil action shall proceed independently of the criminal prosecution, and shall require only a preponderance of evidence." Be that as it may, there was
then no legal impediment against such consolidation. Section 1, Rule 31 of the Rules of Court, which seeks to avoid a multiplicity of suits, guard against oppression and
abuse, prevent delays, clear congested dockets to simplify the work of the trial court, or in short, attain justice with the least expense to the parties litigants, 36 would
have easily sustained a consolidation, thereby preventing the unseeming, if no ludicrous, spectacle of two (2) judges appreciating, according to their respective
orientation, perception and perhaps even prejudice, the same facts differently, and thereafter rendering conflicting decisions. Such was what happened in this case. It
should not, hopefully, happen anymore. In the recent case of Cojuangco vs. Court or Appeals, 37 this Court held that the present provisions of Rule 111 of the Revised

8
Rules of Court allow a consolidation of an independent civil action for the recovery of civil liability authorized under Articles 32, 33, 34 or 2176 of the Civil Code with
the criminal action subject, however, to the condition that no final judgment has been rendered in that criminal case.
Let it be stressed, however, that the judgment in Criminal Case No. 3751 finding Galang guilty of reckless imprudence, although already final by virtue of the denial by
no less than this Court of his last attempt to set aside the respondent Court's affirmance of the verdict of conviction, has no relevance or importance to this case.
As We held in Dionisio vs. Alvendia, 38 the responsibility arising from fault or negligence in a quasi-delict is entirely separate and distinct from the civil liability arising
from negligence under the Penal Code. And, as more concretely stated in the concurring opinion of Justice J.B.L. Reyes, "in the case of independent civil actions under
the new Civil Code, the result of the criminal case, whether acquittal or conviction, would be entirely irrelevant to the civil action." 39 In Salta vs. De Veyra and PNB vs.
Purisima, 40 this Court stated:
. . . It seems perfectly reasonable to conclude that the civil actions mentioned in Article 33, permitted in the same manner to be filed separately
from the criminal case, may proceed similarly regardless of the result of the criminal case.
Indeed, when the law has allowed a civil case related to a criminal case, to be filed separately and to proceed independently even during the
pendency of the latter case, the intention is patent to make the court's disposition of the criminal case of no effect whatsoever on the separate civil
case. This must be so because the offenses specified in Article 33 are of such a nature, unlike other offenses not mentioned, that they may be
made the subject of a separate civil action because of the distinct separability of their respective juridical cause or basis of action . . . .
What remains to be the most important consideration as to why the decision in the criminal case should not be considered in this appeal is the fact that private
respondents were not parties therein. It would have been entirely different if the petitioners' cause of action was for damages arising from a delict, in which case private
respondents' liability could only be subsidiary pursuant to Article 103 of the Revised Penal Code. In the absence of any collusion, the judgment of conviction in the
criminal case against Galang would have been conclusive in the civil cases for the subsidiary liability of the private respondents. 41
And now to the merits of the petition.
It is readily apparent from the pleadings that the principal issue raised in this petition is whether or not respondent Court's findings in its challenged resolution are
supported by evidence or are based on mere speculations, conjectures and presumptions.
The principle is well-established that this Court is not a trier of facts. Therefore, in an appeal by certiorari under Rule 45 of the Revised Rules of Court, only questions
of law may be raised. The resolution of factual issues is the function of the lower courts whose findings on these matters are received with respect and are, as a rule,
binding on this Court. 42
The foregoing rule, however, is not without exceptions. Findings of facts of the trial courts and the Court of Appeals may be set aside when such findings are not
supported by the evidence or when the trial court failed to consider the material facts which would have led to a conclusion different from what was stated in its
judgment. 43The same is true where the appellate court's conclusions are grounded entirely on conjectures, speculations and surmises 44 or where the conclusions of the
lower courts are based on a misapprehension of facts. 45
It is at once obvious to this Court that the instant case qualifies as one of the aforementioned exceptions as the findings and conclusions of the trial court and the
respondent Court in its challenged resolution are not supported by the evidence, are based on an misapprehension of facts and the inferences made therefrom are
manifestly mistaken. The respondent Court's decision of 29 November 1983 makes the correct findings of fact.
In the assailed resolution, the respondent Court held that the fact that the car improperly invaded the lane of the truck and that the collision occurred in said lane gave
rise to the presumption that the driver of the car, Jose Koh, was negligent. On the basis of this presumed negligence, the appellate court immediately concluded that it
was Jose Koh's negligence that was the immediate and proximate cause of the collision. This is an unwarranted deduction as the evidence for the petitioners
convincingly shows that the car swerved into the truck's lane because as it approached the southern end of the bridge, two (2) boys darted across the road from the right
sidewalk into the lane of the car. As testified to by petitioner Araceli Koh McKee:
Q What happened after that, as you approached the bridge?
A When we were approaching the bridge, two (2) boys tried to cross the right lane on the right side of the highway going to
San Fernando. My father, who is (sic) the driver of the car tried to avoid the two (2) boys who were crossing, he blew his
horn and swerved to the left to avoid hitting the two (2) boys. We noticed the truck, he switched on the headlights to warn
the truck driver, to slow down to give us the right of way to come back to our right lane.
Q Did the truck slow down?
A No sir, it did not, just (sic) continued on its way.
Q What happened after that?
A After avoiding the two (2) boys, the car tried to go back to the right lane since the truck is (sic) coming, my father
stepped on the brakes and all what (sic) I heard is the sound of impact (sic), sir. 46
Her credibility and testimony remained intact even during cross examination. Jose Koh's entry into the lane of the truck was necessary in order to avoid what was, in his
mind at that time, a greater peril death or injury to the two (2) boys. Such act can hardly be classified as negligent.
Negligence was defined and described by this Court in Layugan vs. Intermediate Appellate Court, 47 thus:
. . . Negligence is the omission to do something which a reasonable man, guided by those considerations which ordinarily regulate the conduct of
human affairs, would do, or the doing of something which a prudent and reasonable man would not do (Black's Law Dictionary, Fifth Edition,
930), or as Judge Cooley defines it, "(T)he failure to observe for the protection of the interests of another person, that degree of care, precaution,
and vigilance which the circumstances justly demand, whereby such other person suffers injury." (Cooley on Torts, Fourth Edition, vol. 3, 265)
In Picart vs. Smith (37 Phil 809, 813), decided more than seventy years ago but still a sound rule, (W)e held:
The test by which to determine the existence of negligence in a particular case may be stated as follows: Did the defendant
in doing the alleged negligent act use that(reasonable care and caution which an ordinarily prudent person would have
used in the same situation?) If not, then he is guilty of negligence. The law here in effect adopts the standard supposed to
be supplied by the imaginary conduct of the discreet paterfamiliasof the Roman
law. . . .
In Corliss vs. Manila Railroad Company, 48 We held:
. . . Negligence is want of the care required by the circumstances. It is a relative or comparative, not an absolute, term and its application depends
upon the situation of the parties and the degree of care and vigilance which the circumstances reasonably require. Where the danger is great, a
high degree of care is necessary, and the failure to observe it is a want of ordinary care under the circumstances. (citing Ahern v. Oregon
Telephone Co., 35 Pac. 549 (1894).
On the basis of the foregoing definition, the test of negligence and the facts obtaining in this case, it is manifest that no negligence could be imputed to Jose Koh. Any
reasonable and ordinary prudent man would have tried to avoid running over the two boys by swerving the car away from where they were even if this would mean
entering the opposite lane. Avoiding such immediate peril would be the natural course to take particularly where the vehicle in the opposite lane would be several meters
away and could very well slow down, move to the side of the road and give way to the oncoming car. Moreover, under what is known as the emergency rule, "one who
suddenly finds himself in a place of danger, and is required to act without time to consider the best means that may be adopted to avoid the impending danger, is not
guilty of negligence, if he fails to adopt what subsequently and upon reflection may appear to have been a better method, unless the emergency in which he finds
himself is brought about by his own negligence." 49
Considering the sudden intrusion of the two (2) boys into the lane of the car, We find that Jose Koh adopted the best means possible in the given situation to avoid
hitting them. Applying the above test, therefore, it is clear that he was not guilty of negligence.
In any case, assuming, arguendo that Jose Koh is negligent, it cannot be said that his negligence was the proximate cause of the collision. Proximate cause has been
defined as:
9
 . . . 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. And more comprehensively, the proximate legal cause is that acting first and producing the injury, either
immediately or by setting other events in motion, all constituting a natural and continuous chain of events, each having a close causal connection
with its immediate predecessor, the final event in the chain immediately effecting the injury as a natural and probable result of the cause which
first acted, under such circumstances that the person responsible for the first event should, as an ordinary prudent and intelligent person, have
reasonable ground to expect at the moment of his act or default that an injury to some person might probably result therefrom. 50
Applying the above definition, although it may be said that the act of Jose Koh, if at all negligent, was the initial act in the chain of events, it cannot be said that the
same caused the eventual injuries and deaths because of the occurrence of a sufficient intervening event, the negligent act of the truck driver, which was the actual cause
of the tragedy. The entry of the car into the lane of the truck would not have resulted in the collision had the latter heeded the emergency signals given by the former to
slow down and give the car an opportunity to go back into its proper lane. Instead of slowing down and swerving to the far right of the road, which was the proper
precautionary measure under the given circumstances, the truck driver continued at full speed towards the car. The truck driver's negligence becomes more apparent in
view of the fact that the road is 7.50 meters wide while the car measures 1.598 meters and the truck, 2.286 meters, in width. This would mean that both car and truck
could pass side by side with a clearance of 3.661 meters to spare. 51 Furthermore, the bridge has a level sidewalk which could have partially accommodated the truck.
Any reasonable man finding himself in the given situation would have tried to avoid the car instead of meeting it head-on.
The truck driver's negligence is apparent in the records. He himself said that his truck was running at 30 miles (48 kilometers) per hour along the bridge while the
maximum speed allowed by law on a bridge 52 is only 30 kilometers per hour. Under Article 2185 of the Civil Code, a person driving a vehicle is presumed negligent if
at the time of the mishap, he was violating any traffic regulation. We cannot give credence to private respondents' claim that there was an error in the translation by the
investigating officer of the truck driver's response in Pampango as to whether the speed cited was in kilometers per hour or miles per hour. The law presumes that
official duty has been regularly performed; 53 unless there is proof to the contrary, this presumption holds. In the instant case, private respondents' claim is based on
mere conjecture.
The truck driver's negligence was likewise duly established through the earlier quoted testimony of petitioner Araceli Koh McKee which was duly corroborated by the
testimony of Eugenio Tanhueco, an impartial eyewitness to the mishap.
Araceli Koh McKee testified further, thus:
xxx xxx xxx
Q Mrs. how did you know that the truck driven by the herein accused, Ruben Galang did not reduce its speed before the
actual impact of collision as you narrated in this Exhibit "1," how did you know?
A It just kept on coming, sir. If only he reduced his speed, we could have got (sic) back to our right lane on side (sic) of the
highway, sir. (tsn, pp. 33-34, July 22, 1977) or (Exhibit; "O" in these Civil Cases) (pp. 30-31, Appellants' Brief) 54
while Eugenio Tanhueco testified thus:
Q When you saw the truck, how was it moving?
A It was moving 50 to 60 kilometers per hour, sir.
Q Immediately after you saw this truck, do you know what happened?
A I saw the truck and a car collided (sic), sir, and I went to the place to help the victims. (tsn. 28, April 19, 1979)
xxx xxx xxx
Q From the time you saw the truck to the time of the impact, will you tell us if the said truck ever stopped?
A I saw it stopped (sic) when it has (sic) already collided with the car and it was already motionless. (tsn. 31, April 19,
1979; Emphasis Supplied). (p. 27, Appellants' Brief). 55
Clearly, therefore, it was the truck driver's subsequent negligence in failing to take the proper measures and degree of care necessary to avoid the collision which was
the proximate cause of the resulting accident.
Even if Jose Koh was indeed negligent, the doctrine of last clear chance finds application here. Last clear chance is a doctrine in the law of torts which states that the
contributory negligence of the party injured will not defeat the claim for damages if it is shown that the defendant might, by the exercise of reasonable care and
prudence, have avoided the consequences of the negligence of the injured party. In such cases, the person who had the last clear chance to avoid the mishap is
considered in law solely responsible for the consequences thereof. 56
In Bustamante vs. Court of Appeals, 57 We held:
The respondent court adopted the doctrine of "last clear chance." The doctrine, stated broadly, is that the negligence of the plaintiff does not
preclude a recovery for the negligence of the defendant where it appears that the defendant, by exercising reasonable care and prudence, might
have avoided injurious consequences to the plaintiff notwithstanding the plaintiff's negligence. In other words, the doctrine of last clear chance
means that even though a person's own acts may have placed him in a position of peril, and an injury results, the injured person is entitled to
recovery (sic). As the doctrine is usually stated, a person who has the last clear chance or opportunity of avoiding an accident, notwithstanding the
negligent acts of his opponent or that of a third person imputed to the opponent is considered in law solely responsible for the consequences of
the accident. (Sangco, Torts and Damages, 4th Ed., 1986, p. 165).
The practical import of the doctrine is that a negligent defendant is held liable to a negligent plaintiff, or even to a plaintiff who has been grossly
negligent in placing himself in peril, if he, aware of the plaintiff's peril, or according to some authorities, should have been aware of it in the
reasonable exercise of due care, had in fact an opportunity later than that of the plaintiff to avoid an accident (57 Am. Jur., 2d, pp. 798-799).
In Pantranco North Express, Inc., vs. Baesa, 58 We ruled:
The doctrine of last clear chance was defined by this Court in the case of Ong v. Metropolitan Water District, 104 Phil. 397 (1958), in this wise:
The doctrine of the last clear chance simply, means that the negligence of a claimant does not preclude a recovery for the
negligence of defendant where it appears that the latter, by exercising reasonable care and prudence, might have avoided
injurious consequences to claimant notwithstanding his negligence.
The doctrine applies only in a situation where the plaintiff was guilty of prior or antecedent negligence but the defendant, who had the last fair
chance to avoid the impending harm and failed to do so, is made liable for all the consequences of the accident notwithstanding the prior
negligence of the plaintiff [Picart v. Smith, 37 Phil. 809 (1918); Glan People's Lumber and Hardware, et al. vs. Intermediate Appellate Court,
Cecilia Alferez Vda. de Calibo, et al., G.R. No. 70493, May, 18, 1989]. The subsequent negligence of the defendant in failing to exercise ordinary
care to avoid injury to plaintiff becomes the immediate or proximate cause of the accident which intervenes between the accident and the more
remote negligence of the plaintiff, thus making the defendant liable to the plaintiff [Picart v. Smith, supra].
Generally, the last clear chance doctrine is invoked for the purpose of making a defendant liable to a plaintiff who was guilty of prior or
antecedent negligence, although it may also be raised as a defense to defeat claim (sic) for damages.
Applying the foregoing doctrine, it is not difficult to rule, as We now rule, that it was the truck driver's negligence in failing to exert ordinary care to avoid the collision
which was, in law, the proximate cause of the collision. As employers of the truck driver, the private respondents are, under Article 2180 of the Civil Code, directly and
primarily liable for the resulting damages. The presumption that they are negligent flows from the negligence of their employee. That presumption, however, is
only juris tantum, not juris et de jure. 59 Their only possible defense is that they exercised all the diligence of a good father of a family to prevent the damage. Article
2180 reads as follows:
The obligation imposed by Article 2176 is demandable not only for one's own acts or omissions, but also for those of persons for whom one is
responsible.
xxx xxx xxx
10
 Employers shall be liable for the damages caused by their employees and household helpers acting within the scope of their assigned tasks, even
though the former are not engaged in any business or industry.
xxx xxx xxx
The responsibility treated of in this article shall cease when the persons herein mentioned prove that they observed all the diligence of a good
father of a family to prevent damage.
The diligence of a good father referred to means the diligence in the selection and supervision of employees. 60The answers of the private respondents in Civil Cases
Nos. 4477 and 4478 did not interpose this defense. Neither did they attempt to prove it.
The respondent Court was then correct in its Decision of 29 November 1983 in reversing the decision of the trial court which dismissed Civil Cases Nos. 4477 and
4478. Its assailed Resolution of 3 April 1984 finds no sufficient legal and factual moorings.
In the light of recent decisions of this Court, 61 the indemnity for death must, however, be increased from P12,000.00 to P50,000.00.
WHEREFORE, the instant petition is GRANTED. The assailed Resolution of the respondent Court of 3 April 1984 is SET ASIDE while its Decision of 29 November
1983 in C.A.-G.R. CV Nos. 69040-41 is REINSTATED, subject to the modification that the indemnity for death is increased from P12,000.00 to P50,000.00 each for
the death of Jose Koh and Kim Koh McKee.
Costs against private respondents.
SO ORDERED.

FACTS: It was the 8th

of January in 1977, at around 9:00 or 10:00 in the morning, somewhere between Angeles City and SanFernando, Pampanga. Jose Koh was driving his daughter, Araceli
Koh McKee, and her minor children, Christopher, George, andKim, as well as Kims babysitter, Loida Bondoc, from San Fernando, Pampanga in the direction of
Angeles City (northward) in aFord Escort.Meanwhile, a cargo truck owned by Jaime Tayag and Rosalinda Manalo, driven by Ruben Galang, was headed in the opposite
direction, from Angeles City to San Fernando (southward), going to Manila. The cargo truck was considerable in size as itwas carrying 200 hundred cavans of rice,
which weighed 10 metric tons.As the Escort approached one Pulong-Pulo Bridge from the southern portion, 2 boys suddenly ran from the right side ofthe road into the
Escorts lane. As the boys were going back and forth, unsure of whether to cross all the way or turn back, Jose blew his horn. He was then forced to swerve left and
into the lane Galang was driving in. Jose switched his headlights on, appliedhis brakes, and attempted to return to his lane. However, he failed to get back into the right
lane, and collided with the cargo truck.The collision occurred on the bridge.The collision resulted in the deaths of the driver, Jose, the one-year-old, Kim, and her
babysitter, Loida, on whose lap shewas sitting. Loida was seated in the passenger seat. Araceli, Christopher, and George, who were sitting in the back of the
Escort,received physical injuries from the collision.An information was filed against Ruben Galang, charging him for reckless imprudence resulting in multiple
homicide, physical injuries, and damage to property. He was found guilty beyond reasonable doubt of the charges in the information. Theconviction was affirmed by the
CA and achieved finality after the denial by the CA of his MR and the denial by the SC of hisPetition for Review.Two civil cases were filed. The first one, by the wife
and children of Jose Koh, and the second one by Araceli and herhusband for the death of Kim and injuries to Araceli and her other children. The respondents were
impleaded against as theemployers of Ruben Galang Galang was not included. The cases here are based on quasi-delict. These cases were
eventuallyconsolidated.The trial court dismissed the civil cases and awarded the respondents damages and attorneys fees.On appeal to the Intermediate Appellate
Court, the dismissal was reversed. This was based on its finding that it wasGalangs inattentiveness or reckless imprudence that caused the accident. However, upon
filing by the respondents of an MR, theIAC set aside its original decision and upheld that of the trial court because the fact that Kohs car invaded the lane of the truck
andthe collision occurred while still in Galangs lane gave rise to the presumption that Koh was negligent.ISSUE: Was the IAC correct in reversing their original
decision?HELD: NO. The petition has merit.
Procedural (not important): Given the circumstances, the cases (civil and criminal) should have been consolidated to prevent separate appreciation of the evidence. To
be fair, the petitioners did move to adopt the testimonies of the witnesses in the criminalcase but the motion was de nied. The non-consolidation re sulted
in two conflic ting decisions. In any case , the guilty ve rdict ofGalang was deeme d by the Court as irre lev ant to the case at bar.
On the basis of this presumed negligence, the appellate court immediately concluded that it was Jose Kohs negligencethat was the immediate and proximate cause of
the collision. This is an unwarranted deduction as the evidence for the petitionersconvincingly shows that the car swerved into the trucks lane because as it approached
the southern end of the bridge, two boysdarted across the road from the right sidewalk into the lane of the car.Aracelis testimony was pretty much what was stated in
the facts plus the fact that when Jose swerved to the left, the truckwas immediately noticed. This is why he switched his headlights on to warn the trucks driver to
slow down and let the Escortreturn to its lane. When asked as to how she could tell that the truck did not slow down, Araceli said that the truck just kept oncoming,
indicating that it didnt reduce its speed. She posited that if it did, there wouldnt have been a collision. Her testimonyremained intact, even upon cross-examination
that Joses entry into Galangs lane was necessary to avoid what was, in his mindat the time, a greater peril death or injury to the two idiots. This is hardly negligent
behavior.Her testimony was corroborated by one Eugenio Tanhueco
1
, who was an impartial eyewitness. He said that the truck,moving at 50 to 60kph, only stopped upon collision. Also, when the police investigated the scene of the
collision, they foundskidmarks under the truck instead of behind it. This indicated that Galang only applied the brakes moments before the collision.While Galang
claimed that he had stopped when the Escort was within 10 meters of the truck but this only served to substantiateTanhuecos statement that he stopped only upon
collision, considering the speed at which he was going
2
On the basis of the definition
3
and the test
4
of negligence, no negligence can be imputed to Koh. Any reasonable andordinary prudent man would have tried to avoid running over the two boys by swerving the car
away from where they were even ifthis would mean entering the opposite lane. Avoiding such immediate peril would be the natural course to take particularly wherethe
vehicle in the opposite lane would be several meters away and could very well slow down, move to the side of the road andgive way to the oncoming car.
THE EMERGENCY RULE: one who suddenly finds himself in a place of danger, and is required to act without time to consider the best means that may be
adopted to avoid the impending danger, is not guilty ofnegligence, if he fails to adopt what subsequently and upon reflection may appear to have been a better
method,unless the emergency in which he finds himself is brought about by his own negligence.
Jose Koh adopted the bestmeans possible in the given situation. This means he cannot be considered negligent.ASSUMING, ARGUENDO, THAT JOSE WAS
NEGLIGENT, THE COLLISION STILL WOULD NOT BE IMPUTED TO HIMBECAUSE:1.

Proximate Cause: 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.

Galangs negligent act of not slowing down or stopping and allowing the Escort to return to the right lane was thesufficient intervening cause and the actual cause of the
tragedy (failure to take the necessary measures and the degree ofcare necessary to avoid the collision)
o

11
The entry of the car into the lane of the truck would not have resulted in the collision had the latter heeded theemergency signals given by the former to slow down and
give the car an opportunity to go back into its proper lane.Instead of slowing down and swerving to the far right of the road, which was the proper precautionary
measure underthe given circumstances, the truck driver continued at full speed towards the car. The truck drivers negligence becomes more apparent in view of the fact
that the road is 7.50 meters wide while the car measures 1.598 meters andthe truck, 2.286 meters, in width. This would mean that both car and truck could pass side by
side with a clearance of3.661 meters to spare. Furthermore, the bridge has a level sidewalk, which could have partially accommodated thetruck. Any reasonable man
finding himself in the given situation would have tried to avoid the car instead of meetingit head-on.
o

Negligence of Galang apparent in the records: He himself said that his truck was running at 30 miles (48kilometers) per hour along the bridge while the maximum
speed allowed by law on a bridge52 is only 30 kilometers per hour. Under Article 2185 of the Civil Code, a person driving a vehicle is presumed negligent if at the time
of themishap, he was violating any traffic regulation.2.

Last Clear Chance Doctrine: A doctrine in the law of torts which states that the contributory negligence of the party injuredwill not defeat the claim for damages if it
is shown that the defendant might, by the exercise of reasonable care and prudence,have avoided the consequences of the negligence of the injured party. In such cases,
the person who had the last clear chanceto avoid the mishap is considered in law solely responsible for the consequences thereof. A person who has the last clearchance
or opportunity of avoiding an accident, notwithstanding the negligent acts of his opponent or that of a third personimputed to the opponent is considered in law solely
responsible for the consequences of the accident. The doctrine appliesonly in a situation where the plaintiff was guilty of prior or antecedent negligence but the
defendant, who had the last fairchance to avoid the impending harm and failed to do so, is made liable for all the consequences of the accidentnotwithstanding the prior
negligence of the plaintiff.

Basically, the last clear chance was with Galang, as can be gleaned from the evidence presentedTherefore, respondents are found, under Article 2180, directly and
primarily responsible for the acts of their employee. Theirnegligence flows from the negligence of their employee. Such presumption is juris tantum (rebuttable) and not
juris et de jure(conclusive). They did not present evidence that showed that the diligence of a good father of a family in the selection andsupervision of their employee
5
, Galang.WHEREFORE, the instant petition is GRANTED. The assailed Resolution of the respondent Court of 3 April 1984 is SET ASIDEwhile its Decision of 29
November 1983 in C.A.-G.R. CV Nos. 69040-41 is REINSTATED

Sudden peril doctrine is a principle of torts law that a person confronted with a sudden emergency is not obligated to
exercise the same degree of judgment and care as someone who is acting under normal conditions. It exempts a
person from the ordinary standard of reasonable care if that person acted instinctively to meet a sudden and urgent
need for aid. The doctrine applies when the sudden emergency is created in any way other than the actor's own
conduct, as where the emergency is created by the unexpected operation of a natural force or by the innocent or
wrongful act of a third person.

G.R. No. 115024 February 7, 1996

MA. LOURDES VALENZUELA, petitioner,
vs.
COURT OF APPEALS, RICHARD LI and ALEXANDER COMMERCIAL, INC., respondents.
x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x-x
G.R. No. 117944 February 7, 1996
RICHARD LI, petitioner,
vs.
COURT OF APPEALS and LOURDES VALENZUELA, respondents.
DECISION
KAPUNAN, J.:
These two petitions for review on certiorari under Rule 45 of the Revised Rules of Court stem from an action to recover damages by petitioner Lourdes Valenzuela in
the Regional Trial Court of Quezon City for injuries sustained by her in a vehicular accident in the early morning of June 24, 1990. The facts found by the trial court are
succinctly summarized by the Court of Appeals below:
This is an action to recover damages based on quasi-delict, for serious physical injuries sustained in a vehicular accident.
Plaintiff's version of the accident is as follows: At around 2:00 in the morning of June 24, 1990, plaintiff Ma. Lourdes Valenzuela was driving a blue
Mitsubishi lancer with Plate No. FFU 542 from her restaurant at Marcos highway to her home at Palanza Street, Araneta Avenue. She was travelling along
Aurora Blvd. with a companion, Cecilia Ramon, heading towards the direction of Manila. Before reaching A. Lake Street, she noticed something wrong with
her tires; she stopped at a lighted place where there were people, to verify whether she had a flat tire and to solicit help if needed. Having been told by the
people present that her rear right tire was flat and that she cannot reach her home in that car's condition, she parked along the sidewalk, about 1-1/2 feet
away, put on her emergency lights, alighted from the car, and went to the rear to open the trunk. She was standing at the left side of the rear of her car
pointing to the tools to a man who will help her fix the tire when she was suddenly bumped by a 1987 Mitsubishi Lancer driven by defendant Richard Li and
registered in the name of defendant Alexander Commercial, Inc. Because of the impact plaintiff was thrown against the windshield of the car of the
defendant, which was destroyed, and then fell to the ground. She was pulled out from under defendant's car. Plaintiff's left leg was severed up to the middle
of her thigh, with only some skin and sucle connected to the rest of the body. She was brought to the UERM Medical Memorial Center where she was found
to have a "traumatic amputation, leg, left up to distal thigh (above knee)". She was confined in the hospital for twenty (20) days and was eventually fitted
with an artificial leg. The expenses for the hospital confinement (P120,000.00) and the cost of the artificial leg (P27,000.00) were paid by defendants from
the car insurance.
In her complaint, plaintiff prayed for moral damages in the amount of P1 million, exemplary damages in the amount of P100,000.00 and other medical and
related expenses amounting to a total of P180,000.00, including loss of expected earnings.
Defendant Richard Li denied that he was negligent. He was on his way home, travelling at 55 kph; considering that it was raining, visibility was affected and
the road was wet. Traffic was light. He testified that he was driving along the inner portion of the right lane of Aurora Blvd. towards the direction of Araneta
Avenue, when he was suddenly confronted, in the vicinity of A. Lake Street, San Juan, with a car coming from the opposite direction, travelling at 80 kph,
with "full bright lights". Temporarily blinded, he instinctively swerved to the right to avoid colliding with the oncoming vehicle, and bumped plaintiff's car,
which he did not see because it was midnight blue in color, with no parking lights or early warning device, and the area was poorly lighted. He alleged in his
defense that the left rear portion of plaintiff's car was protruding as it was then "at a standstill diagonally" on the outer portion of the right lane towards
Araneta Avenue (par. 18, Answer). He confirmed the testimony of plaintiff's witness that after being bumped the car of the plaintiff swerved to the right and
hit another car parked on the sidewalk. Defendants counterclaimed for damages, alleging that plaintiff was reckless or negligent, as she was not a licensed
driver.
12
 The police investigator, Pfc. Felic Ramos, who prepared the vehicular accident report and the sketch of the three cars involved in the accident, testified that
the plaintiff's car was "near the sidewalk"; this witness did not remember whether the hazard lights of plaintiff's car were on, and did not notice if there was
an early warning device; there was a street light at the corner of Aurora Blvd. and F. Roman, about 100 meters away. It was not mostly dark, i.e. "things can
be seen" (p. 16, tsn, Oct. 28, 1991).
A witness for the plaintiff, Rogelio Rodriguez, testified that after plaintiff alighted from her car and opened the trunk compartment, defendant's car came
approaching very fast ten meters from the scene; the car was "zigzagging". The rear left side of plaintiff's car was bumped by the front right portion of
defendant's car; as a consequence, the plaintiff's car swerved to the right and hit the parked car on the sidewalk. Plaintiff was thrown to the windshield of
defendant's car, which was destroyed, and landed under the car. He stated that defendant was under the influence of liquor as he could "smell it very well"
(pp. 43, 79, tsn, June 17, 1991).
After trial, the lower court sustained the plaintiff's submissions and found defendant Richard Li guilty of gross negligence and liable for damages under Article 2176 of
the Civil Code. The trial court likewise held Alexander Commercial, Inc., Li's employer, jointly and severally liable for damages pursuant to Article 2180. It ordered the
defendants to jointly and severally pay the following amounts:
1. P41,840.00, as actual damages, representing the miscellaneous expenses of the plaintiff as a result of her severed left leg;
2. The sums of (a) P37,500.00, for the unrealized profits because of the stoppage of plaintiff's Bistro La Conga restaurant three (3) weeks after the accident
on June 24, 1990; (b) P20,000.00, a month, as unrealized profits of the plaintiff in her Bistro La Conga restaurant, from August, 1990 until the date of this
judgment and (c) P30,000.00, a month for unrealized profits in plaintiff's two (2) beauty salons from July, 1990 until the date of this decision;
3. P1,000,000.00, in moral damages;
4. P50,000.00, as exemplary damages;
5. P60,000.00, as reasonable attorney's fees; and
6. Costs.
As a result of the trial court's decision, defendants filed an Omnibus Motion for New Trial and for Reconsideration, citing testimony in Criminal Case O.C. No. 804367
(People vs. Richard Li), tending to show that the point of impact, as depicted by the pieces of glass/debris from the parties' cars, appeared to be at the center of the right
lane of Aurora Blvd. The trial court denied the motion. Defendants forthwith filed an appeal with the respondent Court of Appeals. In a Decision rendered March 30,
1994, the Court of Appeals found that there was "ample basis from the evidence of record for the trial court's finding that the plaintiff's car was properly parked at the
right, beside the sidewalk when it was bumped by defendant's car."1 Dismissing the defendants' argument that the plaintiff's car was improperly parked, almost at the
center of the road, the respondent court noted that evidence which was supposed to prove that the car was at or near center of the right lane was never presented during
the trial of the case.2 The respondent court furthermore observed that:
Defendant Li's testimony that he was driving at a safe speed of 55 km./hour is self serving; it was not corroborated. It was in fact contradicted by eyewitness
Rodriguez who stated that he was outside his beerhouse located at Aurora Boulevard after A. Lake Street, at or about 2:00 a.m. of June 24, 1990 when his
attention was caught by a beautiful lady (referring to the plaintiff) alighting from her car and opening the trunk compartment; he noticed the car of Richard
Li "approaching very fast ten (10) meters away from the scene"; defendant's car was zigzagging", although there were no holes and hazards on the street, and
"bumped the leg of the plaintiff" who was thrown against the windshield of defendant's care, causing its destruction. He came to the rescue of the plaintiff,
who was pulled out from under defendant's car and was able to say "hurting words" to Richard Li because he noticed that the latter was under the influence
of liquor, because he "could smell it very well" (p. 36, et. seq., tsn, June 17, 1991). He knew that plaintiff owned a beerhouse in Sta. Mesa in the 1970's, but
did not know either plaintiff or defendant Li before the accident.
In agreeing with the trial court that the defendant Li was liable for the injuries sustained by the plaintiff, the Court of Appeals, in its decision, however, absolved the Li's
employer, Alexander Commercial, Inc. from any liability towards petitioner Lourdes Valenzuela and reduced the amount of moral damages to P500,000.00. Finding
justification for exemplary damages, the respondent court allowed an award of P50,000.00 for the same, in addition to costs, attorney's fees and the other damages. The
Court of Appeals, likewise, dismissed the defendants' counterclaims. 3
Consequently, both parties assail the respondent court's decision by filing two separate petitions before this Court. Richard Li, in G.R. No. 117944, contends that he
should not be held liable for damages because the proximate cause of the accident was Ma. Lourdes Valenzuela's own negligence. Alternatively, he argues that in the
event that this Court finds him negligent, such negligence ought to be mitigated by the contributory negligence of Valenzuela.
On the other hand, in G.R. No. 115024, Ma. Lourdes Valenzuela assails the respondent court's decision insofar as it absolves Alexander Commercial, Inc. from liability
as the owner of the car driven by Richard Li and insofar as it reduces the amount of the actual and moral damages awarded by the trial court. 4
As the issues are intimately related, both petitions are hereby consolidated.
It is plainly evident that the petition for review in G.R. No. 117944 raises no substantial questions of law. What it, in effect, attempts to have this Court review are
factual findings of the trial court, as sustained by the Court of Appeals finding Richard Li grossly negligent in driving the Mitsubishi Lancer provided by his company
in the early morning hours of June 24, 1990. This we will not do. As a general rule, findings of fact of the Court of Appeals are binding and conclusive upon us, and this
Court will not normally disturb such factual findings unless the findings of fact of the said court are palpably unsupported by the evidence on record or unless the
judgment itself is based on a misapprehension of facts.5
In the first place, Valenzuela's version of the incident was fully corroborated by an uninterested witness, Rogelio Rodriguez, the owner-operator of an establishment
located just across the scene of the accident. On trial, he testified that he observed a car being driven at a "very fast" speed, racing towards the general direction of
Araneta Avenue.6 Rodriguez further added that he was standing in front of his establishment, just ten to twenty feet away from the scene of the accident, when he saw
the car hit Valenzuela, hurtling her against the windshield of the defendant's Mitsubishi Lancer, from where she eventually fell under the defendant's car. Spontaneously
reacting to the incident, he crossed the street, noting that a man reeking with the smell of liquor had alighted from the offending vehicle in order to survey the
incident.7 Equally important, Rodriguez declared that he observed Valenzuela's car parked parallel and very near the sidewalk, 8 contrary to Li's allegation that
Valenzuela's car was close to the center of the right lane. We agree that as between Li's "self-serving" asseverations and the observations of a witness who did not even
know the accident victim personally and who immediately gave a statement of the incident similar to his testimony to the investigator immediately after the incident, the
latter's testimony deserves greater weight. As the court emphasized:
The issue is one of credibility and from Our own examination of the transcript, We are not prepared to set aside the trial court's reliance on the testimony of
Rodriguez negating defendant's assertion that he was driving at a safe speed. While Rodriguez drives only a motorcycle, his perception of speed is not
necessarily impaired. He was subjected to cross-examination and no attempt was made to question .his competence or the accuracy of his statement that
defendant was driving "very fast". This was the same statement he gave to the police investigator after the incident, as told to a newspaper report (Exh. "P").
We see no compelling basis for disregarding his testimony.
The alleged inconsistencies in Rodriguez' testimony are not borne out by an examination of the testimony. Rodriguez testified that the scene of the accident
was across the street where his beerhouse is located about ten to twenty feet away (pp. 35-36, tsn, June 17, 1991). He did not state that the accident
transpired immediately in front of his establishment. The ownership of the Lambingan se Kambingan is not material; the business is registered in the name
of his mother, but he explained that he owns the establishment (p. 5, tsn, June 20, 1991). Moreover, the testimony that the streetlights on his side of Aurora
Boulevard were on the night the accident transpired (p. 8) is not necessarily contradictory to the testimony of Pfc. Ramos that there was a streetlight at the
corner of Aurora Boulevard and F. Roman Street (p. 45, tsn, Oct. 20, 1991).
With respect to the weather condition, Rodriguez testified that there was only a drizzle, not a heavy rain and the rain has stopped and he was outside his
establishment at the time the accident transpired (pp. 64-65, tsn, June 17, 1991). This was consistent with plaintiff's testimony that it was no longer raining
when she left Bistro La Conga (pp. 10-11, tsn, April 29, 1991). It was defendant Li who stated that it was raining all the way in an attempt to explain why he
was travelling at only 50-55 kph. (p. 11, tsn, Oct. 14, 1991). As to the testimony of Pfc. Ramos that it was raining, he arrived at the scene only in response to
a telephone call after the accident had transpired (pp. 9-10, tsn, Oct. 28, 1991). We find no substantial inconsistencies in Rodriguez's testimony that would
13
 impair the essential integrity of his testimony or reflect on his honesty. We are compelled to affirm the trial court's acceptance of the testimony of said
eyewitness.
Against the unassailable testimony of witness Rodriguez we note that Li's testimony was peppered with so many inconsistencies leading us to conclude that his version
of the accident was merely adroitly crafted to provide a version, obviously self-serving, which would exculpate him from any and all liability in the incident. Against
Valenzuela's corroborated claims, his allegations were neither backed up by other witnesses nor by the circumstances proven in the course of trial. He claimed that he
was driving merely at a speed of 55 kph. when "out of nowhere he saw a dark maroon lancer right in front of him, which was (the) plaintiff's car". He alleged that upon
seeing this sudden "apparition" he put on his brakes to no avail as the road was slippery. 9
One will have to suspend disbelief in order to give credence to Li's disingenuous and patently self-serving asseverations. The average motorist alert to road
conditions will have no difficulty applying the brakes to a car traveling at the speed claimed by Li. Given a light rainfall, the visibility of the street, and the road
conditions on a principal metropolitan thoroughfare like Aurora Boulevard, Li would have had ample time to react to the changing conditions of the road if he were alert
- as every driver should be - to those conditions. Driving exacts a more than usual toll on the senses. Physiological "fight or flight" 10 mechanisms are at work, provided
such mechanisms were not dulled by drugs, alcohol, exhaustion, drowsiness, etc.11 Li's failure to react in a manner which would have avoided the accident could
therefore have been only due to either or both of the two factors: 1) that he was driving at a "very fast" speed as testified by Rodriguez; and 2) that he was under the
influence of alcohol.12 Either factor working independently would have diminished his responsiveness to road conditions, since normally he would have slowed down
prior to reaching Valenzuela's car, rather than be in a situation forcing him to suddenly apply his brakes. As the trial court noted (quoted with approval by respondent
court):
Secondly, as narrated by defendant Richard Li to the San Juan Police immediately after the incident, he said that while driving along Aurora Blvd., out of
nowhere he saw a dark maroon lancer right in front of him which was plaintiff's car, indicating, again, thereby that, indeed, he was driving very fast,
oblivious of his surroundings and the road ahead of him, because if he was not, then he could not have missed noticing at a still far distance the parked car of
the plaintiff at the right side near the sidewalk which had its emergency lights on, thereby avoiding forcefully bumping at the plaintiff who was then standing
at the left rear edge of her car.
Since, according to him, in his narration to the San Juan Police, he put on his brakes when he saw the plaintiff's car in front of him, but that it failed as the
road was wet and slippery, this goes to show again, that, contrary to his claim, he was, indeed, running very fast. For, were it otherwise, he could have easily
completely stopped his car, thereby avoiding the bumping of the plaintiff, notwithstanding that the road was wet and slippery. Verily, since, if, indeed, he was
running slow, as he claimed, at only about 55 kilometers per hour, then, inspite of the wet and slippery road, he could have avoided hitting the plaintiff by the
mere expedient or applying his brakes at the proper time and distance.
It could not be true, therefore, as he now claims during his testimony, which is contrary to what he told the police immediately after the accident and is,
therefore, more believable, that he did not actually step on his brakes but simply swerved a little to the right when he saw the on-coming car with glaring
headlights, from the opposite direction, in order to avoid it.
For, had this been what he did, he would not have bumped the car of the plaintiff which was properly parked at the right beside the sidewalk. And, it was not
even necessary for him to swerve a little to the right in order to safely avoid a collision with the on-coming car, considering that Aurora Blvd. is a double
lane avenue separated at the center by a dotted white paint, and there is plenty of space for both cars, since her car was running at the right lane going
towards Manila on the on-coming car was also on its right lane going to Cubao.13
Having come to the conclusion that Li was negligent in driving his company-issued Mitsubishi Lancer, the next question for us to determine is whether or not
Valenzuela was likewise guilty of contributory negligence in parking her car alongside Aurora Boulevard, which entire area Li points out, is a no parking zone.
We agree with the respondent court that Valenzuela was not guilty of contributory negligence.
Contributory negligence is conduct on the part of the injured party, contributing as a legal cause to the harm he has suffered, which falls below the standard to which he
is required to conform for his own protection.14 Based on the foregoing definition, the standard or act to which, according to petitioner Li, Valenzuela ought to have
conformed for her own protection was not to park at all at any point of Aurora Boulevard, a no parking zone. We cannot agree.
Courts have traditionally been compelled to recognize that an actor who is confronted with an emergency is not to be held up to the standard of conduct normally
applied to an individual who is in no such situation. The law takes stock of impulses of humanity when placed in threatening or dangerous situations and does not
require the same standard of thoughtful and reflective care from persons confronted by unusual and oftentimes threatening conditions. 15
Under the "emergency rule" adopted by this Court in Gan vs. Court of Appeals,16 an individual who suddenly finds himself in a situation of danger and is required to act
without much time to consider the best means that may be adopted to avoid the impending danger, is not guilty of negligence if he fails to undertake what subsequently
and upon reflection may appear to be a better solution, unless the emergency was brought by his own negligence. 17
Applying this principle to a case in which the victims in a vehicular accident swerved to the wrong lane to avoid hitting two children suddenly darting into the street, we
held, in Mc Kee vs. Intermediate Appellate Court,18 that the driver therein, Jose Koh, "adopted the best means possible in the given situation" to avoid hitting the
children. Using the "emergency rule" the Court concluded that Koh, in spite of the fact that he was in the wrong lane when the collision with an oncoming truck
occurred, was not guilty of negligence.19
While the emergency rule applies to those cases in which reflective thought, or the opportunity to adequately weigh a threatening situation is absent, the conduct which
is required of an individual in such cases is dictated not exclusively by the suddenness of the event which absolutely negates thoroughful care, but by the over-all nature
of the circumstances. A woman driving a vehicle suddenly crippled by a flat tire on a rainy night will not be faulted for stopping at a point which is both convenient for
her to do so and which is not a hazard to other motorists. She is not expected to run the entire boulevard in search for a parking zone or turn on a dark street or alley
where she would likely find no one to help her. It would be hazardous for her not to stop and assess the emergency (simply because the entire length of Aurora
Boulevard is a no-parking zone) because the hobbling vehicle would be both a threat to her safety and to other motorists. In the instant case, Valenzuela, upon reaching
that portion of Aurora Boulevard close to A. Lake St., noticed that she had a flat tire. To avoid putting herself and other motorists in danger, she did what was best under
the situation. As narrated by respondent court: "She stopped at a lighted place where there were people, to verify whether she had a flat tire and to solicit help if needed.
Having been told by the people present that her rear right tire was flat and that she cannot reach her home she parked along the sidewalk, about 1 1/2 feet away, behind a
Toyota Corona Car."20 In fact, respondent court noted, Pfc. Felix Ramos, the investigator on the scene of the accident confirmed that Valenzuela's car was parked very
close to the sidewalk.21 The sketch which he prepared after the incident showed Valenzuela's car partly straddling the sidewalk, clear and at a convenient distance from
motorists passing the right lane of Aurora Boulevard. This fact was itself corroborated by the testimony of witness Rodriguez. 22
Under the circumstances described, Valenzuela did exercise the standard reasonably dictated by the emergency and could not be considered to have contributed to the
unfortunate circumstances which eventually led to the amputation of one of her lower extremities. The emergency which led her to park her car on a sidewalk in Aurora
Boulevard was not of her own making, and it was evident that she had taken all reasonable precautions.
Obviously in the case at bench, the only negligence ascribable was the negligence of Li on the night of the accident. "Negligence, as it is commonly understood is
conduct which creates an undue risk of harm to others."23It is the failure to observe that degree of care, precaution, and vigilance which the circumstances justly
demand, whereby such other person suffers injury.24 We stressed, in Corliss vs. Manila Railroad Company,25 that negligence is the want of care required by the
circumstances.
The circumstances established by the evidence adduced in the court below plainly demonstrate that Li was grossly negligent in driving his Mitsubishi Lancer. It bears
emphasis that he was driving at a fast speed at about 2:00 A.M. after a heavy downpour had settled into a drizzle rendering the street slippery. There is ample
testimonial evidence on record to show that he was under the influence of liquor. Under these conditions, his chances of effectively dealing with changing conditions on
the road were significantly lessened. As Presser and Keaton emphasize:
[U]nder present day traffic conditions, any driver of an automobile must be prepared for the sudden appearance of obstacles and persons on the highway, and
of other vehicles at intersections, such as one who sees a child on the curb may be required to anticipate its sudden dash into the street, and his failure to act
properly when they appear may be found to amount to negligence.26
14
Li's obvious unpreparedness to cope with the situation confronting him on the night of the accident was clearly of his own making.
We now come to the question of the liability of Alexander Commercial, Inc. Li's employer. In denying liability on the part of Alexander Commercial, the respondent
court held that:
There is no evidence, not even defendant Li's testimony, that the visit was in connection with official matters. His functions as assistant manager sometimes
required him to perform work outside the office as he has to visit buyers and company clients, but he admitted that on the night of the accident he came from
BF Homes Paranaque he did not have "business from the company" (pp. 25-26, ten, Sept. 23, 1991). The use of the company car was partly required by the
nature of his work, but the privilege of using it for non-official business is a "benefit", apparently referring to the fringe benefits attaching to his position.
Under the civil law, an employer is liable for the negligence of his employees in the discharge of their respective duties, the basis of which liability is
not respondeat superior, but the relationship of pater familias, which theory bases the liability of the master ultimately on his own negligence and not on that
of his servant (Cuison v. Norton and Harrison Co., 55 Phil. 18). Before an employer may be held liable for the negligence of his employee, the act or
omission which caused damage must have occurred while an employee was in the actual performance of his assigned tasks or duties (Francis High School
vs. Court of Appeals, 194 SCRA 341). In defining an employer's liability for the acts done within the scope of the employee's assigned tasks, the Supreme
Court has held that this includes any act done by an employee, in furtherance of the interests of the employer or for the account of the employer at the time
of the infliction of the injury or damage (Filamer Christian Institute vs. Intermediate Appellate Court, 212 SCRA 637). An employer is expected to impose
upon its employees the necessary discipline called for in the performance of any act "indispensable to the business and beneficial to their employer" (at p.
645).
In light of the foregoing, We are unable to sustain the trial court's finding that since defendant Li was authorized by the company to use the company car
"either officially or socially or even bring it home", he can be considered as using the company car in the service of his employer or on the occasion of his
functions. Driving the company car was not among his functions as assistant manager; using it for non-official purposes would appear to be a fringe benefit,
one of the perks attached to his position. But to impose liability upon the employer under Article 2180 of the Civil Code, earlier quoted, there must be a
showing that the damage was caused by their employees in the service of the employer or on the occasion of their functions. There is no evidence that
Richard Li was at the time of the accident performing any act in furtherance of the company's business or its interests, or at least for its benefit. The
imposition of solidary liability against defendant Alexander Commercial Corporation must therefore fail. 27
We agree with the respondent court that the relationship in question is not based on the principle of respondeat superior, which holds the master liable for acts of the
servant, but that of pater familias, in which the liability ultimately falls upon the employer, for his failure to exercise the diligence of a good father of the family in the
selection and supervision of his employees. It is up to this point, however, that our agreement with the respondent court ends. Utilizing the bonus pater
familias standard expressed in Article 2180 of the Civil Code, 28 we are of the opinion that Li's employer, Alexander Commercial, Inc. is jointly and solidarily liable for
the damage caused by the accident of June 24, 1990.
First, the case of St. Francis High School vs. Court of Appeals29 upon which respondent court has placed undue reliance, dealt with the subject of a school and its
teacher's supervision of students during an extracurricular activity. These cases now fall under the provision on special parental authority found in Art. 218 of the
Family Code which generally encompasses all authorized school activities, whether inside or outside school premises.
Second, the employer's primary liability under the concept of pater familias embodied by Art 2180 (in relation to Art. 2176) of the Civil Code is quasi-delictual or
tortious in character. His liability is relieved on a showing that he exercised the diligence of a good father of the family in the selection and supervision of its employees.
Once evidence is introduced showing that the employer exercised the required amount of care in selecting its employees, half of the employer's burden is overcome.
The question of diligent supervision, however, depends on the circumstances of employment.
Ordinarily, evidence demonstrating that the employer has exercised diligent supervision of its employee during the performance of the latter's assigned tasks would be
enough to relieve him of the liability imposed by Article 2180 in relation to Article 2176 of the Civil Code. The employer is not expected to exercise supervision over
either the employee's private activities or during the performance of tasks either unsanctioned by the former or unrelated to the employee's tasks. The case at bench
presents a situation of a different character, involving a practice utilized by large companies with either their employees of managerial rank or their representatives.
It is customary for large companies to provide certain classes of their employees with courtesy vehicles. These company cars are either wholly owned and maintained
by the company itself or are subject to various plans through which employees eventually acquire their vehicles after a given period of service, or after paying a token
amount. Many companies provide liberal "car plans" to enable their managerial or other employees of rank to purchase cars, which, given the cost of vehicles these
days, they would not otherwise be able to purchase on their own.
Under the first example, the company actually owns and maintains the car up to the point of turnover of ownership to the employee; in the second example, the car is
really owned and maintained by the employee himself. In furnishing vehicles to such employees, are companies totally absolved of responsibility when an accident
involving a company-issued car occurs during private use after normal office hours?
Most pharmaceutical companies, for instance, which provide cars under the first plan, require rigorous tests of road worthiness from their agents prior to turning over
the car (subject of company maintenance) to their representatives. In other words, like a good father of a family, they entrust the company vehicle only after they are
satisfied that the employee to whom the car has been given full use of the said company car for company or private purposes will not be a threat or menace to himself,
the company or to others. When a company gives full use and enjoyment of a company car to its employee, it in effect guarantees that it is, like every good father,
satisfied that its employee will use the privilege reasonably and responsively.
In the ordinary course of business, not all company employees are given the privilege of using a company-issued car. For large companies other than those cited in the
example of the preceding paragraph, the privilege serves important business purposes either related to the image of success an entity intends to present to its clients and
to the public in general, or - for practical and utilitarian reasons - to enable its managerial and other employees of rank or its sales agents to reach clients conveniently.
In most cases, providing a company car serves both purposes. Since important business transactions and decisions may occur at all hours in all sorts of situations and
under all kinds of guises, the provision for the unlimited use of a company car therefore principally serves the business and goodwill of a company and only
incidentally the private purposes of the individual who actually uses the car, the managerial employee or company sales agent. As such, in providing for a company car
for business use and/or for the purpose of furthering the company's image, a company owes a responsibility to the public to see to it that the managerial or other
employees to whom it entrusts virtually unlimited use of a company issued car are able to use the company issue capably and responsibly.
In the instant case, Li was an Assistant Manager of Alexander Commercial, Inc. In his testimony before the trial court, he admitted that his functions as Assistant
Manager did not require him to scrupulously keep normal office hours as he was required quite often to perform work outside the office, visiting prospective buyers and
contacting and meeting with company clients. 30 These meetings, clearly, were not strictly confined to routine hours because, as a managerial employee tasked with the
job of representing his company with its clients, meetings with clients were both social as well as work-related functions. The service car assigned to Li by Alexander
Commercial, Inc. therefore enabled both Li - as well as the corporation - to put up the front of a highly successful entity, increasing the latter's goodwill before its
clientele. It also facilitated meeting between Li and its clients by providing the former with a convenient mode of travel.
Moreover, Li's claim that he happened to be on the road on the night of the accident because he was coming from a social visit with an officemate in Paranaque was a
bare allegation which was never corroborated in the court below. It was obviously self-serving. Assuming he really came from his officemate's place, the same could
give rise to speculation that he and his officemate had just been from a work-related function, or they were together to discuss sales and other work related strategies.
In fine, Alexander Commercial, inc. has not demonstrated, to our satisfaction, that it exercised the care and diligence of a good father of the family in entrusting its
company car to Li. No allegations were made as to whether or not the company took the steps necessary to determine or ascertain the driving proficiency and history of
Li, to whom it gave full and unlimited use of a company car.31 Not having been able to overcome the burden of demonstrating that it should be absolved of liability for
entrusting its company car to Li, said company, based on the principle of bonus pater familias, ought to be jointly and severally liable with the former for the injuries
sustained by Ma. Lourdes Valenzuela during the accident.
Finally, we find no reason to overturn the amount of damages awarded by the respondent court, except as to the amount of moral damages. In the case of moral
damages, while the said damages are not intended to enrich the plaintiff at the expense of a defendant, the award should nonetheless be commensurate to the suffering
15
inflicted. In the instant case we are of the opinion that the reduction in moral damages from an amount of P1,000,000.00 to P800,000,00 by the Court of Appeals was
not justified considering the nature of the resulting damage and the predictable sequelae of the injury.
As a result of the accident, Ma. Lourdes Valenzuela underwent a traumatic amputation of her left lower extremity at the distal left thigh just above the knee. Because of
this, Valenzuela will forever be deprived of the full ambulatory functions of her left extremity, even with the use of state of the art prosthetic technology. Well beyond
the period of hospitalization (which was paid for by Li), she will be required to undergo adjustments in her prosthetic devise due to the shrinkage of the stump from the
process of healing.
These adjustments entail costs, prosthetic replacements and months of physical and occupational rehabilitation and therapy. During her lifetime, the prosthetic devise
will have to be replaced and re-adjusted to changes in the size of her lower limb effected by the biological changes of middle-age, menopause and aging. Assuming she
reaches menopause, for example, the prosthetic will have to be adjusted to respond to the changes in bone resulting from a precipitate decrease in calcium levels
observed in the bones of all post-menopausal women. In other words, the damage done to her would not only be permanent and lasting, it would also be permanently
changing and adjusting to the physiologic changes which her body would normally undergo through the years. The replacements, changes, and adjustments will require
corresponding adjustive physical and occupational therapy. All of these adjustments, it has been documented, are painful.
The foregoing discussion does not even scratch the surface of the nature of the resulting damage because it would be highly speculative to estimate the amount of
psychological pain, damage and injury which goes with the sudden severing of a vital portion of the human body. A prosthetic device, however technologically
advanced, will only allow a reasonable amount of functional restoration of the motor functions of the lower limb. The sensory functions are forever lost. The resultant
anxiety, sleeplessness, psychological injury, mental and physical pain are inestimable.
As the amount of moral damages are subject to this Court's discretion, we are of the opinion that the amount of P1,000,000.00 granted by the trial court is in greater
accord with the extent and nature of the injury - physical and psychological - suffered by Valenzuela as a result of Li's grossly negligent driving of his Mitsubishi Lancer
in the early morning hours of the accident.
WHEREFORE, PREMISES CONSIDERED, the decision of the Court of Appeals is modified with the effect of REINSTATING the judgment of the Regional Trial
Court.
SO ORDERED.

FACTS:

June 24, 1990 2 am: While driving from her restaurant at Araneta avenue towards the direction of Manila, Ma. Lourdes Valenzuela noticed that she had a flat
tire so she parked along the sidewalk about 1 1/2 feet away, place her emergency lights and seeked help
She was with her companion Cecilia Ramon
While she was pointing her tools to the man who will help her fixed the tires, she was suddenly hit by another Mitsubishi Lancer driven by Richard Li who
was intoxicated and she slammed accross his windshield and fell to the ground
She was sent to UERM where she stayed for 20 days and her leg was amputated and was replaced with an artificial one.
Her expenses totalled 147, 000 [120,000 php (confinement) + 27, 000 (aritificial leg)]
RTC: Richard Li guilty of gross negligence and liable for damages under Article 2176 of the Civil Code. Alexander Commercial, Inc., Lis employer, jointly
and severally liable for damages pursuant to Article 2180 P41,840 actual damages, P37,500 unrealized profits because of the stoppage of plaintiffs Bistro La
Conga restaurant 3 weeks after the accident on June 24, 1990, P20,000 a month as unrealized profits of Bistro La Conga restaurant, from August, 1990 until the
date of this judgment, P30,000.00, a month, for unrealized profits in 2 Beauty salons, P1,000,000 in moral damages, P50,000, as exemplary damages, P60,000, as
reasonable attorneys fees and costs.
CA: there was ample evidence that the car was parked at the side but absolved Li's employer
Li: 55 kph - self serving and uncorraborated
Rogelio Rodriguez, the owner-operator of an establishment located just across the scene of the accident: Valenzuelas car parked parallel and very
near the sidewalk and Li was driving on a very fast speed and there was only a drizzle (NOT heavy rain)
ISSUE:
1. W/N Li was driving at 55 kph - NO
2. W/N Valenzuela was guilty of contributory negligence - NO
3. W/N Alexander Commercial, Inc. as Li's employer should be held liable - YES
4. W/N the awarding of damages is proper. - YES.

HELD: CA modified with reinstating the RTC decision

1. NO
If Li was running at only about 55 kph then despite the wet and slippery road, he could have avoided hitting the Valenzuela by the mere expedient or
applying his brakes at the proper time and distance
it was not even necessary for him to swerve a little to the right in order to safely avoid a collision with the on-coming car since there is plenty of space for
both cars, since Valenzuela car was running at the right lane going towards Manila and the on-coming car was also on its right lane going to Cubao
2. NO.
Contributory negligence is conduct on the part of the injured party, contributing as a legal cause to the harm he has suffered, which falls below the standard
to which he is required to conform for his own protection
emergency rule
an individual who suddenly finds himself in a situation of danger and is required to act without much time to consider the best means that may be
adopted to avoid the impending danger, is not guilty of negligence if he fails to undertake what subsequently and upon reflection may appear to be a better
solution, unless the emergency was brought by his own negligence
She is not expected to run the entire boulevard in search for a parking zone or turn on a dark Street or alley where she would likely
find no one to help her
She stopped at a lighted place where there were people, to verify whether she had a flat tire and to solicit help if needed
she parked along the sidewalk, about 1 feet away, behind a Toyota Corona Car
3. YES.
Not the principle of respondeat superior, which holds the master liable for acts of the servant (must be in the course of business), but that of pater familias, in
which the liability ultimately falls upon the employer, for his failure to exercise the diligence of a good father of the family in the selection and supervision of his
employees
16
 Ordinarily, evidence demonstrating that the employer has exercised diligent supervision of its employee during the performance of the latters assigned tasks
would be enough to relieve him of the liability imposed by Article 2180 in relation to Article 2176 of the Civil Code.
situation is of a different character, involving a practice utilized by large companies with either their employees of managerial rank or their
representatives.
Moreover, Lis claim that he happened to be on the road on the night of the accident because he was coming from a social visit with an officemate in
Paraaque was a bare allegation which was never corroborated in the court below. It was obviously self-serving. Assuming he really came from his officemates
place, the same could give rise to speculation that he and his officemate had just been from a work-related function, or they were together to discuss sales and
other work related strategies.
Alexander Commercial, Inc. has not demonstrated, to our satisfaction, that it exercised the care and diligence of a good father of the family in entrusting its
company car to Li
4. YES.
As the amount of moral damages are subject to this Courts discretion, we are of the opinion that the amount of P1,000,000.00 granted by the trial court is in
greater accord with the extent and nature of the injury -. physical and psychological - suffered by Valenzuela as a result of Lis grossly negligent driving of his
Mitsubishi Lancer in the early morning hours of the accident.
the damage done to her would not only be permanent and lasting, it would also be permanently changing and adjusting to the physiologic changes
which her body would normally undergo through the years. The replacements, changes, and adjustments will require corresponding adjustive physical and
occupational therapy. All of these adjustments, it has been documented, are painful.

G.R. No. L-53401 November 6, 1989

THE ILOCOS NORTE ELECTRIC COMPANY, petitioner,
vs.
HONORABLE COURT OF APPEALS, (First Division) LILIAN JUAN LUIS, JANE JUAN YABES, VIRGINIA JUAN CID, GLORIA JUAN CARAG, and
PURISIMA JUAN, respondents.
Herman D. Coloma for petitioner.
Glicerio S. Ferrer for private respondents.

PARAS, J.:
Sought to be reversed in this petition is the Decision * of the respondent Court of Appeals' First Division, setting aside the judgment of the then Court of First Instance
(CFI) of Ilocos Norte, with the following dispositive portion:
WHEREFORE, the appealed judgment is hereby set aside and another rendered in its stead whereby defendant is hereby sentenced to pay
plaintiffs actual damages of P30,229.45; compensatory damages of P50,000.00; exemplary damages of P10,000.00; attorney's fees of P3,000.00;
plus the costs of suit in both instances. (p. 27 Rollo)
Basically, this case involves a clash of evidence whereby both patties strive for the recognition of their respective versions of the scenario from which the disputed
claims originate. The respondent Court of Appeals (CA) summarized the evidence of the parties as follows:
From the evidence of plaintiffs it appears that in the evening of June 28 until the early morning of June 29, 1967 a strong typhoon by the code
name "Gening" buffeted the province of Ilocos Norte, bringing heavy rains and consequent flooding in its wake. Between 5:30 and 6:00 A.M. on
June 29, 1967, after the typhoon had abated and when the floodwaters were beginning to recede the deceased Isabel Lao Juan, fondly called Nana
Belen, ventured out of the house of her son-in-law, Antonio Yabes, on No. 19 Guerrero Street, Laoag City, and proceeded northward towards the
direction of the Five Sisters Emporium, of which she was the owner and proprietress, to look after the merchandise therein that might have been
damaged. Wading in waist-deep flood on Guerrero, the deceased was followed by Aida Bulong, a Salesgirl at the Five Sisters Grocery, also
owned by the deceased, and by Linda Alonzo Estavillo, a ticket seller at the YJ Cinema, which was partly owned by the deceased. Aida and Linda
walked side by side at a distance of between 5 and 6 meters behind the deceased, Suddenly, the deceased screamed "Ay" and quickly sank into the
water. The two girls attempted to help, but fear dissuaded them from doing so because on the spot where the deceased sank they saw an electric
wire dangling from a post and moving in snake-like fashion in the water. Upon their shouts for help, Ernesto dela Cruz came out of the house of
Antonio Yabes. Ernesto tried to go to the deceased, but at four meters away from her he turned back shouting that the water was grounded. Aida
and Linda prodded Ernesto to seek help from Antonio Yabes at the YJ Cinema building which was four or five blocks away.
When Antonio Yabes was informed by Ernesto that his mother-in law had been electrocuted, he acted immediately. With his wife Jane, together
with Ernesto and one Joe Ros, Yabes passed by the City Hall of Laoag to request the police to ask the people of defendant Ilocos Norte Electric
Company or INELCO to cut off the electric current. Then the party waded to the house on Guerrero Street. The floodwater was receding and the
lights inside the house were out indicating that the electric current had been cut off in Guerrero. Yabes instructed his boys to fish for the body of
the deceased. The body was recovered about two meters from an electric post.
In another place, at about 4:00 A.M. on that fateful date, June 29, 1967, Engineer Antonio Juan, Power Plant Engineer of the National Power
Corporation at the Laoag Diesel-Electric Plant, noticed certain fluctuations in their electric meter which indicated such abnormalities as grounded
or short-circuited lines. Between 6:00 and 6:30 A.M., he set out of the Laoag NPC Compound on an inspection. On the way, he saw grounded and
disconnected lines. Electric lines were hanging from the posts to the ground. Since he could not see any INELCO lineman, he decided to go to the
INELCO Office at the Life Theatre on Rizal Street by way of Guerrero. As he turned right at the intersection of Guerrero and Rizal, he saw an
electric wire about 30 meters long strung across the street "and the other end was seeming to play with the current of the water." (p. 64, TSN, Oct.
24, 1972) Finding the Office of the INELCO still closed, and seeing no lineman therein, he returned to the NPC Compound.
At about 8:10 A.M., Engr. Juan went out of the compound again on another inspection trip. Having learned of the death of Isabel Lao Juan, he
passed by the house of the deceased at the corner of Guerrero and M.H. del Pilar streets to which the body had been taken. Using the resuscitator
which was a standard equipment in his jeep and employing the skill he acquired from an in service training on resuscitation, he tried to revive the
deceased. His efforts proved futile. Rigor mortis was setting in. On the left palm of the deceased, Engr. Juan noticed a hollow wound. Proceeding
to the INELCO Office, he met two linemen on the way. He told them about the grounded lines of the INELCO In the afternoon of the same day,
he went on a third inspection trip preparatory to the restoration of power. The dangling wire he saw on Guerrero early in the morning of June 29,
1967 was no longer there.
Many people came to the house at the corner of Guerrero and M.H. del Pilar after learning that the deceased had been electrocuted. Among the
sympathizers was Dr. Jovencio Castro, Municipal Health Officer of Sarrat, Ilocos Norte. Upon the request of the relatives of the deceased, Dr.
Castro examined the body at about 8:00 A.M. on June 29, 1967. The skin was grayish or, in medical parlance, cyanotic, which indicated death by
electrocution. On the left palm, the doctor found an "electrically charged wound" (Exh. C-1: p. 101, TSN, Nov. 28, 1972) or a first degree burn.
About the base of the thumb on the left hand was a burned wound. (Exh. C-2, pp. 102-103, Ibid.) The certificate of death prepared by Dr. Castro
stated the cause of' death as ,'circulatory shock electrocution" (Exh. I; p. 103, Ibid.).
In defense and exculpation, defendant presented the testimonies of its officers and employees, namely, Conrado Asis, electric engineer; Loreto
Abijero, collector-inspector; Fabico Abijero, lineman; and Julio Agcaoili, president-manager of INELCO Through the testimonies of these
witnesses, defendant sought to prove that on and even before June 29, 1967 the electric service system of the INELCO in the whole franchise
17
 area, including Area No. 9 which covered the residence of Antonio Yabes at No. 18 Guerrero Street, did not suffer from any defect that might
constitute a hazard to life and property. The service lines, devices and other INELCO equipment in Area No. 9 had been newly-installed prior to
the date in question. As a public service operator and in line with its business of supplying electric current to the public, defendant had installed
safety devices to prevent and avoid injuries to persons and damage to property in case of natural calamities such as floods, typhoons, fire and
others. Defendant had 12 linesmen charged with the duty of making a round-the-clock check-up of the areas respectively assigned to them.
Defendant asserts that although a strong typhoon struck the province of Ilocos Norte on June 29, 1967, putting to streets of Laoag City under
water, only a few known places in Laoag were reported to have suffered damaged electric lines, namely, at the southern approach of the Marcos
Bridge which was washed away and where the INELCO lines and posts collapsed; in the eastern part near the residence of the late Governor
Simeon Mandac; in the far north near the defendant's power plant at the corner of Segundo and Castro Streets, Laoag City and at the far
northwest side, near the premises of the Ilocos Norte National High School. Fabico Abijero, testified that in the early morning before 6 o'clock on
June 29, 1967 he passed by the intersection of Rizal and Guerrero Streets to switch off the street lights in Area No. 9. He did not see any cut or
broken wires in or near the vicinity. What he saw were many people fishing out the body of Isabel Lao Juan.
A witness in the person of Dr. Antonio Briones was presented by the defense to show that the deceased could not have died of electrocution
Substantially, the testimony of the doctor is as follows: Without an autopsy on the cadaver of the victim, no doctor, not even a medicolegal expert,
can speculate as to the real cause of death. Cyanosis could not have been found in the body of the deceased three hours after her death, because
cyanosis which means lack of oxygen circulating in the blood and rendering the color of the skin purplish, appears only in a live person. The
presence of the elongated burn in the left palm of the deceased (Exhibits C-1 and C-2) is not sufficient to establish her death by electrocution;
since burns caused by electricity are more or less round in shape and with points of entry and exit. Had the deceased held the lethal wire for a
long time, the laceration in her palm would have been bigger and the injury more massive. (CA Decision, pp. 18-21, Rollo)
An action for damages in the aggregate amount of P250,000 was instituted by the heirs of the deceased with the aforesaid CFI on June 24, 1968. In its Answer (Vide,
Record on Appeal, p. 55, Rollo), petitioner advanced the theory, as a special defense, that the deceased could have died simply either by drowning or by electrocution
due to negligence attributable only to herself and not to petitioner. In this regard, it was pointed out that the deceased, without petitioner's knowledge, caused the
installation of a burglar deterrent by connecting a wire from the main house to the iron gate and fence of steel matting, thus, charging the latter with electric current
whenever the switch is on. Petitioner then conjectures that the switch to said burglar deterrent must have been left on, hence, causing the deceased's electrocution when
she tried to open her gate that early morning of June 29, 1967. After due trial, the CFI found the facts in favor of petitioner and dismissed the complaint but awarded to
the latter P25,000 in moral damages and attorney's fees of P45,000. An appeal was filed with the CA which issued the controverted decision.
In this petition for review the petitioner assigns the following errors committed by the respondent CA:
1. The respondent Court of Appeals committed grave abuse of discretion and error in considering the purely hearsay
alleged declarations of Ernesto de la Cruz as part of theres gestae.
2. The respondent Court of Appeals committed grave abuse of discretion and error in holding that the strong typhoon
"Gening" which struck Laoag City and Ilocos Norte on June 29, 1967 and the flood and deluge it brought in its wake were
not fortuitous events and did not exonerate petitioner-company from liability for the death of Isabel Lao Juan.
3. The respondent Court of Appeals gravely abused its discretion and erred in not applying the legal principle of
"assumption of risk" in the present case to bar private respondents from collecting damages from petitioner company.
4. That the respondent Court of Appeals gravely erred and abused its discretion in completely reversing the findings of fact
of the trial court.
5. The findings of fact of the respondent Court of Appeals are reversible under the recognized exceptions.
6. The trial court did not err in awarding moral damages and attorney's fees to defendant corporation, now petitioner
company.
7. Assuming arguendo that petitioner company may be held liable from the death of the late Isabel Lao Juan, the damages
granted by respondent Court of Appeals are improper and exhorbitant. (Petitioners Memorandum, p. 133, Rollo)
Basically, three main issues are apparent: (1) whether or not the deceased died of electrocution; (2) whether or not petitioner may be held liable for the deceased's
death; and (3) whether or not the respondent CA's substitution of the trial court's factual findings for its own was proper.
In considering the first issue, it is Our view that the same be resolved in the affirmative. By a preponderance of evidence, private respondents were able to show that the
deceased died of electrocution, a conclusion which can be primarily derived from the photographed burnt wounds (Exhibits "C", "C-1", "C-2") on the left palm of the
former. Such wounds undoubtedly point to the fact that the deceased had clutched a live wire of the petitioner. This was corroborated by the testimony of Dr. Jovencio
Castro who actually examined the body of the deceased a few hours after the death and described the said burnt wounds as a "first degree burn" (p. 144, TSN,
December 11, 1972) and that they were "electrically charged" (p. 102, TSN, November 28, 1972). Furthermore, witnesses Linda Alonzo Estavillo and Aida Bulong
added that after the deceased screamed "Ay" and sank into the water, they tried to render some help but were overcome with fear by the sight of an electric wire
dangling from an electric post, moving in the water in a snake-like fashion (supra). The foregoing therefore justifies the respondent CA in concluding that "(t)he nature
of the wounds as described by the witnesses who saw them can lead to no other conclusion than that they were "burns," and there was nothing else in the street where
the victim was wading thru which could cause a burn except the dangling live wire of defendant company" (CA Decision, p. 22, Rollo).
But in order to escape liability, petitioner ventures into the theory that the deceased was electrocuted, if such was really the case when she tried to open her steel gate,
which was electrically charged by an electric wire she herself caused to install to serve as a burglar deterrent. Petitioner suggests that the switch to said burglar alarm
was left on. But this is mere speculation, not backed up with evidence. As required by the Rules, "each party must prove his own affirmative allegations." (Rule 131,
Sec. 1). Nevertheless, the CA significantly noted that "during the trial, this theory was abandoned" by the petitioner (CA Decision, p. 23, Rollo).
Furthermore the CA properly applied the principle of res gestae. The CA said:
Linda Alonzo Estavillo, a ticket seller, and Aida Bulong, a salesgirl, were with the deceased during that fateful morning of June 29, 1967. This
Court has not been offered any sufficient reason to discredit the testimonies of these two young ladies. They were one in the affirmation that the
deceased, while wading in the waist-deep flood on Guerrero Street five or six meters ahead of them, suddenly screamed "Ay" and quickly sank
into the water. When they approached the deceased to help, they were stopped by the sight of an electric wire dangling from a post and moving in
snake-like fashion in the water. Ernesto dela Cruz also tried to approach the deceased, but he turned back shouting that the water was grounded.
These bits of evidence carry much weight. For the subject of the testimonies was a startling occurrence, and the declarations may be considered
part of the res gestae. (CA Decision, p. 21, Rollo)
FOR THE ADMISSION OF THE RES GESTAE in evidence, the following requisites must be present: (1) that the principal act, the res gestae, be a startling
occurrence; (2) that the statements were made before the declarant had time to contrive or devise; (3) that the statements made must concern the occurrence in question
and its immediately attending circumstances (People vs. Ner, 28 SCRA 1151; People vs. Balbas, 122 SCRA 959). We do not find any abuse of discretion on the CA' part
in view of the satisfaction of said requisites in the case at bar.
The statements made relative to the startling occurrence are admitted in evidence precisely as an exception to the hearsay rule on the grounds of trustworthiness and
necessity. "Trustworthiness" because the statements are made instinctively (Wesley vs. State, 53 Ala. 182), and "necessity" because such natural and spontaneous
utterances are more convincing than the testimony of the same person on the stand (Mobile vs. Ascraft 48 Ala. 31). Therefore, the fact that the declarant, Ernesto de la
Cruz, was not presented to testify does not make the testimony of Linda Alonzo Estavillo and Aida Bulong hearsay since the said declaration is part of the res gestae.
Similarly, We considered part of the res gestae a conversation between two accused immediately after commission of the crime as overheard by a prosecution witness
(People vs. Reyes, 82 Phil. 563).

18
While it may be true that, as petitioner argues (vide petitioner's Memorandum, p. 135, Rollo), Ernesto de la Cruz was not an actual witness to the instant when the
deceased sank into the waist-deep water, he acted upon the call of help of Aida Bulong and Linda Alonzo Estavillo with the knowledge of, and immediately after, the
sinking of the deceased. In fact the startling event had not yet ceased when Ernesto de la Cruz entered the scene considering that the victim remained submerged. Under
such a circumstance, it is undeniable that a state of mind characterized by nervous excitement had been triggered in Ernesto de la Cruz's being as anybody under the
same contingency could have experienced. As such, We cannot honestly exclude his shouts that the water was grounded from the res gestae just because he did not
actually see the sinking of the deceased nor hear her scream "Ay."
Neither can We dismiss the said declaration as a mere opinion of Ernesto de la Cruz. While We concede to the submission that the statement must be one of facts rather
than opinion, We cannot agree to the proposition that the one made by him was a mere opinion. On the contrary, his shout was a translation of an actuality as perceived
by him through his sense of touch.
Finally, We do not agree that the taking of Ernesto de la Cruz' testimony was suppressed by the private respondents, thus, is presumed to be adverse to them pursuant to
Section 5(e), Rule 131. For the application of said Rule as against a party to a case, it is necessary that the evidence alleged to be suppressed is available only to said
party (People vs. Tulale, L-7233, 18 May 1955, 97 Phil. 953). The presumption does not operate if the evidence in question is equally available to both parties
(StaplesHowe Printing Co. vs. Bldg. and Loan Assn., 36 Phil. 421). It is clear from the records that petitioner could have called Ernesto de la Cruz to the witness stand.
This, precisely, was Linda Alonzo Estavillo's suggestion to petitioner's counsel when she testified on cross examination:
Q. And that Erning de la Cruz, how far did he reach from the gate of the house?
A. Well, you can ask that matter from him sir because he is here. (TSN, p. 30, 26 Sept. 1972)
The foregoing shows that petitioner had the opportunity to verify the declarations of Ernesto de la Cruz which, if truly adverse to private respondent, would have helped
its case. However, due to reasons known only to petitioner, the opportunity was not taken.
Coming now to the second issue, We tip the scales in the private respondents' favor. The respondent CA acted correctly in disposing the argument that petitioner be
exonerated from liability since typhoons and floods are fortuitous events. While it is true that typhoons and floods are considered Acts of God for which no person may
be held responsible, it was not said eventuality which directly caused the victim's death. It was through the intervention of petitioner's negligence that death took place.
We subscribe to the conclusions of the respondent CA when it found:
On the issue whether or not the defendant incurred liability for the electrocution and consequent death of the late Isabel Lao Juan, defendant
called to the witness-stand its electrical engineer, chief lineman, and lineman to show exercise of extraordinary diligence and to negate the charge
of negligence. The witnesses testified in a general way about their duties and the measures which defendant usually adopts to prevent hazards to
life and limb. From these testimonies, the lower court found "that the electric lines and other equipment of defendant corporation were properly
maintained by a well-trained team of lineman, technicians and engineers working around the clock to insure that these equipments were in
excellent condition at all times." (P. 40, Record on Appeal) The finding of the lower court, however, was based on what the defendant's
employees were supposed to do, not on what they actually did or failed to do on the date in question, and not on the occasion of
theemergency situation brought about by the typhoon.
The lower court made a mistake in assuming that defendant's employees worked around the clock during the occurrence of the typhoon on the
night of June 28 and until the early morning of June 29, 1967, Engr. Antonio Juan of the National Power Corporation affirmed that when he first
set out on an inspection trip between 6:00 and 6:30 A.M. on June 29, 1967, he saw grounded and disconnected electric lines of the defendant
but he saw no INELCO lineman. The INELCO Office at the Life theatre on Rizal Street was still closed. (pp. 63-64, TSN, Oct. 24, 1972) Even
the witnesses of defendant contradict the finding of the lower court. Conrado Asis, defendant's electrical engineer, testified that he conducted a
general inspection of the franchise area of the INELCO only on June 30, 1967, the day following the typhoon. The reason he gave for the delay
was that all their vehicles were submerged. (p. 337, TSN, July 20, 1973) According to Asis, he arrived at his office at 8:00 A.M. onJune 30 and
after briefing his men on what to do they started out. (p. 338, lbid) One or two days after the typhoon, the INELCO people heard "rumors that
someone was electrocuted" so he sent one of his men to the place but his man reported back that there was no damaged wire. (p. 385, Id.) Loreto
Abijero, chief lineman of defendant, corroborated Engr. Juan. He testified that at about 8:00 A.M. on June 29, 1967 Engr. Juan came to the
INELCO plant and asked the INELCO people to inspect their lines. He went with Engr. Juan and their inspection lasted from 8:00 A.M. to 12:00
noon. (pp. 460, 465, TSN, Jan. 28, 1975) Fabico Abijero lineman of defendant, testified that at about 6:00 on June 29, 1967 the typhoon ceased.
At that time, he was at the main building of the Divine Word College of Laoag where he had taken his family for refuge. (pp. 510-511, Ibid.)
In times of calamities such as the one which occurred in Laoag City on the night of June 28 until the early hours of June 29, 1967, extraordinary
diligence requires a supplier of electricity to be inconstant vigil to prevent or avoid any probable incident that might imperil life or limb. The
evidence does not show that defendant did that. On the contrary, evidence discloses that there were no men (linemen or otherwise) policing the
area, nor even manning its office. (CA Decision, pp. 24-25, Rollo)
Indeed, under the circumstances of the case, petitioner was negligent in seeing to it that no harm is done to the general public"... considering that electricity is an agency,
subtle and deadly, the measure of care required of electric companies must be commensurate with or proportionate to the danger. The duty of exercising this high degree
of diligence and care extends to every place where persons have a right to be" (Astudillo vs. Manila Electric, 55 Phil. 427). The negligence of petitioner having been
shown, it may not now absolve itself from liability by arguing that the victim's death was solely due to a fortuitous event. "When an act of God combines or concurs
with the negligence of the defendant to produce an injury, the defendant is liable if the injury would not have resulted but for his own negligent conduct or omission"
(38 Am. Jur., p. 649).
Likewise, the maxim "volenti non fit injuria" relied upon by petitioner finds no application in the case at bar. It is imperative to note the surrounding circumstances
which impelled the deceased to leave the comforts of a roof and brave the subsiding typhoon. As testified by Linda Alonzo Estavillo (see TSN, p. 5, 26 Sept. 1972) and
Aida Bulong (see TSN, p. 43, 26 Sept. 1972), the deceased, accompanied by the former two, were on their way to the latter's grocery store "to see to it that the goods
were not flooded." As such, shall We punish her for exercising her right to protect her property from the floods by imputing upon her the unfavorable presumption that
she assumed the risk of personal injury? Definitely not. For it has been held that a person is excused from the force of the rule, that when he voluntarily assents to a
known danger he must abide by the consequences, if an emergency is found to exist or if the life or property of another is in peril (65A C.S.C. Negligence(174(5), p.
301), or when he seeks to rescue his endangered property (Harper and James, "The Law of Torts." Little, Brown and Co., 1956, v. 2, p. 1167). Clearly, an emergency
was at hand as the deceased's property, a source of her livelihood, was faced with an impending loss. Furthermore, the deceased, at the time the fatal incident occurred,
was at a place where she had a right to be without regard to petitioner's consent as she was on her way to protect her merchandise. Hence, private respondents, as heirs,
may not be barred from recovering damages as a result of the death caused by petitioner's negligence (ibid., p. 1165, 1166).
But petitioner assails the CA for having abused its discretion in completely reversing the trial court's findings of fact, pointing to the testimonies of three of its
employees its electrical engineer, collector-inspector, lineman, and president-manager to the effect that it had exercised the degree of diligence required of it in keeping
its electric lines free from defects that may imperil life and limb. Likewise, the said employees of petitioner categorically disowned the fatal wires as they appear in two
photographs taken on the afternoon of June 29, 1967 (Exhs. "D" and "E"), suggesting that said wires were just hooked to the electric post (petitioner's Memorandum, p.
170, Rollo). However, as the CA properly held, "(t)he finding of the lower court ... was based on what the defendant's employees were supposed to do, not on what they
actually did or failed to do on the date in question, and not on the occasion of the emergency situation brought about by the typhoon" (CA Decision, p. 25, Rollo). And
as found by the CA, which We have already reiterated above, petitioner was in fact negligent. In a like manner, petitioner's denial of ownership of the several wires
cannot stand the logical conclusion reached by the CA when it held that "(t)he nature of the wounds as described by the witnesses who saw them can lead to no other
conclusion than that they were 'burns', and there was nothing else in the street where the victim was wading thru which could cause a burn except the dangling live wire
of defendant company" (supra).
"When a storm occurs that is liable to prostrate the wires, due care requires prompt efforts to discover and repair broken lines" (Cooley on Torts, 4th ed., v. 3, p. 474).
The fact is that when Engineer Antonio Juan of the National Power Corporation set out in the early morning of June 29, 1967 on an inspection tour, he saw grounded
19
and disconnected lines hanging from posts to the ground but did not see any INELCO lineman either in the streets or at the INELCO office (vide, CA Decision, supra).
The foregoing shows that petitioner's duty to exercise extraordinary diligence under the circumstance was not observed, confirming the negligence of petitioner. To
aggravate matters, the CA found:
. . .even before June 28 the people in Laoag were already alerted about the impending typhoon, through radio announcements. Even the fire
department of the city announced the coming of the big flood. (pp. 532-534, TSN, March 13, 1975) At the INELCO irregularities in the flow of
electric current were noted because "amperes of the switch volts were moving". And yet, despite these danger signals, INELCO had to wait for
Engr. Juan to request that defendant's switch be cut off but the harm was done. Asked why the delay, Loreto Abijero answered that he "was not
the machine tender of the electric plant to switch off the current." (pp. 467-468, Ibid.) How very characteristic of gross inefficiency! (CA
Decision, p. 26, Rollo)
From the preceding, We find that the CA did not abuse its discretion in reversing the trial court's findings but tediously considered the factual circumstances at hand
pursuant to its power to review questions of fact raised from the decision of the Regional Trial Court, formerly the Court of First Instance (see sec. 9, BP 129).
In considering the liability of petitioner, the respondent CA awarded the following in private respondent's favor: P30,229.45 in actual damages (i.e., P12,000 for the
victim's death and P18,229.45 for funeral expenses); P50,000 in compensatory damages, computed in accordance with the formula set in the Villa-Rey Transit case (31
SCRA 511) with the base of P15,000 as average annual income of the deceased; P10,000 in exemplary damages; P3,000 attorney's fees; and costs of suit. Except for the
award of P12,000 as compensation for the victim's death, We affirm the respondent CA's award for damages and attorney's fees. Pusuant to recent jurisprudence (People
vs. Mananquil, 132 SCRA 196; People vs. Traya, 147 SCRA 381), We increase the said award of P12,000 to P30,000, thus, increasing the total actual damages to
P48,229.45.
The exclusion of moral damages and attorney's fees awarded by the lower court was properly made by the respondent CA, the charge of malice and bad faith on the part
of respondents in instituting his case being a mere product of wishful thinking and speculation. Award of damages and attorney's fees is unwarranted where the action
was filed in good faith; there should be no penalty on the right to litigate (Espiritu vs. CA, 137 SCRA 50). If damage results from a person's exercising his legal rights, it
is damnum absque injuria (Auyong Hian vs. CTA, 59 SCRA 110).
WHEREFORE, the questioned decision of the respondent, except for the slight modification that actual damages be increased to P48,229.45 is hereby AFFIRMED.
SO ORDERED.

FACTS:
From the evidence of plaintiffs it appears that in the evening of June 28 until theearly morning of June 29, 1967 a strong typhoon by the code name "Gening"
buffetedthe province of Ilocos Norte, bringing heavy rains and consequent flooding in its wake.Between 5:30 and 6:00 A.M. on June 29, 1967, after the typhoon had
abated and whenthe floodwaters were beginning to recede the deceased Isabel Lao Juan, fondly calledNana Belen, ventured out of the house of her son-in-law, Antonio
Yabes, on No. 19Guerrero Street, Laoag City, and proceeded northward towards the direction of the FiveSisters Emporium, of which she was the owner and
proprietress, to look after themerchandise therein that might have been damaged. Wading in waist-deep flood onGuerrero, the deceased was followed by Aida Bulong, a
Salesgirl at the Five SistersGrocery, also owned by the deceased, and by Linda Alonzo Estavillo, a ticket seller at theYJ Cinema, which was partly owned by the
deceased. Aida and Linda walked side by side at a distance of between 5 and 6 meters behind the deceased, Suddenly, the deceased screamed "Ay" and quickly sank
into the water. The two girls attempted to help, but fear dissuaded them from doing so because on the spot where the deceased sank they saw an electric wire dangling
from a post and moving in snake-like fashion in the water.Upon their shouts for help, Ernesto dela Cruz came out of the house of Antonio Yabes.Ernesto tried to go to
the deceased, but at four meters away from her he turned back shouting that the water was grounded. Aida and Linda prodded Ernesto to seek helpfrom Antonio Yabes
at the YJ Cinema building which was four or five blocks away.After due trial, the CFI found the facts in favor of petitioner and dismissed the complaint but awarded to
the latter P25,000 in moral damages and attorney's fees of P45,000. An appeal was filed with the CA which issued the controverted decision.
ISSUE:
Whether or not the trial court did not err in awarding moral damages andattorney's fees to Defendant Corporation?
RULING:
From the preceding, we find that the CA did not abuse its discretion inreversing the trial court's findings but tediously considered the factual circumstances athand
pursuant to its power to review questions of fact raised from the decision of theRegional Trial Court, formerly the Court of First Instance (see sec. 9, BP 129).In
considering the liability of petitioner, the respondent CA awarded the following in private respondent's favor: P30,229.45 in actual damages (i.e., P12,000 for the
victim'sdeath and P18,229.45 for funeral expenses); P50,000 in compensatory damages,computed in accordance with the formula set in the Villa-Rey Transit case (31
SCRA 511)with the base of P15,000 as average annual income of the deceased; P10,000 inexemplary damages; P3,000 attorney's fees; and costs of suit. Except for the
award of P12,000 as compensation for the victim's death, We affirm the respondent CA's awardfor damages and attorney's fees. Pusuant to recent jurisprudence (People
vs.Mananquil, 132 SCRA 196; People vs. Traya, 147 SCRA 381), We increase the said awardof P12,000 to P30,000, thus, increasing the total actual damages to
P48,229.45.The exclusion of moral damages and attorney's fees awarded by the lower court wasproperly made by the respondent CA, the charge of malice and bad faith
on the part of respondents in instituting his case being a mere product of wishful thinking andspeculation. Award of damages and attorney's fees is unwarranted where
the actionwas filed in good faith; there should be no penalty on the right to litigate (Espiritu vs
CA, 137 SCRA 50). If damage results from a person's exercising his legal rights, it is
damnum

absque injuria
(Auyong Hian vs. CTA, 59 SCRA 110).WHEREFORE, the questioned decision of the respondent, except for the slightmodification that actual damages be increased to
P48,229.45 is hereby AFFIRMED.

Assumption of risk is a defense in the law of torts, which bars or reduces aplaintiff's right to recovery against a negligent tortfeasor if the defendant can
demonstrate that the plaintiff voluntarily and knowingly assumed the risks at issue inherent to the dangerous activity in which he was participating at the
time of his or her injury.

.R. Nos. 153760-61 October 12, 2006

TEODORICO MANZANARES, petitioner,
vs.
THE PEOPLE OF THE PHILIPPINES, respondent.
x-------------------------x
EDUARDO YANG, doing business under the name and style of MANHATTAN ENTERPRISES, INC., and TEODORICO MANZANARES, petitioners,
vs.
Spouses EDILBERTO EXALTACION and ADELAIDA EXALTACION, respondents,
x-------------------------x
MANHATTAN ENTERPRISES, CO., and TEODORICO MANZANARES, petitioners,
vs.
LYDIA, CONSEJO, MIGUEL, JR., WILFREDO, BELINDA, JOHNA, DANIEL, DESPOSORIO, VICTOR, -ANTONIETTE [all surnamed ANAS] and MA.
MILLIE ANAS-SACLOTE, respondents,
20
x-------------------------x
TEODORICO MANZANARES, and EDUARDO YANG, petitioners,
vs.
FELICIDAD TOMAQUIN, respondent,
x-------------------------x
MANHATTAN ENTERPRISES CO., and TEODORICO MANZANARES, petitioners,
vs.
EDUARDA DAPLINAN VDA. DE PASCO, ROSA PASCO ALONZO, JESUSA PASCO BUSLON, FRANCISCO PASCO, MIRAVER PASCO & MA.
TERESA PASCO, respondents,
x-------------------------x
TEODORICO MANZANARES, and EDUARDO YANG, petitioners,
vs.
CITA VICENTE, respondent.

DECISION

CHICO-NAZARIO, J.:
This is a Petition for Review under Rule 45 of the 1997 Rules of Civil Procedure which seeks to reverse and set aside the Decision of the Court of Appeals dated 30
April 20021 in CA-G.R. CR No. 19600 and CA-G.R. CV No. 53834 affirming the joint decision of the Regional Trial Court (RTC) of Malolos, Bulacan, in Criminal
Case No. 5782-M and Civil Cases No. 6734-M, 6769-M, 6935-M, 6894-M, and 8478-M.
The pertinent facts are as follows:
At about 2:30 oclock in the afternoon of 13 January 1983, a vehicular collision took place along MacArthur Highway, Barangay Tikay, Malolos, Bulacan, involving an
Isuzu six-wheeler truck bearing plate no. CBG 283 Pilipinas 82 and a passenger jeepney with plate no. DDC 430 UV Pilipinas 82. The Isuzu truck was owned by
petitioner Manhattan Enterprises, Inc. and was then driven by petitioner Teodorico Manzanares. The passenger jeepney, on the other hand, was registered in the name of
Teodoro Basallo. It was established during the trial that the passenger jeepney was heading southwards in the direction of Manila while the Isuzu truck was heading the
opposite way.
The incident resulted in the deaths of the driver of the passenger jeepney Jesus Basallo, Miguel Anas, Ferdinand Exaltacion, and Antonio Pasco. It also inflicted serious
physical injuries to some of the passengers of the jeepney, namely: Angela Enriquez, Romeo Espelimbergo, Teresita dela Cruz, Cita Vicente, Jesus Bartolome, Rolando
Peralta, and Felicidad Raymundo.
As expected, the incident spawned the filing of civil suits by those harmed by the collision.
The families of the deceased Ferdinand Exaltacion2 and Miguel Anas3 instituted separate civil cases for damages against petitioners Manzanares, Manhattan Enterprises,
Inc., the latters managing partner, Eduardo Yang, and the operator of the passenger jeepney, Teodoro Basallo. The heirs of Antonio Pasco opted to file a complaint
against petitioners Manhattan Enterprises Co. and Teodorico Manzanares.4
The heirs of Jesus Basallo also filed a complaint for his death but their complaint was dismissed for failure to prosecute. 5
Two of those who sustained injuries also filed their respective complaints against petitioners and Teodoro Basallo. In her complaint, 6 Felicidad Tomaquin claimed that
because of the incident, she would not be able to report to her work in a factory for more than twelve months while Cita Vicente demanded that she be paid her salary
for the two-month period that she was unable to perform her job as a secretary in a law firm in Bulacan. 7
Except for the personal circumstances of the parties and the amount of damages claimed, the civil cases filed against petitioner Manzanares alleged that he drove the
Isuzu truck in a grossly negligent, reckless, careless, and imprudent manner without due regard to traffic rules and ordinances.
As for petitioners Manhattan Enterprises, Inc. and Eduardo Yang, the complainants alleged that they failed to exercise the diligence of a good father of a family in the
selection and supervision of petitioner Manzanares who was their employee when the mishap occurred.
Teodoro Basallo was sued on the basis of breach of contract of carriage as he was the registered owner of the passenger jeepney.
In their joint answers,8 petitioners denied the material allegations of the complaints and claimed, by way of special and affirmative defense, that petitioner Manzanares
was faultless in the accident in question; that petitioner Manhattan Enterprises, Inc. had always exercised the diligence required in the selection and supervision of all its
employees; and that it had always acted in good faith in dealing with others.
In his answers,9 Teodoro Basallo alleged that while he owned the passenger jeepney involved in the collision, the same was on lease to his brother and the jeepneys
driver, Jesus Basallo for P100.00 a day thus, he did not have a contract of carriage with anyone.
Aside from the civil cases, an Information was also filed against petitioner Manzanares before the RTC of Malolos, Bulacan. The accusatory portion of the information
reads:
That on or about the 13th day of January, 1983, in the municipality of Malolos, province of Bulacan, Philippines, and within the jurisdiction of this Honorable
Court, the said accused Teodorico Manzanares y Domingo, being then the chauffeur and person in charge of a truck bearing plate no. CBG 283 Pilipinas 82,
did then and there willfully, unlawfully and feloniously drive and operate the same while passing along the Mac-Arthur Highway in the said municipality in
a negligent, careless and imprudent manner, without due regard to the traffic laws, rules and regulations and without taking the necessary precautions to
prevent accident to persons and damage to property, causing by such negligence, carelessness and imprudence, the said truck bearing plate no. CBG 283 T.
Pilipinas 82, to bump a passenger jeep bearing plate no. DDC 430 UV Pilipinas 82 owned by Teodoro Basallo and driven by Jesus Basallo, thereby causing
serious physical injuries which directly caused the death of the said Jesus Basallo, Atty. Miguel Anas y Alli, Ferdinand Exaltacion y de Guzman and Antonio
Pasco y Geronimo; serious physical injuries to the passenger(s) thereof; namely: Angela Enriquez y Nicolas, Romeo Espelimbergo and Teresita dela Cruz,
Cita Vicente, Jesus Bartolome, Rolando Peralta and Felicidad Raymundo y Tomaquin which required medical attendance for a period of two (2) to three (3)
months barring complications and which incapacitated them from performing their customary labor for the same period of time; and damage to the said jeep
in the amount of P65,000.00, to the damage and prejudice of the said owner in the aforesaid amount of P65,000.00.10
These cases were later on consolidated and a joint trial ensued.
During the hearing of the cases, Dr. Eufemia B. Arellano, rural physician of Malolos, Bulacan, testified that she issued the death certificates of Jesus Basallo, Atty.
Anas, and Antonio Pasco11 and she was the one who signed their autopsy reports. For Jesus Basallo, she identified the cause of death to be cerebral hemorrhage due to
fracture of the base of the skull and hemorrhage of the lung due to multiple fractures of the ribs12 while Atty. Anas died because of cerebral hemorrhage due to fracture
of the skull and hemorrhage of the lungs due to multiple fractures of the ribs.13 As for Pasco, his death was brought about by cerebral hemorrhage due to multiple
fractures of cranium and hemorrhage of the lungs brought about by multiple fractures of his ribs.14
The prosecution likewise introduced in evidence the radiological report on Exaltacion stating that he suffered from complete fracture of the distal end of the left clavicle
and complete fracture of the scapula.15
The following temporary medico-legal certificates with respect to the injuries to the passengers of the jeepney were also admitted during the trial:
Angela Enriquez:
1. Lacerated wound on the left eyeball 4-5 cm. in size.
2. Hematoma, periorbital area left.
3. Abrasion, 3-4 cm. left lateral neck.
21
 4. Complete, over-riding fracture middle third of the clavicle, right.16
Cita Vicente
1. Lacerated wound, 6 cm. right parietal area.
2. Lacerated wound, 3 cm. left occipital area.
3. Contusion hematoma, right and left side of nasal bone.
4. Abrasion, right arm.
5. Abrasion, right and left knee.17
Jesus Bartolome
1. 4-5 cms. Lacerated wound, deep right frontal.
2. 3-4 cms. Lacerated wound, on the right eyebrow.
3. 5x1 cm. lacerated wound, right face.
4. Lacerated wound, 4-5 cm. medial aspect right hand.
5. Multiple abrasions, right hand.18
Rolando Peralta
1. Swelling of the right arm.19
Romeo Espelimbergo
1. Punctured wound, left arm, measuring 0.5 cm in circumference, 1 cm. in depth.
2. Lacerated wound superficial face left side 1 cm. in length.
3. Skin Abrasion, multiple, both lower extremities, and left hand.
4. Skin burns 2nd degree multiple left eye inner cantus and around the left leg.
5. Contusion with abrasion, left superior iliac spine measuring 7 cms. x 7 cms.
6. X-ray of the hip shows an incomplete fracture of the left acetabulum.20
Teresita Dela Cruz
1. Wound lacerated, 4-5 cm. temporo-perietal left.
2. Wound lacerated, mouth, left angle, 5 cm.
3. Complete fracture distal end of the clavicle, left.
4. Complete over-riding fracture 3rd rib anteriorly, left and 2nd rib, right.
5. Complete, [over]-riding fracture middle third of the tibia and fibula.21
Felicidad Tomaquin
1. Abrasion, left side of the mouth.
2. 4 cm. lacerated wound, at the right occipital area.
3. Hematoma, chest left side at the level of the angle of lower.
4. Tenderness at the epigastric area.
5. Tenderness at the left lateral side of abdomen and inguinal area.22
Subsequently, Patrolman Liberato Macapagal was presented as a witness and he testified that at about 2:35 oclock in the afternoon of 13 January 1983, he received a
report about an accident which happened at Barangay Tikay, Malolos, Bulacan.23 When he arrived at the said place, he saw that the reported mishap involved a
passenger jeepney with plate number DDC 430 and an Isuzu delivery truck bearing plate number CBG 283.24The two vehicles were resting on the right side of the
MacArthur Highway going towards Guiguinto, Bulacan. The Isuzu truck was still on the asphalted highway while the passenger jeepney rested on the ramp. 25 In the
course of his investigation, he prepared a sketch showing the relative conditions of the Isuzu truck and of the passenger jeepney as well as the other physical evidence
around these vehicles.26 In addition, he also caused the taking of pictures of the incident before the body of Jesus Basallo was extracted from the passenger jeepney. 27
Patrolman Macapagal also stated that he noticed skid marks along the highway which were allegedly caused by the Isuzu truck when its driver stepped on its brake
pedal.28 When asked as to the length of the skid marks, he replied that they measured about fifteen to twenty meters. 29 While he was not certain as to the point of impact,
Patrolman Macapagal stated that there were more pieces of broken glass on the shoulder of the highway than there were on the asphalted portion thereof. 30
After Patrolman Macapagal, Angela Enriquez, a passenger of the jeepney which figured in the collision testified that the vehicle she was riding in was on the inclined
pavement of the cemented portion31 of the highway when it was bumped by the Isuzu truck which was then in the process of overtaking another vehicle. 32 Substantially,
this was also how Tomaquin and Vicente recalled the incident. Tomaquin stated during her turn at the witness stand that "the jeep (they) were riding was already
ascending in the cemented portion of the highway" 33 while Vicente alleged that the passenger jeepney was "umaakyat pa lang sa kalsada"34 when the incident took
place.
Another witness presented by the prosecution was Paterno Dimapilis who claimed that he was resting near the entrance of the vulcanizing shop he was working located
along Barangay Tikay, Malolos, Bulacan.35 He declared that the smash up occurred in the following manner:
Q - Immediately before the collision, where was the passenger jeepney?
A - It was at the shoulder of the road, sir.
Q - What shoulder if coming from Malolos (going) towards the direction of Manila?
A - At the right shoulder of the road, sir.
Q - How about the 6 wheeler truck, where was it before the collision took place?
A - The 6-wheeler truck came from the direction of Manila, sir.
Q - Where was it facing before the collision?
A - It was facing Malolos, sir.
Q - If the truck was coming from Manila while according to you the jeep was facing towards Manila coming from Malolos, please tell the Honorable
Court how the collision took place?
A - That truck was following a Philippine Rabbit Bus, sir.
Q - Yes, please continue.
A - This Philippine Rabbit Bus wanted to overtake while the 6 wheeler truck also wanted to overtake but was in a dilemma because there was an on-
coming tamaraw jeep, sir.
Q - You said that the truck was placed in a dilemma or "naalangan," what do you want to tell the court by"naalangan"?
A - Because of the dilemma of the driver of the 6 wheeler truck due to the oncoming tamaraw jeep, the 6-wheeler truck (swerved) to the left, sir.
Q - Left of what?
A - At the left side of the road coming from Manila going to Malolos, sir.
Q - At that precise moment, when you saw the 6-wheeler truck swerved to the left, did you notice where the passenger jeepney was?
A - The passenger jeepney was at the right shoulder of the road facing Manila, sir.
Q - Alright, what happened when the truck swerved to the left?
A - When the 6-wheeler truck was swerving to the left to avoid the tamaraw, the passenger jeepney was about to stop on the cemented portion of the road,
sir, and that was the time when it was bumped by the 6-wheeler truck, sir. 36
For his part, petitioner Manzanares testified that he, together with a truck helper, was on his way back to petitioner Manhattan Enterprises, Inc. premises after delivering
cement in Tabang, Guiguinto, Bulacan when he got involved in an accident with a passenger jeepney. According to him, he was following a passenger bus which
22
overtook another passenger jeepney unloading its passengers. After the passenger bus successfully went back to its proper lane he tried to see if there was any oncoming
vehicle so that he too can overtake the passenger jeepney which was then still occupying a portion of his side of the road. Seeing no oncoming vehicle except for
another passenger jeepney on the shoulder at the opposite side of the MacArthur Highway, he proceeded to overtake. However, the passenger jeepney he was trying to
pass "immediately took its motion"37 forcing him to apply the brakes of the Isuzu truck which skidded as a result. It was then that the Isuzu truck bumped the passenger
jeepney on the other side of the highway then driven by Jesus Basallo.
When asked by the prosecutor on cross-examination, petitioner Manzanares admitted that the two passenger jeepneys were obliquely situated from one another and
were about five to ten meters apart.38 He also claimed that while he was overtaking, Jesus Basallo suddenly "climbed" 39 onto the asphalted portion of the highway
forcing him to step on his brakes but despite his effort, the Isuzu truck still skidded to the left without him even turning the steering wheel to that side. 40
After the trial, petitioner Manzanares was found guilty of reckless imprudence resulting in multiple homicide and serious physical injuries and damage to property. The
dispositive portion of the trial courts decision states:
WHEREFORE, judgment is hereby rendered as follows:
I. Criminal Case No. 5782-M entitled People of the Philippines vs. Teodorico Manzanares. This Court finds the said accused guilty beyond reasonable doubt
of the crime of Reckless Imprudence Resulting in Multiple Homicide and Serious Physical Injuries and Damage to Property. Accordingly, the said accused is
hereby sentenced to suffer an indeterminate prison term of a minimum of three (3) years, six (6) months and twenty (20) days of prison correccional,
medium to a maximum of seven (7) years and four (4) months of prision mayor, medium and to pay the costs.
The accused is likewise ordered to pay: 1) ANGELA ENRIQUEZ a) actual damages in the amount of Two Hundred Fifty (P250.00) PESOS; b) moral
damages in the amount of FIVE HUNDRED (P500.00) PESOS; c) exemplary damages in the amount of ONE HUNDRED (P100.00) PESOS; and d)
attorneys fees and litigation expenses in the amount of ONE THOUSAND (P1,000.00) PESOS; and 2) TERESITA DELA CRUZ a) actual damages in the
amount of ONE THOUSAND (P1,000.00) PESOS; b) moral damages in the amount of ONE THOUSAND (P1,000.00) PESOS; c) exemplary damages in
the amount of TWO HUNDRED (P200.00) PESOS; and d) attorneys fees and litigation expenses in the amount of ONE THOUSAND (P1,000.00) PESOS.
II. IN THE CIVIL CASES
1) In Civil Case No. 6734-M, entitled Sps. Edilberto Exaltacion, et al. vs. Eduardo Yang, et al., judgment is hereby rendered in favor of the plaintiffs and
against the defendants, ordering the latter to pay the former as follows:
a. actual damages in the amount of TWENTY SIX THOUSAND SIX HUNDRED THIRTY (P26,630.00) PESOS;
b. moral damages in the amount of ONE HUNDRED FIFTY THOUSAND (P150,000.00) PESOS;
c. exemplary damages in the amount of TEN THOUSAND (P10,000.00) PESOS;
d. attorneys fees in the amount of TWENTY THOUSAND (P20,000.00) PESOS plus five (5%) per cent of the total amount recoverable;
e. litigation expenses in the amount of FIFTEEN THOUSAND (P15,000.00) PESOS.
2) In Civil Case No. 6769-M entitled Lydia Anas, et al. vs. Manhattan Enterprises Co., et al., judgment is hereby rendered in favor of the plaintiffs and
against the defendants, ordering the latter to pay the former as follows:
a. actual damages in the amount of THIRTY THOUSAND (P30,000.00) PESOS;
b) compensatory damages in the amount of NINETY FOUR THOUSAND NINE HUNDRED (P94,900.00) PESOS;
c) moral damages in the amount of SIXTY THOUSAND (P60,000.00) PESOS;
d) exemplary damages in the amount of TEN THOUSAND (P10,000.00) PESOS; and
e) attorneys fees and litigation expenses in the amount of TWENTY THOUSAND (P20,000.00) PESOS.
3) In Civil Case No. 6935-M entitled Eduarda Daplinan Vda. De Pasco, et al. vs. Manhattan Enterprises Co., et al., judgment is hereby rendered in favor of
the plaintiffs and against the defendants, ordering the latter to pay the former as follows:
a. actual damages in the amount of TWENTY FIVE THOUSAND (P25,000.00) PESOS;
b. compensatory damages in the amount of THIRTY THOUSAND (P30,000.00) PESOS;
c. moral damages in the amount of TWENTY THOUSAND (P20,000.00) PESOS;
d. exemplary damages in the amount of FIVE THOUSAND (P5,000.00) PESOS; and
e. attorneys fees and litigation expenses in the amount of TWENTY THOUSAND (P20,000.00) PESOS.
4) In Civil Case No. 6894-M entitled Felicidad Tomaquin vs. Teodorico Manzanares, et al., judgment is hereby rendered in favor of the plaintiff and against
the defendants, ordering the latter to pay the former as follows:
a. actual damages in the amount of ONE THOUSAND (P1,000.00) PESOS:
b. moral damages in the amount of FIVE HUNDRED (P500.00) PESOS;
c. exemplary damages in the amount of TWO HUNDRED (P200.00) PESOS; and
d. attorneys fees and litigation expenses in the amount of ONE THOUSAND (P1,000.00) PESOS.
5) In Civil Case No. 8478-M entitled Cita Vicente vs. Teodorico Manzanares, et al., judgment is hereby rendered in favor of the plaintiff and against the
defendants, ordering the latter to pay the former as follows:
a. actual damages in the amount of FIVE HUNDRED (P500.00) PESOS;
b. moral damages in the amount of ONE THOUSAND (P1,000.00) PESOS;
c. exemplary damages in the amount of FIVE HUNDRED (P500.00) PESOS; and
d. attorneys fees and litigation expenses in the amount of TWO THOUSAND FIVE HUNDRED (P2,500.00) PESOS.
COSTS against the defendants in all of the instant 5 civil cases.41
In its assailed Decision of 30 April 2002, the Court of Appeals affirmed, with modification, the Decision of the trial court. The decretal portion of the Court of Appeals
Decision reads:
WHEREFORE, except for these MODIFICATIONS:
In Crim. Case No. 5782-M, the awards for exemplary damages, attorneys fees and litigation expenses, are DELETED;
In Civil Case No. 6734-M, the awards for exemplary damages, attorneys fees and litigation expenses, are deleted; indemnity for death
of P50,000.00 is additionally awarded; and the award for moral damages is reduced to P50,000.00;
In Civil Case No. 6769-M, the awards for exemplary damages, attorneys fees and litigation expenses, are deleted; indemnity for death
of P50,000.00 is additionally awarded; and the award for moral damages is reduced to P50,000.00;
In Civil Case No. 6935-M, the awards for exemplary damages, attorneys fees and litigation expenses, are deleted; indemnity for death
of P50,000.00 is additionally awarded; and the award for moral damages is increased to P50,000.00;
In Civil Case No. 6894-M, the awards for exemplary damages, attorneys fees and litigation expenses, are deleted; and
In Civil Case No. 8478-M, the awards for exemplary damages, attorneys fees and litigation expenses, are deleted.
but in all other respects the appealed Decision is otherwise AFFIRMED.42
Aggrieved, petitioners are now before this Court impugning the judgment of the appellate court for the following reason:
THE COURT A QUO ERRED AND ACTED WITH GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OR EXCESS OF JURISDICTION IN
AFFIRMING WITH MODIFICATION ONLY AS TO DAMAGES THE APRIL 30, 2002 DECISION OF THE TRIAL COURT BY OVERLOOKING
CERTAIN FACTS WHICH MAY SUBSTANTIALLY AFFECT THE RESOLUTION OF THE CASE. 43
Petitioners insist that the prosecution failed to discharge its duty of establishing petitioner Manzanares guilt beyond reasonable doubt and that the decisions both of the
trial court and of the Court of Appeals were based only on mere assumptions. They pointed out that if it were true that petitioner Manzanares swerved farther to the left
of the highway while he was overtaking, as found by the trial court, then, there was no reason why it still ended up on the asphalted portion of the highway. Moreover,
23
they claim that petitioner Manzanares exercised caution before he proceeded to overtake the passenger jeepney on his side of the road by making sure that there was no
oncoming vehicle on the opposite side of the highway. It was only after petitioner Manzanares was certain that he could successfully overtake that he did so but Jesus
Basallo suddenly and unexpectedly maneuvered his passenger jeepney into the highway forcing petitioner Manzanares to apply the brakes of his truck. Unfortunately,
the Isuzu truck skidded and rammed into the passenger jeepney driven by Jesus Basallo. Petitioners also impugn the reliance by the trial court and the Court of Appeals
on the testimony of Dimapilis by claiming that the latter was a biased witness supplied by the parents of Ferdinand Exaltacion, one of the passengers who died because
of the incident.
Petitioners also maintain that at the time of the incident, the passenger jeepney owned by Teodoro Basallo was not covered by any franchise to operate and that Jesus
Basallo was driving with an expired license. Thus, under Article 2185 of the Civil Code,44 Jesus Basallo is presumed negligent.
The Office of the Solicitor General filed its Comment45 and essentially maintained that this petition does not present any special and important reason that may justify
the exercised of this Courts power of review under Rule 45 of the Rules of Court.
THE PETITION IS UNMERITORIOUS .
It is quite evident that the question as to who between petitioner Manzanares and Jesus Basallo was negligent in the operation of his vehicle is factual in nature
justifying the outright rejection of this petition. As this court has repeatedly stressed in the majority of appeals in criminal cases, an appellate court gives great weight to
the factual findings of trial courts and accords them respect if not finality unless the accused-appellant is able to show that the trial court overlooked or disregarded
matters of substance which if considered would very likely change the results.46
Petitioners plead with us to absolve them of any liability arising from the incident which occurred in the afternoon of 13 January 1983 by shifting the blame to the Jesus
Basallo, the driver of the passenger jeepney involved in the incident. We have carefully reviewed the entire records of this case and failed to find any reason to rule in
their favor.
We particularly take note of the inconsistency in petitioner Manzanares stance as to what really caused him to abruptly step on his brakes while he was trying to pass
the passenger jeepney then unloading its passengers in his side of the road. While he insists that he was compelled to apply his brakes when he saw Jesus Basallos
passenger jeepney move into the MacArthur Highway away from the shoulder to allow its passengers to disembark, he stated a different recollection of the incident in
his direct testimony on 5 March 1986, thus:
Q - Will you tell this Honorable Court how that accident where you were involved happened?
A - I was following a truck, sir, and that truck I was following overtook a jeep which was unloading a passenger, sir.
Q - What happened next after that truck you have mentioned overtook a passenger jeep which was unloading a passenger?
A - I was also coming, sir.
Q - Coming from where?
A - From Tabang going to Malolos, sir.
Q - How about that truck which according to you overtook a jeep which was unloading a passenger, where did it come from?
A - From Tabang, sir.
Q - What happened when that truck you were following overtook that jeep which was unloading passenger?
A - He was able to overtook (sic), sir.
Q - And after by the way, what kind of truck was it which you said overtook that passenger jeepney which you said was unloading a passenger, if you
still recall?
A - It was a passenger bus, sir, colored red.
xxxx
Q - After that passenger bus according to you had overtaken the jeep which was unloading a passenger, what happened next to you, if anything had
happened?
A - I was also going to overtake because the jeep was still there but I tried to see whether there was an oncoming vehicle so that I would be able to
overtake, also, sir.
Q - Was that the only thing you did before overtaking the said passenger jeep?
A - I did not see any oncoming vehicle, sir.
Q - When you said you did not see oncoming vehicle, you mean you did not see vehicle coming from the direction of Malolos going towards Guiguinto?
A - No one, sir, was coming except a jeep which was on the shoulder of the road, sir.
Q - What did you do upon seeing that there was no oncoming vehicle from the direction of Malolos?
A - I overtook, sir.
Q - Were you able to successfully overtook that passenger jeepney which was unloading passenger?
A - No, sir.
Q - Why, please tell the Court?
A - When I was already aligned with the jeep, I was to overtake the jeep which was on a stop on the shoulder, it immediately took its motion, sir.
Q - And what did you do when you saw that the jeep on the shoulder immediately entering the pavement?
A - I applied my brakes, sir.
Q - How many times did you apply your brakes?
A - Only once, sir.
Q - Did the truck you were driving stopped as a result of the application of that brake?
A - It still continued to move (umusad), sir.
xxxx
Q - You said your truck skidded, what happened after it skidded?
A - It bumped the jeep, sir.
Q - What kind of jeep?
A - A passenger jeep, sir.47 (Emphases supplied.)
On cross-examination, he reiterated that the passenger jeepney he was supposed to pass commenced moving while he was in the process of overtaking
ATTY. ARCEO:
Q - And when you were abreast to the jeep you testified, did you not, that the jeep started its motion?
ATTY. PASAMBA:
Which jeep now?
ATTY. ARCEO:
The jeep at the right side.
A - Still little by little, sir.48
By his own admission, it is crystal clear that petitioner Manzanares was caught by surprise when the passenger jeepney he intended to overtake started moving
alongside him causing him to hesitate and to step on his brakepedal. But as he was running at such a fast pace, the momentum of the Isuzu truck overpowered his brakes
such that the truck still continued with its motion until it bumped the passenger jeepney driven by Jesus Basallo right at the edge of the asphalted portion of the
highway. The location of the debris, as illustrated by the sketch prepared by Patrolman Macapagal, and his testimony confirm that there were more pieces of broken
glass on the shoulder of the road than there were on the highway itself. Evidence tending to illustrate the relative positions of the vehicles immediately after the accident
tends to throw light on the issue of speed and direction of the vehicles movements prior to, and at the same time of, the accident. 49 This confirms that only a small
24
portion of the passenger jeepney was positioned on the asphalted portion of the highway itself while the remainder of its body was still on the shoulder of the road.
Given petitioners testimony that the two passenger jeepneys were far from one another, there was more than ample road space within which petitioner Manzanares
could have maneuvered the Isuzu truck instead of bumping into the passenger jeepney and pinning Jesus Basallo to his death. The fact that he was unable to do so and
in the end lost control of the Isuzu truck indicate that petitioner Manzanares was unreasonably fast in traversing that portion of the road despite his insistence that he
was driving slowly because his speedometer was not functioning. 50
Equally damning for petitioner Manzanares are the photographs of the two vehicles which were presented before the court for they easily contradict his claim with
respect to the speed of the Isuzu truck.51 In the case ofMacalinao v. Ong,52 we had the occasion to discuss the evidentiary value of photographs
According to American courts, photographs are admissible in evidence in motor vehicle accident cases when they appear to have been accurately taken and
are proved to be a faithful and clear representation of the subject, which cannot itself be produced, and are of such nature as to throw light upon a disputed
point.53
The severe damage to the front left portion of the passenger jeepney as shown by said pictures gives rise to the inevitable conclusion that the Isuzu truck was running
fast before it smashed into the jeepney. Such destruction could not have resulted had petitioner Manzanares been driving his truck slowly for then the impact would not
have been as severe. As we have previously declared, "the very fact of speeding is indicative of imprudent behavior, as a motorist must exercise ordinary care and drive
at a reasonable rate of speed commensurate with the conditions encountered, which will enable him or her to keep the vehicle under control and avoid injury to others
using the highway."54
Nor are we convinced that the Isuzu truck "voluntarily" swerved to the left of the highway. Such bare claim on the part of petitioner Manzanares part amounts to
nothing but an unsubstantiated and self-serving allegation.
Finally, as to petitioners argument that Jesus Basallo should be presumed negligent because he was driving with an expired license and the passenger jeepney owned by
his brother Teodorico did not have a franchise to operate, we hold that the same fails to convince. "The defense of contributory negligence does not apply in criminal
cases committed through reckless imprudence, since one cannot allege the negligence of another to evade the effects of his own negligence." 55
WHEREFORE, premises considered, the present Petition is DENIED. The Court of Appeals Decision dated 30 April 2002 affirming, with modification, the Decision
dated 16 December 1994 of the Regional Trial Court, Branch 7, Malolos, Bulacan is hereby AFFIRMED.
SO ORDERED.

Tedeorico Manzanares vs People of the Philippines

Around 2:30 PM in January 1983, vehicular head-on collision involving asix-wheeler truck owned by Manhattan Enterprises driven byManzanares, and a passenger
jeep owned by Teodoro Basallo. Itresulted in the deaths and physical injuries to some of the passengers of the jeep. The civil cases filed vs Manzanares alleged that he
drove thetruck in a grossly negligent, reckless, careless and imprudent manner without due regard to traffic rules and ordinances. As for ManhattanEnterprises, the
complaints alleged that they failed to exerciseDOAGFOAF in the selection and supervision of their employeeManzanares. Basallo was sued on breach of contract of
carriage.Petitioners insist that the prosecution failed to discharge its duty of establishing petitioner
Manzanares guilt beyond reasonable doubt and
that the decisions both of the trial court and of the Court of Appeals were
based only on mere assumptions. They pointed out that if it were truethat petitioner Manzanares swerved farther to the left of the highwaywhile he was overtaking, as
found by the trial court, then, there was noreason why it still ended up on the asphalted portion of thehighway.
Moreover, they claim that petitioner Manzanares exercisedcaution before he proceeded to overtake the passenger jeepney on hisside of the road by making sure that
there was no oncoming vehicle onthe opposite side of the highway. It was only after petitioner Manzanares was certain that he could successfully overtake that he
didso but Jesus Basallo suddenly and unexpectedly maneuvered hispassenger jeepney into the highway forcing petitioner Manzanares toapply the brakes of his truck.
Unfortunately, the Isuzu truck skidded andrammed into the passenger jeepney driven by Jesus Basallo.Petitioners also maintain that at the time of the incident,
thepassenger jeepney owned by Teodoro Basallo was not covered by anyfranchise to operate and that Jesus Basallo was driving with an
expiredlicense. Thus, under Article 2185 of the Civil Code, Jesus Basallo ispresumed negligent.Trial court found Manzanares guilty of reckless imprudence resulting
inmultiple homicide and serious physical injuries and damage to property.CA affirmed this.HELD: Petition unmeritorious. Manzanares was caught by surprise
whenthe passenger jeepney he intended to overtake started movingalongside him causing him to hesitate and to step onhis brakepedal. But as he was running at such
a fast pace, themomentum of the Isuzu truck overpowered his brakes such that the truckstill continued with its motion until it bumped
thepassenger jeepney driven by Jesus Basallo right at the edge of theasphalted portion of the highway. The location of the debris, asillustrated by the sketch prepared by
Patrolman Macapagal, and histestimony confirm that there were more pieces of broken glass on theshoulder of the road than there were on the highway itself.
Evidencetending to illustrate the relative positions of the vehicles immediatelyafter the accident tends to throw light on the issue of speed and direction
of the vehicles movements prior to, and at the same time of, the
accident.
As to petitioners argument that Jesus Basallo should be presumed
negligent because he was driving with an expired license and thepassenger jeepney owned by his brother Teodorico did not have afranchise to operate, we hold that the
same fails t
o convince. The
defense of contributory negligence does not apply in criminal casescommitted through reckless imprudence, since one cannot allege the
negligence of another to evade the effects of his own negligence.

G.R. No. 121413 January 29, 2001

PHILIPPINE COMMERCIAL INTERNATIONAL BANK (formerly INSULAR BANK OF ASIA AND AMERICA),petitioner,
vs.
COURT OF APPEALS and FORD PHILIPPINES, INC. and CITIBANK, N.A., respondents.

G.R. No. 121479 January 29, 2001

FORD PHILIPPINES, INC., petitioner-plaintiff,
vs.
COURT OF APPEALS and CITIBANK, N.A. and PHILIPPINE COMMERCIAL INTERNATIONAL BANK,respondents.

G.R. No. 128604 January 29, 2001

FORD PHILIPPINES, INC., petitioner,
vs.
CITIBANK, N.A., PHILIPPINE COMMERCIAL INTERNATIONAL BANK and COURT OF APPEALS, respondents.
QUISUMBING, J.:
These consolidated petitions involve several fraudulently negotiated checks.
The original actions a quo were instituted by Ford Philippines to recover from the drawee bank, CITIBANK, N.A. (Citibank) and collecting bank, Philippine
Commercial International Bank (PCIBank) [formerly Insular Bank of Asia and America], the value of several checks payable to the Commissioner of Internal Revenue,
which were embezzled allegedly by an organized syndicate.1wphi1.nt

25
G.R. Nos. 121413 and 121479 are twin petitions for review of the March 27, 1995 Decision1 of the Court of Appeals in CA-G.R. CV No. 25017, entitled "Ford
Philippines, Inc. vs. Citibank, N.A. and Insular Bank of Asia and America (now Philipppine Commercial International Bank), and the August 8, 1995
Resolution,2 ordering the collecting bank, Philippine Commercial International Bank, to pay the amount of Citibank Check No. SN-04867.
In G.R. No. 128604, petitioner Ford Philippines assails the October 15, 1996 Decision 3 of the Court of Appeals and its March 5, 1997 Resolution4 in CA-G.R. No.
28430 entitled "Ford Philippines, Inc. vs. Citibank, N.A. and Philippine Commercial International Bank," affirming in toto the judgment of the trial court holding the
defendant drawee bank, Citibank, N.A., solely liable to pay the amount of P12,163,298.10 as damages for the misapplied proceeds of the plaintiff's Citibanl Check
Numbers SN-10597 and 16508.
I. G.R. Nos. 121413 and 121479
The stipulated facts submitted by the parties as accepted by the Court of Appeals are as follows:
"On October 19, 1977, the plaintiff Ford drew and issued its Citibank Check No. SN-04867 in the amount of P4,746,114.41, in favor of the Commissioner of
Internal Revenue as payment of plaintiff;s percentage or manufacturer's sales taxes for the third quarter of 1977.
The aforesaid check was deposited with the degendant IBAA (now PCIBank) and was subsequently cleared at the Central Bank. Upon presentment with the
defendant Citibank, the proceeds of the check was paid to IBAA as collecting or depository bank.
The proceeds of the same Citibank check of the plaintiff was never paid to or received by the payee thereof, the Commissioner of Internal Revenue.
As a consequence, upon demand of the Bureau and/or Commissioner of Internal Revenue, the plaintiff was compelled to make a second payment to the
Bureau of Internal Revenue of its percentage/manufacturers' sales taxes for the third quarter of 1977 and that said second payment of plaintiff in the amount
of P4,746,114.41 was duly received by the Bureau of Internal Revenue.
It is further admitted by defendant Citibank that during the time of the transactions in question, plaintiff had been maintaining a checking account with
defendant Citibank; that Citibank Check No. SN-04867 which was drawn and issued by the plaintiff in favor of the Commissioner of Internal Revenue was a
crossed check in that, on its face were two parallel lines and written in between said lines was the phrase "Payee's Account Only"; and that defendant
Citibank paid the full face value of the check in the amount of P4,746,114.41 to the defendant IBAA.
It has been duly established that for the payment of plaintiff's percentage tax for the last quarter of 1977, the Bureau of Internal Revenue issued Revenue Tax
Receipt No. 18747002, dated October 20, 1977, designating therein in Muntinlupa, Metro Manila, as the authorized agent bank of Metrobanl, Alabang
branch to receive the tax payment of the plaintiff.
On December 19, 1977, plaintiff's Citibank Check No. SN-04867, together with the Revenue Tax Receipt No. 18747002, was deposited with defendant
IBAA, through its Ermita Branch. The latter accepted the check and sent it to the Central Clearing House for clearing on the samd day, with the indorsement
at the back "all prior indorsements and/or lack of indorsements guaranteed." Thereafter, defendant IBAA presented the check for payment to defendant
Citibank on same date, December 19, 1977, and the latter paid the face value of the check in the amount of P4,746,114.41. Consequently, the amount of
P4,746,114.41 was debited in plaintiff's account with the defendant Citibank and the check was returned to the plaintiff.
Upon verification, plaintiff discovered that its Citibank Check No. SN-04867 in the amount of P4,746,114.41 was not paid to the Commissioner of Internal
Revenue. Hence, in separate letters dated October 26, 1979, addressed to the defendants, the plaintiff notified the latter that in case it will be re-assessed by
the BIR for the payment of the taxes covered by the said checks, then plaintiff shall hold the defendants liable for reimbursement of the face value of the
same. Both defendants denied liability and refused to pay.
In a letter dated February 28, 1980 by the Acting Commissioner of Internal Revenue addressed to the plaintiff - supposed to be Exhibit "D", the latter was
officially informed, among others, that its check in the amount of P4, 746,114.41 was not paid to the government or its authorized agent and instead
encashed by unauthorized persons, hence, plaintiff has to pay the said amount within fifteen days from receipt of the letter. Upon advice of the plaintiff's
lawyers, plaintiff on March 11, 1982, paid to the Bureau of Internal Revenue, the amount of P4,746,114.41, representing payment of plaintiff's percentage
tax for the third quarter of 1977.
As a consequence of defendant's refusal to reimburse plaintiff of the payment it had made for the second time to the BIR of its percentage taxes, plaintiff
filed on January 20, 1983 its original complaint before this Court.
On December 24, 1985, defendant IBAA was merged with the Philippine Commercial International Bank (PCI Bank) with the latter as the surviving entity.
Defendant Citibank maintains that; the payment it made of plaintiff's Citibank Check No. SN-04867 in the amount of P4,746,114.41 "was in due course"; it
merely relied on the clearing stamp of the depository/collecting bank, the defendant IBAA that "all prior indorsements and/or lack of indorsements
guaranteed"; and the proximate cause of plaintiff's injury is the gross negligence of defendant IBAA in indorsing the plaintiff's Citibank check in question.
It is admitted that on December 19, 1977 when the proceeds of plaintiff's Citibank Check No. SN-048867 was paid to defendant IBAA as collecting bank,
plaintiff was maintaining a checking account with defendant Citibank."5
Although it was not among the stipulated facts, an investigation by the National Bureau of Investigation (NBI) revealed that Citibank Check No. SN-04867 was recalled
by Godofredo Rivera, the General Ledger Accountant of Ford. He purportedly needed to hold back the check because there was an error in the computation of the tax
due to the Bureau of Internal Revenue (BIR). With Rivera's instruction, PCIBank replaced the check with two of its own Manager's Checks (MCs). Alleged members of
a syndicate later deposited the two MCs with the Pacific Banking Corporation.
Ford, with leave of court, filed a third-party complaint before the trial court impleading Pacific Banking Corporation (PBC) and Godofredo Rivera, as third party
defendants. But the court dismissed the complaint against PBC for lack of cause of action. The course likewise dismissed the third-party complaint against Godofredo
Rivera because he could not be served with summons as the NBI declared him as a "fugitive from justice".
On June 15, 1989, the trial court rendered its decision, as follows:
"Premises considered, judgment is hereby rendered as follows:
"1. Ordering the defendants Citibank and IBAA (now PCI Bank), jointly and severally, to pay the plaintiff the amount of P4,746,114.41
representing the face value of plaintiff's Citibank Check No. SN-04867, with interest thereon at the legal rate starting January 20, 1983, the date
when the original complaint was filed until the amount is fully paid, plus costs;
"2. On defendant Citibank's cross-claim: ordering the cross-defendant IBAA (now PCI Bank) to reimburse defendant Citibank for whatever
amount the latter has paid or may pay to the plaintiff in accordance with next preceding paragraph;
"3. The counterclaims asserted by the defendants against the plaintiff, as well as that asserted by the cross-defendant against the cross-claimant
are dismissed, for lack of merits; and
"4. With costs against the defendants.
SO ORDERED."6
Not satisfied with the said decision, both defendants, Citibank and PCIBank, elevated their respective petitions for review on certiorari to the Courts of Appeals. On
March 27, 1995, the appellate court issued its judgment as follows:
"WHEREFORE, in view of the foregoing, the court AFFIRMS the appealed decision with modifications.
The court hereby renderes judgment:
1. Dismissing the complaint in Civil Case No. 49287 insofar as defendant Citibank N.A. is concerned;
2. Ordering the defendant IBAA now PCI Bank to pay the plaintiff the amount of P4,746,114.41 representing the face value of plaintiff's
Citibank Check No. SN-04867, with interest thereon at the legal rate starting January 20, 1983, the date when the original complaint was filed
until the amount is fully paid;
3. Dismissing the counterclaims asserted by the defendants against the plaintiff as well as that asserted by the cross-defendant against the cross-
claimant, for lack of merits.
Costs against the defendant IBAA (now PCI Bank).
26
 IT IS SO ORDERED."7
PCI Bank moved to reconsider the above-quoted decision of the Court of Appeals, while Ford filed a "Motion for Partial Reconsideration." Both motions were denied
for lack of merit.
Separately, PCIBank and Ford filed before this Court, petitions for review by certiorari under Rule 45.
In G.R. No. 121413, PCIBank seeks the reversal of the decision and resolution of the Twelfth Division of the Court of Appeals contending that it merely acted on the
instruction of Ford and such casue of action had already prescribed.
PCIBank sets forth the following issues for consideration:
I. Did the respondent court err when, after finding that the petitioner acted on the check drawn by respondent Ford on the said respondent's instructions, it
nevertheless found the petitioner liable to the said respondent for the full amount of the said check.
II. Did the respondent court err when it did not find prescription in favor of the petitioner. 8
In a counter move, Ford filed its petition docketed as G.R. No. 121479, questioning the same decision and resolution of the Court of Appeals, and praying for the
reinstatement in toto of the decision of the trial court which found both PCIBank and Citibank jointly and severally liable for the loss.
In G.R. No. 121479, appellant Ford presents the following propositions for consideration:
I. Respondent Citibank is liable to petitioner Ford considering that:
1. As drawee bank, respondent Citibank owes to petitioner Ford, as the drawer of the subject check and a depositor of respondent Citibank, an
absolute and contractual duty to pay the proceeds of the subject check only to the payee thereof, the Commissioner of Internal Revenue.
2. Respondent Citibank failed to observe its duty as banker with respect to the subject check, which was crossed and payable to "Payee's Account
Only."
3. Respondent Citibank raises an issue for the first time on appeal; thus the same should not be considered by the Honorable Court.
4. As correctly held by the trial court, there is no evidence of gross negligence on the part of petitioner Ford. 9
II. PCI Bank is liable to petitioner Ford considering that:
1. There were no instructions from petitioner Ford to deliver the proceeds of the subject check to a person other than the payee named therein, the
Commissioner of the Bureau of Internal Revenue; thus, PCIBank's only obligation is to deliver the proceeds to the Commissioner of the Bureau
of Internal Revenue.10
2. PCIBank which affixed its indorsement on the subject check ("All prior indorsement and/or lack of indorsement guaranteed"), is liable as
collecting bank.11
3. PCIBank is barred from raising issues of fact in the instant proceedings. 12
4. Petitioner Ford's cause of action had not prescribed.13
II. G.R. No. 128604
The same sysndicate apparently embezzled the proceeds of checks intended, this time, to settle Ford's percentage taxes appertaining to the second quarter of 1978 and
the first quarter of 1979.
The facts as narrated by the Court of Appeals are as follows:
Ford drew Citibank Check No. SN-10597 on July 19, 1978 in the amount of P5,851,706.37 representing the percentage tax due for the second quarter of 1978 payable
to the Commissioner of Internal Revenue. A BIR Revenue Tax Receipt No. 28645385 was issued for the said purpose.
On April 20, 1979, Ford drew another Citibank Check No. SN-16508 in the amount of P6,311,591.73, representing the payment of percentage tax for the first quarter of
1979 and payable to the Commissioner of Internal Revenue. Again a BIR Revenue Tax Receipt No. A-1697160 was issued for the said purpose.
Both checks were "crossed checks" and contain two diagonal lines on its upper corner between, which were written the words "payable to the payee's account only."
The checks never reached the payee, CIR. Thus, in a letter dated February 28, 1980, the BIR, Region 4-B, demanded for the said tax payments the corresponding
periods above-mentioned.
As far as the BIR is concernced, the said two BIR Revenue Tax Receipts were considered "fake and spurious". This anomaly was confirmed by the NBI upon the
initiative of the BIR. The findings forced Ford to pay the BIR a new, while an action was filed against Citibank and PCIBank for the recovery of the amount of Citibank
Check Numbers SN-10597 and 16508.
The Regional Trial Court of Makati, Branch 57, which tried the case, made its findings on the modus operandi of the syndicate, as follows:
"A certain Mr. Godofredo Rivera was employed by the plaintiff FORD as its General Ledger Accountant. As such, he prepared the plaintiff's check marked
Ex. 'A' [Citibank Check No. Sn-10597] for payment to the BIR. Instead, however, fo delivering the same of the payee, he passed on the check to a co-
conspirator named Remberto Castro who was a pro-manager of the San Andres Branch of PCIB.* In connivance with one Winston Dulay, Castro himself
subsequently opened a Checking Account in the name of a fictitious person denominated as 'Reynaldo reyes' in the Meralco Branch of PCIBank where
Dulay works as Assistant Manager.
After an initial deposit of P100.00 to validate the account, Castro deposited a worthless Bank of America Check in exactly the same amount as the first
FORD check (Exh. "A", P5,851,706.37) while this worthless check was coursed through PCIB's main office enroute to the Central Bank for clearing,
replaced this worthless check with FORD's Exhibit 'A' and accordingly tampered the accompanying documents to cover the replacement. As a result, Exhibit
'A' was cleared by defendant CITIBANK, and the fictitious deposit account of 'Reynaldo Reyes' was credited at the PCIB Meralco Branch with the total
amount of the FORD check Exhibit 'A'. The same method was again utilized by the syndicate in profiting from Exh. 'B' [Citibank Check No. SN-16508]
which was subsequently pilfered by Alexis Marindo, Rivera's Assistant at FORD.
From this 'Reynaldo Reyes' account, Castro drew various checks distributing the sahres of the other participating conspirators namely (1) CRISANTO
BERNABE, the mastermind who formulated the method for the embezzlement; (2) RODOLFO R. DE LEON a customs broker who negotiated the initial
contact between Bernabe, FORD's Godofredo Rivera and PCIB's Remberto Castro; (3) JUAN VASTILLO who assisted de Leon in the initial arrangements;
(4) GODOFREDO RIVERA, FORD's accountant who passed on the first check (Exhibit "A") to Castro; (5) REMERTO CASTRO, PCIB's pro-manager at
San Andres who performed the switching of checks in the clearing process and opened the fictitious Reynaldo Reyes account at the PCIB Meralco Branch;
(6) WINSTON DULAY, PCIB's Assistant Manager at its Meralco Branch, who assisted Castro in switching the checks in the clearing process and facilitated
the opening of the fictitious Reynaldo Reyes' bank account; (7) ALEXIS MARINDO, Rivera's Assistant at FORD, who gave the second check (Exh. "B") to
Castro; (8) ELEUTERIO JIMENEZ, BIR Collection Agent who provided the fake and spurious revenue tax receipts to make it appear that the BIR had
received FORD's tax payments.
Several other persons and entities were utilized by the syndicate as conduits in the disbursements of the proceeds of the two checks, but like the
aforementioned participants in the conspiracy, have not been impleaded in the present case. The manner by which the said funds were distributed among
them are traceable from the record of checks drawn against the original "Reynaldo Reyes" account and indubitably identify the parties who illegally
benefited therefrom and readily indicate in what amounts they did so."14
On December 9, 1988, Regional Trial Court of Makati, Branch 57, held drawee-bank, Citibank, liable for the value of the two checks while adsolving PCIBank from
any liability, disposing as follows:
"WHEREFORE, judgment is hereby rendered sentencing defendant CITIBANK to reimburse plaintiff FORD the total amount of P12,163,298.10 prayed for
in its complaint, with 6% interest thereon from date of first written demand until full payment, plus P300,000.00 attorney's fees and expenses litigation, and
to pay the defendant, PCIB (on its counterclaim to crossclaim) the sum of P300,000.00 as attorney's fees and costs of litigation, and pay the costs.
SO ORDERED."15
Both Ford and Citibank appealed to the Court of Appeals which affirmed, in toto, the decision of the trial court. Hence, this petition.

27
Petitioner Ford prays that judgment be rendered setting aside the portion of the Court of Appeals decision and its resolution dated March 5, 1997, with respect to the
dismissal of the complaint against PCIBank and holding Citibank solely responsible for the proceeds of Citibank Check Numbers SN-10597 and 16508 for
P5,851,706.73 and P6,311,591.73 respectively.
Ford avers that the Court of Appeals erred in dismissing the complaint against defendant PCIBank considering that:
I. Defendant PCIBank was clearly negligent when it failed to exercise the diligence required to be exercised by it as a banking insitution.
II. Defendant PCIBank clearly failed to observe the diligence required in the selection and supervision of its officers and employees.
III. Defendant PCIBank was, due to its negligence, clearly liable for the loss or damage resulting to the plaintiff Ford as a consequence of the substitution of
the check consistent with Section 5 of Central Bank Circular No. 580 series of 1977.
IV. Assuming arguedo that defedant PCIBank did not accept, endorse or negotiate in due course the subject checks, it is liable, under Article 2154 of the
Civil Code, to return the money which it admits having received, and which was credited to it its Central bank account. 16
The main issue presented for our consideration by these petitions could be simplified as follows: Has petitioner Ford the right to recover from the collecting bank
(PCIBank) and the drawee bank (Citibank) the value of the checks intended as payment to the Commissioner of Internal Revenue? Or has Ford's cause of action already
prescribed?
Note that in these cases, the checks were drawn against the drawee bank, but the title of the person negotiating the same was allegedly defective because the instrument
was obtained by fraud and unlawful means, and the proceeds of the checks were not remitted to the payee. It was established that instead of paying the checks to the
CIR, for the settlement of the approprite quarterly percentage taxes of Ford, the checks were diverted and encashed for the eventual distribution among the mmbers of
the syndicate. As to the unlawful negotiation of the check the applicable law is Section 55 of the Negotiable Instruments Law (NIL), which provides:
"When title defective -- The title of a person who negotiates an instrument is defective within the meaning of this Act when he obtained the instrument, or
any signature thereto, by fraud, duress, or fore and fear, or other unlawful means, or for an illegal consideration, or when he negotiates it in breach of faith or
under such circumstances as amount to a fraud."
Pursuant to this provision, it is vital to show that the negotiation is made by the perpetator in breach of faith amounting to fraud. The person negotiating the checks must
have gone beyond the authority given by his principal. If the principal could prove that there was no negligence in the performance of his duties, he may set up the
personal defense to escape liability and recover from other parties who. Though their own negligence, alowed the commission of the crime.
In this case, we note that the direct perpetrators of the offense, namely the embezzlers belonging to a syndicate, are now fugitives from justice. They have, even if
temporarily, escaped liability for the embezzlement of millions of pesos. We are thus left only with the task of determining who of the present parties before us must
bear the burden of loss of these millions. It all boils down to thequestion of liability based on the degree of negligence among the parties concerned.
Foremost, we must resolve whether the injured party, Ford, is guilty of the "imputed contributory negligence" that would defeat its claim for reimbursement, bearing ing
mind that its employees, Godofredo Rivera and Alexis Marindo, were among the members of the syndicate.
Citibank points out that Ford allowed its very own employee, Godofredo Rivera, to negotiate the checks to his co-conspirators, instead of delivering them to the
designated authorized collecting bank (Metrobank-Alabang) of the payee, CIR. Citibank bewails the fact that Ford was remiss in the supervision and control of its own
employees, inasmuch as it only discovered the syndicate's activities through the information given by the payee of the checks after an unreasonable period of time.
PCIBank also blames Ford of negligence when it allegedly authorized Godofredo Rivera to divert the proceeds of Citibank Check No. SN-04867, instead of using it to
pay the BIR. As to the subsequent run-around of unds of Citibank Check Nos. SN-10597 and 16508, PCIBank claims that the proximate cause of the damge to Ford lies
in its own officers and employees who carried out the fradulent schemes and the transactions. These circumstances were not checked by other officers of the company
including its comptroller or internal auditor. PCIBank contends that the inaction of Ford despite the enormity of the amount involved was a sheer negligence and stated
that, as between two innocent persons, one of whom must suffer the consequences of a breach of trust, the one who made it possible, by his act of negligence, must bear
the loss.
For its part, Ford denies any negligence in the performance of its duties. It avers that there was no evidence presented before the trial court showing lack of diligence on
the part of Ford. And, citing the case of Gempesaw vs. Court of Appeals,17 Ford argues that even if there was a finding therein that the drawer was negligent, the drawee
bank was still ordered to pay damages.
Furthermore, Ford contends the Godofredo rivera was not authorized to make any representation in its behalf, specifically, to divert the proceeds of the checks. It adds
that Citibank raised the issue of imputed negligence against Ford for the first time on appeal. Thus, it should not be considered by this Court.
On this point, jurisprudence regarding the imputed negligence of employer in a master-servant relationship is instructive. Since a master may be held for his servant's
wrongful act, the law imputes to the master the act of the servant, and if that act is negligent or wrongful and proximately results in injury to a third person, the
negligence or wrongful conduct is the negligence or wrongful conduct of the master, for which he is liable. 18 The general rule is that if the master is injured by the
negligence of a third person and by the concuring contributory negligence of his own servant or agent, the latter's negligence is imputed to his superior and will defeat
the superior's action against the third person, asuming, of course that the contributory negligence was the proximate cause of the injury of which complaint is made.19
Accordingly, we need to determine whether or not the action of Godofredo Rivera, Ford's General Ledger Accountant, and/or Alexis Marindo, his assistant, was the
proximate cause of the loss or damage. AS defined, proximate cause is that which, in the natural and continuous sequence, unbroken by any efficient, intervening cause
produces the injury and without the result would not have occurred.20
It appears that although the employees of Ford initiated the transactions attributable to an organized syndicate, in our view, their actions were not the proximate cause of
encashing the checks payable to the CIR. The degree of Ford's negligence, if any, could not be characterized as the proximate cause of the injury to the parties.
The Board of Directors of Ford, we note, did not confirm the request of Godofredo Rivera to recall Citibank Check No. SN-04867. Rivera's instruction to replace the
said check with PCIBank's Manager's Check was not in theordinary course of business which could have prompted PCIBank to validate the same.
As to the preparation of Citibank Checks Nos. SN-10597 and 16508, it was established that these checks were made payable to the CIR. Both were crossed checks.
These checks were apparently turned around by Ford's emploees, who were acting on their own personal capacity.
Given these circumstances, the mere fact that the forgery was committed by a drawer-payor's confidential employee or agent, who by virtue of his position had unusual
facilities for perpertrating the fraud and imposing the forged paper upon the bank, does notentitle the bank toshift the loss to the drawer-payor, in the absence of some
circumstance raising estoppel against the drawer.21 This rule likewise applies to the checks fraudulently negotiated or diverted by the confidential employees who hold
them in their possession.
With respect to the negligence of PCIBank in the payment of the three checks involved, separately, the trial courts found variations between the negotiation of Citibank
Check No. SN-04867 and the misapplication of total proceeds of Checks SN-10597 and 16508. Therefore, we have to scrutinize, separately, PCIBank's share of
negligence when the syndicate achieved its ultimate agenda of stealing the proceeds of these checks.
G.R. Nos. 121413 and 121479
Citibank Check No. SN-04867 was deposited at PCIBank through its Ermita Branch. It was coursed through the ordinary banking transaction, sent to Central Clearing
with the indorsement at the back "all prior indorsements and/or lack of indorsements guaranteed," and was presented to Citibank for payment. Thereafter PCIBank,
instead of remitting the proceeds to the CIR, prepared two of its Manager's checks and enabled the syndicate to encash the same.
On record, PCIBank failed to verify the authority of Mr. Rivera to negotiate the checks. The neglect of PCIBank employees to verify whether his letter requesting for
the replacement of the Citibank Check No. SN-04867 was duly authorized, showed lack of care and prudence required in the circumstances.
Furthermore, it was admitted that PCIBank is authorized to collect the payment of taxpayers in behalf of the BIR. As an agent of BIR, PCIBank is duty bound to consult
its principal regarding the unwarranted instructions given by the payor or its agent. As aptly stated by the trial court, to wit:
"xxx. Since the questioned crossed check was deposited with IBAA [now PCIBank], which claimed to be a depository/collecting bank of BIR, it has the
responsibility to make sure that the check in question is deposited in Payee's account only.
xxx xxx xxx

28
 As agent of the BIR (the payee of the check), defendant IBAA should receive instructions only from its principal BIR and not from any other person
especially so when that person is not known to the defendant. It is very imprudent on the part of the defendant IBAA to just rely on the alleged telephone call
of the one Godofredo Rivera and in his signature considering that the plaintiff is not a client of the defendant IBAA."
It is a well-settled rule that the relationship between the payee or holder of commercial paper and the bank to which it is sent for collection is, in the absence of an
argreement to the contrary, that of principal and agent.22 A bank which receives such paper for collection is the agent of the payee or holder.23
Even considering arguendo, that the diversion of the amount of a check payable to the collecting bank in behalf of the designated payee may be allowed, still such
diversion must be properly authorized by the payor. Otherwise stated, the diversion can be justified only by proof of authority from the drawer, or that the drawer has
clothed his agent with apparent authority to receive the proceeds of such check.
Citibank further argues that PCI Bank's clearing stamp appearing at the back of the questioned checks stating that ALL PRIOR INDORSEMENTS AND/OR LACK OF
INDORSEMENTS GURANTEED should render PCIBank liable because it made it pass through the clearing house and therefore Citibank had no other option but to
pay it. Thus, Citibank had no other option but to pay it. Thus, Citibank assets that the proximate cause of Ford's injury is the gross negligence of PCIBank. Since the
questione dcrossed check was deposited with PCIBank, which claimed to be a depository/collecting bank of the BIR, it had the responsibility to make sure that the
check in questions is deposited in Payee's account only.
Indeed, the crossing of the check with the phrase "Payee's Account Only," is a warning that the check should be deposited only in the account of the CIR. Thus, it is the
duty of the collecting bank PCIBank to ascertain that the check be deposited in payee's account only. Therefore, it is the collecting bank (PCIBank) which is bound to
scruninize the check and to know its depositors before it could make the clearing indorsement "all prior indorsements and/or lack of indorsement guaranteed".
In Banco de Oro Savings and Mortgage Bank vs. Equitable Banking Corporation,24 we ruled:
"Anent petitioner's liability on said instruments, this court is in full accord with the ruling of the PCHC's Board of Directors that:
'In presenting the checks for clearing and for payment, the defendant made an express guarantee on the validity of "all prior endorsements." Thus, stamped at
the back of the checks are the defedant's clear warranty: ALL PRIOR ENDORSEMENTS AND/OR LACK OF ENDORSEMENTS GUARANTEED.
Without such warranty, plaintiff would not have paid on the checks.'
No amount of legal jargon can reverse the clear meaning of defendant's warranty. As the warranty has proven to be false and inaccurate, the defendant is
liable for any damage arising out of the falsity of its representation."25
Lastly, banking business requires that the one who first cashes and negotiates the check must take some percautions to learn whether or not it is genuine. And if the one
cashing the check through indifference or othe circumstance assists the forger in committing the fraud, he should not be permitted to retain the proceeds of the check
from the drawee whose sole fault was that it did not discover the forgery or the defect in the title of the person negotiating the instrument before paying the check. For
this reason, a bank which cashes a check drawn upon another bank, without requiring proof as to the identity of persons presenting it, or making inquiries with regard to
them, cannot hold the proceeds against the drawee when the proceeds of the checks were afterwards diverted to the hands of a third party. In such cases the drawee bank
has a right to believe that the cashing bank (or the collecting bank) had, by the usual proper investigation, satisfied itself of the authenticity of the negotiation of the
checks. Thus, one who encashed a check which had been forged or diverted and in turn received payment thereon from the drawee, is guilty of negligence which
proximately contributed to the success of the fraud practiced on the drawee bank. The latter may recover from the holder the money paid on the check. 26
Having established that the collecting bank's negligence is the proximate cause of the loss, we conclude that PCIBank is liable in the amount corresponding to the
proceeds of Citibank Check No. SN-04867.
G.R. No. 128604
The trial court and the Court of Appeals found that PCIBank had no official act in the ordinary course of business that would attribute to it the case of the embezzlement
of Citibank Check Numbers SN-10597 and 16508, because PCIBank did not actually receive nor hold the two Ford checks at all. The trial court held, thus:
"Neither is there any proof that defendant PCIBank contributed any official or conscious participation in the process of the embezzlement. This Court is
convinced that the switching operation (involving the checks while in transit for "clearing") were the clandestine or hidden actuations performed by the
members of the syndicate in their own personl, covert and private capacity and done without the knowledge of the defendant PCIBank" 27
In this case, there was no evidence presented confirming the conscious particiapation of PCIBank in the embezzlement. As a general rule, however, a banking
corporation is liable for the wrongful or tortuous acts and declarations of its officers or agents within the course and scope of their employment. 28 A bank will be held
liable for the negligence of its officers or agents when acting within the course and scope of their employment. It may be liable for the tortuous acts of its officers even
as regards that species of tort of which malice is an essential element. In this case, we find a situation where the PCIBank appears also to be the victim of the scheme
hatched by a syndicate in which its own management employees had particiapted.
The pro-manager of San Andres Branch of PCIBank, Remberto Castro, received Citibank Check Numbers SN-10597 and 16508. He passed the checks to a co-
conspirator, an Assistant Manager of PCIBank's Meralco Branch, who helped Castro open a Checking account of a fictitious person named "Reynaldo Reyes." Castro
deposited a worthless Bank of America Check in exactly the same amount of Ford checks. The syndicate tampered with the checks and succeeded in replacing the
worthless checks and the eventual encashment of Citibank Check Nos. SN 10597 and 16508. The PCIBank Ptro-manager, Castro, and his co-conspirator Assistant
Manager apparently performed their activities using facilities in their official capacity or authority but for their personal and private gain or benefit.
A bank holding out its officers and agents as worthy of confidence will not be permitted to profit by the frauds these officers or agents were enabled to perpetrate in the
apparent course of their employment; nor will t be permitted to shirk its responsibility for such frauds, even though no benefit may accrue to the bank therefrom. For the
general rule is that a bank is liable for the fraudulent acts or representations of an officer or agent acting within the course and apparent scope of his employment or
authority.29 And if an officer or employee of a bank, in his official capacity, receives money to satisfy an evidence of indebetedness lodged with his bank for collection,
the bank is liable for his misappropriation of such sum.30
Moreover, as correctly pointed out by Ford, Section 531 of Central Bank Circular No. 580, Series of 1977 provides that any theft affecting items in transit for clearing,
shall be for the account of sending bank, which in this case is PCIBank.
But in this case, responsibility for negligence does not lie on PCIBank's shoulders alone.
The evidence on record shows that Citibank as drawee bank was likewise negligent in the performance of its duties. Citibank failed to establish that its payment of
Ford's checjs were made in due course and legally in order. In its defense, Citibank claims the genuineness and due execution of said checks, considering that Citibank
(1) has no knowledge of any informity in the issuance of the checks in question (2) coupled by the fact that said checks were sufficiently funded and (3) the
endorsement of the Payee or lack thereof was guaranteed by PCI Bank (formerly IBAA), thus, it has the obligation to honor and pay the same.
For its part, Ford contends that Citibank as the drawee bank owes to Ford an absolute and contractual duty to pay the proceeds of the subject check only to the payee
thereof, the CIR. Citing Section 6232 of the Negotiable Instruments Law, Ford argues that by accepting the instrument, the acceptro which is Citibank engages that it will
pay according to the tenor of its acceptance, and that it will pay only to the payee, (the CIR), considering the fact that here the check was crossed with annotation
"Payees Account Only."
As ruled by the Court of Appeals, Citibank must likewise answer for the damages incurred by Ford on Citibank Checks Numbers SN 10597 and 16508, because of the
contractual relationship existing between the two. Citibank, as the drawee bank breached its contractual obligation with Ford and such degree of culpability contributed
to the damage caused to the latter. On this score, we agree with the respondent court's ruling.
Citibank should have scrutinized Citibank Check Numbers SN 10597 and 16508 before paying the amount of the proceeds thereof to the collecting bank of the BIR.
One thing is clear from the record: the clearing stamps at the back of Citibank Check Nos. SN 10597 and 16508 do not bear any initials. Citibank failed to notice and
verify the absence of the clearing stamps. Had this been duly examined, the switching of the worthless checks to Citibank Check Nos. 10597 and 16508 would have
been discovered in time. For this reason, Citibank had indeed failed to perform what was incumbent upon it, which is to ensure that the amount of the checks should be
paid only to its designated payee. The fact that the drawee bank did not discover the irregularity seasonably, in our view, consitutes negligence in carrying out the bank's
duty to its depositors. The point is that as a business affected with public interest and because of the nature of its functions, the bank is under obligation to treat the
accounts of its depositors with meticulous care, always having in mind the fiduciary nature of their relationship.33
29
Thus, invoking the doctrine of comparative negligence, we are of the view that both PCIBank and Citibank failed in their respective obligations and both were negligent
in the selection and supervision of their employees resulting in the encashment of Citibank Check Nos. SN 10597 AND 16508. Thus, we are constrained to hold them
equally liable for the loss of the proceeds of said checks issued by Ford in favor of the CIR.
Time and again, we have stressed that banking business is so impressed with public interest where the trust and confidence of the public in general is of paramount
umportance such that the appropriate standard of diligence must be very high, if not the highest, degree of diligence. 34 A bank's liability as obligor is not merely
vicarious but primary, wherein the defense of exercise of due diligence in the selection and supervision of its employees is of no moment. 35
Banks handle daily transactions involving millions of pesos.36 By the very nature of their work the degree of responsibility, care and trustworthiness expected of their
employees and officials is far greater than those of ordinary clerks and employees.37 Banks are expected to exercise the highest degree of diligence in the selection and
supervision of their employees.38
On the issue of prescription, PCIBank claims that the action of Ford had prescribed because of its inability to seek judicial relief seasonably, considering that the alleged
negligent act took place prior to December 19, 1977 but the relief was sought only in 1983, or seven years thereafter.
The statute of limitations begins to run when the bank gives the depositor notice of the payment, which is ordinarily when the check is returned to the alleged drawer as
a voucher with a statement of his account,39 and an action upon a check is ordinarily governed by the statutory period applicable to instruments in writing. 40
Our laws on the matter provide that the action upon a written contract must be brought within ten year from the time the right of action accrues. 41 hence, the reckoning
time for the prescriptive period begins when the instrument was issued and the corresponding check was returned by the bank to its depositor (normally a month
thereafter). Applying the same rule, the cause of action for the recovery of the proceeds of Citibank Check No. SN 04867 would normally be a month after December
19, 1977, when Citibank paid the face value of the check in the amount of P4,746,114.41. Since the original complaint for the cause of action was filed on January 20,
1984, barely six years had lapsed. Thus, we conclude that Ford's cause of action to recover the amount of Citibank Check No. SN 04867 was seasonably filed within the
period provided by law.
Finally, we also find thet Ford is not completely blameless in its failure to detect the fraud. Failure on the part of the depositor to examine its passbook, statements of
account, and cancelled checks and to give notice within a reasonable time (or as required by statute) of any discrepancy which it may in the exercise of due care and
diligence find therein, serves to mitigate the banks' liability by reducing the award of interest from twelve percent (12%) to six percent (6%) per annum. As provided in
Article 1172 of the Civil Code of the Philippines, respondibility arising from negligence in the performance of every kind of obligation is also demandable, but such
liability may be regulated by the courts, according to the circumstances. In quasi-delicts, the contributory negligence of the plaintiff shall reduce the damages that he
may recover.42
WHEREFORE, the assailed Decision and Resolution of the Court of Appeals in CA-G.R. CV No. 25017 areAFFIRMED. PCIBank, know formerly as Insular Bank
of Asia and America, id declared solely responsible for the loss of the proceeds of Citibank Check No SN 04867 in the amount P4,746,114.41, which shall be paid
together with six percent (6%) interest thereon to Ford Philippines Inc. from the date when the original complaint was filed until said amount is fully paid.
However, the Decision and Resolution of the Court of Appeals in CA-G.R. No. 28430 are MODIFIED as follows: PCIBank and Citibank are adjudged liable for and
must share the loss, (concerning the proceeds of Citibank Check Numbers SN 10597 and 16508 totalling P12,163,298.10) on a fifty-fifty ratio, and each bank
is ORDEREDto pay Ford Philippines Inc. P6,081,649.05, with six percent (6%) interest thereon, from the date the complaint was filed until full payment of said
amount.1wphi1.nt
Costs against Philippine Commercial International Bank and Citibank N.A.
SO ORDERED.

350 SCRA 446 Mercantile Law Negotiable Instruments Law Rights of the Holder What Constitutes a Holder in Due Course Negligence of the Collecting Bank
and the Drawee Bank
There are three cases consolidated here: G.R. No. 121413 (PCIB vs CA and Ford and Citibank), G.R. No. 121479 (Ford vs CA and Citibank and PCIB), and G.R. No.
128604 (Ford vs Citibank and PCIB and CA).
G.R. No. 121413/G.R. No. 121479
In October 1977, Ford Philippines drew a Citibank check in the amount of P4,746,114.41 in favor of the Commissioner of the Internal Revenue (CIR). The check
represents Fords tax payment for the third quarter of 1977. On the face of the check was written Payees account only which means that the check cannot be
encashed and can only be deposited with the CIRs savings account (which is with Metrobank). The said check was however presented to PCIB and PCIB accepted the
same. PCIB then indorsed the check for clearing to Citibank. Citibank cleared the check and paid PCIB P4,746,114.41. CIR later informed Ford that it never received
the tax payment.
An investigation ensued and it was discovered that Fords accountant Godofredo Rivera, when the check was deposited with PCIB, recalled the check since there was
allegedly an error in the computation of the tax to be paid. PCIB, as instructed by Rivera, replaced the check with two of its managers checks.
It was further discovered that Rivera was actually a member of a syndicate and the managers checks were subsequently deposited with the Pacific Banking Corporation
by other members of the syndicate. Thereafter, Rivera and the other members became fugitives of justice.
G.R. No. 128604
In July 1978 and in April 1979, Ford drew two checks in the amounts of P5,851,706.37 and P6,311,591.73 respectively. Both checks are again for tax payments. Both
checks are for Payees account only or for the CIRs bank savings account only with Metrobank. Again, these checks never reached the CIR.
In an investigation, it was found that these checks were embezzled by the same syndicate to which Rivera was a member. It was established that an employee of PCIB,
also a member of the syndicate, created a PCIB account under a fictitious name upon which the two checks, through high end manipulation, were deposited. PCIB
unwittingly endorsed the checks to Citibank which the latter cleared. Upon clearing, the amount was withdrawn from the fictitious account by syndicate members.
ISSUE: What are the liabilities of each party?
HELD: G.R. No. 121413/G.R. No. 121479
PCIB is liable for the amount of the check (P4,746,114.41). PCIB, as a collecting bank has been negligent in verifying the authority of Rivera to negotiate the check. It
failed to ascertain whether or not Rivera can validly recall the check and have them be replaced with PCIBs managers checks as in fact, Ford has no knowledge and
did not authorize such. A bank (in this case PCIB) which cashes a check drawn upon another bank (in this case Citibank), without requiring proof as to the identity of
persons presenting it, or making inquiries with regard to them, cannot hold the proceeds against the drawee when the proceeds of the checks were afterwards diverted to
the hands of a third party. Hence, PCIB is liable for the amount of the embezzled check.
G.R. No. 128604
PCIB and Citibank are liable for the amount of the checks on a 50-50 basis.
As a general rule, a bank is liable for the negligent or tortuous act of its employees within the course and apparent scope of their employment or authority. Hence, PCIB
is liable for the fraudulent act of its employee who set up the savings account under a fictitious name.
Citibank is likewise liable because it was negligent in the performance of its obligations with respect to its agreement with Ford. The checks which were drawn against
Fords account with Citibank clearly states that they are payable to the CIR only yet Citibank delivered said payments to PCIB. Citibank however argues that the checks
were indorsed by PCIB to Citibank and that the latter has nothing to do but to pay it. The Supreme Court cited Section 62 of the Negotiable Instruments Law which
mandates the Citibank, as an acceptor of the checks, to engage in paying the checks according to the tenor of the acceptance which is to deliver the payment to the
payees account only.
But the Supreme Court ruled that in the consolidated cases, that PCIB and Citibank are not the only negligent parties. Ford is also negligent for failing to examine its
passbook in a timely manner which could have avoided further loss. But this negligence is not the proximate cause of the loss but is merely contributory. Nevertheless,
this mitigates the liability of PCIB and Citibank hence the rate of interest, with which PCIB and Citibank is to pay Ford, is lowered from 12% to 6% per annum.

30
It appears that although the employees of Ford initiated the transactions attributable to an organized syndicate, in our view, their actions were not the proximate cause of
encashing the checks payable to the CIR. The degree of Ford's negligence, if any, could not be characterized as the proximate cause of the injury to the parties.

iven these circumstances, the mere fact that the forgery was committed by a drawer-payor's confidential employee or agent, who by virtue of his position had unusual
facilities for perpertrating the fraud and imposing the forged paper upon the bank, does notentitle the bank toshift the loss to the drawer-payor, in the absence of some
circumstance raising estoppel against the drawer. 21 This rule likewise applies to the checks fraudulently negotiated or diverted by the confidential employees who hold
them in their possession

Finally, we also find thet Ford is not completely blameless in its failure to detect the fraud. Failure on the part of the depositor to examine its passbook, statements of
account, and cancelled checks and to give notice within a reasonable time (or as required by statute) of any discrepancy which it may in the exercise of due care and
diligence find therein, serves to mitigate the banks' liability by reducing the award of interest from twelve percent (12%) to six percent (6%) per annum. As provided in
Article 1172 of the Civil Code of the Philippines, respondibility arising from negligence in the performance of every kind of obligation is also demandable, but such
liability may be regulated by the courts, according to the circumstances. In quasi-delicts, the contributory negligence of the plaintiff shall reduce the damages that he
may recover.

POLO S. PANTALEON, G.R. No. 174269

Petitioner,
Present:

- versus - CARPIO MORALES, J.,

Acting Chairperson,
VELASCO, JR.,
AMERICAN EXPRESS INTERNATIONAL, INC., LEONARDO-DE CASTRO,
Respondent. BRION, and
*
BERSAMIN, JJ.
Promulgated:
August 25, 2010
x----------------------------------------------------------------------------------------x

RESO LUTION

BRION, J.:

We resolve the motion for reconsideration filed by respondent American Express International, Inc. (AMEX) dated June 8, 2009,[1] seeking to reverse our Decision
dated May 8, 2009 where we ruled that AMEX was guilty of culpable delay in fulfilling its obligation to its cardholder petitioner Polo Pantaleon. Based on this
conclusion, we held AMEX liable for moral and exemplary damages, as well as attorneys fees and costs of litigation. [2]

FACTUAL ANTECEDENTS

The established antecedents of the case are narrated below.

AMEX is a resident foreign corporation engaged in the business of providing credit services through the operation of a charge card system. Pantaleon has been an
AMEX cardholder since 1980.[3]

In October 1991, Pantaleon, together with his wife (Julialinda), daughter (Regina), and son (Adrian Roberto), went on a guided European tour. On October
25, 1991, the tour group arrived in Amsterdam. Due to their late arrival, they postponed the tour of the city for the following day.[4]

The next day, the group began their sightseeing at around 8:50 a.m. with a trip to the Coster Diamond House (Coster). To have enough time for take a guided
city tour of Amsterdam before their departure scheduled on that day, the tour group planned to leave Coster by 9:30 a.m. at the latest.

While at Coster, Mrs. Pantaleon decided to purchase some diamond pieces worth a total of US$13,826.00. Pantaleon presented his American Express credit
card to the sales clerk to pay for this purchase. He did this at around 9:15 a.m. The sales clerk swiped the credit card and asked Pantaleon to sign the charge slip, which
was then electronically referred to AMEXs Amsterdam office at 9:20 a.m.[5]

At around 9:40 a.m., Coster had not received approval from AMEX for the purchase so Pantaleon asked the store clerk to cancel the sale. The store manager, however,
convinced Pantaleon to wait a few more minutes. Subsequently, the store manager informed Pantaleon that AMEX was asking for bank references; Pantaleon responded
by giving the names of his Philippine depository banks.

At around 10 a.m., or 45 minutes after Pantaleon presented his credit card, AMEX still had not approved the purchase. Since the city tour could not begin until the
Pantaleons were onboard the tour bus, Coster decided to release at around 10:05 a.m. the purchased items to Pantaleon even without AMEXs approval.

When the Pantaleons finally returned to the tour bus, they found their travel companions visibly irritated. This irritation intensified when the tour guide
announced that they would have to cancel the tour because of lack of time as they all had to be in Calais, Belgium by 3 p.m. to catch the ferry to London.[6]

From the records, it appears that after Pantaleons purchase was transmitted for approval to AMEXs Amsterdam office at 9:20 a.m.; was referred to
AMEXs Manila office at9:33 a.m.; and was approved by the Manila office at 10:19 a.m. At 10:38 a.m., AMEXs Manila office finally transmitted the Approval Code to
AMEXs Amsterdam office. In all, it took AMEX a total of 78 minutes to approve Pantaleons purchase and to transmit the approval to the jewelry store. [7]
After the trip to Europe, the Pantaleon family proceeded to the United States. Again, Pantaleon experienced delay in securing approval for purchases using his American
Express credit card on two separate occasions. He experienced the first delay when he wanted to purchase golf equipment in the amount of US$1,475.00 at the Richard
Metz Golf Studio in New York on October 30, 1991. Another delay occurred when he wanted to purchase childrens shoes worth US$87.00 at the Quiency Market
in Boston onNovember 3, 1991.

Upon return to Manila, Pantaleon sent AMEX a letter demanding an apology for the humiliation and inconvenience he and his family experienced due to the delays in
obtaining approval for his credit card purchases. AMEX responded by explaining that the delay in Amsterdam was due to the amount involved the charged purchase of

31
US$13,826.00 deviated from Pantaleons established charge purchase pattern. Dissatisfied with this explanation, Pantaleon filed an action for damages against the
credit card company with the Makati City Regional Trial Court (RTC).
On August 5, 1996, the RTC found AMEX guilty of delay, and awarded Pantaleon P500,000.00 as moral damages, P300,000.00 as exemplary
damages, P100,000.00 as attorneys fees, and P85,233.01 as litigation expenses.

On appeal, the CA reversed the awards.[8] While the CA recognized that delay in the nature of mora accipiendi or creditors default attended AMEXs approval
of Pantaleons purchases, it disagreed with the RTCs finding that AMEX had breached its contract, noting that the delay was not attended by bad faith, malice or gross
negligence.The appellate court found that AMEX exercised diligent efforts to effect the approval of Pantaleons purchases; the purchase at Coster posed particularly a
problem because it was at variance with Pantaleons established charge pattern. As there was no proof that AMEX breached its contract, or that it acted in a wanton,
fraudulent or malevolent manner, the appellate court ruled that AMEX could not be held liable for any form of damages.

Pantaleon questioned this decision via a petition for review on certiorari with this Court.

In our May 8, 2009 decision, we reversed the appellate courts decision and held that AMEX was guilty of mora solvendi, or debtors default. AMEX, as
debtor, had an obligation as the credit provider to act on Pantaleons purchase requests, whether to approve or disapprove them, with timely dispatch. Based on the
evidence on record, we found that AMEX failed to timely act on Pantaleons purchases.

Based on the testimony of AMEXs credit authorizer Edgardo Jaurique, the approval time for credit card charges would be three to four seconds under regular
circumstances. In Pantaleons case, it took AMEX 78 minutes to approve the Amsterdam purchase. We attributed this delay to AMEXs Manila credit authorizer, Edgardo
Jaurique, who had to go over Pantaleons past credit history, his payment record and his credit and bank references before he approved the purchase. Finding this delay
unwarranted, we reinstated the RTC decision and awarded Pantaleon moral and exemplary damages, as well as attorneys fees and costs of litigation.

THE MOTION FOR RECONSIDERATION

In its motion for reconsideration, AMEX argues that this Court erred when it found AMEX guilty of culpable delay in complying with its obligation to act with timely
dispatch on Pantaleons purchases. While AMEX admits that it normally takes seconds to approve charge purchases, it emphasizes that Pantaleon experienced delay
inAmsterdam because his transaction was not a normal one. To recall, Pantaleon sought to charge in a single transaction jewelry items purchased from Coster in the
total amount of US$13,826.00 or P383,746.16. While the total amount of Pantaleons previous purchases using his AMEX credit card did exceed US$13,826.00, AMEX
points out that these purchases were made in a span of more than 10 years, not in a single transaction.

Because this was the biggest single transaction that Pantaleon ever made using his AMEX credit card, AMEX argues that the transaction necessarily required
the credit authorizer to carefully review Pantaleons credit history and bank references. AMEX maintains that it did this not only to ensure Pantaleons protection (to
minimize the possibility that a third party was fraudulently using his credit card), but also to protect itself from the risk that Pantaleon might not be able to pay for his
purchases on credit. This careful review, according to AMEX, is also in keeping with the extraordinary degree of diligence required of banks in handling its
transactions. AMEX concluded that in these lights, the thorough review of Pantaleons credit record was motivated by legitimate concerns and could not be evidence of
any ill will, fraud, or negligence by AMEX.

AMEX further points out that the proximate cause of Pantaleons humiliation and embarrassment was his own decision to proceed with the purchase despite
his awareness that the tour group was waiting for him and his wife. Pantaleon could have prevented the humiliation had he cancelled the sale when he noticed that the
credit approval for the Coster purchase was unusually delayed.

In his Comment dated February 24, 2010, Pantaleon maintains that AMEX was guilty of mora solvendi, or delay on the part of the debtor, in complying with
its obligation to him. Based on jurisprudence, a just cause for delay does not relieve the debtor in delay from the consequences of delay; thus, even if AMEX had a
justifiable reason for the delay, this reason would not relieve it from the liability arising from its failure to timely act on Pantaleons purchase.

In response to AMEXs assertion that the delay was in keeping with its duty to perform its obligation with extraordinary diligence, Pantaleon claims that this
duty includes the timely or prompt performance of its obligation.

As to AMEXs contention that moral or exemplary damages cannot be awarded absent a finding of malice, Pantaleon argues that evil motive or design is not
always necessary to support a finding of bad faith; gross negligence or wanton disregard of contractual obligations is sufficient basis for the award of moral and
exemplary damages.

OUR RULING

We GRANT the motion for reconsideration.

Brief historical background

A credit card is defined as any card, plate, coupon book, or other credit device existing for the purpose of obtaining money, goods, property, labor or services
or anything of value on credit.[9] It traces its roots to the charge card first introduced by the Diners Club in New York City in 1950.[10] American Express followed suit by
introducing its own charge card to the American market in 1958.[11]

In the Philippines, the now defunct Pacific Bank was responsible for bringing the first credit card into the country in the 1970s. [12] However, it was only in the
early 2000s that credit card use gained wide acceptance in the country, as evidenced by the surge in the number of credit card holders then. [13]

Nature of Credit Card Transactions

To better understand the dynamics involved in credit card transactions, we turn to the United States case of Harris Trust & Savings Bank v. McCray [14] which
explains:

The bank credit card system involves a tripartite relationship between the issuer bank, the cardholder, and merchants participating in
the system. The issuer bank establishes an account on behalf of the person to whom the card is issued, and the two parties enter into an agreement
which governs their relationship. This agreement provides that the bank will pay for cardholders account the amount of merchandise or services
purchased through the use of the credit card and will also make cash loans available to the cardholder. It also states that the cardholder shall be
32
 liable to the bank for advances and payments made by the bank and that the cardholders obligation to pay the bank shall not be affected or
impaired by any dispute, claim, or demand by the cardholder with respect to any merchandise or service purchased.

The merchants participating in the system agree to honor the banks credit cards. The bank irrevocably agrees to honor and pay the
sales slips presented by the merchant if the merchant performs his undertakings such as checking the list of revoked cards before accepting the
card. x x x.

These slips are forwarded to the member bank which originally issued the card. The cardholder receives a statement from the bank
periodically and may then decide whether to make payment to the bank in full within a specified period, free of interest, or to defer payment and
ultimately incur an interest charge.

We adopted a similar view in CIR v. American Express International, Inc. (Philippine branch),[15] where we also recognized that credit card issuers are not
limited to banks. We said:

Under RA 8484, the credit card that is issued by banks in general, or by non-banks in particular, refers to any card x x x or other credit
device existing for the purpose of obtaining x x xgoods x x x or services x x x on credit; and is being used usually on a revolving basis. This
means that the consumer-credit arrangement that exists between the issuer and the holder of the credit card enables the latter to procure goods or
services on a continuing basis as long as the outstanding balance does not exceed a specified limit. The card holder is, therefore, given the power
to obtain present control of goods or service on a promise to pay for them in the future.

Business establishments may extend credit sales through the use of the credit card facilities of a non-bank credit card company to avoid the risk of
uncollectible accounts from their customers. Under this system, the establishments do not deposit in their bank accounts the credit card drafts that
arise from the credit sales. Instead, they merely record their receivables from the credit card company and periodically send the drafts evidencing
those receivables to the latter.

The credit card company, in turn, sends checks as payment to these business establishments, but it does not redeem the drafts at full price.
The agreement between them usually provides for discounts to be taken by the company upon its redemption of the drafts. At the end of each
month, it then bills its credit card holders for their respective drafts redeemed during the previous month. If the holders fail to pay the amounts
owed, the company sustains the loss.

Simply put, every credit card transaction involves three contracts, namely: (a) the sales contract between the credit card holder and the merchant or the
business establishment which accepted the credit card; (b) the loan agreement between the credit card issuer and the credit card holder; and lastly, (c) the promise to
pay between the credit card issuer and the merchant or business establishment. [16]
Credit card issuer cardholder relationship

When a credit card company gives the holder the privilege of charging items at establishments associated with the issuer, [17] a necessary question in a legal
analysis is when does this relationship begin? There are two diverging views on the matter. In City Stores Co. v. Henderson,[18] another U.S. decision, held that:

The issuance of a credit card is but an offer to extend a line of open account credit. It is unilateral and supported by no consideration.
The offer may be withdrawn at any time, without prior notice, for any reason or, indeed, for no reason at all, and its withdrawal breaches no duty
for there is no duty to continue it and violates no rights.

Thus, under this view, each credit card transaction is considered a separate offer and acceptance.

Novack v. Cities Service Oil Co. [19] echoed this view, with the court ruling that the mere issuance of a credit card did not create a contractual relationship with
the cardholder.

On the other end of the spectrum is Gray v. American Express Company[20] which recognized the card membership agreement itself as a binding contract between the
credit card issuer and the card holder. Unlike in the Novack and the City Stores cases, however, the cardholder in Gray paid an annual fee for the privilege of being an
American Express cardholder.

In our jurisdiction, we generally adhere to the Gray ruling, recognizing the relationship between the credit card issuer and the credit card holder as a contractual one that
is governed by the terms and conditions found in the card membership agreement. [21] This contract provides the rights and liabilities of a credit card company to its
cardholders and vice versa.

We note that a card membership agreement is a contract of adhesion as its terms are prepared solely by the credit card issuer, with the cardholder merely
affixing his signature signifying his adhesion to these terms. [22] This circumstance, however, does not render the agreement void; we have uniformly held that contracts
of adhesion are as binding as ordinary contracts, the reason being that the party who adheres to the contract is free to reject it entirely. [23] The only effect is that the terms
of the contract are construed strictly against the party who drafted it.[24]

On AMEXs obligations to Pantaleon

We begin by identifying the two privileges that Pantaleon assumes he is entitled to with the issuance of his AMEX credit card, and on which he anchors his claims.
First, Pantaleon presumes that since his credit card has no pre-set spending limit, AMEX has the obligation to approve all his charge requests. Conversely, even if
AMEX has no such obligation, at the very least it is obliged to act on his charge requests within a specific period of time.

i. Use of credit card a mere offer to enter into loan agreements

Although we recognize the existence of a relationship between the credit card issuer and the credit card holder upon the acceptance by the cardholder of the
terms of the card membership agreement (customarily signified by the act of the cardholder in signing the back of the credit card), we have to distinguish this
33
contractual relationship from the creditor-debtor relationship which only arises after the credit card issuer has approved the cardholders purchase
request. The first relates merely to an agreement providing for credit facility to the cardholder. The latter involves the actual credit on loan agreement involving three
contracts, namely: the sales contract betweenthe credit card holder and the merchant or the business establishment which accepted the credit card; the loan
agreement between the credit card issuer and the credit card holder; and the promise to pay between the credit card issuer and the merchant or business establishment.

From the loan agreement perspective, the contractual relationship begins to exist only upon the meeting of the offer [25] and acceptance of the parties involved.
In more concrete terms, when cardholders use their credit cards to pay for their purchases, they merely offer to enter into loan agreements with the credit card company.
Only after the latter approves the purchase requests that the parties enter into binding loan contracts, in keeping with Article 1319 of the Civil Code, which provides:

Article 1319. Consent is manifested by the meeting of the offer and the acceptance upon the thing and the cause which are to
constitute the contract. The offer must be certain and the acceptance absolute. A qualified acceptance constitutes a counter-offer.

This view finds support in the reservation found in the card membership agreement itself, particularly paragraph 10, which clearly states that AMEX reserve[s] the
right to deny authorization for any requested Charge. By so providing, AMEX made its position clear that it has no obligation to approve any and all charge
requests made by its card holders.

ii. AMEX not guilty of culpable delay

Since AMEX has no obligation to approve the purchase requests of its credit cardholders, Pantaleon cannot claim that AMEX defaulted in its obligation.
Article 1169 of the Civil Code, which provides the requisites to hold a debtor guilty of culpable delay, states:

Article 1169. Those obliged to deliver or to do something incur in delay from the time the obligee judicially or extrajudicially demands
from them the fulfillment of their obligation. x x x.

The three requisites for a finding of default are: (a) that the obligation is demandable and liquidated; (b) the debtor delays performance; and (c) the creditor
judicially or extrajudicially requires the debtors performance.[26]

Based on the above, the first requisite is no longer met because AMEX, by the express terms of the credit card agreement, is not obligated to approve
Pantaleons purchase request. Without a demandable obligation, there can be no finding of default.

Apart from the lack of any demandable obligation, we also find that Pantaleon failed to make the demand required by Article 1169 of the Civil Code.

As previously established, the use of a credit card to pay for a purchase is only an offer to the credit card company to enter a loan agreement with the credit
card holder.Before the credit card issuer accepts this offer, no obligation relating to the loan agreement exists between them. On the other hand, a demand is
defined as the assertion of a legal right; xxx an asking with authority, claiming or challenging as due. [27] A demand presupposes the existence of an obligation
between the parties.

Thus, every time that Pantaleon used his AMEX credit card to pay for his purchases, what the stores transmitted to AMEX were his offers to execute loan
contracts. These obviously could not be classified as the demand required by law to make the debtor in default, given that no obligation could arise on the part of
AMEX until after AMEX transmitted its acceptance of Pantaleons offers. Pantaleons act of insisting on and waiting for the charge purchases to be approved by
AMEX[28] is not the demand contemplated by Article 1169 of the Civil Code.

For failing to comply with the requisites of Article 1169, Pantaleons charge that AMEX is guilty of culpable delay in approving his purchase requests must
fail.

iii. On AMEXs obligation to act on the offer within a specific period of time

Even assuming that AMEX had the right to review his credit card history before it approved his purchase requests, Pantaleon insists that AMEX had an
obligation to act on his purchase requests, either to approve or deny, in a matter of seconds or in timely dispatch. Pantaleon impresses upon us the existence of this
obligation by emphasizing two points: (a) his card has no pre-set spending limit; and (b) in his twelve years of using his AMEX card, AMEX had always approved his
charges in a matter of seconds.

Pantaleons assertions fail to convince us.

We originally held that AMEX was in culpable delay when it acted on the Coster transaction, as well as the two other transactions in the United States which
took AMEX approximately 15 to 20 minutes to approve. This conclusion appears valid and reasonable at first glance, comparing the time it took to finally get the
Coster purchase approved (a total of 78 minutes), to AMEXs normal approval time of three to four seconds (based on the testimony of Edgardo Jaurigue, as well as
Pantaleons previous experience). We come to a different result, however, after a closer look at the factual and legal circumstances of the case.

AMEXs credit authorizer, Edgardo Jaurigue, explained that having no pre-set spending limit in a credit card simply means that the charges made by the
cardholder are approved based on his ability to pay, as demonstrated by his past spending, payment patterns, and personal resources. [29] Nevertheless, every time
Pantaleon charges a purchase on his credit card, the credit card company still has to determine whether it will allow this charge, based on his past credit
history. This right to review a card holders credit history, although not specifically set out in the card membership agreement, is a necessary implication of AMEXs
right to deny authorization for any requested charge.

As for Pantaleons previous experiences with AMEX (i.e., that in the past 12 years, AMEX has always approved his charge requests in three or four seconds),
this record does not establish that Pantaleon had a legally enforceable obligation to expect AMEX to act on his charge requests within a matter of seconds. For one,
Pantaleon failed to present any evidence to support his assertion that AMEX acted on purchase requests in a matter of three or four seconds as an established practice.
More importantly, even if Pantaleon did prove that AMEX, as a matter of practice or custom, acted on its customers purchase requests in a matter of seconds, this would
still not be enough to establish a legally demandable right; as a general rule, a practice or custom is not a source of a legally demandable or enforceable right.[30]

We next examine the credit card membership agreement, the contract that primarily governs the relationship between AMEX and Pantaleon.
Significantly, there is no provision in this agreement that obligates AMEX to act on all cardholder purchase requests within a specifically defined period of
time. Thus, regardless of whether the obligation is worded was to act in a matter of seconds or to act in timely dispatch, the fact remains that no obligation exists on the
34
part of AMEX to act within a specific period of time. Even Pantaleon admits in his testimony that he could not recall any provision in the Agreement that guaranteed
AMEXs approval of his charge requests within a matter of minutes.[31]

Nor can Pantaleon look to the law or government issuances as the source of AMEXs alleged obligation to act upon his credit card purchases within a matter
of seconds. As the following survey of Philippine law on credit card transactions demonstrates, the State does not require credit card companies to act upon its
cardholders purchase requests within a specific period of time.

Republic Act No. 8484 (RA 8484), or the Access Devices Regulation Act of 1998, approved on February 11, 1998, is the controlling legislation that regulates
the issuance and use of access devices,[32] including credit cards. The more salient portions of this law include the imposition of the obligation on a credit card company
to disclose certain important financial information[33] to credit card applicants, as well as a definition of the acts that constitute access device fraud.

As financial institutions engaged in the business of providing credit, credit card companies fall under the supervisory powers of the Bangko Sentral ng
Pilipinas (BSP).[34] BSP Circular No. 398 dated August 21, 2003 embodies the BSPs policy when it comes to credit cards
The Bangko Sentral ng Pilipinas (BSP) shall foster the development of consumer credit through innovative products such as credit
cards under conditions of fair and sound consumer credit practices. The BSP likewise encourages competition and transparency to ensure more
efficient delivery of services and fair dealings with customers. (Emphasis supplied)

Based on this Circular, x x x [b]efore issuing credit cards, banks and/or their subsidiary credit card companies must exercise proper diligence by ascertaining
that applicants possess good credit standing and are financially capable of fulfilling their credit commitments. [35] As the above-quoted policy expressly states, the
general intent is to foster fair and sound consumer credit practices.

Other than BSP Circular No. 398, a related circular is BSP Circular No. 454, issued on September 24, 2004, but this circular merely enumerates the unfair
collection practices of credit card companies a matter not relevant to the issue at hand.

In light of the foregoing, we find and so hold that AMEX is neither contractually bound nor legally obligated to act on its cardholders purchase requests
within any specific period of time, much less a period of a matter of seconds that Pantaleon uses as his standard. The standard therefore is implicit and, as in all
contracts, must be based on fairness and reasonableness, read in relation to the Civil Code provisions on human relations, as will be discussed below.

AMEX acted with good faith

Thus far, we have already established that: (a) AMEX had neither a contractual nor a legal obligation to act upon Pantaleons purchases within a specific
period of time; and (b) AMEX has a right to review a cardholders credit card history. Our recognition of these entitlements, however, does not give AMEX an
unlimited right to put off action on cardholders purchase requests for indefinite periods of time. In acting on cardholders purchase requests, AMEX must take
care not to abuse its rights and cause injury to its clients and/or third persons. We cite in this regard Article 19, in conjunction with Article 21, of the Civil Code, which
provide:

Article 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.

Article 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.
Article 19 pervades the entire legal system and ensures that a person suffering damage in the course of anothers exercise of right or performance of duty,
should find himself without relief.[36] It sets the standard for the conduct of all persons, whether artificial or natural, and requires that everyone, in the exercise of rights
and the performance of obligations, must: (a) act with justice, (b) give everyone his due, and (c) observe honesty and good faith. It is not because a person invokes his
rights that he can do anything, even to the prejudice and disadvantage of another.[37]

While Article 19 enumerates the standards of conduct, Article 21 provides the remedy for the person injured by the willful act, an action for damages. We
explained how these two provisions correlate with each other in GF Equity, Inc. v. Valenzona:[38]

[Article 19], known to contain what is commonly referred to as the principle of abuse of rights, sets certain standards which must be
observed not only in the exercise of one's rights but also in the performance of one's duties. These standards are the following: to act with justice;
to give everyone his due; and to observe honesty and good faith. The law, therefore, recognizes a primordial limitation on all rights; that in their
exercise, the norms of human conduct set forth in Article 19 must be observed. A right, though by itself legal because recognized or granted
by law as such, may nevertheless become the source of some illegality. 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 held responsible. But while Article 19 lays down a rule of conduct for the government of human relations and for the maintenance of
social order, it does not provide a remedy for its violation. Generally, an action for damages under either Article 20 or Article 21 would be proper.

In the context of a credit card relationship, although there is neither a contractual stipulation nor a specific law requiring the credit card issuer to act on the credit card
holders offer within a definite period of time, these principles provide the standard by which to judge AMEXs actions.

According to Pantaleon, even if AMEX did have a right to review his charge purchases, it abused this right when it unreasonably delayed the processing of the Coster
charge purchase, as well as his purchase requests at the Richard Metz Golf Studio and Kids Unlimited Store; AMEX should have known that its failure to act
immediately on charge referrals would entail inconvenience and result in humiliation, embarrassment, anxiety and distress to its cardholders who would be required to
wait before closing their transactions.[39]

It is an elementary rule in our jurisdiction that good faith is presumed and that the burden of proving bad faith rests upon the party alleging it. [40] Although it
took AMEX some time before it approved Pantaleons three charge requests, we find no evidence to suggest that it acted with deliberate intent to cause Pantaleon any
loss or injury, or acted in a manner that was contrary to morals, good customs or public policy. We give credence to AMEXs claim that its review procedure was done to
ensure Pantaleons own protection as a cardholder and to prevent the possibility that the credit card was being fraudulently used by a third person.

Pantaleon countered that this review procedure is primarily intended to protect AMEXs interests, to make sure that the cardholder making the purchase has
enough means to pay for the credit extended. Even if this were the case, however, we do not find any taint of bad faith in such motive. It is but natural for AMEX to
want to ensure that it will extend credit only to people who will have sufficient means to pay for their purchases. AMEX, after all, is running a business, not a charity,

35
and it would simply be ludicrous to suggest that it would not want to earn profit for its services. Thus, so long as AMEX exercises its rights, performs its obligations,
and generally acts with good faith, with no intent to cause harm, even if it may occasionally inconvenience others, it cannot be held liable for damages.

We also cannot turn a blind eye to the circumstances surrounding the Coster transaction which, in our opinion, justified the wait. In Edgardo Jaurigues own
words:

Q 21: With reference to the transaction at the Coster Diamond House covered by Exhibit H, also Exhibit 4 for the defendant, the approval came
at 2:19 a.m. after the request was relayed at 1:33 a.m., can you explain why the approval came after about 46 minutes, more or less?

A21: Because we have to make certain considerations and evaluations of [Pantaleons] past spending pattern with [AMEX] at that time before
approving plaintiffs request because [Pantaleon] was at that time making his very first single charge purchase of US$13,826 [this is below the
US$16,112.58 actually billed and paid for by the plaintiff because the difference was already automatically approved by [AMEX] office in
Netherland[s] and the record of [Pantaleons] past spending with [AMEX] at that time does not favorably support his ability to pay for
such purchase. In fact, if the foregoing internal policy of [AMEX] had been strictly followed, the transaction would not have been approved at
all considering that the past spending pattern of the plaintiff with [AMEX] at that time does not support his ability to pay for such purchase. [41]

xxxx

Q: Why did it take so long?

A: It took time to review the account on credit, so, if there is any delinquencies [sic] of the cardmember. There are factors on deciding the charge
itself which are standard measures in approving the authorization. Now in the case of Mr. Pantaleon although his account is single charge
purchase of US$13,826. [sic] this is below the US$16,000. plus actually billed x x x we would have already declined the charge outright and
asked him his bank account to support his charge. But due to the length of his membership as cardholder we had to make a decision on hand. [42]

As Edgardo Jaurigue clarified, the reason why Pantaleon had to wait for AMEXs approval was because he had to go over Pantaleons credit card history for
the past twelve months.[43] It would certainly be unjust for us to penalize AMEX for merely exercising its right to review Pantaleons credit history meticulously.

Finally, we said in Garciano v. Court of Appeals that the right to recover [moral damages] under Article 21 is based on equity, and he who comes to court to
demand equity, must come with clean hands. Article 21 should be construed as granting the right to recover damages to injured persons who are not themselves at fault .
[44]
As will be discussed below, Pantaleon is not a blameless party in all this.

Pantaleons action was the proximate cause for his injury

Pantaleon mainly anchors his claim for moral and exemplary damages on the embarrassment and humiliation that he felt when the European tour group had
to wait for him and his wife for approximately 35 minutes, and eventually had to cancel the Amsterdam city tour. After thoroughly reviewing the records of this case,
we have come to the conclusion that Pantaleon is the proximate cause for this embarrassment and humiliation.

As borne by the records, Pantaleon knew even before entering Coster that the tour group would have to leave the store by 9:30 a.m. to have enough time to
take the city tour of Amsterdam before they left the country. After 9:30 a.m., Pantaleons son, who had boarded the bus ahead of his family, returned to the store to
inform his family that they were the only ones not on the bus and that the entire tour group was waiting for them. Significantly, Pantaleon tried to cancel the sale
at 9:40 a.m. because he did not want to cause any inconvenience to the tour group . However, when Costers sale manager asked him to wait a few more minutes for
the credit card approval, he agreed, despite the knowledge that he had already caused a 10-minute delay and that the city tour could not start without him.

In Nikko Hotel Manila Garden v. Reyes,[45] we ruled that a person who knowingly and voluntarily exposes himself to danger cannot claim damages for the
resulting injury:

The doctrine of VOLENTI NON FIT INJURIA (to which a person assents is not esteemed in law as injury) refers to self-inflicted injury or to
the consent to injury which precludes the recovery of damages by one who has knowingly and voluntarily exposed himself to danger, even if he is
not negligent in doing so.

This doctrine, in our view, is wholly applicable to this case. Pantaleon himself testified that the most basic rule when travelling in a tour group is that you
must never be a cause of any delay because the schedule is very strict.[46] When Pantaleon made up his mind to push through with his purchase, he must have known
that the group would become annoyed and irritated with him. This was the natural, foreseeable consequence of his decision to make them all wait.

We do not discount the fact that Pantaleon and his family did feel humiliated and embarrassed when they had to wait for AMEX to approve the Coster
purchase inAmsterdam. We have to acknowledge, however, that Pantaleon was not a helpless victim in this scenario at any time, he could have cancelled the sale so that
the group could go on with the city tour. But he did not.

More importantly, AMEX did not violate any legal duty to Pantaleon under the circumstances under the principle of damnum absque injuria, or damages
without legal wrong, loss without injury.[47] As we held in BPI Express Card v. CA:[48]
We do not dispute the findings of the lower court that private respondent suffered damages as a result of the cancellation of his credit
card. However, there is a material distinction between damages and injury. Injury is the illegal invasion of a legal right; damage is the loss, hurt,
or harm which results from the injury; and damages are the recompense or compensation awarded for the damage suffered. Thus, there can be
damage without injury in those instances in which the loss or harm was not the result of a violation of a legal duty . In such cases, the
consequences must be borne by the injured person alone, the law affords no remedy for damages resulting from an act which does not amount
to a legal injury or wrong. These situations are often called damnum absque injuria.
In other words, in order that a plaintiff may maintain an action for the injuries of which he complains, he must establish that such
injuries resulted from a breach of duty which the defendant owed to the plaintiff - a concurrence of injury to the plaintiff and legal responsibility
by the person causing it. The underlying basis for the award of tort damages is the premise that an individual was injured in
contemplation of law. Thus, there must first be a breach of some duty and the imposition of liability for that breach before damages may be
awarded; and the breach of such duty should be the proximate cause of the injury.

36
Pantaleon is not entitled to damages

Because AMEX neither breached its contract with Pantaleon, nor acted with culpable delay or the willful intent to cause harm, we find the award of moral
damages to Pantaleon unwarranted.

Similarly, we find no basis to award exemplary damages. In contracts, exemplary damages can only be awarded if a defendant acted in a wanton, fraudulent,
reckless, oppressive or malevolent manner.[49] The plaintiff must also show that he is entitled to moral, temperate, or compensatory damages before the court may
consider the question of whether or not exemplary damages should be awarded.[50]

As previously discussed, it took AMEX some time to approve Pantaleons purchase requests because it had legitimate concerns on the amount being charged;
no malicious intent was ever established here. In the absence of any other damages, the award of exemplary damages clearly lacks legal basis.

Neither do we find any basis for the award of attorneys fees and costs of litigation. No premium should be placed on the right to litigate and not every
winning party is entitled to an automatic grant of attorney's fees. [51] To be entitled to attorneys fees and litigation costs, a party must show that he falls under one of the
instances enumerated in Article 2208 of the Civil Code. [52] This, Pantaleon failed to do. Since we eliminated the award of moral and exemplary damages, so must we
delete the award for attorney's fees and litigation expenses.

Lastly, although we affirm the result of the CA decision, we do so for the reasons stated in this Resolution and not for those found in the CA decision.

WHEREFORE, premises considered, we SET ASIDE our May 8, 2009 Decision and GRANT the present motion for reconsideration. The Court of
Appeals Decision dated August 18, 2006 is hereby AFFIRMED. No costs.

SO ORDERED.

FACTS:

After the Amsterdam incident that happened involving the delay of American Express Card to approve his credit card purchases worth US$13,826.00 at the Coster
store, Pantaleon commenced a complaint for moral and exemplary damages before the RTC against American Express. He said that he and his family experienced
inconvenience and humiliation due to the delays in credit authorization. RTC rendered a decision in favor of Pantaleon. CA reversed the award of damages in favor of
Pantaleon, holding that AmEx had not breached its obligations to Pantaleon, as the purchase at Coster deviated from Pantaleon's established charge purchase pattern.

ISSUE:
1. Whether or not AmEx had committed a breach of its obligations to Pantaleon.
2. Whether or not AmEx is liable for damages.

RULING:
1. Yes. The popular notion that credit card purchases are approved within seconds, there really is no strict, legally determinative point of demarcation on how long
must it take for a credit card company to approve or disapprove a customers purchase, much less one specifically contracted upon by the parties. One hour appears to
be patently unreasonable length of time to approve or disapprove a credit card purchase.

The culpable failure of AmEx herein is not the failure to timely approve petitioners purchase, but the more elemental failure to timely act on the same, whether
favorably or unfavorably. Even assuming that AmExs credit authorizers did not have sufficient basis on hand to make a judgment, we see no reason why it could not
have promptly informed Pantaleon the reason for the delay, and duly advised him that resolving the same could take some time.

2. Yes. The reason why Pantaleon is entitled to damages is not simply because AmEx incurred delay, but because the delay, for which culpability lies under Article 1170,
led to the particular injuries under Article 2217 of the Civil Code for which moral damages are remunerative. The somewhat unusual attending circumstances to the
purchase at Coster that there was a deadline for the completion of that purchase by petitioner before any delay would redound to the injury of his several traveling
companions gave rise to the moral shock, mental anguish, serious anxiety, wounded feelings and social humiliation sustained by Pantaleon, as concluded by the RTC.

G.R. Nos. 103442-45 May 21, 1993

NATIONAL POWER CORPORATION, ET AL., petitioners,
vs.
THE COURT OF APPEALS, GAUDENCIO C. RAYO, ET AL., respondents.
The Solicitor General for plaintiff-appellee.
Ponciano G. Hernandez for private respondents.

DAVIDE, JR., J.:

This is a petition for review on certiorari under Rule 45 of the Revised Rules of Court urging this Court to set aside the 19 August 1991 consolidated Decision of the
Court of Appeals in CA.-G.R. CV Nos. 27290-93 1 which reversed the Decision of Branch 5 of the then Court of First Instance (now Regional Trial Court) of Bulacan,
and held petitioners National Power Corporation (NPC) and Benjamin Chavez jointly and severally liable to the private respondents for actual and moral damages,
litigation expenses and attorney's fees.
This present controversy traces its beginnings to four (4) separate complaints 2 for damages filed against the NPC and Benjamin Chavez before the trial court. The
plaintiffs therein, now private respondents, sought to recover actual and other damages for the loss of lives and the destruction to property caused by the inundation of
the town of Norzagaray, Bulacan on 26-27 October 1978. The flooding was purportedly caused by the negligent release by the defendants of water through the
spillways of the Angat Dam (Hydroelectric Plant). In said complaints, the plaintiffs alleged, inter alia, that: 1) defendant NPC operated and maintained a multi-purpose
hydroelectric plant in the Angat River at Hilltop, Norzagaray, Bulacan; 2) defendant Benjamin Chavez was the plant supervisor at the time of the incident in question; 3)
despite the defendants' knowledge, as early as 24 October 1978, of the impending entry of typhoon "Kading," they failed to exercise due diligence in monitoring the
water level at the dam; 4) when the said water level went beyond the maximum allowable limit at the height of the typhoon, the defendants suddenly, negligently and
recklessly opened three (3) of the dam's spillways, thereby releasing a large amount of water which inundated the banks of the Angat River; and 5) as a consequence,
members of the household of the plaintiffs, together with their animals, drowned, and their properties were washed away in the evening of 26 October and the early
hours of 27 October 1978. 3
In their Answers, the defendants, now petitioners, alleged that: 1) the NPC exercised due care, diligence and prudence in the operation and maintenance of the
hydroelectric plant; 2) the NPC exercised the diligence of a good father in the selection of its employees; 3) written notices were sent to the different municipalities of

37
Bulacan warning the residents therein about the impending release of a large volume of water with the onset of typhoon "Kading" and advise them to take the necessary
precautions; 4) the water released during the typhoon was needed to prevent the collapse of the dam and avoid greater damage to people and property; 5) in spite of the
precautions undertaken and the diligence exercised, they could still not contain or control the flood that resulted and; 6) the damages incurred by the private respondents
were caused by a fortuitous event or force majeure and are in the nature and character of damnum absque injuria. By way of special affirmative defense, the defendants
averred that the NPC cannot be sued because it performs a purely governmental function. 4
Upon motion of the defendants, a preliminary hearing on the special defense was conducted. As a result thereof, the trial court dismissed the complaints as against the
NPC on the ground that the provision of its charter allowing it to sue and be sued does not contemplate actions based on tort. The parties do not, however, dispute the
fact that this Court overruled the trial court and ordered the reinstatement of the complaints as against the NPC. 5
Being closely interrelated, the cases were consolidated and trial thereafter ensued.
The lower court rendered its decision on 30 April 1990 dismissing the complaints "for lack of sufficient and credible evidence." 6 Consequently, the private respondents
seasonably appealed therefrom to the respondent Court which then docketed the cases as CA-G.R. CV Nos. 27290-93.
In its joint decision promulgated on 19 August 1991, the Court of Appeals reversed the appealed decision and awarded damages in favor of the private respondents. The
dispositive portion of the decision reads:
CONFORMABLY TO THE FOREGOING, the joint decision appealed from is hereby REVERSED and SET ASIDE, and a new one is hereby
rendered:
1. In Civil Case No. SM-950, ordering defendants-appellees to pay, jointly and severally, plaintiffs-appellants, with legal interest from the date
when this decision shall become final and executory, the following:
A. Actual damages, to wit:
1) Gaudencio C. Rayo, Two Hundred Thirty One Thousand Two Hundred Sixty Pesos (P231,260.00);
2) Bienvenido P. Pascual, Two Hundred Four Thousand Five Hundred Pesos (P204.500.00);
3) Tomas Manuel, One Hundred Fifty Five Thousand Pesos (P155,000.00);
4) Pedro C. Bartolome, One Hundred Forty Seven Thousand Pesos (P147,000.00);.
5) Bernardino Cruz, One Hundred Forty Three Thousand Five Hundred Fifty Two Pesos and Fifty Centavos (P143,552.50);
6) Jose Palad, Fifty Seven Thousand Five Hundred Pesos (P57,500.00);
7) Mariano S. Cruz, Forty Thousand Pesos (P40,000.00);
8) Lucio Fajardo, Twenty nine Thousand Eighty Pesos (P29,080.00); and
B. Litigation expenses of Ten Thousand Pesos (P10,000.00);
2. In Civil case No. SM-951, ordering defendants-appellees to pay jointly and severally, plaintiff-appellant, with legal interest from the date when
this decision shall have become final and executory, the following :
A. Actual damages of Five Hundred Twenty Thousand Pesos (P520,000.00);.
B. Moral damages of five hundred Thousand Pesos (P500,000.00); and.
C. Litigation expenses of Ten Thousand Pesos (P10,000.00);.
3. In Civil Case No. SM-953, ordering defendants-appellees to pay, jointly and severally, with legal interest from the date when this decision shall
have become final and executory;
A. Plaintiff-appellant Angel C. Torres:
1) Actual damages of One Hundred Ninety Nine Thousand One Hundred Twenty Pesos (P199,120.00);
2) Moral Damages of One Hundred Fifty Thousand Pesos (P150,000.00);
B. Plaintiff-appellant Norberto Torres:
1) Actual damages of Fifty Thousand Pesos (P50,000.00);
2) Moral damages of Fifty Thousand Pesos (P50,000.00);
C. Plaintiff-appellant Rodelio Joaquin:
1) Actual damages of One Hundred Thousand Pesos (P100,000.00);
2) Moral damages of One Hundred Thousand Pesos (P100,000.00); and
D. Plaintifsf-appellants litigation expenses of Ten Thousand Pesos (P10,000.00);
4. In Civil case No. SM-1247, ordering defendants-appellees to pay, jointly and severally, with legal interest from the date when this decision
shall have become final and executory :
A. Plaintiffs-appellants Presentacion Lorenzo and Clodualdo Lorenzo:
1) Actual damages of Two Hundred Fifty Six Thousand Six Hundred Pesos (P256,600.00);
2) Moral damages of Fifty Thousand Pesos (P50,000.00);
B. Plaintiff-appellant Consolacion Guzman :
1) Actual damages of One Hundred forty Thousand Pesos (P140,000.00);
2) Moral damages of Fifty Thousand Pesos (P50,000.00);
C. Plaintiff-appellant Virginia Guzman :
1) Actual damages of Two Hundred Five Hundred Twenty Pesos (205,520.00); and
D. Plaintiffs-appellants litigation expenses of Ten Thousand Pesos (10,000.00).
In addition, in all the four (4) instant cases, ordering defendants-appellees to pay, jointly and severally, plaintiffs-appellants attorney fees in an
amount equivalent to 15% of the total amount awarded.
No pronouncement as to costs. 7
The foregoing judgment is based on the public respondent's conclusion that the petitioners were guilty of:
. . . a patent gross and evident lack of foresight, imprudence and negligence . . . in the management and operation of Angat Dam. The unholiness
of the hour, the extent of the opening of the spillways, And the magnitude of the water released, are all but products of defendants-appellees'
headlessness, slovenliness, and carelessness. The resulting flash flood and inundation of even areas (sic) one (1) kilometer away from the Angat
River bank would have been avoided had defendants-appellees prepared the Angat Dam by maintaining in the first place, a water elevation which
would allow room for the expected torrential rains. 8
This conclusion, in turn, is anchored on its findings of fact, to wit:
As early as October 21, 1978, defendants-appellees knew of the impending onslaught of and imminent danger posed by typhoon "Kading". For as
alleged by defendants-appellees themselves, the coming of said super typhoon was bannered by Bulletin Today, a newspaper of national
circulation, on October 25, 1978, as "Super Howler to hit R.P." The next day, October 26, 1978, said typhoon once again merited a headline in
said newspaper as "Kading's Big Blow expected this afternoon" (Appellee's Brief, p. 6). Apart from the newspapers, defendants-appellees learned
of typhoon "Kading' through radio announcements (Civil Case No. SM-950, TSN, Benjamin Chavez, December 4, 1984, pp. 7-9).
Defendants-appellees doubly knew that the Angat Dam can safely hold a normal maximum headwater elevation of 217 meters (Appellee's brief,
p. 12; Civil Case No. SM-951, Exhibit "I-6"; Civil Case No. SM-953, Exhibit "J-6"; Civil Case No. SM-1247, Exhibit "G-6").
Yet, despite such knowledge, defendants-appellees maintained a reservoir water elevation even beyond its maximum and safe level, thereby
giving no sufficient allowance for the reservoir to contain the rain water that will inevitably be brought by the coming typhoon.

38
 On October 24, 1978, before typhoon "Kading" entered the Philippine area of responsibility, water elevation ranged from 217.61 to 217.53, with
very little opening of the spillways, ranging from 1/2 to 1 meter. On October 25, 1978, when typhoon "Kading" entered the Philippine area of
responsibility, and public storm signal number one was hoisted over Bulacan at 10:45 a.m., later raised to number two at 4:45 p.m., and then to
number three at 10:45 p.m., water elevation ranged from 217.47 to 217.57, with very little opening of the spillways, ranging from 1/2 to 1 meter.
On October 26, 1978, when public storm signal number three remained hoisted over Bulacan, the water elevation still remained at its maximum
level of 217.00 to 218.00 with very little opening of the spillways ranging from 1/2 to 2 meters, until at or about midnight, the spillways were
suddenly opened at 5 meters, then increasing swiftly to 8, 10, 12, 12.5, 13, 13.5, 14, 14.5 in the early morning hours of October 27, 1978,
releasing water at the rate of 4,500 cubic meters per second, more or less. On October 27, 1978, water elevation remained at a range of 218.30 to
217.05 (Civil Case No. SM-950, Exhibits "D" and series, "L", "M", "N", and "O" and Exhibits "3" and "4"; Civil Case No. SM-951, Exhibits "H"
and "H-1"; Civil Case No. SM-953, Exhibits "I" and "I-1"; Civil Case No. SM 1247, Exhibits "F" and "F-1").
xxx xxx xxx
From the mass of evidence extant in the record, We are convinced, and so hold that the flash flood on October 27, 1978, was caused not by rain
waters (sic), but by stored waters (sic) suddenly and simultaneously released from the Angat Dam by defendants-appellees, particularly from
midnight of October 26, 1978 up to the morning hours of October 27,
1978. 9
The appellate court rejected the petitioners' defense that they had sent "early warning written notices" to the towns of Norzagaray, Angat, Bustos, Plaridel, Baliwag and
Calumpit dated 24 October 1978 which read:
TO ALL CONCERN (sic):
Please be informed that at present our reservoir (dam) is full and that we have been releasing water intermittently for the past several days.
With the coming of typhoon "Rita" (Kading) we expect to release greater (sic) volume of water, if it pass (sic) over our place.
In view of this kindly advise people residing along Angat River to keep alert and stay in safe places.
BENJAMI
N L.
CHAVEZ
Power
Plant
Superinten
dent 10
because:
Said notice was delivered to the "towns of Bulacan" on October 26, 1978 by defendants-appellees driver, Leonardo Nepomuceno (Civil Case No.
SM-950, TSN, Benjamin Chavez, December 4, 1984, pp. 7-11 and TSN, Leonardo Nepomuceno, March 7, 1985, pp. 10-12).
Said notice is ineffectual, insufficient and inadequate for purposes of the opening of the spillway gates at midnight of October 26, 1978 and on
October 27, 1978. It did not prepare or warn the persons so served, for the volume of water to be released, which turned out to be of such
magnitude, that residents near or along the Angat River, even those one (1) kilometer away, should have been advised to evacuate. Said notice,
addressed "TO ALL CONCERN (sic)," was delivered to a policeman (Civil Case No. SM-950, pp. 10-12 and Exhibit "2-A") for the municipality
of Norzagaray. Said notice was not thus addressed and delivered to the proper and responsible officials who could have disseminated the warning
to the residents directly affected. As for the municipality of Sta. Maria, where plaintiffs-appellants in Civil Case No. SM-1246 reside, said notice
does not appear to have been served. 11
Relying on Juan F. Nakpil & Sons vs. Court of Appeals, 12 public respondent rejected the petitioners' plea that the incident in question was caused by force majeure and
that they are, therefore, not liable to the private respondents for any kind of damage such damage being in the nature of damnum absque injuria.
The motion for reconsideration filed by the petitioners, as well as the motion to modify judgment filed by the public respondents, 13 were denied by the public
respondent in its Resolution of 27 December 1991. 14
Petitioners thus filed the instant petition on 21 February 1992.
After the Comment to the petition was filed by the private respondents and the Reply thereto was filed by the petitioners, We gave due course to the petition on 17 June
1992 and directed the parties to submit their respective Memoranda, 15 which they subsequently complied with.
The petitioners raised the following errors allegedly committed by the respondent Court :
I. THE COURT OF APPEALS ERRED IN APPLYING THE RULING OF NAKPIL & SONS V. COURT OF APPEALS AND HOLDING THAT
PETITIONERS WERE GUILTY OF NEGLIGENCE.
II. THE COURT OF APPEALS ERRED IN HOLDING THAT THE WRITTEN NOTICES OF WARNING ISSUED BY PETITIONERS WERE
INSUFFICIENT.
III. THE COURT OF APPEALS ERRED IN HOLDING THAT THE DAMAGE SUFFERED BY PRIVATE RESPONDENTS WAS
NOT DAMNUM ABSQUE INJURIA.
IV. THE COURT OF APPEALS ERRED IN NOT AWARDING THE COUNTERCLAIM OF PETITIONERS FOR ATTORNEY'S FEES AND
EXPENSES OF LITIGATION. 16
These same errors were raised by herein petitioners in G.R. No. 96410, entitled National Power Corporation, et al., vs. Court of Appeals, et al., 17 which this Court
decided on 3 July 1992. The said case involved the very same incident subject of the instant petition. In no uncertain terms, We declared therein that the proximate
cause of the loss and damage sustained by the plaintiffs therein who were similarly situated as the private respondents herein was the negligence of the
petitioners, and that the 24 October 1978 "early warning notice" supposedly sent to the affected municipalities, the same notice involved in the case at bar, was
insufficient. We thus cannot now rule otherwise not only because such a decision binds this Court with respect to the cause of the inundation of the town of Norzagaray,
Bulacan on 26-27 October 1978 which resulted in the loss of lives and the destruction to property in both cases, but also because of the fact that on the basis of its
meticulous analysis and evaluation of the evidence adduced by the parties in the cases subject of CA-G.R. CV Nos. 27290-93, public respondent found as conclusively
established that indeed, the petitioners were guilty of "patent gross and evident lack of foresight, imprudence and negligence in the management and operation of Angat
Dam," and that "the extent of the opening of the spillways, and the magnitude of the water released, are all but products of defendants-appellees' headlessness,
slovenliness, and carelessness." 18 Its findings and conclusions are biding upon Us, there being no showing of the existence of any of the exceptions to the general rule
that findings of fact of the Court of Appeals are conclusive upon this Court. 19 Elsewise stated, the challenged decision can stand on its own merits independently of Our
decision in G.R. No. 96410. In any event, We reiterate here in Our pronouncement in the latter case that Juan F. Nakpil & Sons vs. Court of Appeals 20 is still good law
as far as the concurrent liability of an obligor in the case of force majeure is concerned. In the Nakpil case, We held:
To exempt the obligor from liability under Article 1174 of the Civil Code, for a breach of an obligation due to an "act of God," the following must
concur: (a) the cause of the breach of the obligation must be independent of the will of the debtor; (b) the event must be either unforseeable or
unavoidable; (c) the event must be such as to render it impossible for the debtor to fulfill his obligation in a moral manner; and (d) the debtor
must be free from any participation in, or aggravation of the injury to the creditor. (Vasquez v. Court of Appeals, 138 SCRA 553; Estrada v.
Consolacion, 71 SCRA 423; Austria v. Court of Appeals, 39 SCRA 527; Republic of the Phil. v. Luzon Stevedoring Corp., 21 SCRA 279; Lasam
v. Smith, 45 Phil. 657).

39
 Thus, if upon the happening of a fortuitous event or an act of God, there concurs a corresponding fraud, negligence, delay or violation or
contravention in any manner of the tenor of the obligation as provided for in Article 1170 of the Civil Code, which results in loss or damage, the
obligor cannot escape liability.
The principle embodied in the act of God doctrine strictly requires that the act must be one occasioned exclusively by the violence of nature and
all human agencies are to be excluded from creating or entering into the cause of the mischief. When the effect, the cause of which is to be
considered, is found to be in part the result of the participation of man, whether it be from active intervention or neglect, or failure to act, the
whole occurrence is thereby humanized, as it were, and removed from the rules applicable to the acts of God. (1 Corpus Juris, pp. 1174-1175).
Thus it has been held that when the negligence of a person concurs with an act of God in producing a loss, such person is not exempt from
liability by showing that the immediate cause of the damage was the act of God. To be exempt from liability for loss because of an act of God, he
must be free from any previous negligence or misconduct by which that loss or damage may have been occasioned. (Fish & Elective Co. v. Phil.
Motors, 55 Phil. 129; Tucker v. Milan, 49 O.G. 4379; Limpangco & Sons v. Yangco Steamship Co., 34 Phil. 594, 604; Lasam v. Smith, 45 Phil.
657). 21
Accordingly, petitioners cannot be heard to invoke the act of God or force majeure to escape liability for the loss or damage sustained by private respondents since they,
the petitioners, were guilty of negligence. The event then was not occasioned exclusively by an act of God or force majeure; a human factor negligence or
imprudence had intervened. The effect then of the force majeure in question may be deemed to have, even if only partly, resulted from the participation of man.
Thus, the whole occurrence was thereby humanized, as it were, and removed from the laws applicable to acts of God.
WHEREFORE, for want of merit, the instant petition is hereby DISMISSED and the Consolidated Decision of the Court of Appeals in CA-G.R. CV Nos. 27290-93 is
AFFIRMED, with costs against the petitioners.
SO ORDERED.

Facts:
At the height of the typhoon Kading, a flash flood covered the towns near the Angat Dam, causing deaths and destructions to residents and their properties.
Respondents blamed the tragedy to the reckless and imprudent opening of the 3 floodgates by petitioner, without prior warning to the residents within the vicinity of the
dam. Petitioners denied the allegations and contended that they have kept the water at a safe level, that the opening of floodgates was done gradually, that it exercises
diligence in the selection of its employees, and that written warnings were sent to the residents. It further contended that there was no direct causal relationship between
the damage and the alleged negligence on their part, that the residents assumed the risk by living near the dam, and that what happened was a fortuitous event and are of
the nature of damnum absque injuria.
Issues:
(1) Whether the petitioner can be held liable even though the coming of the typhoon is a fortuitous event
(2) Whether a notice was sent to the residents
(3) Whether the damage suffered by respondents is one of damnum absque injuria
Held:
(1) The obligor cannot escape liability, if upon the happening of a fortuitous event or an act of God, a corresponding fraud, negligence, delay or violation or
contravention in any manner of the tenor of the obligation as provided in Article 1170 of the Civil Code which results in loss or damage. Even if there was no
contractual relation between themselves and private respondents, they are still liable under the law on quasi-delict. Article 2176 of the Civil Code explicitly provides
"whoever by act or omission causes damage to another there being fault or negligence is obliged to pay for the damage done." Act of God or force majeure, by
definition, are extraordinary events not foreseeable or avoidable, events that could not be foreseen, or which, though foreseen, are inevitable. It is therefore not enough
that the event should not have been foreseen or anticipated, as is commonly believed, but it must be one impossible to foresee or to avoid. The principle embodied in the
act of God doctrine strictly requires that the act must be occasioned solely by the violence of nature. Human intervention is to be excluded from creating or entering into
the cause of the mischief. When the effect is found to be in part the result of the participation of man, whether due to his active intervention or neglect or failure to act,
the whole occurrence is then humanized and removed from the rules applicable to the acts of God. In the case at bar, although the typhoon "Kading" was an act of God,
petitioners can not escape liability because their negligence was the proximate cause of the loss and damage.
(2) The letter itself, addressed merely "TO ALL CONCERNED", would not strike one to be of serious importance, sufficient enough to set alarm and cause people to
take precautions for their safety's sake. The notices were not delivered, or even addressed to responsible officials of the municipalities concerned who could have
disseminated the warning properly. They were delivered to ordinary employees and policemen. As it happened, the said notices do not appear to have reached the
people concerned, which are the residents beside the Angat River. The plaintiffs in this case definitely did not receive any such warning. Indeed, the methods by which
the defendants allegedly sent the notice or warning was so ineffectual that they cannot claim, as they do in their second assignment of error, that the sending of said
notice has absolved them from liability.
(3) We cannot give credence to petitioners' third assignment of error that the damage caused by the opening of the dam was in the nature of damnum absque
injuria, which presupposes that although there was physical damage, there was no legal injury in view of the fortuitous events. There is no question that petitioners have
the right, duty and obligation to operate, maintain and preserve the facilities of Angat Dam, but their negligence cannot be countenanced, however noble their intention
may be. The end does not justify the means, particularly because they could have done otherwise than simultaneously opening the spillways to such extent. Needless to
say, petitioners are not entitled to counterclaim.

G.R. No. L-69044 May 29, 1987

EASTERN SHIPPING LINES, INC., petitioner,
vs.
INTERMEDIATE APPELLATE COURT and DEVELOPMENT INSURANCE & SURETY CORPORATION,respondents.
No. 71478 May 29, 1987
EASTERN SHIPPING LINES, INC., petitioner,
vs.
THE NISSHIN FIRE AND MARINE INSURANCE CO., and DOWA FIRE & MARINE INSURANCE CO., LTD.,respondents.

MELENCIO-HERRERA, J.:
These two cases, both for the recovery of the value of cargo insurance, arose from the same incident, the sinking of the M/S ASIATICA when it caught fire, resulting in
the total loss of ship and cargo.
The basic facts are not in controversy:
In G.R. No. 69044, sometime in or prior to June, 1977, the M/S ASIATICA, a vessel operated by petitioner Eastern Shipping Lines, Inc., (referred to hereinafter as
Petitioner Carrier) loaded at Kobe, Japan for transportation to Manila, 5,000 pieces of calorized lance pipes in 28 packages valued at P256,039.00 consigned to
Philippine Blooming Mills Co., Inc., and 7 cases of spare parts valued at P92,361.75, consigned to Central Textile Mills, Inc. Both sets of goods were insured against
marine risk for their stated value with respondent Development Insurance and Surety Corporation.
In G.R. No. 71478, during the same period, the same vessel took on board 128 cartons of garment fabrics and accessories, in two (2) containers, consigned to Mariveles
Apparel Corporation, and two cases of surveying instruments consigned to Aman Enterprises and General Merchandise. The 128 cartons were insured for their stated
value by respondent Nisshin Fire & Marine Insurance Co., for US $46,583.00, and the 2 cases by respondent Dowa Fire & Marine Insurance Co., Ltd., for US
$11,385.00.
40
Enroute for Kobe, Japan, to Manila, the vessel caught fire and sank, resulting in the total loss of ship and cargo. The respective respondent Insurers paid the
corresponding marine insurance values to the consignees concerned and were thus subrogated unto the rights of the latter as the insured.
G.R. NO. 69044
On May 11, 1978, respondent Development Insurance & Surety Corporation (Development Insurance, for short), having been subrogated unto the rights of the two
insured companies, filed suit against petitioner Carrier for the recovery of the amounts it had paid to the insured before the then Court of First instance of Manila,
Branch XXX (Civil Case No. 6087).
Petitioner-Carrier denied liability mainly on the ground that the loss was due to an extraordinary fortuitous event, hence, it is not liable under the law.
On August 31, 1979, the Trial Court rendered judgment in favor of Development Insurance in the amounts of P256,039.00 and P92,361.75, respectively, with legal
interest, plus P35,000.00 as attorney's fees and costs. Petitioner Carrier took an appeal to the then Court of Appeals which, on August 14, 1984, affirmed.
Petitioner Carrier is now before us on a Petition for Review on Certiorari.
G.R. NO. 71478
On June 16, 1978, respondents Nisshin Fire & Marine Insurance Co. NISSHIN for short), and Dowa Fire & Marine Insurance Co., Ltd. (DOWA, for brevity), as
subrogees of the insured, filed suit against Petitioner Carrier for the recovery of the insured value of the cargo lost with the then Court of First Instance of Manila,
Branch 11 (Civil Case No. 116151), imputing unseaworthiness of the ship and non-observance of extraordinary diligence by petitioner Carrier.
Petitioner Carrier denied liability on the principal grounds that the fire which caused the sinking of the ship is an exempting circumstance under Section 4(2) (b) of the
Carriage of Goods by Sea Act (COGSA); and that when the loss of fire is established, the burden of proving negligence of the vessel is shifted to the cargo shipper.
On September 15, 1980, the Trial Court rendered judgment in favor of NISSHIN and DOWA in the amounts of US $46,583.00 and US $11,385.00, respectively, with
legal interest, plus attorney's fees of P5,000.00 and costs. On appeal by petitioner, the then Court of Appeals on September 10, 1984, affirmed with modification the
Trial Court's judgment by decreasing the amount recoverable by DOWA to US $1,000.00 because of $500 per package limitation of liability under the COGSA.
Hence, this Petition for Review on certiorari by Petitioner Carrier.
Both Petitions were initially denied for lack of merit. G.R. No. 69044 on January 16, 1985 by the First Division, and G. R. No. 71478 on September 25, 1985 by the
Second Division. Upon Petitioner Carrier's Motion for Reconsideration, however, G.R. No. 69044 was given due course on March 25, 1985, and the parties were
required to submit their respective Memoranda, which they have done.
On the other hand, in G.R. No. 71478, Petitioner Carrier sought reconsideration of the Resolution denying the Petition for Review and moved for its consolidation with
G.R. No. 69044, the lower-numbered case, which was then pending resolution with the First Division. The same was granted; the Resolution of the Second Division of
September 25, 1985 was set aside and the Petition was given due course.
At the outset, we reject Petitioner Carrier's claim that it is not the operator of the M/S Asiatica but merely a charterer thereof. We note that in G.R. No. 69044, Petitioner
Carrier stated in its Petition:
There are about 22 cases of the "ASIATICA" pending in various courts where various plaintiffs are represented by various counsel representing
various consignees or insurance companies. The common defendant in these cases is petitioner herein, being the operator of said vessel. ... 1
Petitioner Carrier should be held bound to said admission. As a general rule, the facts alleged in a party's pleading are deemed admissions of that party and binding upon
it. 2 And an admission in one pleading in one action may be received in evidence against the pleader or his successor-in-interest on the trial of another action to which
he is a party, in favor of a party to the latter action. 3
The threshold issues in both cases are: (1) which law should govern the Civil Code provisions on Common carriers or the Carriage of Goods by Sea Act? and (2)
who has the burden of proof to show negligence of the carrier?
On the Law Applicable
The law of the country to which the goods are to be transported governs the liability of the common carrier in case of their loss, destruction or deterioration. 4 As the
cargoes in question were transported from Japan to the Philippines, the liability of Petitioner Carrier is governed primarily by the Civil Code. 5 However, in all matters
not regulated by said Code, the rights and obligations of common carrier shall be governed by the Code of Commerce and by special laws. 6 Thus, the Carriage of
Goods by Sea Act, a special law, is suppletory to the provisions of the Civil Code. 7
On the Burden of Proof
Under the Civil Code, common carriers, from the nature of their business and for reasons of public policy, are bound to observe extraordinary diligence in the vigilance
over goods, according to all the circumstances of each case. 8 Common carriers are responsible for the loss, destruction, or deterioration of the goods unless the same is
due to any of the following causes only:
(1) Flood, storm, earthquake, lightning or other natural disaster or calamity;
xxx xxx xxx 9
Petitioner Carrier claims that the loss of the vessel by fire exempts it from liability under the phrase "natural disaster or calamity. " However, we are of the opinion that
fire may not be considered a natural disaster or calamity. This must be so as it arises almost invariably from some act of man or by human means. 10 It does not fall
within the category of an act of God unless caused by lightning 11 or by other natural disaster or calamity. 12 It may even be caused by the actual fault or privity of the
carrier. 13
Article 1680 of the Civil Code, which considers fire as an extraordinary fortuitous event refers to leases of rural lands where a reduction of the rent is allowed when
more than one-half of the fruits have been lost due to such event, considering that the law adopts a protection policy towards agriculture. 14
As the peril of the fire is not comprehended within the exception in Article 1734, supra, Article 1735 of the Civil Code provides that all cases than those mention in
Article 1734, the common carrier shall be presumed to have been at fault or to have acted negligently, unless it proves that it has observed the extraordinary deligence
required by law.
In this case, the respective Insurers. as subrogees of the cargo shippers, have proven that the transported goods have been lost. Petitioner Carrier has also proved that the
loss was caused by fire. The burden then is upon Petitioner Carrier to proved that it has exercised the extraordinary diligence required by law. In this regard, the Trial
Court, concurred in by the Appellate Court, made the following Finding of fact:
The cargoes in question were, according to the witnesses defendant placed in hatches No, 2 and 3 cf the vessel, Boatswain Ernesto Pastrana
noticed that smoke was coming out from hatch No. 2 and hatch No. 3; that where the smoke was noticed, the fire was already big; that the fire
must have started twenty-four 24) our the same was noticed; that carbon dioxide was ordered released and the crew was ordered to open the hatch
covers of No, 2 tor commencement of fire fighting by sea water: that all of these effort were not enough to control the fire.
Pursuant to Article 1733, common carriers are bound to extraordinary diligence in the vigilance over the goods. The evidence of the defendant did
not show that extraordinary vigilance was observed by the vessel to prevent the occurrence of fire at hatches numbers 2 and 3. Defendant's
evidence did not likewise show he amount of diligence made by the crew, on orders, in the care of the cargoes. What appears is that after the
cargoes were stored in the hatches, no regular inspection was made as to their condition during the voyage. Consequently, the crew could not
have even explain what could have caused the fire. The defendant, in the Court's mind, failed to satisfactorily show that extraordinary vigilance
and care had been made by the crew to prevent the occurrence of the fire. The defendant, as a common carrier, is liable to the consignees for said
lack of deligence required of it under Article 1733 of the Civil Code. 15
Having failed to discharge the burden of proving that it had exercised the extraordinary diligence required by law, Petitioner Carrier cannot escape liability for the loss
of the cargo.
And even if fire were to be considered a "natural disaster" within the meaning of Article 1734 of the Civil Code, it is required under Article 1739 of the same Code that
the "natural disaster" must have been the "proximate and only cause of the loss," and that the carrier has "exercised due diligence to prevent or minimize the loss before,
during or after the occurrence of the disaster. " This Petitioner Carrier has also failed to establish satisfactorily.
Nor may Petitioner Carrier seek refuge from liability under the Carriage of Goods by Sea Act, It is provided therein that:
41
 Sec. 4(2). Neither the carrier nor the ship shall be responsible for loss or damage arising or resulting from
(b) Fire, unless caused by the actual fault or privity of the carrier.
xxx xxx xxx
In this case, both the Trial Court and the Appellate Court, in effect, found, as a fact, that there was "actual fault" of the carrier shown by "lack of diligence" in that
"when the smoke was noticed, the fire was already big; that the fire must have started twenty-four (24) hours before the same was noticed; " and that "after the cargoes
were stored in the hatches, no regular inspection was made as to their condition during the voyage." The foregoing suffices to show that the circumstances under which
the fire originated and spread are such as to show that Petitioner Carrier or its servants were negligent in connection therewith. Consequently, the complete defense
afforded by the COGSA when loss results from fire is unavailing to Petitioner Carrier.
On the US $500 Per Package Limitation:
Petitioner Carrier avers that its liability if any, should not exceed US $500 per package as provided in section 4(5) of the COGSA, which reads:
(5) Neither the carrier nor the ship shall in any event be or become liable for any loss or damage to or in connection with the transportation of
goods in an amount exceeding $500 per package lawful money of the United States, or in case of goods not shipped in packages, per customary
freight unit, or the equivalent of that sum in other currency, unless the nature and value of such goods have been declared by the shipper before
shipment and inserted in bill of lading. This declaration if embodied in the bill of lading shall be prima facie evidence, but all be conclusive on
the carrier.
By agreement between the carrier, master or agent of the carrier, and the shipper another maximum amount than that mentioned in this paragraph
may be fixed: Provided, That such maximum shall not be less than the figure above named. In no event shall the carrier be Liable for more than
the amount of damage actually sustained.
xxx xxx xxx
Article 1749 of the New Civil Code also allows the limitations of liability in this wise:
Art. 1749. A stipulation that the common carrier's liability as limited to the value of the goods appearing in the bill of lading, unless the shipper or
owner declares a greater value, is binding.
It is to be noted that the Civil Code does not of itself limit the liability of the common carrier to a fixed amount per package although the Code expressly permits a
stipulation limiting such liability. Thus, the COGSA which is suppletory to the provisions of the Civil Code, steps in and supplements the Code by establishing a
statutory provision limiting the carrier's liability in the absence of a declaration of a higher value of the goods by the shipper in the bill of lading. The provisions of the
Carriage of Goods by.Sea Act on limited liability are as much a part of a bill of lading as though physically in it and as much a part thereof as though placed therein by
agreement of the parties. 16
In G.R. No. 69044, there is no stipulation in the respective Bills of Lading (Exhibits "C-2" and "I-3") 1 7 limiting the carrier's liability for the loss or destruction of the
goods. Nor is there a declaration of a higher value of the goods. Hence, Petitioner Carrier's liability should not exceed US $500 per package, or its peso equivalent, at
the time of payment of the value of the goods lost, but in no case "more than the amount of damage actually sustained."
The actual total loss for the 5,000 pieces of calorized lance pipes was P256,039 (Exhibit "C"), which was exactly the amount of the insurance coverage by Development
Insurance (Exhibit "A"), and the amount affirmed to be paid by respondent Court. The goods were shipped in 28 packages (Exhibit "C-2") Multiplying 28 packages by
$500 would result in a product of $14,000 which, at the current exchange rate of P20.44 to US $1, would be P286,160, or "more than the amount of damage actually
sustained." Consequently, the aforestated amount of P256,039 should be upheld.
With respect to the seven (7) cases of spare parts (Exhibit "I-3"), their actual value was P92,361.75 (Exhibit "I"), which is likewise the insured value of the cargo
(Exhibit "H") and amount was affirmed to be paid by respondent Court. however, multiplying seven (7) cases by $500 per package at the present prevailing rate of
P20.44 to US $1 (US $3,500 x P20.44) would yield P71,540 only, which is the amount that should be paid by Petitioner Carrier for those spare parts, and not
P92,361.75.
In G.R. No. 71478, in so far as the two (2) cases of surveying instruments are concerned, the amount awarded to DOWA which was already reduced to $1,000 by the
Appellate Court following the statutory $500 liability per package, is in order.
In respect of the shipment of 128 cartons of garment fabrics in two (2) containers and insured with NISSHIN, the Appellate Court also limited Petitioner Carrier's
liability to $500 per package and affirmed the award of $46,583 to NISSHIN. it multiplied 128 cartons (considered as COGSA packages) by $500 to arrive at the figure
of $64,000, and explained that "since this amount is more than the insured value of the goods, that is $46,583, the Trial Court was correct in awarding said amount only
for the 128 cartons, which amount is less than the maximum limitation of the carrier's liability."
We find no reversible error. The 128 cartons and not the two (2) containers should be considered as the shipping unit.
In Mitsui & Co., Ltd. vs. American Export Lines, Inc. 636 F 2d 807 (1981), the consignees of tin ingots and the shipper of floor covering brought action against the
vessel owner and operator to recover for loss of ingots and floor covering, which had been shipped in vessel supplied containers. The U.S. District Court for the
Southern District of New York rendered judgment for the plaintiffs, and the defendant appealed. The United States Court of Appeals, Second Division, modified and
affirmed holding that:
When what would ordinarily be considered packages are shipped in a container supplied by the carrier and the number of such units is disclosed
in the shipping documents, each of those units and not the container constitutes the "package" referred to in liability limitation provision of
Carriage of Goods by Sea Act. Carriage of Goods by Sea Act, 4(5), 46 U.S.C.A.& 1304(5).
Even if language and purposes of Carriage of Goods by Sea Act left doubt as to whether carrier-furnished containers whose contents are disclosed
should be treated as packages, the interest in securing international uniformity would suggest that they should not be so treated. Carriage of
Goods by Sea Act, 4(5), 46 U.S.C.A. 1304(5).
... After quoting the statement in Leather's Best, supra, 451 F 2d at 815, that treating a container as a package is inconsistent with the
congressional purpose of establishing a reasonable minimum level of liability, Judge Beeks wrote, 414 F. Supp. at 907 (footnotes omitted):
Although this approach has not completely escaped criticism, there is, nonetheless, much to commend it. It gives needed
recognition to the responsibility of the courts to construe and apply the statute as enacted, however great might be the
temptation to "modernize" or reconstitute it by artful judicial gloss. If COGSA's package limitation scheme suffers from
internal illness, Congress alone must undertake the surgery. There is, in this regard, obvious wisdom in the Ninth Circuit's
conclusion in Hartford that technological advancements, whether or not forseeable by the COGSA promulgators, do not
warrant a distortion or artificial construction of the statutory term "package." A ruling that these large reusable metal pieces
of transport equipment qualify as COGSA packages at least where, as here, they were carrier owned and supplied
would amount to just such a distortion.
Certainly, if the individual crates or cartons prepared by the shipper and containing his goods can rightly be considered
"packages" standing by themselves, they do not suddenly lose that character upon being stowed in a carrier's container. I
would liken these containers to detachable stowage compartments of the ship. They simply serve to divide the ship's
overall cargo stowage space into smaller, more serviceable loci. Shippers' packages are quite literally "stowed" in the
containers utilizing stevedoring practices and materials analogous to those employed in traditional on board stowage.
In Yeramex International v. S.S. Tando,, 1977 A.M.C. 1807 (E.D. Va.) rev'd on other grounds, 595 F 2nd 943 (4 Cir. 1979), another district with
many maritime cases followed Judge Beeks' reasoning in Matsushita and similarly rejected the functional economics test. Judge Kellam held that
when rolls of polyester goods are packed into cardboard cartons which are then placed in containers, the cartons and not the containers are the
packages.
xxx xxx xxx
42
The case of Smithgreyhound v. M/V Eurygenes, 18 followed the Mitsui test:
Eurygenes concerned a shipment of stereo equipment packaged by the shipper into cartons which were then placed by the shipper into a carrier-
furnished container. The number of cartons was disclosed to the carrier in the bill of lading. Eurygenes followed the Mitsui test and treated the
cartons, not the container, as the COGSA packages. However, Eurygenes indicated that a carrier could limit its liability to $500 per container if
the bill of lading failed to disclose the number of cartons or units within the container, or if the parties indicated, in clear and unambiguous
language, an agreement to treat the container as the package.
(Admiralty Litigation in Perpetuum: The Continuing Saga of Package Limitations and Third World Delivery Problems by
Chester D. Hooper & Keith L. Flicker, published in Fordham International Law Journal, Vol. 6, 1982-83, Number 1)
(Emphasis supplied)
In this case, the Bill of Lading (Exhibit "A") disclosed the following data:
2 Containers
(128) Cartons)
Men's Garments Fabrics and Accessories Freight Prepaid
Say: Two (2) Containers Only.
Considering, therefore, that the Bill of Lading clearly disclosed the contents of the containers, the number of cartons or units, as well as the nature of the goods, and
applying the ruling in the Mitsui and Eurygenes cases it is clear that the 128 cartons, not the two (2) containers should be considered as the shipping unit subject to the
$500 limitation of liability.
True, the evidence does not disclose whether the containers involved herein were carrier-furnished or not. Usually, however, containers are provided by the carrier. 19 In
this case, the probability is that they were so furnished for Petitioner Carrier was at liberty to pack and carry the goods in containers if they were not so packed. Thus, at
the dorsal side of the Bill of Lading (Exhibit "A") appears the following stipulation in fine print:
11. (Use of Container) Where the goods receipt of which is acknowledged on the face of this Bill of Lading are not already packed into
container(s) at the time of receipt, the Carrier shall be at liberty to pack and carry them in any type of container(s).
The foregoing would explain the use of the estimate "Say: Two (2) Containers Only" in the Bill of Lading, meaning that the goods could probably fit in two (2)
containers only. It cannot mean that the shipper had furnished the containers for if so, "Two (2) Containers" appearing as the first entry would have sufficed. and if there
is any ambiguity in the Bill of Lading, it is a cardinal principle in the construction of contracts that the interpretation of obscure words or stipulations in a contract shall
not favor the party who caused the obscurity. 20 This applies with even greater force in a contract of adhesion where a contract is already prepared and the other party
merely adheres to it, like the Bill of Lading in this case, which is draw. up by the carrier. 21
On Alleged Denial of Opportunity to Present Deposition of Its Witnesses: (in G.R. No. 69044 only)
Petitioner Carrier claims that the Trial Court did not give it sufficient time to take the depositions of its witnesses in Japan by written interrogatories.
We do not agree. petitioner Carrier was given- full opportunity to present its evidence but it failed to do so. On this point, the Trial Court found:
xxx xxx xxx
Indeed, since after November 6, 1978, to August 27, 1979, not to mention the time from June 27, 1978, when its answer was prepared and filed in
Court, until September 26, 1978, when the pre-trial conference was conducted for the last time, the defendant had more than nine months to
prepare its evidence. Its belated notice to take deposition on written interrogatories of its witnesses in Japan, served upon the plaintiff on August
25th, just two days before the hearing set for August 27th, knowing fully well that it was its undertaking on July 11 the that the deposition of the
witnesses would be dispensed with if by next time it had not yet been obtained, only proves the lack of merit of the defendant's motion for
postponement, for which reason it deserves no sympathy from the Court in that regard. The defendant has told the Court since February 16, 1979,
that it was going to take the deposition of its witnesses in Japan. Why did it take until August 25, 1979, or more than six months, to prepare its
written interrogatories. Only the defendant itself is to blame for its failure to adduce evidence in support of its defenses.
xxx xxx xxx 22
Petitioner Carrier was afforded ample time to present its side of the case. 23 It cannot complain now that it was denied due process when the Trial Court rendered its
Decision on the basis of the evidence adduced. What due process abhors is absolute lack of opportunity to be heard. 24
On the Award of Attorney's Fees:
Petitioner Carrier questions the award of attorney's fees. In both cases, respondent Court affirmed the award by the Trial Court of attorney's fees of P35,000.00 in favor
of Development Insurance in G.R. No. 69044, and P5,000.00 in favor of NISSHIN and DOWA in G.R. No. 71478.
Courts being vested with discretion in fixing the amount of attorney's fees, it is believed that the amount of P5,000.00 would be more reasonable in G.R. No. 69044.
The award of P5,000.00 in G.R. No. 71478 is affirmed.
WHEREFORE, 1) in G.R. No. 69044, the judgment is modified in that petitioner Eastern Shipping Lines shall pay the Development Insurance and Surety Corporation
the amount of P256,039 for the twenty-eight (28) packages of calorized lance pipes, and P71,540 for the seven (7) cases of spare parts, with interest at the legal rate
from the date of the filing of the complaint on June 13, 1978, plus P5,000 as attorney's fees, and the costs.
2) In G.R.No.71478,the judgment is hereby affirmed.
SO ORDERED.
Narvasa, Cruz, Feliciano and Gancayco, JJ., concur.

Separate Opinions

YAP, J., concurring and dissenting:

With respect to G.R. No. 71478, the majority opinion holds that the 128 cartons of textile materials, and not the two (2) containers, should be considered as the shipping
unit for the purpose of applying the $500.00 limitation under the Carriage of Goods by Sea Act (COGSA).
The majority opinion followed and applied the interpretation of the COGSA "package" limitation adopted by the Second Circuit, United States Court of Appeals,
in Mitsui & Co., Ltd. vs. American Export Lines, Inc., 636 F. 2d 807 (1981) and the Smithgreyhound v. M/V Eurygenes, 666, F 2nd, 746. Both cases adopted the rule that
carrier-furnished containers whose contents are fully disclosed are not "packages" within the meaning of Section 4 (5) of COGSA.
I cannot go along with the majority in applying the Mitsui and Eurygenes decisions to the present case, for the following reasons: (1) The facts in those cases differ
materially from those obtaining in the present case; and (2) the rule laid down in those two cases is by no means settled doctrine.
In Mitsui and Eurygenes, the containers were supplied by the carrier or shipping company. In Mitsui the Court held: "Certainly, if the individual crates or cartons
prepared by the shipper and containing his goods can rightly be considered "packages" standing by themselves, they do not suddenly lose that character upon being
stowed in a carrier's container. I would liken these containers to detachable stowage compartments of the ship." Cartons or crates placed inside carrier-furnished
containers are deemed stowed in the vessel itself, and do not lose their character as individual units simply by being placed inside container provided by the carrier,
which are merely "detachable stowage compartments of the ship.
In the case at bar, there is no evidence showing that the two containers in question were carrier-supplied. This fact cannot be presumed. The facts of the case in fact
show that this was the only shipment placed in containers. The other shipment involved in the case, consisting of surveying instruments, was packed in two "cases."
We cannot speculate on the meaning of the words "Say: Two (2) Containers Only, " which appear in the bill of lading. Absent any positive evidence on this point, we
cannot say that those words constitute a mere estimate that the shipment could fit in two containers, thereby showing that when the goods were delivered by the shipper,
they were not yet placed inside the containers and that it was the petitioner carrier which packed the goods into its own containers, as authorized under paragraph 11 on
43
the dorsal side of the bill of lading, Exhibit A. Such assumption cannot be made in view of the following words clearly stamped in red ink on the face of the bill of
lading: "Shipper's Load, Count and Seal Said to Contain." This clearly indicates that it was the shipper which loaded and counted the goods placed inside the container
and sealed the latter.
The two containers were delivered by the shipper to the carrier already sealed for shipment, and the number of cartons said to be contained inside them was indicated in
the bill of lading, on the mere say-so of the shipper. The freight paid to the carrier on the shipment was based on the measurement (by volume) of the two containers at
$34.50 per cubic meter. The shipper must have saved on the freight charges by using containers for the shipment. Under the circumstances, it would be unfair to the
carrier to have the limitation of its liability under COGSA fixed on the number of cartons inside the containers, rather than on the containers themselves, since the
freight revenue was based on the latter.
The Mitsui and Eurygenes decisions are not the last word on the subject. The interpretation of the COGSA package limitation is in a state of flux, 1 as the courts
continue to wrestle with the troublesome problem of applying the statutory limitation under COGSA to containerized shipments. The law was adopted before modern
technological changes have revolutionized the shipping industry. There is need for the law itself to be updated to meet the changes brought about by the container
revolution, but this is a task which should be addressed by the legislative body. Until then, this Court, while mindful of American jurisprudence on the subject, should
make its own interpretation of the COGSA provisions, consistent with what is equitable to the parties concerned. There is need to balance the interests of the shipper
and those of the carrier.
In the case at bar, the shipper opted to ship the goods in two containers, and paid freight charges based on the freight unit, i.e., cubic meters. The shipper did not declare
the value of the shipment, for that would have entailed higher freight charges; instead of paying higher freight charges, the shipper protected itself by insuring the
shipment. As subrogee, the insurance company can recover from the carrier only what the shipper itself is entitled to recover, not the amount it actually paid the shipper
under the insurance policy.
In our view, under the circumstances, the container should be regarded as the shipping unit or "package" within the purview of COGSA. However, we realize that this
may not be equitable as far as the shipper is concerned. If the container is not regarded as a "package" within the terms of COGSA, then, the $500.00 liability limitation
should be based on "the customary freight unit." Sec. 4 (5) of COGSA provides that in case of goods not shipped in packages, the limit of the carrier's liability shall be
$500.00 "per customary freight unit." In the case at bar, the petitioner's liability for the shipment in question based on "freight unit" would be $21,950.00 for the
shipment of 43.9 cubic meters.
I concur with the rest of the decision.
Sarmiento, J., concur.

Separate Opinions

YAP, J., concurring and dissenting:

With respect to G.R. No. 71478, the majority opinion holds that the 128 cartons of textile materials, and not the two (2) containers, should be considered as the shipping
unit for the purpose of applying the $500.00 limitation under the Carriage of Goods by Sea Act (COGSA).
The majority opinion followed and applied the interpretation of the COGSA "package" limitation adopted by the Second Circuit, United States Court of Appeals,
in Mitsui & Co., Ltd. vs. American Export Lines, Inc., 636 F. 2d 807 (1981) and the Smithgreyhound v. M/V Eurygenes, 666, F 2nd, 746. Both cases adopted the rule that
carrier-furnished containers whose contents are fully disclosed are not "packages" within the meaning of Section 4 (5) of COGSA.
I cannot go along with the majority in applying the Mitsui and Eurygenes decisions to the present case, for the following reasons: (1) The facts in those cases differ
materially from those obtaining in the present case; and (2) the rule laid down in those two cases is by no means settled doctrine.
In Mitsui and Eurygenes, the containers were supplied by the carrier or shipping company. In Mitsui the Court held: "Certainly, if the individual crates or cartons
prepared by the shipper and containing his goods can rightly be considered "packages" standing by themselves, they do not suddenly lose that character upon being
stowed in a carrier's container. I would liken these containers to detachable stowage compartments of the ship." Cartons or crates placed inside carrier-furnished
containers are deemed stowed in the vessel itself, and do not lose their character as individual units simply by being placed inside container provided by the carrier,
which are merely "detachable stowage compartments of the ship.
In the case at bar, there is no evidence showing that the two containers in question were carrier-supplied. This fact cannot be presumed. The facts of the case in fact
show that this was the only shipment placed in containers. The other shipment involved in the case, consisting of surveying instruments, was packed in two "cases."
We cannot speculate on the meaning of the words "Say: Two (2) Containers Only, " which appear in the bill of lading. Absent any positive evidence on this point, we
cannot say that those words constitute a mere estimate that the shipment could fit in two containers, thereby showing that when the goods were delivered by the shipper,
they were not yet placed inside the containers and that it was the petitioner carrier which packed the goods into its own containers, as authorized under paragraph 11 on
the dorsal side of the bill of lading, Exhibit A. Such assumption cannot be made in view of the following words clearly stamped in red ink on the face of the bill of
lading: "Shipper's Load, Count and Seal Said to Contain." This clearly indicates that it was the shipper which loaded and counted the goods placed inside the container
and sealed the latter.
The two containers were delivered by the shipper to the carrier already sealed for shipment, and the number of cartons said to be contained inside them was indicated in
the bill of lading, on the mere say-so of the shipper. The freight paid to the carrier on the shipment was based on the measurement (by volume) of the two containers at
$34.50 per cubic meter. The shipper must have saved on the freight charges by using containers for the shipment. Under the circumstances, it would be unfair to the
carrier to have the limitation of its liability under COGSA fixed on the number of cartons inside the containers, rather than on the containers themselves, since the
freight revenue was based on the latter.
The Mitsui and Eurygenes decisions are not the last word on the subject. The interpretation of the COGSA package limitation is in a state of flux, 1 as the courts
continue to wrestle with the troublesome problem of applying the statutory limitation under COGSA to containerized shipments. The law was adopted before modern
technological changes have revolutionized the shipping industry. There is need for the law itself to be updated to meet the changes brought about by the container
revolution, but this is a task which should be addressed by the legislative body. Until then, this Court, while mindful of American jurisprudence on the subject, should
make its own interpretation of the COGSA provisions, consistent with what is equitable to the parties concerned. There is need to balance the interests of the shipper
and those of the carrier.
In the case at bar, the shipper opted to ship the goods in two containers, and paid freight charges based on the freight unit, i.e., cubic meters. The shipper did not declare
the value of the shipment, for that would have entailed higher freight charges; instead of paying higher freight charges, the shipper protected itself by insuring the
shipment. As subrogee, the insurance company can recover from the carrier only what the shipper itself is entitled to recover, not the amount it actually paid the shipper
under the insurance policy.
In our view, under the circumstances, the container should be regarded as the shipping unit or "package" within the purview of COGSA. However, we realize that this
may not be equitable as far as the shipper is concerned. If the container is not regarded as a "package" within the terms of COGSA, then, the $500.00 liability limitation
should be based on "the customary freight unit." Sec. 4 (5) of COGSA provides that in case of goods not shipped in packages, the limit of the carrier's liability shall be
$500.00 "per customary freight unit." In the case at bar, the petitioner's liability for the shipment in question based on "freight unit" would be $21,950.00 for the
shipment of 43.9 cubic meters.
I concur with the rest of the decision.
Sarmiento, J., concur.

44
Facts: Sometime in or prior to June, 1977, M/S Asiatica, a vessel operated by Eastern Shipping Lines (ESL) loaded at Kobe, Japan, for transportation to Manila, 5K
pieces of calorized lance pipes in 28 packages valued at P256,039 consigned to Philippine Blooming Mills Co. (BMCI) and 7 cases of spare parts valued at P92,361.75,
consigned to Central Textile Mills, Inc. (CTMI). Both sets of goods were insured against marine risk for their stated value with Development Insurance and Surety
Corp. (DISC). During the same period, the vessel took on board 128 cartons of garment fabrics and accessories, in 2 containers, consigned to Mariveles Apparel Corp.
(MAC), and 2 cases of surveying instruments consigned to Aman Enterprises and General Merchandise. (AEGM). The cartons were insured for their stated value by
Nisshin Fire & Marine Insurance Co. (NFMI), and the 2 cases by Dowa Fire & Marine Insurance (DFMI).

En route to Manila, the vessel caught fire and sank, resulting in the total loss of ship and cargo. The respective insurers paid the marine insurance values to the
consignees and were subrogated unto the rights of the latter as the insured. ESL denied liability on the ground that the lsos was due to extraordinary fortuitous event. It
also held that the fire which caused the sinking of the ship is an exempting circumstance under Sec. 4(2)(b) of the Carriage of Goods by Sea Act (COGSA); and that
when the loss by fire was established, the burden of proving negligence of the vessel was shifted ot the cargo shipper.

Issue: 1) Which law should govern, the Civil Code provisions on Common Carriers or the COGSA? 2) Who has the burden of proof to show negligence of the carrier?

Held:

1) Civil Code. The law of the country to which the goods are to be transported governs the liability of the common carrier in case of their loss, destruction or
deterioration. As the cargoes were transported from Japan to the Philippines, the liability of ESL is governed primarily by the Civil Code. However, in all
matters not regulated by the Code, the rights and obligations of common carrier shall be governed by the Code of Commerce and by special laws. Thus, the
COGSA, a special law, is suppletory to the provisions of the Civil Code.
2) ESL. Under the Civil Code, common carriers, from the nature of their business and for reasons of public policy, are bound to observe extraordinary diligence
in the vigilance over goods, according to all the circumstances of each case. Common carriers are responsible for the loss, destruction, or deterioration of the
goods unless the same is due to any of the following causes only: 1) Flood, storm, earthquake, lightnight, or other natural disaster or calamity; xxx
In this case, contrary to ESLs claim, fire may not be considered a natural disaster or calamity. This must be so as it arises almost invariably from some act of
man or by human means. It does not fall within the category of an act of God unless caused by lightning or by other natural disaster or calamity. It may even
be caused by the actual fault or privity of the carrier. Hence, the common carrier shall be presumed to have been at fault or to have acted negligently, unless
it proves that it has observed the extraordinary diligence required by law. Even if fire was deemed a natural disaster, it must have been the proximate and
only cause of the loss. Here, the respective insurers have proven that the transported goods have been lost, and ESL has proven that the loss was caused by
fire. The burden then is upon ESL to prove that it has exercised the extraordinary diligence required by law. Here, what appears is that, after the cargoes were
stored in the hatches, no regular inspection was made as to their condition during the voyage. The crew could not even explain what could have caused the
fire. When the smoke was noticed, the fire was already big, hence the fire must have started 24 hours before it was noticed.

G.R. No. 129792 December 21, 1999

JARCO MARKETING CORPORATION, LEONARDO KONG, JOSE TIOPE and ELISA PANELO, petitioners,
vs.
HONORABLE COURT OF APPEALS, CONRADO C. AGUILAR and CRISELDA R. AGUILAR, respondents.

DAVIDE, JR., J.:

In this petition for review on certiorari under Rule 45 of the Rules of Court, petitioners seek the reversal of the 17 June 1996 decision 1 of the Court of Appeals in C.A.
G.R. No. CV 37937 and the resolution 2 denying their motion for reconsideration. The assailed decision set aside the 15 January 1992 judgment of the Regional Trial
Court (RTC), Makati City, Branch 60 in Civil Case No. 7119 and ordered petitioners to pay damages and attorney's fees to private respondents Conrado and Criselda
(CRISELDA) Aguilar.
Petitioner Jarco Marketing Corporation is the owner of Syvel's Department Store, Makati City. Petitioners Leonardo Kong, Jose Tiope and Elisa Panelo are the store's
branch manager, operations manager, and supervisor, respectively. Private respondents are spouses and the parents of Zhieneth Aguilar (ZHIENETH).
In the afternoon of 9 May 1983, CRISELDA and ZHIENETH were at the 2nd floor of Syvel's Department Store, Makati City. CRISELDA was signing her credit card
slip at the payment and verification counter when she felt a sudden gust of wind and heard a loud thud. She looked behind her. She then beheld her daughter
ZHIENETH on the floor, her young body pinned by the bulk of the store's gift-wrapping counter/structure. ZHIENETH was crying and screaming for help. Although
shocked, CRISELDA was quick to ask the assistance of the people around in lifting the counter and retrieving ZHIENETH from the floor. 3
ZHIENETH was quickly rushed to the Makati Medical Center where she was operated on. The next day ZHIENETH lost her speech and thereafter communicated with
CRISELDA by writing on a magic slate. The injuries she sustained took their toil on her young body. She died fourteen (14) days after the accident or on 22 May 1983,
on the hospital bed. She was six years old. 4
The cause of her death was attributed to the injuries she sustained. The provisional medical certificate 5 issued by ZHIENETH's attending doctor described the extent of
her injuries:
Diagnoses:
1. Shock, severe, sec. to intra-abdominal injuries due to blunt injury
2. Hemorrhage, massive, intraperitoneal sec. to laceration, (L) lobe liver
3. Rupture, stomach, anterior & posterior walls
4. Complete transection, 4th position, duodenum
5. Hematoma, extensive, retroperitoneal
6. Contusion, lungs, severe
CRITICAL
After the burial of their daughter, private respondents demanded upon petitioners the reimbursement of the hospitalization, medical bills and wake and funeral
expenses 6 which they had incurred. Petitioners refused to pay. Consequently, private respondents filed a complaint for damages, docketed as Civil Case No. 7119
wherein they sought the payment of P157,522.86 for actual damages, P300,000 for moral damages, P20,000 for attorney's fees and an unspecified amount for loss of
income and exemplary damages.
In their answer with counterclaim, petitioners denied any liability for the injuries and consequent death of ZHIENETH. They claimed that CRISELDA was negligent in
exercising care and diligence over her daughter by allowing her to freely roam around in a store filled with glassware and appliances. ZHIENETH too, was guilty of
contributory negligence since she climbed the counter, triggering its eventual collapse on her. Petitioners also emphasized that the counter was made of sturdy wood
with a strong support; it never fell nor collapsed for the past fifteen years since its construction.
Additionally, petitioner Jarco Marketing Corporation maintained that it observed the diligence of a good father of a family in the selection, supervision and control of its
employees. The other petitioners likewise raised due care and diligence in the performance of their duties and countered that the complaint was malicious for which

45
they suffered besmirched reputation and mental anguish. They sought the dismissal of the complaint and an award of moral and exemplary damages and attorney's fees
in their favor.
In its decision 7 the trial court dismissed the complaint and counterclaim after finding that the preponderance of the evidence favored petitioners. It ruled that the
proximate cause of the fall of the counter on ZHIENETH was her act of clinging to it. It believed petitioners' witnesses who testified that ZHIENETH clung to the
counter, afterwhich the structure and the girl fell with the structure falling on top of her, pinning her stomach. In contrast, none of private respondents' witnesses
testified on how the counter fell. The trial court also held that CRISELDA's negligence contributed to ZHIENETH's accident.
In absolving petitioners from any liability, the trial court reasoned that the counter was situated at the end or corner of the 2nd floor as a precautionary measure hence, it
could not be considered as an attractive nuisance. 8The counter was higher than ZHIENETH. It has been in existence for fifteen years. Its structure was safe and well-
balanced. ZHIENETH, therefore, had no business climbing on and clinging to it.
Private respondents appealed the decision, attributing as errors of the trial court its findings that: (1) the proximate cause of the fall of the counter was ZHIENETH's
misbehavior; (2) CRISELDA was negligent in her care of ZHIENETH; (3) petitioners were not negligent in the maintenance of the counter; and (4) petitioners were not
liable for the death of ZHIENETH.
Further, private respondents asserted that ZHIENETH should be entitled to the conclusive presumption that a child below nine (9) years is incapable of contributory
negligence. And even if ZHIENETH, at six (6) years old, was already capable of contributory negligence, still it was physically impossible for her to have propped
herself on the counter. She had a small frame (four feet high and seventy pounds) and the counter was much higher and heavier than she was. Also, the testimony of one
of the store's former employees, Gerardo Gonzales, who accompanied ZHIENETH when she was brought to the emergency room of the Makati Medical Center belied
petitioners' theory that ZHIENETH climbed the counter. Gonzales claimed that when ZHIENETH was asked by the doctor what she did, ZHIENETH replied,
"[N]othing, I did not come near the counter and the counter just fell on me." 9 Accordingly, Gonzales' testimony on ZHIENETH's spontaneous declaration should not
only be considered as part ofres gestae but also accorded credit.
Moreover, negligence could not be imputed to CRISELDA for it was reasonable for her to have let go of ZHIENETH at the precise moment that she was signing the
credit card slip.
Finally, private respondents vigorously maintained that the proximate cause of ZHIENETH's death, was petitioners' negligence in failing to institute measures to have
the counter permanently nailed.
On the other hand, petitioners argued that private respondents raised purely factual issues which could no longer be disturbed. They explained that ZHIENETH's death
while unfortunate and tragic, was an accident for which neither CRISELDA nor even ZHIENETH could entirely be held faultless and blameless. Further, petitioners
adverted to the trial court's rejection of Gonzales' testimony as unworthy of credence.
As to private respondent's claim that the counter should have been nailed to the ground, petitioners justified that it was not necessary. The counter had been in existence
for several years without any prior accident and was deliberately placed at a corner to avoid such accidents. Truth to tell, they acted without fault or negligence for they
had exercised due diligence on the matter. In fact, the criminal case 10 for homicide through simple negligence filed by private respondents against the individual
petitioners was dismissed; a verdict of acquittal was rendered in their favor.
The Court of Appeals, however, decided in favor of private respondents and reversed the appealed judgment. It found that petitioners were negligent in maintaining a
structurally dangerous counter. The counter was shaped like an inverted "L" 11 with a top wider than the base. It was top heavy and the weight of the upper portion was
neither evenly distributed nor supported by its narrow base. Thus, the counter was defective, unstable and dangerous; a downward pressure on the overhanging portion
or a push from the front could cause the counter to fall. Two former employees of petitioners had already previously brought to the attention of the management the
danger the counter could cause. But the latter ignored their concern. The Court of Appeals faulted the petitioners for this omission, and concluded that the incident that
befell ZHIENETH could have been avoided had petitioners repaired the defective counter. It was inconsequential that the counter had been in use for some time without
a prior incident.
The Court of Appeals declared that ZHIENETH, who was below seven (7) years old at the time of the incident, was absolutely incapable of negligence or other tort. It
reasoned that since a child under nine (9) years could not be held liable even for an intentional wrong, then the six-year old ZHIENETH could not be made to account
for a mere mischief or reckless act. It also absolved CRISELDA of any negligence, finding nothing wrong or out of the ordinary in momentarily allowing ZHIENETH
to walk while she signed the document at the nearby counter.
The Court of Appeals also rejected the testimonies of the witnesses of petitioners. It found them biased and prejudiced. It instead gave credit to the testimony of
disinterested witness Gonzales. The Court of Appeals then awarded P99,420.86 as actual damages, the amount representing the hospitalization expenses incurred by
private respondents as evidenced by the hospital's statement of account. 12 It denied an award for funeral expenses for lack of proof to substantiate the same. Instead, a
compensatory damage of P50,000 was awarded for the death of ZHIENETH.
We quote the dispositive portion of the assailed decision, 13 thus:
WHEREFORE, premises considered, the judgment of the lower court is SET ASIDE and another one is entered against [petitioners], ordering
them to pay jointly and severally unto [private respondents] the following:
1. P50,000.00 by way of compensatory damages for the death of Zhieneth Aguilar, with legal interest
(6% p.a.) from 27 April 1984;
2. P99,420.86 as reimbursement for hospitalization expenses incurred; with legal interest (6% p.a.)
from 27 April 1984;
3. P100,000.00 as moral and exemplary damages;
4. P20,000.00 in the concept of attorney's fees; and
5. Costs.
Private respondents sought a reconsideration of the decision but the same was denied in the Court of Appeals' resolution 14 of 16 July 1997.
Petitioners now seek the reversal of the Court of Appeals' decision and the reinstatement of the judgment of the trial court. Petitioners primarily argue that the Court of
Appeals erred in disregarding the factual findings and conclusions of the trial court. They stress that since the action was based on tort, any finding of negligence on the
part of the private respondents would necessarily negate their claim for damages, where said negligence was the proximate cause of the injury sustained. The injury in
the instant case was the death of ZHIENETH. The proximate cause was ZHIENETH's act of clinging to the counter. This act in turn caused the counter to fall on her.
This and CRISELDA's contributory negligence, through her failure to provide the proper care and attention to her child while inside the store, nullified private
respondents' claim for damages. It is also for these reasons that parents are made accountable for the damage or injury inflicted on others by their minor children. Under
these circumstances, petitioners could not be held responsible for the accident that befell ZHIENETH.
Petitioners also assail the credibility of Gonzales who was already separated from Syvel's at the time he testified; hence, his testimony might have been tarnished by ill-
feelings against them.
For their part, private respondents principally reiterated their arguments that neither ZHIENETH nor CRISELDA was negligent at any time while inside the store; the
findings and conclusions of the Court of Appeals are substantiated by the evidence on record; the testimony of Gonzales, who heard ZHIENETH comment on the
incident while she was in the hospital's emergency room should receive credence; and finally, ZHIENETH's part of the res gestae declaration "that she did nothing to
cause the heavy structure to fall on her" should be considered as the correct version of the gruesome events.
We deny the petition.
The two issues to be resolved are: (1) whether the death of ZHIENETH was accidental or attributable to negligence; and (2) in case of a finding of negligence, whether
the same was attributable to private respondents for maintaining a defective counter or to CRISELDA and ZHIENETH for failing to exercise due and reasonable care
while inside the store premises.

46
An accident pertains to an unforeseen event in which no fault or negligence attaches to the defendant. 15 It is "a fortuitous circumstance, event or happening; an event
happening without any human agency, or if happening wholly or partly through human agency, an event which under the circumstances is unusual or unexpected by the
person to whom it happens." 16
On the other hand, negligence is the omission to do something which a reasonable man, guided by those considerations which ordinarily regulate the conduct of human
affairs, would do, or the doing of something which a prudent and reasonable man would not do. 17 Negligence is "the failure to observe, for the protection of the interest
of another person, that degree of care, precaution and vigilance which the circumstances justly demand, whereby such other person suffers injury." 18
Accident and negligence are intrinsically contradictory; one cannot exist with the other. Accident occurs when the person concerned is exercising ordinary care, which
is not caused by fault of any person and which could not have been prevented by any means suggested by common prudence. 19
The test in determining the existence of negligence is enunciated in the landmark case of Plicart v. Smith, 20 thus: Did the defendant in doing the alleged negligent act
use that reasonable care and caution which an ordinarily prudent person would have used in the same situation? If not, then he is guilty of negligence. 21
We rule that the tragedy which befell ZHIENETH was no accident and that ZHIENETH's death could only be attributed to negligence.
We quote the testimony of Gerardo Gonzales who was at the scene of the incident and accompanied CRISELDA and ZHIENETH to the hospital:
Q While at the Makati Medical Center, did you hear or notice anything while the child was being treated?
A At the emergency room we were all surrounding the child. And when the doctor asked the child "what did you do," the
child said "nothing, I did not come near the counter and the counter just fell on me."
Q (COURT TO ATTY. BELTRAN)
You want the words in Tagalog to be translated?
ATTY. BELTRAN
Yes, your Honor.
COURT
Granted. Intercalate "wala po, hindi po ako lumapit doon. Basta bumagsak." 22
This testimony of Gonzales pertaining to ZHIENETH's statement formed (and should be admitted as) part of theres gestae under Section 42, Rule 130 of the Rules of
Court, thus:
Part of res gestae. Statements made by a person while a startling occurrence is taking place or immediately prior or subsequent thereto with
respect to the circumstances thereof, may be given in evidence as part of the res gestae. So, also, statements accompanying an equivocal act
material to the issue, and giving it a legal significance, may be received as part of the res gestae.
It is axiomatic that matters relating to declarations of pain or suffering and statements made to a physician are generally considered declarations and admissions. 23 All
that is required for their admissibility as part of the res gestaeis that they be made or uttered under the influence of a startling event before the declarant had the time to
think and concoct a falsehood as witnessed by the person who testified in court. Under the circumstances thus described, it is unthinkable for ZHIENETH, a child of
such tender age and in extreme pain, to have lied to a doctor whom she trusted with her life. We therefore accord credence to Gonzales' testimony on the matter, i.e.,
ZHIENETH performed no act that facilitated her tragic death. Sadly, petitioners did, through their negligence or omission to secure or make stable the counter's base.
Gonzales' earlier testimony on petitioners' insistence to keep and maintain the structurally unstable gift-wrapping counter proved their negligence, thus:
Q When you assumed the position as gift wrapper at the second floor, will you please describe the gift wrapping counter,
were you able to examine?
A Because every morning before I start working I used to clean that counter and since not nailed and it was only standing
on the floor, it was shaky.
xxx xxx xxx
Q Will you please describe the counter at 5:00 o'clock [sic] in the afternoon on [sic] May 9 1983?
A At that hour on May 9, 1983, that counter was standing beside the verification counter. And since the top of it was heavy
and considering that it was not nailed, it can collapse at anytime, since the top is heavy.
xxx xxx xxx
Q And what did you do?
A I informed Mr. Maat about that counter which is [sic] shaky and since Mr. Maat is fond of putting display decorations on
tables, he even told me that I would put some decorations. But since I told him that it not [sic] nailed and it is shaky he told
me "better inform also the company about it." And since the company did not do anything about the counter, so I also did
not do anything about the counter. 24 [Emphasis supplied]
Ramon Guevarra, another former employee, corroborated the testimony of Gonzales, thus:
Q Will you please described [sic] to the honorable Court the counter where you were assigned in January 1983?
xxx xxx xxx
A That counter assigned to me was when my supervisor ordered me to carry that counter to another place. I told him that
the counter needs nailing and it has to be nailed because it might cause injury or accident to another since it was shaky.
Q When that gift wrapping counter was transferred at the second floor on February 12, 1983, will you please describe that
to the honorable Court?
A I told her that the counter wrapper [sic] is really in good [sic] condition; it was shaky. I told her that we had to nail it.
Q When you said she, to whom are you referring to [sic]?
A I am referring to Ms. Panelo, sir.
Q And what was the answer of Ms. Panelo when you told her that the counter was shaky?
A She told me "Why do you have to teach me. You are only my subordinate and you are to teach me?" And she even got
angry at me when I told her that.
xxx xxx xxx
Q From February 12, 1983 up to May 9, 1983, what if any, did Ms. Panelo or any employee of the management do to that
(sic)
xxx xxx xxx
Witness:
None, sir. They never nailed the counter. They only nailed the counter after the accident happened. 25 [Emphasis supplied]
Without doubt, petitioner Panelo and another store supervisor were personally informed of the danger posed by the unstable counter. Yet, neither initiated any concrete
action to remedy the situation nor ensure the safety of the store's employees and patrons as a reasonable and ordinary prudent man would have done. Thus, as
confronted by the situation petitioners miserably failed to discharge the due diligence required of a good father of a family.
On the issue of the credibility of Gonzales and Guevarra, petitioners failed to establish that the former's testimonies were biased and tainted with partiality. Therefore,
the allegation that Gonzales and Guevarra's testimonies were blemished by "ill feelings" against petitioners since they (Gonzales and Guevarra) were already
separated from the company at the time their testimonies were offered in court was but mere speculation and deserved scant consideration.
It is settled that when the issue concerns the credibility of witnesses, the appellate courts will not as a general rule disturb the findings of the trial court, which is in a
better position to determine the same. The trial court has the distinct advantage of actually hearing the testimony of and observing the deportment of the
witnesses. 26However, the rule admits of exceptions such as when its evaluation was reached arbitrarily or it overlooked or failed to appreciate some facts or
circumstances of weight and substance which could affect the result of the case. 27 In the instant case, petitioners failed to bring their claim within the exception.
47
Anent the negligence imputed to ZHIENETH, we apply the conclusive presumption that favors children below nine (9) years old in that they are incapable of
contributory negligence. In his book, 28 former Judge Cezar S. Sangco stated:
In our jurisdiction, a person under nine years of age is conclusively presumed to have acted without discernment, and is, on that account, exempt
from criminal liability. The same presumption and a like exemption from criminal liability obtains in a case of a person over nine and under
fifteen years of age, unless it is shown that he has acted with discernment. Since negligence may be a felony and aquasi-delict and required
discernment as a condition of liability, either criminal or civil, a child under nine years of age is, by analogy, conclusively presumed to be
incapable of negligence; and that the presumption of lack of discernment or incapacity for negligence in the case of a child over nine but under
fifteen years of age is a rebuttable one, under our law. The rule, therefore, is that a child under nine years of age must be conclusively presumed
incapable of contributory negligence as a matter of law. [Emphasis supplied]
Even if we attribute contributory negligence to ZHIENETH and assume that she climbed over the counter, no injury should have occurred if we accept petitioners'
theory that the counter was stable and sturdy. For if that was the truth, a frail six-year old could not have caused the counter to collapse. The physical analysis of the
counter by both the trial court and Court of Appeals and a scrutiny of the evidence 29 on record reveal otherwise, i.e., it was not durable after all. Shaped like an inverted
"L," the counter was heavy, huge, and its top laden with formica. It protruded towards the customer waiting area and its base was not secured. 30
CRISELDA too, should be absolved from any contributory negligence. Initially, ZHIENETH held on to CRISELDA's waist, later to the latter's hand. 31 CRISELDA
momentarily released the child's hand from her clutch when she signed her credit card slip. At this precise moment, it was reasonable and usual for CRISELDA to let go
of her child. Further, at the time ZHIENETH was pinned down by the counter, she was just a foot away from her mother; and the gift-wrapping counter was just four
meters away from CRISELDA. 32 The time and distance were both significant. ZHIENETH was near her mother and did not loiter as petitioners would want to impress
upon us. She even admitted to the doctor who treated her at the hospital that she did not do anything; the counter just fell on her.
WHEREFORE, in view of all the foregoing, the instant petition is DENIED and the challenged decision of the Court of Appeals of 17 June 1996 in C.A. G.R. No. CV
37937 is hereby AFFIRMED.
Costs against petitioners.
SO ORDERED.

Facts:

Petitioner Jarco Marketing Corporation is the owner of Syvels Department Store,Makati City. Petitioners Leonardo Kong, Jose Tiope and Elisa Panelo are the
stores branch manager, operations manager, and supervisor, respectively. Privaterespondents are spouses and the parents of Zhieneth Aguilar (Zhieneth).

In the afternoon of 9 May 1983, Criselda and Zhieneth were at the 2nd floor of Syvels Department Store, Makati City. Criselda was signing her credit card slip atthe
payment and verification counter when she felt a sudden gust of wind and heard aloud thud. She looked behind her. She then saw Zhieneth on the floor crushed by bulk
of the stores gift-wrapping counter/structure. Although shocked, Criselda wasquick to ask the assistance of the people around in lifting the counter and
retrievingZhieneth from the floor.

Zhieneth was rushed to the hospital. She lived through the operation but lost her ability to speak. She then died two weeks later due to the injuries she sustained.

Respondents demanded the reimbursement of hospitalization, medical bills and wakeand funeral expenses they incurred from the petitioners. The petitioners refused
to pay. Thus, respondents filed a civil case to recover P157522.86 as actual damages,P300,000.00 as moral damages and P20,000.00 in attorneys fees.

In their defense, petitioners claimed that Criselda was negligent for allowing her daughter to freely roam around the Department Store. They also claimed thatZhieneth
was guilty of contributory negligence by climbing onto the counter whichlater fell on her causing her untimely death.

Respondents on the other hand claim that Criselda was not guilty of negligence as itwas natural for her to leave Criselda when she was signing her credit card slip.
Theyargue that Zhieneth is not presumed to be guilty of contributory negligence as she wasonly 6 years old at that time and that her dying declaration as testified to by
the doctor was that the counter just fell on her without her climbing onto it. Respondents alsoargue that the structure should have been nailed to the floor to prevent
incidents likethis.

As to the claim that the counter should have been nailed, they claim that it wasunnecessary as it had been in existence for many years without incident.
Further, petitioners claim that the criminal case for simple negligence filed against them has been dismissed and that a verdict of acquittal issued in their favour.

Trial court dismissed the complaint but the Court of Appeals reversed.

Issue: WON petitioners may be held liable for the death of Zhieneth.

Held:

YES. An accident pertains to an unforeseen event in which no fault or negligenceattaches to the defendant. It is a fortuitous circumstance, event or happening; anevent
happening without any human agency, or if happening wholly or partly throughhuman agency, an event which under the circumstances is unusual or unexpected bythe
person to whom it happens.

While negligence is the omission to do something which a reasonable man, guided bythose considerations which ordinarily regulate the conduct of human affairs,
woulddo, or the doing of something which a prudent and reasonable man would not do. Negligence is the failure to observe, for the protection of the interest of
another person, that degree of care, precaution and vigilance which the circumstances justlydemand, whereby such other person suffers injury. The test of is:

Did the defendant in doing the alleged negligent act use that reasonable care and caution which anordinarily prudent person would have used in the same situation? If
not, then he is guilty of negligence.

Zhieneths dying statement before being rushed to into the operating room that shedid not do anything but merely approached the counter forms part of the

res gestae inaccordance with Section 42 of Rule 130 of the Rules of Court. It is axiomatic thatmatters relating to declarations of pain or suffering and statements
made to a physician are generally considered declarations and admissions.

48
Further, the negligence of the petitioners was proven by the testimony of their employees who testified that the counter was heavy, shaky and could collapse
at anytime. It was verified that the counter was not nailed which further aggravated thecounters instability. Worse, such condition was brought to the attention of the
storesupervisor but no action was taken to address it. Verily, such shows a blatant failureto exercise the diligence of a good father of a family.

Both Criselda and Zhieneth are not guilty of contributory negligence. Zhieneth, a 6year old enjoys the presumption that she is incapable of committing
contributorynegligence. Petitioners failed to rebut such presumption. Further, Criselda was notguilty of contributory negligence as it was only natural for her to let go of
Zhieneth tosign her credit card slip.

Judgment of the Court of Appeals affirmed

G.R. No. L-85868 October 13, 1989

ALLIED BANKING CORPORATION, petitioner,
vs.
COURT OF APPEALS AND JOSELITO Z. YUJUICO, respondents.
Angara, Abello, Concepcion, Regala & Cruz for petitioner.
Balgos & Perez Law Offices for respondents.

GANCAYCO, J.:
What started as a simple collection suit and which developed into an intricate question of procedure is the focus of this petition for review on certiorari.
The present petition seeks the reversal of the decision of the Court of Appeals in CA-G.R. SP No. 14759 dated September 5, 1988 entitled "Joselito Z. Yujuico vs. Hon.
Domingo D. Panis, RTC Judge of Manila Branch LXI and Allied Banking Corp. 1 and the resolution dated November 9,1988 denying petitioner's motion for
reconsideration of the said decision. 2
The antecedent facts of the case are as follows:
On April 1, 1976, private respondent Joselito Z. Yujuico obtained a loan from the General Bank and Trust Company (GENBANK) in the amount of Five Hundred
Thousand pesos (P500,000.00), payable on or before April 1, 1977. As evidence thereof, private respondent issued a corresponding promissory note in favor of
GENBANK. At the time private respondent incurred the obligation, he was then a ranking officer of GENBANK and a member of the family owning the controlling
interest in the said bank.
On March 25,1977, the Monetary Board of the Central Bank issued Resolution No. 675 forbidding GENBANK from doing business in the Philippines. This was
followed by Resolution No. 677 issued by the Monetary Board on March 29, 1977 ordering the liquidation of GENBANK.
It appears that in a Memorandum of Agreement dated May 9, 1977 executed by and between Allied Banking Corporation (ALLIED) and Arnulfo Aurellano as
Liquidator of GENBANK, ALLIED acquired all the assets and assumed the liabilities of GENBANK, which includes the receivable due from private respondent under
the promissory note.
Upon failing to comply with the obligation under the promissory note, petitioner ALLIED, on February 7, 1979, filed a complaint against private respondent for the
collection of a sum of money. This case was docketed as Civil Case No. 121474 before the then Court of First Instance of Manila (now Regional Trial Court).
Sometime in 1987 and in the course of the proceedings in the court below, private respondent, then defendant in the court below, filed a Motion to Admit
Amended/Supplemental Answer and Third-Party Complaint. Private respondent sought to implead the Central Bank and Arnulfo Aurellano as third-party defendants. It
was alleged in the third-party complaint that by reason of the tortious interference by the Central Bank with the affairs of GENBANK, private respondent was prevented
from performing his obligation under the loan such that he should not now be held liable thereon.
Acting on the motion and on the opposition filed thereto, the Regional Trial Court through the Hon. Judge Felix B. Mintu issued an order dated August 13,1987 denying
the admission of the third- party complaint but admitting private respondent's amended/supplemental answer.
When the case was re-raffled to Branch 61 of the Regional Trial Court of Manila, presiding Judge Domingo D. Panis, on February 29, 1 988, reiterated the order
denying the admission of private respondent's third-party complaint and admitting the amended/supplemental answer. When both parties filed their respective motions
for partial reconsideration, the Hon. Judge Panis issued an order dated April 18, 1988 denying both motions.
Thereupon, private respondent filed with the Court of Appeals a petition for certiorari 3 on June 1, 1988 questioning the orders of Hon. Judge Panis dated February 29,
1988 denying private respondent's motion to admit third-party complaint, and April 18, 1988 denying private respondent's motion for partial reconsideration of the
February 29,1988 order.
On September 5, 1988, the Court of Appeals rendered the assailed decision, the dispositive portion of which reads:
WHEREFORE, finding grave abuse of discretion on the part of the respondent Judge, the Order of February 29, 1988 as well as that of April 18,
1988 insofar as it denies petitioner's motion to admit his third party complaint, is hereby declared null and void. Respondent judge is hereby
ordered to admit the proposed third-party complaint. Cost de oficio.
SO ORDERED. 4
A motion for reconsideration thereof filed by petitioner was denied in a resolution dated November 9, 1988. Petitioner assigns the following errors:
I
RESPONDENT COURT OF APPEALS SERIOUSLY ERRED IN HOLDING THAT HON. JUDGE PANIS COMMITTED GRAVE ABUSE OF DISCRETION IN
DENYING ADMISSION TO PRIVATE RESPONDENTS THIRD-PARTY COMPLAINT, CONSIDERING THAT:
A. PRIVATE RESPONDENT'S PROPOSED THIRD-PARTY COMPLAINT DOES NOT STATE A CAUSE OF ACTION
IN RESPECT OF PETITIONERS CLAIM.
B. THE ALLEGED CAUSE OF ACTION SET FORTH IN PRIVATE RESPONDENTS PROPOSED THIRD-PARTY
COMPLAINT HAS ALREADY PRESCRIBED.
C. THE ADMISSION OF PRIVATE RESPONDENT'S PROPOSED THIRD-PARTY COMPLAINT WILL ONLY CAUSE
FURTHER UNNECESSARY DELAY IN THE DISPOSITION OF THE CASE OF PETITIONER AGAINST PRIVATE
RESPONDENT.
II
CONTRARY TO THE RULING OF RESPONDENT COURT OF APPEALS, THE RULE PRESCRIBING THAT DEFENSES NOT RAISED IN THE COURT
BELOW CANNOT BE RAISED FOR THE FIRST TIME ON APPEAL IS NOT APPLICABLE TO SPECIAL CIVIL ACTIONS OF CERTIORARI.5
From the foregoing assignment of errors, petitioner would like Us to resolve the following issues: (a) Is there a proper ground to admit the third-party complaint?; and
(b) assuming that there is, has the cause of action under the third-party complaint prescribed?
A third-party complaint is a procedural device whereby a "third-party who is neither a party nor privy to the act or deed complained of by the plaintiff, may be brought
into the case with leave of court, by the defendant, who acts as third-party plaintiff to enforce against such third-party defendant a right for contribution, indemnity,
subrogation or any other relief, in respect of the plaintiff s claim . 6 The third party complaint is actually independent of, separate and distinct from the plaintiffs
complaint. Such that, were it not for this provision of the Rules of Court, it would have to be filed separately from the original complaint by the defendant against the
third-party. 7
After going through the records of this case, this Court finds that the third-party plaintiffs claim is premised not only on what was alleged as the tortious interference by
the third-party defendants with the affairs of GENBANK. More importantly, attention should have been focused on the fact that this allegation is wedded to a decision

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rendered by the Court of Appeals in CA-G.R. CV No. 03642 which affirmed the decision of the Regional Trial Court in Special Proceedings No. 107812. 8 We quote the
pertinent portion of the affirmed decision, to wit:
Based on the foregoing facts, the Court finds the liquidation of GBTC as embodied in Annex "A" and Annex "B" of the petition, which merely
adopted the bid of the Lucio Tan group as the liquidation plan of GBTC as plainly arbitrary and made in bad faith and therefore the same must be
annulled and set aside. ... 9 (Italics supplied).
This decision, which declared as null and void the liquidation of GENBANK, prompted private respondent herein to file a third-party complaint against the Central
Bank and Arnulfo Aurellano on the theory that he has a right to proceed against them in respect of ALLIED's claim. In the words of private respondent, he "[s]eeks to
transfer liability for the default imputed against him by the petitioner to the proposed third-party defendants because of their tortious acts which prevented him from
performing his obligations. 10 Thus, if at the outset the issue appeared to be a simple maker's liability on a promissory note, it became complex by the rendition of the
aforestated decision.
As early as Capayas vs. Court of First Instance of Albay, 11 this Court had already outlined the tests to determine whether the claim for indemnity in a third-party claim
is "in respect of plaintiff's claim." They are: (a) whether it arises out of the same transaction on which the plaintiffs claim is based, or whether the third-party's claim,
although arising out of another or different contract or transaction, is connected with the plaintiffs claim; (b) whether the third-party defendant would be liable to the
plaintiff or to the defendant for all or part of the plaintiffs claim against the original defendant, although the third-party defendant's liability arises out of another
transaction; or (c) whether the third-party defendant may assert any defense which the third-party plaintiff has, or may have against plaintiff s claim. 12
While the claim of third-party plaintiff, private respondent herein, does not fall under test (c), there is no doubt that such claim can be accommodated under tests (a) and
(b) above-mentioned. Whether or not this Court agrees with the petitioner's assertion that the claim does not "arise out of the same transaction on which the plaintiff s
claim is based," it cannot be denied that the third-party's claim (although arising out of another or different contract or transaction) is connected with plaintiffs claim.
The judgement of the Court of Appeals in CA-G.R. CV No. 03642 is the substantive basis of private respondent's proposed third-party complaint. Put differently, there
is merit in private respondent's position that if held liable on the promissory note, they are seeking, by means of the third-party complaint, to transfer unto the third-
party defendants liability on the note by reason of the illegal liquidation of GENBANK which, in the first place, was the basis for the assignment of the promissory
note. If there was any confusion at all on the ground/s alleged in the third-party complaint, it was the claim of third-party plaintiff for other damages in addition to any
amount which he may be called upon to pay under the original complaint. 13While these allegations in the proposed third-party complaint may cause delay in the
disposition of the main suit, it cannot, however, be outrightly asserted that it would not serve any purpose.
It is one thing to say that a third-party defendant may be held liable to indemnify or reimburse the third-party plaintiff "in respect of plaintiffs claim," but it is quite
another to state that a third-party defendant may be held liable to a third-party plaintiff. The second instance may not carry with it the necessary connection to the main
cause of action and, therefore, is not allowed by the Rules for it introduces a controversy that is entirely foreign to and distinct from the main cause. The first instance is
allowable and should be allowed if it will help in clarifying in a single proceeding the multifarious issues involved arising from a single transaction.
It is this Court's pronouncement that the first instance is applicable in the present situation.
As to the issue of prescription, it is the position of petitioner that the cause of action alleged in the third-party complaint has already prescribed. 14 Being founded on
what was termed as tortious interference," petitioner asserts that under the applicable provisions of the Civil Code on quasi-delict 15 the action against third-party
defendants should have been filed within four (4) years from the date the cause of action accrued. On the theory that the cause of action accrued on March 25, 1977, the
date when the Monetary Board ordered GENBANK to desist from doing business in the Philippines, petitioner maintains that the claim should have been filed at the
latest on March 25, 1981. 16 On the other hand, private respondent relies on the "Doctrine of Relations" or "Relations Back Doctrine" 17 to support his claim that the
cause of action as against the proposed third-party defendant accrued only on December 12,1986 when the decision in CA-G.R. CV No. 03642 became final and
executory. Thus, it is contended that while the third party complaint was filed only on June 17,1987, it must be deemed to have been instituted on February 7, 1979
when the complaint in the case was filed.
There can be no question in this case that the action for damages instituted by private respondent arising from the quasi-delict or alleged tortious interference" should be
filed within four (4) years from the day the cause of action accrued. 18
In the case of Espaol vs. Chairman, Philippine Veterans Administration, 19 this Court ruled that it is from the date of the act or omission violative of the right of a party
when the cause of action arises and it is from this date that the prescriptive period must be reckoned.
Thus, while technically the third party complaint in this case may be admitted as above discussed, however, since the cause of action accrued on March 25, 1980 when
the Monetary Board ordered the General Bank to desist from doing business in the Philippines while the third party complaint was filed only on June 17, 1987,
consequently, the action has prescribed. The third party complaint should not be admitted.
WHEREFORE, the petition is GRANTED. The decision of the respondent Court of Appeals dated September 5, 1988 and its resolution dated November 9, 1988
denying the motion for reconsideration filed by petitioner are hereby reversed and set aside and declared null and void, and another judgment is hereby rendered
sustaining the orders of the trial court of February 29,1988 and April 18,1988, denying the admission of the third party complaint. No pronouncement as to costs.
SO ORDERED.

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