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Republic of the Philippines

G.R. No. 107737 October 1, 1999
This is a petition for review on certiorari of the Decision 1 of the Court of Appeals affirming the decision of the
Regional Trial Court of Bulacan, Branch 9 2 that disposed of Civil Case No. 5610-M (Luis Crisostomo v. Luis Keh,
Juan Perez, Charlie Kee and Atty. Rosendo G. Tansinsin, Jr.) as follows:
WHEREFORE, premises considered, judgment is hereby rendered:
a) directing defendant JUAN PEREZ to allow plaintiff LUIS CRISOSTOMO to
occupy and operate the "Papaya Fishpond" for a period of 5 1/2 years at the
rental rates of P150,000.00 for the first six months and P175,000.00 for the
remaining five years (the same rates provided for in Exh. 4);
b) ordering defendants LUIS KEH, CHARLIE LEE, JUAN PEREZ and Atty.
ROSENDO TANSINSIN, JR. to pay unto the plaintiff the amounts of P150,000.00
as actual damages; P20,000.00 as moral damages; P20,000.00 as exemplary
damages; and P10,000.00 as attorney's fees, plus the costs of the suit;
c) directing the release, delivery or payment directly to plaintiff LUIS
CRISOSTOMO of the amounts of P128,572.00 and P123,993.85, including the
interests which may have already accrued thereon, deposited with the
Paluwagan ng Bayan Savings Bank (Paombong, Bulacan Branch) in the name of
the Clerk of Court and/or Deputy Clerk of Court Rodrigo C. Libunao under this
Court's Order dated February 14, 1980; however, the plaintiff is required to pay
defendant Perez the corresponding rental on the fishpond for the period June
1979-January 1980 based on the rate of P150,000.00 per annum, deducting
therefrom the amount of P21,428.00 already paid to and received by then cousufructuary Maria Perez (Exh. E);
d) dismissing the defendants' separate counter-claims for damages, for lack of
merit; and
e) dismissing the Pleading in Intervention Pro Interesse Suo filed by VICENTE
ASUNCION on the ground of lis pendens.
The facts upon which the Court of Appeals based its Decision are the following:
Along with Maria Perez, Fructuosa Perez, Victoria Perez, Apolonio Lorenzo and Vicente Asuncion, petitioner Juan
Perez is a usufructuary of a parcel of land popularly called the "Papaya Fishpond." Covered by Transfer
Certificate of Title No. 8498 of the Registry of Deeds for the Province of Bulacan, the fishpond is located in Sto.
Rosario, Hagonoy, Bulacan and has an area of around 110 hectares. On June 5, 1975, the usufructuaries
entered into a contract leasing the fishpond to Luis Keh for a period of five (5) years and renewable for another
five (5) years by agreement of the parties, under the condition that for the first five-year period the annual
rental would be P150,000.00 and for the next five years, P175,000.00. Paragraph 5 of the lease contract states
that the lessee "cannot sublease" the fishpond "nor assign his rights to anyone." 3
Private respondent Luis Crisostomo, who reached only the 5th grade, is a businessman engaged in the
operation of fishponds. On September 20, 1977, while he was at his fishpond in Almazar, Hermosa, Bataan, his
bosom friend named Ming Cosim arrived with petitioner Charlie Lee. The two persuaded private respondent to
take over the operation of "Papaya Fishpond" as petitioner Lee and his partner, petitioner Luis Keh, were
allegedly losing money in its operation. Private respondent having acceded to the proposal, sometime in
December of that year, he and petitioners Lee and Keh executed a written agreement denominated as "pakiao
buwis" whereby private respondent would take possession of the "Papaya Fishpond" from January 6, 1978 to

June 6, 1978 in consideration of the amount of P128,000.00 broken down as follows: P75,000.00 as rental,
P50,000.00 for the value of milkfish in the fishpond and P3,000 for labor expenses. Private respondent paid the
P75,000.00 to petitioner Keh at the house of petitioner Lee in Sta. Cruz, Hagonoy, Bulacan in the presence of
Lee's wife, brother-in-law and other persons. He paid the balance to petitioner Lee sometime in February or
March 1978 because he was uncertain as to the right of petitioners Keh and Lee to transfer possession over
the fishpond to him. Private respondent made that payment only after he had received a copy of a written
agreement dated January 9, 1978 4 whereby petitioner Keh ceded, conveyed and transferred all his "rights and
interests" over the fishpond to petitioner Lee, "up to June 1985." From private respondent's point of view, that
document assured him of continuous possession of the property for as long as he paid the agreed rentals of
P150,000.00 until 1980 and P.175,000.00 until 1985.1wphi1.nt
For the operation of the fishpond from June 1978 to May 1979, private respondent, accompanied by Ming
Cosim and Ambrocio Cruz, paid the amount of P150,000.00 at the Malabon, Metro Manila office of petitioner
Keh. The following receipt was issued to him:
June 6, 1978
Received from Mr. LUIS KEH the sum of ONE HUNDRED FIFTY THOUSAND PESOS (P150,000.00),
Philippine Currency, as full payment of the yearly leased rental of the Papaya Fishpond for the
year beginning June 1978 and ending on May 1979. The next payment shall be made on June
6, 1979.
Said sum was paid in Producers Bank of the Philippines Check No. (illegible) 164595 dated June
6, 1978.
Mr. Luis Keh has not transferred his rights over the fishpond to any person.
Caloocan City, June 6, 1978.
Rosendo G. Tansinsin, Jr.
Handwritten below that receipt but above the signature of petitioner Charlie Lee, are the following:
"Rec'd from Luis Crisostomo sum of one hundred fifty-four thousand P154,000.00 for above payment.

Private respondent incurred expenses for repairs in and improvement of the fishpond in the total amount of
P486,562.65. 6 However, sometime in June 1979, petitioners Tansinsin and Juan Perez, in the company of men
bearing armalites, went to the fishpond and presented private respondent with a letter dated June 7, 1979
showing that petitioner Luis Keh had surrendered possession of the fishpond to the usufructuaries.
Because of the threat to deprive him of earnings of around P700,000.00 that the 700,000 milkfish in the
fishpond would yield, and the refusal of petitioners Keh, Juan Perez and Lee to accept the rental for June 5,
1979 to June 6, 1980, private respondent filed on June 14, 1979 with the then Court of First Instance of Bulacan
an action for injunction and damages. He prayed for the issuance of a restraining order enjoining therein
defendants Keh, Perez and Lee from entering the premises and taking possession of the fishpond. He also
prayed for actual damages of P50,000.00, moral damages of P20,000.00, exemplary damages in an amount
that the court might award, and attorney's fees of P10,000.00. 7
That same day, June 14, 1979, the lower court granted the prayer for a restraining order. On November 13,
1979, Crisostomo paid one of the usufructuaries, Maria Perez (who died in 1984), the amount of P21,428.00 as
her 1/7 share of the annual rental of the fishpond for 1979-80. Maria Perez issued a notarized receipt for that
amount. 8

On January 11, 1980, the court lifted the restraining order thereby effectively depriving private respondent of
possession over the fishpond. On February 14, 1980, the parties submitted a partial compromise agreement
with the following stipulations:
1. The amount of P128,572.00 that private respondent deposited as rental with
the Office of the Clerk of Court under O.R. No. 21630 dated November 15, 1979
be withdrawn from that office and deposited with the Paluwagan ng Bayan
Savings & Loan Association, Inc. (Paombong, Bulacan branch) and which
deposit shall not be withdrawn unless authorized by the court; and
2. The plaintiff could personally harvest milkfish "with commercial value" in the
presence of Perez and under the supervision of the deputy clerk of court within
the appointed period and that the net proceeds of the sale (P123,993.85 per
the Report dated March 4, 1980 of the deputy clerk of court) be deposited in
the name of the deputy clerk of court of Branch 6 of the then Court of First
Instance of Bulacan with the same branch of the Paluwagan ng Bayan Savings
& Loan Association, Inc. and which deposit shall not be withdrawn unless upon
order of the court after hearing.
The court approved that agreement on that same date.
Thereafter, the usufructuaries entered into a contract of lease with Vicente Raymundo and Felipe Martinez for
the six-year period of June 1, 1981 to May 30, 1987 in consideration of the annual rentals of P550,000.00 for
the first two years and P400,000.00 for the next four years. Upon expiration of that lease, the same property
was leased to Pat Laderas for P1 million a year.
The complaint was later amended to include petitioner Tansinsin, the alleged administrator of the fishpond, as
one of the defendants. 9 Except in the joint answer that the defendants had filed, petitioners Keh and Lee did
not appear before the court. Neither did they testify.
In their defense, petitioners Juan Perez and Tansinsin presented evidence to prove that they had negotiated for
the lease of the property with Benito Keh in 1975. However, they averred, for reasons unknown to petitioner
Perez, in the contract of lease that petitioner Tansinsin prepared, petitioner Luis Keh was named as lessee.
Petitioner Perez had never met Keh or Lee but according to petitioner Tansinsin, petitioner Luis Keh was
substituted for Benito Keh because the latter was preoccupied with his other businesses. Sometime in 1979,
petitioner Keh's agent named Catalino Alcantara relayed to petitioner Perez, Keh's intention to surrender
possession of the fishpond to the usufructuaries. Because petitioner Perez demanded that said intention
should be made in writing, on June 5, 1979, Perez received from Keh a letter to that effect.
When private respondent received a copy of that letter of petitioner Keh, he took the position that petitioner
Perez had no right to demand possession of the fishpond from him because Perez had no contract with him.
Private respondent was allowed four (4) months within which to vacate the premises but he immediately filed
the complaint for injunction and damages. Thereafter, private respondent's counsel, Atty. Angel Cruz and other
persons tried to prevail upon petitioner Perez to allow private respondent to occupy the property for three (3)
more years. Petitioner Perez declined that proposition.
On September 6, 1989, the lower court rendered the aforesaid decision. It arrived at the conclusion that the
defendants therein "conspired with one another to exploit the plaintiff's naivete and educational inadequacies
and, in the process, to defraud him by inducing him into taking possession of the "Papaya Fishpond" in their
fond hope that, as soon as the plaintiff applying his known expertise as a successful fishpond operator
shall have considerably improved the fishpond, they will regain possession of the premises and offer the lease
thereof to other interested parties at much higher rental rates as laid bare by supervening realities." That
conclusion was founded on the following:
1. The plaintiffs (private respondent Crisostomo's) testimony bears the
"hallmarks of truth: candid, straightforward and uncontrived." He had proven
himself a "much more credible witness than his opponents."
2. The notarized receipt of Maria Perez of her share as a usufructuary in the
rental for 1979-80 is a "clear avowal of plaintiffs legitimate operation of the
"Papaya Fishpond" as assignee or transferee thereof." It was impossible for the
other usufructuaries, especially Juan Perez who was residing in the same
locality and actively involved in the "affairs of the fishpond," not to have known
that plaintiff occupied the fishpond for one and a half years as assignee of Keh
and Lee. It was unbelievable that both Tansinsin and Perez would only perceive
the plaintiff as a mere encargado of Keh and Lee.
3. The receipt whereby Tansinsin acknowledged payment of P150,000.00 as
rental for June 1978-May 1979 bears "tell-tale signs" of the conspiracy. Firstly,
the statement "Mr. Luis Keh has not transferred his rights over the fishpond to

any person" is entirely irrelevant to that receipt unless it was intended "to
preempt plaintiff's claim of rights and interests over the said property as either
sub-lessee or assignee." Secondly, Keh's having signified "Conforme to the
above" is a gratuitous notation as it actually indicates that the money came
from the plaintiff. Thirdly, Atty. Tansinsin's receipt of the amount for and in
behalf of "JUAN L. PEREZ ET AL." illustrates his "active and dominant role in the
affairs" of the fishpond whether as administrator thereof or as beneficiary of a
share from its fruits.
4. Service upon plaintiff of Keh's letter surrendering possession of the fishpond
implied that defendants knew that plaintiff was in possession thereof. That
they resorted to the intimidating presence of armed men is proof that they
expected the plaintiff to refuse to give up possession of the property. These
circumstances "completely belie the protestations of Perez and Tansinsin of
lack of knowledge of the contract entered into" between the plaintiff, and Lee
and Keh.
5. The nonpresentation of Lee and Keh on the witness stand by Atty. Tansinsin
"can very well be construed as a smart maneuver to cover up the sinister cabal
for deception inferrable from the attendant facts and circumstances." In their
joint answer, Keh and Lee tried to relieve Perez of any liability in favor of the
plaintiff. That is understandable "because, should the Court disregard the
reliance of Perez on the prohibition against sub-lease or assignment of the
"Papaya Fishpond", then all the defendants shall have exposed themselves to
unavoidable liability for the acts complained of by the plaintiff."
6. Atty. Tansinsin was the common legal counsel of all the defendants and, by
his testimony, even the plaintiff. Atty. Tansinsin's denial that he was plaintiffs
counsel was his way of "deflecting plaintiffs imputations of professional
improprieties against him." Plaintiff must have assumed that Atty. Tansinsin
was also his lawyer considering that they were "on very friendly terms" and
therefore Atty. Tansinsin might have been instrumental in dispelling whatever
fears plaintiff had entertained as regards the business transactions involved.
7. The fact that the fishpond was subsequently rented out for astronomical
amounts is proof that the plaintiff had considerably improved the fishpond.


The lower court added:

Bluntly yet succinctly put, the foregoing circumstances when viewed collectively with other
cogent aspects of the instant case inexorably lead to the Court's well-considered view that the
defendants tempted by the bright prospect of a lucrative business coup embarked
themselves in an egregious scheme to take undue advantage of the gullibility of the plaintiff
who, as borne by ensuing events, proved himself an ideal victim to prey upon: pathetically
unsuspecting yet only too eager to invest his material resources and self-acquired technical
know-how to redeem what was then a dwindling business enterprise from total collapse.
Plaintiffs impressive performance, alas, only redounded ultimately to the supreme benefit
exclusively of the defendants. A classic case of "ako ang nagsaing, iba ang kumain!"
The defendants elevated the case to the Court of Appeals which, as earlier mentioned, affirmed the decision of
the trial court and disposed of the appeal on February 18, 1992 as follows:
WHEREFORE, in view of all the foregoing, judgment appealed from, is hereby AFFIRMED.
However, intervenor-appellant is hereby declared co-usufructuary of the Papaya fishpond, and
is, therefore, entitled to all rights and interest due to the usufructuaries of the said fishpond.
On the defendant-appellants' contention that the principle of res judicata should be applied because the Court
of Appeals had ruled on the issue of possession in CA-G.R. No. 10415-R, a petition for certiorari and injunction
with preliminary mandatory injunction, the Court of Appeals held that said principle was unavailing. The
petition in CA-G.R. No. 10415-R involved a writ of injunction "which presupposes the pendency of a principal or
main action." Moreover, the decision in that case did not resolve the issue of who should be in possession of
the Papaya Fishpond as findings of fact of the trial court cannot be reviewed in
a certiorari proceeding.1wphi1.nt
The Court of Appeals ruled further that appellee Crisostomo "cannot be considered a possessor in bad faith,
considering that he took possession of the fishpond when appellants Keh and Lee assigned to him appellant

Keh's leasehold right." It held that appellant Perez knew of the transfer of possession of the fishpond to
appellee and that the receipt evidencing payment of the 1978-1979 rental even bears an expressed admission
by Lee that the payment came from appellee Crisostomo.
Agreeing with the court a quo that "defendants-appellants employed fraud to the damage and prejudice of
plaintiff-appellee," the Court of Appeals held that appellants should be held liable for damages. As regards the
intervention pro interesse suo, the appellate court ruled that the same should be allowed because, even if the
litigation would not be technically binding upon him, complications might arise that would prejudice his rights.
Pointing out that a usufruct may be transferred, assigned or disposed of, the Court of Appeals ruled that the
intervenor cannot be excluded as a usufructuary because he had acquired his right as such from a sale in
execution of the share of Jorge Lorenzo, one of the usufructuaries of the fishpond.
Herein petitioners filed a motion for the reconsideration of that Decision of the Court of Appeals. They alleged
that the Decision was premature because it was rendered when they had not yet even received a copy of the
intervenor's brief wherein assignments of errors that directly affected their rights and interests were made.
They insisted that the principle of res judicata was applicable because in G.R. No. 64354, this Court upheld the
Decision of the Court of Appeals in CA-G.R. No. 10415. They added that appellee Crisostomo was guilty of
forum shopping because the issue of possession had been "squarely decided" in CA-G.R. No. 10415. They
stressed that the contract of lease between Keh and the usufructuaries prohibited subleasing of the fishpond;
that by the receipt dated June 6, 1978, it was Keh who paid the rental; that appellee Crisostomo was a perjured
witness because in the notebook showing his expenses, the amount of P150,000.00 for rentals does not
appear; that the term of the contract had expired and there was no renewal thereof, and that the consideration
of P150,000.00 was grossly inadequate. They averred that the Court of Appeals erred in awarding damages
that were not prayed for in the second amended complaint and that amounts not specified in the complaint
were awarded as damages. They disclaimed that Atty. Tansinsin was the administrator of the fishpond.
On October 30, 1992, the Court of Appeals denied the motion for reconsideration for lack of merit. It ruled that
the Decision was not prematurely promulgated "considering that the intervention proceeding is solely between
intervenor and defendants-appellants, which is completely separable and has nothing to do with the merits of
the appeal."
In the instant petition for review on certiorari, petitioners raise six (6) grounds for giving due course to
it. 11 Those grounds may be distilled into the following: (a) the applicability of the principle of res judicata; (b)
the premature promulgation of the Decision of the Court of Appeals, and (c) private respondent was not a
sublesee of the fishpond under the law.
In arguing that the principle of res judicata applies in this case, petitioners rely on the portion of the
Decision 12 of the Court of Appeals in CA-G.R. No. 10415 that states:
We find no basis for declaring respondent Judge guilty of grave abuse of discretion on this
regard. The trial court's finding that petitioner does not appear entitled to any contract or law
to retain possession of the fishpond in question since he is neither an assignee or sublessee and, therefore, merely a stranger to the contract of lease is a finding of fact review of
which is not proper in a certiorari proceedings. Not only is petitioner not a party to the lease
agreement over the fishpond in question but also the very authority upon which he predicates
his possession over the fishpond that the leasehold right of Luis Keh had been assigned to
him undoubtedly lacks basis for the very contract between Luis Keh and the lessors
expressly provides
That the lessee cannot sub-lease above-described fishpond nor assign his
rights to anyone.
xxx xxx xxx
(Emphasis supplied by petitioners.)


Petitioners assert that said Decision of the Court of Appeals which was in effect upheld by this Court when it
denied the petition for review on certiorari in G.R. No. 64354 (Luis Crisostomo v. Intermediate Appellate
Court), 14is "res judicata to the issue of possession in this case." 15 However, as expressed in that quoted
portion of the Decision in CA-G.R. No. 10415, the issue of whether private respondent is an assignee or a sublessee "is a finding of fact review of which is not proper in a certiorari proceeding" or the proceeding in that
CA-G.R. No. 10415 was spawned by the lifting on January 11, 1980 of the restraining order previously issued by
the trial court on June 14, 1979. Private respondent filed a special civil action of certiorari and injunction with
preliminary mandatory injunction and/or mandatory restraining order to question the order of January 11,
1980. Thus, the issue in that petition was whether or not the trial court gravely abused its discretion in lifting
the restraining order. The statement in that Decision of the Court of Appeals that a writ of preliminary
injunction may be denied "if the party applying for it has insufficient title or interest to sustain it and no claim
to an ultimate relief (is) sought" by no means resolved the issue of who is entitled to possess the fishpond. In

denying the petition for certiorari, the Court of Appeals was simply saying that there was no reason to restore
private respondent to the possession of the fishpond pursuant to the restraining order that he had earlier
obtained. The issue of possession was collaterally discussed only to resolve the propriety of the lifting of the
restraining order based on evidence available at that time. Hence, there was no judgment on the merits in the
main case or in Civil Case No. 5610-M. Simply put, the Decision in CA-G.R. No. 10415 involves an interlocutory
order on the propriety of the lifting of the restraining order and not a judgment on the merits of Civil Case No.
For res judicata to apply, the following requisites must concur: (a) the former judgment must be final; (b) the
court which rendered it had jurisdiction over the subject matter and the parties; (c) the judgment must be on
the merits, and (d) there must be between the first and second actions identity of parties, subject matter and
causes of action. 16 The Decision in CA-G.R. No. 10415 having resolved only an interlocutory matter, the
principle of res judicatacannot be applied in this case. There can be no res judicata where the previous order in
question was not an order or judgment determinative of an issue of fact pending before the court but was only
an interlocutory order because it required the parties to perform certain acts for final adjudication. 17 In this
case, the lifting of the restraining order paved the way for the possession of the fishpond on the part of
petitioners and/or their representatives pending the resolution of the main action for injunction. In other words,
the main issue of whether or not private respondent may be considered a sublessee or a transferee of the
lease entitled to possess the fishpond under the circumstances of the case had yet to be resolved when the
restraining order was lifted.
Petitioners assail the Court of Appeals' Decision as "premature" and therefore null and void, because prior to
the promulgation of that Decision, private respondent-intervenor Vicente Asuncion failed to furnish them with a
copy of his brief the assignment of errors of which allegedly "directly" affected their rights and
interests. 18 While it is true that petitioners were deprived of the opportunity to contravene the allegations of
the intervenor in his brief, that fact can not result in the nullity of the Decision of the Court of
Appeals. 19 Vicente Asuncion intervened pro interesse suo or "according to his interest." 20 Intervention pro
interessse suo is a mode of intervention in equity wherein a stranger desires to intervene for the purpose of
asserting a property right in the res, or thing, which is the subject matter of the litigation, without becoming a
formal plaintiff or defendant, and without acquiring control over the course of a litigation, which is conceded to
the main actors therein. 21 In this case, intervenor Vicente Asuncion aimed to protect his right as a
usufructuary. Inasmuch as he has the same rights and interests as petitioner Juan Perez, any judgment
rendered in the latter's favor entitled him to assert his right as such usufructuary against his co-usufructuary.
Should said intervenor claim his share in the usufruct, no rights of the petitioners other than those of Juan
Perez would be prejudiced thereby.
Worth noting is the fact that after the trial court had allowed Vicente Asuncion's intervention pro interesse suo,
petitioner Juan Perez filed a petition for certiorari docketed as CA-G.R. No. 13519 to set aside the order denying
his motion to dismiss the pleading in intervention. In its Decision of January 27, 1988, the Seventh Division of
the Court of Appeals 22 denied the petition for certiorari for lack of merit. It upheld the trial court's ruling to
allow the intervention pro interesse suo to protect Vicente Asuncion's right as a co-usufructuary in the
distribution or disposition of the amounts representing the rentals that were deposited with the court. That
Vicente Asuncion had filed Civil Case No. 8215-M seeking recovery of his alleged share in the fruits of the
Papaya Fishpond from 1978 would not be a reason for the dismissal of the motion for intervention pursuant to
Rule 16, Sec. 1 (e) of the Rules of Court. 23 The Court of Appeals explained as follows:
Indeed, if by means of intervention a stranger to a lawsuit is permitted to intervene without
thereby becoming a formal plaintiff or defendant (Joaquin v. Herrera, 37 Phil. 705, 723 [1918]),
then there is in the case at bar no identity of parties to speak of. Lis pendens as a ground for a
motion to dismiss requires as a first element identity of parties in the two cases.
Nor is there an identity of relief sought. Civil Case No. 8295-M seeks an accounting of the
proceeds of the fishpond while Civil Case No. 5610-M is for injunction to prevent the petitioner
from retaking the fishpond from Luis Crisostomo. The herein private respondent sought to
intervene in the latter case simply to protect his right as usufructuary in the money deposited
in the court by the plaintiff Luis Crisostomo. We hold that in allowing the intervention in this
case the trial court acted with prudence and exercised its discretion wisely. 24
Unconvinced by the Court of Appeals' Decision in CA-G.R. SP No. 13519, petitioner Juan Perez filed a petition
for review on certiorari with this Court under G.R. No. 82096. On May 9, 1988, this Court denied the petition on
the grounds that the issues raised are factual and that there is no sufficient showing that the findings of the
respondent court are not supported by substantial evidence or that the court had committed any reversible
error in the questioned judgment. 25 The Resolution of the Court dated May 9, 1988 became final and
executory on August 26, 1988. 26
Moreover, granting that the intervention be considered as Vicente Asuncion's "appeal," a litigant's failure to
furnish his opponent with a copy of his appeal does not suffice to warrant dismissal of that appeal. In such an
instance, all that is needed is for the court to order the litigant to furnish his opponent with a copy of his
appeal. 27 This is precisely what happened in this case. On May 13, 1992, the Court of Appeals issued a
Resolution directing counsel for intervenor to furnish herein petitioners with a copy of intervenor Vicente

Asuncion's brief within a 10-day period. It also granted petitioners an opportunity to file a reply-brief or
memorandum and the intervenor, a reply to said memorandum. 28That Resolution is proper under the premises
because, by the nature of an intervention pro interesse suo, it can proceed independently of the main action.
Thus, in the Resolution of October 30, 1992, in resolving the issue of the alleged prematurity of its Decision,
the Court of Appeals held that "the proceeding is solely between intervenor and defendants-appellants, which
is completely separable and has nothing to do with the merits of the appeal." 29
At the hearing of Civil Case No. 5610-M, petitioner Juan Perez attempted to establish the death on October 14,
1979 of Jorge Lorenzo, 30 the usufructuary from whom Vicente Asuncion derived his right to intervene pro
interesse suo. Since under Article 603 of the Civil Code a usufruct is extinguished "by the death of the
usufructuary, unless a contrary intention clearly appears," there is no basis by which to arrive at the
conclusion that the usufruct originally exercised by Jorge Lorenzo has indeed been extinguished or, on the
contrary, has survived Lorenzo's demise on account of provisions in the document constituting the usufruct.
That matter is best addressed in Civil Case No. 8215-M wherein Vicente Asuncion seeks his share as a
transferee of the usufruct established for Jorge Lorenzo. All that is discussed here is the matter of
intervention pro interesse suo vis-a-vis the issue of prematurity of the Decision of the Court of Appeals.
Petitioners' principal argument against the Court of Appeals' Decision in favor of private respondent
Crisostomo is that he could not have been an assignee or sub-lessee of the fishpond because no contract
authorized him to be so. Petitioners' argument is anchored on factual issues that, however, have no room for
discussion before this Court. It is well-entrenched doctrine that questions of fact are not proper subjects of
appeal by certiorari under Rule 45 of the Rules of Court as this mode of appeal is confined to questions of
law. 31 Factual findings of the Court of Appeals are conclusive on the parties and carry even more weight when
said court affirms the factual findings of the trial
court. 32 Accordingly, this review shall be limited to questions of law arising from the facts as found by both the
Court of Appeals and the trial court.
Admittedly, the contract between the usufructuaries and petitioner Keh has a provision barring the sublease of
the fishpond. However, it was petitioner Keh himself who violated that provision in offering the operation of the
fishpond to private respondent. Apparently on account of private respondent's apprehensions as regards the
right of petitioners Keh and Lee to transfer operation of the fishpond to him, on January 9, 1978, petitioner Keh
executed a document ceding and transferring his rights and interests over the fishpond to petitioner Lee. That
the same document might have been a ruse to inveigle private respondent to agree to their proposal that he
operate the fishpond is of no moment. The fact is, petitioner Keh did transfer his rights as a lessee to petitioner
Lee in writing and that, by virtue of that document, private respondent acceded to take over petitioner Keh's
rights as a lessee of the fishpond.
Although no written contract to transfer operation of the fishpond to private respondent was offered in
evidence, 33 the established facts further show that petitioner Juan Perez and his counsel, petitioner Tansinsin,
knew of and acquiesced to that arrangement by their act of receiving from the private respondent the rental
for 1978-79. By their act of receiving rental from private respondent through the peculiarly written receipt
dated June 6, 1978, petitioners Perez and Tansinsin were put in estoppel to question private respondent's right
to possess the fishpond as a lessee. Estoppel in paisarises when one, by his acts, representations or
admissions, or by his own silence when he ought to speak out, intentionally or through culpable negligence,
induces another to believe certain facts to exist and such other rightfully relies and acts on such belief, so that
he will be prejudiced if the former is permitted to deny the existence of such facts. 34
Nevertheless, we hesitate to grant private respondent's prayer that he should be restored to the possession of
the fishpond as a consequence of his unjustified ejectment therefrom. To restore possession of the fishpond to
him would entail violation of contractual obligations that the usufructuaries have entered into over quite a long
period of time now. Supervening events, such as the devaluation of the peso as against the dollar as well as
the addition of improvements in the fishpond that the succeeding lessees could have introduced, have
contributed to the increase in rental value of the property. To place private respondent in the same position he
was in before the lifting of the restraining order in 1980 when he was deprived the right to operate the
fishpond under the contract that already expired in 1985 shall be to sanction injustice and inequity. This Court,
after all, may not supplant the right of the usufructuaries to enter into contracts over the fishpond through this
Decision. Nonetheless, under the circumstances of the case, it is but proper that private respondent should be
properly compensated for the improvements he introduced in the fishpond.1wphi1.nt
Art. 1168 of the Civil Code provides that when an obligation "consists in not doing and the obligor does what
has been forbidden him, it shall also be undone at his expense." The lease contract prohibited petitioner Luis
Keh, as lessee, from subleasing the fishpond. In entering into the agreement for pakiao-buwis with private
respondent, not to mention the apparent artifice that was his written agreement with petitioner Lee on January
9, 1978, petitioner Keh did exactly what was prohibited of him under the contract to sublease the fishpond
to a third party. That the agreement for pakiao-buwis was actually a sublease is borne out by the fact that
private respondent paid petitioners Luis Keh and Juan Perez, through petitioner Tansinsin the amount of annual
rental agreed upon in the lease contract between the usufructuaries and petitioner Keh. Petitioner Keh led
private respondent to unwittingly incur expenses to improve the operation of the fishpond. By operation of law,
therefore, petitioner Keh shall be liable to private respondent for the value of the improvements he had made

in the fishpond or for P486,562.65 with interest of six percent (6%) per annum from the rendition of the
decision of the trial court on September 6, 1989. 35
The law supports the awards of moral and exemplary damages in favor of private respondent and against the
petitioners. Their conspiratorial scheme to utilize private respondent's expertise in the operation of fishponds
to bail themselves out of financial losses has been satisfactorily established to warrant a ruling that they
violated Article 21 of the Civil Code and therefore private respondent should be entitled to an award of moral
damages. Article 21 states that "(a)ny person who wilfully 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." Exemplary
damages shall likewise be awarded pursuant to Article 2229 of the Civil Code. 36 Because private respondent
was compelled to litigate to protect his interest, attorney's fees shall also be awarded. 37
WHEREFORE, in light of the foregoing premises, the decision of the Court of Appeals is AFFIRMED insofar as it
(a) directs the release to private respondent of the amounts of P128,572.00 and P123,993.85 deposited with
the Paluwagan ng Bayan Savings Bank in Paombong, Bulacan and (b) requires private respondent Crisostomo
to pay petitioner Juan Perez the rental for the period June 1979 to January 1980 at the rate of P150,000.00 per
annumless the amount of P21,428.00 already paid to usufructuary Maria Perez. It should, however, be subject
to the MODIFICATIONS that:
1. Petitioner Luis Keh shall pay private respondent Luis Crisostomo in the
amount of P486,562.25 with legal interest from the rendition of the judgment
in Civil Case No. 5610-M or on September 6, 1989, and
2. Petitioners be made liable jointly and severally liable for moral damages of
P50,000.00, exemplary damages of P20,000 and attorney's fees of P10,000.00.
No costs.

Republic of the Philippines


G.R. No. 98695 January 27, 1993

SYQUIA, petitioners,
Pacis & Reyes Law Offices for petitioners.
Augusto S. San Pedro & Ari-Ben C. Sebastian for private respondents.


Herein petitioners, Juan J. Syquia and Corazon C. Syquia, Carlota C. Syquia, Carlos C. Syquia, and Anthony
Syquia, were the parents and siblings, respectively, of the deceased Vicente Juan Syquia. On March 5, 1979,
they filed a complaint 1 in the then Court of First Instance against herein private respondent, Manila Memorial
Park Cemetery, Inc. for recovery of damages arising from breach of contract and/or quasi-delict. The trial court
dismissed the complaint.
The antecedent facts, as gathered by the respondent Court, are as follows:
On March 5, 1979, Juan, Corazon, Carlota and Anthony all surnamed Syquia, plaintiff-appellants
herein, filed a complaint for damages against defendant-appellee, Manila Memorial Park
Cemetery, Inc.

The complaint alleged among others, that pursuant to a Deed of Sale (Contract No. 6885)
dated August 27, 1969 and Interment Order No. 7106 dated July 21, 1978 executed between
plaintiff-appellant Juan J. Syquia and defendant-appellee, the former, father of deceased
Vicente Juan J. Syquia authorized and instructed defendant-appellee to inter the remains of
deceased in the Manila Memorial Park Cemetery in the morning of July 25, 1978 conformably
and in accordance with defendant-appellant's (sic) interment procedures; that on September 4,
1978, preparatory to transferring the said remains to a newly purchased family plot also at the
Manila Memorial Park Cemetery, the concrete vault encasing the coffin of the deceased was
removed from its niche underground with the assistance of certain employees of defendantappellant (sic); that as the concrete vault was being raised to the surface, plaintiffs-appellants
discovered that the concrete vault had a hole approximately three (3) inches in diameter near
the bottom of one of the walls closing out the width of the vault on one end and that for a
certain length of time (one hour, more or less), water drained out of the hole; that because of
the aforesaid discovery, plaintiffs-appellants became agitated and upset with concern that the
water which had collected inside the vault might have risen as it in fact did rise, to the level of
the coffin and flooded the same as well as the remains of the deceased with ill effects thereto;
that pursuant to an authority granted by the Municipal Court of Paraaque, Metro Manila on
September 14, 1978, plaintiffs-appellants with the assistance of licensed morticians and
certain personnel of defendant-appellant (sic) caused the opening of the concrete vault on
September 15, 1978; that upon opening the vault, the following became apparent to the
plaintiffs-appellants: (a) the interior walls of the concrete vault showed evidence of total
flooding; (b) the coffin was entirely damaged by water, filth and silt causing the wooden parts
to warp and separate and to crack the viewing glass panel located directly above the head and
torso of the deceased; (c) the entire lining of the coffin, the clothing of the deceased, and the
exposed parts of the deceased's remains were damaged and soiled by the action of the water
and silt and were also coated with filth.
Due to the alleged unlawful and malicious breach by the defendant-appellee of its obligation to
deliver a defect-free concrete vault designed to protect the remains of the deceased and the
coffin against the elements which resulted in the desecration of deceased's grave and in the
alternative, because of defendant-appellee's gross negligence conformably to Article 2176 of
the New Civil Code in failing to seal the concrete vault, the complaint prayed that judgment be
rendered ordering defendant-appellee to pay plaintiffs-appellants P30,000.00 for actual
damages, P500,000.00 for moral damages, exemplary damages in the amount determined by
the court, 20% of defendant-appellee's total liability as attorney's fees, and expenses of
litigation and costs of suit. 2
In dismissing the complaint, the trial court held that the contract between the parties did not guarantee that
the cement vault would be waterproof; that there could be no quasi-delict because the defendant was not
guilty of any fault or negligence, and because there was a pre-existing contractual relation between the
Syquias and defendant Manila Memorial Park Cemetery, Inc.. The trial court also noted that the father himself,
Juan Syquia, chose the gravesite despite knowing that said area had to be constantly sprinkled with water to
keep the grass green and that water would eventually seep through the vault. The trial court also accepted the
explanation given by defendant for boring a hole at the bottom side of the vault: "The hole had to be bored
through the concrete vault because if it has no hole the vault will (sic) float and the grave would be filled with
water and the digging would caved (sic) in the earth, the earth would caved (sic) in the (sic) fill up the grave." 3
From this judgment, the Syquias appealed. They alleged that the trial court erred in holding that the contract
allowed the flooding of the vault; that there was no desecration; that the boring of the hole was justifiable; and
in not awarding damages.
The Court of Appeals in the Decision 4 dated December 7, 1990 however, affirmed the judgment of dismissal.
Petitioner's motion for reconsideration was denied in a Resolution dated April 25, 1991. 5
Unsatisfied with the respondent Court's decision, the Syquias filed the instant petition. They allege herein that
the Court of Appeals committed the following errors when it:
1. held that the contract and the Rules and Resolutions of private respondent allowed the
flooding of the vault and the entrance thereto of filth and silt;
2. held that the act of boring a hole was justifiable and corollarily, when it held that no act of
desecration was committed;
3. overlooked and refused to consider relevant, undisputed facts, such as those which have
been stipulated upon by the parties, testified to by private respondent's witnesses, and
admitted in the answer, which could have justified a different conclusion;
4. held that there was no tort because of a pre-existing contract and the absence of
fault/negligence; and

5. did not award the P25,000.00 actual damages which was agreed upon by the parties, moral
and exemplary damages, and attorney's fees.
At the bottom of the entire proceedings is the act of boring a hole by private respondent on the vault of the
deceased kin of the bereaved petitioners. The latter allege that such act was either a breach of private
respondent's contractual obligation to provide a sealed vault, or, in the alternative, a negligent act which
constituted a quasi-delict. Nonetheless, petitioners claim that whatever kind of negligence private respondent
has committed, the latter is liable for desecrating the grave of petitioners' dead.
In the instant case, We are called upon to determine whether the Manila Memorial Park Cemetery, Inc.,
breached its contract with petitioners; or, alternatively, whether private respondent was guilty of a tort.
We understand the feelings of petitioners and empathize with them. Unfortunately, however, We are more
inclined to answer the foregoing questions in the negative. There is not enough ground, both in fact and in law,
to justify a reversal of the decision of the respondent Court and to uphold the pleas of the petitioners.
With respect to herein petitioners' averment that private respondent has committed culpa aquiliana, the Court
of Appeals found no negligent act on the part of private respondent to justify an award of damages against it.
Although a pre-existing contractual relation between the parties does not preclude the existence of a culpa
aquiliana, We find no reason to disregard the respondent's Court finding that there was no negligence.
Art. 2176. Whoever by act or omission causes damage to another, there being fault or
negligence, is obliged to pay for the damage done. Such fault or negligence, if there is no preexisting contractual relation between the parties, is called a quasi-delict . . . . (Emphasis
In this case, it has been established that the Syquias and the Manila Memorial Park Cemetery, Inc.,
entered into a contract entitled "Deed of Sale and Certificate of Perpetual Care" 6 on August 27, 1969.
That agreement governed the relations of the parties and defined their respective rights and
obligations. Hence, had there been actual negligence on the part of the Manila Memorial Park
Cemetery, Inc., it would be held liable not for a quasi-delict or culpa aquiliana, but
for culpa contractual as provided by Article 1170 of the Civil Code, to wit:
Those who in the performance of their obligations are guilty of fraud, negligence, or delay, and
those who in any manner contravene the tenor thereof, are liable for damages.
The Manila Memorial Park Cemetery, Inc. bound itself to provide the concrete box to be send in the interment.
Rule 17 of the Rules and Regulations of private respondent provides that:
Rule 17. Every earth interment shall be made enclosed in a concrete box, or in an outer wall of
stone, brick or concrete, the actual installment of which shall be made by the employees of the
Association. 7
Pursuant to this above-mentioned Rule, a concrete vault was provided on July 27, 1978, the day before the
interment, and was, on the same day, installed by private respondent's employees in the grave which was dug
earlier. After the burial, the vault was covered by a cement lid.
Petitioners however claim that private respondent breached its contract with them as the latter held out in the
brochure it distributed that the . . . lot may hold single or double internment (sic) underground
in sealed concrete vault." 8 Petitioners claim that the vault provided by private respondent was not sealed, that
is, not waterproof. Consequently, water seeped through the cement enclosure and damaged everything inside
We do not agree. There was no stipulation in the Deed of Sale and Certificate of Perpetual Care and in the
Rules and Regulations of the Manila Memorial Park Cemetery, Inc. that the vault would be waterproof. Private
respondent's witness, Mr. Dexter Heuschkel, explained that the term "sealed" meant "closed." 9 On the other
hand, the word "seal" is defined as . . . any of various closures or fastenings . . . that cannot be opened without
rupture and that serve as a check against tampering or unauthorized opening." 10 The meaning that has been
given by private respondent to the word conforms with the cited dictionary definition. Moreover, it is also quite
clear that "sealed" cannot be equated with "waterproof". Well settled is the rule that when the terms of the
contract are clear and leave no doubt as to the intention of the contracting parties, then the literal meaning of
the stipulation shall control. 11 Contracts should be interpreted according to their literal meaning and should
not be interpreted beyond their obvious intendment. 12 As ruled by the respondent Court:
When plaintiff-appellant Juan J. Syquia affixed his signature to the Deed of Sale (Exhibit "A")
and the attached Rules and Regulations (Exhibit "1"), it can be assumed that he has accepted
defendant-appellee's undertaking to merely provide a concrete vault. He can not now claim
that said concrete vault must in addition, also be waterproofed (sic). It is basic that the parties
are bound by the terms of their contract, which is the law between them (Rizal Commercial

Banking Corporation vs. Court of Appeals, et al. 178 SCRA 739). Where there is nothing in the
contract which is contrary to law, morals, good customs, public order, or public policy, the
validity of the contract must be sustained (Phil. American Insurance Co. vs. Judge Pineda, 175
SCRA 416). Consonant with this ruling, a contracting party cannot incur a liability more than
what is expressly specified in his undertaking. It cannot be extended by implication, beyond
the terms of the contract (Rizal Commercial Banking Corporation vs. Court of Appeals, supra).
And as a rule of evidence, where the terms of an agreement are reduced to writing, the
document itself, being constituted by the parties as the expositor of their intentions, is the only
instrument of evidence in respect of that agreement which the law will recognize, so long as its
(sic) exists for the purpose of evidence (Starkie, Ev., pp. 648, 655, Kasheenath vs. Chundy, 5
W.R. 68 cited in Francisco, Revised Rules of Court in the Phil. p. 153, 1973 Ed.). And if the terms
of the contract are clear and leave no doubt upon the intention of the contracting parties, the
literal meaning of its stipulations shall control (Santos vs. CA, et al., G. R. No. 83664, Nov. 13,
1989; Prudential Bank & Trust Co. vs. Community Builders Co., Inc., 165 SCRA 285; Balatero vs.
IAC, 154 SCRA 530). 13
We hold, therefore, that private respondent did not breach the tenor of its obligation to the Syquias. While this
may be so, can private respondent be liable for culpa aquiliana for boring the hole on the vault? It cannot be
denied that the hole made possible the entry of more water and soil than was natural had there been no hole.
The law defines negligence as the "omission of that diligence which is required by the nature of the obligation
and corresponds with the circumstances of the persons, of the time and of the place." 14 In the absence of
stipulation or legal provision providing the contrary, the diligence to be observed in the performance of the
obligation is that which is expected of a good father of a family.
The circumstances surrounding the commission of the assailed act boring of the hole negate the
allegation of negligence. The reason for the act was explained by Henry Flores, Interment Foreman, who said
Q It has been established in this particular case that a certain Vicente Juan
Syquia was interred on July 25, 1978 at the Paraaque Cemetery of the Manila
Memorial Park Cemetery, Inc., will you please tell the Hon. Court what or
whether you have participation in connection with said internment (sic)?
A A day before Juan (sic) Syquia was buried our personnel dug a grave. After
digging the next morning a vault was taken and placed in the grave and when
the vault was placed on the grave a hole was placed on the vault so that water
could come into the vault because it was raining heavily then because the
vault has no hole the vault will float and the grave would be filled with water
and the digging would caved (sic) in and the earth, the earth would (sic) caved
in and fill up the grave. 15 (Emphasis ours)
Except for the foreman's opinion that the concrete vault may float should there be a heavy rainfall, from the
above-mentioned explanation, private respondent has exercised the diligence of a good father of a family in
preventing the accumulation of water inside the vault which would have resulted in the caving in of earth
around the grave filling the same with earth.
Thus, finding no evidence of negligence on the part of private respondent, We find no reason to award
damages in favor of petitioners.
In the light of the foregoing facts, and construed in the language of the applicable laws and jurisprudence, We
are constrained to AFFIRM in toto the decision of the respondent Court of Appeals dated December 7, 1990. No

Republic of the Philippines


G.R. No. 96505 July 1, 1993

LEGASPI OIL CO., INC., petitioner,
Duran, Lanuzo & Associates for petitioner.
Leovigildo Mijares III for private respondent.

The petition for review on certiorari before us seeks to set aside the decision dated March 23, 1990 of the
Court of Appeals in CA-G.R. CV No. 05828, penned by the Honorable Justice Abelardo Dayrit with whom Justices
Javellana and Kalalo concurred, which dismissed petitioner's complaint for damages (p. 48, Rollo).
Petitioner does not dispute the facts of the case, as found by respondent Court of Appeals. The findings of the
respondent Court are thus adopted, to wit:
From the evidence presented by the plaintiff-appellee [now petitioner Legaspi Oil Company,
Inc.], it appears that defendant-appellant [now private respondent Bernard Oseraos] acting
through his authorized agents, had several transactions with appellee Legaspi Oil Co. for the
sale of copra to the latter. The price at which appellant sells the copra varies from time to time,
depending on the prevailing market price when the contract is entered into. One of his
authorized agents, Jose Llover, had previous transactions with appellee for the sale and
delivery of copra. The records show that he concluded a sale for 70 tons of copra at P95.00 per
100 kilos on May 27, 1975 (Exhibit G-5) and another sale for 30 tons of P102.00 per 100 kilos
on September 23, 1975 (Exhibit G-3). Subsequently, on November 6, 1975, another designated
agent signed a contract in behalf of appellant for the sale of 100 tons of copra at P79.00 per
100 kilos with the delivery terms of 25 days effective December 15, 1975 (Exhibit G-2). At this
point, it must be noted that the price of copra had been fluctuating (going up and down),
indicating its unsteady position in the market.
On February 16, 1976, appellant's agent Jose Llover signed contract No. 3804 for the sale of
100 tons of copra at P82.00 per 100 kilos with delivery terms of 20 days effective March 8,
1976 (Exhibit G, for the plaintiff). As compared to appellant's transaction on November 6,
1975, the current price agreed upon is slightly higher than the last contract. In all these
contracts though, the selling price had always been stated as "total price" rather than per 100
kilos. However, the parties had understood the same to be per 100 kilos in their previous
After the period to deliver had lapsed, appellant sold only 46,334 kilos of copra thus leaving a
balance of 53,666 kilos as per running account card (Exhibit "F"). Accordingly, demands were
made upon appellant to deliver the balance with a final warning embodied in a letter dated
October 6, 1976, that failure to deliver will mean cancellation of the contract, the balance to be
purchased at open market and the price differential to be charged against appellant. On
October 22, 1976, since there was still no compliance, appellee exercised its option under the
contract and purchased the undelivered balance from the open market at the prevailing price
of P168.00 per 100 kilos, or a price differential of P86.00 per 100 kilos, a net loss of P46,152.76
chargeable against appellant.
(pp. 43-44, Rollo)
On November 3, 1976, petitioner filed a complaint against private respondent for breach of a contract and for
After trial, the then Court of First Instance (now Regional Trial Court) of Albay in Civil Case No. 5529 rendered a
decision holding herein private respondent (then defendant) Oseraos liable for damages in the amount of
P48,152.76, attorney's fees (P2,000), and litigation costs.

Oseraos appealed to respondent Court which thereafter rendered a reversal decision on March 23, 1990,
ordering the dismissal of the complaint.
Hence, the instant petition for review on certiorari.
The sole issued posed by the petition is whether or not private respondent Oseraos is liable for damages
arising from fraud or bad faith in deliberately breaching the contract of sale entered into by the parties.
After a review of the case, we believe and thus hold, that private respondent is guilty of fraud in the
performance of his obligation under the sales contract whereunder he bound himself to deliver to petitioner
100 metric tons of copra within twenty (20) days from March 8, 1976. However within the delivery period,
Oseraos delivered only 46,334 kilograms of copra to petitioner, leaving an undelivered balance of 53,666
kilograms. Petitioner made repeated demands upon private respondent to comply with his contractual
undertaking to deliver the balance of 53,666 kilograms but private respondent elected to ignore the same. In a
letter dated October 6, 1976, petitioner made a final demand with a warning that, should private respondent
fail to complete delivery of the balance of 53,666 kilograms of copra, petitioner would purchase the balance at
the open market and charge the price differential to private respondent. Still private respondent failed to fulfill
his contractual obligation to deliver the remaining 53,666 kilograms of copra. On October 22, 1976, since there
was still no compliance by private respondent, petitioner exercised its right under the contract and purchased
53,666 kilograms of copra, the undelivered balance, at the open market at the then prevailing price of P168.00
per 100 kilograms, a price differential of P86.00 per 100 kilograms or a total price differential of P46,152.76.
Under the foregoing undisputed circumstances, the actuality of private respondent's fraud cannot be gainsaid.
In general, fraud may be defined as the voluntary execution of a wrongful act, or a wilfull omission, knowing
and intending the effects which naturally and necessarily arise from such act or omission; the fraud referred to
in Article 1170 of the Civil Code of the Philippines is the deliberate and intentional evasion of the normal
fulfillment of obligation; it is distinguished from negligence by the presence of deliberate intent, which is
lacking in the latter (Tolentino's Civil Code of the Philippines, Vol. IV, p. 110). The conduct of private respondent
clearly manifests his deliberate fraudulent intent to evade his contractual obligation for the price of copra had
in the meantime more than doubled from P82.00 to P168 per 100 kilograms. Under Article 1170 of the Civil
Code of the Philippines, those who in the performance of their obligation are guilty of fraud, negligence, or
delay, and those who in any manner contravene the tenor thereof, are liable for damages. Pursuant to said
article, private respondent is liable for damages.
The next point of inquiry, therefore, is the amount of damages which private respondent is liable to pay
petitioner. As aforementioned, on account of private respondent's deliberate breach of his contractual
obligation, petitioner was compelled to buy the balance of 53,666 kilos of copra in the open market at the then
prevailing price of P168 per 100 kilograms thereby paying P46,152.76 more than he would have paid had
private respondent completed delivery of the copra as agreed upon. Thus, private respondent is liable to pay
respondent the amount of P46,152.76 as damages. In case of fraud, bad faith, malice, or wanton attitude, the
guilty party is liable for all damages which may be reasonably attributed to the non performance of the
obligation (Magat vs. Medialdea, 121 SCRA 418 [1983]). Article 1101 of the old Civil Code, later to be
reproduced as Article 1170 of our present Civil Code, was the basis of our decision in an old case, Acme Films,
Inc. vs. Theaters Supply Corporation, (63 Phil, 657 [1936]), wherein we held:
It is not denied that the plaintiff company failed to supply the defendant with the
cinematographic films which were the subject matter of the contracts entered into on March
20, 1934 (Exhibits 1 and 2), and two films under the contract of March 24, 1934 (Exhibit 3),
one of said films being a serial entitled "Whispering Shadow". Guillermo Garcia Bosque
testified that because the plaintiff company had failed to supply said films, the defendants had
to resort to the Universal Pictures Corporation and ask for films to replace those which said
plaintiff had failed to supply under the contract, having had to pay therefor five per cent more
than for those films contracted with said plaintiff Acme Films, Inc., and that the total cost
thereof, including the printing of programs, posters paraded through the streets with bands of
music to announce the showing of the films which the plaintiff company failed to supply,
amount to from P400 to P550. The plaintiff company did not submit evidence to rebut the
testimony of said witness and the fact that the estimate of the expenses is approximate does
not make said estimate inadmissible. It was incumbent upon the plaintiff company to submit
evidence in rebuttal, or at least ascertain the amount of the different items in crossexamination. There being no evidence to the contrary, it is logical to admit that the defendant
company spent at least the sum of P400.
Inasmuch as the plaintiff company had failed to comply with a part of its booking contract, and
as the defendant company had suffered damages as a result thereof, the former is liable to
indemnify the damages caused to the latter, in accordance with the provisions of Article 1101
of the Civil Code.
(at page 663.)

WHEREFORE, the instant petition is hereby GRANTED. The decision of the respondent Court of Appeals in CAG.R. CV No. 05828 is ANNULLED and SET ASIDE and the decision of the trial court in Civil Case No. 5529
REINSTATED, with costs against private respondent.

Republic of the Philippines

G.R. No. 34840

September 23, 1931

NARCISO GUTIERREZ, plaintiff-appellee,

SATURNINO CORTEZ, defendants-appellants.
L.D. Lockwood for appellants Velasco and Cortez.
San Agustin and Roxas for other appellants.
Ramon Diokno for appellee.
This is an action brought by the plaintiff in the Court of First Instance of Manila against the five defendants, to
recover damages in the amount of P10,000, for physical injuries suffered as a result of an automobile accident.
On judgment being rendered as prayed for by the plaintiff, both sets of defendants appealed.
On February 2, 1930, a passenger truck and an automobile of private ownership collided while attempting to
pass each other on the Talon bridge on the Manila South Road in the municipality of Las Pias, Province of
Rizal. The truck was driven by the chauffeur Abelardo Velasco, and was owned by Saturnino Cortez. The
automobile was being operated by Bonifacio Gutierrez, a lad 18 years of age, and was owned by Bonifacio's
father and mother, Mr. and Mrs. Manuel Gutierrez. At the time of the collision, the father was not in the car, but
the mother, together will several other members of the Gutierrez family, seven in all, were accommodated
therein. A passenger in the autobus, by the name of Narciso Gutierrez, was en route from San Pablo, Laguna,
to Manila. The collision between the bus and the automobile resulted in Narciso Gutierrez suffering a fracture
right leg which required medical attendance for a considerable period of time, and which even at the date of
the trial appears not to have healed properly.
It is conceded that the collision was caused by negligence pure and simple. The difference between the parties
is that, while the plaintiff blames both sets of defendants, the owner of the passenger truck blames the
automobile, and the owner of the automobile, in turn, blames the truck. We have given close attention to these
highly debatable points, and having done so, a majority of the court are of the opinion that the findings of the
trial judge on all controversial questions of fact find sufficient support in the record, and so should be
maintained. With this general statement set down, we turn to consider the respective legal obligations of the
In amplification of so much of the above pronouncement as concerns the Gutierrez family, it may be explained
that the youth Bonifacio was in incompetent chauffeur, that he was driving at an excessive rate of speed, and
that, on approaching the bridge and the truck, he lost his head and so contributed by his negligence to the
accident. The guaranty given by the father at the time the son was granted a license to operate motor vehicles
made the father responsible for the acts of his son. Based on these facts, pursuant to the provisions of article
1903 of the Civil Code, the father alone and not the minor or the mother, would be liable for the damages
caused by the minor.
We are dealing with the civil law liability of parties for obligations which arise from fault or negligence. At the
same time, we believe that, as has been done in other cases, we can take cognizance of the common law rule
on the same subject. In the United States, it is uniformly held that the head of a house, the owner of an
automobile, who maintains it for the general use of his family is liable for its negligent operation by one of his
children, whom he designates or permits to run it, where the car is occupied and being used at the time of the
injury for the pleasure of other members of the owner's family than the child driving it. The theory of the law is
that the running of the machine by a child to carry other members of the family is within the scope of the
owner's business, so that he is liable for the negligence of the child because of the relationship of master and
servant. (Huddy On Automobiles, 6th ed., sec. 660; Missell vs. Hayes [1914], 91 Atl., 322.) The liability of
Saturnino Cortez, the owner of the truck, and of his chauffeur Abelardo Velasco rests on a different basis,
namely, that of contract which, we think, has been sufficiently demonstrated by the allegations of the
complaint, not controverted, and the evidence. The reason for this conclusion reaches to the findings of the
trial court concerning the position of the truck on the bridge, the speed in operating the machine, and the lack
of care employed by the chauffeur. While these facts are not as clearly evidenced as are those which convict
the other defendant, we nevertheless hesitate to disregard the points emphasized by the trial judge. In its
broader aspects, the case is one of two drivers approaching a narrow bridge from opposite directions, with
neither being willing to slow up and give the right of way to the other, with the inevitable result of a collision
and an accident.
The defendants Velasco and Cortez further contend that there existed contributory negligence on the part of
the plaintiff, consisting principally of his keeping his foot outside the truck, which occasioned his injury. In this
connection, it is sufficient to state that, aside from the fact that the defense of contributory negligence was not
pleaded, the evidence bearing out this theory of the case is contradictory in the extreme and leads us far
afield into speculative matters.

The last subject for consideration relates to the amount of the award. The appellee suggests that the amount
could justly be raised to P16,517, but naturally is not serious in asking for this sum, since no appeal was taken
by him from the judgment. The other parties unite in challenging the award of P10,000, as excessive. All facts
considered, including actual expenditures and damages for the injury to the leg of the plaintiff, which may
cause him permanent lameness, in connection with other adjudications of this court, lead us to conclude that a
total sum for the plaintiff of P5,000 would be fair and reasonable. The difficulty in approximating the damages
by monetary compensation is well elucidated by the divergence of opinion among the members of the court,
three of whom have inclined to the view that P3,000 would be amply sufficient, while a fourth member has
argued that P7,500 would be none too much.
In consonance with the foregoing rulings, the judgment appealed from will be modified, and the plaintiff will
have judgment in his favor against the defendants Manuel Gutierrez, Abelardo Velasco, and Saturnino Cortez,
jointly and severally, for the sum of P5,000, and the costs of both instances.
Republic of the Philippines
G.R. No. L-14335

January 28, 1920

MANUEL DE GUIA, plaintiff-appellant,

Sumulong and Estrada, Crossfield and O'Brien and Francisco A. Delgado for
Lawrence and Ross for defendant-appellant.
This is an appeal prosecuted both by the plaintiff and the defendant from a judgment of the Court of First
Instance of the City of Manila, whereby the plaintiff was awarded the sum of P6,100, with interest and costs, as
damages incurred by him in consequence of physical injuries sustained while riding on one of the defendant's
The accident which gave rise to the litigation occurred on September 4, 1915, near the end of the street-car
line in Caloocan, Rizal, a northern suburb of the city of Manila. It appears that, at about 8 o'clock p.m., of the
date mentioned, the plaintiff Manuel de Guia, a physician residing in Caloocan, boarded a car at the end of the
line with the intention of coming to the city. At about 30 meters from the starting point the car entered a
switch, the plaintiff remaining on the back platform holding the handle of the right-hand door. Upon coming out
of the switch, the small wheels of the rear truck left the track, ran for a short distance along the macadam
filling, which was flush with the rails, and struck a concrete post at the left of the tract. The post was shattered;
and as the car stopped the plaintiff was thrown against the door with some violence, receiving bruises and
possibly certain internal injuries, the extent of which is a subject of dispute.
The trial court found that the motorman of the derailed car was negligent in having maintained too rapid a
speed. This inference appears to be based chiefly upon the results of the shock, involving the shattering of the
post and the bending of the kingpost of the car. It is insisted for the defendant company that the derailment
was due to the presence of a stone, somewhat larger than a goose egg, which had become accidentally lodged
between the rails at the juncture of the switch and which was unobserved by the motorman. In this view the
derailment of the car is supposed to be due to casus fortuitos and not chargeable to the negligence of the
Even supposing that the derailment of the car was due to the accidental presence of such a stone as
suggested, we do not think that the existence of negligence is disproved. The motorman says that upon
approaching the switch he reduced the electrical energy to the point that the car barely entered the switch
under its own momentum, and this operation was repeated as he passed out. Upon getting again on the
straight tract he put the control successively at points one, two, three and lastly at point four. At the moment
when the control was placed at point four he perceived that the rear wheels were derailed and applied the
brake; but at the same instant the car struck the post, some 40 meters distant from the exit of the switch. One
of the defendant's witnesses stated in court that the rate of a car propelled by electricity with the control at
point "four" should be about five or 6 miles per hour. There was some other evidence to the effect that the car
was behind schedule time and that it was being driven after leaving the switch, at a higher rate than would
ordinarily be indicated by the control at point four. This inference is rendered more tenable by the
circumstance that the car was practically empty. On the whole, we are of the opinion that the finding of
negligence in the operation of the car must be sustained, as not being clearly contrary to the evidence; not so
much because of excessive speed as because of the distance which the car was allowed to run with the front
wheels of the rear truck derailed. It seems to us than an experienced and attentive motorman should have

discovered that something was wrong and would have stopped before he had driven the car over the entire
distance from the point where the wheels left the track to the place where the post was struck.
The conclusion being accepted that there was negligence on the part of the motorman in driving the car, it
results that the company is liable for the damage resulting to the plaintiff as a consequence of that negligence.
The plaintiff had boarded the car as a passenger for the city of Manila and the company undertook to convey
him for hire. The relation between the parties was, therefore, of a contractual nature, and the duty of the
carrier is to be determined with reference to the principles of contract law, that is, the company was bound to
convey and deliver the plaintiff safely and securely with reference to the degree of care which, under the
circumstances, is required by law and custom applicable to the case (art. 1258, Civil Code). Upon failure to
comply with that obligation the company incurred the liability defined in articles 1103-1107 of the Civil Code.
(Cangco vs. Manila Railroad Company, 38 Phil. Rep., 768; Manila Railroad Company vs. Compaia
Transatlantica, and Atlantic, Gulf & Pacific Co., 38 Phil. Rep., 875.)
From the nature of the liability thus incurred, it is clear that the defendant company can not avail itself of the
last paragraph of article 1903 of the Civil Code, since that provision has reference to liability incurred by
negligence in the absence of contractual relation, that is, to the culpa aquiliana of the civil law. It was therefore
irrelevant for the defendant company to prove, as it did, that the company had exercised due care in the
selection and instruction of the motorman who was in charge of its car and that he was in fact an experienced
and reliable servant.
At this point, however, it should be observed that although in case like this the defendant must answer for the
consequences of the negligence of its employee, the court has the power to moderate liability according to the
circumstances of the case (art. 1103, Civ. Code): Furthermore, we think it obvious that an employer who has in
fact displayed due diligence in choosing and instructing his servants is entitled to be considered a debtor in
good faith, within the meaning of article 1107 of the same Code. Construing these two provisions together,
applying them to the facts of this case, it results that the defendant's liability is limited to such damages as
might, at the time of the accident, have been reasonably foreseen as a probable consequence of the physical
injuries inflicted upon the plaintiff and which were in fact a necessary result of those injuries. There is nothing
novel in this proposition, since both the civil and the common law are agreed upon the point that the damages
ordinarily recoverable for the breach of a contractual obligation, against a person who has acted in good faith,
are such as can reasonably be foreseen at the time the obligation is contracted. In Daywalt vs. Corporacion de
PP. Agustinos Recoletos (39 Phil., 587), we said: "The extent of the liability for the breach of a contract must be
determined in the light of the situation in existence at the time the contract is made; and the damages
ordinarily recoverable are in all events limited to such as might be reasonably foreseen in the light of the facts
then known to the contracting parties."
This brings us to consider the amount which may be awarded to the plaintiff as damages. Upon this point the
trial judge found that, as a result of the physical and nervous derangement resulting from the accident, Dr. De
Guia was unable properly to attend to his professional labors for three months and suspended his practice for
that period. It was also proved by the testimony of the plaintiff that his customary income, as a physician, was
about P300 per month. The trial judge accordingly allowed P900, as damages for loss of professional earnings.
This allowance is attacked upon appeal by the defendant as excessive both as to the period and rate of
allowance. Upon examining the evidence we fell disinclined to disturb this part of the judgment, though it must
be conceded that the estimate of the trial judge on this point was liberal enough to the plaintiff.
Another item allowed by the trial judge consists of P3,900, which the plaintiff is supposed to have lost by
reason of his inability to accept a position as district health officer in Occidental Negros. It appears in this
connection that Mr. Alunan, representative from Occidental Negros, had asked Dr. Montinola, who supposedly
had the authority to make the appointment, to nominate the plaintiff to such position. The job was supposed to
be good for two years, with a salary of P1,600 per annum, and possibility of outside practice worth P350.
Accepting these suggestions as true, it is evident that the damages thus incurred are too speculative to be the
basis of recovery in a civil action. This element of damages must therefore be eliminated. It goes without
saying that damage of this character could not, at the time of the accident, have been foreseen by the
delinquent party as a probable consequence of the injury inflicted a circumstance which makes applicable
article 1107 of the Civil Code, as already expounded.
The last element of damages to be considered is the item of the plaintiff's doctor's bills, a subject which we
momentarily pass for discussion further on, since the controversy on this point can be more readily understood
in connection with the question raised by the plaintiff's appeal.
The plaintiff alleges in the complaint that the damages incurred by him as a result of the injuries in question
ascend to the amount of P40,000. Of this amount the sum of P10,000 is supposed to represent the cost of
medical treatment and other expenses incident to the plaintiff's cure, while the remainder (P30,000)
represents the damage resulting from the character of his injuries, which are supposedly such as to
incapacitate him for the exercise of the medical profession in the future. In support of these claims the plaintiff
introduced evidence, consisting of his own testimony and that of numerous medical experts, tending to show
that as a result of the injuries in question he had developed infarct of the liver and traumatic neurosis,
accompanied by nervousness, vertigo, and other disturbing symptoms of a serious and permanent character,
it being claimed that these manifestations of disorder rendered him liable to a host of other dangerous

diseases, such as pleuresy, tuberculosis, pneumonia, and pulmonary gangrene, and that restoration to health
could only be accomplished, if at all, after long years of complete repose. The trial judge did not take these
pretensions very seriously, and, as already stated, limited the damages to the three items of professional
earnings, expenses of medical treatment, and the loss of the appointment as medical treatment, and the loss
of the appointment as medical inspector in Occidental Negros. As the appeal of the plaintiff opens the whole
case upon the question of damages, it is desirable to present a somewhat fuller statement than that already
given with respect to extent and character of the injuries in question.
The plaintiff testified that, at the time the car struck against the concrete post, he was standing on the rear
platform, grasping the handle of the right-hand door. The shock of the impact threw him forward, and the left
part of his chest struck against the door causing him to fall. In falling, the plaintiff says, his head struck one of
the seats and he became unconscious. He was presently taken to his home which was only a short distance
away, where he was seen at about 10 o'clock p. m., by a physician in the employment of the defendant
company. This physician says that the plaintiff was then walking about and apparently suffering somewhat
from bruises on his chest. He said nothing about his head being injured and refused to go to a hospital. Later,
during the same night Dr. Carmelo Basa was called in to see the plaintiff. This physician says that he found
Doctor De Guia lying in bed and complaining of a severe pain in the side. During the visit of Doctor Basa the
plaintiff several times spit up blood, a manifestation no doubt due to the effects of the bruises received in his
side. The next day Doctor De Guia went into Manila to consult another physician, Doctor Miciano, and during
the course of a few weeks he called into consultation other doctors who were introduced as witnesses in his
behalf at the trial of this case. According to the testimony of these witnesses, as well as that of the plaintiff
himself, the symptoms of physical and nervous derangement in the plaintiff speedily developed in portentous
Other experts were introduced by the defendant whose testimony tended to show that the plaintiff's injuries,
considered in their physical effects, were trivial and that the attendant nervous derangement, with its
complicated train of ailments, was merely simulated.
Upon this question the opposing medical experts ventilated a considerable mass of professional learning with
reference to the nature and effects of the baffling disease known as traumatic neurosis, or traumatic hysteria
a topic which has been the occasion of much controversy in actions of this character in the tribunals of
Europe and America. The subject is one of considerable interest from a medico-legal point of view, but we
deem it unnecessary in this opinion to enter upon a discussion of its voluminous literature. It is enough to say
that in our opinion the plaintiff's case for large damages in respect to his supposed incapacitation for future
professional practice is not made out. Of course in this jurisdiction damages can not be assessed in favor of
the plaintiff as compensation for the physical or mental pain which he may have endured (Marcelo vs. Velasco,
11 Phil. Rep. 287); and the evidence relating to the injuries, both external and internal, received by him must
be examined chiefly in its bearing upon his material welfare, that is, in its results upon his earning capacity
and the expenses incurred in restoration to the usual condition of health.
The evidence before us shows that immediately after the accident in question Doctor De Guia, sensing in the
situation a possibility of profit, devoted himself with great assiduity to the promotion of this litigation; and with
the aid of his own professional knowledge, supplemented by suggestions obtained from his professional friends
and associates, he enveloped himself more or less unconsciously in an atmosphere of delusion which rendered
him incapable of appreciating at their true value the symptoms of disorder which he developed. The trial court
was in our opinion fully justified in rejecting the exaggerated estimate of damages thus created.
We now pass to the consideration of the amount allowed to the plaintiff by the trial judge as the expense
incurred for medical service. In this connection Doctor Montes testified that he was first called to see the
plaintiff upon September 14, 1915, when he found him suffering from traumatic neurosis. Three months later
he was called upon to treat the same patient for an acute catarrhal condition, involving disturbance in the
pulmonary region. The treatment for this malady was successful after two months, but at the end of six
months the same trouble recurred and required further treatment. In October of the year 1916, or more than a
year after the accident in question occurred, Doctor Montes was called in consultation with Doctor Guerrero to
make an examination of the plaintiff. Doctor Montes says that his charges altogether for services rendered to
the plaintiff amount to P350, of which the sum of P200 had been paid by the plaintiff upon bills rendered from
time to time. This physician speaks in the most general terms with respect to the times and extent of the
services rendered; and it is by no means clear that those services which were rendered many months, or year,
after the accident had in fact any necessary or legitimate relation to the injuries received by the plaintiff. In
view of the vagueness and uncertainty of the testimony relating to Doctor Montes' services, we are of the
opinion that the sum of P200, or the amount actually paid to him by the plaintiff, represents the extent of the
plaintiff's obligation with respect to treatment for said injuries.
With regard to the obligation supposedly incurred by the plaintiff to three other physicians, we are of the
opinion that they are not a proper subject of recovery in this action; and this for more than one reason. In the
first place, it does not appear that said physicians have in fact made charges for those services with the
intention of imposing obligations on the plaintiff to pay for them. On the contrary it would seem that said
services were gratuitously rendered out of courtesy to the plaintiff as a member of the medical profession. The
suggestions made on the stand by these physicians to the effect that their services were worth the amounts
stated by them are not sufficient to proved that the plaintiff had incurred the obligation to pay those amounts.

In the second place, we are convinced that in employing so many physicians the plaintiff must have had in
view of the successful promotion of the issue of this lawsuit rather than the bona fide purpose of effecting the
cure of his injuries. In order to constitute a proper element of recovery in an action of this character, the
medical service for which reimbursement is claimed should not only be such as to have created a legal
obligation upon the plaintiff but such as was reasonably necessary in view of his actual condition. It can not be
permitted that a litigant should retain an unusual and unnecessary number of professional experts with a view
to the successful promotion of a lawsuit and expect to recover against his adversary the entire expense thus
incurred. His claim for medical services must be limited to such expenditures as were reasonably suited to the
The second error assigned in the brief of the defendant company presents a question of practice which, though
not vital to the solution of this case, is of sufficient general importance to merit notice. It appears that four of
the physicians examined as witnesses for the plaintiff had made written statements at various dates certifying
the results of their respective examinations into the condition of the plaintiff. When these witnesses were
examined in court the identified their respective signatures to these certificates and the trial judge, over the
defendant's objection, admitted the documents as primary evidence in the case. This was undoubtedly
erroneous. A document of this character is not primary evidence in any sense, since it is fundamentally of a
hearsay nature; and the only legitimate use to which one of these certificates could be put, as evidence for the
plaintiff, was to allow the physician who issued it to refer thereto to refresh his memory upon details which he
might have forgotten. In Zwangizer vs. Newman (83 N. Y. Supp., 1071) which was also an action to recover
damages for personal injury, it appeared that a physician, who had been sent by one of the parties to examine
the plaintiff, had made at the time a written memorandum of the results of the examination; and it was
proposed to introduce this document in evidence at the trial. It was excluded by the trial judge, and it was held
upon appeal that this was proper. Said the court: "There was no failure or exhaustion of the memory, and no
impeachment of the memorandum on cross-examination; and the document was clearly incompetent as
evidence in chief."
It results from the foregoing that the judgment appealed from must be modified by reducing the amount of the
recovery to eleven hundred pesos (1,100), with legal interest from November 8, 1916. As thus modified the
judgment is affirmed, without any special pronouncement as to costs of this instance. So ordered.

Republic of the Philippines

G.R. No. L-29462

March 7, 1929

IGNACIO DEL PRADO, plaintiff-appellee,

MANILA ELECTRIC CO., defendant-appellant.
Ross, Lawrence and Selph and Antonio T. Carrascoso, jr., for appellant.
Vicente Sotto for appellee.
This action was instituted in the Court of First Instance of Manila by Ignacio del Prado to recover damages in
the amount of P50,000 for personal injuries alleged to have been caused by the negligence of te defendant,
the Manila Electric Company, in the operation of one of its street cars in the City of Manila. Upon hearing the
cause the trial court awarded to the plaintiff the sum of P10,000, as damages, with costs of suit, and the
defendant appealed.
The appellant, the Manila Electric Company, is engaged in operating street cars in the City for the conveyance
of passengers; and on the morning of November 18, 1925, one Teodorico Florenciano, as appellant's
motorman, was in charge of car No. 74 running from east to west on R. Hidalgo Street, the scene of the
accident being at a point near the intersection of said street and Mendoza Street. After the car had stopped at
its appointed place for taking on and letting off passengers, just east of the intersection, it resumed its course
at a moderate speed under the guidance of the motorman. The car had proceeded only a short distance,
however, when the plaintiff, Ignacio del Prado, ran across the street to catch the car, his approach being made
from the left. The car was of the kind having entrance and exist at either end, and the movement of the
plaintiff was so timed that he arrived at the front entrance of the car at the moment when the car was passing.
The testimony of the plaintiff and of Ciriaco Guevara, one of his witnesses, tends to shows that the plaintiff,
upon approaching the car, raised his hand as an indication to the motorman of his desire to board the car, in
response to which the motorman eased up a little, without stopping. Upon this the plaintiff seized, with his
hand, the front perpendicular handspot, at the same time placing his left foot upon the platform. However,
before the plaintiff's position had become secure, and even before his raised right foot had reached the
flatform, the motorman applied the power, with the result that the car gave a slight lurch forward. This sudden
impulse to the car caused the plaintiff's foot to slip, and his hand was jerked loose from the handpost, He
therefore fell to the ground, and his right foot was caught and crushed by the moving car. The next day the
member had to be amputated in the hospital. The witness, Ciriaco Guevara, also stated that, as the plaintiff
started to board the car, he grasped the handpost on either side with both right and left hand. The latter
statement may possibly be incorrect as regards the use of his right hand by the plaintiff, but we are of the
opinion that the finding of the trial court to the effect that the motorman slowed up slightly as the plaintiff was
boarding the car that the plaintiff's fall was due in part at lease to a sudden forward movement at the moment
when the plaintiff put his foot on the platform is supported by the evidence and ought not to be disturbed by
The motorman stated at the trial that he did not see the plaintiff attempting to board the car; that he did not
accelerate the speed of the car as claimed by the plaintiff's witnesses; and that he in fact knew nothing of the
incident until after the plaintiff had been hurt and some one called to him to stop. We are not convinced of the
complete candor of this statement, for we are unable to see how a motorman operating this car could have
failed to see a person boarding the car under the circumstances revealed in this case. It must be remembered
that the front handpost which, as all witness agree, was grasped by the plaintiff in attempting to board the car,
was immediately on the left side of the motorman.
With respect to the legal aspects of the case we may observe at the outset that there is no obligation on the
part of a street railway company to stop its cars to let on intending passengers at other points than those
appointed for stoppage. In fact it would be impossible to operate a system of street cars if a company engage
in this business were required to stop any and everywhere to take on people who were too indolent, or who
imagine themselves to be in too great a hurry, to go to the proper places for boarding the cars. Nevertheless,
although the motorman of this car was not bound to stop to let the plaintiff on, it was his duty to do act that
would have the effect of increasing the plaintiff's peril while he was attempting to board the car. The
premature acceleration of the car was, in our opinion, a breach of this duty.
The relation between a carrier of passengers for hire and its patrons is of a contractual nature; and in failure on
the part of the carrier to use due care in carrying its passengers safely is a breach of duty (culpa contructual)
under articles 1101, 1103 and 1104 of the Civil Code. Furthermore, the duty that the carrier of passengers
owes to its patrons extends to persons boarding the cars as well as to those alighting therefrom. The case of
Cangco vs. Manila Railroad Co. (38 Phil., 768), supplies an instance of the violation of this duty with respect to
a passenger who was getting off of a train. In that case the plaintiff stepped off of a moving train, while it was
slowing down in a station, and at the time when it was too dark for him to see clearly where he was putting his
feet. The employees of the company had carelessly left watermelons on the platform at the place where the
plaintiff alighted, with the result that his feet slipped and he fell under the car, where his right arm badly
injured. This court held that the railroad company was liable for breach positive duty (culpa contractual), and
the plaintiff was awarded damages in the amount of P2,500 for the loss of his arm. In the opinion in that case

the distinction is clearly drawn between a liability for negligence arising from breach of contructual duty and
that arising articles 1902 and 1903 of the Civil Code (culpa aquiliana).
The distiction between these two sorts of negligence is important in this jurisdiction, for the reason that where
liability arises from a mere tort (culpa aquiliana), not involving a breach of positive obligation, an employer, or
master, may exculpate himself, under the last paragraph of article 1903 of the Civil Code, by providing that he
had exercised due degligence to prevent the damage; whereas this defense is not available if the liability of
the master arises from a breach of contrauctual duty (culpa contractual). In the case bfore us the company
pleaded as a special defense that it had used all the deligence of a good father of a family to prevent the
damage suffered by the plaintiff; and to establish this contention the company introduced testimony showing
that due care had been used in training and instructing the motorman in charge of this car in his art. But this
proof is irrelevant in view of the fact that the liability involved was derived from a breach of obligation under
article 1101 of the Civil Code and related provisions. (Manila Railroad Co. vs. Compana Transatlantica and
Atlantic, Gulf & Pacific Co., 38 Phil., 875, 887; De Guia vs. Manila Electric Railroad & Light Co., 40 Phil., 706,
Another practical difference between liability for negligence arising under 1902 of the Civil Code and liability
arising from negligence in the performance of a positive duty, under article 1101 and related provisions of the
Civil Code, is that, in dealing with the latter form of negligence, the court is given a discretion to mitigate
liability according to the circumstances of the case (art 1103). No such general discretion is given by the Code
in dealing with liability arising under article 1902; although possibly the same end is reached by courts in
dealing with the latter form of liability because of the latitude of the considerations pertinent to cases arising
under this article.
As to the contributory negligence of the plaintiff, we are of the opinion that it should be treated, as in Rakes vs.
Atlantic, Gulf and Pacific Co. (7 Phil., 359), as a mitigating circumstance under article 1103 of the Civil Code. It
is obvious that the plaintiff's negligence in attempting to board the moving car was not the proximate cause of
the injury. The direct and proximate cause of the injury was the act of appellant's motorman in putting on the
power prematurely. A person boarding a moving car must be taken to assume the risk of injury from boarding
the car under the conditions open to his view, but he cannot fairly be held to assume the risk that the
motorman, having the situation in view, will increase his peril by accelerating the speed of the car before he is
planted safely on the platform. Again, the situation before us is one where the negligent act of the company's
servant succeeded the negligent act of the plaintiff, and the negligence of the company must be considered
the proximate cause of the injury. The rule here applicable seems to be analogous to, if not identical with that
which is sometimes referred to as the doctrine of "the last clear chance." In accordance with this doctrine, the
contributory negligence of the party injured will not defeat the action if it be shown that the defendant might,
by the exercise of reasonable care and prudence, have avoided the consequences of the negligence of the
injured party (20 R. C. L., p. 139; Carr vs. Interurban Ry. Co., 185 Iowa, 872; 171 N. W., 167). The negligence of
the plaintiff was, however, contributory to the accident and must be considered as a mitigating circumstance.
With respect to the effect of this injury upon the plaintiff's earning power, we note that, although he lost his
foot, he is able to use an artificial member without great inconvenience and his earning capacity has probably
not been reduced by more than 30 per centum. In view of the precedents found in our decisions with respect
to the damages that ought to be awarded for the loss of limb, and more particularly Rakes vs. Atlantic, Gulf
and Pacific Co. (7 Phil., 359); Cangco vs. Manila Railroad Co. (38 Phil., 768); and Borromeo vs. Manila Electric
Railroad and Light Co. (44 Phil., 165), and in view of all the circumstances connected with the case, we are of
the opinion that the plaintiff will be adequately compensated by an award of P2,500.
It being understood, therefore, that the appealed judgment is modified by reducing the recovery to the sum of
P2,500, the judgment, as thus modified, is affirmed. So ordered, with costs against the appellant.
Malcolm, Villamor, Ostrand, Romualdez and Villa-Real, JJ., concur.

Separate Opinions
JOHNSON, J., dissenting:
This appeal presents a hard case, whichever way it is decided.
I read the entire record in this case before it was submitted to the second division for decision. I was then
theponente. I was then convinced, as I am now, after a re-examination of the record, that the judgment of the
lower court should be revoked for the following reasons:
(a) That the motorman managed the car carefully and with ordinary prudence at the moment the
alleged accident occured;
(b) That the appellee acted with imprudence and lack of due care in attempting to board a street car
while the same was in motion; and
(c) That he contributed to his own injury, without any negligence or malice or imprudence on the part
of the defendant.

There is nothing in the record which even remotely justifies a contribution of damages between the appellee
and the appellant. The appellee should be required to suffer the damages which he himself, through his own
negligence, occasioned, without any negligence, imprudence or malice on the part of the appellant.
Therefore, the judgment of the court a quo should be revoked, and the appellant absolved from all liability
under the complaint.

Republic of the Philippines

G.R. No. L-6291

April 29, 1954

name of "THE SAN PEDRO BUS LINE," petitioners,
Estanislao R. Bayot for petitioners.
Antonio Enrile Inton and Camilo V. Pea for respondents.
Nicolas Navarro filed a complaint in the court of First Instance of Rizal against the San Pedro Bus Line, Paulino
de la Cruz and Teodulo Lacdan, doing business in the name of the San Pedro Bus Line, alleging that the
plaintiff, on April 21, 1943, rode as a passenger in Manila bound bus No. TPU-7654 owned and operated by the
defendants; that while on its way the bus collided with another vehicle, causing serious physical injuries to the
plaintiff, with subsequent post-traumatic psychosis which might incapacitate him for life; that as a result
thereof the plaintiff suffered damages, for actual medical and hospital expenses and loss of earning power, in
the total sum of P4,500 which the plaintiff sought to recover from the defendants. In their answer the
defendants admitted the occurrence of the accident and the injuries received the plaintiff, but disclaimed
responsibility for the accident. After trial, the court dismissed the complaint on the ground that there was "no
proof whatsoever of the relation of the defendants San Pedro Bus Line and Paulino de la Cruz with the
damages claimed by the plaintiff." The plaintiff appealed to the Court of Appeals which, on part of which reads
as follows: "WHEREFORE, it appearing that the trial court erred as charged, and that the facts and the lawfully
warrant a recovery by the appellant, the judgment appealed in the total sum of P9,500, with interests thereon
from the date this action was commenced. Costs are charged against the appellees." The defendants have
elevated the case by way of a petition for certiorari.
It is contended for the herein petitioners that they cannot be held civilly liable to respondents Nicolas Navarro,
for the reason that the Court of First Instance of Rizal had dismissed the criminal charge against petitioner
Paulino de la Cruz, driver of the bus involved in the accident, citing the case of Martinez vs. Barredo,* Off. Gaz.,
4922. In answer to this contention, it is enough to advert to the conclusion of the Court of Appeals which is
correct that the action was not based on tort or quasi delict, but was one for breach of a carrier's contract,
there being a clear distinction between culpa as a source and creator of obligations (aquiliana) and culpa in the
performance of an already existing obligation (contractual). As already held in the case of Castro vs. Acro
Taxicab Co.** 46 Off. Gaz., 2023, "para que prosperase la accion del demandante pidiendo indemnizacion de
daos y perjuicios bastaba que probase la existencia del contrato de pasaje esto es, que causo lesiones y
daos en el pasajero. De acuerdo con la doctrina enunciada, para el exito de la accion de daos no era
necesario que se probase la culpa, desuido a negligencia del chofer que guiaba el taximetro No. 962." The
case of Martinez vs. Barredo is not controlling, since it referred to an action based on criminal negligence.
The other contention of the petitioners is that it was erroneous for the Court of Appeals to award in favor of
respondent Navarro damages in the amount of P9,500, his claim in the complaint being only for P4,500. It
appears, however, that the complaint prayed for "such further relief as may be deemed just and equitable,"
and this of course warranted the granting in the complaint. Indeed, under section 9, Rule 35, of the Rules of
Court, "the judgment shall grant the relief to which the party in whose favor it is rendered is entitled, even if
the party has not demanded such relief in his pleadings."
It is also urged by counsel for the petitioners that the finding of the Court of Appeals that respondent Navarro
is insane, is not supported by any evidence, and that on the other hand, in the motion for new trial filed by the
petitioners, accompanied by the affidavits of Marcelo Legaspi and Ceferino Terello, respondent Navarro is
shown not to be insane, with the result that there is no basis for awarding the additional amount of P5,000.
However, apart from the fact that the finding of the Court of Appeals is factual and therefore conclusive, the
said sum was granted by the Court of Appeals, not only for the resulting insanity of respondent Navarro but for
his pain and suffering in general; and we are not prepared to hold that the award is excessive as compensation
for moral damages.
Wherefore, the decision complained of is affirmed, and it is so ordered with costs against petitioners.

Republic of the Philippines

[G.R. No. 138569. September 11, 2003]
DIAZ and COMPANY, CPAs, respondents.
The Case
Before us is a petition for review of the Decision [1] of the Court of Appeals dated 27 October 1998 and its
Resolution dated 11 May 1999. The assailed decision reversed the Decision [2]of the Regional Trial Court of
Manila, Branch 8, absolving petitioner Consolidated Bank and Trust Corporation, now known as Solidbank
Corporation (Solidbank), of any liability. The questioned resolution of the appellate court denied the motion for
reconsideration of Solidbank but modified the decision by deleting the award of exemplary damages, attorneys
fees, expenses of litigation and cost of suit.
The Facts
Solidbank is a domestic banking corporation organized and existing under Philippine laws. Private
respondent L.C. Diaz and Company, CPAs (L.C. Diaz), is a professional partnership engaged in the practice of
Sometime in March 1976, L.C. Diaz opened a savings account with Solidbank, designated as Savings
Account No. S/A 200-16872-6.
On 14 August 1991, L.C. Diaz through its cashier, Mercedes Macaraya (Macaraya), filled up a savings
(cash) deposit slip for P990 and a savings (checks) deposit slip for P50.Macaraya instructed the messenger of
L.C. Diaz, Ismael Calapre (Calapre), to deposit the money with Solidbank. Macaraya also gave Calapre the
Solidbank passbook.
Calapre went to Solidbank and presented to Teller No. 6 the two deposit slips and the passbook. The teller
acknowledged receipt of the deposit by returning to Calapre the duplicate copies of the two deposit slips. Teller
No. 6 stamped the deposit slips with the words DUPLICATE and SAVING TELLER 6 SOLIDBANK HEAD
OFFICE. Since the transaction took time and Calapre had to make another deposit for L.C. Diaz with Allied
Bank, he left the passbook with Solidbank. Calapre then went to Allied Bank. When Calapre returned to
Solidbank to retrieve the passbook, Teller No. 6 informed him that somebody got the passbook. [3] Calapre went
back to L.C. Diaz and reported the incident to Macaraya.
Macaraya immediately prepared a deposit slip in duplicate copies with a check of P200,000. Macaraya,
together with Calapre, went to Solidbank and presented to Teller No. 6 the deposit slip and check. The teller
stamped the words DUPLICATE and SAVING TELLER 6 SOLIDBANK HEAD OFFICE on the duplicate copy of the
deposit slip. When Macaraya asked for the passbook, Teller No. 6 told Macaraya that someone got the
passbook but she could not remember to whom she gave the passbook. When Macaraya asked Teller No. 6 if
Calapre got the passbook, Teller No. 6 answered that someone shorter than Calapre got the passbook. Calapre
was then standing beside Macaraya.
Teller No. 6 handed to Macaraya a deposit slip dated 14 August 1991 for the deposit of a check
for P90,000 drawn on Philippine Banking Corporation (PBC). This PBC check of L.C. Diaz was a check that it had
long closed.[4] PBC subsequently dishonored the check because of insufficient funds and because the signature
in the check differed from PBCs specimen signature. Failing to get back the passbook, Macaraya went back to
her office and reported the matter to the Personnel Manager of L.C. Diaz, Emmanuel Alvarez.
The following day, 15 August 1991, L.C. Diaz through its Chief Executive Officer, Luis C. Diaz (Diaz), called
up Solidbank to stop any transaction using the same passbook until L.C. Diaz could open a new account. [5] On
the same day, Diaz formally wrote Solidbank to make the same request. It was also on the same day that L.C.
Diaz learned of the unauthorized withdrawal the day before, 14 August 1991, of P300,000 from its savings
account. The withdrawal slip for the P300,000 bore the signatures of the authorized signatories of L.C. Diaz,
namely Diaz and Rustico L. Murillo. The signatories, however, denied signing the withdrawal slip. A certain Noel
Tamayo received the P300,000.

In an Information[6] dated 5 September 1991, L.C. Diaz charged its messenger, Emerano Ilagan (Ilagan)
and one Roscon Verdazola with Estafa through Falsification of Commercial Document. The Regional Trial Court
of Manila dismissed the criminal case after the City Prosecutor filed a Motion to Dismiss on 4 August 1992.
On 24 August 1992, L.C. Diaz through its counsel demanded from Solidbank the return of its
money. Solidbank refused.
On 25 August 1992, L.C. Diaz filed a Complaint [7] for Recovery of a Sum of Money against Solidbank with
the Regional Trial Court of Manila, Branch 8. After trial, the trial court rendered on 28 December 1994 a
decision absolving Solidbank and dismissing the complaint.
L.C. Diaz then appealed[8] to the Court of Appeals. On 27 October 1998, the Court of Appeals issued its
Decision reversing the decision of the trial court.
On 11 May 1999, the Court of Appeals issued its Resolution denying the motion for reconsideration of
Solidbank. The appellate court, however, modified its decision by deleting the award of exemplary damages
and attorneys fees.
The Ruling of the Trial Court
In absolving Solidbank, the trial court applied the rules on savings account written on the passbook. The
rules state that possession of this book shall raise the presumption of ownership and any payment or
payments made by the bank upon the production of the said book and entry therein of the withdrawal shall
have the same effect as if made to the depositor personally. [9]
At the time of the withdrawal, a certain Noel Tamayo was not only in possession of the passbook, he also
presented a withdrawal slip with the signatures of the authorized signatories of L.C. Diaz. The specimen
signatures of these persons were in the signature cards. The teller stamped the withdrawal slip with the words
Saving Teller No. 5. The teller then passed on the withdrawal slip to Genere Manuel (Manuel) for
authentication. Manuel verified the signatures on the withdrawal slip. The withdrawal slip was then given to
another officer who compared the signatures on the withdrawal slip with the specimen on the signature cards.
The trial court concluded that Solidbank acted with care and observed the rules on savings account when it
allowed the withdrawal of P300,000 from the savings account of L.C. Diaz.
The trial court pointed out that the burden of proof now shifted to L.C. Diaz to prove that the signatures on
the withdrawal slip were forged. The trial court admonished L.C. Diaz for not offering in evidence the National
Bureau of Investigation (NBI) report on the authenticity of the signatures on the withdrawal slip
for P300,000. The trial court believed that L.C. Diaz did not offer this evidence because it is derogatory to its
Another provision of the rules on savings account states that the depositor must keep the passbook under
lock and key.[10] When another person presents the passbook for withdrawal prior to Solidbanks receipt of the
notice of loss of the passbook, that person is considered as the owner of the passbook. The trial court ruled
that the passbook presented during the questioned transaction was now out of the lock and key and
presumptively ready for a business transaction.[11]
Solidbank did not have any participation in the custody and care of the passbook. The trial court believed
that Solidbanks act of allowing the withdrawal of P300,000 was not the direct and proximate cause of the loss.
The trial court held that L.C. Diazs negligence caused the unauthorized withdrawal. Three facts establish L.C.
Diazs negligence: (1) the possession of the passbook by a person other than the depositor L.C. Diaz; (2) the
presentation of a signed withdrawal receipt by an unauthorized person; and (3) the possession by an
unauthorized person of a PBC check long closed by L.C. Diaz, which check was deposited on the day of the
fraudulent withdrawal.
The trial court debunked L.C. Diazs contention that Solidbank did not follow the precautionary procedures
observed by the two parties whenever L.C. Diaz withdrew significant amounts from its account. L.C. Diaz
claimed that a letter must accompany withdrawals of more than P20,000. The letter must request Solidbank to
allow the withdrawal and convert the amount to a managers check. The bearer must also have a letter
authorizing him to withdraw the same amount. Another person driving a car must accompany the bearer so
that he would not walk from Solidbank to the office in making the withdrawal. The trial court pointed out that
L.C. Diaz disregarded these precautions in its past withdrawal. On 16 July 1991, L.C. Diaz withdrew P82,554
without any separate letter of authorization or any communication with Solidbank that the money be
converted into a managers check.
The trial court further justified the dismissal of the complaint by holding that the case was a last ditch
effort of L.C. Diaz to recover P300,000 after the dismissal of the criminal case against Ilagan.
The dispositive portion of the decision of the trial court reads:

IN VIEW OF THE FOREGOING, judgment is hereby rendered DISMISSING the complaint.

The Court further renders judgment in favor of defendant bank pursuant to its counterclaim the amount of
Thirty Thousand Pesos (P30,000.00) as attorneys fees.
With costs against plaintiff.
The Ruling of the Court of Appeals
The Court of Appeals ruled that Solidbanks negligence was the proximate cause of the unauthorized
withdrawal of P300,000 from the savings account of L.C. Diaz. The appellate court reached this conclusion
after applying the provision of the Civil Code on quasi-delict, to wit:
Article 2176. Whoever by act or omission causes damage to another, there being fault or negligence, is obliged
to pay for the damage done. Such fault or negligence, if there is no pre-existing contractual relation between
the parties, is called a quasi-delict and is governed by the provisions of this chapter.
The appellate court held that the three elements of a quasi-delict are present in this case, namely: (a)
damages suffered by the plaintiff; (b) fault or negligence of the defendant, or some other person for whose
acts he must respond; and (c) the connection of cause and effect between the fault or negligence of the
defendant and the damage incurred by the plaintiff.
The Court of Appeals pointed out that the teller of Solidbank who received the withdrawal slip
for P300,000 allowed the withdrawal without making the necessary inquiry. The appellate court stated that the
teller, who was not presented by Solidbank during trial, should have called up the depositor because the
money to be withdrawn was a significant amount. Had the teller called up L.C. Diaz, Solidbank would have
known that the withdrawal was unauthorized. The teller did not even verify the identity of the impostor who
made the withdrawal. Thus, the appellate court found Solidbank liable for its negligence in the selection and
supervision of its employees.
The appellate court ruled that while L.C. Diaz was also negligent in entrusting its deposits to its
messenger and its messenger in leaving the passbook with the teller, Solidbank could not escape liability
because of the doctrine of last clear chance. Solidbank could have averted the injury suffered by L.C. Diaz had
it called up L.C. Diaz to verify the withdrawal.
The appellate court ruled that the degree of diligence required from Solidbank is more than that of a good
father of a family. The business and functions of banks are affected with public interest. Banks are obligated to
treat the accounts of their depositors with meticulous care, always having in mind the fiduciary nature of their
relationship with their clients. The Court of Appeals found Solidbank remiss in its duty, violating its fiduciary
relationship with L.C. Diaz.
The dispositive portion of the decision of the Court of Appeals reads:
WHEREFORE, premises considered, the decision appealed from is hereby REVERSED and a new one entered.
1. Ordering defendant-appellee Consolidated Bank and Trust Corporation to pay plaintiff-appellant the
sum of Three Hundred Thousand Pesos (P300,000.00), with interest thereon at the rate of 12%
per annum from the date of filing of the complaint until paid, the sum of P20,000.00 as
exemplary damages, and P20,000.00 as attorneys fees and expenses of litigation as well as
the cost of suit; and
2. Ordering the dismissal of defendant-appellees counterclaim in the amount of P30,000.00 as
attorneys fees.
Acting on the motion for reconsideration of Solidbank, the appellate court affirmed its decision but modified
the award of damages. The appellate court deleted the award of exemplary damages and attorneys fees.
Invoking Article 2231[14] of the Civil Code, the appellate court ruled that exemplary damages could be granted
if the defendant acted with gross negligence. Since Solidbank was guilty of simple negligence only, the award
of exemplary damages was not justified. Consequently, the award of attorneys fees was also disallowed
pursuant to Article 2208 of the Civil Code. The expenses of litigation and cost of suit were also not imposed on
The dispositive portion of the Resolution reads as follows:

WHEREFORE, foregoing considered, our decision dated October 27, 1998 is affirmed with modification by
deleting the award of exemplary damages and attorneys fees, expenses of litigation and cost of suit.
Hence, this petition.
The Issues
Solidbank seeks the review of the decision and resolution of the Court of Appeals on these grounds:
The Ruling of the Court
The petition is partly meritorious.
Solidbanks Fiduciary Duty under the Law
The rulings of the trial court and the Court of Appeals conflict on the application of the law. The trial court
pinned the liability on L.C. Diaz based on the provisions of the rules on savings account, a recognition of the
contractual relationship between Solidbank and L.C. Diaz, the latter being a depositor of the former. On the
other hand, the Court of Appeals applied the law on quasi-delict to determine who between the two parties
was ultimately negligent. The law on quasi-delict or culpa aquiliana is generally applicable when there is no
pre-existing contractual relationship between the parties.
We hold that Solidbank is liable for breach of contract due to negligence, or culpa contractual.
The contract between the bank and its depositor is governed by the provisions of the Civil Code on simple
loan.[17] Article 1980 of the Civil Code expressly provides that x x x savings x x x deposits of money in banks
and similar institutions shall be governed by the provisions concerning simple loan. There is a debtor-creditor
relationship between the bank and its depositor.The bank is the debtor and the depositor is the creditor. The
depositor lends the bank money and the bank agrees to pay the depositor on demand. The savings deposit
agreement between the bank and the depositor is the contract that determines the rights and obligations of
the parties.
The law imposes on banks high standards in view of the fiduciary nature of banking. Section 2 of Republic
Act No. 8791 (RA 8791),[18] which took effect on 13 June 2000, declares that the State recognizes the fiduciary
nature of banking that requires high standards of integrity and performance. [19] This new provision in the
general banking law, introduced in 2000, is a statutory affirmation of Supreme Court decisions, starting with
the 1990 case of Simex International v. Court of Appeals,[20] holding that the bank is under obligation to
treat the accounts of its depositors with meticulous care, always having in mind the fiduciary nature of their
This fiduciary relationship means that the banks obligation to observe high standards of integrity and
performance is deemed written into every deposit agreement between a bank and its depositor. The fiduciary
nature of banking requires banks to assume a degree of diligence higher than that of a good father of a

family. Article 1172 of the Civil Code states that the degree of diligence required of an obligor is that
prescribed by law or contract, and absent such stipulation then the diligence of a good father of a family.
Section 2 of RA 8791 prescribes the statutory diligence required from banks that banks must observe high
standards of integrity and performance in servicing their depositors. Although RA 8791 took effect almost nine
years after the unauthorized withdrawal of the P300,000 from L.C. Diazs savings account, jurisprudence [23] at
the time of the withdrawal already imposed on banks the same high standard of diligence required under RA
No. 8791.
However, the fiduciary nature of a bank-depositor relationship does not convert the contract between the
bank and its depositors from a simple loan to a trust agreement, whether express or implied. Failure by the
bank to pay the depositor is failure to pay a simple loan, and not a breach of trust. [24] The law simply imposes
on the bank a higher standard of integrity and performance in complying with its obligations under the
contract of simple loan, beyond those required of non-bank debtors under a similar contract of simple loan.
The fiduciary nature of banking does not convert a simple loan into a trust agreement because banks do
not accept deposits to enrich depositors but to earn money for themselves. The law allows banks to offer the
lowest possible interest rate to depositors while charging the highest possible interest rate on their own
borrowers. The interest spread or differential belongs to the bank and not to the depositors who are not cestui
que trust of banks. If depositors are cestui que trust of banks, then the interest spread or income belongs to
the depositors, a situation that Congress certainly did not intend in enacting Section 2 of RA 8791.
Solidbanks Breach of its Contractual Obligation
Article 1172 of the Civil Code provides that responsibility arising from negligence in the performance of
every kind of obligation is demandable. For breach of the savings deposit agreement due to negligence,
or culpa contractual, the bank is liable to its depositor.
Calapre left the passbook with Solidbank because the transaction took time and he had to go to Allied
Bank for another transaction. The passbook was still in the hands of the employees of Solidbank for the
processing of the deposit when Calapre left Solidbank. Solidbanks rules on savings account require that the
deposit book should be carefully guarded by the depositor and kept under lock and key, if possible. When the
passbook is in the possession of Solidbanks tellers during withdrawals, the law imposes on Solidbank and its
tellers an even higher degree of diligence in safeguarding the passbook.
Likewise, Solidbanks tellers must exercise a high degree of diligence in insuring that they return the
passbook only to the depositor or his authorized representative. The tellers know, or should know, that the
rules on savings account provide that any person in possession of the passbook is presumptively its owner. If
the tellers give the passbook to the wrong person, they would be clothing that person presumptive ownership
of the passbook, facilitating unauthorized withdrawals by that person. For failing to return the passbook to
Calapre, the authorized representative of L.C. Diaz, Solidbank and Teller No. 6 presumptively failed to observe
such high degree of diligence in safeguarding the passbook, and in insuring its return to the party authorized
to receive the same.
In culpa contractual, once the plaintiff proves a breach of contract, there is a presumption that the
defendant was at fault or negligent. The burden is on the defendant to prove that he was not at fault or
negligent. In contrast, in culpa aquiliana the plaintiff has the burden of proving that the defendant was
negligent. In the present case, L.C. Diaz has established that Solidbank breached its contractual obligation to
return the passbook only to the authorized representative of L.C. Diaz. There is thus a presumption that
Solidbank was at fault and its teller was negligent in not returning the passbook to Calapre. The burden was on
Solidbank to prove that there was no negligence on its part or its employees.
Solidbank failed to discharge its burden. Solidbank did not present to the trial court Teller No. 6, the teller
with whom Calapre left the passbook and who was supposed to return the passbook to him. The record does
not indicate that Teller No. 6 verified the identity of the person who retrieved the passbook. Solidbank also
failed to adduce in evidence its standard procedure in verifying the identity of the person retrieving the
passbook, if there is such a procedure, and that Teller No. 6 implemented this procedure in the present case.
Solidbank is bound by the negligence of its employees under the principle of respondeat superior or
command responsibility. The defense of exercising the required diligence in the selection and supervision of
employees is not a complete defense in culpa contractual, unlike in culpa aquiliana.[25]
The bank must not only exercise high standards of integrity and performance, it must also insure that its
employees do likewise because this is the only way to insure that the bank will comply with its fiduciary
duty. Solidbank failed to present the teller who had the duty to return to Calapre the passbook, and thus failed
to prove that this teller exercised the high standards of integrity and performance required of Solidbanks
Proximate Cause of the Unauthorized Withdrawal

Another point of disagreement between the trial and appellate courts is the proximate cause of the
unauthorized withdrawal. The trial court believed that L.C. Diazs negligence in not securing its passbook under
lock and key was the proximate cause that allowed the impostor to withdraw the P300,000. For the appellate
court, the proximate cause was the tellers negligence in processing the withdrawal without first verifying with
L.C. Diaz. We do not agree with either court.
Proximate cause is that cause which, in natural and continuous sequence, unbroken by any efficient
intervening cause, produces the injury and without which the result would not have occurred. [26] Proximate
cause is determined by the facts of each case upon mixed considerations of logic, common sense, policy and
L.C. Diaz was not at fault that the passbook landed in the hands of the impostor. Solidbank was in
possession of the passbook while it was processing the deposit. After completion of the transaction, Solidbank
had the contractual obligation to return the passbook only to Calapre, the authorized representative of L.C.
Diaz. Solidbank failed to fulfill its contractual obligation because it gave the passbook to another person.
Solidbanks failure to return the passbook to Calapre made possible the withdrawal of the P300,000 by the
impostor who took possession of the passbook. Under Solidbanks rules on savings account, mere possession of
the passbook raises the presumption of ownership. It was the negligent act of Solidbanks Teller No. 6 that gave
the impostor presumptive ownership of the passbook. Had the passbook not fallen into the hands of the
impostor, the loss of P300,000 would not have happened. Thus, the proximate cause of the unauthorized
withdrawal was Solidbanks negligence in not returning the passbook to Calapre.
We do not subscribe to the appellate courts theory that the proximate cause of the unauthorized
withdrawal was the tellers failure to call up L.C. Diaz to verify the withdrawal. Solidbank did not have the duty
to call up L.C. Diaz to confirm the withdrawal. There is no arrangement between Solidbank and L.C. Diaz to this
effect. Even the agreement between Solidbank and L.C. Diaz pertaining to measures that the parties must
observe whenever withdrawals of large amounts are made does not direct Solidbank to call up L.C. Diaz.
There is no law mandating banks to call up their clients whenever their representatives withdraw
significant amounts from their accounts. L.C. Diaz therefore had the burden to prove that it is the usual
practice of Solidbank to call up its clients to verify a withdrawal of a large amount of money. L.C. Diaz failed to
do so.
Teller No. 5 who processed the withdrawal could not have been put on guard to verify the
withdrawal. Prior to the withdrawal of P300,000, the impostor deposited with Teller No. 6 theP90,000 PBC
check, which later bounced. The impostor apparently deposited a large amount of money to deflect suspicion
from the withdrawal of a much bigger amount of money. The appellate court thus erred when it imposed on
Solidbank the duty to call up L.C. Diaz to confirm the withdrawal when no law requires this from banks and
when the teller had no reason to be suspicious of the transaction.
Solidbank continues to foist the defense that Ilagan made the withdrawal. Solidbank claims that since
Ilagan was also a messenger of L.C. Diaz, he was familiar with its teller so that there was no more need for the
teller to verify the withdrawal. Solidbank relies on the following statements in the Booking and Information
Sheet of Emerano Ilagan:
xxx Ilagan also had with him (before the withdrawal) a forged check of PBC and indicated the amount of
P90,000 which he deposited in favor of L.C. Diaz and Company. After successfully withdrawing this large sum of
money, accused Ilagan gave alias Rey (Noel Tamayo) his share of the loot. Ilagan then hired a taxicab in the
amount of P1,000 to transport him (Ilagan) to his home province at Bauan, Batangas.Ilagan extravagantly and
lavishly spent his money but a big part of his loot was wasted in cockfight and horse racing. Ilagan was
apprehended and meekly admitted his guilt.[28] (Emphasis supplied.)
L.C. Diaz refutes Solidbanks contention by pointing out that the person who withdrew the P300,000 was a
certain Noel Tamayo. Both the trial and appellate courts stated that this Noel Tamayo presented the passbook
with the withdrawal slip.
We uphold the finding of the trial and appellate courts that a certain Noel Tamayo withdrew
the P300,000. The Court is not a trier of facts. We find no justifiable reason to reverse the factual finding of the
trial court and the Court of Appeals. The tellers who processed the deposit of the P90,000 check and the
withdrawal of the P300,000 were not presented during trial to substantiate Solidbanks claim that Ilagan
deposited the check and made the questioned withdrawal. Moreover, the entry quoted by Solidbank does not
categorically state that Ilagan presented the withdrawal slip and the passbook.
Doctrine of Last Clear Chance
The doctrine of last clear chance states that where both parties are negligent but the negligent act of one
is appreciably later than that of the other, or where it is impossible to determine whose fault or negligence
caused the loss, the one who had the last clear opportunity to avoid the loss but failed to do so, is chargeable

with the loss.[29] Stated differently, the antecedent negligence of the plaintiff does not preclude him from
recovering damages caused by the supervening negligence of the defendant, who had the last fair chance to
prevent the impending harm by the exercise of due diligence. [30]
We do not apply the doctrine of last clear chance to the present case. Solidbank is liable for breach of
contract due to negligence in the performance of its contractual obligation to L.C. Diaz. This is a case of culpa
contractual, where neither the contributory negligence of the plaintiff nor his last clear chance to avoid the
loss, would exonerate the defendant from liability. [31]Such contributory negligence or last clear chance by the
plaintiff merely serves to reduce the recovery of damages by the plaintiff but does not exculpate the defendant
from his breach of contract.[32]
Mitigated Damages
Under Article 1172, liability (for culpa contractual) may be regulated by the courts, according to the
circumstances. This means that if the defendant exercised the proper diligence in the selection and
supervision of its employee, or if the plaintiff was guilty of contributory negligence, then the courts may reduce
the award of damages. In this case, L.C. Diaz was guilty of contributory negligence in allowing a withdrawal
slip signed by its authorized signatories to fall into the hands of an impostor. Thus, the liability of Solidbank
should be reduced.
In Philippine Bank of Commerce v. Court of Appeals,[33] where the Court held the depositor guilty of
contributory negligence, we allocated the damages between the depositor and the bank on a 40-60
ratio. Applying the same ruling to this case, we hold that L.C. Diaz must shoulder 40% of the actual damages
awarded by the appellate court. Solidbank must pay the other 60% of the actual damages.
WHEREFORE, the decision of the Court of Appeals is AFFIRMED with MODIFICATION. Petitioner Solidbank
Corporation shall pay private respondent L.C. Diaz and Company, CPAs only 60% of the actual damages
awarded by the Court of Appeals. The remaining 40% of the actual damages shall be borne by private
respondent L.C. Diaz and Company, CPAs.Proportionate costs.