G.R. No. 156940 December 14, 2004 g. 138774 Oct. 2, 1990 6,600.

00

ASSOCIATED BANK (Now WESTMONT BANK), petitioner, h. 167072 Oct. 10, 1990 9,908.00
vs.
VICENTE HENRY TAN, respondent i. 168802 Oct. 10, 1990 3,650.00
DECISION
"However, his suppliers and business partners went back to him alleging that the checks he issued
PANGANIBAN, J.: bounced for insufficiency of funds. Thereafter, TAN, thru his lawyer, informed the BANK to take positive
steps regarding the matter for he has adequate and sufficient funds to pay the amount of the subject
While banks are granted by law the right to debit the value of a dishonored check from a depositor’s checks. Nonetheless, the BANK did not bother nor offer any apology regarding the incident. Consequently,
account, they must do so with the highest degree of care, so as not to prejudice the depositor unduly. TAN, as plaintiff, filed a Complaint for Damages on December 19, 1990, with the Regional Trial Court of
Cabanatuan City, Third Judicial Region, docketed as Civil Case No. 892-AF, against the BANK, as
The Case defendant.

Before us is a Petition for Review1 under Rule 45 of the Rules of Court, assailing the January 27, 2003
Decision2 of the Court of Appeals (CA) in CA-GR CV No. 56292. The CA disposed as follows:
"WHEREFORE, premises considered, the Decision dated December 3, 1996, of the Regional Trial Court of
Cabanatuan City, Third Judicial Region, Branch 26, in Civil Case No. 892-AF is hereby AFFIRMED. Costs
against the [petitioner]."3
The Facts
The CA narrated the antecedents as follows:
"In his [C]omplaint, [respondent] maintained that he ha[d] sufficient funds to pay the subject checks and
alleged that his suppliers decreased in number for lack of trust. As he has been in the business
community for quite a time and has established a good record of reputation and probity, plaintiff claimed
that he suffered embarrassment, humiliation, besmirched reputation, mental anxieties and sleepless
nights because of the said unfortunate incident. [Respondent] further averred that he continuously lost
profits in the amount of P250,000.00. [Respondent] therefore prayed for exemplary damages and that
[petitioner] be ordered to pay him the sum of P1,000,000.00 by way of moral damages, P250,000.00 as lost
profits, P50,000.00 as attorney’s fees plus 25% of the amount claimed including P1,000.00 per court
appearance.

"Vicente Henry Tan (hereafter TAN) is a businessman and a regular depositor-creditor of the Associated
Bank (hereinafter referred to as the BANK). Sometime in September 1990, he deposited a postdated UCPB
check with the said BANK in the amount of P101,000.00 issued to him by a certain Willy Cheng from
Tarlac. The check was duly entered in his bank record thereby making his balance in the amount
of P297,000.00, as of October 1, 1990, from his original deposit of P196,000.00. Allegedly, upon advice and
instruction of the BANK that the P101,000.00 check was already cleared and backed up by sufficient
funds, TAN, on the same date, withdrew the sum of P240,000.00, leaving a balance of P57,793.45. A day
after, TAN deposited the amount of P50,000.00 making his existing balance in the amount
of P107,793.45, because he has issued several checks to his business partners, to wit:
"Meanwhile, [petitioner] filed a Motion to Dismiss on February 7, 1991, but the same was denied for lack of
merit in an Order dated March 7, 1991. Thereafter, [petitioner] BANK on March 20, 1991 filed its Answer
denying, among others, the allegations of [respondent] and alleged that no banking institution would give
an assurance to any of its client/depositor that the check deposited by him had already been cleared and
backed up by sufficient funds but it could only presume that the same has been honored by the drawee
bank in view of the lapse of time that ordinarily takes for a check to be cleared. For its part, [petitioner]
alleged that on October 2, 1990, it gave notice to the [respondent] as to the return of his UCPB check
deposit in the amount of P101,000.00, hence, on even date, [respondent] deposited the amount
of P50,000.00 to cover the returned check.

DATE AMOUNT "By way of affirmative defense, [petitioner] averred that [respondent] had no cause of action against it and
argued that it has all the right to debit the account of the [respondent] by reason of the dishonor of the
CHECK NUMBERS check deposited by the [respondent] which was withdrawn by him prior to its clearing. [Petitioner] further
averred that it has no liability with respect to the clearing of deposited checks as the clearing is being
a. 138814 Sept. 29, 1990 P9,000.00 undertaken by the Central Bank and in accepting [the] check deposit, it merely obligates itself as
depositor’s collecting agent subject to actual payment by the drawee bank. [Petitioner] therefore prayed
b. 138804 Oct. 8, 1990 9,350.00 that [respondent] be ordered to pay it the amount of P1,000,000.00 by way of loss of goodwill, P7,000.00
as acceptance fee plus P500.00 per appearance and by way of attorney’s fees.
c. 138787 Sept. 30, 1990 6,360.00
"Considering that Westmont Bank has taken over the management of the affairs/properties of the BANK,
[respondent] on October 10, 1996, filed an Amended Complaint reiterating substantially his allegations in
d. 138847 Sept. 29, 1990 21,850.00
the original complaint, except that the name of the previous defendant ASSOCIATED BANK is now
WESTMONT BANK.
e. 167054 Sept. 29, 1990 4,093.40
"Trial ensured and thereafter, the court rendered its Decision dated December 3, 1996 in favor of the
f. 138792 ` Sept. 29, 1990 3,546.00 [respondent] and against the [petitioner], ordering the latter to pay the [respondent] the sum
of P100,000.00 by way of moral damages, P75,000.00 as exemplary damages, P25,000.00 as attorney’s
fees, plus the costs of this suit. In making said ruling, it was shown that [respondent] was not officially
informed about the debiting of the P101,000.00 [from] his existing balance and that the BANK merely
allowed the [respondent] to use the fund prior to clearing merely for accommodation because the BANK
considered him as one of its valued clients. The trial court ruled that the bank manager was negligent in
handling the particular checking account of the [respondent] stating that such lapses caused all the
inconveniences to the [respondent]. The trial court also took into consideration that [respondent’s] mother
was originally maintaining with the x x x BANK [a] current account as well as [a] time deposit, but [o]n one
occasion, although his mother made a deposit, the same was not credited in her favor but in the name of
another."4
Petitioner appealed to the CA on the issues of whether it was within its rights, as collecting bank, to debit
the account of its client for a dishonored check; and whether it had informed respondent about the
dishonor prior to debiting his account.
Ruling of the Court of Appeals
Affirming the trial court, the CA ruled that the bank should not have authorized the withdrawal of the
value of the deposited check prior to its clearing. Having done so, contrary to its obligation to treat
respondent’s account with meticulous care, the bank violated its own policy. It thereby took upon itself the
obligation to officially inform respondent of the status of his account before unilaterally debiting the
amount of P101,000. Without such notice, it is estopped from blaming him for failing to fund his account.
The CA opined that, had the P101,000 not been debited, respondent would have had sufficient funds for
the postdated checks he had issued. Thus, the supposed accommodation accorded by petitioner to him is
the proximate cause of his business woes and shame, for which it is liable for damages.
Because of the bank’s negligence, the CA awarded respondent moral damages of P100,000. It also granted
him exemplary damages of P75,000 and attorney’s fees of P25,000.
Hence this Petition.5
Issue
In its Memorandum, petitioner raises the sole issue of "whether or not the petitioner, which is acting as a
collecting bank, has the right to debit the account of its client for a check deposit which was dishonored by
the drawee bank."6
The Court’s Ruling
The Petition has no merit.
Sole Issue:
Debit of Depositor’s Account
Petitioner-bank contends that its rights and obligations under the present set of facts were misappreciated
by the CA. It insists that its right to debit the amount of the dishonored check from the account of
respondent is clear and unmistakable. Even assuming that it did not give him notice that the check had
been dishonored, such right remains immediately enforceable.
In particular, petitioner argues that the check deposit slip accomplished by respondent on September 17,
1990, expressly stipulated that the bank was obligating itself merely as the depositor’s collecting agent and
-- until such time as actual payment would be made to it -- it was reserving the right to charge against the
depositor’s account any amount previously credited. Respondent was allowed to withdraw the amount of
the check prior to clearing, merely as an act of accommodation, it added.
At the outset, we stress that the trial court’s factual findings that were affirmed by the CA are not subject to
review by this Court.7 As petitioner itself takes no issue with those findings, we need only to determine the
legal consequence, based on the established facts.
Right of Setoff
A bank generally has a right of setoff over the deposits therein for the payment of any withdrawals on the
part of a depositor.8 The right of a collecting bank to debit a client’s account for the value of a dishonored
check that has previously been credited has fairly been established by jurisprudence. To begin with, Article
1980 of the Civil Code provides that "[f]ixed, savings, and current deposits of money in banks and similar
institutions shall be governed by the provisions concerning simple loan."
Hence, the relationship between banks and depositors has been held to be that of creditor and
debtor.9 Thus, legal compensation under Article 127810 of the Civil Code may take place "when all the
requisites mentioned in Article 1279 are present,"11 as follows:
"(1) That each one of the obligors be bound principally, and that he be at the same time a principal creditor
of the other;
(2) That both debts consist in a sum of money, or if the things due are consumable, they be of the same
kind, and also of the same quality if the latter has been stated;
(3) That the two debts be due;
(4) That they be liquidated and demandable;
(5) That over neither of them there be any retention or controversy, commenced by third persons and
communicated in due time to the debtor."12
Nonetheless, the real issue here is not so much the right of petitioner to debit respondent’s account but,
rather, the manner in which it exercised such right. The Court has held that even while the right of setoff is
conceded, separate is the question of whether that remedy has properly been exercised.13
The liability of petitioner in this case ultimately revolves around the issue of whether it properly exercised
its right of setoff. The determination thereof hinges, in turn, on the bank’s role and obligations, first, as
respondent’s depositary bank; and second, as collecting agent for the check in question.
Obligation as
Depositary Bank
In BPI v. Casa Montessori,14 the Court has emphasized that the banking business is impressed with public
interest. "Consequently, the highest degree of diligence is expected, and high standards of integrity and
performance are even required of it. By the nature of its functions, a bank is under obligation to treat the
accounts of its depositors with meticulous care."15
Also affirming this long standing doctrine, Philippine Bank of Commerce v. Court of Appeals16 has held that
"the degree of diligence required of banks is more than that of a good father of a family where the fiduciary
nature of their relationship with their depositors is concerned."17 Indeed, the banking business is vested
with the trust and confidence of the public; hence the "appropriate standard of diligence must be very high,
if not the highest, degree of diligence."18 The standard applies, regardless of whether the account consists of
only a few hundred pesos or of millions.19
The fiduciary nature of banking, previously imposed by case law,20 is now enshrined in Republic Act No.
8791 or the General Banking Law of 2000. Section 2 of the law specifically says that the State recognizes
the "fiduciary nature of banking that requires high standards of integrity and performance."
Did petitioner treat respondent’s account with the highest degree of care? From all indications, it did not.
It is undisputed -- nay, even admitted -- that purportedly as an act of accommodation to a valued client,
petitioner allowed the withdrawal of the face value of the deposited check prior to its clearing. That act
certainly disregarded the clearance requirement of the banking system. Such a practice is unusual,
because a check is not legal tender or money;21 and its value can properly be transferred to a depositor’s
account only after the check has been cleared by the drawee bank.22
Under ordinary banking practice, after receiving a check deposit, a bank either immediately credit the
amount to a depositor’s account; or infuse value to that account only after the drawee bank shall have
paid such amount.23Before the check shall have been cleared for deposit, the collecting bank can only
"assume" at its own risk -- as herein petitioner did -- that the check would be cleared and paid out.
Reasonable business practice and prudence, moreover, dictated that petitioner should not have authorized
the withdrawal by respondent of P240,000 on October 1, 1990, as this amount was over and above his
outstanding cleared balance of P196,793.45.24 Hence, the lower courts correctly appreciated the evidence
in his favor.
Obligation as
Collecting Agent
Indeed, the bank deposit slip expressed this reservation:
"In receiving items on deposit, this Bank obligates itself only as the Depositor’s Collecting agent, assuming
no responsibility beyond carefulness in selecting correspondents, and until such time as actual payments
shall have come to its possession, this Bank reserves the right to charge back to the Depositor’s account
any amounts previously credited whether or not the deposited item is returned. x x x."25
However, this reservation is not enough to insulate the bank from any liability. In the past, we have
expressed doubt about the binding force of such conditions unilaterally imposed by a bank without the
consent of the depositor.26 It is indeed arguable that "in signing the deposit slip, the depositor does so only
to identify himself and not to agree to the conditions set forth at the back of the deposit slip."27
Further, by the express terms of the stipulation, petitioner took upon itself certain obligations as
respondent’s agent, consonant with the well-settled rule that the relationship between the payee or holder
of a commercial paper and the collecting bank is that of principal and agent.28 Under Article 190929 of the
Civil Code, such bank could be held liable not only for fraud, but also for negligence.
As a general rule, a bank is liable for the wrongful or tortuous acts and declarations of its officers or agents
within the course and scope of their employment.30 Due to the very nature of their business, banks are
expected to exercise the highest degree of diligence in the selection and supervision of their
employees.31 Jurisprudence has established that the lack of diligence of a servant is imputed to the
negligence of the employer, when the negligent or wrongful act of the former proximately results in an
injury to a third person;32 in this case, the depositor.
The manager of the bank’s Cabanatuan branch, Consorcia Santiago, categorically admitted that she and
the employees under her control had breached bank policies. They admittedly breached those policies
when, without clearance from the drawee bank in Baguio, they allowed respondent to withdraw on
October 1, 1990, the amount of the check deposited. Santiago testified that respondent "was not officially
informed about the debiting of the P101,000 from his existing balance of P170,000 on October 2, 1990 x x
x."33
Being the branch manager, Santiago clearly acted within the scope of her authority in authorizing the
withdrawal and the subsequent debiting without notice. Accordingly, what remains to be determined is
whether her actions proximately caused respondent’s injury. Proximate cause is that which -- in a natural
and continuous sequence, unbroken by any efficient intervening cause --produces the injury, and without
which the result would not have occurred.34
Let us go back to the facts as they unfolded. It is undeniable that the bank’s premature authorization of
the withdrawal by respondent on October 1, 1990, triggered -- in rapid succession and in a natural
sequence -- the debiting of his account, the fall of his account balance to insufficient levels, and the
subsequent dishonor of his own checks for lack of funds. The CA correctly noted thus:
"x x x [T]he depositor x x x withdrew his money upon the advice by [petitioner] that his money was already
cleared. Without such advice, [respondent] would not have withdrawn the sum of P240,000.00. Therefore,
it cannot be denied that it was [petitioner’s] fault which allowed [respondent] to withdraw a huge sum
which he believed was already his.
"To emphasize, it is beyond cavil that [respondent] had sufficient funds for the check. Had the P101,000.00
not [been] debited, the subject checks would not have been dishonored. Hence, we can say that
[respondent’s] injury arose from the dishonor of his well-funded checks. x x x."35
Aggravating matters, petitioner failed to show that it had immediately and duly informed respondent of the
debiting of his account. Nonetheless, it argues that the giving of notice was discernible from his act of
depositing P50,000 on October 2, 1990, to augment his account and allow the debiting. This argument
deserves short shrift.
First, notice was proper and ought to be expected. By the bank manager’s account, respondent was
considered a "valued client" whose checks had always been sufficiently funded from 1987 to 1990,36 until
the October imbroglio. Thus, he deserved nothing less than an official notice of the precarious condition of
his account.
Second, under the provisions of the Negotiable Instruments Law regarding the liability of a general
indorser37 and the procedure for a notice of dishonor,38 it was incumbent on the bank to give proper notice
to respondent. In Gullas v. National Bank,39 the Court emphasized:
"x x x [A] general indorser of a negotiable instrument engages that if the instrument – the check in this case
– is dishonored and the necessary proceedings for its dishonor are duly taken, he will pay the amount
thereof to the holder (Sec. 66) It has been held by a long line of authorities that notice of dishonor is
necessary to charge an indorser and that the right of action against him does not accrue until the notice is
given.
"x x x. The fact we believe is undeniable that prior to the mailing of notice of dishonor, and without waiting
for any action by Gullas, the bank made use of the money standing in his account to make good for the
treasury warrant. At this point recall that Gullas was merely an indorser and had issued checks in good
faith. As to a depositor who has funds sufficient to meet payment of a check drawn by him in favor of a third
party, it has been held that he has a right of action against the bank for its refusal to pay such a check in the
absence of notice to him that the bank has applied the funds so deposited in extinguishment of past due
claims held against him. (Callahan vs. Bank of Anderson [1904], 2 Ann. Cas., 203.) However this may be, as
to an indorser the situation is different, and notice should actually have been given him in order that he might
protect his interests."40
Third, regarding the deposit of P50,000 made by respondent on October 2, 1990, we fully subscribe to the
CA’s observations that it was not unusual for a well-reputed businessman like him, who "ordinarily takes
note of the amount of money he takes and releases," to immediately deposit money in his current account
to answer for the postdated checks he had issued.41

Damages

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

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

SO ORDERED.
 G.R. No. 115324 February 19, 2003
PRODUCERS BANK OF THE PHILIPPINES (now FIRST INTERNATIONAL BANK), petitioner,
vs.
HON. COURT OF APPEALS AND FRANKLIN VIVES, respondents.
DECISION
CALLEJO, SR., J.:
This is a petition for review on certiorari of the Decision1 of the Court of Appeals dated June 25, 1991 in CA-
G.R. CV No. 11791 and of its Resolution2 dated May 5, 1994, denying the motion for reconsideration of
said decision filed by petitioner Producers Bank of the Philippines.
Sometime in 1979, private respondent Franklin Vives was asked by his neighbor and friend Angeles
Sanchez to help her friend and townmate, Col. Arturo Doronilla, in incorporating his business, the Sterela
Marketing and Services ("Sterela" for brevity). Specifically, Sanchez asked private respondent to deposit in a
bank a certain amount of money in the bank account of Sterela for purposes of its incorporation. She
assured private respondent that he could withdraw his money from said account within a month’s time.
Private respondent asked Sanchez to bring Doronilla to their house so that they could discuss Sanchez’s
request.3
On May 9, 1979, private respondent, Sanchez, Doronilla and a certain Estrella Dumagpi, Doronilla’s
private secretary, met and discussed the matter. Thereafter, relying on the assurances and representations
of Sanchez and Doronilla, private respondent issued a check in the amount of Two Hundred Thousand
Pesos (₱200,000.00) in favor of Sterela. Private respondent instructed his wife, Mrs. Inocencia Vives, to
accompany Doronilla and Sanchez in opening a savings account in the name of Sterela in the Buendia,
Makati branch of Producers Bank of the Philippines. However, only Sanchez, Mrs. Vives and Dumagpi
went to the bank to deposit the check. They had with them an authorization letter from Doronilla
authorizing Sanchez and her companions, "in coordination with Mr. Rufo Atienza," to open an account for
Sterela Marketing Services in the amount of ₱200,000.00. In opening the account, the authorized
signatories were Inocencia Vives and/or Angeles Sanchez. A passbook for Savings Account No. 10-1567
was thereafter issued to Mrs. Vives.4
Subsequently, private respondent learned that Sterela was no longer holding office in the address
previously given to him. Alarmed, he and his wife went to the Bank to verify if their money was still intact.
The bank manager referred them to Mr. Rufo Atienza, the assistant manager, who informed them that
part of the money in Savings Account No. 10-1567 had been withdrawn by Doronilla, and that only
₱90,000.00 remained therein. He likewise told them that Mrs. Vives could not withdraw said remaining
amount because it had to answer for some postdated checks issued by Doronilla. According to Atienza,
after Mrs. Vives and Sanchez opened Savings Account No. 10-1567, Doronilla opened Current Account
No. 10-0320 for Sterela and authorized the Bank to debit Savings Account No. 10-1567 for the amounts
necessary to cover overdrawings in Current Account No. 10-0320. In opening said current account,
Sterela, through Doronilla, obtained a loan of ₱175,000.00 from the Bank. To cover payment thereof,
Doronilla issued three postdated checks, all of which were dishonored. Atienza also said that Doronilla
could assign or withdraw the money in Savings Account No. 10-1567 because he was the sole proprietor of
Sterela.5
Private respondent tried to get in touch with Doronilla through Sanchez. On June 29, 1979, he received a
letter from Doronilla, assuring him that his money was intact and would be returned to him. On August
13, 1979, Doronilla issued a postdated check for Two Hundred Twelve Thousand Pesos (₱212,000.00) in
favor of private respondent. However, upon presentment thereof by private respondent to the drawee bank,
the check was dishonored. Doronilla requested private respondent to present the same check on
September 15, 1979 but when the latter presented the check, it was again dishonored.6
Private respondent referred the matter to a lawyer, who made a written demand upon Doronilla for the
return of his client’s money. Doronilla issued another check for ₱212,000.00 in private respondent’s favor
but the check was again dishonored for insufficiency of funds.7
Private respondent instituted an action for recovery of sum of money in the Regional Trial Court (RTC) in
Pasig, Metro Manila against Doronilla, Sanchez, Dumagpi and petitioner. The case was docketed as Civil
Case No. 44485. He also filed criminal actions against Doronilla, Sanchez and Dumagpi in the RTC.
However, Sanchez passed away on March 16, 1985 while the case was pending before the trial court. On
October 3, 1995, the RTC of Pasig, Branch 157, promulgated its Decision in Civil Case No. 44485, the
dispositive portion of which reads:
IN VIEW OF THE FOREGOING, judgment is hereby rendered sentencing defendants Arturo J. Doronila,
Estrella Dumagpi and Producers Bank of the Philippines to pay plaintiff Franklin Vives jointly and severally
–
(a) the amount of ₱200,000.00, representing the money deposited, with interest at the legal rate from the
filing of the complaint until the same is fully paid;
(b) the sum of ₱50,000.00 for moral damages and a similar amount for exemplary damages;
(c) the amount of ₱40,000.00 for attorney’s fees; and
(d) the costs of the suit.
SO ORDERED.8
Petitioner appealed the trial court’s decision to the Court of Appeals. In its Decision dated June 25, 1991,
the appellate court affirmed in toto the decision of the RTC.9 It likewise denied with finality petitioner’s
motion for reconsideration in its Resolution dated May 5, 1994.10
On June 30, 1994, petitioner filed the present petition, arguing that –
I.
THE HONORABLE COURT OF APPEALS ERRED IN UPHOLDING THAT THE TRANSACTION BETWEEN
THE DEFENDANT DORONILLA AND RESPONDENT VIVES WAS ONE OF SIMPLE LOAN AND NOT
ACCOMMODATION;
II.
THE HONORABLE COURT OF APPEALS ERRED IN UPHOLDING THAT PETITIONER’S BANK
MANAGER, MR. RUFO ATIENZA, CONNIVED WITH THE OTHER DEFENDANTS IN DEFRAUDING
PETITIONER (Sic. Should be PRIVATE RESPONDENT) AND AS A CONSEQUENCE, THE PETITIONER
SHOULD BE HELD LIABLE UNDER THE PRINCIPLE OF NATURAL JUSTICE;
III.
THE HONORABLE COURT OF APPEALS ERRED IN ADOPTING THE ENTIRE RECORDS OF THE
REGIONAL TRIAL COURT AND AFFIRMING THE JUDGMENT APPEALED FROM, AS THE FINDINGS OF
THE REGIONAL TRIAL COURT WERE BASED ON A MISAPPREHENSION OF FACTS;
IV.
THE HONORABLE COURT OF APPEALS ERRED IN DECLARING THAT THE CITED DECISION IN
SALUDARES VS. MARTINEZ, 29 SCRA 745, UPHOLDING THE LIABILITY OF AN EMPLOYER FOR ACTS
COMMITTED BY AN EMPLOYEE IS APPLICABLE;
V.
THE HONORABLE COURT OF APPEALS ERRED IN UPHOLDING THE DECISION OF THE LOWER
COURT THAT HEREIN PETITIONER BANK IS JOINTLY AND SEVERALLY LIABLE WITH THE OTHER
DEFENDANTS FOR THE AMOUNT OF P200,000.00 REPRESENTING THE SAVINGS ACCOUNT
DEPOSIT, P50,000.00 FOR MORAL DAMAGES, P50,000.00 FOR EXEMPLARY DAMAGES, P40,000.00
FOR ATTORNEY’S FEES AND THE COSTS OF SUIT.11
Private respondent filed his Comment on September 23, 1994. Petitioner filed its Reply thereto on
September 25, 1995. The Court then required private respondent to submit a rejoinder to the reply.
However, said rejoinder was filed only on April 21, 1997, due to petitioner’s delay in furnishing private
respondent with copy of the reply12 and several substitutions of counsel on the part of private
respondent.13 On January 17, 2001, the Court resolved to give due course to the petition and required the
parties to submit their respective memoranda.14 Petitioner filed its memorandum on April 16, 2001 while
private respondent submitted his memorandum on March 22, 2001.
Petitioner contends that the transaction between private respondent and Doronilla is a simple loan
(mutuum) since all the elements of a mutuum are present: first, what was delivered by private respondent
to Doronilla was money, a consumable thing; and second, the transaction was onerous as Doronilla was
obliged to pay interest, as evidenced by the check issued by Doronilla in the amount of ₱212,000.00, or
₱12,000 more than what private respondent deposited in Sterela’s bank account.15 Moreover, the fact that
private respondent sued his good friend Sanchez for his failure to recover his money from Doronilla shows
that the transaction was not merely gratuitous but "had a business angle" to it. Hence, petitioner argues
that it cannot be held liable for the return of private respondent’s ₱200,000.00 because it is not privy to the
transaction between the latter and Doronilla.16
It argues further that petitioner’s Assistant Manager, Mr. Rufo Atienza, could not be faulted for allowing
Doronilla to withdraw from the savings account of Sterela since the latter was the sole proprietor of said
company. Petitioner asserts that Doronilla’s May 8, 1979 letter addressed to the bank, authorizing Mrs.
Vives and Sanchez to open a savings account for Sterela, did not contain any authorization for these two to
withdraw from said account. Hence, the authority to withdraw therefrom remained exclusively with
Doronilla, who was the sole proprietor of Sterela, and who alone had legal title to the savings
account.17 Petitioner points out that no evidence other than the testimonies of private respondent and Mrs.
Vives was presented during trial to prove that private respondent deposited his ₱200,000.00 in Sterela’s
account for purposes of its incorporation.18 Hence, petitioner should not be held liable for allowing Doronilla
to withdraw from Sterela’s savings account.1a\^/phi1.net
Petitioner also asserts that the Court of Appeals erred in affirming the trial court’s decision since the
findings of fact therein were not accord with the evidence presented by petitioner during trial to prove that
the transaction between private respondent and Doronilla was a mutuum, and that it committed no wrong
in allowing Doronilla to withdraw from Sterela’s savings account.19
Finally, petitioner claims that since there is no wrongful act or omission on its part, it is not liable for the
actual damages suffered by private respondent, and neither may it be held liable for moral and exemplary
damages as well as attorney’s fees.20
Private respondent, on the other hand, argues that the transaction between him and Doronilla is not a
mutuum but an accommodation,21 since he did not actually part with the ownership of his ₱200,000.00
and in fact asked his wife to deposit said amount in the account of Sterela so that a certification can be
issued to the effect that Sterela had sufficient funds for purposes of its incorporation but at the same time,
he retained some degree of control over his money through his wife who was made a signatory to the
savings account and in whose possession the savings account passbook was given.22
He likewise asserts that the trial court did not err in finding that petitioner, Atienza’s employer, is liable for
the return of his money. He insists that Atienza, petitioner’s assistant manager, connived with Doronilla in
defrauding private respondent since it was Atienza who facilitated the opening of Sterela’s current account
three days after Mrs. Vives and Sanchez opened a savings account with petitioner for said company, as
well as the approval of the authority to debit Sterela’s savings account to cover any overdrawings in its
current account.23
There is no merit in the petition.
At the outset, it must be emphasized that only questions of law may be raised in a petition for review filed
with this Court. The Court has repeatedly held that it is not its function to analyze and weigh all over again
the evidence presented by the parties during trial.24 The Court’s jurisdiction is in principle limited to
reviewing errors of law that might have been committed by the Court of Appeals.25 Moreover, factual
findings of courts, when adopted and confirmed by the Court of Appeals, are final and conclusive on this
Court unless these findings are not supported by the evidence on record.26 There is no showing of any
misapprehension of facts on the part of the Court of Appeals in the case at bar that would require this
Court to review and overturn the factual findings of that court, especially since the conclusions of fact of
the Court of Appeals and the trial court are not only consistent but are also amply supported by the
evidence on record.
No error was committed by the Court of Appeals when it ruled that the transaction between private
respondent and Doronilla was a commodatum and not a mutuum. A circumspect examination of the
records reveals that the transaction between them was a commodatum. Article 1933 of the Civil Code
distinguishes between the two kinds of loans in this wise:
By the contract of loan, one of the parties delivers to another, either something not consumable so that the
latter may use the same for a certain time and return it, in which case the contract is called a
commodatum; or money or other consumable thing, upon the condition that the same amount of the
same kind and quality shall be paid, in which case the contract is simply called a loan or mutuum.
Commodatum is essentially gratuitous.
Simple loan may be gratuitous or with a stipulation to pay interest.
In commodatum, the bailor retains the ownership of the thing loaned, while in simple loan, ownership
passes to the borrower.
The foregoing provision seems to imply that if the subject of the contract is a consumable thing, such as
money, the contract would be a mutuum. However, there are some instances where a commodatum may
have for its object a consumable thing. Article 1936 of the Civil Code provides:
Consumable goods may be the subject of commodatum if the purpose of the contract is not the
consumption of the object, as when it is merely for exhibition.
Thus, if consumable goods are loaned only for purposes of exhibition, or when the intention of the parties
is to lend consumable goods and to have the very same goods returned at the end of the period agreed
upon, the loan is a commodatum and not a mutuum.
The rule is that the intention of the parties thereto shall be accorded primordial consideration in
determining the actual character of a contract.27 In case of doubt, the contemporaneous and subsequent
acts of the parties shall be considered in such determination.28
As correctly pointed out by both the Court of Appeals and the trial court, the evidence shows that private
respondent agreed to deposit his money in the savings account of Sterela specifically for the purpose of
making it appear "that said firm had sufficient capitalization for incorporation, with the promise that the
amount shall be returned within thirty (30) days."29 Private respondent merely "accommodated" Doronilla
by lending his money without consideration, as a favor to his good friend Sanchez. It was however clear to
the parties to the transaction that the money would not be removed from Sterela’s savings account and
would be returned to private respondent after thirty (30) days.
Doronilla’s attempts to return to private respondent the amount of ₱200,000.00 which the latter deposited
in Sterela’s account together with an additional ₱12,000.00, allegedly representing interest on the
mutuum, did not convert the transaction from a commodatum into a mutuum because such was not the
intent of the parties and because the additional ₱12,000.00 corresponds to the fruits of the lending of the
₱200,000.00. Article 1935 of the Civil Code expressly states that "[t]he bailee in commodatum acquires the
use of the thing loaned but not its fruits." Hence, it was only proper for Doronilla to remit to private
respondent the interest accruing to the latter’s money deposited with petitioner.
Neither does the Court agree with petitioner’s contention that it is not solidarily liable for the return of
private respondent’s money because it was not privy to the transaction between Doronilla and private
respondent. The nature of said transaction, that is, whether it is a mutuum or a commodatum, has no
bearing on the question of petitioner’s liability for the return of private respondent’s money because the
factual circumstances of the case clearly show that petitioner, through its employee Mr. Atienza, was partly
responsible for the loss of private respondent’s money and is liable for its restitution.
Petitioner’s rules for savings deposits written on the passbook it issued Mrs. Vives on behalf of Sterela for
Savings Account No. 10-1567 expressly states that—
"2. Deposits and withdrawals must be made by the depositor personally or upon his written authority duly
authenticated, and neither a deposit nor a withdrawal will be permitted except upon the production of the
depositor savings bank book in which will be entered by the Bank the amount deposited or withdrawn."30
Said rule notwithstanding, Doronilla was permitted by petitioner, through Atienza, the Assistant Branch
Manager for the Buendia Branch of petitioner, to withdraw therefrom even without presenting the
passbook (which Atienza very well knew was in the possession of Mrs. Vives), not just once, but several
times. Both the Court of Appeals and the trial court found that Atienza allowed said withdrawals because
he was party to Doronilla’s "scheme" of defrauding private respondent:
XXX
But the scheme could not have been executed successfully without the knowledge, help and cooperation of
Rufo Atienza, assistant manager and cashier of the Makati (Buendia) branch of the defendant bank.
Indeed, the evidence indicates that Atienza had not only facilitated the commission of the fraud but he
likewise helped in devising the means by which it can be done in such manner as to make it appear that
the transaction was in accordance with banking procedure.
To begin with, the deposit was made in defendant’s Buendia branch precisely because Atienza was a key
officer therein. The records show that plaintiff had suggested that the ₱200,000.00 be deposited in his
bank, the Manila Banking Corporation, but Doronilla and Dumagpi insisted that it must be in defendant’s
branch in Makati for "it will be easier for them to get a certification". In fact before he was introduced to
plaintiff, Doronilla had already prepared a letter addressed to the Buendia branch manager authorizing
Angeles B. Sanchez and company to open a savings account for Sterela in the amount of ₱200,000.00, as
"per coordination with Mr. Rufo Atienza, Assistant Manager of the Bank x x x" (Exh. 1). This is a clear
manifestation that the other defendants had been in consultation with Atienza from the inception of the
scheme. Significantly, there were testimonies and admission that Atienza is the brother-in-law of a certain
Romeo Mirasol, a friend and business associate of Doronilla.1awphi1.nét
Then there is the matter of the ownership of the fund. Because of the "coordination" between Doronilla and
Atienza, the latter knew before hand that the money deposited did not belong to Doronilla nor to Sterela.
Aside from such foreknowledge, he was explicitly told by Inocencia Vives that the money belonged to her
and her husband and the deposit was merely to accommodate Doronilla. Atienza even declared that the
money came from Mrs. Vives.
Although the savings account was in the name of Sterela, the bank records disclose that the only ones
empowered to withdraw the same were Inocencia Vives and Angeles B. Sanchez. In the signature card
pertaining to this account (Exh. J), the authorized signatories were Inocencia Vives &/or Angeles B.
Sanchez. Atienza stated that it is the usual banking procedure that withdrawals of savings deposits could
only be made by persons whose authorized signatures are in the signature cards on file with the bank. He,
however, said that this procedure was not followed here because Sterela was owned by Doronilla. He
explained that Doronilla had the full authority to withdraw by virtue of such ownership. The Court is not
inclined to agree with Atienza. In the first place, he was all the time aware that the money came from Vives
and did not belong to Sterela. He was also told by Mrs. Vives that they were only accommodating Doronilla
so that a certification can be issued to the effect that Sterela had a deposit of so much amount to be sued
in the incorporation of the firm. In the second place, the signature of Doronilla was not authorized in so far
as that account is concerned inasmuch as he had not signed the signature card provided by the bank
whenever a deposit is opened. In the third place, neither Mrs. Vives nor Sanchez had given Doronilla the
authority to withdraw.
Moreover, the transfer of fund was done without the passbook having been presented. It is an accepted
practice that whenever a withdrawal is made in a savings deposit, the bank requires the presentation of
the passbook. In this case, such recognized practice was dispensed with. The transfer from the savings
account to the current account was without the submission of the passbook which Atienza had given to
Mrs. Vives. Instead, it was made to appear in a certification signed by Estrella Dumagpi that a duplicate
passbook was issued to Sterela because the original passbook had been surrendered to the Makati branch
in view of a loan accommodation assigning the savings account (Exh. C). Atienza, who undoubtedly had a
hand in the execution of this certification, was aware that the contents of the same are not true. He knew
that the passbook was in the hands of Mrs. Vives for he was the one who gave it to her. Besides, as
assistant manager of the branch and the bank official servicing the savings and current accounts in
question, he also was aware that the original passbook was never surrendered. He was also cognizant that
Estrella Dumagpi was not among those authorized to withdraw so her certification had no effect
whatsoever.
The circumstance surrounding the opening of the current account also demonstrate that Atienza’s active
participation in the perpetration of the fraud and deception that caused the loss. The records indicate that
this account was opened three days later after the ₱200,000.00 was deposited. In spite of his disclaimer,
the Court believes that Atienza was mindful and posted regarding the opening of the current account
considering that Doronilla was all the while in "coordination" with him. That it was he who facilitated the
approval of the authority to debit the savings account to cover any overdrawings in the current account
(Exh. 2) is not hard to comprehend.
Clearly Atienza had committed wrongful acts that had resulted to the loss subject of this case. x x x.31
Under Article 2180 of the Civil Code, employers shall be held primarily and solidarily liable for damages
caused by their employees acting within the scope of their assigned tasks. To hold the employer liable
under this provision, it must be shown that an employer-employee relationship exists, and that the
employee was acting within the scope of his assigned task when the act complained of was
committed.32 Case law in the United States of America has it that a corporation that entrusts a general
duty to its employee is responsible to the injured party for damages flowing from the employee’s wrongful
act done in the course of his general authority, even though in doing such act, the employee may have
failed in its duty to the employer and disobeyed the latter’s instructions.33

There is no dispute that Atienza was an employee of petitioner. Furthermore, petitioner did not deny that
Atienza was acting within the scope of his authority as Assistant Branch Manager when he assisted
Doronilla in withdrawing funds from Sterela’s Savings Account No. 10-1567, in which account private
respondent’s money was deposited, and in transferring the money withdrawn to Sterela’s Current Account
with petitioner. Atienza’s acts of helping Doronilla, a customer of the petitioner, were obviously done in
furtherance of petitioner’s interests34 even though in the process, Atienza violated some of petitioner’s rules
such as those stipulated in its savings account passbook.35 It was established that the transfer of funds
from Sterela’s savings account to its current account could not have been accomplished by Doronilla
without the invaluable assistance of Atienza, and that it was their connivance which was the cause of
private respondent’s loss.

The foregoing shows that the Court of Appeals correctly held that under Article 2180 of the Civil Code,
petitioner is liable for private respondent’s loss and is solidarily liable with Doronilla and Dumagpi for the
return of the ₱200,000.00 since it is clear that petitioner failed to prove that it exercised due diligence to
prevent the unauthorized withdrawals from Sterela’s savings account, and that it was not negligent in the
selection and supervision of Atienza. Accordingly, no error was committed by the appellate court in the
award of actual, moral and exemplary damages, attorney’s fees and costs of suit to private respondent.

WHEREFORE, the petition is hereby DENIED. The assailed Decision and Resolution of the Court of
Appeals are AFFIRMED.

SO ORDERED.
 G.R. No. 179096 February 06, 2013
JOSEPH GOYANKO, JR., as administrator of the Estate of Joseph Goyanko, Sr., Petitioner,
vs.
UNITED COCONUT PLANTERS BANK, MANGO AVENUE BRANCH, Respondent.
DECISION
BRION, J.:
We resolve the petition for review on certiorari1 filed by petitioner Joseph Goyanko, Jr., administrator of the
Estate of Joseph Goyanko, Sr., to nullify the decision2 dated February 20, 2007 and the resolution3 dated
July 31, 2007 of the Court of Appeals (CA) in CA-G.R. CV. No. 00257 affirming the decision4 of the
Regional Trial Court of Cebu City, Branch 16(RTC) in Civil Case No. CEB-22277. The RTC dismissed the
petitioner’s complaint for recovery of sum money against United Coconut Planters Bank, Mango Avenue
Branch (UCPB).
The Factual Antecedents
In 1995, the late Joseph Goyanko, Sr. (Goyanko) invested Two Million Pesos (P2,000,000.00) with
Philippine Asia Lending Investors, Inc. family, represented by the petitioner, and his illegitimate family
presented conflicting claims to PALII for the release of the investment. Pending the investigation of the
conflicting claims, PALII deposited the proceeds of the investment with UCPB on October 29, 19965 under
the name "Phil Asia: ITF (In Trust For) The Heirs of Joseph Goyanko, Sr." (ACCOUNT). On September 27,
1997, the deposit under the ACCOUNT was P1,509,318.76.
On December 11, 1997, UCPB allowed PALII to withdraw One Million Five Hundred Thousand Pesos
(P1,500,000.00) from the Account, leaving a balance of only P9,318.76. When UCPB refused the demand
to restore the amount withdrawn plus legal interest from December 11, 1997, the petitioner filed a
complaint before the RTC. In its answer to the complaint, UCPB admitted, among others, the opening of
the ACCOUNT under the name "ITF (In Trust For) The Heirs of Joseph Goyanko, Sr.," (ITF HEIRS) and the
withdrawal on December 11, 1997.
The RTC Ruling
In its August 27, 2003 decision, the RTC dismissed the petitioner’s complaint and awarded UCPB
attorney’s fees, litigation expenses and the costs of the suit.6 The RTC did not consider the words "ITF
HEIRS" sufficient to charge UCPB with knowledge of any trust relation between PALII and Goyanko’s
heirs (HEIRS). It concluded that UCPB merely performed its duty as a depository bank in allowing PALII to
withdraw from the ACCOUNT, as the contract of deposit was officially only between PALII, in its own
capacity, and UCPB. The petitioner appealed his case to the CA.
The CA’s Ruling
Before the CA, the petitioner maintained that by opening the ACCOUNT, PALII established a trust by
which it was the "trustee" and the HEIRS are the "trustors-beneficiaries;" thus, UCPB should be
liable for allowing the withdrawal.
The CA partially granted the petitioner’s appeal. It affirmed the August 27, 2003 decision of the RTC, but
deleted the award of attorney’s fees and litigation expenses. The CA held that no express trust was created
between the HEIRS and PALII. For a trust to be established, the law requires, among others, a competent
trustor and trustee and a clear intention to create a trust, which were absent in this case. Quoting the RTC
with approval, the CA noted that the contract of deposit was only between PALII in its own capacity and
UCPB, and the words "ITF HEIRS" were insufficient to establish the existence of a trust. The CA concluded
that as no trust existed, expressly or impliedly, UCPB is not liable for the amount withdrawn.7
In its July 31, 2007 resolution,8 the CA denied the petitioner’s motion for reconsideration. Hence, the
petitioner’s present recourse.
The Petition
The petitioner argues in his petition that: first, an express trust was created, as clearly shown by PALII’s
March 28, 1996 and November 15, 1996 letters.9 Citing jurisprudence, the petitioner emphasizes that
from the established definition of a trust,10 PALII is clearly the trustor as it created the trust; UCPB is the
trustee as it is the party in whom confidence is reposed as regards the property for the benefit of another;
and the HEIRS are the beneficiaries as they are the persons for whose benefit the trust is created.11 Also,
quoting Development Bank of the Philippines v. Commission on Audit,12 the petitioner argues that the
naming of the cestui que trust is not necessary as it suffices that they are adequately certain or
identifiable.13
Second, UCPB was negligent and in bad faith in allowing the withdrawal and in failing to inquire into the
nature of the ACCOUNT.14 The petitioner maintains that the surrounding facts, the testimony of UCPB’s
witness, and UCPB’s own records showed that: (1) UCPB was aware of the trust relation between PALII
and the HEIRS; and (2) PALII held the ACCOUNT in a trust capacity. Finally, the CA erred in affirming the
RTC’s dismissal of his case for lack of cause of action. The petitioner insists that since an express trust
clearly exists, UCPB, the trustee, should not have allowed the withdrawal.
The Case for UCPB
UCPB posits, in defense, that the ACCOUNT involves an ordinary deposit contract between PALII and
UCPB only, which created a debtor-creditor relationship obligating UCPB to return the proceeds to the
account holder-PALII. Thus, it was not negligent in handling the ACCOUNT when it allowed the
withdrawal. The mere designation of the ACCOUNT as "ITF" is insufficient to establish the existence of an
express trust or charge it with knowledge of the relation between PALII and the HEIRS.
UCPB also argues that the petitioner changed the theory of his case. Before the CA, the petitioner argued
that the HEIRS are the trustors-beneficiaries, and PALII is the trustee. Here, the petitioner maintains that
PALII is the trustor, UCPB is the trustee, and the HEIRS are the beneficiaries. Contrary to the petitioner’s
assertion, the records failed to show that PALII and UCPB executed a trust agreement, and PALII’s letters
made it clear that PALII, on its own, intended to turn-over the proceeds of the ACCOUNT to its rightful
owners.
The Court’s Ruling
The issue before us is whether UCPB should be held liable for the amount withdrawn because a trust
agreement existed between PALII and UCPB, in favor of the HEIRS, when PALII opened the ACCOUNT
with UCPB.
We rule in the negative.
We first address the procedural issues. We stress the settled rule that a petition for review
on certiorari under Rule 45 of the Rules of Court resolves only questions of law, not questions of fact.15 A
question, to be one of law, must not examine the probative value of the evidence presented by the
parties;16 otherwise, the question is one of fact.17Whether an express trust exists in this case is a question
of fact whose resolution is not proper in a petition under Rule 45. Reinforcing this is the equally settled rule
that factual findings of the lower tribunals are conclusive on the parties and are not generally reviewable by
this Court,18 especially when, as here, the CA affirmed these findings. The plain reason is that this Court is
not a trier of facts.19 While this Court has, at times, permitted exceptions from the restriction,20 we find that
none of these exceptions obtain in the present case.
Second, we find that the petitioner changed the theory of his case. The petitioner argued before the lower
courts that an express trust exists between PALII as the trustee and the HEIRS as the trustor-
beneficiary.21 The petitioner now asserts that the express trust exists between PALII as the trustor and
UCPB as the trustee, with the HEIRS as the beneficiaries.22 At this stage of the case, such change of theory
is simply not allowed as it violates basic rules of fair play, justice and due process. Our rulings are clear - "a
party who deliberately adopts a certain theory upon which the case was decided by the lower court will not
be permitted to change [it] on appeal";23 otherwise, the lower courts will effectively be deprived of the
opportunity to decide the merits of the case fairly.24 Besides, courts of justice are devoid of jurisdiction to
resolve a question not in issue.25 For these reasons, the petition must fail. Independently of these, the
petition must still be denied.
No express trust exists; UCPB exercised the required diligence in handling the ACCOUNT;
petitioner has no cause of action against UCPB
A trust, either express or implied,26 is the fiduciary relationship "x x x between one person having an
equitable ownership of property and another person owning the legal title to such property, the equitable
ownership of the former entitling him to the performance of certain duties and the exercise of certain
powers by the latter."27 Express or direct trusts are created by the direct and positive acts of the trustor or
of the parties.28 No written words are required to create an express trust. This is clear from Article 1444 of
the Civil Code,29 but, the creation of an express trust must be firmly shown; it cannot be assumed from
loose and vague declarations or circumstances capable of other interpretations.30
In Rizal Surety & Insurance Co. v. CA,31 we laid down the requirements before an express trust will be
recognized:
Basically, these elements include a competent trustor and trustee, an ascertainable trust res, and
sufficiently certain beneficiaries. xxx each of the above elements is required to be established, and,
if any one of them is missing, it is fatal to the trusts (sic). Furthermore, there must be a present
and complete disposition of the trust property, notwithstanding that the enjoyment in the
beneficiary will take place in the future. It is essential, too, that the purpose be an active one to prevent
trust from being executed into a legal estate or interest, and one that is not in contravention of some
prohibition of statute or rule of public policy. There must also be some power of administration other
than a mere duty to perform a contract although the contract is for a thirdparty beneficiary. A
declaration of terms is essential, and these must be stated with reasonable certainty in order that
the trustee may administer, and that the court, if called upon so to do, may enforce, the trust. [emphasis
ours]
Under these standards, we hold that no express trust was created. First, while an ascertainable
trust res and sufficiently certain beneficiaries may exist, a competent trustor and trustee do not. Second,
UCPB, as trustee of the ACCOUNT, was never under any equitable duty to deal with or given any power of
administration over it. On the contrary, it was PALII that undertook the duty to hold the title to the
ACCOUNT for the benefit of the HEIRS. Third, PALII, as the trustor, did not have the right to the beneficial
enjoyment of the ACCOUNT. Finally, the terms by which UCPB is to administer the ACCOUNT was not
shown with reasonable certainty. While we agree with the petitioner that a trust’s beneficiaries need not be
particularly identified for a trust to exist, the intention to create an express trust must first be firmly
established, along with the other elements laid above; absent these, no express trust exists.
Contrary to the petitioner’s contention, PALII’s letters and UCPB’s records established UCPB’s participation
as a mere depositary of the proceeds of the investment. In the March 28, 1996 letter, PALII manifested its
intention to pursue an active role in and up to the turnover of those proceeds to their rightful
owners,32 while in the November 15, 1996 letter, PALII begged the petitioner to trust it with the safekeeping
of the investment proceeds and documents.33 Had it been PALII’s intention to create a trust in favor of the
HEIRS, it would have relinquished any right or claim over the proceeds in UCPB’s favor as the trustee. As
matters stand, PALII never did.
UCPB’s records and the testimony of UCPB’s witness34 likewise lead us to the same conclusion. While the
words "ITF HEIRS" may have created the impression that a trust account was created, a closer scrutiny
reveals that it is an ordinary savings account.35 We give credence to UCPB’s explanation that the word
"ITF" was merely used to distinguish the ACCOUNT from PALII’s other accounts with UCPB. A trust can be
created without using the word "trust" or "trustee," but the mere use of these words does not automatically
reveal an intention to create a trust.36 If at all, these words showed a trustee-beneficiary relationship
between PALII and the HEIRS.
Contrary to the petitioner’s position, UCPB did not become a trustee by the mere opening of the
ACCOUNT.1âwphi1 While this may seem to be the case, by reason of the fiduciary nature of the bank’s
relationship with its depositors,37 this fiduciary relationship does not "convert the contract between the
bank and its depositors from a simple loan to a trust agreement, whether express or implied."38 It simply
means that the bank is obliged to observe "high standards of integrity and performance" in complying with
its obligations under the contract of simple loan.39 Per Article 1980 of the Civil Code,40 a creditor-debtor
relationship exists between the bank and its depositor.41 The savings deposit agreement is between the
bank and the depositor;42 by receiving the deposit, the bank impliedly agrees to pay upon demand and
only upon the depositor’s order.43
Since the records and the petitioner’s own admission showed that the ACCOUNT was opened by PALII,
UCPB’s receipt of the deposit signified that it agreed to pay PALII upon its demand and only upon its order.
Thus, when UCPB allowed PALII to withdraw from the ACCOUNT, it was merely performing its contractual
obligation under their savings deposit agreement. No negligence or bad faith44 can be imputed to UCPB for
this action. As far as UCPB was concerned, PALII is the account holder and not the HEIRS. As we held
in Falton Iron Works Co. v. China Banking Corporation.45 the bank’s duty is to its creditor-depositor and not
to third persons. Third persons, like the HEIRS here, who may have a right to the money deposited, cannot
hold the bank responsible unless there is a court order or garnishment.46 The petitioner’s recourse is to go
before a court of competent jurisdiction to prove his valid right over the money deposited.
In these lights, we find the third assignment of error mooted. A cause of action requires that there be a
right existing in favor of the plaintiff, the defendant’s obligation to respect that right, and an act or omission
of the defendant in breach of that right.47 We reiterate that UCPB’s obligation was towards PALII as its
creditor-depositor. While the HEIRS may have a valid claim over the proceeds of the investment, the
obligation to turn-over those proceeds lies with PALII. Since no trust exists the petitioner’s complaint was
correctly dismissed and the CA did not commit any reversible error in affirming the RTC decision. One final
note, the burden to prove the existence of an express trust lies with the petitioner.48 For his failure to
discharge this burden, the petition must fail.
WHEREFORE, in view of these considerations, we hereby DENY the petition and AFFIRM the decision
dated February 20, 2007 and the resolution dated July 31, 2007 of the Court of Appeals in CA-G.R. CV.
No. 00257. Costs against the petitioner.
G.R. No. 136202 January 25, 2007
BANK OF THE PHILIPPINE ISLANDS, Petitioner,
vs.
COURT OF APPEALS, ANNABELLE A. SALAZAR, and JULIO R. TEMPLONUEVO, Respondents
DECISION
AZCUNA, J.:
This is a petition for review under Rule 45 of the Rules of Court seeking the reversal of the Decision1 dated
April 3, 1998, and the Resolution2 dated November 9, 1998, of the Court of Appeals in CA-G.R. CV No.
42241.
The facts3 are as follows:
A.A. Salazar Construction and Engineering Services filed an action for a sum of money with damages
against herein petitioner Bank of the Philippine Islands (BPI) on December 5, 1991 before Branch 156 of
the Regional Trial Court (RTC) of Pasig City. The complaint was later amended by substituting the name of
Annabelle A. Salazar as the real party in interest in place of A.A. Salazar Construction and Engineering
Services. Private respondent Salazar prayed for the recovery of the amount of Two Hundred Sixty-Seven
Thousand, Seven Hundred Seven Pesos and Seventy Centavos (P267,707.70) debited by petitioner BPI
from her account. She likewise prayed for damages and attorney’s fees.
Petitioner BPI, in its answer, alleged that on August 31, 1991, Julio R. Templonuevo, third-party defendant
and herein also a private respondent, demanded from the former payment of the amount of Two Hundred
Sixty-Seven Thousand, Six Hundred Ninety-Two Pesos and Fifty Centavos (P267,692.50) representing the
aggregate value of three (3) checks, which were allegedly payable to him, but which were deposited with the
petitioner bank to private respondent Salazar’s account (Account No. 0203-1187-67) without his
knowledge and corresponding endorsement.
Accepting that Templonuevo’s claim was a valid one, petitioner BPI froze Account No. 0201-0588-48 of
A.A. Salazar and Construction and Engineering Services, instead of Account No. 0203-1187-67 where the
checks were deposited, since this account was already closed by private respondent Salazar or had an
insufficient balance.
Private respondent Salazar was advised to settle the matter with Templonuevo but they did not arrive at
any settlement. As it appeared that private respondent Salazar was not entitled to the funds represented
by the checks which were deposited and accepted for deposit, petitioner BPI decided to debit the amount
of P267,707.70 from her Account No. 0201-0588-48 and the sum of P267,692.50 was paid to
Templonuevo by means of a cashier’s check. The difference between the value of the checks (P267,692.50)
and the amount actually debited from her account (P267,707.70) represented bank charges in connection
with the issuance of a cashier’s check to Templonuevo.
In the answer to the third-party complaint, private respondent Templonuevo admitted the payment to him
of P267,692.50 and argued that said payment was to correct the malicious deposit made by private
respondent Salazar to her private account, and that petitioner bank’s negligence and tolerance regarding
the matter was violative of the primary and ordinary rules of banking. He likewise contended that the
debiting or taking of the reimbursed amount from the account of private respondent Salazar by petitioner
BPI was a matter exclusively between said parties and may be pursuant to banking rules and regulations,
but did not in any way affect him. The debiting from another account of private respondent Salazar,
considering that her other account was effectively closed, was not his concern.
After trial, the RTC rendered a decision, the dispositive portion of which reads thus:
WHEREFORE, premises considered, judgment is hereby rendered in favor of the plaintiff [private
respondent Salazar] and against the defendant [petitioner BPI] and ordering the latter to pay as follows:
1. The amount of P267,707.70 with 12% interest thereon from September 16, 1991 until the said amount
is fully paid;
2. The amount of P30,000.00 as and for actual damages;
3. The amount of P50,000.00 as and for moral damages;
4. The amount of P50,000.00 as and for exemplary damages;
5. The amount of P30,000.00 as and for attorney’s fees; and
6. Costs of suit.
The counterclaim is hereby ordered DISMISSED for lack of factual basis.
The third-party complaint [filed by petitioner] is hereby likewise ordered DISMISSED for lack of merit.
Third-party defendant’s [i.e., private respondent Templonuevo’s] counterclaim is hereby likewise
DISMISSED for lack of factual basis.
SO ORDERED.4
On appeal, the Court of Appeals (CA) affirmed the decision of the RTC and held that respondent Salazar
was entitled to the proceeds of the three (3) checks notwithstanding the lack of endorsement thereon by
the payee. The CA concluded that Salazar and Templonuevo had previously agreed that the checks
payable to JRT Construction and Trading5 actually belonged to Salazar and would be deposited to her
account, with petitioner acquiescing to the arrangement.6
Petitioner therefore filed this petition on these grounds:
I.
The Court of Appeals committed reversible error in misinterpreting Section 49 of the Negotiable
Instruments Law and Section 3 (r and s) of Rule 131 of the New Rules on Evidence.
II.
The Court of Appeals committed reversible error in NOT applying the provisions of Articles 22, 1278 and
1290 of the Civil Code in favor of BPI.
III.
The Court of Appeals committed a reversible error in holding, based on a misapprehension of facts, that
the account from which BPI debited the amount of P267,707.70 belonged to a corporation with a separate
and distinct personality.
IV.
The Court of Appeals committed a reversible error in holding, based entirely on speculations, surmises or
conjectures, that there was an agreement between SALAZAR and TEMPLONUEVO that checks payable to
TEMPLONUEVO may be deposited by SALAZAR to her personal account and that BPI was privy to this
agreement.
V.
The Court of Appeals committed reversible error in holding, based entirely on speculation, surmises or
conjectures, that SALAZAR suffered great damage and prejudice and that her business standing was
eroded.
VI.
The Court of Appeals erred in affirming instead of reversing the decision of the lower court against BPI and
dismissing SALAZAR’s complaint.
VII.
The Honorable Court erred in affirming the decision of the lower court dismissing the third-party complaint
of BPI.7
The issues center on the propriety of the deductions made by petitioner from private respondent Salazar’s
account. Stated otherwise, does a collecting bank, over the objections of its depositor, have the authority to
withdraw unilaterally from such depositor’s account the amount it had previously paid upon certain
unendorsed order instruments deposited by the depositor to another account that she later closed?
Petitioner argues thus:
1. There is no presumption in law that a check payable to order, when found in the possession of a person
who is neither a payee nor the indorsee thereof, has been lawfully transferred for value. Hence, the CA
should not have presumed that Salazar was a transferee for value within the contemplation of Section 49
of the Negotiable Instruments Law,8 as the latter applies only to a holder defined under Section 191of the
same.9
2. Salazar failed to adduce sufficient evidence to prove that her possession of the three checks was lawful
despite her allegations that these checks were deposited pursuant to a prior internal arrangement with
Templonuevo and that petitioner was privy to the arrangement.
3. The CA should have applied the Civil Code provisions on legal compensation because in deducting the
subject amount from Salazar’s account, petitioner was merely rectifying the undue payment it made upon
the checks and exercising its prerogative to alter or modify an erroneous credit entry in the regular course
of its business.
4. The debit of the amount from the account of A.A. Salazar Construction and Engineering Services was
proper even though the value of the checks had been originally credited to the personal account of Salazar
because A.A. Salazar Construction and Engineering Services, an unincorporated single proprietorship, had
no separate and distinct personality from Salazar.
5. Assuming the deduction from Salazar’s account was improper, the CA should not have dismissed
petitioner’s third-party complaint against Templonuevo because the latter would have the legal duty to
return to petitioner the proceeds of the checks which he previously received from it.
6. There was no factual basis for the award of damages to Salazar.
The petition is partly meritorious.
First, the issue raised by petitioner requires an inquiry into the factual findings made by the CA. The CA’s
conclusion that the deductions from the bank account of A.A. Salazar Construction and Engineering
Services were improper stemmed from its finding that there was no ineffective payment to Salazar which
would call for the exercise of petitioner’s right to set off against the former’s bank deposits. This finding, in
turn, was drawn from the pleadings of the parties, the evidence adduced during trial and upon the
admissions and stipulations of fact made during the pre-trial, most significantly the following:
(a) That Salazar previously had in her possession the following checks:
(1) Solid Bank Check No. CB766556 dated January 30, 1990 in the amount of P57,712.50;
(2) Solid Bank Check No. CB898978 dated July 31, 1990 in the amount of P55,180.00; and,
(3) Equitable Banking Corporation Check No. 32380638 dated August 28, 1990 for the amount
of P154,800.00;
(b) That these checks which had an aggregate amount of P267,692.50 were payable to the order of JRT
Construction and Trading, the name and style under which Templonuevo does business;
(c) That despite the lack of endorsement of the designated payee upon such checks, Salazar was able to
deposit the checks in her personal savings account with petitioner and encash the same;
(d) That petitioner accepted and paid the checks on three (3) separate occasions over a span of eight
months in 1990; and
(e) That Templonuevo only protested the purportedly unauthorized encashment of the checks after the
lapse of one year from the date of the last check.10
Petitioner concedes that when it credited the value of the checks to the account of private respondent
Salazar, it made a mistake because it failed to notice the lack of endorsement thereon by the designated
payee. The CA, however, did not lend credence to this claim and concluded that petitioner’s actions were
deliberate, in view of its admission that the "mistake" was committed three times on three separate
occasions, indicating acquiescence to the internal arrangement between Salazar and Templonuevo. The
CA explained thus:
It was quite apparent that the three checks which appellee Salazar deposited were not indorsed. Three
times she deposited them to her account and three times the amounts borne by these checks were
credited to the same. And in those separate occasions, the bank did not return the checks to her so that
she could have them indorsed. Neither did the bank question her as to why she was depositing the checks
to her account considering that she was not the payee thereof, thus allowing us to come to the conclusion
that defendant-appellant BPI was fully aware that the proceeds of the three checks belong to appellee.
For if the bank was not privy to the agreement between Salazar and Templonuevo, it is most unlikely that
appellant BPI (or any bank for that matter) would have accepted the checks for deposit on three separate
times nary any question. Banks are most finicky over accepting checks for deposit without the
corresponding indorsement by their payee. In fact, they hesitate to accept indorsed checks for deposit if the
depositor is not one they know very well.11
The CA likewise sustained Salazar’s position that she received the checks from Templonuevo pursuant to
an internal arrangement between them, ratiocinating as follows:
If there was indeed no arrangement between Templonuevo and the plaintiff over the three questioned
checks, it baffles us why it was only on August 31, 1991 or more than a year after the third and last check
was deposited that he demanded for the refund of the total amount of P267,692.50.
A prudent man knowing that payment is due him would have demanded payment by his debtor from the
moment the same became due and demandable. More so if the sum involved runs in hundreds of
thousand of pesos. By and large, every person, at the very moment he learns that he was deprived of a
thing which rightfully belongs to him, would have created a big fuss. He would not have waited for a year
within which to do so. It is most inconceivable that Templonuevo did not do this.12
Generally, only questions of law may be raised in an appeal by certiorari under Rule 45 of the Rules of
Court.13Factual findings of the CA are entitled to great weight and respect, especially when the CA affirms
the factual findings of the trial court.14 Such questions on whether certain items of evidence should be
accorded probative value or weight, or rejected as feeble or spurious, or whether or not the proofs on one
side or the other are clear and convincing and adequate to establish a proposition in issue, are questions of
fact. The same holds true for questions on whether or not the body of proofs presented by a party, weighed
and analyzed in relation to contrary evidence submitted by the adverse party may be said to be strong,
clear and convincing, or whether or not inconsistencies in the body of proofs of a party are of such gravity
as to justify refusing to give said proofs weight – all these are issues of fact which are not reviewable by the
Court.15
This rule, however, is not absolute and admits of certain exceptions, namely: a) when the conclusion is a
finding grounded entirely on speculations, surmises, or conjectures; b) when the inference made is
manifestly mistaken, absurd, or impossible; c) when there is a grave abuse of discretion; d) when the
judgment is based on a misapprehension of facts; e) when the findings of fact are conflicting; f) when the
CA, in making its findings, went beyond the issues of the case and the same are contrary to the
admissions of both appellant and appellee; g) when the findings of the CA are contrary to those of the trial
court; h) when the findings of fact are conclusions without citation of specific evidence on which they are
based; i) when the finding of fact of the CA is premised on the supposed absence of evidence but is
contradicted by the evidence on record; and j) when the CA manifestly overlooked certain relevant facts not
disputed by the parties and which, if properly considered, would justify a different conclusion.16
In the present case, the records do not support the finding made by the CA and the trial court that a prior
arrangement existed between Salazar and Templonuevo regarding the transfer of ownership of the checks.
This fact is crucial as Salazar’s entitlement to the value of the instruments is based on the assumption that
she is a transferee within the contemplation of Section 49 of the Negotiable Instruments Law.
Section 49 of the Negotiable Instruments Law contemplates a situation whereby the payee or indorsee
delivers a negotiable instrument for value without indorsing it, thus:
Transfer without indorsement; effect of- Where the holder of an instrument payable to his order transfers it
for value without indorsing it, the transfer vests in the transferee such title as the transferor had therein,
and the transferee acquires in addition, the right to have the indorsement of the transferor. But for the
purpose of determining whether the transferee is a holder in due course, the negotiation takes effect as of
the time when the indorsement is actually made. 17
It bears stressing that the above transaction is an equitable assignment and the transferee acquires the
instrument subject to defenses and equities available among prior parties. Thus, if the transferor had legal
title, the transferee acquires such title and, in addition, the right to have the indorsement of the transferor
and also the right, as holder of the legal title, to maintain legal action against the maker or acceptor or
other party liable to the transferor. The underlying premise of this provision, however, is that a valid
transfer of ownership of the negotiable instrument in question has taken place.
Transferees in this situation do not enjoy the presumption of ownership in favor of holders since they are
neither payees nor indorsees of such instruments. The weight of authority is that the mere possession of a
negotiable instrument does not in itself conclusively establish either the right of the possessor to receive
payment, or of the right of one who has made payment to be discharged from liability. Thus, something
more than mere possession by persons who are not payees or indorsers of the instrument is necessary to
authorize payment to them in the absence of any other facts from which the authority to receive payment
may be inferred.18
The CA and the trial court surmised that the subject checks belonged to private respondent Salazar based
on the pre-trial stipulation that Templonuevo incurred a one-year delay in demanding reimbursement for
the proceeds of the same. To the Court’s mind, however, such period of delay is not of such unreasonable
length as to estop Templonuevo from asserting ownership over the checks especially considering that it
was readily apparent on the face of the instruments19 that these were crossed checks.
In State Investment House v. IAC,20 the Court enumerated the effects of crossing a check, thus: (1) that the
check may not be encashed but only deposited in the bank; (2) that the check may be negotiated only once
- to one who has an account with a bank; and (3) that the act of crossing the check serves as a warning to
the holder that the check has been issued for a definite purpose so that such holder must inquire if the
check has been received pursuant to that purpose.
Thus, even if the delay in the demand for reimbursement is taken in conjunction with Salazar’s possession
of the checks, it cannot be said that the presumption of ownership in Templonuevo’s favor as the
designated payee therein was sufficiently overcome. This is consistent with the principle that if instruments
payable to named payees or to their order have not been indorsed in blank, only such payees or their
indorsees can be holders and entitled to receive payment in their own right.21
The presumption under Section 131(s) of the Rules of Court stating that a negotiable instrument was given
for a sufficient consideration will not inure to the benefit of Salazar because the term "given" does not
pertain merely to a transfer of physical possession of the instrument. The phrase "given or indorsed" in the
context of a negotiable instrument refers to the manner in which such instrument may be negotiated.
Negotiable instruments are negotiated by "transfer to one person or another in such a manner as to
constitute the transferee the holder thereof. If payable to bearer it is negotiated by delivery. If payable to
order it is negotiated by the indorsement completed by delivery."22The present case involves checks payable
to order. Not being a payee or indorsee of the checks, private respondent Salazar could not be
a holder thereof.
It is an exception to the general rule for a payee of an order instrument to transfer the instrument without
indorsement. Precisely because the situation is abnormal, it is but fair to the maker and to prior holders to
require possessors to prove without the aid of an initial presumption in their favor, that they came into
possession by virtue of a legitimate transaction with the last holder.23 Salazar failed to discharge this
burden, and the return of the check proceeds to Templonuevo was therefore warranted under the
circumstances despite the fact that Templonuevo may not have clearly demonstrated that he never
authorized Salazar to deposit the checks or to encash the same. Noteworthy also is the fact that petitioner
stamped on the back of the checks the words: "All prior endorsements and/or lack of endorsements
guaranteed," thereby making the assurance that it had ascertained the genuineness of all prior
endorsements. Having assumed the liability of a general indorser, petitioner’s liability to the designated
payee cannot be denied.
Consequently, petitioner, as the collecting bank, had the right to debit Salazar’s account for the value of the
checks it previously credited in her favor. It is of no moment that the account debited by petitioner was
different from the original account to which the proceeds of the check were credited because both
admittedly belonged to Salazar, the former being the account of the sole proprietorship which had no
separate and distinct personality from her, and the latter being her personal account.
The right of set-off was explained in Associated Bank v. Tan:24
A bank generally has a right of set-off over the deposits therein for the payment of any withdrawals on the
part of a depositor. The right of a collecting bank to debit a client's account for the value of a dishonored
check that has previously been credited has fairly been established by jurisprudence. To begin with, Article
1980 of the Civil Code provides that "[f]ixed, savings, and current deposits of money in banks and similar
institutions shall be governed by the provisions concerning simple loan."
Hence, the relationship between banks and depositors has been held to be that of creditor and debtor.
Thus, legal compensation under Article 1278 of the Civil Code may take place "when all the requisites
mentioned in Article 1279 are present," as follows:
(1) That each one of the obligors be bound principally, and that he be at the same time a principal creditor
of the other;
(2) That both debts consist in a sum of money, or if the things due are consumable, they be of the same
kind, and also of the same quality if the latter has been stated;
(3) That the two debts be due;
(4) That they be liquidated and demandable;
(5) That over neither of them there be any retention or controversy, commenced by third persons and
communicated in due time to the debtor.
While, however, it is conceded that petitioner had the right of set-off over the amount it paid to
Templonuevo against the deposit of Salazar, the issue of whether it acted judiciously is an entirely different
matter.25 As businesses affected with public interest, and because of the nature of their functions, banks
are under obligation to treat the accounts of their depositors with meticulous care, always having in mind
the fiduciary nature of their relationship.26In this regard, petitioner was clearly remiss in its duty to private
respondent Salazar as its depositor.
To begin with, the irregularity appeared plainly on the face of the checks. Despite the obvious lack of
indorsement thereon, petitioner permitted the encashment of these checks three times on three separate
occasions. This negates petitioner’s claim that it merely made a mistake in crediting the value of the checks
to Salazar’s account and instead bolsters the conclusion of the CA that petitioner recognized Salazar’s
claim of ownership of checks and acted deliberately in paying the same, contrary to ordinary banking
policy and practice. It must be emphasized that the law imposes a duty of diligence on the collecting bank
to scrutinize checks deposited with it, for the purpose of determining their genuineness and regularity. The
collecting bank, being primarily engaged in banking, holds itself out to the public as the expert on this field,
and the law thus holds it to a high standard of conduct.27 The taking and collection of a check without the
proper indorsement amount to a conversion of the check by the bank.28
More importantly, however, solely upon the prompting of Templonuevo, and with full knowledge of the
brewing dispute between Salazar and Templonuevo, petitioner debited the account held in the name of the
sole proprietorship of Salazar without even serving due notice upon her. This ran contrary to petitioner’s
assurances to private respondent Salazar that the account would remain untouched, pending the
resolution of the controversy between her and Templonuevo.29 In this connection, the CA cited the letter
dated September 5, 1991 of Mr. Manuel Ablan, Senior Manager of petitioner bank’s Pasig/Ortigas branch,
to private respondent Salazar informing her that her account had been frozen, thus:
particularly when she had already issued checks drawn against the said account. As can be expected, the
said checks bounced. To prove this, plaintiff-appellee presented as exhibits photocopies of checks dated
September 8, 1991, October 28, 1991, and November 14, 1991 (Exhibits "D", "E" and "F" respectively)30
These checks, it must be emphasized, were subsequently dishonored, thereby causing private respondent
Salazar undue embarrassment and inflicting damage to her standing in the business community. Under
the circumstances, she was clearly not given the opportunity to protect her interest when petitioner
unilaterally withdrew the above amount from her account without informing her that it had already done
so.
For the above reasons, the Court finds no reason to disturb the award of damages granted by the CA
against petitioner. This whole incident would have been avoided had petitioner adhered to the standard of
diligence expected of one engaged in the banking business. A depositor has the right to recover reasonable
moral damages even if the bank’s negligence may not have been attended with malice and bad faith, if the
former suffered mental anguish, serious anxiety, embarrassment and humiliation.31 Moral damages are
not meant to enrich a complainant at the expense of defendant. It is only intended to alleviate the moral
suffering she has undergone. The award of exemplary damages is justified, on the other hand, when the
acts of the bank are attended by malice, bad faith or gross negligence. The award of reasonable attorney’s
fees is proper where exemplary damages are awarded. It is proper where depositors are compelled to
litigate to protect their interest.32
WHEREFORE, the petition is partially GRANTED. The assailed Decision dated April 3, 1998 and
Resolution dated April 3, 1998 rendered by the Court of Appeals in CA-G.R. CV No. 42241
are MODIFIED insofar as it ordered petitioner Bank of the Philippine Islands to return the amount of Two
Hundred Sixty-seven Thousand Seven Hundred and Seven and 70/100 Pesos (P267,707.70) to
respondent Annabelle A. Salazar, which portion is REVERSED and SET ASIDE. In all other respects, the
same are AFFIRMED.
No costs.
SO ORDERED.

From the tenor of the letter of Manuel Ablan, it is safe to conclude that Account No. 0201-0588-48 will
remain frozen or untouched until herein [Salazar] has settled matters with Templonuevo. But, in an
unexpected move, in less than two weeks (eleven days to be precise) from the time that letter was written,
[petitioner] bank issued a cashier’s check in the name of Julio R. Templonuevo of the J.R.T. Construction
and Trading for the sum of P267,692.50 (Exhibit "8") and debited said amount from Ms. Arcilla’s account
No. 0201-0588-48 which was supposed to be frozen or controlled. Such a move by BPI is, to Our minds, a
clear case of negligence, if not a fraudulent, wanton and reckless disregard of the right of its depositor.

The records further bear out the fact that respondent Salazar had issued several checks drawn against the
account of A.A. Salazar Construction and Engineering Services prior to any notice of deduction being
served. The CA sustained private respondent Salazar’s claim of damages in this regard:

The act of the bank in freezing and later debiting the amount of P267,692.50 from the account of A.A.
Salazar Construction and Engineering Services caused plaintiff-appellee great damage and prejudice
 G.R. No. 171845 October 10, 2012
SPOUSES GODFREY and GERARDINA SERFINO, Petitioners,
vs.
FAR EAST BANK AND TRUST COMPANY, INC., now BANK OF THE PHILIPPINE
ISLANDS, Respondent.
DECISION
BRION, J.:
Before the Court is a petition for review on certiorari, 1 filed under Rule 45 of the Rules of Court, assailing
the decision2 dated February 23, 2006 of the Regional Trial Court (RTC) of Bacolod City, Branch 41, in Civil
Case No. 95-9344.
FACTUAL ANTECEDENTS
The present case traces its roots to the compromise judgment dated October 24, 19953 of the RTC of
Bacolod City, Branch 47, in Civil Case No. 95-9880. Civil Case No. 95-9880 was an action for collection of
sum of money instituted by the petitioner spouses Godfrey and Gerardina Serfino (collectively, spouses
Serfino) against the spouses Domingo and Magdalena Cortez (collectively, spouses Cortez). By way of
settlement, the spouses Serfino and the spouses Cortez executed a compromise agreement on October 20,
1995, in which the spouses Cortez acknowledged their indebtedness to the spouses Serfino in the amount
of ₱ 108,245.71. To satisfy the debt, Magdalena bound herself "to pay in full the judgment debt out of
her retirement benefits[.]"4 Payment of the debt shall be made one (1) week after Magdalena has received
her retirement benefits from the Government Service Insurance System (GSIS). In case of default, the debt
may be executed against any of the properties of the spouses Cortez that is subject to execution, upon
motion of the spouses Serfino.5 After finding that the compromise agreement was not contrary to law,
morals, good custom, public order or public policy, the RTC approved the entirety of the parties’ agreement
and issued a compromise judgment based thereon.6 The debt was later reduced to ₱ 155,000.00 from ₱
197,000.00 (including interest), with the promise that the spouses Cortez would pay in full the judgment
debt not later than April 23, 1996.7
No payment was made as promised. Instead, Godfrey discovered that Magdalena deposited her retirement
benefits in the savings account of her daughter-in-law, Grace Cortez, with the respondent, Far East Bank
and Trust Company, Inc. (FEBTC). As of April 23, 1996, Grace’s savings account with FEBTC amounted to
₱ 245,830.37, the entire deposit coming from Magdalena’s retirement benefits.8 That same day, the
spouses Serfino’s counsel sent two letters to FEBTC informing the bank that the deposit in Grace’s
name was owned by the spouses Serfino by virtue of an assignment made in their favor by the
spouses Cortez. The letter requested FEBTC to prevent the delivery of the deposit to either Grace or the
spouses Cortez until its actual ownership has been resolved in court.
On April 25, 1996, the spouses Serfino instituted Civil Case No. 95- 9344 against the spouses Cortez,
Grace and her husband, Dante Cortez, and FEBTC for the recovery of money on deposit and the
payment of damages, with a prayer for preliminary attachment.
On April 26, 1996, Grace withdrew ₱ 150,000.00 from her savings account with FEBTC. On the same
day, the spouses Serfino sent another letter to FEBTC informing it of the pending action; attached to the
letter was a copy of the complaint filed as Civil Case No. 95-9344.
During the pendency of Civil Case No. 95-9344, the spouses Cortez manifested that they were turning over
the balance of the deposit in FEBTC (amounting to ₱ 54,534.00) to the spouses Serfino as partial payment
of their obligation under the compromise judgment. The RTC issued an order dated July 30, 1997,
authorizing FEBTC to turn over the balance of the deposit to the spouses Serfino.
On February 23, 2006, the RTC issued the assailed decision (a) finding the spouses Cortez, Grace and
Dante liable for fraudulently diverting the amount due the spouses Serfino, but (b) absolving FEBTC from
any liability for allowing Grace to withdraw the deposit. The RTC declared that FEBTC was not a party
to the compromise judgment; FEBTC was thus not chargeable with notice of the parties’ agreement, as
there was no valid court order or processes requiring it to withhold payment of the deposit. Given the
nature of bank deposits, FEBTC was primarily bound by its contract of loan with Grace. There was,
therefore, no legal justification for the bank to refuse payment of the account, notwithstanding the claim of
the spouses Serfino as stated in their three letters.
THE PARTIES’ ARGUMENTS
The spouses Serfino appealed the RTC’s ruling absolving FEBTC from liability for allowing the
withdrawal of the deposit. They allege that the RTC cited no legal basis for declaring that only a court
order or process can justify the withholding of the deposit in Grace’s name. Since FEBTC was informed of
their adverse claim after they sent three letters, they claim that:
Upon receipt of a notice of adverse claim in proper form, it becomes the duty of the bank to: 1. Withhold
payment of the deposit until there is a reasonable opportunity to institute legal proceedings to contest
ownership; and 2) give prompt notice of the adverse claim to the depositor. The bank may be held liable to
the adverse claimant if it disregards the notice of adverse claim and pays the depositor.
When the bank has reasonable notice of a bona fide claim that money deposited with it is the
property of another than the depositor, it should withhold payment until there is reasonable
opportunity to institute legal proceedings to contest the ownership.9(emphases and underscoring supplied)
Aside from the three letters, FEBTC should be deemed bound by the compromise judgment, since Article
1625 of the Civil Code states that an assignment of credit binds third persons if it appears in a public
instrument.10 They conclude that FEBTC, having been notified of their adverse claim, should not have
allowed Grace to withdraw the deposit.
While they acknowledged that bank deposits are governed by the Civil Code provisions on loan, the
spouses Serfino allege that the provisions on voluntary deposits should apply by analogy in this case,
particularly Article 1988 of the Civil Code, which states:
Article 1988. The thing deposited must be returned to the depositor upon demand, even though a specified
period or time for such return may have been fixed.
This provision shall not apply when the thing is judicially attached while in the depositary’s possession,
or should he have been notified of the opposition of a third person to the return or the removal of
the thing deposited. In these cases, the depositary must immediately inform the depositor of the
attachment or opposition.
Based on Article 1988 of the Civil Code, the depository is not obliged to return the thing to the depositor if
notified of a third party’s adverse claim.
By allowing Grace to withdraw the deposit that is due them under the compromise judgment, the spouses
Serfino claim that FEBTC committed an actionable wrong that entitles them to the payment of
actual and moral damages.
FEBTC, on the other hand, insists on the correctness of the RTC ruling. It claims that it is not bound by
the compromise judgment, but only by its contract of loan with its depositor. As a loan, the bank deposit is
owned by the bank; hence, the spouses Serfino’s claim of ownership over it is erroneous.
Based on these arguments, the case essentially involves a determination of the obligation of banks to a
third party who claims rights over a bank deposit standing in the name of another.
THE COURT’S RULING
We find the petition unmeritorious and see no reason to reverse the RTC’s ruling.
Claim for actual damages not
meritorious because there could be
no pecuniary loss that should be
compensated if there was no
assignment of credit
The spouses Serfino’s claim for damages against FEBTC is premised on their claim of ownership of the
deposit with FEBTC. The deposit consists of Magdalena’s retirement benefits, which the spouses Serfino
claim to have been assigned to them under the compromise judgment. That the retirement benefits were
deposited in Grace’s savings account with FEBTC supposedly did not divest them of ownership of the
amount, as "the money already belongs to the [spouses Serfino] having been absolutely assigned to them
and constructively delivered by virtue of the x x x public instrument[.]"11 By virtue of the assignment of
credit, the spouses Serfino claim ownership of the deposit, and they posit that FEBTC was duty bound to
protect their right by preventing the withdrawal of the deposit since the bank had been notified of the
assignment and of their claim.
We find no basis to support the spouses Serfino’s claim of ownership of the deposit.
"An assignment of credit is an agreement by virtue of which the owner of a credit, known as the assignor,
by a legal cause, such as sale, dation in payment, exchange or donation, and without the consent of the
debtor, transfers his credit and accessory rights to another, known as the assignee, who acquires the
power to enforce it to the same extent as the assignor could enforce it against the debtor. It may be in the
form of sale, but at times it may constitute a dation in payment, such as when a debtor, in order to
obtain a release from his debt, assigns to his creditor a credit he has against a third person."12 As
a dation in payment, the assignment of credit operates as a mode of extinguishing the
obligation;13 the delivery and transmission of ownership of a thing (in this case, the credit due from a third
person) by the debtor to the creditor is accepted as the equivalent of the performance of the obligation.14
The terms of the compromise judgment, however, did not convey an intent to equate the assignment of
Magdalena’s retirement benefits (the credit) as the equivalent of the payment of the debt due the spouses
Serfino (the obligation). There was actually no assignment of credit; if at all, the compromise judgment
merely identified the fund from which payment for the judgment debt would be sourced:
(c) That before the plaintiffs file a motion for execution of the decision or order based [on this] Compromise
Agreement, the defendant, Magdalena Cortez undertake[s] and bind[s] herself to pay in full the
judgment debt out of her retirement benefits as Local [T]reasury Operation Officer in the City of
Bacolod, Philippines, upon which full payment, the plaintiffs waive, abandon and relinquish absolutely any
of their claims for attorney’s fees stipulated in the Promissory Note (Annex "A" to the
Complaint).15 [emphasis ours]
Only when Magdalena has received and turned over to the spouses Serfino the portion of her retirement
benefits corresponding to the debt due would the debt be deemed paid.
In Aquitey v. Tibong,16 the issue raised was whether the obligation to pay the loan was extinguished by the
execution of the deeds of assignment. The Court ruled in the affirmative, given that, in the deeds involved,
the respondent (the debtor) assigned to the petitioner (the creditor) her credits "to make good" the balance
of her obligation; the parties agreed to relieve the respondent of her obligation to pay the balance of her
account, and for the petitioner to collect the same from the respondent’s debtors.17 The Court concluded
that the respondent’s obligation to pay the balance of her accounts with the petitioner was
extinguished, pro tanto, by the deeds of assignment of credit executed by the respondent in favor of the
petitioner.18
In the present case, the judgment debt was not extinguished by the mere designation in the compromise
judgment of Magdalena’s retirement benefits as the fund from which payment shall be sourced. That the
compromise agreement authorizes recourse in case of default on other executable properties of the
spouses Cortez, to satisfy the judgment debt, further supports our conclusion that there was no
assignment of Magdalena’s credit with the GSIS that would have extinguished the obligation.
The compromise judgment in this case also did not give the supposed assignees, the spouses Serfino, the
power to enforce Magdalena’s credit against the GSIS. In fact, the spouses Serfino are prohibited from
enforcing their claim until after the lapse of one (1) week from Magdalena’s receipt of her retirement
benefits:
(d) That the plaintiffs shall refrain from having the judgment based upon this Compromise Agreement
executed until after one (1) week from receipt by the defendant, Magdalena Cortez of her retirement
benefits from the [GSIS] but fails to pay within the said period the defendants’ judgment debt in this case,
in which case [this] Compromise Agreement [may be] executed upon any property of the defendants that
are subject to execution upon motion by the plaintiffs.19
An assignment of credit not only entitles the assignee to the credit itself, but also gives him the power to
enforce it as against the debtor of the assignor.
Since no valid assignment of credit took place, the spouses Serfino cannot validly claim ownership of the
retirement benefits that were deposited with FEBTC. Without ownership rights over the amount, they
suffered no pecuniary loss that has to be compensated by actual damages. The grant of actual
damages presupposes that the claimant suffered a duly proven pecuniary loss.20
Claim for moral damages not
meritorious because no duty exists
on the part of the bank to protect
interest of third person claiming
deposit in the name of another
Under Article 2219 of the Civil Code, moral damages are recoverable for acts referred to in Article 21 of the
Civil Code.21 Article 21 of the Civil Code, in conjunction with Article 19 of the Civil Code, is part of the cause
of action known in this jurisdiction as "abuse of rights." The elements of abuse of rights are: (a) there is a
legal right or duty; (b) exercised in bad faith; and (c) for the sole intent of prejudicing or injuring
another.1âwphi1
The spouses Serfino invoke American common law that imposes a duty upon a bank receiving a notice
of adverse claim to the fund in a depositor’s account to freeze the account for a reasonable length
of time, sufficient to allow the adverse claimant to institute legal proceedings to enforce his right
to the fund.22 In other words, the bank has a duty not to release the deposits unreasonably early after a
third party makes known his adverse claim to the bank deposit. Acknowledging that no such duty is
imposed by law in this jurisdiction, the spouses Serfino ask the Court to adopt this foreign rule.23
To adopt the foreign rule, however, goes beyond the power of this Court to promulgate rules governing
pleading, practice and procedure in all courts.24 The rule reflects a matter of policy that is better
addressed by the other branches of government, particularly, the Bangko Sentral ng Pilipinas, which is
the agency that supervises the operations and activities of banks, and which has the power to issue "rules
of conduct or the establishment of standards of operation for uniform application to all institutions or
functions covered[.]"25 To adopt this rule will have significant implications on the banking industry and
practices, as the American experience has shown. Recognizing that the rule imposing duty on banks to
freeze the deposit upon notice of adverse claim adopts a policy adverse to the bank and its functions, and
opens it to liability to both the depositor and the adverse claimant,26 many American states have since
adopted adverse claim statutes that shifted or, at least, equalized the burden. Essentially, these statutes do
not impose a duty on banks to freeze the deposit upon a mere notice of adverse claim; they first require
either a court order or an indemnity bond.27

In the absence of a law or a rule binding on the Court, it has no option but to uphold the existing policy
that recognizes the fiduciary nature of banking. It likewise rejects the adoption of a judicially-imposed rule
giving third parties with unverified claims against the deposit of another a better right over the deposit. As
current laws provide, the bank’s contractual relations are with its depositor, not with the third party;28 "a
bank is under obligation to treat the accounts of its depositors with meticulous care and always to have in
mind the fiduciary nature of its relationship with them."29 In the absence of any positive duty of the bank to
an adverse claimant, there could be no breach that entitles the latter to moral damages.

WHEREFORE, in view of the foregoing, the petition for review on certiorari is DENIED, and the decision
dated February 23, 2006 of the Regional Trial Court of Bacolod City, Branch 41, in Civil Case No. 95-9344
is AFFIRMED. Costs against the petitioners.

SO ORDERED.
 G.R. No. 179419 January 12, 2011
DURBAN APARTMENTS CORPORATION, doing business under the name and style of City Garden
Hotel, Petitioner,
vs.
PIONEER INSURANCE AND SURETY CORPORATION, Respondent.
DECISION
NACHURA, J.:
For review is the Decision1 of the Court of Appeals (CA) in CA-G.R. CV No. 86869, which affirmed the
decision2 of the Regional Trial Court (RTC), Branch 66, Makati City, in Civil Case No. 03-857, holding
petitioner Durban Apartments Corporation solely liable to respondent Pioneer Insurance and Surety
Corporation for the loss of Jeffrey See’s (See’s) vehicle.
The facts, as found by the CA, are simple.
On July 22, 2003, [respondent] Pioneer Insurance and Surety Corporation x x x, by right of subrogation,
filed [with the RTC of Makati City] a Complaint for Recovery of Damages against [petitioner] Durban
Apartments Corporation, doing business under the name and style of City Garden Hotel, and [defendant
before the RTC] Vicente Justimbaste x x x. [Respondent averred] that: it is the insurer for loss and damage
of Jeffrey S. See’s [the insured’s] 2001 Suzuki Grand Vitara x x x with Plate No. XBH-510 under Policy No.
MC-CV-HO-01-0003846-00-D in the amount of ₱1,175,000.00; on April 30, 2002, See arrived and
checked in at the City Garden Hotel in Makati corner Kalayaan Avenues, Makati City before midnight, and
its parking attendant, defendant x x x Justimbaste got the key to said Vitara from See to park it[. O]n May
1, 2002, at about 1:00 o’clock in the morning, See was awakened in his room by [a] telephone call from the
Hotel Chief Security Officer who informed him that his Vitara was carnapped while it was parked
unattended at the parking area of Equitable PCI Bank along Makati Avenue between the hours of 12:00
[a.m.] and 1:00 [a.m.]; See went to see the Hotel Chief Security Officer, thereafter reported the incident to
the Operations Division of the Makati City Police Anti-Carnapping Unit, and a flash alarm was issued; the
Makati City Police Anti-Carnapping Unit investigated Hotel Security Officer, Ernesto T. Horlador, Jr. x x x
and defendant x x x Justimbaste; See gave his Sinumpaang Salaysay to the police investigator, and filed a
Complaint Sheet with the PNP Traffic Management Group in Camp Crame, Quezon City; the Vitara has
not yet been recovered since July 23, 2002 as evidenced by a Certification of Non- Recovery issued by the
PNP TMG; it paid the ₱1,163,250.00 money claim of See and mortgagee ABN AMRO Savings Bank, Inc. as
indemnity for the loss of the Vitara; the Vitara was lost due to the negligence of [petitioner] Durban
Apartments and [defendant] Justimbaste because it was discovered during the investigation that this was
the second time that a similar incident of carnapping happened in the valet parking service of [petitioner]
Durban Apartments and no necessary precautions were taken to prevent its repetition; [petitioner] Durban
Apartments was wanting in due diligence in the selection and supervision of its employees particularly
defendant x x x Justimbaste; and defendant x x x Justimbaste and [petitioner] Durban Apartments failed
and refused to pay its valid, just, and lawful claim despite written demands.
Upon service of Summons, [petitioner] Durban Apartments and [defendant] Justimbaste filed their Answer
with Compulsory Counterclaim alleging that: See did not check in at its hotel, on the contrary, he was a
guest of a certain Ching Montero x x x; defendant x x x Justimbaste did not get the ignition key of See’s
Vitara, on the contrary, it was See who requested a parking attendant to park the Vitara at any available
parking space, and it was parked at the Equitable Bank parking area, which was within See’s view, while
he and Montero were waiting in front of the hotel; they made a written denial of the demand of
[respondent] Pioneer Insurance for want of legal basis; valet parking services are provided by the hotel for
the convenience of its customers looking for a parking space near the hotel premises; it is a special privilege
that it gave to Montero and See; it does not include responsibility for any losses or damages to motor
vehicles and its accessories in the parking area; and the same holds true even if it was See himself who
parked his Vitara within the premises of the hotel as evidenced by the valet parking customer’s claim stub
issued to him; the carnapper was able to open the Vitara without using the key given earlier to the parking
attendant and subsequently turned over to See after the Vitara was stolen; defendant x x x Justimbaste
saw the Vitara speeding away from the place where it was parked; he tried to run after it, and blocked its
possible path but to no avail; and See was duly and immediately informed of the carnapping of his Vitara;
the matter was reported to the nearest police precinct; and defendant x x x Justimbaste, and Horlador
submitted themselves to police investigation.
During the pre-trial conference on November 28, 2003, counsel for [respondent] Pioneer Insurance was
present. Atty. Monina Lee x x x, counsel of record of [petitioner] Durban Apartments and Justimbaste was
absent, instead, a certain Atty. Nestor Mejia appeared for [petitioner] Durban Apartments and
Justimbaste, but did not file their pre-trial brief.
On November 5, 2004, the lower court granted the motion of [respondent] Pioneer Insurance, despite the
opposition of [petitioner] Durban Apartments and Justimbaste, and allowed [respondent] Pioneer
Insurance to present its evidence ex parte before the Branch Clerk of Court.
See testified that: on April 30, 2002, at about 11:30 in the evening, he drove his Vitara and stopped in front
of City Garden Hotel in Makati Avenue, Makati City; a parking attendant, whom he had later known to be
defendant x x x Justimbaste, approached and asked for his ignition key, told him that the latter would
park the Vitara for him in front of the hotel, and issued him a valet parking customer’s claim stub; he and
Montero, thereafter, checked in at the said hotel; on May 1, 2002, at around 1:00 in the morning, the Hotel
Security Officer whom he later knew to be Horlador called his attention to the fact that his Vitara was
carnapped while it was parked at the parking lot of Equitable PCI Bank which is in front of the hotel; his
Vitara was insured with [respondent] Pioneer Insurance; he together with Horlador and defendant x x x
Justimbaste went to Precinct 19 of the Makati City Police to report the carnapping incident, and a police
officer came accompanied them to the Anti-Carnapping Unit of the said station for investigation, taking of
their sworn statements, and flashing of a voice alarm; he likewise reported the said incident in PNP TMG in
Camp Crame where another alarm was issued; he filed his claim with [respondent] Pioneer Insurance, and
a representative of the latter, who is also an adjuster of Vesper Insurance Adjusters-Appraisers [Vesper],
investigated the incident; and [respondent] Pioneer Insurance required him to sign a Release of Claim and
Subrogation Receipt, and finally paid him the sum of ₱1,163,250.00 for his claim.
Ricardo F. Red testified that: he is a claims evaluator of [petitioner] Pioneer Insurance tasked, among
others, with the receipt of claims and documents from the insured, investigation of the said claim,
inspection of damages, taking of pictures of insured unit, and monitoring of the processing of the claim
until its payment; he monitored the processing of See’s claim when the latter reported the incident to
[respondent] Pioneer Insurance; [respondent] Pioneer Insurance assigned the case to Vesper who verified
See’s report, conducted an investigation, obtained the necessary documents for the processing of the
claim, and tendered a settlement check to See; they evaluated the case upon receipt of the subrogation
documents and the adjuster’s report, and eventually recommended for its settlement for the sum of
₱1,163,250.00 which was accepted by See; the matter was referred and forwarded to their counsel, R.B.
Sarajan & Associates, who prepared and sent demand letters to [petitioner] Durban Apartments and
[defendant] Justimbaste, who did not pay [respondent] Pioneer Insurance notwithstanding their receipt of
the demand letters; and the services of R.B. Sarajan & Associates were engaged, for ₱100,000.00 as
attorney’s fees plus ₱3,000.00 per court appearance, to prosecute the claims of [respondent] Pioneer
Insurance against [petitioner] Durban Apartments and Justimbaste before the lower court.
Ferdinand Cacnio testified that: he is an adjuster of Vesper; [respondent] Pioneer Insurance assigned to
Vesper the investigation of See’s case, and he was the one actually assigned to investigate it; he conducted
his investigation of the matter by interviewing See, going to the City Garden Hotel, required subrogation
documents from See, and verified the authenticity of the same; he learned that it is the standard procedure
of the said hotel as regards its valet parking service to assist their guests as soon as they get to the lobby
entrance, park the cars for their guests, and place the ignition keys in their safety key box; considering that
the hotel has only twelve (12) available parking slots, it has an agreement with Equitable PCI Bank
permitting the hotel to use the parking space of the bank at night; he also learned that a Hyundai Starex
van was carnapped at the said place barely a month before the occurrence of this incident because Liberty
Insurance assigned the said incident to Vespers, and Horlador and defendant x x x Justimbaste admitted
the occurrence of the same in their sworn statements before the Anti-Carnapping Unit of the Makati City
Police; upon verification with the PNP TMG [Unit] in Camp Crame, he learned that See’s Vitara has not yet
been recovered; upon evaluation, Vesper recommended to [respondent] Pioneer Insurance to settle See’s
claim for ₱1,045,750.00; See contested the recommendation of Vesper by reasoning out that the 10%
depreciation should not be applied in this case considering the fact that the Vitara was used for barely
eight (8) months prior to its loss; and [respondent] Pioneer Insurance acceded to See’s contention, tendered
the sum of ₱1,163,250.00 as settlement, the former accepted it, and signed a release of claim and
subrogation receipt.
The lower court denied the Motion to Admit Pre-Trial Brief and Motion for Reconsideration field by
[petitioner] Durban Apartments and Justimbaste in its Orders dated May 4, 2005 and October 20, 2005,
respectively, for being devoid of merit.3
Thereafter, on January 27, 2006, the RTC rendered a decision, disposing, as follows:
WHEREFORE, judgment is hereby rendered ordering [petitioner Durban Apartments Corporation] to pay
[respondent Pioneer Insurance and Surety Corporation] the sum of ₱1,163,250.00 with legal interest
thereon from July 22, 2003 until the obligation is fully paid and attorney’s fees and litigation expenses
amounting to ₱120,000.00.
SO ORDERED.4
On appeal, the appellate court affirmed the decision of the trial court, viz.:
WHEREFORE, premises considered, the Decision dated January 27, 2006 of the RTC, Branch 66, Makati
City in Civil Case No. 03-857 is hereby AFFIRMED insofar as it holds [petitioner] Durban Apartments
Corporation solely liable to [respondent] Pioneer Insurance and Surety Corporation for the loss of Jeffrey
See’s Suzuki Grand Vitara.
SO ORDERED.5
Hence, this recourse by petitioner.
The issues for our resolution are:
1. Whether the lower courts erred in declaring petitioner as in default for failure to appear at the pre-trial
conference and to file a pre-trial brief;
2. Corollary thereto, whether the trial court correctly allowed respondent to present evidence ex-parte;
3. Whether petitioner is liable to respondent for attorney’s fees in the amount of ₱120,000.00; and
4. Ultimately, whether petitioner is liable to respondent for the loss of See’s vehicle.
The petition must fail.
We are in complete accord with the common ruling of the lower courts that petitioner was in default for
failure to appear at the pre-trial conference and to file a pre-trial brief, and thus, correctly allowed
respondent to present evidence ex-parte. Likewise, the lower courts did not err in holding petitioner liable
for the loss of See’s vehicle.
Well-entrenched in jurisprudence is the rule that factual findings of the trial court, especially when
affirmed by the appellate court, are accorded the highest degree of respect and are considered conclusive
between the parties.6 A review of such findings by this Court is not warranted except upon a showing of
highly meritorious circumstances, such as: (1) when the findings of a trial court are grounded entirely on
speculation, surmises, or conjectures; (2) when a lower court’s inference from its factual findings is
manifestly mistaken, absurd, or impossible; (3) when there is grave abuse of discretion in the appreciation
of facts; (4) when the findings of the appellate court go beyond the issues of the case, or fail to notice certain
relevant facts which, if properly considered, will justify a different conclusion; (5) when there is a
misappreciation of facts; (6) when the findings of fact are conclusions without mention of the specific
evidence on which they are based, are premised on the absence of evidence, or are contradicted by
evidence on record.7 None of the foregoing exceptions permitting a reversal of the assailed decision exists in
this instance.
Petitioner urges us, however, that "strong [and] compelling reason[s]" such as the prevention of miscarriage
of justice warrant a suspension of the rules and excuse its and its counsel’s non-appearance during the
pre-trial conference and their failure to file a pre-trial brief.
We are not persuaded.
Rule 18 of the Rules of Court leaves no room for equivocation; appearance of parties and their counsel at
the pre-trial conference, along with the filing of a corresponding pre-trial brief, is mandatory, nay, their
duty. Thus, Section 4 and Section 6 thereof provide:
SEC. 4. Appearance of parties.–It shall be the duty of the parties and their counsel to appear at the pre-
trial. The non-appearance of a party may be excused only if a valid cause is shown therefor or if a
representative shall appear in his behalf fully authorized in writing to enter into an amicable settlement, to
submit to alternative modes of dispute resolution, and to enter into stipulations or admissions of facts and
documents.
SEC. 6. Pre-trial brief.–The parties shall file with the court and serve on the adverse party, in such manner
as shall ensure their receipt thereof at least three (3) days before the date of the pre-trial, their respective
pre-trial briefs which shall contain, among others:
xxxx
Failure to file the pre-trial brief shall have the same effect as failure to appear at the pre-trial.
Contrary to the foregoing rules, petitioner and its counsel of record were not present at the scheduled pre-
trial conference. Worse, they did not file a pre-trial brief. Their non-appearance cannot be excused as
Section 4, in relation to Section 6, allows only two exceptions: (1) a valid excuse; and (2) appearance of a
representative on behalf of a party who is fully authorized in writing to enter into an amicable settlement, to
submit to alternative modes of dispute resolution, and to enter into stipulations or admissions of facts and
documents.
Petitioner is adamant and harps on the fact that November 28, 2003 was merely the first scheduled date
for the pre-trial conference, and a certain Atty. Mejia appeared on its behalf. However, its assertion is belied
by its own admission that, on said date, this Atty. Mejia "did not have in his possession the Special Power
of Attorney issued by petitioner’s Board of Directors."
As pointed out by the CA, petitioner, through Atty. Lee, received the notice of pre-trial on October 27, 2003,
thirty-two (32) days prior to the scheduled conference. In that span of time, Atty. Lee, who was charged
with the duty of notifying petitioner of the scheduled pre-trial conference,8 petitioner, and Atty. Mejia
should have discussed which lawyer would appear at the pre-trial conference with petitioner, armed with
the appropriate authority therefor. Sadly, petitioner failed to comply with not just one rule; it also did not
proffer a reason why it likewise failed to file a pre-trial brief. In all, petitioner has not shown any persuasive
reason why it should be exempt from abiding by the rules.
The appearance of Atty. Mejia at the pre-trial conference, without a pre-trial brief and with only his bare
allegation that he is counsel for petitioner, was correctly rejected by the trial court. Accordingly, the trial
court, as affirmed by the appellate court, did not err in allowing respondent to present evidence ex-parte.
Former Chief Justice Andres R. Narvasa’s words continue to resonate, thus:
Everyone knows that a pre-trial in civil actions is mandatory, and has been so since January 1, 1964. Yet
to this day its place in the scheme of things is not fully appreciated, and it receives but perfunctory
treatment in many courts. Some courts consider it a mere technicality, serving no useful purpose save
perhaps, occasionally to furnish ground for non-suiting the plaintiff, or declaring a defendant in default, or,
wistfully, to bring about a compromise. The pre-trial device is not thus put to full use. Hence, it has failed
in the main to accomplish the chief objective for it: the simplification, abbreviation and expedition of the
trial, if not indeed its dispensation. This is a great pity, because the objective is attainable, and with not
much difficulty, if the device were more intelligently and extensively handled.
to the hotel lobby to check in. The Equitable PCI Bank parking area became an annex of City Garden Hotel
when the management of the said bank allowed the parking of the vehicles of hotel guests thereat in the
evening after banking hours.11
Article 1962, in relation to Article 1998, of the Civil Code defines a contract of deposit and a necessary
deposit made by persons in hotels or inns:
Art. 1962. A deposit is constituted from the moment a person receives a thing belonging to another, with
the obligation of safely keeping it and returning the same. If the safekeeping of the thing delivered is not the
principal purpose of the contract, there is no deposit but some other contract.
Art. 1998. The deposit of effects made by travelers in hotels or inns shall also be regarded as
necessary.1avvphi1 The keepers of hotels or inns shall be responsible for them as depositaries, provided
that notice was given to them, or to their employees, of the effects brought by the guests and that, on the
part of the latter, they take the precautions which said hotel-keepers or their substitutes advised relative to
the care and vigilance of their effects.
Plainly, from the facts found by the lower courts, the insured See deposited his vehicle for safekeeping with
petitioner, through the latter’s employee, Justimbaste. In turn, Justimbaste issued a claim stub to See.
Thus, the contract of deposit was perfected from See’s delivery, when he handed over to Justimbaste the
keys to his vehicle, which Justimbaste received with the obligation of safely keeping and returning it.
Ultimately, petitioner is liable for the loss of See’s vehicle.

xxxx Lastly, petitioner assails the lower courts’ award of attorney’s fees to respondent in the amount of
₱120,000.00. Petitioner claims that the award is not substantiated by the evidence on record.
Consistently with the mandatory character of the pre-trial, the Rules oblige not only the lawyers but the
parties as well to appear for this purpose before the Court, and when a party "fails to appear at a pre-trial We disagree.
conference (he) may be non-suited or considered as in default." The obligation "to appear" denotes not
While it is a sound policy not to set a premium on the right to litigate,12 we find that respondent is entitled
simply the personal appearance, or the mere physical presentation by a party of one’s self, but connotes as
to reasonable attorney’s fees. Attorney’s fees may be awarded when a party is compelled to litigate or incur
importantly, preparedness to go into the different subject assigned by law to a pre-trial. And in those
expenses to protect its interest,13 or when the court deems it just and equitable.14 In this case, petitioner
instances where a party may not himself be present at the pre-trial, and another person substitutes for
refused to answer for the loss of See’s vehicle, which was deposited with it for safekeeping. This refusal
him, or his lawyer undertakes to appear not only as an attorney but in substitution of the client’s person, it
constrained respondent, the insurer of See, and subrogated to the latter’s right, to litigate and incur
is imperative for that representative of the lawyer to have "special authority" to make such substantive
expenses. However, we reduce the award of ₱120,000.00 to ₱60,000.00 in view of the simplicity of the
agreements as only the client otherwise has capacity to make. That "special authority" should ordinarily be
issues involved in this case.
in writing or at the very least be "duly established by evidence other than the self-serving assertion of
counsel (or the proclaimed representative) himself." Without that special authority, the lawyer or WHEREFORE, the petition is DENIED. The Decision of the Court of Appeals in CA-G.R. CV No. 86869 is
representative cannot be deemed capacitated to appear in place of the party; hence, it will be considered AFFIRMED with the MODIFICATION that the award of attorney’s fees is reduced to ₱60,000.00. Costs
that the latter has failed to put in an appearance at all, and he [must] therefore "be non-suited or against petitioner.
considered as in default," notwithstanding his lawyer’s or delegate’s presence.9
SO ORDERED.
We are not unmindful that defendant’s (petitioner’s) preclusion from presenting evidence during trial does
not automatically result in a judgment in favor of plaintiff (respondent). The plaintiff must still substantiate
the allegations in its complaint.10 Otherwise, it would be inutile to continue with the plaintiff’s presentation
of evidence each time the defendant is declared in default.

In this case, respondent substantiated the allegations in its complaint, i.e., a contract of necessary deposit
existed between the insured See and petitioner. On this score, we find no error in the following disquisition
of the appellate court:

[The] records also reveal that upon arrival at the City Garden Hotel, See gave notice to the doorman and
parking attendant of the said hotel, x x x Justimbaste, about his Vitara when he entrusted its ignition key
to the latter. x x x Justimbaste issued a valet parking customer claim stub to See, parked the Vitara at the
Equitable PCI Bank parking area, and placed the ignition key inside a safety key box while See proceeded
 G.R. No. 189998 August 29, 2012
MAKATI SHANGRI-LA HOTEL AND RESORT, INC., Petitioner,
vs.
ELLEN JOHANNE HARPER, JONATHAN CHRISTOPHER HARPER, and RIGOBERTO
GILLERA, Respondents.
DECISION
BERSAMIN, J.:
The hotel owner is liable for civil damages to the surviving heirs of its hotel guest whom strangers murder
inside his hotel room.
The Case
Petitioner, the owner and operator of the 5-star Shangri-La Hotel in Makati City (Shangri-La Hotel), appeals
the decision promulgated on October 21, 2009,1 whereby the Court of Appeals (CA) affirmed with
modification the judgment rendered on October 25, 2005 by the Regional Trial Court (RTC) in Quezon City
holding petitioner liable for damages for the murder of Christian Fredrik Harper, a Norwegian
national.2 Respondents Ellen Johanne Harper and Jonathan Christopher Harper are the widow and son of
Christian Harper, while respondent Rigoberto Gillera is their authorized representative in the Philippines.
Antecedents
In the first week of November 1999, Christian Harper came to Manila on a business trip as the Business
Development Manager for Asia of ALSTOM Power Norway AS, an engineering firm with worldwide
operations. He checked in at the Shangri-La Hotel and was billeted at Room 1428. He was due to check
out on November 6, 1999. In the early morning of that date, however, he was murdered inside his hotel
room by still unidentified malefactors. He was then 30 years old.
How the crime was discovered was a story in itself. A routine verification call from the American Express
Card Company to cardholder Harper’s residence in Oslo, Norway (i.e., Bygdoy Terasse 16, 0287 Oslo,
Norway) led to the discovery. It appears that at around 11:00 am of November 6, 1999, a Caucasian male
of about 30–32 years in age, 5’4" in height, clad in maroon long sleeves, black denims and black shoes,
entered the Alexis Jewelry Store in Glorietta, Ayala Center, Makati City and expressed interest in
purchasing a Cartier lady’s watch valued at ₱ 320,000.00 with the use of two Mastercard credit cards and
an American Express credit card issued in the name of Harper. But the customer’s difficulty in answering
the queries phoned in by a credit card representative sufficiently aroused the suspicion of saleslady Anna
Liza Lumba (Lumba), who asked for the customer’s passport upon suggestion of the credit card
representative to put the credit cards on hold. Probably sensing trouble for himself, the customer hurriedly
left the store, and left the three credit cards and the passport behind.
In the meanwhile, Harper’s family in Norway must have called him at his hotel room to inform him about
the attempt to use his American Express card. Not getting any response from the room, his family
requested Raymond Alarcon, the Duty Manager of the Shangri-La Hotel, to check on Harper’s room.
Alarcon and a security personnel went to Room 1428 at 11:27 a.m., and were shocked to discover
Harper’s lifeless body on the bed.
Col. Rodrigo de Guzman (de Guzman), the hotel’s Security Manager, initially investigated the murder. In
his incident report, he concluded from the several empty bottles of wine in the trash can and the number
of cigarette butts in the toilet bowl that Harper and his visitors had drunk that much and smoked that
many cigarettes the night before.3
The police investigation actually commenced only upon the arrival in the hotel of the team of PO3
Carmelito Mendoza4 and SPO4 Roberto Hizon. Mendoza entered Harper’s room in the company of De
Guzman, Alarcon, Gami Holazo (the hotel’s Executive Assistant Manager), Norge Rosales (the hotel’s
Executive Housekeeper), and Melvin Imperial (a security personnel of the hotel). They found Harper’s body
on the bed covered with a blanket, and only the back of the head could be seen. Lifting the blanket,
Mendoza saw that the victim’s eyes and mouth had been bound with electrical and packaging tapes, and
his hands and feet tied with a white rope. The body was identified to be that of hotel guest Christian
Fredrik Harper.
Mendoza subsequently viewed the closed circuit television (CCTV) tapes, from which he found that Harper
had entered his room at 12:14 a.m. of November 6, 1999, and had been followed into the room at 12:17
a.m. by a woman; that another person, a Caucasian male, had entered Harper’s room at 2:48 a.m.; that
the woman had left the room at around 5:33 a.m.; and that the Caucasian male had come out at 5:46
a.m.
On November 10, 1999, SPO1 Ramoncito Ocampo, Jr. interviewed Lumba about the incident in the Alexis
Jewelry Shop. During the interview, Lumba confirmed that the person who had attempted to purchase the
Cartier lady’s watch on November 6, 1999 had been the person whose picture was on the passport issued
under the name of Christian Fredrik Harper and the Caucasian male seen on the CCTV tapes entering
Harper’s hotel room.
Sr. Insp. Danilo Javier of the Criminal Investigation Division of the Makati City Police reflected in his
Progress Report No. 25 that the police investigation showed that Harper’s passport, credit cards, laptop and
an undetermined amount of cash had been missing from the crime scene; and that he had learned during
the follow-up investigation about an unidentified Caucasian male’s attempt to purchase a Cartier lady’s
watch from the Alexis Jewelry Store in Glorietta, Ayala Center, Makati City with the use of one of Harper’s
credit cards.
On August 30, 2002, respondents commenced this suit in the RTC to recover various damages from
petitioner,6pertinently alleging:
xxx
7. The deceased was to check out and leave the hotel on November 6, 1999, but in the early morning of
said date, while he was in his hotel room, he was stabbed to death by an (sic) still unidentified male who
had succeeded to intrude into his room.
8. The murderer succeeded to trespass into the area of the hotel’s private rooms area and into the room of
the said deceased on account of the hotel’s gross negligence in providing the most basic security system of
its guests, the lack of which owing to the acts or omissions of its employees was the immediate cause of the
tragic death of said deceased.
xxx
10. Defendant has prided itself to be among the top hotel chains in the East claiming to provide excellent
service, comfort and security for its guests for which reason ABB Alstom executives and their guests have
invariably chosen this hotel to stay.7
xxx
Ruling of the RTC
On October 25, 2005, the RTC rendered judgment after trial,8 viz:
WHEREFORE, finding the defendant hotel to be remiss in its duties and thus liable for the death of SO ORDERED.10
Christian Harper, this Court orders the defendant to pay plaintiffs the amount of:
Issues
PhP 43,901,055.00 as and by way of actual and compensatory damages;
Petitioner still seeks the review of the judgment of the CA, submitting the following issues for consideration
PhP 739,075.00 representing the expenses of transporting the remains of Harper to Oslo, Norway; and determination, namely:

PhP 250,000.00 attorney’s fees; I.

and to pay the cost of suit. WHETHER OR NOT THE PLAINTIFFS-APPELLEES WERE ABLE TO PROVE WITH COMPETENT
EVIDENCE THE AFFIRMATIVE ALLEGATIONS IN THE COMPLAINT THAT THEY ARE THE WIDOW AND
SO ORDERED. SON OF MR. CHRISTIAN HARPER.
Ruling of the CA II.
Petitioner appealed, assigning to the RTC the following errors, to wit: WHETHER OR NOT THE APPELLEES WERE ABLE TO PROVE WITH COMPETENT EVIDENCE THE
AFFIRMATIVE ALLEGATIONS IN THE COMPLAINT THAT THERE WAS NEGLIGENCE ON THE PART OF
I
THE APPELLANT AND ITS SAID NEGLIGENCE WAS THE PROXIMATE CAUSE OF THE DEATH OF MR.
THE TRIAL COURT ERRED IN RULING THAT THE PLAINTIFFS-APPELLEES ARE THE HEIRS OF THE CHRISTIAN HARPER.
LATE CHRISTIAN HARPER, AS THERE IS NO COMPETENT EVIDENCE ON RECORD SUPPORTING
III.
SUCH RULING.
WHETHER OR NOT THE PROXIMATE CAUSE OF THE DEATH OF MR. CHRISTIAN HARPER WAS HIS
II
OWN NEGLIGENCE.
THE TRIAL COURT ERRED IN RULING THAT THE DEFENDANT-APPELLANT’SNEGLIGENCE WAS THE
Ruling
PROXIMATE CAUSE OF THE DEATH OF MR. HARPER, OR IN NOT RULING THAT IT WAS MR.
CHRISTIAN HARPER’S OWN NEGLIGENCE WHICH WAS THE SOLE, PROXIMATE CAUSE OF HIS The appeal lacks merit.
DEATH.
I.
III Requirements for authentication of documents
establishing respondents’ legal relationship
THE TRIAL COURT ERRED IN AWARDING TO THE PLAINTIFFS-APPELLEES THE AMOUNTOF PH₱
with the victim as his heirs were complied with
43,901,055.00, REPRESENTING THE ALLEGED LOST EARNING OF THE LATE CHRISTIAN HARPER,
THERE BEING NO COMPETENT PROOF OF THE EARNING OF MR. HARPER DURING HIS LIFETIME As to the first issue, the CA pertinently held as follows:
AND OF THE ALLEGATION THAT THE PLAINTIFFS-APPELLEES ARE MR. HARPER’S HEIRS.
The documentary evidence that plaintiffs-appellees offered relative to their heirship consisted of the
IV following –
THE TRIAL COURT ERRED IN AWARDING TO THE PLAINTIFFS-APPELLEES THE AMOUNT OF PH₱ 1. Exhibit "Q" - Birth Certificate of Jonathan Christopher Harper, son of Christian Fredrik Harper and
739,075.00, REPRESENTING THE ALLEGED COST OF TRANSPORTING THE REMAINS OF MR. Ellen Johanne Harper;
CHRISTIAN HARPER TO OSLO, NORWAY, THERE BEING NO PROOF ON RECORD THAT IT WAS
PLAINTIFFS-APPELLEES WHO PAID FOR SAID COST. 2. Exhibit "Q-1" - Marriage Certificate of Ellen Johanne Clausen and Christian Fredrik Harper;

V 3. Exhibit "R" - Birth Certificate of Christian Fredrick Harper, son of Christopher Shaun Harper and Eva
THE TRIAL COURT ERRED IN AWARDING ATTORNEY’S FEES AND COST OF SUIT TO THE
PLAINTIFFS-APPELLEES, THERE BEING NO PROOF ON RECORD SUPPORTING SUCH AWARD.
On October 21, 2009, the CA affirmed the judgment of the RTC with modification,9 as follows:
WHEREFORE, the assailed Decision of the Regional Trial Court dated October 25, 2005 is
hereby AFFIRMED with MODIFICATION. Accordingly, defendant-appellant is ordered to pay plaintiffs-
appellees the amounts of ₱ 52,078,702.50, as actual and compensatory damages; ₱ 25,000.00, as
temperate damages; ₱ 250,000.00, as attorney’s fees; and to pay the costs of the suit.
Harper; and
4. Exhibit "R-1" - Certificate from the Oslo Probate Court stating that Ellen Harper was married to the
deceased, Christian Fredrick Harper and listed Ellen Harper and Jonathan Christopher Harper as the
heirs of Christian Fredrik Harper.
Defendant-appellant points out that plaintiffs-appellees committed several mistakes as regards the above
documentary exhibits, resultantly making them incompetent evidence, to wit, (a) none of the plaintiffs-
appellees or any of the witnesses who testified for the plaintiffs gave evidence that Ellen Johanne Harper
and Jonathan Christopher Harper are the widow and son of the deceased Christian Fredrik Harper; (b)
Exhibit "Q" was labeled as Certificate of Marriage in plaintiffs-appellees’ Formal Offer of Evidence, when it
appears to be the Birth Certificate of the late Christian Harper; (c) Exhibit "Q-1" is a translation of the
Marriage Certificate of Ellen Johanne Harper and Christian Fredrik Harper, the original of which was not
produced in court, much less, offered in evidence. Being a mere translation, it cannot be a competent
evidence of the alleged fact that Ellen Johanne Harper is the widow of Christian Fredrik Harper, pursuant
to the Best Evidence Rule. Even assuming that it is an original Marriage Certificate, it is not a public
document that is admissible without the need of being identified or authenticated on the witness stand by
a witness, as it appears to be a document issued by the Vicar of the Parish of Ullern and, hence, a private
document; (d) Exhibit "R" was labeled as Probate Court Certificate in plaintiffs-appellees’ Formal Offer of
Evidence, when it appears to be the Birth Certificate of the deceased, Christian Fredrik Harper; and (e)
Exhibit "R-1" is a translation of the supposed Probate Court Certificate, the original of which was not
produced in court, much less, offered in evidence. Being a mere translation, it is an incompetent evidence
of the alleged fact that plaintiffs-appellees are the heirs of Christian Fredrik Harper, pursuant to the Best
Evidence Rule.
Defendant-appellant further adds that Exhibits "Q-1" and "R-1" were not duly attested by the legal
custodians (by the Vicar of the Parish of Ullern for Exhibit "Q-1" and by the Judge or Clerk of the Probate
Court for Exhibit "R-1") as required under Sections 24 and 25, Rule 132 of the Revised Rules of Court.
Likewise, the said documents are not accompanied by a certificate that such officer has the custody as also
required under Section 24 of Rule 132. Consequently, defendant-appellant asseverates that Exhibits "Q-1"
and "R-1" as private documents, which were not duly authenticated on the witness stand by a competent
witness, are essentially hearsay in nature that have no probative value. Therefore, it is obvious that
plaintiffs-appellees failed to prove that they are the widow and son of the late Christian Harper.
Plaintiffs-appellees make the following counter arguments, viz, (a) Exhibit "Q-1", the Marriage Certificate of
Ellen Johanne Harper and Christian Fredrik Harper, was issued by the Office of the Vicar of Ullern with a
statement that "this certificate is a transcript from the Register of Marriage of Ullern Church." The contents
of Exhibit "Q-1" were translated by the Government of the Kingdom of Norway, through its authorized
translator, into English and authenticated by the Royal Ministry of Foreign Affairs of Norway, which in
turn, was also authenticated by the Consul, Embassy of the Republic of the Philippines in Stockholm,
Sweden; (b) Exhibit "Q", the Birth Certificate of Jonathan Christopher Harper, was issued and signed by
the Registrar of the Kingdom of Norway, as authenticated by the Royal Ministry of Foreign Affairs of
Norway, whose signature was also authenticated by the Consul, Embassy of the Republic of the
Philippines in Stockholm, Sweden; and (c) Exhibit "R-1", the Probate Court Certificate was also
authenticated by the Royal Ministry of Foreign Affairs of Norway, whose signature was also authenticated
by the Consul, Embassy of the Republic of the Philippines in Stockholm, Sweden.
They further argue that since Exhibit "Q-1", Marriage Certificate, was issued by the vicar or parish priest,
the legal custodian of parish records, it is considered as an exception to the hearsay rule. As for Exhibit "R-
1", the Probate Court Certificate, while the document is indeed a translation of the certificate, it is an official
certification, duly confirmed by the Government of the Kingdom of Norway; its contents were lifted by the
Government Authorized Translator from the official record and thus, a written official act of a foreign
sovereign country.
WE rule for plaintiffs-appellees.
The Revised Rules of Court provides that public documents may be evidenced by a copy attested by the
officer having the legal custody of the record. The attestation must state, in substance, that the copy is a
correct copy of the original, or a specific part thereof, as the case may be. The attestation must be under
the official seal of the attesting officer, if there be any, or if he be the clerk of a court having a seal, under the
seal of such court.
If the record is not kept in the Philippines, the attested copy must be accompanied with a certificate that
such officer has the custody. If the office in which the record is kept is in a foreign country, the certificate
may be made by a secretary of the embassy or legation, consul general, consul, vice consul, or consular
agent or by any officer in the foreign service of the Philippines stationed in the foreign country in which the
record is kept, and authenticated by the seal of his office.
The documents involved in this case are all kept in Norway. These documents have been authenticated by
the Royal Norwegian Ministry of Foreign Affairs; they bear the official seal of the Ministry and signature of
one, Tanja Sorlie. The documents are accompanied by an Authentication by the Consul, Embassy of the
Republic of the Philippines in Stockholm, Sweden to the effect that, Tanja Sorlie is duly authorized to
legalize official documents for the Ministry.
Exhibits "Q" and "R" are extracts of the register of births of both Jonathan Christopher Harper and the late
Christian Fredrik Harper, respectively, wherein the former explicitly declares that Jonathan Christopher is
the son of Christian Fredrik and Ellen Johanne Harper. Said documents bear the signature of the keeper,
Y. Ayse B. Nordal with the official seal of the Office of the Registrar of Oslo, and the authentication of Tanja
Sorlie of the Royal Ministry of Foreign Affairs, Oslo, which were further authenticated by Philippine Consul
Marian Jocelyn R. Tirol. In addition, the latter states that said documents are the birth certificates of
Jonathan Christopher Harper and Christian Fredrik Harper issued by the Registrar Office of Oslo, Norway
on March 23, 2004.
Exhibits "Q-1", on the other hand, is the Marriage Certificate of Christian Fredrik Harper and Ellen
Johanne Harper issued by the vicar of the Parish of Ullern while Exhibit "R-1" is the Probate Court
Certificate from the Oslo Probate Court, naming Ellen Johanne Harper and Jonathan Christopher Harper
as the heirs of the deceased Christian Fredrik Harper. The documents are certified true translations into
English of the transcript of the said marriage certificate and the probate court certificate. They were
likewise signed by the authorized government translator of Oslo with the seal of his office; attested by Tanja
Sorlie and further certified by our own Consul.
In view of the foregoing, WE conclude that plaintiffs-appellees had substantially complied with the
requirements set forth under the rules. WE would also like to stress that plaintiffs-appellees herein are
residing overseas and are litigating locally through their representative. While they are not excused from
complying with our rules, WE must take into account the attendant reality that these overseas litigants
communicate with their representative and counsel via long distance communication. Add to this is the
fact that compliance with the requirements on attestation and authentication or certification is no easy
process and completion thereof may vary depending on different factors such as the location of the
requesting party from the consulate and the office of the record custodian, the volume of transactions in
said offices and even the mode of sending these documents to the Philippines. With these circumstances
under consideration, to OUR minds, there is every reason for an equitable and relaxed application of the
rules on the issuance of the required attestation from the custodian of the documents to plaintiffs-
appellees’ situation. Besides, these questioned documents were duly signed by the officers having custody
of the same.11
Petitioner assails the CA’s ruling that respondents substantially complied with the rules on the
authentication of the proofs of marriage and filiation set by Section 24 and Section 25 of Rule 132 of the
Rules of Court when they presented Exhibit Q, Exhibit Q-1, Exhibit R and Exhibit R-1, because the legal
custodian did not duly attest that Exhibit Q-1 and Exhibit R-1 were the correct copies of the originals on
file, and because no certification accompanied the documents stating that "such officer has custody of the
originals." It contends that respondents did not competently prove their being Harper’s surviving heirs by
reason of such documents being hearsay and incompetent.
Petitioner’s challenge against respondents’ documentary evidence on marriage and heirship is not well-
taken.
Section 24 and Section 25 of Rule 132 provide:
Section 24. Proof of official record. — The record of public documents referred to in paragraph (a) of Section
19, when admissible for any purpose, may be evidenced by an official publication thereof or by a copy
attested by the officer having the legal custody of the record, or by his deputy, and accompanied, if the
record is not kept in the Philippines, with a certificate that such officer has the custody. If the office in
which the record is kept is in a foreign country, the certificate may be made by a secretary of the embassy
or legation, consul general, consul, vice consul, or consular agent or by any officer in the foreign service of
the Philippines stationed in the foreign country in which the record is kept, and authenticated by the seal
of his office.
Section 25. What attestation of copy must state. — Whenever a copy of a document or record is attested for
the purpose of evidence, the attestation must state, in substance, that the copy is a correct copy of the
original, or a specific part thereof, as the case may be. The attestation must be under the official seal of the
attesting officer, if there be any, or if he be the clerk of a court having a seal, under the seal of such court.
Although Exhibit Q,12 Exhibit Q-1,13 Exhibit R14 and Exhibit R-115 were not attested by the officer having the
legal custody of the record or by his deputy in the manner required in Section 25 of Rule 132, and said
documents did not comply with the requirement under Section 24 of Rule 132 to the effect that if the
record was not kept in the Philippines a certificate of the person having custody must accompany the copy
of the document that was duly attested stating that such person had custody of the documents, the
deviation was not enough reason to reject the utility of the documents for the purposes they were intended
to serve.
Exhibit Q and Exhibit R were extracts from the registry of births of Oslo, Norway issued on March 23,
2004 and signed by Y. Ayse B. Nordal, Registrar, and corresponded to respondent Jonathan Christopher
Harper and victim Christian Fredrik Harper, respectively.16 Exhibit Q explicitly stated that Jonathan was
the son of Christian Fredrik Harper and Ellen Johanne Harper, while Exhibit R attested to the birth of
Christian Fredrik Harper on December 4, 1968. Exhibit Q and Exhibit R were authenticated on March 29,
2004 by the signatures of Tanja Sorlie of the Royal Ministry of Foreign Affairs of Norway as well as by the
official seal of that office. In turn, Consul Marian Jocelyn R. Tirol of the Philippine Consulate in Stockholm,
Sweden authenticated the signatures of Tanja Sorlie and the official seal of the Royal Ministry of Foreign
Affairs of Norway on Exhibit Q and Exhibit R, explicitly certifying to the authority of Tanja Sorlie "to legalize
official documents for the Royal Ministry of Foreign Affairs of Norway."17
Exhibit Q-1,18 the Marriage Certificate of Ellen Johanne Clausen Harper and Christian Fredrik Harper,
contained the following data, namely: (a) the parties were married on June 29, 1996 in Ullern Church; and
(b) the certificate was issued by the Office of the Vicar of Ullern on June 29, 1996.
Exhibit Q-1 was similarly authenticated by the signature of Tanja Sorlie of the Royal Ministry of Foreign
Affairs of Norway, with the official seal of that office. Philippine Consul Tirol again expressly certified to the
capacity of Sorlie "to legalize official documents for the Royal Ministry of Foreign Affairs of Norway,"19 and
further certified that the document was a true translation into English of a transcript of a Marriage
Certificate issued to Christian Frederik Harper and Ellen Johanne Clausen by the Vicar of the Parish of
Ullern on June 29, 1996.
Exhibit R-1,20 a Probate Court certificate issued by the Oslo Probate Court on February 18, 2000 through
Morten Bolstad, its Senior Executive Officer, was also authenticated by the signature of Tanja Sorlie and
with the official seal of the Royal Ministry of Foreign Affairs of Norway. As with the other documents,
Philippine Consul Tirol explicitly certified to the capacity of Sorlie "to legalize official documents for the
Royal Ministry of Foreign Affairs of Norway," and further certified that the document was a true translation
into English of the Oslo Probate Court certificate issued on February 18, 2000 to the effect that Christian
Fredrik Harper, born on December 4, 1968, had reportedly died on November 6, 1999.21
The Oslo Probate Court certificate recited that both Ellen Johanne Harper and Christopher S. Harper were
Harper’s heirs, to wit:
The above names surviving spouse has accepted responsibility for the commitments of the deceased in
accordance with the provisions of Section 78 of the Probate Court Act (Norway), and the above substitute
guardian has agreed to the private division of the estate.
The following heir and substitute guardian will undertake the private division of the estate:
Ellen Johanne Harper
Christopher S. Harper
This probate court certificate relates to the entire estate.
Oslo Probate Court, 18 February 2000.22
The official participation in the authentication process of Tanja Sorlie of the Royal Ministry of Foreign
Affairs of Norway and the attachment of the official seal of that office on each authentication indicated that
Exhibit Q, Exhibit R, Exhibit Q-1 and Exhibit R-1 were documents of a public nature in Norway, not
merely private documents. It cannot be denied that based on Philippine Consul Tirol’s official
authentication, Tanja Sorlie was "on the date of signing, duly authorized to legalize official documents for
the Royal Ministry of Foreign Affairs of Norway." Without a showing to the contrary by petitioner, Exhibit Q,
Exhibit R, Exhibit Q-1 and Exhibit R-1 should be presumed to be themselves official documents under
Norwegian law, and admissible as prima facie evidence of the truth of their contents under Philippine law.
At the minimum, Exhibit Q, Exhibit R, Exhibit Q-1 and Exhibit R-1 substantially met the requirements of
Section 24 and Section 25 of Rule 132 as a condition for their admission as evidence in default of a
showing by petitioner that the authentication process was tainted with bad faith. Consequently, the
objective of ensuring the authenticity of the documents prior to their admission as evidence was
substantially achieved. In Constantino-David v. Pangandaman-Gania,23 the Court has said that substantial
compliance, by its very nature, is actually inadequate observance of the requirements of a rule or
regulation that are waived under equitable circumstances in order to facilitate the administration of justice,
there being no damage or injury caused by such flawed compliance.
The Court has further said in Constantino-David v. Pangandaman-Gania that the focus in every inquiry on
whether or not to accept substantial compliance is always on the presence of equitable conditions to
administer justice effectively and efficiently without damage or injury to the spirit of the legal
obligation.24 There are, indeed, such equitable conditions attendant here, the foremost of which is that
respondents had gone to great lengths to submit the documents. As the CA observed, respondents’
compliance with the requirements on attestation and authentication of the documents had not been easy;
they had to contend with many difficulties (such as the distance of Oslo, their place of residence, from
Stockholm, Sweden, where the Philippine Consulate had its office; the volume of transactions in the offices
concerned; and the safe transmission of the documents to the Philippines).25 Their submission of the
documents should be presumed to be in good faith because they did so in due course. It would be
inequitable if the sincerity of respondents in obtaining and submitting the documents despite the
difficulties was ignored.
The principle of substantial compliance recognizes that exigencies and situations do occasionally demand
some flexibility in the rigid application of the rules of procedure and the laws.26 That rules of procedure may
be mandatory in form and application does not forbid a showing of substantial compliance under We are not persuaded. Altogether, the documentary and testimonial evidence submitted xxx are
justifiable circumstances,27because substantial compliance does not equate to a disregard of basic rules. competent and adequate proofs that private respondents are collateral heirs of Lourdes Sampayo.
For sure, substantial compliance and strict adherence are not always incompatible and do not always
clash in discord. The power of the Court to suspend its own rules or to except any particular case from the xxx
operation of the rules whenever the purposes of justice require the suspension cannot be challenged.28 In
Under Art. 172 of the Family Code, the filiation of legitimate children shall be proved by any other means
the interest of substantial justice, even procedural rules of the most mandatory character in terms of
allowed by the Rules of Court and special laws, in the absence of a record of birth or a parent’s admission
compliance are frequently relaxed. Similarly, the procedural rules should definitely be liberally construed if
of such legitimate filiation in a public or private document duly signed by the parent. Such other proof of
strict adherence to their letter will result in absurdity and in manifest injustice, or where the merits of a
one’s filiation may be a baptismal certificate, a judicial admission, a family Bible in which his name has
party’s cause are apparent and outweigh considerations of non-compliance with certain formal
been entered, common reputation respecting his pedigree, admission by silence, the testimonies of
requirements.29 It is more in accord with justice that a party-litigant is given the fullest opportunity to
witnesses and other kinds of proof admissible under Rule 130 of the Rules of Court. By analogy, this
establish the merits of his claim or defense than for him to lose his life, liberty, honor or property on mere
method of proving filiation may also be utilized in the instant case.
technicalities. Truly, the rules of procedure are intended to promote substantial justice, not to defeat it, and
should not be applied in a very rigid and technical sense.30 Public documents are the written official acts, or records of the official act of the sovereign authority, official
bodies and tribunals, and public officers, whether of the Philippines, or a foreign country. The baptismal
Petitioner urges the Court to resolve the apparent conflict between the rulings in Heirs of Pedro Cabais v.
certificates presented in evidence by private respondents are public documents. Parish priests continue to
Court of Appeals31 (Cabais) and in Heirs of Ignacio Conti v. Court of Appeals32 (Conti) establishing filiation
be the legal custodians of the parish records and are authorized to issue true copies, in the form of
through a baptismal certificate.33
certificates, of the entries contained therein.
Petitioner’s urging is not warranted, both because there is no conflict between the rulings
The admissibility of baptismal certificates offered by Lydia S. Reyes, absent the testimony of the officiating
in Cabais and Conti, and because neither Cabais nor Conti is relevant herein.
priest or the official recorder, was settled in People v. Ritter, citing U.S. v. de Vera (28 Phil. 105 1914, thus:
In Cabais, the main issue was whether or not the CA correctly affirmed the decision of the RTC that had
.... The entries made in the Registry Book may be considered as entries made in the course of business
relied mainly on the baptismal certificate of Felipa C. Buesa to establish the parentage and filiation of Pedro
under Section 43 of Rule 130, which is an exception to the hearsay rule. The baptisms administered by the
Cabais. The Court held that the petition was meritorious, stating:
church are one of its transactions in the exercise of ecclesiastical duties and recorded in the book of the
A birth certificate, being a public document, offers prima facie evidence of filiation and a high degree of church during this course of its business.
proof is needed to overthrow the presumption of truth contained in such public document. This is
It may be argued that baptismal certificates are evidence only of the administration of the sacrament, but
pursuant to the rule that entries in official records made in the performance of his duty by a public officer
in this case, there were four (4) baptismal certificates which, when taken together, uniformly show that
are prima facie evidence of the facts therein stated. The evidentiary nature of such document must,
Lourdes, Josefina, Remedios and Luis had the same set of parents, as indicated therein. Corroborated by
therefore, be sustained in the absence of strong, complete and conclusive proof of its falsity or nullity.
the undisputed testimony of Adelaida Sampayo that with the demise of Lourdes and her brothers Manuel,
On the contrary, a baptismal certificate is a private document, which, being hearsay, is not a conclusive Luis and sister Remedios, the only sibling left was Josefina Sampayo Reyes, such baptismal certificates
proof of filiation. It does not have the same probative value as a record of birth, an official or public have acquired evidentiary weight to prove filiation.36
document. In US v. Evangelista, this Court held that church registers of births, marriages, and deaths
Obviously, Conti did not treat a baptismal certificate, standing alone, as sufficient to prove filiation; on the
made subsequent to the promulgation of General Orders No. 68 and the passage of Act No. 190 are no
contrary, Conti expressly held that a baptismal certificate had evidentiary value to prove filiation
longer public writings, nor are they kept by duly authorized public officials. Thus, in this jurisdiction, a
if considered alongside other evidence of filiation. As such, a baptismal certificate alone is not sufficient to
certificate of baptism such as the one herein controversy is no longer regarded with the same evidentiary
resolve a disputed filiation.
value as official records of birth. Moreover, on this score, jurisprudence is consistent and uniform in ruling
that the canonical certificate of baptism is not sufficient to prove recognition.34 Unlike Cabais and Conti, this case has respondents presenting several documents, like the birth
certificates of Harper and respondent Jonathan Harper, the marriage certificate of Harper and Ellen
The Court sustained the Cabais petitioners’ stance that the RTC had apparently erred in relying on the
Johanne Harper, and the probate court certificate, all of which were presumably regarded as public
baptismal certificate to establish filiation, stressing the baptismal certificate’s limited evidentiary value as
documents under the laws of Norway. Such documentary evidence sufficed to competently establish the
proof of filiation inferior to that of a birth certificate; and declaring that the baptismal certificate did not
relationship and filiation under the standards of our Rules of Court.
attest to the veracity of the statements regarding the kinsfolk of the one baptized. Nevertheless, the Court
ultimately ruled that it was respondents’ failure to present the birth certificate, more than anything else, II
that lost them their case, stating that: "The unjustified failure to present the birth certificate instead of the Petitioner was liable due to its own negligence
baptismal certificate now under consideration or to otherwise prove filiation by any other means recognized
by law weigh heavily against respondents."35 Petitioner argues that respondents failed to prove its negligence; that Harper’s own negligence in allowing
the killers into his hotel room was the proximate cause of his own death; and that hotels were not insurers
In Conti, the Court affirmed the rulings of the trial court and the CA to the effect that the Conti respondents of the safety of their guests.
were able to prove by preponderance of evidence their being the collateral heirs of deceased Lourdes
Sampayo. The Conti petitioners disagreed, arguing that baptismal certificates did not prove the filiation of The CA resolved petitioner’s arguments thuswise:
collateral relatives of the deceased. Agreeing with the CA, the Court said:
Defendant-appellant contends that the pivotal issue is whether or not it had committed negligence and
corollarily, whether its negligence was the immediate cause of the death of Christian Harper. In its defense,
defendant-appellant mainly avers that it is equipped with adequate security system as follows: (1) keycards
or vingcards for opening the guest rooms, (2) two CCTV monitoring cameras on each floor of the hotel and
(3) roving guards with handheld radios, the number of which depends on the occupancy rate of the hotel.
Likewise, it reiterates that the proximate cause of Christian Harper’s death was his own negligence in
inviting to his room the two (2) still unidentified suspects.
Plaintiffs-appellees in their Brief refute, in that, the liability of defendant-appellant is based upon the fact
that it was in a better situation than the injured person, Christian Harper, to foresee and prevent the
happening of the injurious occurrence. They maintain that there is no dispute that even prior to the
untimely demise of Christian Harper, defendant-appellant was duly forewarned of its security lapses as
pointed out by its Chief Security Officer, Col. Rodrigo De Guzman, who recommended that one roving
guard be assigned on each floor of the hotel considering the length and shape of the corridors. They posit
that defendant-appellant’s inaction constitutes negligence.
This Court finds for plaintiffs-appellees.
As the action is predicated on negligence, the relevant law is Article 2176 of the Civil Code, which states
that –
"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 was no pre-existing contractual relation between the
parties, is called quasi-delict and is governed by the provisions of this chapter."
Negligence is defined as the omission to do something which a reasonable man, guided by those
considerations which ordinarily regulate the conduct of human affairs, would do, or the doing of something
which a prudent and reasonable man would not do. The Supreme Court likewise ruled that negligence is
want of care required by the circumstances. It is a relative or comparative, not an absolute, term and its
application depends upon the situation of the parties and the degree of care and vigilance which the
circumstances reasonably require. In determining whether or not there is negligence on the part of the
parties in a given situation, jurisprudence has laid down the following test: Did defendant, in doing the
alleged negligent act, use that reasonable care and caution which an ordinarily prudent person would have
used in the same situation? If not, the person is guilty of negligence. The law, in effect, adopts the standard
supposed to be supplied by the imaginary conduct of the discreet pater familias of the Roman law.
The test of negligence is objective. WE measure the act or omission of the tortfeasor with a perspective as
that of an ordinary reasonable person who is similarly situated. The test, as applied to the extant case, is
whether or not defendant-appellant, under the attendant circumstances, used that reasonable care and
caution which an ordinary reasonable person would have used in the same situation.
WE rule in the negative.
In finding defendant-appellant remiss in its duty of exercising the required reasonable care under the
circumstances, the court a quo reasoned-out, to wit:
"Of the witnesses presented by plaintiffs to prove its (sic) case, the only one with competence to testify on
the issue of adequacy or inadequacy of security is Col. Rodrigo De Guzman who was then the Chief
Security Officer of defendant hotel for the year 1999. He is a retired police officer and had vast experience
in security jobs. He was likewise a member of the elite Presidential Security Group.
He testified that upon taking over the job as the chief of the security force of the hotel, he made an
assessment of the security situation. Col. De Guzman was not satisfied with the security set-up and told
the hotel management of his desire to improve it. In his testimony, De Guzman testified that at the time he
took over, he noticed that there were few guards in the elevated portion of the hotel where the rooms were
located. The existing security scheme then was one guard for 3 or 4 floors. He likewise testified that he
recommended to the hotel management that at least one guard must be assigned per floor especially
considering that the hotel has a long "L-shaped" hallway, such that one cannot see both ends of the
hallway. He further opined that "even one guard in that hallway is not enough because of the blind portion
of the hallway."
On cross-examination, Col. De Guzman testified that the security of the hotel was adequate at the time the
crime occurred because the hotel was not fully booked. He qualified his testimony on direct in that his
recommendation of one guard per floor is the "ideal" set-up when the hotel is fully-booked.
Be that as it may, it must be noted that Col. De Guzman also testified that the reason why the hotel
management disapproved his recommendation was that the hotel was not doing well. It is for this reason
that the hotel management did not heed the recommendation of Col. De Guzman, no matter how sound
the recommendation was, and whether the hotel is fully-booked or not. It was a business judgment call on
the part of the defendant.
Plaintiffs anchor its (sic) case on our law on quasi-delicts.
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 quasi-delict.
Liability on the part of the defendant is based upon the fact that he was in a better situation than the
injured person to foresee and prevent the happening of the injurious occurrence.
There is no dispute that even prior to the untimely demise of Mr. Harper, defendant was duly forewarned
of the security lapses in the hotel. Col. De Guzman was particularly concerned with the security of the
private areas where the guest rooms are. He wanted not just one roving guard in every three or four floors.
He insisted there must be at least one in each floor considering the length and the shape of the corridors.
The trained eyes of a security officer was (sic) looking at that deadly scenario resulting from that wide
security breach as that which befell Christian Harper.
The theory of the defense that the malefactor/s was/were known to Harper or was/were visitors of Harper
and that there was a shindig among [the] three deserves scant consideration.
The NBI Biology Report (Exh. "C" & "D") and the Toxicology Report (Exh. "E") belie the defense theory of a
joyous party between and among Harper and the unidentified malefactor/s. Based on the Biology Report,
Harper was found negative of prohibited and regulated drugs. The Toxicology Report likewise revealed that
the deceased was negative of the presence of alcohol in his blood.
The defense even suggests that the malefactor/s gained entry into the private room of Harper either
because Harper allowed them entry by giving them access to the vingcard or because Harper allowed them
entry by opening the door for them, the usual gesture of a room occupant to his visitors.
While defendant’s theory may be true, it is more likely, under the circumstances obtaining that the
malefactor/s gained entry into his room by simply knocking at Harper’s door and the latter opening it
probably thinking it was hotel personnel, without an inkling that criminal/s could be in the premises.
The latter theory is more attuned to the dictates of reason. If indeed the female "visitor" is known to or a
visitor of Harper, she should have entered the the room together with Harper. It is quite unlikely that a
supposed "visitor" would wait three minutes to be with a guest when he/she could go with the guest
directly to the room. The interval of three minutes in Harper’s entry and that of the alleged female visitor
belies the "theory of acquaintanceship". It is most likely that the female "visitor" was the one who opened
the door to the male "visitor", undoubtedly, a co-conspirator.
In any case, the ghastly incident could have been prevented had there been adequate security in each of
the hotel floors. This, coupled with the earlier recommendation of Col. De Guzman to the hotel
management to act on the security lapses of the hotel, raises the presumption that the crime was
foreseeable.
Clearly, defendant’s inaction constitutes negligence or want of the reasonable care demanded of it in that
particular situation.
In a case, the Supreme Court defined negligence as:
The failure to observe for the protection of the interests of another person that degree of care, precaution
and vigilance, which the circumstances justly demand, whereby such person suffers injury.
Negligence is want of care required by the circumstances. It is a relative or comparative, not an absolute
term, and its application depends upon the situation of the parties, and the degree of care and vigilance
which the circumstances reasonably impose. Where the danger is great, a high degree of care is necessary.
Moreover, in applying the premises liability rule in the instant case as it is applied in some jurisdiction (sic)
in the United States, it is enough that guests are injured while inside the hotel premises to make the
hotelkeeper liable. With great caution should the liability of the hotelkeeper be enforced when a guest died
inside the hotel premises.
It also bears stressing that there were prior incidents that occurred in the hotel which should have
forewarned the hotel management of the security lapses of the hotel. As testified to by Col. De Guzman,
"there were ‘minor’ incidents" (loss of items) before the happening of the instant case.
These "minor" incidents may be of little significance to the hotel, yet relative to the instant case, it speaks
volume. This should have served as a caveat that the hotel security has lapses.
Makati Shangri-La Hotel, to stress, is a five-star hotel. The "reasonable care" that it must exercise for the
safety and comfort of its guests should be commensurate with the grade and quality of the accommodation
it offers. If there is such a thing as "five-star hotel security", the guests at Makati Shangri-La surely
deserves just that!
When one registers (as) a guest of a hotel, he makes the establishment the guardian of his life and his
personal belongings during his stay. It is a standard procedure of the management of the hotel to screen
visitors who call on their guests at their rooms. The murder of Harper could have been avoided had the
security guards of the Shangri-La Hotel in Makati dutifully observed this standard procedure."
WE concur.
Well settled is the doctrine that "the findings of fact by the trial court are accorded great respect by
appellate courts and should not be disturbed on appeal unless the trial court has overlooked, ignored, or
disregarded some fact or circumstances of sufficient weight or significance which, if considered, would alter
the situation." After a conscientious sifting of the records, defendant-appellant fails to convince US to
deviate from this doctrine.
It could be gleaned from findings of the trial court that its conclusion of negligence on the part of
defendant-appellant is grounded mainly on the latter’s inadequate hotel security, more particularly on the
failure to deploy sufficient security personnel or roving guards at the time the ghastly incident happened.
A review of the testimony of Col. De Guzman reveals that on direct examination he testified that at the time
he assumed his position as Chief Security Officer of defendant-appellant, during the early part of 1999 to
the early part of 2000, he noticed that some of the floors of the hotel were being guarded by a few guards,
for instance, 3 or 4 floors by one guard only on a roving manner. He then made a recommendation that
the ideal-set up for an effective security should be one guard for every floor, considering that the hotel is L-
shaped and the ends of the hallways cannot be seen. At the time he made the recommendation, the same
was denied, but it was later on considered and approved on December 1999 because of the Centennial
Celebration.
On cross-examination, Col. De Guzman confirmed that after he took over as Chief Security Officer, the
number of security guards was increased during the first part of December or about the last week of
November, and before the incident happened, the security was adequate. He also qualified that as to his
direct testimony on "ideal-set up", he was referring to one guard for every floor if the hotel is fully booked. At
the time he made his recommendation in the early part of 1999, it was disapproved as the hotel was not
doing well and it was not fully booked so the existing security was adequate enough. He further explained
that his advice was observed only in the late November 1999 or the early part of December 1999.
It could be inferred from the foregoing declarations of the former Chief Security Officer of defendant-
appellant that the latter was negligent in providing adequate security due its guests. With confidence, it
was repeatedly claimed by defendant-appellant that it is a five-star hotel. Unfortunately, the record failed to
show that at the time of the death of Christian Harper, it was exercising reasonable care to protect its
guests from harm and danger by providing sufficient security commensurate to it being one of the finest
hotels in the country. In so concluding, WE are reminded of the Supreme Court’s enunciation that the
hotel business like the common carrier’s business is imbued with public interest. Catering to the public,
hotelkeepers are bound to provide not only lodging for hotel guests but also security to their persons and
belongings. The twin duty constitutes the essence of the business.
It is clear from the testimony of Col. De Guzman that his recommendation was initially denied due to the
fact that the business was then not doing well. The "one guard, one floor" recommended policy, although
ideal when the hotel is fully-booked, was observed only later in November 1999 or in the early part of
December 1999, or needless to state, after the murder of Christian Harper. The apparent security lapses of
defendant-appellant were further shown when the male culprit who entered Christian Harper’s room was
never checked by any of the guards when he came inside the hotel. As per interview conducted by the
initial investigator, PO3 Cornelio Valiente to the guards, they admitted that nobody know that said man
entered the hotel and it was only through the monitor that they became aware of his entry. It was even
evidenced by the CCTV that before he walked to the room of the late Christian Harper, said male suspect
even looked at the monitoring camera. Such act of the man showing wariness, added to the fact that his
entry to the hotel was unnoticed, at an unholy hour, should have aroused suspicion on the part of the
roving guard in the said floor, had there been any. Unluckily for Christian Harper, there was none at that
time.
Proximate cause is defined as 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.
More comprehensively, proximate cause is that cause acting first and producing the injury, either
immediately or by setting other events in motion, all constituting a natural and continuous chain of events,
each having a close causal connection with its immediate predecessor, the final event in the chain
immediately effecting the injury as natural and probable result of the cause which first acted, under such
circumstances that the person responsible for the first event should, as an ordinarily prudent and
intelligent person, have reasonable ground to expect at the moment of his act or default that an injury to
some person might probably result therefrom.
Defendant-appellant’s contention that it was Christian Harper’s own negligence in allowing the malefactors
to his room that was the proximate cause of his death, is untenable. To reiterate, defendant-appellant is
engaged in a business imbued with public interest, ergo, it is bound to provide adequate security to its
guests. As previously discussed, defendant-appellant failed to exercise such reasonable care expected of it
under the circumstances. Such negligence is the proximate cause which set the chain of events that led to
the eventual demise of its guest. Had there been reasonable security precautions, the same could have
saved Christian Harper from a brutal death.
The Court concurs entirely with the findings and conclusions of the CA, which the Court regards to be
thorough and supported by the records of the trial. Moreover, the Court cannot now review and pass upon
the uniform findings of negligence by the CA and the RTC because doing so would require the Court to
delve into and revisit the factual bases for the finding of negligence, something fully contrary to its
character as not a trier of facts. In that regard, the factual findings of the trial court that are supported by
the evidence on record, especially when affirmed by the CA, are conclusive on the Court.37 Consequently,
the Court will not review unless there are exceptional circumstances for doing so, such as the following:
Probably realizing that his testimony had weakened petitioner’s position in the case, Col. De Guzman soon
clarified on cross-examination that petitioner had seen no need at the time of the incident to augment the
number of guards due to the hotel being then only half-booked. Here is how his testimony went:
ATTY MOLINA:
I just forgot one more point, Your Honor please. Was there ever a time, Mr. Witness, that your
recommendation to post a guard in every floor ever considered and approved by the hotel?
A: Yes, Sir.
Q: When was this?
A: That was on December 1999 because of the Centennial Celebration when the hotel accepted so many
guests wherein most of the rooms were fully booked and I recommended that all the hallways should be
guarded by one guard.41

(a) When the findings are grounded entirely on speculation, surmises or conjectures; xxx

(b) When the inference made is manifestly mistaken, absurd or impossible; ATTY COSICO:

(c) When there is grave abuse of discretion; Q: So at that time that you made your recommendation, the hotel was half-filled.

(d) When the judgment is based on a misapprehension of facts; A: Maybe.

(e) When the findings of facts are conflicting; Q: And even if the hotel is half-filled, your recommendation is that each floor shall be maintained by one
security guard per floors?
(f) When in making its findings the Court of Appeals went beyond the issues of the case, or its findings are
contrary to the admissions of both the appellant and the appellee; A: Yes sir.

(g) When the findings are contrary to the trial court; Q: Would you agree with me that even if the hotel is half-filled, there is no need to increase the guards
because there were only few customers?
(h) When the findings are conclusions without citation of specific evidence on which they are based;
A: I think so.
(i) When the facts set forth in the petition as well as in the petitioner’s main and reply briefs are not
disputed by the respondent; Q: So you will agree with me that each floor should be maintained by one security guard if the rooms are
filled up or occupied?
(j) When the findings of fact are premised on the supposed absence of evidence and contradicted by the
evidence on record; and A: Yes sir.

(k) When the Court of Appeals manifestly overlooked certain relevant facts not disputed by the parties, Q: Now, you even testified that from January 1999 to November 1999 thereof, only minor incidents were
which, if properly considered, would justify a different conclusion.38 involved?

None of the exceptional circumstances obtains herein. Accordingly, the Court cannot depart from or A: Yes sir.
disturb the factual findings on negligence of petitioner made by both the RTC and the CA.39
Q: So it would be correct to say that the security at that time in February was adequate?
Even so, the Court agrees with the CA that petitioner failed to provide the basic and adequate security
measures expected of a five-star hotel; and that its omission was the proximate cause of Harper’s death. A: I believe so.

The testimony of Col. De Guzman revealed that the management practice prior to the murder of Harper Q: Even up to November when the incident happened for that same reason, security was adequate?
had been to deploy only one security or roving guard for every three or four floors of the building; that such
ratio had not been enough considering the L-shape configuration of the hotel that rendered the hallways A: Yes, before the incident.
not visible from one or the other end; and that he had recommended to management to post a guard for
Q: Now, you testified on direct that the hotel posted one guard each floor?
each floor, but his recommendation had been disapproved because the hotel "was not doing well" at that
particular time.40 A: Yes sir.
Q: And it was your own recommendation?

A: Yes, because we are expecting that the hotel will be filled up.

Q: In fact, the hotel was fully booked?

A: Yes sir.42

Petitioner would thereby have the Court believe that Col. De Guzman’s initial recommendation had been
rebuffed due to the hotel being only half-booked; that there had been no urgency to adopt a one-guard-per-
floor policy because security had been adequate at that time; and that he actually meant by his statement
that "the hotel was not doing well" that the hotel was only half-booked.

We are not convinced.

The hotel business is imbued with public interest. Catering to the public, hotelkeepers are bound to
provide not only lodging for their guests but also security to the persons and belongings of their guests. The
twin duty constitutes the essence of the business.43 Applying by analogy Article 2000,44 Article 200145 and
Article 200246 of the Civil Code (all of which concerned the hotelkeepers’ degree of care and responsibility as
to the personal effects of their guests), we hold that there is much greater reason to apply the same if not
greater degree of care and responsibility when the lives and personal safety of their guests are involved.
Otherwise, the hotelkeepers would simply stand idly by as strangers have unrestricted access to all the
hotel rooms on the pretense of being visitors of the guests, without being held liable should anything
untoward befall the unwary guests. That would be absurd, something that no good law would ever
envision.

In fine, the Court sees no reversible-error on the part of the CA.

WHEREFORE, the Court AFFIRMS the judgment of the Court of Appeals; and ORDERS petitioner to pay
the costs of suit.

SO ORDERED.
 G.R. No. 126780 February 17, 2005
YHT REALTY CORPORATION, ERLINDA LAINEZ and ANICIA PAYAM, petitioners,
vs.
THE COURT OF APPEALS and MAURICE McLOUGHLIN, respondents.
DECISION
TINGA, J.:
The primary question of interest before this Court is the only legal issue in the case: It is whether a hotel
may evade liability for the loss of items left with it for safekeeping by its guests, by having these guests
execute written waivers holding the establishment or its employees free from blame for such loss in light of
Article 2003 of the Civil Code which voids such waivers.
Before this Court is a Rule 45 petition for review of the Decision1 dated
19 October 1995 of the Court of
Appeals which affirmed the Decision2 dated 16 December 1991 of the Regional Trial Court (RTC), Branch
13, of Manila, finding YHT Realty Corporation, Brunhilda Mata-Tan (Tan), Erlinda Lainez (Lainez) and
Anicia Payam (Payam) jointly and solidarily liable for damages in an action filed by Maurice McLoughlin
(McLoughlin) for the loss of his American and Australian dollars deposited in the safety deposit box of
Tropicana Copacabana Apartment Hotel, owned and operated by YHT Realty Corporation.
The factual backdrop of the case follow.
Private respondent McLoughlin, an Australian businessman-philanthropist, used to stay at Sheraton Hotel
during his trips to the Philippines prior to 1984 when he met Tan. Tan befriended McLoughlin by showing
him around, introducing him to important people, accompanying him in visiting impoverished street
children and assisting him in buying gifts for the children and in distributing the same to charitable
institutions for poor children. Tan convinced McLoughlin to transfer from Sheraton Hotel to Tropicana
where Lainez, Payam and Danilo Lopez were employed. Lopez served as manager of the hotel while Lainez
and Payam had custody of the keys for the safety deposit boxes of Tropicana. Tan took care of
McLoughlin's booking at the Tropicana where he started staying during his trips to the Philippines from
December 1984 to September 1987.3
On 30 October 1987, McLoughlin arrived from Australia and registered with Tropicana. He rented a safety
deposit box as it was his practice to rent a safety deposit box every time he registered at Tropicana in
previous trips. As a tourist, McLoughlin was aware of the procedure observed by Tropicana relative to its
safety deposit boxes. The safety deposit box could only be opened through the use of two keys, one of
which is given to the registered guest, and the other remaining in the possession of the management of the
hotel. When a registered guest wished to open his safety deposit box, he alone could personally request the
management who then would assign one of its employees to accompany the guest and assist him in
opening the safety deposit box with the two keys.4
McLoughlin allegedly placed the following in his safety deposit box: Fifteen Thousand US Dollars
(US$15,000.00) which he placed in two envelopes, one envelope containing Ten Thousand US Dollars
(US$10,000.00) and the other envelope Five Thousand US Dollars (US$5,000.00); Ten Thousand
Australian Dollars (AUS$10,000.00) which he also placed in another envelope; two (2) other envelopes
containing letters and credit cards; two (2) bankbooks; and a checkbook, arranged side by side inside the
safety deposit box.5
On 12 December 1987, before leaving for a brief trip to Hongkong, McLoughlin opened his safety deposit
box with his key and with the key of the management and took therefrom the envelope containing Five
Thousand US Dollars (US$5,000.00), the envelope containing Ten Thousand Australian Dollars
(AUS$10,000.00), his passports and his credit cards.6 McLoughlin left the other items in the box as he did
not check out of his room at the Tropicana during his short visit to Hongkong. When he arrived in
Hongkong, he opened the envelope which contained Five Thousand US Dollars (US$5,000.00) and
discovered upon counting that only Three Thousand US Dollars (US$3,000.00) were enclosed
therein.7 Since he had no idea whether somebody else had tampered with his safety deposit box, he
thought that it was just a result of bad accounting since he did not spend anything from that envelope.8
After returning to Manila, he checked out of Tropicana on 18 December 1987 and left for Australia. When
he arrived in Australia, he discovered that the envelope with Ten Thousand US Dollars (US$10,000.00)
was short of Five Thousand US Dollars (US$5,000). He also noticed that the jewelry which he bought in
Hongkong and stored in the safety deposit box upon his return to Tropicana was likewise missing, except
for a diamond bracelet.9
When McLoughlin came back to the Philippines on 4 April 1988, he asked Lainez if some money and/or
jewelry which he had lost were found and returned to her or to the management. However, Lainez told him
that no one in the hotel found such things and none were turned over to the management. He again
registered at Tropicana and rented a safety deposit box. He placed therein one (1) envelope containing
Fifteen Thousand US Dollars (US$15,000.00), another envelope containing Ten Thousand Australian
Dollars (AUS$10,000.00) and other envelopes containing his traveling papers/documents. On 16 April
1988, McLoughlin requested Lainez and Payam to open his safety deposit box. He noticed that in the
envelope containing Fifteen Thousand US Dollars (US$15,000.00), Two Thousand US Dollars
(US$2,000.00) were missing and in the envelope previously containing Ten Thousand Australian Dollars
(AUS$10,000.00), Four Thousand Five Hundred Australian Dollars (AUS$4,500.00) were missing.10
When McLoughlin discovered the loss, he immediately confronted Lainez and Payam who admitted that
Tan opened the safety deposit box with the key assigned to him.11 McLoughlin went up to his room where
Tan was staying and confronted her. Tan admitted that she had stolen McLoughlin's key and was able to
open the safety deposit box with the assistance of Lopez, Payam and Lainez.12 Lopez also told McLoughlin
that Tan stole the key assigned to McLoughlin while the latter was asleep.13
McLoughlin requested the management for an investigation of the incident. Lopez got in touch with Tan
and arranged for a meeting with the police and McLoughlin. When the police did not arrive, Lopez and Tan
went to the room of McLoughlin at Tropicana and thereat, Lopez wrote on a piece of paper a promissory
note dated 21 April 1988. The promissory note reads as follows:
I promise to pay Mr. Maurice McLoughlin the amount of AUS$4,000.00 and US$2,000.00 or its equivalent
in Philippine currency on or before May 5, 1988.14
Lopez requested Tan to sign the promissory note which the latter did and Lopez also signed as a witness.
Despite the execution of promissory note by Tan, McLoughlin insisted that it must be the hotel who must
assume responsibility for the loss he suffered. However, Lopez refused to accept the responsibility relying
on the conditions for renting the safety deposit box entitled "Undertaking For the Use Of Safety Deposit
Box,"15 specifically paragraphs (2) and (4) thereof, to wit:
2. To release and hold free and blameless TROPICANA APARTMENT HOTEL from any liability arising from
any loss in the contents and/or use of the said deposit box for any cause whatsoever, including but not
limited to the presentation or use thereof by any other person should the key be lost;
...
4. To return the key and execute the RELEASE in favor of TROPICANA APARTMENT HOTEL upon giving
up the use of the box.16
On 17 May 1988, McLoughlin went back to Australia and he consulted his lawyers as to the validity of the
abovementioned stipulations. They opined that the stipulations are void for being violative of universal
hotel practices and customs. His lawyers prepared a letter dated 30 May 1988 which was signed by
McLoughlin and sent to President Corazon Aquino.17 The Office of the President referred the letter to the
Department of Justice (DOJ) which forwarded the same to the Western Police District (WPD).18
After receiving a copy of the indorsement in Australia, McLoughlin came to the Philippines and registered
again as a hotel guest of Tropicana. McLoughlin went to Malacaňang to follow up on his letter but he was
instructed to go to the DOJ. The DOJ directed him to proceed to the WPD for documentation. But
McLoughlin went back to Australia as he had an urgent business matter to attend to.
For several times, McLoughlin left for Australia to attend to his business and came back to the Philippines
to follow up on his letter to the President but he failed to obtain any concrete assistance.19
McLoughlin left again for Australia and upon his return to the Philippines on 25 August 1989 to pursue
his claims against petitioners, the WPD conducted an investigation which resulted in the preparation of an
affidavit which was forwarded to the Manila City Fiscal's Office. Said affidavit became the basis of
preliminary investigation. However, McLoughlin left again for Australia without receiving the notice of the
hearing on 24 November 1989. Thus, the case at the Fiscal's Office was dismissed for failure to prosecute.
Mcloughlin requested the reinstatement of the criminal charge for theft. In the meantime, McLoughlin and
his lawyers wrote letters of demand to those having responsibility to pay the damage. Then he left again for
Australia.
Upon his return on 22 October 1990, he registered at the Echelon Towers at Malate, Manila. Meetings
were held between McLoughlin and his lawyer which resulted to the filing of a complaint for damages on 3
December 1990 against YHT Realty Corporation, Lopez, Lainez, Payam and Tan (defendants) for the loss of
McLoughlin's money which was discovered on 16 April 1988. After filing the complaint, McLoughlin left
again for Australia to attend to an urgent business matter. Tan and Lopez, however, were not served with
summons, and trial proceeded with only Lainez, Payam and YHT Realty Corporation as defendants.
After defendants had filed their Pre-Trial Brief admitting that they had previously allowed and assisted Tan
to open the safety deposit box, McLoughlin filed an Amended/Supplemental Complaint20 dated 10 June
1991 which included another incident of loss of money and jewelry in the safety deposit box rented by
McLoughlin in the same hotel which took place prior to 16 April 1988.21 The trial court admitted
the Amended/Supplemental Complaint.
During the trial of the case, McLoughlin had been in and out of the country to attend to urgent business in
Australia, and while staying in the Philippines to attend the hearing, he incurred expenses for hotel bills,
airfare and other transportation expenses, long distance calls to Australia, Meralco power expenses, and
expenses for food and maintenance, among others.22
After trial, the RTC of Manila rendered judgment in favor of McLoughlin, the dispositive portion of which
reads:
WHEREFORE, above premises considered, judgment is hereby rendered by this Court in favor of plaintiff
and against the defendants, to wit:
1. Ordering defendants, jointly and severally, to pay plaintiff the sum of US$11,400.00 or its equivalent in
Philippine Currency of ₱342,000.00, more or less, and the sum of AUS$4,500.00 or its equivalent in
Philippine Currency of ₱99,000.00, or a total of ₱441,000.00, more or less, with 12% interest from April 16
1988 until said amount has been paid to plaintiff (Item 1, Exhibit CC);
2. Ordering defendants, jointly and severally to pay plaintiff the sum of ₱3,674,238.00 as actual and
consequential damages arising from the loss of his Australian and American dollars and jewelries
complained against and in prosecuting his claim and rights administratively and judicially (Items II, III, IV,
V, VI, VII, VIII, and IX, Exh. "CC");
3. Ordering defendants, jointly and severally, to pay plaintiff the sum of ₱500,000.00 as moral damages
(Item X, Exh. "CC");
4. Ordering defendants, jointly and severally, to pay plaintiff the sum of ₱350,000.00 as exemplary
damages (Item XI, Exh. "CC");
5. And ordering defendants, jointly and severally, to pay litigation expenses in the sum of ₱200,000.00
(Item XII, Exh. "CC");
6. Ordering defendants, jointly and severally, to pay plaintiff the sum of ₱200,000.00 as attorney's fees, and
a fee of ₱3,000.00 for every appearance; and
7. Plus costs of suit.
SO ORDERED.23
The trial court found that McLoughlin's allegations as to the fact of loss and as to the amount of money he
lost were sufficiently shown by his direct and straightforward manner of testifying in court and found him
to be credible and worthy of belief as it was established that McLoughlin's money, kept in Tropicana's
safety deposit box, was taken by Tan without McLoughlin's consent. The taking was effected through the
use of the master key which was in the possession of the management. Payam and Lainez allowed Tan to
use the master key without authority from McLoughlin. The trial court added that if McLoughlin had not
lost his dollars, he would not have gone through the trouble and personal inconvenience of seeking aid and
assistance from the Office of the President, DOJ, police authorities and the City Fiscal's Office in his desire
to recover his losses from the hotel management and Tan.24
As regards the loss of Seven Thousand US Dollars (US$7,000.00) and jewelry worth approximately One
Thousand Two Hundred US Dollars (US$1,200.00) which allegedly occurred during his stay at Tropicana
previous to 4 April 1988, no claim was made by McLoughlin for such losses in his complaint dated 21
November 1990 because he was not sure how they were lost and who the responsible persons were. But
considering the admission of the defendants in their pre-trial brief that on three previous occasions they
allowed Tan to open the box, the trial court opined that it was logical and reasonable to presume that his
personal assets consisting of Seven Thousand US Dollars (US$7,000.00) and jewelry were taken by Tan
from the safety deposit box without McLoughlin's consent through the cooperation of Payam and Lainez.25
The trial court also found that defendants acted with gross negligence in the performance and exercise of
their duties and obligations as innkeepers and were therefore liable to answer for the losses incurred by
McLoughlin.26
Moreover, the trial court ruled that paragraphs (2) and (4) of the "Undertaking For The Use Of Safety Deposit
Box" are not valid for being contrary to the express mandate of Article 2003 of the New Civil Code and
against public policy.27 Thus, there being fraud or wanton conduct on the part of defendants, they should
be responsible for all damages which may be attributed to the non-performance of their contractual
obligations.28
The Court of Appeals affirmed the disquisitions made by the lower court except as to the amount of
damages awarded. The decretal text of the appellate court's decision reads:
THE FOREGOING CONSIDERED, the appealed Decision is hereby AFFIRMED but modified as follows:
The appellants are directed jointly and severally to pay the plaintiff/appellee the following amounts:
1) ₱153,200.00 representing the peso equivalent of US$2,000.00 and AUS$4,500.00;
2) ₱308,880.80, representing the peso value for the air fares from Sidney [sic] to Manila and back for a total
of eleven (11) trips;
3) One-half of ₱336,207.05 or ₱168,103.52 representing payment to Tropicana Apartment Hotel;
4) One-half of ₱152,683.57 or ₱76,341.785 representing payment to Echelon Tower;
5) One-half of ₱179,863.20 or ₱89,931.60 for the taxi xxx transportation from the residence to Sidney [sic]
Airport and from MIA to the hotel here in Manila, for the eleven (11) trips;
6) One-half of ₱7,801.94 or ₱3,900.97 representing Meralco power expenses;
7) One-half of ₱356,400.00 or ₱178,000.00 representing expenses for food and maintenance;
8) ₱50,000.00 for moral damages;
9) ₱10,000.00 as exemplary damages; and
10) ₱200,000 representing attorney's fees.
With costs.
SO ORDERED.29
Unperturbed, YHT Realty Corporation, Lainez and Payam went to this Court in this appeal by certiorari.
Petitioners submit for resolution by this Court the following issues: (a) whether the appellate court's
conclusion on the alleged prior existence and subsequent loss of the subject money and jewelry is
supported by the evidence on record; (b) whether the finding of gross negligence on the part of petitioners
in the performance of their duties as innkeepers is supported by the evidence on record; (c) whether the
"Undertaking For The Use of Safety Deposit Box" admittedly executed by private respondent is null and
void; and (d) whether the damages awarded to private respondent, as well as the amounts thereof, are
proper under the circumstances.30
The petition is devoid of merit.
It is worthy of note that the thrust of Rule 45 is the resolution only of questions of law and any peripheral
factual question addressed to this Court is beyond the bounds of this mode of review.
Petitioners point out that the evidence on record is insufficient to prove the fact of prior existence of the
dollars and the jewelry which had been lost while deposited in the safety deposit boxes of Tropicana, the
basis of the trial court and the appellate court being the sole testimony of McLoughlin as to the contents
thereof. Likewise, petitioners dispute the finding of gross negligence on their part as not supported by the
evidence on record.
We are not persuaded.l^vvphi1.net We adhere to the findings of the trial court as affirmed by the appellate
court that the fact of loss was established by the credible testimony in open court by McLoughlin. Such
findings are factual and therefore beyond the ambit of the present petition.1awphi1.nét
The trial court had the occasion to observe the demeanor of McLoughlin while testifying which reflected the
veracity of the facts testified to by him. On this score, we give full credence to the appreciation of
testimonial evidence by the trial court especially if what is at issue is the credibility of the witness. The oft-
repeated principle is that where the credibility of a witness is an issue, the established rule is that great
respect is accorded to the evaluation of the credibility of witnesses by the trial court.31 The trial court is in
the best position to assess the credibility of witnesses and their testimonies because of its unique
opportunity to observe the witnesses firsthand and note their demeanor, conduct and attitude under
grilling examination.32
We are also not impressed by petitioners' argument that the finding of gross negligence by the lower court
as affirmed by the appellate court is not supported by evidence. The evidence reveals that two keys are
required to open the safety deposit boxes of Tropicana. One key is assigned to the guest while the other
remains in the possession of the management. If the guest desires to open his safety deposit box, he must
request the management for the other key to open the same. In other words, the guest alone cannot open
the safety deposit box without the assistance of the management or its employees. With more reason that
access to the safety deposit box should be denied if the one requesting for the opening of the safety deposit
box is a stranger. Thus, in case of loss of any item deposited in the safety deposit box, it is inevitable to
conclude that the management had at least a hand in the consummation of the taking, unless the reason
for the loss is force majeure.
Noteworthy is the fact that Payam and Lainez, who were employees of Tropicana, had custody of the
master key of the management when the loss took place. In fact, they even admitted that they assisted Tan
on three separate occasions in opening McLoughlin's safety deposit box.33 This only proves that Tropicana
had prior knowledge that a person aside from the registered guest had access to the safety deposit box. Yet
the management failed to notify McLoughlin of the incident and waited for him to discover the taking
before it disclosed the matter to him. Therefore, Tropicana should be held responsible for the damage
suffered by McLoughlin by reason of the negligence of its employees.
The management should have guarded against the occurrence of this incident considering that Payam
admitted in open court that she assisted Tan three times in opening the safety deposit box of McLoughlin
at around 6:30 A.M. to 7:30 A.M. while the latter was still asleep.34 In light of the circumstances
surrounding this case, it is undeniable that without the acquiescence of the employees of Tropicana to the
opening of the safety deposit box, the loss of McLoughlin's money could and should have been avoided.
The management contends, however, that McLoughlin, by his act, made its employees believe that Tan
was his spouse for she was always with him most of the time. The evidence on record, however, is bereft of
any showing that McLoughlin introduced Tan to the management as his wife. Such an inference from the
act of McLoughlin will not exculpate the petitioners from liability in the absence of any showing that he
made the management believe that Tan was his wife or was duly authorized to have access to the safety
deposit box. Mere close companionship and intimacy are not enough to warrant such conclusion
considering that what is involved in the instant case is the very safety of McLoughlin's deposit. If only
petitioners exercised due diligence in taking care of McLoughlin's safety deposit box, they should have
confronted him as to his relationship with Tan considering that the latter had been observed opening
McLoughlin's safety deposit box a number of times at the early hours of the morning. Tan's acts should
have prompted the management to investigate her relationship with McLoughlin. Then, petitioners would
have exercised due diligence required of them. Failure to do so warrants the conclusion that the
management had been remiss in complying with the obligations imposed upon hotel-keepers under the
law.
Under Article 1170 of the New Civil Code, those who, in the performance of their obligations, are guilty of
negligence, are liable for damages. As to who shall bear the burden of paying damages, Article 2180,
paragraph (4) of the same Code provides that the owners and managers of an establishment or
enterprise are likewise responsible for damages caused by their employees in the service of the branches in
which the latter are employed or on the occasion of their functions. Also, this Court has ruled that if an
employee is found negligent, it is presumed that the employer was negligent in selecting and/or
supervising him for it is hard for the victim to prove the negligence of such employer.35 Thus, given the fact
that the loss of McLoughlin's money was consummated through the negligence of Tropicana's employees
in allowing Tan to open the safety deposit box without the guest's consent, both the assisting employees
and YHT Realty Corporation itself, as owner and operator of Tropicana, should be held solidarily liable
pursuant to Article 2193.36
The issue of whether the "Undertaking For The Use of Safety Deposit Box" executed by McLoughlin is
tainted with nullity presents a legal question appropriate for resolution in this petition. Notably, both the
trial court and the appellate court found the same to be null and void. We find no reason to reverse their
common conclusion. Article 2003 is controlling, thus:
Art. 2003. The hotel-keeper cannot free himself from responsibility by posting notices to the effect that he is
not liable for the articles brought by the guest. Any stipulation between the hotel-keeper and the guest
whereby the responsibility of the former as set forth in Articles 1998 to 200137 is suppressed or diminished
shall be void.
Article 2003 was incorporated in the New Civil Code as an expression of public policy precisely to apply to
situations such as that presented in this case. The hotel business like the common carrier's business is
imbued with public interest. Catering to the public, hotelkeepers are bound to provide not only lodging for
hotel guests and security to their persons and belongings. The twin duty constitutes the essence of the
business. The law in turn does not allow such duty to the public to be negated or diluted by any contrary
stipulation in so-called "undertakings" that ordinarily appear in prepared forms imposed by hotel keepers
on guests for their signature.
In an early case,38 the Court of Appeals through its then Presiding Justice (later Associate Justice of the
Court) Jose P. Bengzon, ruled that to hold hotelkeepers or innkeeper liable for the effects of their guests, it
is not necessary that they be actually delivered to the innkeepers or their employees. It is enough that such
effects are within the hotel or inn.39 With greater reason should the liability of the hotelkeeper be enforced
when the missing items are taken without the guest's knowledge and consent from a safety deposit box
provided by the hotel itself, as in this case.
Paragraphs (2) and (4) of the "undertaking" manifestly contravene Article 2003 of the New Civil Code for
they allow Tropicana to be released from liability arising from any loss in the contents and/or use of the
safety deposit box for any cause whatsoever.40 Evidently, the undertaking was intended to bar any claim
against Tropicana for any loss of the contents of the safety deposit box whether or not negligence was
incurred by Tropicana or its employees. The New Civil Code is explicit that the responsibility of the hotel-
keeper shall extend to loss of, or injury to, the personal property of the guests even if caused by servants or
employees of the keepers of hotels or inns as well as by strangers, except as it may proceed from any force
majeure.41 It is the loss through force majeure that may spare the hotel-keeper from liability. In the case at
bar, there is no showing that the act of the thief or robber was done with the use of arms or through an
irresistible force to qualify the same as force majeure.42
Petitioners likewise anchor their defense on Article 200243 which exempts the hotel-keeper from liability if
the loss is due to the acts of his guest, his family, or visitors. Even a cursory reading of the provision would
lead us to reject petitioners' contention. The justification they raise would render nugatory the public
interest sought to be protected by the provision. What if the negligence of the employer or its employees
facilitated the consummation of a crime committed by the registered guest's relatives or visitor? Should the
law exculpate the hotel from liability since the loss was due to the act of the visitor of the registered guest of
the hotel? Hence, this provision presupposes that the hotel-keeper is not guilty of concurrent negligence or
has not contributed in any degree to the occurrence of the loss. A depositary is not responsible for the loss
of goods by theft, unless his actionable negligence contributes to the loss.44
In the case at bar, the responsibility of securing the safety deposit box was shared not only by the guest
himself but also by the management since two keys are necessary to open the safety deposit box. Without
the assistance of hotel employees, the loss would not have occurred. Thus, Tropicana was guilty of
concurrent negligence in allowing Tan, who was not the registered guest, to open the safety deposit box of
McLoughlin, even assuming that the latter was also guilty of negligence in allowing another person to use
his key. To rule otherwise would result in undermining the safety of the safety deposit boxes in hotels for
the management will be given imprimatur to allow any person, under the pretense of being a family
member or a visitor of the guest, to have access to the safety deposit box without fear of any liability that
will attach thereafter in case such person turns out to be a complete stranger. This will allow the hotel to
evade responsibility for any liability incurred by its employees in conspiracy with the guest's relatives and
visitors.
Petitioners contend that McLoughlin's case was mounted on the theory of contract, but the trial court and
the appellate court upheld the grant of the claims of the latter on the basis of tort.45 There is nothing
anomalous in how the lower courts decided the controversy for this Court has pronounced a
jurisprudential rule that tort liability can exist even if there are already contractual relations. The act that
breaks the contract may also be tort.46
As to damages awarded to McLoughlin, we see no reason to modify the amounts awarded by the appellate
court for the same were based on facts and law. It is within the province of lower courts to settle factual
issues such as the proper amount of damages awarded and such finding is binding upon this Court
especially if sufficiently proven by evidence and not unconscionable or excessive. Thus, the appellate court
correctly awarded McLoughlin Two Thousand US Dollars (US$2,000.00) and Four Thousand Five
Hundred Australian dollars (AUS$4,500.00) or their peso equivalent at the time of payment,47 being the
amounts duly proven by evidence.48 The alleged loss that took place prior to 16 April 1988 was not
considered since the amounts alleged to have been taken were not sufficiently established by evidence. The
appellate court also correctly awarded the sum of ₱308,880.80, representing the peso value for the air fares
from Sydney to Manila and back for a total of eleven (11) trips;49 one-half of ₱336,207.05 or ₱168,103.52
representing payment to Tropicana;50 one-half of ₱152,683.57 or ₱76,341.785 representing payment to
Echelon Tower;51 one-half of ₱179,863.20 or ₱89,931.60 for the taxi or transportation expenses from
McLoughlin's residence to Sydney Airport and from MIA to the hotel here in Manila, for the eleven (11)
trips;52 one-half of ₱7,801.94 or ₱3,900.97 representing Meralco power expenses;53 one-half of ₱356,400.00
or ₱178,000.00 representing expenses for food and maintenance.54
The amount of ₱50,000.00 for moral damages is reasonable. Although trial courts are given discretion to
determine the amount of moral damages, the appellate court may modify or change the amount awarded
when it is palpably and scandalously excessive.l^vvphi1.net Moral damages are not intended to enrich a
complainant at the expense of a defendant.l^vvphi1.net They are awarded only to enable the injured party
to obtain means, diversion or amusements that will serve to alleviate the moral suffering he has
undergone, by reason of defendants' culpable action.55
The awards of ₱10,000.00 as exemplary damages and ₱200,000.00 representing attorney's fees are
likewise sustained.
WHEREFORE, foregoing premises considered, the Decision of the Court of Appeals dated 19 October 1995
is hereby AFFIRMED. Petitioners are directed, jointly and severally, to pay private respondent the following
amounts:
(1) US$2,000.00 and AUS$4,500.00 or their peso equivalent at the time of payment;
(2) ₱308,880.80, representing the peso value for the air fares from Sydney to Manila and back for a total of
eleven (11) trips;
(3) One-half of ₱336,207.05 or ₱168,103.52 representing payment to Tropicana Copacabana Apartment
Hotel;

(4) One-half of ₱152,683.57 or ₱76,341.785 representing payment to Echelon Tower;

(5) One-half of ₱179,863.20 or ₱89,931.60 for the taxi or transportation expense from McLoughlin's
residence to Sydney Airport and from MIA to the hotel here in Manila, for the eleven (11) trips;

(6) One-half of ₱7,801.94 or ₱3,900.97 representing Meralco power expenses;

(7) One-half of ₱356,400.00 or ₱178,200.00 representing expenses for food and maintenance;

(8) ₱50,000.00 for moral damages;

(9) ₱10,000.00 as exemplary damages; and

(10) ₱200,000 representing attorney's fees.

With costs.

SO ORDERED.