1.

ASSOCIATED BANK (Now WESTMONT

BANK), petitioner, vs. VICENTE HENRY TAN,
respondent.
While banks are granted by law the right to debit
the value of a dishonored check from a
depositors account, they must do so with the
highest degree of care, so as not to prejudice the
depositor unduly.
The Case
Before us is a Petition for Review1 under Rule 45
of the Rules of Court, assailing the January 27,
2003 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:
"Vicente Henry Tan (hereafter TAN) is a
businessman and a regular depositor-creditor of
the Associated Bank (hereinafter referred to as
the BANK). Sometime in September 1990, he
deposited a postdated UCPB check with the said
BANK in the amount of P101,000.00 issued to him
by a certain Willy Cheng from Tarlac. The check
was duly entered in his bank record thereby
making his balance in the amount of
P297,000.00, as of October 1, 1990, from his
original deposit of P196,000.00. Allegedly, upon
advice and instruction of the BANK that the
P101,000.00 check was already cleared and
backed up by sufficient funds, TAN, on the same
date, withdrew the sum of P240,000.00, leaving a
balance of P57,793.45. A day after, TAN
deposited the amount of P50,000.00 making his
existing balance in the amount of P107,793.45,
because he has issued several checks to his
business partners, to wit:
"However, his suppliers and business partners
went back to him alleging that the checks he
issued bounced for insufficiency of funds.
Thereafter, TAN, thru his lawyer, informed the
BANK to take positive steps regarding the matter
for he has adequate and sufficient funds to pay
the amount of the subject checks. Nonetheless,
the BANK did not bother nor offer any apology
regarding the incident. Consequently, TAN, as
plaintiff, filed a Complaint for Damages on
December 19, 1990, with the Regional Trial Court
of Cabanatuan City, Third Judicial Region,
docketed as Civil Case No. 892-AF, against the
BANK, as defendant.

"In his [C]omplaint, [respondent] maintained that

he ha[d] sufficient funds to pay the subject
checks and alleged that his suppliers decreased
in number for lack of trust. As he has been in the
business community for quite a time and has
established a good record of reputation and
probity, plaintiff claimed that he suffered
embarrassment, humiliation, besmirched
reputation, mental anxieties and sleepless nights
because of the said unfortunate incident.
[Respondent] further averred that he
continuously lost profits in the amount of
P250,000.00. [Respondent] therefore prayed for
exemplary damages and that [petitioner] be
ordered to pay him the sum of P1,000,000.00 by
way of moral damages, P250,000.00 as lost
profits, P50,000.00 as attorneys fees plus 25% of
the amount claimed including P1,000.00 per
court appearance.
"Meanwhile, [petitioner] filed a Motion to Dismiss
on February 7, 1991, but the same was denied for
lack of merit in an Order dated March 7, 1991.
Thereafter, [petitioner] BANK on March 20, 1991
filed its Answer denying, among others, the
allegations of [respondent] and alleged that no
banking institution would give an assurance to
any of its client/depositor that the check
deposited by him had already been cleared and
backed up by sufficient funds but it could only
presume that the same has been honored by the
drawee bank in view of the lapse of time that
ordinarily takes for a check to be cleared. For its
part, [petitioner] alleged that on October 2, 1990,
it gave notice to the [respondent] as to the return
of his UCPB check deposit in the amount of
P101,000.00, hence, on even date, [respondent]
deposited the amount of P50,000.00 to cover the
returned check.
"By way of affirmative defense, [petitioner]
averred that [respondent] had no cause of action
against it and argued that it has all the right to
debit the account of the [respondent] by reason
of the dishonor of the check deposited by the
[respondent] which was withdrawn by him prior
to its clearing. [Petitioner] further averred that it
has no liability with respect to the clearing of
deposited checks as the clearing is being
undertaken by the Central Bank and in accepting
[the] check deposit, it merely obligates itself as
depositors collecting agent subject to actual
payment by the drawee bank. [Petitioner]
therefore prayed that [respondent] be ordered to
pay it the amount of P1,000,000.00 by way of
loss of goodwill, P7,000.00 as acceptance fee plus
P500.00 per appearance and by way of attorneys
fees.
"Considering that Westmont Bank has taken over
the management of the affairs/properties of the
BANK, [respondent] on October 10, 1996, filed an

Amended Complaint reiterating substantially his

allegations in the original complaint, except that
the name of the previous defendant ASSOCIATED
BANK is now WESTMONT BANK.

It also granted him exemplary damages of

P75,000 and attorneys fees of P25,000.

"Trial ensured and thereafter, the court rendered

its Decision dated December 3, 1996 in favor of
the [respondent] and against the [petitioner],
ordering the latter to pay the [respondent] the
sum of P100,000.00 by way of moral damages,
P75,000.00 as exemplary damages, P25,000.00
as attorneys fees, plus the costs of this suit. In
making said ruling, it was shown that
[respondent] was not officially informed about the
debiting of 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 [respondents] mother was
originally maintaining with the x x x BANK [a]
current account as well as [a] time deposit, but
[o]n one occasion, although his mother made a
deposit, the same was not credited in her favor
but in the name of another."4

Issue

Petitioner appealed to the CA on the issues of

whether it was within its rights, as collecting
bank, to debit the account of its client for a
dishonored check; and whether it had informed
respondent about the dishonor prior to debiting
his account.
Ruling of the Court of Appeals
Affirming the trial court, the CA ruled that the
bank should not have authorized the withdrawal
of the value of the deposited check prior to its
clearing. Having done so, contrary to its
obligation to treat respondents account with
meticulous care, the bank violated its own policy.
It thereby took upon itself the obligation to
officially inform respondent of the status of his
account before unilaterally debiting the amount
of P101,000. Without such notice, it is estopped
from blaming him for failing to fund his account.
The CA opined that, had the P101,000 not been
debited, respondent would have had sufficient
funds for the postdated checks he had issued.
Thus, the supposed accommodation accorded by
petitioner to him is the proximate cause of his
business woes and shame, for which it is liable for
damages.
Because of the banks negligence, the CA
awarded respondent moral damages of P100,000.

Hence this Petition.5

In its Memorandum, petitioner raises the sole

issue of "whether or not the petitioner, which is
acting as a collecting bank, has the right to debit
the account of its client for a check deposit which
was dishonored by the drawee bank."6
The Courts Ruling
The Petition has no merit.
Sole Issue: Debit of Depositors Account
Petitioner-bank contends that its rights and
obligations under the present set of facts were
misappreciated by the CA. It insists that its right
to debit the amount of the dishonored check from
the account of respondent is clear and
unmistakable. Even assuming that it did not give
him notice that the check had been dishonored,
such right remains immediately enforceable.
In particular, petitioner argues that the check
deposit slip accomplished by respondent on
September 17, 1990, expressly stipulated that
the bank was obligating itself merely as the
depositors collecting agent and -- until such time
as actual payment would be made to it -- it was
reserving the right to charge against the
depositors account any amount previously
credited. Respondent was allowed to withdraw
the amount of the check prior to clearing, merely
as an act of accommodation, it added.
At the outset, we stress that the trial courts
factual findings that were affirmed by the CA are
not subject to review by this Court.7 As petitioner
itself takes no issue with those findings, we need
only to determine the legal consequence, based
on the established facts.
Right of 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 clients account for
the value of a dishonored check that has
previously been credited has fairly been
established by jurisprudence. To begin with,
Article 1980 of the Civil Code provides that
"[f]ixed, savings, and current deposits of money
in banks and similar institutions shall be
governed by the provisions concerning simple
loan."

Hence, the relationship between banks and

depositors has been held to be that of creditor
and debtor.9 Thus, legal compensation under
Article 127810 of the Civil Code may take place
"when all the requisites mentioned in Article 1279
are present,"11 as follows:
"(1) That each one of the obligors be bound
principally, and that he be at the same time a
principal creditor of the other;
(2) That both debts consist in a sum of money, or
if the things due are consumable, they be of the
same kind, and also of the same quality if the
latter has been stated;
(3) That the two debts be due;
(4) That they be liquidated and demandable;
(5) That over neither of them there be any
retention or controversy, commenced by third
persons and communicated in due time to the
debtor."12
Nonetheless, the real issue here is not so much
the right of petitioner to debit respondents
account but, rather, the manner in which it
exercised such right. The Court has held that
even while the right of setoff is conceded,
separate is the question of whether that remedy
has properly been exercised.13
The liability of petitioner in this case ultimately
revolves around the issue of whether it properly
exercised its right of setoff. The determination
thereof hinges, in turn, on the banks role and
obligations, first, as respondents depositary
bank; and second, as collecting agent for the
check in question.
Obligation as Depositary Bank
In BPI v. Casa Montessori,14 the Court has
emphasized that the banking business is
impressed with public interest. "Consequently,
the highest degree of diligence is expected, and
high standards of integrity and performance are
even required of it. By the nature of its functions,
a bank is under obligation to treat the accounts of
its depositors with meticulous care."15
Also affirming this long standing doctrine,
Philippine Bank of Commerce v. Court of
Appeals16 has held that "the degree of diligence
required of banks is more than that of a good
father of a family where the fiduciary nature of
their relationship with their depositors is
concerned."17 Indeed, the banking business is
vested with the trust and confidence of the
public; hence the "appropriate standard of
diligence must be very high, if not the highest,
degree of diligence."18 The standard applies,

regardless of whether the account consists of

only a few hundred pesos or of millions.19
The fiduciary nature of banking, previously
imposed by case law,20 is now enshrined in
Republic Act No. 8791 or the General Banking
Law of 2000. Section 2 of the law specifically says
that the State recognizes the "fiduciary nature of
banking that requires high standards of integrity
and performance."
Did petitioner treat respondents account with the
highest degree of care? From all indications, it did
not.
It is undisputed -- nay, even admitted -- that
purportedly as an act of accommodation to a
valued client, petitioner allowed the withdrawal of
the face value of the deposited check prior to its
clearing. That act certainly disregarded the
clearance requirement of the banking system.
Such a practice is unusual, because a check is not
legal tender or money;21 and its value can
properly be transferred to a depositors account
only after the check has been cleared by the
drawee bank.22
Under ordinary banking practice, after receiving a
check deposit, a bank either immediately credit
the amount to a depositors account; or infuse
value to that account only after the drawee bank
shall have paid such amount.23 Before the check
shall have been cleared for deposit, the collecting
bank can only "assume" at its own risk -- as
herein petitioner did -- that the check would be
cleared and paid out.
Reasonable business practice and prudence,
moreover, dictated that petitioner should not
have authorized the withdrawal by respondent of
P240,000 on October 1, 1990, as this amount was
over and above his outstanding cleared balance
of P196,793.45.24 Hence, the lower courts
correctly appreciated the evidence in his favor.
Obligation as Collecting Agent
Indeed, the bank deposit slip expressed this
reservation:
"In receiving items on deposit, this Bank obligates
itself only as the Depositors Collecting agent,
assuming no responsibility beyond carefulness in
selecting correspondents, and until such time as
actual payments shall have come to its
possession, this Bank reserves the right to charge
back to the Depositors account any amounts
previously credited whether or not the deposited
item is returned. x x x."25
However, this reservation is not enough to
insulate the bank from any liability. In the past,
we have expressed doubt about the binding force

of such conditions unilaterally imposed by a bank

without the consent of the depositor.26 It is
indeed arguable that "in signing the deposit slip,
the depositor does so only to identify himself and
not to agree to the conditions set forth at the
back of the deposit slip."27
Further, by the express terms of the stipulation,
petitioner took upon itself certain obligations as
respondents agent, consonant with the wellsettled rule that the relationship between the
payee or holder of a commercial paper and the
collecting bank is that of principal and agent.28
Under Article 190929 of the Civil Code, such bank
could be held liable not only for fraud, but also for
negligence.
As a general rule, a bank is liable for the wrongful
or tortuous acts and declarations of its officers or
agents within the course and scope of their
employment.30 Due to the very nature of their
business, banks are expected to exercise the
highest degree of diligence in the selection and
supervision of their employees.31 Jurisprudence
has established that the lack of diligence of a
servant is imputed to the negligence of the
employer, when the negligent or wrongful act of
the former proximately results in an injury to a
third person;32 in this case, the depositor.
The manager of the banks Cabanatuan branch,
Consorcia Santiago, categorically admitted that
she and the employees under her control had
breached bank policies. They admittedly
breached those policies when, without clearance
from the drawee bank in Baguio, they allowed
respondent to withdraw on October 1, 1990, the
amount of the check deposited. Santiago testified
that respondent "was not officially informed
about the debiting of 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 respondents injury.
Proximate cause is that which -- in a natural and
continuous sequence, unbroken by any efficient
intervening cause --produces the injury, and
without which the result would not have
occurred.34
Let us go back to the facts as they unfolded. It is
undeniable that the banks premature
authorization of the withdrawal by respondent on
October 1, 1990, triggered -- in rapid succession
and in a natural sequence -- the debiting of his
account, the fall of his account balance to
insufficient levels, and the subsequent dishonor

of his own checks for lack of funds. The CA

correctly noted thus:
"x x x [T]he depositor x x x withdrew his money
upon the advice by [petitioner] that his money
was already cleared. Without such advice,
[respondent] would not have withdrawn the sum
of P240,000.00. Therefore, it cannot be denied
that it was [petitioners] fault which allowed
[respondent] to withdraw a huge sum which he
believed was already his.
"To emphasize, it is beyond cavil that
[respondent] had sufficient funds for the check.
Had the P101,000.00 not [been] debited, the
subject checks would not have been dishonored.
Hence, we can say that [respondents] injury
arose from the dishonor of his well-funded
checks. x x x."35
Aggravating matters, petitioner failed to show
that it had immediately and duly informed
respondent of the debiting of his account.
Nonetheless, it argues that the giving of notice
was discernible from his act of 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 managers account,
respondent was considered a "valued client"
whose checks had always been sufficiently
funded from 1987 to 1990,36 until the October
imbroglio. Thus, he deserved nothing less than an
official notice of the precarious condition of his
account.
Second, under the provisions of the Negotiable
Instruments Law regarding the liability of a
general indorser37 and the procedure for a notice
of dishonor,38 it was incumbent on the bank to
give proper notice to respondent. 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 CAs observations that it was not
unusual for a well-reputed businessman like him,
who "ordinarily takes note of the amount of
money he takes and releases," to immediately
deposit money in his current account to answer
for the postdated checks he had issued.41
Damages
Inasmuch as petitioner does not contest the basis
for the award of damages and attorneys fees, we
will no longer address these matters.
WHEREFORE, the Petition is DENIED and the
assailed Decision AFFIRMED. Costs against
petitioner.
2. PRODUCERS BANK OF THE PHILIPPINES,
petitioner, vs. HONORABLE COURT OF
APPEALS
In this Petition for Review on Certiorari under Rule
45 of the 1997 Rules of Civil Procedure, petitioner
Producers Bank of the Philippines ("petitioner"
for brevity) assails the September 19, 1996
Resolution1 of the Court of Appeals in CA-G.R. CV
No. 50016 which dismissed petitioners appeal for
being filed out of time. The Court of Appeals
decreed thus:
"WHEREFORE, finding the Motion to Dismiss
Appeal to be meritorious, the same is granted.
The appeal is DISMISSED.
SO ORDERED."2
The Antecedent Facts
On March 29, 1988, petitioner through its former
counsel, Atty. Antonio M. Pery, filed a Complaint
to recover the sum of P11,420,000.00 from Asia
Trust Development Bank ("Asiatrust" for brevity)
and the Central Bank of the Philippines ("CBP" for
brevity) before the Regional Trial Court of Makati,
Branch 147 ("RTC" for brevity). Thereafter,
petitioner filed an amended complaint,
impleading additional defendants.3

Petitioner sought to recover the proceeds of

several treasury bills amounting to
P11,420,000.00. According to petitioner, said
proceeds were fraudulently credited to the
demand deposit account of Asiatrust with the CBP
and withdrawn by Milagros B. Nayve, Elizabeth C.
Garcia and Alberto Limjoco, Sr.
It appears that petitioner owned several treasury
bills. On the respective maturity dates of these
bills, petitioner caused these bills to be delivered
to the CBP. The bills were initially received by
Manuel B. Ala, petitioners rediscounting clerk
together with a letter of transmittal and a receipt
for the bills addressed to the CBP. Mr. Ala turned
over the bills together with the accompanying
documents to Rogelio Carrera for delivery to the
CBP. Alberto Limjoco, Sr., Elizabeth C. Garcia and
Milagros B. Nayve4 came into possession of these
bills which they in turn delivered to Rainelda A.
Andrews and Rhodora B. Landrito5. Petitioner
alleged that Andrews and Landrito failed to
ascertain the lawful ownership of the bills, and
caused their transmittal and delivery to the CBP,
through a letter signed by Eduardo G. Escobar
and Alfonso Leong, Jr..6 The proceeds of the bills
were credited to the account of Asiatrust which
approved the managers check applications and
facilitated payment to the bearers of the bills.
Petitioner discovered that the proceeds of the
bills were not credited to its demand deposit
account with the CBP. Upon such discovery,
petitioner informed the CBP which furnished
petitioner with a copy of the acknowledgment
from Asiatrust of receipt of the bills and that the
proceeds were credited to the account of
Asiatrust. Petitioner claimed that Rainelda A.
Andrews, Samson Flores, Alfonso Leong, Jr.,
Rhodora D. Landrito, Joseph Chua, Ramon Yu and
Eduardo G. Escobar were negligent in the
performance of their duties and responsibilities as
officers of Asiatrust as they failed to exercise
reasonable care and caution to determine the
true ownership of the bills before allowing the
proceeds to be paid to Milagros B. Nayve,
Elizabeth C. Garcia and Alberto Limjoco, Sr.
Petitioner sought to hold Asiatrust solidarily liable
with the other defendants for the payment of the
value of the treasury bills and for damages.
Subsequently, the complaint was dismissed as
against the CBP on motion of petitioner on the
ground that the latter had lifted petitioners
conservatorship and allowed the return of the
management and assets to petitioners Board of
Directors. The CBPs lifting of the conservatorship
was conditioned upon petitioners dropping of all
its cases pending against the CBP.
The defendants filed their respective Answers,
after which the issues were joined and trial on the
merits ensued.

On August 30, 1993, the law firm of Quisumbing,

Torres and Evangelista ("QTE" for brevity) entered
its appearance for petitioner in substitution of
Atty. Antonio M. Pery.
Petitioners handling counsel, Atty. Alvin Agustin
T. Ignacio ("Atty. Ignacio" for brevity) of QTE
arrived late during the hearing held on May 17,
1995. On motion of Asiatrusts counsel, the RTC
issued an Order on the same day dismissing the
case for lack of interest to prosecute.
On June 9, 1995, Atty. Ignacio filed a motion to
reconsider the Order dated May 17, 1995,
explaining that his late arrival at the hearing was
due to the unexpected heavy traffic at Roxas
Boulevard in front of Baclaran Church. He also
offered his apologies to the RTC for his
unintended tardiness. QTE received a copy of the
Order dated August 1, 1995 denying the motion
for reconsideration on August 11, 1995. At that
time, Atty. Ignacio was indisposed for allegedly
suffering from "fatigue and stress". It was only on
August 25, 1995 that Atty. Ignacio found out that
the Order denying the motion for reconsideration
was received by the law firm on August 11, 1995.
He filed a Notice of Appeal on August 25, 1995.
On November 13, 1995, Asiatrust, et al. filed a
Motion to Dismiss Appeal with the Court of
Appeals. On March 8, 1996, QTE filed its
Comment to the Motion to Dismiss Appeal.
In the Resolution dated September 19, 1996, the
Court of Appeals granted the motion to dismiss
petitioners appeal.
Ruling of the Court of Appeals
In granting the motion to dismiss appeal, the
Court of Appeals held in part:
"xxx. We hold that the failure of plaintiff-appellant
to file the Notice of Appeal on time was
inexcusable negligence. These are the reasons:
One. In paragraph 7.28 of the Comment (to the
Motion to Dismiss), plaintiff-appellant states that

"On 11 August 1995 at 3:00 pm., plaintiffappellant received a copy of the Order dated 1
August 1995 denying its motion for
reconsideration of the dismissed order."
Since, the last day for plaintiff-appellant to file
the Notice of Appeal was August 12, 1995, why
did it not file the Notice of Appeal right away
considering that its preparation and mailing could
not take two hours? If counsel for plaintiffappellant did not take advantage of the two
remaining office hours on August 11, 1995, why
did it not file the Notice of Appeal at anytime, the

following day, August 12? In failing to do that, the

law firm counsel was guilty of gross and
inexcusable negligence.
TWO. If the counsel for plaintiff-appellant did not
know that the last day to file the Notice of Appeal
was on August 12, 1995, why did it not ask the
handling lawyer about it? There was no
impediment to do that because the handling
lawyer was not comatose. The counsel was
inexcusably negligent for failing to make that
inquiry.
THREE. The handling lawyer knew that if the
Motion for Reconsideration would be denied as
in fact it was he would have only a day after
receipt of the order of denial to file a notice of
appeal. Why did he not forewarn his law firm
about such fact so that even in his absence, the
latter could file said notice? Assuming that the
handling lawyer was really sick, his ailment which
was allegedly just "fatigue and stress" was not at
all serious much less incapacitating. In fact he
was not even hospitalized for he was just advised
to rest for at least two weeks. With all the
communication facilities in Metro-Manila, there
was no reason for said counsel even if sick not
to have gotten in touch with his law firm to check
on the result of his Motion for Reconsideration. It
was, therefore, inexcusable negligence for him to
have failed doing that which an ordinarily prudent
lawyer would have done.
The inexcusable negligence of plaintiff-appellants
counsel is made more glaring by the fact that the
Notice of Appeal was late not only by 2 or 4 days
but all of 13 days.1wphi1.nt
We are not unaware of the rule that technicality
should not smother the right of a litigant to a day
in court. But the Supreme Court instructs us that
strict adherence to reglementary periods fixed in
the Rules of Court is necessary to ensure the
efficient and orderly disposition of cases (Panes v.
Court of Appeals, 120 SCRA 509). We cannot also
close Our eyes to the rule that perfecting an
appeal within the period permitted by law is not
only mandatory but jurisdictional and the failure
to perfect the appeal on time renders the
judgment of the court final and executory. (Bank
of America, Gerochi, Jr. 230 SCRA 9; Philippine
Commercial International Bank v. Court of
Appeals, 229 SCRA 560). Well rooted is the
principle that once a decision becomes final the
appellate court is without jurisdiction to entertain
the appeal (Sumbillo v. IAC, 165 SCRA 232; Hensy
Zoilo Llido v. Marquez, 166 SCRA 61)."
Hence, the instant petition.
The Issue

Petitioner now comes before us with the following

assignment of error:
THE RESPONDENT COURT OF APPEALS ERRED IN
FINDING THAT THE ACTS OF PETITIONERS
PREVIOUS COUNSEL, QUISUMBING, TORRES AND
EVANGELISTA, SHOULD BIND THE PETITIONER,
DESPITE THE FINDINGS IN ITS RESOLUTION THAT
THE LAW FIRM COUNSEL WAS GROSSLY AND
INEXCUSABLY NEGLIGENT.
The threshold issue in this petition for review on
certiorari is whether the Court of Appeals erred in
dismissing an appeal that was filed 13 days late
despite its own findings that petitioners counsel
was grossly negligent.
Petitioner argues that a client should not be
bound by counsels gross and inexcusable
negligence. Petitioner admits that its handling
counsel, Atty. Ignacio of QTE, committed two
blunders: first, he failed to arrive on time during
one of the hearings allegedly due to the traffic at
Roxas Boulevard in front of Baclaran Church;
second, he failed to file the notice of appeal
within the reglementary period due to "fatigue
and stress". Petitioner further admits that Atty.
Ignacio offered a "flimsy excuse" for his tardiness
and an "out of this world excuse" for his failure to
file the notice of appeal on time. Petitioner,
however, submits that such gross negligence and
mistake of counsel should not bind the client in
line with the case of Legarda vs. Court of
Appeals.7 Petitioner enumerates the similarities
between the Legarda case and its own, as
follows:
"First, like the petitioner in the Legarda case,
petitioner herein was not negligent in choosing a
counsel to represent them in the case. The former
engaged the services of former law school dean,
Dean Antonio Coronel, while the latter engaged
the service of the well known and reputable law
firm, Quisumbing, Torres and Evangelista which is
associated with Baker and McKenzie of the United
States, as counsels to their respective cases.

while in the latter case, counsel caused the

dismissal of the case by arriving late at the trial
date and also by failing to timely perfect an
appeal to the Court of Appeals.
Third, in both cases the Court of Appeals has
found that both counsels committed negligence.
The only difference would be that in the case of
Legarda, the Court of Appeals only held that there
was only pure and simple negligence on the part
of Dean Antonio Coronel, while in the case at bar,
the Court of Appeals found that there was gross
and inexcusable negligence on the part of
Quisumbing, Torres and Evangelista Law Firm.
Thus, the Court of Appeals committed an error in
stating that: "The plaintiff appellant has to bite
the bullet for it cannot shake itself of the
inexcusable negligence of its counsel" (Alabanza.
vs. Intermediate Appellate Court, 204 SCRA 304),
because of its own findings that there was a
gross and inexcusable negligence on the part of
the previous counsel. The applicable decision of
the Supreme Court to the case at bar should be
the case of Legarda vs. Court of Appeals. (195
SCRA 418)."
The Courts Ruling
The petition is bereft of merit. We uphold the
dismissal of the appeal by the Court of Appeals.
The general rule is that a client is bound by the
acts, even mistakes, of his counsel in the realm of
procedural technique. The exception to this rule
is when the negligence of counsel is so gross,
reckless and inexcusable that the client is
deprived of his day in court. In which case, the
remedy then is to reopen the case and allow the
party who was denied his day in court to adduce
his evidence.8 However, a thorough review of the
instant case reveals that petitioner cannot seek
refuge or obtain reprieve under these principles.
Legarda case is not applicable

In fact, the diligence of petitioner can be shown

by the fact that it even replaced its first counsel,
Atty. Antonio Pery in favor of Quisumbing, Torres
and Evangelista, hoping that by hiring the
services of that law firm the case would be
handled better and would have a better chance of
winning. Unfortunately, such hope was dampened
by the gross negligence and blunders committed
by the law firm.

Petitioners reliance on the Legarda case which

was promulgated on March 18, 1991 is clearly
misplaced. In said case, the Court declared that
petitioners counsel, Atty. Antonio Coronel, a wellknown practicing lawyer and dean of a law
school, committed not just ordinary or simple
negligence, but reckless and gross negligence
which deprived his client of her property without
due process of law. According to the Legarda
decision-

Second, just like in the case of Legarda, the

previous counsel of the petitioner committed two
blunders. In the case of the former, counsel failed
to file an answer in the trial court and failed to
timely appeal the case to the appellate courts,

"xxx, the negligence of the then counsel for

petitioner when he failed to file the proper motion
to dismiss or to draw a compromise agreement if
it was true that they agreed on a settlement of
the case; or in simply filing an answer; and that

after having been furnished a copy of the

decision by the court he failed to appeal
therefrom or to file a petition for relief from the
order declaring petitioner in default."9
was so gross and inexcusable that it should not
bind his client. The Court declared that the
counsels acts or omissions "consigned (the
client) to penury" because "her lawyer appeared
to have abandoned her case not once but
repeatedly." The Court noted that counsels "lack
of devotion to duty is so gross and palpable that
this Court must come to the aid of his distraught
client." Thus, the Court held as null and void the
decisions of the trial and appellate courts against
Atty. Coronels client and ordered, among other
things, the reconveyance of the property in her
favor.
However, the decision in said case was not yet
final in 1991. The private respondent therein filed
a timely motion for reconsideration. In granting
the motion for reconsideration, the Court en banc
held:
"Under the Gancayco ruling, the order of
reconveyance was premised on the alleged gross
negligence of Legardas counsel which should not
be allowed to bind her as she was deprived of her
property `without due process of law.
It is, however, basic that as long as a party was
given the opportunity to defend her interests in
due course, she cannot be said to have been
denied due process of law, for this opportunity to
be heard is the very essence of due process. The
chronology of events shows that the case took its
regular course in the trial and appellate courts
but Legardas counsel failed to act as any
ordinary counsel should have acted, his
negligence every step of the way amounting to
"abandonment, " in the words of the Gancayco
decision. Yet, it cannot be denied that the
proceedings which led to the filing of this case
were not attended by any irregularity. The
judgment by default was valid, so was the
ensuing sale at public auction. If Cabrera was
adjudged highest bidder in said auction sale, it
was not through any machination on his part. All
of his actuations that led to the final registration
of the title in his name were aboveboard,
untainted by any irregularity."
x x xNeither Cathay nor Cabrera10 should be
made to suffer for the gross negligence of
Legardas counsel. If she may be said to be
"innocent" because she was ignorant of the acts
of negligence of her counsel, with more reason
are respondents truly "innocent." As between two
parties who may lose due to the negligence or
incompetence of the counsel of one, the party
who was responsible for making it happen should

suffer the consequences. This reflects the basic

common law maxim, so succinctly stated by
Justice J.B.L. Reyes, that ". . . (B)etween two
innocent parties, the one who made it possible
for the wrong to be done should be the one to
bear the resulting loss." In this case, it was not
respondents, but Legarda, who misjudged and
hired the services of the lawyer who practically
abandoned her case and who continued to retain
him even after his proven apathy and negligence.
The Gancayco decision makes much of the fact
that Legarda is now "consigned to penury" and,
therefore, this Court "must come to the aid of the
distraught client." It must be remembered that
this Court renders decisions, not on the basis of
emotions but on its sound judgment, applying the
relevant, appropriate law. Much as it may pity
Legarda, or any losing litigant for that matter, it
cannot play the role of a "knight in shining armor"
coming to the aid of someone, who through her
weakness, ignorance or misjudgment may have
been bested in a legal joust which complied with
all the rules of legal proceedings."
In sum, the court did not relieve the client from
the consequences of her counsels negligence
and mistakes considering that she was given an
opportunity to defend her interests in due course.
Certainly, it cannot be said that she was denied
due process. Consequently, the Legarda case
does not support petitioners cause.
No Denial of Due Process
Contrary to petitioners stance, the Legarda case
supports the view that petitioner was not denied
its day in court. The Constitution mandates that
"(n)o person shall be deprived of life, liberty, or
property without due process of law x x x ."11
The right to due process of law has been
interpreted to mean as follows:
"The essence of due process is to be found in the
reasonable opportunity to be heard and submit
any evidence one may have in support of ones
defense. `To be heard' does not mean only verbal
arguments in court; one may be heard also
through pleadings. Where opportunity to be
heard, either through oral arguments or
pleadings, is accorded, there is no denial of due
process."12 (Emphasis supplied)
Verily, so long as a party is given the opportunity
to advocate her cause or defend her interest in
due course, it cannot be said that there was
denial of due process. In petitioners case as in
the Legarda case, the chronology of events shows
that the case took its regular course in the trial
court.

On December 8, 1992, petitioner presented its

first witness, Mr. Manuel B. Ala, the Accounting
Clerk of its Accounting Department. He was crossexamined by CBP, Nayve and Garcia on February
10, 1993. On March 1, 1993, petitioner presented
its second witness, Ms. Josie Fernandez, the
Security Custodian of its Treasury Bills. On July 5,
1993, petitioner presented its third witness, Atty.
Leopoldo Cotaco, head of its Department of
Security and Internal Affairs. At this hearing, only
counsels of Nayve and Garcia were present. The
counsels of CBP and Asiatrust were absent. On
August 25, 1993, the direct testimony of Atty.
Leopoldo Cotaco was terminated. On August 30,
1993, QTE entered its appearance in substitution
of Atty. Antonio M. Pery. On September 8, 1993,
QTE moved for the postponement of the crossexamination of Atty. Cotaco since it had only
recently entered its appearance. On September
16, 1993, petitioner moved to dismiss the
complaint against CBP on the ground that the
latter had lifted the conservatorship and allowed
the return of the management and assets to
petitioners Board of Directors. The motion was
granted in an Order dated September 28, 1993.
The hearings on November 17 and 24, 1993 were
postponed upon petitioners motion since former
counsel, Atty. Antonio M. Pery, refused to turn
over the records and files of the case due to a
dispute over legal fees. The hearings were reset
to February 21 and March 9 and 16, 1994. On
February 18, 1994, petitioner again moved that
the hearing scheduled on February 21, 1994 be
reset for the same reason. The hearings on March
9 and 16, 1994 were likewise postponed due to
former counsels adamant refusal to turn over the
files. The hearings were reset to May 18 and 25,
1994. By May 18, 1994, petitioners former
counsel still refused to turn over the files of the
case, prompting petitioner to request for another
postponement. The hearings were reset to July 6,
20 and August 15, 1994. The hearing scheduled
on July 6, 1994 was postponed on the ground that
there was no proof of service of the notice of
hearing to counsels for the defendants. The
hearing scheduled on July 20, 1994 was
postponed by Asiatrust on the ground that its
counsel was not available for said hearing. The
hearings were reset to August 31 and September
19, 1994. The hearing scheduled on August 15,
1994 was cancelled. The hearing on August 31,
1994 was reset to September 19, 1995 because
there was no proof of service of the notice of
hearing on counsels. The hearing on September
19, 1994 was also reset to November 21, 1994
for lack of proof that the contending counsels
received the notice of hearing for said date. On
November 16, 1994, Asiatrust filed an urgent
motion to postpone the hearing on November 21,
1994, due to unavailability of its counsel.
Consequently, the hearings were reset to January

30 and February 15, 1995. However, the hearing

on said dates were cancelled since the presiding
judge was indisposed, and reset to May 17, 1995.
As mentioned earlier, petitioners handling
lawyer, Atty. Ignacio of QTE arrived late during
the hearing on May 17, 1995 allegedly due to the
unexpectedly heavy traffic on Roxas Boulevard in
front of Baclaran Church. On motion of Asiatrusts
counsel, the trial court issued the Order
dismissing the case for lack of interest to
prosecute.
Upon said dismissal, petitioners counsel filed a
timely motion for reconsideration. The same was
denied by the trial court. However, it must be
emphasized that petitioner was not left without
any relief. Upon the denial thereof, the situation
could have been easily remedied by filling a
notice of appeal within the reglementary
period13 considering that a dismissal for failure
to prosecute is an adjudication on the merits.14
As correctly pointed out by Asiatrust, all that is
required is a singled-paged, pro forma notice of
appeal, the accomplishment of which does not
require a high degree of legal skill. Despite this,
counsel failed to file its notice of appeal on time
and the proffered excuse that he was suffering
from "stress and fatigue" while highly
unacceptable, does not amount to gross,
palpable, pervasive and reckless negligence so as
to deprive counsels client its day in court. As the
proceedings in the trial court all the way up to the
appellate court would show, petitioner was not
deprived of due process.
Indeed, by failing to file its appeal within the
reglementary period, it could not be successfully
argued that petitioner was deprived of its day in
court.
Time and again it has been held that the right to
appeal is not a natural right or a part of due
process, it is merely a statutory privilege, and
may be exercised only in the manner and in
accordance with the provisions of the law.15 The
party who seeks to avail of the same must
comply with the requirements of the rules.16
Failing to do so, the right to appeal is lost.17
The Court has had several occasions to hold that
"rules of procedure, especially those prescribing
the time within which certain acts must be done,
have oft been held as absolutely indispensable to
the prevention of needless delays and to the
orderly and speedy discharge of business. The
reason for rules of this nature is because the
dispatch of business by courts would be
impossible, and intolerable delays would result,
without rules governing practice. Such rules are a
necessary incident to the proper, efficient and
orderly discharge of judicial functions. Thus, we
have held that the failure to perfect an appeal

within the prescribed reglementary period is not a

mere technicality, but jurisdictional.18
Neither could petitioner plead leniency in the
application of the rules considering that the
period to appeal is prescribed not only by the
Rules of Court but also by statute, particularly
Sec. 39 of Batas Pambansa Blg. 129 which
provides
Sec. 39. Appeals. The period for appeal from
final orders, resolutions, awards, judgments, or
decisions of any court in all cases shall be fifteen
(15) days counted from the notice of the final
order, resolution, award, judgment, or decision
appealed from: Provided, however, That habeas
corpus, the period for appeal shall be forty-eight
(48) hours from the notice of the judgment
appealed from x x x x
Clearly, the perfection of an appeal in the manner
and within the period prescribed by law is not
only mandatory but jurisdictional, and failure to
perfect an appeal has the effect of rendering the
judgment final and executory. Public policy and
sound practice demand that judgments of courts
should become final and irrevocable at some
definite date fixed by law."19
Counsel for petitioner committed simple
negligence
We also find that the negligence of the law firm
engaged by the petitioner to litigate its cause
was not gross but simple negligence. Petitioner
capitalizes on the following "blunders" of the law
firm to establish gross negligence: (1) arriving
late during the hearing on May 17, 1995 and (2)
filing the notice of appeal thirteen (13) days late.
Tardiness is plain and simple negligence. On the
other hand, counsels failure to file the notice of
appeal within the reglementary period did not
deprive petitioner of due process of
law.1wphi1.nt
We also do not miss the fact that petitioners were
represented by a law firm which meant that any
of its members could lawfully act as their counsel
during the trial."20 As such, "[w]hen a client
employs the services of a law firm, he does not
employ the services of the lawyer who is
assigned to personally handle the case. Rather,
he employs the entire law firm. In the event that
the counsel appearing for the client resigns, the
firm is bound to provide a replacement."21
Petitioner cannot now complain of counsels
errors. It has been held that "[l]itigants,
represented by counsel, should not expect that all
they need to do is sit back, relax and await the
outcome of their case. x x x22." Especially in this
case, where petitioner has a legal department to
monitor its pending cases and to liaise with its

retained counsel. To agree with petitioners

stance would enable every party to render inutile
any adverse order or decision through the simple
expedient of alleging gross negligence on the
part of its counsel. The Court will not
countenance such a farce which contradicts longsettled doctrines of trial and procedure.23
Hence, there is no justifiable reason to exempt
petitioner from the general rule that clients
should suffer the consequences of the
negligence, mistake or lack of competence of the
counsel whom they themselves hired and had the
full authority to fire at any time and replace with
another even without any justifiable reason.24
In sum, this is not a case where the negligence of
counsel is one that is so gross, palpable,
pervasive and reckless which is the type of
negligence that deprives a party of his or her day
in court. For this reason, the Court need no longer
concern itself with the merits of petitioners
causes of action nor consider the propriety of the
dismissal of the case by the trial court for lack of
interest to prosecute. The Court is bound by the
trial courts judgment which had become final
and executory due to the simple negligence of
the petitioners counsel in allowing the
reglementary period to lapse without perfecting
the appeal.
WHEREFORE, there being no reversible error
committed by the Court of Appeals, the petition
for review on certiorari is DENIED and the
assailed Resolution dated September 19, 1996
dismissing the appeal is AFFIRMED.
3 JOSEPH GOYANKO, JR., as administrator of
the Estate of Joseph Goyanko, Sr.,
Petitioner, vs.UNITED COCONUT PLANTERS
BANK, MANGO AVENUE BRANCH,
Respondent.
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
petitioners 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 petitioners complaint and awarded
UCPB attorneys fees, litigation expenses and the
costs of the suit.6 The RTC did not consider the
words "ITF HEIRS" sufficient to charge UCPB with
knowledge of any trust relation between PALII and
Goyankos 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 CAs 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 petitioners appeal.
It affirmed the August 27, 2003 decision of the
RTC, but deleted the award of attorneys fees and
litigation expenses. The CA held that no express
trust was created between the HEIRS and PALII.
For a trust to be established, the law requires,
among others, a competent trustor and trustee
and a clear intention to 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

petitioners motion for reconsideration. Hence,
the petitioners present recourse.
The Petition
The petitioner argues in his petition that: first, an
express trust was created, as clearly shown by
PALIIs 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 UCPBs witness, and UCPBs own
records showed that: (1) UCPB was aware of the
trust relation between PALII and the HEIRS; and
(2) PALII held the ACCOUNT in a trust capacity.
Finally, the CA erred in affirming the RTCs
dismissal of his case for lack of cause of action.
The petitioner insists that since an express trust
clearly exists, UCPB, the trustee, should 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 debtorcreditor 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 trustorsbeneficiaries, 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 petitioners
assertion, the records failed to show that PALII
and UCPB executed a trust agreement, and
PALIIs letters made it clear that PALII, on its own,

intended to turn-over the proceeds of the

ACCOUNT to its rightful owners.
The Courts 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.17 Whether an express
trust exists in this case is a question of fact
whose resolution is not proper in a petition under
Rule 45. Reinforcing this is the equally settled
rule that factual findings of the lower tribunals
are conclusive on the parties and are not
generally 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.

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,
andsufficiently 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]

No express trust exists; UCPB exercised the

required diligence in handling the ACCOUNT;
petitioner has no cause of action against UCPB

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

A trust, either express or implied,26 is the

fiduciary relationship "x x x between one person

Contrary to the petitioners contention, PALIIs

letters and UCPBs records established UCPBs

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 PALIIs intention to create a trust in favor
of the HEIRS, it would have relinquished any right
or claim over the proceeds in UCPBs favor as the
trustee. As matters stand, PALII never did.
UCPBs records and the testimony of UCPBs
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
UCPBs explanation that the word "ITF" was
merely used to distinguish the ACCOUNT from
PALIIs 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 trusteebeneficiary relationship between PALII and the
HEIRS.
Contrary to the petitioners position, UCPB did not
become a trustee by the mere opening of the
ACCOUNT.1wphi1 While this may seem to be the
case, by reason of the fiduciary nature of the
banks 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 creditordebtor 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
depositors order.43
Since the records and the petitioners own
admission showed that the ACCOUNT was opened
by PALII, UCPBs 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 banks 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 petitioners 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 defendants obligation to respect that right,
and an act or omission of the defendant in breach
of that right.47 We reiterate that UCPBs
obligation was towards PALII as its creditordepositor. While the HEIRS may have a valid
claim over the proceeds of the investment, the
obligation to turn-over those proceeds lies with
PALII. Since no trust exists the petitioners
complaint was correctly dismissed and the CA did
not commit any reversible error in affirming the
RTC decision. One final note, the burden to prove
the existence of an express trust lies with the
petitioner.48 For his failure to discharge this
burden, the petition must fail.
WHEREFORE, in view of these considerations, we
hereby DENY the petition and AFFIRM the
decision dated February 20, 2007 and the
resolution dated July 31, 2007 of the Court of
Appeals in CA-G.R. CV. No. 00257. Costs against
the petitioner
4. BANK OF THE PHILIPPINE ISLANDS,
Petitioner, vs. COURT OF APPEALS,
ANNABELLE A. SALAZAR, and JULIO R.
TEMPLONUEVO, Respondents
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 SixtySeven Thousand, Seven Hundred Seven Pesos
and Seventy Centavos (P267,707.70) debited by
petitioner BPI from her account. She likewise
prayed for damages and attorneys fees.

Petitioner BPI, in its answer, alleged that on

August 31, 1991, Julio R. Templonuevo, thirdparty defendant and herein also a private
respondent, demanded from the former payment
of the amount of Two Hundred Sixty-Seven
Thousand, Six Hundred Ninety-Two Pesos and Fifty
Centavos (P267,692.50) representing the
aggregate value of three (3) checks, which were
allegedly payable to him, but which were
deposited with the petitioner bank to private
respondent Salazars account (Account No. 02031187-67) without his knowledge and
corresponding endorsement.

respondent Salazar] and against the defendant

[petitioner BPI] and ordering the latter to pay as
follows:

Accepting that Templonuevos claim was a valid

one, petitioner BPI froze Account No. 0201-058848 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.

4. The amount of P50,000.00 as and for

exemplary damages;

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 cashiers 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 cashiers 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 banks
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

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;

5. The amount of P30,000.00 as and for

attorneys 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 defendants [i.e., private respondent
Templonuevos] 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.

erroneous credit entry in the regular course of its

business.

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.

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.

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.

5. Assuming the deduction from Salazars

account was improper, the CA should not have
dismissed petitioners third-party complaint
against Templonuevo because the latter would
have the legal duty to return to petitioner the
proceeds of the checks which he previously
received from it.

VI.The Court of Appeals erred in affirming instead

of reversing the decision of the lower court
against BPI and dismissing SALAZARs complaint.
VII.The Honorable Court erred in affirming the
decision of the lower court dismissing the thirdparty complaint of BPI.7
The issues center on the propriety of the
deductions made by petitioner from private
respondent Salazars account. Stated otherwise,
does a collecting bank, over the objections of its
depositor, have the authority to withdraw
unilaterally from such depositors account the
amount it had previously paid upon certain
unendorsed order instruments deposited by the
depositor to another account that she later
closed?
Petitioner argues thus:
1. There is no presumption in law that a check
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 Salazars
account, petitioner was merely rectifying the
undue payment it made upon the checks and
exercising its prerogative to alter or modify an

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 CAs 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 petitioners right to set off against the
formers bank deposits. This finding, in turn, was
drawn from the pleadings of the parties, the
evidence adduced during trial and upon the
admissions and stipulations of fact made during
the pre-trial, most significantly the following:
(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 petitioners 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 Salazars 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.13 Factual 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

Salazars 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 Courts 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
Salazars possession of the checks, it cannot be
said that the presumption of ownership in
Templonuevos 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."22 The
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,
petitioners liability to the designated payee
cannot be denied.
Consequently, petitioner, as the collecting bank,
had the right to debit Salazars 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.26 In 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 petitioners
claim that it merely made a mistake in crediting
the value of the checks to Salazars account and
instead bolsters the conclusion of the CA that
petitioner recognized Salazars 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
petitioners assurances to private respondent
Salazar that the account would remain
untouched, pending the resolution of the
controversy between her and Templonuevo.29 In
this connection, the CA cited the letter dated
September 5, 1991 of Mr. Manuel Ablan, Senior
Manager of petitioner banks Pasig/Ortigas
branch, to private respondent Salazar informing
her that her account had been frozen, thus:
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
cashiers 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. Arcillas

account No. 0201-0588-48 which was supposed

to be frozen or controlled. Such a move by BPI is,
to Our minds, a clear case of negligence, if not a
fraudulent, wanton and reckless disregard of the
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 Salazars 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 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
banks 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 attorneys fees is proper where
exemplary damages are awarded. It is proper
where depositors are compelled to litigate to
protect their interest.32
WHEREFORE, the petition is 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
5.DURBAN APARTMENTS CORPORATION,
doing business under the name and style of
City Garden Hotel, Petitioner, vs.PIONEER
INSURANCE AND SURETY CORPORATION,
Respondent.
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 Sees (Sees) 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. Sees [the insureds] 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
P1,175,000.00; 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
oclock 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 AntiCarnapping 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

P1,163,250.00 money claim of See and
mortgagee ABN AMRO Savings Bank, Inc. as
indemnity for the loss of the Vitara; the Vitara
was lost due to the negligence of [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 Sees Vitara, on the
contrary, it was See who requested a parking
attendant to park the Vitara at any available
parking space, and it was parked at the Equitable
Bank parking area, which was within Sees view,
while he and Montero were waiting in front of the
hotel; they made a written denial of the demand
of [respondent] Pioneer Insurance for want of
legal basis; valet parking services are provided by
the hotel for the convenience of its customers
looking for a parking space near the hotel
premises; it is a special privilege that it gave to
Montero and See; it does not include
responsibility for any losses or damages to motor
vehicles and its accessories in the parking area;
and the same holds true even if it was See
himself who parked his Vitara within the premises
of the hotel as evidenced by the valet parking
customers 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 customers 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 P1,163,250.00 for
his claim.
Ricardo F. Red testified that: he is a claims
evaluator of [petitioner] Pioneer Insurance
tasked, among others, with the receipt of claims
and documents from the insured, investigation of
the said claim, inspection of damages, taking of
pictures of insured unit, and monitoring of the
processing of the claim until its payment; he
monitored the processing of Sees claim when the
latter reported the incident to [respondent]
Pioneer Insurance; [respondent] Pioneer
Insurance assigned the case to Vesper who
verified Sees 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 adjusters report, and eventually
recommended for its settlement for the sum of
P1,163,250.00 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 P100,000.00 as
attorneys fees plus P3,000.00 per court
appearance, to prosecute the claims of
[respondent] Pioneer Insurance against
[petitioner] Durban Apartments and Justimbaste
before the lower court.

[petitioner] Durban Apartments and Justimbaste

in its Orders dated May 4, 2005 and October 20,
2005, respectively, for being devoid of merit.3

Ferdinand Cacnio testified that: he is an adjuster

of Vesper; [respondent] Pioneer Insurance
assigned to Vesper the investigation of Sees
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 AntiCarnapping Unit of the Makati City Police; upon
verification with the PNP TMG [Unit] in Camp
Crame, he learned that Sees Vitara has not yet
been recovered; upon evaluation, Vesper
recommended to [respondent] Pioneer Insurance
to settle Sees claim for P1,045,750.00; 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 Sees contention, tendered
the sum of P1,163,250.00 as settlement, the
former accepted it, and signed a release of claim
and subrogation receipt.

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 Sees Suzuki
Grand Vitara.

The lower court denied the Motion to Admit PreTrial Brief and Motion for Reconsideration field by

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
P1,163,250.00 with legal interest thereon from
July 22, 2003 until the obligation is fully paid and
attorneys fees and litigation expenses amounting
to P120,000.00.
SO ORDERED.4
On appeal, the appellate court affirmed the
decision of the trial court, viz.:

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
attorneys fees in the amount of P120,000.00;
and
4. Ultimately, whether petitioner is liable to
respondent for the loss of Sees 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 Sees
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 courts
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.

Failure to file the pre-trial brief shall have the

same effect as failure to appear at the pre-trial.

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 counsels nonappearance during the pre-trial conference and
their failure to file a pre-trial brief.

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.

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 pretrial, their respective pre-trial briefs which shall
contain, among others:
xxxx

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 petitioners Board of
Directors."

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. Narvasas 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.x x x x
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 conference (he) may be nonsuited or considered as in default." The obligation
"to appear" denotes not simply the personal
appearance, or the mere physical presentation by
a party of ones self, but connotes as importantly,
preparedness to go into the different subject
assigned by law to a pre-trial. And in those
instances where a party may not himself be
present at the pre-trial, and another person
substitutes for him, or his lawyer undertakes to
appear not only as an attorney but in substitution
of the clients person, it is imperative for that
representative of the lawyer to have "special
authority" to make such substantive agreements
as only the client otherwise has capacity to make.
That "special authority" should ordinarily be 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 representative cannot be deemed
capacitated to appear in place of the party;
hence, it will be considered that the latter has
failed to put in an appearance at all, and he
[must] therefore "be non-suited or considered as
in default," notwithstanding his lawyers or
delegates presence.9
We are not unmindful that defendants
(petitioners) 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 plaintiffs 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 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 latters
employee, Justimbaste. In turn, Justimbaste
issued a claim stub to See. Thus, the contract of
deposit was perfected from Sees delivery, when
he handed over to Justimbaste the keys to his
vehicle, which Justimbaste received with the
obligation of safely keeping and returning it.
Ultimately, petitioner is liable for the loss of Sees
vehicle.
Lastly, petitioner assails the lower courts award
of attorneys fees to respondent in the amount of
P120,000.00. Petitioner claims that the award is
not substantiated by the evidence on record.
We disagree.
While it is a sound policy not to set a premium on
the right to litigate,12 we find that respondent is
entitled to reasonable attorneys fees. Attorneys
fees may be awarded when a party is compelled
to litigate or incur expenses to protect its
interest,13 or when the court deems it just and
equitable.14 In this case, petitioner refused to
answer for the loss of Sees vehicle, which was

deposited with it for safekeeping. This refusal

constrained respondent, the insurer of See, and
subrogated to the latters right, to litigate and
incur expenses. However, we reduce the award of
P120,000.00 to P60,000.00 in view of the
simplicity of the issues involved in this case.
WHEREFORE, the petition is DENIED. The Decision
of the Court of Appeals in CA-G.R. CV No. 86869
is AFFIRMED with the MODIFICATION that the
award of attorneys fees is reduced to
P60,000.00. Costs against petitioner.
6.SPOUSES GODFREY and GERARDINA
SERFINO, Petitioners, vs.FAR EAST BANK
AND TRUST COMPANY, INC., now BANK OF
THE PHILIPPINE ISLANDS, Respondent.
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 P 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 P 155,000.00 from P
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, Graces savings
account with FEBTC amounted to P 245,830.37,
the entire deposit coming from Magdalenas
retirement benefits.8 That same day, the spouses
Serfinos counsel sent two letters to FEBTC
informing the bank that the deposit in Graces
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 P 150,000.00
from her savings account with FEBTC. On the
same day, the spouses Serfino sent another letter
to FEBTC informing it of the pending action;
attached to the letter was a copy of the complaint
filed as Civil Case No. 95-9344.

During the pendency of Civil Case No. 959344, the spouses Cortez manifested that they
were turning over the balance of the deposit in
FEBTC (amounting to P 54,534.00) to the spouses
Serfino as partial payment of their obligation
under the compromise judgment. The RTC issued
an order dated July 30, 1997, authorizing FEBTC
to turn over the balance of the deposit to the
spouses Serfino.
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 RTCs ruling

absolving FEBTC from liability for allowing the
withdrawal of the deposit. They allege that the
RTC cited no legal basis for declaring that only a
court order or process can justify the withholding
of the deposit in Graces name. Since FEBTC was
informed of their adverse claim after they sent
three letters, they claim that:
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 depositarys
possession, or should he have been notified of
the opposition of a third person to the return or
the removal of the thing deposited. In these
cases, the depositary must immediately inform
the depositor of the attachment or opposition.
Based on Article 1988 of the Civil Code, the
depository is not obliged to return the thing to
the depositor if notified of a third partys 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 Serfinos 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 COURTS RULING
We find the petition unmeritorious and see no
reason to reverse the RTCs ruling.
Claim for actual damages not meritorious
because there could be no pecuniary loss that
should be compensated if there was no
assignment of credit
The spouses Serfinos claim for damages against
FEBTC is premised on their claim of ownership of
the deposit with FEBTC. The deposit consists of
Magdalenas retirement benefits, which the
spouses Serfino claim to have been assigned to
them under the compromise judgment. That the
retirement benefits were deposited in Graces
savings account 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 Serfinos
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 Magdalenas 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
attorneys 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 respondents debtors.17 The Court
concluded that the respondents 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 Magdalenas 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
Magdalenas 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 Magdalenas credit
against the GSIS. In fact, the spouses Serfino are
prohibited from enforcing their claim until after
the lapse of one (1) week from Magdalenas
receipt of her retirement 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.1wphi1
The spouses Serfino invoke American common
law that imposes a duty upon a bank receiving a
notice of adverse claim to the fund in a
depositors account to freeze the account for a
reasonable length of time, sufficient to allow 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 banks 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.
7. MAKATI SHANGRI-LA HOTEL AND RESORT,
INC., Petitioner, vs.ELLEN JOHANNE
HARPER, JONATHAN CHRISTOPHER HARPER,
and RIGOBERTO GILLERA, Respondents.

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 Harpers
residence in Oslo, Norway (i.e., Bygdoy Terasse
16, 0287 Oslo, Norway) led to the discovery. It
appears that at around 11:00 am of November 6,
1999, a Caucasian male of about 3032 years in
age, 54" in height, clad in maroon long sleeves,
black denims and black shoes, entered the Alexis
Jewelry Store in Glorietta, Ayala Center, Makati
City and expressed interest in purchasing a
Cartier ladys watch valued at P 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 customers 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 customers 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, Harpers 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
Harpers room. Alarcon and a security personnel
went to Room 1428 at 11:27 a.m., and were
shocked to discover Harpers lifeless body on the
bed.
Col. Rodrigo de Guzman (de Guzman), the hotels
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 Harpers room in the company
of De Guzman, Alarcon, Gami Holazo (the hotels
Executive Assistant Manager), Norge Rosales (the
hotels Executive Housekeeper), and Melvin
Imperial (a security personnel of the hotel). They
found Harpers 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
victims 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 Harpers
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 ladys 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
Harpers 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 Harpers 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
males attempt to purchase a Cartier ladys watch
from the Alexis Jewelry Store in Glorietta, Ayala
Center, Makati City with the use of one of
Harpers credit cards.
On August 30, 2002, respondents commenced
this suit in the RTC to recover various damages
from petitioner,6 pertinently 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 hotels private rooms area and into
the room of the said deceased on account of the
hotels 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 Christian Harper, this Court orders the
defendant to pay plaintiffs the amount of:
PhP 43,901,055.00 as and by way of actual and
compensatory damages;
PhP 739,075.00 representing the expenses of
transporting the remains of Harper to Oslo,
Norway;
PhP 250,000.00 attorneys fees; and to pay the
cost of suit. SO ORDERED.
Ruling of the CA

Petitioner appealed, assigning to the RTC the

following errors, to wit:
I.THE TRIAL COURT ERRED IN RULING THAT THE
PLAINTIFFS-APPELLEES ARE THE HEIRS OF THE
LATE CHRISTIAN HARPER, AS THERE IS NO
COMPETENT EVIDENCE ON RECORD SUPPORTING
SUCH RULING.
II.THE TRIAL COURT ERRED IN RULING THAT THE
DEFENDANT-APPELLANTSNEGLIGENCE WAS THE
PROXIMATE CAUSE OF THE DEATH OF MR.
HARPER, OR IN NOT RULING THAT IT WAS MR.
CHRISTIAN HARPERS OWN NEGLIGENCE WHICH
WAS THE SOLE, PROXIMATE CAUSE OF HIS
DEATH.
III.THE TRIAL COURT ERRED IN AWARDING TO THE
PLAINTIFFS-APPELLEES THE AMOUNTOF PHP
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
AND OF THE ALLEGATION THAT THE PLAINTIFFSAPPELLEES ARE MR. HARPERS HEIRS.
IV.THE TRIAL COURT ERRED IN AWARDING TO THE
PLAINTIFFS-APPELLEES THE AMOUNT OF PHP
739,075.00, REPRESENTING THE ALLEGED COST
OF TRANSPORTING THE REMAINS OF MR.
CHRISTIAN HARPER TO OSLO, NORWAY, THERE
BEING NO PROOF ON RECORD THAT IT WAS
PLAINTIFFS-APPELLEES WHO PAID FOR SAID
COST.
V.THE TRIAL COURT ERRED IN AWARDING
ATTORNEYS 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 P
52,078,702.50, as actual and compensatory
damages; P 25,000.00, as temperate damages; P
250,000.00, as attorneys fees; and to pay the
costs of the suit.
SO ORDERED.10
Issues
Petitioner still seeks the review of the judgment
of the CA, submitting the following issues for
consideration and determination, namely:

I.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
SON OF MR. CHRISTIAN HARPER.
II.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
THE APPELLANT AND ITS SAID NEGLIGENCE WAS
THE PROXIMATE CAUSE OF THE DEATH OF MR.
CHRISTIAN HARPER.
III.WHETHER OR NOT THE PROXIMATE CAUSE OF
THE DEATH OF MR. CHRISTIAN HARPER WAS HIS
OWN NEGLIGENCE.
Ruling
The appeal lacks merit.
I.Requirements for authentication of documents
establishing respondents legal relationship with
the victim as his heirs were complied with
As to the first issue, the CA pertinently held as
follows:
The documentary evidence that plaintiffsappellees offered relative to their heirship
consisted of the following
1. Exhibit "Q" - Birth Certificate of Jonathan
Christopher Harper, son of Christian Fredrik
Harper and Ellen Johanne Harper;
2. Exhibit "Q-1" - Marriage Certificate of Ellen
Johanne Clausen and Christian Fredrik Harper;
3. Exhibit "R" - Birth Certificate of Christian
Fredrick Harper, son of Christopher Shaun Harper
and Eva 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 plaintiffsappellees 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 plaintiffsappellees 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 "Q1" 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
attestedby 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 plaintiffsappellees 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 CAs 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 Harpers surviving heirs by
reason of such documents being hearsay and
incompetent.
Petitioners 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 Harpers 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 Tirols 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. PangandamanGania,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
justifiable circumstances,27 because substantial
compliance does not equate to a disregard of
basic rules. 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 operation of the rules
whenever the purposes of justice require the
suspension cannot be challenged.28 In the
interest of substantial justice, even procedural
rules of the most mandatory character in terms of
compliance are frequently relaxed. Similarly, the
procedural rules should definitely be liberally
construed if strict adherence to their letter will
result in absurdity and in manifest injustice, or
where the merits of a partys cause are apparent
and outweigh considerations of non-compliance
with certain formal requirements.29 It is more in
accord with justice that a party-litigant is given
the fullest opportunity to establish the merits of
his claim or defense than for him to lose his life,
liberty, honor or property on mere technicalities.
Truly, the rules of procedure are intended to
promote substantial justice, not to defeat it, and
should not be applied in a very rigid and technical
sense.30
Petitioner urges the Court to resolve the apparent
conflict between the rulings in Heirs of Pedro
Cabais v. Court of Appeals31 (Cabais) and in Heirs
of Ignacio Conti v. Court of Appeals32 (Conti)
establishing filiation through a baptismal
certificate.33

Petitioners urging is not warranted, both because

there is no conflict between the rulings in Cabais
and Conti, and because neither Cabais nor Conti
is relevant herein.
In Cabais, the main issue was whether or not the
CA correctly affirmed the decision of the RTC that
had relied mainly on the baptismal certificate of
Felipa C. Buesa to establish the parentage and
filiation of Pedro Cabais. The Court held that the
petition was meritorious, stating:
A birth certificate, being a public document,
offers prima facie evidence of filiation and a high
degree of proof is needed to overthrow the
presumption of truth contained in such public
document. This is pursuant to the rule that
entries in official records made in the
performance of his duty by a public officer are
prima facie evidence of the facts therein stated.
The evidentiary nature of such document must,
therefore, be sustained in the absence of strong,
complete and conclusive proof of its falsity or
nullity.
On the contrary, a baptismal certificate is a
private document, which, being hearsay, is not a
conclusive proof of filiation. It does not have the
same probative value as a record of birth, an
official or public document. In US v. Evangelista,
this Court held that church registers of births,
marriages, and deaths made subsequent to the
promulgation of General Orders No. 68 and the
passage of Act No. 190 are no longer public
writings, nor are they kept by duly authorized
public officials. Thus, in this jurisdiction, a
certificate of baptism such as the one herein
controversy is no longer regarded with the same
evidentiary 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
The Court sustained the Cabais petitioners
stance that the RTC had apparently erred in
relying on the baptismal certificate to establish
filiation, stressing the baptismal certificates
limited evidentiary value as proof of filiation
inferior to that of a birth certificate; and declaring
that the baptismal certificate did not 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, that lost them their case, stating that: "The
unjustified failure to present the birth certificate
instead of the baptismal certificate now under
consideration or to otherwise prove filiation by
any other means recognized by law weigh heavily
against respondents."35

In Conti, the Court affirmed the rulings of the trial

court and the CA to the effect that the Conti
respondents 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
collateral relatives of the deceased. Agreeing with
the CA, the Court said:
We are not persuaded. Altogether, the
documentary and testimonial evidence submitted
xxx are competent and adequate proofs that
private respondents are collateral heirs of
Lourdes Sampayo.
xxx
Under Art. 172 of the Family Code, the filiation of
legitimate children shall be proved by any other
means allowed by the Rules of Court and special
laws, in the absence of a record of birth or a
parents admission of such legitimate filiation in a
public or private document duly signed by the
parent. Such other proof of ones filiation may be
a baptismal certificate, a judicial admission, a
family Bible in which his name has been entered,
common reputation respecting his pedigree,
admission by silence, the testimonies of
witnesses and other kinds of proof admissible
under Rule 130 of the Rules of Court. By analogy,
this method of proving filiation may also be
utilized in the instant case.
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 certificates presented in
evidence by private respondents are public
documents. Parish priests continue to be the legal
custodians of the parish records and are
authorized to issue true copies, in the form of
certificates, of the entries contained therein.
The admissibility of baptismal certificates offered
by Lydia S. Reyes, absent the testimony of
theofficiating priest or the official recorder, was
settled in People v. Ritter, citing U.S. v. de Vera
(28 Phil. 105 1914, thus:
.... The entries made in the Registry Book may be
considered as entries made in the course of
business under Section 43 of Rule 130, which is
an exception to the hearsay rule. The baptisms
administered by the church are one of its
transactions in the exercise of ecclesiastical
duties and recorded in the book of the church
during this course of its business.
It may be argued that baptismal certificates are
evidence only of the administration of the

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

baptismal certificates which, when taken
together, uniformly show that Lourdes, Josefina,
Remedios and Luis had the same set of parents,
as indicated therein. Corroborated by the
undisputed testimony of Adelaida Sampayo that
with the demise of Lourdes and her brothers
Manuel, Luis and sister Remedios, the only sibling
left was Josefina Sampayo Reyes, such baptismal
certificates have acquired evidentiary weight to
prove filiation.36
Obviously, Conti did not treat a baptismal
certificate, standing alone, as sufficient to prove
filiation; on the contrary, Conti expressly held
that a baptismal certificate had evidentiary value
to prove filiation if considered alongside other
evidence of filiation. As such, a baptismal
certificate alone is not sufficient to resolve a
disputed filiation.
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 Johanne Harper, and the probate
court certificate, all of which were presumably
regarded as public documents under the laws of
Norway. Such documentary evidence sufficed to
competently establish the relationship and
filiation under the standards of our Rules of Court.
IIPetitioner was liable due to its own negligence
Petitioner argues that respondents failed to prove
its negligence; that Harpers own negligence in
allowing the killers into his hotel room was the
proximate cause of his own death; and that hotels
were not insurers of the safety of their guests.
The CA resolved petitioners arguments thuswise:
Defendant-appellant contends that the pivotal
issue is whether or not it had committed
negligence and corollarily, whether its negligence
was the immediate cause of the death of
Christian Harper. In its defense, defendantappellant 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 Harpers 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-appellants 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 quasidelicts.
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 preexisting 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 defendants 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 Harpers 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 Harpers entry and
that of the alleged female visitor belies the
"theory of acquaintanceship". It is most likely that
the female "visitor" was the one who opened the
door to the male "visitor", undoubtedly, a coconspirator.

In any case, the ghastly incident could have been

prevented had there been adequate security in
each of the hotel floors. This, coupled with the
earlier recommendation of Col. De Guzman to the
hotel management to act on the security lapses
of the hotel, raises the presumption that the
crime was foreseeable.
Clearly, defendants inaction constitutes
negligence or want of the reasonable care
demanded of it in that particular situation.
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
defedant-appellant is grounded mainly on the
latters 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 "idealset 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 fivestar 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
Courts enunciation that the hotel business like
the common carriers business is imbued with
public interest. Catering to the public,
hotelkeepers are bound to provide not only
lodging for hotel guests 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 fullybooked, was observed only later in November
1999 or in the early part of December 1999, or
needless to state, after the murder of Christian
Harper. The apparent security lapses of
defendant-appellant were further shown when
the male culprit who entered Christian Harpers
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-appellants contention that it was
Christian Harpers own negligence in allowing the
malefactors to his room that was the proximate
cause of his death, is untenable. To reiterate,
defendant-appellant is engaged in a business
imbued with public interest, 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:
(a) When the findings are grounded entirely on
speculation, surmises or conjectures;
(b) When the inference made is manifestly
mistaken, absurd or impossible;
(c) When there is grave abuse of discretion;
(d) When the judgment is based on a
misapprehension of facts;
(e) When the findings of facts are conflicting;
(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;
(g) When the findings are contrary to the trial
court;

(h) When the findings are conclusions without

citation of specific evidence on which they are
based;
(i) When the facts set forth in the petition as well
as in the petitioners main and reply briefs are not
disputed by the respondent;
(j) When the findings of fact are premised on the
supposed absence of evidence and contradicted
by the evidence on record; and
(k) When the Court of Appeals manifestly
overlooked certain relevant facts not disputed by
the parties, which, if properly considered, would
justify a different conclusion.38

None of the exceptional circumstances obtains

herein. Accordingly, the Court cannot depart from
or disturb the factual findings on negligence of
petitioner made by both the RTC and the CA.39
Even so, the Court agrees with the CA that
petitioner failed to provide the basic and
adequate security measures expected of a fivestar hotel; and that its omission was the
proximate cause of Harpers death.
The testimony of Col. De Guzman revealed that
the management practice prior to the murder of
Harper had been to deploy only one security or
roving guard for every three or four floors of the
building; that such ratio had not been enough
considering the L-shape configuration of the hotel
that rendered the hallways not visible from one or
the other end; and that he had recommended to
management to post a guard for each floor, but
his recommendation had been disapproved
because the hotel "was not doing well" at that
particular time.40
Probably realizing that his testimony had
weakened petitioners position in the case, Col.
De Guzman soon clarified on cross-examination
that petitioner had seen no need at the time of
the incident to augment the number of guards
due to the hotel being then only half-booked.
Here is how his testimony went:
Petitioner would thereby have the Court believe
that Col. De Guzmans 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.
8. YHT REALTY CORPORATION, ERLINDA
LAINEZ and ANICIA PAYAM, petitioners,
vs.THE COURT OF APPEALS and MAURICE
McLOUGHLIN, respondents.
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 Malacaang to follow up on
his letter but he was instructed to go to the DOJ.
The DOJ directed him to proceed to the WPD for
documentation. But McLoughlin went back to
Australia as he had an urgent business matter to
attend to.
For several times, McLoughlin left for Australia to
attend to his business and came back to the
Philippines to follow up on his letter to the
President but he failed to obtain any concrete
assistance.19

McLoughlin left again for Australia and upon his

return to the Philippines on 25 August 1989 to
pursue his claims against petitioners, the WPD
conducted an investigation which resulted in the
preparation of an affidavit which was forwarded
to the Manila City 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.

1. Ordering defendants, jointly and severally, to

pay plaintiff the sum of US$11,400.00 or its
equivalent in Philippine Currency of P342,000.00,
more or less, and the sum of AUS$4,500.00 or its
equivalent in Philippine Currency of P99,000.00,
or a total of P441,000.00, more or less, with 12%
interest from April 16 1988 until said amount has
been paid to plaintiff (Item 1, Exhibit CC);

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.

3. Ordering defendants, jointly and severally, to

pay plaintiff the sum of P500,000.00 as moral
damages (Item X, Exh. "CC");

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:

2. Ordering defendants, jointly and severally to

pay plaintiff the sum of P3,674,238.00 as actual
and consequential damages arising from the loss
of his Australian and American dollars and
jewelries complained against and in prosecuting
his claim and rights administratively and judicially
(Items II, III, IV, V, VI, VII, VIII, and IX, Exh. "CC");

4. Ordering defendants, jointly and severally, to

pay plaintiff the sum of P350,000.00 as
exemplary damages (Item XI, Exh. "CC");
5. And ordering defendants, jointly and severally,
to pay litigation expenses in the sum of
P200,000.00 (Item XII, Exh. "CC");
6. Ordering defendants, jointly and severally, to
pay plaintiff the sum of P200,000.00 as attorney's
fees, and a fee of P3,000.00 for every
appearance; and
7. Plus costs of suit.
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 nonperformance 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) P153,200.00 representing the peso equivalent
of US$2,000.00 and AUS$4,500.00;
2) P308,880.80, representing the peso value for
the air fares from Sidney [sic] to Manila and back
for a total of eleven (11) trips;
3) One-half of P336,207.05 or P168,103.52
representing payment to Tropicana Apartment
Hotel;
4) One-half of P152,683.57 or P76,341.785
representing payment to Echelon Tower;
5) One-half of P179,863.20 or P89,931.60 for the
taxi xxx transportation from the residence to
Sidney [sic] Airport and from MIA to the hotel
here in Manila, for the eleven (11) trips;

6) One-half of P7,801.94 or P3,900.97

representing Meralco power expenses;
7) One-half of P356,400.00 or P178,000.00
representing expenses for food and maintenance;
8) P50,000.00 for moral damages;
9) P10,000.00 as exemplary damages; and
10) P200,000 representing 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.nt

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 hotelkeeper 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 hotelkeeper 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 P308,880.80, representing
the peso value for the air fares from Sydney to
Manila and back for a total of eleven (11) trips;49
one-half of P336,207.05 or P168,103.52
representing payment to Tropicana;50 one-half of
P152,683.57 or P76,341.785 representing
payment to Echelon Tower;51 one-half of
P179,863.20 or P89,931.60 for the taxi or
transportation expenses from McLoughlin's
residence to Sydney Airport and from MIA to the
hotel here in Manila, for the eleven (11) trips;52
one-half of P7,801.94 or P3,900.97 representing
Meralco power expenses;53 one-half of
P356,400.00 or P178,000.00 representing
expenses for food and maintenance.54
The amount of P50,000.00 for moral damages is
reasonable. Although trial courts are given
discretion to determine the amount of moral
damages, the appellate court may modify or
change the amount awarded when it is palpably
and scandalously excessive.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 P10,000.00 as exemplary damages
and P200,000.00 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) P308,880.80, representing the peso value for
the air fares from Sydney to Manila and back for a
total of eleven (11) trips;
(3) One-half of P336,207.05 or P168,103.52
representing payment to Tropicana Copacabana
Apartment Hotel;
(4) One-half of P152,683.57 or P76,341.785
representing payment to Echelon Tower;
(5) One-half of P179,863.20 or P89,931.60 for the
taxi or transportation expense from McLoughlin's
residence to Sydney Airport and from MIA to the
hotel here in Manila, for the eleven (11) trips;
(6) One-half of P7,801.94 or P3,900.97
representing Meralco power expenses;
(7) One-half of P356,400.00 or P178,200.00
representing expenses for food and maintenance;
(8) P50,000.00 for moral damages;
(9) P10,000.00 as exemplary damages; and
(10) P200,000 representing attorney's fees.