c
  c


  cash. Various customers of Great Asian issued these postdated checks in payment for
appliances and other merchandise.




 
  
  
 

 petitioners, Great Asian and Bancasia signed the first Deed of Assignment on January 12, 1982
vs. covering four postdated checks with a total face value of P244,225.82, with maturity
  

  


 

  !" dates not later than March 17, 1982. Of these four postdated checks, two were

 respondents. dishonored. Great Asian and Bancasia signed the second Deed of Assignment also
on January 12, 1982 covering four postdated checks with a total face value of
P312,819.00, with maturity dates not later than April 1, 1982. All these four checks

½ #
were dishonored. Great Asian and Bancasia signed the third Deed of Assignment on
February 11, 1982 covering eight postdated checks with a total face value of
O

P344,475.00, with maturity dates not later than April 30, 1982. All these eight checks
were dishonored. Great Asian and Bancasia signed the fourth Deed of Assignment on
March 5, 1982 covering one postdated check with a face value of P200,000.00, with
Before us is a Petition for Review on Certiorari under Rule 45 of the Revised Rules on
1 2 maturity date on March 18, 1982. This last check was also dishonored. Great Asian
Civil Procedure assailing the June 9, 1992 Decision of the Court of Appeals in CA-
3 assigned the postdated checks to Bancasia at a discount rate of less than 24% of the
G.R. CV No. 20167. The Court of Appeals affirmed the January 26, 1988 Decision of face value of the checks.
4
the Regional Trial Court of Manila, Branch 52, ordering petitioners Great Asian Sales
Center Corporation ("Great Asian" for brevity) and Tan Chong Lin to pay, solidarily,
respondent Bancasia Finance and Investment Corporation ("Bancasia" for brevity) the Arsenio endorsed all the fifteen dishonored checks by signing his name at the back of
amount of P1,042,005.00. The Court of Appeals affirmed the trial court¶s award of the checks. Eight of the dishonored checks bore the endorsement of Arsenio below
interest and costs of suit but deleted the award of attorney¶s fees. the stamped name of "Great Asian Sales Center", while the rest of the dishonored
checks just bore the signature of Arsenio. The drawee banks dishonored the fifteen
checks on maturity when deposited for collection by Bancasia, with any of the
O

following as reason for the dishonor: "account closed", "payment stopped", "account
under garnishment", and "insufficiency of funds". The total amount of the fifteen
Great Asian is engaged in the business of buying and selling general merchandise, in dishonored checks is P1,042,005.00. Below is a table of the fifteen dishonored
particular household appliances. On March 17, 1981, the board of directors of Great checks:
Asian approved a resolution authorizing its Treasurer and General Manager, Arsenio
Lim Piat, Jr. ("Arsenio" for brevity) to secure a loan from Bancasia in an amount not to
exceed P1.0 million. The board resolution also authorized Arsenio to sign all papers, Drawee Bank Check No. Amount Maturity Date
documents or promissory notes necessary to secure the loan. On February 10, 1982,
the board of directors of Great Asian approved a second resolution authorizing Great 1st Deed
Asian to secure a discounting line with Bancasia in an amount not exceeding P2.0 Solid Bank C-A097480 P137,500.00 March 16, 1982
million. The second board resolution also designated Arsenio as the authorized
signatory to sign all instruments, documents and checks necessary to secure the Pacific Banking Corp. 23950 P47,211.00 March 17, 1982
discounting line.
2nd Deed
On March 4, 1981, Tan Chong Lin signed a Surety Agreement in favor of Bancasia to Metrobank 030925 P68,722.00 March 19, 1982
guarantee, solidarily, the debts of Great Asian to Bancasia. On January 29, 1982, Tan
Chong Lin signed a Comprehensive and Continuing Surety Agreement in favor of 030926 P45,230.00 March 19, 1982
Bancasia to guarantee, solidarily, the debts of Great Asian to Bancasia. Thus, Tan
Solidbank C-A097478 P140,000.00 March 23, 1982
Chong Lin signed two surety agreements ("Surety Agreements" for brevity) in favor of
Bancasia. Pacific Banking Corp. CC 769910 P58,867.00 April 1, 1982
3rd Deed
Great Asian, through its Treasurer and General Manager Arsenio, signed four (4)
Deeds of Assignment of Receivables ("Deeds of Assignment" for brevity), assigning to Phil. Trust Company 060835 P21,228.00 April 21, 1982
Bancasia fifteen (15) postdated checks. Nine of the checks were payable to Great
Asian, three were payable to "New Asian Emp.", and the last three were payable to 060836 P22,187.00 April 28, 1982
 Piat, Jr., general manager and treasurer of the defendant Great Asian to
Allied Banking Corp. 11251624 P41,773.00 April 22, 1982
apply and negotiate for a loan accommodation or credit line with the plaintiff
11251625 P38,592.00 April 29, 1982 Bancasia in an amount not exceeding One Million Pesos (P1,000,000.00),
and the other Board Resolution approved on February 10, 1982, authorizing
Pacific Banking Corp. 237984 P37,886.00 April 23, 1982 Arsenio Lim Piat, Jr., to obtain for defendant Asian Center a discounting line
with Bancasia at prevailing discounting rates in an amount not to exceed
237988 P47,385.00 April 28, 1982 Two Million Pesos (P2,000,000.00), both of which were intended to secure

237985 P46,748.00 April 30, 1982 money from the plaintiff financing firm to finance the business operations of
defendant Great Asian, and pursuant to which Arsenio Lim Piat, Jr. was
Security Bank & Trust Co. 22061 P88,676.00 April 30, 1982 able to have the aforementioned fifteen (15) checks totaling P1,042,005.00
discounted with the plaintiff, which transactions were obviously known by
4th Deed the beneficiary thereof, defendant Great Asian, as in fact, in its
aforementioned Schedule and Inventory of Liabilities and Creditors (Exh.
Pacific Banking Corp. 860178 P200,000.00 March 18, 1982
DD, DD-1) attached to its Verified Petition for Insolvency, dated May 12,
1982 (pp. 50-56), the defendant Great Asian admitted an existing liability to
the plaintiff, in the amount of P1,243,632.00, secured by it, by way of
After the drawee bank dishonored Check No. 097480 dated March 16, 1982, Bancasia
µfinancing accommodation,¶ from the said financing institution Bancasia
referred the matter to its lawyer, Atty. Eladia Reyes, who sent by registered mail to
Finance and Investment Corporation, plaintiff herein, sufficiently establish
Tan Chong Lin a letter dated March 18, 1982, notifying him of the dishonor and
the liability of the defendant Great Asian to the plaintiff for the amount of
demanding payment from him. Subsequently, Bancasia sent by personal delivery a 5
P1,042,005.00 sought to be recovered by the latter in this case.
letter dated June 16, 1982 to Tan Chong Lin, notifying him of the dishonor of the
fifteen checks and demanding payment from him. Neither Great Asian nor Tan Chong
Lin paid Bancasia the dishonored checks. xxx

On May 21, 1982, Great Asian filed with the then Court of First Instance of Manila a WHEREFORE, judgment is hereby rendered in favor of the plaintiff and
petition for insolvency, verified under oath by its Corporate Secretary, Mario Tan. against the two (2) defendants ordering the latter, jointly and severally, to
Attached to the verified petition was a "Schedule and Inventory of Liabilities and pay the former:
Creditors of Great Asian Sales Center Corporation," listing Bancasia as one of the
creditors of Great Asian in the amount of P1,243,632.00.
(a) The amount of P1,042,005.00, plus interest thereon at the legal rate
from the filing of the complaint until the same is fully paid;
On June 23, 1982, Bancasia filed a complaint for collection of a sum of money against
Great Asian and Tan Chong Lin. Bancasia impleaded Tan Chong Lin because of the
(b) Attorney¶s fees equivalent to twenty per cent (20%) of the total amount
Surety Agreements he signed in favor of Bancasia. In its answer, Great Asian denied
due; and
the material allegations of the complaint claiming it was unfounded, malicious,
baseless, and unlawfully instituted since there was already a pending insolvency
proceedings, although Great Asian subsequently withdrew its petition for voluntary (c) The costs of suit.
insolvency. Great Asian further raised the alleged lack of authority of Arsenio to sign
the Deeds of Assignment as well as the absence of consideration and consent of all 6
SO ORDERED."
the parties to the Surety Agreements signed by Tan Chong Lin.

Ê


 



Ê


O
 

On appeal, the Court of Appeals sustained the decision of the lower court, deleting
The trial court rendered its decision on January 26, 1988 with the following findings
only the award of attorney¶s fees, as follows:
and conclusions:

"As against appellants¶ bare denial of it, the Court is more inclined to accept
"From the foregoing facts and circumstances, the Court finds that the
the appellee¶s version, to the effect that the subject deeds of assignment are
plaintiff has established its causes of action against the defendants. The
but individual transactions which -- being collectively evidentiary of the loan
Board Resolution (Exh. "T"), dated March 17, 1981, authorizing Arsenio Lim
accommodation and/or credit line it granted the appellant corporation --
should not be taken singly and distinct therefrom. In addition to its
plausibility, the proposition is, more importantly, adequately backed by the
documentary evidence on record. Aside from the aforesaid Deeds of
Assignment (Exhs. "A", "D", "I", and "R") and the Board Resolutions of the
appellant corporation¶s Board of Directors (Exhs. "T", "U" and "V"), the
appellee -- consistent with its theory -- interposed the Surety Agreements
the appellant Tan Chong Lin executed (Exhs. "W" and "X"), as well as the
demand letters it served upon the latter as surety (Exhs. "Y" and "Z"). It
bears emphasis that the second Resolution of the appellant corporation¶s
Board of Directors (Exh. "V") even closely coincides with the execution of
the February 11, 1982 and March 5, 1982 Deeds of Assignment (Exhs. "I"
and "R"). Were the appellants¶ posturings true, it seems rather strange that
the appellant Tan Chong Lin did not even protest or, at least, make known
to the appellee what he -- together with the appellant corporation --
represented to be a corporate larceny to which all of them supposedly fell
prey. In the petition for voluntary insolvency it filed, the appellant
corporation, instead, indirectly acknowledged its indebtedness in terms of
financing accommodations to the appellee, in an amount which, while not
exactly matching the sum herein sought to be collected, approximates the
same (Exhs. "CC", "DD" and "DD-1").
7 with the provisions of the Negotiable Instruments Law on the dishonor of the
xxx
The appellants contend that the foregoing warranties enlarged or increased
the surety¶s risk, such that appellant Tan Chong Lin should be released from
his liabilities (pp. 37-44, Appellant¶s Brief). Without saying more, the
appellants¶ position is, however, soundly debunked by the undertaking
expressed in the Comprehensive and Continuing Surety Agreements (Exhs.
"W" and "X"), to the effect that the "xxx surety/ies, jointly and severally
among themselves and likewise with the principal, hereby agree/s and
bind/s himself to pay at maturity all the notes, drafts, bills of exchange,
overdrafts and other obligations which the principal may now or may
hereafter owe the creditor xxx." With the possible exception of the fixed
ceiling for the amount of loan obtainable, the surety undertaking in the case
at bar is so comprehensive as to contemplate each and every condition,
term or warranty which the principal parties may have or may be minded to
agree on. Having affixed his signature thereto, the appellant Tan Chong Lin
is expected to have, at least, read and understood the same.
xxx
With the foregoing disquisition, the Court sees little or no reason to go into
the appellants¶ remaining assignments of error, save the matter of attorney¶s
fees. For want of a statement of the rationale therefore in the body of the
challenged decision, the trial court¶s award of attorney¶s fees should be
WHEREFORE, the decision appealed from is MODIFIED, to delete the trial
court¶s award of attorney¶s fees. The rest is AFFIRMED   .
8
SO ORDERED."
O


The petition is anchored on the following assigned errors:
"1. The respondent Court erred in not holding that the proper parties against
whom this action for collection should be brought are the drawers and
indorser of the checks in question, being the real parties in interest, and not
the herein petitioners.
2. The respondent Court erred in not holding that the petitioner-corporation
is discharged from liability for failure of the private respondent to comply
checks.
3. The respondent Court erred in its appreciation and interpretation of the
effect and legal consequences of the signing of the deeds of assignment
and the subsequent indorsement of the checks by Arsenio Lim Piat, Jr. in
his individual and personal capacity and without stating or indicating the
name of his supposed principal.
4. The respondent Court erred in holding that the assignment of the checks
is a loan accommodation or credit line accorded by the private respondent
to petitioner-corporation, and not a purchase and sale thereof.
5. The respondent Court erred in not holding that there was a material
alteration of the risk assumed by the petitioner-surety under his surety
agreement by the terms, conditions, warranties and obligations assumed by
the assignor Arsenio Lim Piat, Jr. under the deeds of assignment or
receivables.
6. The respondent Court erred in holding that the petitioner-corporation
impliedly admitted its liability to private respondent when the former included
the latter as one of its creditors in its petition for voluntary insolvency,
although no claim was filed and proved by the private respondent in the
insolvency court.
7. The respondent Court erred in holding the petitioners liable to private
9
deleted and disallowed (   


 





  , 157 respondent on the transactions in question."
SCRA 57).
The issues to be resolved in this petition can be summarized into three:
 1. WHETHER ARSENIO HAD AUTHORITY TO EXECUTE THE DEEDS OF
ASSIGNMENT AND THUS BIND GREAT ASIAN;
2. WHETHER GREAT ASIAN IS LIABLE TO BANCASIA UNDER THE
DEEDS OF ASSIGNMENT FOR BREACH OF CONTRACT PURSUANT
TO THE CIVIL CODE, INDEPENDENT OF THE NEGOTIABLE
INSTRUMENTS LAW;
"RESOLVED, that the Treasurer of the corporation, Mr. Arsenio Lim Piat,
Jr., be authorized as he is authorized to apply for and negotiate for a

     


in the amount not to exceed ONE MILLION
PESOS (P1,000,000.00), with Bancasia Finance and Investment
Corporation, and likewise to sign any and all papers, documents, and/or
promissory notes in connection with said loan accommodation or credit line,
including the power to mortgage such properties of the corporation as may
10
be needed to effectuate the same." (Emphasis supplied)

3. WHETHER TAN CHONG LIN IS LIABLE TO GREAT ASIAN UNDER


  Ê

 
THE SURETY AGREEMENTS.

"RESOLVED that Great Asian Sales Center Corp. obtain a discounting line
O
 Ê

with BANCASIA FINANCE & INVESTMENT CORPORATION, at prevailing
discounting rates, in an amount not to exceed** TWO MILLION PESOS
The petition is bereft of merit. ONLY (P2,000,000),** Philippine Currency.


  


  




 RESOLVED FURTHER, that the corporation secure such other forms of
credit lines with BANCASIA FINANCE & INVESTMENT CORPORATION in
an amount not to exceed** TWO MILLION PESOS ONLY
Great Asian asserts that Arsenio signed the Deeds of Assignment and indorsed the (P2,000,000.00),** PESOS, under such terms and conditions as the
checks in his personal capacity. The primordial question that must be resolved is
signatories may deem fit and proper.
whether Great Asian authorized Arsenio to sign the Deeds of Assignment. If Great
Asian so authorized Arsenio, then Great Asian is bound by the Deeds of Assignment
and must honor its terms. RESOLVED FURTHER, that the following persons be authorized
individually, jointly or collectively to sign, execute and deliver any and all
instruments, documents, checks, sureties, etc. necessary or incidental to
The Corporation Code of the Philippines vests in the board of directors the exercise of secure any of the foregoing obligation:
the corporate powers of the corporation, save in those instances where the Code
requires stockholders¶ approval for certain specific acts. Section 23 of the Code
provides: (signed)
Specimen Signature
"SEC. 23. O
 

  O 

. Unless otherwise provided in
this Code, the corporate powers of all corporations formed under this Code 1. ARSENIO LIM PIAT, JR.
shall be exercised, all business conducted and all property of such
corporations controlled and held by the board of directors or trustees x x x."
PROVIDED FINALLY that this authority shall be valid, binding and effective
until revoked by the Board of Directors in the manner prescribed by law, and
In the ordinary course of business, a corporation can borrow funds or dispose of
that BANCASIA FINANCE & INVESTMENT CORPORATION shall not be
assets of the corporation only on authority of the board of directors. The board of
bound by any such revocation until such time as it is noticed in writing of
directors normally designates one or more corporate officers to sign loan documents 11
such revocation." (Emphasis supplied)
or deeds of assignment for the corporation.

To secure a credit accommodation from Bancasia, the board of directors of Great
Asian adopted two board resolutions on different dates, the first on March 17, 1981,
and the second on February 10, 1982. These two board resolutions, as certified under
oath by Great Asian¶s Corporate Secretary Mario K. Tan, state:
The first board resolution expressly authorizes Arsenio, as Treasurer of Great Asian,
to apply for a "
      


" with Bancasia for not more than
P1.0 million. Also, the first resolution explicitly authorizes Arsenio to sign any
document, paper or promissory note, including mortgage deeds over properties of
Great Asian, to secure the loan or credit line from Bancasia.

 Ê

 
The second board resolution expressly authorizes Great Asian to secure a
" 

" from Bancasia for not more than P2.0 million. The second board
resolution also expressly empowers Arsenio, as the authorized signatory of Great
Asian, " 

 





  



 


   
 
" the discounting line. The second board resolution specifically
authorizes Arsenio to secure the discounting line " 
  
  






."
As plain as daylight, the two board resolutions clearly authorize Great Asian to secure
a
   

from Bancasia. The two board resolutions also categorically
designate Arsenio as the authorized signatory to sign and deliver all the implementing
documents, including checks, for Great Asian. There is no iota of doubt whatsoever
about the purpose of the two board resolutions, and about the authority of Arsenio to
act and sign for Great Asian. The second board resolution even gave Arsenio


 profit out of the difference between the face value of the receivable and the discounted
   to agree with Bancasia on the terms and conditions of the discounting line.
Great Asian adopted the correct and proper board resolutions to secure a loan or
discounting line from Bancasia, and Bancasia had a right to rely on the two board
resolutions of Great Asian. Significantly, the two board resolutions specifically refer to
Bancasia as the financing institution from whom Great Asian will secure the loan
accommodation or discounting line.

Armed with the two board resolutions, Arsenio signed the Deeds of Assignment
selling, and endorsing, the fifteen checks of Great Asian to Bancasia. On the face of
the Deeds of Assignment, the contracting parties are indisputably Great Asian and
Bancasia as the names of these entities are expressly mentioned therein as the
assignor and assignee, respectively. Great Asian claims that Arsenio signed the
Deeds of Assignment in his personal capacity because Arsenio signed above his
printed name, below which was the word "Assignor", thereby making Arsenio the
assignor. Great Asian conveniently omits to state that the first paragraph of the Deeds
waiting for the maturity dates of the fifteen postdated checks, Great Asian sold the
checks to Bancasia at less than the total face value of the checks. In exchange for
receiving an amount less than the face value of the checks, Great Asian obtained
immediately much needed cash. Over three months, Great Asian entered into four
transactions of this nature with Bancasia, showing that Great Asian availed of a
discounting line with Bancasia.
In the financing industry, the term "discounting line" means a credit facility with a
financing company or bank, which allows a business entity to sell, on a continuing
12
basis, its accounts receivable at a discount. The term "discount" means the sale of a
receivable at less than its face value. The purpose of a discounting line is to enable a
business entity to generate instant cash out of its receivables which are still to mature
at future dates. The financing company or bank which buys the receivables makes its
price. Thus, Section 3 (a) of the Financing Company Act of 1998 provides:
"Financing companies" are corporations x x x primarily organized for the
purpose of

 
 facilities to consumers and to industrial,
commercial or agricultural enterprises    or factoring
commercial papers or   



     



 contracts, leases, chattel mortgages, or other






, or by financial leasing of movable as well as immovable
property." (Emphasis supplied)
This definition of "financing companies" is substantially the same definition as in the
13
old Financing Company Act (R.A. No. 5980).
Moreover, Section 1 (h) of the New Rules and Regulations adopted by the Securities
expressly contains the following words: "
 Ê




 and Exchange Commission to implement the Financing Company Act of 1998 states:
 
 
 






   O
 

  !"#."
The assignor is undoubtedly Great Asian, represented by its Treasurer, Arsenio. The
$ $







 whereby evidences of indebtedness of
only issue to determine is whether the Deeds of Assignment are indeed the
a third party, such as installment contracts, promissory notes and similar instruments,
transactions the board of directors of Great Asian authorized Arsenio to sign under the
are purchased by, or 
   
  
     
 
two board resolutions.
 
 

 




." (Emphasis supplied)

Under the Deeds of Assignment, Great Asian sold fifteen postdated checks at a
discount, over three months, to Bancasia. The Deeds of Assignment uniformly state Likewise, this definition of "discounting" is an exact reproduction of the definition of
"discounting" in the implementing rules of the old Finance Company Act.
that Great Asian, ±

"x x x for valuable consideration received, does hereby SELL, TRANSFER,
CONVEY, and ASSIGN, unto the ASSIGNEE, BANCASIA FINANCE &
INVESTMENT CORP., a domestic corporation x x x, the following
ACCOUNTS RECEIVABLES due and payable to it, having an aggregate
face value of x x x."
Clearly, the discounting arrangements entered into by Arsenio under the Deeds of
Assignment were the very transactions envisioned in the two board resolutions of
Great Asian to raise funds for its business. Arsenio acted completely within the limits
of his authority under the two board resolutions. Arsenio did exactly what the board of
directors of Great Asian directed and authorized him to do.

The Deeds of Assignment enabled Great Asian to generate instant cash from its Arsenio had all the proper and necessary authority from the board of directors of Great
Asian to sign the Deeds of Assignment and to endorse the fifteen postdated checks.
fifteen checks, which were still not due and demandable then. In short, instead of
Arsenio signed the Deeds of Assignment as agent and authorized signatory of Great "Obligations arise from:
Asian under an authority expressly granted by its board of directors. The signature of
Arsenio on the Deeds of Assignment is effectively also the signature of the board of
(1) Law;
directors of Great Asian, binding on the board of directors and on Great Asian itself.
Evidently, Great Asian shows its bad faith in disowning the Deeds of Assignment
signed by its own Treasurer, after receiving valuable consideration for the checks (2) Contracts;
assigned under the Deeds.
(3) Quasi-contracts;

 

 
 

(4) Acts or omissions punished by law; and
Bancasia¶s complaint against Great Asian is founded on the latter¶s breach of contract
14
under the Deeds of Assignment. The Deeds of Assignment uniformly stipulate as
(5) Quasi-delicts."
follows:

"


 




 



 


 By express provision in the Deeds of Assignment, Great Asian unconditionally

 %
 Ê   


 


 

 obligated itself to pay Bancasia the full value of the dishonored checks. In short, Great

, assuming the liability to pay, by way of penalty three per cent (3%) of
the total amount unpaid, for the period of delay until the same is fully paid.
In case of any litigation which the ASSIGNEE may institute to enforce the
terms of this agreement, the ASSIGNOR shall be liable for all the costs, plus
attorney¶s fees equivalent to twenty-five (25%) per cent of the total amount
due. Further thereto, the ASSIGNOR agrees that any and all actions which
may be instituted relative hereto shall be filed before the proper courts of the
City of Manila, all other appropriate venues being hereby waived.
15
The last Deed of Assignment contains the following added stipulation:
"xxx Likewise, it is hereby understood that the warranties which the
ASSIGNOR hereby made are deemed part of the consideration for this
transaction, such that any violation of any one, some, or all of said
warranties shall be deemed as deliberate misrepresentation on the part of
the ASSIGNOR. In such event, the monetary obligation herein conveyed
unto the ASSIGNEE shall be conclusively deemed defaulted, giving rise to
the immediate responsibility on the part of the ASSIGNOR to make good
said obligation, and making the ASSIGNOR liable to pay the penalty
stipulated hereinabove as if the original obligor/s of the receivables actually
defaulted. xxx"
Obviously, there is one vital suspensive condition in the Deeds of Assignment. That is,
in case the drawers fail to pay the checks on maturity, Great Asian obligated itself to
pay Bancasia the full face value of the dishonored checks, including penalty and
attorney¶s fees. The failure of the drawers to pay the checks is a suspensive
16
condition, the happening of which gives rise to Bancasia¶s right to demand payment
from Great Asian. This conditional obligation of Great Asian arises from its written
contracts with Bancasia as embodied in the Deeds of Assignment. Article 1157 of the
Civil Code provides that -
Asian sold the postdated checks  &  
 
basis against itself. This is an
obligation that Great Asian is bound to faithfully comply because it has the force of law
as between Great Asian and Bancasia. Article 1159 of the Civil Code further provides
that -
"Obligations arising from contracts have the force of law between the
contracting parties and should be complied with in good faith."
Great Asian and Bancasia agreed on this specific &  
 
stipulation, despite
the fact that the receivables were negotiable instruments with the endorsement of
Arsenio. The contracting parties had the right to adopt the&  
 
stipulation
which is separate and distinct from the warranties of an endorser under the Negotiable
Instruments Law. Article 1306 of the Civil Code provides that ±
"The contracting parties may establish such stipulations, clauses, terms and
conditions as they may deem convenient, provided they are not contrary to
law, morals, good customs, public order, or public policy."
The explicit &  
 
stipulation against Great Asian effectively enlarges, by
agreement of the parties, the liability of Great Asian beyond that of a mere endorser of
a negotiable instrument. Thus, whether or not Bancasia gives notice of dishonor to
Great Asian, the latter remains liable to Bancasia because of the & 

 
stipulation which is independent of the warranties of an endorser under the
Negotiable Instruments Law.
There is nothing in the Negotiable Instruments Law or in the Financing Company Act
(old or new), that prohibits Great Asian and Bancasia parties from adopting the & 

 
stipulation uniformly found in the Deeds of Assignment. Instead of being
17
negotiated, a negotiable instrument may be assigned. Assignment of a negotiable
instrument is actually the principal mode of conveying accounts receivable under the
Financing Company Act. Since in discounting of receivables the assignee is
subrogated as creditor of the receivable, the endorsement of the negotiable instrument
becomes necessary to enable the assignee to collect from the drawer. This is
particularly true with checks because collecting banks will not accept checks unless
endorsed by the payee. The purpose of the endorsement is merely to facilitate
collection of the proceeds of the checks.
The purpose of the endorsement is not to make the assignee finance company a
holder in due course because policy considerations militate against according finance
18
companies the rights of a holder in due course. Otherwise, consumers who purchase
appliances on installment, giving their promissory notes or checks to the seller, will
have no defense against the finance company should the appliances later turn out to
be defective. Thus, the endorsement does not operate to make the finance company a
holder in due course. For its own protection, therefore, the finance company usually
requires the assignor, in a separate and distinct contract, to pay the finance company
in the event of dishonor of the notes or checks.
As endorsee of Great Asian, Bancasia had the option to proceed against Great Asian
under the Negotiable Instruments Law. Had it so proceeded, the Negotiable
Instruments Law would have governed Bancasia¶s cause of action. Bancasia,
however, did not choose this route. Instead, Bancasia decided to sue Great Asian for
breach of contract under the Civil Code, a right that Bancasia had under the
express & 
 
stipulation in the Deeds of Assignment.
The exercise by Bancasia of its option to sue for breach of contract under the Civil
Code will not leave Great Asian holding an empty bag. Great Asian, after paying
Bancasia, is subrogated back as creditor of the receivables. Great Asian can then
proceed against the drawers who issued the checks. Even if Bancasia failed to give
timely notice of dishonor, still there would be no prejudice whatever to Great Asian.
Under the Negotiable Instruments Law, notice of dishonor is not required if the drawer
has no right to expect or require the bank to honor the check, or if the drawer has
19
countermanded payment. In the instant case, all the checks were dishonored for any
of the following reasons: "account closed", "account under garnishment", insufficiency
of funds", or "payment stopped". In the first three instances, the drawers had no right
to expect or require the bank to honor the checks, and in the last instance, the
drawers had countermanded payment.
Moreover, under common law, delay in notice of dishonor, where such notice is
required, discharges the drawer only to the extent of the loss caused by the
20
delay. This rule finds application in this jurisdiction pursuant to Section 196 of the
Negotiable Instruments Law which states, "Any case not provided for in this Act shall
be governed by the provisions of existing legislation, or in default thereof, by the rules
of the Law Merchant." Under Section 186 of the Negotiable Instruments Law, delay in
the presentment of checks discharges the drawer. However, Section 186 refers only to
delay in presentment of checks but is silent on delay in giving notice of dishonor.
Consequently, the common law or Law Merchant can supply this gap in accordance
with Section 196 of the Negotiable Instruments Law.
One other issue raised by Great Asian, that of lack of consideration for the Deeds of
Assignment, is completely unsubstantiated. The Deeds of Assignment uniformly
provide that the fifteen postdated checks were assigned to Bancasia "for valuable
consideration." Moreover, Article 1354 of the Civil Code states that, "Although the
cause is not stated in the contract, it is presumed that it exists and is lawful, unless the
debtor proves the contrary." The record is devoid of any showing on the part of Great
Asian rebutting this presumption. On the other hand, Bancasia¶s Loan Section
Manager, Cynthia Maclan, testified that Bancasia paid Great Asian a consideration at
the discount rate of less than 24% of the face value of the postdated
21
checks. Moreover, in its verified petition for voluntary insolvency, Great Asian
admitted its debt to Bancasia when it listed Bancasia as one of its creditors, an extra-
judicial admission that Bancasia proved when it formally offered in evidence the
22
verified petition for insolvency. The Insolvency Law requires the petitioner to submit
a schedule of debts that must "contain a full and true statement of all his debts and
23
liabilities." The Insolvency Law even requires the petitioner to state in his verification
that the schedule of debts contains "a full, correct and true discovery of all my debts
24
and liabilities x x x." Great Asian cannot now claim that the listing of Bancasia as a
creditor was not an admission of its debt to Bancasia but merely an acknowledgment
that Bancasia had sent a demand letter to Great Asian.
Great Asian, moreover, claims that the assignment of the checks is not a loan
accommodation but a sale of the checks. With the sale, ownership of the checks
passed to Bancasia, which must now, according to Great Asian, sue the drawers and
indorser of the check who are the parties primarily liable on the checks. Great Asian
forgets that under the Deeds of Assignment, Great Asian expressly undertook to pay
the full value of the checks in case of dishonor. Again, we reiterate that this obligation
of Great Asian is separate and distinct from its warranties as indorser under the
Negotiable Instruments Law.
Great Asian is, however, correct in saying that the assignment of the checks is a sale,
or more properly a discounting, of the checks and not a loan accommodation.
However, it is precisely because the transaction is a sale or a discounting of
receivables, embodied in separate Deeds of Assignment, that the relevant provisions
of the Civil Code are applicable and not the Negotiable Instruments Law.
At any rate, there is indeed a fine distinction between a discounting line and a loan
accommodation. If the accounts receivable, like postdated checks, are sold for a
consideration less than their face value, the transaction is one of discounting, and is
subject to the provisions of the Financing Company Act. The assignee is immediately
subrogated as creditor of the accounts receivable. However, if the accounts receivable
are merely used as collateral for the loan, the transaction is only a simple loan, and
the lender is not subrogated as creditor until there is a default and the collateral is
foreclosed.
In summary, Great Asian¶s four contracts assigning its fifteen postdated checks to
Bancasia expressly stipulate the suspensive condition that in the event the drawers of
the checks fail to pay, Great Asian itself will pay Bancasia. Since the common
condition in the contracts had transpired, an obligation on the part of Great Asian
arose from the four contracts, and that obligation is to pay Bancasia the full value of 6. that it has valid and genuine title to and indefeasible right to dispose of
the checks, including the stipulated penalty and attorney¶s fees. said accounts;

O 
O




 
O ! 7. that said receivables are free from all liens and encumbrances;

Tan Chong Lin, the President of Great Asian, is being sued in his personal capacity
based on the Surety Agreements he signed wherein he solidarily held himself liable
with Great Asian for the payment of its debts to Bancasia. The Surety Agreements
contain the following common condition:
"Upon failure of the Principal to pay at maturity, with or without demand, any
of the obligations above mentioned, or in case of the Principal¶s failure
promptly to respond to any other lawful demand made by the Creditor, its
successors, administrators or assigns, both the Principal and the Surety/ies
shall be considered in default and the Surety/ies agree/s to pay jointly and
severally to the Creditor all outstanding obligations of the Principal, whether
due or not due, and whether held by the Creditor as Principal or agent, and
it is agreed that a certified statement by the Creditor as to the amount due

from the Principal shall be accepted by the Surety/ies as correct and final for
 
 from" Bancasia. Tan Chong Lin was clearly on notice that he was holding
all legal intents and purposes."
Indisputably, Tan Chong Lin explicitly and unconditionally bound himself to pay
Bancasia, solidarily with Great Asian, if the drawers of the checks fail to pay on due
date. The condition on which Tan Chong Lin¶s obligation hinged had happened. As
surety, Tan Chong Lin automatically became liable for the entire obligation to the
same extent as Great Asian.
Tan Chong Lin, however, contends that the following warranties in the Deeds of
Assignment enlarge or increase his risks under the Surety Agreements:
8. that the said receivables are freely and legally transferable, and that the
obligor/s therein will not interpose any objection to this assignment, and has
in fact given his/their consent hereto."
Tan Chong Lin maintains that these warranties in the Deeds of Assignment materially
altered his obligations under the Surety Agreements, and therefore he is released
from any liability to Bancasia. Under Article 1215 of the Civil Code, what releases a
solidary debtor is a "novation, compensation, confusion or remission of the debt"
made by the creditor with any of the solidary debtors. These warranties, however, are
the usual warranties made by one who discounts receivables with a financing
company or bank. The Surety Agreements, written on the letter head of "Bancasia
Finance & Investment Corporation," uniformly state that "Great Asian Sales Center x x
x has obtained and/or desires to obtain loans, overdrafts,  %  

himself as surety of Great Asian which was discounting postdated checks issued by its
buyers of goods and merchandise. Moreover, Tan Chong Lin, as President of Great
Asian, cannot feign ignorance of Great Asian¶s business activities or discounting
transactions with Bancasia. Thus, the warranties do not increase or enlarge the risks
of Tan Chong Lin under the Surety Agreements. There is, moreover, no novation of
the debt of Great Asian that would warrant release of the surety.
In any event, the provisions of the Surety Agreements are broad enough to include the
obligations of Great Asian to Bancasia under the warranties. The first Surety
Agreement states that:

"x x x

  
%
 ' 
  



 among themselves and
"The ASSIGNOR warrants:
likewise with principal, hereby 

%% 


%



  
   

 
  
 
 



 
 

  

1. the soundness of the receivables herein assigned; 
 


&  
" 
 & 



 &


 
 , including extensions or renewals thereof in the sum *** ONE
MILLION ONLY*** PESOS (P1,000,000.00), Philippine Currency, plus
2. that said receivables are duly noted in its books and are supported by
stipulated interest thereon at the rate of sixteen percent (16%) per annum,
appropriate documents; or at such increased rate of interest which the Creditor may charge on the
Principal¶s obligations or renewals or the reduced amount thereof, plus all
3. that said receivables are genuine, valid and subsisting; the costs and expenses which the Creditor may incur in connection
therewith.
4. that said receivables represent bona fide sale of goods, merchandise,
and/or services rendered in the ordinary course of its business transactions; xxx

5. that the obligors of the receivables herein assigned are solvent; ( 





" 
   &  & 


 
 
   
 
 
   

 
 " 




  
   
     

&

 
 
  
 
 , its
 successors, administrators or assigns, both the Principal and the Surety/ies Asian and Tan Chong Lin acted in gross and evident bad faith in refusing to pay
shall be considered in default and the  
%
 

%  ' 
 Bancasia¶s plainly valid, just and demandable claim. We deem it just and equitable




 

 

  
 

" 
, whether that the stipulated attorney¶s fee should be awarded to Bancasia.
due or not due, and whether held by the Creditor as Principal or agent, and
it is agreed that a certified statement by the Creditor as to the amount due
The Deeds of Assignment also provide for a 3% penalty on the total amount due in
from the Principal shall be accepted by the Surety/ies as correct and final for
case of failure to pay, but the Deeds are silent on whether this penalty is a running
all legal intents and purposes. (Emphasis supplied)
monthly or annual penalty. Thus, the 3% penalty can only be considered as a one-
time penalty. Moreover, the Deeds of Assignment do not provide for interest if Great
The second Surety Agreement contains the following provisions: Asian fails to pay. We can only award Bancasia legal interest at 12% interest per
annum, and only from the time it filed the complaint because the records do not show
that Bancasia made a written demand on Great Asian prior to filing the
"x x x

  
%
 ' 
  



   themselves and 26
complaint. Bancasia made an extrajudicial demand on Tan Chong Lin, the surety,
likewise with PRINCIPAL, hereby 

   



    
but not on the principal debtor, Great Asian.
  

 
  
 
 



 
 

  


 


&   
 "Ê"!   &  




&
 
 
 , including extensions and/or renewals thereof in the WHEREFORE, the assailed Decision of the Court of Appeals in CA-G.R. CV No.
principal sum not to exceed TWO MILLION (P2,000,000.00) PESOS, 20167 is AFFIRMED with MODIFICATION. Petitioners are ordered to pay, solidarily,
Philippine Currency, plus stipulated interest thereon, or such increased or private respondent the following amounts: (a) P1,042,005.00 plus 3% penalty thereon,
decreased rate of interest which the Creditor may charge on the principal (b) interest on the total outstanding amount in item (a) at the legal rate of 12% per
sum outstanding pursuant to the rules and regulations which the Monetary annum from the filing of the complaint until the same is fully paid, (c) attorney¶s fees
Board may from time to time promulgate, together with all the cost and equivalent to 25% of the total amount in item (a), including interest at 12% per annum
expenses which the CREDITOR may incur in connection therewith. on the outstanding amount of the attorney¶s fees from the finality of this judgment until
the same is fully paid, and (c) costs of suit.
If for any reason whatsoever, the PRINCIPAL should fail to pay at maturity
any of the obligations or amounts due to the CREDITOR, or if for any SO ORDERED.
reason whatsoever the PRINCIPAL fails to promptly respond to and comply
with any other lawful demand made by the CREDITOR, or if for any reason
whatsoever any obligation of the PRINCIPAL in favor of any person or entity
should be considered as defaulted, then both the PRINCIPAL and the
SURETY/IES shall be considered in default under the terms of this
Agreement. Pursuant thereto, 
 (ÊO)% 

%    ' 
 




 &  
 "Ê"! 

  
 
 

ÊO Ê, whether due or not due, and whether owing to the PRINCIPAL
in its personal capacity or as agent of any person, endorsee, assignee or
transferee. x x x. (Emphasis supplied)

Article 1207 of the Civil Code provides, "xxx There is a solidary liability only when the
obligation expressly so states, or when the law or nature of the obligation requires
solidarity." The stipulations in the Surety Agreements undeniably mandate the solidary
liability of Tan Chong Lin with Great Asian. Moreover, the stipulations in the Surety
Agreements are sufficiently broad, expressly encompassing "


 






 
 

 
 
 


&  
"Ê"!
 & 



 &


 ". Consequently, Tan Chong Lin must be held
solidarily liable with Great Asian for the nonpayment of the fifteen dishonored checks,
including penalty and attorney¶s fees in accordance with the Deeds of Assignment.

The Deeds of Assignment stipulate that in case of suit Great Asian shall pay attorney¶s
fees equivalent to 25% of the outstanding debt. The award of attorney¶s fees in the
25
instant case is justified, not only because of such stipulation, but also because Great
 On December 15, 1997, petitioner filed the instant case for collection of sum of
money, seeking to recover the amount of the checks subject of the estafa cases. On
February 18, 1998, respondent filed a motion to dismiss the complaint contending that

  c $%&'(&c
petitioner¶s action is barred by the doctrine of res judicata. Respondent further prayed
7
that petitioner should be held in contempt of court for forum-shopping.
) 
) &&*&+&(, 
 petitioner,
vs.
"

 respondent.
DECISION
-
.


½

The instant petition for review under Rule 45 of the Rules of Court raises pure
1 2 3
questions of law involving the March 20, 1998 and June 1, 1998 Orders rendered by
the Regional Trial Court of Pampanga, Branch 49, in Civil Case No. G-3272.
The undisputed facts are as follows:
Petitioner, assisted by a private prosecutor, filed three cases of Violation of B.P. No.
22 and three cases of Estafa, against respondent for allegedly issuing the following
checks without sufficient funds, to wit: 1) Interbank Check No. 25001151 in the
amount of P80,000.00; 2) Interbank Check No. 25001152 in the amount of P
4 arising from an act or omission complained of as felony [e.g. culpa contractual or
80,000.00; and 3) Interbank Check No. 25001157 in the amount of P30,000.00.
The Office of the Provincial Prosecutor dismissed Criminal Case No. 13356, for
Violation of B.P. No. 22 covering check no. 25001151 on the ground that the check
was deposited with the drawee bank after 90 days from the date of the check. The two
other cases for Violation of B.P. No. 22 (Criminal Case No. 13359 and 13360) were
filed with and subsequently dismissed by the Municipal Trial Court of Guagua,
5
Pampanga, Branch 1, on the ground of "failure to prosecute."
Meanwhile, the three cases for Estafa were filed with the Regional Trial Court of
Pampanga, Branch 49, and docketed as Criminal Case Nos. G-3611 to G-3613. On
October 21, 1997, after failing to present its second witness, the prosecution moved to
dismiss the estafa cases against respondent. The prosecution likewise reserved its
right to file a separate civil action arising from the said criminal cases. On the same
date, the trial court granted the motions of the prosecution. Thus-
Upon motion of the prosecution for the dismissal of these cases without prejudice to
the refiling of the civil aspect thereof and there being no comment from the defense,
let these cases be dismissed without prejudice to the refiling of the civil aspect of the
cases.
6
SO ORDER[ED].
On March 20, 1998, the trial court found in favor of respondent and dismissed the
complaint. The court held that the dismissal of the criminal cases against respondent
on the ground of lack of interest or failure to prosecute is an adjudication on the merits
which amounted to res judicata on the civil case for collection. It further held that the
filing of said civil case amounted to forum-shopping.
8
On June 1, 1998, the trial court denied petitioner¶s motion for reconsideration. Hence,
the instant petition.
The legal issues for resolution in the case at bar are: 1) whether the dismissal of the
estafa cases against respondent bars the institution of a civil action for collection of
the value of the checks subject of the estafa cases; and 2) whether the filing of said
civil action violated the anti-forum-shopping rule.
An act or omission causing damage to another may give rise to two separate civil
liabilities on the part of the offender, i.e., (1) civil liability ex delicto, under Article 100 of
9
the Revised Penal Code; and (2) independent civil liabilities, such as those (a) not
10 11
obligations arising from law under Article 31 of the Civil Code, intentional torts
12 13 14
under Articles 32 and 34, and culpa aquiliana under Article 2176 of the Civil
Code]; or (b) where the injured party is granted a right to file an action independent
15 16
and distinct from the criminal action [Article 33, Civil Code]. Either of these two
possible liabilities may be enforced against the offender subject, however, to the
caveat under Article 2177 of the Civil Code that the offended party "cannot recover
17
damages twice for the same act or omission" or under both causes.
The modes of enforcement of the foregoing civil liabilities are provided for in the
Revised Rules of Criminal Procedure. Though the assailed order of the trial court was
issued on March 20, 1998, the said Rules, which took effect on December 1, 2000,
must be given retroactive effect in the instant case considering that statutes regulating
the procedure of the court are construed as applicable to actions pending and
18
undetermined at the time of their passage.
Section 1, Rule 111, of the Revised Rules of Criminal Procedure provides:
SECTION 1. Institution of criminal and civil actions. ± (a) When a criminal action is
instituted, the civil action for the recovery of civil liability arising from the offense
charged shall be deemed instituted with the criminal action unless the offended party
waives the civil action, reserves the right to institute it separately or institutes the civil
action prior to the criminal action.
The reservation of the right to institute separately the civil action shall be made before
the prosecution starts presenting its evidence and under circumstances affording the
offended party a reasonable opportunity to make such reservation.
xxxxxxxxx
Where the civil action has been filed separately and trial thereof has not yet
commenced, it may be consolidated with the criminal action upon application with the
court trying the latter case. If the application is granted, the trial of both actions shall
proceed in accordance with section 2 of this Rule governing consolidation of the civil
and criminal actions.
Under the 1985 Rules on Criminal Procedure, as amended in 1988 and under the
present Rules, the civil liability ex-delicto is deemed instituted with the criminal action,
but the offended party is given the option to file a separate civil action before the
19
prosecution starts to present evidence.
Anent the independent civil actions under Articles 31, 32, 33, 34 and 2176 of the Civil
Code, the old rules considered them impliedly instituted with the civil liability ex-delicto
in the criminal action, unless the offended party waives the civil action, reserves his
right to institute it separately, or institutes the civil action prior to the criminal action.
Under the present Rules, however, the independent civil actions may be filed
separately and prosecuted independently even without any reservation in the criminal
action. The failure to make a reservation in the criminal action is not a waiver of the
right to file a separate and independent civil action based on these articles of the Civil
20
Code.
In the case at bar, a reading of the complaint filed by petitioner show that his cause of
action is based on culpa contractual, an independent civil action. Pertinent portion of
the complaint reads:
xxxxxxxxx
2. That plaintiff is the owner/proprietor to CANCIO¶S MONEY EXCHANGE
with office address at Guagua, Pampanga;
3. That on several occasions, particularly on February 27, 1993 to April 17
1993, inclusive, defendant drew, issued and made in favor of the plaintiff the
following checks:
CHECK NO. DATE AMOUNT
1. Interbank Check No. 25001151 March 10, 1993 P80,000.00
2. Interbank Check No. 25001152 March 27, 1993 P80,000.00
3. Interbank Check No. 25001157 May 17, 1993 P30,000.00
in exchange of cash with the assurance that the said checks will
be honored for payment on their maturity dates, copy of the
aforementioned checks are hereto attached and marked.
4. That when the said checks were presented to the drawee bank for
encashment, the same were all dishonored for reason of DRAWN AGAINST
INSUFFICIENT FUNDS (DAIF);
5. That several demands were made upon the defendant to make good the
checks but she failed and refused and still fails and refuses without
justifiable reason to pay plaintiff;
6. That for failure of the defendant without any justifiable reason to pay
plaintiff the value of the checks, the latter was forced to hire the services of
undersigned counsel and agreed to pay the amount of P30,000.00 as
attorney¶s fees and P1,000.00 per appearance in court;
7. That for failure of the defendant without any justifiable reason to pay
plaintiff and forcing the plaintiff to litigate, the latter will incur litigation
expenses in the amount of P20,000.00.
IN VIEW OF THE FOREGOING, it is prayed of this Court that after due notice and
hearing a judgment be rendered ordering defendant to pay plaintiff as follows:
a. the principal sum of P190,000.00 plus the legal interest;
b. attorney¶s fees of P30,000.00 plus P1,000.00 per court appearance;
c. litigation expenses in the amount of P20,000.00
PLAINTIFF prays for other reliefs just and equitable under the premises.
21
x x x x x x x x x.
Evidently, petitioner sought to enforce respondent¶s obligation to make good the value
of the checks in exchange for the cash he delivered to respondent. In other words,
petitioner¶s cause of action is the respondent¶s breach of the contractual obligation. It
22
matters not that petitioner claims his cause of action to be one based on delict. The
nature of a cause of action is determined by the facts alleged in the complaint as
constituting the cause of action. The purpose of an action or suit and the law to govern
it is to be determined not by the claim of the party filing the action, made in his
argument or brief, but rather by the complaint itself, its allegations and prayer for 4 .
  c$/c
010*+ c
23
relief.
"


 Petitioner,
Neither does it matter that the civil action reserved in the October 21, 1997 order of vs.
the trial court was the civil action ex delicto. To reiterate, an independent civil action "
 2) 
  
 2

 2
*
arising from contracts, as in the instant case, may be filed separately and prosecuted )-"


 Respondents.
independently even without any reservation in the criminal action. Under Article 31 of
the Civil Code "[w]hen the civil action is based on an obligation not arising from the act
DECISION
or omission complained of as a felony, [e.g. culpa contractual] such civil action may
proceed independently of the criminal proceedings and regardless of the result of the
24
latter." Thus, in Vitola, et al. v. Insular Bank of Asia and America, the Court, applying 
"
½

Article 31 of the Civil Code, held that a civil case seeking to recover the value of the
goods subject of a Letter of Credit-Trust Receipt is a civil action ex contractu and not
ex delicto. As such, it is distinct and independent from the estafa case filed against the The present petition for review on certiorari bears, in the main, on the issue of whether
respondents who were charged with but acquitted of murder are civilly liable to the
offender and may proceed regardless of the result of the criminal proceedings.
heirs of Rustico Garces (the victim).
25
One of the elements of res judicata is identity of causes of action. In the instant case, 1
In its November 10, 2004 Decision acquitting respondent of murder, Branch 4 of the
it must be stressed that the action filed by petitioner is an independent civil action,
Regional Trial Court (RTC) of Batangas City discoursed.
which remains separate and distinct from any criminal prosecution based on the same
26
act. Not being deemed instituted in the criminal action based on culpa criminal, a
ruling on the culpability of the offender will have no bearing on said independent civil It is stated that the guilt of an accused rests solely on the strength of the Prosecution¶s
action based on an entirely different cause of action, i.e., culpa contractual. evidence and does not depend on the weakness of the evidence of the Defense.
Moreover, such guilt must be proven beyond a reasonable doubt.
In the same vein, the filing of the collection case after the dismissal of the estafa cases
against respondent did not amount to forum-shopping. The essence of forum- In the case at bar, there is clearly '3&+
+,+4+3(&
%&+ by the
shopping is the filing of multiple suits involving the same parties for the same cause of Court in convicting the accused. Physical and testimonial evidence presented by the
action, either simultaneously or successively, to secure a favorable judgment. Prosecution have failed to elicit in the mind of the Court the conclusion that the herein
Although the cases filed by petitioner arose from the same act or omission of accused should and must be held criminally liable for the heinous death of Rustico
respondent, they are, however, based on different causes of action. The criminal Garces. As a matter of fact, +4&4,*
3&%
&3&
4
*3*&
*+&5
cases for estafa are based on culpa criminal while the civil action for collection is
1,6&7&&
+*3*&.
anchored on culpa contractual. Moreover, there can be no forum-shopping in the
instant case because the law expressly allows the filing of a separate civil action which
can proceed independently of the criminal action.
27
Clearly, therefore, the trial court erred in dismissing petitioner¶s complaint for collection
of the value of the checks issued by respondent. Being an independent civil action
which is separate and distinct from any criminal prosecution and which require no prior
reservation for its institution, the doctrine of res judicata and forum-shopping will not
operate to bar the same.
*+&1+4&
Moreover, it is noted that not one of the accused went into hiding even though they
have acquired knowledge about the death of Rustico. Instead, Simplicio Sr., Candido
and Simplicio Hernandez Jr. voluntarily went with the police investigators on the night
of August 13, 2000. As the oft repeated dictum states ["]the guilty fleeth while the
innocent is as brave as a lion". And, with respect to accused Rosita Hernandez, she
appears to have been arrested in Cuta, Batangas City. She must have been visiting
her husband and children at the Provincial Jail of Batangas located in Cuta, Batangas
City on March 5, 2000 when it happened. These actuations of the accused
eloquently *&75+4&

3&3&
+4&53&50&
(&&%
&3&&*&+&
2
WHEREFORE, in view of all the foregoing, the instant petition is GRANTED. The
. (emphasis and underscoring supplied)
March 20, 1998 and June 1, 1998 Orders of the Regional Trial Court of Pampanga,
Branch 49, in Civil Case No. G-3272 are REVERSED and SET ASIDE. The instant
case is REMANDED to the trial court for further proceedings.
SO ORDERED.
(,+4&*&30+
After the promulgation of judgment, Atty. Florentino H. Garces entered his appearance
as counsel for the father of the victim, Roman Garces (petitioner), and filed a Motion
for Reconsideration of the trial court¶s decision respecting respondents¶ civil
3
liability. The trial court dismissed the motion in this wise:
Acting on the motion for reconsideration dated December 9, 2004 filed by Atty.
Florentino H. Garces, it is to be stated at the very outset that said Counsel appears
to have no legal personality to file the motion. The records do not show that he was
Counsel of record for the Private Prosecution and neither [was] the motion signed by
the [Provincial] Prosecutor.
As regards the manifestation on the right of the private Prosecution to claim civil
damages where the acquittal of the accused was based on grounds of reasonable
doubt, suffice it to state that while such right subsists in favor of the Private
Prosecution, the matter should be properly prosecuted in an appropriate separate civil
4
action and not in the same criminal case which gave rise to such right. (underscoring
supplied)
5
Petitioner¶s Supplemental Motion for Reconsideration was dismissed by the trial court
6
for being moot and academic.
7 Rosita walking with them. Indeed, as observed by public respondent, if such fact
Petitioner assailed the trial court¶s denial of his motions via Certiorari before the Court
8 actually happened, there should have been many witnesses who could have testified
of Appeals which dismissed it for lack of merit, viz:
x x x [P]etitioner argues that the fact that the prosecutor did not sign the motion for
reconsideration is of no moment since what is sought to be reconsidered involves only
the civil liability of private respondents. We agree.
xxxx
The foregoing notwithstanding, We cannot entertain the petition.
xxxx
While physical evidence was submitted, primarily a gun, empty bullet shells recovered
near the body of Rustico, the slug recovered from the body of Rustico, the traces of
blood and the strands of hair recovered at the house of private respondents ±
these failed to point to private respondents as the perpetrators of the killing. The gun
recovered was never established to have belonged to any of the private respondents.
Furthermore, the ballistics examination failed to confirm that the slug recovered from
the body of Rustico came from the same gun. As for the traces of blood and strands of
hair, these were never established to have come from Rustico.
As for the testimonial evidence, We find no reason to disagree with the finding of
public respondent giving no credence to the testimonies of Miguel Jovello and
Jefferson Garcia. Both Jovello and Garcia testified that they saw Simplicio, Jr. and
Candido at around eleven o¶clock (11:00) in the morning of August 13, 2000 traversing
the barangay road while carrying the dead body of Rustico with Simplicio, Sr. and
to this event. Besides, settled is the rule that to be credible, testimonial evidence
should not only come from the mouth of a credible witness but should also be credible.
In this case, the said testimonies are inconsistent with human nature. It is unbelievable
that private respondents would kill Rustico and then expose themselves to prosecution
by parading the evidence of their crime in public and in broad daylight. While petitioner
claims that "the events transpired in an insolated place within a desolate town", no
10
evidence was offered to prove such claim. (emphasis and underscoring supplied)
11
Thus, petitioner filed the present petition which contends that

I
It is settled that a judgment of acquittal is immediately final and executory and the
prosecution cannot appeal the acquittal because of the constitutional prohibition
against double jeopardy. Nonetheless, insofar as the civil aspect of the case is CONTRARY TO THE RULING OF THE COURT OF APPEALS, THE PETITION FOR
concerned, the offended party, despite a judgment of acquittal, is afforded the remedy CERTIORARI WAS THE PROPER REMEDY AVAILED OF BY PETITIONER
of appeal. GARCES IN ASSAILING THE ACTS OF PUBLIC RESPONDENT JUDGE ANTONA
WHICH WERE COMMITTED IN GRAVE ABUSE OF DISCRETION AMOUNTING TO
LACK OR EXCESS OF JURISDICTION.
In the present case, there is no dispute that the judgment of the trial court acquitting
private respondents is already final. What petitioner is assailing is the failure of public
respondent to rule on the civil liability of private respondents. However, while an II
appeal appears to have been open and available, petitioner, without any justifiable
reason, did not resort to this remedy. This is a fatal procedural lapse. Section 1, Rule
THE COURT OF APPEALS COMMITTED GRAVE AND REVERSIBLE ERROR
65 of the Rules of Civil Procedure is plain and unambiguous in providing that the
WHEN IT DENIED THE PETITION FOR CERTIORARI CONSIDERING THAT THERE
remedy of certiorari may be availed of only when "there is no appeal, nor any plain,
9 IS MORE THAN A PREPONDERANCE OF EVIDENCE ON RECORD SUPPORTING
speedy, and adequate remedy in the ordinary course of law." (emphasis and italics in
THE CLAIMS OF PETITIONER GARCES AGAINST THE PRIVATE
the original; underscoring supplied) 12
RESPONDENTS. (capitalization and emphasis in the original; underscoring
supplied)
At all events, the appellate court held that, even on the merits, petitioner¶s certiorari
would not lie on the following ratiocination:
Rule 111, Section 1 of the Revised Rules of Court provides:
SECTION 1. Institution of criminal and civil actions. ± (a) When a criminal action is Prosecution have failed to elicit in the mind of the Court the conclusion that the herein
instituted, the civil action for the recovery of civil liability arising from the offense accused should and must be held criminally liable for the heinous death of Rustico
charged shall be deemed instituted with the criminal action unlessthe offended party Garces. As a matter of fact, +4&4,* 3&% &3& 4 *3*& *+&5
waives the civil action, reserves the right to institute it separately or institutes the civil *+&1+4& 1,6&7&& +*3*&.
action prior to the criminal action.
x x x These actuations of the accused &80&+, *&75+4&  3&3& +4&
15
The reservation of the right to institute separately the civil action shall be made before 53&50& (&&% &3&&*&+&(,+4&*&30+  (emphasis and
the prosecution starts presenting its evidence under circumstances affording the underscoring supplied),
offended party a reasonable opportunity to make such reservation.
the Court finds that the acts or omissions from which the civil liability of respondents
x x x x (italics in the original; underscoring supplied) might arise did not exist.

13
In his Petition for Certiorari before the appellate court, petitioner admitted that he "did 9, the petition is " .
not waive the civil action or reserve the right to institute it separately nor did he
14
institute the civil action prior to the criminal action." Petitioner¶s remedy then was, as
correctly ruled by the appellate court, to appeal within the reglementary period the trial
court¶s decision, which was silent on the civil aspect of the case.

Technicality aside, on the merits, the petition just the same fails.c *c Rule 120,
Section 2 of the Rules of Court provides:

SEC. 2. Contents of the judgment. ± If the judgment is of conviction, it shall state (1)
the legal qualification of the offense constituted by the acts committed by the accused
and the aggravating or mitigating circumstances which attended its commission,; (2)
the participation of the accused in the offense, whether as principal, accomplice, or
accessory after the fact; (3) the penalty imposed upon the accused; and (4) the civil
liability or damages caused by his wrongful act or omission to be recovered from the
accused by the offended party, if there is any, unless the enforcement of the civil
liability by a separate civil action has been reserved or waived.

In case the judgment is of 380 ++, it shall state whether the evidence of the
prosecution absolutely failed to prove the guilt of the accused or merely failed to prove
his guilt beyond reasonable doubt. In either case, the judgment shall determine if the
act or omission from which the civil liability might arise did not exist.

x x x x (emphasis and underscoring supplied)

Under the immediately-quoted rule, a trial court, in case of acquittal of an accused, is

to state whether the prosecution absolutely failed to prove his guilt or merely failed to
prove his guilt beyond reasonable doubt, and in either case, it shall determine if the
act or omission from which the civil liability might arise did not exist. From the earlier-
quoted portion of the decision of the trial court, however, particularly the following
portions:

In the case at bar, there is 3&,'3&+ +, that can be arrived at by the
Court in convicting the accused. Physical and testimonial evidence presented by the
 7

  c/ &3&'(&c / Trial thereafter ensued. On January 10, 2003, the RTC rendered its Decision, the
dispositive portion of which reads:



 -

- 
"
)
petitioners,
vs. WHEREFORE, judgment is hereby rendered in favor of the plaintiffs, the



!


!
-

!

 heirs of Evangeline Tangco, and against defendants Admer Pajarillo and


!


!


!!
2 Safeguard Security Agency, Inc. ordering said defendants to pay the


 respondent. plaintiffs, jointly and severally, the following:

 1. ONE HUNDRED FIFTY SEVEN THOUSAND FOUR

HUNDRED THIRTY PESOS (P157,430.00), as actual damages


."
2½ #
2. FIFTY THOUSAND PESOS (P50,000.00) as death indemnity;
Before us is a petition for review on 
  filed by Safeguard Security Agency, Inc.
1
(Safeguard) and Admer Pajarillo (Pajarillo) assailing the Decision dated July 16, 2004 3. ONE MILLION PESOS (P1,000,000.00), as moral damages;
2
and the Resolution dated October 20, 2004 issued by the Court of Appeals (CA) in
CA-G.R. CV No. 77462.
4. THREE HUNDRED THOUSAND PESOS (P300,000.00), as
exemplary damages;
On November 3, 1997, at about 2:50 p.m., Evangeline Tangco (Evangeline) went to
Ecology Bank, Katipunan Branch, Quezon City, to renew her time deposit per advise
5. THIRTY THOUSAND PESOS (P30,000.00), as attorney's fees;
of the bank's cashier as she would sign a specimen card. Evangeline, a duly licensed
and
firearm holder with corresponding permit to carry the same outside her residence,
approached security guard Pajarillo, who was stationed outside the bank, and pulled
out her firearm from her bag to deposit the same for safekeeping. Suddenly, Pajarillo 6. costs of suit.
shot Evangeline with his service shotgun hitting her in the abdomen instantly causing
her death.
For lack of merit, defendants' counterclaim is hereby DISMISSED.

Lauro Tangco, Evangeline's husband, together with his six minor children 8
SO ORDERED.
(respondents) filed with the Regional Trial Court (RTC) of Quezon City, a criminal
case of Homicide against Pajarillo, docketed as Criminal Case No. 0-97-73806 and
assigned to Branch 78. Respondents reserved their right to file a separate civil action The RTC found respondents to be entitled to damages. It rejected Pajarillo's claim that
in the said criminal case. The RTC of Quezon City subsequently convicted Pajarillo of he merely acted in self-defense. It gave no credence to Pajarillo's bare claim that
3
Homicide in its Decision dated January 19, 2000. On appeal to the CA, the RTC Evangeline was seen roaming around the area prior to the shooting incident since
4
decision was affirmed with modification as to the penalty in a Decision dated July 31, Pajarillo had not made such report to the head office and the police authorities. The
2000. Entry of Judgment was made on August 25, 2001. RTC further ruled that being the guard on duty, the situation demanded that he should
have exercised proper prudence and necessary care by asking Evangeline for him to
ascertain the matter instead of shooting her instantly; that Pajarillo had already been
Meanwhile, on January 14, 1998, respondents filed with RTC, Branch 273, Marikina
5 convicted of Homicide in Criminal Case No. 0-97-73806; and that he also failed to
City, a complaint for damages against Pajarillo for negligently shooting Evangeline
and against Safeguard for failing to observe the diligence of a good father of a family proffer proof negating liability in the instant case.
to prevent the damage committed by its security guard. Respondents prayed for
actual, moral and exemplary damages and attorney's fees. The RTC also found Safeguard as employer of Pajarillo to be jointly and severally
liable with Pajarillo. It ruled that while it may be conceded that Safeguard had perhaps
6 exercised care in the selection of its employees, particularly of Pajarillo, there was no
In their Answer, petitioners denied the material allegations in the complaint and
sufficient evidence to show that Safeguard exercised the diligence of a good father of
alleged that Safeguard exercised the diligence of a good father of a family in the
selection and supervision of Pajarillo; that Evangeline's death was not due to a family in the supervision of its employee; that Safeguard's evidence simply showed
that it required its guards to attend trainings and seminars which is not the supervision
Pajarillo's negligence as the latter acted only in self-defense. Petitioners set up a
contemplated under the law; that supervision includes not only the issuance of
compulsory counterclaim for moral damages and attorney's fees.
regulations and instructions designed for the protection of persons and property, for
the guidance of their servants and employees, but also the duty to see to it that such The issues for resolution are whether (1) Pajarillo is guilty of negligence in shooting
regulations and instructions are faithfully complied with. Evangeline; and (2) Safeguard should be held solidarily liable for the damages
awarded to respondents.
Petitioners appealed the RTC decision to the CA. On July 16, 2004, the CA issued its
assailed Decision, the dispositive portion of which reads: Safeguard insists that the claim for damages by respondents is based
11
on 
 * 
 under Article 2176 of the Civil Code, in which case, its liability is
jointly and severally with Pajarillo. However, since it has established that it had
IN VIEW OF ALL THE FOREGOING, the appealed decision is hereby
exercised due diligence in the selection and supervision of Pajarillo, it should be
AFFIRMED, with the modification that Safeguard Security Agency, Inc.'s
exonerated from civil liability.
civil liability in this case is only subsidiary under Art. 103 of the Revised
9
Penal Code. No pronouncement as to costs.
We will first resolve whether the CA correctly held that respondents, in filing a
separate civil action against petitioners are limited to the recovery of damages arising
In finding that Safeguard is only subsidiarily liable, the CA held that the applicable
from a crime or 

, in which case the liability of Safeguard as employer under
provisions are not Article 2180 in relation to Article 2176 of the Civil Code, on * - 12
Articles 102 and 103 of the Revised Penal Code is subsidiary and the defense of


, but the provisions on civil liability arising from felonies under the Revised
due diligence in the selection and supervision of employee is not available to it.
Penal Code; that since Pajarillo had been found guilty of Homicide in a final and
executory judgment and is said to be serving sentence in Muntinlupa, he must be
adjudged civilly liable under the provisions of Article 100 of the Revised Penal Code The CA erred in ruling that the liability of Safeguard is only subsidiary.
since the civil liability recoverable in the criminal action is one solely dependent upon
conviction, because said liability arises from the offense charged and no other; that
The law at the time the complaint for damages was filed is Rule 111 of the 1985 Rules
this is also the civil liability that is deemed extinguished with the extinction of the penal
on Criminal Procedure, as amended, to wit:
liability with a pronouncement that the fact from which the civil action might proceed
does not exist; that unlike in civil liability arising from * 

, the defense of
diligence of a good father of a family in the employment and supervision of employees SECTION 1.   


 . - When a criminal action
is inapplicable and irrelevant in civil liabilities based on crimes or


 ; that is instituted, the civil action for the recovery of civil liability is impliedly
Article 103 of the Revised Penal Code provides that the liability of an employer for the instituted with the criminal action, unless the offended party waives the civil
civil liability of their employees is only subsidiary, not joint or solidary. action, reserves his right to institute it separately, or institutes the civil action
prior to the criminal action.
Petitioners filed their Motion for Reconsideration which the CA denied in a Resolution
dated October 20, 2004. Such civil action includes recovery of indemnity under the Revised Penal
Code, and damages under Articles 32, 33, 34, and 2176 of the Civil Code of
the Philippines arising from the same act or omission of the accused.
Hence, the instant Petition for Review on 
  with the following assignment of
errors, to wit:
Respondents reserved the right to file a separate civil action and in fact filed the same
on January 14, 1998.
The Honorable Court of Appeals gravely erred in finding petitioner Pajarillo
liable to respondents for the payment of damages and other money claims.
The CA found that the source of damages in the instant case must be the crime of
homicide, for which he had already been found guilty of and serving sentence thereof,
The Honorable Court of Appeals gravely erred when it applied Article 103 of
thus must be governed by the Revised Penal Code.
the Revised Penal Code in holding petitioner Safeguard solidarily [sic] liable
with petitioner Pajarillo for the payment of damages and other money
claims. We do not agree.

The Honorable Court of Appeals gravely erred in failing to find that petitioner An act or omission causing damage to another may give rise to two separate civil
Safeguard Security Agency, Inc. exercised due diligence in the selection liabilities on the part of the offender, 
., (1) civil liability


 , under Article 100 of
and supervision of its employees, hence, should be excused from any the Revised Penal Code; and (2) independent civil liabilities, such as those (a) not
10
liability. arising from an act or omission complained of as a felony,
., 

 contractual or
obligations arising from law under Article 31 of the Civil Code, intentional torts under
Articles 32 and 34, ^
 
0&
+
3&c/5+4&
%
&; or (b) The scope of Article 2176 is not limited to acts or omissions resulting from negligence.
17
where the injured party is granted a right to file an action independent and distinct In 
 




, we held:
from the criminal action under Article 33 of the Civil Code. Either of these liabilities
may be enforced against the offender subject to the caveat under Article 2177 of the
x x x Well-entrenched is the doctrine that Article 2176 covers not only acts
Civil Code that the offended party cannot recover damages twice for the same act or
13 committed with negligence, but also acts which are voluntary and
omission or under both causes.
intentional. As far back as the definitive case of Elcano v. Hill (77 SCRA 98
[1977]), this Court already held that:
It is important to determine the nature of respondents' cause of action. The nature of a
cause of action is determined by the facts alleged in the complaint as constituting the
14 "x x x
+
3&c/64&&
+&5&*+:50+&1
1&3&:3%&*+
cause of action. The purpose of an action or suit and the law to govern it is to be
,3+*:+0
*4(&(,6:(0+*3+*3
'

343+&
determined not by the claim of the party filing the action, made in his argument or
15 64&+4&
+&+
%0+,&1
1&+ Consequently, a
brief, but rather by the complaint itself, its allegations and prayer for relief.
The pertinent portions of the complaint read:
7. That Defendant Admer A. Pajarillo was the guard assigned and posted in
the Ecology Bank ± Katipunan Branch, Quezon City, who was employed
and under employment of Safeguard Security Agency, Inc. hence there is
employer-employee relationship between co-defendants.
The Safeguard Security Agency, Inc. failed to observe the diligence of a
good father of a family to prevent damage to herein plaintiffs.
8. That defendant Admer Pajarillo upon seeing Evangeline Tangco, who
brought her firearm out of her bag, suddenly without exercising necessary
caution/care, and in idiotic manner, with the use of his shotgun, fired and
burst bullets upon Evangeline M. Tangco, killing her instantly. x x x
* 
 or * 

 which is
16. That defendants, being employer and the employee are jointly and
16
severally liable for the death of Evangeline M. Tangco.
Thus, a reading of respondents' complaint shows that the latter are invoking their right
to recover damages against Safeguard for their vicarious responsibility for the injury
caused by Pajarillo's act of shooting and killing Evangeline under Article 2176, Civil
Code which provides:
ARTICLE 2176. Whoever by act or omission causes damage to another,
there being fault or negligence, is obliged to pay for the damage done. Such
fault or negligence, if there is no pre-existing contractual relation between
the parties is called a quasi-delict and is governed by the provisions of this
Chapter.
separate civil action lies against the offender in a criminal act, whether or
not he is criminally prosecuted and found guilty or acquitted, provided that
the offended party is not allowed, if he is actually charged also criminally, to
recover damages on both scores, and would be entitled in such eventuality
only to the bigger award of the two, assuming the awards made in the two
cases vary. In other words, the extinction of civil liability referred to in Par.
(e) of Section 3, Rule 111, refers exclusively to civil liability founded on
Article 100 of the Revised Penal Code, whereas the civil liability for the
same act considered as quasi-delict only and not as a crime is not
extinguished even by a declaration in the criminal case that the criminal act
charged has not happened or has not been committed by the accused.
Briefly stated, We here hold, in reiteration of Garcia, that culpa aquiliana
includes voluntary and negligent acts which may be punishable by law."
(Emphasis supplied)
The civil action filed by respondents was not derived from the criminal liability of
Pajarillo in the criminal case but one based on 

18
separate and distinct from the civil liability arising from crime. The source of the
obligation sought to be enforced in the civil case is a * 

 not an act or
omission punishable by law.
19
In 
 
+,


 

, where the issue involved was whether the civil
action filed by plaintiff-appellants is founded on crime or on quasi-delict, we held:
x x x The trial court treated the case as an action based on a crime in view
of the reservation made by the offended party in the criminal case (Criminal
Case No. 92944), also pending before the court, to file a separate civil
action. Said the trial court:
It would appear that plaintiffs instituted this action on the assumption that
defendant Pontino's negligence in the accident of May 10, 1969 constituted
a * -

. The Court cannot accept the validity of that assumption. In
Criminal Case No. 92944 of this Court, plaintiffs had already appeared as
complainants. While that case was pending, the offended parties reserved
the right to institute a separate civil action. If, in a criminal case, the right to
file a separate civil action for damages is reserved, such civil action is to be
 based on crime and not on tort. That was the ruling in Joaquin vs. Aniceto,
L-18719, Oct. 31, 1964.
We do not agree. The doctrine in the case cited by the trial court is
inapplicable to the instant case
In cases of negligence, the injured party or his heirs has the choice between
an action to enforce the civil liability arising from crime under Article 100 of
the Revised Penal Code and an action for* -

 under Article 2176-
2194 of the Civil Code. If a party chooses the latter, he may hold the
employer solidarily liable for the negligent act of his employee, subject to the
employer's defense of exercise of the diligence of a good father of the
family.
In the case at bar, the action filed by appellant was an action for damages
went beyond the issues of the case and the same is contrary to the admissions of both
appellant and appellee; (7) when the findings of fact are conclusions without citation of
specific evidence on which they are based; (8) when the CA manifestly overlooked
certain relevant facts not disputed by the parties and which, if properly considered,
would justify a different conclusion; and (9) when the findings of fact of the CA are
premised on the absence of evidence and are contradicted by the evidence on
[24]
record.
A thorough review of the records of the case fails to show any cogent reason for us to
deviate from the factual finding of the trial court and affirmed by the CA that petitioner
Pajarillo was guilty of negligence in shooting Evangeline.
Respondents' evidence established that Evangeline's purpose in going to the bank
25
was to renew her time deposit. On the other hand, Pajarillo claims that Evangeline
drew a gun from her bag and aimed the same at him, thus, acting instinctively, he shot
her in self-defense.
based on * -

. 4&53++4+&+*&*&%&+4&

14+
+4&
3
'
3*&+5
&
&&&+3
%
3+

+&30&+4&'
20
5'34*
1+5
&3
%
3+
5 .

^. (Emphasis Pajarillo testified that when Evangeline aimed the gun at him at a distance of about
26
supplied) one meter or one arm's length he stepped backward, loaded the chamber of his gun
27
and shot her. It is however unimaginable that petitioner Pajarillo could still make
such movements if indeed the gun was already pointed at him. Any movement could
Although the judgment in the criminal case finding Pajarillo guilty of Homicide is
have prompted Evangeline to pull the trigger to shoot him.
already final and executory, such judgment has no relevance or importance to this
21
case. It would have been entirely different if respondents' cause of action was for
damages arising from a 

, in which case the CA is correct in finding Safeguard to Petitioner Pajarillo would like to justify his action in shooting Evangeline on his mere
22
be only subsidiary liable pursuant to Article 103 of the Revised Penal Code. apprehension that Evangeline will stage a bank robbery. However, such claim is
befuddled by his own testimony. Pajarillo testified that prior to the incident, he saw
Evangeline roaming under the fly over which was about 10 meters away from the
As clearly shown by the allegations in the complaint, respondents' cause of action is 28 29
bank and saw her talking to a man thereat; that she left the man under the fly-over,
based on * -

. Under Article 2180 of the Civil Code, when the injury is caused
crossed the street and approached the bank. However, except for the bare testimony
by the negligence of the employee, there instantly arises a presumption of law that
of Pajarillo, the records do not show that indeed Evangeline was seen roaming near
there was negligence on the part of the master or the employer either in the selection
the vicinity of the bank and acting suspiciously prior to the shooting incident. In fact,
of the servant or employee, or in the supervision over him after selection or both. The
there is no evidence that Pajarillo called the attention of his head guard or the bank's
liability of the employer under Article 2180 is direct and immediate. Therefore, it is
branch manager regarding his concerns or that he reported the same to the police
incumbent upon petitioners to prove that they exercised the diligence of a good father
authorities whose outpost is just about 15 meters from the bank.
of a family in the selection and supervision of their employee.

We must first resolve the issue of whether Pajarillo was negligent in shooting
Evangeline.
The issue of negligence is factual in nature. Whether a person is negligent or not is a
question of fact, which, as a general rule, we cannot pass upon in a petition for review
23
on 
 , as our jurisdiction is limited to reviewing errors of law. Generally, factual
findings of the trial court, affirmed by the CA, are final and conclusive and may not be
reviewed on appeal. The established exceptions are: (1) when the inference made is
manifestly mistaken, absurd or impossible; (2) when there is grave abuse of
discretion; (3) when the findings are grounded entirely on speculations, surmises or
conjectures; (4) when the judgment of the CA is based on misapprehension of facts;
(5) when the findings of fact are conflicting; (6) when the CA, in making its findings,
Moreover, if Evangeline was already roaming the vicinity of the bank, she could have
already apprised herself that Pajarillo, who was posted outside the bank, was armed
30
with a shotgun; that there were two guards inside the bank manning the entrance
door. Thus, it is quite incredible that if she really had a companion, she would leave
him under the fly-over which is 10 meters far from the bank and stage a bank robbery
all by herself without a back-up. In fact, she would have known, after surveying the
area, that aiming her gun at Pajarillo would not ensure entrance to the bank as there
were guards manning the entrance door.
Evidence, to be believed, must not only proceed from the mouth of a credible witness,
but it must be credible in itself ² such as the common experience and observation of
mankind can approve as probable under the circumstances. We have no test of the
truth of human testimony, except its conformity to our knowledge, observation and
experience. Whatever is repugnant to these belongs to the miraculous and is outside
31
judicial cognizance.
That Evangeline just wanted to deposit her gun before entering the bank and was
actually in the act of pulling her gun from her bag when petitioner Pajarillo recklessly
shot her, finds support from the contentions raised in petitioners' petition for review
where they argued that when Evangeline approached the bank, she was seen pulling
a gun from inside her bag and petitioner Pajarillo who was suddenly beset by fear and
perceived the act as a dangerous threat, shot and killed the deceased out of pure
32
instinct; that the act of drawing a gun is a threatening act, regardless of whether or
33
not the gun was intended to be used against petitioner Pajarillo; that the fear that
was created in the mind of petitioner Pajarillo as he saw Evangeline Tangco drawing a
gun from her purse was suddenly very real and the former merely reacted out of pure
34
self-preservation.
Considering that unlawful aggression on the part of Evangeline is absent, Pajarillo's
claim of self-defense cannot be accepted specially when such claim was
uncorroborated by any separate competent evidence other than his testimony which
was even doubtful. Pajarillo's apprehension that Evangeline will shoot him to stage a
bank robbery has no basis at all. It is therefore clear that the alleged threat of bank
robbery was just a figment of Pajarillo's imagination which caused such unfounded
unlawful aggression on his part.
Petitioners argue that Evangeline was guilty of contributory negligence. Although she
was a licensed firearm holder, she had no business bringing the gun in such
establishment where people would react instinctively upon seeing the gun; that had
Evangeline been prudent, she could have warned Pajarillo before drawing the gun and
did not conduct herself with suspicion by roaming outside the vicinity of the bank; that
she should not have held the gun with the nozzle pointed at Pajarillo who mistook the
act as hold up or robbery.
We are not persuaded.
As we have earlier held, Pajarillo failed to substantiate his claim that Evangeline was
seen roaming outside the vicinity of the bank and acting suspiciously prior to the
shooting incident. Evangeline's death was merely due to Pajarillo's negligence in
shooting her on his imagined threat that Evangeline will rob the bank.
Safeguard contends that it cannot be jointly held liable since it had adequately shown
that it had exercised the diligence required in the selection and supervision of its
employees. It claims that it had required the guards to undergo the necessary training
and to submit the requisite qualifications and credentials which even the RTC found to
have been complied with; that the RTC erroneously found that it did not exercise the
diligence required in the supervision of its employee. Safeguard further claims that it
conducts monitoring of the activities of its personnel, wherein supervisors are
assigned to routinely check the activities of the security guards which include among
others, whether or not they are in their proper post and with proper equipment, as well
as regular evaluations of the employees' performances; that the fact that Pajarillo
loaded his firearm contrary to Safeguard's operating procedure is not sufficient basis
to say that Safeguard had failed its duty of proper supervision; that it was likewise
error to say that Safeguard was negligent in seeing to it that the procedures and
policies were not properly implemented by reason of one unfortunate event.
We are not convinced.
Article 2180 of the Civil Code provides:
Art. 2180. The obligation imposed by Article 2176 is demandable not only
for one's own acts or omissions, but also for those of persons for whom one
is responsible.
Employers shall be liable for the damages caused by their employees and
household helpers acting within the scope of their assigned tasks, even
though the former are not engaged in any business or industry.
The responsibility treated of in this article shall cease when the persons
herein mentioned prove that they observed all the diligence of a good father
of a family to prevent damage.
As the employer of Pajarillo, Safeguard is primarily and solidarily liable for the * 


 committed by the former. Safeguard is presumed to be negligent in the selection
and supervision of his employee by operation of law. This presumption may be
overcome only by satisfactorily showing that the employer exercised the care and the
diligence of a good father of a family in the selection and the supervision of its
employee.
In the selection of prospective employees, employers are required to examine them as
35
to their qualifications, experience, and service records. On the other hand, due
diligence in the supervision of employees includes the formulation of suitable rules
and regulations for the guidance of employees and the issuance of proper instructions
intended for the protection of the public and persons with whom the employer has
relations through his or its employees and the imposition of necessary disciplinary
measures upon employees in case of breach or as may be warranted to ensure the
performance of acts indispensable to the business of and beneficial to their employer.
To this, we add that actual implementation and monitoring of consistent compliance
with said rules should be the constant concern of the employer, acting through
dependable supervisors who should regularly report on their supervisory
36
functions. To establish these factors in a trial involving the issue of vicarious liability,
employers must submit concrete proof, including documentary evidence.
We agree with the RTC's finding that Safeguard had exercised the diligence in the
selection of Pajarillo since the record shows that Pajarillo underwent a psychological
and neuro-psychiatric evaluation conducted by the St. Martin de Porres Center where
no psychoses ideations were noted, submitted a certification on the Pre-licensing
training course for security guards, as well as police and NBI clearances.
The RTC did not err in ruling that Safeguard fell short of the diligence required in the
supervision of its employee, particularly Pajarillo. In this case, while Safeguard
presented Capt. James Camero, its Director for Operations, who testified on the
issuance of company rules and regulations, such as the Guidelines of Guards Who
37 38
Will Be Assigned To Banks, Weapons Training, Safeguard Training Center
39 40
Marksmanship Training Lesson Plan, Disciplinary/Corrective Sanctions, it had also
been established during Camero's cross-examination that Pajarillo was not aware of
41
such rules and regulations. Notwithstanding Camero's clarification on his re-direct


O




examination that these company rules and regulations are lesson plans as a basis of
guidelines of the instructors during classroom instructions and not necessary to give
  

42
deceased may demand moral damages for mental anguish by reason of the death of
the deceased. Moral damages are awarded to enable the injured party to obtain
means, diversions or amusements that will serve to alleviate the moral suffering
he/she has undergone, by reason of the defendant's culpable action. Its award is
aimed at restoration, as much as possible, of the spiritual  * 
-thus it must
45
be proportionate to the suffering inflicted. The intensity of the pain experienced by
the relatives of the victim is proportionate to the intensity of affection for him and bears
46
no relation whatsoever with the wealth or means of the offender.
In this case, respondents testified as to their moral suffering caused by Evangeline's
death was so sudden causing respondent Lauro to lose a wife and a mother to six
children who were all minors at the time of her death. In "

47
#, we awarded one million pesos as moral damages to the heirs of a seventeen-
year-old girl who was murdered. In ,
 ,
O 
48
students copy of the same, the records do not show that Pajarillo had attended such 



, we likewise awarded the amount of one million pesos as moral damages to
classroom instructions. the parents of a third year high school student and who was also their youngest child
who died in a vehicular accident since the girl's death left a void in their lives. Hence,
we hold that the respondents are also entitled to the amount of one million pesos as
The records also failed to show that there was adequate training and continuous
Evangeline's death left a void in the lives of her husband and minor children as they
evaluation of the security guard's performance. Pajarillo had only attended an in-
were deprived of her love and care by her untimely demise.
service training on March 1, 1997 conducted by Toyota Sta. Rosa, his first assignment
as security guard of Safeguard, which was in collaboration with Safeguard. It was
established that the concept of such training was purely on security of equipments to We likewise uphold the award of exemplary damages in the amount of P300,000.00.
43
be guarded and protection of the life of the employees. Under Article 2229 of the Civil Code, exemplary damages are imposed by way of
example or correction for the public good, in addition to moral, temperate, liquidated or
49
compensatory damages. It is awarded as a deterrent to socially deleterious actions.
It had not been established that after Pajarillo's training in Toyota, Safeguard had ever
In * 

, exemplary damages may be granted if the defendant acted with gross
conducted further training of Pajarillo when he was later assigned to guard a bank 50
negligence.
which has a different nature of business with that of Toyota. In fact, Pajarillo testified
that being on duty in a bank is different from being on duty in a factory since a bank is
44
a very sensitive area. Pursuant to Article 2208 of the Civil Code, attorney's fees may be recovered when, as
in the instant case, exemplary damages are awarded. Hence, we affirm the award of
attorney's fees in the amount of P30,000.00.
Moreover, considering his reactions to Evangeline's act of just depositing her firearm
for safekeeping, 
., of immediately shooting her, confirms that there was no training
or seminar given on how to handle bank clients and on human psychology. 9, the petition for review is  . The Decision dated July 16, 2004 of
the Court of Appeals is
" with " 
 that the civil liability of
petitioner Safeguard Security Agency, Inc. is 
- and "
- under Article
Furthermore, while Safeguard would like to show that there were inspectors who go
2180 of the Civil Code.
around the bank two times a day to see the daily performance of the security guards
assigned therein, there was no record ever presented of such daily inspections. In
fact, if there was really such inspection made, the alleged suspicious act of Evangeline   .
could have been taken noticed and reported.

Turning now to the award of damages, we find that the award of actual damages in
the amount P157,430.00 which were the expenses incurred by respondents in
connection with the burial of Evangeline were supported by receipts. The award
of P50,000.00 as civil indemnity for the death of Evangeline is likewise in order.

As to the award of moral damages, Article 2206 of the Civil Code provides that the
spouse, legitimate children and illegitimate descendants and ascendants of the