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G.R. No.

L-12191 October 14, 1918

JOSE CANGCO, plaintiff-appellant,

MANILA RAILROAD CO., defendant-appellee.

Ramon Sotelo for appellant.

Kincaid & Hartigan for appellee.


At the time of the occurrence which gave rise to this litigation the plaintiff, Jose Cangco, was in the
employment of Manila Railroad Company in the capacity of clerk, with a monthly wage of P25. He
lived in the pueblo of San Mateo, in the province of Rizal, which is located upon the line of the
defendant railroad company; and in coming daily by train to the company's office in the city of Manila
where he worked, he used a pass, supplied by the company, which entitled him to ride upon the
company's trains free of charge. Upon the occasion in question, January 20, 1915, the plaintiff arose
from his seat in the second class-car where he was riding and, making, his exit through the door,
took his position upon the steps of the coach, seizing the upright guardrail with his right hand for

On the side of the train where passengers alight at the San Mateo station there is a cement platform
which begins to rise with a moderate gradient some distance away from the company's office and
extends along in front of said office for a distance sufficient to cover the length of several coaches.
As the train slowed down another passenger, named Emilio Zuñiga, also an employee of the railroad
company, got off the same car, alighting safely at the point where the platform begins to rise from
the level of the ground. When the train had proceeded a little farther the plaintiff Jose Cangco
stepped off also, but one or both of his feet came in contact with a sack of watermelons with the
result that his feet slipped from under him and he fell violently on the platform. His body at once
rolled from the platform and was drawn under the moving car, where his right arm was badly
crushed and lacerated. It appears that after the plaintiff alighted from the train the car moved forward
possibly six meters before it came to a full stop.

The accident occurred between 7 and 8 o'clock on a dark night, and as the railroad station was
lighted dimly by a single light located some distance away, objects on the platform where the
accident occurred were difficult to discern especially to a person emerging from a lighted car.

The explanation of the presence of a sack of melons on the platform where the plaintiff alighted is
found in the fact that it was the customary season for harvesting these melons and a large lot had
been brought to the station for the shipment to the market. They were contained in numerous sacks
which has been piled on the platform in a row one upon another. The testimony shows that this row
of sacks was so placed of melons and the edge of platform; and it is clear that the fall of the plaintiff
was due to the fact that his foot alighted upon one of these melons at the moment he stepped upon
the platform. His statement that he failed to see these objects in the darkness is readily to be

The plaintiff was drawn from under the car in an unconscious condition, and it appeared that the
injuries which he had received were very serious. He was therefore brought at once to a certain
hospital in the city of Manila where an examination was made and his arm was amputated. The
result of this operation was unsatisfactory, and the plaintiff was then carried to another hospital
where a second operation was performed and the member was again amputated higher up near the
shoulder. It appears in evidence that the plaintiff expended the sum of P790.25 in the form of
medical and surgical fees and for other expenses in connection with the process of his curation.

Upon August 31, 1915, he instituted this proceeding in the Court of First Instance of the city of
Manila to recover damages of the defendant company, founding his action upon the negligence of
the servants and employees of the defendant in placing the sacks of melons upon the platform and
leaving them so placed as to be a menace to the security of passenger alighting from the company's
trains. At the hearing in the Court of First Instance, his Honor, the trial judge, found the facts
substantially as above stated, and drew therefrom his conclusion to the effect that, although
negligence was attributable to the defendant by reason of the fact that the sacks of melons were so
placed as to obstruct passengers passing to and from the cars, nevertheless, the plaintiff himself
had failed to use due caution in alighting from the coach and was therefore precluded form
recovering. Judgment was accordingly entered in favor of the defendant company, and the plaintiff

It can not be doubted that the employees of the railroad company were guilty of negligence in piling
these sacks on the platform in the manner above stated; that their presence caused the plaintiff to
fall as he alighted from the train; and that they therefore constituted an effective legal cause of the
injuries sustained by the plaintiff. It necessarily follows that the defendant company is liable for the
damage thereby occasioned unless recovery is barred by the plaintiff's own contributory negligence.
In resolving this problem it is necessary that each of these conceptions of liability, to-wit, the primary
responsibility of the defendant company and the contributory negligence of the plaintiff should be
separately examined.

It is important to note that the foundation of the legal liability of the defendant is the contract of
carriage, and that the obligation to respond for the damage which plaintiff has suffered arises, if at
all, from the breach of that contract by reason of the failure of defendant to exercise due care in its
performance. That is to say, its liability is direct and immediate, differing essentially, in legal
viewpoint from that presumptive responsibility for the negligence of its servants, imposed by article
1903 of the Civil Code, which can be rebutted by proof of the exercise of due care in their selection
and supervision. Article 1903 of the Civil Code is not applicable to obligations arising ex contractu,
but only to extra-contractual obligations — or to use the technical form of expression, that article
relates only to culpa aquiliana and not to culpa contractual.

Manresa (vol. 8, p. 67) in his commentaries upon articles 1103 and 1104 of the Civil Code, clearly
points out this distinction, which was also recognized by this Court in its decision in the case of
Rakes vs. Atlantic, Gulf and Pacific Co. (7 Phil. rep., 359). In commenting upon article 1093 Manresa
clearly points out the difference between "culpa, substantive and independent, which of itself
constitutes the source of an obligation between persons not formerly connected by any legal tie"
and culpa considered as an accident in the performance of an obligation already existing . . . ."

In the Rakes case (supra) the decision of this court was made to rest squarely upon the proposition
that article 1903 of the Civil Code is not applicable to acts of negligence which constitute the breach
of a contract.

Upon this point the Court said:

The acts to which these articles [1902 and 1903 of the Civil Code] are applicable are
understood to be those not growing out of pre-existing duties of the parties to one another.
But where relations already formed give rise to duties, whether springing from contract or
quasi-contract, then breaches of those duties are subject to article 1101, 1103, and 1104 of
the same code. (Rakes vs. Atlantic, Gulf and Pacific Co., 7 Phil. Rep., 359 at 365.)

This distinction is of the utmost importance. The liability, which, under the Spanish law, is, in certain
cases imposed upon employers with respect to damages occasioned by the negligence of their
employees to persons to whom they are not bound by contract, is not based, as in the English
Common Law, upon the principle of respondeat superior — if it were, the master would be liable in
every case and unconditionally — but upon the principle announced in article 1902 of the Civil Code,
which imposes upon all persons who by their fault or negligence, do injury to another, the obligation
of making good the damage caused. One who places a powerful automobile in the hands of a
servant whom he knows to be ignorant of the method of managing such a vehicle, is himself guilty of
an act of negligence which makes him liable for all the consequences of his imprudence. The
obligation to make good the damage arises at the very instant that the unskillful servant, while acting
within the scope of his employment causes the injury. The liability of the master is personal and
direct. But, if the master has not been guilty of any negligence whatever in the selection and
direction of the servant, he is not liable for the acts of the latter, whatever done within the scope of
his employment or not, if the damage done by the servant does not amount to a breach of the
contract between the master and the person injured.

It is not accurate to say that proof of diligence and care in the selection and control of the servant
relieves the master from liability for the latter's acts — on the contrary, that proof shows that the
responsibility has never existed. As Manresa says (vol. 8, p. 68) the liability arising from extra-
contractual culpa is always based upon a voluntary act or omission which, without willful intent, but
by mere negligence or inattention, has caused damage to another. A master who exercises all
possible care in the selection of his servant, taking into consideration the qualifications they should
possess for the discharge of the duties which it is his purpose to confide to them, and directs them
with equal diligence, thereby performs his duty to third persons to whom he is bound by no
contractual ties, and he incurs no liability whatever if, by reason of the negligence of his servants,
even within the scope of their employment, such third person suffer damage. True it is that under
article 1903 of the Civil Code the law creates a presumption that he has been negligent in the
selection or direction of his servant, but the presumption is rebuttable and yield to proof of due care
and diligence in this respect.

The supreme court of Porto Rico, in interpreting identical provisions, as found in the Porto Rico
Code, has held that these articles are applicable to cases of extra-contractual culpa exclusively.
(Carmona vs. Cuesta, 20 Porto Rico Reports, 215.)

This distinction was again made patent by this Court in its decision in the case of Bahia vs. Litonjua
and Leynes, (30 Phil. rep., 624), which was an action brought upon the theory of the extra-
contractual liability of the defendant to respond for the damage caused by the carelessness of his
employee while acting within the scope of his employment. The Court, after citing the last paragraph
of article 1903 of the Civil Code, said:

From this article two things are apparent: (1) That when an injury is caused by the
negligence of a servant or employee there instantly arises a presumption of law that there
was negligence on the part of the master or employer either in selection of the servant or
employee, or in supervision over him after the selection, or both; and (2) that that
presumption is juris tantum and not juris et de jure, and consequently, may be rebutted. It
follows necessarily that if the employer shows to the satisfaction of the court that in selection
and supervision he has exercised the care and diligence of a good father of a family, the
presumption is overcome and he is relieved from liability.
This theory bases the responsibility of the master ultimately on his own negligence and not
on that of his servant. This is the notable peculiarity of the Spanish law of negligence. It is, of
course, in striking contrast to the American doctrine that, in relations with strangers, the
negligence of the servant in conclusively the negligence of the master.

The opinion there expressed by this Court, to the effect that in case of extra-contractual culpa based
upon negligence, it is necessary that there shall have been some fault attributable to the defendant
personally, and that the last paragraph of article 1903 merely establishes a rebuttable presumption,
is in complete accord with the authoritative opinion of Manresa, who says (vol. 12, p. 611) that the
liability created by article 1903 is imposed by reason of the breach of the duties inherent in the
special relations of authority or superiority existing between the person called upon to repair the
damage and the one who, by his act or omission, was the cause of it.

On the other hand, the liability of masters and employers for the negligent acts or omissions of their
servants or agents, when such acts or omissions cause damages which amount to the breach of a
contact, is not based upon a mere presumption of the master's negligence in their selection or
control, and proof of exercise of the utmost diligence and care in this regard does not relieve the
master of his liability for the breach of his contract.

Every legal obligation must of necessity be extra-contractual or contractual. Extra-contractual

obligation has its source in the breach or omission of those mutual duties which civilized society
imposes upon it members, or which arise from these relations, other than contractual, of certain
members of society to others, generally embraced in the concept of status. The legal rights of each
member of society constitute the measure of the corresponding legal duties, mainly negative in
character, which the existence of those rights imposes upon all other members of society. The
breach of these general duties whether due to willful intent or to mere inattention, if productive of
injury, give rise to an obligation to indemnify the injured party. The fundamental distinction between
obligations of this character and those which arise from contract, rests upon the fact that in cases of
non-contractual obligation it is the wrongful or negligent act or omission itself which creates
the vinculum juris, whereas in contractual relations the vinculum exists independently of the breach
of the voluntary duty assumed by the parties when entering into the contractual relation.

With respect to extra-contractual obligation arising from negligence, whether of act or omission, it is
competent for the legislature to elect — and our Legislature has so elected — whom such an
obligation is imposed is morally culpable, or, on the contrary, for reasons of public policy, to extend
that liability, without regard to the lack of moral culpability, so as to include responsibility for the
negligence of those person who acts or mission are imputable, by a legal fiction, to others who are in
a position to exercise an absolute or limited control over them. The legislature which adopted our
Civil Code has elected to limit extra-contractual liability — with certain well-defined exceptions — to
cases in which moral culpability can be directly imputed to the persons to be charged. This moral
responsibility may consist in having failed to exercise due care in the selection and control of one's
agents or servants, or in the control of persons who, by reason of their status, occupy a position of
dependency with respect to the person made liable for their conduct.

The position of a natural or juridical person who has undertaken by contract to render service to
another, is wholly different from that to which article 1903 relates. When the sources of the obligation
upon which plaintiff's cause of action depends is a negligent act or omission, the burden of proof
rests upon plaintiff to prove the negligence — if he does not his action fails. But when the facts
averred show a contractual undertaking by defendant for the benefit of plaintiff, and it is alleged that
plaintiff has failed or refused to perform the contract, it is not necessary for plaintiff to specify in his
pleadings whether the breach of the contract is due to willful fault or to negligence on the part of the
defendant, or of his servants or agents. Proof of the contract and of its nonperformance is
sufficient prima facie to warrant a recovery.

As a general rule . . . it is logical that in case of extra-contractual culpa, a suing creditor

should assume the burden of proof of its existence, as the only fact upon which his action is
based; while on the contrary, in a case of negligence which presupposes the existence of a
contractual obligation, if the creditor shows that it exists and that it has been broken, it is not
necessary for him to prove negligence. (Manresa, vol. 8, p. 71 [1907 ed., p. 76]).

As it is not necessary for the plaintiff in an action for the breach of a contract to show that the breach
was due to the negligent conduct of defendant or of his servants, even though such be in fact the
actual cause of the breach, it is obvious that proof on the part of defendant that the negligence or
omission of his servants or agents caused the breach of the contract would not constitute a defense
to the action. If the negligence of servants or agents could be invoked as a means of discharging the
liability arising from contract, the anomalous result would be that person acting through the medium
of agents or servants in the performance of their contracts, would be in a better position than those
acting in person. If one delivers a valuable watch to watchmaker who contract to repair it, and the
bailee, by a personal negligent act causes its destruction, he is unquestionably liable. Would it be
logical to free him from his liability for the breach of his contract, which involves the duty to exercise
due care in the preservation of the watch, if he shows that it was his servant whose negligence
caused the injury? If such a theory could be accepted, juridical persons would enjoy practically
complete immunity from damages arising from the breach of their contracts if caused by negligent
acts as such juridical persons can of necessity only act through agents or servants, and it would no
doubt be true in most instances that reasonable care had been taken in selection and direction of
such servants. If one delivers securities to a banking corporation as collateral, and they are lost by
reason of the negligence of some clerk employed by the bank, would it be just and reasonable to
permit the bank to relieve itself of liability for the breach of its contract to return the collateral upon
the payment of the debt by proving that due care had been exercised in the selection and direction
of the clerk?

This distinction between culpa aquiliana, as the source of an obligation, and culpa contractual as a
mere incident to the performance of a contract has frequently been recognized by the supreme court
of Spain. (Sentencias of June 27, 1894; November 20, 1896; and December 13, 1896.) In the
decisions of November 20, 1896, it appeared that plaintiff's action arose ex contractu, but that
defendant sought to avail himself of the provisions of article 1902 of the Civil Code as a defense.
The Spanish Supreme Court rejected defendant's contention, saying:

These are not cases of injury caused, without any pre-existing obligation, by fault or
negligence, such as those to which article 1902 of the Civil Code relates, but of damages
caused by the defendant's failure to carry out the undertakings imposed by the contracts . . .

A brief review of the earlier decision of this court involving the liability of employers for damage done
by the negligent acts of their servants will show that in no case has the court ever decided that the
negligence of the defendant's servants has been held to constitute a defense to an action for
damages for breach of contract.

In the case of Johnson vs. David (5 Phil. Rep., 663), the court held that the owner of a carriage was
not liable for the damages caused by the negligence of his driver. In that case the court commented
on the fact that no evidence had been adduced in the trial court that the defendant had been
negligent in the employment of the driver, or that he had any knowledge of his lack of skill or
In the case of Baer Senior & Co's Successors vs. Compania Maritima (6 Phil. Rep., 215), the plaintiff
sued the defendant for damages caused by the loss of a barge belonging to plaintiff which was
allowed to get adrift by the negligence of defendant's servants in the course of the performance of a
contract of towage. The court held, citing Manresa (vol. 8, pp. 29, 69) that if the "obligation of the
defendant grew out of a contract made between it and the plaintiff . . . we do not think that the
provisions of articles 1902 and 1903 are applicable to the case."

In the case of Chapman vs. Underwood (27 Phil. Rep., 374), plaintiff sued the defendant to recover
damages for the personal injuries caused by the negligence of defendant's chauffeur while driving
defendant's automobile in which defendant was riding at the time. The court found that the damages
were caused by the negligence of the driver of the automobile, but held that the master was not
liable, although he was present at the time, saying:

. . . unless the negligent acts of the driver are continued for a length of time as to give the
owner a reasonable opportunity to observe them and to direct the driver to desist therefrom. .
. . The act complained of must be continued in the presence of the owner for such length of
time that the owner by his acquiescence, makes the driver's acts his own.

In the case of Yamada vs. Manila Railroad Co. and Bachrach Garage & Taxicab Co. (33 Phil. Rep.,
8), it is true that the court rested its conclusion as to the liability of the defendant upon article 1903,
although the facts disclosed that the injury complaint of by plaintiff constituted a breach of the duty to
him arising out of the contract of transportation. The express ground of the decision in this case was
that article 1903, in dealing with the liability of a master for the negligent acts of his servants "makes
the distinction between private individuals and public enterprise;" that as to the latter the law creates
a rebuttable presumption of negligence in the selection or direction of servants; and that in the
particular case the presumption of negligence had not been overcome.

It is evident, therefore that in its decision Yamada case, the court treated plaintiff's action as though
founded in tort rather than as based upon the breach of the contract of carriage, and an examination
of the pleadings and of the briefs shows that the questions of law were in fact discussed upon this
theory. Viewed from the standpoint of the defendant the practical result must have been the same in
any event. The proof disclosed beyond doubt that the defendant's servant was grossly negligent and
that his negligence was the proximate cause of plaintiff's injury. It also affirmatively appeared that
defendant had been guilty of negligence in its failure to exercise proper discretion in the direction of
the servant. Defendant was, therefore, liable for the injury suffered by plaintiff, whether the breach of
the duty were to be regarded as constituting culpa aquiliana or culpa contractual. As Manresa points
out (vol. 8, pp. 29 and 69) whether negligence occurs an incident in the course of the performance of
a contractual undertaking or its itself the source of an extra-contractual undertaking obligation, its
essential characteristics are identical. There is always an act or omission productive of damage due
to carelessness or inattention on the part of the defendant. Consequently, when the court holds that
a defendant is liable in damages for having failed to exercise due care, either directly, or in failing to
exercise proper care in the selection and direction of his servants, the practical result is identical in
either case. Therefore, it follows that it is not to be inferred, because the court held in the Yamada
case that defendant was liable for the damages negligently caused by its servants to a person to
whom it was bound by contract, and made reference to the fact that the defendant was negligent in
the selection and control of its servants, that in such a case the court would have held that it would
have been a good defense to the action, if presented squarely upon the theory of the breach of the
contract, for defendant to have proved that it did in fact exercise care in the selection and control of
the servant.

The true explanation of such cases is to be found by directing the attention to the relative spheres of
contractual and extra-contractual obligations. The field of non- contractual obligation is much more
broader than that of contractual obligations, comprising, as it does, the whole extent of juridical
human relations. These two fields, figuratively speaking, concentric; that is to say, the mere fact that
a person is bound to another by contract does not relieve him from extra-contractual liability to such
person. When such a contractual relation exists the obligor may break the contract under such
conditions that the same act which constitutes the source of an extra-contractual obligation had no
contract existed between the parties.

The contract of defendant to transport plaintiff carried with it, by implication, the duty to carry him in
safety and to provide safe means of entering and leaving its trains (civil code, article 1258). That
duty, being contractual, was direct and immediate, and its non-performance could not be excused by
proof that the fault was morally imputable to defendant's servants.

The railroad company's defense involves the assumption that even granting that the negligent
conduct of its servants in placing an obstruction upon the platform was a breach of its contractual
obligation to maintain safe means of approaching and leaving its trains, the direct and proximate
cause of the injury suffered by plaintiff was his own contributory negligence in failing to wait until the
train had come to a complete stop before alighting. Under the doctrine of comparative negligence
announced in the Rakes case (supra), if the accident was caused by plaintiff's own negligence, no
liability is imposed upon defendant's negligence and plaintiff's negligence merely contributed to his
injury, the damages should be apportioned. It is, therefore, important to ascertain if defendant was in
fact guilty of negligence.

It may be admitted that had plaintiff waited until the train had come to a full stop before alighting, the
particular injury suffered by him could not have occurred. Defendant contends, and cites many
authorities in support of the contention, that it is negligence per se for a passenger to alight from a
moving train. We are not disposed to subscribe to this doctrine in its absolute form. We are of the
opinion that this proposition is too badly stated and is at variance with the experience of every-day
life. In this particular instance, that the train was barely moving when plaintiff alighted is shown
conclusively by the fact that it came to stop within six meters from the place where he stepped from
it. Thousands of person alight from trains under these conditions every day of the year, and sustain
no injury where the company has kept its platform free from dangerous obstructions. There is no
reason to believe that plaintiff would have suffered any injury whatever in alighting as he did had it
not been for defendant's negligent failure to perform its duty to provide a safe alighting place.

We are of the opinion that the correct doctrine relating to this subject is that expressed in
Thompson's work on Negligence (vol. 3, sec. 3010) as follows:

The test by which to determine whether the passenger has been guilty of negligence in
attempting to alight from a moving railway train, is that of ordinary or reasonable care. It is to
be considered whether an ordinarily prudent person, of the age, sex and condition of the
passenger, would have acted as the passenger acted under the circumstances disclosed by
the evidence. This care has been defined to be, not the care which may or should be used
by the prudent man generally, but the care which a man of ordinary prudence would use
under similar circumstances, to avoid injury." (Thompson, Commentaries on Negligence, vol.
3, sec. 3010.)

Or, it we prefer to adopt the mode of exposition used by this court in Picart vs. Smith (37 Phil. rep.,
809), we may say that the test is this; Was there anything in the circumstances surrounding the
plaintiff at the time he alighted from the train which would have admonished a person of average
prudence that to get off the train under the conditions then existing was dangerous? If so, the plaintiff
should have desisted from alighting; and his failure so to desist was contributory negligence. 1aw ph!
As the case now before us presents itself, the only fact from which a conclusion can be drawn to the
effect that plaintiff was guilty of contributory negligence is that he stepped off the car without being
able to discern clearly the condition of the platform and while the train was yet slowly moving. In
considering the situation thus presented, it should not be overlooked that the plaintiff was, as we
find, ignorant of the fact that the obstruction which was caused by the sacks of melons piled on the
platform existed; and as the defendant was bound by reason of its duty as a public carrier to afford
to its passengers facilities for safe egress from its trains, the plaintiff had a right to assume, in the
absence of some circumstance to warn him to the contrary, that the platform was clear. The place,
as we have already stated, was dark, or dimly lighted, and this also is proof of a failure upon the part
of the defendant in the performance of a duty owing by it to the plaintiff; for if it were by any
possibility concede that it had right to pile these sacks in the path of alighting passengers, the
placing of them adequately so that their presence would be revealed.

As pertinent to the question of contributory negligence on the part of the plaintiff in this case the
following circumstances are to be noted: The company's platform was constructed upon a level
higher than that of the roadbed and the surrounding ground. The distance from the steps of the car
to the spot where the alighting passenger would place his feet on the platform was thus reduced,
thereby decreasing the risk incident to stepping off. The nature of the platform, constructed as it was
of cement material, also assured to the passenger a stable and even surface on which to alight.
Furthermore, the plaintiff was possessed of the vigor and agility of young manhood, and it was by no
means so risky for him to get off while the train was yet moving as the same act would have been in
an aged or feeble person. In determining the question of contributory negligence in performing such
act — that is to say, whether the passenger acted prudently or recklessly — the age, sex, and
physical condition of the passenger are circumstances necessarily affecting the safety of the
passenger, and should be considered. Women, it has been observed, as a general rule are less
capable than men of alighting with safety under such conditions, as the nature of their wearing
apparel obstructs the free movement of the limbs. Again, it may be noted that the place was
perfectly familiar to the plaintiff as it was his daily custom to get on and of the train at this station.
There could, therefore, be no uncertainty in his mind with regard either to the length of the step
which he was required to take or the character of the platform where he was alighting. Our
conclusion is that the conduct of the plaintiff in undertaking to alight while the train was yet slightly
under way was not characterized by imprudence and that therefore he was not guilty of contributory

The evidence shows that the plaintiff, at the time of the accident, was earning P25 a month as a
copyist clerk, and that the injuries he has suffered have permanently disabled him from continuing
that employment. Defendant has not shown that any other gainful occupation is open to plaintiff. His
expectancy of life, according to the standard mortality tables, is approximately thirty-three years. We
are of the opinion that a fair compensation for the damage suffered by him for his permanent
disability is the sum of P2,500, and that he is also entitled to recover of defendant the additional sum
of P790.25 for medical attention, hospital services, and other incidental expenditures connected with
the treatment of his injuries.

The decision of lower court is reversed, and judgment is hereby rendered plaintiff for the sum of
P3,290.25, and for the costs of both instances. So ordered.

G.R. No. L-21438 September 28, 1966

AIR FRANCE, petitioner,

Lichauco, Picazo and Agcaoili for petitioner.
Bengzon Villegas and Zarraga for respondent R. Carrascoso.


The Court of First Instance of Manila 1 sentenced petitioner to pay respondent Rafael Carrascoso
P25,000.00 by way of moral damages; P10,000.00 as exemplary damages; P393.20 representing
the difference in fare between first class and tourist class for the portion of the trip Bangkok-Rome,
these various amounts with interest at the legal rate, from the date of the filing of the complaint until
paid; plus P3,000.00 for attorneys' fees; and the costs of suit.

On appeal,2 the Court of Appeals slightly reduced the amount of refund on Carrascoso's plane ticket
from P393.20 to P383.10, and voted to affirm the appealed decision "in all other respects", with costs
against petitioner.

The case is now before us for review on certiorari.

The facts declared by the Court of Appeals as " fully supported by the evidence of record", are:

Plaintiff, a civil engineer, was a member of a group of 48 Filipino pilgrims that left Manila for
Lourdes on March 30, 1958.

On March 28, 1958, the defendant, Air France, through its authorized agent, Philippine Air
Lines, Inc., issued to plaintiff a "first class" round trip airplane ticket from Manila to Rome.
From Manila to Bangkok, plaintiff travelled in "first class", but at Bangkok, the Manager of the
defendant airline forced plaintiff to vacate the "first class" seat that he was occupying
because, in the words of the witness Ernesto G. Cuento, there was a "white man", who, the
Manager alleged, had a "better right" to the seat. When asked to vacate his "first class" seat,
the plaintiff, as was to be expected, refused, and told defendant's Manager that his seat
would be taken over his dead body; a commotion ensued, and, according to said Ernesto G.
Cuento, "many of the Filipino passengers got nervous in the tourist class; when they found
out that Mr. Carrascoso was having a hot discussion with the white man [manager], they
came all across to Mr. Carrascoso and pacified Mr. Carrascoso to give his seat to the white
man" (Transcript, p. 12, Hearing of May 26, 1959); and plaintiff reluctantly gave his "first
class" seat in the plane.3

1. The trust of the relief petitioner now seeks is that we review "all the findings" 4 of respondent Court
of Appeals. Petitioner charges that respondent court failed to make complete findings of fact on all
the issues properly laid before it. We are asked to consider facts favorable to petitioner, and then, to
overturn the appellate court's decision.

Coming into focus is the constitutional mandate that "No decision shall be rendered by any court of
record without expressing therein clearly and distinctly the facts and the law on which it is
based". 5 This is echoed in the statutory demand that a judgment determining the merits of the case
shall state "clearly and distinctly the facts and the law on which it is based"; 6 and that "Every
decision of the Court of Appeals shall contain complete findings of fact on all issues properly raised
before it". 7
A decision with absolutely nothing to support it is a nullity. It is open to direct attack. 8 The law,
however, solely insists that a decision state the "essential ultimate facts" upon which the court's
conclusion is drawn. 9 A court of justice is not hidebound to write in its decision every bit and piece of
evidence 10 presented by one party and the other upon the issues raised. Neither is it to be burdened
with the obligation "to specify in the sentence the facts" which a party "considered as proved". 11 This
is but a part of the mental process from which the Court draws the essential ultimate facts. A
decision is not to be so clogged with details such that prolixity, if not confusion, may result. So long
as the decision of the Court of Appeals contains the necessary facts to warrant its conclusions, it is
no error for said court to withhold therefrom "any specific finding of facts with respect to the evidence
for the defense". Because as this Court well observed, "There is no law that so requires". 12 Indeed,
"the mere failure to specify (in the decision) the contentions of the appellant and the reasons for
refusing to believe them is not sufficient to hold the same contrary to the requirements of the
provisions of law and the Constitution". It is in this setting that in Manigque, it was held that the mere
fact that the findings "were based entirely on the evidence for the prosecution without taking into
consideration or even mentioning the appellant's side in the controversy as shown by his own
testimony", would not vitiate the judgment. 13 If the court did not recite in the decision the testimony
of each witness for, or each item of evidence presented by, the defeated party, it does not mean that
the court has overlooked such testimony or such item of evidence. 14 At any rate, the legal
presumptions are that official duty has been regularly performed, and that all the matters within an
issue in a case were laid before the court and passed upon by it. 15

Findings of fact, which the Court of Appeals is required to make, maybe defined as "the written
statement of the ultimate facts as found by the court ... and essential to support the decision and
judgment rendered thereon". 16They consist of the court's "conclusions" with respect to the
determinative facts in issue". 17 A question of law, upon the other hand, has been declared as "one
which does not call for an examination of the probative value of the evidence presented by the
parties." 18

2. By statute, "only questions of law may be raised" in an appeal by certiorari from a judgment of the
Court of Appeals. 19 That judgment is conclusive as to the facts. It is not appropriately the business
of this Court to alter the facts or to review the questions of fact. 20

With these guideposts, we now face the problem of whether the findings of fact of the Court of
Appeals support its judgment.

3. Was Carrascoso entitled to the first class seat he claims?

It is conceded in all quarters that on March 28, 1958 he paid to and received from petitioner a first
class ticket. But petitioner asserts that said ticket did not represent the true and complete intent and
agreement of the parties; that said respondent knew that he did not have confirmed reservations for
first class on any specific flight, although he had tourist class protection; that, accordingly, the
issuance of a first class ticket was no guarantee that he would have a first class ride, but that such
would depend upon the availability of first class seats.

These are matters which petitioner has thoroughly presented and discussed in its brief before the
Court of Appeals under its third assignment of error, which reads: "The trial court erred in finding that
plaintiff had confirmed reservations for, and a right to, first class seats on the "definite" segments of
his journey, particularly that from Saigon to Beirut". 21

And, the Court of Appeals disposed of this contention thus:

Defendant seems to capitalize on the argument that the issuance of a first-class ticket was
no guarantee that the passenger to whom the same had been issued, would be
accommodated in the first-class compartment, for as in the case of plaintiff he had yet to
make arrangements upon arrival at every station for the necessary first-class reservation.
We are not impressed by such a reasoning. We cannot understand how a reputable firm like
defendant airplane company could have the indiscretion to give out tickets it never meant to
honor at all. It received the corresponding amount in payment of first-class tickets and yet it
allowed the passenger to be at the mercy of its employees. It is more in keeping with the
ordinary course of business that the company should know whether or riot the tickets it
issues are to be honored or not.22

Not that the Court of Appeals is alone. The trial court similarly disposed of petitioner's contention,

On the fact that plaintiff paid for, and was issued a "First class" ticket, there can be no question.
Apart from his testimony, see plaintiff's Exhibits "A", "A-1", "B", "B-1," "B-2", "C" and "C-1", and
defendant's own witness, Rafael Altonaga, confirmed plaintiff's testimony and testified as follows:

Q. In these tickets there are marks "O.K." From what you know, what does this OK mean?

A. That the space is confirmed.

Q. Confirmed for first class?

A. Yes, "first class". (Transcript, p. 169)

xxx xxx xxx

Defendant tried to prove by the testimony of its witnesses Luis Zaldariaga and Rafael Altonaga that
although plaintiff paid for, and was issued a "first class" airplane ticket, the ticket was subject to
confirmation in Hongkong. The court cannot give credit to the testimony of said witnesses. Oral
evidence cannot prevail over written evidence, and plaintiff's Exhibits "A", "A-l", "B", "B-l", "C" and "C-
1" belie the testimony of said witnesses, and clearly show that the plaintiff was issued, and paid for,
a first class ticket without any reservation whatever.

Furthermore, as hereinabove shown, defendant's own witness Rafael Altonaga testified that the
reservation for a "first class" accommodation for the plaintiff was confirmed. The court cannot believe
that after such confirmation defendant had a verbal understanding with plaintiff that the "first class"
ticket issued to him by defendant would be subject to confirmation in Hongkong. 23

We have heretofore adverted to the fact that except for a slight difference of a few pesos in the
amount refunded on Carrascoso's ticket, the decision of the Court of First Instance was affirmed by
the Court of Appeals in all other respects. We hold the view that such a judgment of affirmance has
merged the judgment of the lower court. 24Implicit in that affirmance is a determination by the Court
of Appeals that the proceeding in the Court of First Instance was free from prejudicial error and "all
questions raised by the assignments of error and all questions that might have been raised are to be
regarded as finally adjudicated against the appellant". So also, the judgment affirmed "must be
regarded as free from all error". 25 We reached this policy construction because nothing in the
decision of the Court of Appeals on this point would suggest that its findings of fact are in any way at
war with those of the trial court. Nor was said affirmance by the Court of Appeals upon a ground or
grounds different from those which were made the basis of the conclusions of the trial court. 26
If, as petitioner underscores, a first-class-ticket holder is not entitled to a first class seat,
notwithstanding the fact that seat availability in specific flights is therein confirmed, then an air
passenger is placed in the hollow of the hands of an airline. What security then can a passenger
have? It will always be an easy matter for an airline aided by its employees, to strike out the very
stipulations in the ticket, and say that there was a verbal agreement to the contrary. What if the
passenger had a schedule to fulfill? We have long learned that, as a rule, a written document speaks
a uniform language; that spoken word could be notoriously unreliable. If only to achieve stability in
the relations between passenger and air carrier, adherence to the ticket so issued is desirable. Such
is the case here. The lower courts refused to believe the oral evidence intended to defeat the
covenants in the ticket.

The foregoing are the considerations which point to the conclusion that there are facts upon which
the Court of Appeals predicated the finding that respondent Carrascoso had a first class ticket and
was entitled to a first class seat at Bangkok, which is a stopover in the Saigon to Beirut leg of the
flight. 27 We perceive no "welter of distortions by the Court of Appeals of petitioner's statement of its
position", as charged by petitioner. 28 Nor do we subscribe to petitioner's accusation that respondent
Carrascoso "surreptitiously took a first class seat to provoke an issue". 29And this because, as
petitioner states, Carrascoso went to see the Manager at his office in Bangkok "to confirm my seat
and because from Saigon I was told again to see the Manager". 30 Why, then, was he allowed to take
a first class seat in the plane at Bangkok, if he had no seat? Or, if another had a better right to the

4. Petitioner assails respondent court's award of moral damages. Petitioner's trenchant claim is that
Carrascoso's action is planted upon breach of contract; that to authorize an award for moral
damages there must be an averment of fraud or bad faith;31 and that the decision of the Court of
Appeals fails to make a finding of bad faith. The pivotal allegations in the complaint bearing on this
issue are:

3. That ... plaintiff entered into a contract of air carriage with the Philippine Air Lines for a
valuable consideration, the latter acting as general agents for and in behalf of the defendant,
under which said contract, plaintiff was entitled to, as defendant agreed to furnish plaintiff,
First Class passage on defendant's plane during the entire duration of plaintiff's tour of
Europe with Hongkong as starting point up to and until plaintiff's return trip to Manila, ... .

4. That, during the first two legs of the trip from Hongkong to Saigon and from Saigon to
Bangkok, defendant furnished to the plaintiff First Class accommodation but only after
protestations, arguments and/or insistence were made by the plaintiff with defendant's

5. That finally, defendant failed to provide First Class passage, but instead furnished plaintiff
only Tourist Class accommodations from Bangkok to Teheran and/or Casablanca, ... the
plaintiff has been compelled by defendant's employees to leave the First Class
accommodation berths at Bangkok after he was already seated.

6. That consequently, the plaintiff, desiring no repetition of the inconvenience and

embarrassments brought by defendant's breach of contract was forced to take a Pan
American World Airways plane on his return trip from Madrid to Manila.32

xxx xxx xxx

2. That likewise, as a result of defendant's failure to furnish First Class accommodations aforesaid,
plaintiff suffered inconveniences, embarrassments, and humiliations, thereby causing plaintiff mental
anguish, serious anxiety, wounded feelings, social humiliation, and the like injury, resulting in moral
damages in the amount of P30,000.00. 33

xxx xxx xxx

The foregoing, in our opinion, substantially aver: First, That there was a contract to furnish plaintiff a
first class passage covering, amongst others, the Bangkok-Teheran leg; Second, That said contract
was breached when petitioner failed to furnish first class transportation at Bangkok; and Third, that
there was bad faith when petitioner's employee compelled Carrascoso to leave his first class
accommodation berth "after he was already, seated" and to take a seat in the tourist class, by
reason of which he suffered inconvenience, embarrassments and humiliations, thereby causing him
mental anguish, serious anxiety, wounded feelings and social humiliation, resulting in moral
damages. It is true that there is no specific mention of the term bad faith in the complaint. But, the
inference of bad faith is there, it may be drawn from the facts and circumstances set forth
therein. 34 The contract was averred to establish the relation between the parties. But the stress of
the action is put on wrongful expulsion.

Quite apart from the foregoing is that (a) right the start of the trial, respondent's counsel placed
petitioner on guard on what Carrascoso intended to prove: That while sitting in the plane in Bangkok,
Carrascoso was ousted by petitioner's manager who gave his seat to a white man; 35 and (b)
evidence of bad faith in the fulfillment of the contract was presented without objection on the part of
the petitioner. It is, therefore, unnecessary to inquire as to whether or not there is sufficient averment
in the complaint to justify an award for moral damages. Deficiency in the complaint, if any, was cured
by the evidence. An amendment thereof to conform to the evidence is not even required. 36 On the
question of bad faith, the Court of Appeals declared:

That the plaintiff was forced out of his seat in the first class compartment of the plane
belonging to the defendant Air France while at Bangkok, and was transferred to the tourist
class not only without his consent but against his will, has been sufficiently established by
plaintiff in his testimony before the court, corroborated by the corresponding entry made by
the purser of the plane in his notebook which notation reads as follows:

"First-class passenger was forced to go to the tourist class against his will, and that
the captain refused to intervene",

and by the testimony of an eye-witness, Ernesto G. Cuento, who was a co-passenger. The
captain of the plane who was asked by the manager of defendant company at Bangkok to
intervene even refused to do so. It is noteworthy that no one on behalf of defendant ever
contradicted or denied this evidence for the plaintiff. It could have been easy for defendant to
present its manager at Bangkok to testify at the trial of the case, or yet to secure his
disposition; but defendant did neither. 37

The Court of appeals further stated —

Neither is there evidence as to whether or not a prior reservation was made by the white
man. Hence, if the employees of the defendant at Bangkok sold a first-class ticket to him
when all the seats had already been taken, surely the plaintiff should not have been picked
out as the one to suffer the consequences and to be subjected to the humiliation and
indignity of being ejected from his seat in the presence of others. Instead of explaining to the
white man the improvidence committed by defendant's employees, the manager adopted the
more drastic step of ousting the plaintiff who was then safely ensconsced in his rightful seat.
We are strengthened in our belief that this probably was what happened there, by the
testimony of defendant's witness Rafael Altonaga who, when asked to explain the meaning
of the letters "O.K." appearing on the tickets of plaintiff, said "that the space is confirmed for
first class. Likewise, Zenaida Faustino, another witness for defendant, who was the chief of
the Reservation Office of defendant, testified as follows:

"Q How does the person in the ticket-issuing office know what reservation the
passenger has arranged with you?

A They call us up by phone and ask for the confirmation." (t.s.n., p. 247, June 19,

In this connection, we quote with approval what the trial Judge has said on this point:

Why did the, using the words of witness Ernesto G. Cuento, "white man" have a
"better right" to the seat occupied by Mr. Carrascoso? The record is silent. The
defendant airline did not prove "any better", nay, any right on the part of the "white
man" to the "First class" seat that the plaintiff was occupying and for which he paid
and was issued a corresponding "first class" ticket.

If there was a justified reason for the action of the defendant's Manager in Bangkok,
the defendant could have easily proven it by having taken the testimony of the said
Manager by deposition, but defendant did not do so; the presumption is that
evidence willfully suppressed would be adverse if produced [Sec. 69, par (e), Rules
of Court]; and, under the circumstances, the Court is constrained to find, as it does
find, that the Manager of the defendant airline in Bangkok not merely asked but
threatened the plaintiff to throw him out of the plane if he did not give up his "first
class" seat because the said Manager wanted to accommodate, using the words of
the witness Ernesto G. Cuento, the "white man".38

It is really correct to say that the Court of Appeals in the quoted portion first transcribed did
not use the term "bad faith". But can it be doubted that the recital of facts therein points to
bad faith? The manager not only prevented Carrascoso from enjoying his right to a first class
seat; worse, he imposed his arbitrary will; he forcibly ejected him from his seat, made him
suffer the humiliation of having to go to the tourist class compartment - just to give way to
another passenger whose right thereto has not been established. Certainly, this is bad faith.
Unless, of course, bad faith has assumed a meaning different from what is understood in
law. For, "bad faith" contemplates a "state of mind affirmatively operating with furtive design
or with some motive of self-interest or will or for ulterior purpose." 39

And if the foregoing were not yet sufficient, there is the express finding of bad faith in the
judgment of the Court of First Instance, thus:

The evidence shows that the defendant violated its contract of transportation with
plaintiff in bad faith, with the aggravating circumstances that defendant's Manager in
Bangkok went to the extent of threatening the plaintiff in the presence of many
passengers to have him thrown out of the airplane to give the "first class" seat that
he was occupying to, again using the words of the witness Ernesto G. Cuento, a
"white man" whom he (defendant's Manager) wished to accommodate, and the
defendant has not proven that this "white man" had any "better right" to occupy the
"first class" seat that the plaintiff was occupying, duly paid for, and for which the
corresponding "first class" ticket was issued by the defendant to him.40
5. The responsibility of an employer for the tortious act of its employees need not be essayed. It is
well settled in law. 41 For the willful malevolent act of petitioner's manager, petitioner, his employer,
must answer. Article 21 of the Civil Code says:

ART. 21. Any person who willfully causes loss or injury to another in a manner that is
contrary to morals, good customs or public policy shall compensate the latter for the

In parallel circumstances, we applied the foregoing legal precept; and, we held that upon the
provisions of Article 2219 (10), Civil Code, moral damages are recoverable. 42

6. A contract to transport passengers is quite different in kind and degree from any other contractual
relation. 43 And this, because of the relation which an air-carrier sustains with the public. Its business
is mainly with the travelling public. It invites people to avail of the comforts and advantages it offers.
The contract of air carriage, therefore, generates a relation attended with a public duty. Neglect or
malfeasance of the carrier's employees, naturally, could give ground for an action for damages.

Passengers do not contract merely for transportation. They have a right to be treated by the carrier's
employees with kindness, respect, courtesy and due consideration. They are entitled to be protected
against personal misconduct, injurious language, indignities and abuses from such employees. So it
is, that any rule or discourteous conduct on the part of employees towards a passenger gives the
latter an action for damages against the carrier. 44

Thus, "Where a steamship company 45 had accepted a passenger's check, it was a breach of
contract and a tort, giving a right of action for its agent in the presence of third persons to falsely
notify her that the check was worthless and demand payment under threat of ejection, though the
language used was not insulting and she was not ejected." 46 And this, because, although the
relation of passenger and carrier is "contractual both in origin and nature" nevertheless "the act that
breaks the contract may be also a tort". 47 And in another case, "Where a passenger on a railroad
train, when the conductor came to collect his fare tendered him the cash fare to a point where the
train was scheduled not to stop, and told him that as soon as the train reached such point he would
pay the cash fare from that point to destination, there was nothing in the conduct of the passenger
which justified the conductor in using insulting language to him, as by calling him a lunatic," 48 and
the Supreme Court of South Carolina there held the carrier liable for the mental suffering of said
passenger. 1awphîl.nèt

Petitioner's contract with Carrascoso is one attended with public duty. The stress of Carrascoso's
action as we have said, is placed upon his wrongful expulsion. This is a violation of public duty by
the petitioner air carrier — a case of quasi-delict. Damages are proper.

7. Petitioner draws our attention to respondent Carrascoso's testimony, thus —

Q You mentioned about an attendant. Who is that attendant and purser?

A When we left already — that was already in the trip — I could not help it. So one of the
flight attendants approached me and requested from me my ticket and I said, What for? and
she said, "We will note that you transferred to the tourist class". I said, "Nothing of that kind.
That is tantamount to accepting my transfer." And I also said, "You are not going to note
anything there because I am protesting to this transfer".

Q Was she able to note it?

A No, because I did not give my ticket.

Q About that purser?

A Well, the seats there are so close that you feel uncomfortable and you don't have enough
leg room, I stood up and I went to the pantry that was next to me and the purser was there.
He told me, "I have recorded the incident in my notebook." He read it and translated it to me
— because it was recorded in French — "First class passenger was forced to go to the
tourist class against his will, and that the captain refused to intervene."


I move to strike out the last part of the testimony of the witness because the best evidence
would be the notes. Your Honor.


I will allow that as part of his testimony. 49

Petitioner charges that the finding of the Court of Appeals that the purser made an entry in his
notebook reading "First class passenger was forced to go to the tourist class against his will, and
that the captain refused to intervene" is predicated upon evidence [Carrascoso's testimony above]
which is incompetent. We do not think so. The subject of inquiry is not the entry, but the ouster
incident. Testimony on the entry does not come within the proscription of the best evidence rule.
Such testimony is admissible. 49a

Besides, from a reading of the transcript just quoted, when the dialogue happened, the impact of the
startling occurrence was still fresh and continued to be felt. The excitement had not as yet died
down. Statements then, in this environment, are admissible as part of the res gestae. 50 For, they
grow "out of the nervous excitement and mental and physical condition of the declarant". 51 The
utterance of the purser regarding his entry in the notebook was spontaneous, and related to the
circumstances of the ouster incident. Its trustworthiness has been guaranteed. 52 It thus escapes the
operation of the hearsay rule. It forms part of the res gestae.

At all events, the entry was made outside the Philippines. And, by an employee of petitioner. It would
have been an easy matter for petitioner to have contradicted Carrascoso's testimony. If it were really
true that no such entry was made, the deposition of the purser could have cleared up the matter.

We, therefore, hold that the transcribed testimony of Carrascoso is admissible in evidence.

8. Exemplary damages are well awarded. The Civil Code gives the court ample power to grant
exemplary damages — in contracts and quasi- contracts. The only condition is that defendant should
have "acted in a wanton, fraudulent, reckless, oppressive, or malevolent manner." 53 The manner of
ejectment of respondent Carrascoso from his first class seat fits into this legal precept. And this, in
addition to moral damages.54

9. The right to attorney's fees is fully established. The grant of exemplary damages justifies a similar
judgment for attorneys' fees. The least that can be said is that the courts below felt that it is but just
and equitable that attorneys' fees be given. 55 We do not intend to break faith with the tradition that
discretion well exercised — as it was here — should not be disturbed.
10. Questioned as excessive are the amounts decreed by both the trial court and the Court of
Appeals, thus: P25,000.00 as moral damages; P10,000.00, by way of exemplary damages, and
P3,000.00 as attorneys' fees. The task of fixing these amounts is primarily with the trial court. 56 The
Court of Appeals did not interfere with the same. The dictates of good sense suggest that we give
our imprimatur thereto. Because, the facts and circumstances point to the reasonableness thereof.57

On balance, we say that the judgment of the Court of Appeals does not suffer from reversible error.
We accordingly vote to affirm the same. Costs against petitioner. So ordered.

G.R. No. L-24837 June 27, 1968


BANK OF THE PHILIPPINE ISLANDS and SANTIAGO FREIXAS, in his capacity as President of
the said Bank, defendants.

Gil B. Galang for plaintiffs.

Aviado and Aranda for defendants.


Appeal by plaintiffs, Julian Singson and his wife, Ramona del Castillo, from a decision of the Court of
First Instance of Manila dismissing their complaint against defendants herein, the Bank of the
Philippine Islands and Santiago Freixas.

It appears that Singson, was one of the defendants in civil case No. 23906 of the Court of First
Instance, Manila, in which judgment had been rendered sentencing him and his co-defendants
therein, namely, Celso Lobregat and Villa-Abrille & Co., to pay the sum of P105,539.56 to the
plaintiff therein, Philippine Milling Co. Singson and Lobregat had seasonably appealed from said
judgment, but not Villa-Abrille & Co., as against which said judgment, accordingly, became final and
executory. In due course, a writ of garnishment was subsequently served upon the Bank of the
Philippine Islands — in which the Singsons had a current account — insofar as Villa-Abrille's credits
against the Bank were concerned. What happened thereafter is set forth in the decision appealed
from, from which we quote:

Upon receipt of the said Writ of Garnishment, a clerk of the bank in charge of all matters of
execution and garnishment, upon reading the name of the plaintiff herein in the title of the
Writ of Garnishment as a party defendants, without further reading the body of the said
garnishment and informing himself that said garnishment was merely intended for the
deposits of defendant Villa-Abrille & Co., Valentin Teus, Fernando F. de Villa-Abrille and
Joaquin Bona, prepared a letter for the signature of the President of the Bank informing the
plaintiff Julian C. Singson of the garnishment of his deposits by the plaintiff in that case.
Another letter was also prepared and signed by the said President of the Bank for the
Special Sheriff dated April 17, 1963.

Subsequently, two checks issued by the plaintiff Julian C. Singson, one for the amount of
P383 in favor of B. M. Glass Service dated April 16, 1963 and bearing No. C-424852, and
check No. C-394996 for the amount of P100 in favor of the Lega Corporation, and drawn
against the said Bank, were deposited by the said drawers with the said bank. Believing that
the plaintiff Singson, the drawer of the check, had no more control over the balance of his
deposits in the said bank, the checks were dishonored and were refused payment by the
said bank. After the first check was returned by the bank to the B. M. Glass Service, the
latter wrote plaintiff Julian C. Singson a letter, dated April 19, 1963, advising him that his
check for P383.00 bearing No. C-424852 was not honored by the bank for the reason that
his account therein had already been garnished. The said B. M. Glass Service further stated
in the said letter that they were constrained to close his credit account with them. In view
thereof, plaintiff Julian C. Singson wrote the defendant bank a letter on April 19, 1963,
claiming that his name was not included in the Writ of Execution and Notice of Garnishment,
which was served upon the bank. The defendant President Santiago Freixas of the said bank
took steps to verify this information and after having confirmed the same, apologized to the
plaintiff Julian C. Singson and wrote him a letter dated April 22, 1963, requesting him to
disregard their letter of April 17, 1963, and that the action of garnishment from his account
had already been removed. A similar letter was written by the said official of the bank on
April 22, 1963 to the Special Sheriff informing him that his letter dated April 17, 1963 to the
said Special Sheriff was considered cancelled and that they had already removed the Notice
of Garnishment from plaintiff Singson's account. Thus, the defendants lost no time to rectify
the mistake that had been inadvertently committed, resulting in the temporary freezing of the
account of the plaintiff with the said bank for a short time.

xxx xxx xxx

On May 8, 1963, the Singsong commenced the present action against the Bank and its president,
Santiago Freixas, for damages1 in consequence of said illegal freezing of plaintiffs' account.
1äw phï1.ñët

After appropriate proceedings, the Court of First Instance of Manila rendered judgment dismissing
the complaint upon the ground that plaintiffs cannot recover from the defendants upon the basis of a
quasi-delict, because the relation between the parties is contractual in nature; because this case
does not fall under Article 2219 of our Civil Code, upon which plaintiffs rely; and because plaintiffs
have not established the amount of damages allegedly sustained by them.

The lower court held that plaintiffs' claim for damages cannot be based upon a tort or quasi-delict,
their relation with the defendants being contractual in nature. We have repeatedly held, however,
that the existence of a contract between the parties does not bar the commission of a tort by the one
against the order and the consequent recovery of damages therefor.2 Indeed, this view has been, in
effect, reiterated in a comparatively recent case. Thus, in Air France vs. Carrascoso,3 involving an
airplane passenger who, despite his first-class ticket, had been illegally ousted from his first-class
accommodation and compelled to take a seat in the tourist compartment, was held entitled to
recover damages from the air-carrier, upon the ground of tort on the latter's part, for, although the
relation between a passenger and a carrier is "contractual both in origin and nature ... the act that
breaks the contract may also be a tort".

In view, however, of the facts obtaining in the case at bar, and considering, particularly, the
circumstance, that the wrong done to the plaintiff was remedied as soon as the President of the bank
realized the mistake he and his subordinate employee had committed, the Court finds that an award
of nominal damages — the amount of which need not be proven4 — in the sum of P1,000, in addition
to attorney's fees in the sum of P500, would suffice to vindicate plaintiff's rights.5

WHEREFORE, the judgment appealed from is hereby reversed, and another one shall be entered
sentencing the defendant Bank of the Philippine Islands to pay to the plaintiffs said sums of P1,000,
as nominal damages, and P500, as attorney's fees, apart from the costs. It is so ordered.

G.R. No. 145804 February 6, 2003

AGENCY, respondents.



The case before the Court is an appeal from the decision and resolution of the Court of Appeals,
promulgated on 27 April 2000 and 10 October 2000, respectively, in CA-G.R. CV No. 60720, entitled
"Marjorie Navidad and Heirs of the Late Nicanor Navidad vs. Rodolfo Roman, et. al.," which has
modified the decision of 11 August 1998 of the Regional Trial Court, Branch 266, Pasig City,
exonerating Prudent Security Agency (Prudent) from liability and finding Light Rail Transit Authority
(LRTA) and Rodolfo Roman liable for damages on account of the death of Nicanor Navidad.

On 14 October 1993, about half an hour past seven o’clock in the evening, Nicanor Navidad, then
drunk, entered the EDSA LRT station after purchasing a "token" (representing payment of the fare).
While Navidad was standing on the platform near the LRT tracks, Junelito Escartin, the security
guard assigned to the area approached Navidad. A misunderstanding or an altercation between the
two apparently ensued that led to a fist fight. No evidence, however, was adduced to indicate how
the fight started or who, between the two, delivered the first blow or how Navidad later fell on the
LRT tracks. At the exact moment that Navidad fell, an LRT train, operated by petitioner Rodolfo
Roman, was coming in. Navidad was struck by the moving train, and he was killed instantaneously.

On 08 December 1994, the widow of Nicanor, herein respondent Marjorie Navidad, along with her
children, filed a complaint for damages against Junelito Escartin, Rodolfo Roman, the LRTA, the
Metro Transit Organization, Inc. (Metro Transit), and Prudent for the death of her husband. LRTA
and Roman filed a counterclaim against Navidad and a cross-claim against Escartin and Prudent.
Prudent, in its answer, denied liability and averred that it had exercised due diligence in the selection
and supervision of its security guards.

The LRTA and Roman presented their evidence while Prudent and Escartin, instead of presenting
evidence, filed a demurrer contending that Navidad had failed to prove that Escartin was negligent in
his assigned task. On 11 August 1998, the trial court rendered its decision; it adjudged:

"WHEREFORE, judgment is hereby rendered in favor of the plaintiffs and against the defendants
Prudent Security and Junelito Escartin ordering the latter to pay jointly and severally the plaintiffs the

"a) 1) Actual damages of P44,830.00;

2) Compensatory damages of P443,520.00;

3) Indemnity for the death of Nicanor Navidad in the sum of P50,000.00;

"b) Moral damages of P50,000.00;

"c) Attorney’s fees of P20,000;

"d) Costs of suit.

"The complaint against defendants LRTA and Rodolfo Roman are dismissed for lack of merit.

"The compulsory counterclaim of LRTA and Roman are likewise dismissed."1

Prudent appealed to the Court of Appeals. On 27 August 2000, the appellate court promulgated its
now assailed decision exonerating Prudent from any liability for the death of Nicanor Navidad and,
instead, holding the LRTA and Roman jointly and severally liable thusly:

"WHEREFORE, the assailed judgment is hereby MODIFIED, by exonerating the appellants from any
liability for the death of Nicanor Navidad, Jr. Instead, appellees Rodolfo Roman and the Light Rail
Transit Authority (LRTA) are held liable for his death and are hereby directed to pay jointly and
severally to the plaintiffs-appellees, the following amounts:

a) P44,830.00 as actual damages;

b) P50,000.00 as nominal damages;

c) P50,000.00 as moral damages;

d) P50,000.00 as indemnity for the death of the deceased; and

e) P20,000.00 as and for attorney’s fees."2

The appellate court ratiocinated that while the deceased might not have then as yet boarded the
train, a contract of carriage theretofore had already existed when the victim entered the place where
passengers were supposed to be after paying the fare and getting the corresponding token therefor.
In exempting Prudent from liability, the court stressed that there was nothing to link the security
agency to the death of Navidad. It said that Navidad failed to show that Escartin inflicted fist blows
upon the victim and the evidence merely established the fact of death of Navidad by reason of his
having been hit by the train owned and managed by the LRTA and operated at the time by Roman.
The appellate court faulted petitioners for their failure to present expert evidence to establish the fact
that the application of emergency brakes could not have stopped the train.

The appellate court denied petitioners’ motion for reconsideration in its resolution of 10 October

In their present recourse, petitioners recite alleged errors on the part of the appellate court; viz:








Petitioners would contend that the appellate court ignored the evidence and the factual findings of
the trial court by holding them liable on the basis of a sweeping conclusion that the presumption of
negligence on the part of a common carrier was not overcome. Petitioners would insist that
Escartin’s assault upon Navidad, which caused the latter to fall on the tracks, was an act of a
stranger that could not have been foreseen or prevented. The LRTA would add that the appellate
court’s conclusion on the existence of an employer-employee relationship between Roman and
LRTA lacked basis because Roman himself had testified being an employee of Metro Transit and
not of the LRTA.

Respondents, supporting the decision of the appellate court, contended that a contract of carriage
was deemed created from the moment Navidad paid the fare at the LRT station and entered the
premises of the latter, entitling Navidad to all the rights and protection under a contractual relation,
and that the appellate court had correctly held LRTA and Roman liable for the death of Navidad in
failing to exercise extraordinary diligence imposed upon a common carrier.

Law and jurisprudence dictate that a common carrier, both from the nature of its business and for
reasons of public policy, is burdened with the duty of exercising utmost diligence in ensuring the
safety of passengers.4 The Civil Code, governing the liability of a common carrier for death of or
injury to its passengers, provides:

"Article 1755. A common carrier is bound to carry the passengers safely as far as human care and
foresight can provide, using the utmost diligence of very cautious persons, with a due regard for all
the circumstances.

"Article 1756. In case of death of or injuries to passengers, common carriers are presumed to have
been at fault or to have acted negligently, unless they prove that they observed extraordinary
diligence as prescribed in articles 1733 and 1755."

"Article 1759. Common carriers are liable for the death of or injuries to passengers through the
negligence or willful acts of the former’s employees, although such employees may have acted
beyond the scope of their authority or in violation of the orders of the common carriers.

"This liability of the common carriers does not cease upon proof that they exercised all the diligence
of a good father of a family in the selection and supervision of their employees."

"Article 1763. A common carrier is responsible for injuries suffered by a passenger on account of the
willful acts or negligence of other passengers or of strangers, if the common carrier’s employees
through the exercise of the diligence of a good father of a family could have prevented or stopped
the act or omission."

The law requires common carriers to carry passengers safely using the utmost diligence of very
cautious persons with due regard for all circumstances.5 Such duty of a common carrier to provide
safety to its passengers so obligates it not only during the course of the trip but for so long as the
passengers are within its premises and where they ought to be in pursuance to the contract of
carriage.6 The statutory provisions render a common carrier liable for death of or injury to passengers
(a) through the negligence or wilful acts of its employees or b) on account of wilful acts or negligence
of other passengers or of strangers if the common carrier’s employees through the exercise of due
diligence could have prevented or stopped the act or omission.7 In case of such death or injury, a
carrier is presumed to have been at fault or been negligent, and8 by simple proof of injury, the
passenger is relieved of the duty to still establish the fault or negligence of the carrier or of its
employees and the burden shifts upon the carrier to prove that the injury is due to an unforeseen
event or to force majeure.9 In the absence of satisfactory explanation by the carrier on how the
accident occurred, which petitioners, according to the appellate court, have failed to show, the
presumption would be that it has been at fault,10 an exception from the general rule that negligence
must be proved.11

The foundation of LRTA’s liability is the contract of carriage and its obligation to indemnify the victim
arises from the breach of that contract by reason of its failure to exercise the high diligence required
of the common carrier. In the discharge of its commitment to ensure the safety of passengers, a
carrier may choose to hire its own employees or avail itself of the services of an outsider or an
independent firm to undertake the task. In either case, the common carrier is not relieved of its
responsibilities under the contract of carriage.

Should Prudent be made likewise liable? If at all, that liability could only be for tort under the
provisions of Article 217612 and related provisions, in conjunction with Article 2180,13 of the Civil Code.
The premise, however, for the employer’s liability is negligence or fault on the part of the employee.
Once such fault is established, the employer can then be made liable on the basis of the
presumption juris tantum that the employer failed to exercise diligentissimi patris families in the
selection and supervision of its employees. The liability is primary and can only be negated by
showing due diligence in the selection and supervision of the employee, a factual matter that has not
been shown. Absent such a showing, one might ask further, how then must the liability of the
common carrier, on the one hand, and an independent contractor, on the other hand, be described?
It would be solidary. A contractual obligation can be breached by tort and when the same act or
omission causes the injury, one resulting in culpa contractual and the other in culpa aquiliana, Article
219414 of the Civil Code can well apply.15 In fine, a liability for tort may arise even under a contract,
where tort is that which breaches the contract.16 Stated differently, when an act which constitutes a
breach of contract would have itself constituted the source of a quasi-delictual liability had no
contract existed between the parties, the contract can be said to have been breached by tort,
thereby allowing the rules on tort to apply.17

Regrettably for LRT, as well as perhaps the surviving spouse and heirs of the late Nicanor Navidad,
this Court is concluded by the factual finding of the Court of Appeals that "there is nothing to link
(Prudent) to the death of Nicanor (Navidad), for the reason that the negligence of its employee,
Escartin, has not been duly proven x x x." This finding of the appellate court is not without substantial
justification in our own review of the records of the case.

There being, similarly, no showing that petitioner Rodolfo Roman himself is guilty of any culpable act
or omission, he must also be absolved from liability. Needless to say, the contractual tie between the
LRT and Navidad is not itself a juridical relation between the latter and Roman; thus, Roman can be
made liable only for his own fault or negligence.

The award of nominal damages in addition to actual damages is untenable. Nominal damages are
adjudicated in order that a right of the plaintiff, which has been violated or invaded by the defendant,
may be vindicated or recognized, and not for the purpose of indemnifying the plaintiff for any loss
suffered by him.18 It is an established rule that nominal damages cannot co-exist with compensatory

WHEREFORE, the assailed decision of the appellate court is AFFIRMED with MODIFICATION but
only in that (a) the award of nominal damages is DELETED and (b) petitioner Rodolfo Roman is
absolved from liability. No costs.

G.R. No. 138550 October 14, 2005


NOEL CORDERO, Defendant.



This is a petition for review on certiorari of the Decision1 of the Court of Appeals dated April 30, 1999
in CA-G.R. CV No. 51671, entitled, "Noel Cordero, Plaintiff-Appellee versus American Express
International, Inc., Defendant-Appellant."

Petitioner is a foreign corporation that issues charge cards to its customers, which the latter then use
to purchase goods and services at accredited merchants worldwide. Sometime in 1988, Nilda
Cordero, wife of respondent Noel Cordero, applied for and was issued an American Express charge
card with No. 3769-895901-010020. The issuance of the charge card was covered by an Amex
Cardmember Agreement. As cardholder, Nilda, upon signing the back portion of the card,
manifested her acceptance of the terms of the Agreement.

An extension charge card, with No. 3769-895901-01010, was likewise issued to respondent Noel
Cordero which he also signed.2

On November 29, 1991, respondent, together with his wife, Nilda, daughter, sisters-in-law and uncle-
in-law, went on a three-day holiday trip to Hong Kong. In the early evening of November 30, 1991, at
about 7:00 o’clock, the group went to the Watson’s Chemist Shop located at 277C Ocean Gallery,
Kowloon, Hong Kong. Noel picked up some chocolate candies and handed to the sales clerk his
American Express extension charge card to pay for his purchases. The sales clerk verified the card
by making a telephone call to the American Express Office in Hong Kong. Moments later, Susan
Chong, the store manager, emerged from behind the counter and informed respondent that she had
to confiscate the card. Thereupon, she cut respondent’s American Express card in half with a pair of
scissors. This, according to respondent, caused him embarrassment and humiliation considering
that it was done in front of his family and the other customers lined up at the check-out counter.
Hence, Nilda had to pay for the purchases using her own American Express charge card.3

When they returned to the Excelsior Hotel, Nilda called up petitioner’s Office in Hong Kong. She was
able to talk to Senior Authorizer Johnny Chen, who informed her that on November 1, 1991, a
person in Hong Kong attempted to use a charge card with the same number as respondent’s card.
The Hong Kong American Express Office called up respondent and after determining that he was in
Manila and not in Hong Kong, placed his card in the "Inspect Airwarn Support System." This is the
system utilized by petitioner as a protection both for the company and the cardholders against the
fraudulent use of their charge cards. Once a card suspected of unauthorized use is placed in the
system, the person to whom the card is tendered must verify the identity of the holder. If the true
identity of the card owner is established, the card is honored and the charges are approved.
Otherwise, the card is revoked or confiscated.4

When the Watson’s sales clerk called up petitioner’s Hong Kong Office, its representative said he
wants to talk to respondent in order to verify the latter’s identity, pursuant to the procedure observed
under the "Inspect Airwarn Support System." However, respondent refused. Consequently,
petitioner’s representative was unable to establish the identity of the cardholder.5 This led to the
confiscation of respondent’s card.

On March 31, 1992, respondent filed with the Regional Trial Court, Branch V, Manila, a complaint for
damages against petitioner, docketed as Civil Case No. 92-60807. He prayed for the award of moral
damages and exemplary damages, as well as attorney’s fees as a result of the humiliation he

The trial court found that "the inexcusable failure of defendant (petitioner herein) to inform plaintiff
(respondent herein) of the November 1, 1991 incident despite sufficient time was the proximate
cause of the confiscation and cutting of plaintiff’s extension card which exposed the latter to public
humiliation for which defendant should be held liable."6 On February 20, 1995, the trial court
promulgated its Decision, the dispositive portion of which reads:

"WHEREFORE, judgment is hereby rendered in favor of the plaintiff and against the defendant,
ordering the latter to pay the former the following amounts, namely:

a) The sum of ₱300,000.00 as and by way of moral damages;

b) The sum of ₱200,000.00 as exemplary damages;

c) The sum of ₱100,000.00 as and for reasonable attorney’s fees; and

d) The costs of the suit.


Upon appeal, the Court of Appeals rendered the assailed Decision affirming the trial court’s Decision
with modification in the sense that the amounts of damages awarded were reduced, thus:

"WHEREFORE, in view of the foregoing, the appealed decision dated February 20, 1995 of the
Regional Trial Court of Manila, Branch V, in Civil Case No. 92-60807 is hereby AFFIRMED, subject
to modifications with respect to the amount of damages awarded, which are reduced as follows:

(a) Moral damages from ₱300,000.00 to ₱150,000.00; and

(b) Exemplary damages from ₱200,000.00 to ₱100,000.00.

No pronouncement as to costs.


Hence, the instant petition raising the following issues:

"A. Whether the lower courts gravely erred in attributing the ‘public humiliation’ allegedly suffered by
Cordero to Amex.

B. Whether the lower courts gravely erred in holding Amex liable to Cordero for moral damages,
exemplary damages and attorney’s fees."8
Respondent filed his comment contending in the main that the petition raises questions of fact
beyond this Court’s domain.

While it is true that under Rule 45 of the 1997 Rules of Civil Procedure, as amended, this Court may
review only errors of law, however, this rule admits of well-known recognized exceptions, thus:

". . . (1) the conclusion is a finding grounded entirely on speculation, surmise and conjecture; (2) the
inference made is manifestly mistaken; (3) there is grave abuse of discretion; (4) the judgment is
based on a misapprehension of facts; (5) the findings of fact are conflicting; (6) the Court of Appeals
went beyond the issues of the case and its findings are contrary to the admissions of both parties;
(7) the findings of fact of the Court of Appeals are contrary to those of the trial court; (8) said findings
of fact are conclusions without citation of specific evidence on which they are based; (9) the facts set
forth in the petition are not disputed by the respondents; and (10) the findings of fact of the Court of
Appeals are premised on the supposed absence of evidence and contradicted by the evidence on

In this case, the inference made by the courts below is manifestly mistaken. Therefore, we are
justified in reviewing the records of this case and rendering judgment based on our own findings.

In his complaint, respondent claimed that he suffered embarrassment and humiliation because his
card was unceremoniously confiscated and cut in half by Susan Chong of Watson’s Chemist Shop.

Respondent anchors his cause of action on the following provision of the Civil Code:

"Art. 2176. Whoever by act or omission causes damage to another, there being fault or negligence,
is obliged to pay for the damage done. Such fault or negligence, if there is no pre-existing
contractual relation between the parties, is called a quasi-delict and is governed by the provisions of
this Chapter."10

In order that an obligation based on quasi-delict may arise, there must be no pre-existing contractual
relation between the parties. But there are exceptions. There may be an action for quasi-delict
notwithstanding that there is a subsisting contract between the parties. A liability for tort may arise
even under a contract, where tort is that which breaches the contract. Stated differently, when an act
which constitutes a breach of contract would have itself constituted the source of a quasi-delictual
liability, the contract can be said to have been breached by tort, thereby allowing the rules on tort to

Furthermore, to constitute quasi-delict, the fault or negligence must be the proximate cause of the
damage or injury suffered by the plaintiff. Proximate cause is that cause which, in natural and
continuous sequence, unbroken by any efficient intervening cause, produces the injury and without
which the result would not have occurred. Proximate cause is determined by the facts of each case
upon mixed considerations of logic, common sense, policy and precedent.12

According to the trial court, petitioner should have informed respondent that on November 1, 1991, a
person in Hong Kong attempted to use a charge card bearing similar number to that of respondent’s
card; and that petitioner’s inexcusable failure to do so is the proximate cause of the "confiscation and
cutting of [respondent’s] extension card which exposed the latter to public humiliation for which
[petitioner] should be held liable."13

We cannot sustain the trial court’s conclusion.

As explained by respondent himself, he could have used his card upon verification by the sales clerk
of Watson that indeed he is the authorized cardholder. This could have been accomplished had
respondent talked to petitioner’s representative, enabling the latter to determine that respondent is
indeed the true holder of the card. Clearly, no negligence which breaches the contract can be
attributed to petitioner. If at all, the cause of respondent’s humiliation and embarrassment was his
refusal to talk to petitioner’s representative.

That respondent refused to talk to petitioner’s representative can be gleaned from the testimony of
Mr. Chen Heng Kun a.k.a. Johnny Chen during the deposition in Hong Kong,14 thus:

"Question No 9 : Was AEII required under its existing policies and/or membership agreement with its
cardholders to advise said cardholders of their card have been put under the support INSPECT –
Strictly Question (for identification) cardmembers before approving any charge?

Mr. Johnny Chen : Under the existing policies of AEII, we don’t have to inform the cardholders if they
have to pass the INSPECT –Strictly Questions (for identification).

Question No 10 : If the answer to Q9 is in the negative, please explain why not?

Mr. Johnny Chen : The reason why we don’t have to are because, first, we are not terminating the
service to the cardholder. Second, it doesn’t mean that we are going to limit the service to the
cardholder. Third, as long as the cardholder can present an identification card of his membership,
we allow him to use the card. He can show this by telephoning the company or by presenting us his
passport or travel document. When Watson Company called AEII for authorization, AEII
representative requested that he talk to Mr. Cordero but he refused to talk to any
representative of AEII. AEII could not prove then that he is really the real card holder."

Mr. Chen Heng Kun was briefly cross-examined by respondent’s counsel, thus:

"Question No 10 : Question 9 is objected to since the best evidence would be the membership
agreement between plaintiffs and AEII."

Significantly, paragraph 16 of the Cardmember Agreement signed by respondent provides:


"The Card remains our property and we can revoke your right and the right of ay Additional
Cardmember to use it at any time, we can do this with or without giving you notice. If we have
revoked the Card without cause, we will refund a proportion of your annual Card Account fee. We
may list revoked Cards in our "Cancellation Bulletin", or otherwise inform Establishments that the
Card issued to you and, if you are the basic Cardmember, any Additional Cards have been revoked
or cancelled.

"If we revoke the card or it expires, you must return it to us if we request. Also, if any Establishment
asks you to surrender an expired or revoked Card, you must do so. You may not use the Card after
it has expired or after it has been revoked.

"The revocation, repossession or request for the return of the Card is not, and shall not constitute
any reflection of your character or credit-worthiness and we shall not be liable in any way for any
statement made by any person requesting the return or surrender of the Card."15
To be sure, pursuant to the above stipulation, petitioner can revoke respondent’s card without notice,
as was done here. It bears reiterating that the subject card would not have been confiscated and cut
had respondent talked to petitioner’s representative and identified himself as the genuine cardholder.
It is thus safe to conclude that there was no negligence on the part of petitioner and that, therefore, it
cannot be held liable to respondent for damages.

WHEREFORE, the petition is GRANTED. The assailed Decision of the Court of Appeals in CA-G.R.
CV No. 51671 is REVERSED.


G.R. No. 120554 September 21, 1999

SO PING BUN, petitioner,



This petition for certiorari challenges the Decision 1 of the Court of Appeals dated October 10, 1994,
and the Resolution 2dated June 5, 1995, in CA-G.R. CV No. 38784. The appellate court affirmed the
decision of the Regional Trial Court of Manila, Branch 35, except for the award of attorney's fees, as

WHEREFORE, foregoing considered, the appeal of respondent-appellant So Ping

Bun for lack of merit is DISMISSED. The appealed decision dated April 20, 1992 of
the court a quo is modified by reducing the attorney's fees awarded to plaintiff Tek
Hua Enterprising Corporation from P500,000.00 to P200,000.00. 3

The facts are as follows:

In 1963, Tek Hua Trading Co, through its managing partner, So Pek Giok, entered into lease
agreements with lessor Dee C. Chuan & Sons Inc. (DCCSI). Subjects of four (4) lease contracts
were premises located at Nos. 930, 930-Int., 924-B and 924-C, Soler Street, Binondo, Manila. Tek
Hua used the areas to store its textiles. The contracts each had a one-year term. They provided that
should the lessee continue to occupy the premises after the term, the lease shall be on a month-to-
month basis.

When the contracts expired, the parties did not renew the contracts, but Tek Hua continued to
occupy the premises. In 1976, Tek Hua Trading Co. was dissolved. Later, the original members of
Tek Hua Trading Co. including Manuel C. Tiong, formed Tek Hua Enterprising Corp., herein
respondent corporation.

So Pek Giok, managing partner of Tek Hua Trading, died in 1986. So Pek Giok's grandson,
petitioner So Ping Bun, occupied the warehouse for his own textile business, Trendsetter Marketing.

On August 1, 1989, lessor DCCSI sent letters addressed to Tek Hua Enterprises, informing the latter
of the 25% increase in rent effective September 1, 1989. The rent increase was later on reduced to
20% effective January 1, 1990, upon other lessees' demand. Again on December 1, 1990, the lessor
implemented a 30% rent increase. Enclosed in these letters were new lease contracts for signing.
DCCSI warned that failure of the lessee to accomplish the contracts shall be deemed as lack of
interest on the lessee's part, and agreement to the termination of the lease. Private respondents did
not answer any of these letters. Still, the lease contracts were not rescinded.

On March 1, 1991, private respondent Tiong sent a letter to petitioner which reads as follows:

March 1, 1991

Mr. So Ping Bun

930 Soler Street

Binondo, Manila

Dear Mr. So,

Due to my closed (sic) business associate (sic) for three decades with your late
grandfather Mr. So Pek Giok and late father, Mr. So Chong Bon, I allowed you
temporarily to use the warehouse of Tek Hua Enterprising Corp. for several years to
generate your personal business.

Since I decided to go back into textile business, I need a warehouse immediately for
my stocks. Therefore, please be advised to vacate all your stocks in Tek Hua
Enterprising Corp. Warehouse. You are hereby given 14 days to vacate the premises
unless you have good reasons that you have the right to stay. Otherwise, I will be
constrained to take measure to protect my interest.

Please give this urgent matter your preferential attention to avoid inconvenience on
your part.

Very truly yours,

(Sgd) Manuel C. Tiong


President 4

Petitioner refused to vacate. On March 4, 1992, petitioner requested formal contracts of lease with DCCSI
in favor Trendsetter Marketing. So Ping Bun claimed that after the death of his grandfather, So Pek Giok,
he had been occupying the premises for his textile business and religiously paid rent. DCCSI acceded to
petitioner's request. The lease contracts in favor of Trendsetter were executed.

In the suit for injunction, private respondents pressed for the nullification of the lease contracts
between DCCSI and petitioner. They also claimed damages.

After trial, the trial court ruled:

WHEREFORE, judgment is rendered:

1. Annulling the four Contracts of Lease (Exhibits A,
A-1 to A-3, inclusive) all dated March 11, 1991,
between defendant So Ping Bun, doing business
under the name and style of "Trendsetter Marketing",
and defendant Dee C. Chuan & Sons, Inc. over the
premises located at Nos. 924-B, 924-C, 930 and 930,
Int., respectively, Soler Street, Binondo Manila;

2. Making permanent the writ of preliminary injunction

issued by this Court on June 21, 1991;

3. Ordering defendant So Ping Bun to pay the

aggrieved party, plaintiff Tek Hua Enterprising
Corporation, the sum of P500,000.00, for attorney's

4. Dismissing the complaint, insofar as plaintiff

Manuel C. Tiong is concerned, and the respective
counterclaims of the defendant;

5. Ordering defendant So Ping Bun to pay the costs of

this lawsuit;

This judgment is without prejudice to the rights of plaintiff Tek Hua Enterprising
Corporation and defendant Dee C. Chuan & Sons, Inc. to negotiate for the renewal of
their lease contracts over the premises located at Nos. 930, 930-Int., 924-B and 924-
C Soler Street, Binondo, Manila, under such terms and conditions as they agree
upon, provided they are not contrary to law, public policy, public order, and morals.


Petitioner's motion for reconsideration of the above decision was denied.

On appeal by So Ping Bun, the Court of Appeals upheld the trial court. On motion for
reconsideration, the appellate court modified the decision by reducing the award of attorney's fees
from five hundred thousand (P500,000.00) pesos to two hundred thousand (P200,000.00) pesos.

Petitioner is now before the Court raising the following issues:





The foregoing issues involve, essentially, the correct interpretation of the applicable law on tortuous
conduct, particularly unlawful interference with contract. We have to begin, obviously, with certain
fundamental principles on torts and damages.
Damage is the loss, hurt, or harm which results from injury, and damages are the recompense or
compensation awarded for the damage suffered. 6 One becomes liable in an action for damages for a
nontrespassory invasion of another's interest in the private use and enjoyment of asset if (a) the other has
property rights and privileges with respect to the use or enjoyment interfered with, (b) the invasion is
substantial, (c) the defendant's conduct is a legal cause of the invasion, and (d) the invasion is either
intentional and unreasonable or unintentional and actionable under general negligence rules. 7

The elements of tort interference are: (1) existence of a valid contract; (2) knowledge on the part of the
third person of the existence of contract; and (3) interference of the third person is without legal
justification or excuse. 8

A duty which the law of torts is concerned with is respect for the property of others, and a cause of
action ex delicto may be predicated upon an unlawful interference by one person of the enjoyment by the
other of his private
property.9 This may pertain to a situation where a third person induces a party to renege on or violate his
undertaking under a contract. In the case before us, petitioner's Trendsetter Marketing asked DCCSI to
execute lease contracts in its favor, and as a result petitioner deprived respondent corporation of the
latter's property right. Clearly, and as correctly viewed by the appellate court, the three elements of tort
interference above-mentioned are present in the instant case.

Authorities debate on whether interference may be justified where the defendant acts for the sole
purpose of furthering his own financial or economic interest. 10 One view is that, as a general rule,
justification for interfering with the business relations of another exists where the actor's motive is to
benefit himself. Such justification does not exist where his sole motive is to cause harm to the other.
Added to this, some authorities believe that it is not necessary that the interferer's interest outweigh that
of the party whose rights are invaded, and that an individual acts under an economic interest that is
substantial, not merely de minimis, such that wrongful and malicious motives are negatived, for he acts in
self-protection. 11Moreover justification for protecting one's financial position should not be made to
depend on a comparison of his economic interest in the subject matter with that of others. 12 It is sufficient
if the impetus of his conduct lies in a proper business interest rather than in wrongful motives. 13

As early as Gilchrist vs. Cuddy, 14 we held that where there was no malice in the interference of a
contract, and the impulse behind one's conduct lies in a proper business interest rather than in wrongful
motives, a party cannot be a malicious interferer. Where the alleged interferer is financially interested,
and such interest motivates his conduct, it cannot be said that he is an officious or malicious
intermeddler. 15

In the instant case, it is clear that petitioner So Ping Bun prevailed upon DCCSI to lease the warehouse to
his enterprise at the expense of respondent corporation. Though petitioner took interest in the property of
respondent corporation and benefited from it, nothing on record imputes deliberate wrongful motives or
malice on him.

Sec. 1314 of the Civil Code categorically provides also that, "Any third person who induces another
to violate his contract shall be liable for damages to the other contracting party." Petitioner argues
that damage is an essential element of tort interference, and since the trial court and the appellate
court ruled that private respondents were not entitled to actual, moral or exemplary damages, it
follows that he ought to be absolved of any liability, including attorney's fees.

It is true that the lower courts did not award damages, but this was only because the extent of
damages was not quantifiable. We had a similar situation in Gilchrist, where it was difficult or
impossible to determine the extent of damage and there was nothing on record to serve as basis
thereof. In that case we refrained from awarding damages. We believe the same conclusion applies
in this case.
While we do not encourage tort interferers seeking their economic interest to intrude into existing
contracts at the expense of others, however, we find that the conduct herein complained of did not
transcend the limits forbidding an obligatory award for damages in the absence of any malice. The
business desire is there to make some gain to the detriment of the contracting parties. Lack of
malice, however, precludes damages. But it does not relieve petitioner of the legal liability for
entering into contracts and causing breach of existing ones. The respondent appellate court correctly
confirmed the permanent injunction and nullification of the lease contracts between DCCSI and
Trendsetter Marketing, without awarding damages. The injunction saved the respondents from
further damage or injury caused by petitioner's interference.

Lastly, the recovery of attorney's fees in the concept of actual or compensatory damages, is allowed
under the circumstances provided for in Article 2208 of the Civil Code. 16 One such occasion is when
the defendant's act or omission has compelled the plaintiff to litigate with third persons or to incur
expenses to protect his interest. 17 But we have consistently held that the award of considerable damages
should have clear factual and legal bases. 18 In connection with attorney's fees, the award should be
commensurate to the benefits that would have been derived from a favorable judgment. Settled is the rule
that fairness of the award of damages by the trial court calls for appellate review such that the award if far
too excessive can be reduced. 19 This ruling applies with equal force on the award of attorney's fees. In a
long line of cases we said, "It is not sound policy to place in penalty on the right to litigate. To compel the
defeated party to pay the fees of counsel for his successful opponent would throw wide open the door of
temptation to the opposing party and his counsel to swell the fees to undue proportions." 20

Considering that the respondent corporation's lease contract, at the time when the cause of action
accrued, ran only on a month-to-month basis whence before it was on a yearly basis, we find even
the reduced amount of attorney's fees ordered by the Court of Appeals still exorbitant in the light of
prevailing jurisprudence. 21 Consequently, the amount of two hundred thousand (P200,000.00) awarded
by respondent appellate court should be reduced to one hundred thousand (P100,000.00) pesos as the
reasonable award or attorney's fees in favor of private respondent corporation.

WHEREFORE, the petition is hereby DENIED. The assailed Decision and Resolution of the Court of
Appeals in CA-G.R. CV No. 38784 are hereby AFFIRMED, with MODIFICATION that the award of
attorney's fees is reduced from two hundred thousand (P200,000.00) to one hundred thousand
(P100,000.00) pesos. No pronouncement as to costs. 1âw phi1.nêt


[G.R. No. 138569. September 11, 2003]


CPAs, respondents.

The Case

Before us is a petition for review of the Decision of the Court of Appeals


dated 27 October 1998 and its Resolution dated 11 May 1999. The assailed
decision reversed the Decision of the Regional Trial Court of Manila, Branch

8, absolving petitioner Consolidated Bank and Trust Corporation, now known

as Solidbank Corporation (Solidbank), of any liability. The questioned resolution
of the appellate court denied the motion for reconsideration of Solidbank but
modified the decision by deleting the award of exemplary damages, attorneys
fees, expenses of litigation and cost of suit.

The Facts

Solidbank is a domestic banking corporation organized and existing under

Philippine laws. Private respondent L.C. Diaz and Company, CPAs (L.C. Diaz),
is a professional partnership engaged in the practice of accounting.
Sometime in March 1976, L.C. Diaz opened a savings account with
Solidbank, designated as Savings Account No. S/A 200-16872-6.
On 14 August 1991, L.C. Diaz through its cashier, Mercedes Macaraya
(Macaraya), filled up a savings (cash) deposit slip for P990 and a savings
(checks) deposit slip for P50. Macaraya instructed the messenger of L.C. Diaz,
Ismael Calapre (Calapre), to deposit the money with Solidbank. Macaraya also
gave Calapre the Solidbank passbook.
Calapre went to Solidbank and presented to Teller No. 6 the two deposit
slips and the passbook. The teller acknowledged receipt of the deposit by
returning to Calapre the duplicate copies of the two deposit slips. Teller No. 6
stamped the deposit slips with the words DUPLICATE and SAVING TELLER 6
SOLIDBANK HEAD OFFICE. Since the transaction took time and Calapre had
to make another deposit for L.C. Diaz with Allied Bank, he left the passbook
with Solidbank. Calapre then went to Allied Bank. When Calapre returned to
Solidbank to retrieve the passbook, Teller No. 6 informed him that somebody
got the passbook. Calapre went back to L.C. Diaz and reported the incident to

Macaraya immediately prepared a deposit slip in duplicate copies with a
check of P200,000. Macaraya, together with Calapre, went to Solidbank and
presented to Teller No. 6 the deposit slip and check. The teller stamped the
the duplicate copy of the deposit slip. When Macaraya asked for the passbook,
Teller No. 6 told Macaraya that someone got the passbook but she could not
remember to whom she gave the passbook. When Macaraya asked Teller No.
6 if Calapre got the passbook, Teller No. 6 answered that someone shorter than
Calapre got the passbook. Calapre was then standing beside Macaraya.
Teller No. 6 handed to Macaraya a deposit slip dated 14 August 1991 for
the deposit of a check for P90,000 drawn on Philippine Banking Corporation
(PBC). This PBC check of L.C. Diaz was a check that it had long closed. PBC

subsequently dishonored the check because of insufficient funds and because

the signature in the check differed from PBCs specimen signature. Failing to
get back the passbook, Macaraya went back to her office and reported the
matter to the Personnel Manager of L.C. Diaz, Emmanuel Alvarez.
The following day, 15 August 1991, L.C. Diaz through its Chief Executive
Officer, Luis C. Diaz (Diaz), called up Solidbank to stop any transaction using
the same passbook until L.C. Diaz could open a new account. On the same

day, Diaz formally wrote Solidbank to make the same request. It was also on
the same day that L.C. Diaz learned of the unauthorized withdrawal the day
before, 14 August 1991, of P300,000 from its savings account. The withdrawal
slip for the P300,000 bore the signatures of the authorized signatories of L.C.
Diaz, namely Diaz and Rustico L. Murillo. The signatories, however, denied
signing the withdrawal slip. A certain Noel Tamayo received the P300,000.
In an Information dated 5 September 1991, L.C. Diaz charged its

messenger, Emerano Ilagan (Ilagan) and one Roscon Verdazola with Estafa
through Falsification of Commercial Document. The Regional Trial Court of
Manila dismissed the criminal case after the City Prosecutor filed a Motion to
Dismiss on 4 August 1992.
On 24 August 1992, L.C. Diaz through its counsel demanded from
Solidbank the return of its money. Solidbank refused.
On 25 August 1992, L.C. Diaz filed a Complaint for Recovery of a Sum of

Money against Solidbank with the Regional Trial Court of Manila, Branch
8. After trial, the trial court rendered on 28 December 1994 a decision absolving
Solidbank and dismissing the complaint.
L.C. Diaz then appealed to the Court of Appeals. On 27 October 1998, the

Court of Appeals issued its Decision reversing the decision of the trial court.
On 11 May 1999, the Court of Appeals issued its Resolution denying the
motion for reconsideration of Solidbank. The appellate court, however, modified
its decision by deleting the award of exemplary damages and attorneys fees.
The Ruling of the Trial Court

In absolving Solidbank, the trial court applied the rules on savings account
written on the passbook. The rules state that possession of this book shall raise
the presumption of ownership and any payment or payments made by the bank
upon the production of the said book and entry therein of the withdrawal shall
have the same effect as if made to the depositor personally. [9]

At the time of the withdrawal, a certain Noel Tamayo was not only in
possession of the passbook, he also presented a withdrawal slip with the
signatures of the authorized signatories of L.C. Diaz. The specimen signatures
of these persons were in the signature cards. The teller stamped the withdrawal
slip with the words Saving Teller No. 5. The teller then passed on the withdrawal
slip to Genere Manuel (Manuel) for authentication. Manuel verified the
signatures on the withdrawal slip. The withdrawal slip was then given to another
officer who compared the signatures on the withdrawal slip with the specimen
on the signature cards. The trial court concluded that Solidbank acted with care
and observed the rules on savings account when it allowed the withdrawal
of P300,000 from the savings account of L.C. Diaz.
The trial court pointed out that the burden of proof now shifted to L.C. Diaz
to prove that the signatures on the withdrawal slip were forged. The trial court
admonished L.C. Diaz for not offering in evidence the National Bureau of
Investigation (NBI) report on the authenticity of the signatures on the withdrawal
slip for P300,000. The trial court believed that L.C. Diaz did not offer this
evidence because it is derogatory to its action.
Another provision of the rules on savings account states that the depositor
must keep the passbook under lock and key. When another person presents

the passbook for withdrawal prior to Solidbanks receipt of the notice of loss of
the passbook, that person is considered as the owner of the passbook. The trial
court ruled that the passbook presented during the questioned transaction was
now out of the lock and key and presumptively ready for a business

Solidbank did not have any participation in the custody and care of the
passbook. The trial court believed that Solidbanks act of allowing the withdrawal
of P300,000 was not the direct and proximate cause of the loss. The trial court
held that L.C. Diazs negligence caused the unauthorized withdrawal. Three
facts establish L.C. Diazs negligence: (1) the possession of the passbook by a
person other than the depositor L.C. Diaz; (2) the presentation of a signed
withdrawal receipt by an unauthorized person; and (3) the possession by an
unauthorized person of a PBC check long closed by L.C. Diaz, which check
was deposited on the day of the fraudulent withdrawal.
The trial court debunked L.C. Diazs contention that Solidbank did not follow
the precautionary procedures observed by the two parties whenever L.C. Diaz
withdrew significant amounts from its account. L.C. Diaz claimed that a letter
must accompany withdrawals of more than P20,000. The letter must request
Solidbank to allow the withdrawal and convert the amount to a managers
check. The bearer must also have a letter authorizing him to withdraw the same
amount. Another person driving a car must accompany the bearer so that he
would not walk from Solidbank to the office in making the withdrawal. The trial
court pointed out that L.C. Diaz disregarded these precautions in its past
withdrawal. On 16 July 1991, L.C. Diaz withdrew P82,554 without any separate
letter of authorization or any communication with Solidbank that the money be
converted into a managers check.
The trial court further justified the dismissal of the complaint by holding that
the case was a last ditch effort of L.C. Diaz to recover P300,000 after the
dismissal of the criminal case against Ilagan.
The dispositive portion of the decision of the trial court reads:

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


The Court further renders judgment in favor of defendant bank pursuant to its
counterclaim the amount of Thirty Thousand Pesos (P30,000.00) as attorneys fees.

With costs against plaintiff.


The Ruling of the Court of Appeals

The Court of Appeals ruled that Solidbanks negligence was the proximate
cause of the unauthorized withdrawal of P300,000 from the savings account of
L.C. Diaz. The appellate court reached this conclusion after applying the
provision of the Civil Code on quasi-delict, to wit:

Article 2176. Whoever by act or omission causes damage to another, there being fault
or negligence, is obliged to pay for the damage done. Such fault or negligence, if there
is no pre-existing contractual relation between the parties, is called a quasi-delict and
is governed by the provisions of this chapter.

The appellate court held that the three elements of a quasi-delict are present in
this case, namely: (a) damages suffered by the plaintiff; (b) fault or negligence
of the defendant, or some other person for whose acts he must respond; and
(c) the connection of cause and effect between the fault or negligence of the
defendant and the damage incurred by the plaintiff.
The Court of Appeals pointed out that the teller of Solidbank who received
the withdrawal slip for P300,000 allowed the withdrawal without making the
necessary inquiry.The appellate court stated that the teller, who was not
presented by Solidbank during trial, should have called up the depositor
because the money to be withdrawn was a significant amount. Had the teller
called up L.C. Diaz, Solidbank would have known that the withdrawal was
unauthorized. The teller did not even verify the identity of the impostor who
made the withdrawal. Thus, the appellate court found Solidbank liable for its
negligence in the selection and supervision of its employees.
The appellate court ruled that while L.C. Diaz was also negligent in
entrusting its deposits to its messenger and its messenger in leaving the
passbook with the teller,Solidbank could not escape liability because of the
doctrine of last clear chance. Solidbank could have averted the injury suffered
by L.C. Diaz had it called up L.C. Diaz to verify the withdrawal.
The appellate court ruled that the degree of diligence required from
Solidbank is more than that of a good father of a family. The business and
functions of banks are affected with public interest. Banks are obligated to treat
the accounts of their depositors with meticulous care, always having in mind the
fiduciary nature of their relationship with their clients. The Court of Appeals
found Solidbank remiss in its duty, violating its fiduciary relationship with L.C.
The dispositive portion of the decision of the Court of Appeals reads:

WHEREFORE, premises considered, the decision appealed from is hereby

REVERSED and a new one entered.

1. Ordering defendant-appellee Consolidated Bank and Trust Corporation to

pay plaintiff-appellant the sum of Three Hundred Thousand Pesos
(P300,000.00), with interest thereon at the rate of 12% per annum from
the date of filing of the complaint until paid, the sum of P20,000.00 as
exemplary damages, and P20,000.00 as attorneys fees and expenses of
litigation as well as the cost of suit; and
2. Ordering the dismissal of defendant-appellees counterclaim in the amount
of P30,000.00 as attorneys fees.


Acting on the motion for reconsideration of Solidbank, the appellate court

affirmed its decision but modified the award of damages. The appellate court
deleted the award of exemplary damages and attorneys fees. Invoking Article
2231 of the Civil Code, the appellate court ruled that exemplary damages

could be granted if the defendant acted with gross negligence. Since Solidbank
was guilty of simple negligence only, the award of exemplary damages was not
justified. Consequently, the award of attorneys fees was also disallowed
pursuant to Article 2208 of the Civil Code. The expenses of litigation and cost
of suit were also not imposed on Solidbank.
The dispositive portion of the Resolution reads as follows:

WHEREFORE, foregoing considered, our decision dated October 27, 1998 is

affirmed with modification by deleting the award of exemplary damages and attorneys
fees, expenses of litigation and cost of suit.


Hence, this petition.

The Issues

Solidbank seeks the review of the decision and resolution of the Court of
Appeals on these grounds:







The Ruling of the Court

The petition is partly meritorious.

Solidbanks Fiduciary Duty under the Law

The rulings of the trial court and the Court of Appeals conflict on the
application of the law. The trial court pinned the liability on L.C. Diaz based on
the provisions of the rules on savings account, a recognition of the contractual
relationship between Solidbank and L.C. Diaz, the latter being a depositor of
the former. On the other hand, the Court of Appeals applied the law on quasi-
delict to determine who between the two parties was ultimately negligent. The
law on quasi-delict or culpa aquiliana is generally applicable when there is no
pre-existing contractual relationship between the parties.
We hold that Solidbank is liable for breach of contract due to negligence,
or culpa contractual.
The contract between the bank and its depositor is governed by the
provisions of the Civil Code on simple loan. Article 1980 of the Civil Code

expressly provides that x x x savings x x x deposits of money in banks and

similar institutions shall be governed by the provisions concerning simple
loan. There is a debtor-creditor relationship between the bank and its
depositor. The bank is the debtor and the depositor is the creditor. The
depositor lends the bank money and the bank agrees to pay the depositor on
demand.The savings deposit agreement between the bank and the depositor is
the contract that determines the rights and obligations of the parties.
The law imposes on banks high standards in view of the fiduciary nature of
banking.Section 2 of Republic Act No. 8791 (RA 8791), which took effect on

13 June 2000, declares that the State recognizes the fiduciary nature of banking
that requires high standards of integrity and performance. This new provision

in the general banking law, introduced in 2000, is a statutory affirmation of

Supreme Court decisions, starting with the 1990 case of Simex International
v. Court of Appeals, holding that the bank is under obligation to treat the

accounts of its depositors with meticulous care, always having in mind the
fiduciary nature of their relationship.

This fiduciary relationship means that the banks obligation to observe high
standards of integrity and performance is deemed written into every deposit
agreement between a bank and its depositor. The fiduciary nature of banking
requires banks to assume a degree of diligence higher than that of a good father
of a family. Article 1172 of the Civil Code states that the degree of diligence
required of an obligor is that prescribed by law or contract, and absent such
stipulation then the diligence of a good father of a family. Section 2 of RA 8791

prescribes the statutory diligence required from banks that banks must observe
high standards of integrity and performance in servicing their
depositors.Although RA 8791 took effect almost nine years after the
unauthorized withdrawal of the P300,000 from L.C. Diazs savings account,
jurisprudence at the time of the withdrawal already imposed on banks the

same high standard of diligence required under RA No. 8791.

However, the fiduciary nature of a bank-depositor relationship does not
convert the contract between the bank and its depositors from a simple loan to
a trust agreement, whether express or implied. Failure by the bank to pay the
depositor is failure to pay a simple loan, and not a breach of trust. The law

simply imposes on the bank a higher standard of integrity and performance in

complying with its obligations under the contract of simple loan, beyond those
required of non-bank debtors under a similar contract of simple loan.
The fiduciary nature of banking does not convert a simple loan into a trust
agreement because banks do not accept deposits to enrich depositors but to
earn money for themselves. The law allows banks to offer the lowest possible
interest rate to depositors while charging the highest possible interest rate on
their own borrowers. The interest spread or differential belongs to the bank and
not to the depositors who are not cestui que trust of banks. If depositors
are cestui que trust of banks, then the interest spread or income belongs to the
depositors, a situation that Congress certainly did not intend in enacting Section
2 of RA 8791.

Solidbanks Breach of its Contractual Obligation

Article 1172 of the Civil Code provides that responsibility arising from
negligence in the performance of every kind of obligation is demandable. For
breach of the savings deposit agreement due to negligence, or culpa
contractual, the bank is liable to its depositor.
Calapre left the passbook with Solidbank because the transaction took time
and he had to go to Allied Bank for another transaction. The passbook was still
in the hands of the employees of Solidbank for the processing of the deposit
when Calapre left Solidbank.Solidbanks rules on savings account require that
the deposit book should be carefully guarded by the depositor and kept under
lock and key, if possible. When the passbook is in the possession of Solidbanks
tellers during withdrawals, the law imposes on Solidbank and its tellers an even
higher degree of diligence in safeguarding the passbook.
Likewise, Solidbanks tellers must exercise a high degree of diligence in
insuring that they return the passbook only to the depositor or his authorized
representative. The tellers know, or should know, that the rules on savings
account provide that any person in possession of the passbook is presumptively
its owner. If the tellers give the passbook to the wrong person, they would be
clothing that person presumptive ownership of the passbook, facilitating
unauthorized withdrawals by that person. For failing to return the passbook to
Calapre, the authorized representative of L.C. Diaz, Solidbank and Teller No. 6
presumptively failed to observe such high degree of diligence in safeguarding
the passbook, and in insuring its return to the party authorized to receive the
In culpa contractual, once the plaintiff proves a breach of contract, there is
a presumption that the defendant was at fault or negligent. The burden is on the
defendant to prove that he was not at fault or negligent. In contrast, in culpa
aquiliana the plaintiff has the burden of proving that the defendant was
negligent. In the present case, L.C. Diaz has established that Solidbank
breached its contractual obligation to return the passbook only to the authorized
representative of L.C. Diaz. There is thus a presumption that Solidbank was at
fault and its teller was negligent in not returning the passbook to Calapre. The
burden was on Solidbank to prove that there was no negligence on its part or
its employees.
Solidbank failed to discharge its burden. Solidbank did not present to the
trial court Teller No. 6, the teller with whom Calapre left the passbook and who
was supposed to return the passbook to him. The record does not indicate that
Teller No. 6 verified the identity of the person who retrieved the
passbook. Solidbank also failed to adduce in evidence its standard procedure
in verifying the identity of the person retrieving the passbook, if there is such a
procedure, and that Teller No. 6 implemented this procedure in the present
Solidbank is bound by the negligence of its employees under the principle
of respondeat superior or command responsibility. The defense of exercising
the required diligence in the selection and supervision of employees is not a
complete defense in culpa contractual, unlike in culpa aquiliana. [25]

The bank must not only exercise high standards of integrity and
performance, it must also insure that its employees do likewise because this is
the only way to insure that the bank will comply with its fiduciary duty. Solidbank
failed to present the teller who had the duty to return to Calapre the passbook,
and thus failed to prove that this teller exercised the high standards of integrity
and performance required of Solidbanks employees.

Proximate Cause of the Unauthorized Withdrawal

Another point of disagreement between the trial and appellate courts is the
proximate cause of the unauthorized withdrawal. The trial court believed that
L.C. Diazs negligence in not securing its passbook under lock and key was the
proximate cause that allowed the impostor to withdraw the P300,000. For the
appellate court, the proximate cause was the tellers negligence in processing
the withdrawal without first verifying with L.C. Diaz. We do not agree with either
Proximate cause is that cause which, in natural and continuous sequence,
unbroken by any efficient intervening cause, produces the injury and without
which the result would not have occurred. Proximate cause is determined by

the facts of each case upon mixed considerations of logic, common sense,
policy and precedent. [27]

L.C. Diaz was not at fault that the passbook landed in the hands of the
impostor.Solidbank was in possession of the passbook while it was processing
the deposit. After completion of the transaction, Solidbank had the contractual
obligation to return the passbook only to Calapre, the authorized representative
of L.C. Diaz. Solidbank failed to fulfill its contractual obligation because it gave
the passbook to another person.
Solidbanks failure to return the passbook to Calapre made possible the
withdrawal of the P300,000 by the impostor who took possession of the
passbook. Under Solidbanks rules on savings account, mere possession of the
passbook raises the presumption of ownership. It was the negligent act of
Solidbanks Teller No. 6 that gave the impostor presumptive ownership of the
passbook. Had the passbook not fallen into the hands of the impostor, the loss
of P300,000 would not have happened. Thus, the proximate cause of the
unauthorized withdrawal was Solidbanks negligence in not returning the
passbook to Calapre.
We do not subscribe to the appellate courts theory that the proximate cause
of the unauthorized withdrawal was the tellers failure to call up L.C. Diaz to
verify the withdrawal. Solidbank did not have the duty to call up L.C. Diaz to
confirm the withdrawal. There is no arrangement between Solidbank and L.C.
Diaz to this effect. Even the agreement between Solidbank and L.C. Diaz
pertaining to measures that the parties must observe whenever withdrawals of
large amounts are made does not direct Solidbank to call up L.C. Diaz.
There is no law mandating banks to call up their clients whenever their
representatives withdraw significant amounts from their accounts. L.C. Diaz
therefore had the burden to prove that it is the usual practice of Solidbank to
call up its clients to verify a withdrawal of a large amount of money. L.C. Diaz
failed to do so.
Teller No. 5 who processed the withdrawal could not have been put on
guard to verify the withdrawal. Prior to the withdrawal of P300,000, the impostor
deposited with Teller No. 6 the P90,000 PBC check, which later bounced. The
impostor apparently deposited a large amount of money to deflect suspicion
from the withdrawal of a much bigger amount of money. The appellate court
thus erred when it imposed on Solidbank the duty to call up L.C. Diaz to confirm
the withdrawal when no law requires this from banks and when the teller had
no reason to be suspicious of the transaction.
Solidbank continues to foist the defense that Ilagan made the
withdrawal. Solidbank claims that since Ilagan was also a messenger of L.C.
Diaz, he was familiar with its teller so that there was no more need for the teller
to verify the withdrawal. Solidbank relies on the following statements in the
Booking and Information Sheet of Emerano Ilagan:

xxx Ilagan also had with him (before the withdrawal) a forged check of PBC and
indicated the amount of P90,000 which he deposited in favor of L.C. Diaz and
Company. After successfully withdrawing this large sum of money, accused Ilagan
gave alias Rey (Noel Tamayo) his share of the loot. Ilagan then hired a taxicab in the
amount of P1,000 to transport him (Ilagan) to his home province at Bauan,
Batangas. Ilagan extravagantly and lavishly spent his money but a big part of his loot
was wasted in cockfight and horse racing. Ilagan was apprehended and meekly
admitted his guilt. (Emphasis supplied.)

L.C. Diaz refutes Solidbanks contention by pointing out that the person who
withdrew the P300,000 was a certain Noel Tamayo. Both the trial and appellate
courts stated that this Noel Tamayo presented the passbook with the withdrawal
We uphold the finding of the trial and appellate courts that a certain Noel
Tamayo withdrew the P300,000. The Court is not a trier of facts. We find no
justifiable reason to reverse the factual finding of the trial court and the Court of
Appeals. The tellers who processed the deposit of the P90,000 check and the
withdrawal of the P300,000 were not presented during trial to substantiate
Solidbanks claim that Ilagan deposited the check and made the questioned
withdrawal. Moreover, the entry quoted by Solidbank does not categorically
state that Ilagan presented the withdrawal slip and the passbook.

Doctrine of Last Clear Chance

The doctrine of last clear chance states that where both parties are
negligent but the negligent act of one is appreciably later than that of the other,
or where it is impossible to determine whose fault or negligence caused the
loss, the one who had the last clear opportunity to avoid the loss but failed to
do so, is chargeable with the loss. Stated differently, the antecedent

negligence of the plaintiff does not preclude him from recovering damages
caused by the supervening negligence of the defendant, who had the last fair
chance to prevent the impending harm by the exercise of due diligence. [30]

We do not apply the doctrine of last clear chance to the present

case. Solidbank is liable for breach of contract due to negligence in the
performance of its contractual obligation to L.C. Diaz. This is a case of culpa
contractual, where neither the contributory negligence of the plaintiff nor his last
clear chance to avoid the loss, would exonerate the defendant from
liability. Such contributory negligence or last clear chance by the plaintiff

merely serves to reduce the recovery of damages by the plaintiff but does not
exculpate the defendant from his breach of contract. [32]

Mitigated Damages

Under Article 1172, liability (for culpa contractual) may be regulated by the
courts, according to the circumstances. This means that if the defendant
exercised the proper diligence in the selection and supervision of its employee,
or if the plaintiff was guilty of contributory negligence, then the courts may
reduce the award of damages. In this case, L.C. Diaz was guilty of contributory
negligence in allowing a withdrawal slip signed by its authorized signatories to
fall into the hands of an impostor. Thus, the liability of Solidbank should be
In Philippine Bank of Commerce v. Court of Appeals, where the Court

held the depositor guilty of contributory negligence, we allocated the damages

between the depositor and the bank on a 40-60 ratio. Applying the same ruling
to this case, we hold that L.C. Diaz must shoulder 40% of the actual damages
awarded by the appellate court. Solidbank must pay the other 60% of the actual
WHEREFORE, the decision of the Court of Appeals
is AFFIRMED with MODIFICATION. Petitioner Solidbank Corporation shall pay
private respondent L.C. Diaz and Company, CPAs only 60% of the actual
damages awarded by the Court of Appeals.The remaining 40% of the actual
damages shall be borne by private respondent L.C. Diaz and Company,
CPAs. Proportionate costs.

G.R. No. 138334 August 25, 2003

The Court of Appeals and CARAVAN TRAVEL & TOURS INTERNATIONAL, INC., Respondents.



In May 1991, petitioner Estela L. Crisostomo contracted the services of respondent Caravan Travel
and Tours International, Inc. to arrange and facilitate her booking, ticketing and accommodation in a
tour dubbed "Jewels of Europe". The package tour included the countries of England, Holland,
Germany, Austria, Liechstenstein, Switzerland and France at a total cost of P74,322.70. Petitioner
was given a 5% discount on the amount, which included airfare, and the booking fee was also
waived because petitioner’s niece, Meriam Menor, was respondent company’s ticketing manager.

Pursuant to said contract, Menor went to her aunt’s residence on June 12, 1991 – a Wednesday – to
deliver petitioner’s travel documents and plane tickets. Petitioner, in turn, gave Menor the full
payment for the package tour. Menor then told her to be at the Ninoy Aquino International Airport
(NAIA) on Saturday, two hours before her flight on board British Airways.

Without checking her travel documents, petitioner went to NAIA on Saturday, June 15, 1991, to take
the flight for the first leg of her journey from Manila to Hongkong. To petitioner’s dismay, she
discovered that the flight she was supposed to take had already departed the previous day. She
learned that her plane ticket was for the flight scheduled on June 14, 1991. She thus called up
Menor to complain.

Subsequently, Menor prevailed upon petitioner to take another tour – the "British Pageant" – which
included England, Scotland and Wales in its itinerary. For this tour package, petitioner was asked
anew to pay US$785.00 or P20,881.00 (at the then prevailing exchange rate of P26.60). She gave
respondent US$300 or P7,980.00 as partial payment and commenced the trip in July 1991.

Upon petitioner’s return from Europe, she demanded from respondent the reimbursement of
P61,421.70, representing the difference between the sum she paid for "Jewels of Europe" and the
amount she owed respondent for the "British Pageant" tour. Despite several demands, respondent
company refused to reimburse the amount, contending that the same was non-refundable.1 Petitioner
was thus constrained to file a complaint against respondent for breach of contract of carriage and
damages, which was docketed as Civil Case No. 92-133 and raffled to Branch 59 of the Regional
Trial Court of Makati City.

In her complaint,2 petitioner alleged that her failure to join "Jewels of Europe" was due to
respondent’s fault since it did not clearly indicate the departure date on the plane ticket. Respondent
was also negligent in informing her of the wrong flight schedule through its employee Menor. She
insisted that the "British Pageant" was merely a substitute for the "Jewels of Europe" tour, such that
the cost of the former should be properly set-off against the sum paid for the latter.

For its part, respondent company, through its Operations Manager, Concepcion Chipeco, denied
responsibility for petitioner’s failure to join the first tour. Chipeco insisted that petitioner was informed
of the correct departure date, which was clearly and legibly printed on the plane ticket. The travel
documents were given to petitioner two days ahead of the scheduled trip. Petitioner had only herself
to blame for missing the flight, as she did not bother to read or confirm her flight schedule as printed
on the ticket.
Respondent explained that it can no longer reimburse the amount paid for "Jewels of Europe",
considering that the same had already been remitted to its principal in Singapore, Lotus Travel Ltd.,
which had already billed the same even if petitioner did not join the tour. Lotus’ European tour
organizer, Insight International Tours Ltd., determines the cost of a package tour based on a
minimum number of projected participants. For this reason, it is accepted industry practice to
disallow refund for individuals who failed to take a booked tour.3

Lastly, respondent maintained that the "British Pageant" was not a substitute for the package tour
that petitioner missed. This tour was independently procured by petitioner after realizing that she
made a mistake in missing her flight for "Jewels of Europe". Petitioner was allowed to make a partial
payment of only US$300.00 for the second tour because her niece was then an employee of the
travel agency. Consequently, respondent prayed that petitioner be ordered to pay the balance of
P12,901.00 for the "British Pageant" package tour.

After due proceedings, the trial court rendered a decision,4 the dispositive part of which reads:

WHEREFORE, premises considered, judgment is hereby rendered as follows:

1. Ordering the defendant to return and/or refund to the plaintiff the amount of Fifty Three
Thousand Nine Hundred Eighty Nine Pesos and Forty Three Centavos (P53,989.43) with
legal interest thereon at the rate of twelve percent (12%) per annum starting January 16,
1992, the date when the complaint was filed;

2. Ordering the defendant to pay the plaintiff the amount of Five Thousand (P5,000.00)
Pesos as and for reasonable attorney’s fees;

3. Dismissing the defendant’s counterclaim, for lack of merit; and

4. With costs against the defendant.


The trial court held that respondent was negligent in erroneously advising petitioner of her departure
date through its employee, Menor, who was not presented as witness to rebut petitioner’s testimony.
However, petitioner should have verified the exact date and time of departure by looking at her ticket
and should have simply not relied on Menor’s verbal representation. The trial court thus declared
that petitioner was guilty of contributory negligence and accordingly, deducted 10% from the amount
being claimed as refund.

Respondent appealed to the Court of Appeals, which likewise found both parties to be at fault.
However, the appellate court held that petitioner is more negligent than respondent because as a
lawyer and well-traveled person, she should have known better than to simply rely on what was told
to her. This being so, she is not entitled to any form of damages. Petitioner also forfeited her right to
the "Jewels of Europe" tour and must therefore pay respondent the balance of the price for the
"British Pageant" tour. The dispositive portion of the judgment appealed from reads as follows:

WHEREFORE, premises considered, the decision of the Regional Trial Court dated October 26,
1995 is hereby REVERSED and SET ASIDE. A new judgment is hereby ENTERED requiring the
plaintiff-appellee to pay to the defendant-appellant the amount of P12,901.00, representing the
balance of the price of the British Pageant Package Tour, the same to earn legal interest at the rate
of SIX PERCENT (6%) per annum, to be computed from the time the counterclaim was filed until the
finality of this decision. After this decision becomes final and executory, the rate of TWELVE
PERCENT (12%) interest per annum shall be additionally imposed on the total obligation until
payment thereof is satisfied. The award of attorney’s fees is DELETED. Costs against the plaintiff-


Upon denial of her motion for reconsideration,7 petitioner filed the instant petition under Rule 45 on
the following grounds:

It is respectfully submitted that the Honorable Court of Appeals committed a reversible error
in reversing and setting aside the decision of the trial court by ruling that the petitioner is not
entitled to a refund of the cost of unavailed "Jewels of Europe" tour she being equally, if not
more, negligent than the private respondent, for in the contract of carriage the common
carrier is obliged to observe utmost care and extra-ordinary diligence which is higher in
degree than the ordinary diligence required of the passenger. Thus, even if the petitioner and
private respondent were both negligent, the petitioner cannot be considered to be equally, or
worse, more guilty than the private respondent. At best, petitioner’s negligence is only
contributory while the private respondent [is guilty] of gross negligence making the principle
of pari delicto inapplicable in the case;


The Honorable Court of Appeals also erred in not ruling that the "Jewels of Europe" tour was
not indivisible and the amount paid therefor refundable;


The Honorable Court erred in not granting to the petitioner the consequential damages due
her as a result of breach of contract of carriage.8

Petitioner contends that respondent did not observe the standard of care required of a common
carrier when it informed her wrongly of the flight schedule. She could not be deemed more negligent
than respondent since the latter is required by law to exercise extraordinary diligence in the
fulfillment of its obligation. If she were negligent at all, the same is merely contributory and not the
proximate cause of the damage she suffered. Her loss could only be attributed to respondent as it
was the direct consequence of its employee’s gross negligence.

Petitioner’s contention has no merit.

By definition, a contract of carriage or transportation is one whereby a certain person or association

of persons obligate themselves to transport persons, things, or news from one place to another for a
fixed price.9 Such person or association of persons are regarded as carriers and are classified as
private or special carriers and common or public carriers.10 A common carrier is defined under Article
1732 of the Civil Code as persons, corporations, firms or associations engaged in the business of
carrying or transporting passengers or goods or both, by land, water or air, for compensation,
offering their services to the public.
It is obvious from the above definition that respondent is not an entity engaged in the business of
transporting either passengers or goods and is therefore, neither a private nor a common carrier.
Respondent did not undertake to transport petitioner from one place to another since its covenant
with its customers is simply to make travel arrangements in their behalf. Respondent’s services as a
travel agency include procuring tickets and facilitating travel permits or visas as well as booking
customers for tours.

While petitioner concededly bought her plane ticket through the efforts of respondent company, this
does not mean that the latter ipso facto is a common carrier. At most, respondent acted merely as
an agent of the airline, with whom petitioner ultimately contracted for her carriage to Europe.
Respondent’s obligation to petitioner in this regard was simply to see to it that petitioner was
properly booked with the airline for the appointed date and time. Her transport to the place of
destination, meanwhile, pertained directly to the airline.

The object of petitioner’s contractual relation with respondent is the latter’s service of arranging and
facilitating petitioner’s booking, ticketing and accommodation in the package tour. In contrast, the
object of a contract of carriage is the transportation of passengers or goods. It is in this sense that
the contract between the parties in this case was an ordinary one for services and not one of
carriage. Petitioner’s submission is premised on a wrong assumption.

The nature of the contractual relation between petitioner and respondent is determinative of the
degree of care required in the performance of the latter’s obligation under the contract. For reasons
of public policy, a common carrier in a contract of carriage is bound by law to carry passengers as
far as human care and foresight can provide using the utmost diligence of very cautious persons and
with due regard for all the circumstances.11 As earlier stated, however, respondent is not a common
carrier but a travel agency. It is thus not bound under the law to observe extraordinary diligence in
the performance of its obligation, as petitioner claims.

Since the contract between the parties is an ordinary one for services, the standard of care required
of respondent is that of a good father of a family under Article 1173 of the Civil Code.12 This connotes
reasonable care consistent with that which an ordinarily prudent person would have observed when
confronted with a similar situation. The test to determine whether negligence attended the
performance of an obligation is: did the defendant in doing the alleged negligent act use that
reasonable care and caution which an ordinarily prudent person would have used in the same
situation? If not, then he is guilty of negligence.13

In the case at bar, the lower court found Menor negligent when she allegedly informed petitioner of
the wrong day of departure. Petitioner’s testimony was accepted as indubitable evidence of Menor’s
alleged negligent act since respondent did not call Menor to the witness stand to refute the
allegation. The lower court applied the presumption under Rule 131, Section 3 (e)14 of the Rules of
Court that evidence willfully suppressed would be adverse if produced and thus considered
petitioner’s uncontradicted testimony to be sufficient proof of her claim.

On the other hand, respondent has consistently denied that Menor was negligent and maintains that
petitioner’s assertion is belied by the evidence on record. The date and time of departure was legibly
written on the plane ticket and the travel papers were delivered two days in advance precisely so
that petitioner could prepare for the trip. It performed all its obligations to enable petitioner to join the
tour and exercised due diligence in its dealings with the latter.

We agree with respondent.

Respondent’s failure to present Menor as witness to rebut petitioner’s testimony could not give rise
to an inference unfavorable to the former. Menor was already working in France at the time of the
filing of the complaint,15 thereby making it physically impossible for respondent to present her as a
witness. Then too, even if it were possible for respondent to secure Menor’s testimony, the
presumption under Rule 131, Section 3(e) would still not apply. The opportunity and possibility for
obtaining Menor’s testimony belonged to both parties, considering that Menor was not just
respondent’s employee, but also petitioner’s niece. It was thus error for the lower court to invoke the
presumption that respondent willfully suppressed evidence under Rule 131, Section 3(e). Said
presumption would logically be inoperative if the evidence is not intentionally omitted but is simply
unavailable, or when the same could have been obtained by both parties.16

In sum, we do not agree with the finding of the lower court that Menor’s negligence concurred with
the negligence of petitioner and resultantly caused damage to the latter. Menor’s negligence was not
sufficiently proved, considering that the only evidence presented on this score was petitioner’s
uncorroborated narration of the events. It is well-settled that the party alleging a fact has the burden
of proving it and a mere allegation cannot take the place of evidence.17 If the plaintiff, upon whom
rests the burden of proving his cause of action, fails to show in a satisfactory manner facts upon
which he bases his claim, the defendant is under no obligation to prove his exception or defense.18

Contrary to petitioner’s claim, the evidence on record shows that respondent exercised due diligence
in performing its obligations under the contract and followed standard procedure in rendering its
services to petitioner. As correctly observed by the lower court, the plane ticket19 issued to petitioner
clearly reflected the departure date and time, contrary to petitioner’s contention. The travel
documents, consisting of the tour itinerary, vouchers and instructions, were likewise delivered to
petitioner two days prior to the trip. Respondent also properly booked petitioner for the tour,
prepared the necessary documents and procured the plane tickets. It arranged petitioner’s hotel
accommodation as well as food, land transfers and sightseeing excursions, in accordance with its
avowed undertaking.

Therefore, it is clear that respondent performed its prestation under the contract as well as
everything else that was essential to book petitioner for the tour. Had petitioner exercised due
diligence in the conduct of her affairs, there would have been no reason for her to miss the flight.
Needless to say, after the travel papers were delivered to petitioner, it became incumbent upon her
to take ordinary care of her concerns. This undoubtedly would require that she at least read the
documents in order to assure herself of the important details regarding the trip.

The negligence of the obligor in the performance of the obligation renders him liable for damages for
the resulting loss suffered by the obligee. Fault or negligence of the obligor consists in his failure to
exercise due care and prudence in the performance of the obligation as the nature of the obligation
so demands.20 There is no fixed standard of diligence applicable to each and every contractual
obligation and each case must be determined upon its particular facts. The degree of diligence
required depends on the circumstances of the specific obligation and whether one has been
negligent is a question of fact that is to be determined after taking into account the particulars of
each case.211âwphi1

The lower court declared that respondent’s employee was negligent. This factual finding, however, is
not supported by the evidence on record. While factual findings below are generally conclusive upon
this court, the rule is subject to certain exceptions, as when the trial court overlooked,
misunderstood, or misapplied some facts or circumstances of weight and substance which will affect
the result of the case.22
In the case at bar, the evidence on record shows that respondent company performed its duty
diligently and did not commit any contractual breach. Hence, petitioner cannot recover and must
bear her own damage.

WHEREFORE, the instant petition is DENIED for lack of merit. The decision of the Court of Appeals
in CA-G.R. CV No. 51932 is AFFIRMED. Accordingly, petitioner is ordered to pay respondent the
amount of P12,901.00 representing the balance of the price of the British Pageant Package Tour,
with legal interest thereon at the rate of 6% per annum, to be computed from the time the
counterclaim was filed until the finality of this Decision. After this Decision becomes final and
executory, the rate of 12% per annum shall be imposed until the obligation is fully settled, this interim
period being deemed to be by then an equivalent to a forbearance of credit.23