Civil Cases Sources To Usurious Transactions

Sources of Obligations 2
Metropolitan Bank & Trust Company v. Ana Grace Rosales and Yo Yuk To ...................................................2
Obligation to give 7
Philippine National Bank v. Marañon .................................................................................................................7
Delay 12
Bonrostro v. Luna ..............................................................................................................................................12
Development Bank of the Philippines v. Guariña Agricultural and Realty Development Corporation ............18
Maybank Philippines, Inc. v. Foundation Specialists, Inc. ................................................................................25
Federal Builders, Inc. v. Foundation Specialists, Inc. .......................................................................................28
Rivera vs. Chua ..................................................................................................................................................34
Cabanting v. BPI Family Savings Bank, Inc. ....................................................................................................45
Negligence 49
Philippine National Bank v. Santos ...................................................................................................................49
BJDC Construction v. Lanuzo ...........................................................................................................................59
Bignay EX-IM Philippines, Inc. vs. Union Bank of the Philippines .................................................................67
Development Bank of the Philippines v. Guariña Agricultural and Realty Development Corporation ............75
Eastern Shipping Lines, Inc. vs BPI/MS Insurance Corp., and Mitsui Sumitomo Insurance Co., Ltd. ............75
Solidum v. People of the Philippines .................................................................................................................79
Land Bank of the Philippines v. Kho .................................................................................................................92
Abrogar v. Cosmos Bottling Company..............................................................................................................97
Dela Cruz v. Octaviano ....................................................................................................................................121
Medical malpractice/negligence 130
Solidum v. People of the Philippines ...............................................................................................................130
Rosit v. Davao Doctors Hospital .....................................................................................................................130
Borromeo v. Family Care Hospital ..................................................................................................................138
Our Lady of Lourdes Hospital v. Capanzana...................................................................................................147
Nature and Effect of Obligations 160
Swire Realty Development Corp. v. Specialty Contracts General and Construction Services, Inc. ...............160
Fortuitous Event 165
Metro Concast Steel Corp., Spouses Jose S. Dychiao and Tiu Oh Yan, et al. Allied Bank Corporation ........165
Bernales v. Northwest Airlines ........................................................................................................................169
Usurious transactions 174
Mallari v. Prudential Bank ...............................................................................................................................174
Anchor Savings Bank v. Pinzman Realty and Development Corp..................................................................178
Obligations from sources to usurious transactions | Page 1 of 182

S OURCES OF O BLIGATIONS
Metropolitan Bank & Trust Company v. Ana Grace Rosales and Yo Yuk To
G.R. No. 183204 January 13, 2014
THE METROPOLITAN BANK AND TRUST COMPANY, Petitioner,
vs.
ANA GRACE ROSALES AND YO YUK TO, Respondents.
DECISION
DEL CASTILLO, J.:
Bank deposits, which are in the nature of a simple loan or mutuum,1 must be paid upon demand by the
depositor.2
This Petition for Review on Certiorari3 under Rule 45 of the Rules of Court assails the April 2, 2008
Decision4 and the May 30, 2008 Resolution5 of he Court of Appeals CA) in CA-G.R. CV No. 89086.
Factual Antecedents
Petitioner Metropolitan Bank and Trust Company is a domestic banking corporation duly organized and
existing under the laws of the Philippines.6 Respondent Ana Grace Rosales (Rosales) is the owner of
China Golden Bridge Travel Services,7 a travel agency.8 Respondent Yo Yuk To is the mother of
respondent Rosales.9
In 2000, respondents opened a Joint Peso Account10 with petitioner’s Pritil-Tondo Branch.11 As of
August 4, 2004, respondents’ Joint Peso Account showed a balance of ₱2,515,693.52.12
In May 2002, respondent Rosales accompanied her client Liu Chiu Fang, a Taiwanese National
applying for a retiree’s visa from the Philippine Leisure and Retirement Authority (PLRA), to petitioner’s
branch in Escolta to open a savings account, as required by the PLRA.13 Since Liu Chiu Fang could
speak only in Mandarin, respondent Rosales acted as an interpreter for her.14
On March 3, 2003, respondents opened with petitioner’s Pritil-Tondo Branch a Joint Dollar
Account15 with an initial deposit of US$14,000.00.16
On July 31, 2003, petitioner issued a "Hold Out" order against respondents’ accounts.17
On September 3, 2003, petitioner, through its Special Audit Department Head Antonio Ivan Aguirre,
filed before the Office of the Prosecutor of Manila a criminal case for Estafa through False Pretences,
Misrepresentation, Deceit, and Use of Falsified Documents, docketed as I.S. No. 03I-25014,18 against
respondent Rosales.19 Petitioner accused respondent Rosales and an unidentified woman as the ones
responsible for the unauthorized and fraudulent withdrawal of US$75,000.00 from Liu Chiu Fang’s
dollar account with petitioner’s Escolta Branch.20Petitioner alleged that on February 5, 2003, its branch
in Escolta received from the PLRA a Withdrawal Clearance for the dollar account of Liu Chiu
Fang;21 that in the afternoon of the same day, respondent Rosales went to petitioner’s Escolta Branch
to inform its Branch Head, Celia A. Gutierrez (Gutierrez), that Liu Chiu Fang was going to withdraw her
dollar deposits in cash;22 that Gutierrez told respondent Rosales to come back the following day
because the bank did not have enough dollars;23 that on February 6, 2003, respondent Rosales
accompanied an unidentified impostor of Liu Chiu Fang to the bank;24 that the impostor was able to
withdraw Liu Chiu Fang’s dollar deposit in the amount of US$75,000.00;25 that on March 3, 2003,
respondents opened a dollar account with petitioner; and that the bank later discovered that the serial
numbers of the dollar notes deposited by respondents in the amount of US$11,800.00 were the same
as those withdrawn by the impostor.26
Respondent Rosales, however, denied taking part in the fraudulent and unauthorized withdrawal from
the dollar account of Liu Chiu Fang.27 Respondent Rosales claimed that she did not go to the bank on
February 5, 2003.28Neither did she inform Gutierrez that Liu Chiu Fang was going to close her
account.29 Respondent Rosales further claimed that after Liu Chiu Fang opened an account with
petitioner, she lost track of her.30 Respondent Rosales’ version of the events that transpired thereafter
is as follows:
On February 6, 2003, she received a call from Gutierrez informing her that Liu Chiu Fang was at the
bank to close her account.31 At noon of the same day, respondent Rosales went to the bank to make a
transaction.32 While she was transacting with the teller, she caught a glimpse of a woman seated at the
desk of the Branch Operating Officer, Melinda Perez (Perez).33 After completing her transaction,
respondent Rosales approached Perez who informed her that Liu Chiu Fang had closed her account
and had already left.34 Perez then gave a copy of the Withdrawal Clearance issued by the PLRA to
respondent Rosales.35 On June 16, 2003, respondent Rosales received a call from Liu Chiu Fang
inquiring about the extension of her PLRA Visa and her dollar account.36 It was only then that Liu Chiu
Fang found out that her account had been closed without her knowledge.37 Respondent Rosales then
went to the bank to inform Gutierrez and Perez of the unauthorized withdrawal.38 On June 23, 2003,
respondent Rosales and Liu Chiu Fang went to the PLRA Office, where they were informed that the
Withdrawal Clearance was issued on the basis of a Special Power of Attorney (SPA) executed by Liu
Chiu Fang in favor of a certain Richard So.39 Liu Chiu Fang, however, denied executing the SPA.40 The
following day, respondent Rosales, Liu Chiu Fang, Gutierrez, and Perez met at the PLRA Office to
discuss the unauthorized withdrawal.41 During the conference, the bank officers assured Liu Chiu Fang
that the money would be returned to her.42
On December 15, 2003, the Office of the City Prosecutor of Manila issued a Resolution dismissing the
criminal case for lack of probable cause.43 Unfazed, petitioner moved for reconsideration.
On September 10, 2004, respondents filed before the Regional Trial Court (RTC) of Manila a
Complaint44 for Breach of Obligation and Contract with Damages, docketed as Civil Case No.
04110895 and raffled to Branch 21, against petitioner. Respondents alleged that they attempted several
times to withdraw their deposits but were unable to because petitioner had placed their accounts under
"Hold Out" status.45 No explanation, however, was given by petitioner as to why it issued the "Hold Out"
order.46 Thus, they prayed that the "Hold Out" order be lifted and that they be allowed to withdraw their
deposits.47 They likewise prayed for actual, moral, and exemplary damages, as well as attorney’s
fees.48
Petitioner alleged that respondents have no cause of action because it has a valid reason for issuing
the "Hold Out" order.49 It averred that due to the fraudulent scheme of respondent Rosales, it was
compelled to reimburse Liu Chiu Fang the amount of US$75,000.0050 and to file a criminal complaint
for Estafa against respondent Rosales.51
While the case for breach of contract was being tried, the City Prosecutor of Manila issued a Resolution
dated February 18, 2005, reversing the dismissal of the criminal complaint.52 An Information, docketed
as Criminal Case No. 05-236103,53 was then filed charging respondent Rosales with Estafa before
Branch 14 of the RTC of Manila.54
Ruling of the Regional Trial Court
On January 15, 2007, the RTC rendered a Decision55 finding petitioner liable for damages for breach
of contract.56The RTC ruled that it is the duty of petitioner to release the deposit to respondents as the
act of withdrawal of a bank deposit is an act of demand by the creditor.57 The RTC also said that the
recourse of petitioner is against its negligent employees and not against respondents.58 The dispositive
portion of the Decision reads:
WHEREFORE, premises considered, judgment is hereby rendered ordering [petitioner]
METROPOLITAN BANK & TRUST COMPANY to allow [respondents] ANA GRACE ROSALES and
YO YUK TO to withdraw their Savings and Time Deposits with the agreed interest, actual damages of
₱50,000.00, moral damages of ₱50,000.00, exemplary damages of ₱30,000.00 and 10% of the amount
due [respondents] as and for attorney’s fees plus the cost of suit.
The counterclaim of [petitioner] is hereby DISMISSED for lack of merit.
SO ORDERED.59
Ruling of the Court of Appeals
Aggrieved, petitioner appealed to the CA.
On April 2, 2008, the CA affirmed the ruling of the RTC but deleted the award of actual damages
because "the basis for [respondents’] claim for such damages is the professional fee that they paid to
their legal counsel for [respondent] Rosales’ defense against the criminal complaint of [petitioner] for
estafa before the Office of the City Prosecutor of Manila and not this case."60 Thus, the CA disposed of
the case in this wise:
WHEREFORE, premises considered, the Decision dated January 15, 2007 of the RTC, Branch 21,
Manila in Civil Case No. 04-110895 is AFFIRMED with MODIFICATION that the award of actual
damages to [respondents] Rosales and Yo Yuk To is hereby DELETED.
SO ORDERED.61
Petitioner sought reconsideration but the same was denied by the CA in its May 30, 2008 Resolution.62
Issues
Hence, this recourse by petitioner raising the following issues:
A. THE [CA] ERRED IN RULING THAT THE "HOLD-OUT" PROVISION IN THE APPLICATION AND
AGREEMENT FOR DEPOSIT ACCOUNT DOES NOT APPLY IN THIS CASE.
B. THE [CA] ERRED WHEN IT RULED THAT PETITIONER’S EMPLOYEES WERE NEGLIGENT IN
RELEASING LIU CHIU FANG’S FUNDS.
C. THE [CA] ERRED IN AFFIRMING THE AWARD OF MORAL DAMAGES, EXEMPLARY DAMAGES,
AND ATTORNEY’S FEES.63
Petitioner’s Arguments
Petitioner contends that the CA erred in not applying the "Hold Out" clause stipulated in the Application
and Agreement for Deposit Account.64 It posits that the said clause applies to any and all kinds of
obligation as it does not distinguish between obligations arising ex contractu or ex delictu.65 Petitioner
also contends that the fraud committed by respondent Rosales was clearly established by
evidence;66 thus, it was justified in issuing the "Hold-Out" order.67 Petitioner likewise denies that its
employees were negligent in releasing the dollars.68 It claims that it was the deception employed by
respondent Rosales that caused petitioner’s employees to release Liu Chiu Fang’s funds to the
impostor.69
Lastly, petitioner puts in issue the award of moral and exemplary damages and attorney’s fees. It insists
that respondents failed to prove that it acted in bad faith or in a wanton, fraudulent, oppressive or
malevolent manner.70
Respondents’ Arguments
Respondents, on the other hand, argue that there is no legal basis for petitioner to withhold their
deposits because they have no monetary obligation to petitioner.71 They insist that petitioner miserably
failed to prove its accusations against respondent Rosales.72 In fact, no documentary evidence was
presented to show that respondent Rosales participated in the unauthorized withdrawal.73 They also
question the fact that the list of the serial numbers of the dollar notes fraudulently withdrawn on
February 6, 2003, was not signed or acknowledged by the alleged impostor.74 Respondents likewise
maintain that what was established during the trial was the negligence of petitioner’s employees as
they allowed the withdrawal of the funds without properly verifying the identity of the
depositor.75 Furthermore, respondents contend that their deposits are in the nature of a loan; thus,
petitioner had the obligation to return the deposits to them upon demand.76 Failing to do so makes
petitioner liable to pay respondents moral and exemplary damages, as well as attorney’s fees.77
Our Ruling
The Petition is bereft of merit.
At the outset, the relevant issues in this case are (1) whether petitioner breached its contract with
respondents, and (2) if so, whether it is liable for damages. The issue of whether petitioner’s employees
were negligent in allowing the withdrawal of Liu Chiu Fang’s dollar deposits has no bearing in the
resolution of this case. Thus, we find no need to discuss the same.
The "Hold Out" clause does not apply
to the instant case.
Petitioner claims that it did not breach its contract with respondents because it has a valid reason for
issuing the "Hold Out" order. Petitioner anchors its right to withhold respondents’ deposits on the
Application and Agreement for Deposit Account, which reads:
Authority to Withhold, Sell and/or Set Off:
The Bank is hereby authorized to withhold as security for any and all obligations with the Bank, all
monies, properties or securities of the Depositor now in or which may hereafter come into the
possession or under the control of the Bank, whether left with the Bank for safekeeping or otherwise,
or coming into the hands of the Bank in any way, for so much thereof as will be sufficient to pay any or
all obligations incurred by Depositor under the Account or by reason of any other transactions between
the same parties now existing or hereafter contracted, to sell in any public or private sale any of such
properties or securities of Depositor, and to apply the proceeds to the payment of any Depositor’s
obligations heretofore mentioned.
xxxx
JOINT ACCOUNT
xxxx
The Bank may, at any time in its discretion and with or without notice to all of the Depositors, assert a
lien on any balance of the Account and apply all or any part thereof against any indebtedness, matured
or unmatured, that may then be owing to the Bank by any or all of the Depositors. It is understood that
if said indebtedness is only owing from any of the Depositors, then this provision constitutes the consent
by all of the depositors to have the Account answer for the said indebtedness to the extent of the equal
share of the debtor in the amount credited to the Account.78
Petitioner’s reliance on the "Hold Out" clause in the Application and Agreement for Deposit Account is
misplaced.
The "Hold Out" clause applies only if there is a valid and existing obligation arising from any of the
sources of obligation enumerated in Article 115779 of the Civil Code, to wit: law, contracts, quasi-
contracts, delict, and quasi-delict. In this case, petitioner failed to show that respondents have an
obligation to it under any law, contract, quasi-contract, delict, or quasi-delict. And although a criminal
case was filed by petitioner against respondent Rosales, this is not enough reason for petitioner to
issue a "Hold Out" order as the case is still pending and no final judgment of conviction has been
rendered against respondent Rosales. In fact, it is significant to note that at the time petitioner issued
the "Hold Out" order, the criminal complaint had not yet been filed. Thus, considering that respondent
Rosales is not liable under any of the five sources of obligation, there was no legal basis for petitioner
to issue the "Hold Out" order. Accordingly, we agree with the findings of the RTC and the CA that the
"Hold Out" clause does not apply in the instant case.
In view of the foregoing, we find that petitioner is guilty of breach of contract when it unjustifiably refused
to release respondents’ deposit despite demand. Having breached its contract with respondents,
petitioner is liable for damages.
Respondents are entitled to moral and
exemplary damages and attorney’s fees.1âwphi1
In cases of breach of contract, moral damages may be recovered only if the defendant acted
fraudulently or in bad faith,80 or is "guilty of gross negligence amounting to bad faith, or in wanton
disregard of his contractual obligations."81
In this case, a review of the circumstances surrounding the issuance of the "Hold Out" order reveals
that petitioner issued the "Hold Out" order in bad faith. First of all, the order was issued without any
legal basis. Second, petitioner did not inform respondents of the reason for the "Hold Out."82 Third, the
order was issued prior to the filing of the criminal complaint. Records show that the "Hold Out" order
was issued on July 31, 2003,83 while the criminal complaint was filed only on September 3, 2003.84 All
these taken together lead us to conclude that petitioner acted in bad faith when it breached its contract
with respondents. As we see it then, respondents are entitled to moral damages.
As to the award of exemplary damages, Article 222985 of the Civil Code provides that exemplary
damages may be imposed "by way of example or correction for the public good, in addition to the moral,
temperate, liquidated or compensatory damages." They are awarded only if the guilty party acted in a
wanton, fraudulent, reckless, oppressive or malevolent manner.86
In this case, we find that petitioner indeed acted in a wanton, fraudulent, reckless, oppressive or
malevolent manner when it refused to release the deposits of respondents without any legal basis. We
need not belabor the fact that the banking industry is impressed with public interest.87 As such, "the
highest degree of diligence is expected, and high standards of integrity and performance are even
required of it."88 It must therefore "treat the accounts of its depositors with meticulous care and always
to have in mind the fiduciary nature of its relationship with them."89 For failing to do this, an award of
exemplary damages is justified to set an example.
The award of attorney's fees is likewise proper pursuant to paragraph 1, Article 220890 of the Civil Code.
In closing, it must be stressed that while we recognize that petitioner has the right to protect itself from
fraud or suspicions of fraud, the exercise of his right should be done within the bounds of the law and
in accordance with due process, and not in bad faith or in a wanton disregard of its contractual obligation
to respondents.
WHEREFORE, the Petition is hereby DENIED. The assailed April 2, 2008 Decision and the May 30,
2008 Resolution of the Court of Appeals in CA-G.R. CV No. 89086 are hereby AFFIRMED. SO
ORDERED.

O BLIGATION TO GIVE
Philippine National Bank v. Marañon
G.R. No. 189316 June 1, 2013
PHILIPPINE NATIONAL BANK, Petitioner,
vs.
SPOUSES BERNARD and CRESENCIA MARANON, Respondents.
RESOLUTION
REYES, J.:
This is a petition for review on certiorari1 under Rule 45 of the Rules of Court, assailing the
Decision2 dated June 18, 2008 and Resolution3 dated August 10, 2009 of the Court of Appeals (CA) in
CA-G.R. SP No. 02513, which affirmed in toto the Orders dated September 8, 20064 and December 6,
20065 of the Regional Trial Court (RTC) of Bacolod City, Branch 54, directing petitioner Philippine
National Bank (PNB) to release in favor of Spouses Bernard and Cresencia Marafion (Spouses
Marafion) the rental fees it received amounting to Thirty Thousand Pesos (₱30,000.00).
The Facts
The controversy at bar involves a 152-square meter parcel of land located at Cuadra-Smith Streets,
Downtown, Bacolod (subject lot) erected with a building leased by various tenants. The subject lot was
among the properties mortgaged by Spouses Rodolfo and Emilie Montealegre (Spouses Montealegre)
to PNB as a security for a loan. In their transactions with PNB, Spouses Montealegre used Transfer
Certificate of Title (TCT) No. T-156512 over the subject lot purportedly registered in the name of Emilie
Montealegre (Emilie).6
When Spouses Montealegre failed to pay the loan, PNB initiated foreclosure proceedings on the
mortgaged properties, including the subject lot. In the auction sale held on August 16, 1991, PNB
emerged as the highest bidder. It was issued the corresponding Certificate of Sale dated December
17, 19917 which was subsequently registered on February 4, 1992.8
Before the expiration of the redemption period or on July 29, 1992, Spouses Marañon filed before the
RTC a complaint for Annulment of Title, Reconveyance and Damages9 against Spouses Montealegre,
PNB, the Register of Deeds of Bacolod City and the Ex-Officio Provincial Sheriff of Negros Occidental.
The complaint, docketed as Civil Case No. 7213, alleged that Spouses Marañon are the true registered
owners of the subject lot by virtue of TCT No. T-129577 which was illegally cancelled by TCT No. T-
156512 under the name of Emilie who used a falsified Deed of Sale bearing the forged signatures of
Spouse Marañon10 to effect the transfer of title to the property in her name.
In its Answer,11 PNB averred that it is a mortgagee in good faith and for value and that its mortgage
lien on the property was registered thus valid and binding against the whole world.
As reflected in the Pre-trial Order12 dated March 12, 1996, the parties stipulated, among others, that
the period for legal redemption of the subject lot has already expired.
While the trial proceedings were ongoing, Paterio Tolete (Tolete), one of the tenants of the building
erected on the subject lot deposited his rental payments with the Clerk of Court of Bacolod City which,
as of October 24, 2002, amounted to ₱144,000.00.
On June 2, 2006, the RTC rendered its Decision13 in favor of the respondents after finding, based on
the expert testimony of Colonel Rodolfo Castillo, Head of the Forensic Technology Section of Bacolod
City Philippine National Police, that the signatures of Spouses Marañon in the Deed of Sale presented
by Spouses Montealegre before the Register of Deeds to cause the cancellation of TCT No. T-129577
were forged. Hence, the RTC concluded the sale to be null and void and as such it did not transfer any

right or title in law. PNB was adjudged to be a mortgagee in good faith whose lien on the subject lot
must be respected. Accordingly, the Decision disposed as follows:
WHEREFORE, judgment is hereby rendered in favor of the plaintiffs herein respondents:
1. The cancellation of TCT No. 129577 over Lot 177-A-1 Bacolod Cadastre in the name of Bernard
Marañon and the issuance of new TCT No. 156512 in the name of defendant Emilie Montealegre are
hereby declared null and void;
2. The defendant Emilie Montealegre is ordered to reconvey the title over Lot No. 177-A-1, Bacolod
Cadastre back to the plaintiffs Marañon herein respondents;
3. The Real Estate Mortgage lien of the Philippine National Bank registered on the title of Lot No. 177-
A-1 Bacolod Cadastre shall stay and be respected; and
4. The defendants - Emilie Montealegre and spouse are ordered to pay attorney’s fees in the sum of
Php50,000.00, and to pay the costs of the suit.
SO ORDERED.14
Neither of the parties sought a reconsideration of the above decision or any portion thereof nor did they
elevate the same for appellate review.
What precipitated the controversy at hand were the subsequent motions filed by Spouses Marañon for
release of the rental payments deposited with the Clerk of Court and paid to PNB by Tolete.
On June 13, 2006, Spouses Marañon filed an Urgent Motion for the Withdrawal of Deposited
Rentals15 praying that the ₱144,000.00 rental fees deposited by Tolete with the Clerk of Court be
released in their favor for having been adjudged as the real owner of the subject lot. The RTC granted
the motion in its Order16 dated June 28, 2006.
On September 5, 2006, Spouses Marañon again filed with the RTC an Urgent Ex-Parte Motion for
Withdrawal of Deposited Rentals17 praying that the ₱30,000.00 rental fees paid to PNB by Tolete on
December 12, 1999 be released in their favor. The said lease payments were for the five (5)-month
period from August 1999 to December 1999 at the monthly lease rate of ₱6,000.00.
The RTC granted the motion in its Order18 dated September 8, 2006 reasoning that pursuant to its
Decision dated June 2, 2006 declaring Spouses Marañon to be the true registered owners of the subject
lot, they are entitled to its fruits.
The PNB differed with the RTC’s ruling and moved for reconsideration averring that as declared by the
RTC in its Decision dated June 2, 2006, its mortgage lien should be carried over to the new title
reconveying the lot to Spouses Marañon. PNB further argued that with the expiration of the redemption
period on February 4, 1993, or one (1) year from the registration of the certificate of sale, PNB is now
the owner of the subject lot hence, entitled to its fruits. PNB prayed that (1) the Order dated September
8, 2006 be set aside, and (2) an order be issued directing Spouses Marañon to turn over to PNB the
amount of ₱144,000.00 released in their favor by the Clerk of Court.19
On November 20, 2006, the RTC issued an Order again directing PNB to release to Spouses Marañon
the ₱30,000.00 rental payments considering that they were adjudged to have retained ownership over
the property.20
On December 6, 2006, the RTC issued another Order denying PNB’s motion for reconsideration and
reiterating the directives in its Order dated September 8, 2006.21
Aggrieved, PNB sought recourse with the CA via a petition for certiorari and mandamus22 claiming that
as the lawful owner of the subject lot per the RTC’s judgment dated June 2, 2006, it is entitled to the
fruits of the same such as rentals paid by tenants hence, the ruling that "the real estate mortgage lien

of the PNB registered on the title of Lot No. 177-A-1 Bacolod Cadastre shall stay and be respected."
PNB also contended that it is an innocent mortgagee.
In its Decision23 dated June 18, 2008, the CA denied the petition and affirmed the RTC’s judgment
ratiocinating that not being parties to the mortgage transaction between PNB and Spouses
Montealegre, Spouses Marañon cannot be deprived of the fruits of the subject lot as the same will
amount to deprivation of property without due process of law. The RTC further held that PNB is not a
mortgagee in good faith because as a financial institution imbued with public interest, it should have
looked beyond the certificate of title presented by Spouses Montealegre and conducted an inspection
on the circumstances surrounding the transfer to Spouses Montealegre. The decretal portion of the
Decision thus read:
WHEREFORE, in view of the foregoing, the petition is hereby DISMISSED. The Orders dated
September 8, 2006 and December 6, 2006, rendered by the respondent Presiding Judge of the
Regional Trial Court, Branch 54, Bacolod City, in Civil Case NO. 7213 directing the release of the
deposited rental in the amount of THIRTY THOUSAND PESOS ([P]30,000.00) to private respondents
are hereby AFFIRMED.
SO ORDERED.24
PNB moved for reconsideration25 but the motion was denied in the CA Resolution dated August 10,
2009.26 Hence, the present recourse whereby PNB argues that the RTC Decision dated June 2, 2006
lapsed into finality when it was not appealed or submitted for reconsideration. As such, all conclusions
therein are immutable and can no longer be modified by any court even by the RTC that rendered the
same. The CA however erroneously altered the RTC Decision by reversing the pronouncement that
PNB is a mortgagee-in-good-faith.
PNB further asseverates that its mortgage lien was carried over to the new title issued to Spouses
Marañon and thus it retained the right to foreclose the subject lot upon non-payment of the secured
debt. PNB asserts that it is entitled to the rent because it became the subject lot’s new owner when the
redemption period expired without the property being redeemed.
Ruling of the Court
We deny the petition.
It is readily apparent from the facts at hand that the status of PNB’s lien on the subject lot has already
been settled by the RTC in its Decision dated June 2, 2006 where it was adjudged as a mortgagee in
good faith whose lien shall subsist and be respected. The decision lapsed into finality when neither of
the parties moved for its reconsideration or appealed.
Being a final judgment, the dispositions and conclusions therein have become immutable and
unalterable not only as against the parties but even the courts. This is known as the doctrine of
immutability of judgments which espouses that a judgment that has acquired finality becomes
immutable and unalterable, and may no longer be modified in any respect even if the modification is
meant to correct erroneous conclusions of fact or law and whether it will be made by the court that
rendered it or by the highest court of the land.27 The significance of this rule was emphasized in Apo
Fruits Corporation v. Court of Appeals,28 to wit:
The reason for the rule is that if, on the application of one party, the court could change its judgment to
the prejudice of the other, it could thereafter, on application of the latter, again change the judgment
and continue this practice indefinitely. The equity of a particular case must yield to the overmastering
need of certainty and unalterability of judicial pronouncements.
The doctrine of immutability and inalterability of a final judgment has a two-fold purpose: (1) to avoid
delay in the administration of justice and thus, procedurally, to make orderly the discharge of judicial

business and (2) to put an end to judicial controversies, at the risk of occasional errors, which is
precisely why courts exist. Controversies cannot drag on indefinitely. The rights and obligations of every
litigant must not hang in suspense for an indefinite period of time. The doctrine is not a mere technicality
to be easily brushed aside, but a matter of public policy as well as a time-honored principle of procedural
law.29 (Citations omitted)
Hence, as correctly argued by PNB, the issue on its status as a mortgagee in good faith have been
adjudged with finality and it was error for the CA to still delve into and, worse, overturn, the same. The
CA had no other recourse but to uphold the status of PNB as a mortgagee in good faith regardless of
its defects for the sake of maintaining stability of judicial pronouncements. "The main role of the courts
of justice is to assist in the enforcement of the law and in the maintenance of peace and order by putting
an end to judiciable controversies with finality. Nothing better serves this role than the long established
doctrine of immutability of judgments."30
Further, it must be remembered that what reached the CA on certiorari were RTC resolutions issued
long after the finality of the Decision dated June 2, 2006. The RTC Orders dated September 8, 2006
and December 6, 2006 were implements of the pronouncement that Spouses Marañon are still the
rightful owners of the subject lot, a matter that has been settled with finality as well. This
notwithstanding, the Court agrees with the ultimate outcome of the CA’s assailed resolutions.
Rent is a civil fruit31 that belongs to the owner of the property32 producing it by right of
accession33.34 The rightful recipient of the disputed rent in this case should thus be the owner of the
subject lot at the time the rent accrued. It is beyond question that Spouses Marañon never lost
ownership over the subject lot. This is the precise consequence of the final and executory judgment in
Civil Case No. 7213 rendered by the RTC on June 3, 2006 whereby the title to the subject lot was
reconveyed to them and the cloud thereon consisting of Emilie’s fraudulently obtained title was
removed. Ideally, the present dispute can be simply resolved on the basis of such pronouncement.
However, the application of related legal principles ought to be clarified in order to settle the intervening
right of PNB as a mortgagee in good faith.
The protection afforded to PNB as a mortgagee in good faith refers to the right to have its mortgage
lien carried over and annotated on the new certificate of title issued to Spouses Marañon35 as so
adjudged by the RTC. Thereafter, to enforce such lien thru foreclosure proceedings in case of non-
payment of the secured debt,36 as PNB did so pursue. The principle, however, is not the singular rule
that governs real estate mortgages and foreclosures attended by fraudulent transfers to the mortgagor.
Rent, as an accessory follow the principal.37 In fact, when the principal property is mortgaged, the
mortgage shall include all natural or civil fruits and improvements found thereon when the secured
obligation becomes due as provided in Article 2127 of the Civil Code, viz:
Art. 2127. The mortgage extends to the natural accessions, to the improvements, growing fruits, and
the rents or income not yet received when the obligation becomes due, and to the amount of the
indemnity granted or owing to the proprietor from the insurers of the property mortgaged, or in virtue of
expropriation for public use, with the declarations, amplifications and limitations established by law,
whether the estate remains in the possession of the mortgagor, or it passes into the hands of a third
person.
Consequently, in case of non-payment of the secured debt, foreclosure proceedings shall cover not
only the hypothecated property but all its accessions and accessories as well. This was illustrated in
the early case of Cu Unjieng e Hijos v. Mabalacat Sugar Co.38 where the Court held:
That a mortgage constituted on a sugar central includes not only the land on which it is built but also
the buildings, machinery, and accessories installed at the time the mortgage was constituted as well
as the buildings, machinery and accessories belonging to the mortgagor, installed after the constitution
thereof x x x .39
Applying such pronouncement in the subsequent case of Spouses Paderes v. Court of Appeals,40 the
Court declared that the improvements constructed by the mortgagor on the subject lot are covered by
the real estate mortgage contract with the mortgagee bank and thus included in the foreclosure
proceedings instituted by the latter.41
However, the rule is not without qualifications. In Castro, Jr. v. CA42 the Court explained that Article
2127 is predicated on the presumption that the ownership of accessions and accessories also belongs
to the mortgagor as the owner of the principal. After all, it is an indispensable requisite of a valid real
estate mortgage that the mortgagor be the absolute owner of the encumbered property, thus:
All improvements subsequently introduced or owned by the mortgagor on the encumbered property are
deemed to form part of the mortgage. That the improvements are to be considered so incorporated
only if so owned by the mortgagor is a rule that can hardly be debated since a contract of security,
whether, real or personal, needs as an indispensable element thereof the ownership by the pledgor or
mortgagor of the property pledged or mortgaged. x x x.43 (Citation omitted)
Otherwise stated, absent an adverse claimant or any evidence to the contrary, all accessories and
accessions accruing or attached to the mortgaged property are included in the mortgage contract and
may thus also be foreclosed together with the principal property in case of non-payment of the debt
secured.
Corollary, any evidence sufficiently overthrowing the presumption that the mortgagor owns the
mortgaged property precludes the application of Article 2127. Otherwise stated, the provision is
irrelevant and inapplicable to mortgages and their resultant foreclosures if the mortgagor is later on
found or declared to be not the true owner of the property, as in the instant case.1âwphi1
It is beyond question that PNB’s mortgagors, Spouses Montealegre, are not the true owners of the
subject lot much less of the building which produced the disputed rent. The foreclosure proceedings on
August 16, 1991 caused by PNB could not have, thus, included the building found on the subject lot
and the rent it yields. PNB’s lien as a mortgagee in good faith pertains to the subject lot alone because
the rule that improvements shall follow the principal in a mortgage under Article 2127 of the Civil Code
does not apply under the premises. Accordingly, since the building was not foreclosed, it remains a
property of Spouses Marañon; it is not affected by non-redemption and is excluded from any
consolidation of title made by PNB over the subject lot. Thus, PNB’s claim for the rent paid by Tolete
has no basis.
It must be remembered that there is technically no juridical tie created by a valid mortgage contract that
binds PNB to the subject lot because its mortgagor was not the true owner. But by virtue of the
mortgagee in good faith principle, the law allows PNB to enforce its lien. We cannot, however, extend
such principle so as to create a juridical tie between PNB and the improvements attached to the subject
lot despite clear and undeniable evidence showing that no such juridical tie exists.
Lastly, it is worthy to note that the effects of the foreclosure of the subject lot is in fact still contentious
considering that as a purchaser in the public sale, PNB was only substituted to and acquired the right,
title, interest and claim of the mortgagor to the property as of the time of the levy.44 There being already
a final judgment reconveying the subject lot to Spouses Marañon and declaring as null and void Emilie's
purported claim of ownership, the legal consequences of the foreclosure sale, expiration of the
redemption period and even the consolidation of the subject lot's title in PNB's name shall be subjected
to such final judgment. This is the clear import of the ruling in Unionbank of the Philippines v. Court of
Appeals:45
This is because as purchaser at a public auction, UNIONBANK is only substituted to and acquires the
right, title, interest and claim of the judgment debtors or mortgagors to the property at the time of levy.
Perforce, the judgment in the main action for reconveyance will not be rendered ineffectual by the
consolidation of ownership and the issuance of title in the name of UNIONBANK.46 (Citation omitted)
Nonetheless, since the present recourse stemmed from a mere motion claiming ownership of rent and
not from a main action for annulment of the foreclosure sale or of its succeeding incidents, the Court
cannot proceed to make a ruling on the bearing of the CA's Decision dated June 18, 2008 to PNB's
standing as a purchaser in the public auction. Such matter will have to be threshed out in the proper
forum.
All told, albeit the dispositive portions of the assailed CA decision and resolution are differently
premised, they ought to be upheld as they convey the similar conclusion that Spouses Marañon are
the rightful owners of the rent earned by the building on the subject lot.
WHEREFORE, foregoing considered, the petition is hereby DENIED. The Decision dated June 18,
2008 and Resolution dated August 10, 2009 of the Court of Appeals in CA-G.R. SP No. 02513 are
AFFIRMED.
SO ORDERED.
D ELAY
Bonrostro v. Luna
G.R. No. 172346 July 24, 2013
SPOUSES NAMEAL and LOURDES BONROSTRO, Petitioners,
vs.
SPOUSES JUAN and CONSTANCIA LUNA, Respondents.
DECISION
DEL CASTILLO, J.:
Questioned in this case is the Court of Appeals' (CA) disquisition on the matter of interest.
Petitioners spouses Nameal and Lourdes Bonrostro (spouses Bonrostro) assail through this Petition
for Review on Certiorari1 the April 15, 2005 Decision2 of the CA in CA-G.R. CV No. 56414 which
affirmed with modifications the April 4, 1997 Decision3 of the Regional Trial Court (RTC) of Quezon
City, Branch 104 in Civil Case No. Q-94-18895. They likewise question the CA April17, 2006
Resolution4 denying their motion for partial reconsideration.
Factual Antecedents
In 1992, respondent Constancia Luna (Constancia), as buyer, entered into a Contract to Sell5 with Bliss
Development Corporation (Bliss) involving a house and lot identified as Lot 19, Block 26 of New Capitol
Estates in Diliman, Quezon City. Barely a year after, Constancia, this time as the seller, entered into
another Contract to Sell6with petitioner Lourdes Bonrostro (Lourdes) concerning the same property
under the following terms and conditions:
1. The stipulated price of ₱1,250,000.00 shall be paid by the VENDEE to the VENDOR in the following
manner:
(a) ₱200,000.00 upon signing x x x the Contract To Sell,
(b) ₱300,000.00 payable on or before April 30, 1993,
(c) ₱330,000.00 payable on or before July 31, 1993,
(d) ₱417,000.00 payable to the New Capitol Estate, for 15 years at ₱6,867.12 a month,
2. x x x In the event the VENDEE fails to pay the second installment on time, the VENDEE will pay
starting May 1, 1993 a 2% interest on the ₱300,000.00 monthly. Likewise, in the event the VENDEE
fails to pay the amount of ₱630,000.00 on the stipulated time, this CONTRACT TO SELL shall likewise
be deemed cancelled and rescinded and x x x 5% of the total contract price of ₱1,250,000.00 shall be
deemed forfeited in favor of the VENDOR. Unpaid monthly amortization shall likewise be deducted
from the initial down payment in favor of the VENDOR.7
Immediately after the execution of the said second contract, the spouses Bonrostro took possession of
the property. However, except for the ₱200,000.00 down payment, Lourdes failed to pay any of the
stipulated subsequent amortization payments.
On January 11, 1994, Constancia and her husband, respondent Juan Luna (spouses Luna), filed before
the RTC a Complaint8 for Rescission of Contract and Damages against the spouses Bonrostro praying
for the rescission of the contract, delivery of possession of the subject property, payment by the latter
of their unpaid obligation, and awards of actual, moral and exemplary damages, litigation expenses
and attorney’s fees.
In their Answer with Compulsory Counterclaim,9 the spouses Bonrostro averred that they were willing
to pay their total balance of ₱630,000.00 to the spouses Luna after they sought from them a 60-day
extension to pay the same.10 However, during the time that they were ready to pay the said amount in
the last week of October 1993, Constancia and her lawyer, Atty. Arlene Carbon (Atty. Carbon), did not
show up at their rendezvous. On November 24, 1993, Lourdes sent Atty. Carbon a letter11 expressing
her desire to pay the balance, but received no response from the latter. Claiming that they are still
willing to settle their obligation, the spouses Bonrostro prayed that the court fix the period within which
they can pay the spouses Luna.
The spouses Bonrostro likewise belied that they were not paying the monthly amortization to New
Capitol Estates and asserted that on November 18, 1993, they paid Bliss, the developer of New Capitol
Estates, the amount of ₱46,303.44. Later during trial, Lourdes testified that Constancia instructed Bliss
not to accept amortization payments from anyone as evidenced by her March 4, 1993 letter12 to Bliss.
On April 4, 1997, the RTC rendered its Decision13 focusing on the sole issue of whether the spouses
Bonrostro’s delay in their payment of the installments constitutes a substantial breach of their obligation
under the contract warranting rescission. The RTC ruled that the delay could not be considered a
substantial breach considering that Lourdes (1) requested for an extension within which to pay; (2) was
willing and ready to pay as early as the last week of October 1993 and even wrote Atty. Carbon about
this on November 24, 1993; (3) gave Constancia a down payment of ₱200,000.00; and, (4) made
payment to Bliss.
The dispositive portion of the said Decision reads:
WHEREFORE, in view of the foregoing, judgment is hereby rendered as follows:
1.) Declaring the Contract to Sell executed by the plaintiff Constancia and defendant Lourdes with
respect to the house and lot located at Blk. 26, Lot 19, New Capitol Estates, Diliman, Quezon City to
be in force and effect. And that Lourdes Bonrostro must remain in the possession of the premises.
2.) Ordering the defendants to pay plaintiffs within 60 days from receipt of this decision the sum of
₱300,000.00 plus an interest of 2% per month from April 1993 to November 1993.
3.) Ordering the defendants to pay plaintiffs within sixty (60) days from receipt of this decision the sum
of ₱330,000.00 plus an interest of 2% per month from July 1993 to November 1993.
4.) Ordering the defendants to reimburse plaintiffs the sum of ₱214,492.62 which plaintiffs paid to Bliss
Development Corporation.
No pronouncement as to Cost.
SO ORDERED.14

As their Motion for Reconsideration15 was likewise denied in an Order16 dated July 15, 1997, the
spouses Luna appealed to the CA.17
In its Decision18 of April 15, 2005, the CA concluded that since the contract entered into by and between
the parties is a Contract to Sell, rescission is not the proper remedy. Moreover, the subject contract
being specifically a contract to sell a real property on installment basis, it is governed by Republic Act
No. 655219 or the Maceda Law, Section 4 of which states:
Sec. 4. In case where less than two years of installment were paid, the seller shall give the buyer a
grace period of not less than sixty days from the date the installment became due.
If the buyer fails to pay the installments due at the expiration of the grace period, the seller may cancel
the contract after thirty days from receipt by the buyer of the notice of cancellation or the demand for
rescission of the contract by a notarial act. (Emphases supplied)
The CA held that while the spouses Luna sent the spouses Bonrostro letters20 rescinding the contract
for non-payment of the sum of ₱630,000.00, the same could not be considered as valid and effective
cancellation under the Maceda Law since they were made within the 60-day grace period and were not
notarized. The CA concluded that there being no cancellation effected in accordance with the procedure
prescribed by law, the contract therefore remains valid and subsisting.
The CA also affirmed the RTC’s finding that Lourdes was ready to pay her obligation on November 24,
1993.
However, the CA modified the RTC Decision with respect to interest, viz:
Nevertheless, there is a need to modify the appealed decision insofar as (i) the interest imposed on the
sum of ₱300,000.00 is only for the period April 1993 to November 1993; (ii) the interest imposed on the
sum of ₱330,000.00 is 2% per month and is only for the period July 1993 to November 1993; (iii) it
does not impose interest on the amount of ₱214,492.62 which was paid by Constancia to BLISS in
behalf of Lourdes x x x
The rule is that ‘no interest shall be due unless it has been expressly stipulated in writing’ (Art. 1956,
Civil Code). However, the contract does not provide for interest in case of default in payment of the
sum of ₱330,000.00 to Constancia and the monthly amortizations to BLISS.
Considering that Lourdes had incurred x x x delay in the performance of her obligations, she should
pay (i) interest at the rate of 2% per month on the sum of ₱300,000.00 from May 1, 1993 until fully paid
and (ii) interest at the legal rate on the amounts of ₱330,000.00 and ₱214,492.62 from the date of
default (August 1, 1993 and April 4, 1997 date of the appealed decision, respectively) until the same
are fully paid x x x21
Hence, the dispositive portion of the said Decision:
WHEREFORE, the appealed decision is AFFIRMED with the MODIFICATIONS that paragraphs 2, 3,
and 4 of its dispositive portion shall now read:
2.) Ordering the defendants to pay plaintiffs the sum of ₱300,000.00 plus interest thereon at the rate of
2% per month from May 1, 1993 until fully paid;
3.) Ordering the defendants to pay plaintiffs the sum of ₱330,000.00 plus interest thereon at the legal
rate from August 1, 1993 until fully paid; and
4.) Ordering the defendants to reimburse plaintiffs the sum of ₱214,492.62, which plaintiffs paid to Bliss
Development Corporation, plus interest thereon at the legal rate from filing of the complaint until fully
reimbursed.

SO ORDERED.22
The spouses Luna no longer assailed the ruling. On the other hand, the spouses Bonrostro filed a
Partial Motion for Reconsideration23 questioning the above-mentioned modifications. The CA, however,
denied for lack of merit the said motion in a Resolution24 dated April 17, 2006.
Hence, this Petition for Review on Certiorari.
Issue
The basic issue in this case is whether the CA correctly modified the RTC Decision with respect to
interests.
The Parties’ Arguments
As may be recalled, the RTC under paragraphs 2 and 3 of the dispositive portion of its Decision ordered
the spouses Bonrostro to pay the spouses Luna the sums of ₱300,000.00 plus interest of 2% per month
from April 1993 to November 1993 and ₱330,000.00 plus interest of 2% per month from July 1993 to
November 1993, respectively. The CA modified these by reckoning the payment of the 2% interest on
the ₱300,000.00 from May 1, 1993 until fully paid and by imposing interest at the legal rate on the
₱330,000.00 reckoned from August 1, 1993 until fully paid.
The spouses Bonrostro harp on the factual finding of the RTC, as affirmed by the CA, that Lourdes was
willing and ready to pay her obligation as evidenced by her November 24, 1993 letter to Atty. Carbon.
They also assert that the sending of the said letter constitutes a valid tender of payment on their part.
Hence, they argue that they should not be assessed any interest subsequent to the date of the said
letter. Neither should they be ordered to pay interest on the amount of ₱214,492.62 which covers the
amortizations paid by the spouses Luna to Bliss. They point out that it was Constancia who prevented
them from fulfilling their obligation to pay the amortizations when she instructed Bliss not to accept
payment from them.25
The spouses Luna, on the other hand, aver that the November 24, 1993 letter of Lourdes is not
equivalent to tender of payment since the mere sending of a letter expressing the intention to pay,
without the accompanying payment, cannot be considered a valid tender of payment. Also, if the
spouses Bonrostro were really willing and ready to pay at that time and assuming that the spouses
Luna indeed refused to accept payment, the former should have resorted to consignation. Anent the
payment of amortization, the spouses Luna explain that under the parties’ Contract to Sell, Lourdes
was to assume Constancia’s balance to Bliss by paying the monthly amortization in order to avoid the
cancellation of the earlier Contract to Sell entered into by Constancia with Bliss.26 However, since
Lourdes was remiss in paying the same, the spouses Luna were constrained to pay the amortization.
They thus assert that reimbursement to them of the said amount with interest is proper considering that
by reason of such payment, the spouses Bonrostro were spared from the interests and penalties which
would have been imposed by Bliss if the amortizations remained unpaid.
Our Ruling
The Petition lacks merit.
The spouses Bonrostro’s reliance on the RTC’s factual finding that Lourdes was willing and ready to
pay on November 24, 1993 is misplaced.
As mentioned, the RTC in resolving the Complaint focused on the sole issue of whether the failure of
spouses Bonrostro to pay the installments of ₱300,000.00 on April 30, 1993 and ₱330,000.00 on July
31, 1993 is a substantial breach of their obligation under the contract as to warrant the rescission of
the same.27 The said court ratiocinated, viz:

After careful evaluation of the evidence testimonial and documentary, the Court believes that the
defendants’ delay in the payment of the two installments is not so substantial as to warrant rescission
of contract. Although, the defendant failed to pay the two installments in due time, she was able to
communicate with the plaintiffs through letters requesting for an extension of two months within which
to pay the installments. In fact, on November 24, 1993 defendant informed Atty. Arlene Carbon that
she was ready to pay the installments and the money is ready for pick-up. However, plaintiff did not
bother to get or pick-up the money without any valid reason. It would be very prejudicial on the part of
the defendant if the contract to sell be rescinded considering that she made a downpayment of
₱200,000.00 and made partial amortization to the Bliss Development Corporation. In fact, the
defendant testified that she is willing and ready to pay the balance including the interest on November
24, 1993.
The Court is of the opinion that the delay in the payment of the balance of the purchase price of the
house and lot is not so substantial as to warrant the rescission of the contract to sell. The question of
whether a breach of contract is substantial depends upon the attendant circumstance. x x x28
Clearly, the RTC arrived at the above-quoted conclusion based on its mistaken premise that rescission
is applicable to the case. Hence, its determination of whether there was substantial breach. As may be
recalled, however, the CA, in its assailed Decision, found the contract between the parties as a contract
to sell, specifically of a real property on installment basis, and as such categorically declared rescission
to be not the proper remedy. This is considering that in a contract to sell, payment of the price is a
positive suspensive condition, failure of which is not a breach of contract warranting rescission under
Article 119129 of the Civil Code but rather just an event that prevents the supposed seller from being
bound to convey title to the supposed buyer.30 Also, and as correctly ruled by the CA, Article 1191
cannot be applied to sales of real property on installment since they are governed by the Maceda Law.31
There being no breach to speak of in case of non-payment of the purchase price in a contract to sell,
as in this case, the RTC’s factual finding that Lourdes was willing and able to pay her obligation – a
conclusion arrived at in connection with the said court’s determination of whether the non-payment of
the purchase price in accordance with the terms of the contract was a substantial breach warranting
rescission – therefore loses significance. The spouses Bonrostro’s reliance on the said factual finding
is thus misplaced. They cannot invoke their readiness and willingness to pay their obligation on
November 24, 1993 as an excuse from being made liable for interest beyond the said date.
The spouses Bonrostro are liable for interest on the installments due from the date of default until fully
paid.
The spouses Bonrostro assert that Lourdes’ letter of November 24, 1993 amounts to tender of payment
of the remaining balance amounting to ₱630,000.00. Accordingly, thenceforth, accrual of interest
should be suspended.
Tender of payment "is the manifestation by the debtor of a desire to comply with or pay an obligation.
If refused without just cause, the tender of payment will discharge the debtor of the obligation to pay
but only after a valid consignation of the sum due shall have been made with the proper
court."32 "Consignation is the deposit of the proper amount with a judicial authority in accordance with
rules prescribed by law, after the tender of payment has been refused or because of circumstances
which render direct payment to the creditor impossible or inadvisable."33
"Tender of payment, without more, produces no effect."34 "To have the effect of payment and the
consequent extinguishment of the obligation to pay, the law requires the companion acts of tender of
payment and consignation."35
As to the effect of tender of payment on interest, noted civilist Arturo M. Tolentino explained as follows:

When a tender of payment is made in such a form that the creditor could have immediately realized
payment if he had accepted the tender, followed by a prompt attempt of the debtor to deposit the means
of payment in court by way of consignation, the accrual of interest on the obligation will be suspended
from the date of such tender. But when the tender of payment is not accompanied by the means of
payment, and the debtor did not take any immediate step to make a consignation, then interest is not
suspended from the time of such tender. x x x x36(Emphasis supplied)
Here, the subject letter merely states Lourdes’ willingness and readiness to pay but it was not
accompanied by payment. She claimed that she made numerous telephone calls to Atty. Carbon
reminding the latter to collect her payment, but, neither said lawyer nor Constancia came to collect the
payment. After that, the spouses Bonrostro took no further steps to effect payment. They did not resort
to consignation of the payment with the proper court despite knowledge that under the contract, non-
payment of the installments on the agreed date would make them liable for interest thereon. The
spouses Bonrostro erroneously assumed that their notice to pay would excuse them from paying
interest. Their claimed tender of payment did not produce any effect whatsoever because it was not
accompanied by actual payment or followed by consignation. Hence, it did not suspend the running of
interest. The spouses Bonrostro are therefore liable for interest on the subject installments from the
date of default until full payment of the sums of ₱300,000.00 and ₱330,000.00.
The spouses Bonrostro are likewise liable for interest on the amount paid by the spouses Luna to Bliss
as amortization.
The spouses Bonrostro want to be relieved from paying interest on the amount of ₱214,492.62 which
the spouses Luna paid to Bliss as amortizations by asserting that they were prevented by the latter
from fulfilling such obligation. They invoke Art. 1186 of the Civil Code which provides that "the condition
shall be deemed fulfilled when the obligor voluntarily prevents its fulfillment."
However, the Court finds Art. 1186 inapplicable to this case. The said provision explicitly speaks of a
situation where it is the obligor who voluntarily prevents fulfillment of the condition. Here, Constancia is
not the obligor but the obligee. Moreover, even if this significant detail is to be ignored, the mere
intention to prevent the happening of the condition or the mere placing of ineffective obstacles to its
compliance, without actually preventing fulfillment is not sufficient for the application of Art. 1186.37 Two
requisites must concur for its application, to wit: (1) intent to prevent fulfillment of the condition; and, (2)
actual prevention of compliance.38
In this case, while it is undisputed that Constancia indeed instructed Bliss on March 4, 1994 not to
accept payment from anyone but her, there is nothing on record to show that Bliss heeded the
instruction of Constancia as to actually prevent the spouses Bonrostro from making payments to Bliss.
There is no showing that subsequent to the said letter, the spouses Bonrostro attempted to make
payment to and was refused by Bliss. Neither was there a witness presented to prove that Bliss indeed
gave effect to the instruction contained in Constancia’s letter. While Bliss’ Project Development Officer,
Mr. Ariel Cordero, testified during trial, nothing could be gathered from his testimony regarding this
except for the fact that Bliss received the said letter.39 In view of these, the spouses Luna could not be
said to have placed an effective obstacle as to actually prevent the spouses Bonrostro from making
amortization payments to Bliss.
On the other hand, there are telling circumstances which militate against the spouses Bonrostro’s
claimed keenness to comply with their obligation to pay the monthly amortization. After the execution
of the contract in January 1993, they immediately took possession of the property but failed to make
amortization payments. It was only after seven months or on November 18, 1993 that they made
payments to Bliss in the amount of ₱46,303.44.40 Whether the same covers previous unpaid
amortizations is also not clear as the receipt does not indicate the same41 and per Statement of
Account42 as of March 8, 1994 issued by Bliss, the unpaid monthly amortizations for February to
November 1993 in the total amount of ₱78,271.69 remained outstanding. There was also no payment
made of the amortizations due on December 4, 1993 and January 4, 199443 before the filing of the
Complaint on January 11, 1994.
On the part of the spouses Luna, it is understandable that they paid the amortizations due.1âwphi1 The
assumption of payment of the monthly amortization to Bliss was made part of the obligations of the
spouses Bonrostro under their contract with the spouses Luna precisely to avoid the cancellation of the
earlier contract entered into by Constancia with Bliss. But as the spouses Bonrostro failed in this
obligation, the spouses Luna were constrained to pay Bliss to avoid the adverse effect of such failure.
This act of the spouses Luna proved to be even more beneficial to the spouses Bonrostro as the
cancellation of the Contract to Sell between Constancia and Bliss would result in the cancellation of the
subsequent Contract to Sell between Constancia and Lourdes. Also, the spouses Bonrostro were
relieved from paying the penalties that would have been imposed by Bliss if the monthly amortizations
covered by the said payment remained unpaid. The Statements of Account44 issued by Bliss clearly
state that each monthly amortization is due on or before the fourth day of every month and a penalty
equivalent to 1/10th of 1% per day of delay shall be imposed for all payments made after due date.
That translates to 3% monthly or 36% per annum rate of interest, three times higher than the 12% per
annum rate of interest correctly imposed by the CA.
Hence, the resulting situation is that the spouses Luna are constrained to part with their money while
the spouses Bonrostro, despite being remiss in their obligation to pay the monthly amortization, are
relieved from paying higher penalties at the expense of the former. This is aside from the fact that the
spouses Bonrostro are in continued possession of the subject property and are enjoying the beneficial
use thereof. Under the circumstances and considering that the spouses Bonrostro are obviously in
delay in complying with their obligation to pay the amortizations due from February 1993 to January
1995 for which the spouses Luna paid ₱214,492.62,45 the CA correctly ordered the reimbursement to
the latter of the said amount with interest. "Delay in the performance of an obligation is looked upon
with disfavor because, when a party to a contract incurs delay, the other party who performs his part of
the contract suffers damages thereby."46 As discussed, the spouses Luna obviously suffered damages
brought about by the failure of the spouses Bonrostro to comply with their obligation on time. "And,
sans elaboration of the matter at hand, damages take the form of interest x x x."47
Under Article 2209 of the Civil Code, "if the obligation consists in the payment of a sum of money, and
the debtor incurs in delay, the indemnity for damages, there being no stipulation to the contrary, shall
be the payment of the interest agreed upon, and in the absence of stipulation, the legal interest x x x."
There being no stipulation on interest in case of delay in the payment of amortization, the CA thus
correctly imposed interest at the legal rate which is now 12% per annum.
WHEREFORE, the Petition for Review on Certiorari is DENIED and the assailed Decision dated April
15, 2005 and the Resolution dated April 17, 2006 of the Court of Appeals in CA-G.R. CV No. 56414
are AFFIRMED.
SO ORDERED.
Development Bank of the Philippines v. Guariña Agricultural and Realty Development
Corporation
G.R. No. 160758 January 15, 2014
DEVELOPMENT BANK OF THE PHILIPPINES, Petitioner,
vs.
GUARIÑA AGRICULTURAL AND REALTY DEVELOPMENT CORPORATION, Respondent.
DECISION
BERSAMIN, J.:

The foreclosure of a mortgage prior to the mortgagor's default on the principal obligation is premature,
and should be undone for being void and ineffectual. The mortgagee who has been meanwhile given
possession of the mortgaged property by virtue of a writ of possession issued to it as the purchaser at
the foreclosure sale may be required to restore the possession of the property to the mortgagor and to
pay reasonable rent for the use of the property during the intervening period.
The Case
In this appeal, Development Bank of the Philippines (DBP) seeks the reversal of the adverse decision
promulgated on March 26, 2003 in C.A.-G.R. CV No. 59491,1 whereby the Court of Appeals (CA)
upheld the judgment rendered on January 6, 19982 by the Regional Trial Court, Branch 25, in Iloilo City
(RTC) annulling the extra-judicial foreclosure of the real estate and chattel mortgages at the instance
of DBP because the debtor-mortgagor, Guariña Agricultural and Realty Development Corporation
(Guariña Corporation), had not yet defaulted on its obligations in favor of DBP.
Antecedents
In July 1976, Guariña Corporation applied for a loan from DBP to finance the development of its resort
complex situated in Trapiche, Oton, Iloilo. The loan, in the amount of ₱3,387,000.00, was approved on
August 5, 1976.3Guariña Corporation executed a promissory note that would be due on November 3,
1988.4 On October 5, 1976, Guariña Corporation executed a real estate mortgage over several real
properties in favor of DBP as security for the repayment of the loan. On May 17, 1977, Guariña
Corporation executed a chattel mortgage over the personal properties existing at the resort complex
and those yet to be acquired out of the proceeds of the loan, also to secure the performance of the
obligation.5 Prior to the release of the loan, DBP required Guariña Corporation to put up a cash equity
of ₱1,470,951.00 for the construction of the buildings and other improvements on the resort complex.
The loan was released in several instalments, and Guariña Corporation used the proceeds to defray
the cost of additional improvements in the resort complex. In all, the amount released totalled
₱3,003,617.49, from which DBP withheld ₱148,102.98 as interest.6
Guariña Corporation demanded the release of the balance of the loan, but DBP refused. Instead, DBP
directly paid some suppliers of Guariña Corporation over the latter's objection. DBP found upon
inspection of the resort project, its developments and improvements that Guariña Corporation had not
completed the construction works.7 In a letter dated February 27, 1978,8 and a telegram dated June 9,
1978,9 DBP thus demanded that Guariña Corporation expedite the completion of the project, and
warned that it would initiate foreclosure proceedings should Guariña Corporation not do so.10
Unsatisfied with the non-action and objection of Guariña Corporation, DBP initiated extrajudicial
foreclosure proceedings. A notice of foreclosure sale was sent to Guariña Corporation. The notice was
eventually published, leading the clients and patrons of Guariña Corporation to think that its business
operation had slowed down, and that its resort had already closed.11
On January 6, 1979, Guariña Corporation sued DBP in the RTC to demand specific performance of the
latter's obligations under the loan agreement, and to stop the foreclosure of the mortgages (Civil Case
No. 12707).12However, DBP moved for the dismissal of the complaint, stating that the mortgaged
properties had already been sold to satisfy the obligation of Guariña Corporation at a public auction
held on January 15, 1979 at the Costa Mario Resort Beach Resort in Oton, Iloilo.13 Due to this, Guariña
Corporation amended the complaint on February 6, 197914 to seek the nullification of the foreclosure
proceedings and the cancellation of the certificate of sale. DBP filed its answer on December 17,
1979,15 and trial followed upon the termination of the pre-trial without any agreement being reached by
the parties.16
In the meantime, DBP applied for the issuance of a writ of possession by the RTC. At first, the RTC
denied the application but later granted it upon DBP's motion for reconsideration. Aggrieved, Guariña

Corporation assailed the granting of the application before the CA on certiorari (C.A.-G.R. No. 12670-
SP entitled Guariña Agricultural and Realty Development Corporation v. Development Bank of the
Philippines). After the CA dismissed the petition for certiorari, DBP sought the implementation of the
order for the issuance of the writ of possession. Over Guariña Corporation's opposition, the RTC issued
the writ of possession on June 16, 1982.17
Judgment of the RTC
On January 6, 1998, the RTC rendered its judgment in Civil Case No. 12707, disposing as follows:
WHEREFORE, premises considered, the court hereby resolves that the extra-judicial sales of the
mortgaged properties of the plaintiff by the Office of the Provincial Sheriff of Iloilo on January 15, 1979
are null and void, so with the consequent issuance of certificates of sale to the defendant of said
properties, the registration thereof with the Registry of Deeds and the issuance of the transfer
certificates of title involving the real property in its name.
It is also resolved that defendant give back to the plaintiff or its representative the actual possession
and enjoyment of all the properties foreclosed and possessed by it. To pay the plaintiff the reasonable
rental for the use of its beach resort during the period starting from the time it (defendant) took over its
occupation and use up to the time possession is actually restored to the plaintiff.
And, on the part of the plaintiff, to pay the defendant the loan it obtained as soon as it takes possession
and management of the beach resort and resume its business operation.
Furthermore, defendant is ordered to pay plaintiff's attorney's fee of ₱50,000.00.
So ORDERED.18
Decision of the CA
On appeal (C.A.-G.R. CV No. 59491), DBP challenged the judgment of the RTC, and insisted that:
I
THE TRIAL COURT ERRED AND COMMITTED REVERSIBLE ERROR IN DECLARING DBP'S
FORECLOSURE OF THE MORTGAGED PROPERTIES AS INVALID AND UNCALLED FOR.
II
THE TRIAL COURT GRIEVOUSLY ERRED IN HOLDING THE GROUNDS INVOKED BY DBP TO
JUSTIFY FORECLOSURE AS "NOT SUFFICIENT." ON THE CONTRARY, THE MORTGAGE WAS
FORECLOSED BY EXPRESS AUTHORITY OF PARAGRAPH NO. 4 OF THE MORTGAGE
CONTRACT AND SECTION 2 OF P.D. 385 IN ADDITION TO THE QUESTIONED PAR. NO. 26
PRINTED AT THE BACK OF THE FIRST PAGE OF THE MORTGAGE CONRACT.
III
THE TRIAL COURT ERRED IN HOLDING THE SALES OF THE MORTGAGED PROPERTIES TO
DBP AS INVALID UNDER ARTICLES 2113 AND 2141 OF THE CIVIL CODE.
IV
THE TRIAL COURT GRAVELY ERRED AND COMMITTED [REVERSIBLE] ERROR IN ORDERING
DBP TO RETURN TO PLAINTIFF THE ACTUAL POSSESSION AND ENJOYMENT OF ALL THE
FORECLOSED PROPERTIES AND TO PAY PLAINTIFF REASONABLE RENTAL FOR THE USE OF
THE FORECLOSED BEACH RESORT.
V

THE TRIAL COURT ERRED IN AWARDING ATTORNEY'S FEES AGAINST DBP WHICH MERELY
EXERCISED ITS RIGHTS UNDER THE MORTGAGE CONTRACT.19
In its decision promulgated on March 26, 2003,20 however, the CA sustained the RTC's judgment but
deleted the award of attorney's fees, decreeing:
WHEREFORE, in view of the foregoing, the Decision dated January 6, 1998, rendered by the Regional
Trial Court of Iloilo City, Branch 25 in Civil Case No. 12707 for Specific Performance with Preliminary
Injunction is hereby AFFIRMED with MODIFICATION, in that the award for attorney's fees is deleted.
SO ORDERED.21
DBP timely filed a motion for reconsideration, but the CA denied its motion on October 9, 2003.
Hence, this appeal by DBP.
Issues
DBP submits the following issues for consideration, namely:
WHETHER OR NOT THE DECISION OF THE COURT OF APPEALS DATED MARCH 26, 2003 AND
ITS RESOLUTION DATED OCTOBER 9, DENYING PETITIONER'S MOTION FOR
RECONSIDERATION WERE ISSUED IN ACCORDANCE WITH LAW, PREVAILING
JURISPRUDENTIAL DECISION AND SUPPORTED BY EVIDENCE;
WHETHER OR NOT THE HONORABLE COURT OF APPEALS ADHERED TO THE USUAL COURSE
OF JUDICIAL PROCEEDINGS IN DECIDING C.A.-G.R. CV NO. 59491 AND THEREFORE IN
ACCORDANCE WITH THE "LAW OF THE CASE DOCTRINE."22
Ruling
The appeal lacks merit.
1.
Findings of the CA were supported by the
evidence as well as by law and jurisprudence
DBP submits that the loan had been granted under its supervised credit financing scheme for the
development of a beach resort, and the releases of the proceeds would be subject to conditions that
included the verification of the progress of works in the project to forestall diversion of the loan
proceeds; and that under Stipulation No. 26 of the mortgage contract, further loan releases would be
terminated and the account would be considered due and demandable in the event of a deviation from
the purpose of the loan,23 including the failure to put up the required equity and the diversion of the loan
proceeds to other purposes.24 It assails the declaration by the CA that Guariña Corporation had not yet
been in default in its obligations despite violations of the terms of the mortgage contract securing the
promissory note.
Guariña Corporation counters that it did not violate the terms of the promissory note and the mortgage
contracts because DBP had fully collected the interest notwithstanding that the principal obligation did
not yet fall due and become demandable.25
The submissions of DBP lack merit and substance.
The agreement between DBP and Guariña Corporation was a loan. Under the law, a loan requires the
delivery of money or any other consumable object by one party to another who acquires ownership
thereof, on the condition that the same amount or quality shall be paid.26 Loan is a reciprocal obligation,
as it arises from the same cause where one party is the creditor, and the other the debtor.27 The
obligation of one party in a reciprocal obligation is dependent upon the obligation of the other, and the

performance should ideally be simultaneous. This means that in a loan, the creditor should release the
full loan amount and the debtor repays it when it becomes due and demandable.28
In its assailed decision, the CA found and held thusly:
xxxx
x x x It is undisputed that appellee obtained a loan from appellant, and as security, executed real estate
and chattel mortgages. However, it was never established that appellee was already in default.
Appellant, in a telegram to the appellee reminded the latter to make good on its construction works,
otherwise, it would foreclose the mortgage it executed. It did not mention that appellee was already in
default. The records show that appellant did not make any demand for payment of the promissory note.
It appears that the basis of the foreclosure was not a default on the loan but appellee's failure to
complete the project in accordance with appellant's standards. In fact, appellant refused to release the
remaining balance of the approved loan after it found that the improvements introduced by appellee
were below appellant's expectations.
The loan agreement between the parties is a reciprocal obligation. Appellant in the instant case bound
itself to grant appellee the loan amount of ₱3,387,000.00 condition on appellee's payment of the
amount when it falls due. Furthermore, the loan was evidenced by the promissory note which was
secured by real estate mortgage over several properties and additional chattel mortgage. Reciprocal
obligations are those which arise from the same cause, and in which each party is a debtor and a
creditor of the other, such that the obligation of one is dependent upon the obligation of the other (Areola
vs. Court of Appeals, 236 SCRA 643). They are to be performed simultaneously such that the
performance of one is conditioned upon the simultaneous fulfilment of the other (Jaime Ong vs. Court
of Appeals, 310 SCRA 1). The promise of appellee to pay the loan upon due date as well as to execute
sufficient security for said loan by way of mortgage gave rise to a reciprocal obligation on the part of
appellant to release the entire approved loan amount. Thus, appellees are entitled to receive the total
loan amount as agreed upon and not an incomplete amount.
The appellant did not release the total amount of the approved loan. Appellant therefore could not have
made a demand for payment of the loan since it had yet to fulfil its own obligation. Moreover, the fact
that appellee was not yet in default rendered the foreclosure proceedings premature and improper.
The properties which stood as security for the loan were foreclosed without any demand having been
made on the principal obligation. For an obligation to become due, there must generally be a demand.
Default generally begins from the moment the creditor demands the performance of the obligation.
Without such demand, judicial or extrajudicial, the effects of default will not arise (Namarco vs.
Federation of United Namarco Distributors, Inc., 49 SCRA 238; Borje vs. CFI of Misamis Occidental,
88 SCRA 576).
xxxx
Appellant also admitted in its brief that it indeed failed to release the full amount of the approved loan.
As a consequence, the real estate mortgage of appellee becomes unenforceable, as it cannot be
entirely foreclosed to satisfy appellee's total debt to appellant (Central Bank of the Philippines vs. Court
of Appeals, 139 SCRA 46).
Since the foreclosure proceedings were premature and unenforceable, it only follows that appellee is
still entitled to possession of the foreclosed properties. However, appellant took possession of the same
by virtue of a writ of possession issued in its favor during the pendency of the case. Thus, the trial court
correctly ruled when it ordered appellant to return actual possession of the subject properties to
appellee or its representative and to pay appellee reasonable rents.
However, the award for attorney's fees is deleted. As a rule, the award of attorney's fees is the exception
rather than the rule and counsel's fees are not to be awarded every time a party wins a suit. Attorney's
fees cannot be recovered as part of damages because of the policy that no premium should be placed
on the right to litigate (Pimentel vs. Court of Appeals, et al., 307 SCRA 38).29
xxxx
We uphold the CA.
To start with, considering that the CA thereby affirmed the factual findings of the RTC, the Court is
bound to uphold such findings, for it is axiomatic that the trial court's factual findings as affirmed by the
CA are binding on appeal due to the Court not being a trier of facts.
Secondly, by its failure to release the proceeds of the loan in their entirety, DBP had no right yet to
exact on Guariña Corporation the latter's compliance with its own obligation under the loan. Indeed, if
a party in a reciprocal contract like a loan does not perform its obligation, the other party cannot be
obliged to perform what is expected of it while the other's obligation remains unfulfilled.30 In other words,
the latter party does not incur delay.31
Still, DBP called upon Guariña Corporation to make good on the construction works pursuant to the
acceleration clause written in the mortgage contract (i.e., Stipulation No. 26),32 or else it would foreclose
the mortgages.
DBP's actuations were legally unfounded. It is true that loans are often secured by a mortgage
constituted on real or personal property to protect the creditor's interest in case of the default of the
debtor. By its nature, however, a mortgage remains an accessory contract dependent on the principal
obligation,33 such that enforcement of the mortgage contract will depend on whether or not there has
been a violation of the principal obligation. While a creditor and a debtor could regulate the order in
which they should comply with their reciprocal obligations, it is presupposed that in a loan the lender
should perform its obligation - the release of the full loan amount - before it could demand that the
borrower repay the loaned amount. In other words, Guariña Corporation would not incur in delay before
DBP fully performed its reciprocal obligation.34
Considering that it had yet to release the entire proceeds of the loan, DBP could not yet make an
effective demand for payment upon Guariña Corporation to perform its obligation under the loan.
According to Development Bank of the Philippines v. Licuanan,35 it would only be when a demand to
pay had been made and was subsequently refused that a borrower could be considered in default, and
the lender could obtain the right to collect the debt or to foreclose the mortgage.1âwphi1 Hence,
Guariña Corporation would not be in default without the demand.
Assuming that DBP could already exact from the latter its compliance with the loan agreement, the
letter dated February 27, 1978 that DBP sent would still not be regarded as a demand to render Guariña
Corporation in default under the principal contract because DBP was only thereby requesting the latter
"to put up the deficiency in the value of improvements."36
Under the circumstances, DBP's foreclosure of the mortgage and the sale of the mortgaged properties
at its instance were premature, and, therefore, void and ineffectual.37
Being a banking institution, DBP owed it to Guariña Corporation to exercise the highest degree of
diligence, as well as to observe the high standards of integrity and performance in all its transactions
because its business was imbued with public interest.38 The high standards were also necessary to
ensure public confidence in the banking system, for, according to Philippine National Bank v.
Pike:39 "The stability of banks largely depends on the confidence of the people in the honesty and
efficiency of banks." Thus, DBP had to act with great care in applying the stipulations of its agreement
with Guariña Corporation, lest it erodes such public confidence. Yet, DBP failed in its duty to exercise
the highest degree of diligence by prematurely foreclosing the mortgages and unwarrantedly causing
the foreclosure sale of the mortgaged properties despite Guariña Corporation not being yet in default.
DBP wrongly relied on Stipulation No. 26 as its basis to accelerate the obligation of Guariña
Corporation, for the stipulation was relevant to an Omnibus Agricultural Loan, to Guariña Corporation's
loan which was intended for a project other than agricultural in nature.
Even so, Guariña Corporation did not elevate the actionability of DBP's negligence to the CA, and did
not also appeal the CA's deletion of the award of attorney's fees allowed by the RTC.1âwphi1 With the
decision of the CA consequently becoming final and immutable as to Guariña Corporation, we will not
delve any further on DBP's actionable actuations.
2.
The doctrine of law of the case
did not apply herein
DBP insists that the decision of the CA in C.A.-G.R. No. 12670-SP already constituted the law of the
case. Hence, the CA could not decide the appeal in C.A.-G.R. CV No. 59491 differently.
Guariña Corporation counters that the ruling in C.A.-G.R. No. 12670-SP did not constitute the law of
the case because C.A.-G.R. No. 12670-SP concerned the issue of possession by DBP as the winning
bidder in the foreclosure sale, and had no bearing whatsoever to the legal issues presented in C.A.-
G.R. CV No. 59491.
Law of the case has been defined as the opinion delivered on a former appeal, and means, more
specifically, that whatever is once irrevocably established as the controlling legal rule of decision
between the same parties in the same case continues to be the law of the case, whether correct on
general principles or not, so long as the facts on which such decision was predicated continue to be
the facts of the case before the court.40
The concept of law of the case is well explained in Mangold v. Bacon,41 an American case, thusly:
The general rule, nakedly and boldly put, is that legal conclusions announced on a first appeal, whether
on the general law or the law as applied to the concrete facts, not only prescribe the duty and limit the
power of the trial court to strict obedience and conformity thereto, but they become and remain the law
of the case in all other steps below or above on subsequent appeal. The rule is grounded on
convenience, experience, and reason. Without the rule there would be no end to criticism, reagitation,
reexamination, and reformulation. In short, there would be endless litigation. It would be intolerable if
parties litigants were allowed to speculate on changes in the personnel of a court, or on the chance of
our rewriting propositions once gravely ruled on solemn argument and handed down as the law of a
given case. An itch to reopen questions foreclosed on a first appeal would result in the foolishness of
the inquisitive youth who pulled up his corn to see how it grew. Courts are allowed, if they so choose,
to act like ordinary sensible persons. The administration of justice is a practical affair. The rule is a
practical and a good one of frequent and beneficial use.
The doctrine of law of the case simply means, therefore, that when an appellate court has once declared
the law in a case, its declaration continues to be the law of that case even on a subsequent appeal,
notwithstanding that the rule thus laid down may have been reversed in other cases.42 For practical
considerations, indeed, once the appellate court has issued a pronouncement on a point that was
presented to it with full opportunity to be heard having been accorded to the parties, the pronouncement
should be regarded as the law of the case and should not be reopened on remand of the case to
determine other issues of the case, like damages.43 But the law of the case, as the name implies,
concerns only legal questions or issues thereby adjudicated in the former appeal.
The foregoing understanding of the concept of the law of the case exposes DBP's insistence to be
unwarranted.
To start with, the ex parte proceeding on DBP's application for the issuance of the writ of possession
was entirely independent from the judicial demand for specific performance herein. In fact, C.A.-G.R.
No. 12670-SP, being the interlocutory appeal concerning the issuance of the writ of possession while
the main case was pending, was not at all intertwined with any legal issue properly raised and litigated
in C.A.-G.R. CV No. 59491, which was the appeal to determine whether or not DBP's foreclosure was
valid and effectual. And, secondly, the ruling in C.A.-G.R. No. 12670-SP did not settle any question of
law involved herein because this case for specific performance was not a continuation of C.A.-G.R. No.
12670-SP (which was limited to the propriety of the issuance of the writ of possession in favor of DBP),
and vice versa.
3.
Guarifia Corporation is legally entitled to the
restoration of the possession of the resort complex
and payment of reasonable rentals by DBP
Having found and pronounced that the extrajudicial foreclosure by DBP was premature, and that the
ensuing foreclosure sale was void and ineffectual, the Court affirms the order for the restoration of
possession to Guarifia Corporation and the payment of reasonable rentals for the use of the resort. The
CA properly held that the premature and invalid foreclosure had unjustly dispossessed Guarifia
Corporation of its properties. Consequently, the restoration of possession and the payment of
reasonable rentals were in accordance with Article 561 of the Civil Code, which expressly states that
one who recovers, according to law, possession unjustly lost shall be deemed for all purposes which
may redound to his benefit to have enjoyed it without interruption.
WHEREFORE, the Court AFFIRMS the decision promulgated on March 26, 2003; and ORDERS the
petitioner to pay the costs of suit.
SO ORDERED.
Maybank Philippines, Inc. v. Foundation Specialists, Inc.
G.R. No. 213014, October 14, 2015
MAYBANK PHILIPPINES, INC. (FORMERLY PNB-REPUBLIC BANK1), Petitioner, v. SPOUSES
OSCAR AND NENITA TARROSA, Respondents.
DECISION
PERLAS-BERNABE, J.:
Assailed in this petition for review on certiorari2 are the Decision3 dated November 29, 2013 and the
Resolution4 dated May 13, 2014 of the Court of Appeals (CA) in CA-G.R. CV No. 02211, which affirmed
the Decision5 dated June 16, 2005 of the Regional Trial Court of Bacolod City, Branch 41 (RTC) in Civil
Case No. 98-10451 declaring the extrajudicial foreclosure sale of the property covered by Transfer
Certificate of Title (TCT) No. T-5649 as null and void for being barred by prescription.
The Facts
On December 15, 1980, respondents-spouses Oscar and Nenita Tarrosa (Sps. Tarrosa) obtained from
then PNB-Republic Bank, now petitioner Maybank Philippines, Inc. (Maybank), a loan in the amount of
P91,000.00. The loan was secured by a Real Estate Mortgage6 dated January 5, 1981 (real estate
mortgage) over a 500-square meter parcel of land situated in San Carlos City, Negros Occidental
(subject property), covered by TCT No. T-5649,7 and the improvements thereon.8
After paying the said loan, or sometime in March 1983, Sps. Tarrosa obtained another loan from
Maybank in the amount of P60,000.00 (second loan),9 payable on March 11, 1984.10 However, Sps.
Tarrosa failed to settle the second loan upon maturity.11

Sometime in April 1998, Sps. Tarrosa received a Final Demand Letter12 dated March 4, 1998 (final
demand letter) from Maybank requiring them to settle their outstanding loan in the aggregate amount
of P564,579.91, inclusive of principal, interests, and penalty charges.13 They offered to pay a lesser
amount, which Maybank refused.14 Thereafter, or on June 25, 1998, Maybank commenced extrajudicial
foreclosure proceedings15 before the office of Ex-Officio Provincial Sheriff Ildefonso Villanueva, Jr.
(Sheriff Villanueva). The subject property was eventually sold in a public auction sale held on July 29,
199816 for a total bid price of P600,000.00, to the highest bidder, Philmay Property, Inc. (PPI), which
was thereafter issued a Certificate of Sale17 dated July 30, 1998.18
On September 7, 1998, Sps. Tarrosa filed a complaint19 for declaration of nullity and invalidity of the
foreclosure of real estate and of public auction sale proceedings and damages with prayer for
preliminary injunction against Maybank, PPI, Sheriff Villanueva, and the Registry of Deeds of San
Carlos City, Negros Occidental (RD-San Carlos), before the RTC, docketed as Civil Case No. 98-
10451. They averred, inter alia, that: (a) the second loan was a clean or unsecured loan; (b) after
receiving the final demand letter, they tried to pay the second loan, including the agreed interests and
charges, but Maybank unjustly refused their offers of payment; and (c) Maybank's right to foreclose had
prescribed or is barred by laches.20
On the other hand, Maybank and PPI countered21 that: (a) the second loan was secured by the same
real estate mortgage under a continuing security provision therein; (b) when the loan became past due,
Sps. Tarrosa promised to pay and negotiated for a restructuring of their loan, but failed to pay despite
demands; and (c) Sps. Tarrosa's positive acknowledgment and admission of their indebtedness
controverts the defense of prescription.
The RTC Ruling
In a Decision23 dated June 16, 2005, the RTC held that the second loan was subject to the continuing
security provision in the real estate mortgage.24 However, it ruled that Maybank's right to foreclose,
reckoned from the time the mortgage indebtedness became due and payable on March 11, 1984, had
already prescribed, considering the lack of any timely judicial action, written extrajudicial demand or
written acknowledgment by the debtor of his debt that could interrupt the prescriptive
period.25Accordingly, it declared the extrajudicial foreclosure proceedings affecting the subject property
as null and void, and ordered Maybank to pay Sps. Tarrosa moral and exemplary damages, as well as
attorney's fees and litigation expenses.26
Maybank filed a motion for reconsideration27 which was, however, denied in an Order28 dated
December 9, 2005, prompting it to appeal29 to the CA.
The CA Ruling
In a Decision30 dated November 29, 2013, the CA affirmed the RTC ruling that Maybank's right to
foreclose the real estate mortgage over the subject property is already barred by prescription. It held
that the prescriptive period should be reckoned from March 11, 1984 when the second loan had become
past due and remained unpaid since demand was not a condition sine qua non for the accrual of the
latter's right to foreclose under paragraph 5 of the real estate mortgage. It observed that Maybank failed
to present evidence of any timely written extrajudicial demand or written acknowledgment by the
debtors of their debt that could have effectively interrupted the running of the prescriptive period.31
Undaunted, Maybank moved for reconsideration,32 which was denied in a Resolution33 dated May 13,
2014; hence this petition.

The Issues Before the Court
The essential issue for the Court's resolution is whether or not the CA committed reversible error in
finding that Maybank's right to foreclose the real estate mortgage over the subject property was barred
by prescription.chanrobleslaw
The Court's Ruling
The petition is meritorious.
An action to enforce a right arising from a mortgage should be enforced within ten (10) years
from the time the right of action accrues, i.e., when the mortgagor defaults in the payment of
his obligation to the mortgagee; otherwise, it will be barred by prescription and the mortgagee
will lose his rights under the mortgage.34 However, mere delinquency in payment does not
necessarily mean delay in the legal concept. To be in default is different from mere delay in the
grammatical sense, because it involves the beginning of a special condition or status which has its own
peculiar effects or results.35
In order that the debtor may be in default, it is necessary that: (a) the obligation be demandable and
already liquidated; (b) the debtor delays performance; and (c) the creditor requires the performance
judicially or extrajudicially,36unless demand is not necessary - i.e., when there is an express stipulation
to that effect; where the law so provides; when the period is the controlling motive or the principal
inducement for the creation of the obligation; and where demand would be useless. Moreover, it is not
sufficient that the law or obligation fixes a date for performance; it must further state expressly that after
the period lapses, default will commence. Thus, it is only when demand to pay is unnecessary in
case of the aforementioned circumstances, or when required, such demand is made and
subsequently refused that the mortgagor can be considered in default and the mortgagee
obtains the right to file an action to collect the debt or foreclose the mortgage.38
In the present case, both the CA and the RTC reckoned the accrual of Maybank's cause of action to
foreclose the real estate mortgage over the subject property from the maturity of the second loan on
May 11, 1984. The CA further held that demand was unnecessary for the accrual of the cause of action
in light of paragraph 5 of the real estate mortgage, which pertinently provides:
5. In the event that the Mortgagor herein should fail or refuse to pay any of the sums of money secured
by this mortgage, or any part thereof, in accordance with the terms and conditions herein set forth, or
should he/it fail to perform any of the conditions stipulated herein, then and in any such case, the
Mortgagee shall have the right, at its election to foreclose this mortgage, [x x x].39
However, this provision merely articulated Maybank's right to elect foreclosure upon Sps. Tarrosa's
failure or refusal to comply with the obligation secured, which is one of the rights duly accorded to
mortgagees in a similar situation.40 In no way did it affect the general parameters of default, particularly
the need of prior demand under Article 116941 of the Civil Code, considering that it did not expressly
declare: (a) that demand shall not be necessary in order that the mortgagor may be in default; or (b)
that default shall commence upon mere failure to pay on the maturity date of the loan. Hence, the CA
erred in construing the above provision as one through which the parties had dispensed with demand
as a condition sine qua non for the accrual of Maybank's right to foreclose the real estate mortgage
over the subject property, and thereby, mistakenly reckoned such right from the maturity date of the
loan on March 11, 1984. In the absence of showing that demand is unnecessary for the loan obligation
to become due and demandable, Maybank's right to foreclose the real estate mortgage accrued only
after the lapse of the period indicated in its final demand letter for Sps. Tarrosa to pay, i.e., after the
lapse of five (5) days from receipt of the final demand letter dated March 4, 1998.42 Consequently, both
the CA and the RTC committed reversible error in declaring that Maybank's right to foreclose the real
estate mortgage had already prescribed.
Thus, considering that the existence of the loan had been admitted, the default on the part of the
debtors-mortgagors had been duly established, and the foreclosure proceedings had been initiated
within the prescriptive period as afore-discussed, the Court finds no reason to nullify the extrajudicial
foreclosure sale of the subject property.
WHEREFORE, the petition is GRANTED. The Decision dated
November 29, 2013 and the Resolution dated May 13, 2014 of the Court of Appeals in CA-G.R. CV
No. 02211 are hereby REVERSED AND SET ASIDE. The complaint in Civil Case No. 98-10451
is DISMISSED.
SO ORDERED.
Federal Builders, Inc. v. Foundation Specialists, Inc.

G.R. No. 194507 September 8, 2014
FEDERAL BUILDERS, INC., Petitioner,
vs.
FOUNDATION SPECIALISTS, INC., Respondent,
x-----------------------x
G.R. No. 194621
FOUNDATION SPECIALISTS, INC., Petitioner,
vs.
FEDERAL BUILDERS, INC., Respondent.
DECISION
PERALTA, J.:
Before the Court are two consolidated cases, namely: (1) Petition for review on certiorari under Rule
45 of the Rules of Court, docketed as G.R. No. 194507, filed by Federal Builders, Inc., assailing the
Decision1 and Resolution,2dated July 15, 2010 and November 23, 2010, respectively, of the Court of
Appeals (CA) in CA-G.R. CV No. 70849, which affirmed with modification the Decision3 dated May 3,
2001 of the Regional Trial Court (RTC) in Civil Case No. 92-075; and (2) Petition for review on certiorari
under Rule 45 of the Rules of Court,docketed as G.R. No. 194621, filed by Foundation Specialists, Inc.,
assailing the same Decision4 and Resolution,5 dated July 15, 2010 and November 23,
2010,respectively, of the CA in CA- G.R. CV No. 70849, which affirmed with modification the
Decision6 dated May 3, 2001 of the RTC in Civil Case No. 92-075.
The antecedent facts are as follows:
On August 20, 1990, Federal Builders, Inc. (FBI) entered into an agreement with Foundation
Specialists, Inc. (FSI) whereby the latter, as subcontractor, undertook the construction of the diaphragm
wall, capping beam, and guide walls of the Trafalgar Plaza located at Salcedo Village, Makati City (the
Project), for a total contract price of Seven Million Four Hundred Thousand Pesos
(₱7,400,000.00).7 Under the agreement,8 FBI was to pay a downpayment equivalent to twenty percent
(20%) of the contract price and the balance, through a progress billing every fifteen (15) days, payable
not later than one (1) week from presentation of the billing.

On January 9, 1992, FSI filed a complaint for Sum of Money against FBI before the RTC of Makati City
seeking to collect the amount of One Million Six Hundred Thirty-Five Thousand Two Hundred Seventy-
Eight Pesos and Ninety-One Centavos (₱1,635,278.91), representing Billings No. 3 and 4, with accrued
interest from August 1, 1991 plus moral and exemplary damages with attorney’s fees.9 In its
complaint,FSI alleged that FBI refused to pay said amount despite demand and itscompletion of ninety-
seven percent (97%) of the contracted works.
In its Answer with Counterclaim, FBI claimed that FSI completed only eighty-five percent (85%) of the
contracted works, failing to finish the diaphragm wall and component works in accordance with the
plans and specifications and abandoning the jobsite. FBI maintains that because of FSI’s inadequacy,
its schedule in finishing the Project has been delayed resulting in the Project owner’s deferment of its
own progress billings.10 It further interposed counterclaims for amounts it spent for the remedial works
on the alleged defects in FSI’s work.
On May 3, 2001, after evaluating the evidence of both parties, the RTC ruled in favor of FSI, the
dispositive portion of its Decision reads:
WHEREFORE, on the basis of the foregoing, judgment is rendered ordering defendant to pay plaintiff
the following:
1. The sum of ₱1,024,600.00 representing billings 3 and 4, less the amount of ₱33,354.40 plus 12%
legal interest from August 30, 1991;
2. The sum of ₱279,585.00 representing the cost of undelivered cement;
3. The sum of ₱200,000.00 as attorney’s fees; and
4. The cost of suit.
Defendant’s counterclaim is deniedfor lack of factual and legal basis.
SO ORDERED.11
On appeal, the CA affirmed the Decision of the lower court, but deleted the sum of ₱279,585.00
representing the cost of undelivered cement and reduced the award of attorney’s fees to ₱50,000.00.
In its Decision12 dated July 15, 2010, the CA explained that FSI failed to substantiate how and in what
manner it incurred the cost of cement by stressing that its claim was not supported by actual receipts.
Also, it found that while the trial court did not err in awarding attorney’s fees, the same should be
reduced for being unconscionable and excessive. On FBI’s rejection of the 12% annual interest rate on
the amount of Billings 3 and 4, the CA ruled that the lower court did not err in imposing the same in the
following wise:
x x x The rule is well-settled that when an obligation is breached, and it consists in the payment of a
sum of money, the interest due shall itself earn legal interest from the time it is judicially demanded
(BPI Family Savings Bank, Inc. vs. First Metro Investment Corporation, 429 SCRA 30). When there is
no rate of interest stipulated, such as in the present case, the legal rate of interest shall be imposed,
pursuant to Article 2209 of the New Civil Code. In the absence of a stipulated interest rate on a loan
due, the legal rate of interest shall be 12% per annum.13
Both parties filed separate Motions for Reconsideration assailing different portions of the CADecision,
but to no avail.14 Undaunted, they subsequently elevated their claims withthis Court via petitions for
review on certiorari.
On the one hand, FSI asserted that the CA should not have deleted the sum of ₱279,585.00
representing the cost of undelivered cement and reduced the award of attorney’s fees to ₱50,000.00,
since it was an undisputed fact that FBI failed to deliver the agreed quantity of cement. On the other
hand, FBI faulted the CA for affirming the decision of the lower court insofar as the award of the sum

representing Billings 3 and 4, the interest imposed thereon, and the rejection of his counterclaim were
concerned. In a Resolution15 dated February 21, 2011, however, this Court denied, with finality, the
petition filed by FSI in G.R. No. 194621 for having been filed late.
Hence, the present petition filed byFBI in G.R. No. 194507 invoking the following arguments:
I.
THE COURT OF APPEALS COMMITTED A CLEAR, REVERSABLE ERROR WHEN IT AFFIRMED
THE TRIAL COURT’S JUDGMENT THAT FEDERAL BUILDERS, INC. WAS LIABLE TO PAY THE
BALANCE OF ₱1,024,600.00 LESS THE AMOUNT OF ₱33,354.40 NOTWITHSTANDING THAT THE
DIAPHRAGM WALL CONSTRUCTED BY FOUNDATION SPECIALIST, INC. WAS CONCEDEDLY
DEFECTIVE AND OUT-OF-SPECIFICATIONS AND THAT PETITIONER HAD TO REDO IT AT ITS
OWN EXPENSE.
II.
THE COURT OF APPEALS COMMITTED SERIOUS, REVERSABLE ERROR WHEN IT IMPOSED
THE 12% LEGAL INTEREST FROM AUGUST 30, 1991 ON THE DISPUTED CLAIM OF
₱1,024,600.00 LESS THE AMOUNT OF ₱33,354.40 DESPITE THE FACT THAT THERE WAS NO
STIPULATION IN THE AGREEMENT OF THE PARTIES WITH REGARD TO INTEREST AND
DESPITE THE FACT THAT THEIR AGREEMENT WAS NOT A "LOAN OR FORBEARANCE OF
MONEY."
III.
THE COURT OF APPEALS COMMITTED GRAVE AND SERIOUS REVERSABLE ERROR WHEN IT
DISMISSED THE COUNTERCLAIM OF PETITIONER NOTWITHSTANDING OVERWHELMING
EVIDENCE SUPPORTING ITS CLAIM OF ₱8,582,756.29 AS ACTUAL DAMAGES.
The petition is partly meritorious.
We agree with the courts below and reject FBI’s first and third arguments. Well-entrenched in
jurisprudence is the rule that factual findings of the trial court, especially when affirmed by the appellate
court, are accorded the highest degree of respectand considered conclusive between the parties, save
for the following exceptional and meritorious circumstances: (1) when the factual findings of the
appellate court and the trial court are contradictory; (2) whenthe findings of the trial court are grounded
entirely on speculation, surmises or conjectures; (3) when the lower court’s inference from its factual
findings is manifestly mistaken, absurd or impossible; (4) when there is grave abuse of discretion in the
appreciation of facts; (5) when the findings of the appellate court go beyond the issues of the case, or
fail to notice certain relevant facts which, if properly considered, will justify a different conclusion; (6)
when there is a misappreciation of facts; (7) when the findings of fact are themselves conflicting; and
(8) when the findings of fact are conclusions without mention of the specific evidence on which they are
based, are premised on the absence of evidence, or are contradicted by evidence on record.16
None of the aforementioned exceptions are present herein. In the assailed Decision, the RTC
meticulouslydiscussed the obligations of each party, the degree of their compliance therewith, as well
as their respective shortcomings, all of which were properly substantiated with the corresponding
documentary and testimonial evidence.
Under the construction agreement, FSI’s scope of workconsisted in (1) the construction of the guide
walls, diaphragm walls, and capping beam; and (2) the installation of steel props.17 As the lower courts
aptly observed from the records at hand, FSI had, indeed, completed ninety-seven percent (97%) of its
contracted works and the non-completion of the remaining three percent (3%), as well as the alleged
defects in the said works, are actually attributable to FBI’s own fault such as, but not limited to, the
failure to deliver the needed cement as agreed upon in the contract, to wit:

On March 8, 1991, plaintiff had finished the construction of the guide wall and diaphragm wall (Exh.
"R") but had not yet constructed the capping beam as of April 22, 1991 for defendant’s failure to deliver
the needed cement in accordance with their agreement(Exhibit "I"). The diaphragm wall had likewise
been concrete tested and was found to have conformed with the required design strength (Exh. "R").
Subsequently, plaintiff was paid the aggregate amount of ₱5,814,000.00. But as of May 30, 1991,
plaintiff’s billings numbers 3 and 4 had remained unpaid (Exhs. "L", "M", and "M-1").
xxxx
On the misaligned diaphragm wall from top to bottom and inbetween panels, plaintiff explained thatin
the excavation of the soil where the rebar cages are lowered and later poured with concrete cement,
the characteristics of the soil is not the same or homogenous all throughout. Because of this property
of the soil,in the process of excavation, it may erode in some places that may cause spaces that the
cement may fill or occupy which would naturally cause bulges, protrusions and misalignment in the
concrete cast into the excavated ground(tsn., June 1, 2000, pp 14-18). This, in fact was anticipated
when the agreement was executed and included as provision 6.4 thereof.
The construction of the diaphragm wall panel by panel caused misalignment and the chipping off of the
portions misaligned is considered a matter of course. Defendant, as the main contractor of the project,
has the responsibility of chopping or chipping off of bulges(tsn., ibid, pp 20-21). Wrong location of rebar
dowels was anticipated by both contractor and subcontractor as the latter submitted a plan called
"Detail of Sheer Connectors" (Exh "T") which was approved.The plan provided two alternatives by
which the wrong location of rebar dowels may be remedied. Hence, defendant, aware of the possibility
of inaccurate location of these bars, cannot therefore ascribe the same to the plaintiff as defective work.
Construction of the capping beam required the use of cement. Records, however, show that from
September 14, 1990 up to May 30, 1991 (Exhs. "B" to "L"), plaintiff had repeatedly requested defendant
to deliver cement. Finally, on April 22, 1991, plaintiff notified defendant of its inability to construct the
capping beam for the latter’s failure to deliver the cement as provided in their agreement(Exh. "I").
Although records show that there was mention of revision of design, there was no evidence presented
to show such revision required less amount of cement than what was agreed on by plaintiff and
defendant.
The seventh phase of the construction of the diaphragm wall is the construction of the steel props which
could be installed only after the soil has been excavated by the main contractor. When defendant
directed plaintiff to install the props, the latter requested for a site inspection to determine if the
excavation of the soil was finished up to the 4th level basement. Plaintiff, however, did not receive any
response.It later learned that defendant had contracted out that portion of work to another sub-
contractor (Exhs. "O" and "P"). Nevertheless, plaintiff informed defendant of its willingness to execute
that portion of its work.18
It is clear from the foregoing that contrary to the allegations of FBI, FSI had indeed completed its
assigned obligations, with the exception of certain assigned tasks, which was due to the failure of FBI
to fulfil its end of the bargain.
It can similarly be deduced that the defects FBI complained of, such as the misaligned diaphragm wall
and the erroneous location of the rebar dowels, were not only anticipated by the parties, having
stipulated alternative plans to remedy the same, but more importantly, are also attributable to the very
actions of FBI. Accordingly, considering that the alleged defects in FSI’s contracted works were not so
much due to the fault or negligence of the FSI, but were satisfactorily proven to be caused by FBI’s
own acts, FBI’s claim of ₱8,582,756.29 representing the cost of the measures it undertook to rectify the
alleged defects must necessarily fail. In fact, as the lower court noted, at the time when FBI had
evaluated FSI’s works, it did not categorically pose any objection thereto, viz:

Defendant admitted that it had paid ₱6 million based on its evaluation of plaintiff’s accomplishments
(tsn., Sept. 28, 2000, p. 17) and its payment was made without objection on plaintiff’s works, the
majority of which were for the accomplishments in the construction of the diaphragm wall (tsn., ibid, p.
70).
xxxx
While there is no evidence to show the scope of work for these billings, it is safe to assume that these
were also works in the construction of the diaphragm wall considering that as of May 16, 1991, plaintiff
had only the installation of the steel props and welding works to complete (Exh. "H"). If defendant was
able to evaluate the work finished by plaintiff the majority of which was the construction of the
diaphragm wall and paid it about ₱6 million as accomplishment, there was no reason why it could not
evaluate plaintiff’s works covered by billings 3 and 4.In other words, defendants did nothave to excavate
in order to determine and evaluate plaintiff’s works. Hence, defendant’s refusal to pay was not justified
and the alleged defects of the diaphragm wall (tsn, Sept. 28, 2000, p. 17) which it claims to have
discovered only after January 1992 were mere afterthoughts.19
Thus, in the absence of any record to otherwise prove FSI’s neglect in the fulfilment of its obligations
under the contract, this Court shall refrain from reversing the findings of the courts below, which are
fully supported by and deducible from, the evidence on record. Indeed, FBI failed to present any
evidence to justify its refusal to pay FSI for the works it was contracted to perform. As such, We do not
see any reason to deviate from the assailed rulings.
Anent FBI’s second assignment of error, however, We find merit in the argument that the 12% interest
rateis inapplicable, since this case does not involve a loan or forbearance ofmoney. In the landmark
case of Eastern Shipping Lines, Inc. v. Court of Appeals,20 We laid down the following guidelines in
computing legal interest:
II. With regard particularly to an award of interest in the concept of actual and compensatory damages,
the rate of interest, as well as the accrual thereof, is imposed, as follows:
1. When the obligation is breached, and it consists in the payment of a sum of money, i.e., a loan or
forbearance of money, the interest due should be that which may have been stipulated in writing.
Furthermore, the interest due shall itself earn legal interest from the time it is judicially demanded. In
the absence of stipulation, the rate of interest shall be 12% per annum to be computed from default,
i.e., from judicial or extrajudicial demand under and subject to the provisions of Article1169 of the Civil
Code.
2. When an obligation, not constituting a loan or forbearance of money, is breached, an interest on the
amount of damages awarded may be imposed at the discretion of the court at the rate of 6% per annum.
No interest, however, shall be adjudged on unliquidated claims or damages except when or until the
demand can be established with reasonable certainty. Accordingly, where the demand is established
with reasonable certainty, the interest shall begin to run from the time the claim is made judicially or
extrajudicially (Art. 1169, Civil Code) but when such certainty cannot be so reasonably established at
the time the demand is made, the interest shall begin to run only from the date the judgment of the
court is made (at which time the quantification of damages may be deemed to have been reasonably
ascertained). The actual base for the computation of legal interest shall, in any case, be on the amount
finally adjudged.
3. When the judgment of the court awarding a sum of money becomes final and executory, the rate of
legal interest, whether the case falls under paragraph 1 or paragraph 2, above, shall be 12% per annum
from such finality until its satisfaction, this interim period being deemed to be by then an equivalent to
a forbearance of credit.21

In line, however, with the recent circular of the Monetary Board of the Bangko Sentral ng Pilipinas (BSP-
MB) No. 799, we have modified the guidelines in Nacar v. Gallery Frames,22 as follows:
I. When an obligation, regardless of itssource, i.e., law, contracts, quasicontracts, delicts or quasi-
delicts is breached, the contravenor can be held liable for damages. The provisions under Title XVIII
on "Damages" of the Civil Code govern in determining the measure of recoverable damages.
the absence of stipulation, the rate of interest shall be 6% per annumto be computed from default, i.e.,
from judicial or extrajudicial demand under and subject to the provisions of Article 1169 of the Civil
Code.
amount of damages awarded may be imposed at the discretion of the court at the rate of 6% per annum.
No interest, however, shall be adjudged on unliquidated claims or damages, except when or until the
demand can be established with reasonable certainty. Accordingly, where the demand is established
with reasonable certainty, the interest shall begin to run from the time the claim is made judicially or
extrajudicially(Art. 1169, Civil Code), but when such certainty cannot be so reasonably established at
the time the demand is made, the interest shall begin to run only from the date the judgment of the
court is made (at which time the quantification of damages may be deemed to have been reasonably
ascertained). The actual base for the computation of legal interest shall, in any case, be on the amount
finally adjudged. 3. When the judgment of the court awarding a sum of money becomes final and
executory, the rate of legal interest, whether the case falls under paragraph 1 or paragraph 2, above,
shall be 6% per annumfrom such finality until its satisfaction, this interim period being deemed to be by
then an equivalent to a forbearance of credit.
And, in addition to the above, judgments that have become final and executory prior to July 1, 2013,
shall not be disturbed and shall continue to be implemented applying the rate of interest fixed therein.23
It should be noted, however, that the new rate could only be applied prospectively and not retroactively.
Consequently, the twelve percent (12%) per annum legal interest shall apply only until June 30, 2013.
Come July 1, 2013, the new rate of six percent (6%) per annum shall be the prevailing rate of interest
when applicable. Thus, the need to determine whether the obligation involved herein is a loanand
forbearance of money nonetheless exists.
In S.C. Megaworld Construction and Development Corporation v. Engr. Parada,24 We clarified the
meaning of obligations constituting loans or forbearance of money in the following wise:
As further clarified in the case of Sunga-Chan v. CA, a loan or forbearance of money, goods or credit
describes a contractual obligation whereby a lender or creditor has refrained during a given period from
requiring the borrower or debtor to repay the loan or debt then due and payable. Thus:
In Reformina v. Tomol, Jr., the Court held that the legal interest at 12% per annum under Central Bank
(CB) Circular No. 416 shall be adjudged only in cases involving the loan or forbearance of money. And
for transactions involving payment of indemnities in the concept of damages arising from default in the
performance of obligations in general and/or for money judgment not involving a loan or forbearance
of money, goods, or credit, the governing provision is Art. 2209 of the Civil Code prescribing a yearly
6% interest. Art. 2209 pertinently provides:
Art. 2209. If the obligation consists in the payment of a sum of money, and the debtor incurs in delay,
the indemnity for damages, there being no stipulation to the contrary, shall be the payment of the
interest agreed upon, and in the absence of stipulation, the legal interest, which is six per cent per
annum.
The term "forbearance," within the context of usury law, has been described as a contractual obligation
ofa lender or creditor to refrain, during a given period of time, from requiring the borrower or debtor to
repay the loan or debt then due and payable.25
Forbearance of money, goods or credits, therefore, refers to arrangements other than loan agreements,
where a person acquiesces to the temporary use of his money, goods orcredits pending the happening
of certain events or fulfilment of certain conditions.26 Consequently, if those conditions are breached,
said person is entitled not only to the return of the principal amount paid, but also to compensation for
the use of his money which would be the same rateof legal interest applicable to a loan since the use
or deprivation of funds therein is similar to a loan.27
This case, however, does not involve an acquiescence to the temporary use of a party’s money but a
performance of a particular service, specifically the construction of the diaphragm wall, capping beam,
and guide walls of the Trafalgar Plaza.
A review of similar jurisprudence would tell us that this Court had repeatedly recognized this distinction
and awarded interest at a rate of 6% on actual or compensatory damages arising from a breach not
only of construction contracts,28 such as the one subject ofthis case, but also of contracts wherein one
of the parties reneged on its obligation to perform messengerial services,29 deliver certain quantities of
molasses,30 undertake the reforestation of a denuded forest land,31 as well as breaches of contracts of
carriage,32 and trucking agreements.33 We have explained therein that the reason behind such is that
said contracts do not partake of loans or forbearance of money but are more in the nature of contracts
of service.
Thus, in the absence of any stipulation as to interest in the agreement between the parties herein, the
matter of interest award arising from the dispute in this case would actually fall under the second
paragraph of the above-quoted guidelines inthe landmark case of Eastern Shipping Lines, which
necessitates the imposition of interestat the rate of 6%, instead of the 12% imposed by the courts below.
The 6% interest rate shall further be imposed from the finality of the judgment herein until satisfaction
thereof, in light of our recent ruling in Nacar v. Gallery Frames.34
Note, however, that contrary to FBI’sassertion, We find no error in the RTC’s ruling that the interest
shall begin to run from August 30, 1991 as this is the date when FSI extrajudicially made its claim
against FBI through a letter demanding payment for its services.35
In view of the foregoing, therefore, We find no compelling reason to disturb the factual findings of the
RTC and the CA, which are fully supported by and deducible from, the evidence on record, insofar as
the sum representing Billings 3 and 4 is concerned. As to the rate of interest due thereon, however, We
note that the same should be reduced to 6% per annum considering the fact that the obligation involved
herein does not partake of a loan or forbearance of money.
WHEREFORE, premises considered, the instant petition is DENIED. The Decision and Resolution,
dated July 15, 2010 and November 23, 2010, respectively, of the Court of Appeals in CA-G.R. CV No.
70849 are hereby AFFIRMED with MODIFICATION. Federal Builders, Inc. is ORDERED to pay
Foundation Specialists, Inc. the sum of Pl ,024,600.00 representing billings 3 and 4, less the amount
of ₱33,354.40, plus interest at six percent (6%) per annum reckoned from August 30, 1991 until full
payment thereof.
SO ORDERED.
Rivera vs. Chua
G.R. No. 184458 January 14, 2015

RODRIGO RIVERA, Petitioner,
vs.
SPOUSES SALVADOR CHUA AND VIOLETA S. CHUA, Respondents.
x-----------------------x
G.R. No. 184472
SPS. SALVADOR CHUA and VIOLETA S. CHUA, Petitioners,
vs.
RODRIGO RIVERA, Respondent.
DECISION
PEREZ, J.:
Before us are consolidated Petitions for Review on Certiorari under Rule 45 of the Rules of Court
assailing the Decision1 of the Court of Appeals in CA-G.R. SP No. 90609 which affirmed with
modification the separate rulings of the Manila City trial courts, the Regional Trial Court, Branch 17 in
Civil Case No. 02-1052562 and the Metropolitan Trial Court (MeTC), Branch 30, in Civil Case No.
163661,3 a case for collection of a sum of money due a promissory note. While all three (3) lower courts
upheld the validity and authenticity of the promissory note as duly signed by the obligor, Rodrigo Rivera
(Rivera), petitioner in G.R. No. 184458, the appellate court modified the trial courts’ consistent awards:
(1) the stipulated interest rate of sixty percent (60%) reduced to twelve percent (12%) per
annumcomputed from the date of judicial or extrajudicial demand, and (2) reinstatement of the award
of attorney’s fees also in a reduced amount of ₱50,000.00.
In G.R. No. 184458, Rivera persists in his contention that there was no valid promissory note and
questions the entire ruling of the lower courts. On the other hand, petitioners in G.R. No. 184472,
Spouses Salvador and Violeta Chua (Spouses Chua), take exception to the appellate court’s reduction
of the stipulated interest rate of sixty percent (60%) to twelve percent (12%) per annum.
We proceed to the facts.
The parties were friends of long standing having known each other since 1973: Rivera and Salvador
are kumpadres, the former is the godfather of the Spouses Chua’s son.
On 24 February 1995, Rivera obtained a loan from the Spouses Chua:
PROMISSORY NOTE
120,000.00
FOR VALUE RECEIVED, I, RODRIGO RIVERA promise to pay spouses SALVADOR C. CHUA and
VIOLETA SY CHUA, the sum of One Hundred Twenty Thousand Philippine Currency (₱120,000.00)
on December 31, 1995.
It is agreed and understood that failure on my part to pay the amount of (120,000.00) One Hundred
Twenty Thousand Pesos on December 31, 1995. (sic) I agree to pay the sum equivalent to FIVE
PERCENT (5%) interest monthly from the date of default until the entire obligation is fully paid for.
Should this note be referred to a lawyer for collection, I agree to pay the further sum equivalent to
twenty percent (20%) of the total amount due and payable as and for attorney’s fees which in no case
shall be less than ₱5,000.00 and to pay in addition the cost of suit and other incidental litigation
expense.
Any action which may arise in connection with this note shall be brought in the proper Court of the City
of Manila.

Manila, February 24, 1995[.]
(SGD.) RODRIGO RIVERA4
In October 1998, almost three years from the date of payment stipulated in the promissory note, Rivera,
as partial payment for the loan, issued and delivered to the SpousesChua, as payee, a check numbered
012467, dated 30 December 1998, drawn against Rivera’s current account with the Philippine
Commercial International Bank (PCIB) in the amount of ₱25,000.00.
On 21 December 1998, the Spouses Chua received another check presumably issued by Rivera,
likewise drawn against Rivera’s PCIB current account, numbered 013224, duly signed and dated, but
blank as to payee and amount. Ostensibly, as per understanding by the parties, PCIB Check No.
013224 was issued in the amount of ₱133,454.00 with "cash" as payee. Purportedly, both checks were
simply partial payment for Rivera’s loan in the principal amount of ₱120,000.00.
Upon presentment for payment, the two checks were dishonored for the reason "account closed."
As of 31 May 1999, the amount due the Spouses Chua was pegged at ₱366,000.00 covering the
principal of ₱120,000.00 plus five percent (5%) interest per month from 1 January 1996 to 31 May
1999.
The Spouses Chua alleged that they have repeatedly demanded payment from Rivera to no avail.
Because of Rivera’s unjustified refusal to pay, the Spouses Chua were constrained to file a suit on 11
June 1999. The case was raffled before the MeTC, Branch 30, Manila and docketed as Civil Case No.
163661.
In his Answer with Compulsory Counterclaim, Rivera countered that: (1) he never executed the subject
Promissory Note; (2) in all instances when he obtained a loan from the Spouses Chua, the loans were
always covered by a security; (3) at the time of the filing of the complaint, he still had an existing
indebtedness to the Spouses Chua, secured by a real estate mortgage, but not yet in default; (4) PCIB
Check No. 132224 signed by him which he delivered to the Spouses Chua on 21 December 1998,
should have been issued in the amount of only 1,300.00, representing the amount he received from
the Spouses Chua’s saleslady; (5) contrary to the supposed agreement, the Spouses Chua presented
the check for payment in the amount of ₱133,454.00; and (6) there was no demand for payment of the
amount of ₱120,000.00 prior to the encashment of PCIB Check No. 0132224.5
In the main, Rivera claimed forgery of the subject Promissory Note and denied his indebtedness
thereunder.
The MeTC summarized the testimonies of both parties’ respective witnesses:
[The spouses Chua’s] evidence include[s] documentary evidence and oral evidence (consisting of the
testimonies of [the spouses] Chua and NBI Senior Documents Examiner Antonio Magbojos). x x x
xxxx
Witness Magbojos enumerated his credentials as follows: joined the NBI (1987); NBI document
examiner (1989); NBI Senior Document Examiner (1994 to the date he testified); registered
criminologist; graduate of 18th Basic Training Course [i]n Questioned Document Examination
conducted by the NBI; twice attended a seminar on US Dollar Counterfeit Detection conducted by the
US Embassy in Manila; attended a seminar on Effective Methodology in Teaching and Instructional
design conducted by the NBI Academy; seminar lecturer on Questioned Documents, Signature
Verification and/or Detection; had examined more than a hundred thousand questioned documents at
the time he testified.
Upon [order of the MeTC], Mr. Magbojos examined the purported signature of [Rivera] appearing in the
Promissory Note and compared the signature thereon with the specimen signatures of [Rivera]

appearing on several documents. After a thorough study, examination, and comparison of the signature
on the questioned document (Promissory Note) and the specimen signatures on the documents
submitted to him, he concluded that the questioned signature appearing in the Promissory Note and
the specimen signatures of [Rivera] appearing on the other documents submitted were written by one
and the same person. In connection with his findings, Magbojos prepared Questioned Documents
Report No. 712-1000 dated 8 January 2001, with the following conclusion: "The questioned and the
standard specimen signatures RODGRIGO RIVERA were written by one and the same person."
[Rivera] testified as follows: he and [respondent] Salvador are "kumpadres;" in May 1998, he obtained
a loan from [respondent] Salvador and executed a real estate mortgage over a parcel of land in favor
of [respondent Salvador] as collateral; aside from this loan, in October, 1998 he borrowed ₱25,000.00
from Salvador and issued PCIB Check No. 126407 dated 30 December 1998; he expressly denied
execution of the Promissory Note dated 24 February 1995 and alleged that the signature appearing
thereon was not his signature; [respondent Salvador’s] claim that PCIB Check No. 0132224 was partial
payment for the Promissory Note was not true, the truth being that he delivered the check to
[respondent Salvador] with the space for amount left blank as he and [respondent] Salvador had agreed
that the latter was to fill it in with the amount of ₱1,300.00 which amount he owed [the spouses Chua];
however, on 29 December 1998 [respondent] Salvador called him and told him that he had written
₱133,454.00 instead of ₱1,300.00; x x x. To rebut the testimony of NBI Senior Document Examiner
Magbojos, [Rivera] reiterated his averment that the signature appearing on the Promissory Note was
not his signature and that he did not execute the Promissory Note.6
After trial, the MeTC ruled in favor of the Spouses Chua:
WHEREFORE, [Rivera] is required to pay [the spouses Chua]: ₱120,000.00 plus stipulated interest at
the rate of 5% per month from 1 January 1996, and legal interest at the rate of 12% percent per annum
from 11 June 1999, as actual and compensatory damages; 20% of the whole amount due as attorney’s
fees.7
On appeal, the Regional Trial Court, Branch 17, Manila affirmed the Decision of the MeTC, but deleted
the award of attorney’s fees to the Spouses Chua:
WHEREFORE, except as to the amount of attorney’s fees which is hereby deleted, the rest of the
Decision dated October 21, 2002 is hereby AFFIRMED.8
Both trial courts found the Promissory Note as authentic and validly bore the signature of Rivera.
Undaunted, Rivera appealed to the Court of Appeals which affirmed Rivera’s liability under the
Promissory Note, reduced the imposition of interest on the loan from 60% to 12% per annum, and
reinstated the award of attorney’s fees in favor of the Spouses Chua:
WHEREFORE, the judgment appealed from is hereby AFFIRMED, subject to the MODIFICATION that
the interest rate of 60% per annum is hereby reduced to12% per annum and the award of attorney’s
fees is reinstated atthe reduced amount of ₱50,000.00 Costs against [Rivera].9
Hence, these consolidated petitions for review on certiorariof Rivera in G.R. No. 184458 and the
Spouses Chua in G.R. No. 184472, respectively raising the following issues:
A. In G.R. No. 184458
1. WHETHER OR NOT THE HONORABLE COURT OF APPEALS ERRED IN UPHOLDING THE
RULING OF THE RTC AND M[e]TC THAT THERE WAS A VALID PROMISSORY NOTE EXECUTED
BY [RIVERA].
2. WHETHER OR NOT THE HONORABLE COURT OF APPEALS ERRED IN HOLDING THAT
DEMAND IS NO LONGER NECESSARY AND IN APPLYING THE PROVISIONS OF THE
NEGOTIABLE INSTRUMENTS LAW.

3. WHETHER OR NOT THE HONORABLE COURT OF APPEALS ERRED IN AWARDING
ATTORNEY’S FEES DESPITE THE FACT THAT THE SAME HAS NO BASIS IN FACT AND IN LAW
AND DESPITE THE FACT THAT [THE SPOUSES CHUA] DID NOT APPEAL FROM THE DECISION
OF THE RTC DELETING THE AWARD OF ATTORNEY’S FEES.10
B. In G.R. No. 184472
[WHETHER OR NOT] THE HONORABLE COURT OF APPEALS COMMITTED GROSS LEGAL
ERROR WHEN IT MODIFIED THE APPEALED JUDGMENT BY REDUCING THE INTEREST RATE
FROM 60% PER ANNUM TO 12% PER ANNUM IN SPITE OF THE FACT THAT RIVERA NEVER
RAISED IN HIS ANSWER THE DEFENSE THAT THE SAID STIPULATED RATE OF INTEREST IS
EXORBITANT, UNCONSCIONABLE, UNREASONABLE, INEQUITABLE, ILLEGAL, IMMORAL OR
VOID.11
As early as 15 December 2008, wealready disposed of G.R. No. 184472 and denied the petition, via a
Minute Resolution, for failure to sufficiently show any reversible error in the ruling of the appellate court
specifically concerning the correct rate of interest on Rivera’s indebtedness under the Promissory
Note.12
On 26 February 2009, Entry of Judgment was made in G.R. No. 184472.
Thus, what remains for our disposition is G.R. No. 184458, the appeal of Rivera questioning the entire
ruling of the Court of Appeals in CA-G.R. SP No. 90609.
Rivera continues to deny that heexecuted the Promissory Note; he claims that given his friendship
withthe Spouses Chua who were money lenders, he has been able to maintain a loan account with
them. However, each of these loan transactions was respectively "secured by checks or sufficient
collateral."
Rivera points out that the Spouses Chua "never demanded payment for the loan nor interest thereof
(sic) from [Rivera] for almost four (4) years from the time of the alleged default in payment [i.e., after
December 31, 1995]."13
On the issue of the supposed forgery of the promissory note, we are not inclined to depart from the
lower courts’ uniform rulings that Rivera indeed signed it.
Rivera offers no evidence for his asseveration that his signature on the promissory note was forged,
only that the signature is not his and varies from his usual signature. He likewise makes a confusing
defense of having previously obtained loans from the Spouses Chua who were money lenders and who
had allowed him a period of "almost four (4) years" before demanding payment of the loan under the
Promissory Note.
First, we cannot give credence to such a naked claim of forgery over the testimony of the National
Bureau of Investigation (NBI) handwriting expert on the integrity of the promissory note. On that score,
the appellate court aptly disabled Rivera’s contention:
[Rivera] failed to adduce clear and convincing evidence that the signature on the promissory note is a
forgery. The fact of forgery cannot be presumed but must be proved by clear, positive and convincing
evidence. Mere variance of signatures cannot be considered as conclusive proof that the same was
forged. Save for the denial of Rivera that the signature on the note was not his, there is nothing in the
records to support his claim of forgery. And while it is true that resort to experts is not mandatory or
indispensable to the examination of alleged forged documents, the opinions of handwriting experts are
nevertheless helpful in the court’s determination of a document’s authenticity.
To be sure, a bare denial will not suffice to overcome the positive value of the promissory note and the
testimony of the NBI witness. In fact, even a perfunctory comparison of the signatures offered in
evidence would lead to the conclusion that the signatures were made by one and the same person.
It is a basic rule in civil cases that the party having the burden of proof must establish his case by
preponderance of evidence, which simply means "evidence which is of greater weight, or more
convincing than that which is offered in opposition to it."
Evaluating the evidence on record, we are convinced that [the Spouses Chua] have established a prima
faciecase in their favor, hence, the burden of evidence has shifted to [Rivera] to prove his allegation of
forgery. Unfortunately for [Rivera], he failed to substantiate his defense.14 Well-entrenched in
jurisprudence is the rule that factual findings of the trial court, especially when affirmed by the appellate
court, are accorded the highest degree of respect and are considered conclusive between the
parties.15 A review of such findings by this Court is not warranted except upon a showing of highly
meritorious circumstances, such as: (1) when the findings of a trial court are grounded entirely on
speculation, surmises or conjectures; (2) when a lower court's inference from its factual findings is
manifestly mistaken, absurd or impossible; (3) when there is grave abuse of discretion in the
appreciation of facts; (4) when the findings of the appellate court go beyond the issues of the case, or
fail to notice certain relevant facts which, if properly considered, will justify a different conclusion; (5)
when there is a misappreciation of facts; (6) when the findings of fact are conclusions without mention
of the specific evidence on which they are based, are premised on the absence of evidence, or are
contradicted by evidence on record.16 None of these exceptions obtains in this instance. There is no
reason to depart from the separate factual findings of the three (3) lower courts on the validity of Rivera’s
signature reflected in the Promissory Note.
Indeed, Rivera had the burden ofproving the material allegations which he sets up in his Answer to the
plaintiff’s claim or cause of action, upon which issue is joined, whether they relate to the whole case or
only to certain issues in the case.17
In this case, Rivera’s bare assertion is unsubstantiated and directly disputed by the testimony of a
handwriting expert from the NBI. While it is true that resort to experts is not mandatory or indispensable
to the examination or the comparison of handwriting, the trial courts in this case, on its own, using the
handwriting expert testimony only as an aid, found the disputed document valid.18
Hence, the MeTC ruled that:
[Rivera] executed the Promissory Note after consideration of the following: categorical statement of
[respondent] Salvador that [Rivera] signed the Promissory Note before him, in his ([Rivera’s]) house;
the conclusion of NBI Senior Documents Examiner that the questioned signature (appearing on the
Promissory Note) and standard specimen signatures "Rodrigo Rivera" "were written by one and the
same person"; actual view at the hearing of the enlarged photographs of the questioned signature and
the standard specimen signatures.19
Specifically, Rivera insists that: "[i]f that promissory note indeed exists, it is beyond logic for a money
lender to extend another loan on May 4, 1998 secured by a real estate mortgage, when he was already
in default and has not been paying any interest for a loan incurred in February 1995."20
We disagree.
It is likewise likely that precisely because of the long standing friendship of the parties as "kumpadres,"
Rivera was allowed another loan, albeit this time secured by a real estate mortgage, which will cover
Rivera’s loan should Rivera fail to pay. There is nothing inconsistent with the Spouses Chua’s two (2)
and successive loan accommodations to Rivera: one, secured by a real estate mortgage and the other,
secured by only a Promissory Note.
Also completely plausible is thatgiven the relationship between the parties, Rivera was allowed a
substantial amount of time before the Spouses Chua demanded payment of the obligation due under
the Promissory Note.

In all, Rivera’s evidence or lack thereof consisted only of a barefaced claim of forgery and a discordant
defense to assail the authenticity and validity of the Promissory Note. Although the burden of proof
rested on the Spouses Chua having instituted the civil case and after they established a prima facie
case against Rivera, the burden of evidence shifted to the latter to establish his
defense.21 Consequently, Rivera failed to discharge the burden of evidence, refute the existence of the
Promissory Note duly signed by him and subsequently, that he did not fail to pay his obligation
thereunder. On the whole, there was no question left on where the respective evidence of the parties
preponderated—in favor of plaintiffs, the Spouses Chua. Rivera next argues that even assuming the
validity of the Promissory Note, demand was still necessary in order to charge him liable thereunder.
Rivera argues that it was grave error on the part of the appellate court to apply Section 70 of the
Negotiable Instruments Law (NIL).22
We agree that the subject promissory note is not a negotiable instrument and the provisions of the NIL
do not apply to this case. Section 1 of the NIL requires the concurrence of the following elements to be
a negotiable instrument:
(a) It must be in writing and signed by the maker or drawer;
(b) Must contain an unconditional promise or order to pay a sum certain in money;
(c) Must be payable on demand, or at a fixed or determinable future time;
(d) Must be payable to order or to bearer; and
(e) Where the instrument is addressed to a drawee, he must be named or otherwise indicated therein
with reasonable certainty.
On the other hand, Section 184 of the NIL defines what negotiable promissory note is: SECTION 184.
Promissory Note, Defined. – A negotiable promissory note within the meaning of this Act is an
unconditional promise in writing made by one person to another, signed by the maker, engaging to pay
on demand, or at a fixed or determinable future time, a sum certain in money to order or to bearer.
Where a note is drawn to the maker’s own order, it is not complete until indorsed by him.
The Promissory Note in this case is made out to specific persons, herein respondents, the Spouses
Chua, and not to order or to bearer, or to the order of the Spouses Chua as payees. However, even if
Rivera’s Promissory Note is not a negotiable instrument and therefore outside the coverage of Section
70 of the NIL which provides that presentment for payment is not necessary to charge the person liable
on the instrument, Rivera is still liable under the terms of the Promissory Note that he issued.
The Promissory Note is unequivocal about the date when the obligation falls due and becomes
demandable—31 December 1995. As of 1 January 1996, Rivera had already incurred in delay when
he failed to pay the amount of ₱120,000.00 due to the Spouses Chua on 31 December 1995 under the
Promissory Note.
Article 1169 of the Civil Code explicitly provides:
Art. 1169. Those obliged to deliver or to do something incur in delay from the time the obligee judicially
or extrajudicially demands from them the fulfillment of their obligation.
However, the demand by the creditor shall not be necessary in order that delay may exist:
(1) When the obligation or the law expressly so declare; or
(2) When from the nature and the circumstances of the obligation it appears that the designation of the
time when the thing is to be delivered or the service is to be rendered was a controlling motive for the
establishment of the contract; or
(3) When demand would be useless, as when the obligor has rendered it beyond his power to perform.

In reciprocal obligations, neither party incurs in delay if the other does not comply or is not ready to
comply in a proper manner with what is incumbent upon him. From the moment one of the parties fulfills
his obligation, delay by the other begins. (Emphasis supplied)
There are four instances when demand is not necessary to constitute the debtor in default: (1) when
there is an express stipulation to that effect; (2) where the law so provides; (3) when the period is the
controlling motive or the principal inducement for the creation of the obligation; and (4) where demand
would be useless. In the first two paragraphs, it is not sufficient that the law or obligation fixes a date
for performance; it must further state expressly that after the period lapses, default will commence.
We refer to the clause in the Promissory Note containing the stipulation of interest:
It is agreed and understood that failure on my part to pay the amount of (₱120,000.00) One Hundred
Twenty Thousand Pesos on December 31, 1995. (sic) I agree to pay the sum equivalent to FIVE
PERCENT (5%) interest monthly from the date of default until the entire obligation is fully paid for.23
which expressly requires the debtor (Rivera) to pay a 5% monthly interest from the "date of default"
until the entire obligation is fully paid for. The parties evidently agreed that the maturity of the obligation
at a date certain, 31 December 1995, will give rise to the obligation to pay interest. The Promissory
Note expressly provided that after 31 December 1995, default commences and the stipulation on
payment of interest starts.
The date of default under the Promissory Note is 1 January 1996, the day following 31 December 1995,
the due date of the obligation. On that date, Rivera became liable for the stipulated interest which the
Promissory Note says is equivalent to 5% a month. In sum, until 31 December 1995, demand was not
necessary before Rivera could be held liable for the principal amount of ₱120,000.00. Thereafter, on 1
January 1996, upon default, Rivera became liable to pay the Spouses Chua damages, in the form of
stipulated interest.
The liability for damages of those who default, including those who are guilty of delay, in the
performance of their obligations is laid down on Article 117024 of the Civil Code.
Corollary thereto, Article 2209 solidifies the consequence of payment of interest as an indemnity for
damages when the obligor incurs in delay:
Art. 2209. If the obligation consists inthe payment of a sum of money, and the debtor incurs in delay,
the indemnity for damages, there being no stipulation to the contrary, shall be the payment of the
interest agreed upon, and in the absence of stipulation, the legal interest, which is six percent per
annum. (Emphasis supplied)
Article 2209 is specifically applicable in this instance where: (1) the obligation is for a sum of money;
(2) the debtor, Rivera, incurred in delay when he failed to pay on or before 31 December 1995; and (3)
the Promissory Note provides for an indemnity for damages upon default of Rivera which is the payment
of a 5%monthly interest from the date of default.
We do not consider the stipulation on payment of interest in this case as a penal clause although Rivera,
as obligor, assumed to pay additional 5% monthly interest on the principal amount of ₱120,000.00 upon
default.
Article 1226 of the Civil Code provides:
Art. 1226. In obligations with a penal clause, the penalty shall substitute the indemnity for damages and
the payment of interests in case of noncompliance, if there isno stipulation to the contrary.
Nevertheless, damages shall be paid if the obligor refuses to pay the penalty or is guilty of fraud in the
fulfillment of the obligation.

The penalty may be enforced only when it is demandable in accordance with the provisions of this
Code.
The penal clause is generally undertaken to insure performance and works as either, or both,
punishment and reparation. It is an exception to the general rules on recovery of losses and damages.
As an exception to the general rule, a penal clause must be specifically set forth in the obligation.25
In high relief, the stipulation in the Promissory Note is designated as payment of interest, not as a penal
clause, and is simply an indemnity for damages incurred by the Spouses Chua because Rivera
defaulted in the payment of the amount of ₱120,000.00. The measure of damages for the Rivera’s
delay is limited to the interest stipulated in the Promissory Note. In apt instances, in default of
stipulation, the interest is that provided by law.26
In this instance, the parties stipulated that in case of default, Rivera will pay interest at the rate of 5% a
month or 60% per annum. On this score, the appellate court ruled:
It bears emphasizing that the undertaking based on the note clearly states the date of payment tobe 31
December 1995. Given this circumstance, demand by the creditor isno longer necessary in order that
delay may exist since the contract itself already expressly so declares. The mere failure of [Spouses
Chua] to immediately demand or collect payment of the value of the note does not exonerate [Rivera]
from his liability therefrom. Verily, the trial court committed no reversible error when it imposed interest
from 1 January 1996 on the ratiocination that [Spouses Chua] were relieved from making demand under
Article 1169 of the Civil Code.
xxxx
As observed by [Rivera], the stipulated interest of 5% per month or 60% per annum in addition to legal
interests and attorney’s fees is, indeed, highly iniquitous and unreasonable. Stipulated interest rates
are illegal if they are unconscionable and the Court is allowed to temper interest rates when necessary.
Since the interest rate agreed upon is void, the parties are considered to have no stipulation regarding
the interest rate, thus, the rate of interest should be 12% per annum computed from the date of judicial
or extrajudicial demand.27
The appellate court found the 5% a month or 60% per annum interest rate, on top of the legal interest
and attorney’s fees, steep, tantamount to it being illegal, iniquitous and unconscionable. Significantly,
the issue on payment of interest has been squarely disposed of in G.R. No. 184472 denying the petition
of the Spouses Chua for failure to sufficiently showany reversible error in the ruling of the appellate
court, specifically the reduction of the interest rate imposed on Rivera’s indebtedness under the
Promissory Note. Ultimately, the denial of the petition in G.R. No. 184472 is res judicata in its concept
of "bar by prior judgment" on whether the Court of Appeals correctly reduced the interest rate stipulated
in the Promissory Note.
Res judicata applies in the concept of "bar by prior judgment" if the following requisites concur: (1) the
former judgment or order must be final; (2) the judgment or order must be on the merits; (3) the decision
must have been rendered by a court having jurisdiction over the subject matter and the parties; and (4)
there must be, between the first and the second action, identity of parties, of subject matter and of
causes of action.28
In this case, the petitions in G.R. Nos. 184458 and 184472 involve an identity of parties and subject
matter raising specifically errors in the Decision of the Court of Appeals. Where the Court of Appeals’
disposition on the propriety of the reduction of the interest rate was raised by the Spouses Chua in G.R.
No. 184472, our ruling thereon affirming the Court of Appeals is a "bar by prior judgment."
At the time interest accrued from 1 January 1996, the date of default under the Promissory Note, the
then prevailing rate of legal interest was 12% per annum under Central Bank (CB) Circular No. 416 in
cases involving the loan or for bearance of money.29 Thus, the legal interest accruing from the
Promissory Note is 12% per annum from the date of default on 1 January 1996. However, the 12% per
annumrate of legal interest is only applicable until 30 June 2013, before the advent and effectivity of
Bangko Sentral ng Pilipinas (BSP) Circular No. 799, Series of 2013 reducing the rate of legal interest
to 6% per annum. Pursuant to our ruling in Nacar v. Gallery Frames,30 BSP Circular No. 799 is
prospectively applied from 1 July 2013. In short, the applicable rate of legal interest from 1 January
1996, the date when Rivera defaulted, to date when this Decision becomes final and executor is divided
into two periods reflecting two rates of legal interest: (1) 12% per annum from 1 January 1996 to 30
June 2013; and (2) 6% per annum FROM 1 July 2013 to date when this Decision becomes final and
executory.
As for the legal interest accruing from 11 June 1999, when judicial demand was made, to the date when
this Decision becomes final and executory, such is likewise divided into two periods: (1) 12% per annum
from 11 June 1999, the date of judicial demand to 30 June 2013; and (2) 6% per annum from 1 July
2013 to date when this Decision becomes final and executor.31 We base this imposition of interest on
interest due earning legal interest on Article 2212 of the Civil Code which provides that "interest due
shall earn legal interest from the time it is judicially demanded, although the obligation may be silent on
this point."
From the time of judicial demand, 11 June 1999, the actual amount owed by Rivera to the Spouses
Chua could already be determined with reasonable certainty given the wording of the Promissory
Note.32
We cite our recent ruling in Nacar v. Gallery Frames:33
I. When an obligation, regardless of its source, i.e., law, contracts, quasicontracts, delicts or quasi-
1. When the obligation is breached, and it consists in the payment of a sum of money, i.e., a loan or for
bearance of money, the interest due should be that which may have been stipulated in writing.
the absence of stipulation, the rate of interest shall be 6% per annum to be computed from default, i.e.,
from judicial or extra judicial demand under and subject to the provisions ofArticle 1169 of the Civil
Code.
amount of damages awarded may be imposed at the discretion of the court at the rate of 6% per
annum.1âwphi1 No interest, however, shall be adjudged on unliquidated claims or damages, except
when or until the demand can be established with reasonable certainty. Accordingly, where the demand
is established with reasonable certainty, the interest shall begin to run from the time the claim is made
judicially or extrajudicially (Art. 1169, Civil Code), but when such certainty cannot be so reasonably
established at the time the demand is made, the interest shall begin to run only from the date the
judgment of the court is made (at which time the quantification of damages may be deemed to have
been reasonably ascertained). The actual base for the computation of legal interest shall, in any case,
be on the amount finally adjudged. 3. When the judgment of the court awarding a sum of money
becomes final and executory, the rate of legal interest, whether the case falls under paragraph 1 or
paragraph 2, above, shall be 6% per annum from such finality until its satisfaction, this interim period
being deemed to be by then an equivalent to a for bearance of credit. And, in addition to the above,
judgments that have become final and executory prior to July 1, 2013, shall not be disturbed and shall
continue to be implemented applying the rate of interest fixed therein. (Emphasis supplied)

On the reinstatement of the award of attorney’s fees based on the stipulation in the Promissory Note,
weagree with the reduction thereof but not the ratiocination of the appellate court that the attorney’s
fees are in the nature of liquidated damages or penalty. The interest imposed in the Promissory Note
already answers as liquidated damages for Rivera’s default in paying his obligation. We award
attorney’s fees, albeit in a reduced amount, in recognition that the Spouses Chua were compelled to
litigate and incurred expenses to protect their interests.34 Thus, the award of ₱50,000.00 as attorney’s
fees is proper.
For clarity and to obviate confusion, we chart the breakdown of the total amount owed by Rivera to the
Spouses Chua:
Face value of the Promissory Note Stipulated Interest A & B Interest due earning legal interest A & B Attorney’s fees Total
Amount
February 24, 1995 to A. January 1, 1996 to A. June 11, 1999 (date of judicial demand) Wholesale Amount
to June 30, 2013
December 31, 1995 June 30, 2013
B. July 1, 2013 to date when this Decision
becomes final and executory
B. July 1 2013 to date when this Decision

becomes final and executory
₱120,000.00 A. 12 % per annumon the principal amount A. 12% per annumon the total amount of ₱50,000.00 Total amount of
of ₱120,000.00 column 2 Columns 1-4
B. 6% per annumon the principal amount of B. 6% per annumon the total amount of
₱120,000.00 column 235
The total amount owing to the Spouses Chua set forth in this Decision shall further earn legal interest
at the rate of 6% per annum computed from its finality until full payment thereof, the interim period being
deemed to be a forbearance of credit.
WHEREFORE, the petition in G.R. No. 184458 is DENIED. The Decision of the Court of Appeals in
CA-G.R. SP No. 90609 is MODIFIED. Petitioner Rodrigo Rivera is ordered to pay respondents Spouse
Salvador and Violeta Chua the following:
(1) the principal amount of ₱120,000.00;
(2) legal interest of 12% per annumof the principal amount of ₱120,000.00 reckoned from 1 January
1996 until 30 June 2013;
(3) legal interest of 6% per annumof the principal amount of ₱120,000.00 form 1 July 2013 to date when
this Decision becomes final and executory;
(4) 12% per annumapplied to the total of paragraphs 2 and 3 from 11 June 1999, date of judicial
demand, to 30 June 2013, as interest due earning legal interest;
(5) 6% per annumapplied to the total amount of paragraphs 2 and 3 from 1 July 2013 to date when this
Decision becomes final and executor, asinterest due earning legal interest;
(6) Attorney’s fees in the amount of ₱50,000.00; and
(7) 6% per annum interest on the total of the monetary awards from the finality of this Decision until full
payment thereof.
Costs against petitioner Rodrigo Rivera.
SO ORDERED.

Cabanting v. BPI Family Savings Bank, Inc.
G.R. No. 201927
VICENTE D. CABANTING and LALAINE V. CABANTING, Petitioners,
vs.
BPI FAMILY SAVINGS BANK, INC., Respondent.
DECISION
PERALTA, J.:
This deals with the Petition for Review on Certiorari under Rule 45 of the Rules of Court praying that
the Decision1of the Court of Appeals (CA), promulgated on September 28, 2011, and the
Resolution2 dated May 16, 2012, denying petitioner's motion for reconsideration thereof, be reversed
and set aside.
On January 14, 2003, petitioners bought on installment basis from Diamond Motors Corporation a 2002
Mitsubishi Adventure SS MT and for value received, petitioners also signed, executed and delivered to
Diamond Motors a Promissory Note with Chattel Mortgage. Therein, petitioners jointly and severally
obligated themselves to pay Diamond Motors the sum of P836,032.00, payable in monthly installments
in accordance with the schedule of payment indicated therein, and which obligation is secured by a
chattel mortgage on the aforementioned motor vehicle. On the day of the execution of the document,
Diamond Motors, with notice to petitioners, executed a Deed of Assignment, thereby assigning to BPI
Family Savings Bank, Inc. (BPI Family) all its rights, title and interest to the Promissory Note with
Chattel Mortgage.
Come October 16, 2003, however, a Complaint was filed by BPI Family against petitioners for Replevin
and damages before the Regional Trial Court of Manila (RTC), praying that petitioners be ordered to
pay the unpaid portion of the vehicle's purchase price, accrued interest thereon at the rate of 36% per
annum as of August 26, 2003, 25% attorney's fees and 25% liquidated damages, as stipulated on the
Promissory Note with Chattel Mortgage. BPI Family likewise prayed for the issuance of a writ of replevin
but it failed to file a bond therefor, hence, the writ was never issued. BPI Family alleged that petitioners
failed to pay three (3) consecutive installments and despite written demand sent to petitioners through
registered mail, petitioners failed to comply with said demand to pay or to surrender possession of the
vehicle to BPI Family.
In their Answer, petitioners alleged that they sold the subject vehicle to one Victor S. Abalos, with the
agreement that the latter shall assume the obligation to pay the remaining monthly installments. It was
then Abalos who made payments to BPI Family through his personal checks, and BPI Family accepted
the post-dated checks delivered to it by Abalos. The checks issued by Abalos for the months of May
2003 to October 2003 were made good, but subsequent checks were dishonored and not paid.
Petitioners pointed out that BPI Family should have sued Abalos instead of them.
Trial ensued, where BPI Family dispensed with the testimony of its sole witness and formally offered
its documentary evidence. When it was petitioners' tum to present its defense, several hearing dates
were cancelled, sometimes due to failure of either or both the petitioners' and/or respondent's counsels
to appear. What is clear, though, is that despite numerous opportunities given to petitioners to present
evidence, they were never able to present their witness, Jacobina T. Alcantara, despite the court's
issuance of a subpoena duces tecum ad testificandum. Said failure to present evidence on several
hearing dates and petitioners' absence at the hearing on February 13, 2008 prompted BPI Family to
move that petitioners' right to present evidence be deemed waived. On the same date, the R TC granted
said motion and the case was submitted for decision. There is nothing on record to show that petitioners
ever moved for reconsideration of the Order dated February 13, 2008.

On April 14, 2008, the RTC rendered a Decision, the dispositive portion of which reads as follows:
WHEREFORE, and in the view of the foregoing considerations, judgment is hereby rendered in favor
of the plaintiff BPI Family Savings Bank, Inc. and against the defendants VICENTE D.
CABANTING and LALAINE V. CABANTING, by ordering the latter to pay the plaintiff Bank the sum
of Php742,022.92, with interest at the rate of 24% per annum from the filing of the Complaint, until its
full satisfaction, as well as the amount of P20,000.00 for and as attorney's fees.
With costs against the defendants.
SO ORDERED.3
Aggrieved by the RTC's Decision, herein petitioners appealed to the CA. However, in its Decision dated
September 28, 2011, the appellate court affirmed with modification the judgment of the trial court, to
wit:
WHEREFORE, premises considered, the appeal is DISMISSED. The Decision of the Regional Trial
Court dated April 14, 2008 is AFFIRMED but with MODIFICATION. The defendants-appellants are
ordered to pay the plaintiff-appellee the sum of Seven Hundred Forty Thousand One Hundred Fifty-
Five Pesos and Eighteen Centavos (P740,155.18), in Philippine currency, with legal interest of 12% per
annum from the filing of the Complaint, until its full satisfaction. The award of Twenty Thousand Pesos
(P20,000.00) as attorney's fees is DELETED.
Costs against the defendants-appellants.
SO ORDERED.4
The CA ruled that a preponderance of evidence was in favor of respondent, as the evidence, coupled
with petitioners' admission in their Answer, established that petitioners indeed executed a Promissory
Note with Chattel Mortgage and then failed to pay the forty-three (43) monthly amortizations. Moreover,
since petitioners were deemed to have waived their right to present evidence, there is nothing on record
to prove their claim that there was a valid assumption of obligation by one Victor S. Abalos. Petitioners'
motion for reconsideration of the CA Decision was denied per Resolution dated May 16, 2012.
Elevating the matter to this Court via a petition for review on certiorari, petitioners now raise the
following issues:
1. Whether or not respondent bank may be held entitled to the possession of the motor vehicle subject
of the instant case for replevin, or the payment of its value and damages, without proof of prior demand;
2. Whether or not petitioners were deprived of their right to due process when they were deemed to
have waived their right to present evidence in their behalf.5
The petition is devoid of merit.
The CA is correct that no prior demand was necessary to make petitioners' obligation due and payable.
The Promissory Note with Chattel Mortgage clearly stipulated that "[i]n case of my/our [petitioners']
failure to pay when due and payable, any sum which I/We x x x or any of us may now or in the future
owe to the holder of this note x x x then the entire sum outstanding under this note shall immediately
become due and payable without the necessity of notice or demand which I/We hereby
waive."6 Petitioners argue that such stipulation should be deemed invalid as the document they
executed was a contract of adhesion. It is impmiant to stress the Court's ruling in Dia v. St. Ferdinand
Memorial Park, Inc., 7 to wit:
A contract of adhesion, wherein one party imposes a ready-made form of contract on the other, is not
strictly against the law. A contract of adhesion is as binding as ordinary contracts, the reason being that
the party who adheres to the contract is free to reject it entirely. Contrary to petitioner's contention, not

every contract of adhesion is an invalid agreement. As we had the occasion to state in Development
Bank of the Philippines v. Perez:
x x x In discussing the consequences of a contract of adhesion, we held in Rizal Commercial Banking
Corporation v. Court of Appeals:
It bears stressing that a contract of adhesion is just as binding as ordinary contracts. It is true that we
have, on occasion, struck down such contracts as void when the weaker party is imposed upon in
dealing with the dominant bargaining party and is reduced to the alternative of taking it or leaving it,
completely deprived of the opportunity to bargain on equal footing, Nevertheless, contracts of
adhesion are not invalid per se; they are not entirely prohibited. The one who adhe.rcs to the
contract is in reality free to reject it entirely; if he adheres, he gives his consent.
The validity or enforceability of the impugned contracts will have to be determined by the
peculiar circumstances obtaining in each case and the situation of the parties
concerned.Indeed, Article 24 of the New Civil Code provides that "[in] all contractual, property or other
relations, when one of the·parties is at a disadvantage on account of his moral dependence, ignorance,
indigence, mental weakness, tender age, or other handicap, the courts must be vigilant for his
protection." x x x8
Here, there is no proof that petitioners were disadvantaged, uneducated or utterly inexperienced in
dealing with financial institutions; thus, there is no reason for the court to step in and protect the interest
of the supposed weaker party.
Verily, petitioners are bound by the aforementioned stipulation in the Promissory Note with Chattel
Mortgage waiving the necessity of notice and demand to make the obligation due and payable. Agner
v. BPI Family Savings Bank, Inc.,9 which is closely similar to the present case, is squarely applicable.
Petitioners therein also executed a Promissory Note with Chattel Mortgage containing the stipulation
waiving the need for notice and demand. The Court ruled:
x x x Even assuming, for argument's sake, that no demand letter was sent by respondent, there is really
no need for it because petitioners legally waived the necessity of notice or demand in the Promissory
Note with Chattel Mortgage, which they voluntarily and knowingly signed in favor of respondent's
predecessor-in-interest. Said contract expressly stipulates:
In case of my/our failure to pay when due and payable, any sum which I/We are obliged to pay under
this note and/or any other obligation which I/We or any of us may now or in the future owe to the holder
of this note or to any other party whether as principal or guarantor x x x then the entire sum outstanding
under this note shall, without prior notice or demand, immediately become due and payable. (Emphasis
and underscoring supplied)
A provision on waiver of notice or demand has been recognized as legal and valid in Bank of the
Philippine Islands v. Court of Appeals, wherein We held:
The Civil Code in Article 1169 provides that one incurs in delay or is in default from the time the obligor
demands the fulfillment of the obligation from the obligee. However, the law expressly provides that
demand is not necessary under ce1iain circumstances, and one of these circumstances is when the
parties expressly waive demand. Hence, since the co-signors expressly waived demand in the
promissory notes, demand was unnecessary for them to be in default.
Further, the Court even ruled in Navarro v. Escobido that prior demand is not a condition precedent to
an action for a writ of replevin, since there is nothing in Section 2, Rule 60 of the Rules of Court that
requires the applicant to make a demand on the possessor of the property before an action for a writ
of replevin could be filed.10

Clearly, as stated above, Article 1169 (1) of the Civil Code allows a party to waive the need for notice
and demand. Petitioners' argument that their liability cannot be deemed due and payable for lack of
proof of demand must be struck down.
There is likewise no merit to petitioners' claim that they were deprived of due process when they were
deemed to have waived their right to present evidence. Time and again, the Court has stressed that
there is no deprivation of due process when a party is given an opportunity to be heard, not only through
hearings but even through pleadings, so that one may explain one's side or arguments; or an
opportunity to seek reconsideration of the action or ruling being assailed.11 The records bear out that
herein petitioners were given several opportunities to present evidence, but said opportunities were
frittered away. We stress the fact that petitioners did not even bother to move for reconsideration of the
Order dated February 13, 2008, deeming petitioners to have waived their right to present evidence.
Such is glaring proof of their propensity to waste the opportunities granted them to present their
evidence.
Lastly, the CA is correct that the interest rate being charged by respondent under the Promissory Note
with Chattel Mortgage is quite unreasonable.1âwphi1 In New Sampaguita Builders Construction, Inc.
(NSBCI) v. Philippine National Bank,12the Court ruled that "the interest ranging from 26 percent to 35
percent in the statements of account - 'must be equitably reduced for being iniquitous, unconscionable
and exorbitant.' Rates found to be iniquitous or unconscionable are void, as if it there were no express
contract thereon. Above all, it is undoubtedly against public policy to charge excessively for the use of
money." However, pursuant to prevailing jurisprudence and banking regulations, the Court must modify
the lower court's award of legal interest. In Nacar v. Gallery Frames,13 the Court held, thus:
x x x the guidelines laid down in the case of Eastern Shipping Lines are accordingly modified to embody
BSP-MB Circular No. 799, as follows:
I. When an obligation, regardless of its source, i.e., law, contracts, quasi-contracts, delicts or quasi-
the absence of stipulation, the rate of interest shall be 6% per annum to be computed from
default, i.e., from judicial or extrajudicial demand under and subject to the provisions of Article 1169 of
the Civil Code.
amount of damages awarded may be imposed at the discretion of the court at the rate of 6% per
annum. No interest, however, shall be adjudged on unliquidated claims or damages, except when or
until the demand can be established with reasonable certainty. Accordingly, where the demand is
established with reasonable certainty, the interest shall begin to run from the time the claim is made
judicially or extrajudicially (Art. 1169, Civil Code), but when such certainty cannot be so reasonably
established at the time the demand is made, the interest shall begin to run only from the date the
judgment of the court is made (at which time the quantification of damages may be deemed to have
been reasonably ascertained). The actual base for the computation of legal interest shall, in any case,
be on the amount finally adjudged.
3. When the judgment of the court awarding a sum of money becomes final and executory, the rate of
legal interest, whether the case falls under paragraph 1 or paragraph 2, above, shall be 6% per

annum from such finality until its satisfaction, this interim period being deemed to be by then an
equivalent to a forbearance of credit.14
Thus, legal interest, effective July 1, 2013, was set at six percent (6%) per annum in accordance
with Bangko Sentral ng Pilipinas – Monetary Board Circular No. 799, Series of 2013.
WHEREFORE, the petition is DENIED. The Decision of the Court of Appeals, promulgated on
September 28, 2011, and the Resolution dated May 16, 2012 in CA-G.R. CV No. 91814 are AFFIRMED
with MODIFICATION by ordering payment of legal interest at the rate of twelve percent (12%) per
annum from the time of filing of the complaint up to June 30, 2013, and thereafter, at the lower rate of
six percent (6%) per annum from July 1, 2013 until full satisfaction, pursuant to Bangko Sentral ng
Pilipinas - Monetary Board Circular No. 799, Series of 2013 and applicable jurisprudence.
SO ORDERED.
N EGLIGENCE
Philippine National Bank v. Santos
[ GR No. 208293, Dec 10, 2014 ]
PHILIPPINE NATIONAL BANK v. CARMELITA S. SANTOS +
DECISION
LEONEN, J.:
The standard of diligence required of banks is higher than the degree of diligence of a good father of a
family.
Respondents are children of Angel C. Santos who died on March 21, 1991.[1]
Sometime in May 1996, respondents discovered that their father maintained a premium savings
account with Philippine National Bank (PNB), Sta. Elena-Marikina City Branch.[2] As of July 14, 1996,
the deposit amounted to P1,759,082.63.[3] Later, respondents would discover that their father also had
a time deposit of P1,000,000.00 with PNB.[4]
Respondents went to PNB to withdraw their father's deposit.[5]
Lina B. Aguilar, the Branch Manager of PNB-Sta. Elena-Marikina City Branch, required them to submit
the following: "(1) original or certified true copy of the Death Certificate of Angel C. Santos; (2) certificate
of payment of, or exemption from, estate tax issued by the Bureau of Internal Revenue (BIR); (3) Deed
of Extrajudicial Settlement; (4) Publisher's Affidavit of publication of the Deed of Extrajudicial
Settlement; and (5) Surety bond effective for two (2) years and in an amount equal to the balance of
the deposit to be withdrawn."[6]
By April 26, 1998, respondents had already obtained the necessary documents.[7] They tried to
withdraw the deposit.[8] However, Aguilar informed them that the deposit had already "been released
to a certain Bernardito Manimbo (Manimbo) on April 1, 1997."[9] An amount of PI,882,002.05 was
released upon presentation of: (a) an affidavit of self-adjudication purportedly executed by one of the
respondents, Reyme L. Santos; (b) a certificate of time deposit dated December 14, 1989 amounting
to P1,000,000.00; and (c) the death certificate of Angel C. Santos, among others.[10] A special power
of attorney was purportedly executed by Reyme L. Santos in favor of Manimbo and a certain Angel P.
Santos for purposes of withdrawing and receiving the proceeds of the certificate of time deposit.[11]
On May 20, 1998, respondents filed before the Regional Trial Court of Marikina City a complaint for
sum of money and damages against PNB, Lina B. Aguilar, and a John Doe.[12] Respondents
questioned the release of the deposit amount to Manimbo who had no authority from them to withdraw
their father's deposit and who failed to present to PNB all the requirements for such
withdrawal.[13] Respondents prayed that they be paid: (a) the premium deposit amount; (b) the
certificate of time deposit amount; and (c) moral and exemplary damages, attorney's fees, and costs of
suit.[14]
PNB and Aguilar denied that Angel C. Santos had two separate accounts (premium deposit account
and time deposit account) with PNB.[15] They alleged that Angel C. Santos' deposit account was
originally a time deposit account that was subsequently converted into a premium savings
account.[16]They also alleged that Aguilar did not know about Angel C. Santos' death in 1991 because
she only assumed office in 1996.[17] Manimbo was able to submit an affidavit of self-adjudication and
the required surety bond.[18] He also submitted a certificate of payment of estate tax dated March 31,
1997.[19]All documents he submitted appeared to be regular.[20]
PNB and Aguilar filed a third-party complaint against Manimbo, Angel P. Santos, and Capital Insurance
and Surety Co., Inc.[21]
Angel P. Santos denied having anything to do with the special power of attorney and affidavit of self-
adjudication presented by Manimbo.[22] He also alleged that Manimbo presented the certificate of time
deposit without his knowledge and consent.[23]
Capital Insurance and Surety Co., Inc. alleged that its undertaking was to pay claims only when persons
who were unduly deprived of their lawful participation in the estate filed an action in court for their
claims.[24] It did not undertake to pay claims resulting from PNB's negligence.[25]
In the decision[26] dated February 22, 2011, the trial court held that PNB and Aguilar were jointly and
severally liable to pay respondents the amount of P1,882,002.05 with an interest rate of 6% starting
May 20, 1998.[27] PNB and Aguilar were also declared jointly and severally liable for moral and
exemplary damages, attorney's fees, and costs of suit.[28] Manimbo, Angel P. Santos, and Capital
Insurance and Surety Co., Inc. were held jointly and severally liable to pay PNB P1,877,438.83 pursuant
to the heir's bond and P50,000.00 as attorney's fees and the costs of suit.[29] The dispositive portion
of the trial court's decision reads:
WHEREFORE, foregoing premises considered, judgment is hereby rendered as follows:
1. ordering the defendants PNB and LIN A B. AGUILAR jointly and severally liable to pay
the plaintiffs the amount of P1,882,002.05, representing the face value of PNB Manager's Check No.
AF-974686B as balance of the total deposits of decedent Angel C. Santos at the time of its issue, with
interest thereon at the rate of 6% starting on May 20, 1998, the date when the complaint was filed, until
fully paid;
2. ordering both defendants jointly and severally liable to pay plaintiffs the amount of Php
100,000.00 as moral damages, another Php 100,000.00 as exemplary damages and Php 50,000.00
as attorney's fees and the costs of suit;
On the Third party complaint:

3. Ordering the third party defendants Bernardito P. Manimbo, Angel P. Santos and Capital
Insurance & Surety Co., Inc., jointly and severally liable to pay third party plaintiff PNB, the amount of
Php 1,877,438.83 pursuant to the Heir's Bond and the amount of Php 50,000.00 as attorney's fees and
the costs of suit.
SO ORDERED.[30]
The trial court found that Angel C. Santos had only one account with PNB.[31]The account was
originally a time deposit, which was converted into a premium savings account when it was not renewed
on maturity.[32] The trial court took judicial notice that in 1989, automatic rollover of time deposit was
not yet prevailing.[33]
On the liability of PNB and Aguilar, the trial court held that they were both negligent in releasing the
deposit to Manimbo.[34] The trial court noted PNB's failure to notify the depositor about the maturity of
the time deposit and the conversion of the time deposit into a premium savings account.[35]The trial
court also noted PNB's failure to cancel the certificate of time deposit despite conversion.[36] PNB and
Aguilar also failed to require the production of birth certificates to prove claimants' relationship to the
depositor.[37]Further, they relied on the affidavit of self-adjudication when several persons claiming to
be heirs had already approached them previously.[38]
Aguilar filed a motion for reconsideration[39] of the February 22, 2011 Regional Trial Court decision.
This was denied in the June 21, 2011 Regional Trial Court order.[40]
PNB and Aguilar appealed before the Court of Appeals.[41]
Aguilar contended that she was not negligent and should not have been made jointly and severally
liable with PNB.[42] She merely implemented PNB's Legal Department's directive to release the deposit
to Manimbo.[43]
PNB argued that it was not negligent.[44] The release of the deposit to Manimbo was pursuant to an
existing policy.[45] Moreover, the documents submitted by Manimbo were more substantial than those
submitted by respondents.[46] Respondents could have avoided the incident "had they accomplished
the required documents immediately."[47]

In the decision[48] promulgated on July 25, 2013, the Court of Appeals sustained the trial court's finding
that there was only one account.[49] Angel C. Santos could not have possibly opened the premium
savings account in 1994 since he already died in 1991.[50] The Court of Appeals also held that PNB
and Aguilar were negligent in handling the deposit.[51] The deposit amount was released to Manimbo
who did not present all the requirements, particularly the Bureau of Internal Revenue (BIR) certification
that estate taxes had already been paid.[52] They should also not have honored the affidavit of self-
adjudication.[53]
The Court of Appeals ruled that Aguilar could not escape liability by pointing her finger at PNB's Legal
Department.[54] As the Bank Manager, she should have given the Legal Department all the necessary
information that must be known in order to protect both the depositors' and the bank's interests.[55]
The Court of Appeals removed the award of exemplary damages, upon finding that there was no malice
or bad faith.[56]
The Court of Appeals considered the deposit as an ordinary loan by the bank from Angel C. Santos or
his heirs.[57] Therefore, the deposit was a forbearance which should earn an interest of 12% per
annum.[58] The dispositive portion of the Court of Appeals' decision reads:
WHEREFORE, premises considered, the assailed decision of the court a quo dated February 22, 2011
is AFFIRMED with the MODIFICATIONS in that the rate of interest shall be twelve percent (12%) per
annum computed from the filing of the case until fully satisfied. The interest due shall further earn an
interest of 12% per annum to be computed from the date of the filing of the complaint until fully paid.
Meanwhile, the award of exemplary damages is DELETED.
SO ORDERED.[59]
PNB and Aguilar filed their separate petitions for review of the Court of Appeals' July 25, 2013
decision.[60]
We resolve the following issues:

I. Whether Philippine National Bank was negligent in releasing the deposit to Bernardito
Manimbo;
II. Whether Lina B. Aguilar is jointly and severally liable with Philippine National Bank for the
release of the deposit to Bernardito Manimbo; and
III. Whether respondents were properly awarded damages.
Petitioner Aguilar argued that the Court of Appeals had already found no malice or bad faith on her
part.[61] Moreover, as a mere officer of the bank, she cannot be made personally liable for acts that
she was authorized to do.[62] These acts were mere directives to her by her superiors.[63] Hence, she
should not be held solidarity liable with PNB.[64]
Petitioner PNB argued that it was the presumptuousness and cavalier attitude of respondents that gave
rise to the controversy and not its judgment call.[65]Respondents were lacking in sufficient
documentation.[66] Petitioner PNB also argued that respondents failed to show any justification for the
award of moral damages.[67] No bad faith can be attributed to Aguilar.[68]
In their separate comments to the petitions, respondents argued that the trial court and the Court of
Appeals did not err in finding that petitioners PNB and Aguilar were negligent in handling their father's
deposit.[69] The acceptance of invalid and incomplete documents to support the deposit's release to
Manimbo was a violation of the bank's fiduciary duty to its clients.[70] These acts constituted grcss
negligence on the part of petitioners PNB and Aguilar.[71]
However, according to respondents, the Court of Appeals erred in deleting the award for exemplary
damages because the acts in violation of the bank's fiduciary were done in bad faith.[72]
We rule for the respondents.
The trial court and the Court of Appeals correctly found that petitioners PNB and Aguilar were negligent
in handling the deposit of Angel C. Santos.
The contractual relationship between banks and their depositors is governed by the Civil Code
provisions on simple loan.[73] Once a person makes a deposit of his or her money to the bank, he or
she is considered to have lent the bank that money.[74] The bank becomes his or her debtor, and he
or she becomes the creditor of the bank, which is obligated to pay him or her on demand.[75]
The default standard of diligence in the performance of obligations is "diligence of a good father of a
family." Thus, the Civil Code provides:
ART. 1163. Every person obliged to give something is also obliged to take care of it with the proper
diligence of a good father of a family, unless the law or the stipulation of the parties requires another
standard of care.
ART. 1173. The fault or negligence of the obligor consists in the omission of that diligence which is
required by the nature of the obligation and corresponds with the circumstances of the persons, of the
time and of the place. When negligence shows bad faith, the provisions of articles 1171 and 2201,
paragraph 2, shall apply.
If the law or contract does not state the diligence which is to be observed in the performance, that which
is expected of a good father of a family shall be required. (Emphasis supplied)
"Diligence of a good father of a family" is the standard of diligence expected of, among others,
usufructuaries,[76] passengers of common
carriers,[77] agents,[78] depositaries,[79] pledgees,[80] officious managers,[81] and persons deemed

by law as responsible for the acts of others.[82] "The diligence of a good father of a family requires only
that diligence which an ordinary prudent man would exercise with regard to his own property."[83]
Other industries, because of their nature, are bound by law to observe higher standards of diligence.
Common carriers, for example, must observe "extraordinary diligence in the vigilance over the goods
and for the safety of [their] passengers"[84] because it is considered a business affected with public
interest. "Extraordinary diligence" with respect to passenger safety is further qualified as "carrying 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."[85]
Similar to common carriers, banking is a business that is impressed with public interest. It affects
economies and plays a significant role in businesses and commerce.[86] The public reposes its faith
and confidence upon banks, such that "even the humble wage-earner has not hesitated to entrust his
life's savings to the bank of his choice, knowing that they will be safe in its custody and will even earn
some interest for him."[87] This is why we have recognized the fiduciary nature of the banks' functions,
and attached a special standard of diligence for the exercise of their functions.
In Simex International (Manila), Inc. v. Court of Appeals,[88] this court described the nature of banks'
functions and the attitude expected of banks in handling their depositors' accounts, thus:
In every case, the depositor expects the bank to treat his account with the utmost fidelity, whether such
account consists only of a few hundred pesos or of millions. . . .
The point is that as a business affected with public interest and because of the nature of its functions,
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.[89] (Emphasis supplied)
The fiduciary nature of banking is affirmed in Republic Act No. 8791 or The General Banking Law, thus:
SEC. 2. Declaration of Policy. — The State recognizes the vital role of banks in providing an
environment conducive to the sustained development of the national economy and the fiduciary nature
of banking that requires high standards of integrity and performance. In furtherance thereof, the State
shall promote and maintain a stable and efficient banking and financial system that is globally
competitive, dynamic and responsive to the demands of a developing economy. (Emphasis supplied)
In The Consolidated Bank and Trust Corporation v. Court of Appeals,[90]this court explained the
meaning of fiduciary relationship and the standard of diligence assumed by banks:
This fiduciary relationship means that the bank's 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.[91] (Emphasis supplied, citation omitted)
Petitioners PNB and Aguilar's treatment of Angel C. Santos' account is inconsistent with the high
standard of diligence required of banks. They accepted Manimbo's representations despite knowledge
of the existence of circumstances that should have raised doubts on such representations. As a result,
Angel C. Santos' deposit was given to a person stranger to him.

Petitioner PNB pointed out that since petitioner Aguilar assumed office as PNB-Sta. Elena-Marikina
City Branch Manager only five (5) years from Angel C. Santos' death, she was not in the position to
know that respondents were the heirs of Angel C. Santos.[92] She could not have accepted the
unsigned and unnotarized extrajudicial settlement deed that respondents had first showed her.[93] She
was not competent to make a conclusion whether that deed was genuine.[94] Neither could petitioners
PNB and Aguilar pass judgment on a letter from respondents' lawyer stating that respondents were the
nine heirs of Angel C. Santos.[95]
Petitioners PNB and Aguilar's negligence is not based on their failure to accept respondents' documents
as evidence of their right to claim Angel C. Santos' deposit. Rather, it is based on their failure to exercise
the diligence required of banks when they accepted the fraudulent representations of Manimbo.
Petitioners PNB and Aguilar disregarded their own requirements for the release of the deposit to
persons claiming to be heirs of a deceased depositor. When respondents asked for the release of Angel
C. Santos' deposit, they were required to present the following: "(1) original or certified true copy of the
Death Certificate of Angel C. Santos; (2) certificate of payment of, or exemption from, estate tax issued
by the Bureau of Internal Revenue (BIR); (3) Deed of Extrajudicial Settlement; (4) Publisher's Affidavit
of publication of the Deed of Extrajudicial Settlement; and (5) Surety bond effective for two (2) years
and in an amount equal to the balance of the deposit to be withdrawn."[96]
Petitioners PNB and Aguilar, however, accepted Manimbo's representations, and they released Angel
C. Santos' deposit based on only the following documents:
1. Death certificate of Angel C. Santos;
2. Birth certificate of Reyme L. Santos;
3. Affidavit of self-adjudication of Reyme L. Santos;
4. Affidavit of publication;
5. Special power of attorney that Reyme L. Santos executed in favor of Bernardito Manimbo
and Angel P. Santos;
6. Personal items of Angel C. Santos, such as photocopies or originals of passport,

residence certificate for year 1990, SSS I.D., etc.;

7. Surety good for two (2) years; and
8. Certificate of Time Deposit No. 341306.[97]
Based on these enumerations, petitioners PNB and Aguilar either have no fixed standards for the
release of their deceased clients' deposits or they have standards that they disregard for convenience,
favor, or upon exercise of discretion. Both are inconsistent with the required diligence of banks. These
threaten the safety of the depositors' accounts as they provide avenues for fraudulent practices by third
persons or by bank officers themselves.
In this case, petitioners PNB and Aguilar released Angel C. Santos' deposit to Manimbo without having
been presented the BIR-issued certificate of payment of, or exception from, estate tax. This is a legal
requirement before the deposit of a decedent is released. Presidential Decree No. 1158,[98] the tax
code applicable when Angel C. Santos died in 1991, provides:
SEC. 118. Payment of tax antecedent to the transfer of shares, bonds, or rights. — There shall not be
transferred to any new owner in the books of any corporation, sociedad anonima, partnership,
business, or industry organized or established in the Philippines, any shares, obligations, bonds or
rights by way of gift inter vivos or mortis causa, legacy, or inheritance unless a certification from the
Commissioner that the taxes fixed in this Title and due thereon have been paid is shown.
If a bank has knowledge of the death of a person who maintained a hank deposit account alone, or
jointly with another, it shall not allow any withdrawal from the said deposit account, unless the
Commissioner has certified that the taxes imposed thereon by this Title have been paid; Provided,
however, That the administrator of the estate or any one of the heirs of the decedent may upon
authorization by the Commissioner of Internal Revenue, withdraw an amount not exceeding P10,000
without the said certification. For this purpose, all withdrawal slips shall contain a statement to the effect
that all of the joint depositors are still living at the time of withdrawal by any one of the joint depositors
and such statement shall be under oath by the said depositors.[99] (Emphasis supplied)
This provision was reproduced in Section 97 of the 1997 National Internal Revenue Code, thus:
SEC. 97. Payment of Tax Antecedent to the Transfer of Shares, Bonds or Rights. — There shall
not be transferred to any new owner in the books of any corporation, sociedad anonima, partnership,
business, or industry organized or established in the Philippines any share, obligation, bond or right by
way of gift inter vivos or mortis causa, legacy or inheritance, unless a certification from the
Commissioner that the taxes fixed in this Title and due thereon have been paid is shown.
If a bank has knowledge of the death of a person, who maintained a bank deposit account alone, or
jointly with another, it shall not allow any withdrawal from the said deposit account, unless the
Commissioner has certified that the taxes imposed thereon by this Title have been paid: Provided,
however, That the administrator of the estate or any one (1) of the heirs of the decedent may, upon
authorization by the Commissioner, withdraw an amount not exceeding Twenty thousand pesos
(P20,000) without the said certification. For this purpose, all withdrawal slips shall contain a statement
to the effect that all of the joint depositors are still living at the time of withdrawal by any one of the joint
depositors and such statement shall be under oath by the said depositors. (Emphasis supplied)

Taxes are created primarily to generate revenues for the maintenance of the government. However,
this particular tax may also serve as guard against the release of deposits to persons who have no
sufficient and valid claim over the deposits. Based on the assumption that only those with sufficient and
valid claim to the deposit will pay the taxes for it, requiring the certificate from the BIR increases the
chance that the deposit will be released only to them.
In their compulsory counterclaim,[100] petitioners PNB and Aguilar claimed that Manimbo presented a
certificate of payment of estate tax.[101] During trial, however, it turned out that this certificate was
instead an authority to accept payment, which is not the certificate required for the release of bank
deposits.[102] It appears that Manimbo was not even required to submit the BIR certificate.[103] He,
thus, failed to present such certificate. Petitioners PNB and Aguilar provided no satisfactory explanation
why Angel C. Santos' deposit was released without it.
Petitioners PNB and Aguilar's negligence is also clear when they accepted as bases for the release of
the deposit to Manimbo: (a) a mere photocopy of Angel C. Santos' death certificate;[104] (b) the falsified
affidavit of self-adjudication and special power of attorney purportedly executed by Reyme L.
Santos;[105]and (c) the certificate of time deposit.[106]
Petitioner Aguilar was aware that there were other claimants to Angel C. Santos' deposit. Respondents
had already communicated with petitioner Aguilar regarding Angel C. Santos' account before Manimbo
appeared. Petitioner Aguilar even gave respondents the updated passbook of Angel C. Santos'
account.[107] Yet, petitioners PNB and Aguilar did not think twice before they released the deposit to
Manimbo. They did not doubt why no original death certificate could be submitted. They did not doubt
why Reyme L. Santos would execute an affidavit of self-adjudication when he, together with others,
had previously asked for the release of Angel C. Santos' deposit. They also relied on the certificate of
time deposit and on Manimbo's representation that the passbook was lost when the passbook had just
been previously presented to Aguilar for updating.[108]
During the trial, petitioner PNB's counsel only reasoned that the photocopy of the death certificate was
also submitted with other documents, which led him to no other conclusion than that Angel C. Santos
was already dead.[109] On petitioners PNB and Aguilar's reliance special power of attorney allegedly
executed by Reyme L. Santos, Aguilar admitted that she did not contact Reyme L. Santos for
verification. Her reason was that Reyme L. Santos was not their client. Therefore, they had no obligation
to do so.[110]
Given the circumstances, "diligence of a good father of a family" would have required petitioners PNB
and Aguilar to verify. A prudent man would have inquired why Reyme L. Santos would issue an affidavit
of self-adjudication when others had also claimed to be heirs of Angel C. Santos. Contrary to petitioner
Aguilar's reasoning, the fact that Reyme L. Santos was not petitioner PNB's client should have moved
her to take measures to ensure the veracity of Manimbo's documents and representations. This is
because she had no previous knowledge of Reyme L. Santos his representatives, and his signature.
Petitioner PNB is a bank from which a degree of diligence higher than that of a good father of a family
is expected. Petitioner PNB and its manager, petitioner Aguilar, failed to meet even the standard of
diligence of a good father of a family. Their actions and inactions constitute gross negligence. It is for
this reason that we sustain the trial court's and the Court of Appeals' rulings that petitioners PNB and
Aguilar are solidarity liable with each other.[111]
For the same reason, we sustain the award for moral damages. Petitioners PNB and Aguilar's gross
negligence deprived Angel C. Santos' heirs what is rightfully theirs. Respondents also testified that they
experienced anger and embarrassment when petitioners PNB and Aguilar refused to release Angel C.
Santos' deposit.[112] "The bank's negligence was the result of lack of due care and caution required of
managers and employees of a firm engaged in so sensitive and demanding business as banking."[113]
Exemplary damages should also be awarded. "The law allows the grant of exemplary damages by way
of example for the public good. The public relies on the banks' sworn profession of diligence and
meticulousness in giving irreproachable service. The level of meticulousness must be maintained at all
times by the banking sector."[114]
Since exemplary damages are awarded and since respondents were compelled to litigate to protect
their interests,[115] the award of attorney's fees is also proper.
The Court of Appeals' award of interest should be modified to 12% from demand on April 26, 1998 until
June 30, 2013, and 6% from July 1, 2013 until fully paid. In Nacar v. Gallery Frames:[116]
Thus, from the foregoing, in the absence of an express stipulation as to the rate of interest that would
govern the parties, the rate of legal interest for loans or forbearance of any money. . . shall no longer
be twelve percent (12%) per annum. . . but will now be six percent (6%) per annum effective July 1,
2013. It should be noted, nonetheless, that. . . the twelve percent (12%) per annum legal interest shall
apply only until June 30, 2013. Come July 1, 2013 the new rate of six percent (6%) per annum shall be
the prevailing rate of interest when applicable.
....
1. When the obligation is breached, and it consists in the payment of a sum of money, i.e.,
a loan or forbearance of money, the interest due should be that which may have been stipulated in
writing. Furthermore, the interest due shall itself earn legal interest from the time it is judicially
demanded. In the absence of stipulation, the rate of interest shall be 6% per annum to be computed
from default, i.e., from judicial or extrajudicial demand. . .
....
3. When the judgment of the court awarding a sum of money becomes final and executory,
the rate of legal interest, whether the case falls under paragraph 1 or paragraph 2, above, shall be
6% per annumfrom such finality until its satisfaction, this interim period being deemed to be by then an
equivalent to a forbearance of credit.[117]
WHEREFORE, the Court of Appeals' decision dated July 25, 2013 is AFFIRMED with
the MODIFICATIONS in that petitioners Philippine National Bank and Lina B. Aguilar are ordered
solidarity liable to pay respondents P100,000.00 as exemplary damages. Further, the interest rate for
the amount of P1,882,002.05, representing the face value of PNB Manager's Check No. AF-974686B
is modified to 12% from April 26, 1998 until June 30, 2013, and 6% from July 1, 2013 until satisfaction.
All monetary awards shall then earn interest at the rate of 6% per annum from finality of the decision
until full satisfaction.
SO ORDERED.
BJDC Construction v. Lanuzo
March 24, 2014
G.R. No. 161151
BJDC CONSTRUCTION, REPRESENTED BY ITS MANAGER/PROPRIETOR JANET S. DELA
CRUZ, Petitioner,
vs.
NENA E. LANUZO, CLAUDETTE E. LANUZO, JANET E. LANUZO, JOAN BERNABE E. LANUZO,
and RYAN JOSEE. LANUZO, Respondent.
DECISION
BERSAMIN, J.:
The party alleging the negligence of the other as the cause of injury has the burden to establish the
allegation with competent evidence. If the action based on negligence is civil in nature, the proof
required is preponderance of evidence.
This case involves a claim for damages arising from the death of a motorcycle rider in a nighttime
accident due to the supposed negligence of a construction company then undertaking re-blocking work
on a national highway. The plaintiffs insisted that the accident happened because the construction
company did not provide adequate lighting on the site, but the latter countered that the fatal accident
was caused by the negligence of the motorcycle rider himself. The trial court decided in favor of the
construction company, but the Court of Appeals (CA) reversed the decision and ruled for the plaintiffs.
Hence, this appeal.
Antecedents
On January 5, 1998, Nena E. Lanuzo (Nena) filed a complaint for damages1 against BJDC Construction
(company), a single proprietorship engaged in the construction business under its Manager/Proprietor
Janet S. de la Cruz. The company was the contractor of the re-blocking project to repair the damaged
portion of one lane of the national highway at San Agustin, Pili, Camarines Sur from September 1997to
November 1997.
Nena alleged that she was the surviving spouse of the late Balbino Los Baños Lanuzo (Balbino) who
figured in the accident that transpired at the site of the re-blocking work at about 6:30 p.m. on October
30, 1997; that Balbino’s Honda motorcycle sideswiped the road barricade placed by the company in
the right lane portion of the road, causing him to lose control of his motorcycle and to crash on the
newly cemented road, resulting in his instant death; and that the company’s failure to place illuminated
warning signs on the site of the project, especially during night time, was the proximate cause of the
death of Balbino. She prayed that the company be held liable for damages, to wit: (a) P5,000.00 as the
actual damage to Balbino’s motorcycle; (b) P100,000.00 as funeral and burial expenses; (c)
P559,786.00 representing the "unearned income in expectancy" of Balbino; (d) P100,000.00 as moral
damages; (e) P75,000.00 as attorney’s fees, plus P1,500.00 per court appearance; and (f) P20,000.00
as litigation costs and other incidental expenses.
In its answer,2 the company denied Nena’s allegations of negligence, insisting that it had installed
warning signs and lights along the highway and on the barricades of the project; that at the time of the

incident, the lights were working and switched on; that its project was duly inspected by the Department
of Public Works and Highways (DPWH), the Office of the Mayor of Pili, and the Pili Municipal Police
Station; and that it was found to have satisfactorily taken measures to ensure the safety of motorists.
The company further alleged that since the start of the project in September 1997, it installed several
warning signs, namely: (a) big overhead streamers containing the words SLOW DOWN ROAD UNDER
REPAIR AHEAD hung approximately 100 meters before the re-blocking site, one facing the Pili-bound
motorists and another facing the Naga-bound motorists; (b) road signs containing the words SLOW
DOWN ROAD UNDER REPAIR 100 METERS AHEAD placed on the road shoulders below the
streamers; (c) road signs with the words SLOW DOWN ROAD UNDER REPAIR 50 METERS AHEAD
placed 50 meters before the project site; (d) barricades surrounded the affected portion of the highway,
and a series of 50-watt light bulbs were installed and switched on daily from 6:00 p.m. until the following
morning; (e) big warning signs containing the words SLOW DOWN ROAD UNDER REPAIR and SLOW
DOWN MEN WORKING were displayed at both ends of the affected portion of the highway with
illumination from two 50-watt bulbs from 6:00 p.m. until the following morning; and (f) the unaffected
portion of the highway was temporarily widened in the adjacent road shoulder to allow two-way
vehicular traffic.
The company insisted that the death of Balbino was an accident brought about by his own negligence,
as confirmed by the police investigation report that stated, among others, that Balbino was not wearing
any helmet at that time, and the accident occurred while Balbino was overtaking another motorcycle;
and that the police report also stated that the road sign/barricade installed on the road had a light. Thus,
it sought the dismissal of the complaint and prayed, by way of counterclaim, that the Nena be ordered
to pay P100,000.00 as attorney’s fees, as well as moral damages to be proven in the course of trial.
The RTC subsequently directed the amendment of the complaint to include the children of Nena and
Balbino as co-plaintiffs, namely: Janet, Claudette, Joan Bernabe and Ryan Jose, all surnamed Lanuzo.
Hence, the plaintiffs are hereinafter be referred to as the Lanuzo heirs.
Decision of the RTC
On October 8, 2001, the RTC rendered judgment in favor of the company, as follows:
Plaintiffs are the survivors of Balbino Los Baños Lanuzo who met a traumatic death on 30 October,
1997 at about 6:30 p.m., when he bumped his motorcycle on a barricade that was lighted with an
electric bulb, protecting from traffic the newly-reblocked cement road between San Agustin and San
Jose, Pili, Camarines Sur; they claim defendant’s OMISSION in lighting up the barricaded portion of
the reblocking project being undertaken by defendant was the proximate cause of the accident, leaving
them bereaved and causing them actual and moral damages.
Defendant DENIED the claim of plaintiffs; both parties offered testimonial and documentary evidence,
from which this Court,
FINDS
that: plaintiff DID NOT present an eyewitness account of the death of their decedent; on the contrary,
the flagman of defendant was present when the accident occurred, which was caused by the decedent
having overtaken a motorcycle ahead of [him] and on swerving, to avoid the barricade, hit it, instead,
breaking the lighted electric bulb on top of the barricade, resulting in the fall of the decedent about 18
paces from where his motorcycle fell on the reblocked pavement; the police investigator, policeman
Corporal, by Exh. 1, confirmed the tale of the flagman, aside from confirming the presence of the
warning devices placed not only on the premises but at places calculated to warn motorists of the
ongoing reblocking project.
OPINION

From the foregoing findings, it is the opinion of this Court that the plaintiffs were unable to make out a
case for damages, with a preponderance of evidence.
WHEREFORE, Judgment is hereby rendered, DISMISSING the complaint.3
Decision of the CA
The Lanuzo heirs appealed to the CA.
On August 11, 2003, the CA promulgated its decision declaring that the issue was whether the company
had installed adequate lighting in the project so that motorists could clearly see the barricade placed
on the newly cemented lane that was then still closed to vehicular traffic,4 thereby reversing the
judgment of the RTC, and holding thusly:
WHEREFORE, premises considered, the present appeal is hereby GRANTED and the decision
appealed from in Civil Case No. P-2117 is hereby REVERSED and SET ASIDE. A new judgment is
hereby entered ordering the defendant-appellee to pay the plaintiff-appellants, heirs of the victim
Balbino L. B. Lanuzo, the sums of P50,000.00 as death indemnity, P20,000.00 by way of temperate
damages and P939,736.50 as loss of earning capacity of the deceased Balbino L. B. Lanuzo.
SO ORDERED.5
The CA ruled that the following elements for the application of the doctrine of res ipsa loquitur were
present, namely: (1) the accident was of such character as to warrant an inference that it would not
have happened except for the defendant’s negligence; (2) the accident must have been caused by an
agency or instrumentality within the exclusive management or control of the person charged with the
negligence complained of; and (3) the accident must not have been due to any voluntary action or
contribution on the part of the person injured.
The CA regarded as self-serving the testimony of Eduardo Zamora, an employee of the company who
testified that there was an electric bulb placed on top of the barricade on the area of the accident. It
held that Zamora’s statement was negated by the statements of Ernesto Alto and Asuncion Sandia to
the effect that they had passed by the area immediately before the accident and had seen the road to
be dark and lit only by a gas lamp. It noted that SPO1 Corporal, the police investigator, had noticed the
presence of lighted electric bulbs in the area, but the same had been installed on the other side of the
street opposite the barricade.
The CA ruled that the placing of road signs and streamers alone did not prove that the electric bulbs
were in fact switched on at the time of the accident as to sufficiently light up the newly re-blocked portion
of the highway. It opined that "[t]he trial court gave undue weight to the self- serving statement of
appellee’s employee, Eduardo Zamora, which was supposedly corroborated by SPO1 Pedro Corporal.
SPO1 Corporal arrived at the scene only after the accident occurred, and thus the electric bulbs could
have already been switched on by Zamora who was at the area of the project." It concluded that the
negligence of the company was the proximate cause of Balbino’s death; hence, the company was liable
for damages.
The company filed a motion for reconsideration,6 but the CA denied the motion in the resolution
promulgated on November 13, 2003.
Issues
In this appeal, the company submits the following issues, namely:
I. The application by the Honorable Court of Appeals of the doctrine of res ipsa loquitur to the case at
bar, despite and contrary to the finding, among others, by the trial court that the proximate cause of the
accident is the victim’s own negligence, is "not in accord with the law or with the applicable decisions
of the Supreme Court" [Sec. 6 (a), Rule 45, Rules of Court].

II. The Honorable Court of Appeals, by substituting its own findings of fact and conclusion with those of
the trial court despite the lack of "strong or cogent reasons" therefor, "has so far departed from the
accepted and usual course of judicial proceedings ... as to call for an exercise of the power of
supervision" by this Honorable Supreme Court [Sec. 6 (b), Ibid.].
III. The findings by the Honorable Court of Appeals that respondents (appellants therein) "had
satisfactorily presented a prima facie case of negligence which the appellee (petitioner herein) had not
overcome with an adequate explanation" and which alleged negligence is "the proximate cause of death
of Lanuzo" are manifestations of grave abuse of discretion in the appreciation of facts, and constitute
a judgment based on a misinterpretation of facts, which justify a review by this Honorable Supreme
Court.7
The company reiterates the categorical finding of the RTC that the proximate cause of the accident was
Balbino’s own negligence, and that such finding was based on the conclusion stated by SPO1 Corporal
in his investigation report to the effect that the incident was "purely self accident," and on the unrebutted
testimony of Zamora to the effect that Balbino was driving his motorcycle at a fast speed trying to
overtake another motorcycle rider before hitting the barricade. On the other hand, it insists that its
documentary and testimonial evidence proved its exercise of due care and observance of the legally
prescribed safety requirements for contractors.
The company maintains that Balbino was familiar with the re- blocking project that had been going on
for months because he had been passing the area at least four times a day during weekdays in going
to and from his place of work in the morning and in the afternoon; and that he could have avoided the
accident had he exercised reasonable care and prudence.
The company assails the application of the doctrine of res ipsa loquitur, positing that the Lanuzo heirs
did not establish all the requisites for the doctrine to apply.
Anent the first requisite, the company states that the Lanuzo heirs did not successfully counter its
documentary and testimonial evidence showing that Balbino’s own negligence had caused the
accident. It cites the fact that Balbino was familiar with the road conditions and the re-blocking project
because he had been passing there daily; and that Balbino had been driving too fast and not wearing
the required helmet for motorcycle drivers, which were immediately evident because he had been
thrown from his motorcycle and had landed "18 paces away" from the barricade that he had hit.
On the second requisite, the company argues that Balbino’s driving and operation of his motorcycle on
the day of the accident indicated that the accident was not within its exclusive management and control;
and that as to the matters that were within its control, it sufficiently showed its observance of due and
reasonable care and its compliance with the legally prescribed safety requirements.
Regarding the third requisite, the company reminds that Zamora and SPO1 Corporal revealed that
Balbino was overtaking another motorcycle rider before hitting the barricade. The credibility of said
witnesses was not challenged, and their testimonies not rebutted; hence, the CA erred in relying on the
recollections of Asuncion Sandia and Ernesto Alto who were not present when the incident took place.
Sandia and Alto’s testimonies could not be accorded more weight than Zamora’s eyewitness account,
considering that the latter was believed by the trial judge who had the first-hand opportunity to observe
the demeanor of the witnesses.
Whose negligence was the proximate cause of the death of Balbino?
Ruling of the Court
Inasmuch as the RTC and the CA arrived at conflicting findings of fact on who was the negligent party,
the Court holds that an examination of the evidence of the parties needs to be undertaken to properly
determine the issue.8The Court must ascertain whose evidence was preponderant, for Section 1, Rule

133 of the Rules of Court mandates that in civil cases, like this one, the party having the burden of proof
must establish his case by a preponderance of evidence.9
Burden of proof is the duty of a party to present evidence on the facts in issue necessary to establish
his claim or defense by the amount of evidence required by law.10 It is basic that whoever alleges a fact
has the burden of proving it because a mere allegation is not evidence.11 Generally, the party who
denies has no burden to prove.12 In civil cases, the burden of proof is on the party who would be
defeated if no evidence is given on either side.13 The burden of proof is on the plaintiff if the defendant
denies the factual allegations of the complaint in the manner required by the Rules of Court, but it may
rest on the defendant if he admits expressly or impliedly the essential allegations but raises affirmative
defense or defenses, which if proved, will exculpate him from liability.14
By preponderance of evidence, according to Raymundo v. Lunaria:15
x x x is meant that the evidence as a whole adduced by one side is superior to that of the other. It refers
to the weight, credit and value of the aggregate evidence on either side and is usually considered to be
synonymous with the term "greater weight of evidence" or "greater weight of the credible evidence." It
is evidence which is more convincing to the court as worthy of belief than that which is offered in
opposition thereto.
In addition, according to United Airlines, Inc. v. Court of Appeals,16 the plaintiff must rely on the strength
of his own evidence and not upon the weakness of the defendant’s.
Upon a review of the records, the Court affirms the findings of the RTC, and rules that the Lanuzo heirs,
the parties carrying the burden of proof, did not establish by preponderance of evidence that the
negligence on the part of the company was the proximate cause of the fatal accident of Balbino.
Negligence, the Court said in Layugan v. Intermediate Appellate Court,17 is "the omission to do
something which a reasonable man, guided by those considerations which ordinarily regulate the
conduct of human affairs, would do, or the doing of something which a prudent and reasonable man
would not do,18 or as Judge Cooley defines it, ‘(t)he failure to observe for the protection of the interests
of another person, that degree of care, precaution, and vigilance which the circumstances justly
demand, whereby such other person suffers injury.’"19 In order that a party may be held liable for
damages for any injury brought about by the negligence of another, the claimant must prove that the
negligence was the immediate and proximate cause of the injury. Proximate cause is defined as "that
cause, which, in natural and continuous sequence, unbroken by any efficient intervening cause,
produces the injury and without which the result would not have occurred."20
The test by which the existence of negligence in a particular case is determined is aptly stated in the
leading case of Picart v. Smith,21 as follows:
The test by which to determine the existence of negligence in a particular case may be stated as follows:
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.
The law here in effect adopts the standard supposed to be supplied by the imaginary conduct of the
discreet paterfamilias of the Roman law. The existence of negligence in a given case is not determined
by reference to the personal judgment of the actor in the situation before him. The law considers what
would be reckless, blameworthy, or negligent in the man of ordinary intelligence and prudence and
determines liability by that.
The question as to what would constitute the conduct of a prudent man in a given situation must of
course be always determined in the light of human experience and in view of the facts involved in the
particular case. Abstract speculation cannot here be of much value but this much can be profitably said:
Reasonable men govern their conduct by the circumstances which are before them or known to them.
They are not, and are not supposed to be, omniscient of the future. Hence they can be expected to

take care only when there is something before them to suggest or warn of danger. Could a prudent
man, in the case under consideration, foresee harm as a result of the course actually pursued? If so, it
was the duty of the actor to take precautions to guard against that harm. Reasonable foresight of harm,
followed by the ignoring of the suggestion born of this prevision, is always necessary before negligence
can be held to exist. Stated in these terms, the proper criterion for determining the existence of
negligence in a given case is this: Conduct is said to be negligent when a prudent man in the position
of the tortfeasor would have foreseen that an effect harmful to another was sufficiently probable to
warrant his foregoing the conduct or guarding against its consequences.
First of all, we note that the Lanuzo heirs argued in the trial and appellate courts that there was a total
omission on the part of the company to place illuminated warning signs on the site of the project,
especially during night time, in order to warn motorists of the project. They claim that the omission was
the proximate cause of the death of Balbino.22 In this appeal, however, they contend that the negligence
of the company consisted in its omission to put up adequate lighting and the required signs to warn
motorists of the project, abandoning their previous argument of a total omission to illuminate the project
site.
During the trial, the Lanuzo heirs attempted to prove inadequacy of illumination instead of the total
omission of illumination. Their first witness was Cesar Palmero, who recalled that lights had been
actually installed in the site of the project. The next witness was Ernesto Alto, who stated that he had
seen three light bulbs installed in the site, placed at intervals along the stretch of the road covered by
the project. Alto further stated that he had passed the site on board his tricycle on October 30, 1997
prior to the accident, and had seen only a gas lamp, not light bulbs, on his approach. Another witness
of the plaintiffs, Asuncion Sandia, claimed that she had also passed the site on board a bus on the
night just prior to the accident, and had seen the site to be dark, with only one lane open to traffic, with
no light at all. Obviously, the witnesses of the plaintiffs were not consistent on their recollections of the
significant detail of the illumination of the site.
In contrast, the company credibly refuted the allegation of inadequate illumination. Zamora, its flagman
in the project, rendered an eyewitness account of the accident by stating that the site had been
illuminated by light bulbs and gas lamps, and that Balbino had been in the process of overtaking another
motorcycle rider at a fast speed when he hit the barricade placed on the newly cemented road. On his
part, SPO1 Corporal, the police investigator who arrived at the scene of the accident on October 30,
1997, recalled that there were light bulbs on the other side of the barricade on the lane coming from
Naga City; and that the light bulb on the lane where the accident had occurred was broken because it
had been hit by the victim’s motorcycle. Witnesses Gerry Alejo and Engr. Victorino del Socorro
remembered that light bulbs and gas lamps had been installed in the area of the project.
Secondly, the company presented as its documentary evidence the investigation report dated
December 3, 1997 of SPO1 Corporal (Annex 1), the relevant portions of which indicated the finding of
the police investigator on the presence of illumination at the project site, viz:
SUBJECT: Investigation Report Re: Homicide Thru Reckless Imprudence
(Self Accident)
xxxx
II.MATTERS INVESTIGATED:
1.To determine how the incident happened.
2.To determine the vehicle involved.
III. FACTS OF THE CASE:

3.At 6:45 P.M. October 30, 1997, Elements of Pili Municipal Police Station led by SPO2 Melchor Estallo,
SPO2 Cesar Pillarda, both members of the patrol section and SPO1 Pedro D. Corporal, investigator
reported having conducted an on the spot investigation re: vehicular incident (Self Accident) that
happened on or about 6:30 o’clock in the evening of October 30, 1997 along national highway, San
Agustin, Pili, Camarines Sur, wherein one Balbino Lanuzo y Doe, of legal age, married, a public school
teacher, a resident of San Jose, Pili, Camarines Sur while driving his Honda motorcycle 110 CC enroute
to San Jose, Pili, Camarines Sur from Poblacion, this municipality and upon reaching at road re:
blocking portion of the national highway at barangay San Agustin, Pili, Camarines Sur and while
overtaking another motorcycle ahead incidentally side-swiped a road sign/barricade installed at the
lane road re: blocking of the national highway, causing said motorcycle rider to swerved his ridden
motorcycle to the right and stumble down and fell to the concrete cemented road. Victim was rushed to
Bicol Medical Center, Naga City for treatment but was pronounced dead on arrival.
4.That upon arrival at the scene of the incident it was noted that road sign/barricade installed on the
road has a light.
5.That said road was under repair for almost a month which one lane portion of the national highway is
possible of all passing vehicles from south and north bound.
6.That said motorcycle stumble down on the newly repair portion of the national highway and the driver
lying down beside the motorcycle.
xxxx
8.That one of the passerby revealed that the victim possibly be miscalculated the road block that made
him to tumble down when he applied sudden brake.
IV. FINDINGS/DISCUSSION:
9.The time of the incident was at about 6:30 o’clock in the evening a time wherein dark of the night is
approaching the vision of the driver is affected with the changing condition and it is all the time when
driver should lights his driven vehicle, as to this case, the driver Balbino Lanuzo y Doe (victim has
exercise all precautionary measures to avoid accident but due to self accident he incidentally
sideswiped the road sign/barricade of the re: Blocking portion of the national highway resulting him to
stumble down his motorcycle and fell down to the concrete cement road.
10.The driver/victim met unexpectedly (sic) along that one lane potion of the re: blocking and
considering it was night time, confusion overthrew him and because of sudden impulse, he lost control
on the motorcycle he was driving.
11.That the driver/victim has no crush (sic) helmet at the time of the incident considering that it should
be a basic requirement as to prevent from any accident.
V. RECOMMENDATION:
12.Basing on the above discussion and facts surroundings the case was purely self accident resulting
to Homicide Thru Reckless Imprudence and the case must be closed. (Emphasis ours.)23
Additionally, the company submitted the application for lighting permit covering the project site (Annex
7) to prove the fact of installation of the electric light bulbs in the project site.
In our view, the RTC properly gave more weight to the testimonies of Zamora and SPO1 Corporal than
to those of the witnesses for the Lanuzo heirs.1âwphi1 There was justification for doing so, because
the greater probability pertained to the former. Moreover, the trial court’s assessment of the credibility
of the witnesses and of their testimonies is preferred to that of the appellate court’s because of the trial
court’s unique first-hand opportunity to observe the witnesses and their demeanor as such. The Court
said in Cang v. Cullen:24

The findings of the trial court on the credibility of witnesses are accorded great weight and respect -
even considered as conclusive and binding on this Court - since the trial judge had the unique
opportunity to observe the witness firsthand and note his demeanor, conduct and attitude under
grueling examination. Only the trial judge can observe the furtive glance, blush of conscious shame,
hesitation, flippant or sneering tone, calmness, sigh of a witness, or his scant or full realization of an
oath - all of which are useful aids for an accurate determination of a witness' honesty and sincerity. He
can thus be expected to determine with reasonable discretion which testimony is acceptable and which
witness is worthy of belief.
Absent any showing that the trial court's calibration of the credibility of the witnesses was flawed, we
are bound by its assessment. This Court will sustain such findings unless it can be shown that the trial
court ignored, overlooked, misunderstood, misappreciated, or misapplied substantial facts and
circumstances, which, if considered, would materially affect the result of the case.25
The Court observes, too, that SPO1 Corporal, a veteran police officer detailed for more than 17 years
at the Pili Police Station, enjoyed the presumption of regularity in the performance of his official
duties.26 The presumption, although rebuttable, stands because the Lanuzo heirs did not adduce
evidence to show any deficiency or irregularity in the performance of his official duty as the police
investigator of the accident. They also did not show that he was impelled by any ill motive or bias to
testify falsely.
Thirdly, the CA unreasonably branded the testimonies of Zamora and SPO1 Corporal as "self-serving."
They were not. Self-serving evidence refers to out-of-court statements that favor the declarant’s
interest;27 it is disfavored mainly because the adverse party is given no opportunity to dispute the
statement and their admission would encourage fabrication of testimony.28 But court declarations are
not self-serving considering that the adverse party is accorded the opportunity to test the veracity of
the declarations by cross-examination and other methods.
There is no question that Zamora and SPO1 Corporal were thoroughly cross-examined by the counsel
for the Lanuzo heirs. Their recollections remained unchallenged by superior contrary evidence from the
Lanuzo heirs.
Fourthly, the doctrine of res ipsa loquitur had no application here. In Tan v. JAM Transit, Inc.,29 the
Court has discussed the doctrine thusly:
Res ipsa loquitur is a Latin phrase that literally means "the thing or the transaction speaks for itself." It
is a maxim for the rule that the fact of the occurrence of an injury, taken with the surrounding
circumstances, may permit an inference or raise a presumption of negligence, or make out a plaintiff's
prima facie case, and present a question of fact for defendant to meet with an explanation. Where the
thing that caused the injury complained of is shown to be under the management of the defendant or
his servants; and the accident, in the ordinary course of things, would not happen if those who had
management or control used proper care, it affords reasonable evidence — in the absence of a
sufficient, reasonable and logical explanation by defendant — that the accident arose from or was
caused by the defendant's want of care. This rule is grounded on the superior logic of ordinary human
experience, and it is on the basis of such experience or common knowledge that negligence may be
deduced from the mere occurrence of the accident itself. Hence, the rule is applied in conjunction with
the doctrine of common knowledge.
For the doctrine to apply, the following requirements must be shown to exist, namely: (a) the accident
is of a kind that ordinarily does not occur in the absence of someone’s negligence; (b) it is caused by
an instrumentality within the exclusive control of the defendant or defendants; and (c) the possibility of
contributing conduct that would make the plaintiff responsible is eliminated.30

The Court has warned in Reyes v. Sisters of Mercy Hospital,31 however, that "res ipsa loquitur is not a
rigid or ordinary doctrine to be perfunctorily used but a rule to be cautiously applied, depending upon
the circumstances of each case."
Based on the evidence adduced by the Lanuzo heirs, negligence cannot be fairly ascribed to the
company considering that it has shown its installation of the necessary warning signs and lights in the
project site. In that context, the fatal accident was not caused by any instrumentality within the exclusive
control of the company. In contrast, Balbino had the exclusive control of how he operated and managed
his motorcycle. The records disclose that he himself did not take the necessary precautions. As Zamora
declared, Balbino overtook another motorcycle rider at a fast speed, and in the process could not avoid
hitting a barricade at the site, causing him to be thrown off his motorcycle onto the newly cemented
road. SPO1 Corporal’s investigation report corroborated Zamora’s declaration. This causation of the
fatal injury went uncontroverted by the Lanuzo heirs.
Moreover, by the time of the accident, the project, which had commenced in September 1997, had
been going on for more than a month and was already in the completion stage. Balbino, who had
passed there on a daily basis in going to and from his residence and the school where he then worked
as the principal, was thus very familiar with the risks at the project site. Nor could the Lanuzo heirs
justly posit that the illumination was not adequate, for it cannot be denied that Balbino’s motorcycle was
equipped with headlights that would have enabled him at dusk or night time to see the condition of the
road ahead. That the accident still occurred surely indicated that he himself did not exercise the degree
of care expected of him as a prudent motorist.
According to Dr. Abilay, the cause of death of Balbino was the fatal depressed fracture at the back of
his head, an injury that Dr. Abilay opined to be attributable to his head landing on the cemented road
after being thrown off his motorcycle. Considering that it was shown that Balbino was not wearing any
protective head gear or helmet at the time of the accident, he was guilty of negligence in that respect.
Had he worn the protective head gear or helmet, his untimely death would not have occurred.
The RTC was correct on its conclusions and findings that the company was not negligent in ensuring
safety at the project site. All the established circumstances showed that the proximate and immediate
cause of the death of Balbino was his own negligence. Hence, the Lanuzo heirs could not recover
damages.32
WHEREFORE, the Court GRANTS the petition for review on certiorari; REVERSES and SETS ASIDE
the decision promulgated on August 11, 2003 by the Court of Appeals; REINSTATES the decision
rendered on October 8, 2001 by the Regional Trial Court, Branch 32, in Pili, Camarines Sur dismissing
the complaint; and MAKES no pronouncements on costs of suit.
SO ORDERED.
Bignay EX-IM Philippines, Inc. vs. Union Bank of the Philippines
G.R. No. 171590 February 12, 2014
BIGNA Y EX-IM PHILIPPINES, INC., Petitioner,
vs.
UNION BANK OF THE PIDLIPPINES, Respondent.
x-----------------------x
G.R. No.171598
UNION BANK OF THE PIDLIPPINES, Petitioner,
vs.
BIGNAY EX-IM PHILIPPINES, INC., Respondent.
DECISION
DEL CASTILLO, J.:
The gross negligence of the seller in defending its title to the property subject matter of the sale - thereby
contravening the express undertaking under the deed of sale to protect its title against the claims of
third persons resulting in the buyer's eviction from the property -. amounts to bad faith, and the buyer
is entitled to the remedies afforded under Article 1555 of the Civil Code.
Before us are consolidated Petitions for Review on Certiorari1 assailing the August 25, 2005
Decision2 of the Court of Appeals (CA) in CA-G.R. CV No. 67788 as well as its February 10, 2006
Resolution3 denying the parties’ respective motions for reconsideration.
Factual Antecedents
In 1984, Alfonso de Leon (Alfonso) mortgaged in favor of Union Bank of the Philippines (Union Bank)
real property situated at Esteban Abada, Loyola Heights, Quezon City, which was registered in his and
his wife Rosario’s name and covered by Transfer Certificate of Title (TCT) No. 286130 (TCT 286130).
The property was foreclosed and sold at auction to Union Bank. After the redemption period expired,
the bank consolidated its ownership, whereupon TCT 362405 was issued in its name in 1987.
In 1988, Rosario filed against Alfonso and Union Bank, Civil Case No. Q-52702 for annulment of the
1984 mortgage, claiming that Alfonso mortgaged the property without her consent, and for
reconveyance.
In a September 6, 1989 Letter-Proposal,4 Bignay Ex-Im Philippines, Inc. (Bignay), through its President,
Milagros Ong Siy (Siy), offered to purchase the property. The written offer stated, among others, that –
The property is the subject of a pending litigation between Rosario de Leon and Union Bank for
nullification of the foreclosure before the Regional Trial Court of Quezon City. Should this offer be
approved by your management, we suggest that instead of the usual conditional sale, a deed of
absolute sale be executed to document the transaction in our favor subject to a mortgage in favor of
the bank to secure the balance.
This documentation is intended to isolate the property from any lis pendens that the former owner may
annotate on the title and to allow immediate reconstitution thereof since the original Torrens title was
burned in 1988 when the City Hall housing the Register of Deeds of Quezon City was gutted by fire.5
On December 20, 1989, a Deed of Absolute Sale6 was executed by and between Union Bank and
Bignay whereby the property was conveyed to Bignay for ₱4 million. The deed of sale was executed
by the parties through Bignay’s Siy and Union Bank’s Senior Vice President Anthony Robles (Robles).
One of the terms of the deed of sale is quoted below:
Section 1. The VENDEE hereby recognizes that the Parcel/s of Land with improvements thereon is
acquired through foreclosure proceedings and agrees to buy the Parcel/s of Land with improvement[s]
thereon in its present state and condition. The VENDOR therefore does not make any x x x
representations or warranty with respect to the Parcel/s of Land but that it will defend its title to the
Parcel/s of Land with improvement[s] thereon against the claims of any person whomsoever.7
On December 27, 1989, Bignay mortgaged the property to Union Bank, presumably to secure a loan
obtained from the latter.
On December 12, 1991, a Decision8 was rendered in Civil Case No. Q-52702, decreeing as follows:
WHEREFORE, premises above considered, finding that defendant Alfonso de Leon, Jr. had alone
executed the mortgage (Exh. 7) on their conjugal property with T.C.T. No. 286130 (Exh. L) upon a
forged signature (Exh. M-1) of his wife plaintiff Rosario T. de Leon, the Court hereby declares NULL
and VOID the following documents:

1. Said Mortgage Contract dated April 11, 1984 (Exh. 7) executed by and between defendants Alfonso
de Leon, Jr. alone and Union Bank of the Philippines;
2. Sheriff’s Sale dated June 12, 1985 (Exh. F);
3. T.C.T. No. 362405 (Exh. O) issued in the name of defendant Union Bank on June 10, 1987 which
replaced the said T.C.T. No. 286130;
4. Sale and mortgage by and between Union Bank and Bignay Ex-Im Phil. Inc. on December 27, 1989
over the subject conjugal property as annotated on T.C.T. No. 362405 (Exh. O).
Further, the Court hereby declares plaintiff Rosario T. de Leon the owner still of the undivided ONE
HALF (1/2) of the subject property covered by T.C.T. No. 286130.
The order dated February 2, 1988 granting a writ of possession in favor of Union Bank is hereby SET
ASIDE and QUASHED.
Defendant Alfonso de Leon, Jr. is hereby ordered to pay his co-defendant Union Bank of the Philippines
the sum of his ₱1M loan with interest from the time the same was extended to him which is hereby
charged against his other undivided share of ONE HALF (1/2) of the subject property with T.C.T. No.
286130.
No damages is [sic], however, adjudicated against defendant Union Bank of the Philippines there being
no substantial evidence that it is in complicity with defendant Alfonso de Leon, Jr. in the presentation
of the forged signature of his wife plaintiff on the Special Power of Attorney (Exh. M).
Without cost, except for the professional fee, if any, for the examination of the forged signature (Exh.
M-1) which shall be paid by defendant Alfonso de Leon, Jr.
SO ORDERED.9
Union Bank appealed the above Decision with the CA. It likewise sought a new trial of the case, which
the trial court denied. The CA appeal was dismissed for failure to file appellant’s brief; the ensuing
Petition for Review with this Court was similarly denied for late filing and payment of legal fees.10
Union Bank next filed with the CA an action to annul the trial court’s December 12, 1991 judgment.11 In
a September 9, 1993 Resolution, however, the CA again dismissed the Petition12 for failure to comply
with Supreme Court Circular No. 28-91.13 The bank’s Motion for Reconsideration was once more
denied.14
This time, Bignay filed a Petition for annulment of the December 12, 1991 Decision, docketed as CA-
G.R. SP No. 33901. In a July 15, 1994 Decision,15 the CA dismissed the Petition. Bignay’s resultant
Petition for Certiorari with this Court suffered the same fate.16
Meanwhile, as a result of the December 12, 1991 Decision in Civil Case No. Q-52702, Bignay was
evicted from the property; by then, it had demolished the existing structure on the lot and begun
construction of a new building.
On March 21, 1994, Bignay filed Civil Case No. 94-1129 for breach of warranty against eviction under
Articles 1547 and 1548 of the Civil Code, with damages, against Union Bank and Robles. The case
was assigned to Branch 141 of the Makati Regional Trial Court (RTC). Bignay alleged in its
Complaint17 that at the time of the sale, the title to the property was lost due to fire at the Register of
Deeds; that at the time of the sale, Union Bank represented that there were no liens or encumbrances
over the property other than those annotated on the title, and that a reconstitution of the lost title would
be made; that on these assurances, Bignay began and completed construction of a building on the
property; that it turned out that the property was the subject of a case by Rosario, and Bignay began to

receive copies of court orders and pleadings relative to the case; that it issued a demand to Union Bank
for the latter to make good on its warranties; that despite such demands, it appeared that Bignay was
in jeopardy of losing the property as a result of Union Bank’s lack of candor and bad faith in not
disclosing the pending case. Bignay prayed to be awarded the following:
1. ₱54,000,000.00 as actual damages;
2. ₱2,000,000.00 as exemplary damages;
3. ₱1,000,000.00 by way of attorney’s fees; and
4. Costs of suit.
In a March 10, 1995 Order18 of the trial court, Robles was dropped as party defendant upon agreement
of the parties and in view of Union Bank’s admission and confirmation that it had authorized all of
Robles’s acts relative to the sale.
Union Bank interposed a Motion to Dismiss19 grounded on lack of or failure to state a cause of action,
claiming that it made no warranties in favor of Bignay when it sold the property to the latter on December
20, 1989. The trial court deferred the resolution of the motion on finding that the ground relied upon did
not appear to be indubitable. Union Bank thus filed its Answer Ad Cautelam,20 where it alleged that
Bignay was not an innocent purchaser for value, knowing the condition of the property as evidenced
by Siy’s September 6, 1989 letter-proposal to purchase the same. It interposed a counterclaim as well,
grounded on two promissory notes signed by Siy in favor of the bank – 1) Promissory Note No. 90-
1446 dated December 20, 1990 for the amount of ₱1.5 million payable on demand with annual interest
of 33%, and 2) Promissory Note No. 91-0286 dated February 26, 1991 for the amount of ₱2 million
payable on demand with annual interest of 30% – which resulted in outstanding liabilities, inclusive of
interest and penalties, in the total amount of more than ₱10.4 million as of December 20, 1996.
During trial, Siy testified that she was a client of Union Bank, and that she was a regular buyer of some
of the bank’s acquired assets. She admitted that she maintained a close business relationship with
Robles, who would identify cheap bank properties for her and then facilitate or assist her in the
acquisition thereof. To do this, she claimed that she signed papers in blank and left them with Robles,
who would then use the same in preparing the necessary documents, such as the supposed September
6, 1989 letter-proposal, which Siy claimed she knew nothing about.21
Siy further testified that for his services, Robles was given a 3% commission each time she obtained a
loan from Union Bank. Moreover, she claimed that she gifted Robles with shares of stock in one of her
corporations, International General Auto Parts Corporation (IGAPC), and made him an incorporator
and director thereof.22
Finally, Siy testified that the existing structure on the subject property was demolished and a new one
was constructed at a cost of ₱20 million. From the new structure, Bignay earned monthly rental income
of ₱60,000.00, until the lessee was evicted on account of the execution of the Decision in Civil Case
No. Q-52702.23
On the other hand, Robles – testifying for Union Bank – denied that he prepared the September 6, 1989
letter-proposal. He added that Siy was apprised of the then pending Civil Case No. Q-52702. He also
admitted that Siy gave him shares of stock in IGAPC and made him an incorporator and director
thereof.24
Evidence on Union Bank’s counterclaim was likewise received by the trial court.
On March 21, 2000, the trial court rendered its Decision25 in Civil Case No. 94-1129, which decreed
thus:

WHEREFORE, decision is hereby rendered ordering the defendant to pay plaintiff the sum of Four
Million (₱4,000,000.00) Pesos representing the cost of the land and Twenty Million (₱20,000,000.00)
Pesos representing the value of the building constructed on the subject land, and the costs of this suit.
The counterclaim interposed by defendant is hereby dismissed without prejudice.
SO ORDERED.26
The trial court found that Union Bank’s Senior Vice President, Robles, maintained a secret alliance and
relationship of trust with Bignay’s Siy, whereby Robles would look out for desirable properties from the
bank’s asset inventory, recommend them to Siy, then facilitate the negotiation, sale and documentation
for her. In return, he would receive a 3% commission from Siy, or some other benefit; in fact, Siy made
him an incorporator and director of one of her corporations, IGAPC. The trial court believed Siy’s claim
that she signed papers in blank and left them with Robles in order to facilitate the negotiation and
purchase of bank properties which they both considered to be cheap and viable. In this connection, the
trial court concluded that it was Robles – and not Siy – who prepared the September 6, 1989 letter-
proposal on a piece of paper signed in blank by Siy, and that even though the pending Civil Case No.
Q-52702 was mentioned in the letter-proposal, Siy in fact had no knowledge thereof. This is proved by
the fact that she proceeded to construct a costly building on the property; if Siy knew of the pending
Civil Case No. Q-52702, it is highly doubtful that she would do so.
The trial court thus declared that Union Bank, through Robles, acted in bad faith in selling the subject
property to Bignay; for this reason, the stipulation in the December 20, 1989 deed of sale limiting Union
Bank’s liability in case of eviction cannot apply, because under Article 1553 of the Civil Code, "[a]ny
stipulation exempting the vendor from the obligation to answer for eviction shall be void, if he acted in
bad faith." Moreover, it held that in its handling of Civil Case No. Q-52702, the bank was guilty of gross
negligence amounting to bad faith, which thus contravened its undertaking in the deed of sale to "defend
its title to the Parcel/s of Land with improvement thereon against the claims of any person whatsoever."
In resolving the controversy, the trial court applied Article 1555 of the Civil Code, which provides thus:
Art. 1555. When the warranty has been agreed upon or nothing has been stipulated on this point, in
case eviction occurs, the vendee shall have the right to demand of the vendor:
(1) The return of the value which the thing sold had at the time of the eviction, be it greater or less than
the price of the sale;
(2) The income or fruits, if he has been ordered to deliver them to the party who won the suit against
him;
(3) The costs of the suit which caused the eviction, and, in a proper case, those of the suit brought
against the vendor for the warranty;
(4) The expenses of the contract, if the vendee has paid them;
(5) The damages and interests, and ornamental expenses, if the sale was made in bad faith.
Thus, it held that Bignay was entitled to the return of the value of the property (₱4 million), as well as
the cost of the building erected thereon (₱20 million), since Union Bank acted in bad faith. At the same
time, the trial court held that the bank’s counterclaim was not at all connected with Bignay’s Complaint,
which makes it a permissive counterclaim for which the docket fees should accordingly be paid. Since
the bank did not pay the docket fees, the trial court held that it did not acquire jurisdiction over its
counterclaim; thus, it dismissed the same.
Union Bank took the trial court’s March 21, 2000 Decision to the CA on appeal. On August 25, 2005,
the CA issued the assailed Decision, decreeing as follows:
WHEREFORE, the instant Appeal is PARTLY GRANTED. Judgment is hereby rendered ordering
defendant-appellant to pay plaintiff-appellee the sum of ₱4,000,000.00 representing the cost of the land
and ₱20,000,000.00 representing the value of the building constructed on the subject land.
On the Counterclaim, judgment is rendered ordering plaintiff-appellee to pay defendant-appellant the
principal amount of ₱1,500,000.00 under Promissory Note No. 90-1446 dated December 18, 1990,
plus the stipulated interests and stipulated penalty charges from date of maturity of the loan or from
June 6, 1991 until its full payment and also to pay the principal amount of ₱2,000,000.00 under
Promissory Note No. 90-0286 dated February 25, 1991, plus the stipulated interests and stipulated
penalty charges from date of maturity of the loan or from August 26, 1991 until full payment thereof.
No pronouncement as to costs.
SO ORDERED.27
Applying Articles 1548 and 1549 of the Civil Code,28 the CA held that Union Bank is liable pursuant to
its commitment under the December 20, 1989 deed of sale to defend the title to the property against
the claims of third parties. It shared the trial court’s opinion that the bank was guilty of negligence in the
handling and prosecution of Civil Case No. Q-52702, for which reason it should be made answerable,
since it lost its title to the whole property when it could have protected its right to Alfonso’s share therein
considering that the Decision in Civil Case No. Q-52702 merely awarded Rosario’s conjugal share. In
other words, the CA intimated that if Union Bank exercised prudence, it could have maintained at least
its rights and title to Alfonso’s one-half share in the property, and the trial court’s Decision completely
nullifying the Alfonso-Union Bank mortgage, the bank’s new title TCT 362405, and the Union Bank-
Bignay sale could have been avoided.
The CA added that the declaration contained in the September 6, 1989 letter-proposal to the effect that
Siy knew about the pending Civil Case No. Q-52702 cannot bind Bignay because the proposal was
supposedly prepared and signed by Siy in her personal capacity, and not for and in behalf of Bignay. It
further affirmed the trial court’s view that it was Robles – and not Siy – who prepared the said letter-
proposal on a piece of paper which she signed in blank and left with Robles to facilitate her transactions
with Union Bank.
Regarding the bank’s counterclaim, the CA held that Union Bank timely paid the docket fees therefor –
amounting to ₱32,940.00 – at the time it filed its Answer Ad Cautelam on November 4, 1994, as shown
by Official Receipt Nos. 4272579 and 4271965 to such effect and the rubberstamped mark on the face
of the answer itself. It added that since the trial court received the bank’s evidence on the counterclaim
during trial, it should have made a ruling thereon.
Bignay filed its Motion for Partial Reconsideration29 questioning the appellate court’s ruling on Union
Bank’s counterclaim. On the other hand, Union Bank in its Motion for Reconsideration30 took exception
to the CA’s application of Articles 1548 and 1549 of the Civil Code, as well as its finding that the bank
was negligent in the handling and prosecution of Civil Case No. Q-52702.
On February 10, 2006, the CA issued the second assailed Resolution denying the parties’ respective
motions for reconsideration.
Thus, the present Petitions were filed. G.R. No. 171590 was initiated by Bignay, while G.R. No. 171598
was filed by Union Bank. In a June 21, 2006 Resolution31 of the Court, both Petitions were ordered
consolidated.
Issues
The following issues are raised:
By Bignay as petitioner in G.R. No. 171590

1. IN A PERMISSIVE COUNTERCLAIM, WHEN SHOULD THE DOCKET FEES BE PAID TO ENABLE
THE TRIAL COURT TO ACQUIRE JURISDICTION OVER THE CASE?
2. IN THE EVENT OF NON-PAYMENT OF DOCKET FEES FOR PERMISSIVE COUNTERCLAIMS,
CAN THE COURT DISMISS THE SAID COUNTERCLAIMS?32
By Union Bank as petitioner in G.R. No. 171598
The portion of the [D]ecision of the Honorable Court of Appeals dated August 25, 2005 ordering
petitioner to pay private respondent the total amount of ₱24.0 million should be set aside for it has
altogether ignored:
I. THE TESTIMONY OF ROBLES;
II. THAT THE LETTER-PROPOSAL DATED SEPTEMBER 6, 1989 WAS SIGNED BY SIY IN BEHALF
OF (BIGNAY);
III. THE FACT THAT THE APPLICATION OF ARTS. 1548 AND 1549 OF THE CIVIL CODE WAS
PATENTLY ERRONEOUS.33
The Parties’ Respective Arguments
G.R. No. 171590. As petitioner in G.R. No. 171590, Bignay registers its doubts as to whether Union
Bank indeed paid the docket fees on its permissive counterclaim, arguing that if the bank indeed paid
the docket fees, the trial court would have so held in its March 21, 2000 Decision; instead, it specifically
declared therein that the docket fees on the counterclaim remained unpaid at that point in time. In other
words, Bignay appears to insinuate that there was an irregularity surrounding the bank’s alleged
payment of the docket fees on its counterclaim. It adds that since Union Bank is guilty of negligence
and bad faith in transacting with Bignay, it should be penalized through the proper dismissal of its
counterclaim; the Court should instead require Union Bank to prosecute its claims in a separate action.
In the alternative, Bignay claims that the amount of ₱1,039,457.33 should be deducted from its
adjudged liabilities to Union Bank, as it has been proved during trial that it paid such amount to the
bank, as shown by receipts duly marked and offered in evidence as Exhibits "H" to "H-6."
Bignay thus prays in its Petition that the assailed dispositions of the CA be modified to the extent that
Union Bank’s counterclaim should be denied and dismissed.
In its Comment34 praying that the CA’s ruling on its counterclaim be affirmed, Union Bank insists that it
timely paid the docket fees on its counterclaim, arguing that the official receipts proving payment as
well as the rubber stamp-mark on the face of its answer may not be overturned by Bignay’s baseless
suspicions, claims and insinuations not supported by controverting evidence or proof. It adds that,
contrary to Bignay’s assertion, a separate case for the prosecution of its counterclaim is unnecessary
since the same may sufficiently be tried in Civil Case No. 94-1129 precisely as a permissive
counterclaim; and by allowing its permissive counterclaim, multiplicity of suits is avoided.
In a Reply35 to the bank’s Comment, Bignay among others vehemently insists that at the time of the
rendition of the trial court’s judgment in Civil Case No. 94-1129, Union Bank had not yet paid the docket
fees on its counterclaim; the bank’s claim that it paid the docket fees when it filed its Answer Ad
Cautelam is absolutely questionable. If indeed the bank paid the docket fees, then it should have
questioned the trial court’s dismissal of its counterclaim in a motion for reconsideration and attached
the receipts showing its payment of the fees; yet it did not. Besides, if indeed the fact of payment of
docket fees was stamped on the face of the bank’s Answer Ad Cautelam when it filed the same, the
trial court should have noticed it, or at least its attention would have been directed to the fact; but it was
not. And if indeed the docket fees were paid as early as 1994, it is incredible how Union Bank never
informed the trial court of its payment, even after the adverse Decision in the case was rendered. Bignay
adds that in a September 12, 2005 letter36 to the Clerk of Court of the Makati City RTC, its counsel
inquired into the circumstances surrounding the sudden appearance of official receipts – copies of
which were attached to the letter – indicating that Union Bank paid the docket fees on its permissive
counterclaim, when it appears that no such payment was in fact made; up to now, however, it has not
received any reply from the said office.
G.R. No. 171598. In its Petition in G.R. No. 171598, Union Bank insists that the September 6, 1989
letter-proposal effectively limited its liability for eviction since from said letter it is seen that Bignay knew
beforehand of the pendency of Civil Case No. Q-52702. It insists that under the December 20, 1989
deed of sale, it did not make any representations or warranty with respect to the property; thus, the
application of Articles 1548 and 1549 of the Civil Code by the CA was erroneous. Thus, the bank seeks
a partial reversal of the CA’s disposition – particularly the portion of the Decision which holds it liable
to pay Bignay the respective sums of ₱4 million for the cost of the land, and ₱20 million for the cost of
the building.
In its Comment,37 Bignay claims that in urging the Court to consider the testimony of Robles and Siy’s
declaration in the September 6, 1989 letter-proposal, Union Bank is raising questions of fact in its
Petition which this Court may not resolve. It likewise reiterates its argument relating to the bank’s
counterclaim; only this time, Bignay claims that the official receipts evidencing the bank’s supposed
payment of the docket fees were falsified.
Our Ruling
The Court finds for Bignay.
Indeed, this Court is convinced – from an examination of the evidence and by the concurring opinions
of the courts below – that Bignay purchased the property without knowledge of the pending Civil Case
No. Q-52702. Union Bank is therefore answerable for its express undertaking under the December 20,
1989 deed of sale to "defend its title to the Parcel/s of Land with improvement thereon against the
claims of any person whatsoever." By this warranty, Union Bank represented to Bignay that it had title
to the property, and by assuming the obligation to defend such title, it promised to do so at least in good
faith and with sufficient prudence, if not to the best of its abilities.
The record reveals, however, that Union Bank was grossly negligent in the handling and prosecution
of Civil Case No. Q-52702. Its appeal of the December 12, 1991 Decision in said case was dismissed
by the CA for failure to file the required appellant’s brief. Next, the ensuing Petition for Review on
Certiorari filed with this Court was likewise denied due to late filing and payment of legal fees. Finally,
the bank sought the annulment of the December 12, 1991 judgment, yet again, the CA dismissed the
petition for its failure to comply with Supreme Court Circular No. 28-91. As a result, the December 12,
1991 Decision became final and executory, and Bignay was evicted from the property. Such negligence
in the handling of the case is far from coincidental; it is decidedly glaring, and amounts to bad faith.
"[N]egligence may be occasionally so gross as to amount to malice [or bad faith]."38 Indeed, in culpa
contractual or breach of contract, gross negligence of a party amounting to bad faith is a ground for the
recovery of damages by the injured party.39
Eviction shall take place whenever by a final judgment based on a right prior to the sale or an act
imputable to the vendor, the vendee is deprived of the whole or of a part of the thing purchased.40 In
case eviction occurs, the vendee shall have the right to demand of the vendor, among others, the return
of the value which the thing sold had at the time of the eviction, be it greater or less than the price of
the sale; the expenses of the contract, if the vendee has paid them; and the damages and interests,
and ornamental expenses, if the sale was made in bad faith.41There appears to be no dispute as to the
value of the building constructed on the property by Bignay; the only issue raised by Union Bank in
these Petitions is the propriety of the award of damages, and the amount thereof is not in issue. The
award in favor of Bignay of ₱4 million, or the consideration or cost of the property, and ₱20 million –
the value of the building it erected thereon – is no longer in issue and is thus in order.

However, the Court disagrees with the CA on the issue of Union Bank’s counterclaim.1âwphi1 Bignay
correctly observes that if the bank indeed paid the docket fees therefor, the trial court would have so
held in its March 21, 2000 Decision; yet in its judgment, the trial court specifically declared that the
docket fees remained unpaid at the time of its writing, thus –
Anent the counterclaims interposed by defendant for the collection of certain sum of money adverted
earlier hereof [sic], this Court could not exercise jurisdiction over the same as defendant did not pay
the docket fees therefor. Although the counterclaims were denominated as compulsory in the answer,
the matters therein alleged were not connected with the plaintiff’s complaint. The counterclaims could
stand independently from the plaintiff’s complaint hence they are a [sic] permissive counterclaims.
During the pre-trial, this Court had already ruled that the counterclaims were permissive yet the records
showed that defendant had not paid the docket fees. This Court therefore has not acquired jurisdiction
over said case.42
And if it is true that the bank paid the docket fees on its counterclaim as early as in 1994, it would have
vigorously insisted on such fact after being apprised of the trial court’s March 21, 2000 Decision. It is
indeed surprising that the supposed payment was never raised by the bank in a timely motion for
reconsideration, considering that the trial court dismissed its counterclaim; if there is any opportune
time to direct the court’s attention to such payment and cause the counterclaim to be reinstated, it was
at that point and no other. All it had to do was prove payment by presenting to the court the official
receipts or any other acceptable documentary evidence, and thus secure the proper reversal of the
ruling on its counterclaim. Still, nothing was heard from the bank on the issue, until it filed its brief with
the CA on appeal. Indeed, "whatever is repugnant to the standards of human knowledge, observation
and experience becomes incredible and must lie outside judicial cognizance."43
More than the above, this Court finds true and credible the trial court's express declaration that no
docket fees have been paid on the bank's counterclaim; the trial court's pronouncement enjoys the
presumption of regularity. Indeed, the sudden appearance of the receipts supposedly evidencing
payment of the "docket fees is highly questionable and irregular, and deserves to be thoroughly
investigated; the actuations of the bank relative thereto go against the common experience of mankind,
if they are not entirely anomalous.
WHEREFORE, the Court resolves as follows:
1. The Petition in G.R. No. 171590 is GRANTED. The August 25, 2005 Decision and February 10, 2006
Resolution of the Court of Appeals in CA-G.R. CV No. 67788 are MODIFIED, in that Union Bank of the
Philippines's counterclaim is ordered DISMISSED.
2. The Petition in G.R. No. 171598 is DENIED.
SO ORDERED.
Development Bank of the Philippines v. Guariña Agricultural and Realty Development
Corporation
see under the topic on Delay
Eastern Shipping Lines, Inc. vs BPI/MS Insurance Corp., and Mitsui Sumitomo Insurance
Co., Ltd.
G.R. No. 193986 January 15, 2014
EASTERN SHIPPING LINES INC., Petitioner,
vs.
BPI/MS INSURANCE CORP. and MITSUI SUM TOMO INSURANCE CO. LTD., Respondents.
DECISION
VILLARAMA, JR., J.:
Before this Court is a petition1 for review on certiorari under Rule 45 of the 1997 Rules of Civil
Procedure, as amended, seeking the reversal of the Decision2 of the Court of Appeals (CA) in CA-G.R.
CV No. 88361, which affirmed with modification the Decision3 of the Regional Trial Court (RTC), of
Makati City, Branch 138 in Civil Case No. 04-1005.
The facts follow:
On August 29, 2003, Sumitomo Corporation (Sumitomo) shipped through MV Eastern Challenger V-9-
S, a vessel owned by petitioner Eastern Shipping Lines, Inc. (petitioner), 31 various steel sheets in coil
weighing 271,828 kilograms from Yokohama, Japan for delivery in favor of the consignee Calamba
Steel Center Inc. (Calamba Steel).4The cargo had a declared value of US$125,417.26 and was insured
against all risk by Sumitomo with respondent Mitsui Sumitomo Insurance Co., Ltd. (Mitsui). On or about
September 6 2003, the shipment arrived at the port of Manila. Upon unloading from the vessel, nine
coils were observed to be in bad condition as evidenced by the Turn Over Survey of Bad Order Cargo
No. 67327. The cargo was then turned over to Asian Terminals, Inc. (ATI) for stevedoring, storage and
safekeeping pending Calamba Steel’s withdrawal of the goods. When ATI delivered the cargo to
Calamba Steel, the latter rejected its damaged portion, valued at US$7,751.15, for being unfit for its
intended purpose.5
Subsequently, on September 13, 2003, a second shipment of 28 steel sheets in coil, weighing 215,817
kilograms, was made by Sumitomo through petitioner’s MV Eastern Challenger V-10-S for transport
and delivery again to Calamba Steel.6 Insured by Sumitomo against all risk with Mitsui,7 the shipment
had a declared value of US$121,362.59. This second shipment arrived at the port of Manila on or about
September 23, 2003. However, upon unloading of the cargo from the said vessel, 11 coils were found
damaged as evidenced by the Turn Over Survey of Bad Order Cargo No. 67393. The possession of
the said cargo was then transferred to ATI for stevedoring, storage and safekeeping pending withdrawal
thereof by Calamba Steel. When ATI delivered the goods, Calamba Steel rejected the damaged portion
thereof, valued at US$7,677.12, the same being unfit for its intended purpose.8
Lastly, on September 29, 2003, Sumitomo again shipped 117 various steel sheets in coil weighing
930,718 kilograms through petitioner’s vessel, MV Eastern Venus V-17-S, again in favor of Calamba
Steel.9 This third shipment had a declared value of US$476,416.90 and was also insured by Sumitomo
with Mitsui. The same arrived at the port of Manila on or about October 11, 2003. Upon its discharge,
six coils were observed to be in bad condition. Thereafter, the possession of the cargo was turned over
to ATI for stevedoring, storage and safekeeping pending withdrawal thereof by Calamba Steel. The
damaged portion of the goods being unfit for its intended purpose, Calamba Steel rejected the damaged
portion, valued at US$14,782.05, upon ATI’s delivery of the third shipment.10
Calamba Steel filed an insurance claim with Mitsui through the latter’s settling agent, respondent
BPI/MS Insurance Corporation (BPI/MS), and the former was paid the sums of US$7,677.12,
US$14,782.05 and US$7,751.15 for the damage suffered by all three shipments or for the total amount
of US$30,210.32. Correlatively, on August 31, 2004, as insurer and subrogee of Calamba Steel, Mitsui
and BPI/MS filed a Complaint for Damages against petitioner and ATI.11
As synthesized by the RTC in its decision, during the pre-trial conference of the case, the following
facts were established, viz:
1. The fact that there were shipments made on or about August 29, 2003, September 13, 2003 and
September 29, 2003 by Sumitomo to Calamba Steel through petitioner’s vessels;
2. The declared value of the said shipments and the fact that the shipments were insured by
respondents;
3. The shipments arrived at the port of Manila on or about September 6, 2003, September 23, 2003
and October 11, 2003 respectively;

4. Respondents paid Calamba Steel’s total claim in the amount of US$30,210.32.12
Trial on the merits ensued.
On September 17, 2006, the RTC rendered its Decision,13 the dispositive portion of which provides:
WHEREFORE, judgment is hereby rendered in favor of the plaintiff and against defendants Eastern
Shipping Lines, Inc. and Asian Terminals, Inc., jointly and severally, ordering the latter to pay plaintiffs
the following:
1. Actual damages amounting to US$30,210.32 plus 6% legal interest thereon commencing from the
filing of this complaint, until the same is fully paid;
2. Attorney’s fees in a sum equivalent to 25% of the amount claimed;
3. Costs of suit. The defendants’ counterclaims and ATI’s crossclaim are DISMISSED for lack of merit.
SO ORDERED.14
Aggrieved, petitioner and ATI appealed to the CA. On July 9, 2010, the CA in its assailed Decision
affirmed with modification the RTC’s findings and ruling, holding, among others, that both petitioner and
ATI were very negligent in the handling of the subject cargoes. Pointing to the affidavit of Mario Manuel,
Cargo Surveyor, the CA found that "during the unloading operations, the steel coils were lifted from the
vessel but were not carefully laid on the ground. Some were even ‘dropped’ while still several inches
from the ground while other coils bumped or hit one another at the pier while being arranged by the
stevedores and forklift operators of ATI and [petitioner]." The CA added that such finding coincides with
the factual findings of the RTC that both petitioner and ATI were both negligent in handling the goods.
However, for failure of the RTC to state the justification for the award of attorney’s fees in the body of
its decision, the CA accordingly deleted the same.15 Petitioner filed its Motion for
Reconsideration16 which the CA, however, denied in its Resolution17 dated October 6, 2010.
Both petitioner and ATI filed their respective separate petitions for review on certiorari before this
Court.1âwphi1 However, ATI’s petition, docketed as G.R. No. 192905, was denied by this Court in our
Resolution18 dated October 6, 2010 for failure of ATI to show any reversible error in the assailed CA
decision and for failure of ATI to submit proper verification. Said resolution had become final and
executory on March 22, 2011.19 Nevertheless, this Court in its Resolution20 dated September 3, 2012,
gave due course to this petition and directed the parties to file their respective memoranda.
In its Memorandum,21 petitioner essentially avers that the CA erred in affirming the decision of the RTC
because the survey reports submitted by respondents themselves as their own evidence and the pieces
of evidence submitted by petitioner clearly show that the cause of the damage was the rough handling
of the goods by ATI during the discharging operations. Petitioner attests that it had no participation
whatsoever in the discharging operations and that petitioner did not have a choice in selecting the
stevedore since ATI is the only arrastre operator mandated to conduct discharging operations in the
South Harbor. Thus, petitioner prays that it be absolved from any liability relative to the damage incurred
by the goods.
On the other hand, respondents counter, among others, that as found by both the RTC and the CA, the
goods suffered damage while still in the possession of petitioner as evidenced by various Turn Over
Surveys of Bad Order Cargoes which were unqualifiedly executed by petitioner’s own surveyor, Rodrigo
Victoria, together with the representative of ATI. Respondents assert that petitioner would not have
executed such documents if the goods, as it claims, did not suffer any damage prior to their turn-over
to ATI. Lastly, respondents aver that petitioner, being a common carrier is required by law to observe
extraordinary diligence in the vigilance over the goods it carries.22
Simply put, the core issue in this case is whether the CA committed any reversible error in finding that
petitioner is solidarily liable with ATI on account of the damage incurred by the goods.
The Court resolves the issue in the negative.
Well entrenched in this jurisdiction is the rule that factual questions may not be raised before this Court
in a petition for review on certiorari as this Court is not a trier of facts. This is clearly stated in Section
1, Rule 45 of the 1997 Rules of Civil Procedure, as amended, which provides:
SECTION 1. Filing of petition with Supreme Court. — A party desiring to appeal by certiorari from a
judgment or final order or resolution of the Court of Appeals, the Sandiganbayan, the Regional Trial
Court or other courts whenever authorized by law, may file with the Supreme Court a verified petition
for review on certiorari. The petition shall raise only questions of law which must be distinctly set forth.
Thus, it is settled that in petitions for review on certiorari, only questions of law may be put in issue.
Questions of fact cannot be entertained.23
A question of law exists when the doubt or controversy concerns the correct application of law or
jurisprudence to a certain set of facts, or when the issue does not call for an examination of the probative
value of the evidence presented, the truth or falsehood of facts being admitted. A question of fact exists
when the doubt or difference arises as to the truth or falsehood of facts or when the query invites
calibration of the whole evidence considering mainly the credibility of the witnesses, the existence and
relevancy of specific surrounding circumstances as well as their relation to each other and to the whole,
and the probability of the situation.24
In this petition, the resolution of the question as to who between petitioner and ATI should be liable for
the damage to the goods is indubitably factual, and would clearly impose upon this Court the task of
reviewing, examining and evaluating or weighing all over again the probative value of the evidence
presented25 – something which is not, as a rule, within the functions of this Court and within the office
of a petition for review on certiorari.
While it is true that the aforementioned rule admits of certain exceptions,26 this Court finds that none
are applicable in this case. This Court finds no cogent reason to disturb the factual findings of the RTC
which were duly affirmed by the CA. Unanimous with the CA, this Court gives credence and accords
respect to the factual findings of the RTC – a special commercial court27 which has expertise and
specialized knowledge on the subject matter28 of maritime and admiralty – highlighting the solidary
liability of both petitioner and ATI. The RTC judiciously found:
x x x The Turn Over Survey of Bad Order Cargoes (TOSBOC, for brevity) No. 67393 and Request for
Bad Order Survey No. 57692 show that prior to the turn over of the first shipment to the custody of ATI,
eleven (11) of the twenty-eight (28) coils were already found in bad order condition. Eight (8) of the said
eleven coils were already "partly dented/crumpled " and the remaining three (3) were found "partly
dented, scratches on inner hole, crumple (sic)". On the other hand, the TOSBOC No. 67457 and
Request for Bad Order Survey No. 57777 also show that prior to the turn over of the second shipment
to the custody of ATI, a total of six (6) coils thereof were already "partly dented on one side,
crumpled/cover detach (sic)". These documents were issued by ATI. The said TOSBOC’s were jointly
executed by ATI, vessel’s representative and surveyor while the Requests for Bad Order Survey were
jointly executed by ATI, consignee’s representative and the Shed Supervisor. The aforementioned
documents were corroborated by the Damage Report dated 23 September 2003 and Turn Over Survey
No. 15765 for the first shipment, Damage Report dated 13 October 2003 and Turn Over Survey No.
15772 for the second shipment and, two Damage Reports dated 6 September 2003 and Turn Over
Survey No. 15753 for the third shipment.
It was shown to this Court that a Request for Bad Order Survey is a document which is requested by
an interested party that incorporates therein the details of the damage, if any, suffered by a shipped
commodity. Also, a TOSBOC, usually issued by the arrastre contractor (ATI in this case), is a form of
certification that states therein the bad order condition of a particular cargo, as found prior to its turn
over to the custody or possession of the said arrastre contractor.
The said Damage Reports, Turn Over Survey Reports and Requests for Bad Order Survey led the
Court to conclude that before the subject shipments were turned over to ATI, the said cargo were
already in bad order condition due to damage sustained during the sea voyage. Nevertheless, this
Court cannot turn a blind eye to the fact that there was also negligence on the part of the employees of
ATI and [Eastern Shipping Lines, Inc.] in the discharging of the cargo as observed by plaintiff’s witness,
Mario Manuel, and [Eastern Shipping Lines, Inc.’s] witness, Rodrigo Victoria.
In ascertaining the cause of the damage to the subject shipments, Mario Manuel stated that the "coils
were roughly handled during their discharging from the vessel to the pier of (sic) ASIAN TERMINALS,
INC. and even during the loading operations of these coils from the pier to the trucks that will transport
the coils to the consignee’s warehouse. During the aforesaid operations, the employees and forklift
operators of EASTERN SHIPPING LINES and ASIAN TERMINALS, INC. were very negligent in the
handling of the subject cargoes. Specifically, "during unloading, the steel coils were lifted from the
vessel and not carefully laid on the ground, sometimes were even ‘dropped’ while still several inches
from the ground. The tine (forklift blade) or the portion that carries the coils used for the forklift is
improper because it is pointed and sharp and the centering of the tine to the coils were negligently done
such that the pointed and sharp tine touched and caused scratches, tears and dents to the coils. Some
of the coils were also dragged by the forklift instead of being carefully lifted from one place to another.
Some coils bump/hit one another at the pier while being arranged by the stevedores/forklift operators
of ASIAN TERMINALS, INC. and EASTERN SHIPPING LINES.29 (Emphasis supplied.)
Verily, it is settled in maritime law jurisprudence that cargoes while being unloaded generally remain
under the custody of the carrier.30 As hereinbefore found by the RTC and affirmed by the CA based on
the evidence presented, the goods were damaged even before they were turned over to ATI. Such
damage was even compounded by the negligent acts of petitioner and ATI which both mishandled the
goods during the discharging operations. Thus, it bears stressing unto petitioner that common carriers,
from the nature of their business and for reasons of public policy, are bound to observe extraordinary
diligence in the vigilance over the goods transported by them. Subject to certain exceptions enumerated
under Article 173431 of the Civil Code, common carriers are responsible for the loss, destruction, or
deterioration of the goods. The extraordinary responsibility of the common carrier lasts from the time
the goods are unconditionally placed in the possession of, and received by the carrier for transportation
until the same are delivered, actually or constructively, by the carrier to the consignee, or to the person
who has a right to receive them.32 Owing to this high degree of diligence required of them, common
carriers, as a general rule, are presumed to have been at fault or negligent if the goods they transported
deteriorated or got lost or destroyed. That is, unless they prove that they exercised extraordinary
diligence in transporting the goods. In order to avoid responsibility for any loss or damage, therefore,
they have the burden of proving that they observed such high level of diligence.33 In this case, petitioner
failed to hurdle such burden.
In sum, petitioner failed to show any reversible error on the part of the CA in affirming the ruling of the
RTC as to warrant the modification, much less the reversal of its assailed decision.
WHEREFORE, the petition is DENIED. The Decision dated July 9, 2010 of the Court of Appeals in CA-
G.R. CV No. 88361 is hereby AFFIRMED.
With costs against the petitioner.
SO ORDERED.
Solidum v. People of the Philippines
G.R. No. 192123 March 10, 2014
DR. FERNANDO P. SOLIDUM, Petitioner,
vs.
PEOPLE OF THE PHILIPPINES, Respondent.
DECISION
BERSAMIN, J.:
This appeal is taken by a physician-anesthesiologist who has been pronounced guilty of reckless
imprudence resulting in serious physical injuries by the Regional Trial Court (RTC) and the Court of
Appeals (CA). He had been part of the team of anesthesiologists during the surgical pull-through
operation conducted on a three-year old patient born with an imperforate anus.1
The antecedents are as follows:
Gerald Albert Gercayo (Gerald) was born on June 2, 19922 with an imperforate anus. Two days after
his birth, Gerald underwent colostomy, a surgical procedure to bring one end of the large intestine out
through the abdominal wall,3 enabling him to excrete through a colostomy bag attached to the side of
his body.4
On May 17, 1995, Gerald, then three years old, was admitted at the Ospital ng Maynila for a pull-
through operation.5Dr. Leandro Resurreccion headed the surgical team, and was assisted by Dr.
Joselito Luceño, Dr. Donatella Valeña and Dr. Joseph Tibio. The anesthesiologists included Dr.
Marichu Abella, Dr. Arnel Razon and petitioner Dr. Fernando Solidum (Dr. Solidum).6 During the
operation, Gerald experienced bradycardia,7 and went into a coma.8His coma lasted for two
weeks,9 but he regained consciousness only after a month.10 He could no longer see, hear or move.11
Agitated by her son’s helpless and unexpected condition, Ma. Luz Gercayo (Luz) lodged a complaint
for reckless imprudence resulting in serious physical injuries with the City Prosecutor’s Office of Manila
against the attending physicians.12
Upon a finding of probable cause, the City Prosecutor’s Office filed an information solely against Dr.
Solidum,13alleging: –
That on or about May 17, 1995, in the City of Manila, Philippines, the said accused, being then an
anesthesiologist at the Ospital ng Maynila, Malate, this City, and as such was tasked to administer the
anesthesia on three-year old baby boy GERALD ALBERT GERCAYO, represented by his mother, MA.
LUZ GERCAYO, the former having been born with an imperforate anus [no anal opening] and was to
undergo an operation for anal opening [pull through operation], did then and there willfully, unlawfully
and feloniously fail and neglect to use the care and diligence as the best of his judgment would dictate
under said circumstance, by failing to monitor and regulate properly the levels of anesthesia
administered to said GERALD ALBERT GERCAYO and using 100% halothane and other anesthetic
medications, causing as a consequence of his said carelessness and negligence, said GERALD
ALBERT GERCAYO suffered a cardiac arrest and consequently a defect called hypoxic
encephalopathy meaning insufficient oxygen supply in the brain, thereby rendering said GERALD
ALBERT GERCAYO incapable of moving his body, seeing, speaking or hearing, to his damage and
prejudice.
Contrary to law.14
The case was initially filed in the Metropolitan Trial Court of Manila, but was transferred to the RTC
pursuant to Section 5 of Republic Act No. 8369 (The Family Courts Act of 1997),15 where it was
docketed as Criminal Case No. 01-190889.
Judgment of the RTC
On July 19, 2004, the RTC rendered its judgment finding Dr. Solidum guilty beyond reasonable doubt
of reckless imprudence resulting to serious physical injuries,16 decreeing:
WHEREFORE, premises considered, the Court finds accused DR. FERNANDO P. SOLIDUM GUILTY
beyond reasonable doubt as principal of the crime charged and is hereby sentenced to suffer the

indeterminate penalty of TWO (2) MONTHS and ONE (1) DAY of arresto mayor as minimum to ONE
(1) YEAR, ONE (1) MONTH and TEN (10) DAYS of prision correccional as maximum and to indemnify,
jointly and severally with the Ospital ng Maynila, Dr. Anita So and Dr. Marichu Abella, private
complainant Luz Gercayo, the amount of ₱500,000.00 as moral damages and ₱100,000.00 as
exemplary damages and to pay the costs.
Accordingly, the bond posted by the accused for his provisional liberty is hereby CANCELLED.
SO ORDERED.17
Upon motion of Dr. Anita So and Dr. Marichu Abella to reconsider their solidary liability,18 the RTC
excluded them from solidary liability as to the damages, modifying its decision as follows:
WHEREFORE, premises considered, the Court finds accused Dr. Fernando Solidum, guilty beyond
reasonable doubt as principal of the crime charged and is hereby sentenced to suffer the indeterminate
penalty of two (2) months and one (1) day of arresto mayor as minimum to one (1) year, one (1) month
and ten (10) days of prision correccional as maximum and to indemnify jointly and severally with Ospital
ng Maynila, private complainant Luz Gercayo the amount of ₱500,000.00 as moral damages and
₱100,000 as exemplary damages and to pay the costs.
Accordingly, the bond posted by the accused for his provisional liberty is hereby cancelled.19
Decision of the CA
On January 20, 2010, the CA affirmed the conviction of Dr. Solidum,20 pertinently stating and ruling:
The case appears to be a textbook example of res ipsa loquitur.
xxxx
x x x [P]rior to the operation, the child was evaluated and found fit to undergo a major operation. As
noted by the OSG, the accused himself testified that pre-operation tests were conducted to ensure that
the child could withstand the surgery. Except for his imperforate anus, the child was healthy. The tests
and other procedures failed to reveal that he was suffering from any known ailment or disability that
could turn into a significant risk. There was not a hint that the nature of the operation itself was a
causative factor in the events that finally led to hypoxia.
In short, the lower court has been left with no reasonable hypothesis except to attribute the accident to
a failure in the proper administration of anesthesia, the gravamen of the charge in this case. The High
Court elucidates in Ramos vs. Court of Appeals 321 SCRA 584 –
In cases where the res ipsa loquitur is applicable, the court is permitted to find a physician negligent
upon proper proof of injury to the patient, without the aid of expert testimony, where the court from its
fund of common knowledge can determine the proper standard of care.
Where common knowledge and experience teach that a resulting injury would not have occurred to the
patient if due care had been exercised, an inference of negligence may be drawn giving rise to an
application of the doctrine of res ipsa loquitur without medical evidence, which is ordinarily required to
show not only what occurred but how and why it occurred. When the doctrine is appropriate, all that
the patient must do is prove a nexus between the particular act or omission complained of and the
injury sustained while under the custody and management of the defendant without need to produce
expert medical testimony to establish the standard of care. Resort to res ipsa loquitur is allowed
because there is no other way, under usual and ordinary conditions, by which the patient can obtain
redress for injury suffered by him.
The lower court has found that such a nexus exists between the act complained of and the injury
sustained, and in line with the hornbook rules on evidence, we will afford the factual findings of a trial

court the respect they deserve in the absence of a showing of arbitrariness or disregard of material
facts that might affect the disposition of the case. People v. Paraiso 349 SCRA 335.
The res ipsa loquitur test has been known to be applied in criminal cases. Although it creates a
presumption of negligence, it need not offend due process, as long as the accused is afforded the
opportunity to go forward with his own evidence and prove that he has no criminal intent. It is in this
light not inconsistent with the constitutional presumption of innocence of an accused.
IN VIEW OF THE FOREGOING, the modified decision of the lower court is affirmed.
SO ORDERED.21
Dr. Solidum filed a motion for reconsideration, but the CA denied his motion on May 7, 2010.22
Hence, this appeal.
Issues
Dr. Solidum avers that:
I.
THE HONORABLE COURT OF APPEALS ERRED IN AFFIRMING THE DECISION OF THE LOWER
COURT IN UPHOLDING THE PETITIONER’S CONVICTION FOR THE CRIME CHARGED BASED
ON THE TRIAL COURT’S OPINION, AND NOT ON THE BASIS OF THE FACTS ESTABLISHED
DURING THE TRIAL. ALSO, THERE IS A CLEAR MISAPPREHENSION OF FACTS WHICH IF
CORRECTED, WILL RESULT TO THE ACQUITTAL OF THE PETITIONER. FURTHER, THE
HONORABLE COURT ERRED IN AFFIRMING THE SAID DECISION OF THE LOWER COURT, AS
THIS BREACHES THE CRIMINAL LAW PRINCIPLE THAT THE PROSECUTION MUST PROVE THE
ALLEGATIONS OF THE INFORMATION BEYOND REASONABLE DOUBT, AND NOT ON THE
BASIS OF ITS PRESUMPTIVE CONCLUSION.
II.
THE HONORABLE COURT OF APPEALS ERRED IN APPLYING THE PRINCIPLE OF RES IPSA
LOQUITOR (sic) WHEN THE DEFENSE WAS ABLE TO PROVE THAT THERE IS NO NEGLIGENCE
ON THE PART OF THE PETITIONER, AND NO OVERDOSING IN THE APPLICATION OF THE
ANESTHETIC AGENT BECAUSE THERE WAS NO 100% HALOTHANE ADMINISTERED TO THE
CHILD, BUT ONLY ONE (1%) PERCENT AND THE APPLICATION THEREOF, WAS REGULATED
BY AN ANESTHESIA MACHINE. THUS, THE APPLICATION OF THE PRINCIPLE OF RES IPSA
LOQUITOR (sic) CONTRADICTED THE ESTABLISHED FACTS AND THE LAW APPLICABLE IN THE
CASE.
III.
THE AWARD OF MORAL DAMAGES AND EXEMPLARY DAMAGES IS NOT JUSTIFIED THERE
BEING NO NEGLIGENCE ON THE PART OF THE PETITIONER. ASSUMING THAT THE CHILD IS
ENTITLED TO FINANCIAL CONSIDERATION, IT SHOULD BE ONLY AS A FINANCIAL
ASSISTANCE, BECAUSE THERE WAS NO NEGLIGENCE, AND NO OVERDOSING OF
ANESTHETIC AGENT AND AS SUCH, THE AWARD IS SO EXCESSIVE, AND NO FACTUAL AND
LEGAL BASIS.23
To simplify, the following are the issues for resolution, namely: (a) whether or not the doctrine of res
ipsa loquitur was applicable herein; and (b) whether or not Dr. Solidum was liable for criminal
negligence.
Ruling
The appeal is meritorious.
Applicability of the Doctrine of Res Ipsa Loquitur
Res ipsa loquitur is literally translated as "the thing or the transaction speaks for itself." The doctrine
res ipsa loquitur means that "where the thing which causes injury is shown to be under the management
of the defendant, and the accident is such as in the ordinary course of things does not happen if those
who have the management use proper care, it affords reasonable evidence, in the absence of an
explanation by the defendant, that the accident arose from want of care."24 It is simply "a recognition of
the postulate that, as a matter of common knowledge and experience, the very nature of certain types
of occurrences may justify an inference of negligence on the part of the person who controls the
instrumentality causing the injury in the absence of some explanation by the defendant who is charged
with negligence. It is grounded in the superior logic of ordinary human experience and on the basis of
such experience or common knowledge, negligence may be deduced from the mere occurrence of the
accident itself.
Hence, res ipsa loquitur is applied in conjunction with the doctrine of common knowledge."25
Jarcia, Jr. v. People26 has underscored that the doctrine is not a rule of substantive law, but merely a
mode of proof or a mere procedural convenience. The doctrine, when applicable to the facts and
circumstances of a given case, is not meant to and does not dispense with the requirement of proof of
culpable negligence against the party charged. It merely determines and regulates what shall be prima
facie evidence thereof, and helps the plaintiff in proving a breach of the duty. The doctrine can be
invoked when and only when, under the circumstances involved, direct evidence is absent and not
readily available.27
The applicability of the doctrine of res ipsa loquitur in medical negligence cases was significantly and
exhaustively explained in Ramos v. Court of Appeals,28 where the Court said –
Medical malpractice cases do not escape the application of this doctrine. Thus, res ipsa loquitur has
been applied when the circumstances attendant upon the harm are themselves of such a character as
to justify an inference of negligence as the cause of that harm. The application of res ipsa loquitur in
medical negligence cases presents a question of law since it is a judicial function to determine whether
a certain set of circumstances does, as a matter of law, permit a given inference.
Although generally, expert medical testimony is relied upon in malpractice suits to prove that a physician
has done a negligent act or that he has deviated from the standard medical procedure, when the
doctrine of res ipsa loquitur is availed by the plaintiff, the need for expert medical testimony is dispensed
with because the injury itself provides the proof of negligence. The reason is that the general rule on
the necessity of expert testimony applies only to such matters clearly within the domain of medical
science, and not to matters that are within the common knowledge of mankind which may be testified
to by anyone familiar with the facts. Ordinarily, only physicians and surgeons of skill and experience
are competent to testify as to whether a patient has been treated or operated upon with a reasonable
degree of skill and care. However, testimony as to the statements and acts of physicians and surgeons,
external appearances, and manifest conditions which are observable by any one may be given by non-
expert witnesses. Hence, in cases where the res ipsa loquitur is applicable, the court is permitted to
find a physician negligent upon proper proof of injury to the patient, without the aid of expert testimony,
where the court from its fund of common knowledge can determine the proper standard of care. Where
common knowledge and experience teach that a resulting injury would not have occurred to the patient
if due care had been exercised, an inference of negligence may be drawn giving rise to an application
of the doctrine of res ipsa loquitur without medical evidence, which is ordinarily required to show not
only what occurred but how and why it occurred. When the doctrine is appropriate, all that the patient
must do is prove a nexus between the particular act or omission complained of and the injury sustained
while under the custody and management of the defendant without need to produce expert medical
testimony to establish the standard of care. Resort to res ipsa loquitur is allowed because there is no

other way, under usual and ordinary conditions, by which the patient can obtain redress for injury
suffered by him.
Thus, courts of other jurisdictions have applied the doctrine in the following situations: leaving of a
foreign object in the body of the patient after an operation, injuries sustained on a healthy part of the
body which was not under, or in the area, of treatment, removal of the wrong part of the body when
another part was intended, knocking out a tooth while a patient’s jaw was under anesthetic for the
removal of his tonsils, and loss of an eye while the patient plaintiff was under the influence of anesthetic,
during or following an operation for appendicitis, among others.
Nevertheless, despite the fact that the scope of res ipsa loquitur has been measurably enlarged, it does
not automatically apply to all cases of medical negligence as to mechanically shift the burden of proof
to the defendant to show that he is not guilty of the ascribed negligence. Res ipsa loquitur is not a rigid
or ordinary doctrine to be perfunctorily used but a rule to be cautiously applied, depending upon the
circumstances of each case. It is generally restricted to situations in malpractice cases where a layman
is able to say, as a matter of common knowledge and observation, that the consequences of
professional care were not as such as would ordinarily have followed if due care had been exercised.
A distinction must be made between the failure to secure results, and the occurrence of something
more unusual and not ordinarily found if the service or treatment rendered followed the usual procedure
of those skilled in that particular practice. It must be conceded that the doctrine of res ipsa loquitur can
have no application in a suit against a physician or surgeon which involves the merits of a diagnosis or
of a scientific treatment. The physician or surgeon is not required at his peril to explain why any
particular diagnosis was not correct, or why any particular scientific treatment did not produce the
desired result. Thus, res ipsa loquitur is not available in a malpractice suit if the only showing is that the
desired result of an operation or treatment was not accomplished. The real question, therefore, is
whether or not in the process of the operation any extraordinary incident or unusual event outside of
the routine performance occurred which is beyond the regular scope of customary professional activity
in such operations, which, if unexplained would themselves reasonably speak to the average man as
the negligent cause or causes of the untoward consequence. If there was such extraneous intervention,
the doctrine of res ipsa loquitur may be utilized and the defendant is called upon to explain the matter,
by evidence of exculpation, if he could.
In order to allow resort to the doctrine, therefore, the following essential requisites must first be satisfied,
to wit: (1) the accident was of a kind that does not ordinarily occur unless someone is negligent; (2) the
instrumentality or agency that caused the injury was under the exclusive control of the person charged;
and (3) the injury suffered must not have been due to any voluntary action or contribution of the person
injured.29
The Court considers the application here of the doctrine of res ipsa loquitur inappropriate. Although it
should be conceded without difficulty that the second and third elements were present, considering that
the anesthetic agent and the instruments were exclusively within the control of Dr. Solidum, and that
the patient, being then unconscious during the operation, could not have been guilty of contributory
negligence, the first element was undeniably wanting. Luz delivered Gerald to the care, custody and
control of his physicians for a pull-through operation. Except for the imperforate anus, Gerald was then
of sound body and mind at the time of his submission to the physicians. Yet, he experienced
bradycardia during the operation, causing loss of his senses and rendering him immobile. Hypoxia, or
the insufficiency of oxygen supply to the brain that caused the slowing of the heart rate, scientifically
termed as bradycardia, would not ordinarily occur in the process of a pull-through operation, or during
the administration of anesthesia to the patient, but such fact alone did not prove that the negligence of
any of his attending physicians, including the anesthesiologists, had caused the injury. In fact, the
anesthesiologists attending to him had sensed in the course of the operation that the lack of oxygen
could have been triggered by the vago-vagal reflex, prompting them to administer atropine to the
patient.30
This conclusion is not unprecedented. It was similarly reached in Swanson v. Brigham,31 relevant
portions of the decision therein being as follows:
On January 7, 1973, Dr. Brigham admitted 15-year-old Randall Swanson to a hospital for the treatment
of infectious mononucleosis. The patient's symptoms had included a swollen throat and some breathing
difficulty. Early in the morning of January 9 the patient was restless, and at 1:30 a.m. Dr. Brigham
examined the patient. His inspection of the patient's air passage revealed that it was in satisfactory
condition. At 4:15 a.m. Dr. Brigham received a telephone call from the hospital, advising him that the
patient was having respiratory difficulty. The doctor ordered that oxygen be administered and he
prepared to leave for the hospital. Ten minutes later, 4:25 a.m., the hospital called a second time to
advise the doctor that the patient was not responding. The doctor ordered that a medicine be
administered, and he departed for the hospital. When he arrived, the physician who had been on call
at the hospital had begun attempts to revive the patient. Dr. Brigham joined him in the effort, but the
patient died.
The doctor who performed the autopsy concluded that the patient died between 4:25 a.m. and 4:30
a.m. of asphyxia, as a result of a sudden, acute closing of the air passage. He also found that the air
passage had been adequate to maintain life up to 2 or 3 minutes prior to death. He did not know what
caused the air passage to suddenly close.
xxxx
It is a rare occurrence when someone admitted to a hospital for the treatment of infectious
mononucleosis dies of asphyxiation. But that is not sufficient to invoke res ipsa loquitur. The fact that
the injury rarely occurs does not in itself prove that the injury was probably caused by someone's
negligence. Mason v. Ellsworth, 3 Wn. App. 298, 474 P.2d 909 (1970). Nor is a bad result by itself
enough to warrant the application of the doctrine. Nelson v. Murphy, 42 Wn.2d 737, 258 P.2d 472
(1953). See 2 S. Speiser, The Negligence Case – Res Ipsa Loquitur § 24:10 (1972). The evidence
presented is insufficient to establish the first element necessary for application of res ipsa loquitur
doctrine. The acute closing of the patient’s air passage and his resultant asphyxiation took place over
a very short period of time. Under these circumstances it would not be reasonable to infer that the
physician was negligent. There was no palpably negligent act. The common experience of mankind
does not suggest that death would not be expected without negligence. And there is no expert medical
testimony to create an inference that negligence caused the injury.
Negligence of Dr. Solidum
In view of the inapplicability of the doctrine of res ipsa loquitur, the Court next determines whether the
CA correctly affirmed the conviction of Dr. Solidum for criminal negligence.
Negligence is defined as the failure to observe for the protection of the interests of another person that
degree of care, precaution, and vigilance that the circumstances justly demand, whereby such other
person suffers injury.32Reckless imprudence, on the other hand, consists of voluntarily doing or failing
to do, without malice, an act from which material damage results by reason of an inexcusable lack of
precaution on the part of the person performing or failing to perform such act.33
Dr. Solidum’s conviction by the RTC was primarily based on his failure to monitor and properly regulate
the level of anesthetic agent administered on Gerald by overdosing at 100% halothane. In affirming the
conviction, the CA observed:
On the witness stand, Dr. Vertido made a significant turnaround. He affirmed the findings and
conclusions in his report except for an observation which, to all intents and purposes, has become the
storm center of this dispute. He wanted to correct one piece of information regarding the dosage of the
anesthetic agent administered to the child. He declared that he made a mistake in reporting a 100%
halothane and said that based on the records it should have been 100% oxygen.

The records he was relying on, as he explains, are the following:
(a) the anesthesia record – A portion of the chart in the record was marked as Exhibit 1-A and 1-B to
indicate the administration at intervals of the anesthetic agent.
(b) the clinical abstract – A portion of this record that reads as follows was marked Exhibit 3A. 3B –
Approximately 1 hour and 45 minutes through the operation, patient was noted to have bradycardia
(CR = 70) and ATSO4 0.2 mg was immediately administered. However, the bradycardia persisted, the
inhalational agent was shut off, and the patient was ventilated with 100% oxygen and another dose of
ATSO4 0.2 mg was given. However, the patient did not respond until no cardiac rate can be auscultated
and the surgeons were immediately told to stop the operation. The patient was put on a supine position
and CPR was initiated. Patient was given 1 amp of epinephrine initially while continuously doing cardiac
massage – still with no cardiac rate appreciated; another ampule of epinephrine was given and after
45 secs, patient’s vital signs returned to normal. The entire resuscitation lasted approximately 3-5 mins.
The surgeons were then told to proceed to the closure and the child’s vital signs throughout and until
the end of surgery were: BP = 110/70; CR = 116/min and RR = 20-22 cycles/min (on assisted
ventilation).
Dr. Vertido points to the crucial passage in the clinical abstract that the patient was ventilated with 100%
oxygen and another dose of ATSO4 when the bradycardia persisted, but for one reason or another, he
read it as 100% halothane. He was asked to read the anesthesia record on the percentage of the
dosage indicated, but he could only sheepishly note I can’t understand the number. There are no clues
in the clinical abstract on the quantity of the anesthetic agent used. It only contains the information that
the anesthetic plan was to put the patient under general anesthesia using a nonrebreathing system
with halothane as the sole anesthetic agent and that 1 hour and 45 minutes after the operation began,
bradycardia occurred after which the inhalational agent was shut off and the patient administered with
100% oxygen. It would be apparent that the 100% oxygen that Dr. Vertido said should be read in lieu
of 100% halothane was the pure oxygen introduced after something went amiss in the operation and
the halothane itself was reduced or shut off.
The key question remains – what was the quantity of halothane used before bradycardia set in?
The implication of Dr. Vertido’s admission is that there was no overdose of the anesthetic agent, and
the accused Dr. Solidum stakes his liberty and reputation on this conclusion. He made the assurance
that he gave his patient the utmost medical care, never leaving the operating room except for a few
minutes to answer the call of nature but leaving behind the other members of his team Drs. Abella and
Razon to monitor the operation. He insisted that he administered only a point 1% not 100% halothane,
receiving corroboration from Dr. Abella whose initial MA in the record should be enough to show that
she assisted in the operation and was therefore conversant of the things that happened. She revealed
that they were using a machine that closely monitored the concentration of the agent during the
operation.
But most compelling is Dr. Solidum’s interpretation of the anesthesia record itself, as he takes the bull
by the horns, so to speak. In his affidavit, he says, reading from the record, that the quantity of halothane
used in the operation is one percent (1%) delivered at time intervals of 15 minutes. He studiedly
mentions – the concentration of halothane as reflected in the anesthesia record (Annex D of the
complaint-affidavit) is only one percent (1%) – The numbers indicated in 15 minute increments for
halothane is an indication that only 1% halothane is being delivered to the patient Gerard Gercayo for
his entire operation; The amount of halothane delivered in this case which is only one percent cannot
be summated because halothane is constantly being rapidly eliminated by the body during the entire
operation.
xxxx

In finding the accused guilty, despite these explanations, the RTC argued that the volte-face of Dr.
Vertido on the question of the dosage of the anesthetic used on the child would not really validate the
non-guilt of the anesthesiologist. Led to agree that the halothane used was not 100% as initially
believed, he was nonetheless unaware of the implications of the change in his testimony. The court
observed that Dr. Vertido had described the condition of the child as hypoxia which is deprivation of
oxygen, a diagnosis supported by the results of the CT Scan. All the symptoms attributed to a failing
central nervous system such as stupor, loss of consciousness, decrease in heart rate, loss of usual
acuity and abnormal motor function, are manifestations of this condition or syndrome. But why would
there be deprivation of oxygen if 100% oxygen to 1% halothane was used? Ultimately, to the court,
whether oxygen or halothane was the object of mistake, the detrimental effects of the operation are
incontestable, and they can only be led to one conclusion – if the application of anesthesia was really
closely monitored, the event could not have happened.34
The Prosecution did not prove the elements of reckless imprudence beyond reasonable doubt because
the circumstances cited by the CA were insufficient to establish that Dr. Solidum had been guilty of
inexcusable lack of precaution in monitoring the administration of the anesthetic agent to Gerald. The
Court aptly explained in Cruz v. Court of Appeals35 that:
Whether or not a physician has committed an "inexcusable lack of precaution" in the treatment of his
patient is to be determined according to the standard of care observed by other members of the
profession in good standing under similar circumstances bearing in mind the advanced state of the
profession at the time of treatment or the present state of medical science. In the recent case of Leonila
Garcia-Rueda v. Wilfred L. Pacasio, et. al., this Court stated that in accepting a case, a doctor in effect
represents that, having the needed training and skill possessed by physicians and surgeons practicing
in the same field, he will employ such training, care and skill in the treatment of his patients. He therefore
has a duty to use at least the same level of care that any other reasonably competent doctor would use
to treat a condition under the same circumstances. It is in this aspect of medical malpractice that expert
testimony is essential to establish not only the standard of care of the profession but also that the
physician's conduct in the treatment and care falls below such standard. Further, inasmuch as the
causes of the injuries involved in malpractice actions are determinable only in the light of scientific
knowledge, it has been recognized that expert testimony is usually necessary to support the conclusion
as to causation.
xxxx
In litigations involving medical negligence, the plaintiff has the burden of establishing appellant's
negligence and for a reasonable conclusion of negligence, there must be proof of breach of duty on the
part of the surgeon as well as a causal connection of such breach and the resulting death of his patient.
In Chan Lugay v. St Luke's Hospital, Inc., where the attending physician was absolved of liability for
the death of the complainant’s wife and newborn baby, this Court held that:
"In order that there may be a recovery for an injury, however, it must be shown that the ‘injury for which
recovery is sought must be the legitimate consequence of the wrong done; the connection between the
negligence and the injury must be a direct and natural sequence of events, unbroken by intervening
efficient causes.’ In other words, the negligence must be the proximate cause of the injury. For,
‘negligence, no matter in what it consists, cannot create a right of action unless it is the proximate cause
of the injury complained of.’ And ‘the proximate cause of an injury 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.’"
An action upon medical negligence – whether criminal, civil or administrative – calls for the plaintiff to
prove by competent evidence each of the following four elements, namely: (a) the duty owed by the
physician to the patient, as created by the physician-patient relationship, to act in accordance with the
specific norms or standards established by his profession; (b) the breach of the duty by the physician’s
failing to act in accordance with the applicable standard of care; (3) the causation, i.e., there must be a
reasonably close and causal connection between the negligent act or omission and the resulting injury;
and (4) the damages suffered by the patient.36
In the medical profession, specific norms or standards to protect the patient against unreasonable risk,
commonly referred to as standards of care, set the duty of the physician to act in respect of the patient.
Unfortunately, no clear definition of the duty of a particular physician in a particular case exists. Because
most medical malpractice cases are highly technical, witnesses with special medical qualifications must
provide guidance by giving the knowledge necessary to render a fair and just verdict. As a result, the
standard of medical care of a prudent physician must be determined from expert testimony in most
cases; and in the case of a specialist (like an anesthesiologist), the standard of care by which the
specialist is judged is the care and skill commonly possessed and exercised by similar specialists under
similar circumstances. The specialty standard of care may be higher than that required of the general
practitioner.37
The standard of care is an objective standard by which the conduct of a physician sued for negligence
or malpractice may be measured, and it does not depend, therefore, on any individual physician’s own
knowledge either. In attempting to fix a standard by which a court may determine whether the physician
has properly performed the requisite duty toward the patient, expert medical testimony from both
plaintiff and defense experts is required. The judge, as the trier of fact, ultimately determines the
standard of care, after listening to the testimony of all medical experts.38
Here, the Prosecution presented no witnesses with special medical qualifications in anesthesia to
provide guidance to the trial court on what standard of care was applicable. It would consequently be
truly difficult, if not impossible, to determine whether the first three elements of a negligence and
malpractice action were attendant.
Although the Prosecution presented Dr. Benigno Sulit, Jr., an anesthesiologist himself who served as
the Chairman of the Committee on Ethics and Malpractice of the Philippine Society of Anesthesiologists
that investigated the complaint against Dr. Solidum, his testimony mainly focused on how his
Committee had conducted the investigation.39 Even then, the report of his Committee was favorable to
Dr. Solidum,40 to wit:
Presented for review by this committee is the case of a 3 year old male who underwent a pull-thru
operation and was administered general anesthesia by a team of anesthesia residents. The patient, at
the time when the surgeons was manipulating the recto-sigmoid and pulling it down in preparation for
the anastomosis, had bradycardia. The anesthesiologists, sensing that the cause thereof was the
triggering of the vago-vagal reflex, administered atropine to block it but despite the administration of
the drug in two doses, cardiac arrest ensued. As the records show, prompt resuscitative measures
were administered and spontaneous cardiac function re-established in less than five (5) minutes and
that oxygen was continuously being administered throughout, unfortunately, as later become manifest,
patient suffered permanent irreversible brain damage.
In view of the actuations of the anaesthesiologists and the administration of anaesthesia, the committee
find that the same were all in accordance with the universally accepted standards of medical care and
there is no evidence of any fault or negligence on the part of the anaesthesiologists.
Dr. Antonio Vertido, a Senior Medico-Legal Officer of the National Bureau of Investigation, was also
presented as a Prosecution witness, but his testimony concentrated on the results of the physical
examination he had conducted on Gerald, as borne out by the following portions of his direct
examination, to wit:
FISCAL CABARON Doctor, what do you mean by General Anesthetic Agent?

WITNESS General Anesthetic Agent is a substance used in the conduction of Anesthesia and in this
case, halothane was used as a sole anesthetic agent.
xxxx
Q Now under paragraph two of page 1 of your report you mentioned that after one hour and 45 minutes
after the operation, the patient experienced a bradycardia or slowing of heart rate, now as a doctor,
would you be able to tell this Honorable Court as to what cause of the slowing of heart rate as to Gerald
Gercayo?
WITNESS Well honestly sir, I cannot give you the reason why there was a bradycardia of time because
is some reason one way or another that might caused bradycardia.
FISCAL CABARON What could be the possible reason?
A Well bradycardia can be caused by anesthetic agent itself and that is a possibility, we’re talking about
possibility here.
Q What other possibility do you have in mind, doctor?
A Well, because it was an operation, anything can happen within that situation.
FISCAL CABARON Now, this representation would like to ask you about the slowing of heart rate, now
what is the immediate cause of the slowing of the heart rate of a person?
WITNESS Well, one of the more practical reason why there is slowing of the heart rate is when you do
a vagal reflex in the neck wherein the vagal receptors are located at the lateral part of the neck, when
you press that, you produce the slowing of the heart rate that produce bradycardia.
Q I am pro[p]ounding to you another question doctor, what about the deficiency in the supply of oxygen
by the patient, would that also cause the slowing of the heart rate?
A Well that is a possibility sir, I mean not as slowing of the heart rate, if there is a hypoxia or there is a
low oxygen level in the blood, the normal thing for the heart is to pump or to do not a bradycardia but a
… to counter act the Hypoxia that is being experienced by the patient
(sic).
xxxx
Q Now, you made mention also doctor that the use of general anesthesia using 100% halothane and
other anesthetic medications probably were contributory to the production of hypoxia.
A Yes, sir in general sir.41
On cross-examination, Dr. Vertido expounded more specifically on his interpretation of the anesthesia
record and the factors that could have caused Gerald to experience bradycardia, viz:
ATTY. COMIA I noticed in, may I see your report Doctor, page 3, will you kindly read to this Honorable
court your last paragraph and if you will affirm that as if it is correct?
A "The use of General Anesthesia, that is using 100% Halothane probably will be contributory to the
production of Hypoxia and - - - -"
ATTY COMIA And do you affirm the figure you mentioned in this Court Doctor?
WITNESS Based on the records, I know the - - -
Q 100%?
A 100% based on the records.

Q I will show you doctor a clinical record. I am a lawyer I am not a doctor but will you kindly look at this
and tell me where is 100%, the word "one hundred" or 1-0-0, will you kindly look at this Doctor, this
Xerox copy if you can show to this Honorable Court and even to this representation the word "one
hundred" or 1-0-0 and then call me.
xxxx
ATTY. COMIA Doctor tell this Honorable Court where is that 100, 1-0-0 and if there is, you just call me
and even the attention of the Presiding Judge of this Court. Okay, you read one by one.
WITNESS Well, are you only asking 100%, sir?
ATTY. COMIA I’m asking you, just answer my question, did you see there 100% and 100 figures, tell
me, yes or no?
WITNESS I’m trying to look at the 100%, there is no 100% there sir.
ATTY. COMIA Okay, that was good, so you Honor please, may we request also temporarily, because
this is just a xerox copy presented by the fiscal, that the percentage here that the Halothane
administered by Dr. Solidum to the patient is 1% only so may we request that this portion, temporarily
your Honor, we are marking this anesthesia record as our Exhibit 1 and then this 1% Halothane also
be bracketed and the same be marked as our Exhibit "1-A".
xxxx
ATTY. COMIA Doctor, my attention was called also when you said that there are so many factors that
contributed to Hypoxia is that correct?
WITNESS Yes, sir.
Q I remember doctor, according to you there are so many factors that contributed to what you call
hypoxia and according to you, when this Gerald suffered hypoxia, there are other factors that might
lead to this Hypoxia at the time of this operation is that correct?
WITNESS The possibility is there, sir.
Q And according to you, it might also be the result of such other, some or it might be due to operations
being conducted by the doctor at the time when the operation is being done might also contribute to
that hypoxia is that correct?
A That is a possibility also.
xxxx
ATTY. COMIA How will you classify now the operation conducted to this Gerald, Doctor?
WITNESS Well, that is a major operation sir.
Q In other words, when you say major operation conducted to this Gerald, there is a possibility that this
Gerald might [be] exposed to some risk is that correct?
A That is a possibility sir.
Q And which according to you that Gerald suffered hypoxia is that correct?
A Yes, sir.
Q And that is one of the risk of that major operation is that correct?
A That is the risk sir.42

At the continuation of his cross-examination, Dr. Vertido maintained that Gerald’s operation for his
imperforate anus, considered a major operation, had exposed him to the risk of suffering the same
condition.43 He then corrected his earlier finding that 100% halothane had been administered on Gerald
by saying that it should be 100% oxygen.44
Dr. Solidum was criminally charged for "failing to monitor and regulate properly the levels of anesthesia
administered to said Gerald Albert Gercayo and using 100% halothane and other anesthetic
medications."45However, the foregoing circumstances, taken together, did not prove beyond
reasonable doubt that Dr. Solidum had been recklessly imprudent in administering the anesthetic agent
to Gerald. Indeed, Dr. Vertido’s findings did not preclude the probability that other factors related to
Gerald’s major operation, which could or could not necessarily be attributed to the administration of the
anesthesia, had caused the hypoxia and had then led Gerald to experience bradycardia. Dr. Vertido
revealingly concluded in his report, instead, that "although the anesthesiologist followed the normal
routine and precautionary procedures, still hypoxia and its corresponding side effects did occur."46
The existence of the probability about other factors causing the hypoxia has engendered in the mind of
the Court a reasonable doubt as to Dr. Solidum’s guilt, and moves us to acquit him of the crime of
reckless imprudence resulting to serious physical injuries. "A reasonable doubt of guilt," according to
United States v. Youthsey:47
x x x is a doubt growing reasonably out of evidence or the lack of it. It is not a captious doubt; not a
doubt engendered merely by sympathy for the unfortunate position of the defendant, or a dislike to
accept the responsibility of convicting a fellow man. If, having weighed the evidence on both sides, you
reach the conclusion that the defendant is guilty, to that degree of certainty as would lead you to act on
the faith of it in the most important and crucial affairs of your life, you may properly convict him. Proof
beyond reasonable doubt is not proof to a mathematical demonstration. It is not proof beyond the
possibility of mistake.
We have to clarify that the acquittal of Dr. Solidum would not immediately exempt him from civil
liability.1âwphi1 But we cannot now find and declare him civilly liable because the circumstances that
have been established here do not present the factual and legal bases for validly doing so. His acquittal
did not derive only from reasonable doubt. There was really no firm and competent showing how the
injury to Gerard had been caused. That meant that the manner of administration of the anesthesia by
Dr. Solidum was not necessarily the cause of the hypoxia that caused the bradycardia experienced by
Gerard. Consequently, to adjudge Dr. Solidum civilly liable would be to speculate on the cause of the
hypoxia. We are not allowed to do so, for civil liability must not rest on speculation but on competent
evidence.
Liability of Ospital ng Maynila
Although the result now reached has resolved the issue of civil liability, we have to address the unusual
decree of the RTC, as affirmed by the CA, of expressly holding Ospital ng Maynila civilly liable jointly
and severally with Dr. Solidum. The decree was flawed in logic and in law.
In criminal prosecutions, the civil action for the recovery of civil liability that is deemed instituted with
the criminal action refers only to that arising from the offense charged.48 It is puzzling, therefore, how
the RTC and the CA could have adjudged Ospital ng Maynila jointly and severally liable with Dr.
Solidum for the damages despite the obvious fact that Ospital ng Maynila, being an artificial entity, had
not been charged along with Dr. Solidum. The lower courts thereby acted capriciously and whimsically,
which rendered their judgment against Ospital ng Maynila void as the product of grave abuse of
discretion amounting to lack of jurisdiction.
Not surprisingly, the flawed decree raises other material concerns that the RTC and the CA overlooked.
We deem it important, then, to express the following observations for the instruction of the Bench and
Bar.
For one, Ospital ng Maynila was not at all a party in the proceedings. Hence, its fundamental right to
be heard was not respected from the outset. The R TC and the CA should have been alert to this
fundamental defect. Verily, no person can be prejudiced by a ruling rendered in an action or proceeding
in which he was not made a party. Such a rule would enforce the constitutional guarantee of due
process of law.
Moreover, Ospital ng Maynila could be held civilly liable only when subsidiary liability would be properly
enforceable pursuant to Article 103 of the Revised Penal Code. But the subsidiary liability seems far-
fetched here. The conditions for subsidiary liability to attach to Ospital ng Maynila should first be
complied with. Firstly, pursuant to Article 103 of the Revised Penal Code, Ospital ng Maynila must be
shown to be a corporation "engaged in any kind of industry." The term industry means any department
or branch of art, occupation or business, especially one that employs labor and capital, and is engaged
in industry.49 However, Ospital ng Maynila, being a public hospital, was not engaged in industry
conducted for profit but purely in charitable and humanitarian work.50 Secondly, assuming that Ospital
ng Maynila was engaged in industry for profit, Dr. Solidum must be shown to be an employee of Ospital
ng Maynila acting in the discharge of his duties during the operation on Gerald. Yet, he definitely was
not such employee but a consultant of the hospital. And, thirdly, assuming that civil liability was
adjudged against Dr. Solidum as an employee (which did not happen here), the execution against him
was unsatisfied due to his being insolvent.
WHEREFORE, the Court GRANTS the petition for review on certiorari; REVERSES AND SETS ASIDE
the decision promulgated on January 20, 2010; ACQUITS Dr. Fernando P. Solidum of the crime of
reckless imprudence resulting to serious physical injuries; and MAKES no pronouncement on costs of
suit.
SO ORDERED.
Land Bank of the Philippines v. Kho
G.R. No. 205839
LAND BANK OF THE PHILIPPINES, Petitioner
vs.
NARCISO L. KHO, Respondent
x-----------------------x
G.R. No. 205840
MA.LORENA FLORES and ALEXANDER CRUZ, Petitioners,
vs.
NARCISO L. KHO, Respondent.
DECISION
BRION, J.:
These are consolidated petitions for review on certiorari assailing the Court of Appeals' (CA) August
30, 2012 decision and February 14, 2013 Resolution in CA-G.R. CV No. 93881.1The CA set aside the
Regional Trial Court’s (RTC) dismissal of Civil Case No. Q-06-571542and remanded the case for
further proceedings.
Antecedents
The respondent Narciso Kho is the sole proprietor of United Oil Petroleum, a business engaged in
trading diesel fuel. Sometime in December 2006, he entered into a verbal agreement to purchase
lubricants from Red Orange International Trading (Red Orange), represented by one Rudy Medel. Red
Orange insisted that it would only accept a Land Bank manager’s check as payment.

On December 28, 2005, Kho, accompanied by Rudy Medel, opened Savings Account No. 0681-0681-
80 at the Araneta Branch of petitioner Land Bank of the Philippines (Land Bank).3His
initial ₱25,993,537.37 deposit4consisted of the following manager’s checks:
1 UCPB Del Monte Branch PHP 15,000,000
Check No. 19107
2 E-PCI Banawe Branch PHP 2,900,000

Check No. 26200720
3 I.E. Bank Retiro Branch PHP 8,093,537.37

Check No. 1466
These checks were scheduled for clearance on January 2, 2006.

Kho also purchased Land Bank Manager’s Check No. 07410 leveraged by his newly opened savings
account. Recem Macarandan, the Acting Operations Supervisor of the Araneta branch, and Leida
Benitez, the Document Examiner, prepared and signed the check.5
The check was postdated to January 2, 2006, and scheduled for actual delivery on the same date after
the three checks were expected to have been cleared. It was valued at ₱25,000,000.00 and made
payable to Red Orange.6
Kho requested a photocopy of the manager’s check to provide Red Orange with proof that he had
available funds for the transaction.1âwphi1 The branch manager, petitioner Ma. Lorena Flores,
accommodated his request. Kho gave the photocopy of the check to Rudy Medel.7
On January 2, 2006, Kho returned to the bank and picked up check No. 07410. Accordingly,
₱25,000,000.00 was debited from his savings account.
Unfortunately, his deal with Red Orange did not push through.
On January 3, 2006, an employee of the Bank of the Philippine Islands (BPI) called Land Bank, Araneta
Branch, to inform them that Red Orange had deposited check No. 07410 for payment. Flores confirmed
with BPI that Land Bank had issued the check to Kho.8
On January 4, 2006, the Central Clearing Department (CCD) of the Land Bank Head Office faxed a
copy of the deposited check to the Araneta branch for payment. The officers of the Araneta
branch examined the fax copy and thought that the details matched the check purchased by Kho. Thus,
Land Bank confirmed the deposited check.9
On January 5, 2006, Flores informed Kho by phone that Check No. 07410 was cleared and paid by the
BPI, Kamuning branch.10
Shocked, Kho informed Flores that he never negotiated the check because the deal did not materialize.
More importantly, the actual check was still in his possession.11
Kho immediately went to Land Bank with the check No. 07410. They discovered that what was
deposited and encashed with BPI was a spurious manager’s check.12 Kho demanded the cancellation
of his manager’s check and the release of the remaining money in his account (then
₱995,207.27).13 However, Flores refused his request because she had no authority to do so at the time.
Kho returned to the Land Bank, Araneta branch on January 12, 2006, with the same demands. He was
received by petitioner Alexander Cruz who was on his second day as the Officer in Charge (OIC) of the
Araneta branch.14 Cruz informed him that there was a standing freeze order on his account because of
the (then) ongoing investigation on the fraudulent withdrawal of the manager’s check.15

On January 16, 2006, Kho sent Land Bank a final demand letter for the return of his ₱25,000,000.00
and the release of the ₱995,207.27 from his account but the bank did not comply.
Hence, on January 23, 2006, Kho filed a Complaint for Specific Performance and Damages against
Land Bank, represented by its Araneta Avenue Branch Manager Flores and its OIC Cruz. He also
impleaded Flores and Cruz in their personal capacities. The complaint was docketed as Civil Case No.
Q-06-57154.
Kho asserted that the manager’s check No. 07410 was still in his possession and that he had no
obligation to inform Land Bank whether or not he had already negotiated the check.16
On the other hand, Land Bank argued that Kho was negligent because he handed Medel a photocopy
of the manager’s check and that this was the proximate cause of his loss.17
On April 30, 2009, the RTC dismissed the complaint.18
Citing Associated Bank v. Court of Appeals, the RTC reasoned that the failure of the purchaser/drawer
to exercise ordinary care that substantially contributed to the making of the forged check precludes him
from asserting the forgery.19 It held that (1) Kho’s act of giving Medel a photocopy of the check and (2)
his failure to inform the bank that the transaction with Red Orange did not push through were the
proximate causes of his loss.20
The RTC also found that Flores and Cruz acted in good faith in performing their duties as officers of
Land Bank when they refused to cancel the manager’s check and disallowed Kho from withdrawing
from his account.21
Kho appealed to the CA where the case was docketed as CA-G.R. CV No. 93881.
On August 30, 2012, the CA set aside the RTC’s decision and remanded the case for further
proceedings.
The CA pointed out that Land Bank was conducting an investigation to determine whether there was a
fraudulent negotiation of the manager’s check No. 07410. It held that the outcome of the investigation
– which was not yet available during the trial – is crucial to the resolution of the case. It noted that the
RTC’s ruling on Kho’s negligence in dealing with Medel preempted the outcome of Land Bank’s
investigation.22 Thus, it remanded the case to the RTC with the directive to consider the outcome of the
investigation.
Dissatisfied, Land Bank, Flores, and Cruz, filed separately petitions for review on certiorari before this
Court.
The Arguments
Land Bank asserts that neither party denied the spurious nature of the manager’s check that was
deposited with BPI. Therefore, the conclusion of its investigation as to the fraudulent negotiation
of check No. 07410 is immaterial to the resolution of the case.23
Land Bank adopts the RTC’s conclusion that Kho is precluded from asserting the forgery of check No.
07410 because his negligence substantially contributed to his loss.24
The bank highlights the following instances of Kho’s negligence:
(1) Kho transacted with Rudy Medel, a person he barely knew, without verifying Medel’s actual
relationship with Red Orange. In fact, Kho even mistook him as "Rudy Rodel" in his complaint;
(2) Kho accorded Medel an unusual degree of trust. He brought Medel with him to the bank and
carelessly gave the latter a photocopy of the manager’s check; and

(3) When he picked up check No. 07410 on January 2, 2006, Kho did not even bother to inform Land
Bank that his transaction with Red Orange did not push through. He could have prevented or detected
the duplication of the check if he had simply notified the bank.25
Flores and Cruz maintain that they did not incur any personal liability to Kho because they were only
performing their official duties in good faith. They insist that their alleged wrongdoing, if there was any,
were corporate acts performed within the scope of their official authority; therefore, only Land Bank
should be made liable for the consequences.26
For his part, Kho adopts the CA’s arguments and reasoning in CA-G. R. CV No. 93881.27
Our Ruling
At the outset, we agree with Land Bank’s contention that the result of its investigation is not
indispensable to resolving this case. After all, it was not conducted by an independent party but by a
party-litigant. We cannot expect the report to yield a completely impartial result. At best, the
investigation report will be of doubtful probative value.
More importantly, all the facts necessary to decide the case are already available. Although they have
reached different legal conclusions, both the RTC and the CA agree that:
On December 28, 2005, Kho opened an account with Land Bank in order to leverage a business
deal with Red Orange;
He purchased Land Bank Manager’s check No. 07410 worth ₱25,000,000.00 payable to Red Orange
and dated January 2, 2006;
He also gave Rudy Medel a photocopy of the check that the bank had given him;
After his visit to the Bank, the deal with Medel and Red Orange did not push through;
He picked up check No. 07410 from the bank on January 2, 2006, without informing the bank that
the deal did not materialize;
Afterwards, Red Orange presented a spurious copy of check No. 07410 to BPI, Kamuning for
payment;
Land Bank cleared the check;
However, Kho never negotiated the actual check. It was in his possession the whole time.
This case can already be resolved based on these undisputed facts. Therefore, the CA erred when it
remanded the case for further proceedings.
That said, we cannot agree that the proximate causes of the loss were Kho’s act of giving Medel a
photocopy of check No. 07410 and his failure to inform Land Bank that his deal with Red Orange did
not push through.
Proximate cause – which is determined by a mixed consideration of logic, common sense, policy, and
precedent – 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."28
We cannot understand how both the RTC and the CA overlooked the fact that Land Bank’s officers
cleared the counterfeit check. We stress that the signatories of the genuine check No. 07410 were
Land Bank’s officers themselves.
The business of banking is imbued with public interest; it is an industry where the general public’s trust
and confidence in the system is of paramount importance.29 Consequently, banks are expected to exert
the highest degree of, if not the utmost, diligence. They are obligated to treat their depositors’ accounts
with meticulous care, always keeping in mind the fiduciary nature of their relationship.30
Banks hold themselves out to the public as experts in determining the genuineness of checks and
corresponding signatures thereon.31 Stemming from their primordial duty of diligence, one of a bank’s
prime duties is to ascertain the genuineness of the drawer’s signature on check being encashed.32 This
holds especially true for manager’s checks.
A manager’s check is a bill of exchange drawn by a bank upon itself, and is accepted by its issuance.
It is an order of the bank to pay, drawn upon itself, committing in effect its total resources, integrity, and
honor behind its issuance. The check is signed by the manager (or some other authorized officer) for
the bank. In this case, the signatories were Macarandan and Benitez.
The genuine check No. 07410 remained in Kho’s possession the entire time and Land Bank admits
that the check it cleared was a fake. When Land Bank’s CCD forwarded the deposited check to its
Araneta branch for inspection, its officers had every opportunity to recognize the forgery of their
signatures or the falsity of the check. Whether by error or neglect, the bank failed to do so, which led
to the withdrawal and eventual loss of the ₱25,000,000.00.
This is the proximate cause of the loss. Land Bank breached its duty of diligence and assumed the risk
of incurring a loss on account of a forged or counterfeit check. Hence, it should suffer the resulting
damage.
We cannot agree with the Land Bank and the RTC’s positions that Kho is precluded from invoking the
forgery. A drawer or a depositor of the bank is precluded from asserting the forgery if the drawee bank
can prove his failure to exercise ordinary care and if this negligence substantially contributed to the
forgery or the perpetration of the fraud.
In Gempesaw v. Court of Appeals,33 Natividad Gempesaw, a businesswoman, completely placed her
trust in her bookkeeper. Gempesaw allowed her bookkeeper to prepare the checks payable to her
suppliers. She signed the checks without verifying their amounts and their corresponding invoices.
Despite receiving her banks statements, Gempesaw never verified the correctness of the returned
checks nor confirmed if the payees actually received payment. This went on for over two years, allowing
her bookkeeper to forge the indorsements of over 82 checks.
Gempesaw failed to examine her records with reasonable diligence before signing the checks and after
receiving her bank statements. Her gross negligence allowed her bookkeeper to benefit from the
subsequent forgeries for over two years.
Gempesaw’s negligence precluded her from asserting the forgery. Nevertheless, we adjudged the
drawee Bank liable to share evenly in her loss for its failure to exercise utmost diligence, which
amounted to a breach of its contractual obligations to the depositor.34
In Associated Bank v. Court of Appeals,35 the province of Tarlac (the depositor) released 30 checks
payable to the order of a government hospital to a retired administrative officer/cashier of the hospital.
The retired officer forged the hospital’s indorsement and deposited the checks into his personal
account. This took place for over three years resulting in the accumulated loss of ₱203,300.00. We
found the province of Tarlac grossly negligent, to the point of substantially contributing to its loss.36
Nevertheless, we apportioned the loss evenly between the province of Tarlac and the drawee bank
because of the bank’s failure to pay according to the terms of the check. It violated its duty to charge
the customer’s account only for properly payable items.37
Kho’s negligence does not even come close to approximating those of Gempesaw or of the province
of Tarlac. While his act of giving Medel a photocopy of the check may have allowed the latter to create
a duplicate, this cannot possibly excuse Land Bank’s failure to recognize that the check itself –not just
the signatures – is a fake instrument. More importantly, Land Bank itself furnished Kho the photocopy
without objecting to the latter’s intention of giving it to Medel.

Kho' s failure to inform Land Bank that the deal did not push through as of January 2, 2006, does not
justify Land Bank's confirmation and clearing of a fake check bearing the forged signatures of its own
officers. Whether or not the deal pushed through, the check remained in Kho's possession. He was
entitled to a reasonable expectation that the bank would not release any funds corresponding to the
check.
Lastly, we agree with the RTC's finding that neither Flores nor Cruz is liable to Kho in their private
capacities. Their refusal to honor Kho' s demands was made in good faith pursuant to the directives of
the Land Bank's management.
As a pillar of economic development, the banking industry is impressed with public interest. The general
public relies on banks' sworn duty to serve with utmost diligence. Public trust and confidence in banks
is critical to a healthy, stable, and well-functioning economy. Let this serve as a reminder for banks to
always act with the highest degree of diligence and the most meticulous attention to detail.
WHEREFORE, we PARTLY GRANT the petitions. The Court of Appeals' August 30, 2012 decision
and February 14, 2013 resolution in CA-G.R. CV No. 93881 are SET ASIDE. The Regional Trial
Court's April 30, 2009 decision in Civil Case No. Q-06-57154 is REVERSED.
Petitioner Land Bank of the Philippines is ORDERED:
(1) to PAY Narciso Kho the sum of TWENTY FIVE MILLION PESOS (₱25,000,000.00), plus interest
at the legal rate reckoned from the filing of the complaint; and
(2) to ALLOW Narciso Kho to withdraw his remaining funds from Savings Account No. 0681-0681-
80.
SO ORDERED.
Abrogar v. Cosmos Bottling Company
March 15, 2017
G.R. No. 164749
ROMULO ABROGAR and ERLINDA ABROGAR, Petitioners
vs
COSMOS BOTTLING COMPANY and INTERGAMES, INC., Respondents
DECISION
BERSAMIN, J.:
This case involves a claim for damages arising from the negligence causing the death of a participant
in an organized marathon bumped by a passenger jeepney on the route of the race. The issues revolve
on whether the organizer and the sponsor of the marathon were guilty of negligence, and, if so, was
their negligence the proximate cause of the death of the participant; on whether the negligence of the
driver of the passenger jeepney was an efficient intervening cause; on whether the doctrine of
assumption of risk was applicable to the fatality; and on whether the heirs of the fatality can recover
damages for loss of earning capacity of the latter who, being then a minor, had no gainful employment.
The Case
By this appeal, the parents of the late Rommel Abrogar (Rommel), a marathon runner, seek the review
and reversal of the decision promulgated on March l 0, 2004,1 whereby the Court of Appeals (CA)
reversed and set aside the judgment rendered in their favor on May 10, 1991 by the Regional Trial
Court (RTC), Branch 83, in Quezon City2finding and declaring respondents Cosmos Bottling Company
(Cosmos), a domestic soft-drinks company whose products included Pop Cola, and Intergames, Inc.
(Intergames), also a domestic corporation organizing and supervising the 1st Pop Cola Junior

Marathon" held on June 15, 1980 in Quezon City, solidarily liable for damages arising from the untimely
death of Rommel, then a minor 18 years of age,3 after being bumped by a recklessly driven passenger
jeepney along the route of the marathon.
Antecedents
The CA narrated the antecedents in the assailed judgment,4 viz.:
[T]o promote the sales of "Pop Cola", defendant Cosmos, jointly with Intergames, organized an
endurance running contest billed as the "1st Pop Cola Junior Marathon" scheduled to be held on June
15, 1980. The organizers plotted a 10-kilometer course starting from the premises of the Interim
Batasang Pambansa (IBP for brevity), through public roads and streets, to end at the Quezon Memorial
Circle. Plaintiffs' son Rommel applied with the defendants to be allowed to participate in the contest
and after complying with defendants' requirements, his application was accepted and he was given an
official number. Consequently, on June 15, 1980 at the designated time of the marathon, Rommel
joined the other participants and ran the course plotted by the defendants. As it turned out, the plaintiffs'
(sic) further alleged, the defendants failed to provide adequate safety and precautionary measures and
to exercise the diligence required of them by the nature of their undertaking, in that they failed to insulate
and protect the participants of the marathon from the vehicular and other dangers along the marathon
route. Rommel was bumped by a jeepney that was then running along the route of the marathon on
Don Mariano Marcos A venue (DMMA for brevity), and in spite of medical treatment given to him at the
Ospital ng Bagong Lipunan, he died later that same day due to severe head injuries.
On October 28, 1980, the petitioners sued the respondents in the then Court of First Instance of Rizal
(Quezon City) to recover various damages for the untimely death of Rommel (i.e., actual and
compensatory damages, loss of earning capacity, moral damages, exemplary damages, attorney's fees
and expenses oflitigation).5
Cosmos denied liability, insisting that it had not been the organizer of the marathon, but only its sponsor;
that its participation had been limited to providing financial assistance to Intergames;6 that the financial
assistance it had extended to Intergames, the sole organizer of the marathon, had been in answer to
the Government's call to the private sector to help promote sports development and physical
fitness;7 that the petitioners had no cause of action against it because there was no privity of contract
between the participants in the marathon and Cosmos; and that it had nothing to do with the
organization, operation and running of the event.8
As counterclaim, Cosmos sought attorney's fees and expenses of litigation from the petitioners for their
being unwarrantedly included as a defendant in the case. It averred a cross-claim against Intergames,
stating that the latter had guaranteed to hold Cosmos "completely free and harmless from any claim or
action for liability for any injuries or bodily harm which may be sustained by any of the entries in the '1st
Pop Cola Junior Marathon' or for any damage to the property or properties of third parties, which may
likewise arise in the course of the race."9 Thus, Cosmos sought to hold Intergames solely liable should
the claim of the petitioners prosper.10
On its part, Intergames asserted that Rommel's death had been an accident exclusively caused by the
negligence of the jeepney driver; that it was not responsible for the accident; that as the marathon
organizer, it did not assume the responsibilities of an insurer of the safety of the participants; that it
nevertheless caused the participants to be covered with accident insurance, but the petitioners refused
to accept the proceeds thereof;11 that there could be no cause of action against it because the
acceptance and approval of Rommel's application to join the marathon had been conditioned on his
waiver of all rights and causes of action arising from his participation in the marathon;12 that it exercised
due diligence in the conduct of the race that the circumstances called for and was appropriate, it having
availed of all its know-how and expertise, including the adoption and implementation of all known and

possible safety and precautionary measures in order to protect the participants from injuries arising
from vehicular and other forms of accidents;13 and, accordingly, the complaint should be dismissed.
In their reply and answer to counterclaim, the petitioners averred that contrary to its claims, Intergames
did not provide adequate measures for the safety and protection of the race participants, considering
that motor vehicles were traversing the race route and the participants were made to run along the flow
of traffic, instead of against it; that Intergames did not provide adequate traffic marshals to secure the
safety and protection of the participants;14that Intergames could not limit its liability on the basis of the
accident insurance policies it had secured to cover the race participants; that the waiver signed by
Rommel could not be a basis for denying liability because the same was null and void for being contrary
to law, morals, customs and public policy;15 that their complaint sufficiently stated a cause of action
because in no way could they be held liable for attorney's fees, litigation expenses or any other relief
due to their having abided by the law and having acted honestly, fairly, in good faith by according to
Intergames its due, as demanded by the facts and circumstances.16
At the pre-trial held on April 12, 1981, the parties agreed that the principal issue was whether or not
Cosmos and lntergames were liable for the death of Rommel because of negligence in conducting the
marathon.17
Judgment of the RTC
In its decision dated May 10, 1991,18 the RTC ruled as follows:
WHEREFORE, judgment is hereby rendered in favor of plaintiffs-spouses Romulo Abrogar and Erlinda
Abrogar and against defendants Cosmos Bottling Company, Inc. and Intergames, Inc., ordering both
defendants, jointly and severally, to pay and deliver to the plaintiffs the amounts of Twenty Eight
Thousand Sixty One Pesos and Sixty Three Centavos (₱28,061.63) as actual damages; One Hundred
Thousand Pesos (₱100,000.00) as moral damages; Fifty Thousand Pesos (₱50,000.00) as exemplary
damages and Ten Percent (10%) of the total amount of One Hundred Seventy Eight Thousand Sixty
One Pesos and Sixty Three Centavos (₱178,061,63) or Seventeen Thousand Eight Hundred Six Pesos
and Sixteen Centavos (₱17,806.16) as attorney's fees.
On the cross-claim of defendant Cosmos Bottling Company, Inc., defendant Intergames, Inc, is hereby
ordered to reimburse to the former any and all amounts which may be recovered by the plaintiffs from
it by virtue of this Decision.
SO ORDERED.
The RTC observed that the safeguards allegedly instituted by Intergames in conducting the marathon
had fallen short of the yardstick to satisfy the requirements of due diligence as called for by and
appropriate under the circumstances; that the accident had happened because of inadequate
preparation and Intergames' failure to exercise due diligence;19 that the respondents could not be
excused from liability by hiding behind the waiver executed by Rommel and the permission given to
him by his parents because the waiver could only be effective for risks inherent in the marathon, such
a:s stumbling, heat stroke, heart attack during the race, severe exhaustion and similar
occurrences;20 that the liability of the respondents towards the participants and third persons was
solidary, because Cosmos, the sponsor of the event, had been the principal mover of the event, and,
as such, had derived benefits from the marathon that in turn had carried responsibilities towards the
participants and the public; that the respondents' agreement to free Cosmos from any liability had been
an agreement binding only between them, and did not bind third persons; and that Cosmos had a cause
of action against Intergames for whatever could be recovered by the petitioners from Cosmos.21
Decision of the CA
All the parties appealed to the CA.

The petitioners contended that the RTC erred in not awarding damages for loss of earning capacity on
the part of Rommel for the reason that such damages were not recoverable due to Rommel not yet
having finished his schooling; and that it would be premature to award such damages upon the
assumption that he would finish college and be gainfully employed.22
On their part, Cosmos and Intergames separately raised essentially similar errors on the part of the
RTC, to wit: (1) in holding them liable for the death of Rommel; (2) in finding them negligent in
conducting the marathon; (3) in holding that Rommel and his parents did not assume the risks of the
marathon; (4) in not holding that the sole and proximate cause of the death of Rommel was the
negligence of the jeepney driver; and (5) in making them liable, jointly and solidarily, for damages,
attorney's fees and expenses of litigation.23
The CA reduced the issues to four, namely:
1. Whether or not appellant Intergames was negligent in its conduct of the "1st Pop Cola Junior
Marathon" held on June 15, 1980 and if so, whether its negligence was the proximate cause of the
death of Rommel Abrogar.
2. Whether or not appellant Cosmos can be held jointly and solidarily liable with appellant Intergames
for the death of Rommel Abrogar, assuming that appellant Intergames is found to have been negligent
in the conduct of the Pop Cola marathon and such negligence was the proximate cause of the death of
Rommel Abrogar.
3. Whether or not the appellants Abrogar are entitled to be compensated for the "loss of earning
capacity" of their son Rommel.
4. Whether or not the appellants Abrogar are entitled to the actual, moral, and exemplary damages
granted to them by the Trial Court.24
In its assailed judgment promulgated on March 10, 2004,25 the CA ruled as follows:
As to the first issue, this Court finds that appellant Intergames was not negligent in organizing the said
marathon.
Negligence is the omission to do something which a reasonable man, guided upon those considerations
which ordinarily regulate the conduct to human affairs, would do, or doing something which a prudent
and reasonable man would not do.
The whole theory of negligence presuppose some uniform standard of behavior which must be an
external and objective one, rather than the individual judgment good or bad, of the particular actor; it
must be, as far as possible, the same for all persons; and at the same time make proper allowance for
the risk apparent to the actor for his capacity to meet it, and for the circumstances under which he must
act.
course be always determined in the light of human experience and of the acts involved in the particular
case.
In the case at bar, the trial court erred in finding that the appellant Intergames failed to satisfy the
requirements of due diligence in the conduct of the race.
The trial court in its decision said that the accident in question could have been avoided if the route of
the marathon was blocked off from the regular traffic, instead of allowing the runners to run together
with the flow of traffic. Thus, the said court considered the appellant Intergames at fault for proceeding
with the marathon despite the fact that the Northern Police District, MPF, Quezon City did not allow the
road to be blocked off from traffic.

This Court finds that the standard of conduct used by the trial court is not the ordinary conduct of a
prudent man in such a given situation. According to the said court, the only way to conduct a safe road
race is to block off the traffic for the duration of the event and direct the cars and public utilities to take
alternative routes in the meantime that the marathon event is being held. Such standard is too high and
is even inapplicable in the case at bar because, there is no alternative route from IBP to Don Mariano
Marcos to Quezon City Hall.
The Civil Code provides that if the law or contract does not state the diligence which is to be observed
in the performance of an obligation that which is expected of a good father of the family shall only be
required. Accordingly, appellant Intergames is only bound to exercise the degree of care that would be
exercised by an ordinarily careful and prudent man in the same position and circumstances and not
that of the cautious man of more than average prudence. Hence, appellant Intergames is only expected
to observe ordinary diligence and not extraordinary diligence.
In this case, the marathon was allowed by the Northern Police District, MPF, Quezon City on the
condition that the road should not be blocked off from traffic. Appellant Intergames had no choice. It
had to comply with it or else the said marathon would not be allowed at all.
The trial court erred in contending that appellant Intergames should have looked for alternative places
in Metro Manila given the condition set by the Northern Police District, MPF, Quezon City; precisely
because as Mr. Jose Castro has testified the said route was found to be the best route after a careful
study and consideration of all the factors involved. Having conducted several marathon events in said
route, appellant Intergames as well as the volunteer groups and the other agencies involved were in
fact familiar with the said route. And assuming that there was an alternative place suitable for the said
race, the question is would they be allowed to block off the said road from traffic?
Also, the trial court erred in stating that there was no adequate number of marshals, police officers and
personnel to man the race so as to prevent injury to the participants.
The general rule is that the party who relies on negligence for his cause of action has the burden of
proving the existence of the same, otherwise his action fails.
Here, the appellants-spouses failed to prove that there was inadequate number of marshals, police
officers, and personnel because they failed to prove what number is considered adequate.
This court considers that seven (7) traffic operatives, five (5) motorcycle policemen, fifteen (15)
patrolmen deployed along the route, fifteen (15) boyscouts, twelve (12) CA Ts, twenty (20) barangay
tanods, three (3) ambulances and three (3) medical teams were sufficient to stage a safe marathon.
Moreover, the failure of Mr. Jose R. Castro, Jr. to produce records of the lists of those constituting the
volunteer help during the marathon is not fatal to the case considering that one of the volunteers, Victor
Landingin of the Citizens Traffic Action (CTA) testified in court that CTA fielded five units on June 15,
1980, assigned as follows: (1) at the sphere head; (2) at the finish line; (3) tail ender; (4) & (5) roving.
The trial court again erred in concluding that the admission of P/Lt. Jesus Lipana, head of the traffic
policemen assigned at the marathon, that he showed up only at the finish line means that he did not
bother to check on his men and did not give them appropriate instructions. P/Lt. Lipana in his testimony
explained that he did not need to be in the start of the race because he had predesignated another
capable police officer to start the race.
In addition, this Court finds that the precautionary measures and preparations adopted by appellant
Intergames were sufficient considering the circumstances surrounding the case.
Appellant Intergames, using its previous experiences in conducting safe and successful road races,
took all the necessary precautions and made all the preparations for the race. The initial preparations
included: determination of the route to be taken; and an ocular inspection of the same to see if it was

well-paved, whether it had less corners for easy communication and coordination, and whether it was
wide enough to accommodate runners and transportation. Appellant Intergames choose the Don
Mariano Marcos Avenue primarily because it was well-paved; had wide lanes to accommodate runners
and vehicular traffic; had less corners thus facilitating easy communication and coordination among the
organizers and cooperating agencies; and was familiar to the race organizers and operating agencies.
The race covered a ten-kilometer course from the IBP lane to the Quezon City Hall Compound passing
through the Don Mariano Marcos A venue, which constituted the main stretch of the route. Appellant
Intergames scheduled the marathon on a Sunday morning, when traffic along the route was at its
lightest. Permission was sought from the then Quezon City Mayor Adelina Rodriguez for the use of the
Quezon City Hall Grandstand and the street fronting it as the finish line. Police assistance was also
obtained to control and supervise the traffic. The Quezon City Traffic Detachment took charge of traffic
control by assigning policemen to the traffic route. The particular unit assigned during the race
underwent extensive training and had been involved in past marathons, including marathons in highly
crowded areas. The Philippine Boy Scouts tasked to assist the police and monitor the progress of the
race; and Citizens Traffic Action Group tasked with the monitoring of the race, which assigned five units
consisting of ten operatives, to provide communication and assistance were likewise obtained. Finally,
medical equipments and personnel were also requested from Camp Aguinaldo, the Philippine Red
Cross and the Hospital ng Bagong Lipunan.
Neither does this Court find the appellant Intergames' conduct of the marathon the proximate cause of
the death of Rommel Abrogar. Proximate cause has been defined as that which, in natural and
continuous sequence, unbroken by any efficient intervening cause, produces injury, and without which
the result would not have occurred.
It appears that Rommel Abrogar, while running on Don Mariano Marcos A venue and after passing the
Philippine Atomic Energy Commission Building, was bumped by a jeepney which apparently was racing
against a minibus and the two vehicles were trying to crowd each other. In fact, a criminal case was
filed against the jeepney driver by reason of his having killed Rommel Abrogar.
This proves that the death of Rommel Abrogar was caused by the negligence of the jeepney driver.
Rommel Abrogar cannot be faulted because he was performing a legal act; the marathon was
conducted with the permission and approval of all the city officials involved. He had the right to be there.
Neither can the appellant Intergames be faulted, as the organizer of the said marathon, because it was
not negligent in conducting the marathon.
Given the facts of this case, We believe that no amount of precaution can prevent such an accident.
Even if there were fences or barriers to separate the lanes for the runners and for the vehicles, it would
not prevent such an accident in the event that a negligent driver loses control of his vehicle. And even
if the road was blocked off from traffic, it would still not prevent such an accident, if a jeepney driver on
the other side of the road races with another vehicle loses control of his wheel and as a result hits a
person on the other side of the road. Another way of saying this is: A defendant's tort cannot be
considered a legal cause of plaintiffs damage if that damage would have occurred just the same even
though the defendant's tort had not been committed.
This Court also finds the doctrine of assumption of risk applicable in the case at bar. As explained by a
well-known authority on torts:
"The general principle underlying the defense of assumption of risk is that a plaintiff who voluntarily
assumes a risk of harm arising from the negligent or reckless conduct of the defendant cannot recover
for such harm. The defense may arise where a plaintiff, by contract or otherwise, expressly agrees to
accept a risk or harm arising from the defendant's conduct, or where a plaintiff who fully understands a
risk or harm caused by the defendant's conduct, or by a condition created by the defendant, voluntarily
chooses to enter or remain, or to permit his property to enter or remain, within the area of such risk,
under circumstances manifesting his willingness to accept the risk.
xxxx
"Assumption of the risk in its primary sense arises by assuming through contract, which may be implied,
the risk of a known danger. Its essence is venturousness. It implies intentional exposure to a known
danger; It embraces a mental state of willingness; It pertains to the preliminary conduct of getting into
a dangerous employment or relationship, it means voluntary incurring the risk of an accident, which
may or may not occur, and which the person assuming the risk may be careful to avoid; and it defeats
recovery because it is a previous abandonment of the right to complain if an accident occurs.
"Of course, if the defense is predicated upon an express agreement the agreement must be valid, and
in the light of this qualification the rule has been stated that a plaintiff who, by contract or otherwise,
expressly agreed to accept a risk of harm arising from the defendant's negligent or reckless conduct,
cannot recover for such harm unless the agreement is invalid as contrary to public policy.
xxxx
"The defense of assumption of risk presupposes: (1) that the plaintiff had actual knowledge of the
danger; (2) that he understood and appreciated the risk from the danger; and (3) that he voluntarily
exposed himself to such risk. x x x
"The term 'risk' as used in this connection applies to known dangers, and not to things from which
danger may possibly flow. The risk referred to is the particular risk, or one of the risks, which the plaintiff
accepted within the context of the situation in which he placed himself and the question is whether the
specific conduct or condition which caused the injury was such a risk."
In this case, appellant Romulo Abrogar himself admitted that his son, Rommel Abrogar, surveyed the
route of the marathon and even attended a briefing before the race. Consequently, he was aware that
the marathon would pass through a national road and that the said road would not be blocked off from
traffic. And considering that he was already eighteen years of age, had voluntarily participated in the
marathon, with his parents' consent, and was well aware of the traffic hazards along the route, he
thereby assumed all the risks of the race. This is precisely why permission from the participant's
parents, submission of a medical certificate and a waiver of all rights and causes of action arising from
the participation in the marathon which the participant or his heirs may have against appellant
Intergames were required as conditions in joining the marathon.
In the decision of the trial court, it stated that the risk mentioned in the waiver signed by Rommel
Abrogar only involved risks such as stumbling, suffering heatstroke, heart attack and other similar risks.
It did not consider vehicular accident as one of the risks included in the said waiver.
This Court does not agree. With respect to voluntary participation in a sport, the doctrine of assumption
of risk applies to any facet of the activity inherent in it and to any open and obvious condition of the
place where it is carried on. We believe that the waiver included vehicular accidents for the simple
reason that it was a road race run on public roads used by vehicles. Thus, it cannot be denied that
vehicular accidents are involved. It was not a track race which is held on an oval and insulated from
vehicular traffic. In a road race, there is always the risk of runners being hit by motor vehicles while they
train or compete. That risk is inherent in the sport and known to runners. It is a risk they assume every
time they voluntarily engage in their sport.
Furthermore, where a person voluntarily participates in a lawful game or contest, he assumes the
ordinary risks of such game or contest so as to preclude recovery from the promoter or operator of the
game or contest for injury or death resulting therefrom. Proprietors of amusements or of places where
sports and games are played are not insurers of safety of the public nor of their patrons.
In McLeod Store v. Vinson 213 Ky 667, 281 SW 799 (1926), it was held that a boy, seventeen years of
age, of ordinary intelligence and physique, who entered a race conducted by a department store, the
purpose of which was to secure guinea fowl which could be turned in for cash prizes, had assumed the
ordinary risks incident thereto and was barred from recovering against the department store for injuries
suffered when, within catching distance, he stopped to catch a guinea, and was tripped or stumbled
and fell to the pavement, six or eight others falling upon him. The court further said: "In this (the race)
he was a voluntary participant. xxx The anticipated danger was as obvious to him as it was to appellant
(the department store). While not an adult, he was practically 17 years of age, of ordinary intelligence,
and perfectly able to determine the risks ordinarily incident to such games. An ordinary boy of that age
is practically as well advised as to the hazards of baseball, basketball, football, foot races and other
games of skill and endurance as is an adult
x x x."
In the case at bar, the "1st Pop Cola Junior Marathon" held on June 15, 1980 was a race the winner of
which was to represent the country in the annual Spirit of Pheidippides Marathon Classic in Greece, if
he equals or breaks the 29-minute mark for the 10-km. race. Thus, Rommel Abrogar having voluntarily
participated in the race, with his parents' consent, assumed all the risks of the race.
Anent the second issue, this Court finds that appellant Cosmos must also be absolved from any liability
in the instant case.
This Court finds that the trial court erred in holding appellant Cosmos liable for being the principal mover
and resultant beneficiary of the event.
In its decision it said that in view of the fact that appellant Cosmos will be deriving certain benefits from
the marathon event, it has the responsibility to ensure the safety of all the participants and the public.
It further said that the stipulations in the contract entered into by the two appellants, Cosmos and
Intergames, relieving the former from any liability does not bind third persons.
This Court does not agree with the reasoning of the trial court. The sponsorship contract entered
between appellant Cosmos and appellant Intergames specifically states that:
1. COSMOS BOTTLING CORPORATION shall pay INTERGAMES the amount of FIFTY FIVE
THOUSAND PESOS (₱55,000.00) representing full sponsorship fee and in consideration thereof,
INTERGAMES shall organize and stage a marathon race to be called '1st POP COLA JUNIOR
MARATHON.
xxxx
3. INTER GAMES shall draw up all the rules of the marathon race, eligibility requirements of participants
as well as provide all the staff required in the organization and actual staging of the race. It is understood
that all said staff shall be considered under the direct employ of INTERGAMES which shall have full
control over them.
xxxx
5. INTERGAMES shall secure all the necessary permits, clearances, traffic and police assistance in all
the areas covered by the entire route of the '1st POP COLA JUNIOR MARATHON.
12. INTERGAMES shall hold COSMOS BOTTLING CORPORATION, completely free and harmless
from any claim or action for liability for any injuries or bodily harm which may be sustained by any of
the entries in the '1st POP COLA JUNIOR MARATHON', or for any damages to the property or
properties of third parties, which may likewise arise in the course of the race.
From the foregoing, it is crystal clear that the role of the appellant Cosmos was limited to providing
financial assistance in the form of sponsorship. Appellant Cosmos' sponsorship was merely in
pursuance to the company's commitment for spo1is development of the youth as well as for advertising
purposes. The use of the name Cosmos was done for advertising purposes only; it did not mean that it

was an organizer of the said marathon. As pointed out by Intergames' President, Jose Castro Jr.,
appellant Cosmos did not even have the right to suggest the location and the number of runners.
To hold a defendant liable for torts, it must be clearly shown that he is the proximate cause of the harm
done to the plaintiff. The nexus or connection of the cause and effect, between a negligent act and the
damage done, must be established by competent evidence.
In this case, appellant Cosmos was not negligent in entering into a contract with the appellant
Intergames considering that the record of the latter was clean and that it has conducted at least thirty
(30) road races.
Also there is no direct or immediate causal connection between the financial sponsorship and the death
of Rommel Abrogar. The singular act of providing financial assistance without participating in any
manner in the conduct of the marathon cannot be palmed off as such proximate cause. In fact, the
appellant spouses never relied on any representation that Cosmos organized the race. It was not even
a factor considered by the appellants-spouses in allowing their son to join said marathon.
In view of the fact that both defendants are not liable for the death of Rommel Abrogar, appellants-
spouses are not entitled to actual, moral, exemplary damages as well as for the "loss of earning
capacity" of their son. The third and fourth issues are thus moot and academic.
UPON THE VIEW WE TAKE OF THIS CASE, THUS, the judgment appealed from must be, as it hereby
is, REVERSED and SET ASIDE, and another entered DISMISSING the complaint a quo. The
appellants shall bear their respective costs.
SO ORDERED.26
Issues
In this appeal, the petitioners submit that the CA gravely erred:
A.
x x x in reversing the RTC Decision, (and) in holding that respondent Intergames was not negligent
considering that:
1. Respondent Intergames failed to exercise the diligence of a good father of the family in the conduct
of the marathon in that it did not block off from traffic the marathon route; and
2. Respondent Intergames' preparations for the race, including the number of marshal during the
marathon, were glaringly inadequate to prevent the happening of the injury to its participants.
B.
x x x in reversing the RTC Decision, (and) in holding that the doctrine of assumption of risk finds
application to the case at bar even though getting hit or run over by a vehicle is not an inherent risk in
a marathon race. Even assuming arguendo that deceased Abrogar made such waiver as claimed, still
there can be no valid waiver of one's right to life and limb for being against public policy.
C.
x x x in reversing the RTC Decision, (and) in absolving respondent Cosmos from liability to petitioners
on the sole ground that respondent Cosmos' contract with respondent Intergames contained a
stipulation exempting the former from liability.
D.
x x x m reversing the RTC Decision and consequently holding respondents free from liability, (and) in
not awarding petitioners with actual, moral and exemplary damages for the death of their child, Rommel
Abrogar.27
Ruling of the Court
The appeal is partly meritorious.
I
Review of factual issues is allowed because of
the conflict between the findings of fact
by the RTC and the CA on the issue of negligence
The petitioners contend that Intergames was negligent; that Cosmos as the sponsor and Intergames
as the organizer of the marathon both had the obligation to provide a reasonably safe place for the
conduct of the race byblocking the route of the race from vehicular traffic and by providing adequate
manpower and personnel to ensure the safety of the participants; and that Intergames had foreseen
the harm posed by the situation but had not exercised the diligence of a good father of a family to avoid
the risk;28 hence, for such omission, Intergames was negligent.29
Refuting, Cosmos and Intergames submit that the latter as the organizer was not negligent because it
had undertaken all the precautionary measures to ensure the safety of the race; and that there was no
duty on the part of the latter as the organizer to keep a racecourse "free and clear from reasonably
avoidable elements that would [occasion] or have the probable tendency, to occasion injury."30
The issue of whether one or both defendants were negligent is a mixed issue of fact and law. Does this
not restrict the Court against reviewing the records in this appeal on certiorari in order to settle the
issue?
The Court can proceed to review the factual findings of the CA as an exception to the general rule that
it should not review issues of fact on appeal on certiorari. We have recognized exceptions to the rule
that the findings of fact of the CA are conclusive and binding in the following instances: (1) when the
findings are grounded entirely on speculation, surmises or conjectures; (2) when the inference made is
manifestly mistaken, absurd or impossible; (3) when there is grave abuse of discretion; (4) when the
judgment is based on a misapprehension of facts; (5) when the findings of facts are conflicting; (6)
when in making its findings the CA went beyond the issues of the case, or its findings are contrary to
the admissions of both the appellant and the appellee; (7) when the findings are contrary to the trial
court; (8) when the findings are conclusions without citation of specific evidence on which they are
based; (9) when the facts set forth in the petition as well as in the petitioner's main and reply briefs are
not disputed by the respondent; (10) when the findings of fact are premised on the supposed absence
of evidence and contradicted by the evidence on record; and (11) when the CA manifestly overlooked
certain relevant facts not disputed by the parties, which, if properly considered, would justify a different
conclusion.31 Considering that the CA arrived at factual findings contrary to those of the trial court, our
review of the records in this appeal should have to be made.
Negligence is the failure to observe for the protection of the interests of another person that degree of
care, precaution, and vigilance which the circumstances justly demand, whereby such other person
suffers injury.32 Under Article 1173 of the Civil Code, it consists of the "omission of that diligence which
is required by the nature of the obligation and corresponds with the circumstances of the person, of the
time and of the place."33 The Civil Code makes liability for negligence clear under Article 2176,34 and
Article 20.35
To determine the existence of negligence, the following time-honored test has been set in Picart v.
Smith:36
They are not, and are not supposed to be, omniscient of the future. Hence they can be expected to
warrant his foregoing the conduct or guarding against its consequences.37 (bold underscoring supplied
for emphasis)
A careful review of the evidence presented, particularly the testimonies of the relevant witnesses, in
accordance with the foregoing guidelines reasonably leads to the conclusion that the safety and
precautionary measures undertaken by Intergames were short of the diligence demanded by the
circumstances of persons, time and place under consideration. Hence, Intergames as the organizer
was guilty of negligence.
The race organized by Intergames was a junior marathon participated in by young persons aged 14 to
18 years. It was plotted to cover a distance of 10 kilometers, starting from the IBP Lane,38 then going
towards the Batasang Pambansa, and on to the circular route towards the Don Mariano Marcos
Highway,39 and then all the way back to the Quezon City Hall compound where the finish line had been
set.40 In staging the event, Intergames had no employees of its own to man the race,41 and relied only
on the "cooperating agencies" and volunteers who had worked with it in previous races.42 The
cooperating agencies included the Quezon City police, barangay tanods, volunteers from the Boy
Scouts of the Philippines, the Philippine National Red Cross, the Citizens Traffic Action Group, and the
medical teams of doctors and nurses coming from the Office of the Surgeon General and the Ospital
ng Bagong Lipunan.43 According to Jose R. Castro, Jr., the President of Intergames, the preparations
for the event included conducting an ocular inspection of the route of the race,44 sending out letters to
the various cooperating agencies,45 securing permits from proper authorities,46 putting up directional
signs,47 and setting up the water stations.48
We consider the "safeguards" employed and adopted by Intergames not adequate to meet the
requirement of due diligence.
For one, the police authorities specifically prohibited Intergames from blocking Don Mariano Marcos
Highway in order not to impair road accessibility to the residential villages located beyond the IBP
Lanc.49
However, contrary to the findings of the CA,50 Intergames had a choice on where to stage the marathon,
considering its admission of the sole responsibility for the conduct of the event, including the choice of
location.
Moreover, the CA had no basis for holding that "the said route was found to be the best route after a
careful study and consideration of all the factors involved."51 Castro, Jr. himself attested that the route
had been the best one only within the vicinity of the Batasan Pambansa, to wit:

COURT
q Was there any specific reason from ... Was there any specific reason why you used this route from
Batasan to City Hall? Was there any special reason?
a We have, your Honor, conducted for example the Milo Marathon in that area in the Batasan
Pambansa and we found it to be relatively safer than any other areas within the vicinity. As a matter of
fact, we had more runners in the Milo Marathon at that time and nothing happened, your Honor.52
The chosen route (IBP Lane, on to Don Mariano Marcos Highway, and then to Quezon City Hall) was
not the only route appropriate for the marathon. In fact, Intergames came under no obligation to use
such route especially considering that the participants, who were young and inexperienced runners,
would be running alongside moving vehicles.
Intergames further conceded that the marathon could have been staged on a blocked-off route like
Roxas Boulevard in Manila where runners could run against the flow of vehicular traffic.53 Castro, Jr.
stated in that regard:
COURT TO WITNESS
q What law are you talking about when you say I cannot violate the law?
a The police authority, your Honor, would not grant us permit because that is one of the conditions that
if we are to conduct a race we should run the race in accordance with the flow of traffic.
q Did you not inform the police this is in accordance with the standard safety measures for a marathon
race?
a I believed we argued along that line but but (sic) again, if we insist the police again would not grant
us any permit like ... except in the case of Roxas Boulevard when it is normally closed from 8 a.m.
when you can run against the flow of traffic.
q You were aware for a runner to run on the same route of the traffic would be risky because he would
not know what is coming behind him?
a I believed we talked of the risk, your Honor when the risk has been minimized to a certain level. Yes,
there is greater risk when you run with the traffic than when you run against the traffic to a certain level,
it is correct but most of the races in Manila or elsewhere are being run in accordance with the flow of
the traffic.
xxxx
ATTY. VINLUAN
q Following the observation of the Court, considering the local condition, you will agree with me the
risks here are greater than in the United States where drivers on the whole follow traffic rules?
a That is correct.
q And because of that fact, it is with all the more reason that you should take all necessary precautions
to insure the safety of the runners?
a That is correct.54
xxxx
COURT:
xxxx

Q In your case in all the marathons that you had managed, how many cases have you encountered
where the routes are blocked off for vehicular traffic?
A These are the International Marathon, Philippines Third World Marathon and the Milo Marathon. We
are blocking them to a certain length of time.
Q What was the purpose of blocking the routes? Is it for the safety of the runners or just a matter of
convenience?
A In blocking off the route, Your Honor, it is light easier for the runners to run without impediments to
be rendered by the people or by vehicles and at the same time it would be also advantageous if the
road will be blocked off for vehicle traffic permitted to us by the traffic authorities.
Q So, in this case, you actually requested for the traffic authorities to block off the route?
A As far as I remember we asked Sgt. Pascual to block off the route but considering that it is the main
artery to Fairview Village, it would not be possible to block off the route since it will cause a lot of
inconvenience for the other people in those areas and jeepney drivers.
Q In other words, if you have your way you would have opted to block off the route.
A Yes, Your Honor.
Q But the fact is that the people did not agree.
A Yes, Your Honor, and it is stated in the permit given to us.55
Based on the foregoing testimony of Castro, Jr., Intergames had full awareness of the higher risks
involved in staging the race alongside running vehicles, and had the option to hold the race in a route
where such risks could be minimized, if not eliminated. But it did not heed the danger already foreseen,
if not expected, and went ahead with staging the race along the plotted route on Don Mariano Marcos
Highway on the basis of its supposedly familiarity with the route. Such familiarity of the organizer with
the route and the fact that previous races had been conducted therein without any untoward
incident56 were not in themselves sufficient safeguards. The standards for avoidance of injury through
negligence further required Intergames to establish that it did take adequate measures to avert the
foreseen danger, but it failed to do so.
Another failing on the part of Intergames was the patent inadequacy of the personnel to man the route.
As borne by the records, Intergames had no personnel of its own for that purpose, and relied exclusively
on the assistance of volunteers, that is, "seven (7) traffic operatives, five (5) motorcycle policemen,
fifteen (15) patrolmen deployed along the route, fifteen (15) boy scouts, twelve (12) CATs, twenty (20)
barangay tanods, three (3) ambulances and three (3) medical teams"57 to ensure the safety of the
young runners who would be running alongside moving vehicular traffic, to make the event safe and
well coordinated.
Although the party relying on negligence as his cause of action had the burden of proving the existence
of the same, Intergames' coordination and supervision of the personnel sourced from the cooperating
agencies did not satisfy the diligence required by the relevant circumstances. In this regard, it can be
pointed out that the number of deployed personnel, albeit sufficient to stage the marathon, did not per
se ensure the safe conduct of the race without proof that such deployed volunteers had been properly
coordinated and instructed on their tasks.
That the proper coordination and instruction were crucial elements for the safe conduct of the race was
well known to Intergames. Castro, Jr. stated as much, to wit:
ATTY. LOMBOS:
xxxx

Q You also said that if you block off one side of the road, it is possible that it would be more convenient
to hold the race in that matter. Will you tell the Honorable Court if it is possible also to hold a race safely
if the road is not blocked off?
A Yes, sir.
Q How is it done.
A You can still run a race safely even if it is partially blocked off as long as you have the necessary
cooperation with the police authorities, and the police assigned along the route of the race and the
police assigned would be there, this will contribute the safety of the participants, and also the vehicular
division, as long as there are substantial publicities in the newspapers, normally they will take the
precautions in the use of the particular route of the race.
Q Let me clarify this. Did you say that it is possible to hold a marathon safely if you have this traffic
assistance or coordination even if the route is blocked or not blocked?
A It is preferable to have the route blocked but in some cases, it would be impossible for the portions
of the road to be blocked totally. The route of the race could still be safe for runners if a proper
coordination or the agencies are notified especially police detailees to man the particular stage.58
Sadly, Intergames' own evidence did not establish the conduct of proper coordination and instruction.
Castro, Jr. described the action plan adopted by Intergames in the preparation for the race, as follows:
COURT
a Did you have any rehearsal let us say the race was conducted on June 15, now before June 15 you
call a meeting of all these runners so you can have more or less a map-up and you would indicate or
who will be stationed in their places etc. Did you have such a rehearsal?
WITNESS
a It is not being done, your honor, but you have to specify them. You meet with the group and you tell
them that you wanted them to be placed in their particular areas which we pointed out to them for
example in the case of the Barangay Tanod, I specifically assigned them in the areas and we sat down
and we met.
COURT
q Did you have any action, plan or brochure which would indicate the assignment of each of the
participating group?
WITNESS
a Normally, sir, many of the races don't have that except when they called them to meeting either as a
whole group or the entire cooperating agency or meet them per group.
COURT
q Did you have a check list of the activities that would have to be entered before the actual marathon
some kind of system where you will indicate this particular activity has to be checked etc. You did not
have that?
WITNESS
q Are you asking, your honor, as a race director of I will check this because if I do that, I won't have a
race because that is not being done by any race director anywhere in the world?
COURT
I am interested in your planning activities.
q In other words, what planning activities did you perform before the actual marathon?
a The planning activities we had, your honor, was to coordinate with the different agencies involved
informing them where they would be more or less placed.
COURT
q Let us go to ... Who was supposed to be coordinating with you as to the citizens action group who
was your ... you were referring to a person who was supposed to be manning these people and who
was the person whom you coordinate with the Traffic Action Group?
WITNESS
a I can only remember his name ... his family name is Esguerra.
q How about with the Tanods?
a With the Tanods his name is Pedring Serrano.
q And with the Boys Scouts? (sic)
a And with the Boys Scouts of the Phils. (sic) it is Mr. Greg Panelo.
COURT
q When did you last meet rather how many times did you meet with Esguerra before the marathon on
June 15?
WITNESS
a The Citizens Traffic Action Group, your honor, had been with me m previous races.
COURT
q I am asking you a specific question. I am not interested in the Citizen Traffic Action Group. The
marathon was on June 15, did you meet with him on June 14, June 13 or June 12?
a We met once, your honor, I cannot remember the date.
q You don't recall how many days before?
a I cannot recall at the moment.
q How about with Mr. Serrano, how many times did you meet with him before the race?
a If my mind does not fail me, your honor, I met him twice because he lives just within our area and we
always see each other.
q How about with Panelo, how many times did you meet him?
a With Mr. Panelo, I did not meet with them, your honor.
q Was there an occasion where before the race you met with these three people together since you did
not meet with Panelo anytime? Was there anytime where you met with Serrano and Esguerra together?
WITNESS
a No, your honor.
COURT
g When you met once with Esguerra, where did you meet? What place?
a I cannot recall at the moment, your honor, since it was already been almost six years ago.

g How about Serrano, where did you meet him?
a We met in my place.
q From your house? He went in your house?
a Yes, your honor.
q So you did not have let us say a ... you don't have records of your meetings with these people?
WITNESS
a With the Citizens Traffic Action, your honor?
COURT
a Yes.
WITNESS
a I don't have, your honor.
COURT
q Because you are familiar, I was just thinking this is an activity which requires planning etc., what I
was thinking when you said this was never done in any part of the world but all activities it has to be
planned. There must be some planning, now are you saying that in this particular case you had no
written plan or check list of activities what activities have to be implemented on a certain point and time,
who are the persons whom you must meet in a certain point and time.
WITNESS
a Normally, we did not have that, your honor, except the check list of all the things that should be ready
at a particular time prior to the race and the people to be involved and we have a check list to see to it
that everything would be in order before the start of the race.
COURT
Proceed.
ATTY. VINLUAN
q Following the question of the Court Mr. Castro, did you meet with Lt. Depano of the Police Department
who were supposed to supervise the police officers assigned to help during the race?
a I did not meet with him, sir.
q You did not meet with him?
a I did not meet with him.
q In fact, ever before or during the race you had no occasion to talk to Lt. Depano. Is that correct?
a That is correct, sir.
ATTY. VINLUAN
Based on the question of the Court and your answer to the question of the Court, are you trying to say
that this planning before any race of all these groups who have committed to help in the race, this is
not done in any part of the world?
WITNESS
a In the latter years when your race became bigger and bigger, this is being done now slowly.

ATTY. VINLUAN
q But for this particular race you will admit that you failed to do it when you have to coordinate and even
have a dry run of the race you failed to do all of that in this particular race, yes or no?
a Because there was ...
COURT
It was already answered by him when I asked him. The Court has ... Everybody has a copy how of this
time planner. Any activity or even meeting a girlfriend or most people plan.
A TTY. F .M. LOMBOS
If your honor please, before we proceed ...
WITNESS
In the latter years, your honor, when your race became bigger and bigger, this is being done now slowly.
q For this particular race you will admit that you failed to do it?
a Because there was no need, sir.59
Probably sensing that he might have thereby contradicted himself, Castro, Jr. clarified on re-direct
examination:
ATTY. LOMBOS
Q Now, you also responded to a question during the same hearing and this appears on page 26 of the
transcript that you did not hold any rehearsal or dry run for this particular marathon. Could you tell the
Court why you did not hold any such rehearsal or dry run?
A Because I believe there was no need for us to do that since we have been doing this for many years
and we have been the same people, same organization with us for so many years conducting several
races including some races in that area consisting of longer distances and consisting of more runners,
a lot more runners in that areay (sic) so these people, they know exactly what to do and there was no
need for us to have a rehearsal. I believe this rehearsal would only be applicable if I am new and these
people are new then, we have to rehearse.
ATTY. LOMBOS
q You also stated Mr. Castro that you did not have any action plan or brochure which you would indicate,
an assignment of each of the participating group as to what to do during the race. Will you please
explain what you meant when you said you have no action plan or brochure?
WITNESS
a What I mean of action plan, I did not have any written action plan but I was fully aware of what to do.
I mean, those people did not just go there out of nowhere. Obviously, there was an action on my part
because I have to communicate with them previously and to tell them exactly what the race is all about;
where to start; where it would end, and that is the reason why we have the ambulances, we have the
Boy Scouts, we have the CT A, we have the police, so it was very obvious that there was a plan of
action but not written because I know pretty well exactly what to do. I was dealing with people who have
been doing this for a long period of time.60
While the level of trust Intergames had on its volunteers was admirable, the coordination among the
cooperating agencies was predicated on circumstances unilaterally assumed by Intergames. It was
obvious that Intergames' inaction had been impelled by its belief that it did not need any action plan
because it had been dealing with people who had been manning similar races for a long period of time.

The evidence presented undoubtedly established that Intergames' notion of coordination only involved
informing the cooperating agencies of the date of the race, the starting and ending points of the route,
and the places along the route to man. Intergames did not conduct any general assembly with all of
them, being content with holding a few sporadic meetings with the leaders of the coordinating agencies.
It held no briefings of any kind on the actual duties to be performed by each group of volunteers prior
to the race. It did not instruct the volunteers on how to minimize, if not avert, the risks of danger in
manning the race, despite such being precisely why their assistance had been obtained in the first
place.
Intergames had no right to assume that the volunteers had already been aware of what exactly they
would be doing during the race. It had the responsibility and duty to give to them the proper instructions
despite their experience from the past races it had organized considering that the particular race related
to runners of a different level of experience, and involved different weather and environmental
conditions, and traffic situations. It should have remembered that the personnel manning the race were
not its own employees paid to perform their tasks, but volunteers whose nature of work was remotely
associated with the safe conduct of road races. Verily, that the volunteers showed up and assumed
their proper places or that they were sufficient in number was not really enough. It is worthy to stress
that proper coordination in the context of the event did not consist in the mere presence of the
volunteers, but included making sure that they had been properly instructed on their duties and tasks
in order to ensure the safety of the young runners.
It is relevant to note that the participants of the 1st Pop Cola Junior Marathon were mostly minors aged
14 to 18 years joining a race of that kind for the first time. The combined factors of their youth, eagerness
and inexperience ought to have put a reasonably prudent organizer on higher guard as to their safety
and security needs during the race, especially considering Intergames' awareness of the risks already
foreseen and of other risks already known to it as of similar events in the past organizer. There was no
question at all that a higher degree of diligence was required given that practically all of the participants
were children or minors like Rommel; and that the law imposes a duty of care towards children and
minors even if ordinarily there was no such duty under the same circumstances had the persons
involved been adults of sufficient discretion.61 In that respect, Intergames did not observe the degree
of care necessary as the organizer, rendering it liable for negligence. As the Court has emphasized
in Corliss v. The Manila Railroad Company,62 where the danger is great, a high degree of care is
necessary, and the failure to observe it is a want of ordinary care under the circumstances. 63
The circumstances of the persons, time and place required far more than what Intergames undertook
in staging the race. Due diligence would have made a reasonably prudent organizer of the race
participated in by young, inexperienced or beginner runners to conduct the race in a route suitably
blocked off from vehicular traffic for the safety and security not only of the participants but the motoring
public as well. Since the marathon would be run alongside moving vehicular traffic, at the very least,
Intergames ought to have seen to the constant and closer coordination among the personnel manning
the route to prevent the foreseen risks from befalling the participants. But this it sadly failed to do.
II
The negligence of Intergames as the organizer
was the proximate cause of the death of Rommel
As earlier mentioned, the CA found that Rommel, while running the marathon on Don Mariano Marcos
A venue and after passing the Philippine Atomic Energy Commission Building, was bumped by a
passenger jeepney that was racing with a minibus and two other vehicles as if trying to crowd each
other out. As such, the death of Rommel was caused by the negligence of the jeepney driver.

Intergames staunchly insists that it was not liable, maintaining that even assuming arguendo that it was
negligent, the negligence of the jeepney driver was the proximate cause of the death of Rommel; hence,
it should not be held liable.
Did the negligence of Intergames give rise to its liability for the death of ommel notwithstanding the
negligence of the jeepney driver?
In order for liability from negligence to arise, there must be not only proof of damage and negligence,
but also proof that the damage was the consequence of the negligence. The Court has said in Vda. de
Gregorio v. Go Chong Bing:64
x x x Negligence as a source of obligation both under the civil law and in American cases was carefully
considered and it was held:
We agree with counsel for appellant that under the Civil Code, as under the generally accepted doctrine
in the United States, the plaintiff in an action such as that under consideration, in order to establish his
right to a recovery, must establish by competent evidence:
(1) Damages to the plaintiff.
(2) Negligence by act or omission of which defendant personally or some person for whose acts it must
respond, was guilty.
(3) The connection of cause and effect between the negligence and the damage." (Taylor vs. Manila
Electric Railroad and Light Co., supra, p. 15.)
In accordance with the decision of the Supreme Court of Spain, in order that a person may be held
guilty for damage through negligence, it is necessary that there be an act or omission on the part of the
person who is to be charged with the liability and that damage is produced by the said act or
omission.65 (Emphasis supplied)
We hold that the negligence of Intergames was the proximate cause despite the intervening negligence
of the jeepney driver.
Proximate cause is "that which, in natural and continuous sequence, unbroken by any new cause,
produces an event, and without which the event would not have occurred."66 In Vda. de Bataclan, et
al. v. Medina,67 the Court, borrowing from American Jurisprudence, has more extensively
defined proximate cause thusly:
"* * * '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.' And more
comprehensively, 'the proximate legal cause is that acting first and producing the injury, either
immediately or by setting other events in motion, all constituting a natural and continuous chain of
events, each having a close causal connection with its immediate predecessor, the final event in the
chain immediately effecting the injury as a natural and probable result of the cause which first acted,
under such circumstances that the person responsible for the first event should, as an ordinarily prudent
and intelligent person, have reasonable ground to expect at the moment of his act or default that an
injury to some person might probably result therefrom."68
To be considered the proximate cause of the injury, the negligence need not be the event closest in
time to the injury; a cause is still proximate, although farther in time in relation to the injury, if the
happening of it set other foreseeable events into motion resulting ultimately in the damage.69 According
to an authority on civil law:70"A prior and remote cause cannot be made the basis of an action, if such
remote cause did nothing more than furnish the condition or give rise to the occasion by which the injury
was made possible, if there intervened between such prior or remote cause and the injury a distinct,
successive, unrelated and efficient cause, even though such injury would not have happened but for
such condition or occasion. If no damage exists in the condition except because of the independent
cause, such condition was not the proximate cause. And if an independent negligent act or defective
condition sets into operation the circumstances which result in injury because of the prior defective
condition, such act or condition is the proximate cause."
Bouvier adds:
In many cases important questions arise as to which, in the chain of acts tending to the production of
a given state of things, is to be considered the responsible cause. It is not merely distance of place or
of causation that renders a cause remote. The cause nearest in the order of causation, without any
efficient concurring cause to produce the result, may be considered the direct cause. In the course of
decisions of cases in which it is necessary to determine which of several causes is so far responsible
for the happening of the act or injury complained of, what is known as the doctrine of proximate cause
is constantly resorted to in order to ascertain whether the act, omission, or negligence of the person
whom it is sought to hold liable was in law and in fact responsible for the result which is the foundation
of the action.71
xxxx
The question of proximate cause is said to be determined, not by the existence or non-existence of
intervening events, but by their character and the natural connection between the original act or
omission and the injurious consequences. When the intervening cause is set in operation by the original
negligence, such negligence is still the proximate cause; x x x If the party guilty of the first act of
negligence might have anticipated the intervening cause, the connection is not broken; x x x. Any
number of causes and effects may intervene, and if they arc such as might with reasonable diligence
have been foreseen, the last result is to be considered as the proximate result. But whenever a new
cause intervenes, which is not a consequence of the first wrongful cause, which is not under control of
the wrongdoer, which could not have been foreseen by the exercise of reasonable diligence, and except
for which the final injurious consequence could not have happened, then such injurious consequence
must be deemed too remote; x x x.72 (bold underscoring supplied for emphasis)
An examination of the records in accordance with the foregoing concepts supports the conclusions that
the negligence of Intergames was the proximate cause of the death of Rommel; and that the negligence
of the jeepney driver was not an efficient intervening cause.
First of all, Intergames' negligence in not conducting the race in a road blocked off from vehicular traffic,
and in not properly coordinating the volunteer personnel manning the marathon route effectively set the
stage for the injury complained of. The submission that Intergames had previously conducted numerous
safe races did not persuasively demonstrate that it had exercised due diligence because, as the trial
court pointedly observed, "[t]hey were only lucky that no accident occurred during the previous
marathon races but still the danger was there."73
Secondly, injury to the participants arising from an unfortunate vehicular accident on the route was an
event known to and foreseeable by Intergames, which could then have been avoided if only Intergames
had acted with due diligence by undertaking the race on a blocked-off road, and if only Intergames had
enforced and adopted more efficient supervision of the race through its volunteers.
And, thirdly, the negligence of the jeepney driver, albeit an intervening cause, was not efficient enough
to break the chain of connection between the negligence of Intergames and the injurious consequence
suffered by Rommel. An intervening cause, to be considered efficient, must be "one not produced by a
wrongful act or omission, but independent of it, and adequate to bring the injurious results. Any cause
intervening between the first wrongful cause and the final injury which might reasonably have been
foreseen or anticipated by the original wrongdoer is not such an efficient intervening cause as will
relieve the original wrong of its character as the proximate cause of the final injury."74
In fine, it was the duty of Intergames to guard Rommel against the foreseen risk, but it failed to do so.

III
The doctrine of assumption of risk
had no application to Rommel
Unlike the R TC, the CA ruled that the doctrine of assumption of risk applied herein; hence, it declared
Intergames and Cosmos not liable. The CA rendered the following rationalization to buttress its ruling,
to wit:
In this case, appellant Romulo Abrogar himself admitted that his son, Rommel Abrogar, surveyed the
route of the marathon and even attended a briefing before the race. Consequently, he was aware that
the marathon would pass through a national road and that the said road would not be blocked off from
traffic. And considering that he was already eighteen years of age, had voluntarily participated in the
marathon, with his parents' consent, and was well aware of the traffic hazards along the route, he
thereby assumed all the risks of the race. This is precisely why permission from the participant's
parents, submission of a medical certificate and a waiver of all rights and causes of action arising from
the participation in the marathon which the participant or his heirs may have against appellant
Intergames were required as conditions in joining the marathon.
In the decision of the trial court, it stated that the risk mentioned in the waiver signed by Rommel
Abrogar only involved risks such as stumbling, suffering heatstroke, heart attack and other similar risks.
It did not consider vehicular accident as one of the risks included in the said waiver.
This Court does not agree. With respect to voluntary participation in a sport, the doctrine of assumption
of risk applies to any facet of the activity inherent in it and to any open and obvious condition of the
place where it is carried on. We believe that the waiver included vehicular accidents for the simple
reason that it was a road race run on public roads used by vehicles. Thus, it cannot be denied that
vehicular accidents are involved. It was not a track race which is held on an oval and insulated from
vehicular traffic. In a road race, there is always the risk of runners being hit by motor vehicles while they
train or compete. That risk is inherent in the sport and known to runners. It is a risk they assume every
time they voluntarily engage in their sport.
Furthermore, where a person voluntarily participates in a lawful game or contest, he assumes the
ordinary risks of such game or contest so as to preclude recovery from the promoter or operator of the
game or contest for injury or death resulting therefrom. Proprietors of amusements or of places where
sports and games are played are not insurers of safety of the public nor of their patrons.
In Mc Leod Store v. Vinson 213 Ky 667, 281 SW 799 (1926), it was held that a boy, seventeen years
of age, of ordinary intelligence and physique, who entered a race conducted by a department store, the
purpose of which was to secure guinea fowl which could be turned in for cash prizes, had assumed the
ordinary risks incident thereto and was barred from recovering against the department store for injuries
suffered when, within catching distance, he stopped to catch a guinea, and was tripped or stumbled
and fell to the pavement, six or eight others falling upon him. The comi further said: "In this (the race)
he was a voluntary participant. x x x The anticipated danger was as obvious to him as it was to appellant
(the department store). While not an adult, he was practically 17 years of age, of ordinary intelligence,
and perfectly able to determine the risks ordinarily incident to such games. An ordinary boy of that age
is practically as well advised as to the hazards of baseball, basketball, football, foot races and other
games of skill and endurance as is an adult
x x x."
In the case at bar, the "1st Pop Cola Junior Marathon" held on June 15, 1980 was a race the winner of
which was to represent the country in the annual Spirit of Pheidippides Marathon Classic in Greece, if
he equals or breaks the 29-minute mark for the 19-km. race. Thus, Rommel Abrogar having voluntarily
participated in the race, with his parents' consent, assumed all the risks of the race.75

The doctrine of assumption of risk means that one who voluntarily exposes himself to an obvious,
known and appreciated danger assumes the risk of injury that may result therefrom.76 It rests on the
fact that the person injured has consented to relieve the defendant of an obligation of conduct toward
him and to take his chance of injury from a known risk, and whether the former has exercised proper
caution or not is immaterial.77 In other words, it is based on voluntary consent, express or implied, to
accept danger of a known and appreciated risk; it may sometimes include acceptance of risk arising
from the defendant's negligence, but one does not ordinarily assume risk of any negligence which he
does not know and appreciate.78 As a defense in negligence cases, therefore, the doctrine requires
the concurrence of three elements, namely: (1) the plaintiff must know that the risk is present; (2) he
must further understand its nature; and (3) his choice to incur it must be free and voluntary.79 According
to Prosser:80"Knowledge of the risk is the watchword of assumption of risk."
Contrary to the notion of the CA, the concurrence of the three elements was not shown to exist. Rommel
could not have assumed the risk of death when he participated in the race because death was neither
a known nor normal risk incident to running a race. Although he had surveyed the route prior to the
race and should be presumed to know that he would be running the race alongside moving vehicular
traffic, such knowledge of the general danger was not enough, for some authorities have required that
the knowledge must be of the specific risk that caused the harm to him.81 In theory, the standard to be
applied is a subjective one, and should be geared to the particular plaintiff and his situation, rather than
that of the reasonable person of ordinary prudence who appears in contributory negligence.82 He could
not have appreciated the risk of being fatally struck by any moving vehicle while running the race.
Instead, he had every reason to believe that the organizer had taken adequate measures to guard all
participants against any danger from the fact that he was participating in an organized marathon. Stated
differently, nobody in his right mind, including minors like him, would have joined the marathon if he
had known of or appreciated the risk of harm or even death from vehicular accident while running in
the organized running event. Without question, a marathon route safe and free from foreseeable risks
was the reasonable expectation of every runner participating in an organized running event.
Neither was the waiver by Rommel, then a minor, an effective form of express or implied consent in the
context of the doctrine of assumption of risk. There is ample authority, cited in Prosser,83 to the effect
that a person does not comprehend the risk involved in a known situation because of his youth,84 or
lack of information or experience,85and thus will not be taken to consent to assume the risk.
Clearly, the doctrine of assumption of risk does not apply to bar recovery by the petitioners.
IV
Cosmos is not liable for the negligence
of Intergames as the organizer
Nonetheless, the CA did not err in absolving Cosmos from liability.
The sponsorship of the marathon by Cosmos was limited to financing the race. Cosmos did nothing
beyond that, and did not involve itself at all in the preparations for the actual conduct of the race. This
verity was expressly confirmed by Intergames, through Castro, Jr., who declared as follows:
COURT
q Do you discuss all your preparation with Cosmos Bottling Company?
a As far as the Cosmos Bottling Company (sic) was a sponsor as to the actual conduct of the race, it
is my responsibility. The conduct of the race is my responsibility. The sponsor has nothing to do as well
as its code of the race because they are not the ones running. I was the one running. The responsibility
of Cosmos was just to provide the sponsor's money.
COURT

q They have no right to who (sic) suggest the location, the number of runners, you decide these yourself
without consulting them?
a Yes, your honor.86
We uphold the finding by the CA that the role of Cosmos was to pursue its corporate commitment to
sports development of the youth as well as to serve the need for advertising its business. In the absence
of evidence showing that Cosmos had a hand in the organization of the race, and took part in the
determination of the route for the race and the adoption of the action plan, including the safety and
security measures for the benefit of the runners, we cannot but conclude that the requirement for the
direct or immediate causal connection between the financial sponsorship of Cosmos and the death of
Rommel simply did not exist. Indeed, Cosmos' mere sponsorship of the race was, legally speaking, too
remote to be the efficient and proximate cause of the injurious consequences.
V
Damages
Article 2202 of the Civil Code lists the damages that the plaintiffs in a suit upon crimes and quasi-delicts
can recover from the defendant, viz.:
Art. 2202. In crimes and quasi-delicts, the defendant shall be liable for all damages which are the natural
and probable consequences of the act or omission complained of. It is not necessary that such
damages have been foreseen or could have reasonably been foreseen by the defendant.
Accordingly, Intergames was liable for all damages that were the natural and probable consequences
of its negligence. In its judgment, the RTC explained the award of damages in favor of the petitioners,
as follows:
As borne by the evidence on record, the plaintiffs incurred medical, hospitalization and burial expenses
for their son in this aggregate amount of ₱28,061.65 (Exhibits "D'', "D-1" and "D-2"). In instituting this
case, they have paid their lawyer ₱5,000 as initial deposit, their arrangement being that they would pay
attorney's fees to the extent of 10% of whatever amount would be awarded to them in this case.
For the loss of a son, it is unquestionable that plaintiffs suffered untold grief which should entitle them
to recover moral damages, and this Court believes that if only to assuage somehow their untold grief
but not necessarily to compensate them to the fullest, the nominal amount of ₱l00,00.00 should be paid
by the defendants.
For failure to adopt elementary and basic precautionary measure to insure the safety of the participants
so that sponsors and organizers of sports events should exercise utmost diligence in preventing injury
to the participants and the public as well, exemplary damages should also be paid by the defendants
and this Court considers the amount of ₱50,000.00
as reasonable.87
Although we will not disturb the foregoing findings and determinations, we need to add to the
justification for the grant of exemplary damages. Article 2231 of the Civil Code stipulates that exemplary
damages are to be awarded in cases of quasi-delict if the defendant acted with gross negligence. The
foregoing characterization by the RTC indicated that Intergames' negligence was gross. We agree with
the characterization. Gross negligence, according to Mendoza v. Spouses Gomez,88 is the absence of
care or diligence as to amount to a reckless disregard of the safety of persons or property; it evinces a
thoughtless disregard of consequences without exerting any effort to avoid them. Indeed, the failure of
Intergames to adopt the basic precautionary measures for the safety of the minor participants like
Rommel was in reckless disregard of their safety. Conduct is reckless when it is an extreme departure
from ordinary care, in a situation in which a high degree of danger is apparent; it must be more than
any mere mistake resulting from inexperience, excitement, or confusion, and more than mere
thoughtlessness or inadvertence, or simple inattention.89 The RTC did not recognize the right of the
petitioners to recover the loss of earning capacity of Rommel. It should have, for doing so would have
conformed to jurisprudence whereby the Court has unhesitatingly allowed such recovery in respect of
children, students and other non-working or still unemployed victims. The legal basis for doing so is
Article 2206 (l) of the Civil Code, which stipulates that the defendant "shall be liable for the loss of the
earning capacity of the deceased, and the indemnity shall be paid to the heirs of the latter; such
indemnity shall in every case be assessed and awarded by the court, unless the deceased on account
of permanent physical disability not caused by the defendant, had no earning capacity at the time of
his death."
Indeed, damages for loss of earning capacity may be awarded to the heirs of a deceased non-working
victim simply because earning capacity, not necessarily actual earning, may be lost.
In Metro Manila Transit Corporation v. Court of Appeals,90 damages for loss of earning capacity were
granted to the heirs of a third-year high school student of the University of the Philippines Integrated
School who had been killed when she was hit and run over by the petitioner's passenger bus as she
crossed Katipunan Avenue in Quezon City. The Court justified the grant in this wise:
Compensation of this nature is awarded not for loss of earnings but for loss of capacity to earn money.
Evidence must be presented that the victim, if not yet employed at the time of death, was reasonably
certain to complete training for a specific profession. In People v. Teehankee, no award of
compensation for loss of earning capacity was granted to the heirs of a college freshman because there
was no sufficient evidence on record to show that the victim would eventually become a professional
pilot. But compensation should be allowed for loss of earning capacity resulting from the death of a
minor who has not yet commenced employment or training for a specific profession if sufficient evidence
is presented to establish the amount thereor.91 (bold underscoring supplied for emphasis)
In People v. Sanchez,92 damages for loss of earning capacity was also allowed to the heirs of the
victims of rape with homicide despite the lack of sufficient evidence to establish what they would have
earned had they not been killed. The Court rationalized its judgment with the following observations:
Both Sarmenta and Gomez were senior agriculture students at UPLB, the country's leading educational
institution in agriculture.1âwphi1 As reasonably assumed by the trial court, both victims would have
graduated in due course. Undeniably, their untimely death deprived them of their future time and
earning capacity. For these deprivation, their heirs are entitled to compensation. xxxx. However,
considering that Sarmenta and Gomez would have graduated in due time from a reputable university,
it would not be unreasonable to assume that in 1993 they would have earned more than the minimum
wage. All factors considered, the Court believes that it is fair and reasonable to fix the monthly income
that the two would have earned in 1993 at ₱8,000.000 per month (or ₱96,000.00/year) and their
deductible living and other incidental expenses at ₱3,000.00 per month (or ₱36,000.00/year).93 (bold
underscoring supplied for emphasis)
In Perena v. Zarate,94 the Court fixed damages for loss of earning capacity to be paid to the heirs of
the 15-year-old high school student of Don Bosco Technical Institute killed when a moving train hit the
school van ferrying him to school while it was traversing the railroad tracks. The RTC and the CA had
awarded damages for loss of earning capacity computed on the basis of the minimum wage in effect
at the time of his death. Upholding said findings, the Court opined:
x x x, the fact that Aaron was then without a history of earnings should not be taken against his parents
and in favor of the defendants whose negligence not only cost Aaron his life and his right to work and
earn money, but also deprived his parents of their right to his presence and his services as well. x x x.
Accordingly, we emphatically hold in favor of the indemnification for Aaron's loss of earning capacity
despite him having been unemployed, because compensation of this nature is awarded not for loss of
time or earnings but for loss of the deceased's power or ability to earn money.

The petitioners sufficiently showed that Rommel was, at the time of his untimely but much lamented
death, able-bodied, in good physical and mental state, and a student in good standing.95 It should be
reasonable to assume that Rommel would have finished his schooling and would turn out to be a useful
and productive person had he not died. Under the foregoing jurisprudence, the petitioners should be
compensated for losing Rommel's power or ability to earn. The basis for the computation of earning
capacity is not what he would have become or what he would have wanted to be if not for his untimely
death, but the minimum wage in effect at the time of his death. The formula for this purpose is:
Net Earning Capacity = Life Expectancy x [Gross Annual Income less Necessary Living Expenses ]96
Life expectancy is equivalent to 2/3 multiplied by the difference of 80 and the age of the deceased.
Since Rommel was 18 years of age at the time of his death, his life expectancy was 41 years. His
projected gross annual income, computed based on the minimum wage for workers in the non-
agricultural sector in effect at the time of his death,97then fixed at ₱l4.00/day, is ₱5,535.83. Allowing for
necessary living expenses of 50% of his projected gross annual income, his total net earning capacity
is ₱l13,484.52.
Article 2211 of the Civil Code expressly provides that interest, as a part of damages, may be awarded
in crimes and quasi-delicts at the discretion of the court. The rate of interest provided under Article 2209
of the Civil Code is 6% per annum in the absence of stipulation to the contrary. The legal interest rate
of 6% per annum is to be imposed upon the total amounts herein awarded from the time of the judgment
of the RTC on May 10, 1991 until finality of judgment.98 Moreover, pursuant to Article 221299 of the Civil
Code, the legal interest rate of 6o/o per annum is to be further imposed on the interest earned up to
the time this judgment of the Court becomes final and executory until its full satisfaction.100
Article 2208 of the Civil Code expressly allows the recovery of attorney's fees and expenses of litigation
when exemplary damages have been awarded.1âwphi1 Thus, we uphold the RTC's allocation of
attorney's fees in favor of the petitioners equivalent to 10% of the total amount to be recovered, inclusive
of the damages for loss of earning capacity and interests, which we consider to be reasonable under
the circumstances.
WHEREFORE, the Court PARTLY AFFIRMS the decision promulgated on March 10, 2004 to the
extent that it absolved COSMOS BOTTLING COMPANY, INC. from liability; REVERSES and SETS
ASIDE the decision as to INTERGAMES, INC., and REINSTATES as to it the judgment rendered on
May 10, 1991 by the Regional Trial Court, Branch 83, in Quezon City subject to
the MODIFICATIONS that INTERGAMES, INC. is ORDERED TO PAY to the petitioners, in addition
to the aw3:rds thereby allowed: (a) the sum of ₱l13,484.52 as damages for the loss of Rommel
Abrogar's earning capacity; (b) interest of 6% per annum on the actual damages, moral damages,
exemplary damages and loss of earning capacity reckoned from May 10, 1991 until full payment; (c)
compounded interest of 6% per annum from the finality of this decision until full payment; and (d) costs
of suit.
SO ORDERED.
Dela Cruz v. Octaviano
July 26, 2017
G.R. No. 219649
AL DELA CRUZ, Petitioner
vs.
CAPT. RENATO OCTA VIANO and WILMA OCTA VIANO, Respondents
DECISION
PERALTA, J.:

Before this Court is the Petition for Review on Certiorari under Rule 45 of the Rules of Court, dated
August 12, 2015, of petitioner Al Dela Cruz that seeks to reverse and set aside the Decision1 dated
January 30, 2014 and Resolution2 dated June 22, 2015 of the Court of Appeals (CA) reversing the:
Decision dated February 24, 2009 of the Regional Trial Court (RTC), Branch 275, Las Piñas City in a
civil case for damages.
The facts follow.
Around 9:00 p.m. on April 1, 1999, respondent Captain Renato Octaviano, a military dentist assigned
at the Office of the Chief Dental Service, Armed Forces of the Philippines, Camp Aguinaldo, Quezon
City, respondent Wilma Octaviano, Renato's mother and Janet Octaviano, Renato's sister, rode a
tricycle driven by Eduardo Y. Padilla. Respondent Wilma and Janet were inside the sidecar of the
vehicle, while Renato rode at the back of the tricycle driver. They then proceeded to Naga Road towards
the direction of CAA and BF Homes. Renato was asking his mother for a change to complete his ₱l0.00
bill when he looked at the road and saw a light from an oncoming car which was going too fast. The
car, driven by petitioner, hit the back portion of the tricycle where Renato was riding. The force of the
impact caused the tricycle to tum around and land on the pavement near the gutter. Thus, Renato was
thrown from the tricycle and landed on the gutter about two meters away. Renato felt severe pain in his
lower extremities and went momentarily unconscious and when he regained consciousness, he heard
his sister shouting for help. A man came followed by other people. The first man who answered Janet's
call for help shouted to another man at a distance saying: "Ikaw, dalhin mo yung sasakyan mo dito.
Jkaw ang nakabangga sa kanila. Dalhin mo sila sa ospital." They pulled Renato out of the gutter and
carried him to the car. Petitioner brought them to his house and alighted thereat for two to three minutes
and then he brought the passengers to a clinic. Renato insisted on being brought to a hospital because
he realized the severity of his injuries. Thus, Renato, hb mother, and Janet were brought to Perpetual
Help Medical Center where Renato's leg was amputated from below the knee on that same night. After
his treatment at Perpetual Help Medical Center, Renato was brought to the AFP Medical Center at V.
Luna General Hospital and stayed there for nine months for rehabilitation. Shortly before his discharge
at V. Luna, he suffered bone infection. He was brought to Fort Bonifacio Hospital where he was
operated on thrice for bone infection. Thereafter, he was treated at the same hospital for six months.
In the year 2000, he had a prosthesics attached to his leg at V. Luna at his own expense. Renato spent
a total of ₱623,268.00 for his medical bills and prosthetics.
Thus, Renato and his mother Wilma filed with the RTC a civil case for damages against petitioner and
the owner of the vehicle.
Aside from their testimonies, the complainants, herein respondents presented the testimonies of S/Sgt.
Joselito Lacuesta (S/Sgt. Lacuesta) and Antonio Fernandez.
According to S/Sgt. Lacuesta, he was somewhere along Naga Road around 9:00 p.m. when the incident
occurred. He was talking with his three friends when he felt like urinating, so he moved a few paces
away from his companions. When he was about to relieve himself, he saw an oncoming vehicle with
bright lights and also saw a tricycle which was not moving fast and after the latter passed him by, it
collided with the vehicle. He then saw someone fell down near him and when he saw that the car was
about to move, he told his companions to stop the car from leaving. Thereafter, he noticed that the
person who landed in front of him was already unconscious so he helped him and called one of his
companions to carry the injured man to the car. He told the driver of the car "lsakay mo ito, nabangga
mo ito," and then proceeded to board the injured man in front of the car, while he told the other
passengers of the tricycle to board at the back of the car. His companions forcibly took (''pinilas") the
license plate of the car and he also noticed that the driver of the car was drunk ("nakainom"). After the
car left, he and his companions stayed in the area wherein a policeman later arrived and towed the
tricycle.
Witness Antonio Fernandez, one of S/Sgt. Lacuesta's companions, corroborated the latter's testimony.
Petitioner, on the other hand, testified that on April 1, 1999, he borrowed the car of Dr. Isagani Cirilo, a
Honda Civic registered under the name of the latter, to bring his mother to church. Thus, he then brought
his mother to the Jehovah's Witness church in Greenview which was about 20 to 25 minute drive from
their house in Naga Road, Pulanlupa. Around 6:25 p.m., he went home directly from the church and
waited for the call of his mother. Thereafter, he left the house around 8:30 p.m. and went to pick up fish
food that he previously ordered before fetching his mother. When he was along Naga Road, he noticed
a tricycle from a distance of about 100 to 120 meters away and was going the opposite direction. He
also noticed an Elf van parked along the road on the opposite side. He flashed his low beam and high
beam light to signal the tricycle. The tricycle then slowed down and stopped a bit, hence, he also slowed
down. Suddenly, the tricycle picked up speed from its stop position and the two vehicles collided. He
then stopped his car a few meters away from the collision site and made a u-turn to confront the driver
of the tricycle. He also noticed that there were already about a dozen people around the site of the
collision. He saw a man sitting on the gutter and proceeded to move the car towards the former and
asked him and his companions to help board the injured man and the latter's co-passengers of the
tricycle in the car he was driving. Thereafter, he drove them to Perpetual Help Hospital where the man
was treated for his injuries.
The testimony of Imelda Cirilo, the wife of the owner of the car, was also presented. She testified,
among others, that on the night of the accident, petitioner borrowed their car to bring the latter's mother
to the church and that upon learning of the incident, she went to Perpetual Help Hospital and signed
on the Admission Slip so that respondent Renato could be operated on without the former admitting
any liability. She also testified that she offered to help the victims, but the latter refused and that she
admitted that she did not give any financial assistance for the hospital bills nor for medicines.
Renato Martinez, a traffic enforcer, was also presented and testified that he received a call through
radio about an incident along Naga Road, Pulanlupa, Las Piñas City around 8:30 p.m. so he proceeded
to the area and arrived there around 9:00 p.m. When he arrived at the scene, nobody was there and
that the vehicles involved in the collision were no longer there. At the scene of the accident, he saw
splinters of glass on the road but there was no blood and he also saw an Elf van parked along the street
fronting CAA. He then proceeded to Perpetual Help Hospital after he received a call on his radio that
the people involved in the accident were already at the said hospital. At the hospital, he was able to
talk with petitioner. Thereafter, he called up his base and informed the base that the driver of the Honda
Civic was at the hospital. Later on, Sgt. Soriano, the investigator-on-duty arrived at the hospital and
instructed Sgt. Martinez to accompany petitioner to the headquarters because some relatives of
respondents were asking that petitioner be brought to Fort Bonifacio. Thus, Sgt. Martinez and petitioner
boarded the Honda Civic involved in the accident and proceeded to the headquarters.
The RTC, in its Decision dated February 24, 2009, dismissed the claim of respondents. According to
the RTC, petitioner's version of the incident was more believable because it was corroborated by Sgt.
Martinez who testified that he saw an Elf van parked along the street. The R TC also ruled that petitioner
did everything that was expected of a cautious driver. The court further ruled that the owner of the
Honda Civic, Isagani Cirilo could not be held liable because petitioner was a family friend who merely
borrowed the car and not his driver nor his employee. It was also ruled that the liability rests on the
tricycle driver who drove without license and petitioner's contributory negligence in riding at the back of
the driver in violation of Municipal Ordinance No. 35-88 that limits the passengers of a tricycle to three
persons including the driver.
Respondents appealed the R TC decision to the CA.
In its Decision dated January 30, 2014, the CA reversed the RTC's decision. According to the CA,
petitioner was negligent as shown in the police report. It also found that petitioner was positive for
alcoholic breath, thus, he violated Republic Act (R.A.) No. 4136 that prohibits any person from driving
a motor vehicle while under the influence of alcohol or narcotic drug. It also ruled that the owner of the

vehicle is equally responsible and liable for the accident and the resulting injuries that the victims
sustained. As such, the CA disposed of the case as follows:
WHEREFORE, in view of the foregoing, the decision appealed from is hereby REVERSED and SET
ASIDE. Defendants are held solidarily liable to plaintiffs and ordered to pay the plaintiffs in the following
manner:
1. pay plaintiff Wilma Octaviano the following: medical expenses, ₱l,500.00, hospital expenses,
₱l,450.00 and transportation expenses, ₱6,000.00;
2. pay plaintiff Renato Octaviano the following: hospital expenses, ₱369,354.00, medical expenses,
₱60,462.23, loss of income, ₱90,000.00;
3. pay [plaintiff] Wilma Octaviano ₱50,000.00 as and by way of moral damages;
4. pay plaintiff Renato Octaviano ₱l00,000.00 as and by way of moral damages;
5. pay plaintiffs ₱20,000.00 each as and by way of exemplary damages; and
6. pay plaintiffs ₱100,000.00 as attorney's fees.
SO ORDERED.3
Thus, the present petition after the CA denied petitioner's motion for reconsideration.
Petitioner relies upon the following grounds:
I
THE COURT OF APPEALS GRAVELY ERRED IN HOLDING THAT THE PETITIONER WAS
NEGLIGENT WHILE DRIVING HIS CAR.
II
THE FINDINGS OF FACT OF THE COURT OF APPEALS ARE NOT SUPPORTED BY THE
EVIDENCE ADDUCED.
III
THE COURT OF APPEALS GRAVELY ERRED IN FAILING TO CONSIDER THAT THE PROXIMATE
CAUSE OF THE INCIDENT WAS THE FAULT OR GROSS NEGLIGENCE OF THE TRICYCLE
DRIVER.
IV
THE COURT OF APPEALS MANIFESTLY OVERLOOKED CERTAIN FACTS NOT DISPUTED BY
THE PARTIES AND WHICH, IF PROPERLY CONSIDERED, WOULD JUSTIFY A DIFFERENT
CONCLUSION.4
Petitioner insists that he was not negligent and that the driver of the tricycle was the one at fault. He
also argues that the investigation report relied upon by the CA should not have been used in
determining what actually transpired because the traffic investigator was not presented as a witness
and petitioner was not able to confront or cross-examine him regarding the report. Petitioner further
denies that he was drunk when the incident happened and that the CA erred in appreciating the mere
opinions of the witnesses that he appeared drunk at that time.
In their Comment, respondents contend that the issues raised by petitioner are factual in nature and
are not the proper subjects of a petition for review under Rule 45. They also contend that the CA did
not err in their finding that petitioner was negligent at the time of the incident.

A close reading of the present petition would show that the issues raised are factual in nature. This
Court has recognized exceptions to the rule that the findings of fact of the CA are conclusive and binding
in the following instances: (1) when the findings are grounded entirely on speculation, surmises or
conjectures; (2) when the inference made is manifestly mistaken, absurd or impossible; (3) when there
is grave abuse of discretion; (4) when the judgment is based on a misapprehension of facts; (5) when
the findings of facts are conflicting; (6) when in making its findings the CA went beyond the issues of
the case, or its findings are contrary to the admissions of both the appellant and the appellee; (7) when
the findings are contrary to the trial court; (8) when the findings are conclusions without citation of
specific evidence on which they are based; (9) when the facts set forth in the petition as well as in the
petitioner's main and reply briefs are not disputed by the respondent; (10) when the findings of fact are
premised on the supposed absence of evidence and contradicted by the evidence on record; and (11)
when the CA manifestly overlooked certain relevant facts not disputed by the parties, which, if properly
considered, would justify a different conclusion.5 Inasmuch as the R TC and the CA arrived at conflicting
findings of fact on who was the negligent party, the Court holds that an examination of the evidence of
the parties needs to be undertaken to properly determine the issue.6
The concept of negligence has been thoroughly discussed by this Court in Romulo Abrogar, et al. v.
Cosmos Bottling Company, et al.,7 thus:
Negligence is the failure to observe for the protection of the interests of another person that degree of
care, precaution, and vigilance which the circumstances justly demand, whereby such other person
suffers injury.8 Under Article 1173 of the Civil Code, it consists of the "omission of that diligence which
is required by the nature of the obligation and corresponds with the circumstances of the person, of the
time and of the place."9 The Civil Code makes liability for negligence clear under Article 2176,10 and
Article 20.11
To determine the existence of negligence, the following time-honored test has been set in Picart v.
Smith:12
They are not, and are not supposed to be, omniscient of the future. Hence, they can be expected to
warrant his foregoing the conduct or guarding against its consequences.13
xxxx

In order for liability from negligence to arise, there must be not only proof of damage and negligence,
but also proof that the damage was the consequence of the negligence. The Court has said in Vda. de
Gregorio v. Go Chong Bing:14
x x x Negligence as a source of obligation both under the civil law and in American cases was carefully
considered and it was held:
We agree with counsel for appellant that under the Civil Code, as under the generally accepted doctrine
in the United States, the plaintiff in an action such as that under consideration, in order to establish his
right to a recovery, must establish by competent evidence:
(1) Damages to the plaintiff.
(2) Negligence by act or omission of which defendant personally or some person for whose acts it must
respond, was guilty.
(3) The connection of cause and effect between the negligence and the damage."
In this case, the RTC found no reason to conclude that petitioner was negligent. The CA, however,
found the contrary. This Court must then ascertain whose evidence was preponderant, for Section
1,15 Rule 133 of the Rules of Court mandates that in civil cases, like this one, the party having the
burden of proof must establish his case by a preponderance of evidence. Burden of proof is the duty of
a party to present evidence on the facts in issue necessary to establish his claim or defense by the
amount of evidence required by law.16 It is basic that whoever alleges a fact has the burden of proving
it because a mere allegation is not evidence.17 Generally, the party who denies has no burden to
prove.18 In civil cases, the burden of proof is on the party who would be defeated if no evidence is given
on either side.19 The burden of proof is on the plaintiff if the defendant denies the factual allegations of
the complaint in the manner required by the Rules of Court, but it may rest on the defendant if he admits
expressly or impliedly the essential allegations but raises affirmative defense or defenses, which if
proved, will exculpate him from liability.20
By preponderance of evidence, according to Raymundo v. Lunaria:21
x x x is meant that the evidence as a whole adduced by one side is superior to that of the other. It refers
to the weight, credit and value of the aggregate evidence on either side and is usually considered to be
synonymous with the term "greater weight of evidence" or "greater weight of the credible evidence." It
is evidence which is more convincing to the court as worthy of belief than that which is offered in
opposition thereto.
In addition, according to United Airlines, Inc. v. Court of Appeals,22 the plaintiff must rely on the strength
of his own evidence and not upon the weakness of the defendant's.
After reviewing the records of the case, this Court affirms the findings of the CA. In ruling that petitioner
was negligent, the CA correctly appreciated the pieces of evidence presented by the respondents, thus:
First, with regard to the damage or injury, there is no question that the plaintiffs suffered damage due
to the incident on April 1, 1999. Plaintiff Renato Octaviano's right leg was crushed by the impact of the
Honda Civic driven by defendant Dela Cruz against the tricycle where the Octavianos were riding and
as a result thereof, Renato's right leg was amputated. Plaintiff Wilma Octaviano suffered traumatic
injuries/hematoma on different parts of her body as borne by the evidence submitted to the trial court.
The damages or injuries were duly proved by preponderant evidence.
Second, with regard to the wrongful act or omission imputable to the negligence of defendant Al Dela
Cruz, We hold that the trial court missed the glaring fact that defendant Dela Cruz was guilty of
negligence.

The police report prepared by the traffic investigator SPO2 Vicente Soriano detailed what happened on
the night of April 1, 1999, to wit:
xxxx
On the Spot Investigation conducted by the undersigned, showed that Vehicle 2 while moving ahead
and upon arriving in front of said motor shop, Vehicle 2 avoided hitting another tricycle which vehicle
(Tricycle) was standing while waiting for a would-be passenger. Said Veh-2 driver swerved the car to
the left and it was at this instance when said Veh-1 was sideswiped by said Veh-2.
xxx
Weather Condition: Fair
Road condition: Concrete and Dry
Driver's Condition: Veh-1, Normal; Veh-2 Positive for Alcoholic Breath (AB)"
For a clearer understanding of the said police report, Vehicle-I referred to by Soriano is the tricycle
where plaintiffs were riding, and Vehicle-2 is the Honda Civic driven by Dela Cruz.
Was the statement in the police report that Al Dela Cruz was positive for alcoholic breath
substantiated/corroborated?
Yes. Two witnesses testified that Dela Cruz appeared to be drunk on that fateful night. Joey Lacuesta
and Antonio Fernandez were there on the spot when the incident happened. They were the first ones
to assist the victim Renato Octaviano who was slumped unconscious in the gutter. Lacuesta was the
one who boarded the injured Renato into the front seat of the car and he noticed that the driver was
drunk:
Q: You said that you placed the injured person in front of the Honda Civic, the driver was there in the
car, what, if anything did you notice about the condition of the driver of the car?
A: Nakainom, I noticed that because when I boarded the injured person into the front passenger seat,
I noticed that he is drunk.
Antonio Fernandez heard his friend Aries Sy shout at the driver of the car to stop when it appeared to
by continuously moving. Fernandez also noted that the driver appeared to be drunk, thus:
Q: Now you said that the driver of the car was drunk. Did you say that when you testified?
A: Yes, sir. Lasing yung driver.
Q: What made you think that this driver of the car was drunk?
A: Because of his actions and he was also mad.
Q: Because he was mad, then you thought that he was drunk. x x x?
A: No, Sir. You can see or you can observe the actions of a person if he is drunk.
xxxx
More importantly, the law prohibits drunk driving. Republic Act No. 4136, Chapter IV, Article V, Section
53 known as Land Transportation and Traffic Code provides that no person shall drive a motor vehicle
while under the influence of liquor or narcotic drug. It is established by plaintiffs evidence that defendant
Dela Cruz drove the Honda Civic while under the influence of alcohol thus proving his negligence.
With regard to the third requisite, that there be a direct relation of cause and effect between the damage
or injury and the fault or negligence is clearly present in the case at bar. Had defendant Dela Cruz
exercised caution, his Honda Civic would not have collided with the tricycle and plaintiffs leg would not

be crushed necessitating its amputation. The cause of the injury or damage to the plaintiff’s leg is the
negligent act of defendant Dela Cruz.
The last requisite is that there be no pre-existing contractual relation between the parties. It is
undeniable that defendant and plaintiffs had no prior contractual relation, that they were strangers to
each other before the incident happened. Thus, the four requisites that must concur under Article 2176
are clearly established in the present case. Plaintiffs are entitled to claim damages.23
Petitioner argues that the CA erred in relying on the police report without petitioner having the chance
to cross-examine the police officer who prepared the same. Be that as it may, the contents of the said
police report are corroborated by the testimonies of the other witnesses presented before the court.
The said contents of the police report are more believable than the version of petitioner of what
transpired. As correctly observed by the CA:
Dela Cruz narrated in his testimony that he saw a parked Elf van on the opposite road and the tricycle
also on the opposite road going to the opposite direction. He claims that he flashed his low beam and
high beam to warn the tricycle, the tricycle stopped momentarily and then picked up
speed "umarangkada" and that was why the two vehicles collided. However, he admitted that the point
of impact of the two vehicles was "lagpas fang konti" from the front of the parked Elf. He could not stop.
He did not know what to do. He slowed down. He did not stop but continued driving. If it were true that
as far as about 100-120 meters away he already saw the parked Elf van and the tricycle, he could have
slowed down or stopped to give way to the tricycle to avoid collision. In fact, if the collision point was
right ahead of the front of the parked Elf van, it means that the tricycle was already past the parked Elf
and it was Dela Cruz who forced his way into the two-way road. More evident is that the tricycle was
hit at the back portion meaning it was already turning after passing the parked Elf. Had Dela Cruz
slowed down or stopped a short while to let the tricycle pass clear of the van, then the incident would
not have happened. The reasonable foresight required of a cautious driver was not exercised by
defendant Dela Cruz.24
As to the denial of petitioner that he was drunk at the time of the accident, whether or not he was in a
state of inebriation is inconsequential given the above findings.1âwphi1 His being sober does not and
will not erase the fact that he was still negligent and that the proximate cause of the collision was due
to his said negligence. Proximate cause is "that which, in natural and continuous sequence, unbroken
by any new cause, produces an event, and without which the event would not have occurred."25 As
such, petitioner is wrong when he claims that the proximate cause of the accident was the fault of the
tricycle driver.
Neither is it correct to impute contributory negligence on the part of the tricycle driver and respondent
Renato when the latter had violated a municipal ordinance that limits the number of passengers for
each tricycle for hire to three persons including the driver. Contributory negligence is conduct on the
part of the injured party, contributing as a legal cause to the harm he has suffered, which falls below
the standard to which he is required to conform for his own protection.26 To hold a person as having
contributed to his injuries, it must be shown that he performed an act that brought about his injuries in
disregard of warning or signs of an impending danger to health and body.27 To prove contributory
negligence, it is still necessary to establish a causal link, although not proximate, between the
negligence of the party and the succeeding injury. In a legal sense, negligence is contributory only
when it contributes proximately to the injury, and not simply a condition for its occurrence.28 In this case,
the causal link between the alleged negligence of the tricycle driver and respondent Renato was not
established. This court has appreciated that negligence per se, arising from the mere violation of a
traffic statute, need not be sufficient in itself in establishing liability for damages.29 Also, noteworthy is
the ruling of the CA as to the matter, thus:
The trial court absolved defendants of liability because of the failure of the plaintiffs to present the
tricycle driver and thus concluding that plaintiffs suppressed evidence adverse to them. This is error on
the part of the trial court. The non-presentation of the tricycle driver as a witness does not affect the
claim of the plaintiffs-appellants against herein defendants-appellees. Even granting that the tricycle
driver was presented in court and was proved negligent, his negligence cannot cancel out the
negligence of defendant Dela Cruz, because their liabilities arose from different sources. The obligation
or liability of the tricycle driver arose out of the contract of carriage between him and petitioners whereas
defendant Dela Cruz is liable under Article 2176 of the Civil Code or under quasi-delicts. There is ample
evidence to show that defendant Dela Cruz was negligent within the purview of Article 2176 of the Civil
Code, hence, he cannot escape liability.30
This Court further agrees with the CA that the respondents are entitled to the award of moral and
exemplary damages. Moral damages, x x x, may be awarded to compensate one for manifold injuries
such as physical suffering, mental anguish, serious anxiety, besmirched reputation, wounded feelings
and social humiliation. These damages must be understood to be in the concept of grants, not punitive
or corrective in nature, calculated to compensate the claimant for the injury suffered. Although incapable
of exactness and no proof of pecuniary loss is necessary in order that moral damages may be awarded,
the amount of indemnity being left to the discretion of the court, it is imperative, nevertheless, that (1)
injury must have been suffered by the claimant, and (2) such injury must have sprung from any of the
cases expressed in Article 221931 and Article 222032 of the Civil Code, x x x33 Also known as "punitive"
or "vindictive" damages, exemplary or corrective damages are intended to serve as a deterrent to
serious wrongdoings, and as a vindication of undue sufferings and wanton invasion of the rights of an
injured or a punishment for those guilty of outrageous conduct. These terms are generally, but not
always, used interchangeably. In common law, there is preference in the use of exemplary damages
when the award is to account for injury to feelings and for the sense of indignity and humiliation suffered
by a person as a result of an injury that has been maliciously and wantonly inflicted,34 the theory being
that there should be compensation for the hurt caused by the highly reprehensible conduct of the
defendant - associated with such circumstances as willfulness, wantonness, malice, gross negligence
or recklessness, oppression, insult or fraud or gross fraud35 - that intensifies the injury. The terms
punitive or vindictive damages are often used to refer to those species of damages that may be awarded
against a person to punish him for his outrageous conduct. In either case, these damages are intended
in good measure to deter the wrongdoer and others like him from similar conduct in the future.36
In awarding the above, the CA correctly ruled that:
It is extant in the records that defendants did not overturn or disprove the plaintiffs' claim for actual
damages such as the hospital bills/expenses which were duly supported by documentary evidence
(receipts). It was also duly proven that defendant Al Dela Cruz acted with gross disregard for the
suffering of his victims when he refused to board them in his car and only did so when forced by the
by-standers who assisted the victims, when he drove to his house first before driving to a clinic then to
[the] hospital when it was obvious that Renato Octaviano's wound was severe and needed immediate
professional attention. These insensitivity of defendant caused suffering to the plaintiffs that must be
compensated.37
As to the award of attorney's fees, Article 2208 of the New Civil Code provides the following:
ART. 2208. In the absence of stipulation, attorney's fees and expenses of litigation, other than judicial
costs, cannot be recovered, except:
(1) When exemplary damages are awarded;
(2) When the defendant's act or omission has compelled the plaintiff to litigate with third persons or to
incur expenses to protect his interest;
(3) In criminal cases of malicious prosecution against the plaintiff;
(4) In case of a clearly unfounded civil action or proceeding against the plaintiff;

(5) Where the defendant acted in gross and evident bad faith in refusing to satisfy the plaintiffs plainly
valid, just and demandable claim;
(6) In actions for legal support;
(7) In actions for the recovery of wages of household helpers, laborers and skilled workers;
(8) In actions for indemnity under workmen's compensation and employer's liability laws;
(9) In a separate civil action to recover civil liability arising from a crime;
(10) When at least double judicial costs are awarded;
(11) In any other case where the court deems it just and equitable that attorney's fees and expenses of
litigation should be recovered.
In this case, since exemplary damages are awarded, the award of attorney's fees is necessary.
WHEREFORE, the Petition for Review on Certiorari under Rule 45 of the Rules of Court, dated August
12, 2015, of petitioner Al Dela Cruz is DENIED for lack of merit. Consequently, the Decision dated
January 30, 2014 and Resolution dated June 22, 2015 of the Court of Appeals in CAG. R. CV No.
93399 are AFFIRMED.
SO ORDERED.
M EDICAL MALPRACTICE / NEGLIGENCE
Solidum v. People of the Philippines
see under topic on Negligence
Rosit v. Davao Doctors Hospital
G.R. No. 210445, December 07, 2015
NILO B. ROSIT, Petitioner, v. DAVAO DOCTORS HOSPITAL AND DR. ROLANDO G.
GESTUVO, Respondent.
DECISION
VELASCO JR., J.:
The Case
This is a petition filed under Rule 45 of the Rules of Court assailing the Decision and Resolution dated
January 22, 20131 and November 7, 2013,2 respectively, of the Court of Appeals, Cagayan De Oro City
(CA), in CA-G.R. CV No. 00911-MIN. The CA Decision reversed the Decision dated September 14,
20043of the Regional Trial Court, Branch 33 in Davao City-(RTC) in Civil Case No. 27,354-99, a suit
for damages thereat which Nilo B. Rosit (Rosit) commenced against Dr. Rolando Gestuvo (Dr.
Gestuvo).
Factual Antecedents
On January 15, 1999, Rosit figured in a motorcycle accident. The X-ray soon taken the next day at the
Davao Doctors Hospital (DDH) showed that he fractured his jaw. Rosit was then referred to Dr.
Gestuvo, a specialist in mandibular injuries,4 who, on January 19, 1999, operated on Rosit.
During the operation, Dr. Gestuvo used a metal plate fastened to the jaw with metal screws to
immobilize the mandible. As the operation required the smallest screws available, Dr. Gestuvo cut the
screws on hand to make them smaller. Dr. Gestuvo knew that there were smaller titanium screws

available in Manila, but did not so inform Rosit supposing that the latter would not be able to afford the
same.5
Following the procedure, Rosit could not properly open and close his mouth and was in pain. X-rays
done on Rosit two (2) days after the operation showed that the fracture in his jaw was aligned but the
screws used on him touched his molar. Given the X-ray results, Dr. Gestuvo referred Rosit to a dentist.
The dentist who checked Rosit, Dr. Pangan, opined that another operation is necessary and that it is
to be performed in Cebu.6
Alleging that the dentist told him that the operation conducted on his mandible was improperly done,
Rosit went back to Dr. Gestuvo to demand a loan to defray the cost of the additional operation as well
as the expenses of the trip to Cebu. Dr. Gestuvo gave Rosit P4,500.
Rosit went to Cebu on February 19, 1999, still suffering from pain and could hardly open his mouth.
In Cebu, Dr. Pangan removed the plate and screws thus installed by Dr. Gestuvo and replaced them
with smaller titanium plate and screws. Dr. Pangan also extracted Rosit's molar that was hit with a
screw and some bone fragments. Three days after the operation, Rosit was able to eat and speak well
and could open and close his mouth normally.7
On his return to Davao, Rosit demanded that Dr. Gestuvo reimburse him for the cost of the operation
and the expenses he incurred in Cebu amounting to P140,000, as well as for the P50,000 that Rosit
would have to spend for the removal of the plate and screws that Dr. Pangan installed. Dr. Gestuvo
refused to pay.8
Thus, Rosit filed a civil case for damages and attorney's fees with the RTC against Dr. Gestuvo and
DDH, the suit docketed as Civil Case No. 27,354-99.
The Ruling of the Regional Trial Court
The RTC freed DDH from liability on the ground that it exercised the proper diligence in the selection
and supervision of Dr. Gestuvo, but adjudged Dr. Gestuvo negligent and ruled, thus:
FOR ALL THE FOREGOING, finding the plaintiff Nilo B. Rosit to have preponderantly established his
cause of action in the complaint against defendant Dr. Rolando G. Gestuvo only, judgment is hereby
rendered for the plaintiff and against said defendant, ordering the defendant DR. ROLANDO G.
GESTUVO to pay unto plaintiff NILO B. ROSIT the following:chanRoblesvirtualLawlibrary
a) the sum of ONE HUNDRED FORTY THOUSAND ONE HUNDRED NINETY NINE PESOS and 13/100 (P140,199.13) representing
reimbursement of actual expenses incurred by plaintiff in the operation and re-operation of his mandible;
b) the sum of TWENTY NINE THOUSAND AND SIXTY EIGHT PESOS (P29,068.00) representing reimbursement of the filing fees and
appearance fees;
c) the sum of ONE HUNDRED FIFTY THOUSAND PESOS (P150,000.00) as and for attorney's fees;

d) the amount of FIFTY THOUSAND PESOS (P50,000.00) as moral damages;
e) the amount of TEN THOUSAND PESOS (P10,000.00) as exemplary damages; and
f) the costs of the suit.
For lack of merit, the complaint against defendant DAVAO DOCTORS HOSPITAL and the defendants'
counterclaims are hereby ordered DISMISSED.
Cost against Dr. Rolando G. Gestuvo.
SO ORDERED.
In so ruling, the trial court applied the res ipsa loquitur principle holding that "the need for expert,
medical testimony may be dispensed with because the injury itself provides the proof of negligence."
Therefrom, both parties appealed to the CA.
The Ruling of the Court of Appeals
In its January 22, 2013 Decision, the CA modified the appealed judgment by deleting the awards made
by the trial court, disposing as follows:
WHEREFORE, the appeal filed by Gestuvo is GRANTED. The Decision dated September 14, 2004 of
the Regional Trial Court, Branch 33, Davao City, rendered in Civil Case No. 27,354-99 is hereby
MODIFIED. The monetary awards adjudged in favor of Nilo B. Rosit are hereby DELETED for lack of
basis.
SO ORDERED.
Unlike the RTC, the CA ruled that the res ipsa loquitur principle is not applicable and that the testimony
of an expert witness is necessary for a finding of negligence. The appellate court also gave credence
to Dr. Pangan's letter stating the opinion that Dr. Gestuvo did not commit gross negligence in his
emergency management of Rosit's fractured mandible.
Rosit's motion for reconsideration was denied in the CA's November 7, 2013 Resolution.
Hence, the instant appeal.
The Issue
The ultimate issue for our resolution is whether the appellate court correctly absolved Dr. Gestuvo from
liability.
The Court's Ruling
The petition is impressed with merit.

In Flores v. Pineda,9 the Court explained the concept of a medical negligence case and the elements
required for its prosecution, viz:chanRoblesvirtualLawlibrary
A medical negligence case is a type of claim to redress a wrong committed by a medical professional,
that has caused bodily harm to or the death of a patient. There are four elements involved in a
medical negligence case, namely: duty, breach, injury, and proximate causation.
Duty refers to the standard of behavior which imposes restrictions on one's conduct. The standard in
turn refers to the amount of competence associated with the proper discharge of the profession. A
physician is expected to use at least the same level of care that any other reasonably competent doctor
would use under the same circumstances. Breach of duty occurs when the physician fails to comply
with these professional standards. If injury results to the patient as a result of this breach, the physician
is answerable for negligence. (Emphasis supplied)
An expert witness is not necessary as the res ipsa loquitur doctrine is applicable
To establish medical negligence, this Court has held that an expert testimony is generally required to
define the standard of behavior by which the court may determine whether the physician has properly
performed the requisite duty toward the patient. This is so considering that the requisite degree of skill
and care in the treatment of a patient is usually a matter of expert opinion.10
Solidum v. People of the Philippines11 provides an exception. There, the Court explained that where
the application of the principle of res ipsa loquitur is warranted, an expert testimony may be dispensed
with in medical negligence cases:
Although generally, expert medical testimony is relied upon in malpractice suits to prove that a
physician has done a negligent act or that he has deviated from the standard medical procedure,
when the doctrine of res ipsa loquitur is availed by the plaintiff, the need for expert medical
testimony is dispensed with because the injury itself provides the proof of negligence. The
reason is that the general rule on the necessity of expert testimony applies only to such matters clearly
within the domain of medical science, and not to matters that are within the common knowledge of
mankind which may be testified to by anyone familiar with the facts. x x x
Thus, courts of other jurisdictions have applied the doctrine in the following situations: leaving of a
foreign object in the body of the patient after an operation, injuries sustained on a healthy part of the
body which was not under, or in the area, of treatment, removal of the wrong part of the body when
another part was intended, knocking out a tooth while a patient's jaw was under anesthetic for the
removal of his tonsils, and loss of an eye while the patient plaintiff was under the influence of anesthetic,
during or following an operation for appendicitis, among others.
We have further held that resort to the doctrine of res ipsa loquitur as an exception to the requirement
of an expert testimony in medical negligence cases may be availed of if the following essential
requisites are satisfied: (1) the accident was of a kind that does not ordinarily occur unless someone is
negligent; (2) the instrumentality or agency that caused the injury was under the exclusive control of
the person charged; and (3) the injury suffered must not have been due to any voluntary action or
contribution of the person injured.12
In its assailed Decision, the CA refused to acknowledge the application of the res ipsa loquitur doctrine
on the ground that the foregoing elements are absent. In particular, the appellate court is of the position
that post-operative pain is not unusual after surgery and that there is no proof that the molar Dr. Pangan
removed is the same molar that was hit by the screw installed by Dr. Gestuvo in Rosit's mandible.
Further, a second operation was conducted within the 5-week usual healing period of the mandibular
fracture so that the second element cannot be considered present. Lastly, the CA pointed out that the
X-ray examination conducted on Rosit prior to his first surgery suggests that he had "chronic
inflammatory lung disease compatible," implying that the injury may have been due to Rosit's peculiar
condition, thus effectively negating the presence of the third element.13
After careful consideration, this Court cannot accede to the CA's findings as it is at once apparent from
the records that the essential requisites for the application of the doctrine of res ipsa loquitur are
present.
The first element was sufficiently established when Rosit proved that one of the screws installed by Dr.
Gestuvo struck his molar. It was for this issue that Dr. Gestuvo himself referred Rosit to Dr. Pangan. In
fact, the affidavit of Dr. Pangan presented by Dr. Gestuvo himself before the trial court narrated that
the same molar struck with the screw installed by Dr. Gestuvo was examined and eventually operated
on by Dr. Pangan. Dr. Gestuvo cannot now go back and say that Dr. Pangan treated a molar different
from that which was affected by the first operation.
Clearly, had Dr. Gestuvo used the proper size and length of screws and placed the same in the proper
locations, these would not have struck Rosit's teeth causing him pain and requiring him to undergo a
corrective surgery.
Dr. Gestuvo knew that the screws he used on Rosit were too large as, in fact, he cut the same with a
saw.14 He also stated during trial that common sense dictated that the smallest screws available should
be used. More importantly, he also knew that these screws were available locally at the time of the
operation.15 Yet, he did not avail of such items and went ahead with the larger screws and merely
sawed them off. Even assuming that the screws were already at the proper length after Dr. Gestuvo
cut the same, it is apparent that he negligently placed one of the screws in the wrong area thereby
striking one of Rosit's teeth.
In any event, whether the screw hit Rosit's molar because it was too long or improperly placed, both
facts are the product of Dr. Gestuvo's negligence. An average man of common intelligence would know
that striking a tooth with any foreign object much less a screw would cause severe pain. Thus, the first
essential requisite is present in this case.
Anent the second element for the res ipsa loquitur doctrine application, it is sufficient that the operation
which resulted in the screw hitting Rosit's molar was, indeed, performed by Dr. Gestuvo. No other
doctor caused such fact.
The CA finds that Rosit is guilty of contributory negligence in having Dr. Pangan operate on him during
the healing period of his fractured mandible. What the CA overlooked is that it was Dr. Gestuvo himself
who referred Rosit to Dr. Pangan. Nevertheless, Dr. Pangan's participation could not have contributed
to the reality that the screw that Dr. Gestuvo installed hit Rosit's molar.
Lastly, the third element that the injury suffered must not have been due to any voluntary action or
contribution of the person injured was satisfied in this case. It was not shown that Rosit's lung disease
could have contributed to the pain. What is clear is that he suffered because one of the screws that Dr.
Gestuvo installed hit Rosit's molar.
Clearly then, the res ipsa loquitur doctrine finds application in the instant case and no expert testimony
is required to establish the negligence of defendant Dr. Gestuvo.
Petitioner was deprived of the opportunity to make an "informed consent"

What is more damning for Dr. Gestuvo is his failure to inform Rosit that such smaller screws were
available in Manila, albeit at a higher price.16 As testified to by Dr. Gestuvo himself:
Court Alright. This titanium materials according to you were already available in the Philippines since the time of Rosit's accident?
Witness Yes, your Honor.
xxxx
Court Did you inform Rosit about the existence of titanium screws and plates which according to you is the screws and plates of
choice?
Witness No, your Honor.
xxxx
Witness The reason I did not inform him anymore Judge because what I thought he was already hard up with the down payment.
And if I will further introduce him this screws, the more he will not be able to afford the operation.
xxxx
Court This titanium screws and plates were available then it is up to Rosit to decide whether to use it or not because after all the
material you are using is paid by the patient himscll, is it not?
Witness Yes, that is true.
Li v. Soliman17 made the following disquisition on the relevant Doctrine of Informed Consent in relation
to medical negligence cases, to wit:
The doctrine of informed consent within the context of physician-patient relationships goes far back into
English common law. x x x From a purely ethical norm, informed consent evolved into a general
principle of law that a physician has a duty to disclose what a reasonably prudent physician in the

medical community in the exercise of reasonable care would disclose to his patient as to whatever
grave risks of injury might be incurred from a proposed course of treatment, so that a patient, exercising
ordinary care for his own welfare, and faced with a choice of undergoing the proposed treatment, or
alternative treatment, or none at all, may intelligently exercise his judgment by reasonably balancing
the probable risks against the probable benefits.
xxxx
There are four essential elements a plaintiff must prove in a malpractice action based upon the doctrine
of informed consent: "(1) the physician had a duty to disclose material risks; (2) he failed to disclose or
inadequately disclosed those risks; (3) as a direct and proximate result of the failure to disclose, the
patient consented to treatment she otherwise would not have consented to; and (4) plaintiff was injured
by the proposed treatment." The gravamen in an informed consent case requires the plaintiff to "point
to significant undisclosed information relating to the treatment which would have altered her decision
to undergo it." (Emphasis supplied)
The four adverted essential elements above are present here.
First, Dr. Gestuvo clearly had the duty of disclosing to Rosit the risks of using the larger screws for the
operation. This was his obligation as the physician undertaking the operation.
Second, Dr. Gestuvo failed to disclose these risks to Rosit, deciding by himself that Rosit could not
afford to get the more expensive titanium screws.
Third, had Rosit been informed that there was a risk that the larger screws are not appropriate for the
operation and that an additional operation replacing the screws might be required to replace the same,
as what happened in this case, Rosit would not have agreed to the operation. It bears pointing out that
Rosit was, in fact, able to afford the use of the smaller titanium screws that were later used by Dr.
Pangan to replace the screws that were used by Dr. Gestuvo.
Fourth, as a result of using the larger screws, Rosit experienced pain and could not heal properly
because one of the screws hit his molar. This was evident from the fact that just three (3) days after Dr.
Pangan repeated the operation conducted by Dr. Gestuvo, Rosit was pain-free and could already
speak. This is compared to the one (1) month that Rosit suffered pain and could not use his mouth after
the operation conducted by Dr. Gestuvo until the operation of Dr. Pangan.
Without a doubt, Dr. Gestuvo is guilty of withholding material information which would have been vital
in the decision of Rosit in going through with the operation with the materials at hand. Thus, Dr. Gestuvo
is also guilty of negligence on this ground.
Dr. Pangan's Affidavit is not admissible
The appellate court's Decision absolving Dr. Gestuvo of negligence was also anchored on a letter
signed by Dr. Pangan who stated the opinion that Dr. Gestuvo did not commit gross negligence in his
emergency management of Mr. Rosit's fractured mandible.18 Clearly, the appellate court overlooked
the elementary principle against hearsay evidence.
In Dantis v. Maghinang, Jr.,19 the Court reiterated the oft-repeated rule that "an affidavit is merely
hearsay evidence where its affiant/maker did not take the witness stand." Here, Dr. Pangan never took
the witness stand to affirm the contents of his affidavit. Thus, the affidavit is inadmissible and cannot
be given any weight. The CA, therefore, erred when it considered the affidavit of Dr. Pangan, mpreso
for considering the same as expert testimony.
Moreover, even if such affidavit is considered as admissible and the testimony of an expert witness,
the Court is not bound by such testimony. As ruled in Ilao-Quianay v. Mapile:20
Indeed, courts are not bound by expert testimonies. They may place whatever weight they choose upon
such testimonies in accordance with the facts of the case. The relative weight and sufficiency of expert
testimony is peculiarly within the province of the trial court to decide, considering the ability and
character of the witness, his actions upon the witness stand, the weight and process of the reasoning
by which he has supported his opinion, his possible bias in favor of the side for whom he testifies, and
any other matters which serve to illuminate his statements. The opinion of an expert should be
considered by the court in view of all the facts and circumstances of the case. The problem of the
evaluation of expert testimony is left to the discretion of the trial court whose ruling thereupon is not
revicwable in the absence of an abuse of that discretion.
Thus, the belief of Dr. Pangan whether Dr. Gestuvo is guilty of negligence or not will not bind the Court.
The Court must weigh and examine such testimony and decide for itself the merits thereof.
As discussed above, Dr. Gestuvo's negligence is clearly demonstrable by the doctrines of res ipsa
loquiturand informed consent.
Damages
For the foregoing, the trial court properly awarded Rosit actual damages after he was able to prove the
actual expenses that he incurred due to the negligence of Dr. Gestuvo. In Mendoza v. Spouses
Gomez,21the Court explained that a claimant is entitled to actual damages when the damage he
sustained is the natural and probable consequences of the negligent act and he adequately proved the
amount of such damage.
Rosit is also entitled to moral damages as provided under Article 2217 of the Civil Code,22 given the
unnecessary physical suffering he endured as a consequence of defendant's negligence.
To recall, from the time he was negligently operated upon by Dr. Gestuvo until three (3) days from the
corrective surgery performed by Dr. Pangan, or for a period of one (1) month, Rosit suffered pain and
could not properly use his jaw to speak or eat.
The trial court also properly awarded attorney's fees and costs of suit under Article 2208 of the Civil
Code,23 since Rosit was compelled to litigate due to Dr. Gestuvo's refusal to pay for Rosit's damages.
As to the award of exemplary damages, the same too has to be affirmed. In Mendoza,24 the Court
enumerated the requisites for the award of exemplary damages:
Our jurisprudence sets certain conditions when exemplary damages may be awarded: First, they may
be imposed by way of example or correction only in addition, among others, to compensatory damages,
and cannot be recovered as a matter of right, their determination depending upon the amount of
compensatory damages that may be awarded to the claimant. Second, the claimant must first establish
his right to moral, temperate, liquidated or compensatory damages. Third, the wrongful act must be
accompanied by bad faith, and the award would be allowed only if the guilty party acted in a wanton,
fraudulent, reckless, oppressive or malevolent manner.
The three (3) requisites are met. Dr. Gestuvo's actions are clearly negligent. Likewise, Dr. Gestuvo
acted in bad faith or in a wanton, fraudulent, reckless, oppressive manner when he was in breach of
the doctrine of informed consent. Dr. Gestuvo had the duty to fully explain to Rosit the risks of using
large screws for the operation. More importantly, he concealed the correct medical procedure of using
the smaller titanium screws mainly because of his erroneous belief that Rosit cannot afford to buy the

expensive titanium screws. Such concealment is clearly a valid basis for an award of exemplary
damages.
WHEREFORE, the instant petition is GRANTED. The CA Decision dated January 22, 2013 and
Resolution dated November 7, 2013 in CA-G.R. CV No. 00911-MIN are hereby REVERSED and SET
ASIDE. Further, the Decision dated September 14, 2004 of the Regional Trial Court, Branch 33 in
Davao City in Civil Case No. 27,345-99 is hereby REINSTATED and AFFIRMED.
SO ORDERED.
Borromeo v. Family Care Hospital

January 25, 2016
G.R. No. 191018
CARLOS BORROMEO, Petitioner,
vs.
FAMILY CARE HOSPITAL, INC. and RAMON S. INSO, M.D., Respondents.
DECISION
BRION, J.:
Carlos Borromeo lost his wife Lillian when she died after undergoing a routine appendectomy. The
hospital and the attending surgeon submit that Lillian bled to death due to a rare, life-threatening
condition that prevented her blood from clotting normally. Carlos believes, however, that the hospital
and the surgeon were simply negligent in the care of his late wife.
On January 22, 2010, the Court of Appeals (CA) in CA-G.R CV No. 890961 dismissed Carlos'
complaint and thus reversed the April 10, 2007 decision of the Regional Trial Court (RTC) in Civil Case
No. 2000-603-MK2 which found the respondents liable for medical negligence.
The present petition for review on certiorari seeks to reverse the CA’s January 22, 2010 decision.
ANTECEDENTS
The petitioner, Carlos Borromeo, was the husband of the late Lilian V. Borromeo (Lilian). Lilian was a
patient of the respondent Family Care Hospital, Inc. (Family Care) under the care of respondent Dr.
Ramon Inso (Dr. Inso).
On July 13, 1999, the petitioner brought his wife to the Family Care Hospital because she had been
complaining of acute pain at the lower stomach area and fever for two days. She was admitted at the
hospital and placed under the care of Dr. Inso.
Dr. Inso suspected that Lilian might be suffering from acute appendicitis. However, there was
insufficient data to rule out other possible causes and to proceed with an appendectomy. Thus, he
ordered Lilian’s confinement for testing and evaluation.
Over the next 48 hours, Lilian underwent multiple tests such as complete blood count, urinalysis, stool
exam, pelvic ultrasound, and a pregnancy test. However, the tests were not conclusive enough to
confirm that she had appendicitis.
Meanwhile, Lilian’s condition did not improve. She suffered from spiking fever and her abdominal pain
worsened. The increasing tenderness of her stomach, which was previously confined to her lower right
side, had also extended to her lower left side. Lilian abruptly developed an acute surgical abdomen.
On July 15, 1999, Dr. Inso decided to conduct an exploratory laparotomy on Lilian because of the
findings on her abdomen and his fear that she might have a ruptured appendix. Exploratory laparotomy
is a surgical procedure involving a large incision on the abdominal wall that would enable Dr. Inso to
examine the abdominal cavity and identify the cause of Lilian’s symptoms. After explaining the situation,
Dr. Inso obtained the patient’s consent to the laparotomy.
At around 3:45 P.M., Lilian was brought to the operating room where Dr. Inso conducted the surgery.
During the operation, Dr. Inso confirmed that Lilian was suffering from acute appendicitis. He proceeded
to remove her appendix which was already infected and congested with pus.
The operation was successful. Lilian’s appearance and vital signs improved. At around 7:30 P.M., Lilian
was brought back to her private room from the recovery room.
At around 1:30 A.M. on July 16, 1999, roughly six hours after Lilian was brought back to her room, Dr.
Inso was informed that her blood pressure was low. After assessing her condition, he ordered the
infusion of more intravenous (IV) fluids which somehow raised her blood pressure.
Despite the late hour, Dr. Inso remained in the hospital to monitor Lilian’s condition. Subsequently, a
nurse informed him that Lilian was becoming restless. Dr. Inso immediately went to Lilian and saw that
she was quite pale. He immediately requested a blood transfusion.
Lilian did not respond to the blood transfusion even after receiving two 500 cc-units of blood. Various
drugs, such as adrenaline or epinephrine, were administered.
Eventually, an endotracheal tube connected to an oxygen tank was inserted into Lilian to ensure her
airway was clear and to compensate for the lack of circulating oxygen in her body from the loss of red
blood cells. Nevertheless, her condition continued to deteriorate.
Dr. Inso observed that Lilian was developing petechiae in various parts of her body. Petechiae are
small bruises caused by bleeding under the skin whose presence indicates a blood-coagulation
problem – a defect in the ability of blood to clot. At this point, Dr. Inso suspected that Lilian
had Disseminated Intravascular Coagulation (DIC), a blood disorder characterized by bleeding in many
parts of her body caused by the consumption or the loss of the clotting factors in the blood. However,
Dr. Inso did not have the luxury to conduct further tests because the immediate need was to resuscitate
Lilian.
Dr. Inso and the nurses performed cardiopulmonary resuscitation (CPR) on Lilian. Dr. Inso also
informed her family that there may be a need to re-operate on her, but she would have to be put in an
Intensive Care Unit (ICU). Unfortunately, Family Care did not have an ICU because it was only a
secondary hospital and was not required by the Department of Health to have one. Dr. Inso informed
the petitioner that Lilian would have to be transferred to another hospital.
At around 3:30 A.M., Dr. Inso personally called the Perpetual Help Medical Center to arrange Lilian’s
transfer, but the latter had no available bed in its ICU. Dr. Inso then personally coordinated with the
Muntinlupa Medical Center (MMC) which had an available bed.
At around 4:00 A.M., Lilian was taken to the MMC by ambulance accompanied by the resident doctor
on duty and a nurse. Dr. Inso followed closely behind in his own vehicle.
Upon reaching the MMC, a medical team was on hand to resuscitate Lilian. A nasogastric tube (NGT)
was inserted and IV fluids were immediately administered to her. Dr. Inso asked for a plasma expander.
Unfortunately, at around 10:00 A.M., Lilian passed away despite efforts to resuscitate her.
At the request of the petitioner, Lilian’s body was autopsied at the Philippine National
Police (PNP) Camp Crame Crime Laboratory. Dr. Emmanuel Reyes (Dr. Reyes), the medico-legal
assigned to the laboratory, conducted the autopsy. Dr. Reyes summarized his notable findings as:
x x x I opened up the body and inside the abdominal cavity which you call peritoneal cavity there were
3,000 ml of clot and unclot blood accumulated thereat. The peritoneal cavity was also free from any

adhesion. Then, I opened up the head and the brain revealed paper white in color and the heart
revealed abundant petechial hemorrhages from the surface and it was normal. The valvular leaflets
were soft and pliable, and of course, the normal color is reddish brown as noted. And the coronary
arteries which supply the heart were normal and unremarkable. Next, the lungs appears [sic]
hemorrhagic. That was the right lung while the left lung was collapsed and paled. For the intestines, I
noted throughout the entire lengths of the small and large intestine were hemorrhagic areas. Noted
absent is the appendix at the ileo-colic area but there were continuous suture repair done thereat.
However, there was a 0.5 x 0.5 cm opening or left unrepaired at that time. There was an opening on
that repair site. Meaning it was not repaired. There were also at that time clot and unclot blood found
adherent thereon. The liver and the rest of the visceral organs were noted exhibit [sic] some degree of
pallor but were otherwise normal. The stomach contains one glassful about 400 to 500 ml.3
Dr. Reyes concluded that the cause of Lilian’s death was hemorrhage due to bleeding petechial blood
vessels: internal bleeding. He further concluded that the internal bleeding was caused by the 0.5 x 0.5
cm opening in the repair site. He opined that the bleeding could have been avoided if the site was
repaired with double suturing instead of the single continuous suture repair that he found.
Based on the autopsy, the petitioner filed a complaint for damages against Family Care and against
Dr. Inso for medical negligence.
During the trial, the petitioner presented Dr. Reyes as his expert witness. Dr. Reyes testified as to his
findings during the autopsy and his opinion that Lilian’s death could have been avoided if Dr. Inso had
repaired the site with double suture rather than a single suture.
However, Dr. Reyes admitted that he had very little experience in the field of pathology and his only
experience was an on-the-job training at the V. Luna Hospital where he was only on observer status.
He further admitted that he had no experience in appendicitis or appendectomy and that Lilian’s case
was his first autopsy involving a death from appendectomy.
Moreover, Dr. Reyes admitted that he was not intelligently guided during the autopsy because he was
not furnished with clinical, physical, gross, histopath, and laboratory information that were important for
an accurate conclusion. Dr. Reyes also admitted that an appendical stump is initially swollen when
sutured and that the stitches may loosen during the healing process when the initial swelling subside.
In their defense, Dr. Inso and Family Care presented Dr. Inso, and expert witnesses Dr. Celso Ramos
(Dr. Ramos) and Dr. Herminio Hernandez (Dr. Hernandez).
Dr. Ramos is a practicing pathologist with over 20 years of experience. He is an associate professor at
the Department of Surgery of the Fatima Medical Center, the Manila Central University, and the
Perpetual Help Medical Center. He is a Fellow of the Philippine College of Surgeons, a Diplomate of
the Philippine Board of Surgery, and a Fellow of the Philippine Society of General Surgeons.
Dr. Ramos discredited Dr. Reyes’ theory that the 0.5 x 0.5 cm opening at the repair site caused Lilian’s
internal bleeding. According to Dr. Ramos, appendical vessels measure only 0.1 to 0.15 cm, a claim
that was not refuted by the petitioner. If the 0.5 x 0.5 cm opening had caused Lilian’s hemorrhage, she
would not have survived for over 16 hours; she would have died immediately, within 20 to 30 minutes,
after surgery.
Dr. Ramos submitted that the cause of Lilian’s death was hemorrhage due to DIC, a blood disorder that
leads to the failure of the blood to coagulate. Dr. Ramos considered the abundant petechial hemorrhage
in the myocardic sections and the hemorrhagic right lung; the multiple bleeding points indicate that
Lilian was afflicted with DIC.
Meanwhile, Dr. Hernandez is a general surgeon and a hospital administrator who had been practicing
surgery for twenty years as of the date of his testimony.

Dr. Hernandez testified that Lilian’s death could not be attributed to the alleged wrong suturing. He
submitted that the presence of blood in the lungs, in the stomach, and in the entire length of the bowels
cannot be reconciled with Dr. Reyes’ theory that the hemorrhage resulted from a single-sutured
appendix.
Dr. Hernandez testified that Lilian had uncontrollable bleeding in the microcirculation as a result of DIC.
In DIC, blood oozes from very small blood vessels because of a problem in the clotting factors of the
blood vessels. The microcirculation is too small to be seen by the naked eye; the red cell is even smaller
than the tip of a needle. Therefore, the alleged wrong suturing could not have caused the amount of
hemorrhaging that caused Lilian’s death.
Dr. Hernandez further testified that the procedure that Dr. Inso performed was consistent with the usual
surgical procedure and he would not have done anything differently.4
The petitioner presented Dr. Rudyard Avila III (Dr. Avila) as a rebuttal witness. Dr. Avila, also a lawyer,
was presented as an expert in medical jurisprudence. Dr. Avila testified that between Dr. Reyes who
autopsied the patient and Dr. Ramos whose findings were based on medical records, greater weight
should be given to Dr. Reyes’ testimony.
On April 10, 2007, the RTC rendered its decision awarding the petitioner P88,077.50 as compensatory
damages; P50,000.00 as death indemnity; P3,607,910.30 as loss of earnings; P50,000.00 as moral
damages; P30,000.00 as exemplary damages; P50,000.00 as attorney’s fees, and the costs of the suit.
The RTC relied on Dr. Avila’s opinion and gave more weight to Dr. Reyes’ findings regarding the cause
of Lilian’s death. It held that Dr. Inso was negligent in using a single suture on the repair site causing
Lilian’s death by internal hemorrhage. It applied the doctrine of res ipsa loquitur, holding that a patient’s
death does not ordinarily occur during an appendectomy.
The respondents elevated the case to the CA and the appeal was docketed as CA-G.R. CV No. 89096.
On January 22, 2010, the CA reversed the RTC’s decision and dismissed the complaint. The CA gave
greater weight to the testimonies of Dr. Hernandez and Dr. Ramos over the findings of Dr. Reyes
because the latter was not an expert in pathology, appendectomy, nor in surgery. It disregarded Dr.
Avila’s opinion because the basic premise of his testimony was that the doctor who conducted the
autopsy is a pathologist of equal or of greater expertise than Dr. Ramos or Dr. Hernandez.
The CA held that there was no causal connection between the alleged omission of Dr. Inso to use a
double suture and the cause of Lilian’s death. It also found that Dr. Inso did, in fact, use a double suture
ligation with a third silk reinforcement ligation on the repair site which, as Dr. Reyes admitted on cross-
examination, loosened up after the initial swelling of the stump subsided.
The CA denied the applicability of the doctrine of res ipsa loquitur because the element of causation
between the instrumentality under the control and management of Dr. Inso and the injury that caused
Lilian’s death was absent; the respondents sufficiently established that the cause of Lilian’s death was
DIC.
On March 18, 2010, the petitioner filed the present petition for review on certiorari.
THE PETITION
The petitioner argues: (1) that Dr. Inso and Family Care were negligent in caring for Lilian before,
during, and after her appendectomy and were responsible for her death; and (2) that the doctrine of res
ipsa loquitur is applicable to this case.
In their Comment, the respondents counter: (1) that the issues raised by the petitioner are not pure
questions of law; (2) that they exercised utmost care and diligence in the treatment of Lilian; (3) that
Dr. Inso did not deviate from the standard of care observed under similar circumstances by other

members of the profession in good standing; (4) that res ipsa loquitur is not applicable because direct
evidence as to the cause of Lilian’s death and the presence/absence of negligence is available; and
(5) that doctors are not guarantors of care and cannot be held liable for the death of their patients when
they exercised diligence and did everything to save the patient.
OUR RULING
The petition involves factual questions.
Under Section 1 of Rule 45, a petition for review on certiorari shall only raise questions of law. The
Supreme Court is not a trier of facts and it is not our function to analyze and weigh evidence that the
lower courts had already passed upon.
The factual findings of the Court of Appeals are, as a general rule, conclusive upon this Court. However,
jurisprudence has also carved out recognized exceptions 5 to this rule, to wit: (1) when the findings are
grounded entirely on speculation, surmises, or conjectures;6 (2) when the inference made is manifestly
mistaken, absurd, or impossible;7 (3) when there is grave abuse of discretion;8 (4) when the judgment
is based on a misapprehension of facts;9 (5) when the findings of facts are conflicting;10 (6) when in
making its findings the Court of Appeals went beyond the issues of the case, or its findings are contrary
to the admissions of both the appellant and the appellee;11 (7) when the findings are contrary to
those of the trial court’s;12 (8) when the findings are conclusions without citation of specific evidence
on which they are based;13 (9) when the facts set forth in the petition as well as in the petitioner’s main
and reply briefs are not disputed by the respondent;14 (10) when the findings of fact are premised on
the supposed absence of evidence and contradicted by the evidence on record;15and (11) when the
Court of Appeals manifestly overlooked certain relevant facts not disputed by the parties, which, if
properly considered, would justify a different conclusion.16
Considering that the CA’s findings with respect to the cause of Lilian’s death contradict those of the
RTC, this case falls under one of the exceptions. The Court will thus give due course to the petition to
dispel any perception that we denied the petitioner justice.
The requisites of establishing medical malpractice
Whoever alleges a fact has the burden of proving it. This is a basic legal principle that equally applies
to civil and criminal cases. In a medical malpractice case, the plaintiff has the duty of proving its
elements, namely: (1) a duty of the defendant to his patient; (2) the defendant’s breach of this duty;
(3) injury to the patient; and (4) proximate causation between the breach and the injury suffered.17 In
civil cases, the plaintiff must prove these elements by a preponderance of evidence.
A medical professional has the duty to observe the standard of care and exercise the degree of skill,
knowledge, and training ordinarily expected of other similarly trained medical professionals acting under
the same circumstances.18 A breach of the accepted standard of care constitutes negligence or
malpractice and renders the defendant liable for the resulting injury to his patient.19
The standard is based on the norm observed by other reasonably competent members of the
profession practicing the same field of medicine.20 Because medical malpractice cases are often
highly technical, expert testimony is usually essential to establish: (1) the standard of care that the
defendant was bound to observe under the circumstances; (2) that the defendant’s conduct fell below
the acceptable standard; and (3) that the defendant’s failure to observe the industry standard caused
injury to his patient.21
The expert witness must be a similarly trained and experienced physician. Thus, a pulmonologist is not
qualified to testify as to the standard of care required of an anesthesiologist22 and an autopsy expert is
not qualified to testify as a specialist in infectious diseases.23
The petitioner failed to present an expert witness.

In ruling against the respondents, the RTC relied on the findings of Dr. Reyes in the light of Dr. Avila’s
opinion that the former’s testimony should be given greater weight than the findings of Dr. Ramos and
Dr. Hernandez. On the other hand, the CA did not consider Dr. Reyes or Dr. Avila as expert witnesses
and disregarded their testimonies in favor of Dr. Ramos and Dr. Hernandez. The basic issue, therefore,
is whose testimonies should carry greater weight?
We join and affirm the ruling of the CA.
Other than their conclusion on the culpability of the respondents, the CA and the RTC have similar
factual findings. The RTC ruled against the respondents based primarily on the following testimony of
Dr. Reyes.
Witness: Well, if I remember right during my residency in my extensive training, during the
operation of the appendix, your Honor, it should really be sutured twice which we call double.
Court: What would be the result if there is only single?
Witness: We cannot guarranty [sic] the bleeding of the sutured blood vessels, your Honor.
Court: So, the bleeding of the patient was caused by the single suture?
Witness: It is possible.24
Dr. Reyes testified that he graduated from the Manila Central University (MCU) College of Medicine
and passed the medical board exams in 1994.25 He established his personal practice at his house clinic
before being accepted as an on-the-job trainee in the Department of Pathology at the V. Luna Hospital
in 1994. In January 1996, he joined the PNP Medico-Legal Division and was assigned to the Crime
Laboratory in Camp Crame. He currently heads the Southern Police District Medico-Legal
division.26 His primary duties are to examine victims of violent crimes and to conduct traumatic
autopsies to determine the cause of death.
After having conducted over a thousand traumatic autopsies, Dr. Reyes can be considered an expert
in traumatic autopsies or autopsies involving violent deaths. However, his expertise in traumatic
autopsies does not necessarily make him an expert in clinical and pathological autopsies or in surgery.
Moreover, Dr. Reyes’ cross-examination reveals that he was less than candid about his qualifications
during his initial testimony:
Atty. Castro: Dr. Reyes, you mentioned during your direct testimony last March 5, 2002 that you
graduated in March of 1994, is that correct?
Witness: Yes, sir.
Atty. Castro: You were asked by Atty. Fajardo, the counsel for the plaintiff, when did you finish your
medical works, and you answered the following year of your graduation which was in 1994?
Witness: Not in 1994, it was in 1984, sir.
Atty. Castro: And after you graduated Mr. Witness, were there further study that you undergo after
graduation? [sic]
Witness: It was during my service only at the police organization that I was given the chance to attend
the training, one year course.
Atty. Castro: Did you call that what you call a post graduate internship?
Witness: Residency.
Atty. Castro: Since you call that a post graduate, you were not undergo post graduate? [sic]
Witness: I did.
Atty. Castro: Where did you undergo a post graduate internship?
Witness: Before I took the board examination in the year 1984, sir.
Atty. Castro: That was where?
Witness: MCU Hospital, sir.
Atty. Castro: After the post graduate internship that was the time you took the board examination?
Witness: Yes, sir.
Atty. Castro: And I supposed that you did it for the first take?
Witness: Yes, sir.
Atty. Castro: Are you sure of that?
Witness: Yes, sir.
Atty. Castro: After you took the board examination, did you pursue any study?
Witness: During that time, no sir.
Atty. Castro: You also testified during the last hearing that "page 6 of March 5, 2002, answer of the
witness: then I was accepted as on the job training at the V. Luna Hospital at the Department of
Pathologist in 1994", could you explain briefly all of this Mr. witness?
Witness: I was given an order that I could attend the training only as a civilian not as a member of the
AFP because at that time they were already in the process of discharging civilian from undergoing
training.
Atty. Castro: So in the Department of Pathology, what were you assigned to?
Witness: Only as an observer status.
Atty. Castro: So you only observed.
Witness: Yes, sir.
Atty. Castro: And on the same date during your direct testimony on March 5, 2002, part of which reads
"well if I remember right during my residency in my extensive training during the operation of the
appendix," what do you mean by that Mr. witness?
Witness: I was referring to my internship, sir.
Atty. Castro: So this is not a residency training?
Witness: No, sir.
Atty. Castro: This is not a specialty training?
Witness: No, sir.
Atty. Castro: This was the time the year before you took the board examination?
Witness: That’s right, sir. Yes, sir.
Atty. Castro: You were not then a license[d] doctor?
Witness: No, sir.
Atty. Castro: And you also mentioned during the last hearing shown by page 8 of the same transcript
of the stenographic notes, dated March 5, 2002 and I quote "and that is your residence assignment?",

and you answered "yes, sir." What was the meaning of your answer? What do you mean when you say
yes, sir?
xxxx
Witness: Okay, I stayed at the barracks of the Southern Police District Fort Bonifacio.
Atty. Castro: So this is not referring to any kind of training?
Witness: No, sir.
Atty. Castro: This is not in anyway related to appendicitis?
Witness: No, sir.27
Atty. Reyes appears to have inflated his qualifications during his direct testimony. First, his "extensive
training during [his] residency" was neither extensive actual training, nor part of medical residency. His
assignment to the V. Luna Hospital was not as an on-the-job trainee but as a mere observer. This
assignment was also before he was actually licensed as a doctor. Dr. Reyes also loosely used the
terms "residence" and "residency" – terms that carry a technical meaning with respect to medical
practice –during his initial testimony28 to refer to (1) his physical place of dwelling and (2) his internship
before taking the medical board exams. This misled the trial court into believing that he was more
qualified to give his opinion on the matter than he actually was.
Perhaps nothing is more telling about Dr. Reyes’ lack of expertise in the subject matter than the
petitioner’s counsel’s own admission during Dr. Reyes’ cross examination.
Atty. Castro: How long were you assigned to observe with the Department of Pathology?
Witness: Only 6 months, sir.
Atty. Castro: During your studies in the medical school, Mr. Witness, do you recall attending or having
participated or [sic] what you call motivity mortality complex?
Atty. Fajardo: Your honor, what is the materiality?
Atty. Castro: That is according to his background, your honor. This is a procedure which could more or
less measure his knowledge in autopsy proceedings when he was in medical school and compared to
what he is actually doing now.
Atty. Fajardo: The witness is not an expert witness, your honor.
Atty. Castro: He is being presented as an expert witness, your honor.29
When Atty. Castro attempted to probe Dr. Reyes about his knowledge on the subject of medical or
pathological autopsies, Dr. Fajardo objected on the ground that Dr. Reyes was not an expert in the
field. His testimony was offered to prove that Dr. Inso was negligent during the surgery without
necessarily offering him as an expert witness.
Atty. Fajardo: x x x The purpose of this witness is to establish that there was negligence on the surgical
operation of the appendix or in the conduct of the appendectomy by the defendant doctor on the
deceased Lilian Villaran Borromeo.30
Dr. Reyes is not an expert witness who could prove Dr. Inso’s alleged negligence. His testimony could
not have established the standard of care that Dr. Inso was expected to observe nor assessed Dr.
Inso’s failure to observe this standard. His testimony cannot be relied upon to determine if Dr. Inso
committed errors during the operation, the severity of these errors, their impact on Lilian’s probability
of survival, and the existence of other diseases/conditions that might or might not have caused or
contributed to Lilian’s death.

The testimony of Dr. Avila also has no probative value in determining whether Dr. Inso was at fault. Dr.
Avila testified in his capacity as an expert in medical jurisprudence, not as an expert in medicine,
surgery, or pathology. His testimony fails to shed any light on the actual cause of Lilian’s death.
On the other hand, the respondents presented testimonies from Dr. Inso himself and from two expert
witnesses in pathology and surgery.
Dr. Ramos graduated from the Far Eastern University, Nicanor Reyes Medical Foundation, in 1975. He
took up his post-graduate internship at the Quezon Memorial Hospital in Lucena City, before taking the
board exams. After obtaining his professional license, he underwent residency training in pathology at
the Jose R. Reyes Memorial Center from 1977 to 1980. He passed the examination in Anatomic,
Clinical, and Physical Pathology in 1980 and was inducted in 1981. He also took the examination in
anatomic pathology in 1981 and was inducted in 1982.31
At the time of his testimony, Dr. Ramos was an associate professor in pathology at the Perpetual Help
Medical School in Biñan, Laguna, and at the De La Salle University in Dasmariñas, Cavite. He was the
head of the Batangas General Hospital Teaching and Training Hospital where he also headed the
Pathology Department. He also headed the Perpetual Help General Hospital Pathology department.32
Meanwhile, Dr. Hernandez at that time was a General Surgeon with 27 years of experience as a
General Practitioner and 20 years of experience as a General Surgeon.1âwphi1 He obtained his
medical degree from the University of Santo Tomas before undergoing five years of residency training
as a surgeon at the Veterans Memorial Center hospital. He was certified as a surgeon in 1985. He also
holds a master’s degree in Hospital Administration from the Ateneo de Manila University.33
He was a practicing surgeon at the: St. Luke’s Medical Center, Fatima Medical Center, Unciano Medical
Center in Antipolo, Manila East Medical Center of Taytay, and Perpetual Help Medical Center in
Biñan.34 He was also an associate professor at the Department of Surgery at the Fatima Medical
Center, the Manila Central University, and the Perpetual Help Medical Center. He also chaired the
Department of Surgery at the Fatima Medical Center.35
Dr. Hernandez is a Fellow of the American College of Surgeons, the Philippine College of Surgeons,
and the Philippine Society of General Surgeons. He is a Diplomate of the Philippine Board of Surgery
and a member of the Philippine Medical Association and the Antipolo City Medical Society.36
Dr. Hernandez affirmed that Dr. Inso did not deviate from the usual surgical procedure.37 Both experts
agreed that Lilian could not have died from bleeding of the appendical vessel. They identified Lilian’s
cause of death as massive blood loss resulting from DIC.
To our mind, the testimonies of expert witnesses Dr. Hernandez and Dr. Ramos carry far greater weight
than that of Dr. Reyes. The petitioner’s failure to present expert witnesses resulted in his failure to prove
the respondents’ negligence. The preponderance of evidence clearly tilts in favor of the respondents.
Res ipsa loquitur is not applicable when the failure to observe due care is not immediately apparent to
the layman.
The petitioner cannot invoke the doctrine of res ipsa loquitur to shift the burden of evidence onto the
respondent. Res ipsa loquitur, literally, "the thing speaks for itself;" is a rule of evidence that presumes
negligence from the very nature of the accident itself using common human knowledge or experience.
The application of this rule requires: (1) that the accident was of a kind which does not ordinarily occur
unless someone is negligent; (2) that the instrumentality or agency which caused the injury was under
the exclusive control of the person charged with negligence; and (3) that the injury suffered must not
have been due to any voluntary action or contribution from the injured person.38 The concurrence of
these elements creates a presumption of negligence that, if unrebutted, overcomes the plaintiff’s
burden of proof.

This doctrine is used in conjunction with the doctrine of common knowledge. We have applied this
doctrine in the following cases involving medical practitioners:
a. Where a patient who was scheduled for a cholecystectomy (removal of gall stones) but was otherwise
healthy suffered irreparable brain damage after being administered anesthesia prior to the operation.39
b. Where after giving birth, a woman woke up with a gaping burn wound close to her left armpit;40
c. The removal of the wrong body part during the operation; and
d. Where an operating surgeon left a foreign object (i.e., rubber gloves) inside the body of the patient.41
The rule is not applicable in cases such as the present one where the defendant’s alleged failure to
observe due care is not immediately apparent to a layman.42 These instances require expert opinion to
establish the culpability of the defendant doctor. It is also not applicable to cases where the actual
cause of the injury had been identified or established.43
While this Court sympathizes with the petitioner’s loss, the petitioner failed to present sufficient
convincing evidence to establish: (1) the standard of care expected of the respondent and (2) the fact
that Dr. Inso fell short of this expected standard. Considering further that the respondents established
that the cause of Lilian’s uncontrollable bleeding (and, ultimately, her death) was a medical disorder
– Disseminated Intravascular Coagulation – we find no reversible errors in the CA’s dismissal of the
complaint on appeal.
WHEREFORE, we hereby DENY the petition for lack of merit. No costs.
SO ORDERED.
Our Lady of Lourdes Hospital v. Capanzana

March 22, 2017
G.R. No. 189218
OUR LADY OF LOURDES HOSPITAL, Petitioner
vs
SPOUSES ROMEO AND REGINA CAPANZANA, Respondents
DECISION
SERENO, CJ.:
We resolve the instant Petition for Review on Certiorari1 assailing the Decision2 and
Resolution3 rendered by the Court of Appeals (CA), Second Division, in CA-G.R. CV No. 89030.
THE ANTECEDENT FACTS
Regina Capanzana (Regina), a 40-year-old nurse and clinical instructor pregnant with her third child,
was scheduled for her third caesarean section (C-section) on 2 January 1998. However, a week earlier,
on 26 December 1997, she went into active labor and was brought to petitioner hospital for an
emergency C-section. She first underwent a preoperative physical examination by Dr. Miriam
Ramos4 (Dr. Ramos) and Dr. Milagros Joyce Santos,5 (Dr. Santos) the same attending physicians in
her prior childbirths. She was found fit for anesthesia after she responded negatively to questions about
tuberculosis, rheumatic fever, and cardiac diseases. On that same day, she gave birth to a baby boy.
When her condition stabilized, she was discharged from the recovery room and transferred to a regular
hospital room.6

At 2:30 a.m. the following day, or 13 hours after her operation, Regina who was then under watch by
her niece, Katherine L. Balad (Balad), complained of a headache, a chilly sensation, restlessness, and
shortness of breath. She asked for oxygen and later became cyanotic. After undergoing an x-ray, she
was found to be suffering from pulmonary edema. She was eventually transferred to the Intensive Care
Unit, where she was hooked to a mechanical ventilator. The impression then was that she was showing
signs of amniotic fluid embolism.7
On 2 January 1998, when her condition still showed no improvement, Regina was transferred to the
Cardinal Santos Hospital. The doctors thereat found that she was suffering from rheumatic heart
disease mitral stenosis with mild pulmonary hypertension, which contributed to the onset of fluid in her
lung tissue (pulmonary edema). This development resulted in cardiopulmonary arrest and,
subsequently, brain damage. Regina lost the use of her speech, eyesight, hearing and limbs. She was
discharged, still in a vegetative state, on 19January 1998.8
Respondent spouses Capanzana filed a complaint for damages9 against petitioner hospital, along with
co-defendants: Dr. Miriam Ramos, an obstetrician/gynecologist; Dr. Milagros Joyce Santos, an
anesthesiologist; and Jane Does, the nurses on duty stationed on the second floor of petitioner hospital
on 26-27 December 1997.10
Respondents imputed negligence to Ors. Ramos and Santos for the latter's failure to detect the heart
disease of Regina, resulting in failure not only to refer her to a cardiologist for cardiac clearance, but
also to provide the appropriate medical management before, during, and after the operation. They
further stated that the nurses were negligent for not having promptly given oxygen, and that the hospital
was equally negligent for not making available and accessible the oxygen unit on that same hospital
floor at the time.11
They prayed for actual damages amounting to ₱514,645.80; compensatory damages, ₱3,4 l6,278.40;
moral damages, ₱5,000,000; exemplary damages, ₱2,000,000; attorney's fees, ₱500,000 as well as
₱5,000 per hearing and the costs of suit. They likewise prayed for other just and equitable reliefs.12
Petitioner hospital, defendants Dr. Ramos and Dr. Santos filed their respective Answers.13 On the other
hand, the service of summons on the nurses was unsuccessful, as they were no longer connected with
the hospital. Thus, only defendant Fiorita Ballano (Ballano), who was later proven to be a midwife and
not a nurse, filed her Answer.14
Petitioner hospital and defendant Ballano claimed that there was no instruction to the hospital or the
staff to place Regina in a room with a standby oxygen tank. They also claimed that the nurses on duty
had promptly attended to her needs. They prayed that the complaint be dismissed and respondent3
ordered to pay unpaid medical bills.15
Meanwhile, defendant Dr. Ramos claimed that in all of the consultations and prenatal check-ups of
Regina in the latter's three pregnancies, she never complained nor informed the doctor of any symptom
or sign of a heart problem. Before the last C-section of Regina, Dr. Ramos examined her and found no
abnormal cardiac sound, murmur or sign of rheumatic heart ailment. The doctor further claimed that
since the operation was an emergency, she had no time or chance to have Regina undergo any cardiac
examination and secure a cardiac clearance. Moreover, Dr. Ramos claimed that the cardio-pulmonary
arrest took place 14 hours after the operation, long after she had performed the operation. She prayed
that judgment be rendered ordering spouses Capanzana to pay her moral damages amounting to
₱500,000; exemplary damages, ₱200,000; and attorney's fees, ₱l00,000.16
On the other hand, defendant Dr. Santos claimed that she was the anesthesiologist in Regina's first
and second childbirths via C-section. The doctor further stated that prior to the third emergency C-
section, she conducted a pre-operative evaluation, and Regina showed no sign or symptom of any
heart problem or abnormality in the latter's cardiovascular, respiratory, or central nervous systems. She

then administered the anesthesia to Regina. She also stated that Regina's condition before, during,
and after the operation was stable. Dr. Santos prayed that the complaint against her be dismissed.17
Trial ensued. Plaintiffs presented Dr. Erwin Dizon, a cardiologist; Dr. Godfrey Robeniol, a neurologist;
Mrs. Elizabeth Tayag; Dr. Eleonor Lopez, a cardiologist; Kathleen Lucero Balad; Romeo Capanzana;
and Dr. Asuncion Ranezes, a physician.18
After the plaintiffs rested their case, an amended complaint was filed, this time identifying and
impleading as defendants the nurses on duty who included Czarina Ocampo, H.R. Bolatete, Evelyn S.
David, and Angelica Concepcion.19 After conducting a deposition of the person in charge of the nurses'
schedule, spouses Capanzana further amended their complaint to implead nurses Rochelle Padolina
and Fiorita Ballano, while dropping defendants Czarina Ocampo, H.R. Bolatete, and Angelica
Concepcion.20
The trial continued with the presentation of defense evidence. The defense presented Dr. Santos; Dr.
Ramos; Atty. Nicolas Lutero III, director of the Bureau of Licensing and Facilities of the Department of
Health; Lourdes H. Nicolas, the assistant nursing service director; Dr. Grace de los Angeles; Ma.
Selerina Cuvin, the account receivable clerk; and Milagros de Vera, the administrative supervisor of the
hospital.21
On 11 May 2005, and pending the resolution of the case before the trial court, Regina died and was
substituted by her heirs represented by Romeo Capanzana.22
THE RULING OF THE RTC
On 29 December 2006, the RTC rendered judgment, finding no negligence on the part of Dr. Ramos
or Dr. Santos. It found that the medical community's recognized standard practices in attending to a
patient in connection with a C-section had been duly observed by the doctors.23
The RTC also found that the primary cause of Regina's vegetative state was amniotic fluid embolism,
an unfortunate condition that was not within the control of any doctor to anticipate or prevent. This
condition was the root cause of the pulmonary edema that led to hypoxic encephalopathy, brain
damage and, ultimately, Regina's vegetative state. On the other hand, the trial court noted that hypoxic
encephalopathy was manageable. It could have been prevented, or at least minimized, had there been
a timely administration of oxygen.24
On the strength of the testimony of Balad, the RTC found that negligence on the part of the nurses
contributed to the injury of Regina. It found that they failed to respond immediately when Regina was
experiencing shortness of breath. It took the nurses more or less 10 minutes after being informed of
the condition of Regina before they checked on her, called for the resident doctor, and requested
oxygen. While the trial court acknowledged that the immediate administration of oxygen was not a
guarantee that Regina's condition would improve, it gave credence to the testimony of the expert
witness. The latter opined that the delay contributed to the onset of hypoxic encephalopathy or diffuse
brain damage due to lack of oxygen in Regina's brain. The expert witness also said that had there been
a timely administration of oxygen the risk of brain damage would have been lessened, if not avoided,
and the onset of hypoxic encephalopathy reduced. The RTC therefore found the nurses liable for
contributory negligence.25
On the issue of whether petitioner hospital could be held liable for the negligence of its nurses, the RTC
ruled that the hospital was able to discharge the burden of proof that it had exercised the diligence of
a good father of a family in the selection and supervision of its employees. The trial court arrived at this
finding on the basis of the testimony of the assistant nursing director, Lourdes Nicolas. She stated that
the selection and hiring of their nurses was a rigorous process, whereby the applicants underwent a
series of procedures - examination, orientation, training, on-the-job observation, and evaluation - before
they were hired as regular employees. The nurses were supervised by their head nurses and the charge

nurse. The nurses were also inspected by their clinical supervisor and nursing director. Consequently,
only the nurses were held liable to pay damages. However, since the trial court acquired jurisdiction
only over Ballano among those on duty on that day, she was the only one held liable.26 The dispositive
portion of the RTC decision states:
WHEREFORE, all foregoing considered, judgment is rendered as follows:
A. Ordering the defendant FLORIT A BALLANO to pay the plaintiff Romeo R. Capanzana and the
children of the spouses Capanzana, namely: Roxanne, Rizelle, and Reginald (all minors) who are
represented by plaintiff Romeo R. Capanzana in respect to the children's right to the interest of their
deceased mother Regina in this case:
1. The amount of Pesos: Two Hundred Ninety Nine Thousand One Hundred Two and 041100
(₱299,102.04), as and by way of actual damages;
2. The amount of Pesos: One Hundred Thousand (₱l00,000.00), as and by way of moral damages;
3. The amount of Pesos: One Million Nine Hundred Fifty Thousand Two Hundred Sixty Nine and 80/100
(₱l,950,269.80), as and by way of compensatory damages;
4. The amount of Pesos: One Hundred Thousand (₱l00,000.00), as and by way of attorney's fees;
5. The cost of suit.
B. Ordering the DISMISSAL of the case as against defendants Our Lady of Lourdes Hospital, Inc., Dr.
Mirriam Ramos and Dr. Milagros Joyce (Jocelyn) Santos; and
C. DISMISSING the counterclaims of the defendants.
SO ORDERED.27
Respondents Capanzana filed their appeal28 before the CA, arguing that the RTC committed error in
holding that amniotic fluid embolism, which could not have been foreseen or prevented by the exercise
of any degree of diligence and care by defendants, caused the cardio-pulmonary arrest, brain damage,
and death of the patient (instead of rheumatic heart mitral valve stenosis which could have been
detected and managed). Respondents further argued that it was error for the trial court to hold that
defendants Dr. Ramos and Dr. Santos and petitioner hospital exercised due diligence and to absolve
them from liability for the untimely death of Regina.29
Petitioner hospital also filed its notice of appeal.30 It imputed error to the trial court for holding that the
nurses had not exercised due diligence in attending to the needs of Regina, particularly because (1)
respondent spouses failed to prove any breach of duty on the part of the nurses, particularly Ballano;
(2) there was no delay in the delivery of oxygen to Regina; and (3) Regina was afflicted with amniotic
fluid embolism, a condition that could not have been foreseen or prevented by any degree of care by
defendants.31 Also, petitioner hospital decried the dismissal of its counterclaims and the exclusion of
the material testimony of one of the hospital nurses.32
THE RULING OF THE CA
The CA rendered the assailed decision affirming the RTC ruling with modification. The appellate court
upheld the finding of the trial court that the proximate cause of Regina's condition was hypoxic
encelopathy, a diffuse brain damage secondary to lack of oxygen in the brain. Specifically, the cause
was hypoxic encelopathy secondary to pulmonary cardiac arrest on the background of pulmonary
edema. The CA decreed that the failure of Dr. Ramos to diagnose the rheumatic heart disease of
Regina was not the proximate cause that brought about the latter's vegetative condition as a probable
or natural effect thereof. Even if the appellate court were to concede that Regina indeed suffered from
rheumatic heart mitral valve stenosis, it was not established that Dr. Ramos ignored standard medical

procedure and exhibited an absence of the competence and skill expected of practitioners similarly
situated.33
The CA especially took note of the fact that when Regina was operated on for the third time, albeit in
an emergency situation, she had the benefit of her complete medical history. Also, even the expert
witness presented by the plaintiffs, Dr. Dizon, testified that most patients suffering from mild mitral valve
stenosis are asymptomatic, so the disease cannot be detected on physical examination. He further
testified that a request for cardio-pulmonary clearance is discretionary, and that a referral to a
pulmonologist can be done away with if the attending physician finds the patient's heart normal. Thus,
the appellate court upheld the ruling of the trial court absolving Dr. Ramos.34
On the issue of the liability of Dr. Santos, the CA discredited the theory of Dr. Dizon that the normal
post-operation dosage of 3 liters of intravenous fluid for 24 hours, or 1 liter every 8 hours, could be fatal
to a patient with a heart problem. It ruled that Dr. Dizon was presented as an expert witness on
cardiology, and not on anesthesiology. Upholding the RTC, the appellate court gave more credence to
the testimony of Dr. Santos, who was accepted as an expert witness in the fields of anesthesiology and
obstetric anesthesiology. She had testified that even if the dosage was beyond the recommended
amount, no harmful effect would have ensued if the patient's kidney were functioning properly. She
examined Regina before the operation and found no edema - an indication that the latter's kidney was
functioning well. The testimony of Dr. Santos remained uncontroverted. The CA also upheld the ruling
that respondents similarly failed to prove that Dr. Santos had ignored standard medical procedure and
exhibited an absence of the competence and skill expected of practitioners similarly situated.
Consequently, the appellate court also upheld the ruling of the trial court absolving Dr. Santos.35
Meanwhile, the CA absolved Ballano. Like the RTC, the appellate court found evidence that the nurses
were negligent. But contrary to the trial court, the CA held that there was no showing whether Ballano,
who was later identified as a midwife, was negligent in attending to the needs of Regina. Further, it was
not shown whether Ballano was even one of the nurses on duty who had attended to Regina. The
appellate court also noted that the execution of health care procedures and essential primary health
care is a nurse's (not a midwife's) duty.36
Finally, the CA ruled that petitioner hospital should be held liable based on the doctrine of corporate
responsibility. It was found that while there was evidence to prove that petitioner hospital showed
diligence in its selection and hiring processes, there was no evidence to prove that it exercised the
required diligence in the supervision of its nurses. Also, the appellate court ruled that the non-availability
of an oxygen unit on the hospital floor, a fact that was admitted, constituted gross negligence on the
part of petitioner hospital. The CA stressed that, as borne out by the records, there was only one tank
in the ward section of 27 beds. It said that petitioner hospital should have devised an effective way for
the staff to properly and timely respond to a need for an oxygen tank in a situation of acute distress.37
Accordingly, the CA awarded to respondents exactly the same amounts decreed by the RTC. This time,
however, instead of Ballano, petitioner hospital was deemed directly liable to pay for those amounts.38
Only petitioner hospital filed a Motion for Reconsideration,39 which the CA denied. The denial came
after a finding that the errors raised in support of the motion were substantially a mere reiteration of
those already passed upon and considered in the assailed decision.40
Hence, this petition.
Petitioner hospital is now before this Court assailing the rulings. First, it argues that the CA ruled
contrary to law and evidence, because there was no proof of any breach of duty on the part of the
nurses. Petitioner argues that even if there was a failure to provide oxygen, it did not cause the injury
sustained by Regina. It emphasizes that she suffered from amniotic fluid embolism, a condition that
could not be detected or prevented by any degree of care on the part of the hospital or its nurses.
Second, it argues that it was an error for the CA to hold the former liable on the basis of the doctrine of
corporate responsibility. Third, it alleges that the appellate court erroneously neglected to find
respondents liable for the unpaid hospital bill. Fourth, it claims that the CA supposedly erred in
upholding the exclusion of the testimony of defendant David.41 Petitioner ultimately prays that the
present petition be granted, the assailed rulings of the CA reversed and set aside, the second amended
complaint dismissed, and petitioner's counterclaims granted.42
Respondents filed their Comment,43 saying that the CA committed no error in finding petitioner liable
for the negligence of the nurses to timely administer oxygen to Regina. Neither did the appellate court,
they claim, err in applying the doctrine of res ipsa loquitur or in decreeing that petitioner hospital had
failed to exercise due diligence in the selection and supervision of the latter's nurses. They further claim
that the CA was correct in holding petitioner liable under the doctrines of vicarious liability and corporate
negligence. Respondents also insist that Regina did not die of amniotic fluid embolism.44 Hence, they
pray that the instant petition be denied and that the assailed ruling of the CA, which affirmed that of the
RTC, be upheld.45
Petitioner filed its Reply.46 It vehemently protests the idea that Regina died at its hands. It reiterates
that respondents failed to prove that its purported negligent act caused the injury she sustained, and
that the administration of oxygen would have prevented the brain damage she later suffered. Petitioner
also disputes the ruling that the nurses were negligent in attending to her needs. It bewails the exclusion
of the testimony of one of the defendant nurses who could have debunked the testimony of Balad. It
restates its prayer that the present petition be granted and the assailed rulings of the CA reversed and
set aside. Further, it prays that the second amended complaint be dismissed and its counterclaims
granted. Additionally, albeit belatedly, it asks that the case be remanded to the trial court for the
reception of the testimony of defendant nurse David.
OUR RULING
We find the petition partially meritorious.
We reiterate the elementary rule that only questions of law are entertained in a Rule 45
petition.47 Findings of fact of the lower courts are generally conclusive and binding on this Court whose
function is not to analyze or weigh the evidence all over again. While there are exceptional cases in
which this Court may review findings of fact of the CA, none of these exceptions is present in the case
at bar.48 We see no compelling reason to deviate from this general rule now. We therefore defer to the
pertinent factual findings of the lower courts, especially because these are well-supported by the
records. It is in this light that we affirm the findings of both the trial and the appellate courts which found
negligence on the part of the nurses.
In order to successfully pursue a claim in a medical negligence case, the plaintiff must prove that a
health professional either failed to do something which a reasonably prudent health professional would
have or have not done; and that the action or omission caused injury to the patient. Proceeding from
this guideline, the plaintiff must show the following elements by a preponderance of evidence: duty of
the health professional, breach of that duty, injury of the patient, and proximate causation between the
breach and the injury.49 Meanwhile, in fixing a standard by which a court may determine whether the
physician properly performed the requisite duty toward the patient, expert medical testimonies from
both plaintiff and defense are resorted to.50
In this case, the expert testimony of witness for the respondent Dr. Godfrey Robeniol, a neurosurgeon,
provided that the best time to treat hypoxic encephalopathy is at the time of its occurrence; i.e., when
the patient is experiencing difficulty in breathing and showing signs of cardiac arrest.51
To recall, the records, including petitioner's Nurses' Notes, indisputably show that Regina complained
of difficulty in breathing before eventually showing signs of cyanosis.52 We agree with the courts below
in their finding that when she was gasping for breath and turning cyanotic, it was the duty of the nurses
to intervene immediately by informing the resident doctor. Had they done so, proper oxygenation could
have been restored and other interventions performed without wasting valuable time. That such high
degree of care and responsiveness was needed cannot be overemphasized - considering that
according to expert medical evidence in the records, it takes only five minutes of oxygen deprivation
for irreversible brain damage to set in.53 Indeed, the Court has emphasized that a higher degree of
caution and an exacting standard of diligence in patient management and health care are required of
a hospital's staff, as they deal with the lives of patients who seek urgent medical assistance.54 It is
incumbent upon nurses to take precautions or undertake steps to safeguard patients under their care
from any possible injury that may arise in the course of the latter's treatment and care.55
The Court further notes that the immediate response of the nurses was especially imperative, since
Regina herself had asked for oxygen. They should have been prompted to respond immediately when
Regina herself expressed her needs, especially in that emergency situation when it was not easy to
determine with certainty the cause of her breathing difficulty. Indeed, even if the patient had not asked
for oxygen, the mere fact that her breathing was labored to an abnormal degree should have impelled
the nurses to immediately call the doctor and to administer oxygen.
In this regard, both courts found that there was a delay in the administration of oxygen to the patient,
caused by the delayed response of the nurses of petitioner hospital. They committed a breach of their
duty to respond immediately to the needs of Regina, considering her precarious situation and her
physical manifestations of oxygen deprivation. We quote below the crucial finding of the trial court:
[W]hen Kathleen [Balad] went to the nurse station to inform the nurses thereat that her aunt was
experiencing shortness of breathing and needed oxygen nobody rushed to answer her urgent call. It
took more or less 10 minutes for these nurses to go inside the room to attend and to check the condition
of their patient. When the nurse came in she saw the patient was having chilly sensation with difficulty
in breathing [and was] at the same time asking for oxygen. The nurse learned from Kathleen that the
patient was having an asthma attack. The nurse immediately called resident physician Dr. De Los
Angeles to proceed to room 328 and the hospital aide to bring in the oxygen tank in the said room.
Thereafter, resident doctors Gonzalez and de Los Angeles arrived and followed by the hospital aide
with the oxygen tank. It was clear that the oxygen tank came late because the request for it from the
nurses also came late. Had the nurses exercised certain degree of promptness and diligence in
responding to the patient[']s call for help[,] the occurrence of "hypoxic encephalopathy" could have been
avoided since lack or inadequate supply of oxygen to the brain for 5 minutes will cause damage to it.
(Underscoring supplied)56
The CA agreed with the trial court's factual finding of delay in the administration of oxygen as
competently testified to by Balad. Her testimony, which is uncontroverted in the records, proceeded as
follows:
Q [Atty. Diokno]: During this time from about 1:30 in the morning up to approximately 2:00 in the
morning, did any nurse enter the room that you were in?
A [Balad]: None, sir.
Q: After that conversation between your aunt when she's asking you to [turn] off the aircon and turning
on [sic] again and then turned it off, do you have any occasion to talk with her?
A: None, sir.
Q: How did you describe her physical appearance when she was telling you that "hinihika yata ako"?
A: She feels [sic] very cold even if several blankets were placed in [sic] her body and she is [sic]
coughing at the same time.
Q: What about during the time that you dropped some pillows at her back?
A: She was running her breath sir, "at inaalala niya ang operasyon niya."
Q: Seeing her condition like that what did you do if anything to get any help for her?
A: I buzzered, sir.
Q: About how many time[ s] did you buzz for help?
A: Several times, sir, because I saw Tita Regie [Regina] as if she doesn't [sic] take it anymore, sir.
Q: How long did it take before any nurse come [sic] to the room?
A: Ten (10) to fifteen (15 minutes) because they were not in the nurse's station, sir.
xxxx
Q: What did the nurse do when she entered the room?
A: She asked me if we have an [sic] history of asthma, sir, in the family.
Q: What was your answer.
A: We have, sir, then she hold [sic] the hand of Tita Regie.
Q: What, if anything, did Tita Regie saying [sic] at that time when the nurse was inside the room?
A: She was running her breath and she was mentioning "oxygen, oxygen," sir.
Q: What happened after that?
A: The nurse went out, sir, I was holding Tita Regie at the same time I called up Tito Romy, sir.
xxxx
Q: Going back to the time when the nurse came in and asked you if your family has an [sic] history of
asthma. After that and after touching the hands of Regina, what did the nurse do?
A: She went out because Tita Regie was asking for an oxygen, sir.
Q: Did the nurse say anything or give any instruction before leaving the room?
A: I cannot recall, sir, because I was already afraid of the color [cyanosis] of Tita Regie, sir.
Q: How long did it take before any oxygen arrived if ever?
A: About 20 minutes, sir.57 (Emphases supplied)
The appellate court also correctly noted that even the witness for petitioner, resident physician Dr.
Grace de los Angeles, noticed that it took some time before the oxygen arrived as shown in her
testimony:
Q [Atty. Tanada]: But do you know how much time elapsed from the time oxygen was first requested
since you were not yet there?
xxxx
A [Dr. Delos Angeles]: The one who first orders not considering the nurse's order, it was me who first
ordered for the oxygen.
Q: A nurse made an earlier order also?
A: Yes, sir.
xxxx
Q: Do you recall having heard a statement made by any doctor to the effect why did the oxygen tank
just arrive[ d] at that moment?

xxxx
A: When the nurse, said 'nagpakuha na ng oxygen,' I could not recall if it is [sic] me or Dra. Gonzales,
we asked her 'Bakit wala pa?'
Q: So your answer is there was somebody who made that comment?
A: Yes, Your Honor.58 (Underscoring supplied)
The CA also found that there was negligent delay in referring Regina to the physicians.59 In fact, a
member of the medical staff chided the nurses for not immediately referring the patient's condition to
the physicians as the following excerpt shows:
Q [Atty. Diokno]: Without mentioning anymore whom you believed to be the speaker. Could you just
relay what were the things that you heard, said at that time.
xxxx
A [Balad]: "Why is it that the dextrose is only now, why did you not ask for assistance immediately,"
sir.60(Underscoring supplied)
The records also show another instance of negligence, such as the delay in the removal of Regina's
consumed dextrose, a condition that was already causing her discomfort. In fact, Balad had to inform
the nurses and the patient had to instruct one of them, on what to do as can be seen in this part of
Balad's testimony:
Q [Atty. Diokno]: Would you try to recall what were the words that were used by your aunt in telling you
about the dextrose?
A [Balad]: According to her you call [the] nurse at the nurse station for her to remove the dextrose from
my hand, sir.
xxxx
Q: When you saw that [sic] two (2) nurses there at the nurse station, what were they doing?
A: The other one is sitting eating pansit, sir, and the other one is standing holding a bottle, sir.
Q: What did you tell them, if anything, when you arrived at the nurse station?
A: I told them that the dextrose at Room 238 was already finished, sir.
xxxx
Q: How long did it take before any nurse arrived inside Room 238?
A: I went back to the nurse station because no one responded from [sic] my call, sir.
Q: About how many minutes had elapsed from the time you went to the nurse station for the first time
and from the time you went for the second time?
A: About three (3) to five (5) minutes, sir. "Yung pangalawang tawag ko na sa kanya ay nakasunod na
siya sa akin," sir.
Q: The second time when the nurse was already following you back to the room. What happened there
when you go [sic] inside the room?
A: The nurse approached my Tita Regie and according to my Tita Regie, "Nurse, please remove it
because my hand was already bulging," sir.
Q: What is the response of the nurse to that comment of your auntie?

A: She was following the instruction of my Tita Regie and then she told me to get a towel, sir, to be
placed on her hand, "namaga na", sir.61 (Underscoring supplied)
Taken together, the above instances of delay convinced the courts below, as well as this Court, that
there was a breach of duty on the part of the hospital's nurses. The CA therefore correctly affirmed the
finding of the trial court that the nurses responded late, and that Regina was already cyanotic when she
was referred to the resident doctor.
Regina suffered from brain damage, particularly hypoxic encephalopathy, which is caused by lack of
oxygen in the brain. The testimonies of Dr. Dizon and Dr. Robeniol proved this fact. And the proximate
cause of the brain damage was the delay in responding to Regina's call for help and for oxygen. The
trial court said:
Had the nurses exercised certain degree of promptness and diligence in responding to the patient[']s
call for help[,] the occurrence of "hypoxic encephalopathy" could have been avoided since lack or
inadequate supply of oxygen to the brain for 5 minutes will cause damage to it.62
The CA affirmed the above ruling of the RTC, that whatever the cause of the oxygen deprivation was,
its timely and efficient management would have stopped the chain of events that led to Regina's
condition.
We affirm the findings of the courts below that the negligent delay on the part of the nurses was the
proximate cause of the brain damage suffered by Regina. In Ramos, the Court defines proximate cause
as follows:
Proximate cause has been defined as that which, in natural and continuous sequence, unbroken by
any efficient intervening cause, produces injury, and without which the result would not have occurred.
An injury or damage is proximately caused by an act or a failure to act, whenever it appears from the
evidence in the case, that the act or omission played a substantial part in bringing about or actually
causing the injury or damage; and that the injury or damage was either a direct result or a reasonably
probable consequence of the act or omission. It is the dominant, moving or producing cause.
(Underscoring supplied; citations omitted).63
Thus, a failure to act may be the proximate cause if it plays a substantial part in bringing about an injury.
Note also that the omission to perform a duty may also constitute the proximate cause of an injury, but
only where the omission would have prevented the injury.64 The Court also emphasizes that the injury
need only be a reasonably probable consequence of the failure to act. In other words, there is no need
for absolute certainty that the injury is a consequence of the omission.65
Applying the above definition to the facts in the present case, the omission of the nurses - their failure
to check on Regina and to refer her to the resident doctor and, thereafter, to immediately provide
oxygen - was clearly the proximate cause that led to the brain damage suffered by the patient. As the
trial court and the CA both held, had the nurses promptly responded, oxygen would have been
immediately administered to her and the risk of brain damage lessened, if not avoided.
For the negligence of its nurses, petitioner is thus liable under Article 218066 in relation to Article
217667 of the Civil Code. Under Article 2180, an employer like petitioner hospital may be held liable for
the negligence of its employees based on its responsibility under a relationship of patria potestas.68 The
liability of the employer under this provision is "direct and immediate; it is not conditioned upon a prior
recourse against the negligent employee or a prior showing of the insolvency of that employee."69 The
employer may only be relieved of responsibility upon a showing that it exercised the diligence of a good
father of a family in the selection and supervision of its employees. The rule is that once negligence of
the employee is shown, the burden is on the employer to overcome the presumption of negligence on
the latter's part by proving observance of the required diligence.70

In the instant case, there is no dispute that petitioner was the employer of the nurses who have been
found to be negligent in the performance of their duties. This fact has never been in issue. Hence,
petitioner had the burden of showing that it exercised the diligence of a good father of a family not only
in the selection of the negligent nurses, but also in their supervision.
On this point, the rulings of the RTC and the CA diverge. While the trial court found due diligence in
both the selection and the supervision of the nurses, the appellate court found that petitioner proved
due diligence only in the selection, but not in the supervision, of the nurses.
After a careful review of the records, we find that the preponderance of evidence supports the finding
of the CA that the hospital failed to discharge its burden of proving due diligence in the supervision of
its nurses and is therefore liable for their negligence. It must be emphasized that even though it proved
due diligence in the selection of its nurses, the hospital was able to dispose of only half the burden it
must overcome.71
We therefore note with approval this finding of the CA:
While Lourdes Hospital adduced evidence in the selection and hiring processes of its employees, it
failed to adduce evidence showing the degree of supervision it exercised over its nurses. In neglecting
to offer such proof, or proof of similar nature, respondent [herein petitioner] hospital failed to discharge
its burden under the last paragraph of Article 2180. Consequently, it should be held liable for the
negligence of its nurses which caused damage to Regina.72
Indeed, whether or not the diligence of a good father of a family has been exercised by petitioner is a
matter of proof,73 which under the circumstances in the case at bar has not been clearly established.
The Court finds that there is not enough evidence on record that would overturn the presumption of
negligence. In explaining its basis for saying that petitioner proved due diligence in the supervision of
the nurses, the trial court merely said:
As testified to by Ms. Lourdes Nicolas, the assistant nursing director, the process of selection and hiring
of their nurses was a rigorous process whereby the applicants undergo series of examination,
orientation, training, on the job observation and evaluation before they are hired as regular employees.
The nurses are supervised by their head nurses and the charge nurse and inspected by their clinical
supervisor and nursing director. Based from this evidence the court believes that defendant hospital
had exercised prudence and diligence required of it. The nurses it employed were equipped with
sufficient knowledge and instructions and are able to perform their work and familiar with the duties and
responsibilities assigned to them.74
Indeed, the formulation of a supervisory hierarchy, company rules and regulations, and disciplinary
measures upon employees in case of breach, is indispensable. However, to prove due diligence in the
supervision of employees, it is not enough for an employer such as petitioner to emptily invoke the
existence of such a formulation. What is more important is the actual implementation and monitoring of
consistent compliance with the rules. Understandably, this actual implementation and monitoring
should be the constant concern of the employer, acting through dependable supervisors who should
regularly report on their supervisory functions. Thus, there must be proof of diligence in the actual
supervision of the employees' work.75
In the present case, there is no proof of actual supervision of the employees' work or actual
implementation and monitoring of consistent compliance with the rules. The testimony of petitioner's
Assistant Nursing Service Director, Lourdes H. Nicolas is belied by the actual records76 of petitioner.
These show that Nurses David and Padolina had been observed to be latecomers and absentees; yet
they were never sanctioned by those supposedly supervising them. While the question of diligent
supervision depends on the circumstances of employment,77 we find that by the very nature of a
hospital, the proper supervision of the attendance of its nurses, who are its frontline health
professionals, is crucial considering that patients' conditions can change drastically in a matter of
minutes. Petitioner's Employee Handbook78 recognized exactly this as it decreed the proper procedure
in availing of unavoidable absences and the commensurate penalties of verbal reprimand, written
warning, suspension from work, and dismissal in instances of unexcused absence or
tardiness.79 Petitioner's failure to sanction the tardiness of the defendant nurses shows an utter lack of
actual implementation and monitoring of compliance with the rules and ultimately of supervision over
its nurses.
More important, on that fatal night, it was not shown who were the actual nurses on duty and who was
supervising these nurses. Although Lourdes H. Nicolas explained in her testimony that two nurses are
assigned at the nurses' station for each shift and that they are supervised by the head nurses or the
charge nurses, the documents of petitioner show conflicting accounts of what happened on the fateful
days of 26 and 27 of December 1997.
The schedule of nurses initially submitted by the director of the nursing service of petitioner hospital,
Sister Estrella Crisologo, indicated that David was on duty from 2 p.m. to 11 p.m. on 26 December 1997
and that Padolina and Ballano were on duty from 10 p.m. of 26 December 1997 to 6 a.m. of 27
December 1997. Ballano, however, was employed as a midwife and not a nurse.80 Also, the oral
deposition of Sister Estrella Crisologo indicated that a certain Molina, a nurse, did not report for work
from 10 p.m. of 26 December 1997 to 6 a.m. of 27 December 1997 leaving only Padolina as the nurse
on duty during the said period while Evelyn David was on duty only from 2 p.m. to 11 p.m. on 26
December 1997.81 However, in a Manifestation82 dated 15 July 1999, petitioner submitted a revised
and more accurate schedule of nurses prepared by the nurse supervisor, Charina G. Ocampo, which
curiously contained erasures on the portion pertaining to Evelyn David in that David was now shown to
be on duty from 10 p.m. on 26 December 1997 to 6 a.m. on 27 December 1997.83
Another piece of documentary evidence, the Nurses' Notes, was also not without inconsistencies. In a
Manifestation and Motion84 dated 3 June 2003, petitioner admitted to having inadvertently failed to
include an entry or page in the Nurses' Notes initially submitted to the trial court.85 That entry was the
Nurse's Observation and Report on Capanzana from 8 p.m. of 26 December 1997 to 3:20 a.m. of 27
December 1997 signed by David.86 Moreover, in the testimony of witness for petitioner, Milagros de
Vera, the administrative supervisor of the hospital, it was revealed that entries in the Nurses' Notes
were made in different colors of ink depending on the shift of the nurse: blue ink for the morning shift,
black for afternoon, and red for night. Interestingly, as manifested by the counsel for respondents, the
entries made from 2:45 to 2:50 a.m. of 27 December 1997 were in both blue and red.87
All these negate the due diligence on the part of the nurses, their supervisors, and ultimately, the
hospital.
We therefore affirm the appellate court in finding petitioner directly liable for the negligence of its nurses
under Article 2180 in relation to Article 2176 of the Civil Code.
We are left with two minor issues that need to be addressed in order to completely resolve the petition.
To recall, petitioner questioned before the CA not only the trial court's denial of petitioner's Motion for
Leave to take the deposition of a witness but also the denial of its counterclaims. In the assailed
Decision and Resolution, the appellate court failed to make a pronouncement expressly addressing the
issues. Petitioner now prays that we remand the case to the trial court for the reception of the testimony
of its witness and that we grant its counterclaims.
In support of the first issue, petitioner invokes our pronouncements in Hyatt Manufacturing Corp. v. Ley
Construction Development Corp.,88 in which this Court affirmed the appellate court's ruling to remand
the case to the trial court and to order the deposition-taking to proceed. To bring this issue to a close,
we see the need to present a nuanced parsing of the difference between the circumstances in Hyatt and
in the present petition. First, in the cited case, the party opposing the deposition made unwarranted
claims of delay. This Comi found that it was not the request for deposition, but the voluminous pleadings

filed by the opposing party, that caused the delay in the court proceedings. In this case, however, there
is reason to suspect that the request was indeed meant to delay because the intended deposition in
2004 was meant to be an additional sur-rebuttal evidence to Balad's testimony which, we
characteristically take note, was given in 1999, a long five years before. Moreover, the trial court
reasoned that the case had been tried for many years and was about to be decided:
The timeliness of the motion for leave of court to take deposition through written interrogatories cast
doubt whether or not it was intended to further delay the proceedings of this case. The instant case has
obtained considerable length in its adjudication and to allow movant-defendants to take deposition of
Ms. David [the witness-deponent] would only further delay its disposition and would certainly defeat the
purpose of a disposition which is to expedite proceedings.89
Second, in Hyatt, the trial court arbitrarily cancelled the taking of depositions, which had been
scheduled previously. In other words, everything had been set, and the deponents were available for
deposition. Delay, if any, would have been minimal. In the present case, no deposition was ever
scheduled, and the availability of the supposed deponent was not even ascertained. In fact, the
uncertainty in the taking of the deposition was one of the reasons cited by the trial court when it denied
the Motion for Leave.90
Third, the RTC in this case noted that petitioner had agreed to a self-imposed deadline for the
submission of its sur-rebuttal evidence. When the scheduled hearing came, petitioner's counsel failed
to attend purportedly because he was indisposed. But as curiously observed by the trial court, the
reception of sur-rebuttal evidence on that date could not have proceeded anyway since petitioner had
no witnesses.91 The trial court likewise noted that petitioner failed to state any solid ground to justify the
grant of the taking of that deposition, except for the latter's naked assertion that the witness to be
deposed was out of the country.92 The Court finds that these considerations, taken together, provided
one of the reasons for the RTC to properly deny the Motion for Leave to take the deposition of a witness.
In Hyatt, the movant was completely faultless; in the present case, petitioner failed not only to be
present at the scheduled hearing for the submission of its sur-rebuttal evidence, but also to show good
faith in its request.
Fourth, the movant in Hyatt was clearly prejudiced by the denial of its request, which it had promptly
made before pretrial. The same cannot be said in the present case because petitioner filed the motion
to take deposition six years after trial had started. In fact, petitioner was confident enough to agree to
a deadline for the submission of its sur-rebuttal evidence, a deadline that had long passed when it filed
a Motion for Leave. Petitioner is, therefore, estopped from claiming that it was ever prejudiced.
All in all, petitioner's argument regarding the trial court's denial of petitioner's Motion for Leave to take
the deposition fails to impress us.1âwphi1
This notwithstanding, we find merit in another argument successively raised by petitioner before the
Court of Appeals and before this Court with respect to the unpaid hospital bill of respondents - an issue
not addressed again by the CA in the assailed ruling. The unpaid hospital bill at petitioner hospital
amounted to ₱20,141.60 as of 30 October 1998.93 This fact was uncontroverted by respondents. Since
the amount for actual damages as listed by respondents in their complaint was already inclusive of the
hospital bills incurred at petitioner hospital and at Cardinal Santos Hospital, we deem it proper to deduct
the unpaid hospital bill from the actual damages decreed by the lower court and affirmed by the
appellate court. However, we additionally impose the payment of interest on the resulting amount to
conform with prevailing jurisprudence.94
WHEREFORE, premises considered, we AFFIRM WITH MODIFICATION the Decision and Resolution
rendered by the Court of Appeals in CA-G.R. CV No. 89030 in that petitioner is hereby declared liable
for the payment to respondents of the total amount of ₱299,l 02.04 as actual damages minus ₱20,
141.60 representing the unpaid hospital bill as of 30 October 1998; ₱l,950,269.80 as compensatory

damages; ₱l00,000.00 as moral damages; ₱l00,000.00 as and by way of attorney's fees; and the costs
of suit, as well as interest at the rate of six percent (6%) per annum on the resulting amount from the
finality of this judgment until full payment.
SO ORDERED.
N ATURE AND E FFECT OF O BLIGATIONS

Swire Realty Development Corp. v. Specialty Contracts General and Construction Services,
Inc.

F ORTUITOUS E VENT
Metro Concast Steel Corp., Spouses Jose S. Dychiao and Tiu Oh Yan, et al. Allied Bank
Corporation
G.R. No. 177921 December 4, 2013
METRO CONCAST STEEL CORPORATION, SPOUSES JOSE S. DYCHIAO AND TIUOH YAN,
SPOUSES GUILLERMO AND MERCEDES DYCHIAO, AND SPOUSES VICENTE AND FILOMENA
DYCHIAO, Petitioners,
vs.
ALLIED BANK CORPORATION, Respondent.
RESOLUTION
PERLAS-BERNABE, J.:
Assailed in this petition for review on certiorari1 are the Decision2 dated February 12, 2007 and the
Resolution3dated May 10, 2007 of the Court of Appeals (CA) in CA-G.R. CV No. 86896 which reversed
and set aside the Decision4 dated January 17, 2006 of the Regional Trial Court of Makati, Branch 57
(RTC) in Civil Case No. 00-1563, thereby ordering petitioners Metro Concast Steel Corporation (Metro
Concast), Spouses Jose S. Dychiao and Tiu Oh Yan, Spouses Guillermo and Mercedes Dychiao, and
Spouses Vicente and Filomena Duchiao (individual petitioners) to solidarily pay respondent Allied Bank
Corporation (Allied Bank) the aggregate amount of ₱51,064,094.28, with applicable interests and
penalty charges.
The Facts
On various dates and for different amounts, Metro Concast, a corporation duly organized and existing
under and by virtue of Philippine laws and engaged in the business of manufacturing steel,5 through its
officers, herein individual petitioners, obtained several loans from Allied Bank. These loan transactions
were covered by a promissory note and separate letters of credit/trust receipts, the details of which are
as follows:
Date Document Amount
December 13, 1996 Promissory Note No. 96-213016 ₱2,000,000.00
November 7, 1995 Trust Receipt No. 96-2023657 ₱608,603.04
May 13, 1996 Trust Receipt No. 96-9605228 ₱3,753,777.40
May 24, 1996 Trust Receipt No. 96-9605249 ₱4,602,648.08
March 21, 1997 Trust Receipt No. 97-20472410 ₱7,289,757.79
June 7, 1996 Trust Receipt No. 96-20328011 ₱17,340,360.73
July 26, 1995 Trust Receipt No. 95-20194312 ₱670,709.24
August 31, 1995 Trust Receipt No. 95-20205313 ₱313,797.41
November 16, 1995 Trust Receipt No. 96-20243914 ₱13,015,109.87
July 3, 1996 Trust Receipt No. 96-20355215 ₱401,608.89
June 20, 1995 Trust Receipt No. 95-20171016 ₱750,089.25
December 13, 1995 Trust Receipt No. 96-37908917 ₱92,919.00
December 13, 1995 Trust Receipt No. 96/20258118 ₱224,713.58
The interest rate under Promissory Note No. 96-21301 was pegged at 15.25% per annum (p.a.), with
penalty charge of 3% per month in case of default; while the twelve (12) trust receipts uniformly provided
for an interest rate of 14% p.a. and 1% penalty charge. By way of security, the individual petitioners
executed several Continuing Guaranty/Comprehensive Surety Agreements19 in favor of Allied Bank.
Petitioners failed to settle their obligations under the aforementioned promissory note and trust receipts,
hence, Allied Bank, through counsel, sent them demand letters,20 all dated December 10, 1998,
seeking payment of the total amount of ₱51,064,093.62, but to no avail. Thus, Allied Bank was
prompted to file a complaint for collection of sum of money21 (subject complaint) against petitioners
before the RTC, docketed as Civil Case No. 00-1563. In their second22 Amended Answer,23petitioners
admitted their indebtedness to Allied Bank but denied liability for the interests and penalties charged,
claiming to have paid the total sum of ₱65,073,055.73 by way of interest charges for the period covering
1992 to 1997.24

They also alleged that the economic reverses suffered by the Philippine economy in 1998 as well as
the devaluation of the peso against the US dollar contributed greatly to the downfall of the steel industry,
directly affecting the business of Metro Concast and eventually leading to its cessation. Hence, in order
to settle their debts with Allied Bank, petitioners offered the sale of Metro Concast’s remaining assets,
consisting of machineries and equipment, to Allied Bank, which the latter, however, refused. Instead,
Allied Bank advised them to sell the equipment and apply the proceeds of the sale to their outstanding
obligations. Accordingly, petitioners offered the equipment for sale, but since there were no takers, the
equipment was reduced into ferro scrap or scrap metal over the years. In 2002, Peakstar Oil
Corporation (Peakstar), represented by one Crisanta Camiling (Camiling), expressed interest in buying
the scrap metal. During the negotiations with Peakstar, petitioners claimed that Atty. Peter Saw (Atty.
Saw), a member of Allied Bank’s legal department, acted as the latter’s agent. Eventually, with the
alleged conformity of Allied Bank, through Atty. Saw, a Memorandum of Agreement25 dated November
8, 2002 (MoA) was drawn between Metro Concast, represented by petitioner Jose Dychiao, and
Peakstar, through Camiling, under which Peakstar obligated itself to purchase the scrap metal for a
total consideration of ₱34,000,000.00, payable as follows:
(a) ₱4,000,000.00 by way of earnest money – ₱2,000,000.00 to be paid in cash and the other
₱2,000,000.00 to be paid in two (2) post-dated checks of ₱1,000,000.00 each;26 and
(b) the balance of ₱30,000,000.00 to be paid in ten (10) monthly installments of ₱3,000,000.00, secured
by bank guarantees from Bankwise, Inc. (Bankwise) in the form of separate post-dated checks.27
Unfortunately, Peakstar reneged on all its obligations under the MoA.1âwphi1 In this regard, petitioners
asseverated that:
(a) their failure to pay their outstanding loan obligations to Allied Bank must be considered as force
majeure ; and
(b) since Allied Bank was the party that accepted the terms and conditions of payment proposed by
Peakstar, petitioners must therefore be deemed to have settled their obligations to Allied Bank. To
bolster their defense, petitioner Jose Dychiao (Jose Dychiao) testified28 during trial that it was Atty. Saw
himself who drafted the MoA and subsequently received29 the ₱2,000,000.00 cash and the two (2)
Bankwise post-dated checks worth ₱1,000,000.00 each from Camiling. However, Atty. Saw turned over
only the two (2) checks and ₱1,500,000.00 in cash to the wife of Jose Dychiao.30
Claiming that the subject complaint was falsely and maliciously filed, petitioners prayed for the award
of moral damages in the amount of ₱20,000,000.00 in favor of Metro Concast and at least
₱25,000,000.00 for each individual petitioner, ₱25,000,000.00 as exemplary damages, ₱1,000,000.00
as attorney’s fees, ₱500,000.00 for other litigation expenses, including costs of suit.
The RTC Ruling
After trial on the merits, the RTC, in a Decision31 dated January 17, 2006, dismissed the subject
complaint, holding that the "causes of action sued upon had been paid or otherwise extinguished." It
ruled that since Allied Bank was duly represented by its agent, Atty. Saw, in all the negotiations and
transactions with Peakstar – considering that Atty. Saw
(a) drafted the MoA,
(b) accepted the bank guarantee issued by Bankwise, and
(c) was apprised of developments regarding the sale and disposition of the scrap metal – then it stands
to reason that the MoA between Metro Concast and Peakstar was binding upon said bank.
The CA Ruling

Allied Bank appealed to the CA which, in a Decision32 dated February 12, 2007, reversed and set aside
the ruling of the RTC, ratiocinating that there was "no legal basis in fact and in law to declare that when
Bankwise reneged its guarantee under the [MoA], herein [petitioners] should be deemed to be
discharged from their obligations lawfully incurred in favor of [Allied Bank]."33
The CA examined the MoA executed between Metro Concast, as seller of the ferro scrap, and Peakstar,
as the buyer thereof, and found that the same did not indicate that Allied Bank intervened or was a
party thereto. It also pointed out the fact that the post-dated checks pursuant to the MoA were issued
in favor of Jose Dychiao. Likewise, the CA found no sufficient evidence on record showing that Atty.
Saw was duly and legally authorized to act for and on behalf of Allied Bank, opining that the RTC was
"indulging in hypothesis and speculation"34 when it made a contrary pronouncement. While Atty. Saw
received the earnest money from Peakstar, the receipt was signed by him on behalf of Jose Dychiao.35
It also added that "[i]n the final analysis, the aforesaid checks and receipts were signed by [Atty.] Saw
either as representative of [petitioners] or as partner of the latter’s legal counsel, and not in anyway as
representative of [Allied Bank]."36
Consequently, the CA granted the appeal and directed petitioners to solidarily pay Allied Bank their
corresponding obligations under the aforementioned promissory note and trust receipts, plus interests,
penalty charges and attorney’s fees. Petitioners sought reconsideration37 which was, however, denied
in a Resolution38 dated May 10, 2007. Hence, this petition.
The Issue Before the Court
At the core of the present controversy is the sole issue of whether or not the loan obligations incurred
by the petitioners under the subject promissory note and various trust receipts have already been
extinguished.
The Court’s Ruling
Article 1231 of the Civil Code states that obligations are extinguished either by payment or performance,
the loss of the thing due, the condonation or remission of the debt, the confusion or merger of the rights
of creditor and debtor, compensation or novation.
In the present case, petitioners essentially argue that their loan obligations to Allied Bank had already
been extinguished due to Peakstar’s failure to perform its own obligations to Metro Concast pursuant
to the MoA. Petitioners classify Peakstar’s default as a form of force majeure in the sense that they
have, beyond their control, lost the funds they expected to have received from the Peakstar (due to the
MoA) which they would, in turn, use to pay their own loan obligations to Allied Bank. They further state
that Allied Bank was equally bound by Metro Concast’s MoA with Peakstar since its agent, Atty. Saw,
actively represented it during the negotiations and execution of the said agreement. Petitioners’
arguments are untenable. At the outset, the Court must dispel the notion that the MoA would have any
relevance to the performance of petitioners’ obligations to Allied Bank. The MoA is a sale of assets
contract, while petitioners’ obligations to Allied Bank arose from various loan transactions. Absent any
showing that the terms and conditions of the latter transactions have been, in any way, modified or
novated by the terms and conditions in the MoA, said contracts should be treated separately and
distinctly from each other, such that the existence, performance or breach of one would not depend on
the existence, performance or breach of the other. In the foregoing respect, the issue on whether or
not Allied Bank expressed its conformity to the assets sale transaction between Metro Concast and
Peakstar (as evidenced by the MoA) is actually irrelevant to the issues related to petitioners’ loan
obligations to the bank. Besides, as the CA pointed out, the fact of Allied Bank’s representation has not
been proven in this case and hence, cannot be deemed as a sustainable defense to exculpate
petitioners from their loan obligations to Allied Bank. Now, anent petitioners’ reliance on force majeure,
suffice it to state that Peakstar’s breach of its obligations to Metro Concast arising from the MoA cannot
be classified as a fortuitous event under jurisprudential formulation. As discussed in Sicam v. Jorge:39
Fortuitous events by definition are extraordinary events not foreseeable or avoidable.1âwphi1 It is
therefore, not enough that the event should not have been foreseen or anticipated, as is commonly
believed but it must be one impossible to foresee or to avoid. The mere difficulty to foresee the
happening is not impossibility to foresee the same. To constitute a fortuitous event, the following
elements must concur: (a) the cause of the unforeseen and unexpected occurrence or of the failure of
the debtor to comply with obligations must be independent of human will; (b) it must be impossible
to foresee the event that constitutes the caso fortuito or, if it can be foreseen, it must be impossible to
avoid; (c) the occurrence must be such as to render it impossible for the debtor to fulfill
obligations in a normal manner; and (d) the obligor must be free from any participation in the
aggravation of the injury or loss.40(Emphases supplied)
While it may be argued that Peakstar’s breach of the MoA was unforseen by petitioners, the same us
clearly not "impossible"to foresee or even an event which is independent of human will." Neither has it
been shown that said occurrence rendered it impossible for petitioners to pay their loan obligations to
Allied Bank and thus, negates the former’s force majeure theory altogether. In any case, as earlier
stated, the performance or breach of the MoA bears no relation to the performance or breach of the
subject loan transactions, they being separate and distinct sources of obligations. The fact of the matter
is that petitioners’ loan obligations to Allied Bank remain subsisting for the basic reason that the former
has not been able to prove that the same had already been paid41 or, in any way, extinguished. In this
regard, petitioners’ liability, as adjudged by the CA, must perforce stand. Considering, however, that
Allied Bank’s extra-judicial demand on petitioners appears to have been made only on December 10,
1998, the computation of the applicable interests and penalty charges should be reckoned only from
such date.
WHEREFORE, the petition is DENIED. The Decision dated February 12, 2007 and Resolution dated
May 10, 2007 of the Court of Appeals in CA-G.R. CV No. 86896 are hereby AFFIRMED with
MODIFICATION reckoning the applicable interests and penalty charges from the date of the
extrajudicial demand or on December 10, 1998. The rest of the appellate court’s dispositions stand.
SO ORDERED.
Bernales v. Northwest Airlines

G.R. No. 182395, October 05, 2015
MARITO T. BERNALES, Petitioner, v. NORTHWEST AIRLINES, Respondent.
DECISION
BRION, J.:*
This petition for review on certiorari seeks to reverse the 31 March 2008 decision of the Court of
Appeals (CA) in CA-G.R. CV No. 86861,1 which reversed the 26 January 2006 decision of the Regional
Trial Court (RTC) of Iriga City, Branch 60 in Civil Case No. 3355.2 This RTC ruling, in turn, ordered the
respondent Northwest Airlines (NWA) to pay the petitioner moral and exemplary damages plus
attorney's fees in the sum of twelve million five hundred thirty thousand pesos (P12,530,000.00).
ANTECEDENTS
The petitioner Marito T. Bernales is a lawyer, a university dean, and a board member of
the Sangguniang Panlalawigan of Camarines Sur. On 1 October 2002, he and several other prominent

personalities from Bicol were on their way to Honolulu, Hawaii, as the delegates of a trade and tourism
mission for the province. They were economy class passengers of Northwest Airlines Flight No. 10
from Manila to Honolulu via Narita, Japan.
The delegation arrived at Narita International Airport (NRT) at around 11:00 a.m. Their connecting flight
was scheduled at 8:40 p.m., later that evening.
At around 6:00 p.m., a typhoon hit Japan, leading to the cancellation of most flights, including NWA
Flight No. 10. However, NWA did not cancel Flight No. 22, also bound for Honolulu later that night, to
minimize delays and to accommodate stranded passengers in case the typhoon would subside.
Under NWA policy, affected passengers are protected in their booking for the next available flight in
case of cancellations. This means that if there are available seats in the next flight, the delayed
passengers would be accommodated with priority given to first class and business class passengers.
If only limited seats are available, the delayed passengers are wait-listed according to their priority level
and in the sequence of their check-in. In all cases, the original passengers of the next flight are
prioritized over the delayed passengers.
At around 9:00 p.m., the storm subsided and the airport resumed its operations. Ordinarily, NRT has
an 11:00 p.m. cut-off for flights to give the city a reprieve from airplane noise. On this day, the Narita
Airport Authority extended the airplane curfew to 1:00 a.m., in order to accommodate the delayed flights
and to make up for lost time. This opened up the possibility that the petitioner's group could still push
through to Honolulu.
The delegates opted to be wait-listed for Flight No. 22. The petitioner was placed last in the wait-list as
he was the last economy class passenger to check in for Flight No. 10. To ensure departure before the
1:00 a.m. curfew, NWA gave out "dummy" boarding passes to the wait-listed passengers even before
the priority passengers boarded the plane.
The passengers of Flight 22 were called for boarding at around 11:00 p.m. and the delegates boarded
the shuttle taking them to the airplane. But before the shuttle bus could leave, NWA Customer Service
Agent Tsuruki Ohashi entered the shuttle and informed the petitioner that he could not take Flight 22
as no available seat was left for him.
According to the petitioner's version of events, Ohashi barged into the bus and shouted "Marito, Marito
Bernales, where are you?" When the petitioner identified himself, Ohashi allegedly yelled, "Bullshit,
Marito Bernales, you are not included in the manifest. Get out! Get out!" Ohashi allegedly took the
petitioner's boarding pass and grabbed him by the arm before ejecting him from the shuttle. The shuttle
bus carrying his hand-carried bag left the petitioner alone outside the terminal without his money,
passport, and other travel documents.
Because of the incident, the other delegates refused to board the airplane unless the petitioner was
physically brought to them at the tarmac. After a stalemate between the delegates and the airline's
employees, the petitioner was transported by shuttle to the aircraft to rejoin his group.
NWA narrates in its narration of events, that Ohashi politely approached the petitioner in the shuttle
bus and informed him that they needed to accommodate two original priority passengers who arrived.
Ohashi politely asked the petitioner to alight. Ohashi assured the petitioner that he would look for a
volunteer passenger who would give up his seat to accommodate the petitioner and asked him to wait
inside the terminal. NWA alleges that the petitioner gracefully complied without objections. Ohashi

found a volunteer passenger within ten minutes. NWA immediately transported the petitioner to the
airplane for the flight.
NWA maintains that Ohashi has an impeccable service record in customer relations and has received
multiple commendations.
In either case, the petitioner was given a dummy boarding pass for Seat No. 35 in the name of "Eddie
Tanno." The dummy boarding pass was issued out of necessity due to the lack of time to issue a new
one. The petitioner, however, thought it was a real boarding pass. He proceeded to Seat No. 35-H and
found it occupied by Eddie Tanno. He showed the dummy boarding pass to Tanno who, noticing his
name irately asked, "Can't you read? " An attendant noticed the commotion and immediately escorted
the petitioner to Seat No. 15-H, his allotted vacant seat.
Unfortunately, Flight No. 22 failed to depart in time to beat the Narita curfew. The pilot thus instructed
the passengers to disembark and wait for the next flight. The passengers of Flight No. 22 were returned
to the terminal where they had to wait with 1,500 other stranded passengers.
All the nearby hotels were fully booked from the many flight cancellations. Because it was already late,
NWA failed to find billeting for the stranded Flight No. 22 passengers and they had to spend the night
at the airport; they were given blankets, pillows, snacks, water, and food coupons. The petitioner claims
that he was made to sleep on the terminal floor "akin to the beggars of Quiapo and Baclaran" and had
to suffer the discomfort of using the public toilets.
In the morning of 2 October 2002, NWA gave the delegates two options: (1) take a direct flight to
Honolulu scheduled for 3 October 2002; or (2) take a 3:35 p.m. flight later that day to Los Angeles,
California, with an immediate connecting flight to Honolulu. The delegates chose the second option so
they could leave immediately.
The delegates arrived at Honolulu on 2 October 2002 between 3:00 and 4:00 p.m., Honolulu time. But
they had already missed the courtesy calls they were to make on the governor and the mayor, which
were scheduled for earlier that day.
On 12 February 2003, the petitioner filed a complaint for moral and exemplary damages against the
respondent NWA for breach of their contract of carriage. The petitioner alleged that Ohashi's rude
treatment, his ejection from the shuttle bus, the resulting missed obligations due to the flight's delay,
and the humiliation from the ordeal caused him immense mental anguish and moral shock. He prayed
for P10,000,000.00 as moral damages, P2,000,000.00 as exemplary damages, and P500,000.00 as
attorney's fees plus P5,000.00 per court appearance. The complaint was docketed as Civil Case No.
3355.
On 30 April 2003, NWA filed its answer denying that Ohashi, or any of its employees, forcibly ejected
the petitioner or treated him rudely. NWA insisted that it acted in good faith and never in a wanton,
fraudulent, oppressive, or malevolent manner.
After proceedings, the RTC rendered its decision on 3 October 2005 in favor of the petitioner. The RTC
believed the petitioner's version of events and blamed the respondent for: (1) the humiliation caused
by Eddie Tanno; (2) the failure to billet the passengers to a nearby hotel; and (3) for causing the
petitioner to miss his scheduled obligations in Honolulu. The RTC awarded him P10,000,000.00 as
moral damages, P2,000,000.00 as exemplary damages, P530,000.00 as attorney's fees.
NWA appealed the case to the CA. The appeal was docketed as CA-G.R. CV No. 86861.
On 31 March 2008, the CA reversed the RTC decision and dismissed the complaint. The CA held that:
(1) moral damages cannot be awarded in breaches of contracts of carriage except in cases of the death
of a passenger or when the common carrier acted in bad faith;3 (2) the typhoon was the real and
proximate cause of the cancellation of flights and NWA's failure to bring the petitioner to Honolulu in
time; (3) the petitioner's accusation that Mr. Ohashi verbally abused him is not believable and contrary
to ordinary human experience; (4) the airline cannot be responsible for the remarks of Eddie Tanno, a
fellow passenger; and (5) 1,500 other passengers similarly experienced the discomfort of spending the
night at the airport, and NWA did not maliciously single him out. The CA concluded that NWA did not
act in bad faith; therefore, there was no basis to grant moral and exemplary damages.
On 23 April 2008, the petitioner filed this petition for review on certiorari arguing that the CA erred in
finding that NWA acted in good faith and in dismissing his complaint. The petitioner also adopts the
RTC's decision and asserts that this case is an exception to the rule that the factual findings of the CA
are conclusive on this Court.
In its comment, NWA pointed out that the petition should be dismissed outright because it only raises
questions of fact. NWA also maintained in its memorandum that the CA did not err in concluding that
the former acted in good faith and that the petitioner's version of the events was incredible and contrary
to human experience.
OUR RULING
At the outset, we also note that the petitioner only raised questions of fact, which are not proper in a
petition for review on certiorari. Under Section 1 of Rule 45, such petition shall only raise questions of
law. The Supreme Court is not a trier of facts and it is not our function to analyze and weigh the evidence
that the lower courts have passed upon. Ordinarily, the factual findings of the Court of Appeals are
conclusive upon this Court. However, jurisprudence has carved out recognized exceptions4 to this rule,
to wit: (1) when the findings are grounded entirely on speculation, surmises or conjectures;5 (2) when
the inference made is manifestly mistaken, absurd or impossible;6 (3) when there is grave abuse of
discretion;7 (4) when the judgment is based on a misapprehension of facts;8 (5) when the findings of
facts are conflicting;9 (6) when in making its findings the Court of Appeals went beyond the issues of
the case, or its findings are contrary to the admissions of both the appellant and the appellee;10(7)
when the findings are contrary to those of the trial court;11 (8) when the findings are conclusions
without citation of specific evidence on which they are based;12 (9) when the facts set forth in the petition
as well as in the petitioner's main and reply briefs are not disputed by the respondent;13 (10) when the
findings of fact are premised on the supposed absence of evidence and contradicted by the evidence
on record;14and (11) when the Court of Appeals manifestly overlooked certain relevant facts not
disputed by the parties, which, if properly considered, would justify a different conclusion.15
In the present case, the RTC believed the petitioner's version of events while the CA believed the
respondent. Considering that the lower courts differ in their factual conclusions, this case qualifies as
an exception to the general rule.
After a review of the records and considering the conflicting versions of events, we agree with the CA.
Moral damages predicated upon a breach of a carriage contract is only recoverable in instances where
the mishap results in the death of a passenger,16 or where the carrier is guilty of fraud or bad faith.17Bad
faith is not simple negligence or bad judgment; it involves ill intentions and a conscious design to do a
wrongful act for a dishonest purpose..18

Under the carriage contract, NWA had the obligation to transport the petitioner from Narita International
Airport to Honolulu, Hawaii, on 1 October 2002 at 8:40 p.m. NWA failed to perform this duty because a
strong typhoon hit Japan that evening, forcing widespread flight cancellations. Nevertheless, NWA
attempted to fly the petitioner to Honolulu on a later flight after the typhoon passed. This attempt failed
because NWA was prevented by the mandatory airport curfew. NWA was only able to fulfill its obligation
at 3:35 p.m. the following day
The primary cause of NWA's delay in the fulfillment of its obligation was the unusually strong typhoon
that struck Japan that evening. We take notice that this was Typhoon Higos, one of the most powerful
typhoons to hit Japan as of that date.19 Typhoon Higos resulted in the cancellation of more than 200
flights.20
From this perspective, we cannot attribute bad faith or ill motives on NWA for cancelling Flight No. 10.
Pushing through would have recklessly endangered the lives of the passengers and the crew. Evidently,
the real and proximate cause of NWA's breach of contract was a fortuitous event.
Moreover, NWA demonstrated good faith when it exerted its best efforts to accommodate the delayed
Flight No. 10 passengers on Flight No. 22. While Flight No. 22 also failed to leave, the failure was
caused by the 1:00 p.m. Narita curfew. Again, we cannot attribute malice on NWA for the cancellation
of Flight No. 22.
As the CA did, we do not believe the petitioner's accusations that Ohashi barged into shuttle bus,
verbally abused him, and forced him off the bus. It makes no sense for Ohashi to suddenly yell, "Bullshit,
Marito Bernales, you are not included in the manifest. Get out! Get out!" out of nowhere without any
prior exchanges. Moreover, we find it hard to believe that neither the petitioner nor the other delegates
protested on the spot against the alleged abusive treatment. As the CA observed, this version of events
is contrary to ordinary human experience.
Moreover, Ohashi has a good track record in customer service and was the recipient of several
commendation letters that were presented in court. We agree with the petitioner that under the rules of
evidence, his previous acts are not admissible to prove how Ohashi behaved during the incident. But
as the respondent pointed out, previous conduct may be received as evidence to prove specific intent,
habit, and tendencies.21 Ohashi's track record contradicts the petitioner's portrayal of him as an
unreasonably rude person.
We also find it hard to swallow the petitioner's theory that Ohashi only brought him to the plane because
the other delegates stayed on the tarmac and refused to board unless the petitioner was with them.
These delegates did not object when the petitioner was allegedly maltreated and ejected from the
shuttle bus, yet the petitioner would have us believe that they protested on the tarmac for thirty to forty
minutes in his behalf. We find it contrary to common experience for people to do or say nothing when
a companion is being abused, then suddenly protest after the fact when they were already away from
the incident. These, to us, are inconsistent reactions. Thus, we find NWA's account to be more credible.
On the insulting remark from Eddie Tanno, we cannot possibly hold NWA responsible for the actions
of the other passengers. The RTC blames the mistake of NWA's agents in the issuance of the dummy
boarding pass for putting the petitioner in that situation. Moral damages, however, cannot be awarded
for simple mistakes in the absence of bad faith.
Finally, we also cannot impute bad faith on NWA's failure to house the passengers in any nearby hotels.
Flight No. 22 was cancelled at around 1 a.m. Considering the number of flights cancelled earlier that

evening, it is understandable that hotel rooms had already been booked by the other airlines also
billeting their passengers.
The petitioner paints the dismal picture that he was forced to use the public comfort rooms and sleep
on the floor like "the beggars of Quiapo and Baclaran." He fails to mention though that the 1,500 other
stranded passengers had to endure the same discomforts that he experienced; NWA did not maliciously
single him out. All the stranded passengers suffered the same experience because of
Typhoon Higos.NWA did the next best thing it could and provided the passengers with blankets,
snacks, and other comforts available under the circumstances.
The arrival of Typhoon Higos was an extraordinary and unavoidable event. Its occurrence made it
impossible for NWA to bring the petitioner to Honolulu in time for his commitments. We cannot hold the
respondent liable for a breach of contract resulting from a fortuitous event. Moreover, we find that NWA
did not act in bad faith or in a wanton, fraudulent, reckless, or oppressive manner. On the contrary, it
exerted its best efforts to accommodate the petitioner on Flight No. 22 and to lessen the petitioner's
discomfort when he and the other passengers were left to pass the night at the terminal. Thus, the CA
did not err in dismissing the complaint.
WHEREFORE, considering that the Court of Appeals committed no reversible errors, we DENY the
petition for lack of merit. Costs against the petitioner.
SO ORDERED.
U SURIOUS TRANSACTIONS
Mallari v. Prudential Bank
G.R. No. 197861 June 5, 2013
SPOUSES FLORENTINO T. MALLARI and AUREA V. MALLARI, Petitioners,
vs.
PRUDENTIAL BANK (now BANK OF THE PHILIPPINE ISLANDS), Respondent.
DECISION
PERALTA, J.:
Before us is a Petition for Review on Certiorari under Rule 45, assailing the Decision1 dated June 17,
2010 and the Resolution2 dated July 20, 2011 of the Court of Appeals (CA) in CA-G.R. CV No. 65993.
On December 11, 1984, petitioner Florentino T. Mallari (Florentino) obtained from respondent
Prudential Bank-Tarlac Branch (respondent bank), a loan in the amount of ₱300,000.00 as evidenced
by Promissory Note (PN) No. BD 84-055.3 Under the promissory note, the loan was subject to an
interest rate of 21% per annum (p.a.), attorney's fees equivalent to 15% of the total amount due but not
less than ₱200.00 and, in case of default, a penalty and collection charges of 12% p.a. of the total
amount due. The loan had a maturity date of January 10, 1985, but was renewed up to February 17,
1985. Petitioner Florentino executed a Deed of Assignment4 wherein he authorized the respondent
bank to pay his loan with his time deposit with the latter in the amount of ₱300,000.00.
On December 22, 1989, petitioners spouses Florentino and Aurea Mallari (petitioners) obtained again
from respondent bank another loan of ₱1.7 million as evidenced by PN No. BDS 606-895 with a maturity
date of March 22, 1990. They stipulated that the loan will bear 23% interest p.a., attorney's fees
equivalent to 15% p.a. of the total amount due, but not less than ₱200.00, and penalty and collection
charges of 12% p.a. Petitioners executed a Deed of Real Estate Mortgage6 in favor of respondent bank

covering petitioners' property under Transfer Certificate of Title (TCT) No. T-215175 of the Register of
Deeds of Tarlac to answer for the said loan.
Petitioners failed to settle their loan obligations with respondent bank, thus, the latter, through its lawyer,
sent a demand letter to the former for them to pay their obligations, which when computed up to January
31, 1992, amounted to ₱571,218.54 for PN No. BD 84-055 and ₱2,991,294.82 for PN No. BDS 606-
89.
On February 25, 1992, respondent bank filed with the Regional Trial Court (RTC) of Tarlac, a petition
for the extrajudicial foreclosure of petitioners' mortgaged property for the satisfaction of the latter's
obligation of ₱1,700,000.00 secured by such mortgage, thus, the auction sale was set by the Provincial
Sheriff on April 23, 1992.7
On April 10, 1992, respondent bank's Assistant Manager sent petitioners two (2) separate Statements
of Account as of April 23, 1992, i.e., the loan of ₱300,000.00 was increased to ₱594,043.54, while the
₱1,700,000.00 loan was already ₱3,171,836.18.
On April 20, 1992, petitioners filed a complaint for annulment of mortgage, deeds, injunction, preliminary
injunction, temporary restraining order and damages claiming, among others, that: (1) the ₱300,000.00
loan obligation should have been considered paid, because the time deposit with the same amount
under Certificate of Time Deposit No. 284051 had already been assigned to respondent bank; (2)
respondent bank still added the ₱300,000.00 loan to the ₱1.7 million loan obligation for purposes of
applying the proceeds of the auction sale; and (3) they realized that there were onerous terms and
conditions imposed by respondent bank when it tried to unilaterally increase the charges and interest
over and above those stipulated. Petitioners asked the court to restrain respondent bank from
proceeding with the scheduled foreclosure sale.
Respondent bank filed its Answer with counterclaim arguing that: (1) the interest rates were clearly
provided in the promissory notes, which were used in computing for interest charges; (2) as early as
January 1986, petitioners' time deposit was made to apply for the payment of interest of their
₱300,000.00 loan; and (3) the statement of account as of April 10, 1992 provided for a computation of
interest and penalty charges only from May 26, 1989, since the proceeds of petitioners' time deposit
was applied to the payment of interest and penalty charges for the preceding period. Respondent bank
also claimed that petitioners were fully apprised of the bank's terms and conditions; and that the
extrajudicial foreclosure was sought for the satisfaction of the second loan in the amount of ₱1.7 million
covered by PN No. BDS 606-89 and the real estate mortgage, and not the ₱300,000.00 loan covered
by another PN No. 84-055.
In an Order8 dated November 10, 1992, the RTC denied the Application for a Writ of Preliminary
Injunction. However, in petitioners' Supplemental Motion for Issuance of a Restraining Order and/or
Preliminary Injunction to enjoin respondent bank and the Provincial Sheriff from effecting or conducting
the auction sale, the RTC reversed itself and issued the restraining order in its Order9 dated January
14, 1993.
Respondent bank filed its Motion to Lift Restraining Order, which the RTC granted in its Order10 dated
March 9, 1993. Respondent bank then proceeded with the extrajudicial foreclosure of the mortgaged
property. On July 7, 1993, a Certificate of Sale was issued to respondent bank being the highest bidder
in the amount of ₱3,500,000.00.
Subsequently, respondent bank filed a Motion to Dismiss Complaint11 for failure to prosecute action for
unreasonable length of time to which petitioners filed their Opposition.12 On November 19, 1998, the
RTC issued its Order13 denying respondent bank's Motion to Dismiss Complaint.
Trial thereafter ensued. Petitioner Florentino was presented as the lone witness for the plaintiffs.
Subsequently, respondent bank filed a Demurrer to Evidence.

On November 15, 1999, the RTC issued its Order14 granting respondent's demurrer to evidence, the
dispositive portion of which reads:
WHEREFORE, this case is hereby ordered DISMISSED. Considering there is no evidence of bad faith,
the Court need not order the plaintiffs to pay damages under the general concept that there should be
no premium on the right to litigate.
NO COSTS.
SO ORDERED.15
The RTC found that as to the ₱300,000.00 loan, petitioners had assigned petitioner Florentino's time
deposit in the amount of ₱300,000.00 in favor of respondent bank, which maturity coincided with
petitioners' loan maturity. Thus, if the loan was unpaid, which was later extended to February 17, 1985,
respondent bank should had just applied the time deposit to the loan. However, respondent bank did
not, and allowed the loan interest to accumulate reaching the amount of ₱594,043.54 as of April 10,
1992, hence, the amount of ₱292,600.00 as penalty charges was unjust and without basis.
As to the ₱1.7 million loan which petitioners obtained from respondent bank after the ₱300,000.00 loan,
it had reached the amount of ₱3,171,836.18 per Statement of Account dated April 27, 1993, which was
computed based on the 23% interest rate and 12% penalty charge agreed upon by the parties; and
that contrary to petitioners' claim, respondent bank did not add the ₱300,000.00 loan to the ₱1.7 million
loan obligation for purposes of applying the proceeds of the auction sale.
The RTC found no legal basis for petitioners' claim that since the total obligation was ₱1.7 million and
respondent bank's bid price was ₱3.5 million, the latter should return to petitioners the difference of
₱1.8 million. It found that since petitioners' obligation had reached ₱2,991,294.82 as of January 31,
1992, but the certificate of sale was executed by the sheriff only on July 7, 1993, after the restraining
order was lifted, the stipulated interest and penalty charges from January 31, 1992 to July 7, 1993
added to the loan already amounted to ₱3.5 million as of the auction sale.
The RTC found that the 23% interest rate p.a., which was then the prevailing loan rate of interest could
not be considered unconscionable, since banks are not hospitable or equitable institutions but are
entities formed primarily for profit. It also found that Article 1229 of the Civil Code invoked by petitioners
for the reduction of the interest was not applicable, since petitioners had not paid any single centavo of
the ₱1.7 million loan which showed they had not complied with any part of the obligation.
Petitioners appealed the RTC decision to the CA. A Comment was filed by respondent bank and
petitioners filed their Reply thereto.
On June 17, 2010, the CA issued its assailed Decision, the dispositive portion of which reads:
WHEREFORE, the instant appeal is hereby DENIED. The Order dated November 15, 1999 issued by
the Regional Trial Court (RTC), Branch 64, Tarlac City, in Civil Case No. 7550 is hereby AFFIRMED.16
The CA found that the time deposit of ₱300,000.00 was equivalent only to the principal amount of the
loan of ₱300,000.00 and would not be sufficient to cover the interest, penalty, collection charges and
attorney's fees agreed upon, thus, in the Statement of Account dated April 10, 1992, the outstanding
balance of petitioners' loan was ₱594,043.54. It also found not persuasive petitioners' claim that the
₱300,000.00 loan was added to the ₱1.7 million loan. The CA, likewise, found that the interest rates
and penalty charges imposed were not unconscionable and adopted in toto the findings of the RTC on
the matter.
Petitioners filed their Motion for Reconsideration, which the CA denied in a Resolution dated July 20,
2011.
Hence, petitioners filed this petition for review arguing that:

THE HON. COURT OF APPEALS ERRED IN AFFIRMING THE ORDER OF THE RTC-BRANCH 64,
TARLAC CITY, DATED NOVEMBER 15, 1999, DESPITE THE FACT THAT THE SAME IS
CONTRARY TO SETTLED JURISPRUDENCE ON THE MATTER.17
The issue for resolution is whether the 23% p.a. interest rate and the 12% p.a. penalty charge on
petitioners' ₱1,700,000.00 loan to which they agreed upon is excessive or unconscionable under the
circumstances.
Parties are free to enter into agreements and stipulate as to the terms and conditions of their contract,
but such freedom is not absolute. As Article 1306 of the Civil Code provides, "The contracting parties
may establish such stipulations, clauses, terms and conditions as they may deem convenient, provided
they are not contrary to law, morals, good customs, public order, or public policy." Hence, if the
stipulations in the contract are valid, the parties thereto are bound to comply with them, since such
contract is the law between the parties. In this case, petitioners and respondent bank agreed upon on
a 23% p.a. interest rate on the ₱1.7 million loan. However, petitioners now contend that the interest
rate of 23% p.a. imposed by respondent bank is excessive or unconscionable, invoking our ruling in
Medel v. Court of Appeals,18 Toring v. Spouses Ganzon-Olan,19 and Chua v. Timan.20
We are not persuaded.
In Medel v. Court of Appeals,21 we found the stipulated interest rate of 66% p.a. or a 5.5% per month
on a ₱500,000.00 loan excessive, unconscionable and exorbitant, hence, contrary to morals if not
against the law and declared such stipulation void. In Toring v. Spouses Ganzon-Olan,22 the stipulated
interest rates involved were 3% and 3.81% per month on a ₱10 million loan, which we find under the
circumstances excessive and reduced the same to 1% per month. While in Chua v. Timan,23 where the
stipulated interest rates were 7% and 5% a month, which are equivalent to 84% and 60% p.a.,
respectively, we had reduced the same to 1% per month or 12% p.a. We said that we need not unsettle
the principle we had affirmed in a plethora of cases that stipulated interest rates of 3% per month and
higher are excessive, unconscionable and exorbitant, hence, the stipulation was void for being contrary
to morals.24
In this case, the interest rate agreed upon by the parties was only 23% p.a., or less than 2% per month,
which are much lower than those interest rates agreed upon by the parties in the above-mentioned
cases. Thus, there is no similarity of factual milieu for the application of those cases.
We do not consider the interest rate of 23% p.a. agreed upon by petitioners and respondent bank to be
unconscionable.
In Villanueva v. Court of Appeals,25 where the issue raised was whether the 24% p.a. stipulated interest
rate is unreasonable under the circumstances, we answered in the negative and held:
In Spouses Zacarias Bacolor and Catherine Bacolor v. Banco Filipino Savings and Mortgage Bank,
Dagupan City Branch, this Court held that the interest rate of 24% per annum on a loan of ₱244,000.00,
agreed upon by the parties, may not be considered as unconscionable and excessive. As such, the
Court ruled that the borrowers cannot renege on their obligation to comply with what is incumbent upon
them under the contract of loan as the said contract is the law between the parties and they are bound
by its stipulations.
Also, in Garcia v. Court of Appeals, this Court sustained the agreement of the parties to a 24% per
annum interest on an ₱8,649,250.00 loan finding the same to be reasonable and clearly evidenced by
the amended credit line agreement entered into by the parties as well as two promissory notes executed
by the borrower in favor of the lender.
Based on the above jurisprudence, the Court finds that the 24% per annum interest rate, provided for
in the subject mortgage contracts for a loan of ₱225,000.00, may not be considered unconscionable.

Moreover, considering that the mortgage agreement was freely entered into by both parties, the same
is the law between them and they are bound to comply with the provisions contained therein.26
Clearly, jurisprudence establish that the 24% p.a. stipulated interest rate was not considered
unconscionable, thus, the 23% p.a. interest rate imposed on petitioners' loan in this case can by no
means be considered excessive or unconscionable.
We also do not find the stipulated 12% p.a. penalty charge excessive or unconscionable.
In Ruiz v. CA,27 we held:
The 1% surcharge on the principal loan for every month of default is valid.1âwphi1 This surcharge or
penalty stipulated in a loan agreement in case of default partakes of the nature of liquidated damages
under Art. 2227 of the New Civil Code, and is separate and distinct from interest payment. Also referred
to as a penalty clause, it is expressly recognized by law. It is an accessory undertaking to assume
greater liability on the part of an obligor in case of breach of an obligation. The obligor would then be
bound to pay the stipulated amount of indemnity without the necessity of proof on the existence and on
the measure of damages caused by the breach. x x x28 And in Development Bank of the Philippines v.
Family Foods Manufacturing Co., Ltd.,29 we held that:
x x x The enforcement of the penalty can be demanded by the creditor only when the non-performance
is due to the fault or fraud of the debtor. The non-performance gives rise to the presumption of fault; in
order to avoid the payment of the penalty, the debtor has the burden of proving an excuse - the failure
of the performance was due to either force majeure or the acts of the creditor himself.30
Here, petitioners defaulted in the payment of their loan obligation with respondent bank and their
contract provided for the payment of 12% p.a. penalty charge, and since there was no showing that
petitioners' failure to perform their obligation was due to force majeure or to respondent bank's acts,
petitioners cannot now back out on their obligation to pay the penalty charge. A contract is the law
between the parties and they are bound by the stipulations therein.
WHEREFORE, the petition for review is DENIED. The Decision dated June 17, 2010 and the Resolution
dated July 20, 2011 of the Court of Appeals are hereby AFFIRMED.
SO ORDERED.
Anchor Savings Bank v. Pinzman Realty and Development Corp.
G.R. No. 192304 August 13, 2014
ANCHOR SAVINGS BANK (now Equicom Savings Bank), Petitioner,
vs.
PINZMAN REALTY AND DEVELOPMENT CORPORATION, MARYLIN MANALAC AND RENATO
GONZALES,Respondents.
DECISION
VILLARAMA, JR., J.:
Before us is a petition for review on certiorari assailing the Decision1 dated September 11, 2009 and
Resolution2dated May 1 7, 2010 of the Court of Appeals (CA) in CA-G.R. CV No. 89420. The CA had
reversed and set aside the Decision3 dated March 16, 2007 of the Regional Trial Court (RTC), Branch
147 ofMakati City, in Civil Case No. 00-1094.
The facts, as culled from the records, follow:
Sometime in December 1997, the private respondents obtained a loan from the petitioner in the amount
of ₱3,000,000 secured by a real estate mortgage over parcels of land located in Cubao, Quezon City
which were registered in the name of herein private respondent Marylin Mafialac. Private respondent

Mafialac executed a Promissory Note4 and Disclosure Statement5 in favor of the petitioner in the total
amount of ₱3,308,447.74 which amount already included payment for three months interest. The loan
documents stipulated that the first installment shall be for ₱148,640 and will be due on December 26,
1997, the second installment will be for the same amount and shall be due on January 26, 1998, and
the third installment will be for ₱3,011,167.74 and will be due on February 26, 1998. Moreover, the
Promissory Note and Disclosure Statement imposed a monthly 5% latepayment charge, 25% attorney’s
fees, and 25% liquidated damages in case of unpaid installments on the part of private respondent
Mañalac. On December 3, 1997, the proceeds of the loan were released to private respondent Mañalac
who then issued three checks for the payment of monthly installments to the petitioner.The first check
was for ₱144,000 and was for the first installment due on December 26, 1997. The second check in
the same amount was for the second installment due on January 26, 1998. Finally, the third check in
the amount of₱3,300,000 corresponded to the last installment due on February 26, 1998.However,
among the three checks, only the first one was cleared for payment, and the private respondents
incurred an outstanding balance of ₱3,012,252.32 which they failed to settle. Private respondent
Mañalac continued her correspondence with the petitioner through its Vice President toask for an
update on their account.6
Subsequently, the private respondents received a Second Notice of Extrajudicial Sale7 for the
satisfaction of an obligation, which as of October 15, 1998 amounted to ₱4,577,269.42, excluding
penalties, charges, attorney’s fees and costs of foreclosure. On June 1,1999, the assailed foreclosure
sale was held where the petitioner emerged as the highest bidder of the disputed properties, and a
Certificate of Sale8 was issued in favor of the petitioner. Still, private respondent Mañalac allegedly tried
to settle the loan but was surprised when petitioner issued a Statement of Account9 stating that as of
October 29, 1999, Pinzman Realty owed the petitioner ₱12,525,673.44 computed as follows:
STATEMENT OF ACCOUNT
AS OF OCTOBER 29, 1999
PARTICULAR PAYSYS METHOD
Principal Balance 3,012,525.32
Interest 2,026,062.38
Penalty Interest @ 60% 3,129,879.85
Forfeited Rebate 8,620.00
Litigation Expenses 158,595.41
Others 14,766.00
Sub-total 8,350,448.96
Attorney's fees 2,087,612.24
Liquidated Damages 2,087,612.24
Total Amount Due 12,525,673.44

As private respondent Mañalac failed to redeem the properties, ownership of the foreclosed properties
was eventually consolidated in petitioner’s name. Petitioner later succeeded in acquiring certificates of
title over the disputed properties.
On September 6, 2000, private respondents filed a Complaint for the Annulment of Extrajudicial
Foreclosure of Mortgaged Properties, Auction Sale, Certificate ofSale and Damages10 against the
petitioner before the RTC. The private respondents prayed for the nullification of the foreclosure sale
alleging that the amount demanded in the Notice of Extrajudicial Sale was exorbitant and excessive.
Specifically, instead of the amount of ₱4,577,269.42 as demanded therein, the private respondents
contended that the proper amount should only be ₱3,825,907.16 if the balance of the loan is computed
with interest at the rate of 3% reckoned from the date of last payment.
In its Decision dated March 16,2007, the RTC dismissed the complaint and found that the private
respondents did not question the compliance of the petitioner with the procedural requirements for
extrajudicial foreclosure. Moreover, the RTC ruled that the private respondents did not take any
measures toenjoin the foreclosure sale despite their knowledge of the alleged usurious interest
charges.
On appeal, the CA reversed and set aside the court a quo, and held as follows:
WHEREFORE, the foregoing considered, the instant appeal is hereby GRANTEDand the assailed
Decision dated 16 March 2007 is REVERSEDand SET ASIDE. Accordingly, the present complaint is
hereby GRANTEDand the Extra-judicial Foreclosure, Auction Sale, Certificate of Sale and Certificates
of Title issued in favor of appellee bank are hereby ANNULLED, without prejudice to the right of the
latter to re-institute foreclosure proceedings based on the recomputed amount of the unpaid loan as
herein provided. No costs.
SO ORDERED.11
The CA declared that the loan agreement as embodied in the Promissory Note and Disclosure
Statement failed to stipulate a rate of interest. Petitioner bank likewise admitted that there is no written
agreement to prove that the parties agreed to the interest rate of 30.33% per annum on the loan. Thus,
the CA held that petitioner erred in unilaterally imposing an interest rate of 30.33% on the unpaid portion
of the loan. The CA held that said rate was excessive, iniquitous, unconscionable and blatantly contrary
to law and morals. Further, the CA ruled that the imposition of such unlawful interest rate will nullify the
foreclosure sale arising therefrom. However, this was without prejudice to the lender’s right to recover
the principal of the loan and the validity of the terms of the real estate mortgage. In particular, the CA
affirmed the subsistence of the principal amount due without the unlawful interest rate. In its place, the
CA imposed a legal interest rate of 12% per annum. Moreover, the CA annulled the previously held
foreclosure sale, but upheld the right of the mortgagee to institute another foreclosure proceedings
upon default of the mortgagor.
Thus, the petitioner filed the instant petition for review on certiorari raising the following issues:
I
WHETHER OR NOT ARTICLE 195612 OF THE CIVIL CODE REQUIRES THE RATE OF INTEREST
TO BE STIPULATED; and
II
WHETHER OR NOT FORECLOSURE OF MORTGAGE WAS VALID.13
Essentially, the sole issue for our resolution is whether the imposition of usurious interest rates on a
loan obligation secured by a real estate mortgage will result in the invalidity of the subsequent
foreclosure sale of the mortgage.

Petitioner argues that the CA was under the mistaken belief that the failure to stipulate a rate of interest
was equivalent to the failure to provide for the payment of interest. Thus, petitioner establishes a
distinction between stipulation of interest rate and stipulation of interest. Petitioner further contends that
while the Promissory Note and Disclosure Statement did not provide a specific interest rate, the parties
still agreed to the payment of interest based on the tenor of the language used therein. This, petitioner
stresses, militates against the ruling ofthe CA that there was a unilateral imposition of interest rate.
Petitioner further claims that the defect in the Second Notice of Extrajudicial Sale cannot affect the
validity of the foreclosure sale. Based on case law, petitioner argues that discrepancies between the
Notice of Foreclosure Sale and the actual indebtedness of the mortgagor will not result in the annulment
of the foreclosure sale as long as the objectives of the notice are attained. Petitioner likewise argues
that the action of the private respondents which was filed after the redemption period, was barred by
laches.
On the other hand, private respondents claim that the imposition of interest rates and penalty charges
by petitioner should be struck down as these were manifestly excessive, unreasonable, and
unconscionable. Private respondents maintain that the CA correctly ruled that the foreclosure sale
which arose from the enforcement of usurious interest rates and penalty charges should be nullified.
The petition lacks merit.
It is jurisprudential axiom that a foreclosure sale arising from a usurious mortgage cannot be given legal
effect.14Relevantly, in Heirs of Zoilo Espiritu v. Sps. Landrito,15 we struck down a foreclosure sale where
the amount declared as mortgageindebtedness involved excessive, unreasonable, and unconscionable
interestcharges. In no uncertain terms, we ruled that a mortgagor cannot be legally compelled to pay
for a grossly inflated loan:
Since the Spouses Landrito, the debtors in this case, were not given an opportunity to settle their debt,
at the correctamount and without the iniquitous interest imposed, no foreclosure proceedings may be
instituted. A judgment ordering a foreclosure sale is conditioned upon a finding on the correct amount
of the unpaid obligation and the failure of the debtor to pay the said amount. In this case, ithas not yet
beenshown that the Spouses Landrito had already failed to pay the correct amount of the debt and,
therefore, a foreclosure sale cannotbe conducted in order to answer for the unpaid debt. The
foreclosure sale conducted upon their failure to pay ₱874,125 in 1990 should be nullified since the
amount demanded as the outstanding loan was overstated; consequently it has not been shown that
the mortgagors – the Spouses Landrito, have failed to pay their outstanding obligation. Moreover, if the
proceeds of the sale together with its reasonable rates of interest were applied to the obligation, only a
small part of its original loans would actually remain outstanding, but because of the unconscionable
interest rates, the larger part corresponded to said excessive and iniquitous interest.16
Recently, in Castro v. Tan,17 we affirmed the above doctrinal pronouncements as we also nullified a
foreclosure proceeding where the amount demanded as outstanding loanwas clearly overstated due to
exorbitant interest rates.
In the case at bar, the unlawful interest charge which led to the demand for ₱4,577,269.42 as stated in
the Notice of Extrajudicial Sale resulted in the invalidity of the subsequent foreclosure sale held on June
1, 1999.1âwphi1 The private respondents cannot beobliged to pay an inflated or overstated mortgage
indebtedness on account of excessive interest charges without offending the basic tenetsof due
process and equity.
The argument of the petitioner that defects in the Notice of Sale cannot affect the validity of the
foreclosure sale cannot be given credence. In relying on a long litany of cases, the petitioner failed to
realize that the issue in those cases was the validity of the Notice of Sale per se. Meanwhile, in the
present case, the issue is the validity of the foreclosure sale in view of the presence of usurious interest
charges.
WHEREFORE, the petition for review on certiorari is hereby DENIED. The Decision dated September
11, 2009 and Resolution dated May 17, 2010 of the Court of Appeals in CA-G.R. CV No. 89420 are
AFFIRMED.
With costs against petitioner.
SO ORDERED.

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Sources of Obligations 2

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The RTC Ruling

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The Court's Ruling

The petition is meritorious.

WHEREFORE, the petition is GRANTED. The Decision dated

Federal Builders, Inc. v. Foundation Specialists, Inc.

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B. July 1 2013 to date when this Decision

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Respondents went to PNB to withdraw their father's deposit.[5]

On the Third party complaint:

PNB and Aguilar appealed before the Court of Appeals.[41]

Obligations from sources to usurious transactions | Page 51 of 182

We resolve the following issues:

III. Whether respondents were properly awarded damages.

We rule for the respondents.

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2. Birth certificate of Reyme L. Santos;

3. Affidavit of self-adjudication of Reyme L. Santos;

6. Personal items of Angel C. Santos, such as photocopies or originals of passport,

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8. Certificate of Time Deposit No. 341306.[97]

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