A.

HUMAN RELATIONS

1. Abuse of Rights

METROPOLITAN WATERWORKS AND SEWERAGE SYSTEM, petitioner, (MWSS) vs. ACT

THEATER, INC., respondent.
G.R. No. 147076 June 17, 2004
CAUBANG

Facts:
On September 22, 1988, four employees of Act Theater, Inc., namely, Rodolfo Tabian, Armando Aguilar,
Arnel Concha and Modesto Ruales, were apprehended by members of the Quezon City police force for
allegedly tampering a water meter in violation of P.D. No. 401, as amended by B.P. Blg. 876. The 4
employees were subsequently criminally charged. Due to the incident, Act Theater’s water service
connection was cut off. Thus, Act Theater filed a complaint for injunction with damages against the MWSS.
Act Theater alleged that MWSS acted arbitrarily, whimsically and capriciously, in cutting off the water
service connection without prior notice. Due to lack of water, the health and sanitation, not only of the
patrons but in the surrounding premises as well, were adversely affected. Act Theater prayed that the
MWSS be directed to pay damages. MWSS insists that in cutting off the water service connection, it merely
exercised its proprietary right under Article 429 of the Civil Code. Article 429 of the Civil Code, relied upon
by MWSS in justifying its act of disconnecting the water supply of the respondent without prior notice,
reads:

Art. 429. The owner or lawful possessor of a thing has the right to exclude any person from the
enjoyment and disposal thereof. For this purpose, he may use such force as may be reasonable to
repel or prevent an actual or threatened unlawful physical invasion or usurpation of his property.

Issue:
WON MWSS’s act of cutting off the Act Theater’s water service connection without prior notice arbitrary,
injurious and prejudicial to the latter justifying the award of damages under Article 19 of the Civil Code.

Ruling:
Yes. MWSS’s act was arbitrary, injurious and prejudicial to the respondent, justifying the award of damages
under Article 19 of the Civil Code. Article 19 of the Civil Code precisely sets the norms for the exercise of
one’s rights:

Art. 19. Every person must, in the exercise of his rights and in the performance of his duties, act
with justice, give everyone his due, and observe honesty and good faith.

A right is a power, privilege, or immunity guaranteed under a constitution, statute or decisional law, or
recognized as a result of long usage, constitutive of a legally enforceable claim of one person against the
other. Truly, MWSS, as the owner of the utility providing water supply to certain consumers including the
respondent, had the right to exclude any person from the enjoyment and disposal thereof. However, the
exercise of rights is not without limitations. Having the right should not be confused with the manner by
which such right is to be exercised.

When a right is exercised in a manner which discards these norms resulting in damage to another, a legal
wrong is committed for which actor can be held accountable. In this case, MWSS failed to act with justice
and give Act Theater what is due to it when the former unceremoniously cut off the respondent’s water
service connection. While it is true that MWSS had sent a notice of investigation to Act Theater prior to the

1
disconnection of the water services, this was done only a few hours before the actual disconnection. Upon
receipt of the notice and in order to ascertain the matter, Act sent its assistant manager Teodulo Gumalid,
Jr. to the MWSS office but he was treated badly on the flimsy excuse that he had no authority to represent
Act. Act’s water services were cut at midnight of the day following the apprehension of the employees.
Clearly, Act Theater was denied due process when it was deprived of the water services.

2
 2. Breach of Promise to Marry

FRANCISCO HERMOSISIMA, petitioner, vs. THE HON. COURT OF APPEALS, ET AL., respondents.
G.R. No. L-14628 September 30, 1960
CLARK

FACTS:
In 1950, Soledad Cagigas then a teacher in the Sibonga Provincial High School in Cebu, and petitioner
Francisco Hermosisima, who was almost ten (10) years younger than she, used to go around together and
were regarded as engaged, although he had made no promise of marriage prior thereto. In 1951, she gave
up teaching and became a life insurance underwriter in Cebu City, where intimacy developed among her
and the petitioner, since one evening in 1953, when after coming from the movies, they had sexual
intercourse in his cabin on board M/V "Escaño," to which he was then attached as apprentice pilot. In
February 1954, Soledad advised petitioner that she was pregnant, whereupon he promised to marry her.
Their child, Chris Hermosisima, was born on June 17, 1954. However, on July 24, 1954, defendant married
one Romanita Perez.

On October 4, 1954, Soledad filed with the court an action against Francisco for recognition of paternity of
their child, Chris Hermosisima, and for moral damages for alleged breach of promise to marry. Petitioner
admitted the paternity of child and expressed willingness to support the latter, but denied having ever
promised to marry the complainant. The trial court ruled in favor of Soledad which was affirmed by the
Court of Appeals and even increasing the award for damages. The Court of Appeals reasoned that Francisco
is liable for damages because he seduced Soledad. He exploited the love of Soledad for him in order to
satisfy his sexual desires – that being said, the award for moral damages is proper.

ISSUE:
Whether or not moral damages are recoverable, under our laws, for breach of promise to marry.

HELD:
No. Breach of promise to marry is not actionable wrong as has been definitely decided in the case of De
Jesus vs. Syquia, 58 Phil., 866. Further, in the light of the clear and manifest intent of our law making body
not to sanction actions for breach of promise to marry, the award of moral damages made by the lower
courts is, accordingly, untenable.

The Court of Appeals, rely its decision on the award of moral damages on paragraph 3 of Article 2219 of
the Civil Code: . . . Moral damages may be recovered in the following and analogous cases: xxx (3)
Seduction, abduction, rape or other lascivious acts.

However, the language used in said paragraph strongly indicates that the "seduction" therein contemplated
is the crime punished as such in Article 337 and 338 of the Revised Penal Code, which does not exist in the
present case. The Court was unable to say that petitioner is morally guilty of seduction, not only because
he is approximately ten (10) years younger than the complainant — who around thirty-six (36) years of
age, and as highly enlightened as a former high school teacher and a life insurance agent are supposed to
be — when she became intimate with petitioner, then a mere apprentice pilot, but also because, the court
of first instance found that, complainant "surrendered herself" to petitioner because, she was "overwhelmed
by her love" for him, and she "wanted to bind" "by having a fruit of their engagement even before they
had the benefit of clergy."

3
 BEATRIZ P. WASSMER, plaintiff-appellee, vs. FRANCISCO X. VELEZ, defendant-appellant.
G.R. No. L-20089 December 26, 1964
DALISAY

Facts:
Francisco X. Velez and Beatriz P. Wassmer following their mutual promise of love, decided to get married
and set September 4, 1954 as the big day. On September 2, 1954 Velez left a note for his bride-to-be
stating for postponement of their wedding due to the opposition of his mother. But the next day, September
3, he sent a telegram stipulating that nothing has changed. Thereby Beatriz filed for damages of which the
trial court rendered judgment ordering defendant to pay plaintiff P2,000 as actual damages; P25,000 as
moral and exemplary damages; P2,500 as attorney’s fees; and the cost.

Another chance for amicable settlement was given by the court in its order of July 6, 1956 calling the
parties and their attorneys to appear on July 13, 1956. This time. however, defendant's counsel informed
the court that chances of settling the case amicably were nil.

Issue:
WON Velez is liable for damages.

Ruling:
Velez is liable for damages based on Article 21 of the Civil Code. Article 21 of the Civil code provides that
“any person who willfully causes loss or injury to another in a manner that is contrary to morals, good
customs or public policy shall compensate the latter for the damage.” While it is true that this case is not
a breach of promise to marry as not an actionable wrong but to formally set a wedding and go through all
the above-described preparation and publicity, only to walk out of it when the matrimony is about to be
solemnized, is quite different. This is palpably and unjustifiably contrary to good customs for which
defendant must be held answerable in damages in accordance with Article 21.

Per express provision of Article 2219 (10) of the New Civil Code, moral damages are recoverable in the
cases mentioned in Article 21. As to exemplary damages, defendant contends that the same could not be
adjudged against him because under Article 2232 of the New Civil Code the condition precedent is that
"the defendant acted in a wanton, fraudulent, reckless, oppressive, or malevolent manner." The argument
is devoid of merit as under the above-narrated circumstances of this case defendant clearly acted in a
"wanton ... , reckless [and] oppressive manner."

4
 CECILIO PE, ET AL., plaintiffs-appellants, vs. ALFONSO PE, defendant-appellee.
G.R. No. L-17396 May 30, 1962
DELA SERNA

FACTS:
Lolita Pe was 24 years old and unmarried. Alfonso was a married man, an adoptedson of a Chinaman who
is a collateral relative of Lolita's father. Defendant became close to plaintiffs because of such fact and
similarity in their family name. Sometime in 1952, defendant frequented the house of Lolita on the pretext
thathe wanted her to teach him how to pray the rosary. They fell in love with eachother. Rumors of their
affair reached the parents in 1955 and since then, defendant was prohibited from going to their house and
from seeing Lolita. The affaircontinued nonetheless. On April 14, 1957, Lolita disappeared from said house
andthe disappearance was reported to the police authorities and the NBI. up to thepresent, there is no
news or trace of her whereabouts.

ISSUE:
WON the facts alleged, even if true, constitute a valid cause of action

RULING:
Defendant won Lolita's affection through an ingenious scheme or trickery and seduced her to the extent of
making her fall in love with him. The wrong that defendant has caused Lolita and her family is indeed
immeasurable considering the fact that he is a married man. Verily, he has committed an injury to Lolita's
family in a manner contrary to morals, good customs, and public policy as contemplated in Article 21 of
the New Civil Code.ARTICLE 21, NEW CIVIL CODE OF THE PHILIPPINES"Any person who wilfully causes
loss or injury to another in a manner which is contrary to morals, good customs, or public policy shall
compensate the latter for the damage." P5,000.00 as damages and P2,000.00 as attorney's fees and
expenses of litigation- costs against appellee.

5
B. ELEMENTS OF TORTS

1. Definition of Negligence

PHILIPPINE BANK OF COMMERCE, now absorbed by PHILIPPINE COMMERCIAL

INTERNATIONAL BANK, ROGELIO LACSON, DIGNA DE LEON, MARIA ANGELITA PASCUAL, et
al., petitioners, vs. THE COURT OF APPEALS, ROMMEL'S MARKETING CORP., represented by
ROMEO LIPANA, its President & General Manager, respondents.
G.R. No. 97626 March 14, 1997
DULAY

FACTS:
Rommel's Marketing Corporation (RMC) engaged in the business of selling appliances, filed a complaint to
recover from PBC, the sum of P304,979.74 representing various deposits it had made in its current account
with said bank but which were not credited to its account, and were instead deposited to the account of
one Bienvenido Cotas, allegedly due to the gross and inexcusable negligence of the petitioner bank.

From May 5, 1975 to July 16, 1976, RMC’s President Romeo Lipana claims to have entrusted RMC funds in
the form of cash totalling P304,979.74 to his secretary, Irene Yabut, for the purpose of depositing said
funds in the current accounts of RMC with PBC.

It turned out, however, that these deposits, on all occasions, were not credited to RMC's account but were
instead deposited to the account of Yabut's husband, Bienvenido Cotas who likewise maintains an account
with the same bank.

During this period, petitioner bank had, however, been regularly furnishing Lipana with monthly statements
showing its current accounts balances. Unfortunately, it had never been the practice of Romeo Lipana to
check these monthly statements of account reposing complete trust and confidence on petitioner bank.

The (secretary) Irene Yabut's modus operandi was to accomplish two (2) copies of the deposit slip, an
original and a duplicate. The original showed the name of her husband as depositor and his current account
number. On the duplicate copy was written the account number of her husband but the name of the
account holder was left blank. PBC's teller, Azucena Mabayad, would, however, validate and stamp both
the original and the duplicate of these deposit slips retaining only the original copy despite the lack of
information on the duplicate slip. The second copy was kept by Irene Yabut allegedly for record purposes.
After validation, Yabut would then fill up the name of RMC in the space left blank in the duplicate copy and
change the account number written thereon, which is that of her husband's, and make it appear to be
RMC's account number. This went on in a span of more than one (1) year without private respondent's
knowledge. Upon discovery of the loss of its funds, RMC demanded from the bank the return of its money,
but as its demand went unheeded, it filed a collection suit before the RTC.

RTC: found that the bank was negligent; PBC and (PBC Teller) Azucena Mabayad jointly and severally liable

CA: affirmed but deleted the awards of exemplary damages and attorney's fees

ISSUES:
What is the proximate cause of the loss, to the tune of P304,979.74, suffered by the private respondent
RMC — petitioner bank's negligence or that of private respondent's?

6
CONTENTIONS:

Petitioners submit that the proximate cause of the loss is the negligence of respondent RMC and Romeo
Lipana in entrusting cash to a dishonest employee in the person of Ms. Irene Yabut.5 According to them,
it was impossible for the bank to know that the money deposited by Ms. Irene Yabut belong to RMC; neither
was the bank forewarned by RMC that Yabut will be depositing cash to its account. Thus, it was impossible
for the bank to know the fraudulent design of Yabut considering that her husband, Bienvenido Cotas, also
maintained an account with the bank. For the bank to inquire into the ownership of the cash deposited by
Ms. Irene Yabut would be irregular. Otherwise stated, it was RMC's negligence in entrusting cash to a
dishonest employee which provided Ms. Irene Yabut the opportunity to defraud RMC.6

Private respondent, on the other hand, maintains that the proximate cause of the loss was the negligent
act of the bank, thru its teller Ms. Azucena Mabayad, in validating the deposit slips, both original and
duplicate, presented by Ms. Yabut to Ms. Mabayad, notwithstanding the fact that one of the deposit slips
was not completely accomplished.

HELD:
We sustain the private respondent. Our law on quasi-delicts states:

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

There are three elements of a quasi-delict:

(a) damages suffered by the plaintiff;

(b) fault or negligence of the defendant, or some other person for whose acts he must
respond; and
(c) the connection of cause and effect between the fault or negligence of the defendant and
the damages incurred by the plaintiff.

First Element

In the case at bench, there is no dispute as to the damage suffered by RMC in the amount of
P304,979.74.

Second Element

It is in ascribing fault or negligence which caused the damage where the parties point to each other as the
culprit.

Negligence 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 do. The seventy-eight (78)-year-old, yet still relevant, case of Picart v. Smith,
provides the TEST by which to determine the existence of negligence in a particular case which
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

7
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.

Applying the above test, it appears that the bank's teller, Ms. Azucena Mabayad, was negligent
in validating, officially stamping and signing all the deposit slips prepared and presented by
Ms. Yabut, despite the glaring fact that the duplicate copy was not completely accomplished
contrary to the self-imposed procedure of the bank with respect to the proper validation of
deposit slips, original or duplicate, as testified to by Ms. Mabayad herself, xxx.

Clearly, Ms. Mabayad failed to observe this very important procedure. The fact that the duplicate slip was
not compulsorily required by the bank in accepting deposits should not relieve the petitioner bank of
responsibility. The odd circumstance alone that such duplicate copy lacked one vital information — that of
the name of the account holder — should have already put Ms. Mabayad on guard. Rather than readily
validating the incomplete duplicate copy, she should have proceeded more cautiously by being more
probing as to the true reason why the name of the account holder in the duplicate slip was left blank while
that in the original was filled up. She should not have been so naive in accepting hook, line and sinker the
too shallow excuse of Ms. Irene Yabut to the effect that since the duplicate copy was only for her personal
record, she would simply fill up the blank space later on. 11 A "reasonable man of ordinary prudence" 12
would not have given credence to such explanation and would have insisted that the space left blank be
filled up as a condition for validation. Unfortunately, this was not how bank teller Mabayad proceeded thus
resulting in huge losses to the private respondent.

Negligence here lies not only on the part of Ms. Mabayad but also on the part of the bank itself
in its lackadaisical selection and supervision of Ms. Mabayad. This was exemplified in the testimony
of Mr. Romeo Bonifacio, then Manager of the Pasig Branch of the petitioner bank and now its Vice-President,
to the effect that, while he ordered the investigation of the incident, he never came to know that blank
deposit slips were validated in total disregard of the bank's validation procedures.

It was in fact only when he testified in this case in February, 1983, or after the lapse of more than seven
(7) years counted from the period when the funds in question were deposited in plaintiff's accounts (May,
1975 to July, 1976) that bank manager Bonifacio admittedly became aware of the practice of his teller
Mabayad of validating blank deposit slips. Undoubtedly, this is gross, wanton, and inexcusable negligence
in the appellant bank's supervision of its employees.

Third Element

IT WAS THIS NEGLIGENCE OF MS. AZUCENA MABAYAD, COUPLED BY THE NEGLIGENCE OF

THE PETITIONER BANK IN THE SELECTION AND SUPERVISION OF ITS BANK TELLER, WHICH
WAS THE PROXIMATE CAUSE OF THE LOSS SUFFERED BY THE PRIVATE RESPONDENT, AND
NOT THE LATTER'S ACT OF ENTRUSTING CASH TO A DISHONEST EMPLOYEE, AS INSISTED BY
THE PETITIONERS.

Proximate cause is determined on the facts of each case upon mixed considerations of logic, common
sense, policy and precedent. 15 Vda. de Bataclan v. Medina, 16 reiterated in the case of Bank of the Phil.
Islands v. Court of Appeals, 17 defines proximate cause 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. . . ." In this case, absent the act of Ms. Mabayad in negligently validating
the incomplete duplicate copy of the deposit slip, Ms. Irene Yabut would not have the facility
with which to perpetrate her fraudulent scheme with impunity. Apropos, once again, is the
pronouncement made by the respondent appellate court, to wit:

8
 . . . . Even if Yabut had the fraudulent intention to misappropriate the funds entrusted to her by
plaintiff, she would not have been able to deposit those funds in her husband's current account, and
then make plaintiff believe that it was in the latter's accounts wherein she had deposited them, had it
not been for bank teller Mabayad's aforesaid gross and reckless negligence. The latter's negligence
was thus the proximate, immediate and efficient cause that brought about the loss claimed by plaintiff
in this case, and the failure of plaintiff to discover the same soon enough by failing to scrutinize the
monthly statements of account being sent to it by appellant bank could not have prevented the fraud
and misappropriation which Irene Yabut had already completed when she deposited plaintiff's money
to the account of her husband instead of to the latter's accounts. 18

Doctrine of Last Clear Chance

Furthermore, under the doctrine of "last clear chance" (also referred to, at times as "supervening
negligence" or as "discovered peril"), petitioner bank was indeed the culpable party. This doctrine, in
essence, states that where both parties are negligent, but the negligent act of one is appreciably later in
time than that of the other, or when it is impossible to determine whose fault or negligence should be
attributed to the incident, the one who had the last clear opportunity to avoid the impending harm and
failed to do so is chargeable with the consequences thereof. 19 Stated differently, the rule would also mean
that an antecedent negligence of a person does not preclude the recovery of damages for the supervening
negligence of, or bar a defense against liability sought by another, if the latter, who had the last fair chance,
could have avoided the impending harm by the exercise of due diligence. 20 Here, assuming that RMC
was negligent in entrusting cash to a dishonest employee, thus providing the latter with the
opportunity to defraud the company, as advanced by the petitioner, yet it cannot be denied
that the petitioner bank, thru its teller, had the last clear opportunity to avert the injury
incurred by its client, simply by faithfully observing their self-imposed validation procedure.

Degree of diligence ought to be exercised by banks in dealing with their clients.

The New Civil Code provides:

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. (1104a)

In the case of banks, however, the degree of diligence required is more than that of a good father of a
family. Considering the fiduciary nature of their relationship with their depositors, banks are duty bound to
treat the accounts of their clients with the highest degree of care.

As elucidated in Simex International (Manila), Inc. v. Court of Appeals, 22 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 bank must record every single transaction accurately, down to the last
centavo, and as promptly as possible. This has to be done if the account is to reflect at any given time the
amount of money the depositor can dispose as he sees fit, confident that the bank will deliver it as and to
whomever he directs. A blunder on the part of the bank, such as the failure to duly credit him his deposits
as soon as they are made, can cause the depositor not a little embarrassment if not financial loss and
perhaps even civil and criminal litigation.

9
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. In the case before us, it is apparent that the petitioner bank was
remiss in that duty and violated that relationship.

Contributory Negligence by RMC

Petitioners nevertheless aver that the failure of respondent RMC to cross-check the bank's statements of
account with its own records during the entire period of more than one (1) year is the proximate cause of
the commission of subsequent frauds and misappropriation committed by Ms. Irene Yabut.

We do not agree.

While it is true that had private respondent checked the monthly statements of account sent
by the petitioner bank to RMC, the latter would have discovered the loss early on, such cannot
be used by the petitioners to escape liability. This omission on the part of the private
respondent does not change the fact that were it not for the wanton and reckless negligence
of the petitioners' employee in validating the incomplete duplicate deposit slips presented by
Ms. Irene Yabut, the loss would not have occurred. Considering, however, that the fraud was
committed in a span of more than one (1) year covering various deposits, common human
experience dictates that the same would not have been possible without any form of collusion
between Ms. Yabut and bank teller Mabayad. Ms. Mabayad was negligent in the performance
of her duties as bank teller nonetheless. Thus, the petitioners are entitled to claim
reimbursement from her for whatever they shall be ordered to pay in this case.

The foregoing notwithstanding, it cannot be denied that, indeed, private respondent was
likewise negligent in not checking its monthly statements of account. Had it done so, the
company would have been alerted to the series of frauds being committed against RMC by its
secretary. The damage would definitely not have ballooned to such an amount if only RMC,
particularly Romeo Lipana, had exercised even a little vigilance in their financial affairs. This
omission by RMC amounts to contributory negligence which shall mitigate the damages that
may be awarded to the private respondent under Article 2179 of the New Civil Code, to wit:

. . . When the plaintiff's own negligence was the immediate and proximate cause of his injury, he
cannot recover damages. But if his negligence was only contributory, the immediate and proximate
cause of the injury being the defendant's lack of due care, the plaintiff may recover damages, but the
courts shall mitigate the damages to be awarded.

In view of this, we believe that the DEMANDS OF SUBSTANTIAL JUSTICE ARE SATISFIED BY
ALLOCATING THE DAMAGE ON A 60-40 RATIO. Thus, 40% of the damage awarded by the respondent
appellate court, except the award of P25,000.00 attorney's fees, shall be borne by private respondent RMC;
only the balance of 60% needs to be paid by the petitioners. The award of attorney's fees shall be
borne exclusively by the petitioners.

10
 SMITH BELL DODWELL SHIPPING AGENCY CORPORATION, petitioner, vs. CATALINO BORJA
and INTERNATIONAL TO WAGE AND TRANSPORT CORPORATION, respondents.
G.R. No. 143008 June 10, 2002
INOK

FACTS:
In September 23, 1987, Smith Bell filed a written request with the Bureau of Customs for the attendance
of the latter's inspection team on vessel M/T King Family which was due to arrive at the port of Manila on
September 24, 1987.Said vessel contained 750 metric tons of alkyl benzene and methyl methacrylate
monomer.

On the same day, Supervising Customs Inspector Manuel Ma. D. Nalgan instructed [Respondent Catalino
Borja] to board said vessel and perform his duties as inspector upon the vessel's arrival until its departure.

On the next day, While M/T King Family was unloading chemicals unto two (2) barges [--] ITTC 101 and
CLC-1002 [--] owned by [Respondent] ITTC, a sudden explosion occurred setting the vessels afire. Upon
hearing the explosion, [Borja], who was at that time inside the cabin preparing reports, ran outside to
check what happened. Again, another explosion was heard.

Seeing the fire and fearing for his life, [Borja] hurriedly jumped over board to save himself. However, the
[water] [was] likewise on fire due mainly to the spilled chemicals. Despite the tremendous heat, [Borja]
swam his way for one (1) hour until he was rescued by the people living in the squatters' area and sent to
San Juan De Dios Hospital.

After weeks of intensive care at the hospital, his attending physician diagnosed [Borja] to be permanently
disabled due to the incident. [Borja] made demands against Smith Bell and ITTC for the damages caused
by the explosion. However, both denied liabilities and attributed to each other negligence.

RTC: ruled in favor of Respondent Borja and held petitioner liable for damages and loss of income.

CA: Affirming the trial court, the CA rejected the plea of petitioner that it be exonerated from liability for
Respondent Borja's injuries. Contrary to the claim of petitioner that no physical evidence was shown to
prove that the explosion had originated from its vessel, the CA held that the fire had originated from M/T
King Family.

ISSUE:
WON petitioner should be held liable for the injuries of Respondent Catalino Borja.

HELD:
YES. Negligence is conduct that creates undue risk of harm to another. It is the failure to
observe that degree of care, precaution and vigilance that the circumstances justly demand,
whereby that other person suffers injury. Petitioner's vessel was carrying chemical cargo -- alkyl
benzene and methyl methacrylate monomer. While knowing that their vessel was carrying dangerous
inflammable chemicals, its officers and crew failed to take all the necessary precautions to prevent an
accident. Petitioner was, therefore, negligent.

The three elements of quasi delict are: (a) damages suffered by the plaintiff, (b) fault or
negligence of the defendant, and (c) the connection of cause and effect between the fault or
negligence of the defendant and the damages inflicted on the plaintiff. All these elements were

11
eswtablished in this case. Knowing fully well that it was carrying dangerous chemicals, petitioner was
negligent in not taking all the necessary precautions in transporting the cargo.

As a result of the fire and the explosion during the unloading of the chemicals from petitioner's vessel,
Respondent Borja suffered the following damage: and injuries: "(1) chemical burns of the face and arms;
(2) inhalation of fumes from burning chemicals; (3) exposure to the elements [while] floating in sea water
for about three (3) hours; (4) homonymous hemianopsia or blurring of the right eye [which was of] possible
toxic origin; and (5) [c]erebral infract with neo-vascularization, left occipital region with right sided
headache and the blurring of vision of right eye."17

Hence, the owner or the person in possession and control of a vessel and the vessel are liable
for all natural and proximate damage caused to persons and property by reason of negligent
management or navigation.

12
 2. Test to Determine the Existence of Negligence

AMADO PICART, plaintiff-appellant, vs. FRANK SMITH, JR., defendant-appellee.

G.R. No. L-12219 March 15, 1918
MISTERIO

FACTS:
Petitioner Picart was riding a pony on a bridge. Seeing an automobile ahead he improperly pulled his horse
over to the railing on the right. The driver of the automobile, however, guided his car toward the plaintiff
without diminution of speed until he was only a few feet away. He then turned to the right but passed so
closely to the horse that the latter being frightened, jumped around and was killed by the passing car. The
plaintiff received contusions which caused temporary unconsciousness and required medical attention for
several days.

The lower court rendered a decision absolving defendant Smith from liability. Hence, this appeal.

ISSUE:
WON Smith is guilty of negligence that will give rise to a civil obligation to repair the damage done to Picart.

HELD:
Yes. Smith is guilty of negligence. The test for determining whether a person is negligent in doing an act
whereby injury or damage results to the person or property of another is this: Would a prudent man, in
the position of the person to whom negligence is attributed, foresee harm to the person injured as a
reasonable consequence of the course about to be pursued? If so, the law imposes a duty on the actor to
refrain from that course or to take precaution against its mischievous results, and the failure to do so
constitutes negligence. Reasonable foresight of harm, followed by the ignoring of the admonition born of
this prevision, is the constitutive act in negligence.

Further, where both parties are guilty of negligence, but the negligent act of one succeeds that of the other
by an appreciable interval of time, the one who has the last reasonable opportunity to avoid the impending
harm and fails to do so is chargeable with the consequences, without reference to the prior negligence of
the other party.

In this case, although the plaintiff was guilty of negligence in being on the wrong side of the bridge, the
defendant was nevertheless civilly liable for the legal damages resulting from the collision, as he had a fair
opportunity to avoid the accident after he realized the situation created by the negligence of the plaintiff
and failed to avail himself of that opportunity; while the plaintiff could by no means then place himself in
a position of greater safety.

13
 3. Nature of Negligence

THE UNITED STATES, plaintiff-appellee, vs. TEODORO JUANILLO, defendant-appellant.

G.R. No. L-7255 October 3, 1912
NALLA
Facts:
On April 3, 1911, an automobile, driven by herein petitioner, crushed and hit one Ponciano Leal which
caused the latter’s instantaneous death. According to the eyewitnesses, the victim together with other
simple rural folk where walking along the road abreast. When the automobile was about a 300 yards
distance from the victim and his companions, the victim crossed from the right to the left side of the road
in an attempt to evade the automobile. The trial court, in ruling in favor of the victim and against herein
petitioner, said that an automobile has no right to run at a greater speed along the public highway in
passing people afoot or in vehicles that it can stope when danger arises. A footman has the right of way in
public highways and people in vehicles have no right to ride him down. On appeal, herein petitioner-
appellant insisted that the court had mistaken conception of reckless negligence as applied to the rights of
vehicles and parties on foot on public highways.

Issue:
WON the incident constitutes reckless imprudence as defined in Article 568 of the Penal Code.

Ruling:
Yes. Negligence is want of care required by the circumstances. It is a relative or comparative, not an
absolute term, and its application depends upon the situation of the parties, and the degree of care and
vigilance which the circumstances reasonably impose. Where the danger is great a high degree of care is
necessary, and the failure to observe it is a want of ordinary care under the circumstances. The operator
of an automobile is bound to exercise care in proportion to the varying danger and risks of the highway
and commensurate with the dangers naturally incident to the use of such vehicle. He is obliged to take
notice of the conditions before him, and if it is apparent that by any particular method of proceeding he is
liable to work an injury, it is his duty to adopt some other or safer method if within reasonable care and
prudence he can do so. In determining the degree of care an operator of an automobile should use, when
on the highway, it is proper to take into consideration the place, presence or absence of other travelers,
the speed of the automobile, its size, appearance, manner of movement, and the amount of noise it makes,
and anything that indicates unusual or peculiar danger.

Petitioner appellant, being in charge of the powerful machine, capable of doing great damage if not skillfully
manipulated, was bound to use a high degree of care to avoid injuring pedestrians who also had common
right to the highway. In failing to so check the speed of the automobile when he saw the deceased in front
of him to give him sufficient control to avert the injury or to stop it entirely, when he knew that if he
continued at the same speed at which he was going he would collide with the deceased, not only shows
negligence but reckless negligence in a marked degree.

14
 FEDERICO YLARDE and ADELAIDA DORONIO petitioners, vs. EDGARDO AQUINO, MAURO
SORIANO and COURT OF APPEALS, respondents.
G.R. No. L-33722 July 29, 1988
PASAOL

FACTS:
Mariano Soriano was the principal of the Gabaldon Primary School, a public educational institution located
in Tayug, Pangasinan- Edgardo Aquino was a teacher therein. At that time, the school was fittered with
several concrete blocks which were remnants of the old school shop that was destroyed in World War II.
Realizing that the huge stones were serious hazards to the schoolchildren, another teacher by the name of
Sergio Banez started burying them one by one. In fact, he was able to bury ten of these blocks all by
himself.

Deciding to help his colleague, private respondent Edgardo Aquino gathered eighteen of his male pupils,
aged ten to eleven, after class dismissal. Being their teacher-in-charge, he ordered them to dig beside a
one-ton concrete block in order to make a hole wherein the stone can be buried. The work was left
unfinished. The following day, also after classes, private respondent Aquino called four of the original
eighteen pupils to continue the digging. These four pupils — Reynaldo Alonso, Francisco Alcantara, Ismael
Abaga and Novelito Ylarde, dug until the excavation was one meter and forty centimeters deep. At this
point, private respondent Aquino alone continued digging while the pupils remained inside the pit throwing
out the loose soil that was brought about by the digging.

When the depth was right enough to accommodate the concrete block, private respondent Aquino and his
four pupils got out of the hole. Then, said private respondent left the children to level the loose soil around
the open hole while he went to see Banez who was about thirty meters away. Private respondent wanted
to borrow from Banez the key to the school workroom where he could get some rope. Before leaving. ,
private respondent Aquino allegedly told the children "not to touch the stone."

A few minutes after private respondent Aquino left, three of the four kids, Alonso, Alcantara and Ylarde,
playfully jumped into the pit. Then, without any warning at all, the remaining Abaga jumped on top of the
concrete block causing it to slide down towards the opening. Alonso and Alcantara were able to scramble
out of the excavation on time but unfortunately fo Ylarde, the concrete block caught him before he could
get out, pinning him to the wall in a standing position. As a result thereof, Ylarde sustained injuries. Three
days later, Novelito Ylarde died.

Ylarde's parents, petitioners in this case, filed a suit for damages against both private respondents Aquino
and Soriano.

The lower court dismissed the complaint on the following grounds:

(1) that the digging done by the pupils is in line with their course called Work Education;
(2) that Aquino exercised the utmost diligence of a very cautious person; and
(3) that the demise of Ylarde was due to his own reckless imprudence.

On appeal, the Court of Appeals affirmed the Decision of the lower court.

Petitioners base their action against private respondent Aquino on Article 2176 of the Civil Code for his
alleged negligence that caused their son's death while the complaint against respondent Soriano as the
head of school is founded on Article 2180 of the same Code.

15
Article 2176 of the Civil Code provides: Whoever by act or omission causes damage to another, there being
fault or negligence, is obliged to pay for the damage done. Such fault or negligence, if there is no pre-
existing contractual relation between the parties, is called a quasi-delict and is governed by the provisions
of this Chapter.

On the other hand, the applicable provision of Article 2180 states:

Art. 2180. x x x

Lastly, teachers or heads of establishments of arts and trades shall be liable for damages caused by their
pupils and students or apprentices, so long as they remain in their custody. 3

ISSUE:
WON under the cited provisions, both private respondents can be held liable for damages.

HELD:
DISPOSITIVE: WHEREFORE, in view of the foregoing, the petition is hereby GRANTED and the questioned
judgment of the respondent court is REVERSED and SET ASIDE and another judgment is hereby
rendered ordering private respondent Edagardo Aquino to pay petitioners an Imdemnity for the death of
Child Ylarde, Exemplary damages and Moral damages.

As regards the principal, Mariano Soriano

We hold that he cannot be made responsible for the death of the child Ylarde, he being the head of an
academic school and not a school of arts and trades.

After an exhaustive examination of the problem, the Court has come to the conclusion that the provision
in question should apply to all schools, academic as well as non-academic. Where the school is academic
rather than technical or vocational in nature, responsibility for the tort committed by the student will
attach to the teacher in charge of such student, following the first part of the provision. This is the general
rule. In the case of establishments of arts and trades, it is the head thereof, and only he, who shall be
held liable as an exception to the general rule. In other words, teachers in general shall be liable for the
acts of their students except where the school is technical in nature, in which case it is the head thereof
who shall be answerable. Following the canon ofreddendo singula sinquilis 'teachers' should apply to the
words "pupils and students' and 'heads of establishments of arts and trades to the word "apprentices."

As regards the teacher, Edgardo Aquino

From the foregoing, it can be easily seen that Aquino can be held liable under Article 2180 of the Civil Code
as the teacher-in-charge of the children for being negligent in his supervision over them and his failure to
take the necessary precautions to prevent any injury on their persons. However, as earlier pointed out,
petitioners base the alleged liability of private respondent Aquino on Article 2176 which is separate and
distinct from that provided for in Article 2180. With this in mind, the question We need to answer is this:
Were there acts and omissions on the part of private respondent Aquino amounting to fault or negligence
which have direct causal relation to the death of his pupil Ylarde?

Our answer is in the affirmative. He is liable for damages.

The negligent act of private respondent Aquino in leaving his pupils in such a dangerous site
has a direct causal connection to the death of the child Ylarde. Left by themselves, it was but
natural for the children to play around. Tired from the strenuous digging, they just had to amuse themselves
with whatever they found. Driven by their playful and adventurous instincts and not knowing the risk they

16
were facing three of them jumped into the hole while the other one jumped on the stone. Since the stone
was so heavy and the soil was loose from the digging, it was also a natural consequence that the stone
would fall into the hole beside it, causing injury on the unfortunate child caught by its heavy weight.
Everything that occurred was the natural and probable effect of the negligent acts of private respondent
Aquino. Needless to say, the child Ylarde would not have died were it not for the unsafe situation created
by private respondent Aquino which exposed the lives of all the pupils concerned to real danger.

We cannot agree with the finding of the lower court that the injuries which resulted in the death of the
child Ylarde were caused by his own reckless imprudence, It should be remembered that he was only ten
years old at the time of the incident, As such, he is expected to be playful and daring.

The degree of care required to be exercised must vary with the capacity of the person endangered to care
for himself. The standard of conduct to which a child must conform for his own protection is that degree
of care ordinarily exercised by children of the same age, capacity, discretion, knowledge and experience
under the same or similar circumstances. Bearing this in mind, We cannot charge the child Ylarde with
reckless imprudence.

The court is not persuaded that the digging done by the pupils can pass as part of their Work Education.
A single glance at the picture showing the excavation and the huge concrete block 7 would reveal a
dangerous site requiring the attendance of strong, mature laborers and not ten-year old grade-four pupils.

We cannot comprehend why the lower court saw it otherwise when private respondent Aquino himself
admitted that there were no instructions from the principal requiring what the pupils were told to do. Nor
was there any showing that it was included in the lesson plan for their Work Education.

The contention that Aquino exercised the utmost diligence of a very cautious person is certainly without
cogent basis. A reasonably prudent person would have foreseen that bringing children to an excavation
site, and more so, leaving them there all by themselves, may result in an accident. An ordinarily careful
human being would not assume that a simple warning "not to touch the stone" is sufficient to cast away
all the serious danger that a huge concrete block adjacent to an excavation would present to the children.
Moreover, a teacher who stands in loco parentis to his pupils would have made sure that the children are
protected from all harm in his company.

We close by categorically stating that a truly careful and cautious person would have acted in all contrast
to the way private respondent Aquino did. Were it not for his gross negligence, the unfortunate incident
would not have occurred and the child Ylarde would probably be alive today, a grown- man of thirty-five.
Due to his failure to take the necessary precautions to avoid the hazard, Ylarde's parents suffered great
anguish all these years.

17
ASSOCIATED BANK (Now WESTMONT BANK), petitioner, vs. VICENTE HENRY TAN, respondent.
G.R. No. 156940 December 14, 2004
PELAEZ

Facts:
Vicente Henry Tan (TAN) is a businessman and a regular depositor-creditor of the Associated Bank (BANK).
Sometime in September 1990, he deposited a postdated UCPB check with the said BANK in the amount of
P101,000.00 issued to him by a certain Willy Cheng from Tarlac. Allegedly, upon advice and instruction of
the BANK that the P101,000.00 check was already cleared and backed up by sufficient funds, TAN, on the
same date, withdrew the sum of P240,000.00, leaving a balance of P57,793.45. A day after, TAN deposited
the amount of P50,000.00 making his existing balance in the amount of P107,793.45, because he has
issued several checks to his business partners. However, his suppliers and business partners went back to
him alleging that the checks he issued bounced for insufficiency of funds. Thereafter, TAN, thru his lawyer,
informed the BANK to take positive steps regarding the matter for he has adequate and sufficient funds to
pay the amount of the subject checks. Nonetheless, the BANK did not bother nor offer any apology
regarding the incident. Consequently, TAN filed a Complaint for Damages with the Regional Trial Court of
Cabanatuan City against the BANK. The RTC ruled in favor of Tan. CA affirmed the decision.

The BANK insists that its right to debit the amount of the dishonored check from the account of TAN is
clear and unmistakable. Even assuming that it did not give him notice that the check had been dishonored,
such right remains immediately enforceable. In particular, the BANK argues that the check deposit slip
accomplished by TAN on September 1990 expressly stipulated that the bank was obligating itself merely
as the depositor’s collecting agent and -- until such time as actual payment would be made to it -- it was
reserving the right to charge against the depositor’s account any amount previously credited.

Issue:
Whether or not the BANK is liable.

Held:
Yes. By the express terms of the stipulation, the BANK took upon itself certain obligations as Tan’s agent,
consonant with the well-settled rule that the relationship between the payee or holder of a commercial
paper and the collecting bank is that of principal and agent. Under Article 1909 of the Civil Code, such bank
could be held liable not only for fraud, but also for negligence.

As a general rule, a bank is liable for the wrongful or tortuous acts and declarations of its officers or agents
within the course and scope of their employment. Due to the very nature of their business, banks are
expected to exercise the highest degree of diligence in the selection and supervision of their employees.
Jurisprudence has established that the lack of diligence of a servant is imputed to the negligence of the
employer, when the negligent or wrongful act of the former proximately results in an injury to a third
person; in this case, the depositor.

The manager of the bank’s Cabanatuan branch, Consorcia Santiago, categorically admitted that she and
the employees under her control had breached bank policies. They admittedly breached those policies
when, without clearance from the drawee bank in Baguio, they allowed respondent to withdraw on October
1, 1990, the amount of the check deposited. Santiago testified that respondent "was not officially informed
about the debiting of the P101,000 from his existing balance of P170,000 on October 2, 1990 x x x."

18
 4. Factors to be Considered in Negligence

OLIMPIO PANGONOROM and METRO MANILA TRANSIT CORPORATION, Petitioners, vs.

PEOPLE OF THE PHILIPPINES, Respondents.
G.R. No. 143380. April 11, 2005
PLAZA

Facts:
Olimpio Pangonorom was a passenger bus driver employed by Metro Manila Transit Corp. since 1984. On
the day of July 10, 1989 at around 9 pm he drove the passenger bus with plate number NVJ 999 from
Monumento to Baclaran passing along EDSA where an accident took place.

According to the witnesses, Pangonorom was driving so fast and at the time it was raining and the road
was slippery and drizzling. A Isuzu Gemini car driven by Carlos Berba, which is ahead of the passenger bus
driven by Pangonorom swift into the left lane of EDSA road to avoid the stranded van was bumped by the
said passenger bus, resulting to damage to property and slight physical injury incurred by Carlos Berba and
his passengers.

The RTC finds Pangonorom guilty of reckless imprudence resulting in damage to property with multiple
slight physical injury and was sentenced him to suffer an imprisonment of 30 days of arresto menor and a
civil liability for damages in the sum of 42,600.00 and medical expenses incurred by the victim.

The ruling of RTC was affirmed by the Court of Appeal. Pangonorom asserted that the negligence was
attributable to the driver of Isuzu Gemini car which swift to other lane of the road without warning of a
signal light.

Issues:
1. WON Pangonorom was negligent in driving the passenger bus causing damage to property and person?
2. WON the employer Metro Manila Transit Corp. subsidiarily liable for the damage caused by the negligence
of his employee?

Rulings:
1. The Supreme Court upheld the ruling of the lower court. Article 365 of the Revised Penal Code states
that reckless imprudence consists in voluntarily but without malice, doing or failing to do an act from which
material damage results by reason of inexcusable lack of precaution on the part of the person performing
or failing to perform such act taking into consideration the following:
(1) His employment or occupation;
(2) His degree of intelligence;
(3) His physical condition;
(4) Other circumstances regarding persons, time and place.

Pangonorom is a professional driver and he has been employed with MMTC since 1984. As a public utility
driver it is his primary concern the safety not only of himself and his passengers but also the safety of his
fellow motorists. At the time accident happened it was raining and the road expected to be slippery and
drizzling, he should have been more cautious and prudent in driving, he should have been more cautious
and prudent in driving his passenger bus.

Pangonorom was driving 70 kilometer per hour and the fact that he is familiar with the road and the bus
was moving downhill slope he should not driving so fast which took him belatedly to stop the bus from
moving that cause the bumping of the car ahead of it.

19
2. The Supreme Court held that due diligence in the selection and supervision of employees is not a defense
in the present case.

Under Article 103 of the Revised Penal Code states that the subsidiary liability established in the next
preceding article shall also apply to employers, teachers, persons and corporation engaged in any kind of
industry for felonies committed by their servants, pupils, workmen, apprentices or employees in the
discharge of their duties.

Pursuant to Article 103, an employer may be subsidiarily liable for the employee’s civil liability in a criminal
action when there is adequate evidence establishing that:
(1) He is indeed the employer of the convicted employee;
(2) That he is engaged in some kind of industry;
(3) That the employee committed the offense in the discharge of his duties; and
(4) That the execution against the employee has not been satisfied due to insolvency.

Subsidiary liability of employer arises only when the conviction of guilty has become final and executory
and only after proof of the accused-employee’s insolvency.

However in this case the conviction of guilt against Pangonorom has not yet become final and there was
no evidence yet showing that he is insolvent. Pending writ of execution issued against Pangonorom, MMTC
cannot yet be held subsidiarily liable.

UNITED STATES OF AMERICA and MAXINE BRADFORD, petitioners, vs. HON. LUIS R. REYES, as
Presiding Judge of Branch 22, Regional Trial Court of Cavite, and NELIA T.
MONTOYA, respondents.
G.R. No. 79253 March 1, 1993
REYES

FACTS:
Nelia T. Montoya, an American citizen employed as an identification checker at the U.S. Navy Exchange
(NEX) at the Joint United States Military Assistance Group (JUSMAG) headquarters in Quezon City, filed a
complaint against Maxine Bradford, also an American citizen working as a manager at JUSMAG
Headquarter’s activity exchange, for damages due to the oppressive and discriminatory acts committed by
the latter in excess of her authority as store manager of the NEX JUSMAG. This was due to the incident on
January 22, 1987 when Bradford searched Montoya’s body and belongings while the latter was already in
the parking area after buying some items NEX JUSMAG’s retail store, where she had purchasing privileges.
To support the motion, the petitioners claimed that checking of purchases is a routine procedure observed
at base retail outlets to protect and safeguard merchandise, cash, and equipment pursuant to paragraphs
2 and 4(b) of NAVRESALEACT SUBIC INST. 5500.1. 7. Therefore, Bradford’s order to check all employee
purchases was done in the exercise of her duties as Manager of the NEX-JUSMAG.

ISSUES:
W/N the trial court committed grave abuse of discretion in denying the motion to dismiss based on the
following grounds:(a) the complaint in Civil Case No. 224-87 is in effect a suit against the public petitioner,
a foreign sovereign immune from suit which has not given consent to such suit and(b) Bradford is immune
from suit for acts done by her in the performance of her official functions as manager of the U.S. Navy
Exchange of JUSMAG pursuant to the Philippines-United States Military Assistance Agreement of 1947 and
the Military Bases Agreement of 1947, as amended.

20
HELD:
The petition was DENIED for lack of merit. There can be no doubt that on the basis of the allegations in
the complaint, Montoya has a sufficient and viable cause of action. Bradford's purported non-suability on
the ground of state immunity is then a defense which may be pleaded in the answer and proven at the
trial. Since Bradford did not file her Answer within the reglementary period, the trial court correctly declared
her in default upon motion of the private respondent. The judgment then rendered against her on 10
September 1987 after the ex parte reception of the evidence for the private respondent and before this
Court issued the Temporary Restraining Order on 7 December 1987 cannot be impugned. The filing of the
instant petition and the knowledge thereof by the trial court did not prevent the latter from proceeding
with Civil Case No.224-87. "It is elementary that the mere pendency of a special civil action for certiorari,
commenced in relation to a case pending before a lower Court, does not interrupt the course of the latter
when there is no writ of injunction restraining it.

21
 *** ADDITIONAL CASES ON NEGLIGENCE***

PALSGRAF VS. LONG ISLAND RAILROAD COMPANY (LIRC)

May 29, 1928 248 N.Y. 339 | 162 N.E. 99
ALABA

FACTS:
Helen Palsgraf was standing on a platform owned by the Long Island Railroad Company (LIRC), defendant,
waiting for the train to Rockaway Beach. At this time, another train bound for a different location stopped
at the platform and two men raced to board it. The train began to slow down and the first man jumped
onto the train successfully, while the other, who carried a package, had difficulty boarding. In turn, two of
the railroad company employees assisted him by pushing and pulling him onto the train. As a result, the
man dropped his package, which contained fireworks (unknown by any other party). The package fell onto
the rails and exploded, resulting in dislodgment of multiple scales at the other end of the platform station.
A few of the dislodged scales then struck and injured Palsgraf.

Accordingly, the Palsgraf brings an action of suit for negligence against the railroad company. The trial
court issued a judgment in favor of Palsgraf, which the railroad company appealed. The appellate court
affirmed the decision and now the company appeals once again.

ISSUE:
Could a Defendant be held liable for negligence and resultant injury for actions that cannot be reasonably
foreseen?

HELD:
NO. The court reversed the judgment of the appellate court and dismissed the complaint.

The court held that the passenger failed to prove that the railroad's alleged negligence proximately caused
her injuries. Essentially, the court held that under the foreseeability test, it was not reasonable to hold that
the railroad's alleged negligence was the cause of the passenger's injuries. Rather, it was the explosion
that was the proximate cause, and the railroad could not have reasonably expected such a disaster. Hence,
LIRC was not liable to Palsgraf.

In this respect, it was held that Palsgraf must, in order to bring a claim in negligence, demonstrate that
there has been some violation of her personal rights. Whilst it was acknowledged that the guards who
caused the package of fireworks to fall were negligent in doing so, it was not considered that they were
negligent to Palsgraf. There was no indication that the content of the package was fireworks or that
dropping it would cause it to explode. Furthermore, Palsgraf was standing some distance away from the
package. Therefore, it was considered that if the LIRC was held liable to the claimant in these
circumstances, a defendant would be liable in any circumstance for almost any loss.

22
 PHILIPPINE AIR LINES, INC., petitioner, vs. THE COURT OF APPEALS and JESUS V. SAMSON,
respondents.
GR No. L-46558, July 31, 1981
BALUCANAG
FACTS:
Jesus Samson (Samson) was employed as co-pilot by Philippine Airlines (PAL). He was assigned to and/or
paired with pilot Delfin Bustamante. Previously, Samson complained to PAL through its authorized official
that Delfin had slow reaction and poor judgment. Notwithstanding this, PAL still allowed Delfin to fly.

On January 8, 1951, Samson and Delfin manned the Manila to Legaspi flight, with stops in Daet and Pili.
Upon making a landing a Daet, the airplane overshot the airfield and crash-landed into the mangroves. As
a result of the jolt and impact, Samson hit his head on the from windshield of the plane that caused him
brain concussion, wounds in the forehead and intense pain. After the accident, Samson claimed that he did
not receive any proper medical attention. He was merely referred to the company clinic and was never
examined by experts despite his plea. Days and years after the accident, Samson suffered periodic dizzy
spells, headache and general debility which eventually led PAL to terminate him in 1953.

In 1954, Samson filed a complaint against PAL for damages. The trial court and Court of Appeals ruled in
favor of Samson. PAL claimed that the injuries suffered by private respondent during the accident were
superficial in nature and that it was due to emotional disturbances and not the negligence of Delfin nor
PAL, hence PAL cannot be held liable for damages.

ISSUE:
WON PAL is liable for damages to Samson.

RULING:
YES. A common carrier is required to exercise the highest degree of care in the discharge of its business.
Here, PAL is a common carrier engaged in the business of transporting passengers and/or goods, by land,
water or air, for compensation, offering their services to the public, as defined in Article 1732 of the New
Civil Code. The law is clear in requiring a common carrier to exercise the highest degree of care in the
discharge of its duty and business of carriage under articles 1733, 1755 and 1756 of the New Civil Code.
Any omission or lapse will result to damage, prejudice injuries and even death, as in this case.

Also, even if there is an employee-employer relationship between plaintiff and respondent, Samson is
entitled to moral damages in view of the bad faith and malice properly found by the appellate court,
applying the provisions of Article 2220 of the New Civil Code which provides that the willful injury to property
may be a legal ground for moral damages. The justification on the award of moral damages is found on
Article 19 of NCC which requires every person must, in the exercise of his rights and in the performance of
his duties, act with justice, give everyone his due, and observe honesty and good faith as applied in this
case.

23
MA. LOURDES VALENZUELA, petitioner, vs. COURT OF APPEALS, RICHARD LI and ALEXANDER
COMMERCIAL, INC., respondents.
G.R. No. 115024 February 7, 1996

RICHARD LI, petitioner, vs. COURT OF APPEALS and LOURDES VALENZUELA, respondents.
G.R. No. 117944 February 7, 1996
CABALLERO
Facts:
Ma. Lourdes Valenzuela was driving a blue Mitsubishi lancer from her restaurant at Marcos highway to her
home with a companion, Cecilia Ramon. She noticed something wrong with her tires. Having been told by
the people present that her rear right tire was flat and that she cannot reach her home in that car's
condition, she parked along the sidewalk, about 1-1/2 feet away, put on her emergency lights, alighted
from the car, and went to the rear to open the trunk. She was standing at the left side of the rear of her
car pointing to the tools to a man who will help her fix the tire when she was suddenly bumped by a 1987
Mitsubishi Lancer driven by Richard Li and registered in the name of Alexander Commercial, Inc. Because
of the impact, Valenzuela was thrown against the windshield of the car of Li which was destroyed, and
then fell to the ground. She was pulled out from under Li’s car. Valenzuela’s left leg was severed up to the
middle of her thigh, with only some skin and sucle connected to the rest of the body. She was brought to
the UERM Medical Memorial Center where she was found to have a "traumatic amputation, leg, left up to
distal thigh. She was confined in the hospital for 20 days and was eventually fitted with an artificial leg.
The expenses for the hospital confinement (P120,000.00) and the cost of the artificial leg (P27,000.00)
were paid by defendants from the car insurance.

Li denied that he was negligent. He was on his way home, travelling at 55 kph; considering that it was
raining, visibility was affected and the road was wet. Traffic was light. He testified that he was driving along
the inner portion of the right lane of Aurora Blvd. towards the direction of Araneta Avenue, when he was
suddenly confronted, in the vicinity of A. Lake Street, San Juan, with a car coming from the opposite
direction, travelling at 80 kph, with "full bright lights". Temporarily blinded, he instinctively swerved to the
right to avoid colliding with the oncoming vehicle, and bumped Valenzuela’s car, which he did not see
because it was midnight blue in color, with no parking lights or early warning device, and the area was
poorly lighted.

Valenzuela prayed for moral damages in the amount of P1 million, exemplary damages in the amount of
P100,000.00 and other medical and related expenses amounting to a total of P180,000.00, including loss
of expected earnings. RTC found Li guilty of gross negligence and liable for damages under Article 2176 of
the Civil Code and likewise held Alexander Commercial, Inc., Li's employer, jointly and severally liable for
damages pursuant to Article 2180. CA affirmed RTC but absolved the Li's employer, Alexander Commercial,
Inc. from any liability towards Valenzuela.

Issues:
1. WON Li was negligent in driving his vehicle.
2. WON Valenzuela is guilty of contributory negligence.

Ruling:
1. Yes. One will have to suspend disbelief in order to give credence to Li's disingenuous and patently self-
serving asseverations. The average motorist alert to road conditions will have no difficulty applying the
brakes to a car traveling at the speed claimed by Li. Given a light rainfall, the visibility of the street, and
the road conditions on a principal metropolitan thoroughfare like Aurora Boulevard, Li would have had
ample time to react to the changing conditions of the road if he were alert - as every driver should be - to
those conditions. Driving exacts a more than usual toll on the senses. Physiological "fight or

24
flight" 10 mechanisms are at work, provided such mechanisms were not dulled by drugs, alcohol,
exhaustion, drowsiness, etc.11 Li's failure to react in a manner which would have avoided the accident could
therefore have been only due to either or both of the two factors: 1) that he was driving at a "very fast"
speed as testified by Rodriguez; and 2) that he was under the influence of alcohol.12 Either factor working
independently would have diminished his responsiveness to road conditions, since normally he would have
slowed down prior to reaching Valenzuela's car, rather than be in a situation forcing him to suddenly apply
his brakes.

2. No. 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. Based on the foregoing definition, the standard or act to which, according to Li, Valenzuela
ought to have conformed for her own protection was not to park at all at any point of Aurora Boulevard, a
no parking zone. The SC cannot agree. Courts have traditionally been compelled to recognize that an actor
who is confronted with an emergency is not to be held up to the standard of conduct normally applied to
an individual who is in no such situation. The law takes stock of impulses of humanity when placed in
threatening or dangerous situations and does not require the same standard of thoughtful and reflective
care from persons confronted by unusual and oftentimes threatening conditions.

Under the "emergency rule" adopted by this Court in Gan vs. Court of Appeals, an individual who suddenly
finds himself in a situation of danger and is required to act without much time to consider the best means
that may be adopted to avoid the impending danger, is not guilty of negligence if he fails to undertake
what subsequently and upon reflection may appear to be a better solution, unless the emergency was
brought by his own negligence.

While the emergency rule applies to those cases in which reflective thought, or the opportunity to
adequately weigh a threatening situation is absent, the conduct which is required of an individual in such
cases is dictated not exclusively by the suddenness of the event which absolutely negates thoroughful care,
but by the over-all nature of the circumstances. In the instant case, Valenzuela, upon reaching that portion
of Aurora Boulevard close to A. Lake St., noticed that she had a flat tire. To avoid putting herself and other
motorists in danger, she did what was best under the situation. As narrated by respondent court: "She
stopped at a lighted place where there were people, to verify whether she had a flat tire and to solicit help
if needed. Having been told by the people present that her rear right tire was flat and that she cannot
reach her home she parked along the sidewalk, about 1 1/2 feet away, behind a Toyota Corona Car." Under
the circumstances described, Valenzuela did exercise the standard reasonably dictated by the emergency
and could not be considered to have contributed to the unfortunate circumstances which eventually led to
the amputation of one of her lower extremities. The emergency which led her to park her car on a sidewalk
in Aurora Boulevard was not of her own making, and it was evident that she had taken all reasonable
precautions.

Notes:

Doctrine of bonus pater familias

The relationship of Li and Alexander Commercial is not based on the principle of respondeat superior, which
holds the master liable for acts of the servant, but that of pater familias, in which the liability ultimately
falls upon the employer, for his failure to exercise the diligence of a good father of the family in the selection
and supervision of his employees. Utilizing the bonus pater familias standard expressed in Article 2180 of
the Civil Code, the SC is of the opinion that Li's employer, Alexander Commercial, Inc. is jointly and solidarily
liable for the damage caused by the accident.

The employer's primary liability under the concept of pater familias embodied by Art 2180 (in relation to
Art. 2176) of the Civil Code is quasi-delictual or tortious in character. His liability is relieved on a showing
that he exercised the diligence of a good father of the family in the selection and supervision of its

25
employees. Once evidence is introduced showing that the employer exercised the required amount
of care in selecting its employees, half of the employer's burden is overcome. The question of
diligent supervision, however, depends on the circumstances of employment.

Li was an Assistant Manager of Alexander Commercial, Inc. In his testimony before the trial court, he
admitted that his functions as Assistant Manager did not require him to scrupulously keep normal office
hours as he was required quite often to perform work outside the office, visiting prospective buyers and
contacting and meeting with company clients. 30 These meetings, clearly, were not strictly confined to
routine hours because, as a managerial employee tasked with the job of representing his company with its
clients, meetings with clients were both social as well as work-related functions. The service car assigned
to Li by Alexander Commercial, Inc. therefore enabled both Li - as well as the corporation - to put up the
front of a highly successful entity, increasing the latter's goodwill before its clientele. It also facilitated
meeting between Li and its clients by providing the former with a convenient mode of travel.

In fine, Alexander Commercial, inc. has not demonstrated, to our satisfaction, that it exercised the care
and diligence of a good father of the family in entrusting its company car to Li. No allegations were made
as to whether or not the company took the steps necessary to determine or ascertain the driving proficiency
and history of Li, to whom it gave full and unlimited use of a company car.31 Not having been able to
overcome the burden of demonstrating that it should be absolved of liability for entrusting its company car
to Li, said company, based on the principle of bonus pater familias, ought to be jointly and severally liable
with the former for the injuries sustained by Ma. Lourdes Valenzuela during the accident.

26
HEDY GAN y YU, petitioner, vs. THE HONORABLE COURT OF APPEALS and the PEOPLE OF THE
PHILIPPINES, respondents.
G.R. No. L-44264 September 19, 1988
CAMASURA

Facts:
In the morning of 4 July 1972, the accused Hedy Gan was driving along North Bay Boulevard, Tondo,
Manila. There were two vehicles parked on one side of the road, one following the other. As the car driven
by Gan approached the place where the two vehicles were parked, there was a vehicle coming from the
opposite direction, followed by another which tried to overtake the one in front of it thereby encroaching
the lane of the car driven by Gan. To avoid a head-on collision, Gan swerved to the right and as a
consequence, hit an old man who was about to cross the street, pinning him against the rear of one of the
parked vehicles. The force of the impact caused the parked vehicle to move forward hitting the other
parked vehicle in front of it. The pedestrian was injured, Gan's car and the two parked vehicle suffered
damages. The pedestrian was pronounced dead on arrival at the hospital.

Gan was convicted of Homicide thru reckless imprudence. On appeal, CA modified the trial court's decision
convicting Gan of Homicide thru simple imprudence.

Issue:
Whether or not the CA erred in convicting petitioner Gan for Homicide thru simple imprudence.

Ruling:
Yes. SC reversed CA's decision, acquitting petitioner.

The test for determining whether or not a person is negligent in doing an act whereby injury or damage
results to the person or property of another is this: Would a prudent man in the position of the person to
whom negligence is attributed foresee harm to the person injured as a reasonable consequence of the
course about to be pursued? If so, the law imposes the duty oil the doer to take precaution against its
mischievous results and the failure to do so constitutes negligence.

A corollary rule is what is known in the law as the emergency rule. "Under that rule, one who suddenly
finds himself in a place of danger, and is required to act without time to consider the best means that may
be adopted to avoid the impending danger, is not guilty of negligence, if he fails to adopt what subsequently
and upon reflection may appear to have been a better method, unless the emergency in which he finds
himself is brought about by his own negligence.

Applying the above test to the case at bar, the SC finds the petitioner not guilty of the crime of simple
imprudence resulting in Homicide.

The danger confronting petitioner was real and imminent, threatening her very existence. She had no
opportunity for rational thinking but only enough time to heed the very powerful instinct of self-
preservation.

27
 5. Definition of Proximate Cause

GEORGE MCKEE and ARACELI KOH MCKEE, petitioners, vs. INTERMEDIATE APPELLATE COURT,
JAIME TAYAG and ROSALINDA MANALO, respondents.
G.R. No. L-68102 July 16, 1992

CARMEN DAYRIT KOH, LETICIA KOH, JULIETA KOH TUQUERO, ARACELI KOH MCKEE,
ANTONIO KOH and ELIZABETH KOH TURLA, petitioners, vs. INTERMEDIATE APPELLATE
COURT, JAIME TAYAG and ROSALINDA MANALO, respondents.
G.R. No. L-68103 July 16, 1992
TACDER

FACTS:
In January 8 1977, at around 9:00 or 10:00 in the morning, somewhere between Angeles City and San
Fernando, Pampanga, Jose Koh was driving his daughter, Araceli Koh McKee, and her minor children, as
well as Kim’s babysitter, Loida Bondoc. A cargo truck owned by Jaime Tayag and Rosalinda Manalo, driven
by Ruben Galang, was carrying 200 hundred cavans of rice, which weighed 10 metric tons. 2 boys suddenly
ran from the right side of the road, unsure of whether to cross all the way or turn back, Jose blew his horn.
He was then forced to swerve left and into the lane Galang was driving in. Jose failed to get back into the
right lane, and collided with the cargo truck. The collision occurred on the bridge resulted in the deaths of
the driver, Jose, the one-year-old, Kim, and her babysitter, Loida, on whose lap she was sitting.

An information was filed against Ruben Galang, charging him for reckless imprudence resulting in multiple
homicide, physical injuries, and damage to property who was found guilty. SC denied his Petition for
Review.

Two civil cases were filed.

The first one, by the wife and children of Jose Koh, and the second one by Araceli and her husband for the
death of Kim and injuries to Araceli and her other children. The respondents were impleaded against as
the employers of Ruben Galang (Galang was not included). The cases here are based on quasi-delict. These
cases were eventually consolidated.

The trial court dismissed the civil cases and awarded the respondents damages and attorney’s fees.

On appeal to the Intermediate Appellate Court, the dismissal was reversed based on its finding that it was
Galang’s inattentiveness or reckless imprudence that caused the accident. However, upon filing by the
respondents of an MR, the IAC set aside its original decision and upheld that of the trial court
because the fact that Koh’s car invaded the lane of the truck and the collision occurred while
still in Galang’s lane gave rise to the presumption that Koh was negligent.

ISSUES/ RULING:
1. Was the IAC correct in reversing their original decision?
NO. Given the circumstances, the cases (civil and criminal) should have been consolidated to prevent
separate appreciation of the evidence. To be fair, the petitioners did move to adopt the testimonies of the
witnesses in the criminal case but the motion was denied. The non-consolidation resulted in two conflicting
decisions. In any case, the guilty verdict of Galang was deemed by the Court as irrelevant to the case at
bar. On the basis of this presumed negligence, the appellate court immediately concluded that it was Jose
Koh’s negligence that was the immediate and proximate cause of the collision. This is an unwarranted
deduction as the evidence for the petitioners convincingly shows that the car swerved into the truck’s lane
because as it approached the southern end of the bridge, two boys darted across the road from the right

28
sidewalk into the lane of the car. Araceli’s testimony was pretty much what was stated in the facts plus the
fact that when Jose swerved to the left, the truck was immediately noticed. This is why he switched his
headlights on – to warn the truck’s driver to slow down and let the Escort return to its lane.

When asked as to how she could tell that the truck did not slow down, Araceli said that the truck just kept
on coming, indicating that it didn’t reduce its speed. She posited that if it did, there wouldn’t have been a
collision. Her testimony remained intact, even upon cross-examination – that Jose’s entry into Galang’s
lane was necessary to avoid what was, in his mind at the time, a greater peril – death or injury.
This is hardly negligent behavior.

Any reasonable and ordinary prudent man would have tried to avoid running over the two boys by swerving
the car away from where they were even if this would mean entering the opposite lane. Avoiding such
immediate peril would be the natural course to take particularly where the vehicle in the opposite lane
would be several meters away and could very well slow down, move to the side of the road and give way
to the oncoming car.

2. Was Jose guilty of negligence?

NO. THE EMERGENCY RULE:
“One who suddenly finds himself in a place of danger, and is required to act without time to consider the
best means that may be adopted to avoid the impending danger, is not guilty of negligence, if he fails
to adopt what subsequently and upon reflection may appear to have been a better method, unless the
emergency in which he finds himself is brought about by his own negligence.” Jose Koh adopted the
best means possible in the given situation. This means he cannot be considered negligent.

3. Would the collision be imputed to Jose if we were to assume that he was negligent?
NO. PROXIMATE CAUSE:
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.
- Galang’s negligent act of not slowing down or stopping and allowing the Escort to return to the
right lane was the sufficient intervening cause and the actual cause of the tragedy (failure to take
the necessary measures and the degree of care necessary to avoid the collision)
- “The entry of the car into the lane of the truck would not have resulted in the collision had the
latter heeded the emergency signals given by the former to slow down and give the car an
opportunity to go back into its proper lane. Instead of slowing down and swerving to the far right
of the road, which was the proper precautionary measure under the given circumstances, the truck
driver continued at full speed towards the car. The truck driver’s negligence becomes more
apparent in view of the fact that the road is 7.50 meters wide while the car measures 1.598 meters
and the truck, 2.286 meters, in width. This would mean that both car and truck could pass side by
side with a clearance of 3.661 meters to spare. Furthermore, the bridge has a level sidewalk, which
could have partially accommodated the truck. Any reasonable man finding himself in the given
situation would have tried to avoid the car instead of meeting it head-on.”
- Negligence of Galang apparent in the records: “He himself said that his truck was running at 30
miles (48 kilometers) per hour along the bridge while the maximum speed allowed by law on a
bridge is only 30 kilometers per hour.
- Under Article 2185 of the Civil Code, a person driving a vehicle is presumed negligent if at the time
of the mishap, he was violating any traffic regulation.”

Last Clear Chance Doctrine:

A doctrine in the law of torts which states that the contributory negligence of the party injured will
not defeat the claim for damages if it is shown that the defendant might, by the exercise of
reasonable care and prudence, have avoided the consequences of the negligence of the injured
party. In such cases, the person who had the last clear chance to avoid the mishap is considered in law

29
solely responsible for the consequences thereof. A person who has the last clear chance or
opportunity of avoiding an accident, notwithstanding the negligent acts of his opponent or that of a
third person imputed to the opponent is considered in law solely responsible for the consequences
of the accident. The doctrine applies only in a situation where the plaintiff was guilty of prior or
antecedent negligence but the defendant, who had the last fair chance to avoid the impending harm and
failed to do so, is made liable for all the consequences of the accident notwithstanding the prior negligence
of the plaintiff.

4. Whis negligent in this case?

Basically, the last clear chance was with Galang, as can be gleaned from the evidence presented Therefore,
respondents are found, under Article 2180, directly and primarily responsible for the acts of
their employee. Their negligence flows from the negligence of their employee. Such presumption
is juris tantum (rebuttable) and not juris et de jure (conclusive). They did not present evidence that showed
that the diligence of a good father of a family in the selection and supervision of their employee, Galang.

30
 THE CONSOLIDATED BANK and TRUST CORPORATION, Petitioner, v. COURT OF APPEALS and
L.C. DIAZ and COMPANY, CPA’s, Respondents.
GR. No. 138569. September 11, 2003
AREVALO

FACTS:
Solidbank is a domestic banking corporation organized and existing under Philippine laws. Private
respondent L.C. Diaz and Company, CPA’s ("L.C. Diaz"), is a professional partnership engaged in the
practice of accounting. LC. Diaz opened a savings account with Solidbank, designated as Savings Account
No. S/A 200-16872-6.

On 14 August 1991, L.C. Diaz through its cashier, Mercedes Macaraya ("Macaraya"), filled up a savings
(cash) deposit slip. Macaraya instructed the messenger of L.C. Diaz, Ismael Calapre ("Calapre"), to deposit
the money with Solidbank.

Calapre went to Solidbank and presented to Teller No. 6 the two deposit slips and the passbook. The teller
acknowledged receipt of the deposit by returning to Calapre the duplicate copies of the two deposit slips.
Teller No. 6 stamped the deposit slips with the words "DUPLICATE" and "SAVING TELLER 6 SOLIDBANK
HEAD OFFICE." Since the transaction took time and Calapre had to make another deposit for L.C. Diaz with
Allied Bank, he left the passbook with Solidbank. Calapre then went to Allied Bank. When Calapre returned
to Solidbank to retrieve the passbook, Teller No. 6 informed him that "somebody got the passbook. Calapre
went back to L.C. Diaz and reported the incident to Macaraya.

Macaraya immediately prepared a deposit slip in duplicate copies with a check of P200,000. Macaraya,
together with Calapre, went to Solidbank and presented to Teller No. 6 the deposit slip and check. The
teller stamped the words "DUPLICATE" and "SAVING TELLER 6 SOLIDBANK HEAD OFFICE" on the duplicate
copy of the deposit slip. When Macaraya asked for the passbook, Teller No. 6 told Macaraya that someone
got the passbook but she could not remember to whom she gave the passbook. When Macaraya asked
Teller No. 6 if Calapre got the passbook, Teller No. 6 answered that someone shorter than Calapre got the
passbook.

The following day, 15 August 1991, L.C. Diaz formally wrote Solidbank to stop any transaction
using the same passbook until L.C. Diaz could open a new account. On the same day that L.C.
Diaz learned of the unauthorized withdrawal the day before of P300,000 from its savings
account. The withdrawal slip for the P300,000 bore the signatures of the authorized
signatories of L.C. Diaz, namely Diaz and Rustico L. Murillo. The signatories, however, denied
signing the withdrawal slip. A certain Noel Tamayo received the P300,000.

On 25 August 1992, L.C. Diaz filed a Complaint 7 for Recovery of a Sum of Money against Solidbank with
the Regional Trial Court of Manila, Branch 8. After trial, the trial court rendered on 28 December 1994 a
decision absolving Solidbank and dismissing the complaint. CA reversed the trial court.

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

The Court of Appeals ruled that Solidbank’s negligence was the proximate cause of the unauthorized
withdrawal of P300,000 from the savings account of L.C. Diaz. The appellate court reached this conclusion
after applying the provision of the Civil Code on quasi-delict (Art.2176).

31
ISSUE:
Whether or not Solidbank should bear the loss.

RULING:
YES. We hold that Solidbank is liable for breach of contract due to negligence, or culpa contractual. The
contract between the bank and its depositor is governed by the provisions of the Civil Code on simple loan.
There is a debtor-creditor relationship between the bank and its depositor. The bank is the debtor and the
depositor is the creditor.
The law imposes on banks high standards in view of the fiduciary nature of banking. Section 2 of Republic
Act No. 8791 ("RA 8791") declares that the State recognizes the "fiduciary nature of banking that requires
high standards of integrity and performance."

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.

Section 2 of RA 8791 prescribes the statutory diligence required from banks — that banks must observe
"high standards of integrity and performance" in servicing their depositors. Although RA 8791 took
effect almost nine years after the unauthorized withdrawal of the P300,000 from L.C. Diaz’s savings
account, jurisprudence at the time of the withdrawal already imposed on banks the same high
standard of diligence required under RA No. 8791.

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

Solidbank’s Breach of its Contractual Obligation: Article 1172 of the Civil Code provides that
"responsibility arising from negligence in the performance of every kind of obligation is demandable." For
breach of the savings deposit agreement due to negligence, or culpa contractual, the bank is liable to its
depositor.

Calapre left the passbook with Solidbank because the "transaction took time" and he had to go to Allied
Bank for another transaction. The passbook was still in the hands of the employees of Solidbank for the
processing of the deposit when Calapre left Solidbank. Solidbank’s rules on savings account require that
the "deposit book should be carefully guarded by the depositor and kept under lock and key, if possible."
When the passbook is in the possession of Solidbank’s tellers during withdrawals, the law
imposes on Solidbank and its tellers an even higher degree of diligence in safeguarding the
passbook.

Likewise, Solidbank’s tellers must exercise a high degree of diligence in insuring that they return the
passbook only to the depositor or his authorized representative. The tellers know, or should know,
that the rules on savings account provide that any person in possession of the passbook is
presumptively its owner. For failing to return the passbook to Calapre, the authorized representative of
L.C. Diaz, Solidbank and Teller No. 6 presumptively failed to observe such high degree of diligence in
safeguarding the passbook, and in insuring its return to the party authorized to receive the same.

In culpa contractual, once the plaintiff proves a breach of contract, there is a presumption
that the defendant was at fault or negligent. The burden is on the defendant to prove that he

32
was not at fault or negligent. In contrast, in culpa aquiliana the plaintiff has the burden of proving that
the defendant was negligent. In the present case, L.C. Diaz has established that Solidbank
breached its contractual obligation to return the passbook only to the authorized
representative of L.C. Diaz. There is thus a presumption that Solidbank was at fault and its
teller was negligent in not returning the passbook to Calapre. The burden was on Solidbank to
prove that there was no negligence on its part or its employees.

Solidbank failed to discharge its burden. Solidbank is bound by the negligence of its employees
under the principle of respondeat superior or command responsibility. The defense of exercising
the required diligence in the selection and supervision of employees is not a complete defense in culpa
contractual, unlike in culpa aquiliana.

Proximate Cause of the Unauthorized Withdrawal

Proximate cause is that cause which, in natural and continuous sequence, unbroken by any efficient
intervening cause, produces the injury and without which the result would not have occurred.
L. C. Diaz was not at fault that the passbook landed in the hands of the impostor. Solidbank was in
possession of the passbook while it was processing the deposit. After completion of the transaction,
Solidbank had the contractual obligation to return the passbook only to Calapre, the authorized
representative of L.C. Diaz. Solidbank failed to fulfill its contractual obligation because it gave the passbook
to another person.

We do not subscribe to the appellate court’s theory that the proximate cause of the unauthorized withdrawal
was the teller’s failure to call up L.C. Diaz to verify the withdrawal. Solidbank did not have the duty to call
up L.C. Diaz to confirm the withdrawal. There is no arrangement between Solidbank and L.C. Diaz to this
effect.

Doctrine of Last Clear Chance

The doctrine of last clear chance states that where both parties are negligent but the negligent act of one
is appreciably later than that of the other, or where it is impossible to determine whose fault or negligence
caused the loss, the one who had the last clear opportunity to avoid the loss but failed to do so, is
chargeable with the loss. Stated differently, the antecedent negligence of the plaintiff does not preclude
him from recovering damages caused by the supervening negligence of the defendant, who had the last
fair chance to prevent the impending harm by the exercise of due diligence.

We do not apply the doctrine of last clear chance to the present case. Solidbank is liable for breach of
contract due to negligence in the performance of its contractual obligation to L.C. Diaz. This is a case of
culpa contractual, where neither the contributory negligence of the plaintiff nor his last clear chance to
avoid the loss, would exonerate the defendant from liability. Such contributory negligence or last clear
chance by the plaintiff merely serves to reduce the recovery of damages by the plaintiff but does not
exculpate the defendant from his breach of contract.

Mitigated Damages

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

33