Torts and Damages

The concept of pater familias

The pater familias, also written as paterfamilias (plural patres familias), was the
head of a Roman family. The paterfamilias was the oldest living male in a household. He
had complete control of all family members. The term is Latin for "father of the family" or
the "owner of the family estate". The form is archaic in Latin, preserving the old genitive
ending in -s (see Latin declension), whereas in classical Latin the normal genitive ending
was -ae. The pater familias was always a Roman citizen.
Roman law and tradition (mos maiorum) established the power of the pater
familias within the community of his own extended familia. He held legal privilege over
the property of the familia, and varying levels of authority over his dependents: these
included his wife and children, certain other relatives through blood or adoption, clients,
freedmen and slaves. The same mos maiorum moderated his authority and determined
his responsibilities to his own familia and to the broader community. He had a duty to
father and raise healthy children as future citizens of Rome, to maintain the moral
propriety and well-being of his household, to honour his clan and ancestral gods and to
dutifully participateand if possible, servein Rome's political, religious and social life.
In effect, the pater familias was expected to be a good citizen. In theory at least, he held
powers of life and death over every member of his extended familia through ancient
right but in practice, the extreme form of this right was seldom exercised. It was
eventually limited by law.
[G.R. No. 97626. March 14, 1997]

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.
DECISION
HERMOSISIMA, JR., J.:
Challenged in this petition for review is the Decision dated February 28, 1991[1]
rendered by public respondent Court of Appeals which affirmed the Decision dated
November 15, 1985 of the Regional Trial Court, National Capital Judicial Region, Branch
CLX (160), Pasig City, in Civil Case No. 27288 entitled Rommel's Marketing Corporation,
etc. v. Philippine Bank of Commerce, now absorbed by Philippine Commercial and
Industrial Bank.

The case stemmed from a complaint filed by the private respondent Rommel's Marketing
Corporation (RMC for brevity), represented by its President and General Manager Romeo
Lipana, to recover from the former Philippine Bank of Commerce (PBC for brevity), now
absorbed by the Philippine Commercial International Bank, 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.
RMC maintained two (2) separate current accounts, Current Account Nos. 53-01980-3
and 53-01748-7, with the Pasig Branch of PBC in connection with its business of selling
appliances.
In the ordinary and usual course of banking operations, current account deposits are
accepted by the bank on the basis of deposit slips prepared and signed by the depositor,
or the latter's agent or representative, who indicates therein the current account number
to which the deposit is to be credited, the name of the depositor or current account
holder, the date of the deposit, and the amount of the deposit either in cash or checks.
The deposit slip has an upper portion or stub, which is detached and given to the
depositor or his agent; the lower portion is retained by the bank. In some instances,
however, the deposit slips are prepared in duplicate by the depositor. The original of the
deposit slip is retained by the bank, while the duplicate copy is returned or given to the
depositor.
From May 5, 1975 to July 16, 1976, petitioner 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 Account No. 53-01734-7 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 private respondent 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.
Irene Yabut's modus operandi is far from complicated. She would 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, i.e., C.A. No. 53-01980-3. With the daily remittance records also prepared by Ms.
Yabut and submitted to private respondent RMC together with the validated duplicate
slips with the latter's name and account number, she made her company believe that all
the while the amounts she deposited were being credited to its account when, in truth
and in fact, they were being deposited by her and credited by the petitioner bank in the
account of Cotas. 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 petitioner bank the return of
its money, but as its demand went unheeded, it filed a collection suit before the Regional
Trial Court of Pasig, Branch 160. The trial court found petitioner bank negligent and ruled
as follows:
"WHEREFORE, judgment is hereby rendered sentencing defendant Philippine Bank of
Commerce, now absorbed by defendant Philippine Commercial & Industrial Bank, and
defendant Azucena Mabayad to pay the plaintiff, jointly and severally, and without
prejudice to any criminal action which may be instituted if found warranted:
1.
The sum of P304,979.72, representing plaintiff's lost deposit, plus interest thereon
at the legal rate from the filing of the complaint;
2.
3.
4.

A sum equivalent to 14% thereof, as exemplary damages;

A sum equivalent to 25% of the total amount due, as and for attorney's fees; and
Costs.

Defendants' counterclaim is hereby dismissed for lack of merit."[2]

On appeal, the appellate court affirmed the foregoing decision with modifications, viz:
"WHEREFORE, the decision appealed from herein is MODIFIED in the sense that the
awards of exemplary damages and attorney's fees specified therein are eliminated and
instead, appellants are ordered to pay plaintiff, in addition to the principal sum of
P304,979.74 representing plaintiff's lost deposit plus legal interest thereon from the filing
of the complaint, P25,000.00 attorney's fees and costs in the lower court as well as in
this Court."[3]
Hence, this petition anchored on the following grounds:
1) The proximate cause of the loss is the negligence of respondent Rommel Marketing
Corporation and Romeo Lipana in entrusting cash to a dishonest employee.

2) The failure of respondent Rommel Marketing Corporation 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.
3) The duplicate copies of the deposit slips presented by respondent Rommel Marketing
Corporation are falsified and are not proof that the amounts appearing thereon were
deposited to respondent Rommel Marketing Corporation's account with the bank.
4) The duplicate copies of the deposit slips were used by Ms. Irene Yabut to cover up her
fraudulent acts against respondent Rommel Marketing Corporation, and not as records of
deposits she made with the bank.[4]
The petition has no merit.
Simply put, the main issue posited before us is: 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?
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.
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.[7]
In the case at bench, there is no dispute as to the damage suffered by the private
respondent (plaintiff in the trial court) RMC in the amount of P304, 979.74. 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,[8] 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 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, thus:
"Q: Now, as teller of PCIB, Pasig Branch, will you please tell us Mrs. Mabayad your
important duties and functions?
A:

I accept current and savings deposits from depositors and encashments.

Q: Now in the handling of current account deposits of bank clients, could you tell us the
procedure you follow?
A:
The client or depositor or the authorized representative prepares a deposit slip by
filling up the deposit slip with the name, the account number, the date, the cash
breakdown, if it is deposited for cash, and the check number, the amount and then he
signs the deposit slip.

Q:
Now, how many deposit slips do you normally require in accomplishing current
account deposit, Mrs. Mabayad?
A: The bank requires only one copy of the deposit although some of our clients prepare
the deposit slip in duplicate.
Q: Now in accomplishing current account deposits from your clients, what do you issue
to the depositor to evidence the deposit made?
A:

We issue or we give to the clients the depositor's stub as a receipt of the deposit.

Q: And who prepares the deposit slip?

A:

The depositor or the authorized representative sir.

Q:
Where does the depositor's stub comes (sic) from Mrs. Mabayad, is it with the
deposit slip?
A:
The depositor's stub is connected with the deposit slip or the bank's copy. In a
deposit slip, the upper portion is the depositor's stub and the lower portion is the bank's
copy, and you can detach the bank's copy from the depositor's stub by tearing it sir.
Q: Now what do you do upon presentment of the deposit slip by the depositor or the
depositor's authorized representative?
A: We see to it that the deposit slip [9] is properly accomplished and then we count the
money and then we tally it with the deposit slip sir.
Q: Now is the depositor's stub which you issued to your clients validated?
A:

Yes, sir. "[10] [Emphasis ours.]

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, viz:
"Q: Did he ever tell you that one of your cashiers affixed the stamp mark of the bank on
the deposit slips and they validated the same with the machine, the fact that those
deposit slips were unfilled up, is there any report similar to that?
A: No, it was not the cashier but the teller.
Q: The teller validated the blank deposit slip?
A: No it was not reported.
Q: You did not know that any one in the bank tellers or cashiers validated the blank
deposit slip?
A: I am not aware of that.
Q: It is only now that you are aware of that?
A: Yes, sir."[13]
Prescinding from the above, public respondent Court of Appeals aptly observed:
xxx xxx

xxx

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 plaintiffs 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."[14]
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. x x x." 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:
" x x x. 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]
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 private respondent 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.
At this juncture, it is worth to discuss the 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
diligence which is required by the nature of
circumstances of the persons, of the time and
faith, the provisions of articles 1171 and 2201,

obligor consists in the omission of that

the obligation and corresponds with the
of the place. When negligence shows bad
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.[21]
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.
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.
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[23] under Article
2179 of the New Civil Code, to wit:
"x x x. 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.
WHEREFORE, the decision of the respondent Court of Appeals is modified by reducing the
amount of actual damages private respondent is entitled to by 40%. Petitioners may
recover from Ms. Azucena Mabayad the amount they would pay the private respondent.
Private respondent shall have recourse against Ms. Irene Yabut. In all other respects, the
appellate court's decision is AFFIRMED.
Proportionate costs.

G.R. No. 143008

June 10, 2002
SMITH BELL DODWELL SHIPPING AGENCY CORPORATION, petitioner,
vs.
CATALINO BORJA and INTERNATIONAL TO WAGE AND TRANSPORT
CORPORATION, respondents.
PANGANIBAN, J.:
The owner or the person in possession and control of a vessel is liable for all natural and
proximate damages caused to persons and property by reason of negligence in its
management or navigation. The liability for the loss of the earning capacity of the
deceased is fixed by taking into account the net income of the victim at the time of

death -- of the incident

expectancy.1wphi1.nt

in

this

case

--

and

that

person's

probable

life

The Case
Before us is a Petition for Review on Certiorari under Rule 45 of the Rules of Court,
challenging the March 6, 2000 Decision1 and the April 25, 2000 Resolution2 of the Court
of Appeals3 (CA) in CA-GR CV No. 57470. The assailed Decision disposed as follows:
"WHEREFORE, premises considered, the instant appeal is hereby DENIED. The
questioned decision of the lower court is hereby AFFIRMED in toto. No pronouncement as
to costs."4
Reconsideration was denied in the assailed Resolution.
The Facts
The facts of the case are set forth by the CA as follows:
"It appears that on September 23, 1987, Smith Bell [herein petitioner] 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. At that time, [Borja] was a customs inspector
of the Bureau of Customs receiving a salary of P31,188.25 per annum.
"At about 11 o'clock in the morning on September 24, 1987, 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."5
The trial court6 (RTC) ruled in favor of Respondent Borja and held petitioner liable for
damages and loss of income. The RTC disposed as follows:
"WHEREFORE, premises considered, judgment is hereby rendered ordering [Petitioner]
Smith Bell Dodwell [S]hipping Agency Corporation to pay [Borja]:
1. The amount of P495,360.00 as actual damages for loss of earning capacity:
2. The amount of P100,000.00 for moral damages; and
3. The amount of P50,000.00 for and as reasonable attorney's fees.
"The cross-claim of [Petitioner] Smith Bell Dodwell Shipping Agency Corporation against
co-defendant International Towage and Transport Corporation and the latter's
counterclaim against [Borja] and cross-claim with compulsory counterclaim against
Smith Bell are hereby ordered dismissed."7
Ruling of the Court of Appeals
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. This conclusion was amply
supported by the testimonies of Borja and Eulogio Laurente (the eyewitness of
International Towage and Transport Corporation or ITTC) as well as by the investigation
conducted by the Special Board of Marine Inquiry and affirmed by the secretary of the
Department of National Defense. On the other hand, the RTC, which the CA sustained,
had not given probative value to the evidence of petitioner, whose sole eyewitness had
not shown up for cross-examination.
Hence, this Petition.8
The Issues
In its Memorandum,9 petitioner raises the following issues:
"1. Whether petitioner should be held liable for the injuries of Respondent Catalino Borja.

"2. Whether Respondent ITTC should be held liable for the injuries of Respondent
Catalino Borja.
"3. Assuming without admitting that Respondent Catalino Borja is entitled to damages,
whether Respondent Borja is entitled to the amount of damages awarded to him by the
trial court."10
Simply put, these issues can be summed up in these two questions: (1) Who, if any, is
liable for Borja's injuries? (2) What is the proper amount of liability?
This Court's Ruling
The Petition is partly meritorious.
First Issue:
Responsibility for Injuries
Petitioner avers that both lower courts labored under a misapprehension of the facts. It
claims that the documents adduced in the RTC conclusively revealed that the explosion
that caused the fire on M/T King Family had originated from the barge ITTC-101, a
conclusion based on three grounds. First, the Survey Report (Exh. "10") dated October
21, 1987 submitted by the Admiral Surveyors and Adjusters, Inc., showed that no part of
M/T King Family sustained any sharp or violent damage that would otherwise be
observed if indeed an explosion had occurred on it. On the other hand, the fact that the
vessel sustained cracks on its shell plating was noted in two Survey Reports from
Greutzman Divers Underwater Specialist, dated October 6, 1987 (Exh. "11"), and during
the underwater inspection on the sunken barge ITTC-101.
Second, external fire damage on the hull of M/T King Family indicated that the fire had
started from outside the vessel and from ITTC-101. The port side of the vessel to which
the ITTC barge was tied was completely gutted by fire, while the starboard side to which
the barge CLC-1002 was tied sustained only slight fire damage.
Third, testimonial evidence proved that the explosion came from the barge of the ITTC
and not from its vessel. Security Guard Vivencio Estrella testified that he had seen the
sudden explosion of monomer on the barge with fire that went up to about 60 meters.
Third Mate Choi Seong Hwan and Second Mate Nam Bang Choun of M/T King Family
narrated that while they were discharging the chemicals, they saw and heard an
explosion from the barge ITTC-101. Chief Security Guard Reynaldo Patron, in turn,
testified that he was 7 to 10 meters away from the barge when he heard the explosion
from the port side of M/T King Family and saw the barge already on fire.
We are not persuaded. Both the RTC and the CA ruled that the fire and the explosion had
originated from petitioner's vessel. Said the trial court:

"The attempts of [Petitioner] Smith Bell to shift the blame on x x x ITTC were all for
naught. First, the testimony of its alleged eyewitness was stricken off the record for his
failure to appear for cross-examination (p. 361, Record). Second, the documents offered
to prove that the fire originated from barge ITTC-101 were all denied admission by the
[c]ourt for being, in effect, hearsay (pp. 335 and 362). x x x Thus, there is nothing in the
record to support [petitioner's] contention that the fire and explosion originated from
barge ITTC-101."11
We find no cogent reason to overturn these factual findings. Nothing is more settled in
jurisprudence than that this Court is bound by the factual findings of the Court of
Appeals when these are supported by substantial evidence and are not under any of the
exceptions in Fuentes v. Court of Appeals;12 more so, when such findings affirm those of
the trial court.13 Verily, this Court reviews only issues of law.
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.14 Petitioner's vessel was carrying
chemical cargo -- alkyl benzene and methyl methacrylate monomer.15 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.16 All
these elements were established 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.18
Second Issue:
Amount of Liability

Petitioner insists that Borja is not entitled to the full amount of damages awarded by the
lower courts. It disputes the use of his gross earning as basis for the computation of the
award for loss of earning capacity. Both courts, in computing the value of such loss, used
the remaining years of the victim as a government employee and the amount he had
been receiving per annum at the time of the incident.
Counsel for Respondent Borja, on the other hand, claims that petitioner had no cause to
complain, because the miscomputation had ironically been in its favor. The multiplier
used in the computation was erroneously based on the remaining years in government
service, instead of the life expectancy, of the victim. Borja's counsel also points out that
the award was based on the former's meager salary in 1987, or about 23 years ago when
the foreign exchange was still P14 to $1. Hence, the questioned award is consistent with
the primary purpose of giving what is just, moral and legally due the victim as the
aggrieved party.
Both parties have a point. In determining the reasonableness of the damages awarded
under Article 1764 in conjunction with Article 2206 of the Civil Code, the factors to be
considered are: (1) life expectancy (considering the health of the victim and the
mortality table which is deemed conclusive) and loss of earning capacity; (b) pecuniary
loss, loss of support and service; and (c) moral and mental sufferings.19 The loss of
earning capacity is based mainly on the number of years remaining in the person's
expected life span. In turn, this number is the basis of the damages that shall be
computed and the rate at which the loss sustained by the heirs shall be fixed.20
The formula for the computation of loss of earning capacity is as follows:21
Net earning capacity
=
Life expectancy x [Gross Annual Income - Living Expenses
(50% of gross annual income)], where life expectancy
=
2/3 (80 - the age of the
deceased).22
Petitioner is correct in arguing that it is net income (or gross income less living expenses)
which is to be used in the computation of the award for loss of income. Villa Rey Transit
v. Court of Appeals23 explained that "the amount recoverable is not the loss of the entire
earning, but rather the loss of that portion of the earnings which the beneficiary would
have received." Hence, in fixing the amount of the said damages, the necessary
expenses of the deceased should be deducted from his earnings.
In other words, only net earnings, not gross earnings, are to be considered; that is, the
total of the earnings less expenses necessary in the creation of such earnings or income,
less living and other incidental expenses. When there is no showing that the living
expenses constituted a smaller percentage of the gross income, we fix the living
expenses at half of the gross income. To hold that one would have used only a small part

of the income, with the larger part going to the support of one's children, would be
conjectural and unreasonable.24
Counsel for Respondent Borja is also correct in saying that life expectancy should not be
based on the retirement age of government employees, which is pegged at 65. In Negros
Navigation Co, Inc. v. CA,25 the Court resolved that in calculating the life expectancy of
an individual for the purpose of determining loss of earning capacity under Article
2206(1) of the Civil Code, it is assumed that the deceased would have earned income
even after retirement from a particular job.1wphi1.nt
Respondent Borja should not be situated differently just because he was a government
employee. Private employees, given the retirement packages provided by their
companies, usually retire earlier than government employees; yet, the life expectancy of
the former is not pegged at 65 years.
Petitioner avers that Respondent Borja died nine years after the incident and, hence, his
life expectancy of 80 years should yield to the reality that he was only 59 when he
actually died.
We disagree. The Court uses the American Experience/Expectancy Table of Mortality or
the Actuarial or Combined Experience Table of Mortality, which consistently pegs the life
span of the average Filipino at 80 years, from which it extrapolates the estimated income
to be earned by the deceased had he or she not been killed.26
Respondent Borja's demise earlier than the estimated life span is of no moment. For
purposes of determining loss of earning capacity, life expectancy remains at 80.
Otherwise, the computation of loss of earning capacity will never become final, being
always subject to the eventuality of the victim's death. The computation should not
change even if Borja lived beyond 80 years. Fair is fair.
Based on the foregoing discussion, the award for loss of earning capacity should be
computed as follows:
Loss of earning capacity = [2 (80-50)] x [(P2,752x12)-16,512]
3 = P330,240
Having been duly proven, the moral damages and attorney's fees awarded are justified
under the Civil Code's Article 2219, paragraph 2; and Article 2208, paragraph 11,
respectively.
WHEREFORE, the Petition is PARTLY GRANTED. The assailed Decision is AFFIRMED with
the following MODIFICATIONS: petitioner is ordered to pay the heirs of the victim
damages in the amount of P320,240 as loss of earning capacity, moral damages in the
amount of P100,000, plus another P50,000 as attorney's fees. Costs against petitioner.

SO ORDERED.
Sandoval-Gutierrez, and Carpio, JJ., concur.
Puno, J., abroad on official leave.

G.R. No. L-5691

December 27, 1910
S. D. MARTINEZ and his wife, CARMEN ONG DE MARTINEZ, plaintiffs-appellees,
vs.
WILLIAM VAN BUSKIRK, defendant-appellant.
Lionel D. Hargis for appellant.
Sanz and Oppisso for appellee.

MORELAND, J.:
The facts found by the trial court are undisputed by either party in this case. They are
That on the 11th day of September, 1908, the plaintiff, Carmen Ong de Martinez, was
riding in a carromata on Calle Real, district of Ermita, city of Manila, P.I., along the lefthand side of the street as she was going, when a delivery wagon belonging to the
defendant used for the purpose of transportation of fodder by the defendant, and to
which was attached a pair of horses, came along the street in the opposite direction to
that the in which said plaintiff was proceeding, and that thereupon the driver of the said
plaintiff's carromata, observing that the delivery wagon of the defendant was coming at
great speed, crowded close to the sidewalk on the left-hand side of the street and
stopped, in order to give defendant's delivery wagon an opportunity to pass by, but that
instead of passing by the defendant's wagon and horses ran into the carromata occupied
by said plaintiff with her child and overturned it, severely wounding said plaintiff by
making a serious cut upon her head, and also injuring the carromata itself and the
harness upon the horse which was drawing it.
xxx

xxx

xxx

These facts are not dispute, but the defendant presented evidence to the effect that the
cochero, who was driving his delivery wagon at the time the accident occurred, was a
good servant and was considered a safe and reliable cochero; that the delivery wagon
had sent to deliver some forage at Paco Livery Stable on Calle Herran, and that for the
purpose of delivery thereof the cochero driving the team as defendant's employee tied
the driving lines of the horses to the front end of the delivery wagon and then went back
inside of the wagon for the purpose of unloading the forage to be delivered; that while
unloading the forage and in the act of carrying some of it out, another vehicle drove by,

the driver of which cracked a whip and made some other noises, which frightened the
horses attached to the delivery wagon and they ran away, and the driver was thrown
from the inside of the wagon out through the rear upon the ground and was unable to
stop the horses; that the horses then ran up and on which street they came into collision
with the carromata in which the plaintiff, Carmen Ong de Martinez, was riding.
The defendant himself was not with the vehicle on the day in question.
Upon these facts the court below found the defendant guilty of negligence and gave
judgment against him for P442.50, with interest thereon at the rate of 6 per cent per
annum from the 17th day of October, 1908, and for the costs of the action. The case is
before us on an appeal from that judgment.
There is no general law of negligence in the Philippine Islands except that embodied in
the Civil Code. The provisions of that code pertinent to this case are
Art. 1902. A person who by an act or omission causes damage to another when there is
fault or negligence shall be obliged to repair the damage so done.
Art. 1903. The obligation imposed by preceding article is demandable, not only for
personal acts and omissions, but also for those of the persons for whom they should be
responsible.
The father, and on his death or incapacity the mother, is liable for the damages caused
by the minors who live with them.
Guardians are liable for the damages caused by minors or incapacitated persons who are
under their authority and live with them.
Owners of directors of an establishment or enterprise are equally liable for the damages
caused by the employees in the service of the branches in which the latter may be
employed or on account of their duties.
The State is liable in this sense when it acts through a special agent, but not when the
damages should have been caused by the official to whom properly it pertained to do the
act performed, in which case the provisions of the preceding article shall be applicable.
Finally, masters or directors of arts and trades are liable for the damages caused by their
pupils or apprentices while they are under their custody.
The liability referred to in this article shall cease when the persons mentioned therein
prove that they employed all the diligence of a good father of a family to avoid the
damage.

Passing the question whether or not an employer who has furnished a gentle and
tractable team and a trusty and capable driver is, under the last paragraph of the above
provisions, liable for the negligence of such driver in handling the team, we are of the
opinion that the judgment must be reversed upon the ground that the evidence does not
disclose that the cochero was negligent.
While the law relating to negligence in this jurisdiction may possibly be some what
different from that in Anglo-Saxon countries, a question we do not now discuss, the rules
under which the fact of negligence is determined are, nevertheless, generally the same.
That is to say, while the law designating the person responsible for a negligent act may
not be the same here as in many jurisdictions, the law determining what is a negligent
act is the same here, generally speaking, as elsewhere. (Supreme court of Spain, 4
December, 1903; 16 May, 1893; 27 June, 1894; 9 April, 1896; 14 March, 1901; 2 March,
1904; 7 February, 1905; 16 June, 1905; 23 June, 1905; 13 April, 1903; 7 March, 1902; 12
June, 1900; 2 March, 1907; 18 March, 1898; 3 June, 1901.)
It appears from the undisputed evidence that the horses which caused the damage were
gentle and tractable; that the cochero was experienced and capable; that he had driven
one of the horses several years and the other five or six months; that he had been in the
habit, during all that time, of leaving them in the condition in which they were left on the
day of the accident; that they had never run away up to that time and there had been,
therefore, no accident due to such practice; that to leave the horses and assist in
unloading the merchandise in the manner described on the day of the accident was the
custom of all cochero who delivered merchandise of the character of that which was
being delivered by the cochero of the defendant on the day in question, which custom
was sanctioned by their employers.
In our judgment, the cochero of the defendant was not negligent in leaving the horses in
the manner described by the evidence in this case, either under Spanish or American
jurisprudence. (Lynch vs. Nurdin, 1 Q. B., 422; Rumsey vs. Nelson, 58 Vt., 590; Drake vs.
Mount, 33 N. J. L., 442; Hoboken Land and Improvement Co. vs. Lally, 48 N. J. L., 604;
Wasmer vs. D. L. & W. R. R. Co., 80 N. Y., 212.) lawphi1.net
In the case of Hayman vs. Hewitt (Peake N. P. Cas., pt. 2, p. 170), Lord Kenyon said:
He was performing his duty while removing the goods into the house, and, if every
person who suffered a cart to remain in the street while he took goods out of it was
obliged to employ another to look after the horses, it would be impossible for the
business of the metropolis to go on.
In the case of Griggs vs. Fleckenstein (14 Minn., 81), the court said:
The degree of care required of the plaintiff, or those in charged of his horse, at the time
of the injury, is that which would be exercised by a person of ordinary care and prudence

under like circumstances. It can not be said that the fact of leaving the horse unhitched
is in itself negligence. Whether it is negligence to leave a horse unhitched must be
depend upon the disposition of the horse; whether he was under the observation and
control of some person all the time, and many other circumstances; and is a question to
be determined by the jury from the facts of each case.
In the case of Belles vs. Kellner (67 N. J. L., 255), it was held that it was error on the part
of the trial court to refuse to charge that "it is not negligence for the driver of a quite,
gentle horse to leave him unhitched and otherwise unattended on the side of a public
highways while the driver is upon the sidewalk loading goods on the wagon." The said
court closed its opinion with these words:
There was evidence which could have fully justified the jury in finding that the horse was
quite and gentle, and that the driver was upon the sidewalk loading goods on the wagon,
at time of the alleged injury, and that the horse had been used for years in that way
without accident. The refusal of the trial court to charge as requested left the jury free to
find was verdict against the defendant, although the jury was convinced that these facts
were proven.lawphil.net
In the case of Southworth vs. Ry. Co. (105 Mass., 342), it was held:
That evidence that a servant, whom traders employed to deliver goods, upon stopping
with his horse and wagon to deliver a parcel at a house from fifty to a hundred rods from
a railroad crossing, left the horse unfastened for four or five minutes while he was in the
house, knowing that it was not afraid of cars, and having used it for three or four months
without ever hitching it or knowing it to start, is not conclusive, as a matter of law, of a
want of due care on his part.
The duty, a violation of which is claimed to be negligence in the respect in question, is to
exercise reasonable care and prudence. Where reasonable care is employed in doing an
act not itself illegal or inherently likely to produce damage to others, there will be no
liability, although damage in fact ensues. (Milwaukee Ry. Co. vs. Arms, 91 U. S., 489;
Parrott vs. Wells, 15 Wall., 524; Brown vs. Kendall, 6 Cushing, 292; Jackson Architectural
Iron Works vs. Hurlbut, 158 N. Y., 34 Westerfield vs. Levis, 43 La. An., 63; Niosi vs. Empire
Steam Laundry, 117 Cal., 257.)
The act of defendant's driver in leaving the horses in the manner proved was not
unreasonable or imprudent. Acts the performance of which has not proved destructive or
injurious and which have, therefore, been acquiesced in by society for so long a time that
they have ripened into custom, can not be held to be themselves unreasonable or
imprudent. Indeed the very reason why they have been permitted by society is that they
beneficial rather than prejudicial.itc-alf Accidents sometimes happen and injuries result
from the most ordinary acts of life. But such are not their natural or customary results. To
hold that, because such an act once resulted in accident or injury, the actor is

necessarily negligent, is to go far. The fact that the doctrine of res ipsa loquitur is
sometimes successfully invoked in such a case, does not in any sense militate against
the reasoning presented. That maxim at most only creates a prima facie case, and that
only in the absence of proof of the circumstances under which the act complained of was
performed. It is something invoked in favor of the plaintiff before defendant's case
showing the conditions and circumstances under which the injury occurred, the creative
reason for the doctrine of res ipsa loquitur disappears. This is demonstrated by the case
of Inland and Seaboard Costing Co. vs. Tolson (139 U.S., 551), where the court said (p.
554):
. . . The whole effect of the instruction in question, as applied to the case before the jury,
was that if the steamboat, on a calm day and in smooth water, was thrown with such
force against a wharf properly built, as to tear up some of the planks of the flooring, this
would be prima facie evidence of negligence on the part of the defendant's agent in
making the landing, unless upon the whole evidence in the case this prima facie
evidence was rebutted. As such damage to a wharf is not ordinarily done by a steamboat
under control of her officers and carefully managed by them, evidence that such damage
was done in this case was prima facie, and, if unexplained, sufficient evidence of
negligence on their part, and the jury might properly be so instructed.
There was presented in this case, and by the plaintiffs themselves, not only the fact of the
runway and the accident resulting therefrom, but also the conditions under which the runaway
occurred. Those conditions showing of themselves that the defendant's cochero was not
negligent in the management of the horse, the prima facie case in plaintiffs' favor, if any, was
destroyed as soon as made.
It is a matter of common knowledge as well as proof that it is the universal practice of merchants
to deliver merchandise of the kind of that being delivered at the time of the injury, in the manner
in which that was then being delivered; and that it is the universal practice to leave the horses in
the manner in which they were left at the time of the accident. This is the custom in all cities. It
has not been productive of accidents or injuries. The public, finding itself unprejudiced by such
practice, has acquiesced for years without objection. Ought the public now, through the courts,
without prior objection or notice, to be permitted to reverse the practice of decades and thereby
make culpable and guilty one who had every reason and assurance to believe that he was acting
under the sanction of the strongest of all civil forces, the custom of a people? We think not.
The judgement is reversed, without special finding as to costs. So ordered.

G.R. No. L-12219

March 15, 1918

AMADO PICART, plaintiff-appellant,

vs.
FRANK SMITH, JR., defendant-appellee.
Alejo Mabanag for appellant.

G. E. Campbell for appellee.

STREET, J.:
In this action the plaintiff, Amado Picart, seeks to recover of the defendant, Frank Smith, jr., the
sum of P31,000, as damages alleged to have been caused by an automobile driven by the
defendant. From a judgment of the Court of First Instance of the Province of La Union absolving
the defendant from liability the plaintiff has appealed.
The occurrence which gave rise to the institution of this action took place on December 12, 1912,
on the Carlatan Bridge, at San Fernando, La Union. It appears that upon the occasion in question
the plaintiff was riding on his pony over said bridge. Before he had gotten half way across, the
defendant approached from the opposite direction in an automobile, going at the rate of about
ten or twelve miles per hour. As the defendant neared the bridge he saw a horseman on it and
blew his horn to give warning of his approach. He continued his course and after he had taken
the bridge he gave two more successive blasts, as it appeared to him that the man on horseback
before him was not observing the rule of the road.
The plaintiff, it appears, saw the automobile coming and heard the warning signals. However,
being perturbed by the novelty of the apparition or the rapidity of the approach, he pulled the
pony closely up against the railing on the right side of the bridge instead of going to the left. He
says that the reason he did this was that he thought he did not have sufficient time to get over to
the other side. The bridge is shown to have a length of about 75 meters and a width of 4.80
meters. As the automobile approached, the defendant guided it toward his left, that being the
proper side of the road for the machine. In so doing the defendant assumed that the horseman
would move to the other side. The pony had not as yet exhibited fright, and the rider had made
no sign for the automobile to stop. Seeing that the pony was apparently quiet, the defendant,
instead of veering to the right while yet some distance away or slowing down, continued to
approach directly toward the horse without diminution of speed. When he had gotten quite near,
there being then no possibility of the horse getting across to the other side, the defendant
quickly turned his car sufficiently to the right to escape hitting the horse alongside of the railing
where it as then standing; but in so doing the automobile passed in such close proximity to the
animal that it became frightened and turned its body across the bridge with its head toward the
railing. In so doing, it as struck on the hock of the left hind leg by the flange of the car and the
limb was broken. The horse fell and its rider was thrown off with some violence. From the
evidence adduced in the case we believe that when the accident occurred the free space where
the pony stood between the automobile and the railing of the bridge was probably less than one
and one half meters. As a result of its injuries the horse died. The plaintiff received contusions
which caused temporary unconsciousness and required medical attention for several days.
The question presented for decision is whether or not the defendant in maneuvering his car in
the manner above described was guilty of negligence such as gives rise to a civil obligation to
repair the damage done; and we are of the opinion that he is so liable. As the defendant started
across the bridge, he had the right to assume that the horse and the rider would pass over to the
proper side; but as he moved toward the center of the bridge it was demonstrated to his eyes
that this would not be done; and he must in a moment have perceived that it was too late for the
horse to cross with safety in front of the moving vehicle. In the nature of things this change of
situation occurred while the automobile was yet some distance away; and from this moment it
was not longer within the power of the plaintiff to escape being run down by going to a place of

greater safety. The control of the situation had then passed entirely to the defendant; and it was
his duty either to bring his car to an immediate stop or, seeing that there were no other persons
on the bridge, to take the other side and pass sufficiently far away from the horse to avoid the
danger of collision. Instead of doing this, the defendant ran straight on until he was almost upon
the horse. He was, we think, deceived into doing this by the fact that the horse had not yet
exhibited fright. But in view of the known nature of horses, there was an appreciable risk that, if
the animal in question was unacquainted with automobiles, he might get exited and jump under
the conditions which here confronted him. When the defendant exposed the horse and rider to
this danger he was, in our opinion, negligent in the eye of the law.
The test by which to determine the existence of negligence in a particular case may be stated as
follows: Did the defendant in doing the alleged negligent act use that person would have used in
the same situation? If not, then he is guilty of negligence. The law here in effect adopts the
standard supposed to be supplied by the imaginary conduct of the discreet paterfamilias of the
Roman law. The existence of negligence in a given case is not determined by reference to the
personal judgment of the actor in the situation before him. The law considers what would be
reckless, blameworthy, or negligent in the man of ordinary intelligence and prudence and
determines liability by that.
The question as to what would constitute the conduct of a prudent man in a given situation must
of course be always determined in the light of human experience and in view of the facts
involved in the particular case. Abstract speculations cannot here be of much value but this
much can be profitably said: Reasonable men govern their conduct by the circumstances which
are before them or known to them. They are not, and are not supposed to be, omniscient of the
future. Hence they can be expected to take care only when there is something before them to
suggest or warn of danger. Could a prudent man, in the case under consideration, foresee harm
as a result of the course actually pursued? If so, it was the duty of the actor to take precautions
to guard against that harm. Reasonable foresight of harm, followed by ignoring of the suggestion
born of this prevision, is always necessary before negligence can be held to exist. Stated in these
terms, the proper criterion for determining the existence of negligence in a given case is this:
Conduct is said to be negligent when a prudent man in the position of the tortfeasor would have
foreseen that an effect harmful to another was sufficiently probable to warrant his foregoing
conduct or guarding against its consequences.
Applying this test to the conduct of the defendant in the present case we think that negligence is
clearly established. A prudent man, placed in the position of the defendant, would in our opinion,
have recognized that the course which he was pursuing was fraught with risk, and would
therefore have foreseen harm to the horse and the rider as reasonable consequence of that
course. Under these circumstances the law imposed on the defendant the duty to guard against
the threatened harm.
It goes without saying that the plaintiff himself was not free from fault, for he was guilty of
antecedent negligence in planting himself on the wrong side of the road. But as we have already
stated, the defendant was also negligent; and in such case the problem always is to discover
which agent is immediately and directly responsible. It will be noted that the negligent acts of
the two parties were not contemporaneous, since the negligence of the defendant succeeded the
negligence of the plaintiff by an appreciable interval. Under these circumstances the law is that
the person who has the last fair chance 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.

The decision in the case of Rkes vs. Atlantic, Gulf and Pacific Co. (7 Phil. Rep., 359) should
perhaps be mentioned in this connection. This Court there held that while contributory
negligence on the part of the person injured did not constitute a bar to recovery, it could be
received in evidence to reduce the damages which would otherwise have been assessed wholly
against the other party. The defendant company had there employed the plaintiff, as a laborer, to
assist in transporting iron rails from a barge in Manila harbor to the company's yards located not
far away. The rails were conveyed upon cars which were hauled along a narrow track. At certain
spot near the water's edge the track gave way by reason of the combined effect of the weight of
the car and the insecurity of the road bed. The car was in consequence upset; the rails slid off;
and the plaintiff's leg was caught and broken. It appeared in evidence that the accident was due
to the effects of the typhoon which had dislodged one of the supports of the track. The court
found that the defendant company was negligent in having failed to repair the bed of the track
and also that the plaintiff was, at the moment of the accident, guilty of contributory negligence
in walking at the side of the car instead of being in front or behind. It was held that while the
defendant was liable to the plaintiff by reason of its negligence in having failed to keep the track
in proper repair nevertheless the amount of the damages should be reduced on account of the
contributory negligence in the plaintiff. As will be seen the defendant's negligence in that case
consisted in an omission only. The liability of the company arose from its responsibility for the
dangerous condition of its track. In a case like the one now before us, where the defendant was
actually present and operating the automobile which caused the damage, we do not feel
constrained to attempt to weigh the negligence of the respective parties in order to apportion
the damage according to the degree of their relative fault. It is enough to say that the negligence
of the defendant was in this case the immediate and determining cause of the accident and that
the antecedent negligence of the plaintiff was a more remote factor in the case.
A point of minor importance in the case is indicated in the special defense pleaded in the
defendant's answer, to the effect that the subject matter of the action had been previously
adjudicated in the court of a justice of the peace. In this connection it appears that soon after the
accident in question occurred, the plaintiff caused criminal proceedings to be instituted before a
justice of the peace charging the defendant with the infliction of serious injuries (lesiones
graves). At the preliminary investigation the defendant was discharged by the magistrate and
the proceedings were dismissed. Conceding that the acquittal of the defendant at the trial upon
the merits in a criminal prosecution for the offense mentioned would be res adjudicata upon the
question of his civil liability arising from negligence -- a point upon which it is unnecessary to
express an opinion -- the action of the justice of the peace in dismissing the criminal proceeding
upon the preliminary hearing can have no effect. (See U. S. vs. Banzuela and Banzuela, 31 Phil.
Rep., 564.)
From what has been said it results that the judgment of the lower court must be reversed, and
judgment is her rendered that the plaintiff recover of the defendant the sum of two hundred
pesos (P200), with costs of other instances. The sum here awarded is estimated to include the
value of the horse, medical expenses of the plaintiff, the loss or damage occasioned to articles of
his apparel, and lawful interest on the whole to the date of this recovery. The other damages
claimed by the plaintiff are remote or otherwise of such character as not to be recoverable. So
ordered.
Arellano, C.J., Torres, Carson, Araullo, Avancea, and Fisher, JJ., concur.
Johnson, J., reserves his vote.

Separate Opinions
MALCOLM, J., concurring:
After mature deliberation, I have finally decided to concur with the judgment in this case. I do so
because of my understanding of the "last clear chance" rule of the law of negligence as
particularly applied to automobile accidents. This rule cannot be invoked where the negligence of
the plaintiff is concurrent with that of the defendant. Again, if a traveler when he reaches the
point of collision is in a situation to extricate himself and avoid injury, his negligence at that point
will prevent a recovery. But Justice Street finds as a fact that the negligent act of the interval of
time, and that at the moment the plaintiff had no opportunity to avoid the accident.
Consequently, the "last clear chance" rule is applicable. In other words, when a traveler has
reached a point where he cannot extricate himself and vigilance on his part will not avert the
injury, his negligence in reaching that position becomes the condition and not the proximate
cause of the injury and will not preclude a recovery. (Note especially Aiken vs. Metcalf [1917],
102 Atl., 330.)

G.R. No. L-33722

July 29, 1988

FEDERICO YLARDE and ADELAIDA DORONIO petitioners,

vs.
EDGARDO AQUINO, MAURO SORIANO and COURT OF APPEALS, respondents.
Buenaventura C. Evangelista for petitioners.
Modesto V. Cabanela for respondent Edgardo Aquino.
Manuel P. Pastor for respondent Mauro Soriano.

GANCAYCO, J.:
In this petition for review on certiorari seeking the reversal of the decision of the Court of Appeals
in CA-G.R. No. 36390-R entitled "Federico Ylarde, et al. vs. Edgardo Aquino, et al.," a case which
originated from the Court of First Instance of Pangasinan, We are again caned upon determine
the responsibility of the principals and teachers towards their students or pupils.
In 1963, private respondent Mariano Soriano was the principal of the Gabaldon Primary School, a
public educational institution located in Tayug, Pangasinan-Private respondent 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 as early as 1962. 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 on October 7, 1963. Being their teacher-incharge, 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 the following injuries:
1.
Contusion with hematoma, left inguinal region and suprapubic region.
2.
Contusion with ecchymosis entire scrotal region.
3.
Lacerated wound, left lateral aspect of penile skin with phimosis
4.
Abrasion, gluteal region, bilateral.
5. Intraperitoneal and extrapertitoneal extravasation of blood and urine about 2 liters.
6.
Fracture, simple, symphesis pubis
7.
Ruptured (macerated) urinary bladder with body of bladder almost entirely separated from
its neck.
REMARKS:
1. Above were incurred by crushing injury.
2. Prognosis very poor.
(Sgd.) MELQUIADES A. BRAVO
Physician on Duty. 1
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. 2
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.

Article 2176 of the Civil Code provides:

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 preexisting 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
xxx

xxx

xxx

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
The issue to be resolved is whether or not under the cited provisions, both private respondents
can be held liable for damages.
As regards the principal, 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. This is in
line with Our ruling in Amadora vs. Court of Appeals, 4 wherein this Court thoroughly discussed
the doctrine that under Article 2180 of the Civil Code, it is only the teacher and not the head of
an academic school who should be answerable for torts committed by their students. This Court
went on to say that in a school of arts and trades, it is only the head of the school who can be
held liable. In the same case, We explained:
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 of reddendo singula sinquilis 'teachers' should apply to the words "pupils
and students' and 'heads of establishments of arts and trades to the word "apprentices."
Hence, applying the said doctrine to this case, We rule that private respondent Soriano, as
principal, cannot be held liable for the reason that the school he heads is an academic school
and not a school of arts and trades. Besides, as clearly admitted by private respondent Aquino,
private respondent Soriano did not give any instruction regarding the digging.
From the foregoing, it can be easily seen that private respondent 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.
From a review of the record of this case, it is very clear that private respondent Aquino acted
with fault and gross negligence when he: (1) failed to avail himself of services of adult manual
laborers and instead utilized his pupils aged ten to eleven to make an excavation near the oneton concrete stone which he knew to be a very hazardous task; (2) required the children to
remain inside the pit even after they had finished digging, knowing that the huge block was lying
nearby and could be easily pushed or kicked aside by any pupil who by chance may go to the
perilous area; (3) ordered them to level the soil around the excavation when it was so apparent
that the huge stone was at the brink of falling; (4) went to a place where he would not be able to
check on the children's safety; and (5) left the children close to the excavation, an obviously
attractive nuisance.
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 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. His actuations were natural to a boy his age. Going back to the facts, it was not only him
but the three of them who jumped into the hole while the remaining boy jumped on the block.
From this, it is clear that he only did what any other ten-year old child would do in the same
situation.
In ruling that the child Ylarde was imprudent, it is evident that the lower court did not consider
his age and maturity. This should not be the case. The degree of care required to be exercised
must vary with the capacity of the person endangered to care for himself. A minor should not be
held to the same degree of care as an adult, but his conduct should be judged according to the
average conduct of persons of his age and experience. 5 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. 6 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 tenyear 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. Even the Court of Appeals made mention of the fact that
respondent Aquino decided all by himself to help his co-teacher Banez bury the concrete
remnants of the old school shop. 8 Furthermore, the excavation should not be placed in the
category of school gardening, planting trees, and the like as these undertakings do not expose
the children to any risk that could result in death or physical injuries.
The contention that private respondent 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.
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 the following:
(1)

Indemnity for the death of Child Ylarde P30,000.00

(2)

Exemplary damages 10,000.00

(3)

Moral damages 20,000.00

SO ORDERED.

[G.R. No. 156940. December 14, 2004]

ASSOCIATED BANK (Now WESTMONT BANK), petitioner, vs. VICENTE HENRY TAN,
respondent.
DECISION
PANGANIBAN, J.:
While banks are granted by law the right to debit the value of a dishonored check from a
depositors account, they must do so with the highest degree of care, so as not to prejudice the
depositor unduly.
The Case

Before us is a Petition for Review[1] under Rule 45 of the Rules of Court, assailing the January 27,
2003 Decision[2] of the Court of Appeals (CA) in CA-GR CV No. 56292. The CA disposed as
follows:
WHEREFORE, premises considered, the Decision dated December 3, 1996, of the Regional Trial
Court of Cabanatuan City, Third Judicial Region, Branch 26, in Civil Case No. 892-AF is hereby
AFFIRMED. Costs against the [petitioner].[3]
The Facts
The CA narrated the antecedents as follows:
Vicente Henry Tan (hereafter TAN) is a businessman and a regular depositor-creditor of the
Associated Bank (hereinafter referred to as the BANK). Sometime in September 1990, he
deposited a postdated UCPB check with the said BANK in the amount of P101,000.00 issued to
him by a certain Willy Cheng from Tarlac. The check was duly entered in his bank record thereby
making his balance in the amount of P297,000.00, as of October 1, 1990, from his original
deposit of P196,000.00.
Allegedly,
upon advice and instruction of the BANK that the
P101,000.00 check was already cleared and backed up by sufficient funds, TAN, on the same
date, withdrew the sum of P240,000.00, leaving a balance of P57,793.45. A day after, TAN
deposited the amount of P50,000.00 making his existing balance in the amount of P107,793.45,
because he has issued several checks to his business partners, to wit:
However, his suppliers and business partners went back to him alleging that the checks he
issued bounced for insufficiency of funds. Thereafter, TAN, thru his lawyer, informed the BANK to
take positive steps regarding the matter for he has adequate and sufficient funds to pay the
amount of the subject checks. Nonetheless, the BANK did not bother nor offer any apology
regarding the incident. Consequently, TAN, as plaintiff, filed a Complaint for Damages on
December 19, 1990, with the Regional Trial Court of Cabanatuan City, Third Judicial Region,
docketed as Civil Case No. 892-AF, against the BANK, as defendant.
In his [C]omplaint, [respondent] maintained that he ha[d] sufficient funds to pay the subject
checks and alleged that his suppliers decreased in number for lack of trust. As he has been in
the business community for quite a time and has established a good record of reputation and
probity, plaintiff claimed that he suffered embarrassment, humiliation, besmirched reputation,
mental anxieties and sleepless nights because of the said unfortunate incident. [Respondent]
further averred that he continuously lost profits in the amount of P250,000.00. [Respondent]
therefore prayed for exemplary damages and that [petitioner] be ordered to pay him the sum of
P1,000,000.00 by way of moral damages, P250,000.00 as lost profits, P50,000.00 as attorneys
fees plus 25% of the amount claimed including P1,000.00 per court appearance.
Meanwhile, [petitioner] filed a Motion to Dismiss on February 7, 1991, but the same was denied
for lack of merit in an Order dated March 7, 1991. Thereafter, [petitioner] BANK on March 20,
1991 filed its Answer denying, among others, the allegations of [respondent] and alleged that no
banking institution would give an assurance to any of its client/depositor that the check
deposited by him had already been cleared and backed up by sufficient funds but it could only
presume that the same has been honored by the drawee bank in view of the lapse of time that
ordinarily takes for a check to be cleared. For its part, [petitioner] alleged that on October 2,

1990, it gave notice to the [respondent] as to the return of his UCPB check deposit in the amount
of P101,000.00, hence, on even date, [respondent] deposited the amount of P50,000.00 to cover
the returned check.
By way of affirmative defense, [petitioner] averred that [respondent] had no cause of action
against it and argued that it has all the right to debit the account of the [respondent] by reason
of the dishonor of the check deposited by the [respondent] which was withdrawn by him prior to
its clearing. [Petitioner] further averred that it has no liability with respect to the clearing of
deposited checks as the clearing is being undertaken by the Central Bank and in accepting [the]
check deposit, it merely obligates itself as depositors collecting agent subject to actual payment
by the drawee bank. [Petitioner] therefore prayed that [respondent] be ordered to pay it the
amount of P1,000,000.00 by way of loss of goodwill, P7,000.00 as acceptance fee plus P500.00
per appearance and by way of attorneys fees.
Considering that Westmont Bank has taken over the management of the affairs/properties of
the BANK, [respondent] on October 10, 1996, filed an Amended Complaint reiterating
substantially his allegations in the original complaint, except that the name of the previous
defendant ASSOCIATED BANK is now WESTMONT BANK.
Trial ensured and thereafter, the court rendered its Decision dated December 3, 1996 in favor of
the [respondent] and against the [petitioner], ordering the latter to pay the [respondent] the sum
of P100,000.00 by way of moral damages, P75,000.00 as exemplary damages, P25,000.00 as
attorneys fees, plus the costs of this suit. In making said ruling, it was shown that [respondent]
was not officially informed about the debiting of the P101,000.00 [from] his existing balance and
that the BANK merely allowed the [respondent] to use the fund prior to clearing merely for
accommodation because the BANK considered him as one of its valued clients. The trial court
ruled that the bank manager was negligent in handling the particular checking account of the
[respondent] stating that such lapses caused all the inconveniences to the [respondent]. The
trial court also took into consideration that [respondents] mother was originally maintaining with
the x x x BANK [a] current account as well as [a] time deposit, but [o]n one occasion, although
his mother made a deposit, the same was not credited in her favor but in the name of
another.[4]
Petitioner appealed to the CA on the issues of whether it was within its rights, as collecting bank,
to debit the account of its client for a dishonored check; and whether it had informed respondent
about the dishonor prior to debiting his account.
Ruling of the Court of Appeals
Affirming the trial court, the CA ruled that the bank should not have authorized the withdrawal of
the value of the deposited check prior to its clearing. Having done so, contrary to its obligation
to treat respondents account with meticulous care, the bank violated its own policy. It thereby
took upon itself the obligation to officially inform respondent of the status of his account before
unilaterally debiting the amount of P101,000. Without such notice, it is estopped from blaming
him for failing to fund his account.
The CA opined that, had the P101,000 not been debited, respondent would have had sufficient
funds for the postdated checks he had issued. Thus, the supposed accommodation accorded by

petitioner to him is the proximate cause of his business woes and shame, for which it is liable for
damages.
Because of the banks negligence, the CA awarded respondent moral damages of P100,000. It
also granted him exemplary damages of P75,000 and attorneys fees of P25,000.
Hence this Petition.[5]
Issue
In its Memorandum, petitioner raises the sole issue of whether or not the petitioner, which is
acting as a collecting bank, has the right to debit the account of its client for a check deposit
which was dishonored by the drawee bank.[6]
The Courts Ruling
The Petition has no merit.
Sole Issue:
Debit of Depositors Account
Petitioner-bank contends that its rights and obligations under the present set of facts were
misappreciated by the CA. It insists that its right to debit the amount of the dishonored check
from the account of respondent is clear and unmistakable. Even assuming that it did not give
him notice that the check had been dishonored, such right remains immediately enforceable.
In particular, petitioner argues that the check deposit slip accomplished by respondent on
September 17, 1990, expressly stipulated that the bank was obligating itself merely as the
depositors collecting agent and -- until such time as actual payment would be made to it -- it
was reserving the right to charge against the depositors account any amount previously
credited. Respondent was allowed to withdraw the amount of the check prior to clearing, merely
as an act of accommodation, it added.
At the outset, we stress that the trial courts factual findings that were affirmed by the CA are not
subject to review by this Court.[7] As petitioner itself takes no issue with those findings, we need
only to determine the legal consequence, based on the established facts.
Right of Setoff
A bank generally has a right of setoff over the deposits therein for the payment of any
withdrawals on the part of a depositor.[8] The right of a collecting bank to debit a clients
account for the value of a dishonored check that has previously been credited has fairly been
established by jurisprudence. To begin with, Article 1980 of the Civil Code provides that [f]ixed,
savings, and current deposits of money in banks and similar institutions shall be governed by the
provisions concerning simple loan.
Hence, the relationship between banks and depositors has been held to be that of creditor and
debtor.[9] Thus, legal compensation under Article 1278[10] of the Civil Code may take place
when all the requisites mentioned in Article 1279 are present,[11] as follows:

(1)
That each one of the obligors be bound principally, and that he be at the same time a
principal creditor of the other;
(2)
That both debts consist in a sum of money, or if the things due are consumable, they be of
the same kind, and also of the same quality if the latter has been stated;
(3)
That the two debts be due;
(4)
That they be liquidated and demandable;
(5)
That over neither of them there be any retention or controversy, commenced by third
persons and communicated in due time to the debtor.[12]
Nonetheless, the real issue here is not so much the right of petitioner to debit respondents
account but, rather, the manner in which it exercised such right. The Court has held that even
while the right of setoff is conceded, separate is the question of whether that remedy has
properly been exercised.[13]
The liability of petitioner in this case ultimately revolves around the issue of whether it properly
exercised its right of setoff. The determination thereof hinges, in turn, on the banks role and
obligations, first, as respondents depositary bank; and second, as collecting agent for the check
in question.
Obligation as
Depositary Bank
In BPI v. Casa Montessori,[14] the Court has emphasized that the banking business is impressed
with public interest. Consequently, the highest degree of diligence is expected, and high
standards of integrity and performance are even required of it. By the nature of its functions, a
bank is under obligation to treat the accounts of its depositors with meticulous care.[15]
Also affirming this long standing doctrine, Philippine Bank of Commerce v. Court of Appeals[16]
has held that the degree of diligence required of banks is more than that of a good father of a
family where the fiduciary nature of their relationship with their depositors is concerned.[17]
Indeed, the banking business is vested with the trust and confidence of the public; hence the
appropriate standard of diligence must be very high, if not the highest, degree of diligence.[18]
The standard applies, regardless of whether the account consists of only a few hundred pesos or
of millions.[19]
The fiduciary nature of banking, previously imposed by case law,[20] is now enshrined in
Republic Act No. 8791 or the General Banking Law of 2000. Section 2 of the law specifically says
that the State recognizes the fiduciary nature of banking that requires high standards of
integrity and performance.
Did petitioner treat respondents account with the highest degree of care? From all indications, it
did not.
It is undisputed -- nay, even admitted -- that purportedly as an act of accommodation to a valued
client, petitioner allowed the withdrawal of the face value of the deposited check prior to its
clearing. That act certainly disregarded the clearance requirement of the banking system. Such
a practice is unusual, because a check is not legal tender or money;[21] and its value can

properly be transferred to a depositors account only after the check has been cleared by the
drawee bank.[22]
Under ordinary banking practice, after receiving a check deposit, a bank either immediately
credit the amount to a depositors account; or infuse value to that account only after the drawee
bank shall have paid such amount.[23] Before the check shall have been cleared for deposit, the
collecting bank can only assume at its own risk -- as herein petitioner did -- that the check
would be cleared and paid out.
Reasonable business practice and prudence, moreover, dictated that petitioner should not have
authorized the withdrawal by respondent of P240,000 on October 1, 1990, as this amount was
over and above his outstanding cleared balance of P196,793.45.[24] Hence, the lower courts
correctly appreciated the evidence in his favor.
Obligation as
Collecting Agent
Indeed, the bank deposit slip expressed this reservation:
In receiving items on deposit, this Bank obligates itself only as the Depositors Collecting agent,
assuming no responsibility beyond carefulness in selecting correspondents, and until such time
as actual payments shall have come to its possession, this Bank reserves the right to charge
back to the Depositors account any amounts previously credited whether or not the deposited
item is returned. x x x."[25]
However, this reservation is not enough to insulate the bank from any liability. In the past, we
have expressed doubt about the binding force of such conditions unilaterally imposed by a bank
without the consent of the depositor.[26] It is indeed arguable that in signing the deposit slip,
the depositor does so only to identify himself and not to agree to the conditions set forth at the
back of the deposit slip.[27]
Further, by the express terms of the stipulation, petitioner took upon itself certain obligations as
respondents agent, consonant with the 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.[28] Under
Article 1909[29] of the Civil Code, such bank could be held liable not only for fraud, but also for
negligence.
As a general rule, a bank is liable for the wrongful or tortuous acts and declarations of its officers
or agents within the course and scope of their employment.[30] Due to the very nature of their
business, banks are expected to exercise the highest degree of diligence in the selection and
supervision of their employees.[31] Jurisprudence has established that the lack of diligence of a
servant is imputed to the negligence of the employer, when the negligent or wrongful act of the
former proximately results in an injury to a third person;[32] in this case, the depositor.
The manager of the banks Cabanatuan branch, Consorcia Santiago, categorically admitted that
she and the employees under her control had breached bank policies. They admittedly breached
those policies when, without clearance from the drawee bank in Baguio, they allowed respondent
to withdraw on October 1, 1990, the amount of the check deposited. Santiago testified that

respondent was not officially informed about the debiting of the P101,000 from his existing
balance of P170,000 on October 2, 1990 x x x.[33]
Being the branch manager, Santiago clearly acted within the scope of her authority in
authorizing the withdrawal and the subsequent debiting without notice. Accordingly, what
remains to be determined is whether her actions proximately caused respondents injury.
Proximate cause is that which -- in a natural and continuous sequence, unbroken by any efficient
intervening cause --produces the injury, and without which the result would not have occurred.
[34]
Let us go back to the facts as they unfolded. It is undeniable that the banks premature
authorization of the withdrawal by respondent on October 1, 1990, triggered -- in rapid
succession and in a natural sequence -- the debiting of his account, the fall of his account
balance to insufficient levels, and the subsequent dishonor of his own checks for lack of funds.
The CA correctly noted thus:
x x x [T]he depositor x x x withdrew his money upon the advice by [petitioner] that his money
was already cleared. Without such advice, [respondent] would not have withdrawn the sum of
P240,000.00. Therefore, it cannot be denied that it was [petitioners] fault which allowed
[respondent] to withdraw a huge sum which he believed was already his.
To emphasize, it is beyond cavil that [respondent] had sufficient funds for the check. Had the
P101,000.00 not [been] debited, the subject checks would not have been dishonored. Hence, we
can say that [respondents] injury arose from the dishonor of his well-funded checks. x x x.[35]
Aggravating matters, petitioner failed to show that it had immediately and duly informed
respondent of the debiting of his account. Nonetheless, it argues that the giving of notice was
discernible from his act of depositing P50,000 on October 2, 1990, to augment his account and
allow the debiting. This argument deserves short shrift.
First, notice was proper and ought to be expected. By the bank managers account, respondent
was considered a valued client whose checks had always been sufficiently funded from 1987 to
1990,[36] until the October imbroglio. Thus, he deserved nothing less than an official notice of
the precarious condition of his account.
Second, under the provisions of the Negotiable Instruments Law regarding the liability of a
general indorser[37] and the procedure for a notice of dishonor,[38] it was incumbent on the
bank to give proper notice to respondent. In Gullas v. National Bank,[39] the Court emphasized:
x x x [A] general indorser of a negotiable instrument engages that if the instrument the check
in this case is dishonored and the necessary proceedings for its dishonor are duly taken, he will
pay the amount thereof to the holder (Sec. 66) It has been held by a long line of authorities that
notice of dishonor is necessary to charge an indorser and that the right of action against him
does not accrue until the notice is given.
x x x. The fact we believe is undeniable that prior to the mailing of notice of dishonor, and
without waiting for any action by Gullas, the bank made use of the money standing in his
account to make good for the treasury warrant. At this point recall that Gullas was merely an
indorser and had issued checks in good faith. As to a depositor who has funds sufficient to meet

payment of a check drawn by him in favor of a third party, it has been held that he has a right of
action against the bank for its refusal to pay such a check in the absence of notice to him that
the bank has applied the funds so deposited in extinguishment of past due claims held against
him. (Callahan vs. Bank of Anderson [1904], 2 Ann. Cas., 203.) However this may be, as to an
indorser the situation is different, and notice should actually have been given him in order that
he might protect his interests.[40]
Third, regarding the deposit of P50,000 made by respondent on October 2, 1990, we fully
subscribe to the CAs observations that it was not unusual for a well-reputed businessman like
him, who ordinarily takes note of the amount of money he takes and releases, to immediately
deposit money in his current account to answer for the postdated checks he had issued.[41]
Damages
Inasmuch as petitioner does not contest the basis for the award of damages and attorneys fees,
we will no longer address these matters.

WHEREFORE, the Petition is DENIED and the assailed Decision AFFIRMED.

petitioner.

Costs against

SO ORDERED.

G.R. No. L-7567

November 12, 1912

THE UNITED STATES, plaintiff-appellee,

vs.
SEGUNDO BARIAS, defendant-appellant.
Bruce, Lawrence, Ross and Block for appellant.
Office of the Solicitor-General Harvey, for appellee.

CARSON, J.:
This is an appeal from a sentence imposed by the Honorable A. S. Crossfield, judge of the Court
of First Instance of Manila, for homicide resulting from reckless negligence. The information
charges:
That on or about November 2, 1911, in the city of Manila, Philippine Islands, the said Segundo
Barias was a motorman on street car No. 9, run 7 of the Pasay-Cervantes lines of the Manila
Electric Railroad and Light Company, a corporation duly organized and doing business in the city
of Manila, Philippine Islands; as a such motorman he was controlling and operating said street car
along Rizal Avenue, formerly Calle Cervantes, of this city, and as such motorman of the said
street car he was under obligation to run the same with due care and diligence to avoid any
accident that might occur to vehicles and pedestrians who were travelling on said Rizal Avenue;
said accused, at said time and place, did willfully, with reckless imprudence and inexcusable

negligence and in violation of the regulations promulgated to that effect, control and operate
said street car, without heeding the pedestrians crossing Rizal Avenue from one side to the other,
thus knocking down and causing by his carelessness and imprudent negligence that said street
car No. 9, operated and controlled by said accused, as hereinbefore stated, should knock down
and pass over the body and head of one Fermina Jose, a girl 2 years old, who at said time and
place was crossing the said Rizal Avenue, the body of said girl being dragged along street-car on
said Rizal Avenue for a long distance, thus crushing and destroying her head and causing her
sudden death as a result of the injury received; that if the acts executed by the accused had
been done with malice, he would be guilty of the serious crime of homicide.
The defendant was a motorman for the Manila Electric Railroad and Light Company. At about 6
o'clock on the morning of November 2, 1911, he was driving his car along Rizal avenue and
stopped it near the intersection of that street with Calle Requesen to take on some passengers.
When the car stopped, the defendant looked backward, presumably to note whether all the
passengers were aboard, and then started his car. At that moment Fermina Jose, a child about 3
years old, walked or ran in front of he car. She was knocked down and dragged some little
distance underneath the car, and was left dead upon the track. The motorman proceeded with
his car to the end of the track, some distance from the place of the accident, and apparently
knew nothing of it until his return, when he was informed of what happened.
There is no substantial dispute as to the facts. It is true that one witness testified that the
defendant started the car without turning his head, and while he was still looking backwards and
that this testimony was directly contradicted by that of another witness. But we do not deem it
necessary to make an express finding as to the precise direction in which the defendant's head
was turned at the moment when he started his car. It is sufficient for the purpose of our decision
to hold, as we do, that the evidence clearly discloses that he started his car from a standstill
without looking over the track immediately in front of the car to satisfy himself that it was clear.
he did not see the child until after he had run his car over it, and after he had return to the place
where it was found dead, and we think we are justified in saying that whenever he was looking at
the moment when he started his car, he was not looking at the track immediately in front of the
car, and that he had not satisfied himself that this portion of the tract was clear immediately
before putting the car in the motion.
The trial court found the defendant guilty of imprudencia temeraria (reckless negligence) as
charged in the information, and sentenced him to over one year and one month of imprisonment
in the Bilibid Prison, and to pay the cause of the action.
The sole question raised by this appeal is whether the evidence shows such carelessness or want
of ordinary care on the part of the defendant as to amount to reckless negligence (imprudencia
temeraria).
Judge Cooley in his work on Torts (3d ed., 1324) defines negligence to be: "The failure to observe,
for the protection of the interests of another person, that degree of care, precaution and
vigilance which the circumstances justly demand, whereby such other persons suffers injury."
In the case of U. S. vs. Nava, (1 Phil. Rep., 580), we held that: "Reckless negligence consists of
the failure to take such precautions or advance measures in the performance of an act as the
most prudence would suggest whereby injury is caused to persons or to property."

Silvela says in his "Derecho Penal," in speaking of reckless imprudence (imprudencia temeraria):
The word "negligencia" used in the code, and the term "imprudencia" with which this punishable
act is defined, express this idea in such a clear manner that it is not necessary to enlarge upon it.
He who has done everything on his part to prevent his actions from causing damage to another,
although he has not succeeded in doing so, notwithstanding his efforts, is the victim of an
accident and can not be considered responsible for the same. (Vol. 2, p. 127 [153].)
Temerario is, in our opinion, one who omits, with regard to this actions, which are liable to cause
injury to another, that care and diligence, that attention, which can be required of the least
careful, attentive, or diligent. If a moment's attention and reflection would have shown a person
that the act which he was about to perform was liable to have the harmful consequence which it
had, such person acted with temerity and may be guilty of "imprudencia temeraria." It may be
that in practice this idea has been given a greater scope and the acts of imprudence which did
not show carelessness as carried to such high degree, might have been punished as
"imprudencia temeraria;" but in our opinion, the proper meaning of the word does not authorize
another interpretation. (Id., p. 133 [161].)
Groizard, commenting upon "imprudencia temeraria," on page 389, volume 8, of his work on the
Penal Code, says:
Prudence is that cardinal virtue which teaches us to discern and distinguish the good from bad, in
order to adopt or flee from it. It also means good judgment, temperance, and moderation in
one's actions. `Temerario is one who exposes himself to danger or rushes into it without
reflection and without examining the same. Consequently, he who from lack of good judgment,
temperance, or moderation in his actions, exposes himself without reflection and examination to
the danger of committing a crime, must be held responsible under the provision of law
aforementioned.
Negligence is want of the care required by the circumstances. It is a relative or comparative, not
an absolute, term and its application depends upon the situation of the parties and the degree of
care and vigilance which the circumstances reasonably require. 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. (Ahern vs. Oregon Telephone Co., 24 Oreg., 276, 294; 35 Pac., 549.)
Ordinary care, if the danger is great, may arise to the grade of a very exact and unchangeable
attention. (Parry Mfg. Co. vs. Eaton, 41 Ind. App., 81, 1908; 83 N. E., 510.)
In the case of U. S. vs. Reyes (1 Phil. Rep., 375-377), we held that: "The diligence with which the
law requires the individual at all the time to govern his conduct varies with the nature of the
situation in which he is placed and with the importance of the act which he is to perform.lawph!
l.net
The question to be determined then, is whether, under all the circumstances, and having in mind
the situation of the defendant when he put his car in motion and ran it over the child, he was
guilty of a failure to take such precautions or advance measures as common prudence would
suggest.

The evidence shows that the thoroughfare on which the incident occurred was a public street in a
densely populated section of the city. The hour was six in the morning, or about the time when
the residents of such streets begin to move about. Under such conditions a motorman of an
electric street car was clearly charged with a high degree of diligence in the performance of his
duties. He was bound to know and to recognize that any negligence on his part in observing the
track over which he was running his car might result in fatal accidents. He had no right to
assume that the track before his car was clear. It was his duty to satisfy himself of that fact by
keeping a sharp lookout, and to do everything in his power to avoid the danger which is
necessarily incident to the operation of heavy street cars on public thoroughfares in populous
sections of the city.
Did he exercise the degree of diligence required of him? We think this question must be
answered in the negative. We do not go so far as to say that having brought his car to a standstill
it was his bounden duty to keep his eyes directed to the front. Indeed, in the absence of some
regulation of his employers, we can well understand that, at times, it might be highly proper and
prudent for him to glance back before again setting his car in motion, to satisfy himself that he
understood correctly a signal to go forward or that all the passengers had safely alighted or
gotten on board. But we do insist that before setting his car again in motion, it was his duty to
satisfy himself that the track was clear, and, for that purpose, to look and to see the track just in
front of his car. This the defendant did not do, and the result of his negligence was the death of
the child.
In the case of Smith vs. St. Paul City Ry. Co., (32 Minn., p. 1), the supreme court of Minnesota, in
discussing the diligence required of street railway companies in the conduct of their business
observed that: "The defendant was a carrier of passengers for hire, owing and controlling the
tracks and cars operated thereon. It is therefore subject to the rules applicable to passenger
carriers. (Thompson's Carriers, 442; Barrett vs. Third Ave. R. Co., 1 Sweeny, 568; 8 Abb. Pr. (N.S.),
205.) As respects hazards and dangers incident to the business or employment, the law enjoins
upon such carrier the highest degree of care consistent with its undertaking, and it is responsible
for the slightest negligence. (Wilson vs. Northern Pacific R. Co., 26 Minn., 278; Warren vs.
Fitchburg R. Co., 8 Allen, 233; 43 Am. Dec. 354, 356, notes and cases.) . . . The severe ruled
which enjoins upon the carrier such extraordinary care and diligence, is intended, for reasons of
public policy, to secure the safe carriage of passengers, in so far as human skill and foresight can
affect such result." The case just cited was a civil case, and the doctrine therein announced had
special reference to the care which should be exercised in securing the safety of passengers. But
we hold that the reasons of public policy which impose upon street car companies and their
employees the duty of exercising the utmost degree of diligence in securing the safety of
passengers, apply with equal force to the duty of avoiding the infliction of injuries upon
pedestrians and others on the public streets and thoroughfares over which these companies are
authorized to run their cars. And while, in a criminal case, the courts will require proof of the guilt
of the company or its employees beyond a reasonable doubt, nevertheless the care or diligence
required of the company and its employees is the same in both cases, and the only question to
be determined is whether the proofs shows beyond a reasonable doubt that the failure to
exercise such care or diligence was the cause of the accident, and that the defendant was guilty
thereof.
Counsel for the defendant insist that the accident might have happened despite the exercise of
the utmost care by the defendant, and they have introduced photographs into the record for the
purpose of proving that while the motorman was standing in his proper place on the front

platform of the car, a child might have walked up immediately in front of he car without coming
within the line of his vision. Examining the photographs, we think that this contention may have
some foundation in fact; but only to this extent, that standing erect, at the position he would
ordinarily assume while the car is in motion, the eye of the average motorman might just miss
seeing the top of the head of a child, about three years old, standing or walking close up to the
front of the car. But it is also very evident that by inclining the head and shoulders forward very
slightly, and glancing in front of the car, a person in the position of a motorman could not fail to
see a child on the track immediately in front of his car; and we hold that it is the manifest duty of
a motorman, who is about to start his car on a public thoroughfare in a thickly-settled district, to
satisfy himself that the track is clear immediately in front of his car, and to incline his body
slightly forward, if that be necessary, in order to bring the whole track within his line of vision. Of
course, this may not be, and usually is not necessary when the car is in motion, but we think that
it is required by the dictates of the most ordinary prudence in starting from a standstill.
We are not unmindful of our remarks in the case of U. S. vs. Bacho (10 Phil. Rep., 577), to which
our attention is directed by counsel for appellant. In that case we said that:
. . . In the general experience of mankind, accidents apparently avoidable and often inexplicable
are unfortunately too frequent to permit us to conclude that some one must be criminally liable
for negligence in every case where an accident occurs. It is the duty of the prosecution in each
case to prove by competent evidence not only the existence of criminal negligence, but that the
accused was guilty thereof.
Nor do we overlook the ruling in the case of U. S. vs. Barnes (12 Phil. Rep., 93), to which our
attention is also invited, wherein we held that the defendant was not guilty of reckless
negligence, where it appeared that he killed another by the discharge of his gun under such
circumstances that he might have been held guilty of criminally reckless negligence had he had
knowledge at that moment that another person was in such position as to be in danger if the gun
should be discharged. In this latter case the defendant had no reason to anticipate that the
person who was injured was in the line of fire, or that there was any probability that he or anyone
else would place himself in the line of fire. In the case at bar, however, it was, as we have seen,
the manifest duty of the motorman to take reasonable precautions in starting his car to see that
in doing so he was not endangering the life of any pedestrian, old or young; and to this end it
was further his duty to guard against the reasonable possibility that some one might be on the
track immediately in front of the car. We think that the evidence showing, as it does, that the
child was killed at the moment when the car was set in motion, we are justified in holding that,
had the motorman seen the child, he could have avoided the accident; the accident was not,
therefore, "unavailable or inexplicable," and it appearing that the motorman, by the exercise of
ordinary diligence, might have seen the child before he set the car in motion, his failure to satisfy
himself that the track was clear before doing so was reckless negligence, of which he was
properly convicted in the court below.
We think, however, that the penalty should be reduced to that of six months and one day of
prision correccional. Modified by substituting for so much thereof as imposes the penalty of one
year and one month of imprisonment, the penalty of six months and one day of prision
correccional, the judgment of the lower court convicting and sentencing the appellant is
affirmed, with costs of both instances against him. So ordered.
Arellano, C.J., Torres and Mapa, JJ., concur.