1. Just make sure that your digest/presentation of the case can be easily understood.

2. DO NOT use respondent/petitioner etc. use their actual name so we can easily track the event for that case
3. Format: Case Title ----> Doctrine -----> Facts Issue Ruling -----> Dissent if any
4. Please include the argument of the parties and the ruling and reasoning per stage (MTC,RTC, CA)
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(6. Align your digest to the topic in the syllabus)

CONCEPT OF QUASI DELICTS _ ELEMENTS

Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. L-33171 May 31, 1979
PORFIRIO P. CINCO, petitioner-appellant,
vs.
HON. MATEO CANONOY, Presiding Judge of the Third Branch of the Court of First Instance of Cebu,
HON. LORENZO B. BARRIA City Judge of Mandaue City, Second Branch ROMEO HILOT,
VALERIANA PEPITO and CARLOS PEPITO, respondents-appellees.
Eriberto Seno for appellant.
Jose M. Mesina for appellees.

MELENCIO-HERRERA, J.:
This is a Petition for Review on certiorari of the Decision of the Court of First Instance of Cebu rendered on
November 5, 1970.
The background facts to the controversy may be set forth as follows:
Petitioner herein filed, on February 25, 1970, a Complaint in the City Court of Mandaue City, Cebu, Branch
II, for the recovery of damages on account of a vehicular accident involving his automobile and a jeepney
driven by Romeo Hilot and operated by Valeriana Pepito and Carlos Pepito, the last three being the private
respondents in this suit. Subsequent thereto, a criminal case was filed against the driver, Romeo Hilot,
arising from the same accident. At the pre-trial in the civil case, counsel for private respondents moved to
suspend the civil action pending the final determination of the criminal suit, invoking Rule 111, Section 3 (b)
of the Rules of Court, which provides:
(b) After a criminal action has been commenced. no civil action arising from the same
offense can be prosecuted, and the same shall be suspended, in whatever stage it may be
found, until final judgment in the criminal proceeding has been rendered;
The City Court of Mandaue City in an Order dated August 11, 1970, ordered the suspension of the civil
case. Petitioner's Motion for Reconsideration thereof, having been denied on August 25, 1970, 1 petitioner
elevated the matter on certiorari to the Court of First Instance of Cebu, respondent Judge presiding, on

September 11, 1970, alleging that the City Judge had acted with grave abuse of discretion in suspending the civil
action for being contrary to law and jurisprudence. 2

On November 5, 1970, respondent Judge dismissed the Petition for certiorari on the ground that there was
no grave abuse of discretion on the part of the City Court in suspending the civil action inasmuch as damage
to property is not one of the instances when an independent civil action is proper; that petitioner has another
plain, speedy, and adequate remedy under the law, which is to submit his claim for damages in the criminal
case; that the resolution of the City Court is interlocutory and, therefore, certiorari is improper; and that the
Petition is defective inasmuch as what petitioner actually desires is a Writ of mandamus (Annex "R").
Petitioner's Motion for Reconsideration was denied by respondent Judge in an Order dated November
14,1970 (Annex "S" and Annex "U").
Hence, this Petition for Review before this Tribunal, to which we gave due course on February 25, 1971. 3
Petitioner makes these:
ASSIGNMENTS OF ERROR
1. THE TRIAL COURT, RESPONDENT JUDGE MATEO CANONOY, ERRED IN HOLDING
THAT THE TRIAL OF THE CIVIL CASE NO. 189 FILED IN THE CITY COURT OF
MANDAUE SHOULD BE SUSPENDED UNTIL AFTER A FINAL JUDGMENT IS
RENDERED IN THE CRIMINAL CASE.
2. THAT THE COURT ERRED IN HOLDING THAT IN ORDER TO AVOID DELAY THE
OFFENDED PARTY MAY SUBMIT HIS CLAIM FOR DAMAGES IN THE CRIMINAL CASE.
3. THAT THE COURT ERRED IN HOLDING THAT THE PETITION FOR certiorari IS NOT
PROPER, BECAUSE THE RESOLUTION IN QUESTION IS INTERLOCUTORY.
4. THAT THE COURT ERRED IN HOLDING THAT THE PETITION IS DEFECTIVE. 4
all of which can be synthesized into one decisive issue: whether or not there can be an independent civil
action for damage to property during the pendency of the criminal action.
From the Complaint filed by petitioner before the City Court of Mandaue City, Cebu, it is evident that the
nature and character of his action was quasi-delictual predicated principally on Articles 2176 and 2180 of the
Civil Code, which provide:
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 caned a quasi-delict and is governed
by the provisions of this Chapter. (1902a)
Art. 2180. The obligation imposed by article 2176 is demandable not only for one's own acts
or omissions but also for those of persons for whom one is responsible.
xxx xxx xxx
Employers shall be liable for the damages cause by their employees and household helpers
acting within the scope of their assigned tasks, even though the former are not engaged in
any business or industry.

xxx xxx xxx

The responsibility treated of in this article shall cease when the persons herein mentioned
prove that they observed all the diligence of a good father of a family to prevent damage.
(1903a)
Thus, plaintiff made the essential averments that it was the fault or negligence of the driver, Romeo Hilot, in
the operation of the jeepney owned by the Pepitos which caused the collision between his automobile and
said jeepney; that damages were sustained by petitioner because of the collision; that there was a direct
causal connection between the damages he suffered and the fault and negligence of private respondents.
Similarly, in the Answer, private respondents contended, among others, that defendant, Valeriana Pepito,
observed due diligence in the selection and supervision of her employees, particularly of her co-defendant
Romeo Hilot, a defense peculiar to actions based on quasi-delict. 5
Liability being predicated on quasi-delict the civil case may proceed as a separate and independent civil
action, as specifically provided for in Article 2177 of the Civil Code.
Art. 2177. Responsibility for fault or negligence under the preceding article is entirely
separate and distinct from the civil liability arising from negligence under the Penal Code. But
the plaintiff cannot recover damages twice for the same act or omission of the defendant. (n)
The crucial distinction between criminal negligence and quasi-delict, which is readily
discernible from the foregoing codal provision, has been expounded in Barredo vs. Garcia, et
al., 73 Phil. 607, 620-621, 6 thus:
Firstly, the Revised Penal Code in article 365 punishes not only reckless but also simple
imprudence. if we were to hold that articles 1902 to 1910 of the Civil Code refer only to fault
or negligence not punished by law, according to the literal import of article 1093 of the Civil
Code, the legal institution ofculpa aquiliana would have very little scope and application in
actual life. Death or injury to personsand damage to property through any degree of
negligence even the slightest would have to be indemnified only through the principle of
civil hability arising from crime. In such a state of affairs, what sphere would remain for
quasidelito or culpa aquiliana We are loath to impute to the lawmaker any intention to bring
about a situation so absurd and anomalous. Nor are we, in the interpretation of the laws,
disposed to uphold the letter that killeth rather than the spirit that giveth life. We will not use
the literal meaning of the law to smother and render almost lifeless a principle of such
ancient origin and such full-grown development as culpa aquiliana or quasi-delito, which is
conserved and made enduring in articles 1902 to 11910 of the Spanish Civil Code.
Secondly, to find the accused guilty in a criminal case, proof of guilt beyond reasonable
doubt is required, while in a civil case, preponderance of evidence is sufficient to make the
defendant pay in damages. There are numerous cases of criminal negligence which cannot
be shown beyond reasonable doubt, but can be proved by a preponderance of evidence. In
such cases, the defendant can and should be made responsible in a civil action under
articles 1902 to 1910 of the Civil Code, otherwise, there would be many instances of
unvindicated civil wrongs. Ubi jus ibi remedium.
Thirdly, to hold that there is only one way to make defendants liability effective, and that is, to
sue the driver and exhaust his (the latter's) property first, would be tantamount to compelling
the plaintiff to follow a devious and cumbersome method of obtaining a reliel True, there is
such a remedy under our laws, but there is also a more expeditious way, which is based on

the primary and direct responsibility of the defendant under article 1903 of the Civil Code.
Our view of the law is more likely to facilitate remedy for civil wrongs because the procedure
indicated by the defendant is wasteful and productive of delay, it being a matter of common
knowledge that professional drivers of taxis and similar public conveyances usually do not
have sufficient means with which to pay damages. Why, then, should the plaintiff be required
in all cases to go through this round-about, unnecessary, and probably useless procedure?
In construing the laws, courts have endeavored to shorten and facilitate the pathways of right
and justice.
At this juncture, it should be said that the primary and direct responsibility of employers and
their presumed negligence are principles calculated to protect society. Workmen and
employees should be carefully chosen and supervised in order to avoid injury to the public. It
is the masters or employers who principally reap the profits resulting from the services of
these servants and employees. It is but right that they should guarantee the latter's careful
conduct for the personnel and patrimonial safety of others. As Theilhard has said, "they
should reproach themselves, at least, some for their weakness, others for their poor
selection and all for their negligence." And according to Manresa, "It is much more equitable
and just that such responsibility should fail upon the principal or director who could have
chosen a careful and prudent employee, and not upon the such employee because of his
confidence in the principal or director." (Vol. 12, p. 622, 2nd Ed.) Many jurists also base this
primary responsibility of the employer on the principle of representation of the principal by
the agent. Thus, Oyuelos says in the work already cited (Vol. 7, p. 747) that before third
persons the employer and employee vienen a ser como una sola personalidad, por
refundicion de la del dependiente en la de quien la emplea y utihza (become as one
personality by the merging of the person of the employee in that of him who employs and
utilizes him.) All these observations acquire a peculiar force and significance when it comes
to motor accidents, and there is need of stressing and accentuating the responsibility of
owners of motor vehicles.
Fourthly, because of the broad sweep of the provisions of both the Penal Code and the Civil
Code on this subject, which has given rise to overlapping or concurrence of spheres already
discussed, and for lack of understanding of the character and efficacy of the action for
culpaaquiliana there has grown up a common practice to seek damages only by virtue of the
Civil responsibility arising from crime, forgetting that there is another remedy, which is by
invoking articles 1902-1910 of the Civil Code. Although this habitual method is allowed by
our laws, it has nevertheless rendered practically useless and nugatory the more expeditious
and effective remedy based on culpa aquiliana or culpa extra-contractual. In the present
case, we are asked to help perpetuate this usual course. But we believe it is high time we
pointed out to the harm done by such practice and to restore the principle of responsibility for
fault or negligence under articles 1902 et seq. of the Civil Code to its full rigor. It is high time
we cause the stream of quasi-delict or culpa aquiliana to flow on its own natural channel, so
that its waters may no longer be diverted into that of a crime under the Penal Code. This will,
it is believed, make for the better safeguarding of private rights because it re-establishes an
ancient and additional remedy, and for the further reason that an independent civil action, not
depending on the issues, stations and results of a criminal prosecution, and entirely directed
by the party wronged or his counsel is more likely to secure adequate and efficacious
redress. (Garcia vs. Florida 52 SCRA 420, 424-425, Aug. 31, 1973). (Emphasis supplied)
The separate and independent civil action for a quasi-delict is also clearly recognized in section 2, Rule 111
of the Rules of Court, reading:
Sec. 2. Independent civil action. In the cases provided for in Articles 31, 32, 33, 34 and
2177 of the Civil Code of the Philippines, Are independent civil action entirely separate and

distinct from the c action, may be brought by the injured party during the pendency of the
criminal case, provided the right is reserved as required in the preceding section. Such civil
action shag proceed independently of the criminal prosecution, and shall require only a
preponderance of evidence.
Significant to note is the fact that the foregoing section categorically lists cases provided for in Article
2177 of the Civil Code, supra, as allowing of an "independent civil action."
Tested by the hereinabove-quoted legal tenets, it has to be held that the City Court, in surrounding the civil
action, erred in placing reliance on section 3 (b) of Rule 111 of the Rules of Court, supra which refers to
"other civil actions arising from cases not included in the section just cited" (i.e., Section 2, Rule 111 above
quoted), in which case 6 once the criminal action has being commenced, no civil action arising from the
same offense can be prosecuted and the same shall be suspended in whatever stage it may be found, until
final judgment in the criminal proceeding has been rendered." Stated otherwise, the civil action referred to in
Secs. 3(a) and 3(b) of Rule 111 of the Rules of Court, which should be suspended after the criminal action
has been instituted is that arising from the criminal offense not the civil action based on quasi-delict
Article 31 of the Civil Code then clearly assumes relevance when it provides:
Art. 31. When the civil action is based on an obligation not arising from the act or omission
complained of as a felony, such civil action may proceed independently of the criminal
proceedings and regardless of the result of the latter.
For obviously, the jural concept of a quasi-delict is that of an independent source of obligation "not arising
from the act or omission complained of as a felony." Article 1157 of the Civil Code bolsters this conclusion
when it specifically recognizes that:
Art. 1157. Obligations arise from:
(1) Law;
(2) Contracts;
(3) Quasi-contracts;
(4) Acts or omissions punished by law; and
(5) Quasi-delicts. (1089a)
(Emphasis supplied)
It bears emphasizing that petitioner's cause of action is based on quasi-delict. The concept of quasidelica as
enunciated in Article 2176 of the Civil Code (supra), is so broad that it includes not only injuries to persons
but also damage to property. 7 It makes no distinction between "damage to persons" on the one hand and
"damage to property" on the other. Indeed, the word "damage" is used in two concepts: the "harm" done and
"reparation" for the harm done. And with respect to harm it is plain that it includes both injuries to person and
property since "harm" is not limited to personal but also to property injuries. In fact, examples of quasi-delict in the
law itself include damage to property. An instance is Article 2191(2) of the Civil Code which holds proprietors
responsible for damages caused by excessive smoke which may be harmful to persons or property."

In the light of the foregoing disquisition, we are constrained to hold that respondent Judge gravely abused
his discretion in upholding the Decision of the City Court of Mandaue City, Cebu, suspending the civil action
based on a quasi-delict until after the criminal case is finally terminated. Having arrived at this conclusion, a
discussion of the other errors assigned becomes unnecessary.
WHEREFORE, granting the Writ of certiorari prayed for, the Decision of the Court of First Instance of Cebu
sought to be reviewed is hereby set aside, and the City Court of Mandaue City, Cebu, Branch 11, is hereby
ordered to proceed with the hearing of Civil Case No. 189 of that Court.
Without pronouncement as to costs.
SO ORDERED.
Teehankee (Chairman), Makasiar, Fernandez, Guerrero and De Castro, JJ., concur.

Cinco vs Canonoy
Friday, July 11, 2014 Mga etiketa: Civil Law, Human Rights, Torts and Damages

PORFIRIO P. CINCO, petitioner-appellant,

vs.
HON. MATEO CANONOY, Presiding Judge of the Third Branch of the Court of First
Instance of Cebu, HON. LORENZO B. BARRIA City Judge of Mandaue City, Second
Branch ROMEO HILOT, VALERIANA PEPITO and CARLOS PEPITO, respondentsappellees
G.R. No. L-33171 May 31, 1979
FACTS:
Petitioner filed a complaint in the City Court for recovery of damages on account of
a vehicular accident involving his car and a jeepney driven by respondent Romeo
Hilot and operated by respondents Valeriana Pepito and Carlos Pepito.
Subsequently, a criminal case was filed against the driver. At the pre-trial of the
civil
case counsel for the respondents moved for the suspension of the civil action
pending determination of the criminal case invoking Section 3(b), Rule 111 of the
Rules of Court. The City Court granted the motion and ordered the suspension of

the civil case. Petitioner elevated the matter on certiorari to the Court of First
Instance, alleging that the City Judge acted with grave abuse of discretion in
suspending the civil action for being contrary to law and jurisprudence. The Court
of
First Instance dismissed the petition; hence, this petition to review on certiorari.

ISSUE:
Whether or not there can be an independent civil action for damages to property
during the pendency of the criminal action.

HELD:
The Supreme Court held that an action for damages based on Articles 2176 and
2180 of the New Civil Code is quasi-delictual in character which can be prosecuted
independently of the criminal action.Where the plaintiff made essential averments
in the
complaint that it was the driver's fault or negligence in the operation of the
jeepney
which caused the collision between his automobile and said jeepney; that plaintiff
sustained damages because of the collision; that a direct causal connection exists
between the damage he suffered and the fault or negligence of the defendantdriver
and where the defendant-operator in their answer, contended, among others, that
they observed due diligence in the selection and supervision of their employees, a
defense peculiar to actions based on quasi-delict , such action is principally
predicated
on Articles 32176 and 2180 of the New Civil Code which is quasi-delictual in nature
and character. Liability being predicated on quasi-delict , the civil case may
proceed
as a separate and independent court action as specifically provided for in Article
2177. Section 3 (b), Rule 111 of the Rules of Court refers to "other civil
actions arising from cases not included in Section 2 of the same rule" in which,

"once the criminal action has been commenced, no civil action arising from the
same offense can be prosecuted and the same shall be suspended in whatever
stage
it may be found, until final judgment in the criminal proceeding has been
rendered".
The civil action referred to in Section 2(a) and 3(b), Rule 11 of the Rules of Court
which should be suspended after the criminal action has been instituted is that
arising from the criminal offense and not the civil action based on quasi delict.
The concept of quasi-delict enunciated in Article 2176 of the New Civil Code is so
broad that it
includes not only injuries to persons but also damage to property. It makes no
distinction between "damage to persons" on the one hand and "damage to
property" on the other. The word "damage" is used in two concepts: the "harm"
done and "reparation" for the harm done. And with respect to "harm" it is plain
that
it includes both injuries to person and property since "harm" is not limited to
personal but also to property injuries. An example of quasi-delict in the law itself
which includes damage to property in Article 2191(2) of the Civil Code which holds
proprietors responsible for damages caused by excessive smoke which may be
harmful "to person or property". Respondent Judge gravely abused his discretion
in upholding the decision of the city court
suspending the civil action based on quasi-delict until after the criminal action is
finally terminated.
CINCO V CANONOY
90 SCRA 369Melencio-Herrera; May 31, 1979
NATURE
Petition for review on certiorari
FACTS
- Cinco filed on Feb 25, 19701 a complaint for recovery of damages on account of a vehicular accident involving
hisautomobile and a jeepney driven by Romeo Hilot and operated by Valeriana Pepito and Carlos Pepito.Subsequently, a criminal case was filed against the driver Romeo Hilot arising from the same accident.- At the
pre-trial in the civil case, counsel for private respondents moved to suspend the civil action pending the

finaldetermination of the criminal suit.- The City Court of Mandaue ordered the suspension of the civil case.
Petitioners MFR having been denied, he elevated thematter on Certiorari to the CFI Cebu., which in turn
dismissed the petition.
Plaintiffs claims:
- it was the fault r negligence of the driver in the operation of the jeepney owned by the Pepitos which caused
the collision.- Damages were sustained by petitioner because of the collision- There was a direct causal
connection between the damages he suffered and the fault and negligence of private respondents.
Respondents Comments:
- They observed due diligence in the selection and supervision of employees, particularly of Romeo Hilot.
ISSUE
WON there can be an independent civil action for damage to property during the pendency of the criminal
action
HELD
YES- Liability being predicated on quasi-delict, the civil case may proceed as a separate and independent civil
action, asspecifically provided for in Art 2177 of the Civil Code.- The separate and independent civil action for
quasi-delict is also clearly recognized in sec 2, Rule 111 of the Rules of Court:
Sec 2. Independent civil action.
In the cases prvided for in Articles 31, 32, 33, 34 and 2177 of the Civil Code f thePhilippines, an independent
civil action entirely separate and distinct from the criminal action, may be brought by theinjured party during
the pendency of the criminal case, provided the right is reserved as required in the precedingsection. Such civil
action shall proceed independently of the criminal prosecution, and shall require only apreponderance of
evidence.- Petitioners cause of action is based on quasi-delict. The concept of quasi-delict, as enunciated in Art
2176 of the CivilCode, is so broad that in includes not only injuries to persons but also damage to property. It
makes no distinctionbetween damage to persons on the one hand and damage to property on the other. The
word damage is used in twoconcepts: the harm done and reparation for the harm done. And with respect to
harm it is plain that it includes bothinjuries to person and property since harm is not limited to personal but
also to property injuries.
DISPOSITION
Writ of Certiorari granted.

BPI V. CA
216 SCRA 51

FACTS:
Someone who identified herself to be Fernando called up BPI, requesting for the pre-termination of her
money market placement with the bank. The person who took the call didn't bother to verify with Fernandos
office if whether or not she really intended to preterminate her money market
placement. Instead, he relied on the verification stated by the caller. He proceeded with the processing of the
termination. Thereafter, the caller gave delivery instructions that instead of delivering the checks to her
office, it would be picked up by her niece and it indeed happen as such. It was found out later on that the
person impersonated Fernando and her alleged niece in getting the checks. The dispatcher also didn't
bother to get the promissory note evincing the placement when he gave the checks to the impersonated
niece. This was aggravated by the fact that this impersonator opened an account with the bank and
deposited the subject checks. It then withdrew the amounts.
The day of the maturity of the money market placement happened and the real Fernando surfaced herself.
She denied preterminating the money market placements and though she was the payee of the checks in
issue, she didn't receive any of its proceeds. This prompted the bank to
surrender to CBC the checks and asking for reimbursement on alleged forgery of payees indorsements.

HELD:
The general rule shall apply in this case. Since the payees indorsement has been forged, the
instrument is wholly inoperative.
However, underlying circumstances of the case show that the general rule
on forgery isnt applicable. The issue as to who between the parties should bear the
loss in the payment of the forged checks necessitates the determination of the rights and liabilities of the
parties involved in the controversy in relation to the forged checks.
The acts of the employees of BPI were tainted with more negligence if not criminal than the acts of CBC. First,
the act of disclosing information about the money market placement over the phone is a violation of the General
Banking Law. Second, there was failure on the banks part to even compare the signatures during the
termination of the placement, opening of a new account with the specimen signature in file of Fernando.
And third, there was failure to ask the surrender of the promissory note evidencing the placement.
The acts of BPI employees was the proximate cause to the loss. Nevertheless, the negligence of the
employees of CBC should be taken also into consideration. They closed their eyes to the suspicious large
amount withdrawals made over the counter as well as the opening of the account.

045 BANK OF THE PHILIPPINE ISLANDS, petitioner, AUTHOR:

vs.THE HON. COURT OF APPEALS, CHINA NOTES:
BANKING CORP., and PHILIPPINE CLEARING

HOUSE CORPORATION, respondents.

[G.R. No. 102383 November 26, 1992]
TOPIC:Test of Negligence
PONENTE:GUTIERREZ, JR., J.
FACTS:
1. A phone call to BPI's Money Market Department was made by a woman who identified herself as Eligia G. Fernando,
owner of a money market placement as evidenced by a promissory note with a maturity date of November 11, 1981.
2. The caller wanted to preterminate the placement, but Reginaldo Eustaquio, the Dealer Trainee who received the call
and who happened to be alone in the trading room at the time, told her that trading time was over for the day.
3. Eustaquio conveyed the request for pretermination to the officer who before had handled Eligia G. Fernando's account
but Eustaquio was left to attend to the pretermination process.
4. The caller followed up with Eustaquio, by phone again, on the pretermination of the placement. Although not familiar
with the voice of the real Eligia G. Fernando, Eustaquio made certain that the caller was the real Eligia G. Fernando by
verifying that the details the caller gave about the placement tallied with the details in the ledger/folder of the account.
5. Neither Eustaquio nor Bulan who originally handled Fernando's account, nor anybody else at BPI, bothered to call up
Fernando to verify the request for pretermination.
6. Eustaquio, thus, proceeded to prepare the requested pretermination as required by office procedure. From his desk, the
papers, following the processing route, passed through the position analyst, securities clerk, verifier clerk and
documentation clerk, before the two cashier's checks, both payable to Eligia G. Fernando, covering the preterminated
placement, were prepared.
7. The same caller called again to give delivery instructions that instead of the delivering the checks to her office at
Philamlife, she would send her niece, Rosemarie Fernando, to pick them up.
8. It was, in fact Rosemarie Fernando who got the two checks from the dispatcher, as shown by the delivery receipt.
Actually, as it turned out, the same impersonated both Eligia G. Fernando and Rosemarie Fernando. Although the
checks represented the termination proceeds of Eligia G. Fernando's placement, the dispatcher failed to get or to
require the surrender of the promissory note evidencing the placement. There is also no showing that Eligia G.
Fernando's purported signature on the letter requesting the pretermination and the latter authorizing Rosemarie
Fernando to pick up the two checks, both of which letters were presumably handed to the dispatcher by Rosemarie
Fernando, was compared or verified with Eligia G. Fernando's signature in BPI's file.
9. The story's scene now shifted whena woman who represented herself to be Eligia G. Fernando applied at CBC's Head
Office for the opening of a current account.
10. The application form shows the signature of "Eligia G. Fernando", "her" date of birth, sex, civil status, nationality,
occupation ("business woman"), tax account number, and initial deposit of P10,000.00. This final approval of the new
current account is indicated on the application form by the initials of the CBC Cashier who did not interview the new
client but affixed her initials on the application form after reviewing it.
11. The following day, the woman holding herself out as Eligia G. Fernando deposited the two checks in controversy. The
two checks were forthwith sent to clearing by CBC and BPI cleared both on the same day.
12. Two days after, withdrawals began. All withdrawals were allowed on the basis of the verification of the drawer's
signature with the specimen signature on file and the sufficiency of the funds in the account.
13. When the maturity date of Eligia G. Fernado's money market placement with BPI came, the real Eligia G. Fernando
went to BPI for the roll-over of her placement. She disclaimed having preterminated her placement. She executed an
affidavit stating that while she was the payee of the two checks in controversy, she never received nor endorsed them
and that her purported signature on the back of the checks was not hers but forged. With her surrender of the original
of the promissory note evidencing the placement which matured that day, BPI issued her a new promissory note to
evidence a roll-over of the placement.
14. Investigation of the fraud led to the filing of criminal actions for "Estafa Thru Falsification of Commercial
Documents" against four employees of BPI and the woman who impersonated Eligia G. Fernando.
15. BPI returned the two checks in controversy to CBC for the reason "Payee's endorsement forged". CBC, in turn,
returned the checks for reason "Beyond Clearing Time".
16. RTC ruled in favor of CBC and ordered BPI to pay CBC.

17. CA affirmed.
ISSUE(S):Whether or not it was BPI or CBCs negligence which was the proximate cause of the payment of the forged
checks by an impostor?
HELD:The proximate cause of the payment of the forged checks by an impostor was due to the negligence of petitioner
BPI. Nevertheless, the negligence of the employees of CBC should be taken also into consideration.
RATIO:
The test by which by which to determine the existence of negligence in a particular case may be stated as
follows: Did the defendant in doing the alleged negligent act use that reasonable care and caution which an
ordinarily prudent person would have used in the same situation? If not, then he is guilty of negligence.
Petitioner BPI's reliance on the doctrine of last clear chance to clear it from liability is not well-taken. CBC had
no prior notice of the fraud perpetrated by BPI's employees on the pretermination of Eligia G. Fernando's
money market placement. Moreover, Fernando is not a depositor of CBC. Hence, a comparison of the signature
of Eligia G. Fernando with that of the impostor Eligia G. Fernando, which respondent CBC did, could not have
resulted in the discovery of the fraud.
Applying the doctrine of proximate cause, petitioner BPI's contention that CBC alone should bear the loss must
fail. The gap of one (1) day between the issuance and delivery of the checks bearing the impostor's name as payee and
the impostor's negotiating the said forged checks by opening an account and depositing the same with respondent CBC
is not controlling. It is not unnatural or unexpected that after taking the risk of impersonating Eligia G.
Fernando with the connivance of BPI's employees, the impostor would complete her deception by encashing the
forged checks. There is therefore, greater reason to rule that the proximate cause of the payment of the forged
checks by an impostor was due to the negligence of petitioner BPI. This finding, notwithstanding, we are not
inclined to rule that petitioner BPI must solely bear the loss. Due care on the part of CBC could have prevented
any loss.
The Court cannot ignore the fact that the CBC employees closed their eyes to the suspicious circumstances of
huge over-the-counter withdrawals made immediately after the account was opened. The opening of the
account itself was accompanied by inexplicable acts clearly showing negligence.
Banks handle daily transactions involving millions of pesos. By the very nature of their work the degree of
responsibility, care and trustworthiness expected of their employees and officials is far greater than those of
ordinary clerks and employees. For obvious reasons, the banks are expected to exercise the highest degree of
diligence in the selection and supervision of their employees.
Both banks were negligent in the selection and supervision of their employees resulting in the encashment of the
forged checks by an impostor. Both banks were not able to overcome the presumption of negligence in the selection
and supervision of their employees. It was the gross negligence of the employees of both banks which resulted in the
fraud and the subsequent loss.
The Court applies Article 2179 of the Civil Code to the effect that while respondent CBC may recover its losses, such
losses are subject to mitigation by the courts.
CASE LAW/ DOCTRINE:The test by which by which to determine the existence of negligence in a particular case may
be stated as follows: Did the defendant in doing the alleged negligent act use that reasonable care and caution which an
ordinarily prudent person would have used in the same situation? If not, then he is guilty of negligence.

Standard of Conduct Expert/Professionals

Republic of the Philippines

SUPREME COURT
Manila
THIRD DIVISION

G.R. No. 102383 November 26, 1992

BANK OF THE PHILIPPINE ISLANDS, petitioner,
vs.
THE HON. COURT OF APPEALS (SEVENTH JUDICIAL), HON. JUDGE REGIONAL TRIAL COURT OF
MAKATI, BRANCH 59, CHINA BANKING CORP., and PHILIPPINE CLEARING HOUSE
CORPORATION, respondents.

GUTIERREZ, JR., J.:

The present petition asks us to set aside the decision and resolution of the Court of Appeals in CA-G.R. SP
No. 24306 which affirmed the earlier decision of the Regional Trial Court of Makati, Branch 59 in Civil Case
No. 14911 entitled Bank of the Philippine Islands v. China Banking Corporation and the Philippine Clearing
House Corporation, the dispositive portion of which reads:
WHEREFORE, premises considered, judgment is hereby rendered dismissing petitionerappellant's (BPI's) appeal and affirming the appealed order of August 26, 1986 (Annex B of
BPI's Petition) with modification as follows:
1. Ordering the petitioner-appellant (BPI) to pay respondent-appellee (CBC):
(a) the amount of One Million Two Hundred Six Thousand, Six Hundred Seven Pesos and
Fifty Eight Centavos (P1,206,607.58) with interest at the legal rate of twelve percent
(12%) per annum starting August 26, 1986, the date when the order of the PCHC Board of
Directors was issued until the full amount is finally paid; and
(b) the amount of P150,000.00 representing attorney's fees;
2. BPI shall also bear 75% or P5,437.50 and CBC, 25% or P1,812.50 of the cost of the
arbitration proceedings amounting to P7,250.00;
3. The ownership of respondent-appellee (CBC) of the other sum of One Million Two
Hundred Six Thousand Six Hundred Seven Pesos and Fifty Eight Centavos (P1,206,607.58)
previously credited to its clearing account on August 12, 1983 per PCHC Stockholders'
Resolution No. 6083 dated April 6, 1983, is hereby confirmed.
4. The PCHC is hereby directed to immediately debit the clearing account of BPI the sum of
One Million Two Hundred Six Thousand Six Hundred Pesos and Fifty Eight Centavos

(P1,206,607.58) together with its interest as decreed in paragraph 1 (a) herein above stated
and credit the same to the clearing account of CBC;
5. The PCHC's counterclaim and cross-claim are dismissed for lack of merit; and
6. With costs against the petitioner-appellant. (Rollo, pp. 161-162)
The controversy in this case arose from the following facts as found by the Arbitration Committee of
respondent Philippine Clearing House Corporation in Arbicom Case No. 83-029 entitled Bank of the
Philippine Island v. China Banking Corporation:
The story underlying this case began in the afternoon of October 9, 1981 with a phone call to
BPI's Money Market Department by a woman who identified herself as Eligia G. Fernando
who had a money market placement as evidenced by a promissory note with a maturity date
of November 11, 1981 and a maturity value of P2,462,243.19. The caller wanted to
preterminate the placement, but Reginaldo Eustaquio, Dealer Trainee in BPI's Money Market
Department, who received the call and who happened to be alone in the trading room at the
time, told her "trading time" was over for the day, which was a Friday, and suggested that
she call again the following week. The promissory note the caller wanted to preterminate was
a roll-over of an earlier 50-day money market placement that had matured on September 24,
1981.
Later that afternoon, Eustaquio conveyed the request for pretermination to the officer who
before had handled Eligia G. Fernando's account, Penelope Bulan, but Eustaquio was left to
attend to the pretermination process.
The next Monday, October 12, 1981, in the morning, the caller of the previous Friday
followed up with Eustaquio, merely by phone again, on the pretermination of the placement.
Although not familiar with the voice of the real Eligia G. Fernando, Eustaquio "made certain"
that the caller was the real Eligia G. Fernando by "verifying" that the details the caller gave
about the placement tallied with the details in "the ledger/folder" of the account. Eustaquio
knew the real Eligia G. Fernando to be the Treasurer of Philippine American Life Insurance
Company (Philamlife) since he was handling Philamlife's corporate money market account.
But neither Eustaquio nor Bulan who originally handled Fernando's account, nor anybody
else at BPI, bothered to call up Fernando at her Philamlife office to verify the request for
pretermination.
Informed that the placement would yield less than the maturity value because of its
pretermination, the caller insisted on the pretermination just the same and asked that two
checks be issued for the proceeds, one for P1,800,000.00 and the second for the balance,
and that the checks be delivered to her office at Philamlife.
Eustaquio, thus, proceeded to prepare the "purchase order slip" for the requested
pretermination as required by office procedure, and from his desk, the papers, following the
processing route, passed through the position analyst, securities clerk, verifier clerk and
documentation clerk, before the two cashier's checks, nos. 021759 and 021760 for
P1,800,000.00 and P613,215.16, respectively, both payable to Eligia G. Fernando, covering
the preterminated placement, were prepared. The two cashier's checks, together with the
papers consisting of the money market placement was to be preterminated and the
promissory note (No. 35623) to be preterminated, were sent to Gerlanda E. de Castro and
Celestino Sampiton, Jr., Manager and Administrative Assistant, respectively, in BPI's
Treasury Operations Department, both authorized signatories for BPI, who signed the two

checks that very morning. Having been singed, the checks now went to the dispatcher for
delivery.
Later in the same morning, however, the same caller changed the delivery instructions;
instead of the checks being delivered to her office at Philamlife, she would herself pick up the
checks or send her niece, Rosemarie Fernando, to pick them up. Eustaquio then told her
that if it were her niece who was going to get the checks, her niece would have to being a
written authorization from her to pick up the checks. This telephone conversation ended with
the caller's statement that "definitely" it would be her niece, Rosemarie Fernando, who would
pick up the checks. Thus, Eustaquio had to hurriedly go to the dispatcher, Bernardo Laderas,
to tell him of the new delivery instructions for the checks; in fact, he changed the delivery
instruction on the purchase order slip, writing thereon "Rosemarie Fernando release only
with authority to pick up.
It was, in fact Rosemarie Fernando who got the two checks from the dispatcher, as shown by
the delivery receipt. Actually, as it turned out, the same impersonated both Eligia G.
Fernando and Rosemarie Fernando. Although the checks represented the termination
proceeds of Eligia G. Fernando's placement, not just a roll-over of the placement, the
dispatcher failed to get or to require the surrender of the promissory note evidencing the
placement. There is also no showing that Eligia G. Fernando's purported signature on the
letter requesting the pretermination and the latter authorizing Rosemarie Fernando to pick up
the two checks, both of which letters were presumably handed to the dispatcher by
Rosemarie Fernando, was compared or verified with Eligia G. Fernando's signature in BPI's
file. Such purported signature has been established to be forged although it has a "close
similarity" to the real signature of Eligia G. Fernando (TSN of January 15, 1985, pp. 24 and
26).
The story's scene now shifted when, in the afternoon of October 13, 1981, a woman who
represented herself to be Eligia G. Fernando applied at CBC's Head Office for the opening of
a current account.
She was accompanied and introduced to Emily Sylianco Cuaso, Cash Supervisor, by
Antonio Concepcion whom Cuaso knew to have opened, earlier that year, an account upon
the introduction of Valentin Co, a long-standing "valued client" of CBC. What Cuaso
indicated in the application form, however, was that the new client was introduced by
Valentin Co, and with her initials on the form signifying her approval, she referred the
application to the New Accounts Section for processing. As finally proceeds, the application
form shows the signature of "Eligia G. Fernando", "her" date of birth, sex, civil status,
nationality, occupation ("business woman"), tax account number, and initial deposit of
P10,000.00. This final approval of the new current account is indicated on the application
form by the initials of Regina G. Dy, Cashier, who did not interview the new client but affixed
her initials on the application form after reviewing it. The new current account was given the
number: 26310-3.
The following day, October 14, 1981, the woman holding herself out as Eligia G. Fernando
deposited the two checks in controversy with Current Account No. 126310-3. Her
endorsement on the two checks was found to conform with the depositor's specimen
signature. CBC's guaranty of prior endorsements and/or lack of endorsement was then
stamped on the two checks, which CBC forthwith sent to clearing and which BPI cleared on
the same day.

Two days after, withdrawals began on Current Account No. 26310-3: On October 16, 1981,
by means of Check No. 240005 dated the same day for P1,000,000.00, payable to "cash",
which the woman holding herself out as Eligia G. Fernando encashed over the counter, and
Check No. 240003 dated October 15, 1981 for P48,500.00, payable to "cash" which was
received through clearing from PNB Pasay Branch; on October 19, 1981, by means of Check
No. 240006 dated the same day for P1,000,000.00, payable to "cash," which the woman
identifying herself as Eligia G. Fernando encashed over the counter; on October 22, 1981, by
means of Check No. 240007 dated the same day for P370,000.00, payable to "cash" which
the woman herself also encashed over the counter; and on November 4, 1981, by means of
Check No. 240001 dated November 3, 1981 for P4,100.00, payable to "cash," which was
received through clearing from Far East Bank.
All these withdrawals were allowed on the basis of the verification of the drawer's signature
with the specimen signature on file and the sufficiency of the funds in the account. However,
the balance shown in the computerized teller terminal when a withdrawal is serviced at the
counter, unlike the ledger or usual statement prepared at month-end, does not show the
account's opening date, the amounts and dates of deposits and withdrawals. The last
withdrawal on November 4, 1981 left Current Account No. 26310-3 with a balance of only
P571.61.
The day of reckoning came on November 11, 1981, the maturity date of Eligia G. Fernado's
money market placement with BPI, when the real Eligia G. Fernando went to BPI for the rollover of her placement. She disclaimed having preterminated her placement on October 12,
1981. She executed an affidavit stating that while she was the payee of the two checks in
controversy, she never received nor endorsed them and that her purported signature on the
back of the checks was not hers but forged. With her surrender of the original of the
promissory note (No. 35623 with maturity value of P2,462,243.19) evidencing the placement
which matured that day, BPI issued her a new promissory note (No. 40314 with maturity date
of December 23, 1981 and maturity value of P2,500.266.77) to evidence a roll-over of the
placement.
On November 12, 1981, supported by Eligia G. Fernando's affidavit, BPI returned the two
checks in controversy to CBC for the reason "Payee's endorsement forged". A ping-pong
started when CBC, in turn, returned the checks for reason "Beyond Clearing Time", and the
stoppage of this ping-pong, as we mentioned at the outset, prompted the filing of this case.
Investigation of the fraud by the Presidential Security Command led to the filing of criminal
actions for "Estafa Thru Falsification of Commercial Documents" against four employees of
BPI, namely Quirino Victorio, Virgilio Gayon, Bernardo Laderas and Jorge Atayan, and the
woman who impersonated Eligia G. Fernando, Susan Lopez San Juan. Victorio and Gayon
were both bookkeepers in BPI's Money Market Operations Department, Laderas was a
dispatcher in the same department. . . . (Rollo, pp. 74-79)
The Arbitration Committee ruled in favor of petitioner BPI. The dispositive portion of the decision reads:
WHEREFORE, we adjudge in favor of the Bank of the Philippine Islands and hereby order
China Banking Corporation to pay the former the amount of P1,206,607.58 with interest
thereon at 12% per annum from August 12, 1983, or the date when PCHC, pursuant to its
procedure for compulsory arbitration of the ping-pong checks under Stockholders' Resolution
No. 6-83 was implemented, up to the date of actual payment.

Costs of suit in the total amount of P7,250.00 are to be assessed the litigant banks in the
following proportion:
a) Plaintiff BPI P1,812.50
b) Defendant China P5,437.50
Total Assessment P7,250.00
conformably with PCHC Resolution Nos. 46-83 dated October 25, 1983 and 4-85 dated
February 25, 1985.
The PCHC is hereby directed to effect the corresponding entries to the litigant banks'
clearing accounts in accordance with the foregoing decision. (Rollo, pp. 97-98)
However, upon motion for reconsideration filed by respondent CBC, the Board of Directors of the PCHC
reversed the Arbitration Committee's decision in its Order, the dispositive portion of which reads:
WHEREFORE, the Board hereby reconsiders the Decision of the Arbitration Committee
dated March 24, 1986 in Arbicom Case No. 183-029 and in lieu thereof, one is rendered
modifying the decision so that the Complaint of BPI is dismissed, and on the Counterclaim of
CBC, BPI is sentenced to pay CBC the sum of P1,206,607.58. In view of the facts, no
interest nor attorney's fees are awarded. BPI shall also bear 75% or P5,437.50 and CBC,
25% or P1,812.50 of the cost of the Arbitration proceedings amounting to P7,250.00.
The PCHC is hereby directed to debit the clearing account of the BPI the sum of
P1,206,607.58 and credit the same to that of CBC. The cost of Arbitration proceedings are to
be debited from the accounts of the parties in the proportion above stated. (Rollo, pp. 112113)
BPI then filed a petition for review of the abovestated order with the Regional Trial Court of Makati. The trial
court dismissed the petition but modified the order as can be gleaned from the dispositive portion of its
decision quoted earlier.
Not satisfied with the trial court's decision petitioner BPI filed with us a petition for review on certiorari under
Rule 45 of the Rules of Court. The case was docketed as G.R. No. 96376. However, in a Resolution dated
February 6, 1991, we referred the case to the Court of Appeals for proper determination and disposition. The
appellate court affirmed the trial court's decision.
Hence, this petition.
In a resolution dated May 20, 1992 we gave due course to the petition:
Petitioner BPI now asseverates:
I
THE DECISION AND RESOLUTION OF THE RESPONDENT COURT LEAVES THE
UNDESIRABLE RESULT OF RENDERING NUGATORY THE VERY PURPOSE FOR THE
UNIFORM BANKING PRACTICE OF REQUIRING THE CLEARING GUARANTEE OF
COLLECTING BANKS.

II
CONTRARY TO THE RULING OF THE RESPONDENT COURT, THE PROXIMATE CAUSE
FOR THE LOSS OF THE PROCEEDS OF THE TWO CHECKS IN QUESTION WAS THE
NEGLIGENCE OF THE EMPLOYEES OF CBC AND NOT BPI; CONSEQUENTLY, EVEN
UNDER SECTION 23 OF THE NEGOTIABLE INSTRUMENTS LAW, BPI WAS NOT
PRECLUDED FROM RAISING THE DEFENSE OF FORGERY.
III
THE RESPONDENT COURT COMMITTED REVERSIBLE ERROR IN FAILING TO
APPRECIATE THE FACT THAT CBC HAD THE "LAST CLEAR CHANCE" OF AVOIDING
THE LOSS OCCASIONED BY THE FRAUDULENT ACTS INVOLVED IN THE INSTANT
CASE. (Rollo, p. 24)
The main issues raised in the assignment of errors are: When a bank (in this case CBC) presents checks for
clearing and payment, what is the extent of the bank's warranty of the validity of all prior endorsements
stamped at the back of the checks? In the event that the payee's signature is forged, may the
drawer/drawee bank (in this case BPI) claim reimbursement from the collecting bank [CBC] which earlier
paid the proceeds of the checks after the same checks were cleared by petitioner BPI through the PCHC?
Anent the first issue, petitioner BPI contends that respondent CBC's clear warranty that "all prior
endorsements and/or lack of endorsements guaranteed" stamped at the back of the checks was an
unrestrictive clearing guaranty that all prior endorsements in the checks are genuine. Under this premise
petitioner BPI asserts that the presenting or collecting bank, respondent CBC, had an unquestioned liability
when it turned out that the payee's signature on the checks were forged. With these circumstances,
petitioner BPI maintains that considerations of relative negligence becomes totally irrelevant.
In sum, petitioner BPI theorizes that the Negotiable Instruments Law, specifically Section 23 thereof is not
applicable in the light of the absolute liability of the representing or collecting bank as regards forged
endorsements in consonance with the clearing guarantee requirement imposed upon the presenting or
collecting banks "as it is worded today."
Petitioner BPI first returned to CBC the two (2) checks on the ground that "Payee's endorsement (was)
forged" on November 12, 1981. At that time the clearing regulation then in force under PCHC's Clearing
House Rules and Regulations as revised on September 19, 1980 provides:
Items which have been the subject of material alteration or items bearing a forged
endorsement when such endorsement is necessary for negotiation shall be returned within
twenty four (24) hours after discovery of the alteration or the forgery, but in no event beyond
the period prescribed by law for the filing of a legal action by the returning bank/branch
institution or entity against the bank/branch, institution or entity sending the same. (Section
23)
In the case of Banco de Oro Savings and Mortgage Bank v. Equitable Banking Corporation (157 SCRA 188
[1988]) the clearing regulation (this is the present clearing regulation) at the time the parties' dispute
occurred was as follows:
Sec. 21. . . . .

Items which have been the subject of material alteration or items bearing forged
endorsement when such endorsement is necessary for negotiation shall be returned by
direct presentation or demand to the Presenting Bank and not through the regular clearing
house facilities within the period prescribed by law for the filing of a legal action by the
returning bank/branch, institution or entity sending the same.
It is to be noted that the above-cited clearing regulations are substantially the same in that it allows a return
of a check "bearing forged endorsement when such endorsement is necessary for negotiation" even beyond
the next regular clearing although not beyond the prescriptive period "for the filing of a legal action by the
returning bank."
Bearing in mind this similarity in the clearing regulation in force at the time the forged checks in the present
case and the Banco de Oro case were dishonored and returned to the presenting or collecting banks, we
can be guided by the principles enunciated in the Banco de Oro case on the relevance of negligence of the
drawee vis-a-vis the forged checks.
The facts in the Banco de Oro case are as follows: Sometime in March, April, May and August 1983
Equitable Banking Corporation through its Visa Card Department drew six (6) crossed Manager's check with
the total amount of Forty Five Thousand Nine Hundred and Eighty Two Pesos and Twenty Three Centavos
(P45,982.23) and payable to certain member establishments of Visa Card. Later, the checks were deposited
with Banco de Oro to the credit of its depositor, a certain Aida Trencio. Following normal procedures, and
after stamping at the back of the checks the endorsements: "All prior and/or lack of endorsements
guaranteed" Banco de Oro sent the checks for clearing through the PCHC. Accordingly, Equitable Banking
Corporation paid the checks; its clearing amount was debited for the value of the checks and Banco de
Oro's clearing account was credited for the same amount. When Equitable Banking Corporation discovered
that the endorsements at the back of the checks and purporting to be that of the payees were forged it
presented the checks directly to Banco de Oro for reimbursement. Banco de Oro refused to reimburse
Equitable Banking Corporation for the value of the checks. Equitable Banking Corporation then filed a
complaint with the Arbitration Committees of the PCHC. The Arbiter, Atty. Ceasar Querubin, ruled in favor of
Equitable Banking Corporation. The Board of Directors of the PCHC affirmed the Arbiter's decision. A
petition for review of the decision filed by Banco de Oro with the Regional Trial Court of Quezon City was
dismissed. The decision of the PCHC was affirmed in toto.
One of the main issues threshed out in this case centered on the effect of Banco de Oro's (representing or
collecting bank) guarantee of "all prior endorsements and/or lack of endorsements" at the back of the
checks. A corollary issue was the effect of the forged endorsements of the payees which were late
discovered by the Equitable Banking Corporation (drawee bank) resulting in the latter's claim for
reimbursement of the value of checks after it paid the proceeds of the checks.
We agreed with the following disquisition of the Regional Trial Court, to wit:
Anent petitioner's liability on said instruments, this court is in full accord with the ruling of the
PCHC Board of Directors that:
In presenting the checks for clearing and for payment, the defendant made an express
guarantee on the validity of "all prior endorsements." Thus, stamped at the back of the
checks are the defendant's clear warranty: ALL PRIOR ENDORSEMENTS AND/OR LACK
OF ENDORSEMENTS GUARANTEED. Without such warranty, plaintiff would not have paid
on the checks.

No amount of legal jargon can reverse the clear meaning of defendant's warranty. As the
warranty has proven to be false and inaccurate, the defendant is liable for any damage
arising out of the falsity of its representation.
The principle of estoppel, effectively prevents the defendant from denying liability for any
damage sustained by the plaintiff which, relying upon an action or declaration of the
defendant, paid on the checks. The same principle of estoppel effectively prevents the
defendant from denying the existence of the checks. (pp. 10-11, Decision, pp. 43-44, Rollo)
(at pp. 194-195)
We also ruled:
Apropos the matter of forgery in endorsements, this Court has presently succintly
emphasized that the collecting bank or last endorser generally suffers the loss because it
has the duty to ascertain the genuineness of all prior endorsements considering that the act
of presenting the check for payment to the drawee is an assertion that the party making the
presentment has done its duty to ascertain the genuineness of the endorsements. This is laid
down in the case of PNB v. National City Bank. (63 Phil. 1711) In another case, this court
held that if the drawee-bank discovers that the signature of the payee was forged after it has
paid the amount of the check to the holder thereof, it can recover the amount paid from the
collecting bank.
xxx xxx xxx
The point that comes uppermost is whether the drawee bank was negligent in failing to
discover the alteration or the forgery. (Emphasis supplied)
xxx xxx xxx
The court reproduces with approval the following disquisition of the PCHC in its decision.
xxx xxx xxx
III. Having Violated Its Warranty On Validity Of All Endorsements, Collecting Bank Cannot
Deny Liability To Those Who Relied On Its Warranty.
xxx xxx xxx
The damage that will result if judgment is not rendered for the plaintiff is irreparable. The
collecting bank has privity with the depositor who is the principal culprit in this case. The
defendant knows the depositor; her address and her history. Depositor is defendant's
client. It has taken a risk on its depositor when it allowed her to collect on the crossedchecks.
Having accepted the crossed checks from persons other than the payees, the defendant is
guilty of negligence; the risk of wrongful payment has to be assumed by the
defendant. (Emphasis supplied, at pp. 198-202)
As can be gleaned from the decision, one of the main considerations in affirming the PCHC's decision was
the finding that as between the drawee bank (Equitable Bank) and the representing or collecting bank
(Banco de Oro) the latter was negligent and thus responsible for undue payment.

Parenthetically, petitioner BPI's theory that the present clearing guarantee requirement imposed on the
representing or collecting bank under the PCHC rules and regulations is independent of the Negotiable
Instruments Law is not in order.
Another reason why the petitioner's theory is uncalled for is the fact that the Negotiable Instruments Law
(Act No. 2031) applied to negotiable instruments as defined under section one thereof. Undeniably, the
present case involves checks as defined by and under the coverage of the Negotiable Instruments Law. To
affirm the theory of the petitioner would, therefore, violate the rule that rules and regulations implementing
the law should conform to the law, otherwise the rules and regulations are null and void. Thus, we held Shell
Philippines, Inc. v. Central Bank of the Philippines (162 SCRA 628 [1988]):
. . . while it is true that under the same law the Central Bank was given the authority to
promulgate rules and regulations to implement the statutory provision in question, we
reiterate the principle that this authority is limited only to carrying into effect what the law
being implemented provides.
In People v. Maceren (79 SCRA 450, 458 and 460), this Court ruled that:
Administrative regulations adopted under legislative authority by a particular department
must be in harmony with the provisions of the law, and should be for the sole purpose of
carrying into effect its general provisions. By such regulations, of course, the law itself cannot
be extended. (U.S. v. Tupasi Molina, supra). An administrative agency cannot amend an act
of Congress (Santos v. Estenzo, 109 Phil. 419, 422; Teoxon v. Members of the Board of
Administrators, L-25619, June 30, 1970, 33 SCRA 585; Manuel v. General Auditing Office, L28952, December 29, 1971, 42 SCRA 660; Deluao v. Casteel, L-21906, August 29, 1969, 29
SCRA 350).
The rule-making power must be confined to details for regulating the mode or proceeding to
carry into effect the law as it has been enacted. The power cannot be extended to amending
or expanding the statutory requirements or to embrace matters not covered by the statute.
Rules that subvert the statute cannot be sanctioned. (University of Santo Tomas v. Board of
Tax Appeals, 93 Phil. 376, 382,citing 12 C.J. 845-46. as to invalid regulations, see Collector
of Internal Revenue v. Villaflor, 69 Phil. 319; Wise & Co. v. Meer, 78 Phil. 655, 676; Del Mar
v. Phil. Veterans Administration, L-27299, June 27, 1973, 51 SCRA 340, 349).
xxx xxx xxx
. . . The rule or regulation should be within the scope of the statutory authority granted by the
legislature to the administrative agency. (Davis, Administrative Law, p. 194, 197, cited in
Victorias Milling Co., Inc. v. Social Security Commission, 114 Phil. 555, 558).
In case of discrepancy between the basic law and a rule or regulation issued to implement
said law the basic law prevails because said rule or regulation cannot go beyond the terms
and provisions of the basic law (People v. Lim 108 Phil. 1091). (at pp. 633-634)
Section 23 of the Negotiable Instruments Law states:
When signature is forged or made without the authority of the person whose signature it
purports to be, it is wholly inoperative and no right to retain the instrument, or to give
discharge therefore, or to enforce payment thereof, against any party thereto, can be
acquired through or under such forged signature, unless the party against whom it is sought
to enforce such right is precluded from setting up the forgery or want of authority.

There are two (2) parts of the provision. The first part states the general rule while the second part states the
exception to the general rule. The general rule is to the effect that a forged signature is "wholly inoperative",
and payment made "through or under such signature" is ineffectual or does not discharge the instrument.
The exception to this rule is when the party relying in the forgery is "precluded from setting up the forgery or
want of authority. In this jurisdiction we recognize negligence of the party invoking forgery as an exception to
the general rule. (See Banco de Oro Savings and Mortgage Bank v. Equitable Banking
Corporation supra; Philippine National Bank v. Quimpo, 158 SCRA 582 [1988]; Philippine National Bank v.
Court of Appeals, 25 SCRA 693 [1968]; Republic v. Equitable Banking Corporation, 10 SCRA 8 [1964];
National Bank v. National City Bank of New York, 63 Phil. 711 [1936]; San Carlos Milling Co. v. Bank of P.I.,
59 Phil. 59 [1933]). In these cases we determined the rights and liabilities of the parties under a forged
endorsement by looking at the legal effects of the relative negligence of the parties thereto.
In the present petition the payee's names in the two (2) subject checks were forged. Following the general
rule, the checks are "wholly inoperative" and of no effect. However, the underlying circumstances of the
case show that the general rule on forgery is not applicable. The issue as to who between the parties should
bear the loss in the payment of the forged checks necessities the determination of the rights and liabilities of
the parties involved in the controversy in relation to the forged checks.
The records show that petitioner BPI as drawee bank and respondent CBC as representing or collecting
bank were both negligent resulting in the encashment of the forged checks.
The Arbitration Committee in its decision analyzed the negligence of the employees of petitioner BPI
involved in the processing of the pre-termination of Eligia G. Fernando's money market placement and in the
issuance and delivery of the subject checks in this wise:
a) The impostor could have been readily unmasked by a mere telephone call, which nobody
in BPI bothered to make to Eligia G. Fernando, a vice-president of Philamlife (Annex C, p.
13).
b) It is rather curious, too, that the officer who used to handle Eligia G. Fernando's account
did not do anything about the account's pre-termination (Ibid, p. 13).
c) Again no verification appears to have been made by (sic) Eligia G. Fernando's purported
signature on the letter requesting the pre-termination and the letter authorizing her niece to
pick-up the checks, yet, her signature was in BPI's file (Ibid., p. 13).
d) Another step that could have foiled the fraud, but which BPI neglected to take, was
requiring before the two checks in controversy were delivered, the surrender of the
promissory note evidencing the money market placement that was supposedly preterminated. (Rollo, p. 13).
The Arbitration Committee, however, belittled petitioner BPI's negligence compared to that of respondent
CBC which it declared as graver and the proximate cause of the loss of the subject checks to the impostor
who impersonated Eligia G. Fernando. Petitioner BPI now insists on the adoption of the Arbitration
Committee's evaluation of the negligence of both parties, to wit:
a) But what about the lapses of BPI's employees who processed the pretermination of Eligia
G. Fernando's placement and issued the checks? We do not think it was a serious lapse not
to confirm the telephone request for pretermination purportedly made by Eligia G. Fernando,
considering that it is common knowledge that business in the money market is done mostly
by telephone. Then, too, the initial request of the caller was for the two checks representing
the pretermination proceeds to be delivered to "her" office, meaning Eligia G. Fernando's

office at Philamlife, this clever ruse must have put off guard the employee preparing the
"purchase order slip", enough at least for him to do away with having to call Eligia G.
Fernando at her office. (Annex C at p. 17).
b) We also do not think it unusual that Penelope Bulan, who used to handle Eligia G.
Fernando's account, should do nothing about the request for pretermination and leave it to
Eustaquio to process the pretermination. In a bank the of BPI, it would be quite normal for an
officer to take over from another the handling of an account. (Ibid. p. 17)
c) The failure to verify or compare Eligia G. Fernando's purported signature on the letter
requesting the pretermination and the letter authorizing the pick-up of the checks in
controversy with her signature in BPI's file showed lack of care and prudence required by the
circumstances, although it is doubtful that such comparison would have disclosed the
deception considering the "close similarity" between her purported signature and her
signature in BPI's file. (Ibid., p. 17).
d) A significant lapse was, however, committed when the two checks in controversy were
delivered without requiring the surrender of the promissory note evidencing the placement
that was supposedly preterminated. Although, as we already said, it is hard to determine
whether the failure to require the surrender of the promissory note was a deliberate act of
Laderas, the dispatcher, or simply because the "purchase order slip" note, (sic) the fact
remains that such failure contributed to the consummation of the fraud. (Ibid., p. 17-18)
The Arbitration Committee Decision's conclusion was expressed thus
Except for Laderas, not one of the BPI personnel tasked with the
pretermination of Eligia G. Fernando's placement and the issuance of the
pretermination checks colluded in the fraud, although there may have been
lapses of negligence on their part which we shall discuss later. The secreting
out of BPI of Fernando's specimen signature, which, as admitted by the
impostor herself (Exhibit E-2, page 5), helped her in forging Fernando's
signature was no doubt an "inside job" but done by any of the four employees
colluding in the fraud, not by the personnel directly charged with the custody
of Fernando's records. (Annex C, p. 15)
With respect to the negligence of the CBC employees in the payment of the two (2) BPI
cashier's checks involved in this case, the Arbitration Committee's Decision made
incontrovertible findingsundisputed in the statement of facts found in the Court of Appeals'
decision of 8 August 1991, the Regional Trial Court decision of 28 November 1990 and the
PCHC Board of Directors' Order of 26 August 1986 (Annexes A, E, D, respectively). These
findings point to negligence of the CBC employees which led to: (a) the opening of the
impostor's current account in the name of Eligia G. Fernando; (b) the deposit of said account
of the two (2) checks in controversy and (c) the withdrawal of their proceeds from said
account.
The Arbitration Committee found that
1. Since the impostor presented only her tax account number as a means of
identification, we feel that Emily Sylianco Cuaso, Cash Supervisor, approved
the opening of her current account in the name of Eligia G. Fernando on the
strength of the introduction of Antonio Concepcion who had himself opened
an account earlier that year. That Mrs. Cuaso was not comfortable with the

introduction of the new depositor by Concepcion is betrayed by the fact that

she made it appear in the application form that the new depositor was
introduced by Valentin Co a long-standing valued client of CBC who had
introduced Concepcion when he opened his account. We find this
misrepresentation significant because when she reviewed the application
form she assumed that the new client was introduced by Valentin Co as
indicated in the application form (tsn of March 19, 1985, page 13). Thus we
find that the impostor was able to open with CBC's current account in the
name of Eligia G. Fernando due to the negligence, if not misrepresentation,
of its Cash Supervisor, (Annex C, p. 18).
2. Even with negligence attending the impostor's opening of a current
account, her encashment of the two checks in controversy could still have
been prevented if only the care and diligence demanded by the
circumstances were exercised. On October 14, 1981, just a day after she
opened her account, the impostor deposited the two checks which had an
aggregate value of P2,413,215.16, which was grossly disproportionate to her
initial deposit of P10,000. The very date of both checks, October 12, 1981,
should have tipped off the real purpose of the opening of the account on
October 13, 1981. But what surely can be characterized only as
abandonment of caution was allowing the withdrawal of the checks' proceeds
which started on October 16, 1981 only two days after the two checks were
deposited; by October 22, 1981, the account had been emptied of the
checks' proceeds. (Annex C, p. 19).
3. We cannot accept CBC's contention that "big withdrawals" are "usual
business" with it. Huge withdrawals might be a matter of course with an
established account but not for a newly opened account, especially since the
supposed check proceeds being withdrawn were grossly disproportionate to
the initial cash deposit. (Annex C, p. 19).
As intimated earlier, the foregoing findings of fact were not materially disputed either by the
respondent PCHC Board of Directors or by the respondent courts (compare statement of
facts of respondent court as reproduced in pp. 9-11 of this petition).
Having seen the negligence of the employees of both Banks, the relevant question is: which
negligence was graver. The Arbitration Committee's Decision found and concluded thus
Since there were lapses by both BPI and CBC, the question is: whose
negligence was the graver and which was the proximate cause of the loss?
Even viewing BPI's lapses in the worst light, it can be said that while its
negligence may have introduced the two checks in controversy into the
commercial stream. CBC's lack of care in approving the opening with it of the
impostor's current account, and its allowing the withdrawal's of the checks'
proceeds, the aggregate value of which was grossly disproportionate to the
initial cash deposit, so soon after such checks were deposited, caused the
"payment" of the checks. Being closest to the vent of loss, therefore, CBC's
negligence must be held to be proximate cause of the loss. (Annex C, pp. 1920) (Rollo, pp. 38-41)
While it is true that the PCHC Board of Directors, and the lower courts did not dispute the findings of facts of
the Arbitration Committee, the PCHC Board of Directors evaluated the negligence of the parties, to wit:

The Board finds the ruling that the negligence of the employees of CBC is graver than that of
the BPI not warranted by the facts because:
1. The acts and omissions of which BPI employees are guilty are not only negligent but
criminal as found by the decision.
2. The act of BPI's dealer-trainee Eustaquio of disclosing information about the money
market placement of its client over the telephone is a violation, if not of Republic Act 1405, of
Sec. 87 (a) of the General Banking Act which penalizes any officer-employee or agent of any
banking institution who discloses to any unauthorized person any information relative to the
funds or properties in the custody of the bank belonging to private individual, corporations, or
any other entity; and the bland excuse given by the decision that "business in the money
market is done mostly by the telephone" cannot be accepted nor tolerated for it is an
elementary rule of law that no custom or usage of business can override what a law
specifically provides. (Ang Tek v. CA, 87 Phil. 383).
3. The failure of BPI employees to verify or compare Eligia G. Fernando's purported
signature on the letter requesting for pre-termination and the letter authorizing the pick-up of
the checks in controversy with the signatures on file is not even justified but admitted in the
decision as showing lack of care and prudence required by the circumstances. The
conjectural excuse made in the decision that "it is doubtful that such comparison would
have disclosed the deception" does not give an excuse for the omission by BPI employees of
the act of verifying the signature, a duty which is the basic requirement of all acts in the bank.
From the very first time an employee enters the services of a bank up to the time he
becomes the highest officer thereof, the cautionary rule is drilled on him to always be sure
that when he acts on the basis of any signature presented before him, the signature is to be
verified as genuine and that if the bank acts on the basis of a forgery of such signature, the
bank will be held liable. There can be no excuse therefore for such an omission on the part
of BPI employees.
4. The decision admits that:
A significant lapse was, however, committed when the two checks in
controversy were delivered without requiring the surrender of the promissory
note evidencing the placement that was supposedly preterminated.
This omission of the BPI to require the surrender of the promissory notes evidencing the
placement is justified by the decision by saying that Sec. 74 of the Negotiable Instrument
Law is not violated by this omission of the BPI employees because said provision is intended
for the benefit of the person paying (in this case the BPI) so that since the omission to
surrender having been waived by BPI, so the non-surrender does not invalidate the payment.
The fallacy of this argument is that the in this case is: whether or not such non-surrender is a
necessary ingredient in the cause of the success of the fraud and not whether or not the
payment was valid. This excuse may perhaps be acceptable if the omission did not cause
damage to any other person. In this case, however, it did cause tremendous damage.
Moreover, this statement obviously overlooks the provision in Art. 1240 of the Civil Code
requiring the payor (which in this case is the BPI) to be sure he pays to the right person and
as Art. 1242 states, he can claim good faith in paying to the right person only if he pays to
the person possession of the credit (which in this case is the promissory note evidencing the
money market placement). Clearly therefore, the excuse given in the decision for the nonsurrender of this promissory note evidencing the money market placement cannot be
accepted.

xxx xxx xxx

The decision, however, discusses in detail the negligent acts of the CBC in its lapses or
certain requirements in the opening of the account and in allowing withdrawals against the
deposited checks soon after the deposit thereof. As stated by the decision however, in
computerized banks the history of the account is not shown in the computer terminal
whenever a withdrawal is made.
The Board therefore believes that these withdrawals, without any further showing that the
CBC employees "had actual knowledge of the infirmity or defect, or knowledge of such facts"
(Sec. 56, Negotiable Instruments Law) that their action in accepting their checks for deposit
and allowing the withdrawals against the same "amounted to bad faith" cannot be considered
as basis for holding CBC liable. (Rollo, pp. 107-111)
Banks handle daily transactions involving millions of pesos. By the very nature of their work the degree of
responsibility, care and trustworthiness expected of their employees and officials is far greater than those of
ordinary clerks and employees. For obvious reasons, the banks are expected to exercise the highest degree
of diligence in the selection and supervision of their employees.
In the present case, there is no question that the banks were negligent in the selection and supervision of
their employees. The Arbitration Committee, the PCHC Board of Directors and the lower court, however
disagree in the evaluation of the degree of negligence of the banks. While the Arbitration Committee
declared the negligence of respondent CBC graver, the PCHC Board of Directors and the lower courts
declared that petitioner BPI's negligence was graver. To the extent that the degree of negligence is equated
to the proximate cause of the loss, we rule that the issue as to whose negligence is graver is relevant. No
matter how many justifications both banks present to avoid responsibility, they cannot erase the fact that
they were both guilty in not exercising extraordinary diligence in the selection and supervision of their
employees. The next issue hinges on whose negligence was the proximate cause of the payment of the
forged checks by an impostor.
Petitioner BPI accuses the Court of Appeals of inconsistency when it affirmed the PCHC's Board of
Directors' Order but in the same breath declared that the negligent acts of the CBC employees occurred
immediately before the actual loss.
In this regard petitioner BPI insists that the doctrine of last clear chance enunciated in the case of Picart
v. Smith(37 Phil. 809 [1918]) should have been applied considering the circumstances of the case.
In the Picart case, Amado Picart was then riding on his pony over the Carlatan Bridge at San Fernando, La
Union when Frank Smith approached from the opposite direction in a car. As Smith neared the bridge he
saw Picart and blew his horn to give warning of his approach. When he was already on the bridge Picart
gave two more successive blasts as it appeared to him that Picart was not observing the rule of the road.
Picart saw the car coming and heard the warning signals. An accident then ensued resulting in the death of
the horse and physical injuries suffered by Picart which caused him temporary unconsciousness and
required medical attention for several days. Thereafter, Picart sued Smith for damages.
We ruled:
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 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 no 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 to 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 starlight 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 excited 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 eyes of the law.
The test by which by which to determine the existence of negligence in a particular case may
be stated as follows: Did the defendant in doing the alleged negligent act use that
reasonable care and caution which an ordinarily prudent person would have used in the
same situation? If not, then he is guilty of negligence.
xxx xxx xxx
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."
Applying these principles, petitioner BPI's reliance on the doctrine of last clear chance to clear it from liability
is not well-taken. CBC had no prior notice of the fraud perpetrated by BPI's employees on the pretermination
of Eligia G. Fernando's money market placement. Moreover, Fernando is not a depositor of CBC. Hence, a
comparison of the signature of Eligia G. Fernando with that of the impostor Eligia G. Fernando, which
respondent CBC did, could not have resulted in the discovery of the fraud. Hence, unlike in the Picart case
herein the defendant, had he used reasonable care and caution, would have recognized the risk he was
taking and would have foreseen harm to the horse and the plaintiff but did not, respondent CBC had no way
to discover the fraud at all. In fact the records fail to show that respondent CBC had knowledge, actual or
implied, of the fraud perpetrated by the impostor and the employees of BPI.
However, petitioner BPI insists that even if the doctrine of proximate cause is applied, still, respondent CBC
should be held responsible for the payment to the impostor of the two (2) checks. It argues that the acts and
omissions of respondent CBC are the cause "that set into motion the actual and continuous sequence of
events that produced the injury and without which the result would not have occurred." On the other hand, it
assets that its acts and omissions did not end in a loss. Petitioner BPI anchors its argument on its stance
that there was "a gap, a hiatus, an interval between the issuance and delivery of said checks by petitioner
BPI to the impostor and their actual payment of CBC to the impostor. Petitioner BPI points out that the gap
of one (1) day that elapsed from its issuance and delivery of the checks to the impostor is material on the
issue of proximate cause. At this stage, according to petitioner BPI, there was yet no loss and the impostor

could have decided to desist from completing the same plan and could have held to the checks without
negotiating them.
We are not persuaded.
In the case of Vda. de Bataclan, et al, v. Medina (102 Phil. 181 [1957]), we had occasion to discuss the
doctrine of proximate cause.
Briefly, the facts of this case are as follows:
At about 2:00 o'clock in the morning of September 13, 1952 a bus carrying about eighteen (18) passengers
on its way to Amandeo, Cavite figured in an accident. While the bus was running, one of the front tires burst
and the bus began to zigzag until it fell into a canal on the right side of the road and turned turtle. Some
passengers managed to get out from the overturned bus except for four (4) passengers, among them,
Bataclan. The passengers who got out heard shouts for help from Bataclan and another passenger Lara
who said they could not get out from the bus. After half an hour, about ten men came, one of them carrying
a lighted torch made of bamboo with a wick on one end fueled with petroleum. These men approached the
overturned bus, and almost immediately, a fierce fire started burning and all but consuming the bus including
the four (4) passengers trapped inside. It turned out that as the bus overturned, gasoline began to leak and
escape from the gasoline tank on the side of the chassis spreading over and permeating the body of the bus
and the ground under and around it. The lighted torch brought by one of the men who answered the call for
help set it on fire. On the same day, the charred bodies of the trapped passengers were removed and
identified. By reason of his death, Juan Bataclan's wife and her children filed a suit for damages against
Maximo Medina, the operator and owner of the bus in the then Court of First Instance of Cavite. The trial
court ruled in favor of the defendant. However, we reversed and set aside the trial court's decision and said:
There is no question that under the circumstances, the defendant carrier is liable. The only
question is to what degree. The trial court was of the opinion that the proximate cause of the
death of Bataclan was not the overturning of the bus, but rather the fire that burned the bus,
including himself and his co-passengers who were unable to leave it; that at the time the fire
started, Bataclan, though the must have suffered, physical injuries, perhaps serious, was still
alive and so damages were awarded, not for his death, but for the physical satisfactory
definition of promote cause is found in Volume 38, pages 695-696 of American
Jurisprudence, cited by plaintiffs-appellants in their brief. It is as follows:
. . . that cause, which, in natural and continuous sequence, unbroken by any
efficient intervening cause, produces the injury, and without which the result
would not have occurred. And more comprehensively, the proximate legal
cause in that acting first and producing the injury, either immediately or by
setting other events in motion, all constituting a natural and continuous chain
of events, each having a close causal connection with its immediate
predecessor, the final event in the chain immediately effecting the injury as
natural and probable result of the cause which first acted, under such
circumstances that the person responsible for the first event should, as an
ordinarily prudent and intelligent person, have reasonable ground to expect
at the moment of his act or default that an injury to some person might
probably result therefrom.
It may be that ordinarily, when a passenger bus overturns, and pins down a passenger,
merely causing him physical injuries, if through some event, unexpected and extraordinary,
the overturned bus is set on fire, say, by lightning, or if some highwaymen after looting the
vehicle sets it on fire, and the passenger is burned to death, on might still contend that the

proximate cause of his death was the fire and not the overturning of the vehicle. But in the
present case and under the circumstances obtaining in the same, we do not hesitate to hold
that the proximate cause of the death of Bataclan was the overturning of the bus, this for the
reason that when the vehicle turned not only on its side but completely on its back, the
leaking of the gasoline from the tank was not unnatural or unexpected;that the coming of the
men with a lighted torch was in response to the call for help, made not only by the
passengers, but most probably, by the driver and the conductor themselves, and that
because it was very dark (about 2:30 in the morning), the rescuers had to carry a light with
them; and coming as they did from a rural area where lanterns and flashlights were not
available, they had to use a torch, the most handy and available; and what was more natural
than that said rescuers should innocently approach the overturned vehicle to extend the aid
and effect the rescue requested from them. In other words, the coming of the men with the
torch was to be expected and was natural sequence of the overturning of the bus, the
trapping of some of its passengers and the call for outside help. (Emphasis Supplied, at pp.
185-187)
Again, applying the doctrine of proximate cause, petitioner BPI's contention that CBC alone should bear the
loss must fail. The gap of one (1) day between the issuance and delivery of the checks bearing the
impostor's name as payee and the impostor's negotiating the said forged checks by opening an account and
depositing the same with respondent CBC is not controlling. It is not unnatural or unexpected that after
taking the risk of impersonating Eligia G. Fernando with the connivance of BPI's employees, the impostor
would complete her deception by encashing the forged checks. There is therefore, greater reason to rule
that the proximate cause of the payment of the forged checks by an impostor was due to the negligence of
petitioner BPI. This finding, notwithstanding, we are not inclined to rule that petitioner BPI must solely bear
the loss of P2,413,215.16, the total amount of the two (2) forged checks. Due care on the part of CBC could
have prevented any loss.
The Court cannot ignore the fact that the CBC employees closed their eyes to the suspicious circumstances
of huge over-the-counter withdrawals made immediately after the account was opened. The opening of the
account itself was accompanied by inexplicable acts clearly showing negligence. And while we do not apply
the last clear chance doctrine as controlling in this case, still the CBC employees had ample opportunity to
avoid the harm which befell both CBC and BPI. They let the opportunity slip by when the ordinary prudence
expected of bank employees would have sufficed to seize it.
Both banks were negligent in the selection and supervision of their employees resulting in the encashment
of the forged checks by an impostor. Both banks were not able to overcome the presumption of negligence
in the selection and supervision of their employees. It was the gross negligence of the employees of both
banks which resulted in the fraud and the subsequent loss. While it is true that petitioner BPI's negligence
may have been the proximate cause of the loss, respondent CBC's negligence contributed equally to the
success of the impostor in encashing the proceeds of the forged checks. Under these circumstances, we
apply Article 2179 of the Civil Code to the effect that while respondent CBC may recover its losses, such
losses are subject to mitigation by the courts. (See Phoenix Construction Inc. v. Intermediate Appellate
Courts, 148 SCRA 353 [1987]).
Considering the comparative negligence of the two (2) banks, we rule that the demands of substantial justice
are satisfied by allocating the loss of P2,413,215.16 and the costs of the arbitration proceeding in the
amount of P7,250.00 and the cost of litigation on a 60-40 ratio. Conformably with this ruling, no interests and
attorney's fees can be awarded to either of the parties.
WHEREFORE, the questioned DECISION and RESOLUTION of the Court of Appeals are MODIFIED as
outlined above. Petitioner Bank of the Philippine Islands shall be responsible for sixty percent (60%) while
respondent China Banking Corporation shall share forty percent (40%) of the loss of TWO MILLION FOUR

HUNDRED THIRTEEN THOUSAND, TWO HUNDRED FIFTEEN PESOS and SIXTEEN CENTAVOS
(2,413,215.16) and the arbitration costs of SEVEN THOUSAND, TWO HUNDRED FIFTY PESOS
(7,250.00). The Philippine Clearing House Corporation is hereby directed to effect the corresponding entries
to the banks' clearing accounts in accordance with this decision. Costs in the same proportion against the
Bank of the Philippine Islands and the China Banking Corporation.
SO ORDERED
Bidin, Davide, Jr., Romero and Melo, JJ., concur.
DEFENSES _ PRESCRIPTION

Republic of the Philippines

SUPREME COURT
Manila
FIRST DIVISION
Republic of the Philippines
SUPREME COURT
Manila
FIRST DIVISION
G.R. No. L-83524 October 13, 1989
ERNESTO KRAMER, JR. and MARIA KRAMER, petitioners,
vs.
HON. COURT OF APPEALS and TRANS-ASIA SHIPPING LINES, INC., respondents.
Rodolfo D. Mapile for petitioners.
Jose Al. Perez for private respondent.

GANCAYCO, J.:
The principal issue in this Petition for Review is whether or not a Complaint for damages instituted by the
petitioners against the private respondent arising from a marine collision is barred by the statute of
limitations.
The record of the case discloses that in the early morning of April 8, 1976, the F/B Marjolea, a fishing boat
owned by the petitioners Ernesto Kramer, Jr. and Marta Kramer, was navigating its way from Marinduque to
Manila. Somewhere near Maricabon Island and Cape Santiago, the boat figured in a collision with an interisland vessel, the M/V Asia Philippines owned by the private respondent Trans-Asia Shipping Lines, Inc. As
a consequence of the collision, the F/B Marjolea sank, taking with it its fish catch.

After the mishap, the captains of both vessels filed their respective marine protests with the Board of Marine
Inquiry of the Philippine Coast Guard. The Board conducted an investigation for the purpose of determining
the proximate cause of the maritime collision.
On October 19, 1981, the Board concluded that the loss of the F/B Marjolea and its fish catch was
attributable to the negligence of the employees of the private respondent who were on board the M/V Asia
Philippines during the collision. The findings made by the Board served as the basis of a subsequent
Decision of the Commandant of the Philippine Coast Guard dated April 29, 1982 wherein the second mate
of the M/V Asia Philippines was suspended from pursuing his profession as a marine officer. 1
On May 30, 1985, the petitioners instituted a Complaint for damages against the private respondent before
Branch 117 of the Regional Trial Court in Pasay City. 2 The suit was docketed as Civil Case No. 2907-P.
The private respondent filed a Motion seeking the dismissal of the Complaint on the ground of prescription.
He argued that under Article 1146 of the Civil Code, 3 the prescriptive period for instituting a Complaint for
damages arising from a quasi-delict like a maritime collision is four years. He maintained that the petitioners
should have filed their Complaint within four years from the date when their cause of action accrued, i.e., from
April 8, 1976 when the maritime collision took place, and that accordingly, the Complaint filed on May 30, 1985
was instituted beyond the four-year prescriptive period.

For their part, the petitioners contended that maritime collisions have peculiarities and characteristics which
only persons with special skill, training and experience like the members of the Board of Marine Inquiry can
properly analyze and resolve. The petitioners argued that the running of the prescriptive period was tolled by
the filing of the marine protest and that their cause of action accrued only on April 29, 1982, the date when
the Decision ascertaining the negligence of the crew of the M/V Asia Philippines had become final, and that
the four-year prescriptive period under Article 1146 of the Civil Code should be computed from the said date.
The petitioners concluded that inasmuch as the Complaint was filed on May 30, 1985, the same was
seasonably filed.
In an Order dated September 25, 1986, 4 the trial court denied the Motion filed by the private respondent. The
trial court observed that in ascertaining negligence relating to a maritime collision, there is a need to rely on highly
technical aspects attendant to such collision, and that the Board of Marine Inquiry was constituted pursuant to the
Philippine Merchant Marine Rules and Regulations, which took effect on January 1, 1975 by virtue of Letter of
Instruction No. 208 issued on August 12, 1974 by then President Ferdinand E. Marcos, precisely to answer the
need. The trial court went on to say that the four-year prescriptive period provided in Article 1146 of the Civil Code
should begin to run only from April 29, 1982, the date when the negligence of the crew of the M/V Asia Philippines
had been finally ascertained. The pertinent portions of the Order of the trial court are as follows

Considering that the action concerns an incident involving a collision at sea of two vehicles
and to determine negligence for that incident there is an absolute need to rely on highly
technical aspects attendant to such collisions. It is obviously to answer such a need that the
Marine Board of Inquiry (Sic) was constituted pursuant to the Philippine Merchant Marine
Rules and Regulations which became effective January 1, 1975 under Letter of Instruction(s)
No. 208 dated August 12, 1974. The relevant section of that law (Art. XVI/b/ provided as
follow(s):
1. Board of Marine Inquiry (BMI) Shall have the jurisdiction
to investigate marine accidents or casualties relative to
the liability of shipowners and officers, exclusive jurisdiction to
investigate cases/complaints against the marine officers; and
to review all proceedings or investigation conducted by the
Special Boards of Marine Inquiry.

2. Special Board of Marine Inquiry. Shall have original

jurisdiction to investigate marine casualties and disasters
which occur or are committed within the limits of the Coast
Guard District concerned or those referred by the
Commandant.
The Court finds reason in the argument of the plaintiff that marine incidents have those
'peculiarities which only persons of special skill, training and exposure can rightfully decipher
and resolve on the matter of the negligence and liabilities of parties involved and inasmuch
as the report of the Board of Inquiry (sic) admittedly came out only on April 29, 1982, the
prescriptive period provided x x x under Art. 1146 of the Civil Code should begin to run only
from that date. The complaint was filed with this Court on May 10, 1985, hence the statute of
limitations can not constitute a bar to the filing of this case. 5
The private respondent elevated the case to the Court of Appeals by way of a special civil action
for certiorari and prohibition, alleging therein that the trial court committed a grave abuse of discretion in
refusing to dismiss the Complaint filed by the petitioners. The case was assigned to the Second Division of
the appellate court and was docketed as Case No. CA-G.R. SP No. 12032. 6
In a Decision dated November 27, 1987, 7 and clarified in a Resolution dated January 12, 1988, 8 the Court of
Appeals granted the Petition filed by the private respondent and ordered the trial court to dismiss the Complaint.
The pertinent portions of the Decision of the appellate court are as follows

It is clear that the cause of action of private respondent (the herein petitioners Ernesto
Kramer, Jr. and Marta Kramer) accrued from the occurrence of the mishap because that is
the precise time when damages were inflicted upon and sustained by the aggrieved party
and from which relief from the court is presently sought. Private respondents should have
immediately instituted a complaint for damages based on a quasi-delict within four years
from the said marine incident because its cause of action had already definitely ripened at
the onset of the collision. For this reason, he (sic) could cite the negligence on the part of the
personnel of the petitioner to exercise due care and lack of (sic) diligence to prevent the
collision that resulted in the total loss of their x x x boat.
We can only extend scant consideration to respondent judge's reasoning that in view of the
nature of the marine collision that allegedly involves highly technical aspects, the running of
the prescriptive period should only commence from the finality of the investigation conducted
by the Marine Board of Inquiry (sic) and the decision of the Commandant, Philippine Coast
Guard, who has original jurisdiction over the mishap. For one, while it is true that the findings
and recommendation of the Board and the decision of the Commandant may be helpful to
the court in ascertaining which of the parties are at fault, still the former (court) is not bound
by said findings and decision. Indeed, the same findings and decision could be entirely or
partially admitted, modified, amended, or disregarded by the court according to its lights and
judicial discretion. For another, if the accrual of a cause of action will be made to depend on
the action to be taken by certain government agencies, then necessarily, the tolling of the
prescriptive period would hinge upon the discretion of such agencies. Said alternative it is
easy to foresee would be fraught with hazards. Their investigations might be delayed and lag
and then witnesses in the meantime might not be available or disappear, or certain
documents may no longer be available or might be mislaid. ... 9
The petitioners filed a Motion for the reconsideration of the said Decision but the same was denied by the
Court of Appeals in a Resolution dated May 27, 1988. 10

Hence, the instant Petition wherein the arguments raised by the petitioner before the trial court are
reiterated. 11 In addition thereto, the petitioner contends that the Decision of the Court of Appeals 12 The private
respondent filed its Comment on the Petition seeking therein the dismissal of the same. 13 It is also contended by
the private respondent that the ruling of the Court in Vasquez is not applicable to the case at bar because the said
case involves a maritime collision attributable to a fortuitous event. In a subsequent pleading, the private
respondent argues that the Philippine Merchant Marine Rules and Regulations cannot have the effect of repealing
the provisions of the Civil Code on prescription of actions. 14

On September 19,1988, the Court resolved to give due course to the petition. 15 After the parties filed their
respective memoranda, the case was deemed submitted for decision.

The petition is devoid of merit. Under Article 1146 of the Civil Code, an action based upon a quasi-delict
must be instituted within four (4) years. The prescriptive period begins from the day the quasi-delict is
committed. In Paulan vs. Sarabia, 16 this Court ruled that in an action for damages arising from the collision of
two (2) trucks, the action being based on a quasi-delict, the four (4) year prescriptive period must be counted from
the day of the collision.

In Espanol vs. Chairman, Philippine Veterans Administration, 17 this Court held as followsThe right of action accrues when there exists a cause of action, which consists of 3
elements, namely: a) a right in favor of the plaintiff by whatever means and under whatever
law it arises or is created; b) an obligation on the part of defendant to respect such right; and
c) an act or omission on the part of such defendant violative of the right of the plaintiff ... It is
only when the last element occurs or takes place that it can be said in law that a cause of
action has arisen ... .
From the foregoing ruling, it is clear that the prescriptive period must be counted when the last element
occurs or takes place, that is, the time of the commission of an act or omission violative of the right of the
plaintiff, which is the time when the cause of action arises.
It is therefore clear that in this action for damages arising from the collision of two (2) vessels the four (4)
year prescriptive period must be counted from the day of the collision. The aggrieved party need not wait for
a determination by an administrative body like a Board of Marine Inquiry, that the collision was caused by
the fault or negligence of the other party before he can file an action for damages. The ruling in Vasquez
does not apply in this case. Immediately after the collision the aggrieved party can seek relief from the
courts by alleging such negligence or fault of the owners, agents or personnel of the other vessel.
Thus, the respondent court correctly found that the action of petitioner has prescribed. The collision occurred
on April 8, 1976. The complaint for damages was filed iii court only on May 30, 1 985, was beyond the four
(4) year prescriptive period.
WHEREFORE, the petition is dismissed. No costs.
SO ORDERED.
Narvasa, Cruz, Grio-Aquino and Medialdea, JJ., concur.

G.R. No. L-83524 October 13, 1989

ERNESTO
KRAMER,
JR.
and
MARIA
KRAMER, petitioners,
vs.
HON. COURT OF APPEALS and TRANS-ASIA SHIPPING LINES, INC.,respondents.
Facts: On April 8, 1976, the F/B Marjolea, a fishing boat owned by petitioners Ernesto Kramer, Jr. and Marta
Kramer collided with an inter-island vessel, the M/V Asia Philippines owned by the private respondent
Trans-Asia Shipping Lines, Inc. As a consequence of the collision, the F/B Marjolea sank, taking with it its
fish catch.
The Board of Marine Inquiry concluded that the loss of the F/B Marjolea and its fish catch was attributable
to the negligence of the employees of the private respondent who were on board the M/V Asia Philippines
during the collision. The findings made by the Board served as the basis of a subsequent Decision of the
Commandant of the Philippine Coast Guard dated April 29, 1982 wherein the second mate of the M/V Asia
Philippines was suspended from pursuing his profession as a marine officer.
Issue: When does the cause of action for the recovery of damages by petitioners Kramer accrue?
Held:
Under Article 1146 of the Civil Code, an action based upon a quasi-delict must be instituted within four (4)
years. The prescriptive period begins from the day the quasi-delict is committed. From the foregoing ruling,
it is clear that the prescriptive period must be counted when the last element occurs or takes place, that is, the
time of the commission of an act or omission violative of the right of the plaintiff, which is the time when the
cause of action arises.
It is therefore clear that in this action for damages arising from the collision of two (2) vessels the four (4)
year prescriptive period must be counted from the day of the collision. The aggrieved party need not wait for
a determination by an administrative body like a Board of Marine Inquiry, that the collision was caused by
the fault or negligence of the other party before he can file an action for damages.
The collision occurred on April 8, 1976. The complaint for damages was filed in court only on May 30,
1985, was beyond the four (4) year prescriptive period.

3D 2009-2010 DIGESTS TORTS & DAMAGES

Page 145 of 528
132 Kramer, Jr. vs. CA
|

Gancayco, J.:G.R. No. 83524, October 13, 1989 | 178 SCRA 518
FACTS

On April 8, 1976, F/B Marjolea, a fishing boat owned by petitioners Ernest Kramer, Jr. and Marta Kramer was
navigating its way from Marinduque to Manila.

Somewhere near the Maricabon Island and Cape Santiago, the boat figured in acollision with an inter-island
vessel (M/V Asia Philippines) owned by Trans-AsiaShipping Lines, Inc.

Due to the collision, F/B Marjolea sank, taking along its fish catch.

The captains of both vessels filed a protest with the Board of Marine Inquiry of thePhilippine Coast Guard
for the purpose of determining the proximate cuase of the maritime collision

On October 19, 1981, the Board concluded that the collision was due to thenegligence of the employees of
private respondent (Trans-Asia).

On the basis of such decision, the Philippine Coast Guard, on April 29, 1982,suspended M/V Asia Philippines
from pursuing his profession as a marine officer.

On May 30,1985, petitioners filed a complaint for damages in the RTC, Pasay City.

Private respondent filed a MTD on the ground of prescription based on Art. 1146of the Civil Code which
provides, An action based upon quasi-delict must beinstituted within 4 years from the day the quasi-delcit

was committed.

The RTC denied the MTD on the basis of the Boards resolution that there was aneed to rely on highly technical
aspects attendant to such collision, hence, theprescriptive period under the law should begin to run only from
April 29, 1982, thedate when the negligence of the crew of M/V Asia Philippines had been finally ascertained.

On appeal to the CA, the said court reversed the RTCs decision and granted theMTD, hence the present petition
for certiorari and prohibition.
ISSUES & ARGUMENTS
W/N a complaint for damages instituted by the petitioners against the privaterespondent arising from a marine
collision is barred by the statute of limitations
HOLDING & RATIO DECIDENDI YES.

The right of action accrues when there exists a cause of action, which consists of 3elements, namely:
o

A right in favor of the plaintiff by whatever means and under whatever law it arises or is created
o

An obligation on the part of defendant to respect such right

o

An act or omission on the part of such defendant violative of the rightof the plaintiff

The occurrence of the last element is the time when the cause of action arise

Aggrieved party need not wait for a determination by an administrative body thatthe collision was caused by
fault or negligence of the other party before he can fileaction for damages
Petition is DISMISSED
LAST CLEAR CHANCE

THIRD DIVISION
[G.R. Nos. 79050-51. November 14, 1989.]
PANTRANCO NORTH EXPRESS, INC., Petitioner, v. MARICAR BASCOS BAESA, thru her personal guardian
FRANCISCA O. BASCOS, FE O. ICO, in her behalf and in behalf of her minor children, namely ERWIN,
OLIVE, EDMUNDO and SHARON ICO, Respondents.
Efren N. Ambrosio & Associates for petitioner PNEI.
Emiliano S. Micu for Respondents.

SYLLABUS

1. CIVIL LAW; DAMAGES; LAST CLEAR CHANCE DOCTRINE; WHEN APPLICABLE. The doctrine of last clear chance
applies only in a situation where the defendant, having the last fair chance to avoid the impending harm and failed
to do so, becomes liable for all the consequences of the accident notwithstanding the prior negligence of the plaintiff.
2. ID.; ID.; ID.; CONDITION TO MAKE DOCTRINE APPLICABLE. In order that the doctrine of last clear chance may
be applied, it must be shown that the person who allegedly had the last opportunity to avert the accident was aware
of the existence of the peril or with exercise of due care should have been aware of it.
3. ID.; ID.; ID.; NOT APPLICABLE TO PERSON ACTING INSTANTANEOUSLY OR BY AVAILABLE MEANS. This
doctrine of last chance has no application to a case where a person is to act instantaneously, and if the injury cannot

be avoided by using all means available after the peril is or should have been discovered.
4. ID.; ID.; PROVISION OF R.A. NO. 4136 RE VEHICLE ENTERING A THROUGH HIGHWAY OR A STOP
INTERSECTION. Section 43 (c), Article III, Chapter IV of Republic Act No. 1436 cannot apply to case a bar where
at the time of the accident, the jeepney had already crossed the intersection.
5. ID.; ID.; NEGLIGENCE; BURDEN OF PROOF LIES ON THE EMPLOYER. A finding of negligence on the part of the
driver establishes a presumption that the employer has been negligent and the latter has the burden of proof that it
has exercised due negligence not only in the selection of its employees but also in adequately supervising their work.
6. ID.; ID.; FAILURE TO PRESENT EVIDENCE TO SUPPORT CLAIM FOR DAMAGES. Plaintiffs failure to present
documentary evidence to support their claim for damages for loss of earning capacity of the deceased victim does
not bar recovery of the damages, if such loss may be based sufficiently on their testimonies.
7. ID.; ID.; INDEMNITY FIXED AT P30,000. The indemnity for the death of a person was fixed by this Court at
(P30,000.00).

DECISION

CORTES, J.:

In this Petition, Pantranco North Express Inc. (PANTRANCO), asks the Court to review the decision of the Court of
Appeals in CA-G.R. No. 05494-95 which affirmed the decisions of the Court of First Instance of Rosales, Pangasinan
in Civil Case No. 561-R and Civil Case No. 589-R wherein PANTRANCO was ordered to pay damages and attorneys
fees to herein private respondents.
chanrob les vi rtual lawlib rary

The pertinent fact are as follows:

chanrob1es vi rt ual 1aw li bra ry

At about 7:00 oclock in the morning of June 12, 1981, the spouses Ceasar and Marilyn Baesa and their children
Harold Jim, Marcelino and Maricar, together with spouses David Ico and Fe O. Ico with their son Erwin Ico and seven
other persons, were aboard a passenger jeepney on their way to a picnic at Malalam River, Ilagan, Isabela, to
celebrate the fifth wedding anniversary of Ceasar and Marilyn Baesa.
The group, numbering fifteen (15) persons, rode in the passenger jeepney driven by David Ico, who was also the
registered owner thereof. From Ilagan, Isabela, they proceeded to Barrio Capayacan to deliver some viands to one
Mrs. Bascos and thenceforth to San Felipe, taking the highway going to Malalam River. Upon reaching the highway,
the jeepney turned right and proceeded to Malalam River at a speed of about 20 kph. While they were proceeding
towards Malalam River, a speeding PANTRANCO bus from Aparri, on its regular route to Manila, encroached on the
jeepneys lane while negotiating a curve, and collided with it.
As a result of the accident David Ico, spouses Ceasar Baesa and Marilyn Baesa and their children, Harold Jim and
Marcelino Baesa, died while the rest of the passengers suffered injuries. The jeepney was extensively damaged.
After the accident the driver of the PANTRANCO Bus, Ambrosio Ramirez, boarded a car and proceeded to Santiago,
Isabela. From that time on up to the present, Ramirez has never been seen and has apparently remained in hiding.
All the victims and/or their surviving heirs except herein private respondents settled the case amicably under the "No
Fault" insurance coverage of PANTRANCO.
Maricar Baesa through her guardian Francisca O. Bascos and Fe O. Ico for herself and for her minor children, filed
separate actions for damages arising from quasi-delict against PANTRANCO, respectively docketed as Civil Case No.
561-R and 589-R of the Court of First Instance of Pangasinan.
In its answer, PANTRANCO, aside from pointing to the late David Icos alleged negligence as the proximate cause of
the accident, invoked the defense of due diligence in the selection and supervision of its driver, Ambrosio
Ramirez.
chan rob lesvi rtualaw lib rary

On July 3, 1984, the CFI of Pangasinan rendered a decision against PANTRANCO awarding the total amount of Two
Million Three Hundred Four Thousand Six Hundred Forty-Seven (P2,304,647.00) as damages, plus 10% thereof as

attorneys fees and costs to Maricar Baesa in Civil Case No. 561-R, and the total amount of Six Hundred Fifty Two
Thousand Six Hundred Seventy-Two Pesos (P652,672.00) as damages, plus 10% thereof as attorneys fees and
costs to Fe Ico and her children in Civil Case No. 589-R. On appeal, the cases were consolidated and the Court of
Appeals modified the decision of the trial court by ordering PANTRANCO to pay the total amount of One Million One
Hundred Eighty-Nine Thousand Nine Hundred Twenty Seven Pesos (P1,189,927.00) as damages, plus Twenty
Thousand Pesos (P20,000.00) as attorneys fees to Maricar Baesa, and the total amount of Three Hundred FortyFour Thousand Pesos (P344,000.00) plus Ten Thousand Pesos (P10,000.00) as attorneys fees to Fe Ico and her
children, and to pay the costs in both cases. The dispositive portion of the assailed decision reads as follows:
cha nrob 1es vi rtua l 1aw lib rary

WHEREFORE, the decision appealed from is hereby modified by ordering the defendant PANTRANCO North Express,
Inc. to pay:
chanrob1es vi rtua l 1aw lib ra ry

I. The plaintiff in Civil Case No. 561-R, Maricar Bascos Baesa, the following damages:

chan rob1es v irt ual 1aw l ibra ry

A) As compensatory damages for the death of Ceasar Baesa P30,000.00;

B) As compensatory damages for the death of Marilyn Baesa P30,000.00;
C) As compensatory damages for the death of Harold Jim Baesa and Marcelino Baesa P30,000.00;
D) For the loss of earnings of Ceasar Baesa P630,000.00;
E) For the loss of earnings of Marilyn Bascos Baesa P375,000.00;
F) For the burial expenses of the deceased Ceasar and Marilyn Baesa P41,200.00;
G) For hospitalization expenses of Maricar Baesa P3,727.00;
H) As moral damages P50,000.00;
I) As attorneys fees P20,000.00;
II. The plaintiffs in Civil Case No. 589-R, the following damages:

chanrob1e s virtual 1aw lib rary

A) As compensatory damages for the death of David Ico P30,000.00;

B) For loss of earning capacity of David Ico P252,000.00;
C) As moral damages for the death of David Ico and the injury of Fe Ico P30,000.00
D) As payment for the jeepney P20,000.00;
E) For the hospitalization of Fe Ico P12,000.000;
F) And for attorneys fees P10,000.00;
and to pay the costs in both cases.
The amount of P25,000 paid to Maricar Bascos Baesa, plaintiff in Civil Case No. 561-R, and the medical expenses in
the sum of P3,273.55, should be deducted from the award in her favor.
chanro bles vi rt ual lawli bra ry

All the foregoing amounts herein awarded except the costs shall earn interest at the legal rate from date of this
decision until fully paid. [CA Decision, pp. 14-15; Rollo, pp. 57-58.]
PANTRANCO filed a motion for reconsideration of the Court of Appeals decision, but on June 26, 1987, it denied the
same for lack of merit. PANTRANCO then filed the instant petition for review.
I
Petitioner faults the Court of Appeals for not applying the doctrine of the "last clear chance" against the jeepney
driver. Petitioner claims that under the circumstances of the case, it was the driver of the passenger jeepney who

had the last clear chance to avoid the collision and was therefore negligent in failing to utilize with reasonable care
and competence his then existing opportunity to avoid the harm.
The doctrine of the last clear chance was defined by this Court in the case of Ong v. Metropolitan Water District, 104
Phil. 397 (1958), in this wise:
chan rob1e s virtual 1aw lib rary

The doctrine of the last clear chance simply, means that the negligence of a claimant does not preclude a recovery
for the negligence of defendant where it appears that the latter, by exercising reasonable care and prudence, might
have avoided injurious consequences to claimant notwithstanding his negligence.
The doctrine applies only in a situation where the plaintiff was guilty of prior or antecedent negligence but the
defendant, who had the last fair chance to avoid the impending harm and failed to do so, is made liable for all the
consequences of the accident notwithstanding the prior negligence of the plaintiff [Picart v. Smith, 37 Phil. 809
(1918); Glan Peoples Lumber and Hardware, Et. Al. v. Intermediate Appellate Court, Cecilia Alferez Vda. de Calibo,
Et Al., G.R. No. 70493, May 18, 1989]. The subsequent negligence of the defendant in failing to exercise ordinary
care to avoid injury to plaintiff becomes the immediate or proximate cause of the accident which intervenes between
the accident and the more remote negligence of the plaintiff, thus making the defendant liable to the plaintiff [Picart
v. Smith, supra].
Generally, the last clear chance doctrine is invoked for the purpose of making a defendant liable to a plaintiff who
was guilty of prior or antecedent negligence, although it may also be raised as a defense to defeat claim for
damages.
chanrobles lawlib rary : re dnad

To avoid liability for the negligence of its driver, petitioner claims that the original negligence of its driver was not
the proximate cause of the accident and that the sole proximate cause was the supervening negligence of the
jeepney driver David Ico in failing to avoid the accident. It is petitioners position that even assuming arguendo, that
the bus encroached into the lane of the jeepney, the driver of the latter could have swerved the jeepney towards the
spacious dirt shoulder on his right without danger to himself or his passengers.
The above contention of petitioner is manifestly devoid of merit.
Contrary to the petitioners contention, the doctrine of "last clear chance" finds no application in this case. For the
doctrine to be applicable, it is necessary to show that the person who allegedly had the last opportunity to avert the
accident was aware of the existence of the peril or should, with exercise of due care, have been aware of it. One
cannot be expected to avoid an accident or injury if he does not know or could not have known the existence of the
peril. In this case, there is nothing to show that the jeepney driver David Ico knew of the impending danger. When
he saw at a distance that the approaching bus was encroaching on his lane, he did not immediately swerve the
jeepney to the dirt shoulder on his right since he must have assumed that the bus driver will return the bus to its
own lane upon seeing the jeepney approaching from the opposite direction. As held by this Court in the case of Vda.
De Bonifacio v. BLTB, G.R. No. L-26810, August 31, 1970, 34 SCRA 618, a motorist who is properly proceeding on
his own side of the highway is generally entitled to assume that an approaching vehicle coming towards him on the
wrong side, will return to his proper lane of traffic. There was nothing to indicate to David Ico that the bus could not
return to its own lane or was prevented from returning to the proper lane by anything beyond the control of its
driver. Leo Marantan, an alternate driver of the Pantranco bus who was seated beside the driver Ramirez at the time
of the accident, testified that Ramirez had no choice but to swerve the steering wheel to the left and encroach on the
jeepneys lane because there was a steep precipice on the right [CA Decision, p. 2; Rollo, p. 45]. However, this is
belied by the evidence on record which clearly shows that there was enough space to swerve the bus back to its own
lane without any danger [CA Decision, p. 7; Rollo, p. 50].
Moreover, both the trial court and the Court of Appeals found that at the time of the accident the Pantranco bus was
speeding towards Manila [CA Decision, p. 2; Rollo, p. 45]. By the time David Ico must have realized that the bus was
not returning to its own lane, it was already too late to swerve the jeepney to his right to prevent an accident. The
speed at which the approaching bus was running prevented David Ico from swerving the jeepney to the right
shoulder of the road in time to avoid the collision. Thus, even assuming that the jeepney driver perceived the danger
a few seconds before the actual collision, he had no opportunity to avoid it. This Court has held that the last clear
chance doctrine "can never apply where the party charged is required to act instantaneously, and if the injury cannot
be avoided by the application of all means at hand after the peril is or should have been discovered" [Ong v.
Metropolitan Water District, supra].
chanrob les.com : vi rtua l law lib ra ry

Petitioner likewise insists that David Ico was negligent in failing to observe Section 43 (c), Article III Chapter IV of
Republic Act No. 4136 * which provides that the driver of a vehicle entering a through highway or a stop intersection
shall yield the right of way to all vehicles approaching in either direction on such through highway.

Petitioners misplaced reliance on the aforesaid law is readily apparent in this case. The cited law itself provides that
it applies only to vehicles entering a through highway or a stop intersection. At the time of the accident, the jeepney
had already crossed the intersection and was on its way to Malalam River. Petitioner itself cited Fe Icos testimony
that the accident occurred after the jeepney had travelled a distance of about two (2) meters from the point of
intersection [Petition p. 10; Rollo, p. 27]. In fact, even the witness for the petitioner, Leo Marantan, testified that
both vehicles were coming from opposite directions [CA Decision, p. 7; Rollo, p. 50], clearly indicating that the
jeepney had already crossed the intersection.
Considering the foregoing, the Court finds that the negligence of petitioners driver in encroaching into the lane of
the incoming jeepney and in failing to return the bus to its own lane immediately upon seeing the jeepney coming
from the opposite direction was the sole and proximate cause of the accident without which the collision would not
have occurred. There was no supervening or intervening negligence on the part of the jeepney driver which would
have made the prior negligence of petitioners driver a mere remote cause of the accident.
II
On the issue of its liability as an employer, petitioner claims that it had observed the diligence of a good father of a
family to prevent damage, conformably to the last paragraph of Article 2180 of the Civil Code. Petitioner adduced
evidence to show that in hiring its drivers, the latter are required to have professional drivers license and police
clearance. The drivers must also pass written examinations, interviews and practical driving tests, and are required
to undergo a six-month training period. Rodrigo San Pedro, petitioners Training Coordinator, testified on petitioners
policy of conducting regular and continuing training programs and safety seminars for its drivers, conductors,
inspectors and supervisors at a frequency rate of at least two (2) seminars a month.
On this point, the Court quotes with approval the following findings of the trial court which was adopted by the Court
of Appeals in its challenged decision:
c hanrob1es vi rt ual 1aw li bra ry

When an injury is caused by the negligence of an employee, there instantly arises a presumption that the employer
has been negligent either in the selection of his employees or in the supervision over their acts. Although this
presumption is only a disputable presumption which could be overcome by proof of diligence of a good father of a
family, this Court believes that the evidence submitted by the defendant to show that it exercised the diligence of a
good father of a family in the case of Ramirez, as a company driver is far from sufficient. No support evidence has
been adduced. The professional drivers license of Ramirez has not been produced. There is no proof that he is
between 25 to 38 years old. There is also no proof as to his educational attainment, his age, his weight and the fact
that he is married or not. Neither are the result of the written test, psychological and physical test, among other
tests, have been submitted in evidence [sic]. His NBI or police clearances and clearances from previous employment
were not marked in evidence. No evidence was presented that Ramirez actually and really attended the seminars.
Vital evidence should have been the certificate of attendance or certificate of participation or evidence of such
participation like a logbook signed by the trainees when they attended the seminars. If such records are not
available, the testimony of the classmates that Ramirez was their classmate in said seminar (should have been
presented) [CA Decision, pp. 8-9; Rollo, pp. 51-52].
c hanro bles law lib rary

Petitioner contends that the fact that Ambrosio Ramirez was employed and remained as its driver only means that
he underwent the same rigid selection process and was subjected to the same strict supervision imposed by
petitioner on all applicants and employees. It is argued by the petitioner that unless proven otherwise, it is
presumed that petitioner observed its usual recruitment procedure and company polices on safety and efficiency
[Petition, p. 20; Rollo, p. 37].
The Court finds the above contention unmeritorious.
The finding of negligence on the part of its driver Ambrosio Ramirez gave rise to the presumption of negligence on
the part of petitioner and the burden of proving that it exercised due diligence not only in the selection of its
employees but also in adequately supervising their work rests with the petitioner [Lilius v. Manila Railroad Company,
59 Phil. 758 (1934); Umali v. Bacani, G.R. No. L-40570, June 30, 1976, 69 SCRA 623]. Contrary to petitioners
claim, there is no presumption that the usual recruitment procedures and safety standards were observed. The mere
issuance of rules and regulations and the formulation of various company policies on safety, without showing that
they are being complied with, are not sufficient to exempt petitioner from liability arising from the negligence of its
employee. It is incumbent upon petitioner to show that in recruiting and employing the erring driver, the recruitment
procedures and company policies on efficiency and safety were followed. Petitioner failed to do this. Hence, the Court
finds no cogent reason to disturb the finding of both the trial court and the Court of Appeals that the evidence

presented by the petitioner, which consists mainly of the uncorroborated testimony of its Training Coordinator, is
insufficient to overcome the presumption of negligence against petitioner.
c ralawnad

III
On the question of damages, petitioner claims that the Court of Appeals erred in fixing the damages for the loss of
earning capacity of the deceased victims. Petitioner assails respondent courts findings because no documentary
evidence in support thereof, such as income tax returns, pay-rolls, pay slips or invoices obtained in the usual course
of business, were presented [Petition, p. 22; Rollo, p. 39]. Petitioner argues that the "bare and self-serving
testimonies of the wife of the deceased David Ico and the mother of the deceased Marilyn Baesa . . . have no
probative value to sustain in law the Court of Appeals conclusion on the respective earnings of the deceased
victims." [Petition, pp. 21-22; Rollo, pp. 38-39.] It is petitioners contention that the evidence presented by the
private respondent does not meet the requirements of clear and satisfactory evidence to prove actual and
compensatory damages.
The Court finds that the Court of Appeals committed no reversible error in fixing the amount of damages for the loss
of earning capacity of the deceased victims. While it is true that private respondents should have presented
documentary evidence to support their claim for damages for loss of earning capacity of the deceased victims, the
absence thereof does not necessarily bar the recovery of the damages in question. The testimony of Fe Ico and
Francisca Bascos as to the earning capacity of David Ico, and the spouses Baesa, respectively, are sufficient to
establish a basis from which the court can make a fair and reasonable estimate of the damages for the loss of
earning capacity of the three deceased victims. Moreover, in fixing the damages for loss of earning capacity of a
deceased victim, the court can consider the nature of his occupation, his educational attainment and the state of his
health at the time of death.
In the instant case, David Ico was thirty eight (38) years old at the time of his death in 1981 and was driving his
own passenger jeepney. The spouses Ceasar and Marilyn Baesa were both thirty (30) years old at the time of their
death. Ceasar Baesa was a commerce degree holder and the proprietor of the Cauayan Press, printer of the Cauayan
Valley Newspaper and the Valley Times at Cauayan, Isabela. Marilyn Baesa graduated as a nurse in 1976 and at the
time of her death, was the company nurse, personnel manager, treasurer and cashier of the Ilagan Press at Ilagan,
Isabela. Respondent court duly considered these factors, together with the uncontradicted testimonies of Fe Ico and
Francisca Bascos, in fixing the amount of damages for the loss of earning capacity of David Ico and the spouses
Baesa.
chanrobles.com:c ralaw: red

However, it should be pointed out that the Court of Appeals committed error in fixing the compensatory damages for
the death of Harold Jim Baesa and Marcelino Baesa. Respondent court awarded to plaintiff (private respondent)
Maricar Baesa Thirty Thousand Pesos (P30,000.00) as "compensatory damages for the death of Harold Jim Baesa
and Marcelino Baesa." [CA Decision, p. 14; Rollo, 57]. In other words, the Court of Appeals awarded only Fifteen
Thousand Pesos (P15,000.00) as indemnity for the death of Harold Jim Baesa and another Fifteen Thousand Pesos
(P15,000.00) for the death of Marcelino Baesa. This is clearly erroneous. In the case of People v. de la Fuente, G.R.
Nos. 63251-52, December 29, 1983, 126 SCRA 518, the indemnity for the death of a person was fixed by this Court
at Thirty Thousand Pesos (P30,000.00). Plaintiff Maricar Baesa should therefore be awarded Sixty Thousand Pesos
(P60,000.00) as indemnity for the death of her brothers, Harold Jim Baesa and Marcelino Baesa or Thirty Thousand
Pesos (P30,000.00) for the death of each brother.
The other items of damages awarded by respondent court which were not challenged by the petitioner are hereby
affirmed.
WHEREFORE, premises considered, the petition is DENIED, and the decision of respondent Court of Appeals is hereby
AFFIRMED with the modification that the amount of compensatory damages for the death of Harold Jim Baesa and
Marcelino Baesa are increased to Thirty Thousand Pesos (P30,000.00) each.
chanrobles law l ibra ry

SO ORDERED.

Torts And Damages Case Digest: Pantranco

North Express, Inc. V. Maricar Baesa (1989)
G.R. 79050-51

November 14, 1989

Lessons Applicable: Last Clear Chance (Torts and Damages)

FACTS:

Spouses Baesa, their 4 children, the Ico spouses and their son and 7 other people
boarded a passenger jeep driven by David Ico to go to a picnic in Isabela, to celebrate
the 5th wedding anniversary of the Baesa spouses
While they were proceeding towards Malalam River at a speed ofabout 20 kph, a
speeding PANTRANCO bus from Aparri, on a route to Manila, encroached on the
jeepneys lane while negotiating a curve, and collided with it.
As a result, the entire Baesa family, except for their daughter Maricar Baesa, as well as
David Ico, died, and the restsuffered from injuries. Maricar Baesa, through her
guardian filed separate actions for damages arising from quasi-delict against
PANTRANCO.
PANTRANCO: alleged David Ico's negligence as a proximate cause of the accident and
invoked the defense of due diligence in the selection and supervision of its driver.
CA upheld RTC: favor of Baesa

ISSUE: W/N the last clear chance applies thereby making David Ico who had the chance to

avoid the collision negligent in failing to utilize with reasonable care and competence

HELD: NO.

Generally, the last clear change doctrine is invoked for the purpose of making
a defendant liable to a plaintiff who was guilty of prior or antecedent negligence,
although it may also be raised as a defense to defeat claim for damages
For the last clear chance doctrine to apply, it is necessary to show that the person who
allegedly has the last opportunity to avert the accident was aware of the existence of
the peril, or should, with exercise of due care, have been aware of it
there is nothing to show that the jeepney driver David Ico knew of the impending
danger

When he saw at a distance that the approaching bus was encroaching on his lane, he
did not immediately swerve the jeepney to the dirt shoulder on his right since he must
have assumed that the bus driver will return the bus to its own lane upon seeing the
jeepney approaching form the opposite direction
Even assuming that the jeepney driver perceived the danger a few seconds before the
actual collision, he had no opportunity to avoid it
last clear chance doctrine can never apply where the party charged is required to act instantaneously, and if
the injury cannot be avoided by the application of all means at hand after the peril is or should have been
discovered
PANTRANGCO V MARICAR BAESA (aided by her guardians) 19897am: Baesas & Icos were on their way to a
picnic. They (15 people) boarded a jeepney driven & owned by David Ico.Upon reaching the highway, the
jeepney turned right towards the direction of the river where they would have their picnic. A speeding bus
owned by Pantrangco Lines enroached on the jeepney's lane while negotiating a curve andcollided with it. All
the Baesas, except for the daughter Maricar, along with all the Icos died. The bus driver was seen boarding car
and was never seen/found ever since.All the victims' heirs except for Maricar settled with Pantrangco.Maricar
filed an action for damages against Pantrangco based on quasi-delict.

Pantrangco Defense:
1 Jeep driver's negligence is the proximate cause of the accident2 Due diligence in the selection and supervision
of its driver 3 Jeep had the last clear chance of avoiding the accident by swerving towards the dirt shoulder.4
Jeep driver Ico was negligent in failing to observe Section 43 (c), Article III Chapter IV of RA4136 which
providesthat the driver of a vehicle entering a through highway or a stop intersection shall yield the right of way
to all vehiclesapproaching in either direction on such through highway.CFI & CA: in favor of Baesa
SC: DOCTRINE OF LAST CLEAR CHANCE N/A. PANTRANGCO STILL LIABLE
One can't be expected to avoid an accident or injury if he does not know or could not have known the existence
of the peril. there is nothing to show that the jeepney driver David Ico knew of the impending danger. When he
saw at adistance that the approaching bus was encroaching on his lane, he did not immediately swerve the
jeepney to the dirtshoulder on his right since he must have assumed that the bus driver will return the bus to its
own lane upon seeing the jeepney.a motorist who is properly proceeding on his own side of the highway is
generally entitled to assume that anapproaching vehicle coming towards him on the wrong side, will return to
his proper lane of traffic.Even assuming that the jeepney driver perceived the danger a few seconds before the
actual collision, he had noopportunity to avoid it. This Court has held that the last clear chance doctrine can
never apply where the party chargedis required to act instantaneously, and if the injury cannot be avoided by
the application of all means at hand after the peril is or should have been discovered
Section 43 (c), Article III Chapter IV of RA4136 N/A
Jeep has already entered the highway at the time of collission.
Conclusion:

negligence of petitioners driver in encroaching into the lane of the incoming jeepney and in failing toreturn the
bus to its own lane immediately upon seeing the jeepney coming from the opposite direction was the sole and
proximate cause of the accident without which the collision would not have occurred. There was no supervening
or intervening negligence on the part of the jeepney driver which would have made the prior negligence of
petitionersdriver a mere remote cause of the accident.
PETITIONER ALSO NEGLIGENT AS AN EMPLOYER
Claim that it subjected its drivers to periodic tests etc was not substantiated. No documents/ evidence were
presented.PANTRANCO pahabol argument: There is a presumption that it observed its usual recruitment
procedure & company policy on safety & efficiencySC: no such presumption. Finding of negligence on part of its
driver = presumption of employer negligence002E