Republic of the Philippines

SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 145391
August 26, 2002
AVELINO CASUPANAN and ROBERTO CAPITULO, petitioners,
vs.
MARIO LLAVORE LAROYA, respondent.
CARPIO, J.:
The Case
This is a petition for review on certiorari to set aside the Resolution 1 dated December 28, 1999
dismissing the petition for certiorari and the Resolution 2 dated August 24, 2000 denying the
motion for reconsideration, both issued by the Regional Trial Court of Capas, Tarlac, Branch 66, in
Special Civil Action No. 17-C (99).
The Facts
Two vehicles, one driven by respondent Mario Llavore Laroya ("Laroya" for brevity) and the other
owned by petitioner Roberto Capitulo ("Capitulo" for brevity) and driven by petitioner Avelino
Casupanan ("Casupanan" for brevity), figured in an accident. As a result, two cases were filed
with the Municipal Circuit Trial Court ("MCTC" for brevity) of Capas, Tarlac. Laroya filed a criminal
case against Casupanan for reckless imprudence resulting in damage to property, docketed as
Criminal Case No. 002-99. On the other hand, Casupanan and Capitulo filed a civil case against
Laroya for quasi-delict, docketed as Civil Case No. 2089.
When the civil case was filed, the criminal case was then at its preliminary investigation stage.
Laroya, defendant in the civil case, filed a motion to dismiss the civil case on the ground of
forum-shopping considering the pendency of the criminal case. The MCTC granted the motion in
the Order of March 26, 1999 and dismissed the civil case.
On Motion for Reconsideration, Casupanan and Capitulo insisted that the civil case is a separate
civil action which can proceed independently of the criminal case. The MCTC denied the motion
for reconsideration in the Order of May 7, 1999. Casupanan and Capitulo filed a petition for
certiorari under Rule 65 before the Regional Trial Court ("Capas RTC" for brevity) of Capas, Tarlac,
Branch 66,3 assailing the MCTCs Order of dismissal.
The Trial Courts Ruling
The Capas RTC rendered judgment on December 28, 1999 dismissing the petition for certiorari
for lack of merit. The Capas RTC ruled that the order of dismissal issued by the MCTC is a final
order which disposes of the case and therefore the proper remedy should have been an appeal.
The Capas RTC further held that a special civil action for certiorari is not a substitute for a lost
appeal. Finally, the Capas RTC declared that even on the premise that the MCTC erred in
dismissing the civil case, such error is a pure error of judgment and not an abuse of discretion.
Casupanan and Capitulo filed a Motion for Reconsideration but the Capas RTC denied the same in
the Resolution of August 24, 2000.
Hence, this petition.
The Issue
The petition premises the legal issue in this wise:
"In a certain vehicular accident involving two parties, each one of them may think and
believe that the accident was caused by the fault of the other. x x x [T]he first party,
believing himself to be the aggrieved party, opted to file a criminal case for reckless
imprudence against the second party. On the other hand, the second party, together with
his operator, believing themselves to be the real aggrieved parties, opted in turn to file a

civil case for quasi-delict against the first party who is the very private complainant in the
criminal case."4
Thus, the issue raised is whether an accused in a pending criminal case for reckless imprudence
can validly file, simultaneously and independently, a separate civil action for quasi-delict against
the private complainant in the criminal case.
The Courts Ruling
Casupanan and Capitulo assert that Civil Case No. 2089, which the MCTC dismissed on the
ground of forum-shopping, constitutes a counterclaim in the criminal case. Casupanan and
Capitulo argue that if the accused in a criminal case has a counterclaim against the private
complainant, he may file the counterclaim in a separate civil action at the proper time. They
contend that an action on quasi-delict is different from an action resulting from the crime of
reckless imprudence, and an accused in a criminal case can be an aggrieved party in a civil case
arising from the same incident. They maintain that under Articles 31 and 2176 of the Civil Code,
the civil case can proceed independently of the criminal action. Finally, they point out that
Casupanan was not the only one who filed the independent civil action based on quasi-delict but
also Capitulo, the owner-operator of the vehicle, who was not a party in the criminal case.
In his Comment, Laroya claims that the petition is fatally defective as it does not state the real
antecedents. Laroya further alleges that Casupanan and Capitulo forfeited their right to question
the order of dismissal when they failed to avail of the proper remedy of appeal. Laroya argues
that there is no question of law to be resolved as the order of dismissal is already final and a
petition for certiorari is not a substitute for a lapsed appeal.
In their Reply, Casupanan and Capitulo contend that the petition raises the legal question of
whether there is forum-shopping since they filed only one action - the independent civil action for
quasi-delict against Laroya.
Nature of the Order of Dismissal
The MCTC dismissed the civil action for quasi-delict on the ground of forum-shopping under
Supreme Court Administrative Circular No. 04-94. The MCTC did not state in its order of
dismissal5 that the dismissal was with prejudice. Under the Administrative Circular, the order of
dismissal is without prejudice to refiling the complaint, unless the order of dismissal expressly
states it is with prejudice.6 Absent a declaration that the dismissal is with prejudice, the same is
deemed without prejudice. Thus, the MCTCs dismissal, being silent on the matter, is a dismissal
without prejudice.
Section 1 of Rule 417 provides that an order dismissing an action without prejudice is not
appealable. The remedy of the aggrieved party is to file a special civil action under Rule 65.
Section 1 of Rule 41 expressly states that "where the judgment or final order is not appealable,
the aggrieved party may file an appropriate special civil action under Rule 65." Clearly, the
Capas RTCs order dismissing the petition for certiorari, on the ground that the proper remedy is
an ordinary appeal, is erroneous.
Forum-Shopping
The essence of forum-shopping is the filing of multiple suits involving the same parties for the
same cause of action, either simultaneously or successively, to secure a favorable judgment. 8
Forum-shopping is present when in the two or more cases pending, there is identity of parties,
rights of action and reliefs sought. 9 However, there is no forum-shopping in the instant case
because the law and the rules expressly allow the filing of a separate civil action which can
proceed independently of the criminal action.
Laroya filed the criminal case for reckless imprudence resulting in damage to property based on
the Revised Penal Code while Casupanan and Capitulo filed the civil action for damages based on
Article 2176 of the Civil Code. Although these two actions arose from the same act or omission,
they have different causes of action. The criminal case is based on culpa criminal punishable

under the Revised Penal Code while the civil case is based on culpa aquiliana actionable under
Articles 2176 and 2177 of the Civil Code. These articles on culpa aquiliana read:
"Art. 2176. Whoever by act or omission causes damage to another, there being fault or
negligence, is obliged to pay for the damage done. Such fault or negligence, if there is no
pre-existing contractual relation between the parties, is called a quasi-delict and is
governed by the provisions of this Chapter.
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."
Any aggrieved person can invoke these articles provided he proves, by preponderance of
evidence, that he has suffered damage because of the fault or negligence of another. Either the
private complainant or the accused can file a separate civil action under these articles. There is
nothing in the law or rules that state only the private complainant in a criminal case may invoke
these articles.
Moreover, paragraph 6, Section 1, Rule 111 of the 2000 Rules on Criminal Procedure ("2000
Rules" for brevity) expressly requires the accused to litigate his counterclaim in a separate civil
action, to wit:
"SECTION 1. Institution of criminal and civil actions. (a) x x x.
No counterclaim, cross-claim or third-party complaint may be filed by the accused in the
criminal case, but any cause of action which could have been the subject thereof may be
litigated in a separate civil action." (Emphasis supplied)
Since the present Rules require the accused in a criminal action to file his counterclaim in a
separate civil action, there can be no forum-shopping if the accused files such separate civil
action.
Filing of a separate civil action
Section 1, Rule 111 of the 1985 Rules on Criminal Procedure ("1985 Rules" for brevity), as
amended in 1988, allowed the filing of a separate civil action independently of the criminal
action provided the offended party reserved the right to file such civil action. Unless the offended
party reserved the civil action before the presentation of the evidence for the prosecution, all
civil actions arising from the same act or omission were deemed "impliedly instituted" in the
criminal case. These civil actions referred to the recovery of civil liability ex-delicto, the recovery
of damages for quasi-delict, and the recovery of damages for violation of Articles 32, 33 and 34
of the Civil Code on Human Relations.
Thus, to file a separate and independent civil action for quasi-delict under the 1985 Rules, the
offended party had to reserve in the criminal action the right to bring such action. Otherwise,
such civil action was deemed "impliedly instituted" in the criminal action. Section 1, Rule 111 of
the 1985 Rules provided as follows:
"Section 1. Institution of criminal and civil actions. When a criminal action is instituted,
the civil action for the recovery of civil liability is impliedly instituted with the criminal
action, unless the offended party waives the action, reserves his right to institute it
separately, or institutes the civil action prior to the criminal action.
Such civil action includes recovery of indemnity under the Revised Penal Code,
and damages under Articles 32, 33, 34 and 2176 of the Civil Code of the
Philippines arising from the same act or omission of the accused.
A waiver of any of the civil actions extinguishes the others. The institution of, or the
reservation of the right to file, any of said civil actions separately waives the others.

The reservation of the right to institute the separate civil actions shall be made before the
prosecution starts to present its evidence and under circumstances affording the offended
party a reasonable opportunity to make such reservation.
In no case may the offended party recover damages twice for the same act or omission of
the accused.
x x x." (Emphasis supplied)
Section 1, Rule 111 of the 1985 Rules was amended on December 1, 2000 and now provides as
follows:
"SECTION 1. Institution of criminal and civil actions. (a) When a criminal action is
instituted, the civil action for the recovery of civil liability arising from the
offense charged shall be deemed instituted with the criminal action unless the
offended party waives the civil action, reserves the right to institute it separately or
institutes the civil action prior to the criminal action.
The reservation of the right to institute separately the civil action shall be made before the
prosecution starts presenting its evidence and under circumstances affording the offended
party a reasonable opportunity to make such reservation.
xxx
(b) x x x
Where the civil action has been filed separately and trial thereof has not yet commenced,
it may be consolidated with the criminal action upon application with the court trying the
latter case. If the application is granted, the trial of both actions shall proceed in
accordance with section 2 of this rule governing consolidation of the civil and criminal
actions." (Emphasis supplied)
Under Section 1 of the present Rule 111, what is "deemed instituted" with the criminal action is
only the action to recover civil liability arising from the crime or ex-delicto. All the other civil
actions under Articles 32, 33, 34 and 2176 of the Civil Code are no longer "deemed instituted,"
and may be filed separately and prosecuted independently even without any reservation in the
criminal action. The failure to make a reservation in the criminal action is not a waiver of the
right to file a separate and independent civil action based on these articles of the Civil Code. The
prescriptive period on the civil actions based on these articles of the Civil Code continues to run
even with the filing of the criminal action. Verily, the civil actions based on these articles of the
Civil Code are separate, distinct and independent of the civil action "deemed instituted" in the
criminal action.10
Under the present Rule 111, the offended party is still given the option to file a separate civil
action to recover civil liability ex-delicto by reserving such right in the criminal action before the
prosecution presents its evidence. Also, the offended party is deemed to make such reservation
if he files a separate civil action before filing the criminal action. If the civil action to recover civil
liability ex-delicto is filed separately but its trial has not yet commenced, the civil action may be
consolidated with the criminal action. The consolidation under this Rule does not apply to
separate civil actions arising from the same act or omission filed under Articles 32, 33, 34 and
2176 of the Civil Code.11
Suspension of the Separate Civil Action
Under Section 2, Rule 111 of the amended 1985 Rules, a separate civil action, if reserved in the
criminal action, could not be filed until after final judgment was rendered in the criminal action. If
the separate civil action was filed before the commencement of the criminal action, the civil
action, if still pending, was suspended upon the filing of the criminal action until final judgment
was rendered in the criminal action. This rule applied only to the separate civil action filed to
recover liability ex-delicto. The rule did not apply to independent civil actions based on Articles

32, 33, 34 and 2176 of the Civil Code, which could proceed independently regardless of the filing
of the criminal action.
The amended provision of Section 2, Rule 111 of the 2000 Rules continues this procedure, to wit:
"SEC. 2. When separate civil action is suspended. After the criminal action has been
commenced, the separate civil action arising therefrom cannot be instituted until final
judgment has been entered in the criminal action.
If the criminal action is filed after the said civil action has already been
instituted, the latter shall be suspended in whatever stage it may be found
before judgment on the merits. The suspension shall last until final judgment is
rendered in the criminal action. Nevertheless, before judgment on the merits is
rendered in the civil action, the same may, upon motion of the offended party, be
consolidated with the criminal action in the court trying the criminal action. In case of
consolidation, the evidence already adduced in the civil action shall be deemed
automatically reproduced in the criminal action without prejudice to the right of the
prosecution to cross-examine the witnesses presented by the offended party in the
criminal case and of the parties to present additional evidence. The consolidated criminal
and civil actions shall be tried and decided jointly.
During the pendency of the criminal action, the running of the period of prescription of the
civil action which cannot be instituted separately or whose proceeding has been
suspended shall be tolled.
x x x." (Emphasis supplied)
Thus, Section 2, Rule 111 of the present Rules did not change the rule that the separate civil
action, filed to recover damages ex-delicto, is suspended upon the filing of the criminal action.
Section 2 of the present Rule 111 also prohibits the filing, after commencement of the criminal
action, of a separate civil action to recover damages ex-delicto.
When civil action may proceed independently
The crucial question now is whether Casupanan and Capitulo, who are not the offended parties in
the criminal case, can file a separate civil action against the offended party in the criminal case.
Section 3, Rule 111 of the 2000 Rules provides as follows:
"SEC 3. When civil action may proceed independently. - In the cases provided in Articles
32, 33, 34 and 2176 of the Civil Code of the Philippines, the independent civil action may
be brought by the offended party. It shall proceed independently of the criminal action
and shall require only a preponderance of evidence. In no case, however, may the
offended party recover damages twice for the same act or omission charged in the
criminal action." (Emphasis supplied)
Section 3 of the present Rule 111, like its counterpart in the amended 1985 Rules, expressly
allows the "offended party" to bring an independent civil action under Articles 32, 33, 34 and
2176 of the Civil Code. As stated in Section 3 of the present Rule 111, this civil action shall
proceed independently of the criminal action and shall require only a preponderance of evidence.
In no case, however, may the "offended party recover damages twice for the same act or
omission charged in the criminal action."
There is no question that the offended party in the criminal action can file an independent civil
action for quasi-delict against the accused. Section 3 of the present Rule 111 expressly states
that the "offended party" may bring such an action but the "offended party" may not recover
damages twice for the same act or omission charged in the criminal action. Clearly, Section 3 of
Rule 111 refers to the offended party in the criminal action, not to the accused.
Casupanan and Capitulo, however, invoke the ruling in Cabaero vs. Cantos12 where the Court
held that the accused therein could validly institute a separate civil action for quasi-delict against
the private complainant in the criminal case. In Cabaero, the accused in the criminal case filed

his Answer with Counterclaim for malicious prosecution. At that time the Court noted the
"absence of clear-cut rules governing the prosecution on impliedly instituted civil actions and the
necessary consequences and implications thereof." Thus, the Court ruled that the trial
court should confine itself to the criminal aspect of the case and disregard any counterclaim for
civil liability. The Court further ruled that the accused may file a separate civil case against the
offended party "after the criminal case is terminated and/or in accordance with the new Rules
which may be promulgated." The Court explained that a cross-claim, counterclaim or third-party
complaint on the civil aspect will only unnecessarily complicate the proceedings and delay the
resolution of the criminal case.
Paragraph 6, Section 1 of the present Rule 111 was incorporated in the 2000 Rules precisely to
address the lacuna mentioned in Cabaero. Under this provision, the accused is barred from filing
a counterclaim, cross-claim or third-party complaint in the criminal case. However, the same
provision states that "any cause of action which could have been the subject (of the
counterclaim, cross-claim or third-party complaint) may be litigated in a separate civil action."
The present Rule 111 mandates the accused to file his counterclaim in a separate civil actiosn
which shall proceed independently of the criminal action, even as the civil action of the offended
party is litigated in the criminal action.
Conclusion
Under Section 1 of the present Rule 111, the independent civil action in Articles 32, 33, 34 and
2176 of the Civil Code is not deemed instituted with the criminal action but may be filed
separately by the offended party even without reservation. The commencement of the criminal
action does not suspend the prosecution of the independent civil action under these articles of
the Civil Code. The suspension in Section 2 of the present Rule 111 refers only to the civil action
arising from the crime, if such civil action is reserved or filed before the commencement of the
criminal action.
Thus, the offended party can file two separate suits for the same act or omission. The first a
criminal case where the civil action to recover civil liability ex-delicto is deemed instituted, and
the other a civil case for quasi-delict - without violating the rule on non-forum shopping. The two
cases can proceed simultaneously and independently of each other. The commencement or
prosecution of the criminal action will not suspend the civil action for quasi-delict. The only
limitation is that the offended party cannot recover damages twice for the same act or omission
of the defendant. In most cases, the offended party will have no reason to file a second civil
action since he cannot recover damages twice for the same act or omission of the accused. In
some instances, the accused may be insolvent, necessitating the filing of another case against
his employer or guardians.
Similarly, the accused can file a civil action for quasi-delict for the same act or omission he is
accused of in the criminal case. This is expressly allowed in paragraph 6, Section 1 of the present
Rule 111 which states that the counterclaim of the accused "may be litigated in a separate
civil action." This is only fair for two reasons. First, the accused is prohibited from setting up any
counterclaim in the civil aspect that is deemed instituted in the criminal case. The accused is
therefore forced to litigate separately his counterclaim against the offended party. If the accused
does not file a separate civil action for quasi-delict, the prescriptive period may set in since the
period continues to run until the civil action for quasi-delict is filed.
Second, the accused, who is presumed innocent, has a right to invoke Article 2177 of the Civil
Code, in the same way that the offended party can avail of this remedy which is independent of
the criminal action. To disallow the accused from filing a separate civil action for quasi-delict,
while refusing to recognize his counterclaim in the criminal case, is to deny him due process of
law, access to the courts, and equal protection of the law.

Thus, the civil action based on quasi-delict filed separately by Casupanan and Capitulo is proper.
The order of dismissal by the MCTC of Civil Case No. 2089 on the ground of forum-shopping is
erroneous.
We make this ruling aware of the possibility that the decision of the trial court in the criminal
case may vary with the decision of the trial court in the independent civil action. This possibility
has always been recognized ever since the Civil Code introduced in 1950 the concept of an
independent civil action under Articles 32, 33, 34 and 2176 of the Code. But the law itself, in
Article 31 of the Code, expressly provides that the independent civil action "may proceed
independently of the criminal proceedings and regardless of the result of the latter." In Azucena
vs. Potenciano,13 the Court declared:
"x x x. There can indeed be no other logical conclusion than this, for to subordinate the
civil action contemplated in the said articles to the result of the criminal prosecution
whether it be conviction or acquittal would render meaningless the independent
character of the civil action and the clear injunction in Article 31 that this action 'may
proceed independently of the criminal proceedings and regardless of the result of the
latter."
More than half a century has passed since the Civil Code introduced the concept of a civil action
separate and independent from the criminal action although arising from the same act or
omission. The Court, however, has yet to encounter a case of conflicting and irreconcilable
decisions of trial courts, one hearing the criminal case and the other the civil action for quasidelict. The fear of conflicting and irreconcilable decisions may be more apparent than real. In any
event, there are sufficient remedies under the Rules of Court to deal with such remote
possibilities.
One final point. The Revised Rules on Criminal Procedure took effect on December 1, 2000 while
the MCTC issued the order of dismissal on December 28, 1999 or before the amendment of the
rules. The Revised Rules on Criminal Procedure must be given retroactive effect considering the
well-settled rule that "x x x statutes regulating the procedure of the court will be construed as applicable to
actions pending and undetermined at the time of their passage. Procedural laws are
retroactive in that sense and to that extent." 14
WHEREFORE, the petition for review on certiorari is hereby GRANTED. The Resolutions dated
December 28, 1999 and August 24, 2000 in Special Civil Action No. 17-C (99) are ANNULLED
and Civil Case No. 2089 is REINSTATED.
SO ORDERED.

Republic of the Philippines

SUPREME COURT
Manila
THIRD DIVISION
G.R. No. 184905
August 28, 2009
LAMBERT S. RAMOS, Petitioner,
vs.
C.O.L. REALTY CORPORATION, Respondent.
DECISION
YNARES-SANTIAGO, J.:
The issue for resolution is whether petitioner can be held solidarily liable with his driver, Rodel
Ilustrisimo, to pay respondent C.O.L. Realty the amount of P51,994.80 as actual damages
suffered in a vehicular collision.
The facts, as found by the appellate court, are as follows:
On or about 10:40 oclock in the morning of 8 March 2004, along Katipunan (Avenue), corner
Rajah Matanda (Street), Quezon City, a vehicular accident took place between a Toyota Altis
Sedan bearing Plate Number XDN 210, owned by petitioner C.O.L. Realty Corporation, and driven
by Aquilino Larin ("Aquilino"), and a Ford Expedition, owned by x x x Lambert Ramos (Ramos)
and driven by Rodel Ilustrisimo ("Rodel"), with Plate Number LSR 917. A passenger of the sedan,
one Estela Maliwat ("Estela") sustained injuries. She was immediately rushed to the hospital for
treatment.
(C.O.L. Realty) averred that its driver, Aquilino, was slowly driving the Toyota Altis car at a speed
of five to ten kilometers per hour along Rajah Matanda Street and has just crossed the center
lane of Katipunan Avenue when (Ramos) Ford Espedition violently rammed against the cars
right rear door and fender. With the force of the impact, the sedan turned 180 degrees towards
the direction where it came from.
Upon investigation, the Office of the City Prosecutor of Quezon City found probable cause to
indict Rodel, the driver of the Ford Expedition, for Reckless Imprudence Resulting in Damage to
Property. In the meantime, petitioner demanded from respondent reimbursement for the
expenses incurred in the repair of its car and the hospitalization of Estela in the aggregate
amount of P103,989.60. The demand fell on deaf ears prompting (C.O.L. Realty) to file a
Complaint for Damages based on quasi-delict before the Metropolitan Trial Court of Metro Manila
(MeTC), Quezon City, docketed as Civil Case No. 33277, and subsequently raffled to Branch 42.
As could well be expected, (Ramos) denied liability for damages insisting that it was the
negligence of Aquilino, (C.O.L. Realtys) driver, which was the proximate cause of the accident.
(Ramos) maintained that the sedan car crossed Katipunan Avenue from Rajah Matanda Street
despite the concrete barriers placed thereon prohibiting vehicles to pass through the
intersection.
(Ramos) further claimed that he was not in the vehicle when the mishap occurred. He asserted
that he exercised the diligence of a good father of a family in the selection and supervision of his
driver, Rodel.
Weighing the respective evidence of the parties, the MeTC rendered the Decision dated 1 March
2006 exculpating (Ramos) from liability, thus:

"WHEREFORE, the instant case is DISMISSED for lack of merit. The Counterclaims of the
defendant are likewise DISMISSED for lack of sufficient factual and legal basis.
SO ORDERED."
The aforesaid judgment did not sit well with (C.O.L. Realty) so that he (sic) appealed the same
before the RTC of Quezon City, raffled to Branch 215, which rendered the assailed Decision dated
5 September 2006, affirming the MeTCs Decision. (C.O.L. Realtys) Motion for Reconsideration
met the same fate as it was denied by the RTC in its Order dated 5 June 2007. 1
C.O.L. Realty appealed to the Court of Appeals which affirmed the view that Aquilino was
negligent in crossing Katipunan Avenue from Rajah Matanda Street since, as per Certification of
the Metropolitan Manila Development Authority (MMDA) dated November 30, 2004, such act is
specifically prohibited. Thus:
This is to certify that as per records found and available in this office the crossing of vehicles at
Katipunan Avenue from Rajah Matanda Street to Blue Ridge Subdivision, Quezon City has (sic)
not allowed since January 2004 up to the present in view of the ongoing road construction at the
area.2 (Emphasis supplied)
Barricades were precisely placed along the intersection of Katipunan Avenue and Rajah Matanda
Street in order to prevent motorists from crossing Katipunan Avenue. Nonetheless, Aquilino
crossed Katipunan Avenue through certain portions of the barricade which were broken, thus
violating the MMDA rule.3
However, the Court of Appeals likewise noted that at the time of the collision, Ramos vehicle
was moving at high speed in a busy area that was then the subject of an ongoing construction
(the Katipunan Avenue-Boni Serrano Avenue underpass), then smashed into the rear door and
fender of the passengers side of Aquilinos car, sending it spinning in a 180-degree turn. 4 It
therefore found the driver Rodel guilty of contributory negligence for driving the Ford Expedition
at high speed along a busy intersection.
Thus, on May 28, 2008, the appellate court rendered the assailed Decision, 5 the dispositive
portion of which reads, as follows:
WHEREFORE, the Decision dated 5 September 2006 of the Regional Trial Court of Quezon City,
Branch 215 is hereby MODIFIED in that respondent Lambert Ramos is held solidarily liable with
Rodel Ilustrisimo to pay petitioner C.O.L. Realty Corporation the amount of P51,994.80 as actual
damages. Petitioner C.O.L. Realty Corporations claim for exemplary damages, attorneys fees
and cost of suit are DISMISSED for lack of merit.
SO ORDERED.
Petitioner filed a Motion for Reconsideration but it was denied. Hence, the instant petition, which
raises the following sole issue:
THE COURT OF APPEALS DECISION IS CONTRARY TO LAW AND JURISPRUDENCE, AND THE
EVIDENCE TO SUPPORT AND JUSTIFY THE SAME IS INSUFFICIENT.
We resolve to GRANT the petition.
There is no doubt in the appellate courts mind that Aquilinos violation of the MMDA prohibition
against crossing Katipunan Avenue from Rajah Matanda Street was the proximate cause of the
accident. Respondent does not dispute this; in its Comment to the instant petition, it even
conceded that petitioner was guilty of mere contributory negligence. 6
Thus, the Court of Appeals acknowledged that:
The Certification dated 30 November 2004 of the Metropolitan Manila Development Authority
(MMDA) evidently disproved (C.O.L. Realtys) barefaced assertion that its driver, Aquilino, was not
to be blamed for the accident
"TO WHOM IT MAY CONCERN:
This is to certify that as per records found and available in this office the crossing of vehicles at
Katipunan Avenue from Rajah Matanda Street to Blue Ridge Subdivision, Quezon City has (sic)
not allowed since January 2004 up to the present in view of the ongoing road construction at the
area.
This certification is issued upon request of the interested parties for whatever legal purpose it
may serve."
(C.O.L. Realty) admitted that there were barricades along the intersection of Katipunan Avenue
and Rajah Matanda Street. The barricades were placed thereon to caution drivers not to pass
through the intersecting roads. This prohibition stands even if, as (C.O.L. Realty) claimed, the

"barriers were broken" at that point creating a small gap through which any vehicle could pass.
What is clear to Us is that Aquilino recklessly ignored these barricades and drove through it.
Without doubt, his negligence is established by the fact that he violated a traffic regulation. This
finds support in Article 2185 of the Civil Code
"Unless there is proof to the contrary, it is presumed that a person driving a motor vehicle has
been negligent if at the time of the mishap, he was violating any traffic regulation."
Accordingly, there ought to be no question on (C.O.L. Realtys) negligence which resulted in the
vehicular mishap.7
However, it also declared Ramos liable vicariously for Rodels contributory negligence in driving
the Ford Expedition at high speed along a busy intersection. On this score, the appellate court
made the following pronouncement:
As a professional driver, Rodel should have known that driving his vehicle at a high speed in a
major thoroughfare which was then subject of an on-going construction was a perilous act. He
had no regard to (sic) the safety of other vehicles on the road. Because of the impact of the
collision, (Aquilinos) sedan made a 180-degree turn as (Ramos) Ford Expedition careened and
smashed into its rear door and fender. We cannot exculpate Rodel from liability.
Having thus settled the contributory negligence of Rodel, this created a presumption of
negligence on the part of his employer, (Ramos). For the employer to avoid the solidary liability
for a tort committed by his employee, an employer must rebut the presumption by presenting
adequate and convincing proof that in the selection and supervision of his employee, he or she
exercises the care and diligence of a good father of a family. Employers must submit concrete
proof, including documentary evidence, that they complied with everything that was incumbent
on them.
(Ramos) feebly attempts to escape vicarious liability by averring that Rodel was highly
recommended when he applied for the position of family driver by the Social Service Committee
of his parish. A certain Ramon Gomez, a member of the churchs livelihood program, testified
that a background investigation would have to be made before an applicant is recommended to
the parishioners for employment. (Ramos) supposedly tested Rodels driving skills before
accepting him for the job. Rodel has been his driver since 2001, and except for the mishap in
2004, he has not been involved in any road accident.
Regrettably, (Ramos) evidence which consisted mainly of testimonial evidence remained
unsubstantiated and are thus, barren of significant weight. There is nothing on the records which
would support (Ramos) bare allegation of Rodels 10-year unblemished driving record. He failed
to present convincing proof that he went to the extent of verifying Rodels qualifications, safety
record, and driving history.
So too, (Ramos) did not bother to refute (C.O.L. Realtys) stance that his driver was texting with
his cellphone while running at a high speed and that the latter did not slow down albeit he knew
that Katipunan Avenue was then undergoing repairs and that the road was barricaded with
barriers. The presumption juris tantum that there was negligence in the selection of driver
remains unrebutted. As the employer of Rodel, (Ramos) is solidarily liable for the quasi-delict
committed by the former.1avvphi1
Certainly, in the selection of prospective employees, employers are required to examine them as
to their qualifications, experience and service records. In the supervision of employees, the
employer must formulate standard operating procedures, monitor their implementation and
impose disciplinary measures for the breach thereof. These, (Ramos) failed to do. 8
Petitioner disagrees, arguing that since Aquilinos willful disregard of the MMDA prohibition was
the sole proximate cause of the accident, then respondent alone should suffer the consequences
of the accident and the damages it incurred. He argues:
20. It becomes apparent therefore that the only time a plaintiff, the respondent herein, can
recover damages is if its negligence was only contributory, and such contributory negligence was
the proximate cause of the accident. It has been clearly established in this case, however, that
respondents negligence was not merely contributory, but the sole proximate cause of the
accident.
xxxx
22. As culled from the foregoing, respondent was the sole proximate cause of the accident.
Respondents vehicle should not have been in that position since crossing the said intersection

was prohibited. Were it not for the obvious negligence of respondents driver in crossing the
intersection that was prohibited, the accident would not have happened. The crossing of
respondents vehicle in a prohibited intersection unquestionably produced the injury, and without
which the accident would not have occurred. On the other hand, petitioners driver had the right
to be where he was at the time of the mishap. As correctly concluded by the RTC, the petitioners
driver could not be expected to slacken his speed while travelling along said intersection since
nobody, in his right mind, would do the same. Assuming, however, that petitioners driver was
indeed guilty of any contributory negligence, such was not the proximate cause of the accident
considering that again, if respondents driver did not cross the prohibited intersection, no
accident would have happened. No imputation of any lack of care on Ilustrisimos could thus be
concluded. It is obvious then that petitioners driver was not guilty of any negligence that would
make petitioner vicariously liable for damages.
23. As the sole proximate cause of the accident was respondents own driver, respondent cannot
claim damages from petitioner.9
On the other hand, respondent in its Comment merely reiterated the appellate courts findings
and pronouncements, conceding that petitioner is guilty of mere contributory negligence, and
insisted on his vicarious liability as Rodels employer under Article 2184 of the Civil Code.
Articles 2179 and 2185 of the Civil Code on quasi-delicts apply in this case, viz:
Article 2179. When the plaintiffs own negligence was the immediate and proximate cause of his
injury, he cannot recover damages. But if his negligence was only contributory, the immediate
and proximate cause of the injury being the defendants lack of due care, the plaintiff may
recover damages, but the courts shall mitigate the damages to be awarded.
Article 2185. Unless there is proof to the contrary, it is presumed that a person driving a motor
vehicle has been negligent if at the time of the mishap, he was violating any traffic regulation.
If the master is injured by the negligence of a third person and by the concurring contributory
negligence of his own servant or agent, the latters negligence is imputed to his superior and will
defeat the superiors action against the third person, assuming of course that the contributory
negligence was the proximate cause of the injury of which complaint is made. 10
Applying the foregoing principles of law to the instant case, Aquilinos act of crossing Katipunan
Avenue via Rajah Matanda constitutes negligence because it was prohibited by law. Moreover, it
was the proximate cause of the accident, and thus precludes any recovery for any damages
suffered by respondent from the accident.
Proximate cause is defined as that cause, which, in natural and continuous sequence, unbroken
by any efficient intervening cause, produces the injury, and without which the result would not
have occurred. And more comprehensively, the proximate legal cause is that acting first and
producing the injury, either immediately or by setting other events in motion, all constituting a
natural and continuous chain of events, each having a close causal connection with its
immediate predecessor, the final event in the chain immediately effecting the injury as a natural
and probable result of the cause which first acted, under such circumstances that the person
responsible for the first event should, as an ordinary 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.11
If Aquilino heeded the MMDA prohibition against crossing Katipunan Avenue from Rajah Matanda,
the accident would not have happened. This specific untoward event is exactly what the MMDA
prohibition was intended for. Thus, a prudent and intelligent person who resides within the
vicinity where the accident occurred, Aquilino had reasonable ground to expect that the accident
would be a natural and probable result if he crossed Katipunan Avenue since such crossing is
considered dangerous on account of the busy nature of the thoroughfare and the ongoing
construction of the Katipunan-Boni Avenue underpass. It was manifest error for the Court of
Appeals to have overlooked the principle embodied in Article 2179 of the Civil Code, that when
the plaintiffs own negligence was the immediate and proximate cause of his injury, he cannot
recover damages.
Hence, we find it unnecessary to delve into the issue of Rodels contributory negligence, since it
cannot overcome or defeat Aquilinos recklessness which is the immediate and proximate cause
of the accident. Rodels contributory negligence has relevance only in the event that Ramos
seeks to recover from respondent whatever damages or injuries he may have suffered as a

result; it will have the effect of mitigating the award of damages in his favor. In other words, an
assertion of contributory negligence in this case would benefit only the petitioner; it could not
eliminate respondents liability for Aquilinos negligence which is the proximate result of the
accident.
WHEREFORE, the petition is GRANTED. The Decision of the Court of Appeals dated May 28, 2008
in CA-G.R. SP No. 99614 and its Resolution of October 13, 2008 are hereby REVERSED and SET
ASIDE. The Decision of the Regional Trial Court of Quezon City, Branch 215 dated September 5,
2006 dismissing for lack of merit respondents complaint for damages is hereby REINSTATED.
SO ORDERED.

G.R. No. 150228

Republic of the Philippines

SUPREME COURT
Manila
FIRST DIVISION
July 30, 2009

BANK OF AMERICA NT & SA, Petitioner,

vs.
PHILIPPINE RACING CLUB, Respondent.
DECISION
LEONARDO-DE CASTRO, J.:
This is a petition for review on certiorari under Rule 45 of the Rules of Court from the Decision 1
promulgated on July 16, 2001 by the former Second Division of the Court of Appeals (CA), in CAG.R. CV No. 45371 entitled "Philippine Racing Club, Inc. v. Bank of America NT & SA," affirming
the Decision2 dated March 17, 1994 of the Regional Trial Court (RTC) of Makati, Branch 135 in
Civil Case No. 89-5650, in favor of the respondent. Likewise, the present petition assails the
Resolution3 promulgated on September 28, 2001, denying the Motion for Reconsideration of the
CA Decision.
The facts of this case as narrated in the assailed CA Decision are as follows:
Plaintiff-appellee PRCI is a domestic corporation which maintains several accounts with different
banks in the Metro Manila area. Among the accounts maintained was Current Account No. 58891012 with defendant-appellant BA (Paseo de Roxas Branch). The authorized joint signatories with
respect to said Current Account were plaintiff-appellees President (Antonia Reyes) and Vice
President for Finance (Gregorio Reyes).
On or about the 2nd week of December 1988, the President and Vice President of plaintiffappellee corporation were scheduled to go out of the country in connection with the
corporations business. In order not to disrupt operations in their absence, they pre-signed
several checks relating to Current Account No. 58891-012. The intention was to insure continuity
of plaintiff-appellees operations by making available cash/money especially to settle obligations
that might become due. These checks were entrusted to the accountant with instruction to make
use of the same as the need arose. The internal arrangement was, in the event there was need
to make use of the checks, the accountant would prepare the corresponding voucher and
thereafter complete the entries on the pre-signed checks.
It turned out that on December 16, 1988, a John Doe presented to defendant-appellant bank for
encashment a couple of plaintiff-appellee corporations checks (Nos. 401116 and 401117) with
the indicated value of P110,000.00 each. It is admitted that these 2 checks were among those
presigned by plaintiff-appellee corporations authorized signatories.
The two (2) checks had similar entries with similar infirmities and irregularities. On the space
where the name of the payee should be indicated (Pay To The Order Of) the following 2-line
entries were instead typewritten: on the upper line was the word "CASH" while the lower line had
the following typewritten words, viz: "ONE HUNDRED TEN THOUSAND PESOS ONLY." Despite the
highly irregular entries on the face of the checks, defendant-appellant bank, without as much as
verifying and/or confirming the legitimacy of the checks considering the substantial amount
involved and the obvious infirmity/defect of the checks on their faces, encashed said checks. A
verification process, even by was of a telephone call to PRCI office, would have taken less than
ten (10) minutes. But this was not done by BA. Investigation conducted by plaintiff-appellee
corporation yielded the fact that there was no transaction involving PRCI that call for the
payment of P220,000.00 to anyone. The checks appeared to have come into the hands of an
employee of PRCI (one Clarita Mesina who was subsequently criminally charged for qualified
theft) who eventually completed without authority the entries on the pre-signed checks. PRCIs
demand for defendant-appellant to pay fell on deaf ears. Hence, the complaint. 4
After due proceedings, the trial court rendered a Decision in favor of respondent, the dispositive
portion of which reads:
PREMISES CONSIDERED, judgment is hereby rendered in favor of plaintiff and against the
defendant, and the latter is ordered to pay plaintiff:
(1) The sum of Two Hundred Twenty Thousand (P220,000.00) Pesos, with legal interest to
be computed from date of the filing of the herein complaint;
(2) The sum of Twenty Thousand (P20,000.00) Pesos by way of attorneys fees;
(3) The sum of Ten Thousand (P10,000.00) Pesos for litigation expenses, and
(4) To pay the costs of suit.
SO ORDERED.5

Petitioner appealed the aforesaid trial court Decision to the CA which, however, affirmed said
decision in toto in its July 16, 2001 Decision. Petitioners Motion for Reconsideration of the CA
Decision was subsequently denied on September 28, 2001.
Petitioner now comes before this Court arguing that:
I. The Court of Appeals gravely erred in holding that the proximate cause of respondents loss
was petitioners encashment of the checks.
A. The Court of Appeals gravely erred in holding that petitioner was liable for the
amount of the checks despite the fact that petitioner was merely fulfilling its
obligation under law and contract.
B. The Court of Appeals gravely erred in holding that petitioner had a duty to verify
the encashment, despite the absence of any obligation to do so.
C. The Court of Appeals gravely erred in not applying Section 14 of the Negotiable
Instruments Law, despite its clear applicability to this case;
II. The Court of Appeals gravely erred in not holding that the proximate cause of respondents
loss was its own grossly negligent practice of pre-signing checks without payees and amounts
and delivering these pre-signed checks to its employees (other than their signatories).
III. The Court of Appeals gravely erred in affirming the trial courts award of attorneys fees
despite the absence of any applicable ground under Article 2208 of the Civil Code.
IV. The Court of Appeals gravely erred in not awarding attorneys fees, moral and exemplary
damages, and costs of suit in favor of petitioner, who clearly deserves them. 6
From the discussions of both parties in their pleadings, the key issue to be resolved in the
present case is whether the proximate cause of the wrongful encashment of the checks in
question was due to (a) petitioners failure to make a verification regarding the said checks with
the respondent in view of the misplacement of entries on the face of the checks or (b) the
practice of the respondent of pre-signing blank checks and leaving the same with its employees.
Petitioner insists that it merely fulfilled its obligation under law and contract when it encashed
the aforesaid checks. Invoking Sections 126 7 and 1858 of the Negotiable Instruments Law (NIL),
petitioner claims that its duty as a drawee bank to a drawer-client maintaining a checking
account with it is to pay orders for checks bearing the drawer-clients genuine signatures. The
genuine signatures of the clients duly authorized signatories affixed on the checks signify the
order for payment. Thus, pursuant to the said obligation, the drawee bank has the duty to
determine whether the signatures appearing on the check are the drawer-clients or its duly
authorized signatories. If the signatures are genuine, the bank has the unavoidable legal and
contractual duty to pay. If the signatures are forged and falsified, the drawee bank has the
corollary, but equally unavoidable legal and contractual, duty not to pay. 9
Furthermore, petitioner maintains that there exists a duty on the drawee bank to inquire from the
drawer before encashing a check only when the check bears a material alteration. A material
alteration is defined in Section 125 of the NIL to be one which changes the date, the sum
payable, the time or place of payment, the number or relations of the parties, the currency in
which payment is to be made or one which adds a place of payment where no place of payment
is specified, or any other change or addition which alters the effect of the instrument in any
respect. With respect to the checks at issue, petitioner points out that they do not contain any
material alteration.10 This is a fact which was affirmed by the trial court itself. 11
There is no dispute that the signatures appearing on the subject checks were genuine signatures
of the respondents authorized joint signatories; namely, Antonia Reyes and Gregorio Reyes who
were respondents President and Vice-President for Finance, respectively. Both pre-signed the
said checks since they were both scheduled to go abroad and it was apparently their practice to
leave with the company accountant checks signed in black to answer for company obligations
that might fall due during the signatories absence. It is likewise admitted that neither of the
subject checks contains any material alteration or erasure.
However, on the blank space of each check reserved for the payee, the following typewritten
words appear: "ONE HUNDRED TEN THOUSAND PESOS ONLY." Above the same is the typewritten
word, "CASH." On the blank reserved for the amount, the same amount of One Hundred Ten
Thousand Pesos was indicated with the use of a check writer. The presence of these irregularities
in each check should have alerted the petitioner to be cautious before proceeding to encash
them which it did not do.

It is well-settled that banks are engaged in a business impressed with public interest, and it is
their duty to protect in return their many clients and depositors who transact business with them.
They have the obligation to treat their clients account meticulously and with the highest degree
of care, considering the fiduciary nature of their relationship. The diligence required of banks,
therefore, is more than that of a good father of a family. 12
Petitioner asserts that it was not duty-bound to verify with the respondent since the amount
below the typewritten word "CASH," expressed in words, is the very same amount indicated in
figures by means of a check writer on the amount portion of the check. The amount stated in
words is, therefore, a mere reiteration of the amount stated in figures. Petitioner emphasizes that
a reiteration of the amount in words is merely a repetition and that a repetition is not an
alteration which if present and material would have enjoined it to commence verification with
respondent.13
We do not agree with petitioners myopic view and carefully crafted defense. Although not in the
strict sense "material alterations," the misplacement of the typewritten entries for the payee and
the amount on the same blank and the repetition of the amount using a check writer were
glaringly obvious irregularities on the face of the check. Clearly, someone made a mistake in
filling up the checks and the repetition of the entries was possibly an attempt to rectify the
mistake. Also, if the check had been filled up by the person who customarily accomplishes the
checks of respondent, it should have occurred to petitioners employees that it would be unlikely
such mistakes would be made. All these circumstances should have alerted the bank to the
possibility that the holder or the person who is attempting to encash the checks did not have
proper title to the checks or did not have authority to fill up and encash the same. As noted by
the CA, petitioner could have made a simple phone call to its client to clarify the irregularities
and the loss to respondent due to the encashment of the stolen checks would have been
prevented.
In the case at bar, extraordinary diligence demands that petitioner should have ascertained from
respondent the authenticity of the subject checks or the accuracy of the entries therein not only
because of the presence of highly irregular entries on the face of the checks but also of the
decidedly unusual circumstances surrounding their encashment. Respondents witness testified
that for checks in amounts greater than Twenty Thousand Pesos (P20,000.00) it is the companys
practice to ensure that the payee is indicated by name in the check. 14 This was not rebutted by
petitioner. Indeed, it is highly uncommon for a corporation to make out checks payable to "CASH"
for substantial amounts such as in this case. If each irregular circumstance in this case were
taken singly or isolated, the banks employees might have been justified in ignoring them.
However, the confluence of the irregularities on the face of the checks and circumstances that
depart from the usual banking practice of respondent should have put petitioners employees on
guard that the checks were possibly not issued by the respondent in due course of its business.
Petitioners subtle sophistry cannot exculpate it from behavior that fell extremely short of the
highest degree of care and diligence required of it as a banking institution.
Indeed, taking this with the testimony of petitioners operations manager that in case of an
irregularity on the face of the check (such as when blanks were not properly filled out) the bank
may or may not call the client depending on how busy the bank is on a particular day, 15 we are
even more convinced that petitioners safeguards to protect clients from check fraud are
arbitrary and subjective. Every client should be treated equally by a banking institution
regardless of the amount of his deposits and each client has the right to expect that every
centavo he entrusts to a bank would be handled with the same degree of care as the accounts of
other clients. Perforce, we find that petitioner plainly failed to adhere to the high standard of
diligence expected of it as a banking institution.
In defense of its cashier/tellers questionable action, petitioner insists that pursuant to Sections
1416 and 1617 of the NIL, it could validly presume, upon presentation of the checks, that the party
who filled up the blanks had authority and that a valid and intentional delivery to the party
presenting the checks had taken place. Thus, in petitioners view, the sole blame for this debacle
should be shifted to respondent for having its signatories pre-sign and deliver the subject
checks.18 Petitioner argues that there was indeed delivery in this case because, following
American jurisprudence, the gross negligence of respondents accountant in safekeeping the

subject checks which resulted in their theft should be treated as a voluntary delivery by the
maker who is estopped from claiming non-delivery of the instrument. 19
Petitioners contention would have been correct if the subject checks were correctly and properly
filled out by the thief and presented to the bank in good order. In that instance, there would be
nothing to give notice to the bank of any infirmity in the title of the holder of the checks and it
could validly presume that there was proper delivery to the holder. The bank could not be faulted
if it encashed the checks under those circumstances. However, the undisputed facts plainly show
that there were circumstances that should have alerted the bank to the likelihood that the
checks were not properly delivered to the person who encashed the same. In all, we see no
reason to depart from the finding in the assailed CA Decision that the subject checks are properly
characterized as incomplete and undelivered instruments thus making Section 15 20 of the NIL
applicable in this case.
However, we do agree with petitioner that respondents officers practice of pre-signing of blank
checks should be deemed seriously negligent behavior and a highly risky means of purportedly
ensuring the efficient operation of businesses. It should have occurred to respondents officers
and managers that the pre-signed blank checks could fall into the wrong hands as they did in this
case where the said checks were stolen from the company accountant to whom the checks were
entrusted.
Nevertheless, even if we assume that both parties were guilty of negligent acts that led to the
loss, petitioner will still emerge as the party foremost liable in this case. In instances where both
parties are at fault, this Court has consistently applied the doctrine of last clear chance in order
to assign liability.
In Westmont Bank v. Ong,21 we ruled:
[I]t is petitioner [bank] which had the last clear chance to stop the fraudulent encashment of
the subject checks had it exercised due diligence and followed the proper and regular banking
procedures in clearing checks. As we had earlier ruled, the one who had a last clear opportunity
to avoid the impending harm but failed to do so is chargeable with the consequences thereof. 22
(emphasis ours)
In the case at bar, petitioner cannot evade responsibility for the loss by attributing negligence on
the part of respondent because, even if we concur that the latter was indeed negligent in presigning blank checks, the former had the last clear chance to avoid the loss. To reiterate,
petitioners own operations manager admitted that they could have called up the client for
verification or confirmation before honoring the dubious checks. Verily, petitioner had the final
opportunity to avert the injury that befell the respondent. Failing to make the necessary
verification due to the volume of banking transactions on that particular day is a flimsy and
unacceptable excuse, considering that the "banking business is so impressed with public interest
where the trust and confidence of the public in general is of paramount importance such that the
appropriate standard of diligence must be a high degree of diligence, if not the utmost
diligence."23 Petitioners negligence has been undoubtedly established and, thus, pursuant to Art.
1170 of the NCC,24 it must suffer the consequence of said negligence.
In the interest of fairness, however, we believe it is proper to consider respondents own
negligence to mitigate petitioners liability. Article 2179 of the Civil Code provides:
Art. 2179. When the plaintiffs own negligence was the immediate and proximate cause of his
injury, he cannot recover damages. But if his negligence was only contributory, the immediate
and proximate cause of the injury being the defendants lack of due care, the plaintiff may
recover damages, but the courts shall mitigate the damages to be awarded.1avvph!1
Explaining this provision in Lambert v. Heirs of Ray Castillon, 25 the Court held:
The underlying precept on contributory negligence is that a plaintiff who is partly responsible for
his own injury should not be entitled to recover damages in full but must bear the consequences
of his own negligence. The defendant must thus be held liable only for the damages actually
caused by his negligence. xxx xxx xxx
As we previously stated, respondents practice of signing checks in blank whenever its
authorized bank signatories would travel abroad was a dangerous policy, especially considering
the lack of evidence on record that respondent had appropriate safeguards or internal controls to
prevent the pre-signed blank checks from falling into the hands of unscrupulous individuals and
being used to commit a fraud against the company. We cannot believe that there was no other

secure and reasonable way to guarantee the non-disruption of respondents business. As

testified to by petitioners expert witness, other corporations would ordinarily have another set of
authorized bank signatories who would be able to sign checks in the absence of the preferred
signatories.26 Indeed, if not for the fortunate happenstance that the thief failed to properly fill up
the subject checks, respondent would expectedly take the blame for the entire loss since the
defense of forgery of a drawers signature(s) would be unavailable to it. Considering that
respondent knowingly took the risk that the pre-signed blank checks might fall into the hands of
wrongdoers, it is but just that respondent shares in the responsibility for the loss.
We also cannot ignore the fact that the person who stole the pre-signed checks subject of this
case from respondents accountant turned out to be another employee, purportedly a clerk in
respondents accounting department. As the employer of the "thief," respondent supposedly had
control and supervision over its own employee. This gives the Court more reason to allocate part
of the loss to respondent.
Following established jurisprudential precedents, 27 we believe the allocation of sixty percent
(60%) of the actual damages involved in this case (represented by the amount of the checks with
legal interest) to petitioner is proper under the premises. Respondent should, in light of its
contributory negligence, bear forty percent (40%) of its own loss.
Finally, we find that the awards of attorneys fees and litigation expenses in favor of respondent
are not justified under the circumstances and, thus, must be deleted. The power of the court to
award attorneys fees and litigation expenses under Article 2208 of the NCC 28 demands factual,
legal, and equitable justification.
An adverse decision does not ipso facto justify an award of attorneys fees to the winning party. 29
Even when a claimant is compelled to litigate with third persons or to incur expenses to protect
his rights, still attorneys fees may not be awarded where no sufficient showing of bad faith could
be reflected in a partys persistence in a case other than an erroneous conviction of the
righteousness of his cause.30
WHEREFORE, the Decision of the Court of Appeals dated July 16, 2001 and its Resolution dated
September 28, 2001 are AFFIRMED with the following MODIFICATIONS: (a) petitioner Bank of
America NT & SA shall pay to respondent Philippine Racing Club sixty percent (60%) of the sum
of Two Hundred Twenty Thousand Pesos (P220,000.00) with legal interest as awarded by the trial
court and (b) the awards of attorneys fees and litigation expenses in favor of respondent are
deleted.
Proportionate costs.
SO ORDERED.