Showing posts with label September 11. Show all posts

Tax Case Digest: City Treasurer of Manila v. Philippine Beverage Partners, Inc. G.R. No. 233556, September 11, 2019

City Treasurer of Manila v. Philippine Beverage Partners, Inc.
G.R. No. 233556, September 11, 2019

Second Division
REYES, J. JR., J.:

Lessons Applicable: Local Tax Protest, Judicial Claim for Refund
Laws Applicable: Section 125 and 126 of LGC

FACTS:

January 17, 2007: City Treasurer of Manila (CTM) issued a Statement of Account (SOA) under Bill No. 012007-33025 representing business taxes and regulatory fees for the first quarter of 2007 in the total amount of P2,930,239.82 to Philippine Beverage Partners, Inc. (PBP).
February 6, 2007: PBP received the decision of CTM dated February 2, 2007 denying its protest for the assessment dated January 19, 2007, arguing that Tax Ordinance Nos. 7988 and 8011, amending the Revenue Code of Manila (RCM), should be declared null and void since the collection of local business tax under Section 21 (tax on other business) of the RCM and Section 14 (tax on manufacturers) of the same code constitutes double taxation.
February 13, 2007: PBP paid in full the amount stated in the SOA.
March 2, 2007: It filed a written claim for refund of erroneously/illegally collected tax with petitioner in the amount of P2,424,158.93.
March 8, 2007: It filed a Complaint for the Revision of SOA (Preliminary Assessment) and for Refund or Credit of LBT Erroneously/Illegally Collected with the Regional Trial Court, Manila, Branch 47 (RTC).
CTA Second Division affirmed RTC decision: Ordered CTM to refund the amount of P2,424,158.93 and the cost of suit.
CTA En Banc: CTM was able to comply with the requisites for entitlement to a refund/credit of local taxes considering that it filed written claim for refund on March 2, 2007 and filed the judicial claim on March 8, 2007 which is within two years from payment of the tax on February 13, 2007. With regards the deficiency tax for year 2006 and 2007 sought to be offset, CTM has waived any additional defenses by its failure to raise the same in its Answer before the trial court
PBP filed a Petition for Review on Certiorari

ISSUES:
1.    W/N a taxpayer who protested an assessment may later on institute a judicial action for refund
2.    W/N deficiency taxes may be used to offset its claim for refund

HELD: Denied for lack of merit.

1.    YES.

City of Manila v. Cosmos Bottling Corporation (G.R. No. 196681, June 27, 2018) held that a taxpayer facing an assessment issued by the local treasurer may protest it and alternatively: (1) appeal the assessment in court, or (2) pay the tax, and thereafter, seek a refund.
The taxpayers' remedies of protesting an assessment and refund of taxes are stated in Sections 195 and 196 of the LGC

The first provides the procedure for contesting an assessment issued by the local treasurer; whereas, the second provides the procedure for the recovery of an erroneously paid or illegally collected tax, fee or charge. Both Sections 195 and 196 mention an administrative remedy that the taxpayer should first exhaust before bringing the appropriate action in court. In Section 195, it is the written protest with the local treasurer that constitutes the administrative remedy; while in Section 196, it is the written claim for refund or credit with the same office.
Unlike Section 195, Section 196 does not expressly provide a specific period within which the local treasurer must decide the written claim for refund or credit. It is, therefore, possible for a taxpayer to submit an administrative claim for refund very early in the two-year period and initiate the judicial claim already near the end of such two-year period due to an extended inaction by the local treasurer. In this instance, the taxpayer cannot be required to await the decision of the local treasurer any longer, otherwise, his judicial action shall be barred by prescription.
Section 196 does not expressly mention an assessment made by the local treasurer. This simply means that its applicability does not depend upon the existence of an assessment notice. By consequence, a taxpayer may proceed to the remedy of refund of taxes even without a prior protest against an assessment that was not issued in the first place.
Where an assessment is to be protested or disputed, the taxpayer may proceed (a) without payment, or (b) with payment of the assessed tax, fee or charge

(a) Where no payment is made, the taxpayer's procedural remedy is governed strictly by Section 195. That is, in case of whole or partial denial of the protest, or inaction by the local treasurer, the taxpayer's only recourse is to appeal the assessment with the court of competent jurisdiction. The appeal before the court does not seek a refund but only questions the validity or correctness of the assessment.
(b) Where payment was made, the taxpayer may thereafter maintain an action in court questioning the validity and correctness of the assessment (Section 195, LGC) and at the same time seeking a refund of the taxes. In truth, it would be illogical for the taxpayer to only seek a reversal of the assessment without praying for the refund of taxes. Once the assessment is set aside by the court, it follows as a matter of course that all taxes paid under the erroneous or invalid assessment are refunded to the taxpayer.

2 conditions for an action for refund in case the taxpayer had received an assessment:

(a) Pay the tax and administratively assail within 60 days the assessment before the local treasurer, whether in a letter-protest or in a claim for refund
(b) Bring an action in court within thirty (30) days from decision or inaction by the local treasurer, whether such action is denominated as an appeal from assessment and/or claim for refund of erroneously or illegally collected tax

2. NO.

Based on Section 195 of the LGC, the issuance of a notice of assessment is mandatory before the local treasurer may collect deficiency taxes from the taxpayer. The notice of assessment is not only a requirement of due process but it also stands as the first instance the taxpayer is officially made aware of the pending tax liability. The local treasurer cannot simply collect deficiency taxes for a different taxing period by raising it as a defense in an action for refund of erroneously or illegally collected taxes.

Jurisprudence: G.R. No. 138569 September 11, 2003

FIRST DIVISION

G.R. No. 138569. September 11, 2003

THE CONSOLIDATED BANK and TRUST CORPORATION, petitioner, vs. COURT OF APPEALS and L.C. DIAZ and COMPANY, CPA’s, respondents.

D E C I S I O N

CARPIO, J.:

The Case

Before us is a petition for review of the Decision[1] of the Court of Appeals dated 27 October 1998 and its Resolution dated 11 May 1999. The assailed decision reversed the Decision[2] of the Regional Trial Court of Manila, Branch 8, absolving petitioner Consolidated Bank and Trust Corporation, now known as Solidbank Corporation (“Solidbank”), of any liability. The questioned resolution of the appellate court denied the motion for reconsideration of Solidbank but modified the decision by deleting the award of exemplary damages, attorney’s fees, expenses of litigation and cost of suit.

The Facts

Solidbank is a domestic banking corporation organized and existing under Philippine laws. Private respondent L.C. Diaz and Company, CPA’s (“L.C. Diaz”), is a professional partnership engaged in the practice of accounting.

Sometime in March 1976, L.C. Diaz opened a savings account with Solidbank, designated as Savings Account No. S/A 200-16872-6.

On 14 August 1991, L.C. Diaz through its cashier, Mercedes Macaraya (“Macaraya”), filled up a savings (cash) deposit slip for P990 and a savings (checks) deposit slip for P50. Macaraya instructed the messenger of L.C. Diaz, Ismael Calapre (“Calapre”), to deposit the money with Solidbank. Macaraya also gave Calapre the Solidbank passbook.

Calapre went to Solidbank and presented to Teller No. 6 the two deposit slips and the passbook. The teller acknowledged receipt of the deposit by returning to Calapre the duplicate copies of the two deposit slips. Teller No. 6 stamped the deposit slips with the words “DUPLICATE” and “SAVING TELLER 6 SOLIDBANK HEAD OFFICE.” Since the transaction took time and Calapre had to make another deposit for L.C. Diaz with Allied Bank, he left the passbook with Solidbank. Calapre then went to Allied Bank. When Calapre returned to Solidbank to retrieve the passbook, Teller No. 6 informed him that “somebody got the passbook.”[3] Calapre went back to L.C. Diaz and reported the incident to Macaraya.

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

Teller No. 6 handed to Macaraya a deposit slip dated 14 August 1991 for the deposit of a check for P90,000 drawn on Philippine Banking Corporation (“PBC”). This PBC check of L.C. Diaz was a check that it had “long closed.”[4] PBC subsequently dishonored the check because of insufficient funds and because the signature in the check differed from PBC’s specimen signature. Failing to get back the passbook, Macaraya went back to her office and reported the matter to the Personnel Manager of L.C. Diaz, Emmanuel Alvarez.

The following day, 15 August 1991, L.C. Diaz through its Chief Executive Officer, Luis C. Diaz (“Diaz”), called up Solidbank to stop any transaction using the same passbook until L.C. Diaz could open a new account.[5] On the same day, Diaz formally wrote Solidbank to make the same request. It was also on the same day that L.C. Diaz learned of the unauthorized withdrawal the day before, 14 August 1991, of P300,000 from its savings account. The withdrawal slip for the P300,000 bore the signatures of the authorized signatories of L.C. Diaz, namely Diaz and Rustico L. Murillo. The signatories, however, denied signing the withdrawal slip. A certain Noel Tamayo received the P300,000.

In an Information[6] dated 5 September 1991, L.C. Diaz charged its messenger, Emerano Ilagan (“Ilagan”) and one Roscon Verdazola with Estafa through Falsification of Commercial Document. The Regional Trial Court of Manila dismissed the criminal case after the City Prosecutor filed a Motion to Dismiss on 4 August 1992.

On 24 August 1992, L.C. Diaz through its counsel demanded from Solidbank the return of its money. Solidbank refused.

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

L.C. Diaz then appealed[8] to the Court of Appeals. On 27 October 1998, the Court of Appeals issued its Decision reversing the decision of the trial court.

On 11 May 1999, the Court of Appeals issued its Resolution denying the motion for reconsideration of Solidbank. The appellate court, however, modified its decision by deleting the award of exemplary damages and attorney’s fees.

The Ruling of the Trial Court

In absolving Solidbank, the trial court applied the rules on savings account written on the passbook. The rules state that “possession of this book shall raise the presumption of ownership and any payment or payments made by the bank upon the production of the said book and entry therein of the withdrawal shall have the same effect as if made to the depositor personally.”[9]

At the time of the withdrawal, a certain Noel Tamayo was not only in possession of the passbook, he also presented a withdrawal slip with the signatures of the authorized signatories of L.C. Diaz. The specimen signatures of these persons were in the signature cards. The teller stamped the withdrawal slip with the words “Saving Teller No. 5.” The teller then passed on the withdrawal slip to Genere Manuel (“Manuel”) for authentication. Manuel verified the signatures on the withdrawal slip. The withdrawal slip was then given to another officer who compared the signatures on the withdrawal slip with the specimen on the signature cards. The trial court concluded that Solidbank acted with care and observed the rules on savings account when it allowed the withdrawal of P300,000 from the savings account of L.C. Diaz.

The trial court pointed out that the burden of proof now shifted to L.C. Diaz to prove that the signatures on the withdrawal slip were forged. The trial court admonished L.C. Diaz for not offering in evidence the National Bureau of Investigation (“NBI”) report on the authenticity of the signatures on the withdrawal slip for P300,000. The trial court believed that L.C. Diaz did not offer this evidence because it is derogatory to its action.

Another provision of the rules on savings account states that the depositor must keep the passbook “under lock and key.”[10] When another person presents the passbook for withdrawal prior to Solidbank’s receipt of the notice of loss of the passbook, that person is considered as the owner of the passbook. The trial court ruled that the passbook presented during the questioned transaction was “now out of the lock and key and presumptively ready for a business transaction.”[11]

Solidbank did not have any participation in the custody and care of the passbook. The trial court believed that Solidbank’s act of allowing the withdrawal of P300,000 was not the direct and proximate cause of the loss. The trial court held that L.C. Diaz’s negligence caused the unauthorized withdrawal. Three facts establish L.C. Diaz’s negligence: (1) the possession of the passbook by a person other than the depositor L.C. Diaz; (2) the presentation of a signed withdrawal receipt by an unauthorized person; and (3) the possession by an unauthorized person of a PBC check “long closed” by L.C. Diaz, which check was deposited on the day of the fraudulent withdrawal.

The trial court debunked L.C. Diaz’s contention that Solidbank did not follow the precautionary procedures observed by the two parties whenever L.C. Diaz withdrew significant amounts from its account. L.C. Diaz claimed that a letter must accompany withdrawals of more than P20,000. The letter must request Solidbank to allow the withdrawal and convert the amount to a manager’s check. The bearer must also have a letter authorizing him to withdraw the same amount. Another person driving a car must accompany the bearer so that he would not walk from Solidbank to the office in making the withdrawal. The trial court pointed out that L.C. Diaz disregarded these precautions in its past withdrawal. On 16 July 1991, L.C. Diaz withdrew P82,554 without any separate letter of authorization or any communication with Solidbank that the money be converted into a manager’s check.

The trial court further justified the dismissal of the complaint by holding that the case was a last ditch effort of L.C. Diaz to recover P300,000 after the dismissal of the criminal case against Ilagan.

The dispositive portion of the decision of the trial court reads:

IN VIEW OF THE FOREGOING, judgment is hereby rendered DISMISSING the complaint.

The Court further renders judgment in favor of defendant bank pursuant to its counterclaim the amount of Thirty Thousand Pesos (P30,000.00) as attorney’s fees.

With costs against plaintiff.

SO ORDERED.[12]

The Ruling of the Court of Appeals

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

Article 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.

The appellate court held that the three elements of a quasi-delict are present in this case, namely: (a) damages suffered by the plaintiff; (b) fault or negligence of the defendant, or some other person for whose acts he must respond; and (c) the connection of cause and effect between the fault or negligence of the defendant and the damage incurred by the plaintiff.

The Court of Appeals pointed out that the teller of Solidbank who received the withdrawal slip for P300,000 allowed the withdrawal without making the necessary inquiry. The appellate court stated that the teller, who was not presented by Solidbank during trial, should have called up the depositor because the money to be withdrawn was a significant amount. Had the teller called up L.C. Diaz, Solidbank would have known that the withdrawal was unauthorized. The teller did not even verify the identity of the impostor who made the withdrawal. Thus, the appellate court found Solidbank liable for its negligence in the selection and supervision of its employees.

The appellate court ruled that while L.C. Diaz was also negligent in entrusting its deposits to its messenger and its messenger in leaving the passbook with the teller, Solidbank could not escape liability because of the doctrine of “last clear chance.” Solidbank could have averted the injury suffered by L.C. Diaz had it called up L.C. Diaz to verify the withdrawal.

The appellate court ruled that the degree of diligence required from Solidbank is more than that of a good father of a family. The business and functions of banks are affected with public interest. Banks are obligated to treat the accounts of their depositors with meticulous care, always having in mind the fiduciary nature of their relationship with their clients. The Court of Appeals found Solidbank remiss in its duty, violating its fiduciary relationship with L.C. Diaz.

The dispositive portion of the decision of the Court of Appeals reads:

WHEREFORE, premises considered, the decision appealed from is hereby REVERSED and a new one entered.

1.       Ordering defendant-appellee Consolidated Bank and Trust Corporation to pay plaintiff-appellant the sum of Three Hundred Thousand Pesos (P300,000.00), with interest thereon at the rate of 12% per annum from the date of filing of the complaint until paid, the sum of P20,000.00 as exemplary damages, and P20,000.00 as attorney’s fees and expenses of litigation as well as the cost of suit; and

2.       Ordering the dismissal of defendant-appellee’s counterclaim in the amount of P30,000.00 as attorney’s fees.

SO ORDERED.[13]

Acting on the motion for reconsideration of Solidbank, the appellate court affirmed its decision but modified the award of damages. The appellate court deleted the award of exemplary damages and attorney’s fees. Invoking Article 2231[14] of the Civil Code, the appellate court ruled that exemplary damages could be granted if the defendant acted with gross negligence. Since Solidbank was guilty of simple negligence only, the award of exemplary damages was not justified. Consequently, the award of attorney’s fees was also disallowed pursuant to Article 2208 of the Civil Code. The expenses of litigation and cost of suit were also not imposed on Solidbank.

The dispositive portion of the Resolution reads as follows:

WHEREFORE, foregoing considered, our decision dated October 27, 1998 is affirmed with modification by deleting the award of exemplary damages and attorney’s fees, expenses of litigation and cost of suit.

SO ORDERED.[15]

Hence, this petition.

The Issues

Solidbank seeks the review of the decision and resolution of the Court of Appeals on these grounds:

I.        THE COURT OF APPEALS ERRED IN HOLDING THAT PETITIONER BANK SHOULD SUFFER THE LOSS BECAUSE ITS TELLER SHOULD HAVE FIRST CALLED PRIVATE RESPONDENT BY TELEPHONE BEFORE IT ALLOWED THE WITHDRAWAL OF P300,000.00 TO RESPONDENT’S MESSENGER EMERANO ILAGAN, SINCE THERE IS NO AGREEMENT BETWEEN THE PARTIES IN THE OPERATION OF THE SAVINGS ACCOUNT, NOR IS THERE ANY BANKING LAW, WHICH MANDATES THAT A BANK TELLER SHOULD FIRST CALL UP THE DEPOSITOR BEFORE ALLOWING A WITHDRAWAL OF A BIG AMOUNT IN A SAVINGS ACCOUNT.

II.       THE COURT OF APPEALS ERRED IN APPLYING THE DOCTRINE OF LAST CLEAR CHANCE AND IN HOLDING THAT PETITIONER BANK’S TELLER HAD THE LAST OPPORTUNITY TO WITHHOLD THE WITHDRAWAL WHEN IT IS UNDISPUTED THAT THE TWO SIGNATURES OF RESPONDENT ON THE WITHDRAWAL SLIP ARE GENUINE AND PRIVATE RESPONDENT’S PASSBOOK WAS DULY PRESENTED, AND CONTRARIWISE RESPONDENT WAS NEGLIGENT IN THE SELECTION AND SUPERVISION OF ITS MESSENGER EMERANO ILAGAN, AND IN THE SAFEKEEPING OF ITS CHECKS AND OTHER FINANCIAL DOCUMENTS.

III.      THE COURT OF APPEALS ERRED IN NOT FINDING THAT THE INSTANT CASE IS A LAST DITCH EFFORT OF PRIVATE RESPONDENT TO RECOVER ITS P300,000.00 AFTER FAILING IN ITS EFFORTS TO RECOVER THE SAME FROM ITS EMPLOYEE EMERANO ILAGAN.

IV.      THE COURT OF APPEALS ERRED IN NOT MITIGATING THE DAMAGES AWARDED AGAINST PETITIONER UNDER ARTICLE 2197 OF THE CIVIL CODE, NOTWITHSTANDING ITS FINDING THAT PETITIONER BANK’S NEGLIGENCE WAS ONLY CONTRIBUTORY.[16]

The Ruling of the Court

The petition is partly meritorious.

Solidbank’s Fiduciary Duty under the Law

The rulings of the trial court and the Court of Appeals conflict on the application of the law. The trial court pinned the liability on L.C. Diaz based on the provisions of the rules on savings account, a recognition of the contractual relationship between Solidbank and L.C. Diaz, the latter being a depositor of the former. On the other hand, the Court of Appeals applied the law on quasi-delict to determine who between the two parties was ultimately negligent. The law on quasi-delict or culpa aquiliana is generally applicable when there is no pre-existing contractual relationship between the parties.

We hold that Solidbank is liable for breach of contract due to negligence, or culpa contractual.

The contract between the bank and its depositor is governed by the provisions of the Civil Code on simple loan.[17] Article 1980 of the Civil Code expressly provides that “x x x savings x x x deposits of money in banks and similar institutions shall be governed by the provisions concerning simple loan.”   There is a debtor-creditor relationship between the bank and its depositor. The bank is the debtor and the depositor is the creditor. The depositor lends the bank money and the bank agrees to pay the depositor on demand. The savings deposit agreement between the bank and the depositor is the contract that determines the rights and obligations of the parties.

The law imposes on banks high standards in view of the fiduciary nature of banking. Section 2 of Republic Act No. 8791 (“RA 8791”),[18] which took effect on 13 June 2000, declares that the State recognizes the “fiduciary nature of banking that requires high standards of integrity and performance.”[19] This new provision in the general banking law, introduced in 2000, is a statutory affirmation of Supreme Court decisions, starting with the 1990 case of Simex International v. Court of Appeals,[20] holding that “the bank is under obligation to treat the accounts of its depositors with meticulous care, always having in mind the fiduciary nature of their relationship.”[21]

This fiduciary relationship means that the bank’s obligation to observe “high standards of integrity and performance” is deemed written into every deposit agreement between a bank and its depositor. The fiduciary nature of banking requires banks to assume a degree of diligence higher than that of a good father of a family. Article 1172 of the Civil Code states that the degree of diligence required of an obligor is that prescribed by law or contract, and absent such stipulation then the diligence of a good father of a family.[22] Section 2 of RA 8791 prescribes the statutory diligence required from banks – that banks must observe “high standards of integrity and performance” in servicing their depositors. Although RA 8791 took effect almost nine years after the unauthorized withdrawal of the P300,000 from L.C. Diaz’s savings account, jurisprudence[23] at the time of the withdrawal already imposed on banks the same high standard of diligence required under RA No. 8791.

However, the fiduciary nature of a bank-depositor relationship does not convert the contract between the bank and its depositors from a simple loan to a trust agreement, whether express or implied. Failure by the bank to pay the depositor is failure to pay a simple loan, and not a breach of trust.[24] The law simply imposes on the bank a higher standard of integrity and performance in complying with its obligations under the contract of simple loan, beyond those required of non-bank debtors under a similar contract of simple loan.

The fiduciary nature of banking does not convert a simple loan into a trust agreement because banks do not accept deposits to enrich depositors but to earn money for themselves. The law allows banks to offer the lowest possible interest rate to depositors while charging the highest possible interest rate on their own borrowers. The interest spread or differential belongs to the bank and not to the depositors who are not cestui que trust of banks. If depositors are cestui que trust of banks, then the interest spread or income belongs to the depositors, a situation that Congress certainly did not intend in enacting Section 2 of RA 8791.

Solidbank’s Breach of its Contractual Obligation

Article 1172 of the Civil Code provides that “responsibility arising from negligence in the performance of every kind of obligation is demandable.” For breach of the savings deposit agreement due to negligence, or culpa contractual, the bank is liable to its depositor.

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

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

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

Solidbank failed to discharge its burden. Solidbank did not present to the trial court Teller No. 6, the teller with whom Calapre left the passbook and who was supposed to return the passbook to him. The record does not indicate that Teller No. 6 verified the identity of the person who retrieved the passbook. Solidbank also failed to adduce in evidence its standard procedure in verifying the identity of the person retrieving the passbook, if there is such a procedure, and that Teller No. 6 implemented this procedure in the present case.

Solidbank is bound by the negligence of its employees under the principle of respondeat superior or command responsibility. The defense of exercising the required diligence in the selection and supervision of employees is not a complete defense in culpa contractual, unlike in culpa aquiliana.[25]

The bank must not only exercise “high standards of integrity and performance,” it must also insure that its employees do likewise because this is the only way to insure that the bank will comply with its fiduciary duty. Solidbank failed to present the teller who had the duty to return to Calapre the passbook, and thus failed to prove that this teller exercised the “high standards of integrity and performance” required of Solidbank’s employees.

Proximate Cause of the Unauthorized Withdrawal

Another point of disagreement between the trial and appellate courts is the proximate cause of the unauthorized withdrawal. The trial court believed that L.C. Diaz’s negligence in not securing its passbook under lock and key was the proximate cause that allowed the impostor to withdraw the P300,000. For the appellate court, the proximate cause was the teller’s negligence in processing the withdrawal without first verifying with L.C. Diaz. We do not agree with either court.

Proximate cause is that cause which, in natural and continuous sequence, unbroken by any efficient intervening cause, produces the injury and without which the result would not have occurred.[26] Proximate cause is determined by the facts of each case upon mixed considerations of logic, common sense, policy and precedent.[27]

L.C. Diaz was not at fault that the passbook landed in the hands of the impostor. Solidbank was in possession of the passbook while it was processing the deposit. After completion of the transaction, Solidbank had the contractual obligation to return the passbook only to Calapre, the authorized representative of L.C. Diaz. Solidbank failed to fulfill its contractual obligation because it gave the passbook to another person.

Solidbank’s failure to return the passbook to Calapre made possible the withdrawal of the P300,000 by the impostor who took possession of the passbook. Under Solidbank’s rules on savings account, mere possession of the passbook raises the presumption of ownership. It was the negligent act of Solidbank’s Teller No. 6 that gave the impostor presumptive ownership of the passbook. Had the passbook not fallen into the hands of the impostor, the loss of P300,000 would not have happened. Thus, the proximate cause of the unauthorized withdrawal was Solidbank’s negligence in not returning the passbook to Calapre.

We do not subscribe to the appellate court’s theory that the proximate cause of the unauthorized withdrawal was the teller’s failure to call up L.C. Diaz to verify the withdrawal. Solidbank did not have the duty to call up L.C. Diaz to confirm the withdrawal. There is no arrangement between Solidbank and L.C. Diaz to this effect. Even the agreement between Solidbank and L.C. Diaz pertaining to measures that the parties must observe whenever withdrawals of large amounts are made does not direct Solidbank to call up L.C. Diaz.

There is no law mandating banks to call up their clients whenever their representatives withdraw significant amounts from their accounts. L.C. Diaz therefore had the burden to prove that it is the usual practice of Solidbank to call up its clients to verify a withdrawal of a large amount of money. L.C. Diaz failed to do so.

Teller No. 5 who processed the withdrawal could not have been put on guard to verify the withdrawal. Prior to the withdrawal of P300,000, the impostor deposited with Teller No. 6 the P90,000 PBC check, which later bounced. The impostor apparently deposited a large amount of money to deflect suspicion from the withdrawal of a much bigger amount of money. The appellate court thus erred when it imposed on Solidbank the duty to call up L.C. Diaz to confirm the withdrawal when no law requires this from banks and when the teller had no reason to be suspicious of the transaction.

Solidbank continues to foist the defense that Ilagan made the withdrawal. Solidbank claims that since Ilagan was also a messenger of L.C. Diaz, he was familiar with its teller so that there was no more need for the teller to verify the withdrawal. Solidbank relies on the following statements in the Booking and Information Sheet of Emerano Ilagan:

xxx Ilagan also had with him (before the withdrawal) a forged check of PBC and indicated the amount of P90,000 which he deposited in favor of L.C. Diaz and Company. After successfully withdrawing this large sum of money, accused Ilagan gave alias Rey (Noel Tamayo) his share of the loot. Ilagan then hired a taxicab in the amount of P1,000 to transport him (Ilagan) to his home province at Bauan, Batangas. Ilagan extravagantly and lavishly spent his money but a big part of his loot was wasted in cockfight and horse racing. Ilagan was apprehended and meekly admitted his guilt.[28] (Emphasis supplied.)

L.C. Diaz refutes Solidbank’s contention by pointing out that the person who withdrew the P300,000 was a certain Noel Tamayo. Both the trial and appellate courts stated that this Noel Tamayo presented the passbook with the withdrawal slip.

We uphold the finding of the trial and appellate courts that a certain Noel Tamayo withdrew the P300,000. The Court is not a trier of facts. We find no justifiable reason to reverse the factual finding of the trial court and the Court of Appeals. The tellers who processed the deposit of the P90,000 check and the withdrawal of the P300,000 were not presented during trial to substantiate Solidbank’s claim that Ilagan deposited the check and made the questioned withdrawal. Moreover, the entry quoted by Solidbank does not categorically state that Ilagan presented the withdrawal slip and the passbook.

Doctrine of Last Clear Chance

The doctrine of last clear chance states that where both parties are negligent but the negligent act of one is appreciably later than that of the other, or where it is impossible to determine whose fault or negligence caused the loss, the one who had the last clear opportunity to avoid the loss but failed to do so, is chargeable with the loss.[29] Stated differently, the antecedent negligence of the plaintiff does not preclude him from recovering damages caused by the supervening negligence of the defendant, who had the last fair chance to prevent the impending harm by the exercise of due diligence.[30]

We do not apply the doctrine of last clear chance to the present case. Solidbank is liable for breach of contract due to negligence in the performance of its contractual obligation to L.C. Diaz. This is a case of culpa contractual, where neither the contributory negligence of the plaintiff nor his last clear chance to avoid the loss, would exonerate the defendant from liability.[31] Such contributory negligence or last clear chance by the plaintiff merely serves to reduce the recovery of damages by the plaintiff but does not exculpate the defendant from his breach of contract.[32]

Mitigated Damages

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

In Philippine Bank of Commerce v. Court of Appeals,[33] where the Court held the depositor guilty of contributory negligence, we allocated the damages between the depositor and the bank on a 40-60 ratio.   Applying the same ruling to this case, we hold that L.C. Diaz must shoulder 40% of the actual damages awarded by the appellate court. Solidbank must pay the other 60% of the actual damages.

WHEREFORE, the decision of the Court of Appeals is AFFIRMED with MODIFICATION. Petitioner Solidbank Corporation shall pay private respondent L.C. Diaz and Company, CPA’s only 60% of the actual damages awarded by the Court of Appeals. The remaining 40% of the actual damages shall be borne by private respondent L.C. Diaz and Company, CPA’s.   Proportionate costs.

SO ORDERED.

Davide, Jr., C.J., (Chairman), Vitug, and Ynares-Santiago, JJ., concur.

Azcuna, J., on official leave.

Torts and Damages Case Digest: Ernesto Medina et al., v. Hon. Floreliana Castro-Bartolome (1982)

G.R. No. L-59825 September 11, 1982

Lessons Applicable: Unjust dismissal (Torts and Damages)

Laws Applicable:

FACTS:

Cosme de Aboitiz, acting in his capacity as President and Chief Executive Officer of the defendant Pepsi-Cola Bottling Company of the Philippines, Inc., went to the Pepsi-Cola Plant in Muntinlupa, Metro Manila and without any provocation, shouted and maliciously humiliated Ernesto Medina and Jose G. Ong:

GOD DAMN IT. YOU FUCKED ME UP ... YOU SHUT UP! FUCK YOU! YOU ARE BOTH SHIT TO ME! YOU ARE FIRED (referring to Ernesto Medina). YOU TOO ARE FIRED! '(referring to Jose Ong ) for having allegedly delayed the use of promotional crowns
effected on the very day that plaintiffs were awarded rings of loyalty to the Company, 5 days before Christmas and on the day when the employees' Christmas party was held so that when Medina and Ong went home that day and found their wives and children already dressed up for the party, they didn't know what to do and so they cried unashamedly

A joint criminal complaint for oral defamation against Aboitiz

Provincial Fiscal: dismissed the complaint since uttered not to slander but to express anger and displeasure

Petition for Review with the office of the Secretary of Justice (now Ministry of Justice): reversed
Aboitiz filed a motion to dismiss on the ground of lack of jurisdiction but it was dismissed since the complaint for civil damages is clearly not based on an employer-employee relationship but on the manner of plaintiffs' dismissal and the effects flowing therefrom

This case was filed on May 10, 1979. The amendatory decree, P.D. 1367, which took effect on May 1, 1978 and which provides that Regional Directors shall not indorse and Labor Arbiters shall not entertain claims for moral or other forms of damages, now expressly confers jurisdiction on the courts in these cases, specifically under the plaintiff's causes of action
alreadly settled by jurisprudence that mere asking for reinstatement does not remove from the CFI jurisdiction over the damages

The case must involve unfair labor practices to bring it within the jurisdiction of the CIR (now NLRC)

A second motion to dismiss was filed because of the promulgation of P.D. No. 1691 amending Art. 217 of the Labor Code of the Philippines and Batasan Pambansa Bldg. 70 which took effect on May 1, 1980, amending Art. 248 of the Labor Code.

jurisdiction over employee-employer relations and claims of workers have been removed from the Courts of First Instance

ISSUE: W/N the Labor Code has any relevance to the reliefs sought

HELD: NO. petition is granted

simple action for damages for tortuous acts is governed by the Civil Code and not the Labor Code

Separate Opinions

AQUINO, J.,dissenting:

I dissent with due deference to the opinion penned by Mr. Justice Abad Santos
The two signed on January 5, 1978 letters of resignation and quitclaims and were paid P93,063 and P84,386 as separation pay, respectively
More than a month after their dismissal, or on January 27, 1978, Medina and Ong filed with the Ministry of Labor, a complaint for illegal dismissal - dismissed that complaint because of their resignation and quitclaim.
17 days after that order of dismissal, or on May 10, 1979, filed for damages
In my opinion the dismissal of the civil action for damages is correct because the claims of Medina and Ong were within the exclusive jurisdiction of the Labor Arbiter and the NLRC, as originally provided in article 217 of the Labor Code and as reaffirmed in Presidential Decree No. 1691. Medina and Ong could not split their cause of action against Aboitiz and Pepsi-Cola.

Jurisprudence: G.R. No. L-59825

SECOND DIVISION

G.R. No. L-59825 September 11, 1982

ERNESTO MEDINA and JOSE G. ONG, petitioners,

vs.

HON. FLORELIANA CASTRO-BARTOLOME in her capacity as Presiding Judge of the Court of First Instance Cf Rizal, Branch XV, Makati, Metro Manila, COSME DE ABOITIZ and PEPSI-COLA BOTTLING COMPANY OF THE PHILIPPINES, INC., respondents.

ABAD SANTOS, J.:

Civil Case No. 33150 of the Court of First Instance of Rizal Branch XV, was filed in May, 1979, by Ernesto Medina and Jose G. Ong against Cosme de Aboitiz and Pepsi-Cola Bottling Co. of the Philippines, Inc. Medina was the former Plant General Manager and Ong was the former Plant Comptroller of the company. Among the averments in the complaint are the following:

3. That on or about 1:00 o'clock in the afternoon of December 20, 1977, defendant Cosme de Aboitiz, acting in his capacity as President and Chief Executive Officer of the defendant Pepsi-Cola Bottling Company of the Philippines, Inc., went to the Pepsi-Cola Plant in Muntinlupa, Metro Manila, and without any provocation, shouted and maliciously humiliated the plaintiffs with the use of the following slanderous language and other words of similar import uttered in the presence of the plaintiffs' subordinate employees, thus-

GOD DAMN IT. YOU FUCKED ME UP ... YOU SHUT UP! FUCK YOU! YOU ARE BOTH SHIT TO ME! YOU ARE FIRED (referring to Ernesto Medina). YOU TOO ARE FIRED! '(referring to Jose Ong )

4. That on January 9, 1978, the herein plaintiffs filed a joint criminal complaint for oral defamation against the defendant Cosme de Aboitiz duly supported with respective affidavits and corroborated by the affidavits of two (2) witnesses: Isagani Hernandez and Jose Ganseco II, but after conducting a preliminary investigation, Hon. Jose B. Castillo, dismissed the complaint allegedly because the expression "Fuck you and "You are both shit to me" were uttered not to slander but to express anger and displeasure;

5. That on February 8, 1978, plaintiffs filed a Petition for Review with the office of the Secretary of Justice (now Ministry of Justice) and on June 13, 1978, the Deputy Minister of Justice, Catalino Macaraig, Jr., issued a resolution sustaining the plaintiff's complaint, reversing the resolution of the Provincial Fiscal and directing him to file against defendant Cosme de Aboitiz an information for Grave Slander. ... ;

6. That the employment records of plaintiffs show their track performance and impeccable qualifications, not to mention their long years of service to the Company which undoubtedly caused their promotion to the two highest positions in Muntinlupa Plant having about 700 employees under them with Ernesto Medina as the Plant General Manager receiving a monthly salary of P6,600.00 excluding other perquisites accorded only to top executives and having under his direct supervision other professionals like himself, including the plaintiff Jose G. Ong, who was the Plant Comptroller with a basic monthly salary of P4,855.00;

7. That far from taking these matters into consideration, the defendant corporation, acting through its President, Cosme de Aboitiz, dismissed and slandered the plaintiffs in the presence of their subordinate employees although this could have been done in private;

8. That the defendants have evidently enjoyed the act of dismissing the plaintiffs and such dismissal was planned to make it as humiliating as possible because instead of allowing a lesser official like the Regional Vice President to take whatever action was necessary under the circumstances, Cosme de Aboitiz himself went to the Muntinlupa Plant in order to publicly upbraid and dismiss the plaintiffs;

9. That the defendants dismissed the plaintiffs because of an alleged delay in the use of promotional crowns when such delay was true with respect to the other Plants, which is therefore demonstrative of the fact that Cosme de Aboitiz did not really have a strong reason for publicly humiliating the plaintiffs by dismissing them on the spot;

10. That the defendants were moved by evil motives and an anti-social attitude in dismissing the plaintiffs because the dismissal was effected on the very day that plaintiffs were awarded rings of loyalty to the Company, five days before Christmas and on the day when the employees' Christmas party was held in the Muntinlupa Plant, so that when plaintiffs went home that day and found their wives and children already dressed up for the party, they didn't know what to do and so they cried unashamedly;

xxx xxx xxx

20. That because of the anti-social manner by which the plaintiffs were dismissed from their employment and the embarrassment and degradation they experience in the hands of the defendants, the plaintiffs have suffered and will continue to suffer wounded feelings, sleepless nights, mental torture, besmirched reputation and other similar injuries, for which the sum of P150,000.00 for each plaintiff, or the total amount. of P300,000.00 should be awarded as moral damages;

21. That the defendants have demonstrated their lack of concern for the rights and dignity of the Filipino worker and their callous disregard of Philippine labor and social legislation, and to prevent other persons from following the footsteps of defendants, the amount of P50,000.00 for each plaintiff, or the total sum of P100,000.00, should be awarded as exemplary damages;

22. That plaintiffs likewise expect to spend no less than P5,000.00 as litigation expenses and were constrained to secure the services of counsel for the protection and enforcement of their rights for which they agreed to pay the sum of P10,000.00 and P200.00 per appearance as and for attorney's fees.

The complaint contains the following:

P R A Y E R

WHEREFORE, in view of all the foregoing. it is most respectfully that after proper notice and hearing, judgment be rendered for the plaintiffs and against the defendants ordering them, jointly and solidarily, to pay the plaintiffs the sums of:

1. Unrealized income in such sum as will be established during the trial;

2. P300,000.00 as moral damages;

3. P100,000.00 by way of exemplary damages:

4. P5,000.00 as litigation expenses;

5. P10,000.00 and P200.00 per appearance as and for attorney's fees; and

6. Costs of this suit.

Plaintiffs also pray for such further reliefs and remedies as may be in keeping with justice and equity.

On June 4, 1979, a motion to dismiss the complaint on the ground of lack of jurisdiction was filed by the defendants. The trial court denied the motion on September 6, 1979, in an order which reads as follows:

Up for resolution by the Court is the defendants' Motion to Dismiss dated June 4, 1979, which is basically anchored on whether or not this Court has jurisdiction over the instant petition.

The complaint alleges that the plaintiffs' dismissal was without any provocation and that defendant Aboitiz shouted and maliciously humiliated plaintiffs and used the words quoted in paragraph 3 thereof. The plaintiffs further allege that they were receiving salaries of P6,600.00 and P4,855.00 a month. So the complaint for civil damages is clearly not based on an employer-employee relationship but on the manner of plaintiffs' dismissal and the effects flowing therefrom. (Jovito N. Quisaba vs, Sta. Ines-Melale Veneer & Plywood Co., Inc., et al., No. L-38088, Aug. 30,1974.)

This case was filed on May 10, 1979. The amendatory decree, P.D. 1367, which took effect on May 1, 1978 and which provides that Regional Directors shall not indorse and Labor Arbiters shall not entertain claims for moral or other forms of damages, now expressly confers jurisdiction on the courts in these cases, specifically under the plaintiff's causes of action.

Because of the letter dated January 4, 1978 and the statement of plaintiff Medina that his receipt of the amount from defendant company was done "under strong protest," it cannot be said that the demands set forth in the complaint have been paid, waived or other extinguished. In fact, in defendants' Motion to Dismiss, it is stated that 'in the absence of a showing that there was fraud, duress or violence attending said transactions, such Release and Quitclaim Deeds are valid and binding contracts between them, which in effect admits that plaintiffs can prove fraud, violence, duress or violence. Hence a cause of action for plaintiffs exist.

It is noticed that the defamatory remarks standing alone per se had been made the sole cause under the first cause of action, but it is alleged in connection with the manner in which the plaintiffs had been dismissed, and whether the statute of limitations would apply or not would be a matter of evidence.

IT has been alreadly settled by jurisprudence that mere asking for reinstatement does not remove from the CFI jurisdiction over the damages. The case must involve unfair labor practices to bring it within the jurisdiction of the CIR (now NLRC).

WHEREFORE, the defendants' Motion to Dismiss dated June 4, 1979 is hereby denied.

The defendants are hereby directed to interpose their answer within ten (10) days from receipt hereof.

While the trial was underway, the defendants filed a second motion to dismiss the complaint dated January 23, 1981, because of amendments to the Labor Code immediately prior thereto. Acting on the motion, the trial court issued on May 23, 1981, the following order:

Up for resolution by the Court is the defendants' Motion to Dismiss dated January 23, 1981, on grounds not existing when the first Motion to Dismiss dated June 4, 1979 was interposed. The ground relied upon is the promulgation of P.D. No. 1691 amending Art. 217 of the Labor Code of the Philippines and Batasan Pambansa Bldg. 70 which took effect on May 1, 1980, amending Art. 248 of the Labor Code.

The Court agrees with defendants that the complaint alleges unfair labor practices which under Art. 217 of the Labor Code, as amended by P.D. 1691, has vested original and exclusive jurisdiction to Labor Arbiters, and Art. 248, thereof ... "which may include claims for damages and other affirmative reliefs." Under the amendment, therefore, jurisdiction over employee-employer relations and claims of workers have been removed from the Courts of First Instance. If it is argued that this case did not arise from employer-employee relation, but it cannot be denied that this case would not have arisen if the plaintiffs had not been employees of defendant Pepsi-Cola. Even the alleged defamatory remarks made by defendant Cosme de Aboitiz were said to plaintiffs in the course of their employment, and the latter were dismissed from such employment. Hence, the case arose from such employer-employee relationship which under the new Presidential Decree 1691 are under the exclusive, original jurisdiction of the labor arbiters. The ruling of this Court with respect to the defendants' first motion to dismiss, therefore, no longer holds as the positive law has been subsequently issued and being a curative law, can be applied retroactively (Garcia v. Martinez, et al., L-47629, May 28, 1979; 90 SCRA 331-333).

It will also logically follow that plaintiffs can reinterpose the same complaint with the Ministry of Labor.

WHEREFORE, let this case be, as it is hereby ordered, dismissed, without pronouncement as to costs.

A motion to reconsider the above order was filed on July 7, 1981, but it was only on February 8, 1982, or after a lapse of around seven (7) months when the motion was denied.

Plaintiffs have filed the instant petition pursuant to R. A. No. 5440 alleging that the respondent court committed the following errors:

IN DIVESTING ITSELF OF ITS JURISDICTION TO HEAR AND DECIDE CIVIL CASE NO. 33150 DESPITE THE FACT THAT JURISDICTION HAD ALREADY ATTACHED WHICH WAS NOT OUSTED BY THE SUBSEQUENT ENACTMENT OF PRESIDENTIAL DECREE 1691;

IN HOLDING THAT PRESIDENTIAL DECREE 1691 SHOULD BE GIVEN A RETROSPECTIVE EFFECT WHEN PRESIDENTIAL DECREE 1367 WHICH WAS IN FORCE WHEN CIVIL CASE NO. 33150 WAS FILED AND TRIAL THEREOF HAD COMMENCED, WAS NEVER EXPRESSLY REPEALED BY PRESIDENTIAL DECREE 1691, AND IF EVER THERE WAS AN IMPLIED REPEAL, THE SAME IS NOT FAVORED UNDER PREVAILED JURISPRUDENCE;

IN HOLDING THAT WITH THE REMOVAL BY PRESIDENTIAL DECREE 1691 OF THE PROVISO INSERTED IN ARTICLE 217 OF THE LABOR CODE BY PRESIDENTIAL DECREE 1367, THE LABOR ARBITERS HAVE ACQUIRED JURISDICTION OVER CLAIMS FOR DAMAGES ARISING FROM EMPLOYER-EMPLOYEE RELATIONS TO THE EXCLUSION OF THE REGULAR COURTS, WHEN A READING OF ARTICLE 217 WITHOUT THE PROVISO IN QUESTION READILY REVEALS THAT JURISDICTION OVER DAMAGE CLAIMS IS STILL VESTED WITH THE REGULAR COURTS;

IN DISMISSING FOR LACK OF JURISDICTION CIVIL CASE NO. 33150 THEREBY VIOLATING THE CONSTITUTIONAL RIGHTS OF THE PETITIONERS NOTABLY THEIR RIGHT TO DUE PROCESS.

The pivotal question to Our mind is whether or not the Labor Code has any relevance to the reliefs sought by the plaintiffs. For if the Labor Code has no relevance, any discussion concerning the statutes amending it and whether or not they have retroactive effect is unnecessary.

It is obvious from the complaint that the plaintiffs have not alleged any unfair labor practice. Theirs is a simple action for damages for tortious acts allegedly committed by the defendants. Such being the case, the governing statute is the Civil Code and not the Labor Code. It results that the orders under review are based on a wrong premise.

WHEREFORE, the petition is granted; the respondent judge is hereby ordered to reinstate Civil Case No. 33150 and render a decision on the merits. Costs against the private respondents.

SO ORDERED.

Barredo (Chairman), Concepcion, Jr. Guerrero, De Castro and Escolin, JJ., concur.

Separate Opinions

AQUINO, J.,dissenting:

I dissent with due deference to the opinion penned by Mr. Justice Abad Santos.

This case is about the jurisdiction of the Court of First Instance to entertain an action for damages arising from the alleged disgraceful termination of petitioners' employment.

Ernesto Medina, the manager of the Muntinlupa plant of Pepsi-Cola Bottling Company of the Philippines with a monthly salary of P6,600, and Jose G. Ong, Pepsi's controller in the same plant with a monthly salary of P4,855, were summarily dismissed by Cosme de Aboitiz, Pepsi's president and chief executive officer, on December 20, 1977 for having allegedly delayed the use of promotional crowns (pp. 29-31, Rollo),

The two signed on January 5, 1978 letters of resignation and quitclaims and were paid P93,063 and P84,386 as separation pay, respectively. However, before receiving those amounts, Medina and Ong sent by registered mail to Aboitiz letters wherein they indicated that they objected to their illegal dismissal and that they would sign the quitclaim and resignation papers "under protest" (pp. 32, 270-275, Rollo).

More than a month after their dismissal, or on January 27, 1978, Medina and Ong filed with the Ministry of Labor, a complaint for illegal dismissal. They prayed for reinstatement with full backwages and, in the alternative, they prayed for additional separation pay of P72,904 for Medina and P35,927 for Ong (NLRC Case No. R4-STF-1-492-78, pp. 40, 288-299, Rollo).

The director of Region IV of the Ministry of Labor dismissed that complaint because of their resignation and quitclaim. Medina and Ong appealed to the National Labor Relations Commission. Deputy Minister Amado C. Inciong affirmed the dismissal in his order of April 23, 1979 (p. 246, Rollo), He denied the motion for reconsideration of Medina and Ong in his Order of October 25, 1979 (p. 327, Rollo).

Seventeen days after that order of dismissal, or on May 10, 1979, Medina and Ong filed, in the Court of First Instance of Rizal, Makati Branch XV an action for damages against Aboitiz and Pepsi-Cola by reason of the humiliating manner in which they were dismissed. They prayed for the payment of unrealized income and P415,000 as moral and exemplary damages, attorney's fees and litigation expenses (pp. 34-5, 246, Rollo).

Aboitiz and Pepsi-Cola filed a motion to dismiss on the grounds of lack of jurisdiction, pendency of a labor case, lack of cause of action, payment and prescription (p. 37, Rollo). Ong and Medina opposed the motion.

Judge Floreliana Castro-Bartolome in her order of September 6, 1979 denied the motion to dismiss on the ground that under Presidential Decree No. 1367, which took effect on May 1, 1979, the NLRC and Labor Arbiters cannot entertain claims for moral or other damages, thus implying that such claims should be ventilated in court (p. 247, Rollo).

After Medina had commenced his testimony, Aboitiz and Pepsi-Cola filed another motion to dismiss based on Presidential Decree No. 1691, which took effect on May 1, 1980 and which repealed Presidential Decree No. 1367 and restored to the NLRC and Labor Arbiters the jurisdiction to adjudicate money claims of workers, including moral damages, and other claims arising from employer- employee relationship.

Judge Bartolome in her order of May 23, 1981 dismissed the case for lack of jurisdiction. That order of dismissal is assailed in this appeal by Medina and Ong under Republic Act No. 5440.

In my opinion the dismissal of the civil action for damages is correct because the claims of Medina and Ong were within the exclusive jurisdiction of the Labor Arbiter and the NLRC, as originally provided in article 217 of the Labor Code and as reaffirmed in Presidential Decree No. 1691. Medina and Ong could not split their cause of action against Aboitiz and Pepsi-Cola. (See Aguda vs. Judge Vallejos, G. R. No. 58133, March 26,1982; Ebon vs. Judge De Guzman, G. R. No. 58265, March 25, 1982; Cardinal Industries, Inc. vs. Vallejos, G. R. No. 57032, June 19, 1982; Pepsi-Cola Bottling Co. vs. Martinez, G. R. No. 58877, March 15,1982.)

The decisions of the Regional Director and Deputy Minister Inciong are res judicata as to the claims of Medina and Ong.

Separate Opinions

AQUINO, J.,dissenting:

I dissent with due deference to the opinion penned by Mr. Justice Abad Santos.

This case is about the jurisdiction of the Court of First Instance to entertain an action for damages arising from the alleged disgraceful termination of petitioners' employment.

Judge Bartolome in her order of May 23, 1981 dismissed the case for lack of jurisdiction. That order of dismissal is assailed in this appeal by Medina and Ong under Republic Act No. 5440.

The decisions of the Regional Director and Deputy Minister Inciong are res judicata as to the claims of Medina and Ong.

Corporate Law Case Digest: Consolidated Bank v. CA (2003)

G.R. No. 138569. September 11, 2003
Lessons Applicable: Corp. negligence depending on culpa contractual or culpa aquiliana (Corporate Law)

FACTS:

Solidbank is a domestic banking corporation organized and existing under Philippine laws.
Private respondent L.C. Diaz and Company, CPA’s (“L.C. Diaz”), is a professional partnership engaged in the practice of accounting.
March 1976: L.C. Diaz, professional partnership engaged in the practice of accounting, opened a savings account with Solidbank, designated as Savings Account No. S/A 200-16872-6.
August 14 1991:

L.C. Diaz through its cashier, Mercedes Macaraya (Macaraya), filled up a savings (cash) deposit slip for P990 and a savings (checks) deposit slip for P50.
Macaraya instructed the messenger of L.C. Diaz, Ismael Calapre (Calapre), to deposit the money with Solidbank.

Macaraya also gave Calapre the Solidbank passbook

Calapre went to Solidbank and presented to Teller No. 6 the 2 deposit slips and the passbook.
The teller acknowledged receipt of the deposit by returning to Calapre the duplicate copies of the two deposit slips.
Teller No. 6 stamped the deposit slips with the words “DUPLICATE” and “SAVING TELLER 6 SOLIDBANK HEAD OFFICE.”
Since the transaction took time and Calapre had to make another deposit for L.C. Diaz with Allied Bank, he left the passbook with Solidbank.
Calapre then went to Allied Bank.

When Calapre returned to Solidbank to retrieve the passbook, Teller No. 6 informed him that “somebody got the passbook.”

Calapre went back to L.C. Diaz and reported the incident to Macaraya.
Macaraya immediately prepared a deposit slip in duplicate copies with a check of P200,000
When Macaraya asked for the passbook, Teller No. 6 told Macaraya that someone got the passbook but she could not remember to whom she gave the passbook.
When Macaraya asked Teller No. 6 if Calapre got the passbook, Teller No. 6 answered that someone shorter than Calapre got the passbook. Calapre was then standing beside Macaraya.

August 15 1991, L.C. Diaz through its CEO, Luis C. Diaz (Diaz) called up Solidbank to stop any transaction using the same passbook until L.C. Diaz could open a new account

Diaz formally wrote Solidbank to make the same request
L.C. Diaz learned of the unauthorized withdrawal the day before, August 14 1991, of P300,000 from its savings account.

The withdrawal slip for the P300,000 bore the signatures of the authorized signatories of L.C. Diaz, namely Diaz and Rustico L. Murillo.

The signatories, however, denied signing the withdrawal slip.
A certain Noel Tamayo received theP300,000.

September 5 1991: , L.C. Diaz charged its messenger, Emerano Ilagan (Ilagan) and one Roscon Verdazola with Estafa through Falsification of Commercial Document
RTC: dismissed the criminal case after the City Prosecutor
August 24 1992: Solidbank refused the demand from L.C. Diaz' counsel
August 25 1992: L.C. Diaz filed a Complaint for Recovery of a Sum of Money against Solidbank with the RTC.
December 28 1994, RTC: a decision absolving Solidbank and dismissing the complaint
October 27 1998: CA reversed the decision of RTC

ISSUE: W/N Solidbank should be liable for the recovery of the sum of money

HELD: YES. CA AFFIRMED with MODIFICATION. Petitioner Solidbank Corporation shall pay private L.C. Diaz and Company, CPA’s only 60% of the actual damages awarded by the CA. The remaining 40% of the actual damages shall be borne by private respondent L.C. Diaz and Company, CPA’s

Solidbank is liable for breach of contract due to negligence, or culpa contractual
contract between the bank and its depositor is governed by the provisions of the Civil Code on simple loan
Section 2 of RA 8791 effected on June 13 2000, declares that the State recognizes the “fiduciary nature of banking that requires high standards of integrity and performance

Solidbank’s tellers must exercise a high degree of diligence in insuring that they return the passbook only to the depositor or his authorized representative

Solidbank is bound by the negligence of its employees under the principle of respondeat superioror command responsibility

The defense of exercising the required diligence in the selection and supervision of employees is not a complete defense in culpa contractual, unlike in culpa aquiliana

The doctrine of last clear chance states that where both parties are negligent but the negligent act of one is appreciably later than that of the other, or where it is impossible to determine whose fault or negligence caused the loss, the one who had the last clear opportunity to avoid the loss but failed to do so, is chargeable with the loss - not applicable

This is a case of culpa contractual, where neither the contributory negligence of the plaintiff nor his last clear chance to avoid the loss, would exonerate the defendant from liability

In this case, L.C. Diaz was guilty of contributory negligence in allowing a withdrawal slip signed by its authorized signatories to fall into the hands of an impostor. Thus, the liability of Solidbank should be reduced.