Some Case Digests For Law On Obligations

BONIFACIO – OBLICON – DIGESTED CASES
1. SSS vs. Moonwalk Devt. and Housing Corp
TITLE Social Security System vs. Moonwalk Development and Housing

Corporation
GR NUMBER G.R. No. 73345
DATE April 7, 1993
PONENTE CAMPOS, JR.
NATURE/ PETITION for review on certiorari of the decision of the Intermediate
KEYWORDS Appellate Court
FACTS  SSS approved the application of defendant Moonwalk for an
interim loan
 Moonwalk alleged that they had completely paid its obligations
to SSS.
 In the letters to Moonwalk, SSS alleged that it committed an
honest mistake in releasing Moonwalk (in the mortgage).
 The trial court dismissed the complaint on the ground that the
obligation was already extinguished by the payment by
Moonwalk of its indebtedness to SSS
 SSS filed a complaint against Moonwalk.
 Moonwalk asserted that SSS had the opportunity to ascertain
the truth but failed to do so.
ISSUE/S Whether or not the penalty still demandable even after the
extinguishment of the principal obligation?
RULING No. The penalty is no longer demandable after the extinguishment of
the principal obligation.
There is no basis for demanding the penal clause since the obligation
has been extinguished. Here there has been a waiver of the penal
clause as it was not demanded before the full obligation was fully paid
and extinguished.
Now, besides the Real Estate Mortgages, the penal clause which is
also an accessory obligation must also be deemed extinguished
considering that the principal obligation was considered extinguished,
and the penal clause being an accessory obligation cannot exist
without a principal obligation.
Nowhere in this case did it appear that SSS demanded from Moonwalk
the payment of its monthly amortizations. Neither did it show that
petitioner demanded the payment of the stipulated penalty upon the
failure of Moonwalk to meet its monthly amortization. What the
complaint itself showed was that SSS tried to enforce the obligation
sometime in September, 1977 by foreclosing the real estate
mortgages executed by Moonwalk in favor of SSS. But this
foreclosure did not push through upon Moonwalk’s requests and
promises to pay in full. The next demand for payment happened on
October 1,
1979 when SSS issued a Statement of Account to Moonwalk And in
accordance with said statement, Moonwalk paid its loan in full.
What is clear, therefore, is that Moonwalk was never in default
because SSS never compelled performance.
Since there was no default in the performance

of the main obligation—payment of the loan—SSS was never entitled
to recover any penalty.
CONCLUSION WHEREFORE, in view of the foregoing, the petition is
DISMISSED and the decision of the respondent court is AFFIRMED.
2. RCBC vs. CA
TITLE RIZAL COMMERCIAL BANKING CORPORATION, petitioner, vs. COURT
OF APPEALS and FELIPE LUSTRE, respondents

DATE March 25, 1999
PONENTE KAPUNAN
NATURE/ PETITION for review on certiorari of a decision of the Court of Appeals
KEYWORDS
FACTS  In 1991, Toyota Shaw, Inc. assigned all its rights and interests
in the chattel mortgage to petitioner Rizal Commercial Banking
Corporation (RCBC).
 In 1993, respondent Atty. Felipe Lustre purchased a Toyota
Corolla
 The balance of the purchase price to be paid in 24 equal
monthly installments. The private respondent executed a
promissory note and a contract of chattel mortgage
 All the checks dated April 10, 1991 to January 10, 1993 were
thereafter encashed and debited by RCBC from private
respondent’s account, except for RCBC Check No. 279805
representing the payment for August 10, 1991, which was
unsigned. Previously, the amount represented by RCBC Check
No. 279805 was debited from private respondent’s account but
was later recalled and re-credited to him. Because of the recall,
the last two checks, dated February 10, 1993 and March 10,
1993, were no longer presented for payment.
 The petitioner demanded from private respondent the payment
of the balance more than a year after the date of the unsigned
check.
 The respondent refused prompting petitioner to file an action
for replevin and damages before the Pasay City Regional Trial
Court (RTC).
 The appellant bank was remiss in the performance of its
functions for it could have easily called the defendant’s
attention to the lack of signature on the check and sent the
check to, or summoned, the latter to affix his signature.
ISSUE/S Whether or not the failure to pay of Atty. Felipe to RCBC would
constitute default?
RULING No. The “default” was therefore not a case of failure to pay, the
check being sufficiently funded, and which amount was in fact
already debitted from appellee’s account by the appellant bank which
subsequently re-credited the amount to defendant-appellee’s
account for lack of signature. All these actions RCBC did on its own
without notifying defendant until sixteen (16) months later when it
wrote its demand letter dated January 21, 1993.
Article 1170 of the Civil Code states that those who in the
performance of their obligations are guilty of delay are liable for
damages. The delay in the performance of the obligation, however,
must be either malicious or negligent.
Thus, assuming that private respondent was guilty of delay in
the payment of the value of the unsigned check, private respondent
cannot be held liable for damages. There is no imputation, much less
evidence, that private respondent acted with malice or negligence in
failing to sign the check. Indeed, we agree with the Court of Appeals’
finding that such omission was mere “inadvertence” on the part of
private respondent. Toyota salesperson Jorge Geronimo testified that
he even verified whether private respondent had signed all the
checks and in fact returned three or four unsigned checks to him for
signing: x x x Even when the checks were delivered to petitioner, it
did not object to the unsigned.
CONCLUSION WHEREFORE, subject to these modifications, the decision of the
Court of Appeals is AFFIRMED. SO ORDERED.
3. Barzaga vs. CA
TITLE IGNACIO BARZAGA, petitioner, vs. COURT OF

APPEALS and ANGELITO ALVIAR, respondents
GR NUMBER 115129
DATE February 12, 1997
PONENTE BELLOSILLO
NATURE/ PETITION for review on certiorari of a decision of the
KEYWORDS Court of Appeals
FACTS  Ignacio’s wife died due to an ailment. Before her death, she
expressed her wish to be laid to rest before Christmas day.
 Ignacio set out to arrange for her interment on the twenty-
fourth of December in obedience semper fidelis to her dying
wish. But her final entreaty, unfortunately could not be carried
out.
 On 21 December 1990, Ignacio went to the hardware store of
respondent Angelito Alviar to inquire about the availability of
certain materials to be used in the construction of a niche for
his wife. Boncales, storekeeper agreed to deliver the items at
the designated time, date and place. With this assurance,
Barzaga purchased the materials and paid in full the amount of
P2,110.00. The construction materials did not arrive at eight
o’clock as promised.
 Barzaga decided to cancel his transaction with the store and
look for construction materials elsewhere.
 It was two-and-a-half (2-1/2) days behind schedule.
 Barzaga wrote private respondent Alviar demanding
recompense for the damage he suffered. Alviar did not respond.
Consequently, petitioner sued him before the Regional Trial
Court.
 Private respondent contended that legal delay could not be
validly ascribed to him because no specific time of delivery was
agreed upon between them. The invoices evidencing the sale
did not contain any stipulation as to the exact time of delivery.
 The trial court ordered respondent Alviar to pay the petitioner.
 On appeal, respondent Court of Appeals reversed the lower
court and ruled that there was no contractual commitment to
the exact time of delivery since this was not indicated in the
invoice receipts covering the sale.
ISSUE/S Whether or not the respondent, Alviar constitutes non- performance
of reciprocal obligation and shall be held liable for the damage
suffered by the petitioner.
RULING Yes. The court held that the respondent, Angelito Alviar was negligent
and incurred in delay in the performance of his contractual obligation.
This sufficiently entitles petitioner Ignacio Barzaga to be indemnified
for the damage he suffered as a consequence of delay or a contractual
breach.
The law expressly provides that those who in the

performance of their obligation are guilty of fraud,
negligence, or delay and those who in any manner
contravene the tenor thereof, are liable for damages.
Contrary to the appellate court’s factual determination, there was a

specific time agreed upon for the delivery of the materials to the
cemetery. Petitioner went to private respondent’s store on 21
December precisely to inquire if the materials he intended to purchase
could be delivered immediately. But he was told by the storekeeper
that if there were still deliveries to be made that afternoon his order
would be delivered the following day. With this in mind Barzaga
decided to buy the construction materials the following morning after
he was assured of immediate delivery according to his time frame.
The argument that the invoices never indicated a specific delivery
time must fall in the face of the positive verbal commitment of
respondent’s storekeeper. Consequently, no longer necessary to
indicate in the invoices the exact time the purchased items were to
be brought to the cemetery. In fact, storekeeper Boncales admitted
that it was her custom not to indicate the time of delivery whenever
she prepared invoices.
This case is clearly one of non-performance of a reciprocal obligation.

In their contract of purchase and sale, petitioner had already complied
fully with what was required of him as purchaser, i.e., the payment of
the purchase price of P2,110.00. It was incumbent upon respondent
to immediately fulfill his obligation to deliver the goods otherwise
delay would attach.
The court however excluded the award of temperate damages. Under

Art. 2224 of the Civil Code, temperate damages are more than
nominal but less than compensatory, and may be recovered when the
court finds that some pecuniary loss has been suffered but the amount
cannot, from the nature of the case, be proved with certainty.
CONCLUSION WHEREFORE, the decision of the Court of Appeals is
REVERSED and SET ASIDE except insofar as it
GRANTED on a motion for reconsideration the refund by private
respondent
4. Pantaleon vs. American Express
TITLE POLO S. PANTALEON, petitioner, vs. AMERICAN EXPRESS

INTERNATIONAL, INC., respondent
GR NUMBER 174269
DATE May 8, 2009
PONENTE TINGA
NATURE/ PETITION for review on certiorari of a decision of the Court of Appeals
KEYWORDS
FACTS  The petitioner, together with his family joined an escorted tour.
The group had agreed that the visit to Coster Diamond House
should end by 9:30 a.m. to allow enough time to take in a
guided city tour of Amsterdam
 Pantaleon presented his American Express credit card to
purchase some items. Ten minutes later, the store clerk
informed Pantaleon that his AmexCard had not yet been
approved.
 Around 45 minutes after Pantaleon had presented his
AmexCard, and 30 minutes after the tour group was supposed
to have left the store, Coster decided to release the items even
without respondent’s approval of the purchase. The spouses
Pantaleon returned to the bus. It is alleged that their offers of
apology were met by their tourmates with stony silence. The
tour group’s visible irritation.
 Panteleon a letter to the respondent, demanding an apology
for the “inconvenience, humiliation and embarrassment he and
his family thereby suffered.”
 Respondent refused to accede to Pantaleon’s demand for an
apology.
 City RTC rendered a decision in favor of Pantaleon.
 Respondent filed a Notice of Appeal, while Pantaleon moved
for partial reconsideration, praying that the trial court award
the increased amount of moral and exemplary damages he had
prayed for.
 Court of Appeals rendered a decision reversing the award of
damages in favor of Pantaleon.
ISSUE/S Whether or not the respondent, in connection with the
aforementioned transactions, had committed a breach of its
obligations to Pantaleon.
RULING Yes. The Court is convinced that defendants delay constitute breach
of its contractual obligation to act on his use of the card abroad “with
special handling.”
The delay committed by defendant was clearly attended by

unjustified neglect and bad faith, since it alleges to have consumed
more than one hour to simply go over plaintiff’s past credit history
with defendant, his payment record and his credit and bank
references, when all such data are already stored and readily
available from its computer.
“While it is true that the Cardmembership Agreement, which

defendant prepared, is silent as to the amount of time it should take
defendant to grant authorization for a charge purchase, defendant
acknowledged that the normal time for approval should only be three
to four seconds.
CONCLUSION WHEREFORE, the petition is GRANTED. The assailed
Decision of the Court of Appeals is REVERSED and SET ASIDE.
5. Lorenzo Shipping Corp. vs. BJ Mathel International
TITLE LORENZO SHIPPING CORP., petitioner, vs. BJ

MARTHEL INTERNATIONAL, INC., respondent
GR NUMBER 145483
DATE November 19, 2004
PONENTE CHICO-NAZARIO
NATURE/ PETITION for review on certiorari of the decision and
KEYWORDS resolution of the Court of Appeals.
FACTS  Petitioner Lorenzo Shipping is engaged in coastwise shipping
and owns the cargo M/V Dadiangas Express.
 BJ Marthel International, Inc. is a business entity engaged in
trading, marketing, and selling of various industrial
commodities. It is also an importer and distributor of different
brands of engines and spare parts. From 1987 up to the
institution of this case, respondent supplied petitioner with
spare parts for the latter’s marine engines.
 Lorenzo Shipping ordered for the second time cylinder lines
from the respondent stating the term of payment to be 25%
upon delivery, the balance payable in 5 bi-monthly equal
installments, no again stating the date of the cylinder’s
delivery.
 It was allegedly paid through post dated checks but the same
was dishonored due to insufficiency of funds.
 Despite due demands by the respondent, petitioner failed
contending that time was of the essence in the delivery of the
cylinders and that there was a delay since the respondent
committed said items “within two months after receipt of fir
order”.
 RTC held respondents bound to the quotation with respect to
the term of payment, which was reversed by the Court of
appeals ordering appellee to pay appellant P954,000 plus
interest. There was no delay since there was no demand.
ISSUE/S Whether or not respondent incurred delay in performing its
obligation under the contract of sale
RULING No. Even where time is of the essence, a breach of the contract in
that respect by one of the parties may be waived by the other party’s
subsequently treating the contract as still in force.—As an aside, let
it be underscored that “even where time is of the essence, a breach
of the contract in that respect by one of the parties may be waived
by the other party’s subsequently treating the contract as still in
force.”
Petitioner’s receipt of the cylinder liners when they were delivered to

its warehouse on 20 April 1990 clearly indicates that it considered
the contract of sale to be still subsisting up to that time. Indeed, had
the contract of sale been cancelled already as claimed by petitioner,
it no longer had any business receiving the cylinder liners even if
said receipt was “subject to verification.” By accepting the cylinder
liners when these were delivered to its warehouse, petitioner
indisputably waived the claimed delay in the delivery of said items.
CONCLUSION WHEREFORE, premises considered, the instant

Petition for Review on Certiorari is DENIED. The Decision of the Court
of Appeals, dated 28 April 2000, and its Resolution, dated 06 October
2000, are hereby AFFIRMED.
6. Solar Harvest vs. Davao Corrugated Carlon Corp.
TITLE SOLAR HARVEST, INC., petitioner, vs. DAVAO

CORRUGATED CARTON CORPORATION, respondent.
DATE July 26, 2010
PONENTE NACHURA
KEYWORDS resolution of the Court of Appeals
FACTS  Petitioner, Solar Harvest Inc., entered into an agreement with
respondent, Davao Corrugated Carton Corporation, for the
purchase of corrugated carton boxes, specifically designed for
petitioner’s business of exporting fresh bananas.
 The agreement was not reduced into writing. To get the
production underway.
 Petitioner provided the full payment for the ordered boxes. But,
alleged that they did not receive any boxes from respondent,
hence, they wrote a demand letter for reimbursement.
 Respondent, meanwhile, stated that the boxes had been
completed and that petitioner failed to pick them up from the
former’s warehouse as agreed upon.
 Respondent also averred that petitioner even placed an
additional order of 24,000 boxes without any advanced
payment from petitioner.
 Respondent then demanded petitioner to remove the boxes
from the factory and to pay the balance for the additional boxes
as well as for the storage fee.
 RTC) ruled that respondent did not commit any breach of faith
that would justify rescission of the contract and the consequent
reimbursement of the amount paid by petitioner. The RTC said
that respondent was able to produce the ordered boxes but
petitioner failed to obtain possession thereof because its ship
did not arrive. It also dismissed respondent’s counterclaim for
lack of merit.
 CA affirmed the RTC decision. According to the CA, it was
unthinkable that, over a period of more than two years,
petitioner did not even demand for the delivery of the boxes.
The CA added that even assuming that the agreement was for
respondent to deliver the boxes, respondent would not be liable
for breach of contract as petitioner had not yet demanded from
it the delivery of the boxes.
ISSUE/S Whether or not there was default on the part of the respondent to
deliver the boxes and thus make it liable for breach of contract to the
petitioner.
RULING No. There was no default on the part of the respondent to deliver the
boxes.
Solar Harvest cannot demand for the refund of its payment, which in
essence is actually a claim for rescission.
In reciprocal obligations, as in a contract of sale, the general rule is

that the fulfillment of the parties’ respective obligations should be
simultaneous. Hence, no demand is generally necessary because,
once a party fulfills his obligation and the other party does not fulfill
his, the latter automatically incurs in delay. But when different dates
for performance of the obligations are fixed, the default for each
obligation must be determined by the rules given in the first
paragraph of the present article, that is, the other party would incur
in delay only from the moment the other party demands fulfillment of
the former’s obligation. Thus, even in reciprocal obligations, if the
period for the fulfillment of the obligation is fixed, demand upon the
obligee is still necessary before the obligor can be considered in
default and before a cause of action for rescission will accrue.
CONCLUSION WHEREFORE, premises considered, the petition is

DENIED. The Court of Appeals Decision dated September 21, 2006
and Resolution dated February 23, 2007 are AFFIRMED. In addition,
petitioner is given a period of 30 days from notice within which to
cause the removal of the 36,500 boxes from respondent’s warehouse.
After the lapse of said period and petitioner fails to effect such removal
respondent shall have the right to dispose of the boxes in any manner
it may deem fit.
7. Cathay Pacific Airways, Ltd. vs. Vasquez
TITLE CATHAY PACIFIC AIRWAYS, LTD., petitioner, vs.

SPOUSES DANIEL VAZQUEZ and MARIA LUISA
MADRIGAL VAZQUEZ, respondents
DATE March 14, 2003
PONENTE DAVIDE, JR.
NATURE/ PETITION for review on certiorari of a decision of the
KEYWORDS Court of Appeals
FACTS  Cathay is a common carrier engaged in the business of transporting
passengers and goods by air. Among the many routes it services is
the Manila-Hongkong-Manila course. As part of its marketing
strategy, Cathay accords its frequent flyers membership in its
Marco Polo Club. The members enjoy several privileges, such as
priority for upgrading of booking without any extra charge
whenever an opportunity arises.
 Spouses Vasquezes, 2 friends and a maid were booked on a Cathay
flight from HK to Manila. While maid booked for Economy class, the
rest of the group booked Business Class.
 When they were about to board, the Vasquezes were informed that
they had been upgraded to First Class. But they refused because
they were going to discuss business with their 2 companions.
 Shocked by this unusual reaction to a seat upgrade, Ms. Chiu, after
consulting with her supervisor, informed them that if they would
not avail of the privilege, they would not be allowed to take the
flight. Eventually, after talking with his friends, Dr. Vasquez agreed.
He and his wife took the First Class Cabin. Back in Manila, after
apparent inaction on the part of Cathay, the Vasquezes filed a
damage suit. They attributed discourteous and humiliating behavior
to Ms. Chiu. Cathay answered that seat upgrading is a common
practice
ISSUE/S Whether or not Cathay Pacific Airways, Ltd constituted a breach of
contract.
RULING “Breach of Contract” is defined as the “failure without legal reason to
comply with the terms of a contract,” or the failure, without legal
excuse, to perform any promise which forms the whole or part of the
contract.”—The only problem is the legal effect of the upgrading of
the seat accommodation of the Vazquezes. Did it constitute a breach
of contract? Breach of contract is defined as the “failure without legal
reason to comply with the terms of a contract.” It is also defined as
the “failure, without legal excuse, to perform any promise which forms
the whole or part of the contract.” In previous cases, the breach of
contract of carriage consisted in either the bumping off of a passenger
with confirmed reservation or the downgrading of a passenger’s seat
accommodation from one class to a lower class. In this case, what
happened was the reverse. The contract between the parties was for
Cathay to transport the Vazquezes to Manila on a Business Class
accommodation in Flight CX-905. After checking-in their luggage at
the Kai Tak Airport in Hong Kong, the Vazquezes were given boarding
cards indicating their seat assignments in the Business Class Section.
However, during the boarding time, when the Vazquezes presented
their boarding passes, they were informed that they had a seat
change from Business Class to First Class. It turned out that the
Business Class was overbooked in that there were more passengers
than the number of seats. Thus, the seat assignments of the
Vazquezes were given to waitlisted passengers, and the Vazquezes,
being members of the Marco Polo Club, were upgraded from Business
Class to First Class.
An upgrading is for the better condition and, definitely for the benefit
of the passenger.—Neither was the transfer of the Vazquezes effected
for some evil or devious purpose. As testified to by Mr. Robson, the
First Class Section is better than the Business Class Section in terms
of comfort, quality of food, and service from the cabin crew; thus, the
difference in fare between the First Class and Business Class at that
time was $250. Needless to state, an upgrading is for the better
condition and, definitely, for the benefit of the passenger.
CONCLUSION WHEREFORE, the instant petition is hereby partly
GRANTED. The Decision of the Court of Appeals of 24 July 2001 in CA-
G.R. CV No. 63339 is hereby MODIFIED, and as modified, the awards
for moral damages and attorney’s fees are set aside and deleted, and
the award for nominal damages is reduced to P5,000.
8. Meralco vs. Ramoy
TITLE MANILA ELECTRIC COMPANY, petitioner, vs. MATILDE MACABAGDAL

RAMOY, BIENVENIDO RAMOY, ROMANA RAMOY-RAMOS, ROSEMARIE
RAMOY, OFELIA DURIAN and CYRENE PANADO

DATE March 4, 2008
PONENTE USTRIA-MARTINEZ
KEYWORDS resolution of the Court of Appeals
FACTS  National Power Corporation (NPC) filed with the MTC Quezon City
a case for ejectment against several persons allegedly illegally
occupying its properties in Baesa, Quezon City among the
defendants in the ejectment case was Leoncio Ramoy, one of the
plaintiffs in the case at bar.
 On April 28, 1989 the MTC rendered judgment for MERALCO to
demolish or remove the building and structure they built on the
land of the plaintiff and to vacate the premises. On June 20, 1999
NPC wrote to MERALCO requesting the immediate disconnection of
electric power supply to all residential andcommercial
establishments beneath the NPC transmission lines along Baesa,
Quezon City.
 In a letter dated August 17, 1990 MERALCO requested NPC for a
joint survey to determine all the establishments which are
considered under NPC property.
 In due time, the electric service connection of the plaintiffs was
disconnected. During the ocular inspection ordered by the Court, it
was found out that the residence of the plaintiffs-spouses was
indeed outside the NPC property.
 The RTC decided in favor of MERALCO by dismissing herein
respondents’ claim for moral damages, exemplary damages and
attorney’s fees
 RTC ordered MERALCO to restore the electric power supply of
respondents
ISSUE/S Whether or not the Court of Appeals gravely erred when it found
MERALCO negligent when it disconnected the subject electric service
of respondents
RULING No. The Court agrees with the CA that under the factual milieu of the
present case, MERALCO failed to exercise the utmost degree of care
and diligence required of it, pursuant to Articles 1170 & 1173 of the
Civil Code. It was not enough for MERALCO to merely rely on the
Decision of the MTC without ascertaining whether it had become final
and executory. Verily, only upon finality of the said Decision can it be
said with conclusiveness that respondents have no right or proper
interest over the subject property, thus, are not entitled to the
services of MERALCO
In order that moral damages may be awarded, there must be pleading

and proof of moral suffering, mental anguish, fright and the like. While
respondent alleged in his complaint that he suffered mental anguish,
serious anxiety, wounded feelings and moral shock, he failed to prove
them during the trial. Indeed, respondent should have taken the
witness stand and should have testified on the mental anguish,
serious anxiety, wounded feelings and other emotional and mental
suffering he purportedly suffered to sustain his claim for moral
damages. Mere allegations do not suffice; they must be substantiated
by clear and convincing proof. No other person could have proven
such damages except the respondent himself as they were extremely
personal to him.
Actions of MERALCO cannot be considered wanton, fraudulent,

reckless, oppressive or malevolent; Exemplary damages should not
be awarded.
CONCLUSION WHEREFORE, the petition is PARTLY GRANTED. The
Decision of the Court of Appeals is AFFIRMED with
MODIFICATION. The award for exemplary damages and attorney’s
fees is DELETED
LLOVIT – OBLICON – DIGESTED CASES
9. Areola vs. CA & Prudential Guarantee Insurance, 236 SCRA 643

TITLE SANTOS B. AREOLA and LYDIA D. AREOLA, petitioners-appellants, vs.
COURT OF APPEALS and PRUDENTIAL GUARANTEE AND ASSURANCE,
INC., respondents-appellees.

DATE September 22, 1994
PONENTE ROMERO, J.
NATURE/ PETITION for review on certiorari of a decision of the Court of

KEYWORDS/ Appeals/Reciprocal Obligations/Third Division
DIVISION
FACTS Petitioner-insured, Santos Areola bought through the Baguio City

branch of Prudential Guarantee and Assurance, Inc. a personal
accident insurance policy.
Under the terms of the statement of account, petitioner-insured was

supposed to pay the total amount of P1,609.65 which included the
premium of P1,470.00, documentary stamp of P110.25 and 2%
premium tax of P29.40.
On December 17, 1984, respondent issued a collector’s provisional

receipt for the amount of P1,609.65. And on it was a note saying that
the provisional receipt will be confirmed by an official receipt and if
the same had not been received within 7 days, then the insurance
company should be notified.
On June 29, 1985, respondent through its Baguio City manager,

Teofilo M. Malapit, sent petitioner-insured an Endorsement which
“cancelled flat” his insurance for non-payment of premium.
Petitioner-insured confronted Carlito Ang, agent of respondent, and

demanded the issuance of an official receipt. Ang told him that the
cancellation of the policy was a mistake but that he would personally
see to its rectification. However, he still did not receive an Official
receipt.
So, petitioner-insured sent the respondent a letter demanding that

he be insured under the same terms and conditions as those
contained in his Policy and warned that should his demands be
unsatisfied, he would sue for damages.
The petitioner-insured received a letter from Malapit informing him

that the “partial payment” he had made on the policy had been
“exhausted pursuant to the provisions of the Short Period Rate Scale”
and that should he fail to pay the balance, the company’s liability
would cease to operate.
On the other hand, respondent through its Assistant Vice-President

Mariano M. Ampil III, wrote Areola a letter stating that since, no
official receipt had been issued there was reason to believe that no
payment had been made. But, Ampil apologized for the inconvenience
and agreed to hold him covered under the terms of the referenced
policy until the matter was cleared.
On August 3, 1985, Ampil wrote Areola another letter confirming that

the amount covered by the provisional receipt issued to him was
received by Prudential on December 17, 1984 and that the
respondent was amenable to extend his policy for 1 year from the
date when payment was received. Ampil exhorted him to indicate his
conformity to the proposal by signing on the space provided for in the
letter.
Unfortunately, Areola as early as August 6, 1985 had filed a complaint

for breach of contract with damages before Branch 40 RTC of
Dagupan City.
Respondent admitted that the cancellation of petitioner-insured’s
policy was due to the failure of Malapit to turn over the premiums
collected, for which reason no official receipt was issued to him.
However, it argued that, by acknowledging the inconvenience caused
on petitioner-insured and after taking steps to rectify its omission by
reinstating the cancelled policy prior to the filing of the complaint,
respondent had complied with its obligation under the contract.
Hence, it concluded that petitioner-insured no longer has a cause of
action against it.
RTC ruled in favor of Areola. The court declared that the respondent
acted in bad faith in unilaterally cancelling the insurance policy. Had
the insured met an accident at the time, the insurance company
would have disclaimed any liability because Areola could not have
been considered insured. Thus, there was breach of contract entitling
petitioner to damages prayed for.
Respondent filed an appeal to CA denying bad faith on its part. CA

reversed the decision and found that the respondent was not
motivated by negligence, malice or bad faith in cancelling the policy.
Rather, the cancellation of the policy was based on what the existing
records showed. Bad faith, said CA, is some motive of self-interest or
ill-will; a furtive design or ulterior purpose, proof of which must be
established convincingly.
It further observed, the following acts indicate that respondent did

not act precipitately or willfully to inflict a wrong: a) the investigation
conducted to verify if Areola had indeed paid the premium; b) the
letter confirming that the premium had been paid; c) the
reinstatement of the policy with a proposal to extend its effective
period d) respondent's apologies for the “inconvenience” caused; and
e) respondent even relieved Malapit, of his job by forcing him to
resign.
Petitioner-insured moved for reconsideration but was denied by CA.
ISSUE(S) 1. W/N the erroneous act of cancelling subject insurance policy entitle
petitioner-insured to payment of damages?
2. W/N the subsequent act of reinstating the wrongfully cancelled
insurance policy by respondent insurance company, in an effort to
rectify such error, obliterate whatever liability for damages it may
have to bear, thus absolving it therefrom?
RULING(S) 1. Yes. Malapit’s fraudulent act of misappropriating the premiums

paid by petitioner-insured is beyond doubt directly imputable to
respondent insurance company. A corporation, such as respondent
insurance company, acts solely thru its employees. The latters’
acts are considered as its own for which it can be held to account.
His act of receiving the premiums collected is well within the
province of his authority. Thus, his receipt of said premiums is
receipt by private respondent insurance company who, by
provision of law, particularly under Article 1910 of the Civil Code,
is bound by the acts of its agent.
Malapit’s failure to remit the premiums he received cannot
constitute a defense for private respondent insurance company;
no exoneration from liability could result therefrom. The fact that
private respondent insurance company was itself defrauded due to
the anomalies that took place in its Baguio branch office, such as
the non-accrual of said premiums to its account, does not free the
same from its obligation to petitioner Areola.
As held in Prudential Bank v. Court of Appeals citing the ruling in
McIntosh v. Dakota Trust Co.: “A bank is liable for wrongful acts
of its officers done in the interests of the bank or in the course of
dealings of the officers in their representative capacity but not for
acts outside the scope of their authority. A bank holding out its
officers and agent as worthy of confidence will not be permitted to
profit by the frauds they may thus be enabled to perpetrate in the
apparent scope of their employment; nor will it be permitted to
shirk its responsibility for such frauds, even though no benefit may
accrue to the bank therefrom. Accordingly, a banking corporation
is liable to innocent third persons where the representation is
made in the course of its business by an agent acting within the
general scope of his authority even though, in the particular case,
the agent is secretly abusing his authority and attempting to
perpetrate a fraud upon his principal or some other person, for his
own ultimate benefit.
2. No. Its earlier act of reinstating the insurance policy cannot
obliterate the injury inflicted on petitioner-insured. Respondent
company should be reminded that a contract of insurance creates
reciprocal obligations for both insurer and insured. Reciprocal
obligations are those which arise from the same cause and in which
each party is both a debtor and a creditor of the other, such that
the obligation of one is dependent upon the obligation of the other.
Under the law governing reciprocal obligations, particularly the
second paragraph of Article 1191, the injured party, petitioner-
insured in this case, is given a choice between fulfilment or
rescission of the obligation in case one of the obligors, such as
respondent insurance company, fails to comply with what is
incumbent upon him. However, said article entitles the injured
party to payment of damages, regardless of whether he demands
fulfilment or rescission of the obligation. Untenable then is
respondent insurance company’s argument, namely, that
reinstatement being equivalent to fulfilment of its obligation,
divests petitioner-insured of a rightful claim for payment of
damages. Such a claim finds no support in our laws on obligations
and contracts.
CONCLUSION WHEREFORE, the petition for review on certiorari is hereby GRANTED

and the decision of the Court of Appeals REVERSED.
10. Tanguiling vs. CA, 266 SCRA 78

TITLE JACINTO TANGUILIG doing business under the name and style J.M.T.
ENGINEERING AND GENERAL MERCHANDISING, petitioner, vs.
COURT OF APPEALS and VICENTE HERCE, JR., respondents.
DATE January 2, 1997
PONENTE BELLOSILLO, J.
KEYWORDS/ Appeals/ Payments by a Third Person/ First Division
DIVISION
FACTS On April 1987, petitioner Jacinto M. Tanguilig under the name J.M.T.
Engineering and General Merchandising proposed to respondent
Vicente Herce, Jr. to construct a windmill system for the latter, for a
consideration of P60,000.00 with a one-year guaranty.
Respondent paid petitioner a down payment of P30,000.00 and an

instalment payment of P15,000.00, leaving a balance of
P15,000.00.Then, the respondent refused to pay the balance, so the
petitioner filed a complaint to collect the amount, on 14 March 1988.
Respondent denied the claim saying that he had already paid this
amount to the San Pedro General Merchandising Inc. (SPGMI) which
constructed the deep well to which the windmill system was to be
connected. According to respondent, since the deep well formed part
of the system the payment he tendered to SPGMI should be credited
to his account by petitioner.
Moreover, assuming that he owed petitioner a balance of P15,000.00,

this should be offset by the defects in the windmill system which
caused the structure to collapse after a strong wind hit their place.
Petitioner denied that the construction of a deep well was included in

the agreement to build the windmill system, for the contract price of
P60,000.00 was solely for the windmill.
Petitioner also disowned any obligation to repair or reconstruct the

system and insisted that he delivered it in good and working condition
to respondent who accepted the same without protest. Besides, its
collapse was attributable to a typhoon, a force majeure, which
relieved him of any liability.
The trial court held that the construction of the deep well was not part
of the windmill project as evidenced clearly by the letter proposals
submitted by petitioner to respondent and with respect to the repair
of the windmill, there is no clear and convincing proof that the
windmill system fell down due to the defect of the construction.
CA reversed the trial court's decision. It ruled that the construction of

the deep well was included in the agreement of the parties because
the term “deep well” was mentioned in both proposals and
respondent’s witness Guillermo Pili, the proprietor of SPGMI stated
that the petitioner told him that the cost of constructing the deep well
would be deducted from the contract price of P60,000.00.
CA also rejected petitioner’s claim of force majeure and ordered the

latter to reconstruct the windmill in accordance with the stipulated
one-year guaranty.
The petitioner filed for a motion for reconsideration but was denied,
hence this petition.
ISSUE(S) 3. W/N the agreement to construct the windmill system included the
installation of a deep well?
4. W/N petitioner is under obligation to reconstruct the windmill after
it collapsed?
RULING(S) 3. No. Notably, nowhere in either proposal is the installation of a deep

well mentioned, even remotely. Neither is there an itemization or
description of the materials to be used in constructing the deep
well. The contract prices fixed in both proposals cover only the
features specifically described therein and no other. While the
words “deep well” and “deep well pump” are mentioned in both,
these do not indicate that a deep well is part of the windmill
system.
Respondent cannot claim the benefit of the law concerning
“payments made by a third person.” The Civil Code provisions do
not apply in the instant case because no creditor-debtor
relationship between petitioner and Guillermo Pili and/or SPGMI
has been established regarding the construction of the deep well.
Specifically, witness Pili did not testify that he entered into a
contract with petitioner for the construction of respondent’s deep
well. If SPGMI was really commissioned by petitioner to construct
the deep well, an agreement particularly to this effect should have
been entered into.
4. Yes. In order for a party to claim exemption from liability by reason
of fortuitous event under Art. 1174 of the Civil Code the event
should be the sole and proximate cause of the loss or destruction
of the object of the contract. In Nakpil vs. Court of Appeals, 4
requisites must concur: (a) the cause of the breach of the
obligation must be independent of the will of the debtor; (b) the
event must be either unforeseeable or unavoidable; (c) the event
must be such as to render it impossible for the debtor to fulfill his
obligation in a normal manner; and, (d) the debtor must be free
from any participation in or aggravation of the injury to the
creditor.
Petitioner’s argument that private respondent was already in
default in the payment of his outstanding balance of P15,000.00
and hence should bear his own loss, is untenable. In reciprocal
obligations, neither party incurs in delay if the other does not
comply or is not ready to comply in a proper manner with what is
incumbent upon him. When the windmill failed to function properly
it became incumbent upon petitioner to institute the proper repairs
in accordance with the guaranty stated in the contract. Thus,
respondent cannot be said to have incurred in delay; instead, it is
petitioner who should bear the expenses for the reconstruction of
the windmill. Article 1167 of the Civil Code is explicit on this point
that if a person obliged to do something fails to do it, the same
shall be executed at his cost.
CONCLUSION WHEREFORE, the appealed decision is MODIFIED. Respondent

VICENTE HERCE, JR. is directed to pay petitioner JACINTO M.
TANGUILIG the balance of P15,000.00 with interest at the legal rate
from the date of the filing of the complaint. In return, petitioner is
ordered to “reconstruct subject defective windmill system, in
accordance with the oneyear guaranty”16 and to complete the same
within three (3) months from the finality of this decision.
11. Nakpil & Sons vs. CA, 144 SCRA 596

TITLE JUAN F. NAKPIL & SONS, and JUAN F. NAKPIL, petitioners, vs. THE
COURT OF APPEALS, UNITED CONSTRUCTION COMPANY, INC., JUAN
J. CARLOS, and the PHILIPPINE BAR ASSOCIATION, respondents.
THE UNITED CONSTRUCTION CO., INC., petitioner, vs. COURT OF
APPEALS, ET AL., respondents.
PHILIPPINE BAR ASSOCIATION, ET AL., petitioners, vs. COURT OF
APPEALS, ET AL., respondents.
GR NUMBER No. L-47851, No. L-47863 and No. L-47896
DATE October 3, 1986
PONENTE PARAS, J.
NATURE/ PETITIONS for certiorari to review the decision of the Court of

KEYWORDS/ Appeals/Damages/Second Division
DIVISION
FACTS Philippine Bar Association (PBA) decided to construct an office

building in Intramuros, Manila. The construction was undertaken by
the United Construction, Inc. (United) on an “administration” basis,
on the suggestion of Juan J. Carlos, the president and general
manager of said corporation.
The proposal was approved by PBA’s board of directors and signed by

its president Roman Ozaeta, a third-party defendant in this case. The
plans and specifications for the building were prepared by the other
third-party defendants, Juan F. Nakpil & Sons (Nakpil).
The building was completed in June, 1966. On August 2, 1968 an

unusually strong earthquake hit Manila and its environs and the
building in question sustained major damage. The tenants vacated
the building in view of its precarious condition. As a temporary
remedial measure, the building was shored up by United at the cost
of P13,661.28.
On November 29, 1968, PBA commenced an action for the recovery

of damages arising from the partial collapse of the building against
United and its President and General Manager Juan J. Carlos as
defendants. Plaintiff alleges that the collapse of the building was
caused by defects in the construction, the failure of the contractors
to follow plans and specifications and violations by the defendants of
the terms of the contract.
In turn, United filed a third-party complaint against the architects

(Nakpil) who prepared the plans and specifications, alleging in
essence that the collapse of the building was due to the defects in the
said plans and specifications. Roman Ozaeta, the then president of
PBA was included as a third-party defendant for damages for having
included Juan J. Carlos, President of United as party defendant.
Upon the issues being joined, a pre-trial was conducted, during which,
the parties agreed to refer the technical issues involved in the case
to Commissioner Andres O. Hizon, who was appointed by the trial
court. Thus, the issues were divided into technical issues, which were
referred to the Commissioner and non-technical issues, which were
tried by the Court.
Plaintiff moved twice for the demolition of the building for it may
topple down in case of a strong earthquake, which were opposed by
the defendants but was later authorized by the Commissioner at the
expense of the plaintiff. But, other strong earthquakes caused further
damage to the property, so the actual demolition was undertaken by
the buyer of the damaged building.
Hizon submitted his report with the findings that while the damage
sustained by the PBA building was caused by the earthquake, they
were also caused by the (1) defects in the plans and specifications
prepared by the architects, (2) deviations from said plans and
specifications by United and (3) failure of United to observe the
requisite workmanship in construction of the building and of the
contractors and architects to exercise the requisite degree of
supervision in the construction of the said building.
All the parties registered their objections to aforesaid findings which

were answered by the Commissioner. The trial court agreed with the
findings of the Commissioner except as to the holding that the owner
is charged with full time supervision of the construction.
Intermediate Appellate Court (IAC) modified the trial court's decision.

All the parties appealed from the decision of the IAC. Hence, these
petitions.
While, the United Architects of the Philippines, the Association of Civil

Engineers, and the Philippine Institute of Architects filed with the
Court a motion to intervene as amicus curiae and gave the opinion
that the plans and specifications of Nakpil were not defective.
ISSUE(S) 5. W/N an act of God,—an unusually strong earthquake—which

caused the failure of the building, exempts from liability, parties
who are otherwise liable because of their negligence?
RULING(S) 1. No. To exempt the obligor from liability under Art. 1174 of the Civil
Code, for a breach of an obligation due to an “act of God,’ the
following must concur: (a) the cause of the breach of the obligation
must be independent of the will of the debtor; (b) the event must
be either unforeseeable or unavoidable; (c) the event must be
such as to render it impossible for the debtor to fulfill his obligation
in a normal manner; and (d) the debtor must be free from any
participation in, or aggravation of the injury to the creditor.
The negligence of the defendant and the third-party defendants
petitioners was established beyond dispute both in the lower court
and in the IAC. United was found to have made substantial
deviations from the plans and specifications, and to have failed to
observe the requisite workmanship in the construction as well as
to exercise the requisite degree of supervision; while the third-
party defendants were found to have inadequacies or defects in
the plans and specifications prepared by them. As correctly
assessed by both courts, the defects in the construction and in the
plans and specifications were the proximate causes that rendered
the PBA building unable to withstand the earthquake. For this
reason the defendant and third-party defendants cannot claim
exemption from liability.
In any event, the relevant and logical observations of the trial
court as affirmed by IAC that “while it is not possible to state with
certainty that the building would not have collapsed were those
defects not present, the fact remains that several buildings in the
same area withstood the earthquake to which the building of the
plaintiff was similarly subjected,” cannot be ignored.
Relative thereto, the ruling of the Supreme Court in Tucker v.
Milan, reads: “One who negligently creates a dangerous condition
cannot escape liability for the natural and probable consequences
thereof, although the act of a third person, or an act of God for
which he is not responsible, intervenes to precipitate the loss.” As
already discussed, the destruction was not purely an act of God.
Truth to tell hundreds of ancient buildings in the vicinity were
hardly affected by the earthquake. Only one thing spells out the
fatal difference; gross negligence and evident bad faith, without
which the damage would not have occurred.
CONCLUSION WHEREFORE, the decision appealed from is hereby MODIFIED. upon

the defendant and the third-party defendants a solidary indemnity in
favor of PBA of FIVE MILLION Pesos to cover all damages and an
additional ONE HUNDRED THOUSAND Pesos as and for attorney’s
fees, the total sum being payable upon the finality of this decision.
12. Republic vs. Luzon Stevedoring, 21 SCRA 279

TITLE REPUBLIC OF THE PHILIPPINES, plaintiff-appellee, vs. LUZON
STEVEDORING CORPORATION, defendant-appellant.
GR NUMBER No. L-21749
DATE September 29, 1967
PONENTE REYES, J.B.L., J.
NATURE/ APPEAL from a decision of the Court of First Instance of

KEYWORDS/ Manila/Damages/En Banc
DIVISION
FACTS In the early afternoon of August 17, 1960, barge L-1892, owned by
the Luzon Stevedoring Corporation (Luzon) was being towed down
the Pasig river by tugboats “Bangus” and “Barbero”1 also belonging
to the same corporation, when the barge rammed against one of the
wooden piles of the Nagtahan bailey bridge, smashing the posts and
causing the bridge to list. The river, at the time, was swollen and the
current swift, on account of the heavy downpour of Manila and the
surrounding provinces.
Sued by the Republic of the Philippines (Republic) for actual and

consequential damage caused by its employees, amounting to
P200,000 before the CFI of Manila, Luzon disclaimed liability therefor,
on the grounds that it had exercised due diligence in the selection
and supervision of its employees; that the damages to the bridge
were caused by force majeure; that plaintiff has no capacity to sue;
and that the Nagtahan bailey bridge is an obstruction to navigation.
CFI held the defendant liable for the damage caused by its employees
and ordering it to pay to plaintiff the actual cost of the repair of the
Nagtahan bailey bridge which amounted to P192,561.72, with legal
interest thereon from the date of the filing of the complaint.
Defendant appealed directly to the Supreme Court.
However, the established rule is that when a party appeals directly to

the Supreme Court, and submits his case there for decision, he is
deemed to have waived the right to dispute any finding of fact made
by the trial Court. The only questions that may be raised are those of
law.
ISSUE(S) 6. W/N the collision of appellant's barge with the supports or piers of
the Nagtahan bridge was in law caused by fortuitous event or force
majeure?
RULING(S) 5. No. Considering that the Nagtahan bridge was an immovable and
stationary object and uncontrovertedly provided with adequate
openings for the passage of water craft, including barges like those
of appellant's, it is undeniable that the unusual event that the
barge, exclusively controlled by appellant, rammed the bridge
supports raises a presumption of negligence on the part of
appellant or its employees manning the barge or the tugs that
towed it. In the ordinary course of events, such a thing does not
happen if proper care is used. In Anglo American Jurisprudence,
the inference arises by what is known as the “res ipsa loquitur”
rule.
Caso fortuito or force majeure (which in law are identical in so far
as they exempt an obligor from liability) by definition are
extraordinary events not foreseeable or avoidable, “events that
could not be foreseen, or which, though foreseen, were inevitable”
(Art. 1174, Civil Code). It is, therefore, not enough that the event
could not have been foreseen or anticipated, as is commonly
believed, but it must be one impossible to foresee or to avoid. The
mere difficulty to foresee the happening is not impossibility to
foresee the same: “un hecho no constituye caso fortuito por la sola
circunstancia de que su existencia haga mas dificil o mas onerosa
la accion diligente del presento ofensor.” The very measures
adopted by appellant prove that the possibility of danger was not
only foreseeable, but actually foreseen, and was not caso fortuito.
Otherwise stated, the appellant, Luzon Stevedoring Corporation,
knowing and appreciating the perils posed by the swollen stream
and its swift current, voluntarily entered into a situation involving
obvious danger; it therefore assured the risk, and cannot shed
responsibility merely because the precautions it adopted turned
out to be insufficient.
CONCLUSION WHEREFORE, finding no error in the decision of the lower Court

appealed from, the same is hereby affirmed. Costs against the
defendant-appellant.
13. Far East Bank & Trust Co. vs. CA, 241 SCRA 671
TITLE FAR EAST BANK AND TRUST COMPANY, petitioner, vs. THE
HONORABLE COURT OF APPEALS, LUIS A. LUNA and CLARITA S.
LUNA, respondents.
PONENTE VITUG, J.
NATURE/ PETITION for review of a decision of the Court of

KEYWORDS/ Appeals/Damages/En Banc
DIVISION
FACTS In October 1986, private respondent Luis A. Luna applied for, and
was accorded, a FAREASTCARD issued by petitioner Far East Bank
and Trust Company ("FEBTC") at its Pasig Branch. Upon his request,
the bank also issued a supplemental card to private respondent
Clarita S. Luna.
In August 1988, Clarita lost her credit card. Clarita submitted an
affidavit of loss.
On 06 October 1988, Luis tendered a despedida lunch for a close

friend at the Bahia Rooftop Restaurant of the Hotel Intercontinental
Manila. To pay for the lunch, Luis presented his FAREASTCARD, but
it was not honored, so Luis was forced to pay in cash the bill
amounting to P588.13.
In a letter, Luis through counsel, demanded from FEBTC the payment

of damages for the embarrassment. Adrian V. Festejo, vice-president
of FEBTC, expressed the bank's apologies to Luis, in a letter. He
explained that in cases when a card is reported to their office as lost,
FAREASTCARD undertakes the necessary action to avert its
unauthorized use (such as tagging the card as hot-listed), as it is
always their intention to protect their cardholders.
Festejo also sent a letter to Anthony King, the Manager of the

Restaurant to assure the latter that the private respondents were
'Very valued clients" of FEBTC. King wrote back that the credibility of
the private respondent had never been "in question", a copy of which
was sent to Luis.
Still feeling aggrieved, the private respondents filed a complaint for

damages with the Regional Trial Court (RTC) of Pasig.
RTC rendered a decision ordering FEBTC to pay private respondents

(a) P300,000.00 moral damages; (b) P50,000.00 exemplary
damages; and (c) P20,000.00 attorney's fees.
On appeal, the Court of Appeals (CA) affirmed the decision of the trial
court. Its motion for reconsideration having been denied by CA,
FEBTC went to the Supreme Court with this petition for review.
ISSUE(S) 7. W/N the private respondents are entitled to moral damages?
RULING(S) 6. No. In culpa contractual, moral damages may be recovered where

the defendant is shown to have acted in bad faith or with malice
in the breach of the contract. Bad faith, in this context, includes
gross, but not simple, negligence.
Malice or bad faith implies a conscious and intentional design to do
a wrongful act for a dishonest purpose or moral obliquity; it is
different from the negative idea of negligence in that malice or bad
faith contemplates a state of mind affirmatively operating with
furtive design or ill will.
Art. 21 of the Code, contemplates a conscious act to cause harm.
Thus, even if we are to assume that the provision could properly
relate to a breach of contract, its application can be warranted only
when the defendant's disregard of his contractual obligation is so
deliberate as to approximate a degree of misconduct certainly no
less worse than fraud or bad faith. Most importantly, Art. 21 is a
mere declaration of a general principle in human relations that
clearly must, in any case, give way to the specific provision of Art.
2220 of the Civil Code authorizing the grant of moral damages in
culpa contractual solely when the breach is due to fraud or bad
faith.
The Court has not in the process overlooked another rule that a
quasi-delict can be the cause for breaching a contract that might
thereby permit the application of applicable principles on tort even
where there is a pre-existing contract between the plaintiff and the
defendant (Phil. Airlines vs. Court of Appeals; Singson vs. Bank of
Phil Islands; and Air France vs. Carrascoso). This doctrine,
unfortunately, cannot improve private respondents' case for it can
aptly govern only where the act or omission complained of would
constitute an actionable tort independently of the contract. The
test can be stated thusly: Where, without a pre-existing contract
between two parties, an act or omission can nonetheless amount
to an actionable tort by itself, the fact that the parties are
contractually bound is no bar to the application of quasi-delict
provisions to the case. Here, private respondents' damage claim is
predicated solely on their contractual relationship; without such
agreement, the act or omission complained of cannot by itself be
held to stand as a separate cause of action or as an independent
CONCLUSION WHEREFORE, the petition for review is given due course. The
appealed decision is MODIFIED by deleting the award of moral and
exemplary damages to private respondents; in its stead, petitioner is
ordered to pay private respondent Luis A. Luna an amount of
P5,000.00 by way of nominal damages. In all other respects, the
appealed decision is AFFIRMED. No costs.
14. Salugada vs. FEU, 553 SCRA 741

TITLE JOSEPH SALUDAGA, petitioner, vs. FAR EASTERN UNIVERSITY and
EDILBERTO C. DE JESUS in his capacity as President of FEU,
respondents.
DATE April 30, 2008
PONENTE YNARES-SANTIAGO, J.
NATURE/ PETITION for review on certiorari of the decision and resolution of the
KEYWORDS/ Court of Appeals/Third Party/Third Division
DIVISION
FACTS Petitioner Joseph Saludaga was a sophomore law student of

respondent Far Eastern University (FEU) when he was shot by
Alejandro Rosete (Rosete), one of the security guards on duty at the
school premises on August 18, 1996.
Petitioner was rushed to FEU-Dr. Nicanor Reyes Medical Foundation

(FEU-NRMF) due to the wound he sustained. Meanwhile, Rosete was
brought to the police station where he explained that the shooting was
accidental. He was eventually released considering that no formal
complaint was filed against him.
Petitioner thereafter filed a complaint for damages against

respondents on the ground that they breached their obligation to
provide students with a safe and secure environment and an
atmosphere conducive to learning.
Respondents, in turn, filed a Third-Party Complaint against Galaxy

Development and Management Corporation (Galaxy), the agency
contracted by respondent FEU to provide security services within its
premises and Mariano D. Imperial (Imperial), Galaxy’s President, to
indemnify them for whatever would be adjudged in favor of petitioner,
if any; and to pay attorney’s fees and cost of the suit. On the other
hand, Galaxy and Imperial filed a Fourth-Party Complaint against AFP
General Insurance.
The trial court rendered a decision in favor of petitioner. FEU and its
President were ordered to pay jointly and severally Saludaga for
damages, while Galaxy and its President were ordered to indemnify
jointly and severally FEU.
Respondents appealed to the Court of Appeals (CA), which reversed

the Trial Court's decision. Petitioner filed a Motion for Reconsideration
which was denied. Hence, this petition.
ISSUE(S) 8. W/N FEU is guilty of culpa contractual?

9. W/N presence of force majeure may absolve FEU from liability?
10. W/N the petitioner is entitled to indemnification for damages?
11. W/N the FEU President himself is vicariously liable?
12. W/N Galaxy and its President were liable for damages
RULING(S) 7. Yes. It is undisputed that petitioner was enrolled as a sophomore

law student in respondent FEU. As such, there was created a
contractual obligation between the two parties. On petitioner’s part,
he was obliged to comply with the rules and regulations of the
school. On the other hand, respondent FEU, as a learning institution
is mandated to impart knowledge and equip its students with the
necessary skills to pursue higher education or a profession. At the
same time, it is obliged to ensure and take adequate steps to
maintain peace and order within the campus. It is settled that in
culpa contractual, the mere proof of the existence of the contract
and the failure of its compliance justify, prima facie, a
corresponding right of relief. In the instant case, when petitioner
was shot inside the campus by the security guard who was hired to
maintain peace and secure the premises, there is a prima facie
showing that respondents failed to comply with its obligation to
provide a safe and secure environment to its students.
8. No. In order for force majeure to be considered, respondents must
show that no negligence or misconduct was committed that may
have occasioned the loss. An act of God cannot be invoked to
protect a person who has failed to take steps to forestall the
possible adverse consequences of such a loss. One’s negligence
may have concurred with an act of God in producing damage and
injury to another; nonetheless, showing that the immediate or
proximate cause of the damage or injury was a fortuitous event
would not exempt one from liability. When the effect is found to be
partly the result of a person’s participation—whether by active
intervention, neglect or failure to act—the whole occurrence is
humanized and removed from the rules applicable to acts of God.
9. Yes. Art. 1170 of the Civil Code provides that those who are
negligent in the performance of their obligations are liable for
damages. Accordingly, for breach of contract due to negligence in
providing a safe learning environment, FEU is liable to petitioner
for damages. It is essential in the award of damages that the
claimant must have satisfactorily proven during the trial the
existence of the factual basis of the damages and its causal
connection to defendant’s acts.
Petitioner spent expenses for his hospitalization and medical
expenses. Since the case involved an obligation arising from a
contract and not a loan or forbearance of money, the proper rate
of legal interest is 6% per annum of the amount demanded. The
interest shall continue to run from the filing of the complaint until
the finality of the Decision. After the decision becomes final and
executory, the applicable rate shall be 12% per annum until its
satisfaction. Also, transportation expenses and those incurred in
the hiring of a personal assistant while recuperating were not
however supported by receipts. In the absence thereof, no actual
damages may be awarded.
Nonetheless, Art. 2224 of the Civil Code states that temperate
damages may be recovered where it has been shown that the
claimant suffered some pecuniary loss but the amount thereof
cannot be proved with certainty.
SC awarded petitioner moral damages for the “physical suffering,
mental anguish, fright, serious anxiety, and moral shock resulting
from the shooting incident”. SC stressed that the moral damages
are in the category of an award designed to compensate the
claimant for actual injury suffered and not to impose a penalty on
the wrongdoer.
Attorney’s fees and litigation expenses were also reasonable in view
of Art. 2208 of Civil Code.
However, the award of exemplary damages is deleted considering
the absence of proof that the respondents acted in a wanton,
fraudulent, reckless, oppressive, or malevolent manner.
10. No. FEU President cannot be held liable for damages under Art.
2180 of Civil Code because respondents are not employers of
Rosete. The latter was employed by Galaxy. The instructions issued
by respondents’ Security Consultant to Galaxy and its security
guards are ordinarily no more than requests commonly envisaged
in the contract for services entered into by a principal and a security
agency. They cannot be construed as the element of control as to
treat respondents as the employers of Rosete. Where the security
agency recruits, hires and assigns the works of its watchmen or
security guards to a client, the employer of such guards or
watchmen is such agency, and not the client, since the latter has
no hand in selecting the security guards. Thus, the duty to observe
the diligence of a good father of a family cannot be demanded from
the said client.
11. Yes. For the acts of negligence and for having supplied
respondent FEU with an unqualified security guard, which resulted
to the latter’s breach of obligation to petitioner, it is proper to hold
Galaxy liable to respondent FEU for such damages equivalent to the
above-mentioned amounts awarded to petitioner. Also, unlike the
FEU President, SC deemed Galaxy President to be solidarily liable
with Galaxy for being grossly negligent in directing the affairs of
the security agency. It was the Galaxy President who assured
petitioner that his medical expenses will be shouldered by Galaxy,
but said representations were not fulfilled because they presumed
that petitioner and his family were no longer interested in filing a
formal complaint against them.
CONCLUSION WHEREFORE, the petition is GRANTED. Resolution denying the Motion
for Reconsideration is REVERSED and SET ASIDE. The Decision of the
RTC finding respondent FEU liable for damages for breach of its
obligation to provide students with a safe and secure learning
atmosphere, is AFFIRMED with MODIFICATIONS.
15. Fil Estate Properties Inc. vs. Sps. Ronquillo, 713 SCRA 91
TITLE FIL-ESTATE PROPERTIES, INC. and FIL-ESTATE NETWORK, INC.,
petitioners, vs. SPOUSES CONRADO and MARIA VICTORIA
RONQUILLO, respondents.
DATE January 13, 2014
PONENTE PEREZ, J.

KEYWORDS/ Appeals/Breach of Contract/Second Division
DIVISION
FACTS Petitioner Fil-Estate Properties, Inc. is the owner and developer of the
Central Park Place Tower while co-petitioner Fil-Estate Network, Inc.
is its authorized marketing agent. Respondent Spouses Conrado and
Maria Victoria Ronquillo purchased from petitioners an 82-sq. m.
condominium unit at Central Park Place Tower in Mandaluyong for a
pre-selling contract price of P5,174,000.00.
On 29 August 1997, respondents executed and signed a Reservation

Application Agreement wherein they deposited P200,000.00 as
reservation fee. As agreed upon, respondents paid the full down
payment of P1,552,200.00 and had been paying the P63,363.33
monthly amortizations until September 1998.
Upon learning that construction works had stopped, respondents

likewise stopped paying their monthly amortization. Claiming to have
paid a total of P2,198,949.96 to petitioners, respondents through 2
successive letters, demanded a full refund of their payment with
interest.
When their demands went unheeded, respondents filed a Complaint

for Refund and Damages before the Housing and Land Use Regulatory
Board (HLURB). Respondents prayed for reimbursement/refund of
P2,198,949.96 representing the total amortization payments,
P200,000.00 as and by way of moral damages, attorney’s fees and
other litigation expenses.
On 21 October 2000, HLURB issued an Order of Default against

petitioners for failing to file their Answer within the reglementary
period despite service of summons. Petitioners filed a motion to lift
order of default and attached their position paper attributing the delay
in construction to the 1997 Asian financial crisis and denied
committing fraud or misrepresentation which could entitle
respondents to an award of moral damages.
On 13 June 2002, the HLURB, through Arbiter Atty. Joselito F. Melchor,

rendered judgment ordering petitioners to jointly and severally pay
the respondents. The Arbiter considered petitioners’ failure to develop
the condominium project as a substantial breach of their obligation
which entitles respondents to seek for rescission with payment of
damages and stated that mere economic hardship is not an excuse for
contractual and legal delay.
Petitioners appealed the Arbiter’s Decision but the Board of

Commissioners of the HLURB denied the petition for review. HLURB
reiterated that the depreciation of the peso as a result of the Asian
financial crisis is not a fortuitous event. Petitioners then filed a motion
for reconsideration but it was also denied.
Thereafter, petitioners filed a Notice of Appeal with the Office of the

President, which was dismissed for lack of merit. Petitioners moved
for a reconsideration but their motion was likewise denied.
Petitioners also sought relief from the Court of Appeals (CA) but their
petition was denied for lack of merit as well as their motion for
reconsideration. CA pointed out that petitioners failed to prove that
the Asian financial crisis constitutes a fortuitous event.
Aggrieved, petitioners filed the instant petition.
ISSUE(S) 13. W/N the Asian financial crisis constitutes a fortuitous event
which would justify delay in the performance of the petitioners'
contractual obligation?
14. W/N the respondents are entitled to rescission?
RULING(S) 12. No. Notably, the issues had already been settled by the Court in
the case of Fil-Estate Properties, Inc. v. Spouses Go, where the
Court stated that the Asian financial crisis is not an instance of caso
fortuito. Bearing the same factual milieu as the instant case
involves the same company, Fil-Estate, albeit about a different
condominium property. The company likewise reneged on its
obligation to respondents therein by failing to develop the
condominium project despite substantial payment of the contract
price. Fil-Estate advanced the same argument that the 1997 Asian
financial crisis is a fortuitous event which justifies the delay of the
construction project.
First off, the Court classified the issue as a question of fact which
may not be raised in a petition for review considering that there
was no variance in the factual findings of the HLURB, the Office of
the President and the Court of Appeals.
Second, the Court cited the previous rulings of Asian Construction
and Development Corporation v. Philippine Commercial
International Bank and Mondragon Leisure and Resorts Corporation
v. Court of Appeals holding that the 1997 Asian financial crisis did
not constitute a valid justification to renege on obligations. The
Court expounded: Also, we cannot generalize that the Asian
financial crisis in 1997 was unforeseeable and beyond the control
of a business corporation. It is unfortunate that petitioner
apparently met with considerable difficulty e.g., increase cost of
materials and labor, even before the scheduled commencement of
its real estate project as early as 1995. However, a real estate
enterprise engaged in the pre-selling of condominium units is
concededly a master in projections on commodities and currency
movements and business risks. The fluctuating movement of the
Philippine peso in the foreign exchange market is an everyday
occurrence, and fluctuations in currency exchange rates happen
every day, thus, not an instance of caso fortuito.
13. Yes. The non-performance of petitioners’ obligation entitles
respondents to rescission under Art. 1191 of the New Civil Code
which states: Art. 1191. The power to rescind obligations is implied
in reciprocal ones, in case one of the obligors should not comply
with what is incumbent upon him. The injured party may choose
between the fulfilment and the rescission of the obligation, with
payment of damages in either case. He may also seek rescission,
even after he has chosen fulfilment, if the latter should become
impossible.
More in point is Sec. 23 of PD No. 957, the rule governing the sale
of condominiums, which provides: Sec. 23. Non-Forfeiture of
Payments.—No instalment payment made by a buyer in a
subdivision or condominium project for the lot or unit he contracted
to buy shall be forfeited in favor of the owner or developer when
the buyer, after due notice to the owner or developer, desists from
further payment due to the failure of the owner or developer to
develop the subdivision or condominium project according to the
approved plans and within the time limit for complying with the
same. Such buyer may, at his option, be reimbursed the total
amount paid including amortization interests but excluding
delinquency interests, with interest thereon at the legal rate.
CONCLUSION WHEREFORE, the petition is PARTLY GRANTED. The appealed Decision

is AFFIRMED with the MODIFICATION that the legal interest to be paid
is SIX PERCENT (6%) on the amount due computed from the time of
respondents’ demand for refund on 8 October 1998.
16. Metro Concast Steel Corp. vs. Allied Bank Corp., 711 SCRA 479
TITLE METRO CONCAST STEEL CORPORATION, SPOUSES JOSE S. DYCHIAO
AND TIU OH YAN, SPOUSES GUILLERMO AND MERCEDES DYCHIAO,
AND SPOUSES VICENTE AND FILOMENA DYCHIAO, petitioners, vs.
ALLIED BANK CORPORATION, respondent.
DATE December 4, 2013
PONENTE PERLAS-BERNABE, J.
NATURE/ PETITION for review on certiorari of the decision and resolution of the
KEYWORDS/ Court of Appeals/Fortuitous Events/Second Division
DIVISION
FACTS On various dates and for different amounts, Metro Concast engaged
in the business of manufacturing steel, through its officers, obtained
several loans from Allied Bank. These loan transactions were covered
by a promissory note and separate letters of credit/trust receipts.
By way of security, the individual petitioners executed several

Continuing Guaranty/Comprehensive Surety Agreements in favor of
Allied Bank.
Petitioners failed to settle their obligations. Allied Bank, through

counsel, sent them demand letters, seeking payment of the total
amount of P51,064,093.62, but to no avail.
Thus, Allied Bank was prompted to file a complaint for collection of

sum of money against petitioners before the RTC. In their second
Amended Answer, petitioners admitted their indebtedness to Allied
Bank but denied liability for the interests and penalties charged,
claiming to have paid a sum of money by way of interest charges for
the period covering 1992 to 1997.
They also alleged that the economic reverses suffered by the Philippine
economy in 1998 as well as the devaluation of the peso against the
US dollar contributed greatly to the downfall of the steel industry,
directly affecting the business of Metro Concast and eventually leading
to its cessation.
Hence, in order to settle their debts with Allied Bank, they offered the
sale of Metro Concast’s remaining assets to Allied Bank, which the
latter, however, refused. Instead, Allied Bank advised them to sell the
equipment and apply the proceeds of the sale to their outstanding
obligations. Accordingly, petitioners offered the equipment for sale,
but since there were no takers, the equipment was reduced into ferro
scrap or scrap metal over the years.
In 2002, Peakstar Oil Corporation, represented by Crisanta Camiling

expressed interest in buying the scrap metal. During the negotiations
with Peakstar, petitioners claimed Atty. Saw, a member of Allied
Bank’s legal department, acted as the latter’s agent. Eventually, with
the alleged conformity of Allied Bank, through Atty. Saw, a
Memorandum of Agreement, was drawn between Metro Concast,
represented by petitioner Jose Dychiao, and Peakstar under which
Peakstar obligated itself to purchase the scrap metal.
Unfortunately, Peakstar reneged on all its obligations under the MOA.

In this regard, petitioners asseverated that: (a) their failure to pay
their outstanding loan obligations to Allied Bank must be considered
as force majeure; and (b) since Allied Bank was the party that
accepted the terms and conditions of payment proposed by Peakstar,
petitioners must therefore be deemed to have settled their obligations
to Allied Bank.
To bolster their defense, petitioner Jose Dychiao testified that it was

Atty. Saw himself who drafted the MoA and received the
P2,000,000.00 cash and the 2 Bankwise post-dated checks worth
P1,000,000.00 each from Camiling. However, Atty. Saw turned over
only the two (2) checks and P1,500,000.00 in cash to the wife of Jose
Dychiao.
RTC, dismissed the complaint, holding that the causes of action sued
upon had been paid or otherwise extinguished, since Allied Bank was
duly represented by its agent, Atty. Saw, in all the negotiations and
transactions with Peakstar, then it stands to reason that the MoA
between Metro Concast and Peakstar was binding upon said bank.
Allied Bank appealed to the CA, which reversed the RTC's decision
ratiocinating that there was no legal basis in fact and in law to declare
that when Bankwise reneged its guarantee under the [MoA], herein
[petitioners] should be deemed to be discharged from their obligations
lawfully incurred in favor of [Allied Bank].
Petitioners sought reconsideration which was denied. Hence, this

petition.
ISSUE(S) 15. W/N the loan obligations incurred by the petitioners under the
subject promissory note and various trust receipts have already
been extinguished?
RULING(S) 14. No. Art. 1231 of the Civil Code states that obligations are
extinguished either by payment or performance, the loss of the
thing due, the condonation or remission of the debt, the confusion
or merger of the rights of creditor and debtor, compensation or
novation.
Anent petitioners’ reliance on force majeure, suffice it to state that
Peakstar’s breach of its obligations to Metro Concast arising from
the MoA cannot be classified as a fortuitous event under
jurisprudential formulation. As discussed in Sicam v. Jorge:
Fortuitous events by definition are extraordinary events not
foreseeable or avoidable. It is therefore, not enough that the event
should not have been foreseen or anticipated, as is commonly
believed but it must be one impossible to foresee or to avoid. The
mere difficulty to foresee the happening is not impossibility to
foresee the same. To constitute a fortuitous event, the following
elements must concur: (a) the cause of the unforeseen and
unexpected occurrence or of the failure of the debtor to comply
with obligations must be independent of human will; (b) it must be
impossible to foresee the event that constitutes the caso fortuito
or, if it can be foreseen, it must be impossible to avoid; (c) the
occurrence must be such as to render it impossible for the debtor
to fulfil obligations in a normal manner; and, (d) the obligor must
be free from any participation in the aggravation of the injury or
loss.
While it may be argued that Peakstar’s breach of the MoA was
unforeseen by petitioners, the same is clearly not “impossible” to
foresee or even an event which is “independent of human will.”
Neither has it been shown that said occurrence rendered it
impossible for petitioners to pay their loan obligations to Allied Bank
and thus, negates the former’s force majeure theory altogether.
The fact of the matter is that petitioners’ loan obligations to Allied
Bank remain subsisting for the basic reason that the former has not
been able to prove that the same had already been paid or, in any
way, extinguished.
CONCLUSION WHEREFORE, the petition is DENIED. The Decision of the Court of

Appeals is AFFIRMED with MODIFICATION reckoning the applicable
interests and penalty charges.
TE – OBLICON - DIGESTED CASES
17. Sene v. Franco
TITLE VICTORIA SEOANE, administratrix of The Intestate

Estate of Eduardo Fargas, plaintiff and appellee,
vs.
CATALINA FRANCO, administratrix of The Intestate
Estate of Manuel Franco, defendant and appellant.
G.R. No. 7859
PONENTE MORELAND, J.
NATURE An appeal from a judgment of the Court of First
Instance of Zamboanga
FACTS 1. On the 13th of October 1884, a mortgage was executed to secure

the payment of the sum of P4,876.01 from the mortgagor
agreeing to pay the sum "little by little."
2. The claim appears to have been presented to the plaintiff's
intestate on the 8th of August, 1911.
3. Nothing has been paid either of principal or of interest.
4. The plaintiff filed a complaint in the Court of First Instance of
Zamboanga which ruled in favor of the plaintiff, holding that the
right of action upon the mortgage debt which was the basis of the
claim presented against the plaintiff's estate had prescribed.
ISSUE/S Whether or not the obligation in question has a fixed duration of the
period for the payment?
RULING No. The obligation in question seems to leave the duration of the period
for the payment to the will of the debtor as this case falls within the
provisions of article 1128 of the Civil Code where it is apparent from the
nature of the obligation and the circumstances of the case that there
was an intention to grant to the debtor a time for payment and such
time has been left to the will of the debtor, the obligation is not due and
payable until an action has been commenced by the creditor against the
debtor for the purpose of having the court fix the date on and after which
the obligation is payable and, in pursuance of said action, such date has
been fixed.
An action for the purpose of having the court set the date of maturity of
an obligation of the character above described must be brought within
ten years from the time when the Code of Civil Procedure went into
effect under section 38 of said Code. However, in the present case, the
action to recover upon such an obligation, before a time for payment
has been set by the court pursuant to an action for the purpose, is
premature and must be dismissed upon the proper representations.
CONCLUSION The judgment is affirmed, with costs against the appellant.

So ordered.
18. Jimmy Co v CA
TITLE JIMMY CO, doing business under the name & style
DRAGON METAL MANUFACTURING, petitioner,
vs.
COURT OF APPEALS and BROADWAY MOTOR SALES
CORPORATION, respondents.
G.R. No. 124922
DATE June 22, 1998
PONENTE MARTINEZ, J.
NATURE PETITION for Review on Certiorari

FACTS 1. On July 18, 1990, petitioner entrusted his Nissan pick-up car 1988
model to private respondent—which is engaged in the sale,
distribution and repair of motor vehicles—for the following job
repair services and supply of parts:
—Bleed injection pump and all nozzles;
—Adjust valve tappet;
—Change oil and filter;
—Open up and service four wheel brakes, clean and adjust;
—Lubricate accelerator linkages;
—Replace aircon belt; and
—Replace battery
2. Private respondent undertook to return the vehicle on July 21,
1990 fully serviced and supplied in accordance with the job
contract.
3. After petitioner paid in full the repair bill in the amount of
P1,397.00, private respondent issued to him a gate pass for the
release of the vehicle on said date.
4. But came July 21, 1990, the latter could not release the vehicle
as its battery was weak and was not yet replaced and decided to
reschedule the delivery of the car was to July 24, 1990 or three
(3) days later.
5. When petitioner sought to reclaim his car in the afternoon of July
24, 1990, he was told that it was car napped earlier that morning
while being road tested by private respondent’s employee and
that the incident was reported to the police.
6. Having failed to recover his car and its accessories or the value
thereof, petitioner filed a suit for damages against private
respondent anchoring his claim on the latter’s alleged negligence.
7. For its part, private respondent contended that it has no liability
because the car was lost as a result of a fortuitous event—the car
napping.
8. During pre-trial, the parties agreed that: “(T)he cost of the Nissan
Pick-up four (4) door when the plaintiff purchased it from the
defendant is P332,500.00 excluding accessories which were
installed in the vehicle by the plaintiff” and likewise agreed that
the sole issue for trial was who between the parties shall bear the
loss of the vehicle which necessitates the resolution of whether
private respondent was indeed negligent.
9. After trial, the court a quo found private respondent guilty of delay
in the performance of its obligation and held it liable to petitioner
for the value of the lost vehicle and its accessories plus interest
and attorney’s fees.
10. On the appeal, the Court of Appeals (CA) reversed the ruling
of the lower court and ordered the dismissal of petitioner’s
damage suit.
11. Hence, this petition for review.
ISSUE/S Whether or not a repair shop can be held liable for the
loss of a customer’s vehicle while the same is in its custody
for the repair or other job services?
RULING YES. It is not a defense for a repair shop of motor vehicles to escape
liability simply because the damage or loss of a thing lawfully placed in
its possession was due to car napping. Car napping per se cannot be
considered as a fortuitous event. The fact that a thing was unlawfully
and forcefully taken from another’s rightful possession, as in cases of
car napping, does not automatically give rise to a fortuitous event. To
be considered as such, car napping entails more than the mere forceful
taking of another’s property. It must be proved and established that the
event was an act of God or was done solely by third parties and that
neither the claimant nor the person alleged to be negligent has any
participation.
It should also be noted that in accordance with the Rules of evidence,

the burden of proving that the loss was due to a fortuitous event rests
on him who invokes it —which in this case is the private respondent.
However, other than the police report of the alleged car napping
incident, no other evidence was presented by private respondent to the
effect that the incident was not due to its fault. A police report of an
alleged crime, to which only private respondent is privy, does not suffice
to establish the car napping.
It must likewise be emphasized that pursuant to Articles 1174 and 1262

of the New Civil Code, liability attaches even if the loss was due to a
fortuitous event if “the nature of the obligation requires the assumption
of risk.” Car napping is a normal business risk for those engaged in the
repair of motor vehicles. For just as the owner is exposed to that risk so
is the repair shop since the car was entrusted to it. That is why, repair
shops are required to first register with the
Department of Trade and Industry (DTI) and to secure an insurance
policy for the “shop covering the property entrusted by its customer for
repair, service or maintenance” as a pre-requisite for such
registration/accreditation. Violation of this statutory duty
constitutes negligence per se.
CONCLUSION WHEREFORE, premises considered, the decision of the Court of Appeals

is REVERSED and SET ASIDE and the decision of the court a quo is
REINSTATED. SO ORDERED.
19. Sicam v Jorge
TITLE ROBERTO C. SICAM and AGENCIA de R.C. SICAM, INC., petitioners, vs.
LULU V. JORGE and CESAR JORGE, respondents.
G.R. No. 159617
DATE August 8, 2007
PONENTE AUSTRIA-MARTINEZ, J.
NATURE Petition for Review on Certiorari
FACTS 1. On different dates from September to October 1987, Lulu V. Jorge

(respondent Lulu) pawned several pieces of jewelry with Agencia
de R.C. Sicam to secure a loan in the total amount of P59,500.00.
2. On October 19, 1987, two armed men entered the pawnshop and
took away whatever cash and jewelry were found inside the
pawnshop vault. The incident was entered in the police blotter of
the Southern Police District, Parañaque Police Station.
3. Petitioner Sicam sent respondent Lulu a letter dated October 19,
1987 informing her of the loss of her jewelry due to the robbery
incident in the pawnshop.
4. On November 2, 1987, respondent Lulu then wrote a letter to
petitioner Sicam expressing disbelief stating that when the
robbery happened, all jewelry pawned were deposited with Far
East Bank near the pawnshop since it had been the practice that
before they could withdraw, advance notice must be given to the
pawnshop so it could withdraw the jewelry from the bank.
5. Respondent Lulu then requested petitioner Sicam to prepare the
pawned jewelry for withdrawal on November 6, 1987 but
petitioner Sicam failed to return the jewelry.
6. On September 28, 1988, respondent Lulu joined by her husband,
Cesar Jorge, filed a complaint against petitioner Sicam with the
Regional Trial Court of Makati seeking indemnification for the loss
of pawned jewelry and payment of actual, moral and exemplary
damages as well as attorney’s fees.
7. Petitioner Sicam filed his Answer contending that the petitioner
corporation had exercised due care and diligence in the
safekeeping of the articles pledged with it and could not be made
liable for an event that is fortuitous.
8. After trial on the merits, the RTC rendered its Decision dated
January 12, 1993, dismissing respondents’ complaint as well as
petitioners’ counterclaim.
9. The RTC further ruled that petitioner corporation could not be held
liable for the loss of the pawned jewelry since it had not been
rebutted by respondents that the loss of the pledged pieces of
jewelry in the possession of the corporation was occasioned by
armed robbery; that robbery is a fortuitous event which exempts
the victim from liability for the loss, citing the case of Austria v.
Court of Appeals; and that the parties’ transaction was that of a
pledgor and pledgee and under Art. 1174 of the Civil Code, the
pawnshop as a pledgee is not responsible for those events which
could not be foreseen.
10. Respondents appealed the RTC Decision to the CA. In a
Decision dated March 31, 2003, the CA reversed the RTC.
Petitioners’ motion for reconsideration was also denied in a
Resolution dated August 8, 2003.
11. Hence, the instant petition for review.
ISSUE/S Whether or not the CA correctly adjudged petitioner Sicam together with
petitioner’s corporation, liable for the loss of the pawned jewelry
through robbery which is a fortuitous event that exempts the victim
from liability for the said loss?
RULING YES. Fortuitous events by definition are extraordinary events not

foreseeable or avoidable. It is therefore, not enough that the event
should not have been foreseen or anticipated, as is commonly believed
but it must be one impossible to foresee or to avoid. The mere difficulty
to foresee the happening is not impossibility to foresee the same. To
constitute a fortuitous event, the following elements must concur:
(a) the cause of the unforeseen and unexpected occurrence or of the
failure of the debtor to comply with obligations must be
independent of human will;
(b) it must be impossible to foresee the event that constitutes the caso
fortuito or, if it can be foreseen, it must be impossible to avoid; (c) the
occurrence must be such as to render it impossible for the debtor to
fulfill obligations in a normal manner; and,
(d) the obligor must be free from any participation in the aggravation
of the injury or loss.
The burden of proving that the loss was due to a fortuitous event rests
on him who invokes it. And, in order for a fortuitous event to exempt
one from liability, it is necessary that one has committed no negligence
or misconduct that may have occasioned the loss. It has been held that
an act of God cannot be invoked to protect a person who has failed to
take steps to forestall the possible adverse consequences of such a loss.
One’s negligence may have concurred with an act of God in producing
damage and injury to another; nonetheless, showing that the
immediate or proximate cause of the damage or injury was a fortuitous
event would not exempt one from liability. When the effect is found to
be partly the result of a person’s participation—whether by active
intervention, neglect or failure to act— the whole occurrence is
humanized and removed from the rules applicable to acts of God.
Robbery per se, just like carnapping, is not a fortuitous event. It does
not foreclose the possibility of negligence on the part of herein
petitioners. In Co v. Court of Appeals, 291 SCRA 111 (1998), the Court
held: It is not a defense for a repair shop of motor vehicles to escape
liability simply because the damage or loss of a thing lawfully placed in
its possession was due to carnapping. Carnapping per se cannot be
considered as a fortuitous event.” Just like in Co, petitioners merely
presented the police report of the Parañaque Police Station on the
robbery committed based on the report of petitioners’ employees which
is not sufficient to establish robbery. Such report also does not prove
that petitioners were not at fault.
Article 2123 of the Civil Code provides that with regard to pawnshops
and other establishments which are engaged in making loans secured
by pledges, the special laws and regulations concerning them shall
be observed, and subsidiarily, the provisions on pledge, mortgage and
antichresis. The provision on pledge, particularly Article 2099 of the Civil
Code, provides that the creditor shall take care of the thing pledged with
the diligence of a good father of a family. This means that petitioners
must take care of the pawns the way a prudent person would as to his
own property.
We expounded in Cruz v. Gangan, 211 SCRA 517 (1992), that

negligence is the omission to do something which a reasonable man,
guided by those considerations which ordinarily regulate the conduct of
human affairs, would do; or the doing of something which a prudent
and reasonable man would not do. It is want of care required by the
circumstances. A review of the records clearly shows that petitioners
failed to exercise reasonable care and caution that an ordinarily prudent
person would have used in the same situation. Petitioners were guilty
of negligence in the operation of their pawnshop business.
CONCLUSION WHEREFORE, except for the insurance aspect, the Decision of the Court
of Appeals dated March 31, 2003 and its Resolution dated August 8,
2003, are AFFIRMED. Costs against petitioners.
20. Austria v CA
TITLE GUILLERMO AUSTRIA, petitioner,

vs.
THE COURT OF APPEALS (Second Division), PACIFICO ABAD and
MARIA G. ABAD, respondents.
G.R. No.
DATE JUNE 10, 1971
PONENTE REYES, J.B.L., J.
NATURE PETITION for Review by Certiorari
FACTS 1. In a receipt dated 30 January 1961, Maria G. Abad acknowledged

having received from Guillermo Austria one (1) pendant with
diamonds valued at P4,500.00, to be sold on commission basis or
to be returned on demand.
2. On 1 February 1961, however, while walking home to her
residence in Mandaluyong, Rizal, Abad was said to have been
accosted by two men, snatched her purse containing jewelry and
cash, and ran away. Among the pieces of jewelry allegedly taken
by the robbers was the consigned pendant.
3. The incident became the subject of a criminal case filed in the
Court of First Instance of Rizal against certain persons (Criminal
Case No. 10649, People vs. Rene Garcia, et al.).
4. As Abad failed to return the jewelry or pay for its value
notwithstanding demands, Austria brought in the Court of First
Instance of Manila an action against her and her husband for
recovery of the pendant or of its value, and damages.
5. Answering the allegations of the complaint, defendant’s spouses
set up the defense that the alleged robbery had extinguished their
obligation.
6. After due hearing, the trial court rendered judgment for the
plaintiff, and ordered defendants spouses, to pay to the former
the sum of P4,500.00, with legal interest. It was held that
defendants failed to prove the fact of robbery, or, if indeed it was
committed, that defendant Maria Abad was guilty of negligence
such negligence did not free her from liability for damages for the
loss of the jewelry.
7. Not satisfied with his decision, the defendants went to the Court
of Appeals, and there secured a reversal of the judgment and
declaration that the respondents are not responsible for the loss
of the jewelry on account of a fortuitous event, and relieved them
from liability for damages to the owner.
8. Plaintiff thereupon instituted the present proceeding.
ISSUE/S Whether or not in a contract of agency (consignment of goods for sale),

it is necessary that there be prior conviction for robbery before the loss
of the article shall exempt the consignee from liability for such loss?
RULING No. It is recognized in this jurisdiction that to constitute a caso fortuito
that would exempt a person from responsibility, it is necessary that (1)
the event must be independent of the human will (or rather, of the
debtor's or obligor's); (2) the occurrence must render it impossible for
the debtor to fulfill the obligation in a normal manner; and that (3) the
obligor must be free of participation in, or aggravation of, the injury to
the creditor. A fortuitous event, therefore, can be produced by nature,
e.g., earthquakes, storms, floods, etc., or by the act of man, such as
war, attack by bandits, robbery, provided that the event has all the
characteristics enumerated above.
Where Maria Abad received from Guillermo Austria a pendant with

diamonds to be sold on commission basis, which Maria Abad later on
failed to return because of a robbery committed upon her, it is not
necessary that there be a conviction for robbery for Maria Abad to be
relieved from civil liability of returning the pendant under Art, 1174,
New Civil Code, as it would only be sufficient to establish that the
unforeseeable event, the robbery in this case, did take place without
any concurrent fault on the debtor's part, and this can be done by
preponderant evidence. To require, moreover, prior conviction in order
to establish robbery as a fact, would demand proof beyond reasonable
doubt to prove a fact in a civil case.
CONCLUSION WHEREFORE, finding no error in the decision of the Court of Appeals

under review, the petition in this case is hereby dismissed, with costs
against the petitioner.
21. Hernandez v Chairman
TITLE TEODORO M. HERNANDEZ, petitioner,

vs.
THE HONORABLE CHAIRMAN, COMMISSION ON AUDIT, respondent.
G.R. No. 71871
DATE November 6, 1989
PONENTE CRUZ, J.
NATURE PETITION to Review the decision of the Commission on Audit
FACTS 1. At the time of the incident in question, Teodoro M. Hernandez was

the officer-in-charge and special disbursing officer of the Ternate
Beach Project of the Philippine Tourism Authority in Cavite.
2. As such, he went to the main office of the Authority in Manila on July
1, 1983, to encash two checks covering the wages of the employees
and the operating expenses of the Project. He estimated that the
money would be available by ten o’clock in the morning and that he
would be back in Ternate by about two o’clock in the afternoon of
the same day.
3. For some reason, however, the processing of the checks was
delayed and was completed only at three o’clock that afternoon. The
petitioner decided nevertheless to encash them because the Project
employees would be waiting for their pay the following day.
4. And so, on that afternoon of July 1, 1983, he collected the cash
value of the checks and left the main office with not an insubstantial
amount of money in his hands.
5. The petitioner opted to take the money with him to his house in
Marilao, Bulacan, spend the night there, and leave for Ternate the
following morning, thinking it the safer one.
6. And so, on that afternoon of July 1, 1983, at a little past three
o’clock, he took a passenger jeep bound for his house in Bulacan.
7. It was while the vehicle was along Epifanio de los Santos Avenue
that two persons boarded with knives in hand and robbery in mind.
8. One pointed his weapon at the petitioner’s side while the other slit
his pocket and forcibly took the money he was carrying. The two
then jumped out of the jeep and ran.
9. Hernandez, after the initial shock, immediately followed in desperate
pursuit. He caught up with Virgilio Alvarez and over-came him after
a scuffle. But the hold-upper who escaped is still at large and the
stolen money he took with him has not been recovered.
10. On July 5, 1983, the petitioner, invoking the foregoing facts,
filed a request for relief from money accountability under Section
638 of the Revised Administrative Code and avers that he has done
only what any reasonable man would have done and should not be
held accountable for a fortuitous event over which he had no control.
11. This was favorably indorsed by the General Manager of the
Philippine Tourism Authority the same day and by its Corporate
Auditor on July 27, 1983.
12. The Regional Director, National Capital Region, of the
Commission on Audit, made a similar recommendation on January
17, 1984, and also absolved Hernandez of negligence.
13. On June 29, 1984, however, the Commission on Audit,
through then Chairman Francisco S. Tantuico, Jr. denied the
petitioner’s request.
14. Hence, this petition.
ISSUE/S Whether or not the Commission on Audit acted with grave abuse of
discretion in denying him relief and in holding him negligent for the loss
of the stolen money?
RULING YES. It seems that the petitioner was moved only by the best of motives
when he encashed the checks on July 1, 1983, so his co-employees in
Ternate could collect their salaries and wages the following day. For such
an attitude, Hernandez should be commended rather than faulted. As for
Hernandez’s choice between Marilao, Bulacan, and Ternate, Cavite, one
could easily agree that the former was the safer destination, being nearer,
and in view of the comparative hazards in the trips to the two places. It is
true that the petitioner miscalculated, but the Court feels he should not
be blamed for that. The decision he made seemed logical at the time and
was one that could be expected of a reasonable and prudent person. And
if, as it happened, the two robbers attacked him in broad daylight in the
jeep while it was on a busy highway, and in the presence of other
passengers, it cannot be said that all this was the result of his imprudence
and negligence. This was undoubtedly a fortuitous event covered by the
said provisions, something that could not have been reasonably foreseen
although it could have happened, and did. We find, in sum, that under the
circumstances as above narrated, the petitioner is entitled to be relieved
from accountability for the money forcibly taken from him in the afternoon
of July 1, 1983. To impose such liability upon him would be to read the
law too sternly when it should be softened by the proven facts.
CONCLUSION ACCORDINGLY, the petition is GRANTED, without any pronouncement as
to costs. It is so ordered.
22. Yobido v CA
TITLE ALBERTA YOBIDO and CRESENCIO YOBIDO, petitioners,

vs.
COURT OF APPEALS, LENY TUMBOY, ARDEE TUMBOY AND JASMIN
TUMBOY, respondents
G.R. No. 113003
PONENTE ROMERO, J.
NATURE Petition for Review on Certiorari
FACTS 1. On April 26, 1988, spouses Tito and Leny Tumboy and their minor
children named Ardee and Jasmin, boarded at Mangagoy, Surigao
del Sur, a Yobido Liner bus bound for Davao City.
2. Along Picop Road in Km. 17, Sta. Maria, Agusan del Sur, the left
front tire of the bus exploded. The bus fell into a ravine around three
(3) feet from the road and struck a tree. The incident resulted in the
death of 28-year-old Tito Tumboy and physical injuries to other
passengers.
3. On November 21, 1988, a complaint for breach of contract of
carriage, damages and attorney’s fees was filed by Leny and her
children against Alberta Yobido, the owner of the bus, and Cresencio
Yobido, its driver, before the Regional Trial Court of Davao City.
4. At the pre-trial conference, the parties agreed to a stipulation of
facts. No amicable settlement having been arrived at by the parties,
trial on the merits ensued.
5. On August 29, 1991, the lower court rendered a decision dismissing
the action for lack of merit. On the issue of whether or not the tire
blowout was a caso fortuito, it found that “the falling of the bus to
the cliff was a result of no other outside factor than the tire blow-
out.”
6. Dissatisfied, the plaintiffs appealed to the Court of Appeals. They
ascribed to the lower court the following errors: (a) finding that the
tire blowout was a caso fortuito; (b) failing to hold that the
defendants did not exercise utmost and/or extraordinary diligence
required of carriers under Article 1755 of the Civil Code, and (c)
deciding the case contrary to the ruling in Juntilla v. Fontanar,5 and
Necesito v. Paras.
7. On August 23, 1993, the Court of Appeals rendered the Decision
reversing that of the lower court.
8. The defendants filed a motion for reconsideration of said decision
which was denied on November 4, 1993 by the Court of Appeals.
9. Hence, the instant petition and pray that this Court review the facts
of the case.
ISSUE/S Whether or not the explosion of a newly installed tire of a passenger

vehicle is a fortuitous event that exempts the carrier from liability for the
death of a passenger?
RULING NO. As a rule, when a passenger boards a common carrier, he takes the
risks incidental to the mode of travel he has taken. After all, a carrier is
not an insurer of the safety of its passengers and is not bound absolutely
and at all events to carry them safely and without injury. However, when
a passengers is injured or dies while travelling, the law presumes that the
common carrier is negligent. Thus, the Civil Code provides: “Art. 1756. In
case of death or injuries to passengers, common carriers are presumed to
have been at fault or to have acted negligently, unless they prove that
they observed extraordinary diligence as prescribed in Articles 1733 and
1755.”
In view of the foregoing, petitioners’ contention that they should be

exempt from liability because the tire blowout was no more than a
fortuitous event that could not have been foreseen, must fail. A fortuitous
event is possessed of the following characteristics: (a) the cause of the
unforeseen and unexpected occurrence, or the failure of the debtor to
comply with his obligations, must be independent of human will; (b) it
must be impossible to foresee the event which constitutes the caso
fortuito, or if it can be foreseen, it must be impossible to avoid; (c) the
occurrence must be such as to render it impossible for the debtor to fulfill
his obligation in a normal manner; and (d) the obligor must be free from
any participation in the aggravation of the injury resulting to the creditor.
As Article 1174 provides, no person shall be responsible for a fortuitous
event which could not be foreseen, or which, though foreseen, was
inevitable. In other words, there must be an entire exclusion of human
agency from the cause of injury or loss.
Under the circumstances of this case, the explosion of the new tire may
not be considered a fortuitous event. There are human factors involved in
the situation. The fact that the tire was new did not imply that it was
entirely free from manufacturing defects or that it was properly mounted
on the vehicle. Neither may the fact that the tire bought and used in the
vehicle is of a brand name noted for quality, resulting in the conclusion
that it could not explode within five days’ use. Be that as it may, it is
settled that an accident caused either by defects in the automobile or
through the negligence of its driver is not a caso fortuito that would
exempt the carrier from liability for damages.
Moreover, a common carrier may not be absolved from liability in case of

force majeure or fortuitous event alone. The common carrier must still
prove that it was not negligent in causing the death or injury resulting
from an accident. This Court has had occasion to state: “While it may be
true that the tire that blew-up was still good because the grooves of the
tire were still visible, this fact alone does not make the explosion of the
tire a fortuitous event. No evidence was presented to show that the
accident was due to adverse road conditions or that precautions were
taken by the jeepney driver to compensate for any conditions liable to
cause accidents. The sudden blowing-up, therefore, could have been
caused by too much air pressure injected into the tire coupled by the fact
that the jeepney was overloaded and speeding at the time of the accident.”
Moral damages are generally not recoverable in culpa contractual except

when bad faith had been proven. However, the same damages may be
recovered when breach of contract of carriage results in the death of a
passenger, as in this case. Exemplary damages, awarded by way of
example or correction for the public good when moral damages are
awarded, may likewise be recovered in contractual obligations if the
defendant acted in wanton, fraudulent, reckless, oppressive, or
malevolent manner. Because petitioners failed to exercise the
extraordinary diligence required of a common carrier, which resulted in
the death of Tito Tumboy, it is deemed to have acted recklessly. As such,
private respondents shall be entitled to exemplary damages.
CONCLUSION WHEREFORE, the Decision of the Court of Appeals is hereby AFFIRMED

subject to the modification that petitioners shall, in addition to the
monetary awards therein, be liable for the award of exemplary damages
in the amount of P20,000.00. Costs against petitioners. SO ORDERED.
23. Juntilla v Fontanar
TITLE ROBERTO JUNTILLA, petitioner,

vs.
CLEMENTE FONTANAR, FERNANDO BANZON and BERFOL CAMORO,
respondents
G.R. No. L-45637
DATE May 31, 1985
PONENTE GUTIERREZ, JR., J.
NATURE PETITION to review the decision of the Court of First Instance of Cebu.
FACTS 1. The plaintiff was a passenger of the public utility jeepney bearing
Plate No. PUJ-71-7 on the course of the trip from Danao City to Cebu
City.
2. The jeepney was driven by defendant Berfol Camoro. It was
registered under the franchise of defendant Clemente Fontanar but
was actually owned by defendant Fernando Banson.
3. When the jeepney reached Mandaue City, the right rear tire
exploded causing the vehicle to turn turtle. In the process, the
plaintiff who was sitting at the front seat was thrown out of the
vehicle.
4. Upon landing on the ground, the plaintiff momentarily lost
consciousness. When he came to his senses, he found that he had
a lacerated wound on his right palm. Aside from this, he suffered
injuries on his left arm, right thigh and on his back.
5. Because of his shock and injuries, he went back to Danao City but
on the way, he discovered that his ‘Omega’ wrist watch was lost.
6. Upon his arrival in Danao City, he immediately entered the Danao
City Hospital to attend to his injuries, and also requested his father-
in-law to proceed immediately to the place of the accident and look
for the watch.
7. In spite of the efforts of his father-in-law, the wrist watch, which he
bought for P852.70 could no longer be found.
8. Petitioner Roberto Juntilla filed Civil Case No. R-17378 for breach of
contract with damages before the City Court of Cebu City, Branch I
against Clemente Fontanar, Fernando Banzon and Berfol Camoro.
9. The respondents filed their answer, alleging inter alia that the
accident that caused losses to the petitioner was beyond the control
of the respondents taking into account that the tire that exploded
was newly bought and was only slightly used at the time it blew up.
10. After trial, Judge Romulo R. Senining of the City Court of Cebu
rendered judgment in favor of the petitioner and against the
respondents.
11. The respondents appealed to the Court of First Instance of
Cebu, Branch XIV. Judge Leonardo B. Cañares reversed the
judgment of the City Court of Cebu upon a finding that the accident
in question was due to a fortuitous event.
12. A motion for reconsideration was denied by the Court of First
Instance.
13. Hence, this petition.
ISSUE/S Whether or not the Honorable Court of First Instance of Cebu committed
grave abuse of discretion in failing to take cognizance of the fact that
defendants and/or their employee tailed to exercise ‘utmost and/or
extraordinary diligence’ required of common carriers contemplated under
Art. 1755 of the Civil Code of the Philippines?
RULING YES. The said Court erred when it absolved the carrier from any liability
upon a finding that the tire blow out is a fortuitous event. In the case at
bar, there are specific acts of negligence on the part of the respondents.
While it may be true that the tire that blew-up was still good because the
grooves of the tire were still visible, this fact alone does not make the
explosion of the tire a fortuitous event. No evidence was presented to
show that the accident was due to adverse road conditions or that
precautions were taken by the jeepney driver to compensate for any
conditions liable to cause accidents.
In Lasam v. Smith (45 Phil. 657), we laid down the following essential
characteristics of caso fortuito: “x x x ‘In a legal sense and, consequently,
also in relation to contracts, a caso fortuito presents the following essential
characteristics: (1) The cause of the unforeseen and unexpected
occurrence, or of the failure of the debtor to comply with his obligation,
must be independent of the human will. (2) It must be impossible to
foresee the event which constitutes the caso fortuito, or if it can be
foreseen, it must be impossible to avoid. (3) The occurrence must be such
as to render it impossible for the debtor to fulfill his obligation in a normal
manner. And (4) the obligor (debtor) must be free from any participation
in the aggravation of the injury resulting to the creditor.’ (5 Encyclopedia
Juridica Española,309.)”
In the case at bar, the cause of the unforeseen and unexpected occurrence
was not independent of the human will. The accident was caused either
through the negligence of the driver or because of mechanical defects in
the tire. Common carriers should teach their drivers not to overload their
vehicles, not to exceed safe and legal speed limits, and to know the correct
measures to take when a tire blows up thus insuring the safety of
passengers at all times. It is sufficient to reiterate that the source of a
common carrier’s legal liability is the contract of carriage, and by entering
into the said contract, it binds itself to carry the passengers safely as far
as human care and foresight can provide, using the utmost diligence of a
very cautious person, with a due regard for all the circumstances. The
records show that this obligation was not met by the respondents.
It should be noted that the City Court of Cebu found that the petitioner
had a lacerated wound on his right palm aside from injuries on his left
arm, right thigh and on his back, and that on his way back to Danao City,
he discovered that his “Omega” wrist watch was lost. These are findings
of facts of the City Court of Cebu which we find no reason to disturb. More
so when we consider the fact that the Court of First Instance of Cebu
impliedly concurred in these matters when it confined itself to the question
of whether or not the tire blow out was a fortuitous event.
CONCLUSION WHEREFORE, the decision of the Court of First Instance of Cebu, Branch
IV appealed from is hereby REVERSED and SET ASIDE, and the decision
of the City Court of Cebu, Branch I is REINSTATED, with the modification
that the damages shall earn interest at 12% per annum and the attorney’s
fees are increased to SIX HUNDRED PESOS (P600.00). Damages shall earn
interests from January 27, 1975. SO ORDERED.
24. Perla Compania de Suguros v Sarangay
TITLE PERLA COMPANIA DE SEGUROS, INC. and BIENVENIDO S. PASCUAL,

petitioners,
vs.
SPS. GAUDENCIO SARANGAYA III and PRIMITIVA B. SARANGAYA,
respondents
G.R. No. 147746
PONENTE CORONA, J.
FACTS 1. In 1986, respondent spouses Gaudencio Sarangaya III and Primitiva

Sarangaya erected a commercial building known as “Super A
Building” fronting the provincial road of Santiago, Isabela was
subdivided into three doors, each of which was leased out.
2. In 1988, petitioner Perla Compania de Seguros, Inc. (petitioner-
corporation), through its branch manager and co-petitioner
Bienvenido Pascual, entered into a contract of lease of the first door
of the “Super A Building,” abutting the office of Matsushita. The left
side was converted into an office while the right was used by Pascual
as a garage for a 1981 model 4-door Ford Cortina, a company-
provided vehicle he used in covering the different towns within his
area of supervision.
3. Three days later, he returned to Santiago and, after checking his
appointments the next day, decided to “warm up” the car. He then
saw a small flame coming out of the engine and a fire spewed out
of its rear compartment and engulfed the whole garage. Pascual was
trapped inside and suffered burns on his face, legs and arms.
4. Meanwhile, respondents were busy watching television when they
heard two loud explosions. The smell of gasoline permeated the air
and, in no time, fire spread inside their house, destroying all their
belongings, furniture and appliances.
5. The city fire marshall conducted an investigation and thereafter
submitted a report to the provincial fire marshall. He concluded that
the fire was “accidental.” The report also disclosed that petitioner-
corporation had no fire permit as required by law. Based on the
same report, a criminal complaint for “Reckless Imprudence
Resulting to Damage in Property” was filed against petitioner
Pascual.
6. On the other hand, petitioner-corporation was asked to pay the
amount of P7,992,350, inclusive of the value of the commercial
building. At the prosecutor’s office, petitioner Pascual moved for the
withdrawal of the complaint, which was granted.
7. Respondents later on filed a civil complaint based on quasi-delict
against petitioners for a “sum of money and damages,” alleging that
Pascual acted with gross negligence while petitioner-corporation
lacked the required diligence in the selection and supervision of
Pascual as its employee.
8. After the trial, the court a quo ruled in favor of respondents. The
court a quo declared that, although the respondents failed to prove
the precise cause of the fire that engulfed the garage, Pascual was
nevertheless negligent based on the doctrine of res ipsa loquitur.
9. On appeal to the Court of Appeals, the appellate court again ruled
in favor of respondents but modified the amount of damages
awarded by the trial court.
10. Petitioners and respondents filed their respective motions for
reconsideration.
11. In their MR, petitioners contested the findings of fact of the
appellate court. They denied any liability whatsoever to respondents
but this was rejected by the CA for lack of merit.
12. Thus, the present appeal
ISSUE/S Whether or not the court of appeals erred in applying the doctrine of “res
ipsa loquitur” in the present case?
RULING NO. Res ipsa loquitur is a Latin phrase which literally means “the thing or
the transaction speaks for itself.” It relates to the fact of an injury
that sets out an inference to the cause thereof or establishes the plaintiff’s
prima facie case. The doctrine rests on inference and not on presumption.
The facts of the occurrence warrant the supposition of negligence and they
furnish circumstantial evidence of negligence when direct evidence is
lacking. The doctrine is based on the theory that the defendant either
knows the cause of the accident or has the best opportunity of ascertaining
it and the plaintiff, having no knowledge thereof, is compelled to allege
negligence in general terms. In such instance, the plaintiff relies on proof
of the happening of the accident alone to establish negligence.
The test to determine the existence of negligence in a particular case may

be stated as follows: did the defendant in committing the alleged negligent
act, use reasonable care and caution which an ordinarily prudent person
in the same situation would have employed? If not, then he is guilty of
negligence.
The exempting circumstance of caso fortuito may be availed only when:

(a) the cause of the unforeseen and unexpected occurrence was
independent of the human will; (b) it was impossible to foresee the event
which constituted the caso fortuito or, if it could be foreseen, it was
impossible to avoid; (c) the occurrence must be such as to render it
impossible to perform an obligation in a normal manner and (d) the person
tasked to perform the obligation must not have participated in any course
of conduct that aggravated the accident. In fine, human agency must be
entirely excluded as the proximate cause or contributory cause of the
injury or loss. In a vehicular accident, for example, a mechanical defect
will not release the defendant from liability if it is shown that the accident
could have been prevented had he properly maintained and taken good
care of the vehicle.
In the supervision of employees, the employer must formulate standard

operating procedures, monitor their implementation and impose
disciplinary measures for the breach thereof. To fend off vicarious liability,
employers must submit concrete proof, including documentary evidence
that they complied with everything that was incumbent on them. Here,
petitioner-corporation’s evidence hardly included any rule or regulation
that Pascual should have observed in performing his functions. It also did
not have any guidelines for the maintenance and upkeep of company
property like the vehicle that caught fire. Petitioner-corporation did not
require periodic reports on or inventories of its properties either. Based on
these circumstances, petitioner-corporation clearly did not exert effort to
be apprised of the condition of Pascual’s car or its serviceability.
CONCLUSION WHEREFORE, the petition is hereby DENIED and the decision of the Court
of Appeals affirmed in toto. Costs against petitioners. SO ORDERED.
25. Fil-estate Properties v Go.
TITLE FIL-ESTATE PROPERTIES, INC., petitioner,

vs.
SPOUSES GONZALO and CONSUELO GO, respondents
G.R. No. 165164
DATE August 17, 2007
PONENTE QUISUMBING, J.
FACTS 1. On December 29, 1995, petitioner Fil-Estate Properties, Inc. (Fil-

Estate) entered into a contract to sell a condominium unit to
respondent spouses Gonzalo and Consuelo Go at “Eight Sto.
Domingo Place,” a condominium project of petitioner located on Sto.
Domingo Avenue, Quezon City.
2. The spouses paid a total of P3,439,000.07 of the full contract price
set at P3,620,000.00.
3. Because petitioner failed to develop the condominium project, on
August 4, 1999, the spouses demanded the refund of the amount
they paid, plus interest.
4. When petitioner did not refund the spouses, the latter filed a
complaint against petitioner for reimbursement of P3,620,000
representing the lump sum price of the condominium unit, plus
interest, P100,000 attorney’s fees, and expenses of litigation before
the Housing and Land Use Regulatory Board (HLURB).
5. On July 18, 2000, the HLURB Regional Director approved the
decision of the Housing and Land Use Arbiter in favor of the spouses
Go.
6. The Board of Commissioners of the HLURB denied petitioner’s
petition for review and consequent motion for reconsideration.
7. The Office of the President dismissed petitioner’s appeal and denied
its motion for reconsideration.
8. On appeal, asserting that both the HLURB and theOffice of the
President committed reversible errors, Fil-Estate asked the Court of
Appeals to set aside the orders it is appealing.
9. The Court of Appeals affirmed the actions taken by the HLURB and
the Office of the President and declared that the Asian financial crisis
could not be considered a fortuitous event and that respondents’
right is provided for in Section 238 of Presidential Decree (P.D.) No.
957, otherwise known as “The Subdivision and Condominium
Buyers’ Protective Decree.”
10. The appellate court denied petitioner’s motion for
Reconsideration.
11. Hence, this petition
ISSUE/S Whether or not the Honorable Court of Appeals erred in holding that the
Asian Financial Crisis is not a fortuitous event that would excuse the
delivery by petitioner of the subject condominium unit to respondents?
RULING NO. The question of whether or not an event is fortuitous is a question of

fact. As a general rule, questions of fact may not be raised in a petition
for review for as long as there is no variance between the findings of the
lower court and the appellate court, as in this case where the HLURB, the
Office of the President, and the Court of Appeals were agreed on the fact.
In a previous case, Asian Construction and Development Corporation v.

Philippine Commercial International Bank, 488 SCRA 192 (2006), the
Court had said that the 1997 financial crisis that ensued in Asia did not
constitute a valid justification to renege on obligations. We emphatically
stressed the same view in Mondragon Leisure and Resorts Corporation v.
Court of Appeals, 460 SCRA 279 (2005), that the Asian financial crisis in
1997 is not among the fortuitous events contemplated under Article 1174
of the Civil Code.
We cannot generalize that the Asian financial crisis in 1997 was

unforeseeable and beyond the control of a business corporation. It is
unfortunate that petitioner apparently met with considerable difficulty e.g.
increase cost of materials and labor, even before the scheduled
commencement of its real estate project as early as 1995. However, a real
estate enterprise engaged in the pre-selling of condominium units is
concededly a master in projections on commodities and currency
movements and business risks. The fluctuating movement of the Philippine
peso in the foreign exchange market is an everyday occurrence, and
fluctuations in currency exchange rates happen every day, thus, not an
instance of caso fortuito.
CONCLUSION WHEREFORE, the petition is DENIED for lack of merit. Petitioner is hereby
ordered (1) to reimburse respondents P3,439,000.07 at 6% interest
starting August 4, 1999 until full payment, and (2) to pay respondents
P100,000.00 attorney’s fees. Costs against petitioner. SO ORDERED.

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BONIFACIO – OBLICON – DIGESTED CASES

1. SSS vs. Moonwalk Devt. and Housing Corp

TITLE Social Security System vs. Moonwalk Development and Housing

Since there was no default in the performance

GR NUMBER G.R. No. 133107

TITLE IGNACIO BARZAGA, petitioner, vs. COURT OF

The law expressly provides that those who in the

Contrary to the appellate court’s factual determination, there was a

This case is clearly one of non-performance of a reciprocal obligation.

The court however excluded the award of temperate damages. Under

4. Pantaleon vs. American Express

TITLE POLO S. PANTALEON, petitioner, vs. AMERICAN EXPRESS

The delay committed by defendant was clearly attended by

“While it is true that the Cardmembership Agreement, which

5. Lorenzo Shipping Corp. vs. BJ Mathel International

TITLE LORENZO SHIPPING CORP., petitioner, vs. BJ

Petitioner’s receipt of the cylinder liners when they were delivered to

CONCLUSION WHEREFORE, premises considered, the instant

6. Solar Harvest vs. Davao Corrugated Carlon Corp.

TITLE SOLAR HARVEST, INC., petitioner, vs. DAVAO

In reciprocal obligations, as in a contract of sale, the general rule is

CONCLUSION WHEREFORE, premises considered, the petition is

7. Cathay Pacific Airways, Ltd. vs. Vasquez

TITLE CATHAY PACIFIC AIRWAYS, LTD., petitioner, vs.

8. Meralco vs. Ramoy

TITLE MANILA ELECTRIC COMPANY, petitioner, vs. MATILDE MACABAGDAL

GR NUMBER G.R. No. 158911

In order that moral damages may be awarded, there must be pleading

Actions of MERALCO cannot be considered wanton, fraudulent,

LLOVIT – OBLICON – DIGESTED CASES

9. Areola vs. CA & Prudential Guarantee Insurance, 236 SCRA 643

GR NUMBER G.R. No. 95641

NATURE/ PETITION for review on certiorari of a decision of the Court of

FACTS Petitioner-insured, Santos Areola bought through the Baguio City

Under the terms of the statement of account, petitioner-insured was

On December 17, 1984, respondent issued a collector’s provisional

On June 29, 1985, respondent through its Baguio City manager,

Petitioner-insured confronted Carlito Ang, agent of respondent, and

So, petitioner-insured sent the respondent a letter demanding that

The petitioner-insured received a letter from Malapit informing him

On the other hand, respondent through its Assistant Vice-President

On August 3, 1985, Ampil wrote Areola another letter confirming that

Unfortunately, Areola as early as August 6, 1985 had filed a complaint

Respondent filed an appeal to CA denying bad faith on its part. CA

It further observed, the following acts indicate that respondent did

Petitioner-insured moved for reconsideration but was denied by CA.

RULING(S) 1. Yes. Malapit’s fraudulent act of misappropriating the premiums

CONCLUSION WHEREFORE, the petition for review on certiorari is hereby GRANTED

10. Tanguiling vs. CA, 266 SCRA 78

GR NUMBER G.R. No. 117190

DATE January 2, 1997

Respondent paid petitioner a down payment of P30,000.00 and an

Moreover, assuming that he owed petitioner a balance of P15,000.00,

Petitioner denied that the construction of a deep well was included in

Petitioner also disowned any obligation to repair or reconstruct the

CA reversed the trial court's decision. It ruled that the construction of

CA also rejected petitioner’s claim of force majeure and ordered the

RULING(S) 3. No. Notably, nowhere in either proposal is the installation of a deep

CONCLUSION WHEREFORE, the appealed decision is MODIFIED. Respondent

11. Nakpil & Sons vs. CA, 144 SCRA 596

GR NUMBER No. L-47851, No. L-47863 and No. L-47896

DATE October 3, 1986