C.

Fortuitous Event
1. Effect of a fortuitous event to an obligation: General Rule (Art. 1174)

2. Exceptions to the general rule:

a. law (Art. 1174 cf Arts. 1165 3rd paragraph, 552, 1734, 1942, 1979, 2001,
2147)

b. stipulation

c. nature of obligation requires the assumption of risk

d. Cases:
d.1. Lea Mer Industries vs Malayan Insurance, GR No. 161745,
September 30, 2005 (elements of fortuitous event)

Facts:
The case involved a contract of carriage between Ilian Silica Mining and
Lea Mer Industries, Inc. for the shipment of 900 metric tons of silica sand.
The cargo was to be transported from Palawan to Manila on board the
barge Judy VII, which was leased by Lea Mer Industries, Inc.
 During the voyage, the barge sank, resulting in the loss of the cargo.
Malayan Insurance Co., Inc., as the insurer, paid Vulcan Industrial and
Mining Corporation, the consignee, the value of the lost cargo.

In the exercise of its right of subrogation, Malayan Insurance Co., Inc.

demanded reimbursement from Lea Mer Industries, Inc., which refused to
comply.

Malayan Insurance Co., Inc. filed a complaint with the Regional Trial
Court (RTC) of Manila to collect the amount it had paid Vulcan.

Issue:
 Whether the survey report of the cargo surveyor, Jesus Cortez,
could be admitted as evidence.
 Whether the loss of the cargo was due to a fortuitous event.
 Whether the Court of Appeals erred in disregarding the
testimonies of witnesses from the MARINA and PAG-ASA.

Ruling:
The loss of the cargo was not due to a fortuitous event, but rather to the
fault of Lea Mer Industries, Inc. as a common carrier.

Lea Mer Industries, Inc. failed to prove that it had exercised extraordinary
diligence or that the loss was due to a fortuitous event.

The survey report of Jesus Cortez was deemed inadmissible as evidence

because he did not testify during the trial.

The Supreme Court affirmed the decision of the Court of Appeals,

ordering Lea Mer Industries, Inc. to pay Malayan Insurance Co., Inc. the
value of the lost cargo.

Ratio:
Common carriers are required to observe extraordinary diligence in the
vigilance over the goods entrusted to them.

Common carriers are presumed to be at fault or negligent for any loss or

damage to the goods they transport, unless they can prove that they
observed extraordinary diligence or that the loss or damage was due to
any of the exempting circumstances provided by law.

Lea Mer Industries, Inc. failed to prove that it had exercised extraordinary
diligence or that the loss was due to a fortuitous event.

The evidence presented by Lea Mer Industries, Inc. was insufficient to

overcome the presumption of fault.

The survey report of Jesus Cortez was deemed inadmissible as evidence

because he did not testify during the trial.

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 d.2. Fil-Estate Properties vs Sps. Gonzalo and Consuelo Go, GR No.
165164, August 17, 2007 (Asian financial crisis not a fortuitous
event)

Facts:
Contract to sell a condominium unit between petitioner Fil-Estate
Properties, Inc. and respondents spouses Gonzalo and Consuelo Go.

Contract entered into on December 29, 1995.

Spouses paid a total of P3,439,000.07 out of the full contract price of

P3,620,000.00.

Petitioner failed to develop the condominium project.

Spouses demanded a refund of the amount they paid, plus interest.

Petitioner did not comply with the refund.

Spouses filed a complaint against the petitioner for reimbursement of the

full contract price, interest, attorney's fees, and litigation expenses before
the Housing and Land Use Regulatory Board (HLURB).

Issue:
 Whether the Asian financial crisis can be considered a fortuitous
event that would excuse the petitioner from delivering the
condominium unit to the respondents.
 Whether the petitioner should be held liable for the payment of
attorney's fees.
Ruling:
Supreme Court ruled in favor of the respondents and affirmed the
decisions of the HLURB, the Office of the President, and the Court of
Appeals.

Asian financial crisis cannot be considered a fortuitous event that would

excuse the petitioner from fulfilling its contractual obligations.

Financial crisis was not unforeseeable and beyond the control of the
petitioner.

Respondents are entitled to reimbursement of the amount they paid, plus

interest and attorney's fees.

Petitioner ordered to reimburse the respondents P3,439,000.07 at 6%

interest starting from August 4, 1999, until full payment.

Petitioner ordered to pay the respondents P100,000.00 as attorney's

fees.

Ratio:
Asian financial crisis was not unforeseeable and beyond the control of the
petitioner.

Real estate enterprise engaged in pre-selling of condominium units

should be knowledgeable about projections on commodities and currency
movements and business risks.

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 Fluctuating movement of the Philippine peso in the foreign exchange
market is a daily occurrence and fluctuations in currency exchange rates
are not considered a fortuitous event.

Petitioner cannot use the financial crisis as an excuse for failing to

develop the condominium project.

Section 23 of Presidential Decree No. 957 provides that in case of failure

to develop or complete the project, the buyer is entitled to the refund of
the total amount paid, plus interest.

Respondents awarded P3,439,000.07, representing their actual

payments plus amortization interests, with interest at the legal rate of 6%
per annum from the date of demand.

Attorney's fees increased from P25,000 to P100,000 considering the

length of time and the efforts exerted by the respondents in protecting
their interests due to the petitioner's delay in fulfilling its obligations.

d.3. Torres-Madrid Brokerage vs FEB Mitsui Marine Insurance, GR

No. 194121, July 11, 2016 (Common carriers’ responsibility)

Facts:
Shipment of electronic goods from Thailand and Malaysia arrived at the
Port of Manila for Sony Philippines, Inc.

Torres-Madrid Brokerage, Inc. (TMBI) was engaged by Sony to facilitate

the processing, withdrawal, and delivery of the shipment to its warehouse
in Biñan, Laguna.

TMBI subcontracted the trucking services to Benjamin P. Manalastas'

company, BMT Trucking Services (BMT).

Four BMT trucks picked up the shipment from the port, but only three
arrived at Sony's warehouse.

One truck, along with the driver and the shipment, was found abandoned.
TMBI notified Sony of the loss and sent a demand letter to BMT for
payment of the lost shipment.

Mitsui, the insurer of the goods, paid Sony's insurance claim and was
subrogated to Sony's rights.

Mitsui filed a complaint against TMBI for payment of the lost goods.

TMBI impleaded BMT as a third-party defendant, alleging that BMT's

negligence was the proximate cause of the loss.

Issue:
 Whether TMBI is a common carrier required to exercise
extraordinary diligence.

 Whether the loss of the cargo was a fortuitous event.

 Whether TMBI and BMT are solidarily liable for the loss.

 Whether BMT is directly liable to Mitsui for the loss.

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  Whether BMT is liable to TMBI for breach of their contract of
carriage.

Ruling:
TMBI is a common carrier and is therefore required to exercise
extraordinary diligence.

The theft of the goods is not considered a fortuitous event.

TMBI failed to prove that it observed extraordinary diligence in the

transport and safekeeping of the goods.

TMBI is liable to Mitsui for breach of contract.

TMBI and BMT are not solidarily liable for the loss as joint tortfeasors.

BMT is not directly liable to Mitsui for the loss.

BMT is liable to TMBI for breach of their contract of carriage.

TMBI is entitled to reimbursement from BMT for the amounts it is liable to

Mitsui.

Ratio:
A brokerage may be considered a common carrier if it also undertakes to
deliver the goods for its customers.

The theft or robbery of goods is not considered a fortuitous event for a

common carrier.

TMBI and BMT are not solidarily liable for the loss as joint tortfeasors.

BMT is not directly liable to Mitsui for the loss.

BMT is liable to TMBI for breach of their contract of carriage.

TMBI is entitled to reimbursement from BMT for the amounts it is liable to

Mitsui.

d.4. Roberto C. Sicam vs. Lulu V. Jorge & Cesar Jorge, GR No.
159617, August 8, 2007

Facts:
Roberto C. Sicam and Agencia de R.C. Sicam, Inc. are the petitioners.
Lulu V. Jorge and Cesar Jorge are the respondents.

In September to October 1987, Lulu V. Jorge pawned several pieces of

jewelry with Agencia de R.C. Sicam to secure a loan.

On October 19, 1987, two armed men entered the pawnshop and stole
cash and jewelry from the vault.

Petitioner Sicam informed respondent Lulu of the loss, but failed to return
the jewelry as requested.

Respondents filed a complaint seeking indemnification for the loss of the

pawned jewelry and damages.
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 Issue:
 Whether petitioners are liable for the loss of the pawned jewelry.

Ruling:
The Court of Appeals (CA) reversed the decision of the Regional Trial
Court (RTC).

Both petitioners are held liable for the loss of the pawned jewelry.

The CA applied the doctrine of piercing the corporate veil.

The CA also held that petitioners failed to exercise the required diligence
in securing and protecting the pledged items.

The CA ordered petitioners to pay respondents the actual value of the

lost jewelry and attorney's fees.

Ratio:
The CA correctly pierced the corporate veil.

The pawnshop receipts issued to respondents bore the name "Agencia

de R.C. Sicam," creating the impression that petitioner Sicam owned the
pawnshop.

Petitioners' argument that respondents' allegation in their Amended

Complaint that petitioner corporation is the present owner of the
pawnshop should bind the CA was rejected, as it was taken out of
context.

The CA also correctly found petitioners negligent.

Petitioners failed to exercise reasonable care and caution in protecting

the pawned jewelry.

The fact that the vault was open at the time of the robbery and the lack of
security measures indicate negligence on the part of petitioners.

The CA's ruling on insurance was incorrect.

There was no statutory duty for petitioners to insure the pawned jewelry
against burglary.

However, the preponderance of evidence showed that petitioners failed to

exercise the required diligence under the Civil Code.

Therefore, the CA's decision was affirmed, except for the insurance
aspect.

3. Effect of a fortuitous event to prescription of actions (Art. 1154)

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 D. Usurious Transactions (Arts. 1176, 1961)

1. Special laws:
a. Act 2655, as amended by PD No. 858; and

See here: https://chanrobles.com/acts/actsno2655.html

PRESIDENTIAL DECREE No. 1684 September 18, 1980

See here: https://lawphil.net/statutes/presdecs/pd1980/pd_1684_1980.html

a. Monetary Board Circular No. 905; No. 2209

See here: https://jurisprudence.ph/laws/amendment-of-books-i-to-iv-of-
the-manual-of-regulations-for-banks-and-other-financial-intermediaries
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 b.1. Case: Advocates for Truth in Lending vs. Bangko Sentral
Monetary Board, GR No. 192986, January 15, 2013
(Suspension of the Usury Law)

Facts:
Advocates for Truth in Lending, Inc. (AFTIL) and Eduardo B. Olaguer filed
a petition against the authority of the Bangko Sentral ng Pilipinas
Monetary Board (BSP-MB) to enforce Central Bank Circular No. 905.
AFTIL is a non-profit, non-stock corporation engaged in pro bono
concerns and activities related to money lending issues.

The petitioners claimed that they are raising issues of transcendental

importance to the public.

Issue:
 Whether the BSP-MB exceeded its authority when it issued
Central Bank Circular No. 905, which suspended the Usury Law of
1916.

 Whether the BSP-MB may continue to enforce Central Bank

Circular No. 905.

Ruling:
The court dismissed the petition, affirming the authority of the BSP-MB.

Ratio:
The court ruled that the petition was procedurally infirm because the
BSP-MB does not perform judicial or quasi-judicial functions, and
therefore, a writ of certiorari does not lie in this case.

The court held that the petitioners did not have locus standi to file the
petition because they did not show a direct injury or claim that public
funds were being misused.

The court further ruled that the issues raised in the petition did not involve
transcendental importance as there was no allegation of misuse of public
funds and the issues raised were based on interest rates that were no
longer applicable.

The court also held that the BSP-MB had the authority to enforce Central
Bank Circular No. 905 and that the lifting of the interest rate ceilings did
not authorize stipulations charging excessive, unconscionable, and
iniquitous interest.

The court emphasized that the nullity of usurious interest does not affect
the lender's right to recover the principal of a loan.
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 b. RA No. 3765 (Truth in Lending Act)
https://www.sec.gov.ph/wp-content/uploads/
2019/11/1963Law_RA3765.pdf

2. Receipt of the principal by the creditor (Arts. 1176, 1413)

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