Bankarote Bank became insolvent.

Paz Awai sued

the BSP for recovery of her deposits with the said
insolvent bank on the ground that BSP is the
regulatory and monitoring agency of the
government that sees to the viability of local
banks. Will the suit prosper?
NO. The Central Bank has no obligation to pay the
deposits of a depositor of an insolvent bank (Serrano
v Central Bank, 96 SCRA 16).
A borrowed P.5M from the B, promising to pay in
January 2005, with the agreement that if the
payment was not made at the expiration of the
said period, As house and lot would be
considered absolutely sold to B for the said sum
of P.5M. Is this contract valid?
YES.
There is in this case a contract of loan and a
promise of sale of a house and lot, the price of which
should be the amount loaned, if within the period fixed
such amount should not be paid by the debtor-vendor
of the property to the vendee-creditor of the same.
Both contracts are perfectly legal. The agreement of
the parties is the law between them, and must be
enforced (Alcantara vs. Alinea 12 Phil 453, March 22,
1907).
Under the subsisting "Guard Service Contract"
between Acme Security and Bart, Acme a duly
licensed security service agency undertook to

safeguard and protect Barts business premises

of from theft, pilferage, robbery, vandalism and a
other unlawful acts of any person or persons
prejudicial to Barts interests. Carlo, defendant's
security guard on duty at Bart's premises, without
any authority brought out of Barts compound a
car belonging to a customer, Dino and drove said
car into another car, driven by Elmo. Bart sued for
the recovery of the total actual damages he
incurred in having the cars of Dino and Elmo
repaired in the sum of P80,000. Bart premised his
claim on the contractual stipulation whereby
Acme assumed the responsibility for the proper
performance by the guards employed of their
duties and of the sole responsibility for the acts
done during their watch hours. Acme contested
the claim alleging that as stipulated in the
contract, his liability is limited to P1,000.00 per
guard posted for the amount of loss or damage to
any of Barts property. Will the suit prosper?
In the case of People's Car, Inc. vs. Commando
Security Service Agency, May 22, 1973, 51 SCRA 40,
upon which the foregoing problem was based, the SC
essentially ruled that where it appears that
defendant's own guard on duty, instead of complying
with its contractual undertaking to safeguard and
protect the business premises of plaintiff, unlawfully
drove out of plaintiff's premises a customer's car, lost
control of it causing it to fall into a ditch, thereby
causing plaintiff to incur actual damages in the total

amount of P8,489.10, and that under paragraph 5 of

the "Guard Service Contract", the defendant
"assumed the responsibility for the proper
performance by the guards employed of their duties
and contracted to be solely responsible for the acts
done during their watch hours and specifically
released plaintiff from any and all liabilities x x x to the
third parties arising from the acts or omissions done
by the guards during their tour of duty", under the
premises, said defendant is liable to indemnify plaintiff
for such damages incurred.
Plaintiff was in law liable to its customer for the
damages caused the customer's car, which had been
entrusted into its custody. Plaintiff therefore was in law
justified in making good such damages and relying in
turn on defendant to honor its contract and indemnify
it for such undisputed damages, which had been
caused directly by the unlawful and wrongful acts of
defendant's security guard in breach of their contract.
Paragraph 4 of the contract, which limits defendant's
liability for the amount of loss or damage to any
property of plaintiff to "P1,000.00 per guard post" is by
its own terms applicable only for loss or damage
"through the negligence of its guards x x x during the
watch hours" provided that the same is duly reported
by plaintiff within 24 hours of the occurrence and the
guard's negligence is verified after proper
investigation with the attendance of both contracting
parties. Said paragraph is manifestly inapplicable to

the stipulated facts of record, which involve neither

property of plaintiff that has been lost or damaged at
its premises nor mere negligence of defendant's
security guard on duty.
Simply, the scope of liability under Paragraph 5 of the
contract is greater which is the one applicable to the
situation. It must be complied with in good faith. This
is a case of deliberate breach of contract not
negligence. Negligence applies in Paragraph 4 of the
contract. Hence, Paragraph 4 is not applicable but
Paragraph 5. The Security Company should pay
whole amount.
Sith filed a petition for Mandamus against the City
Mayor, the Municipal Board, the City Treasurer
and the City Auditor, for reinstatement to his
former position and for the payment of his back
salaries. The trial court rendered judgment in his
favor and he was paid. The city government sued
for refund claiming that the payment to Sith was
wrongful and illegal, since it was not a party to the
case, invoking Art. 2154 - If something is received
when there is no right to demand it, and it was
unduly delivered through mistake, the obligation
to return it arises." Will the suit for refund
prosper?
NO. In the case of City of Cebu vs. Hon. Piccio, Dec.
31, 1960 On April 11, 1955, the SC essentially ruled
that considering that the indispensable requisites of

this juridical relation, known as solutio indebiti, are (a)

that he who paid was not under obligation to do so;
and (b) that the payment was made by reason of an
essential mistake of fact (Hoskyn vs. The Goodyear
Tire, etc., CA, 40 Off. Gaz., Supp. 11, 245; Velez vs.
Balzarza, 73 Phil., 630), The complaint was correctly
dismissed. It is fully established that the defendant
had the perfect right to demand for the payment of his
back salaries during his illegal dismissal, that the sum
of money that was paid to him by virtue of a writ of
execution lawfully issued; and that the payment was
not made through mistake. On this score, alone, it
would appear manifest that the complaint does not
state a cause of action. The question of whether the
city government was a party or not in the mandamus
case becomes unimportant, as it is immaterial. A
municipal corporation, whether included or not in the
complaint for the recovery of back salaries due to
wrongful removal from office, is liable (Cf. PCIC vs.
CA 274 SCRA 597)
The collision between the car being driven by the
Ben and the jeep of Carl in December 2001, at
about 4 o'clock in the afternoon. Ben had a
companion, Leo, who was seated beside him. Carl
was at the wheel of his vehicle, which had seven
other passengers. Ben was south-bound, and the
jeep was coming from the opposite direction. A
passenger bus ahead of the jeep swerved into the
Ben's lane to overtake and bypass a tricycle. As a
result of this sudden move, Ben, to avoid a head-

on collision, immediately veered his car to the

shoulder of the highway. The car went out of
control when it hit the soft shoulder, moved back
diagonally across the cemented highway, then
collided with Carl's jeep, damaging it and causing
multiple injuries to its passengers. The bus sped
away. Ben was absolved from criminal
responsibility as well as civil liability. Is this
proper?
As the SC ruled in the case of Ongsiako vs. IAC, July
31, 1987, the real culprit in this unfortunate incident
could be the driver of the passenger bus whose
recklessness was the cause of the collision between
the Bs car and Cs jeep. At any rate, in view of the
misappreciation of the evidence of record by the lower
courts, that the guilt of the petitioner has not been
proven beyond reasonable doubt, consequently, he
should not have been held guilty of even simple
negligence and instead is entitled to be completely
absolved of criminal responsibility.
The civil liability is, however, a different question.
While the quantum of proof necessary for conviction
has not been established, there is a preponderance of
evidence to hold the driver of the car liable in
damages for the injuries sustained by the victims of
this accident. Although it is really doubtful that he was
criminally negligent, there is enough evidence to
sustain the conclusion that a little more caution and
discretion on his part in reacting to the threat of a

head-on collision with the oncoming bus, could have

avoided the unfortunate accident.
For this shortcoming, he is liable for the
hospitalization expenses and unearned salaries of the
victims as itemized by the trial court and affirmed by
the CA. Applicable here is the doctrine announced in
the recent case of People v. Ligon, G.R. No. 74041,
prom. July 29,1987 where the accused was acquitted
of the crime of homicide for lack of clear and
convincing proof that he had criminally caused a
cigarette vendor to fall to his death from the jeep
where he was hanging onto. Nevertheless, from the
totality of the facts presented, there was a
preponderance of evidence to hold the accused liable
in damages for the tragic mishap that befell the victim.
Similarly, the car driver is civilly answerable for his
quasi-delict.
1.

While trying to pass each other on a

narrow bridge, a passenger truck and a
private automobile collided, and the
plaintiff, a passenger in the truck, was
injured. The owner of the passenger truck
was made a defendant, although a
chauffeur was driving the truck, and the
owner of the private car was also made a
defendant, although he was not in the car,
which was being driven by his 18 year-old

son and in which members of his family

were then driving. Who are liable?
In Gutierrez vs. Gutierrez 56 Phil 177, upon
which the foregoing problem is based, the SC
found both drivers negligent, basing the liability of
the owner of the truck to the plaintiff on the
contract of carriage; while the liability of the
owner of the private car was based on Art. 2180.
As against the truck owner, there was culpa
contractual. While as against the owner of the
automobile there was culpa acquiliana.
COMMENT: Under ART 2180, the fathers
liability is direct negligence, culpa in vigilando.
Although parents are directly liable, they are the
ones ultimately liable especially when the son is
a minor. Only the owner should be liable. The SC
erroneously said that the driver is liable but not
because of culpa contractual but because of
delict. The SC ruling that the passenger could
recover solidarily is doubtful. In culpa aquiliana,
the delict in selection and supervision of
employees is a defense, which is not true in
culpa contractual. The injured party can recover
from the two sources but he must choose which
of them.
2.

Ana, riding on a bus, was seriously injured

when the bus she was on collided with another.
Who are liable for Anas injuries?

Ana can sue the carrier under culpa contractual

because of the breach of contract of carriage and under
Culpa Aquiliana, she can sue the driver of the bus he
was on. Under Art 2106, the carrier and driver are
JOINT TORTFEASORS one can sue only the
driver but the operator becomes liable only if the
driver is insolvent.
The owner of the public utility bus he driving
would also be liable, but the source of his liability
would be CONTRACT, because there is a
contract of carriage with the passengers, which
was violated when the passengers suffered injury
while in transit. [Paras, Pp. 99-101 citing the
cases of U.S. vs. Barrias, 23 Phil., 434 which
defines negligence; Picart vs. Smith, Phil. 809
that sets down ordinary diligence as the ability of
a prudent man to foresee harm, and the more
recent case of Mascunana vs. Verdeflor, 79
SCRA, 339.]
3.

While at sea, vessel Sisid hit vessel Roro.

During trial Roro proved that the captain
of vessel Sisid was playing poker at the
time of the mishap and that the radar of
vessel Sisid showed the presence of
vessel Dighay way ahead of the collision.
Roro sued for damages. Will the suit
prosper?

10

YES. In the M/V Don Juan case (c. 1997),

the SC determined that the captain and the crew
were guilty of contributory negligence. He was
playing mahjong at the time of the mishap; the
radar showed the presence of the oil tanker, way
ahead of time, and if steps were immediately
taken, the collision could have been avoided.
Had the officers and crew of M/V Don Juan been
more vigilant, they could have minimized the
damage considering the fact that of the two
vessels, the M/V Don Juan was better equipped.
4.

Fundador, who was intoxicated,

was
going home one dark evening in a calesa,
the horse stumbled in crossing Gorios
railway tracks, causing the calesa to
strike one of the rails with great force and
throwing the plaintiff from the calesa,
from which he suffered injuries. Gorio
sued for damages suffered due to
Fundadors negligence for having been
intoxicated while driving. Will the suit
prosper?

NO. In Wright vs, Mla. Electric 28 Phil 122,

the SC ruled that mere intoxication is not
negligence, nor does the fact of intoxication
establish a want of ordinary care. If a persons
conduct is characterized by a proper degree of

11

care and prudence, it is immaterial whether he is

drunk or sober.
5.

Amadora's son was shot to death by

Daffon,
a
classmate
at
school
auditorium. The son was in school to
submit physics project.
The school
contends that the semester had already
ended. Who are liable?

In AMADORA V. CA [160 SCRA 315], the

SC ruled that it is immaterial whether the
semester has already ended for students were
there for a legitimate purpose. He was still in
the custody of the school authorities. Even the
mere savoring of the company of his friends in
the school premises is a legitimate purpose w/c
would also bring him in the custody of the
school. The school principal and dean are not
liable because they are not teachers-in-charge,
but are merely exercising general authority, not
direct control and influence. But even the
teacher-in-charge is not liable because there is
no showing that the teacher was negligent in
enforcing discipline upon Daffon nor had he
waived observance of school rules and
regulations. His absence when the tragedy
happened cannot be considered against him
because he was not supposed or required to
report to school on that day.

12

So who is liable here? It's probably the

dean of the boys. He had earlier confiscated an
unlicensed gun from one of the students and
returned it to the latter w/o taking disciplinary
action or reporting the matter to higher
authorities. But while he was clearly negligent, it
does not necessarily link him to the shooting
since it was not shown that the gun was the one
used to kill petitioner's son.
Who is really liable here? Nobody, since
none of them was found to have been charged
with the custody of the offending student, or has
been remiss in the discharge of his duties.
While the court deeply sympathizes with the
petitioners, the court cannot extend material
relief as a balm to their grief.
6.

What is the reasoning behind the rule in

Art. 2180 NCC that teachers or heads of
establishments of arts and trades are
liable for "damages caused by their
pupils and students or apprentices, so
long as they remain in their custody?"

In SALVOSA V. IAC [166 SCRA 274], the

SC explained that the rationale of such liability is
that so long as the student remains in the
custody of a teacher, the latter "stands, to a

13

certain extent, in loco parentis (as to the

student) and is called upon to exercise
reasonable supervision over the conduct of the
(student.)
Likewise, "the phrase used in (Art. 2180)-so long as the (students) remain in their custody'
means that the protective and supervisory
custody that the school and its heads and
teachers exercise over the pupils and students
for as long as they are at attendance in the
school, including recess time.

Mino held a legacy in trust, but he

deposited the same in his personal
account.
This
money
was
confiscated during the Philippine
revolution. Can he be compelled to
return the same?
NO.
He was not liable for the
confiscation of the money from the bank
although he mixed it with his personal
funds. He was considered to have
exercised the degree of diligence of a

14

good father of a family (Bishop of Jaro

vs. Dela Pena 26 Phil 144, c. 1913).
16.

Waldorf worked as a
disbursing
officer
of
the
government.
Acme
Company
together with another company
became sureties on the official bond
of Waldorf who misappropriated
government funds forcing Acme to
pay the government under its surety
bond. Waldorf was arrested in
Canada and on his person $1,000
was recovered, which amount was
turned over to the government.
Acme sued Waldorf for the said
amount. Danding, Waldorfs lawyer
claimed the same based on a
document executed by Waldorf
ceding to him the $1000 as payment
for legal services legally tendered.
Is Danding correct?

15

In Fidelity & Deposit Co. vs. Wilson, 8

Phil 51, upon which the foregoing problem
is based, the SC ruled that the document
of transfer by itself, and afterwards the
notification of the same to the
government did not produce or could it
produce the effect of transfer to Ws
lawyer of the ownership of $1000 which
was then in the possession of the
Philippine Treasury. To have this effect,
it would have been necessary that the
delivery of the funds be made directly to
Z, which fact was never proved. All the
funds were with the PhilippineTreasurer
until they were transferred to the
possession of the depository. It is
fundamental principle in all matters of
contracts and a well-known doctrine of
law that non nudis pactis, sed traditione
dominia rerum transferentur. Ownership
is transferred among other means, by
tradition. The delivery of a thing
constitutes a necessary and indispensable

16

requisite for the purpose of acquiring the

ownership of the same by virtue of a
contract.
17. On June 7, 1992 Isa sold a lot to
Connie for P200,000, on account of
which
she
received
P150,000.
Connie sold the same on June 3,
1993 to Pino for P200,000. Pino
paid Connie P150,000 and promised
to pay the balance to Isa. Pino took
possession of the lot although he
still had not paid the balance. In
April 1995, Isa again sold the lot to
Ique for P300,000 who took
possession of the lot and had it
fenced despite the opposition of
Pino who was in full possession of
the lot. Who owns the lot?
When Isa sold the lot to Connie in
1992, Isa lost the ownership of the land.
So that when he again sold the same this

17

time to Ique in 1995, it had ceased to

belong to him and the latter sale is null
and void. The fact that the price of the
property was not paid in full could not be
an obstacle to the acquisition of
ownership by Pino because as such a
condition was not stipulated in the
contract, the latter immediately produced
its natural effects in law, the principal
and most important of which being the
conveyance of the ownership by means of
delivery of the thing sold to the
purchaser, without prejudice, of course to
the right of the vendor to claim payment
of any sum still due (Cf. De la Rama vs.
Sanchez 10 Phil 433)
Al and Cap sold a house erected on
leased land to Avi, evidenced by a
document acknowledged before a
notary public. They stipulated that
during four months from October

18

17, 1997, the vendors would

continue in possession of the house,
they would pay the expenses for
repairs, land and other taxes and
the rent for the leased lot. Avi
never took possession of the
property. In March 1998, Al and
Cap for P500,000 sold the same
property to the Arce spouses who
took possession of the same. The
two sales were not registered. Avi
invoked symbolic delivery by the
execution of the public document of
sale. Is he correct?
NO.
In Aviles vs. Arcega 44 Phil
924 (c. 1917) the SC ruled that Aviles
cannot invoke symbolic delivery by the
execution of the public document of sale
because there could not have been
delivery due to the stipulations in the
deed of sale in favor of the vendors.

19

54. Wally entered into a written

agreement with Harry to the effect
that
they
shall
organize
a
partnership for the bottling and
distribution of soft drinks, Wally to
act
as
industrial
partner
or
manager, and Harry as a capitalist
furnishing the capital necessary
therefor. Harry claims that his
consent to the agreement was
secured by the representation of
Wally that he was the owner, or
was about to become owner, of an
exclusive bottling franchise, which
representation was false. Is he
correct?In Woodhouse vs. Halili, 93
Phil 526, Jul. 31, 1953, upon which the
foregoing problem is based, the SC
ruled that fraud is manifested in
illimitable number of degrees or
gradations from the innocent praises
of a salesman about the excellence of

20

his
wares
to
those
malicious
machinations and representations that
the law punishes as a crime. In
consequence, Art. 1270 of the Spanish
Civil Code distinguishes two kinds of
(civil) fraud, the causal fraud which
may be a ground for the annulment of
a contract, and the incidental deceit
which only renders the party who
employs it liable for damages. In
order that fraud may vitiate consent,
it must be the causal (dolo causante),
not merely the incidental (dolo
incidente), inducement to the making
of the contract (art. 1270, Span. Civ.
Code; Hill vs. Veloso, 31 Phil., 160). In
the problem, inasmuch as the principal
consideration, the main cause that
induced Harry to enter into the
partnership agreement with Wally,
was the ability of Wally to get the
exclusive franchise to bottle and
distribute for Harry or for the

21

partnership, the false representation

made by Wally was not the casual
consideration,
or
the
principal
inducement, that led Harry to enter
into the partnership agreement. While
the representation Wally had the
exclusive, franchise did not vitiate
Harry's consent to the contract.
Wally used it to get from Harrys
share of 30 per cent of the net
profits. In other words, by pretending
that he had the exclusive franchise
and promising to transfer it to Harry,
Wally obtained the consent of the
latter to give him a big slice in the net
profits. This is the dolo incidente
defined in article 1270 of the Spanish
Civil Code, because it was used to get
the other party's consent to a big
share in the profits, an incidental
matter in the, agreement. (8 Manresa
602).

22

55. On 2 November 1956, Cathy, wife

of Ivan and mother of Xena, Yam
and
Zach,
passed
away
in
Pangasinan. Her daughter Xena, who
was
then
vacationing
in
the
Philippines, sent a telegram to their
father in the U.S.A. announcing
Cathy's death. Telekupad company
accepted the telegram in its
Dagupan office, for transmission,
after payment of the required fees
or charges. The telegram, however,
never reached its addressee. Cathy
was
interred
with
only
her
daughter, Xena, in attendance.
When Xena returned to the United
States, she discovered that the
wire she had caused the defendant
to send had not been received. Is
Telekupad laible?In Telefast vs.
Castro, 158 SCRA 445, 02/29/1988,
upon which the foregoing problem was
based, the SC held that Art. 1170 of

23

the Civil Code provides that "those

who in the performance of their
obligations are guilty of fraud,
negligence or delay, and those who in
any manner contravene the tenor
thereof, are liable for damages." Art.
2176 also provides that "whoever by
act or omission causes damage to
another, there being fault or
negligence, is obliged to pay for the
damage done." Telefast was guilty of
contravening its obligation and is thus
liable for damages. This liability is not
limited to actual or quantified
damages. To sustain Telefast's
contrary position in this regard would
result in an inequitous situation where
petitioner will only be held 'liable for
the actual cost of a telegram fixed
thirty (30) years ago.
56. Zenith
Company
engaged
the
services of Big Top Engineering &

24

Construction
Company
for
the
construction of a building. The
contract gave Big Top discretionary
power
in
the
manner
the
construction was to be conducted.
Big Top then commissioned Haqotin
Hauling Company to clear and collect
the debris in the construction area.
Haqotin Hauling after collecting the
down payment for its services,
closed shop and its supposed owners
skipped town. Is Big Top liable to
Zenith for the money paid to
Haqotin? No. In
Oleary
vs.
Macondray & Co. 45 Phil 812, 03/25/
1924, the SC ruled that where his
contract of employment gives him
discretionary power, a contractor is
not personally liable for honest
mistakes or errors of judgment.
b.

Two taxis, one owned and

operated by Biajeng Langit,

25

Inc. and the other by Kaskas

Corp., figured in a collision.
Both taxi drivers were negligent.
As a result of the incident,
passenger Mina Las of Biajeng
Langit taxi suffered injuries.
She sued for damages against
Biajeng Langit and Kaskas as
well as the two taxi drivers.
What are the liabilities of the
defendants?
The principal or primary cause of
action by Mina against Biajeng Langit is
culpa contractual and against all others
the source of the liability is culpa
acquilana (also culpa criminal in the case
of the taxi drivers).
Although the cause of action against
Biajeng Langit is basically one of breach
of contracts, the factual circumstances,
however, would also point to the existence

26

of tort as a mode of breach. Where,

without a pre existing contract between
two parties, an act or omission could have
nevertheless constituted an actionable
tort between them, then the mere
existence of a contract between such
parties will not militate against the
application of the rules on tort liability or
even the predominance of tort (See
Singson vs. BPI, 23 SCRA 1117; Air France
vs. Carascoso, 18 SCRA 155). Accordingly,
Biajeng Langit, becomes a joint tortfeasor
with the other defendants rendering
themselves to be solidarily laible (Art.
2194 NCC). Likewise, the possibility of
Biajeng Langit for moral damages for
Minas injuries due to quasi delict under
Art. 2219 NCC may not altogether be
discounted in appropriate cases.
Biajeng Langit may not raise the
defense of due diligence in the selection
(culpa in eligiendo) and supervision (culpa

27

in vigilando) of its employees, although

Kaskas may do so (De Guia vs. Manila
Electric Co., 40 Phil 706).
While Biajeng Langit may not raise
the defense of due diligence in the
selection and supervision of its employees
as against Mina (the latters cause of
action still being basically one of culpa
contractual), the proof of such diligence,
however is not all that immaterial. Once
established, such due diligence, will work
to operate an extenuation of the tort
liability, and Biajeng Langit could no
longer be considered a joint tortfeasor.
In this case, neither solidary liability
under Art. 2194 NCC nor liability for
moral damages to Mina under Art. 2219
NCC (in the absence of gross negligence
amounting to bad faith) would be
applicable. Biajeng Langit, however, would
still be liable but purely on the basis of
culpa contractual.

28

In case direct evidence is bereft of

the existence or non existence of
negligence, Biajeng Langit can still be held
liable, since fault or negligence is
presumed in culpa contractual. In culpa
acquiliana, fault or negligence must, as a
rule be established.
If the drivers of the colliding vehicles
were convicted in a criminal case for their
negligence, Biajeng Langit and Kaskas can
be held liable subsidiarily for their
respective drivers civil liability being
both engaged in an industry (Art. 100 to
103, RPC).
In culpa contractual, the privity of
contracts would bar non successors from
claiming from Biajeng Langit (in case Mina
dies). In culpa acquiliana relatives and
dependents (although non heirs) may claim
damages.

29

58. A participated in the public bidding

called by the N for the subply of
20,000 metric tons of Burmese
rice. As her bid of $203.00 per
metric ton was the lowest, she was
awarded the contract for the same.
Accordingly, on A and the N
entered into a Contract of Sale of
Rice, under the terms of which the
former obligated herself to deliver
to the latter 20,000 metric tons of
Burmese Rice at $203.00 per
metric ton, CIF Manila. In turn, N
committed itself to pay for the
imported rice "by means of an
irrevocable,
confirmed
and
assignable letter of credit in U.S.
currency in favor of A and/or
supplier in Burma, immediately."
However, it was only after a
considerable time later, that NARIC
applied for the opening of a letter
of credit with the PNB Bank. N

30

knew that A, had a deadline to

meet set by her suppliers. On the
day of the deadline itself, the PNB
informed N that its application has
been approved with the condition
that 50% marginal cash deposit be
paid and that drafts are to be paid
upon presentment. As it turned out
however, N was not in any financial
position to meet the condition. As a
result of the delay, the allocation
of As supplier in Rangoon was
cancelled and the 5% deposit,
amounting to 524,000 kyats or
approximately
P200,000
was
forfeited. Is N liable?
YES. In Arrieta vs. National Rice
and Corn Administration (NARIC), 10
SCRA 79, Jan. 31, 1964, upon which the
foregoing problem was based, the SC
ruled that It is clear upon the records
that the sole and principal reason for the

31

cancellation of the allocation contracted

by Arrieta in Rangoon, Burma was the
failure of the letter of credit to be
opened within the contemplated period.
This failure must, therefore, be taken as
the immediate cause for the consequent
damage, which resulted. The liability of
the NARIC, however, stems not alone
from its failure or inability to satisfy the
requirements of the PNB. Its culpability
arises from its willful and deliberate
assumption of contractual obligations even
as it was well aware of its financial
incapacity to undertake the presentation.
This judgment is based on the letter,
which accompanied the application filed
by NARIC with PNB, where it admitted
that it did not have sufficient deposit
with PNB with which to cover the amount
required to be deposited as a condition
for the opening of letters of credit. A
number of logical inferences may be
drawn
from
the
aforementioned

32

admission. First, that the NARIC knew

the bank requirements for opening letters
of credit; second, NARIC also knew it
could not meet those requirements. When,
therefore, despite this awareness that it
was financially incompetent to open a
letter of credit immediately, NARIC
agreed to pay immediately by means of an
irrevocable, confirmed and assignable
letter of credit, it must be similarly be
held to have bound itself too answer for
all and every consequences that would
result from the representation.
Article 1170 of the Civil Code which
provides: "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 in damages. Under this provision,
not only debtors guilty of fraud,
negligence or default in the performance
of obligations are decreed liable: in

33

general, every debtor who fails in the

performance of his obligations is bound to
indemnify for the losses and damages
caused thereby (De la Cruz vs. Seminary
of Manila, 18 Phil. 330; Municipality of
Moncada vs. Cajuigan, 21 Phil. 184; De la
Cavada vs. Diaz, 37 Phil. 982; Maluenda &
Co. vs, Enriquez, 46 Phil. 916; Pasumil vs.
Chong, 49 Phil. 1003; Pando vs. Gimenez,
54 Phil. 459; Acme Films vs. Theaters
Supply, 63 Phil. 657.) The phrase "in any
manner contravene the tenor" of the
obligation includes any illicit act, which
impairs the strict and faithful fulfillment
of the obligation, or every kind of
defective performance. (IV Tolentino,
Civil Code of the Philippines, citing
authorities, p. 103.)
61. Diesel, the owner of a public
garage,
undertook
to
convey
Pasajero by automobile from San

34

Fernando, La Union, to Currimao,

Ilocos Norte. While on the way to
Currimao the automobile fell down a
steep embankment as a result of
which Pasajero was injured. Is
Diesel liable?
YES. As held in Lasam vs. Smith 45
Phil 657 upon which the foregoing problem
was based, the SC held that the
defendant's
liability,
if
any,
was
contractual and that in an action for
damages articles 1101-1107 of the Civil
Code, and not article 1903, were
applicable. Neither under American nor
Spanish law is a carrier of passengers an
absolute insurer against the risks of
travel from which the passenger may
protect himself by exercising due care
and diligence.
The case of Alba vs. Sociedad
Anonima de Tranvias, Jurisprudencia Civil,

35

vol. 102, p. 928, cited by the D in support

of his contentions, affords a good
illustration of the application of this
principle. In that case Alba, a passenger
on a street car, was standing on the
platform of the car while it was in motion.
The car rounded a curve causing Alba to
lose his balance and fall off the platform,
sustaining severe injuries. In an action
brought by him to recover damages, the
supreme court of Spain held that
inasmuch as the car at the time of the
accident was traveling at a moderate rate
of speed and there was no infraction of
the regulations, and the plaintiff was
exposed to no greater danger than that
inherent in that particular mode of travel,
the plaintiff could not recover, especially
so since he should have been on his guard
against a contingency as natural as that of
losing his balance to a greater or less
extent when the car rounded the curve.
But such is not the present case. Here

36

the passengers had no means of avoiding

the danger or escaping the injury.
In determining the extent of the
liability for losses or damages resulting
from negligence in the fulfillment of a
contractual obligation, the courts have a
discretionary power to moderate the
liability according to the circumstances.
(Art. 1103 NCC; De Guia vs. Manila
Electric Railroad & Light Co., 40 Phil.,
706.)Cf. Austria vs. CA, 39 SCRA 527 and
Servando vs. Phil. Steam Navigation, 117
SCRA 832
62. A
passenger
ship
owned
and
operated by Titanic Corp. left
Manila for Cebu. Its officers knew
a typhoon was building up in
Mindanao. Good weather prevailed
until the vessel reached Romblon.
When the ship passed Tanguingui
Island, the weather drastically

37

changed. Although the officers knew

that the island was within the
typhoon zone, they decided to
proceed on course. The ship struck
a reef and sank. Many passengers
perished. Their heirs sued Titanic
Corp., which raised the defense of
force majeure. Is Titanic correct?
No. In Pedro Vasquez vs. CA &
Filipinas Pioneer Lines, Inc. (Sept. 18,
1985), the SC ruled 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; (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.

38

Under the circumstances, while

indeed, the typhoon was an inevitable
occurrence, yet, having been kept posted
on the course of the typhoon by weather
bulletins at intervals of six hours, the
captain and crew were well aware of the
risk they were taking as they hopped
from island to island from Romblon up to
Tanguingui.
They
held
frequent
conferences and oblivious of the utmost
diligence required of very cautious
persons, they decided to take a calculated
risk. In so doing, they failed to observe
that extraordinary diligence required of
them explicitly by law for the safety of
the passengers transported by them with
due regard for all circumstances and
unnecessarily exposed the vessel and
passengers to the tragic mishap. They
failed to overcome the presumption of
fault or negligence that arises in case of
death or injuries to passengers (Cf.
Nakpil & Sons vs. CA, Oct. 3, 1986).

39

63. A public utility jeep driven by

Manny Obra, blew a tire, which
caused it to jump into a ditch. The
tire was a new one. The jeeps
operator claimed fortuitous event.
Is he correct? Explain.
No. In Juntilla vs. Fontanar, May 31,
1985, the SC said that the fact alone that
the tire may have still been good because
its grooves are still visible does not make
the tires explosion a fortuitous event. If
there is no evidence that the driver has
taken
due
course
precautions
to
compensate for any condition liable to
cause accidents, such as the road
condition, a tire blow out could be caused,
for instance, by too much air pressure,
overloading or speeding at the time of the
accident.
64. Bill decided to construct an office
building on its 840 square meters

40

lot located at the corner of Aduana

and Arzobispo Streets, Intramuros,
Manila.
The
construction
was
undertaken
by
the
Union
Construction, Inc. The plans and
specifications for the building were
prepared by Jason. Two years after
the building was finished, an
unusually strong earthquake (7.3
intensity) hit the area where the
building was located and its environs
and
the
building
in
question
sustained major damage. The front
columns of the building buckled,
causing the building to tilt forward
dangerously. The tenants vacated
the building in view of its precarious
condition. The pivotal issue in this
case is whether or not an act of
God caused the failure of the
building?

41

In Juan Nakpil & Sons vs. CA, 114

SCRA 597, 10/03/1986, upon which the
foregoing problem was based, the SC held
that the general rule is that no person
shall be responsible for events which
could not be foreseen or which, though
foreseen, were inevitable (Article 1174,
New Civil Code). An act of God has been
defined as an accident, due directly and
exclusively to natural causes without
human intervention, which by no amount of
foresight, pains or care, reasonably to
have been expected, could have been
prevented. (1 Corpus Juris 1174).
To exempt the obligor from liability
under Article 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
unforseeable or unavoidable; (c) the event

42

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.
(Vasquez v. Court of Appeals, 138 SCRA
553; Estrada v. Consolacion, 71 SCRA 423;
Austria v. Court of Appeals, 39 SCRA
527; Republic of the Phil. v. Luzon
Stevedoring Corp., 21 SCRA 279; Lasam v.
Smith, 45 Phil. 657).
The principle embodied in the act of
God doctrine strictly requires that the
act must be one occasioned exclusively by
the violence of nature and all human
agencies are to be excluded from
creating or entering into the cause of the
mischief. When the effect, the cause of
which is to be considered, is found to be
in part the result of the participation of
man, whether it be from active
intervention or neglect, or failure to act,

43

the whole occurrence is thereby

humanized, as it were, and removed from
the rules applicable to the acts of God. (1
Corpus Juris, pp. 1174-1175).
Thus it has been held that when the
negligence of a person concurs with an act
of God in producing a loss, such person is
not exempt from liability by showing that
the immediate cause of the damage was
the act of God. To be exempt from
liability for loss because of an act of God,
he must be free from any previous
negligence or misconduct by which that
loss or damage may have been occasioned.
(Fish & Elective Co. v. Phil. Motors, 55
Phil. 129; Tucker v. Milan, 49 O.G. 4379;
Limpangco & Sons v. Yangco Steamship
Co., 34 Phil. 594, 604; Lasam v. Smith, 45
Phil. 657).
The negligence of the defendants was
established beyond dispute. United

44

Construction Co., Inc. 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 Nakpil & Sons were
found to have inadequacies or defects in
the plans and specifications prepared by
them. These defects were the proximate
causes that rendered the PBA building
unable to withstand the earthquake of
August 2, 1968. For this reason the
defendant and third-party defendants
cannot claim exemption from liability.
(Cf.Republic vs. Luzon Stevedoring, 108
SCRA 24)

45

65. Pinong went to the LTO to register

his car. Along the way he met Fikser,
an employee of said LTO. Pinong
requested Fikser to introduce him to
one of the clerks in the LTO, who
could facilitate the registration of his
car. Fikser acceded and drove Pinongs
car to the LTO. While about to reach
his destination, the car was stoned by
some 'mischievous boys,' and its
windshield was broken. Pinong sued
Fikser for payment of damages for
the broken windshield. Will the suit
prosper?

46

In Dioquino vs. Laureano, 33 SCRA

65, upon which the foregoing problem
was based, the SC held that the
express language of Art. 1174 of the
present Civil Code which is a
restatement of Art. 1105 of the Old
Civil Code, except for the addition of
the nature of an obligation requiring
the assumption of risk, compels such a
conclusion. It reads thus: "Except in
cases expressly specified by the law,
or when it is otherwise declared by
stipulation, or when the nature of the
obligation requires the assumption of
risk, no person shall be responsible for
those events which could not be
foreseen, or which, though foreseen,
were inevitable."

47

Even under the old Civil Code then,

as stressed by us in the first decision
dating back to 1908, in an opinion by
Justice Mapa, the rule was well-settled
that in the absence of a legal provision
or an express covenant, "no one should
be held to account for fortuitous
cases." Its basis, as Justice Moreland
stressed, is the Roman law principle
major casus est, cui humana infirmitas
resistere non potest.
Authorities of repute are in
agreement, more specifically concerning
an obligation arising from contract
"that some extraordinary circumstance
independent of the will of the obligor,
or of his employees, is an essential
element of a caso fortuito."

48

If it could be shown that such

indeed was the case, liability is ruled
out. There is no requirement of
"diligence beyond what human care and
foresight can provide."
What happened was clearly
unforeseen. It was a fortuitous event
resulting in a loss, which must be borne
by the owner of the car. Reference to
the leading case of Republic v. Luzon
Stevedoring Corp. will illustrate when
the nature of the obligation is such
that the risk could be considered as
having been assumed. As noted in the
opinion of Justice J.B.L. Reyes,
speaking for the Court:

49

"The appellant strongly stresses

the precautions taken by it on
the day in question: that it
assigned two of its most
powerful tugboats to tow down
river its barge L- 1892; that it
assigned to the task the more
competent and experienced
among its patrons, had the
towlines, engines and equipment
double-checked and inspected;
that it instructed its patrons to
take extra precautions; and
concludes that it had done all it
was called to do, and that the
accident, therefore, should be
held due to force majeure or
fortuitous event."
Its next paragraph explained clearly
why the defense of caso fortuito or
force majeure does not lie. Thus:

50

51

"These very precautions,

however, completely destroy the
appellant's defense. For 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 of the
Philippines). 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: 'un hecho no constituye

52

caso fortuito por la sola

circunstancia de que su
existencia haga mas dificil o mas
onerosa la accion diligente del
presente ofensor' (Peirano
Facio, Responsibilidad Extracontractual, p. 465; Mazeaud,
Traite de la Responsabilite
Civile, Vol. 2, Sec. 1569). The
very measures adopted by
appellant prove that the
possibility of danger was not
only foreseeable, but actually
foreseen, and was not caso
fortuito."

In that case then, the risk was

quite evident and the nature of the
obligation such that a party could
rightfully be deemed as having assumed
it. It is not so in the case at bar.

53

Cf. Austria vs. CA, 39 SCRA 527; NPC vs.

CA, 161 SCRA 334
66. Didi owned a house in Pasay City,
while Senyang owns a four-storey
school building in vicinity of Didis
house. A powerful typhoon hit
Metro Manila. The roof of the
school building was partly ripped off
and blown away, landing on and
destroying portions of the roofing
of the Didis house. Later, some
city building engineers conducted an
ocular inspection of the destroyed
buildings and found that the most
likely reason for the dislodging of
the roofings structural trusses is
the improper anchorage of the said
trusses to the roof beams and
recommended that the 4th floor of
the school building be declared as a
"structural hazard. Is Senyang
liable?

54

NO.
In Southeastern College vs.
CA 292 SCRA 422, July 10, 1998, upon
which the foregoing problem was based,
the SC ruled that Article 1174 of the Civil
Code provides: Except in cases expressly
specified by the law, or when it is
otherwise declared by stipulation, or when
the nature of the obligation requires the
assumption of risk, no person shall be
responsible for those events which could
not be foreseen, or which, though
foreseen, were inevitable."
The antecedent of fortuitous event or
caso fortuito is found in the Partidas
which defines it as "an event which takes
place by accident and could not have been
foreseen." Escriche elaborates it as "an
unexpected event or act of God which
could neither be foreseen nor resisted."

55

Civilist Arturo M. Tolentino adds that

"[f]ortuitous events may be produced by
two general causes: (1) by nature, such as
earthquakes, storms, floods, epidemics,
fires, etc. and (2) by the act of man, such
as an armed invasion, attack by bandits,
governmental prohibitions, robbery, etc."
In order that a fortuitous event may
exempt a person from liability, it is
necessary that he be free from any
previous negligence or misconduct by
reason of which the loss may have been
occasioned.
An act of God cannot be invoked for
the protection of a person who has been
guilty of gross negligence in not trying to
forestall
its
possible
adverse
consequences. When a person's negligence
concurs with an act of God in producing
damage or injury to another, such person
is not exempt from liability by showing
that the immediate or proximate cause of

56

the damage or injury was a fortuitous

event. When the effect is found to be
partly the result of the participation of
man - whether it be from active
intervention, or neglect, or failure to act the
whole
occurrence
is
hereby
humanized, and removed from the rules
applicable to acts of God.
There is no question that a typhoon or
storm is a fortuitous event, a natural
occurrence which may be foreseen but is
unavoidable despite any amount of
foresight, diligence or care. In order to
be exempt from liability arising from any
adverse consequence engendered thereby,
there should have been no human
participation amounting to a negligent act.
In other words, the person seeking
exoneration from liability must not be
guilty of negligence. Negligence, as
commonly understood, is conduct, which

57

naturally or reasonably creates undue risk

or harm to others.
It may be the failure to observe that
degree of care, precaution, and vigilance,
which the circumstances justly demand,
or the omission to do something which a
prudent and reasonable man, guided by
considerations which ordinarily regulate
the conduct of human affairs, would do.
It bears emphasizing that a person
claiming damages for the negligence of
another has the burden of proving the
existence of fault or negligence causative
of his injury or loss.
The facts constitutive of negligence
must be affirmatively established by
competent evidence, not merely by
presumptions and conclusions without
basis in fact. The Dimaanos merely relied
on the aforementioned report submitted
by a team, which made an ocular

58

inspection of petitioner's school building

after the typhoon. As the term imparts,
an ocular inspection is one by means of
actual sight or viewing. What is visual to
the eye though, is not always reflective of
the real cause behind. For instance, one
who hears a gunshot and then sees a
wounded person, cannot always definitely
conclude that a third person shot the
victim. It could have been self-inflicted
or caused accidentally by a stray bullet.
The relationship of cause and effect must
be clearly shown.
On the other hand, petitioner elicited
from the city building official that the
original plans and design of petitioner's
school building were approved prior to its
construction. It is a matter of judicial
notice that typhoons are common
occurrences in this country. If subject
school building's roofing was not firmly
anchored to its trusses, obviously, it could

59

not have withstood long years and several

typhoons even stronger than "Saling."