Social Security System v. Moonwalk Development & Housing Corporation G.R. No.

73345 fulfillment in the point of time which is called mora or delay. There is no mora or delay unless there is
(April 7, 1993) a demand.

Facts: In the present case, during all the period when the principal obligation was still subsisting, although
there was late amortizations there was no demand made by the creditor, for the payment of the
penalty. Therefore up to the time of the letter of SSS there was no demand for the payment of the
1. Plaintiff (SSS) approved the application of the defendant (Moonwalk) for an interim loan. penalty, hence the debtor was no in mora in the payment of the penalty.
2. The loan was released to the Moonwalk.
3. Moonwalk made a payment to SSS for the loan principal released to it.
4. The last payment made by Moonwalk was based on the Statement of Accountprepared by the SSS. SSS issued its statement of account showing total obligation of Moonwalk, and forthwith demanded
5. After the settlement of the account, SSS issued to Moonwalk the Release of Mortgage of Moonwalk’s payment from Moonwalk. Because of the demand for payment, Moonwalk made a complete payment
mortgaged properties. of its obligation. Because of this payment the obligation of Moonwalk was considered extinguished,
6. In the letters to Moonwalk, SSS alleged that it committed an honest mistake in releasing Moonwalk and pursuant to said extinguishment, the real estate mortgages given by Moonwalk were released.
(in the mortgage). For all purposes therefor the principal obligation of Moonwalk was deemed extinguished as well as
7. Moonwalk replied in a letter that it had completely paid its obligations to SSS. the accessory obligation of real estate mortgages.

Issue/s:
The demand for payment of the penal clause made by SSS in its demand letter (November 28, 1989)
are therefore ineffective as there was nothing to demand. If the demand for the payment of the
1. Whether or not the 12% penalty demandable even after the extinguishment of the principal obligation penalty was made prior to the extinguishment because then the obligation of Moonwalk would
2. Whether or not Moonwalk was in default (mora) consist of (1) principal obligation, (2) an interest of 12% on the principal obligation, and (3) the
penalty of 12% for the late payment for after demand.
Ruling:
Moonwalk is not in default since there was no mora prior to the demand.
1. No. Obligation was already extinguished by the payment by Moonwalk of its indebtedness to SSS
and by the latter’s act of cancelling the real estate mortgages executed in its favor by defendant
Notes/Doctrine:
moonwalk.

What is sought to be recovered in this case is not the 12% interest on the loan but the 12% penalty Art. 1229. The judge shall equitably reduce the penalty when the principal obligation has been partly
for failure to pay on time the amortization. What is sought to be enforced therefore is a penal clause or irregularly complied with by the debtor. Even if there has been no performance, the penalty may
of the contract entered into between the parties. be also be reduced by the courts if it is iniquitous.

Penal clause is an accessory obligation which the parties attach to a principal obligation for the
purpose of insuring the performance thereof by imposing on the debtor a special presentation in case
the obligation is not fulfilled or is irregularly or inadequately fulfilled. Accessory obligation is
dependent for its existence on the existence of a principal obligation. In the present case, the
principal obligation is the loan between the parties. The accessory obligation of a penal clause is to
enforce the main obligation of payment of the loan. If therefore the principal obligation does not exist
the penalty being accessory cannot exist.
2. No. A penalty is demandable in case of non performance or late performance of the main obligation.
There must be a breach of the obligation either by total or partial non fulfillment or there is non-
● If the penalty can be reduced after the principal obligation has been partly or irregularly complied with
by the debtor which is nonetheless a breach of the obligation, with more reason the penal clause is
not demandable when full obligation has been complied with since in that case there is no breach of
obligation.
Art. 1226. In obligations with a penal clause, the penalty shall substitute the indemnity for damages
and the payment of interest in case of noncompliance, if there is no stipulation to the contrary.
Nevertheless, damages shall be paid if the obligor refuses to pay the payment or is guilty of fraud in
the fulfillment of the obligation.
 Function of a Penal Clause: Moonwalk made a total payment of P23,657,901.84 to SSS for theloan principal of P12,254,700.

-
1. to provide for liquidated damages, and
2. strengthen the coercive force of the obligation by the threat of greater responsibility in the event of After settlement of the account, SSS issued to Moonwalk the
breach.
release of Mortgage for Moonwalk’s Mortgaged properties.
Art. 1169. Those obliged to deliver or to something incur in delay from the time the obligee judicially
or extrajudicially demands from them the fulfillment of their obligation. -

In letter to Moonwalk, SSS alleged that it committed an honestmistake in releasing defendant.

Requisites for a debtor to be in default (mora):
-

1. The obligation be demandable and already liquidated; That Moonwalk has still 12% penalty for failure to pay on time theamortization which is in the penal
2. the debtor delays performance; and clause of the contract.
3. the creditor requires the performance judicially and extrajudicially.
-
Instances when demand is not necessary: Moonwalk’s counsel told SSS that it had completely paid its

obligation to SSS and therefore there is no recovery of any penalty.

1. When the obligation or the law expressly so declares;
2. When from the nature and the circumstances of the obligation it appears that the designation of the ISSUE:
time when the thing is to be delivered or the service is to be rendered was a controlling motive for the
establishment of the contract; or Is the penalty demandable even after the extinguishment of theprincipal obligation?
3. When the demand would be useless, as when the obligor has rendered it beyond his power to
perform. HELD:No. There has been a waiver of the penal clause as it was notdemanded before the full
obligation was fully paid andextinguished.

Default begins from the moment the creditor demands theperformance of the obligation.In this case,
ACTS:
although there were late amortizations there wasno demand made by SSS for the payment of the
- penalty

Plaintiff SSS approved the application of Defendant Moonwalk fora loan of P30,000,000 for the henceMoonwalk is not in delay in the payment of the penalty.No delay occurred and there was no
purpose of developing andconstructing a housing project. occasion when the penaltybecame demandable and enforceable.

- Since there was no default in the performance of the mainobligation-payment of the loan- SSS was
never entitled torecover any penalty.
Out of P30,000,000 approved loan, the sum of P9,595,000 wasreleased to defendant Moonwalk.
If the demand for the payment of the penalty was made prior tothe extinguishment of the obligation
- which are: 1. e principalobligation 2. The interest of 12% on the principal obligation 3.The penalty of
12% for late payment for after demand, Moonwalkwould be in delay and therefore liable for the
A third Amendment Deed of Mortgage was executed for thepayment of the amount of P9,595,000. penalty.
-
Case 8: Barzaga vs. CA and Alviar Held: Yes. An assiduous scrutiny of the record convinces us that respondent Angelito Alviar was
negligent and incurred in delay in the performance of his contractual obligation. Contrary to the
Case about Non-importance of Demand in Obligations where Time is of the Essence Oblicon appellate court's factual determination, there was a specific time agreed upon for the delivery of the
Concept: The law expressly provides that those who in the performance of their obligation are materials to the cemetery. The argument that the invoices never indicated a specific delivery time
guilty of fraud, negligence, or delay and those who in any manner contravene the tenor thereof, are must fall in the face of the positive verbal commitment of respondent's storekeeper. Consequently it
liable for damages. was no longer necessary to indicate in the invoices the exact time the purchased items were to be
Facts: The Fates ordained that Christmas 1990 be bleak for Ignacio Barzaga and his family. On brought to the cemetery. No. Flattening of the tires can be foreseen and as such should have been
the nineteenth of December Ignacio's wife succumbed to a debilitating ailment after prolonged pain reasonably guarded against. The nature of private respondent's business requires that he should be
and suffering. Forewarned by her attending physicians of her impending death, she expressed her ready at all times to meet contingencies of this kind. Yes. This sufficiently entitles petitioner Ignacio
wish to be laid to rest before Christmas day to spare her family from keeping lonely vigil over her Barzaga to be indemnified for the damage he suffered as a consequence of delay or a contractual
remains while the whole of Christendom celebrate the Nativity of their Redeemer. Drained to the breach. We therefore sustain the award of moral damages. It cannot be denied that petitioner and his
bone from the tragedy that befell his family yet preoccupied with overseeing the wake for his family suffered wounded feelings, mental anguish and serious anxiety while keeping watch on
departed wife, Ignacio Barzaga set out to arrange for her interment on the twenty-fourth of December Christmas day over the remains of their loved one who could not be laid to rest on the date she
in obedience semper fidelis to her dying wish. But her final entreaty, unfortunately, could not be herself had chosen. We also affirm the grant of exemplary damages. The lackadaisical and feckless
carried out. Dire events conspired to block his plans that forthwith gave him and his family their attitude of the employees of respondent over which he exercised supervisory authority indicates
gross negligence in the fulfillment of his business obligations. We delete however the award of
gloomiest Christmas ever. On 21 December 1990, at about three o'clock in the afternoon, he went
temperate damages. Under Art. 2224 of the Civil Code, temperate damages are more than nominal
to the hardware store of respondent Angelito Alviar to inquire about the availability of certain
but less than compensatory, and may be recovered when the court finds that some pecuniary loss
materials to be used in the construction of a niche for his wife. He also asked if the materials could
has been suffered but the amount cannot, from the nature of the case, be proved with certainty
be delivered at once. Marina Boncales, Alviar's storekeeper, replied that she had yet to verify if the
store had pending deliveries that afternoon because if there were then all subsequent purchases
would have to be delivered the following day. With that reply petitioner left. At seven o'clock the
following morning, 22 December, Barzaga returned to Alviar's hardware store to follow up his
purchase of construction materials. He told the store employees that the materials he was buying
would have to be delivered at the Memorial Cemetery in Dasmarinas, Cavite, by eight o'clock that
morning since his hired workers were already at the burial site and time was of the essence. The
construction materials did not arrive at eight o'clock as promised. At nine o'clock, the delivery was
still nowhere in sight. Barzaga returned to the hardware store to inquire about the delay. Boncales
assured him that although the delivery truck was not yet around it had already left the garage and
that as soon as it arrived the materials would be brought over to the cemetery in no time at all. That
left petitioner no choice but to rejoin his workers at the memorial park and wait for the materials.

After hours of waiting — which seemed interminable to him — Barzaga became extremely upset. He
decided to dismiss his laborers for the day. He proceeded to the police station, which was just
nearby, and lodged a complaint against Alviar. RTC ruled in favor of petitioner saying that
respondent incurred legal delay. CA reversed the decision and said that there was no contractual
commitment as to the exact time of delivery since this was not indicated in the invoice receipts
covering the sale. SC ruled in favor of petitioner.

Issues: W/N respondent incurred legal delay? W/N the respondent encountered fortuitous event
resulting to the delay? W/N petitioner is entitled to be indemnified?
Pantaleon vs. American Express International, Inc.
Case about Delay of Credit Card Company in its Obligation to Cardholders Oblicon Concept:
Article 1319. Consent is manifested by the meeting of the offer and the acceptance upon the thing
and the cause which are to constitute the contract. The offer must be certain and the acceptance
absolute. A qualified acceptance constitutes a counter-offer. Article 1169. Those obliged to deliver
or to do something incur in delay from the time the obligee judicially or extrajudicially demands from
them the fulfillment of their obligation.
Facts: In October 1991, Pantaleon, together with his wife (Julialinda), daughter (Regina), and son
(Adrian Roberto), went on a guided European tour. On October 25, 1991, the tour group arrived in
Amsterdam. Due to their late arrival, they postponed the tour of the city for the following day. The
next day, the group began their sightseeing at around 8:50 a.m. with a trip to the Coster Diamond
House (Coster). To have enough time for take a guided city tour of Amsterdam before their departure
scheduled on that day, the tour group planned to leave Coster by 9:30 a.m. at the latest. While at
Coster, Mrs. Pantaleon decided to purchase some diamond pieces worth a total of US$13,826.
Pantaleon presented his American Express credit card to the sales clerk to pay for this purchase. He
did this at around 9:15 a.m. The sales clerk swiped the credit card and asked Pantaleon to sign the
charge slip, which was then electronically referred to AMEX‘s Amsterdam office at 9:20 a.m. At
around 9:40 a.m., Coster had not received approval from AMEX for the purchase so Pantaleon
asked the store clerk to cancel the sale. The store manager, however, convinced Pantaleon to wait a
few more minutes. Subsequently, the store manager informed Pantaleon that AMEX was asking for
bank references; Pantaleon responded by giving the names of his Philippine depository banks. At
around 10 a.m., or 45 minutes after Pantaleon presented his credit card, AMEX still had not
approved the purchase. Since the city tour could not begin until the Pantaleons were onboard the
tour bus, Coster decided to release at around 10:05 a.m. the purchased items to Pantaleon even
without AMEX‘s approval. When the Pantaleons finally returned to the tour bus, they found their
travel companions visibly irritated. This irritation intensified when the tour guide announced that they
would have to cancel the tour because of lack of time as they all had to be in Calais, Belgium by 3
p.m. to catch the ferry to London. In all, it took AMEX a total of 78 minutes to approve Pantaleon‘s
purchase and to transmit the approval to the jewelry store.
After the trip to Europe, the Pantaleon family proceeded to the United States. Again, Pantaleon
experienced delay in securing approval for purchases using his American Express credit card on two
separate occasions. He experienced the first delay when he wanted to purchase golf equipment in
the amount of US$1,475 at the Richard Metz Golf Studio in New York on October 30, 1991. Another
delay occurred when he wanted to purchase children‘s shoes worth US$87 at the Quiency Market in
Boston on November 3, 1991. RTC ruled in favor of petitioner and held respondent as guilty of
delay. CA ruled in favor of respondent. SC ruled in favor of petitioner and SC, upon reconsideration,
ruled in favor of the respondent.
Issues: W/N AMEX has an obligation to grant petitioner‘s credit transaction? W/N AMEX is guilty
of culpable delay? W/N AMEX has the obligation to act on the offer within a specific period of
time? W/N AMEX acted with good faith? W/N petitioner‘s actions was the proximate cause of his
injury?
Held: No. This view finds support in the reservation found in the card membership agreement
itself, particularly paragraph 10, which clearly states that AMEX "reserve[s] the right to deny
authorization for any requested Charge." By so providing, AMEX made its position clear that it has no
obligation to approve any and all charge requests made by its card holders. No. Since AMEX has
no obligation to approve the purchase requests of its credit cardholders, Pantaleon cannot claim that
AMEX defaulted in its obligation. Before the credit card issuer accepts this offer, no obligation
relating to the loan agreement exists between them. A demand presupposes the existence of an
obligation between the parties. No. Every time Pantaleon charges a purchase on his credit card,
the credit card company still has to determine whether it will allow this charge, based on his past
credit history. This right to review a card holder‘s credit history, although not specifically set out in the
card membership agreement, is a necessary implication of AMEX‘s right to deny authorization for
any requested charge. There is no provision in this agreement that obligates AMEX to act on all
cardholder purchase requests within a specifically defined period of time. Yes. Although it took
AMEX some time before it approved Pantaleon‘s three charge requests, we find no evidence to
suggest that it acted with deliberate intent to cause Pantaleon any loss or injury, or acted in a
manner that was contrary to morals, good customs or public policy. We give credence to AMEX‘s
claim that its review procedure was done to ensure Pantaleon‘s own protection as a cardholder and
to prevent the possibility that the credit card was being fraudulently used by a third person. Yes.
The doctrine of volenti non fit injuria ("to which a person assents is not esteemed in law as injury")
refers to selfinflicted injury or to the consent to injury which precludes the recovery of damages by
one who has knowingly and voluntarily exposed himself to danger, even if he is not negligent in
doing so. When Pantaleon made up his mind to push through with his purchase, he must have
known that the group would become annoyed and irritated with him. This was the natural,
foreseeable consequence of his decision to make them all wait.
Lorenzo Shipping Corp vs. BJ Marthel International, Inc. Held: No. It was not included in the contract counter-offered by Lorenzo shipping after BJ sent a
quotation. Moreover, even if time is of the essence, BJ was not informed of the urgency of delivery.
Case about Non-requirement of Demand in Obligations which are time is of the essence but not BJ delivered within reasonable time.
communicated to the debtor. Oblicon Concept: No Demand or Notice Necessary

Facts: From 1987 up to the institution of this case, respondent supplied petitioner with spare parts
for the latter's marine engines. Sometime in 1989, petitioner asked respondent for a quotation for
various machine parts. Acceding to this request, respondent furnished petitioner with a formal
quotation. Petitioner thereafter issued to respondent Purchase Order, dated 02 November 1989,
for the procurement of one set of cylinder liner, valued at P477,000, to be used for M/V Dadiangas
Express. Instead of paying the 25% down payment for the first cylinder liner, petitioner issued in
favor of respondent ten postdated checks to be drawn against the former's account with Allied
Banking Corporation. The checks were supposed to represent the full payment of the
aforementioned cylinder liner. Subsequently, petitioner issued another purchase order dated 15
January 1990, for yet another unit of cylinder liner. Like the purchase order of 02 November 1989,
the second purchase order did not state the date of the cylinder liner's delivery. On 26 January
1990, respondent deposited petitioner's check that was postdated 18 January 1990, however, the
same was dishonored by the drawee bank due to insufficiency of funds. The remaining nine
postdated checks were eventually returned by respondent to petitioner. Respondent thereafter
placed the order for the two cylinder liners with its principal in Japan, Daiei Sangyo Co. Ltd., by
opening a letter of credit on 23 February 1990 under its own name with the First Interstate Bank of
Tokyo. On 20 April 1990, Pajarillo delivered the two cylinder liners at petitioner's warehouse in
North Harbor, Manila. The sales invoices evidencing the delivery of the cylinder liners both contain
the notation "subject to verification" under which the signature of Eric Go, petitioner's
warehouseman, appeared. Respondent thereafter sent a Statement of Account dated 15
November 1990 to petitioner. While the other items listed in said statement of account were fully paid
by petitioner, the two cylinder liners delivered to petitioner on 20 April 1990 remained unsettled.
Consequently, Mr. Alejandro Kanaan, Jr., respondent's vice-president, sent a demand letter dated 02
January 1991 to petitioner requiring the latter to pay the value of the cylinder liners subjects of this
case. Instead of heeding the demand of respondent for the full payment of the value of the cylinder
liners, petitioner sent the former a letter dated 12 March 1991 offering to pay only P150,000 for the
cylinder liners. In said letter, petitioner claimed that as the cylinder liners were delivered late and due
to the scrapping of the M/V Dadiangas Express, it (petitioner) would have to sell the cylinder liners in
Singapore and pay the balance from the proceeds of said sale. The trial court held respondent
bound to the quotation it submitted to petitioner particularly with respect to the terms of payment and
delivery of the cylinder liners.

Issues:

W/N time is of the essence in the delivery of the cylinder liner?

Solar Harvest, Inc vs. Davao Corrugated The Complaint only alleged that petitioner made a "follow-up" upon respondent, which, however,
would not qualify as a demand for the fulfillment of the obligation. Petitioner‘s witness also testified
Case about Rescission despite LACK of DEMAND that they made a follow-up of the boxes, but not a demand. Note is taken of the fact that, with respect
to their claim for reimbursement, the Complaint alleged and the witness testified that a demand letter
Oblicon Concept: Art. 1191. The power to rescind obligations is implied in reciprocal ones, in case
was sent to respondent. Without a previous demand for the fulfillment of the obligation, petitioner
one of the obligors should not comply with what is incumbent upon him. Art. 1169. Those obliged
would not have a cause of action for rescission against respondent as the latter would not yet be
to deliver or to do something incur in delay from the time the obligee judicially or extrajudicially
considered in breach of its contractual obligation. We also believe that the agreement between the
demands from them the fulfillment of their obligation.
parties was for petitioner to pick up the boxes from respondent‘s warehouse, contrary to petitioner‘s
Facts: In the first quarter of 1998, petitioner, Solar Harvest, Inc., entered into an agreement with allegation. Thus, it was due to petitioner‘s fault that the boxes were not delivered to TADECO. In
respondent, Davao Corrugated Carton Corporation, for the purchase of corrugated carton boxes, sum, the Court finds that petitioner failed to establish a cause of action for rescission, the evidence
specifically designed for petitioner‘s business of exporting fresh bananas, at US$1.10 each. The having shown that respondent did not commit any breach of its contractual obligation. As previously
agreement was not reduced into writing. To get the production underway, petitioner deposited, on stated, the subject boxes are still within respondent‘s premises. To put a rest to this dispute, we
March 31, 1998, US$40,150 in respondent‘s US Dollar Savings Account with Westmont Bank, as full therefore relieve respondent from the burden of having to keep the boxes within its premises and,
payment for the ordered boxes. Despite such payment, petitioner did not receive any boxes from consequently, give it the right to dispose of them, after petitioner is given a period of time within
respondent. On January 3, 2001, petitioner wrote a demand letter for reimbursement of the amount which to remove them from the premises.
paid. On February 19, 2001, respondent replied that the boxes had been completed as early as April
3, 1998 and that petitioner failed to pick them up from the former‘s warehouse 30 days from
completion, as agreed upon. Respondent mentioned that petitioner even placed an additional order
of 24,000 boxes, out of which, 14,000 had been manufactured without any advanced payment from
petitioner. Respondent then demanded petitioner to remove the boxes from the factory and to pay
the balance of US$15,400 for the additional boxes and P132,000 as storage fee. In its Answer with
Counterclaim, respondent insisted that, as early as April 3, 1998, it had already completed
production of the 36,500 boxes, contrary to petitioner‘s allegation. According to respondent,
petitioner, in fact, made an additional order of 24,000 boxes, out of which, 14,000 had been
completed without waiting for petitioner‘s payment. Respondent stated that petitioner was to pick up
the boxes at the factory as agreed upon, but petitioner failed to do so. Respondent averred that, on
October 8, 1998, petitioner‘s representative, Bobby Que (Que), went to the factory and saw that the
boxes were ready for pick up. On February 20, 1999, Que visited the factory again and supposedly
advised respondent to sell the boxes as rejects to recoup the cost of the unpaid 14,000 boxes,
because petitioner‘s transaction to ship bananas to China did not materialize. Respondent claimed
that the boxes were occupying warehouse space and that petitioner should be made to pay storage
fee at P60 per square meter for every month from April 1998. As counterclaim, respondent prayed
that judgment be rendered ordering petitioner to pay $15,400, plus interest, moral and exemplary
damages, attorney‘s fees, and costs of the suit.

Issue: W/N respondent has incurred legal delay in fulfilling its obligation. W/N petitioner has the
right of rescission to reimburse the money paid.

Held: Evident from the records and even from the allegations in the complaint was the lack of
demand by petitioner upon respondent to fulfill its obligation to manufacture and deliver the boxes.
Cathay Pacific vs. Vazquez

BREACH OF CONTRACTUAL OBLIGATION: NOVATION Case about Claim of Damages Only

Facts: Spouses Vazquez together with their 2 good friends and 1 maid went to Hong Kong. The
spouses are members of Cathay‘s Marco Polo Club. One of the benefits is the involuntary promotion
to better seats in flights. Maid will fly in Economy class while Vazquezes and 2 friends will fly in
Business Class. Upon check-in, the Vazquezes were informed that they were upgraded to First
Class. They refused but the airline insisted. There was a commotion but in the end, the Vazquezes
was succumbed because of the risk that they won‘t be allowed to board the aircraft. Upon arriving
in the Philippines, they filed a demand for apology and damages from the airline but the demand was
not acted upon so they filed the case with the RTC. RTC ruled in favor of Vazquezes by allowing
moral, exemplary, nominal damages and attorney‘s fees. CA also ruled in their favor but decreased
the amount of damages.

Issues: W/N by upgrading the seat accommodation of the Vazquezes from Business Class to First
Class Cathay breached its contract of carriage with the Vazquezes; W/N the upgrading was tainted
with fraud or bad faith; and W/N the Vazquezes are entitled to damages.

Held: Yes. However odd it might be, the Vazquezes had every right to decline the upgrade and
insist on the Business Class accommodation they had booked for and which was designated in their
boarding passes. They clearly waived their priority or preference when they asked that other
passengers be given the upgrade. It should not have been imposed on them over their vehement
objection. By insisting on the upgrade, Cathay breached its contract of carriage with the Vazquezes.
No. The Court finds no persuasive proof of fraud or bad faith in this case. The Vazquezes were not
induced to agree to the upgrading through insidious words or deceitful machination or through willful
concealment of material facts. It is clear from this section that an overbooking that does not exceed
ten percent is not considered deliberate and therefore does not amount to bad faith. Where in
breaching the contract of carriage the airline is not shown to have acted fraudulently or in bad faith,
liability for damages is limited to the natural and probable consequences of the breach of the
obligation which the parties had foreseen or could have reasonably foreseen. In such a case the
liability does not include moral and exemplary damages. And where the awards for moral and
exemplary damages are eliminated, so must the award for attorney‘s fees. There should be bad faith
for these to apply. The most that can be adjudged in favor of the Vazquezes for Cathay‘s breach of
contract is an award for nominal damages (P5,000) under Article 2221 of the Civil Code.
Meralco vs. Ramoy contractual, the mere proof of the existence of the contract and the failure of its compliance justify,
prima facie, a corresponding right of relief. The law, recognizing the obligatory force of contracts, will
SERVICE CONTRACT TO SUPPLY ELECTRICITY: CULPA CONTRACTUAL Case about Breach not permit a party to be set free from liability for any kind of misperformance of the contractual
of Contract undertaking or a contravention of the tenor thereof. o 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
Oblicon Concept: Article 1170. Those who in the performance of their obligations are guilty of
diligence required of it. To repeat, it was not enough for MERALCO to merely rely on the Decision of
fraud, negligence, or delay, and those who in any manner contravene the tenor thereof, are liable for
the MTC without ascertaining whether it had become final and executory. Yes to Moral Damages
damages. Expectation Interest - which is his interest in having the benefit of his bargain by being
since Ramoy testified in Court about his mental anguish. In the present case, MERALCO wilfully
put in as good a position as he would have been in had the contract been performed. Reliance
caused injury to Leoncio Ramoy by withholding from him and his tenants the supply of electricity to
Interest - which is his interest in being reimbursed for loss caused by reliance on the contract by
which they were entitled under the Service Contract. Electricity is a basic necessity the generation
being put in as good a position as he would have been in had the contract not been made.
and distribution of which is imbued with public interest, and its provider is a public utility subject to
Restitution Interest - which is his interest in having restored to him any benefit that he has conferred
strict regulation by the State in the exercise of police power. Failure to comply with these regulations
on the other party.
will give rise to the presumption of bad faith or abuse of right. o No to Exemplary Damages since
Facts: This is a Petition for Review on Certiorari on CA‘s decision of ordering petitioner Manila Article 2232 of the Civil Code provides that in contracts and quasi-contracts, the court may award
Electric Company (MERALCO) to pay Leoncio Ramoy moral and exemplary damages and attorney's exemplary damages if the defendant, in this case MERALCO, acted in a wanton, fraudulent,
fees. The evidence on record has established that in the year 1987 the National Power reckless, oppressive, or malevolent manner, while Article 2233 of the same Code provides that such
Corporation (NPC) filed with the MTC Quezon City a case for ejectment against several persons damages cannot be recovered as a matter of right and the adjudication of the same is within the
allegedly illegally occupying its properties in Baesa, Quezon City. Among the defendants in the discretion of the court o No to Attorney‘s Fees since the Court does not deem it proper to award
exemplary damages in this case, then the CA's award for attorney's fees should likewise be deleted,
ejectment case was Leoncio Ramoy, one of the plaintiffs in the case at bar. The MTC rendered
as Article 2208 of the Civil Code states that in the absence of stipulation, attorney's fees cannot be
judgment for the plaintiff [MERALCO] and "ordering the defendants to demolish or remove the
recovered except in cases provided for in said Article.
building and structures they built on the land of the plaintiff and to vacate the premises. On June
20, 1990 NPC wrote Meralco requesting for the immediate disconnection of electric power supply to
all residential and commercial establishments beneath the NPC transmission lines. Meralco
requested NPC for a joint survey to determine all the establishments which are considered under
NPC property in view of the fact that "the houses in the area are very close to each other. In due
time, the electric service connection of the plaintiffs [herein respondents] was disconnected. After the
electric power in Ramoy's apartment was cut off, the plaintiffs-lessees left the premises. During the
ocular inspection ordered by the Court and attended by the parties, it was found out that the
residence of plaintiffs-spouses Leoncio and Matilde Ramoy 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. However, the RTC ordered MERALCO to restore the
electric power supply of respondents.

Issues: W/N Meralco acted negligently when it disconnected the subject electric service of
respondents. W/N the CA gravely erred when it awarded moral and exemplary damages and
attorney‘s fees against Meralco under the circumstances that the latter acted in good faith in the
disconnection of the electric services of the respondents.

Held: Yes. MERALCO admits that respondents are its customers under a Service Contract
whereby it is obliged to supply respondents with electricity. Clearly, respondents' cause of action
against MERALCO is anchored on culpa contractual or breach of contract for the latter's
discontinuance of its service to respondents under Article 1170 of the Civil Code. In culpa

Tanguilig and JMT Engineering and General Merchandising vs. CA and Vicente Herce, Jr.
Case about Interpretation of Contracts and Fortuitious Event
Oblicon Concept: 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, four (4)
requisites must concur: o (a) the cause of the breach of the obligation must be independent of the
will of the debtor; o (b) the event must be either unforeseeable or unavoidable; o (c) the event must
be such as to render it impossible for the debtor to fulfill his obligation in a normal manner; and, o (d)
the debtor must be free from any participation in or aggravation of the injury to the creditor. 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. IF PETITIONER DOESN‘T WANT TO REPAIR IT.
a windmill, he would have used instead the conjunctions "and" or "with." Since the terms of the
instruments are clear and leave no doubt as to their meaning they should not be disturbed.
Yes. A strong wind in this case cannot be fortuitous — unforeseeable nor unavoidable. On the
contrary, a strong wind should be present in places where windmills are constructed, otherwise the
windmills will not turn. The appellate court correctly observed that "given the newly-constructed
windmill system, the same would not have collapsed had there been no inherent defect in it which
could only be attributable to the appellee." 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.

Facts: Sometime in April 1987 petitioner Jacinto M. Tanguilig doing business under the name and
style J.M.T. Engineering and General Merchandising proposed to respondent Vicente Herce Jr. to
construct a windmill system for him. After some negotiations they agreed on the construction of the
windmill for a consideration of P60,000 with a one-year guaranty from the date of completion and
acceptance by respondent Herce Jr. of the project. Pursuant to the agreement respondent paid
petitioner a down payment of P30,000 and an installment payment of P15,000, leaving a balance of
P15,000. On 14 March 1988, due to the refusal and failure of respondent to pay the balance,
petitioner filed a complaint to collect the amount. In his Answer before the trial court 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, 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 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.

Issues: W/N the agreement to construct the windmill system included the installation of a deep
well? W/N the petitioner is under obligation to reconstruct the windmill after it collapsed?

Held: No. The preponderance of evidence supports the finding of the trial court that the installation
of a deep well was not included in the proposals of petitioner to construct a windmill system for
respondent. 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. They merely describe the type of deep well
pump for which the proposed windmill would be suitable. As correctly pointed out by petitioner, the
words "deep well" preceded by the prepositions "for" and "suitable for" were meant only to convey
the idea that the proposed windmill would be appropriate for a deep well pump with a diameter of 2
to 3 inches. For if the real intent of petitioner was to include a deep well in the agreement to construct
 ISSUE: W/N RCBC as mortgagee, has any right over the insurance policies taken by GOYU, the
mortgagor, in case of the occurrence of loss

HELD: YES.

RCBC vs CA
FACTS:
● RCBC Binondo Branch initially granted a credit facility of P30M to Goyu & Sons, Inc.
GOYU’s applied again and through Binondo Branch key officer's Uy’s and Lao’s
recommendation, RCBC’s executive committee increased its credit facility to P50M to
P90M and finally to P117M.
o As security, GOYU executed 2 real estate mortgages and 2 chattel mortgages in
favor of RCBC.
o GOYU obtained in its name 10 insurance policy on the mortgaged properties
from Malayan Insurance Company, Inc. (MICO). In February 1992, he was
issued 8 insurance policies in favor of RCBC.
● April 27, 1992: One of GOYU’s factory buildings was burned so he claimed against MICO
for the loss who denied contending that the insurance policies were either attached
pursuant to writs of attachments/garnishments or that creditors are claiming to have a
better right
● GOYU filed a complaint for specific performance and damages at the RTC
● RCBC, one of GOYU’s creditors, also filed with MICO its formal claim over the proceeds of
the insurance policies, but said claims were also denied for the same reasons that MICO
denied GOYU’s claims
● RTC: Confirmed GOYU’s other creditors (Urban Bank, Alfredo Sebastian, and Philippine
Trust Company) obtained their writs of attachment covering an aggregate amount
of P14,938,080.23 and ordered that 10 insurance policies be deposited with the court
minus the said amount so MICO deposited P50,505,594.60.
● Another Garnishment of P8,696,838.75 was handed down
● RTC: favored GOYU against MICO for the claim, RCBC for damages and to pay RCBC its
loan
● CA: Modified by increasing the damages in favor of GOYU
● In G.R. No. 128834, RCBC seeks right to intervene in the action between Alfredo C.
Sebastian (the creditor) and GOYU (the debtor), where the subject insurance policies were
attached in favor of Sebastian
● RTC and CA: endorsements do not bear the signature of any officer of GOYU concluded
that the endorsements favoring RCBC as defective.
● mortgagor and a mortgagee have separate and distinct insurable interests in the same
mortgaged property, such that each one of them may insure the same property for his own
sole benefit
● although it appears that GOYU obtained the subject insurance policies naming itself as the
sole payee, the intentions of the parties as shown by their contemporaneous acts, must be
given due consideration in order to better serve the interest of justice and equity
o 8 endorsement documents were prepared by Alchester in favor of RCBC
o MICO, a sister company of RCBC
o GOYU continued to enjoy the benefits of the credit facilities extended to it by
RCBC.
▪ GOYU is at the very least estopped from assailing their operative
effects.
● The two courts below erred in failing to see that the promissory notes which they ruled
should be excluded for bearing dates which are after that of the fire, are mere renewals of
previous ones
● RCBC has the right to claim the insurance proceeds, in substitution of the property lost in
the fire. Having assigned its rights, GOYU lost its standing as the beneficiary of the said
insurance policies
● insurance company to be held liable for unreasonably delaying and withholding payment of
insurance proceeds, the delay must be wanton, oppressive, or malevolent - not shown
● Sebastian’s right as attaching creditor must yield to the preferential rights of RCBC over the
Malayan insurance policies as first mortgagee.
 As for any obligation wherein the agent has exceeded his power, the principal is not bound except
when he ratifies it expressly or tacitly.

● Subsequent reinstatement could not possibly absolve Prudential there being an obvious
breach of contract
Areola vs CA ● a contract of insurance creates reciprocal obligations for both insurer and insured
● Article 1191
Lessons Applicable: Binding Effect of Payment (Insurance) o choice between fulfillment or rescission of the obligation in case one of the
Laws Applicable: Art. 1910,Article 1191
obligors fails to comply with what is incumbent upon him
o entitles the injured party to payment of damages, regardless of whether he
FACTS: demands fulfillment or rescission of the obligation
● Nominal damages are "recoverable where a legal right is technically violated and must be
● December 17, 1984: Prudential Guarantee And Assurance, Inc. issued collector's vindicated against an invasion that has produced no actual present loss of any kind, or
provisional receipt amounting to P1,609.65 where there has been a breach of contract and no substantial injury or actual damages
● June 29, 1985: 7 months after the issuance of petitioner Santos Areola's Personal Accident whatsoever have been or can be shown
Insurance Policy, Prudential Guarantee And Assurance, Inc. unilaterally cancelled it for
failing to pay his premiums through its manager Teofilo M. Malapit
● Shocked by the cancellation of the policy, Santos approached Carlito Ang, agent of
Prudential and demanded the issuance of an official receipt. Ang told Santos that it was a
mistake and assured its rectification.
● July 15, 1985: Santos demanded the same terms and same rate increase as when he paid
the provincial receipt but Malapit insisted that the partial payment he made was exhausted
and that he should pay the balance or his policy will cease to operate
● July 25, 1985 : Assistant Vice-President Mariano M. Ampil III apologized
● August 6, 1985 had filed a complaint for breach of contract with damages before the lower
court
● August 13, 1985: Santos received through Carlito Ang the leeter of Assistant Vice-
President Mariano M. Ampil III finding error on their part since premiums were not
remitted Malapit, proposed to extend its lifetime to December 17, 1985
● RTC: favored Santos - Prudential in Bad Faith
● CA: Reversed - not motivated by negligence, malice or bad faith in cancelling subject policy

ISSUE: W/N the Areolas can file against damages despite the effort to rectify the cancellation

HELD: YES. RTC reinstated

● Malapit's fraudulent act of misappropriating the premiums paid is beyond doubt directly
imputable to Prudential
● Art. 1910. The principal must comply with all the obligations which the agent may have
contracted within the scope of his authority.

Juan F. Nakpil & Sons and United Construction Company, Inc. vs. CA
Case about Inability of Fortuitous Event Defense When The Defendants Acted with Wanton
Negligence.
Oblicon Concept:
if upon the happening of a fortuitous event or an act of God, there concurs a corresponding fraud,
negligence, delay or violation or contravention in any manner of the tenor of the obligation as
provided for in Article 1170 of the Civil Code, which results in loss or damage, the obligor cannot
escape liability.
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.
Facts:
The plaintiff, Philippine Bar Association, a civic-non-profit association, incorporated under the
Corporation Law, decided to construct an office building on its 840 square meters lot located at the
comer of Aduana and Arzobispo Streets, Intramuros, Manila. The construction was undertaken by
the United Construction, Inc. on an "administration" basis, on the suggestion of Juan J. Carlos, the
president and general manager of said corporation. The proposal was approved by plaintiff'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. The building was completed in June, 1966.
In the early morning of August 2, 1968 an unusually strong earthquake hit Manila 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. As a temporary remedial measure, the building was shored up by United
Construction, Inc. at the cost of P13,661.
On November 29, 1968, the plaintiff commenced this action for the recovery of damages arising
from the partial collapse of the building against United Construction, Inc. and its President and
General Manager Juan J. Carlos as defendants. Plaintiff alleges that the collapse of the building was
accused 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.
Defendants in turn filed a third-party complaint against the architects 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 the plaintiff Bar Association was
included as a third-party defendant for damages for having included Juan J. Carlos, President of the
United Construction Co., Inc. as party defendant.
Upon the issues being joined, a pre-trial was conducted on March 7, 1969, during which among
others, the parties agreed to refer the technical issues involved in the case to a Commissioner. Mr.
Andres O. Hizon, who was ultimately appointed by the trial court, assumed his office as
Commissioner, charged with the duty to try the technical issues.
After the protracted hearings, the Commissioner eventually submitted his report on September 25,
1970 with the findings that while the damage sustained by the PBA building was caused directly by
the August 2, 1968 earthquake whose magnitude was estimated at 7.3 they were also caused by the
defects in the plans and specifications prepared by the third-party defendants' architects, deviations
from said plans and specifications by the defendant contractors and failure of the latter to observe
the requisite workmanship in the construction of the building and of the contractors, architects and
even the owners to exercise the requisite degree of supervision in the construction of subject
building.
On May 11, 1978, 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. They
proposed to present a position paper on the liability of architects when a building collapses and to
submit likewise a critical analysis with computations on the divergent views on the design and plans
as submitted by the experts procured by the parties. The motion having been granted, the amicus
curiae were granted a period of 60 days within which to submit their position.
Issues:
W/N the petitioners can use the defense of fortuitous event (i.e., Earthquake) for the damage
incurred by the building they constructed and sold to Philippine Bar Association?
Held:
No. It is reasonable to conclude, therefore, that the proven defects, deficiencies and violations of
the plans and specifications of the PBA building contributed to the damages which resulted during
the earthquake of August 2, 1968 and the vice of these defects and deficiencies is that they not only
increase but also aggravate the weakness mentioned in the design of the structure. In other words,
these defects and deficiencies not only tend to add but also to multiply the effects of the
shortcomings in the design of the building. We may say, therefore, that the defects and deficiencies
in the construction contributed greatly to the damage which occurred.
Republic vs Luzon Stevedoring Corporation (GR No. L-21749, September 29, 1967)
Facts: A barge being towed by tugboats "Bangus" and "Barbero" all owned by Luzon Stevedoring
Corp. rammed one of the wooden piles of the Nagtahan Bailey Bridge due to the swollen current of
the Pasig after heavy rains days before. The Republic sued Luzon Stevedoring for actual and
consequential damages. Luzon Stevedoring claimed 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.

Issue: Whether or not 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.

Held: There is a presumption of negligence on part of the employees of Luzon Stevedoring, as the
Nagtahan Bridge is stationary. 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,
Civ. 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. Luzon
Stevedoring knew the perils posed by the swollen stream and its swift current, and voluntarily
entered into a situation involving obvious danger; it therefore assured the risk, and can not shed
responsibility merely because the precautions it adopted turned out to be insufficient. It is thus liable
for damages.

Far East Bank and Trust Company vs. Diaz
Case about personal check as legal tender when accepted by the creditor as deposit and
transferred it to another branch of the bank.
The steps done by the debtor showed that he is ready, willing and able to pay. The three requisites
are also present: (1) INTENT; (2) CAPABILITY; (3) POSITIVE AND CONDITIONAL ACT
Oblicon Concept:
For a valid tender of payment, it is necessary that there be a fusion of intent, ability and capability to
make good such offer, which must be absolute and must cover the amount due. Though a check is
not legal tender, and a creditor may validly refuse to accept it if tendered as payment, one who in fact
accepted a fully' funded check after the debtor's manifestation that it had been given to settle an
obligation is estopped from later on denouncing the efficacy of such tender of payment.
Tender of payment involves a positive and unconditional act by the obligor of offering legal tender
currency as payment to the obligee for the former's obligation and demanding that the latter accept
the same.
Facts:
1988, Diaz tendered to FEBTC the amount of P1,450,000.00 through an Interbank check, in order to
prevent the imposition of additional interests, penalties and surcharges on its loan; that FEBTC did
not accept it as payment; that instead, Diaz was asked to deposit the amount with the defendant's
Davao City Branch Office, allegedly pending the approval of Central Bank Liquidator Renan Santos;
that in the meantime, Diaz wrote the defendant, asking that the interest rate be reduced from 20% to
12% per annum, but no reply was ever made; that subsequently, the defendant told him to change
the P1,450,000 deposit into a money market placement, which he did; that the money market
placement expired on April 14, 1989; that when there was still no news from the defendant whether
or not it would accept his tender of payment, he filed this case at the Regional Trial Court of Davao
City.
The check was subsequently cleared and honored by Interbank, as shown by the Certification it
issued on January 20, 1992.
Issues:
W/N there is valid legal tender of payment?
Held:
Yes. True, jurisprudence holds that, in general, a check does not constitute legal tender, and that a
creditor may validly refuse it. It must be emphasized, however, that this dictum does not prevent a
creditor from accepting a check as payment. In other words, the creditor has the option and the
discretion of refusing or accepting it. In the present case, petitioner bank did not refuse respondent's
check. On the contrary, it accepted the check which, it insisted, was a deposit. As earlier stated, the
check proved to be fully funded and was in fact honored by the drawee bank. Moreover, FEBTC was
in possession of the money for several months. There must be a fusion of intent, ability and
capability to make good such offer, which must be absolute and must cover the amount due.

Sometime in August 1973, Diaz and Company got a loan from the former PaBC [Pacific Banking
Corporation] in the amount of P720,000, with interest at 12% per annum, later increased to 14%,
16%, 18% and 20%.
The loan was secured by a real estate mortgage over two parcels of land owned by the plaintiff
Diaz Realty, both located in Davao City.
In 1981, Allied Banking Corporation rented an office space in the building constructed on the
properties covered by the mortgage contract, with the conformity of mortgagee PaBC, whereby the
parties agreed that the monthly rentals shall be paid directly to the mortgagee for the lessor's
account, either to partly or fully pay off the aforesaid mortgage indebtedness.
Pursuant to such contract, Allied Bank paid the monthly rentals to PaBC instead of to the plaintiffs.
On July 5, 1985, the Central Bank closed PaBC, placed it under receivership, and appointed Renan
Santos as its liquidator.
Sometime in December 1986, appellant FEBTC purchased the credit of Diaz & Company in favor of
PaBC, but it was not until March 23, 1988 that Diaz was informed about it.
According to the plaintiff as alleged in the complaint and testified to by Antonio Diaz (President of
Diaz & Company and Vice-President of Diaz Realty), on March 23, 1988, he went to office of PaBC
which by then housed FEBTC and was told that the latter had acquired PaBC; that Cashier Ramon
Lim told him that as of such date, his loan was P1,447,142; that he (Diaz) asked the defendant to
make an accounting of the monthly rental payments made by Allied Bank; that on December 14,
 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.
Liable. Article 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, respondent FEU is liable to petitioner for damages. It is
Saludaga vs. FEU essential in the award of damages that the claimant must have satisfactorily proven during the trial
CONTRACT BETWEEN STUDENT AND SCHOOL the existence of the factual basis of the damages and its causal connection to defendant's acts.
Case about Breach of Contract Based on Negligence Medical expenses, temperate damages of P20,000, moral damages of P100,000 and attorney‘s fees
of P50,000. Exemplary damages deleted.
Facts: Not employee. We agree with the findings of the Court of Appeals that respondents cannot be held
Petitioner Joseph Saludaga was a sophomore law student of respondent Far Eastern University liable for damages under Art. 2180 of the Civil Code because respondents are not the employers of
(FEU) when he was shot by Alejandro Rosete (Rosete), one of the security guards on duty at the Rosete. The latter was employed by Galaxy. The instructions issued by respondents' Security
school premises on August 18, 1996. 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.
Petitioner thereafter filed a complaint for damages against respondents on the ground that they No. FEU did not examine Rosete‘s medical records. They just accepted whoever the agency
breached their obligation to provide students with a safe and secure environment and an atmosphere provided. For these acts of negligence and for having supplied respondent FEU with an unqualified
conducive to learning. Respondents, in turn, filed a Third-Party Complaint against Galaxy security guard, which resulted to the latter's breach of obligation to petitioner, it is proper to hold
Development and Management Corporation (Galaxy), the agency contracted by respondent FEU to Galaxy liable to respondent FEU for such damages equivalent to the above-mentioned amounts
provide security services within its premises and Mariano D. Imperial (Imperial), Galaxy's President, awarded to petitioner.
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.
RTC ruled in favor of Saludaga but CA reversed the decision.
Issues:
W/N the shooting incident is a fortuitous event;
W/N the respondents are not liable for damages for the injury resulting from a gunshot wound
suffered by the petitioner from the hands of no less than their own security guard in violation of their
built in contractual obligation to petitioner, being their law student at that time, to provide him with a
safe and secure educational environment;
W/N the security guard who shot petitioner while he was walking on his way to the law library of
respondent FEU is not their employee by virtue of the contract for security services between Galaxy
and FEU notwithstanding the fact that petitioner, not being a party to it, is not bound by the same
under the Principle of Relativity of Contracts; and
W/N the respondent exercised due diligence in selecting Galaxy as the agency which would provide
security services within the premises of respondent FEU.

Held:
No. Consequently, respondents' defense of force majeure must fail. 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

JIMMY CO, doing business under the name & style DRAGON METAL MANUFACTURING, Petitioner, vs.
COURT OF APPEALS and BROADWAY MOTOR SALES CORPORATION, Respondents.
DECISION
MARTINEZ, J.:
On July 18, 1990, petitioner entrusted his Nissan pick-up car 1988 model[1] 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. After petitioner paid in full the repair bill in the amount of P1,397.00,[3] private respondent issued to him a gate
pass for the release of the vehicle on said date. But came July 21, 1990, the latter could not release the vehicle as its battery
was weak and was not yet replaced. Left with no option, petitioner himself bought a new battery nearby and delivered it to
private respondent for installation on the same day. However, the battery was not installed and the delivery of the car was
rescheduled to July 24, 1990 or three (3) days later. When petitioner sought to reclaim his car in the afternoon of July 24,
1990, he was told that it was carnapped earlier that morning while being road-tested by private respondents employee along
Pedro Gil and Perez Streets in Paco, Manila. Private respondent said that the incident was reported to the police.
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 latters alleged negligence. For its part, private respondent contended that it has
no liability because the car was lost as a result of a fortuitous event - the carnapping. 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 consisting of four (4) brand new tires, magwheels, stereo
speaker, amplifier which amount all in all to P20,000.00. It is agreed that the vehicle was lost on July 24, 1990 `approximately
two (2) years and five (5) months from the date of the purchase. It was agreed that the plaintiff paid the defendant the cost of
service and repairs as early as July 21, 1990 in the amount of P1,397.00 which amount was received and duly receipted by
the defendant company. It was also agreed that the present value of a brand new vehicle of the same type at this time
is P425,000.00 without accessories.[4]
They 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.[5] 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 attorneys fees.[6] On appeal, the Court of Appeals (CA) reversed the ruling of the lower court
and ordered the dismissal of petitioners damage suit.[7] The CA ruled that: (1) the trial court was limited to resolving the issue
of negligence as agreed during pre-trial; hence it cannot pass on the issue of delay; and (2) the vehicle was lost due to a
fortuitous event.
In a petition for review to this Court, the principal query raised is whether a repair shop can be held liable for the loss of
a customers vehicle while the same is in its custody for repair or other job services?
The Court resolves the query in favor of the customer. First, on the technical aspect involved. Contrary to the CAs
pronouncement, the rule that the determination of issues at a pre-trial conference bars the consideration of other issues on
appeal, except those that may involve privilege or impeaching matter,[8] is inapplicable to this case. The question of delay,
though not specifically mentioned as an issue at the pre-trial may be tackled by the court considering that it is necessarily
intertwined and intimately connected with the principal issue agreed upon by the parties, i.e. who will bear the loss and
whether there was negligence. Petitioners imputation of negligence to private respondent is premised on delay which is the
very basis of the formers complaint. Thus, it was unavoidable for the court to resolve the case, particularly the question of
negligence without considering whether private respondent was guilty of delay in the performance of its obligation.
On the merits. It is a 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. The fact that a thing was unlawfully and forcefully taken from anothers rightful possession, as in cases of
carnapping, does not automatically give rise to a fortuitous event. To be considered as such, carnapping entails more than the
mere forceful taking of anothers 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.[9] 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[10]- which in this case is the private respondent. However, other than the police report of the alleged carnapping
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 established the carnapping. Neither
does it prove that there was no fault on the part of private respondent notwithstanding the parties agreement at the pre-trial
that the car was carnapped. Carnapping does not foreclose the possibility of fault or negligence on the part of private
respondent.
Even assuming arguendo that carnapping was duly established as a fortuitous event, still private respondent cannot
escape liability. Article 1165[11] of the New Civil Code makes an obligor who is guilty of delay responsible even for a fortuitous
event until he has effected the delivery. In this case, private respondent was already in delay as it was supposed to deliver
petitioners car three (3) days before it was lost. Petitioners agreement to the rescheduled delivery does not defeat his claim as
private respondent had already breached its obligation. Moreover, such accession cannot be construed as waiver of
petitioners right to hold private respondent liable because the car was unusable and thus, petitioner had no option but to leave
it.
Assuming further that there was no delay, still working against private respondent is the legal presumption under
Article 1265 that its possession of the thing at the time it was lost was due to its fault.[12] This presumption is reasonable since
he who has the custody and care of the thing can easily explain the circumstances of the loss. The vehicle owner has no duty
to show that the repair shop was at fault. All that petitioner needs to prove, as claimant, is the simple fact that private
respondent was in possession of the vehicle at the time it was lost. In this case, private respondents possession at the time of
the loss is undisputed. Consequently, the burden shifts to the possessor who needs to present controverting evidence
sufficient enough to overcome that presumption. Moreover, the exempting circumstances - earthquake, flood, storm or other
natural calamity - when the presumption of fault is not applicable[13] do not concur in this case. Accordingly, having failed to
rebut the presumption and since the case does not fall under the exceptions, private respondent is answerable for the loss.
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.[14] Carnapping 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)[15] 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.[16] Violation of this statutory duty
constitutes negligence per se.[17] Having taken custody of the vehicle, private respondent is obliged not only to repair the
vehicle but must also provide the customer with some form of security for his property over which he loses immediate control.
An owner who cannot exercise the seven (7) juses or attributes of ownership the right to possess, to use and enjoy, to abuse
or consume, to accessories, to dispose or alienate, to recover or vindicate and to the fruits -[18] is a crippled owner. Failure of
the repair shop to provide security to a motor vehicle owner would leave the latter at the mercy of the former. Moreover, on the
assumption that private respondents repair business is duly registered, it presupposes that its shop is covered by insurance
from which it may recover the loss. If private respondent can recover from its insurer, then it would be unjustly enriched if it will
not compensate petitioner to whom no fault can be attributed. Otherwise, if the shop is not registered, then the presumption of
negligence applies.
One last thing. With respect to the value of the lost vehicle and its accessories for which the repair shop is liable, it
should be based on the fair market value that the property would command at the time it was entrusted to it or such other
value as agreed upon by the parties subsequent to the loss. Such recoverable value is fair and reasonable considering that
the value of the vehicle depreciates. This value may be recovered without prejudice to such other damages that a claimant is
entitled under applicable laws.
WHEREFORE, premises considered, the decision of the Court Appeals is REVERSED and SET ASIDE and the
decision of the court a quo is REINSTATED.
SO ORDERED.
Regalado (Chairman), Melo, Puno and Mendoza, JJ. concur.
 In their second[22] Amended Answer,[23] petitioners admitted their indebtedness to Allied Bank but denied liability for the interests
and penalties charged, claiming to have paid the total sum of P65,073,055.73 by way of interest charges for the period
covering 1992 to 1997.[24] 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,
petitioners offered the sale of Metro Concast's remaining assets, consisting of machineries and equipment, 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.

Metro Concast Steel Corp. vs. Allied Bank Corp
G.R. No. 177921
PERLAS-BERNABE, J.:
Assailed in this petition for review on certiorari[1] are the Decision[2] dated February 12, 2007 and the Resolution[3] dated May
10, 2007 of the Court of Appeals (CA) in CA-G.R. CV No. 86896 which reversed and set aside the Decision[4] dated January
17, 2006 of the Regional Trial Court of Makati City, Branch 57 (RTC) in Civil Case No. 00-1563, thereby ordering petitioners
Metro Concast Steel Corporation (Metro Concast), Spouses Jose S. Dychiao and Tiu Oh Yan, Spouses Guillermo and
Mercedes Dychiao, and Spouses Vicente and Filomena Dychiao (individual petitioners) to solidarily pay respondent Allied
Bank Corporation (Allied Bank) the aggregate amount of P51,064,094.28, with applicable interests and penalty charges.
The Facts
On various dates and for different amounts, Metro Concast, a corporation duly organized and existing under and by virtue of
Philippine laws and engaged in the business of manufacturing steel,[5] through its officers, herein individual petitioners,
obtained several loans from Allied Bank. These loan transactions were covered by a promissory note and separate letters of
credit/trust receipts, the details of which are as follows:
Date Document Amount
In 2002, Peakstar Oil Corporation (Peakstar), represented by one Crisanta Camiling (Camiling), expressed interest in buying
the scrap metal. During the negotiations with Peakstar, petitioners claimed that Atty. Peter Saw (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[25] dated November 8, 2002 (MoA) was drawn between Metro Concast, represented by
petitioner Jose Dychiao, and Peakstar, through Camiling, under which Peakstar obligated itself to purchase the scrap metal for
a total consideration of P34,000,000.00, payable as follows: (a) P4,000,000.00 by way of earnest money P2,000,000.00 to be
paid in cash and the other P2,000,000.00 to be paid in two (2) post-dated checks of P1,000,000.00 each;[26] and (b) the
balance of P30,000,000.00 to be paid in ten (10) monthly installments of P3,000,000.00, secured by bank guarantees from
Bankwise, Inc. (Bankwise) in the form of separate post-dated checks.[27]
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 (Jose Dychiao)
testified[28] during trial that it was Atty. Saw himself who drafted the MoA and subsequently received[29] the P2,000,000.00 cash
and the two (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.[30]
Claiming that the subject complaint was falsely and maliciously filed, petitioners prayed for the award of moral damages in the
amount of P20,000,000.00 in favor of Metro Concast and at least P25,000,000.00 for each individual petitioner,
P25,000,000.00 as exemplary damages, P1,000,000.00 as attorney's fees, P500,000.00 for other litigation expenses,
including costs of suit.

December 13, 1996 Promissory Note No. 96-21301[6] P 2,000,000.00 The RTC Ruling
November 7, 1995 Trust Receipt No. 96-202365[7] P 608,603.04
May 13, 1996 Trust Receipt No. 96-960522[8] P 3,753,777.40 After trial on the merits, the RTC, in a Decision[31] dated January 17, 2006, dismissed the subject complaint, holding that the
May 24, 1996 Trust Receipt No. 96-960524[9] P 4,602,648.08 "causes of action sued upon had been paid or otherwise extinguished." It ruled that since Allied Bank was duly represented by
March 21, 1997 Trust Receipt No. 97-204724[10] P 7,289,757.79 its agent, Atty. Saw, in all the negotiations and transactions with Peakstar considering that Atty. Saw (a) drafted the MoA, (b)
June 7, 1996 Trust Receipt No. 96-203280[11] P17,340,360.73 accepted the bank guarantee issued by Bankwise, and (c) was apprised of developments regarding the sale and disposition of
July 26, 1995 Trust Receipt No. 95-201943 [12]
P 670,709.24 the scrap metal then it stands to reason that the MoA between Metro Concast and Peakstar was binding upon said bank.
August 31, 1995 Trust Receipt No. 95-202053[13] P 313,797.41
November 16, 1995 Trust Receipt No. 96-202439[14] P13,015,109.87
July 3, 1996 Trust Receipt No. 96-203552[15] P 401,608.89 The CA Ruling
June 20, 1995 Trust Receipt No. 95-201710[16] P 750,089.25
December 13, 1995 Trust Receipt No. 96-379089[17] P 92,919.00 Allied Bank appealed to the CA which, in a Decision[32] dated February 12, 2007, reversed and set aside the ruling of the RTC,
December 13, 1995 Trust Receipt No. 96/202581[18] P 224,713.58 ratiocinating that there was "no legal basis in fact and in law to declare that when Bankwise reneged its guarantee under the
The interest rate under Promissory Note No. 96-21301 was pegged at 15.25% per annum (p.a.), with penalty charge of 3% [MoA], herein [petitioners] should be deemed to be discharged from their obligations lawfully incurred in favor of [Allied
per month in case of default; while the twelve (12) trust receipts uniformly provided for an interest rate of 14% p.a. and 1% Bank]."[33] The CA examined the MoA executed between Metro Concast, as seller of the ferro scrap, and Peakstar, as the
penalty charge. By way of security, the individual petitioners executed several Continuing Guaranty/Comprehensive Surety buyer thereof, and found that the same did not indicate that Allied Bank intervened or was a party thereto. It also pointed out
Agreements[19] in favor of Allied Bank. the fact that the post-dated checks pursuant to the MoA were issued in favor of Jose Dychiao.

Petitioners failed to settle their obligations under the aforementioned promissory note and trust receipts, hence, Allied Bank, Likewise, the CA found no sufficient evidence on record showing that Atty. Saw was duly and legally authorized to act for and
through counsel, sent them demand letters,[20] all dated December 10, 1998, seeking payment of the total amount of on behalf of Allied Bank, opining that the RTC was "indulging in hypothesis and speculation"[34] when it made a contrary
P51,064,093.62, but to no avail. Thus, Allied Bank was prompted to file a complaint for collection of sum of money[21] (subject pronouncement. While Atty. Saw received the earnest money from Peakstar, the receipt was signed by him on behalf of Jose
complaint) against petitioners before the RTC, docketed as Civil Case No. 00-1563.
Dychiao.[35] It also added that "[i]n the final analysis, the aforesaid checks and receipts were signed by [Atty.] Saw either as
representative of [petitioners] or as partner of the latter's legal counsel, and not in anyway as representative of [Allied Bank]."[36]
Consequently, the CA granted the appeal and directed petitioners to solidarily pay Allied Bank their corresponding obligations
under the aforementioned promissory note and trust receipts, plus interests, penalty charges and attorney's fees.
Petitioners sought reconsideration[37] which was, however, denied in a Resolution[38] dated May 10, 2007. Hence, this petition.
impossible for petitioners to pay their loan obligations to Allied Bank and thus, negates the former's force majeure theory
altogether. In any case, as earlier stated, the performance or breach of the MoA bears no relation to the performance or
breach of the subject loan transactions, they being separate and distinct sources of obligation. 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[41] or, in any way, extinguished. In this regard, petitioners' liability, as adjudged by the CA,
must perforce stand. Considering, however, that Allied Bank's extra-judicial demand on petitioners appears to have been
made only on December 10, 1998, the computation of the applicable interests and penalty charges should be reckoned only
from such date.

The Issue Before the Court WHEREFORE, the petition is DENIED. The Decision dated February 12, 2007 and Resolution dated May 10, 2007 of the
Court of Appeals in CA-G.R. CV No. 86896 are hereby AFFIRMED with MODIFICATION reckoning the applicable interests
At the core of the present controversy is the sole issue of whether or not the loan obligations incurred by the petitioners under and penalty charges from the date of the extrajudicial demand or on December 10, 1998. The rest of the appellate court's
the subject promissory note and various trust receipts have already been extinguished. dispositions stand.

SO ORDERED.
The Court's Ruling

Article 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.

In the present case, petitioners essentially argue that their loan obligations to Allied Bank had already been extinguished due
to Peakstar's failure to perform its own obligations to Metro Concast pursuant to the MoA. Petitioners classify Peakstar's
default as a form of force majeure in the sense that they have, beyond their control, lost the funds they expected to have
received from the Peakstar (due to the MoA) which they would, in turn, use to pay their own loan obligations to Allied Bank.
They further state that Allied Bank was equally bound by Metro Concast's MoA with Peakstar since its agent, Atty. Saw,
actively represented it during the negotiations and execution of the said agreement.

Petitioners' arguments are untenable.

At the outset, the Court must dispel the notion that the MoA would have any relevance to the performance of petitioners'
obligations to Allied Bank. The MoA is a sale of assets contract, while petitioners' obligations to Allied Bank arose from various
loan transactions. Absent any showing that the terms and conditions of the latter transactions have been, in any way, modified
or novated by the terms and conditions in the MoA, said contracts should be treated separately and distinctly from each other,
such that the existence, performance or breach of one would not depend on the existence, performance or breach of the
other. In the foregoing respect, the issue on whether or not Allied Bank expressed its conformity to the assets sale transaction
between Metro Concast and Peakstar (as evidenced by the MoA) is actually irrelevant to the issues related to petitioners' loan
obligations to the bank. Besides, as the CA pointed out, the fact of Allied Bank's representation has not been proven in this
case and hence, cannot be deemed as a sustainable defense to exculpate petitioners from their loan obligations to Allied
Bank.

Now, 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:[39]

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.[40] (Emphases supplied)

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

MORELAND, J p:
FIRST DIVISION
[G.R. No. 7859. February 12, 1913.]
VICTORIA SEOANE, administratrix of The Intestate Estate of Eduardo
Fargas, plaintiff-appellee, vs. CATALINA FRANCO, administratrix and The
Intestate Estate of Manuel Franco, defendant-appellant.
Ramon Salimus for appellant.
Gibbs, McDonough & Blanco for appellee.
SYLLABUS
1. MORTGAGE REDEEMABLE AT THE WILL OF THE DEBTOR. — A mortgage was
executed on the 13th day of October, 1884, to secure the payment of the sum of P4,876.01, the
mortgagor agreeing to pay the sum "little by little." Held: That the obligation was payable at the will
of the debtor.
2. ID.; OBLIGATION NOT DUE UNTIL ACTION BROUGHT AND DATE FIXED BY
COURT. — 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.
3. ID.; ID.; PREMATURE ACTION; DISMISSAL. — An 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.
4. ID.; ID.; STATUTE OF LIMITATIONS. — 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.
DECISION
This is an appeal from a judgment of the Court of First Instance of Zamboanga 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.
The mortgage in question was executed on the 13th of October, 1884, to secure the
payment of the sum of P4,876.01, the mortgagor agreeing to pay the sum "little by little." The claim
appears to have been presented to the plaintiff's intestate on the 8th of August, 1911. Nothing has
been paid either of principal or of interest.
We are of the opinion that this case falls within the provisions of article 1128 of the Civil
Code, which reads as follows:
"1128. When the obligation does not fix a term, but it can be inferred
from its nature and circumstance that there was an intention of granting it to the
debtor, the courts shall fix the duration of such a term.
"The courts shall also fix the duration of a term when it may have been
left at the will of the debtor."
The obligation in question seems to leave the duration of the period for the payment
thereof to the will of the debtor. It appears also that it was the intention of the instrument to give
the debtor time within which to pay the obligation. In such cases this court has held, on several
occasions, that the obligation is not due and payable until an action has been commenced by the
mortgagee against the mortgagor for the purpose of having the court fix the date on and after
which the instrument shall be payable and the date of maturity is fixed in pursuance thereof. The
case of Eleizegui vs. The Manila Lawn Tennis Club (2 Phil. Rep., 309), in which the opinion was
written by the Chief Justice of the court, is the leading case upon the subject. In that case the
question was over the duration of a lease concerning "a piece of land for a fixed consideration and
to endure at the will of the lease." In discussing the question the court said (p. 310):
"With respect to the term of the lease the present question has arisen.
In its discussion three theories have been presented: One which makes the
duration depend upon the will of the lessor, who, upon one month's makes it
dependent upon the will of the leasee, as stipulated; and the third, in accordance
with which the right is reserved to the court to fix the duration of the term."
The clause on which the case turns is as follows (p. 312):
"Mr. Williamson, or whether may succeed him as secretary of the club,
may terminate this lease whenever desired without other formality than that of
giving a month's notice. The owners of the land undertake to maintain the club
as tenant as long as the latter shall see fit."
Considering the case the court said (p. 314):
"The Civil Code has made provision for such a case in all kinds of
obligations. In speaking in general of obligations with a term it has supplied the
deficiency of the former law with respect to the duration of the term when it has
been left to the will of the debtor,' and provides that in this case the term shall be
fixed by the courts. (Art. 1128, sec. 2.) In every contract, as laid down by the
 authorities, there is always a creditor who is entitled to demand the performance,
and a debtor upon whom rests the obligation to perform the undertaking. In
bilateral contracts the contracting parties are mutually creditors and debtors.
Thus, in this contract of lease, the lessee is the creditor with respect to the rights
enumerated in article 1554, and is the debtor with respect to the obligations
imposed by articles 1555 and 1561. The term within which performance of the
latter obligation is due is what has been left to the will of the debtor. This term it
is which must be fixed by the courts.
"The only action which can be maintained under the terms of the
contract is that by which it is sought to obtain from the judge the determination of
this period, and not the unlawful detainer action which has been brought — an
action which presupposes the expiration of the term and makes it the duty of the
judge to simply decree an eviction. To maintain the latter action it is sufficient to
show the expiration of the term of the contract, whether conventional or legal; in
order to decree the relief to be granted in the former action it is necessary for the
judge to look into the character and conditions of the mutual undertakings with a
view to supplying the lacking element of a time at which the lease is to expire."
The case of Barretto vs. The City of Manila (7 Phil. Rep., 416) dealt with a case where
the terms of a donation did not fix the time of the performance of the condition placed upon the
donation, and the court held that the period must be determined by the court in a proper action in
accordance with article 1128 of the Civil Code, saying (p. 420):
"The contract having fixed no period in which the condition should be
fulfilled, the provisions of article 1128 of the Civil Code are applicable and it is
the duty of the court to fix a suitable time for its fulfillment. Eleizegui vs. The
Manila Lawn Tennis Club , 2 Phil. Rep., 309." (11 Phil. Rep., 624. 1 )
In the case of Levy Hermanos vs. Paterno (18 Phil. Rep., 353) the court said (p. 355):
"The defendant having bound himself to pay his debt to the plaintiffs
in partial payments, as set forth in the note in question, it is seen that the
obligation is one of payment by installments, since its fulfillment cannot be
required immediately nor does its existence depend upon the happening of any
particular event. But, though the obligation is one of payment by installments,
nevertheless no fixed day was specified for its fulfillment, so that the period for
payment is undetermined or was not fixed by the parties when they executed the
contract. Besides, it is evident that the term for payment was granted for the
exclusive benefit of the defendant and for his own convenience, as by the
language of he document, the plaintiffs gained nothing by the fact that the debt
was not immediately demandable. Nor was any interest stipulated on the debt
during the time that it should remain unpaid by the defendant. For the foregoing
reasons, and in whatever manner this case be considered, it is unquestionable
that it falls within the provisions of article 1128 of the Civil Code. . . .
"The obligation being manifestly defective with regard to the duration
of the period granted to the debtor, that is, to the defendant, that defect which
shall determine the said duration, under the power expressly granted them for
such purpose by the legal provisions just above transcribed.
"The trial court, therefore, acted in the present case, by law in
exercising the said power in the present case, by fixing the duration of the period
on the basis that the payment of the debt should be made at the rate of P200 a
month; and we see no abuse of judicial discretion in fixing such a rate,
considering the importance of the obligation and the absence of any stipulation
of interest in favor of the creditors."
From these decisions it is clear that the instrument sued upon in the case at bar is one
which leaves the period of payment at the will of the mortgagor. Such being the case, as action
should have been brought for the purpose of having the court set a date on which the instrument
should become due and payable. Until such action was prosecuted no suit could be instrument. It
is, therefore, clear that this action is premature. The instrument has been sued upon before it is
due. The action must accordingly be dismissed.
Ordinarily when an action of this sort is dismissed the plaintiff may at once begin his
action for the purpose of fixing a date upon which the instrument shall become due. From the
undisputed facts in this case and from the facts and conditions that very probably cannot be
charged hereafter, it is our present opinion that such action is itself prescribed. Section 38 of the
Code of Civil Procedure reads follows:
"SEC. 38. To what this chapter does not apply. — This chapter shall
not apply to actions already commenced, or to cases wherein the right of action
has already accrued; but the statutes in force when the action or right of action
accrued shall be applicable to such cases according to the subject of the action
and without regard to the form; nor shall this chapter apply in the case of a
continuing and subsisting trust, nor to an action by the vendee of real property in
possession thereof to obtain the conveyance of it: Provided, nevertheless, That
all rights of action which have already accrued, except those named in the last
preceding paragraph, must be vindicated by the commencement of an action or
proceeding to enforce the same within ten years after this Act comes into effect."
This section evidently covers all rights of action of whatever kind or nature, except those
which have special limitations and re referred to in subsequent sections. A right of action to fix a
day for the determination of the time of payment is included within the terms of this section. The
mortgage in question having left the period of payment to the will of the mortgagor, an action could
have been maintained by the mortgagee at any time after its execution for the naming of a date on
which the instrument must be paid in full. That right of action accrued as soon as the instrument
was executed. Such action, therefore, falls within the provisions of section 38, and not having
been commenced within the ten years next following the 1st day of October, 1901, such action
cannot, under the facts as they now appear, be maintained.
While the expression of an opinion as to the prescription of the action to fix a date for
the maturity of the obligation in question is unnecessary for a complete resolution of the case
before us, still we do not hesitate to express that opinion for the reasons which we have heretofore
given in one or two other cases, particularly that of Lichauco vs. Limjuco (19 Phil. Rep., 12). That
case went off upon the finding of the court that the action could not be maintained by the plaintiff,
Lichauco, on behalf of his brothers and sisters and upon that finding the complaint was dismissed.
While the merits in that case were not necessarily before us, we nevertheless took up the facts as
they appeared and expressed our opinion of what the result of the case would be upon the merits
if its subsequently came before us upon the same facts. In that case we said (p. 17):
"We believe, however, that, for the information of the parties interested
in the subject matter of this action and to the end that unnecessary litigation may
be avoided, the opinion of the court should be given upon the facts presented in
this case. Knowing what our opinion is upon these facts it is probable that the
heirs will not care to pursue the litigation further unless, which is somewhat
unlikely, they are able to present new facts. We, therefore, proceed to a
consideration of the case upon the merits as presented by the record."
The judgment is affirmed, with cost against the appellant. So ordered.
Arellano, C.J., Torres, Mapa, and Trent, JJ., concur.
 2. No. In 1961, when the robbery in question did take place, for at that time criminality had not by far reached the levels attained
in the present day. The diligence that Abad portrayed when she went home before she was robbed was not a sign of
negligence on her part.

Austria vs. Court of Appeals

G.R. No. L-29640, June 10, 1971

FACTS:

On January 30, 1961, Maria G. Abad acknowledged that she received from Guillermo Austria one (1) pendant with diamonds
to be sold on a commission basis or to be returned on demand. However, on February 1, 1961, while walking home to her
residence, Abad was said to have been accosted by two men, one of whom hit her on the face, while the other snatched her
purse containing jewelry and cash, and ran away.

Since 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. On their
answer, the defendant spouses set up the defense that the alleged robbery had extinguished their obligation.

Austria v. Court of Appeals 31 SCRA 527, G.R. No. L-29640 (June 10, 1971) The trial court rendered judgment in favor for the plaintiff which is Austria. It held that defendant failed to prove the fact of
robbery, or, if indeed it was committed, the defendant was guilty of negligence. The defendants appealed to the Court of
Facts: Appeals and secured a reversal of judgment. It declared respondents not responsible for the loss of the jewelry on account of
fortuitous event, and relieved them from liability for damages to the owner. Hence, this case contending that for robbery to fall
under the category of fortuitous event and relieve the obligor form his obligation under a contract, there ought to be prior
judgment on the guilt of the persons responsible therefor.
1. Maria G. Abad received from Guillermo Austria one (1) pendant with diamonds to be sold on commission basis or to be
returned on demand.
2. Maria Abad while walking home, two men snatched her purse containing jewelry and cash, and ran away. ISSUE:
3. Thus, Abad failed to return the jewelry or pay its value notwithstanding demands.
4. Austria filed an action against Abad and Abad’s husband for recovery of the pendant or of its value, and damages.
Whether in a contract of agency (consignment of goods for sale) it is necessary that there be prior conviction for robbery
5. Abad raised the defense that the alleged robbery had extinguished their obligation.
before the loss of the article shall exempt the consignee from liability for such loss.

Issue/s:
RULING:

1. Whether or not in a contract of agency (consignment of good for sole) it is necessary that there be prior conviction for robbery NO, the law provides that except in case expressly specified by law, or when it is otherwise declared by stipulation, or when
before the loss of the article shall exempt the consignee from liability for such loss. the nature of the obligation require the assumption of risk, no person shall be responsible for those events which could not be
2. Whether or not Abad was negligent. foreseen, or which, though foreseen, were inevitable.

Ruling: It must be noted that to avail of the exemption granted in the law, it is not necessary that the persons responsible for the
occurrence should be punished; it would only be sufficient to establish that the enforceable 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.
1. No. To avail of the exemption granted in the law, it is not necessary that the persons responsible for the occurrence should be
found or punished, it would only be sufficient to establish that the enforceable event, the robbery in this case did take place
It must also be noted that a court finding that a robbery has happened would not necessarily mean that those accused in the
without any concurrence fault on the debtor’s part, and this can be done by preponderance of evidence.
criminal action should be found guilty of the crime; nor would be a ruling that those actually accused did not commit the
robbery be inconsistent with a finding that a robbery did take place. The evidence to establish these facts would not
A court finding that a robbery has happened would not necessary mean that those accused in the criminal action should be necessarily be the same.
found guilty of the crime; nor would a ruling that those actually accused did not commit the robbery be inconsistent with a
finding that a robbery did take place.

ROBERTO C. SICAM and AGENCIA de R.C. SICAM, INC. vs. SPOUSES JORGE
G.R. No. 159617, August 8, 2007
FACTS: On different dates, Lulu Jorge pawned several pieces of jewelry with Agencia de R. C.
Sicam located in Parañaque to secure a loan.
On October 19, 1987, two armed men entered the pawnshop and took away whatever cash and
jewelry were found inside the pawnshop vault.
On the same date, Sicam sent Lulu a letter informing her of the loss of her jewelry due to the robbery
incident in the pawnshop. Respondent Lulu then wroteback expressing disbelief, then requested
Sicam to prepare the pawned jewelry for withdrawal on November 6, but Sicam failed to return the
jewelry.
Lulu, joined by her husband Cesar, filed a complaint against Sicam with the RTC of Makati seeking
indemnification for the loss of pawned jewelry and payment of AD, MD and ED as well as AF.
The RTC rendered its Decision dismissing respondents’ complaint as well as petitioners’
counterclaim. Respondents appealed the RTC Decision to the CA which reversed the RTC, ordering
the appellees to pay appellants the actual value of the lost jewelry and AF. Petitioners MR denied,
hence the instant petition for review on Certiorari.
ISSUE: are the petitioners liable for the loss of the pawned articles in their possession? (Petitioners
insist that they are not liable since robbery is a fortuitous event and they are not negligent at all.)
HELD: The Decision of the CA is AFFIRMED.
YES
Article 1174 of the Civil Code provides:
Art. 1174. 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.
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.
Sicam had testified that there was a security guard in their pawnshop at the time of the robbery. He
likewise testified that when he started the pawnshop business in 1983, he thought of opening a vault
with the nearby bank for the purpose of safekeeping the valuables but was discouraged by the
Central Bank since pawned articles should only be stored in a vault inside the pawnshop. The very
measures which petitioners had allegedly adopted show that to them the possibility of robbery was
not only foreseeable, but actually foreseen and anticipated. Sicam’s testimony, in effect, contradicts
petitioners’ defense of fortuitous event.
Moreover, petitioners failed to show that they were free from any negligence by which the loss of the
pawned jewelry may have been occasioned.
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.
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. On the contrary, by the very
evidence of petitioners, the CA did not err in finding that petitioners are guilty of concurrent or
contributory negligence as provided in Article 1170 of the Civil Code, to wit:
Art. 1170. 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.
**
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 The robbery in this case happened in petitioners’ pawnshop and they were negligent in not
them shall be observed, and subsidiarily, the provisions on pledge, mortgage and antichresis. exercising the precautions justly demanded of a pawnshop.

The provision on pledge, particularly Article 2099 of the Civil Code, provides that the creditor shall NOTES:
take care of the thing pledged with the diligence of a good father of a family. This means that We, however, do not agree with the CA when it found petitioners negligent for not taking steps to
petitioners must take care of the pawns the way a prudent person would as to his own property. insure themselves against loss of the pawned jewelries.

In this connection, Article 1173 of the Civil Code further provides:
Art. 1173. The fault or negligence of the obligor consists in the omission of that diligence which is
required by the nature of the obligation and corresponds with the circumstances of the persons, of
time and of the place. When negligence shows bad faith, the provisions of Articles 1171 and 2201,
paragraph 2 shall apply.
If the law or contract does not state the diligence which is to be observed in the performance, that
which is expected of a good father of a family shall be required.
Under Section 17 of Central Bank Circular No. 374, Rules and Regulations for Pawnshops, which
took effect on July 13, 1973, and which was issued pursuant to Presidential Decree No. 114,
Pawnshop Regulation Act, it is provided that pawns pledged must be insured, to wit:
Sec. 17. Insurance of Office Building and Pawns- The place of business of a pawnshop and the
pawns pledged to it must be insured against fire and against burglary as well as for the latter(sic), by
an insurance company accredited by the Insurance Commissioner.
However, this Section was subsequently amended by CB Circular No. 764 which took effect on
October 1, 1980, to wit:

We expounded in Cruz v. Gangan that negligence is the omission to do something which a

reasonable man, guided by those considerations which ordinarily regulate the conduct of human Sec. 17 Insurance of Office Building and Pawns – The office building/premises and pawns of a
affairs, would do; or the doing of something which a prudent and reasonable man would not do. It is pawnshop must be insured against fire. (emphasis supplied).
want of care required by the circumstances. where the requirement that insurance against burglary was deleted. Obviously, the Central Bank
considered it not feasible to require insurance of pawned articles against burglary.

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 The robbery in the pawnshop happened in 1987, and considering the above-quoted amendment,
negligence in the operation of their pawnshop business. Sicam’s testimony revealed that there were there is no statutory duty imposed on petitioners to insure the pawned jewelry in which case it was
no security measures adopted by petitioners in the operation of the pawnshop. Evidently, no error for the CA to consider it as a factor in concluding that petitioners were negligent.
sufficient precaution and vigilance were adopted by petitioners to protect the pawnshop from
unlawful intrusion. There was no clear showing that there was any security guard at all. Or if there
was one, that he had sufficient training in securing a pawnshop. Further, there is no showing that the Nevertheless, the preponderance of evidence shows that petitioners failed to exercise the diligence
alleged security guard exercised all that was necessary to prevent any untoward incident or to required of them under the Civil Code.
ensure that no suspicious individuals were allowed to enter the premises. In fact, it is even doubtful
that there was a security guard, since it is quite impossible that he would not have noticed that the
robbers were armed with caliber .45 pistols each, which were allegedly poked at the employees.
Significantly, the alleged security guard was not presented at all to corroborate petitioner Sicam’s
claim; not one of petitioners’ employees who were present during the robbery incident testified in
court.

Furthermore, petitioner Sicam’s admission that the vault was open at the time of robbery is clearly a
proof of petitioners’ failure to observe the care, precaution and vigilance that the circumstances justly
demanded.
 The Yobido failed to rebut the testimony of Leny Tumboy that the bus was running so fast that she
cautioned the driver to slow down. These contradictory facts must, be resolved in favor of liability in
view of the presumption of negligence of the carrier in the law. Coupled with this is the established
condition of the road tough, winding and wet due to rain. It was incumbent upon the defense to
establish that it took precautionary measures considering partially dangerous condition of the road.

Yobido failed to discharge its duty to overthrow the presumption of negligence with clear and
convincing evidence.

Yobido- Petitioner-defendant vs. Court of appeals et al. – respondents

Ponente: Romero, J.,

Facts: On April 26 1988, spouses Tito and Leny Tumboy and their minor children boarded a Yobido
Liner bus. On their way, the left front tire of the bus exploded and the bus fell into a ravine which
resulted to the death of Tito and physical injuries of the other passengers. The wife ( Leny Tumboy
stated that the bus is running fast on a uncemented road while it is raining. On the other hand the
petitioner contended that the explosion of the tire was due to a fortuitous event and the tire is new at the
Yobido v. Court of Appeals 281 SCRA 1, G.R. No. 113003 (October 17, 1997) time of the accident. The trial court ruled in favor of the petitioner that the explosion was due to a
fortuitous event. The Court of Appeals ruled otherwise stating that the explosion is not fortuitous just
because the tire is a new Goodyear tire and such fact is not sufficient to discharge defendant’s burden.
Facts:

Issue: Is the explosion of the newly installed tire of passenger vehicle is a fortuitous event that exempts
1. Spouses Tito and Leny Tumboy and their minor children named Ardee and Jasmin boarded a Yobido the carrier from liability for the death of a passenger?
Liner bus.
2. The left front tire of the bus exploded.
3. The bus fell into a ravine which resulted in the death of 28-year old Tumboy and physical injuries to Held: No, the explosion of the newly installed tire is not a fortuitous event because the fact that the tire
other passengers. is new it does not imply that it was entirely free from manufacturers defect or that it was properly
mounted to the vehicle. Moreover, a common carrier may not be absolved from liability in case of force
Issue/s: majeure or fortuitous event. The common carrier must still prove that it was not negligent in causing the
death or injury resulting from an accident. Therefore the decision of the Court of Appeals is affirmed.
Characteristic of fortuitous event:
1. Whether or not the Yobido (bus-owner) be exempt from liability because the tire blowout was no more
than a fortuitous event that could not have foreseen. 1. The cause of the unforeseen and unexpected occurrence, or failure of the debtor to comply
with his obligations, must be independent of human will;
Ruling: 2. It must be impossible to foresee the event which constitute the caso fortuito, or if it is
foreseen it is 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;
1. No. Under the circumstances of the present case, the explosion of the new tire may not be considered a
4. The obligor must be free from any participation in aggravation of the injury resulting to the
fortuitous event. It is settled that an accident caused either by defects in the automobile or through the
creditor.
negligence of its driver is not a caso fortuito that would exempt the carrier from liability for damages.
Juntilla vs Fontanar Case Digest
A common carrier may not be absolved from liability in case of force majeure or fortuitous event alone. Juntilla vs Fontanar 
The common carrier must still prove that it was not negligent in causing the death or injury resulting
from an accident. (136 SCRA 624) 

In culpa contractual, once a passenger dies or injured, the carrier is presumed to have been at fault or to
have acted negligently. This presumption may only be overcome by evidence that the carrier had Facts: Herein plaintiff was a passenger of the public utility jeepney on course from Danao City to Cebu City. The jeepney was
observed extraordinary diligence. driven by driven by defendant Berfol Camoro and registered under the franchise of Clemente Fontanar. 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. Plaintiff suffered a lacerated wound on his right palm aside from the
injuries he suffered on his left arm, right thigh, and on his back.
Plaintiff filed a case for breach of contract with damages before the City Court of Cebu City. Defendants, in their answer,
alleged that the tire blow out was beyond their control, taking into account that the tire that exploded was newly bought and
was only slightly used at the time it blew up.
Issue: Whether or not the tire blow-out is a fortuitous event?
Held: No. 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 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 tines.
Torts And Damages Case Digest: Perla Compania De Seguros, Inc., Et Al. V. Sps. Gaudencio And
Primitiva Sarangaya (2005)
G.R. No. 147746 October 25, 2005
Lessons Applicable: Res Ipsa Loquitur (Torts and Damages)
FACTS:
▪ 1986: Spouses Gaudencio Sarangaya III and Primitiva Sarangaya erected Super A Building,
a semi-concrete, semi-narra, one-storey commercial building fronting the provincial road of
Santiago, Isabela
▪ It has three doors which were leased out
▪ The two-storey residence of the Sarangayas was behind the second and third doors of the
building
▪ On the left side of the commercial building stood the office of the Matsushita Electric Philippine
Corporation (Matsushita)
▪ 1988: Perla Compania de Seguros, Inc. through its branch manager Bienvenido Pascual,
entered into a contract of lease of the first door beside the Matsushita office
▪ It was converted into a two door so he had a garage where he parked a company car 1981
model 4-door Ford Cortina which he used to supervise different towns
▪ July 7, 1988: Pascual went to San Fernando, Pampanga leaving the car
▪ 3 days later: When he returned and warmed up the car, it made an odd sound. On the second
try, there was again an odd sound and a small flames came out of its engine so he was startled,
stopped the car, went out and pushed it out of the garage
▪ Soon, fire spewed out of its rear compartment and burned the whole garage where he was
trapped so he suffered burns in the face, legs and arms
▪ The spouses were busy atching TV when they heard 2 loud explosions, smelt of gasoline and
fire burned all their belongings
▪ city fire marshall investigated and concluded that the fire was accidental
▪ Spouses filed a complaint against Pascual for gross negligence and Perla for lacking the
required diligence in the selection and supervision of its employee.
▪ RTC: Pascual and Perla liable jointly and solidarily
▪ Pascual was held liable under the doctrine of res ipsa loquitur
▪ CA: affirmed but modified the amount of damages
ISSUE:
1. W/N the doctrine of res ipsa loquitur is applicable - YES
2. W/N Perla lacked the required diligence in the selection and supervision of its employee. - NO
HELD: DENIED
1. YES.
▪ Res ipsa loquitur
▪ 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
▪ facts of the occurrence warrant the supposition of negligence and they furnish circumstantial
evidence of negligence when direct evidence is lacking
▪ 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
▪ plaintiff relies on proof of the happening of the accident alone to establish negligence
▪ provides a means by which a plaintiff can pin liability on a defendant who, if innocent, should be
able to explain the care he exercised to prevent the incident complained of
▪ defendant’s responsibility to show that there was no negligence on his part
▪ Requisites of Res Ipsa Loquitur
▪ 1) the accident is of a kind which does not ordinarily occur unless someone is negligent
▪ “Ordinary” refers to the usual course of events
▪ Flames spewing out of a car engine, when it is switched on, is obviously not a normal event.
Neither does an explosion usually occur when a car engine is revved.
▪ Pascual, as the caretaker of the car, failed to submit any proof that he had it periodically
checked - negligence
▪ 2) the cause of the injury was under the exclusive control of the person in charge and
▪ 3) the injury suffered must not have been due to any voluntary action or contribution on the part
of the person injured.
▪ When there is caso fortuito:
▪ (a) the cause of the unforeseen and unexpected occurrence was independent of the human
will
▪ human agency must be entirely excluded as the proximate cause or contributory cause of the
injury or loss -Not because car not maintained
▪ (b) it was impossible to foresee the event which constituted the caso fortuito or, if it could be
foreseen, it was impossible to avoid - NOT under the control of pascual
▪ (c) the occurrence must be such as to render it impossible to perform an obligation in a normal
manner - Spouses had no access nor obligation for the maintenance
▪ (d) the person tasked to perform the obligation must not have participated in any course of
conduct that aggravated the accident
2. YES.
▪ Perla did not include any rule or regulation that Pascual should have observed in performing his
functions
▪ There was no guidelines for the maintenance and upkeep of company property like the vehicle
that caught fire
▪ Did not require periodic reports on or inventories of its properties
▪ Article 2180 of the Civil Code states that employers shall be liable for the damage caused by
their employees. The liability is imposed on all those who by their industry, profession or other
enterprise have other persons in their service or supervision
▪ Nowhere does it state that the liability is limited to employers in the transportation business.
Fil-Estate Properties, Inc. v. Go, 530 SCRA 624 (2007) Case Digest
Obligations and Contracts: Fortuitous Events – Article 1174
Facts:
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. The spouses paid a total of P3, 439,000.07 of the full contract price
set at P3, 620,000.00.
Fil-Estate failed to develop the condominium project. On August 4, 1999, the
spouses demanded the refund of the amount they paid, plus interest. When Fil-
Estate did not refund the spouses, the latter filed a complaint against petitioner for
reimbursement plus interest before the Housing and Land Use Regulatory Board
(HLURB). In answer, Fil-Estate claimed that respondents had no cause of action
since the delay in the construction of the condominium was caused by the financial
crisis that hit the Asian region, a fortuitous event over which petitioner had no
control.
HLURB Regional Director approved the decision of the Housing and Land Use
Arbiter in favor of the spouses Go. 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.
Fil-Estate explained that the extreme economic exigency and extraordinary
currency fluctuations could not have been reasonably foreseen and were beyond
the contemplation of both parties when they entered the contract. It further
asserted that the resultant economic collapse of the real estate industry was
unforeseen by the whole Asia and if it was indeed foreseeable, then all those
engaged in the real estate business should have foreseen the impending fiasco.
Issue:
Whether or not the Asian financial crisis could be considered a fortuitous event.
Held:
No. The Supreme Court held that the Asian financial crisis cannot be generalized
as unforeseeable and beyond the control of the business corporation. 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.
1. SSS vs. Moonwalk Devt. and Housing Corp., G.R. No. 73345, April 7, 1993)
2. RCBC vs. CA, G.R. No. 133107, March 25, 1999
3. Barzaga vs. CA, February 12, 1997
4. Pantaleon vs. American Express, May 8, 2009
5. Lorenzo Shipping Corp. vs. BJ Mathel International Nov. 19, 2004
6. Solar Harvest vs. Davao Corrugated Carlon Corp. July 26, 2010
7. Cathay Pacific Airways vs. Vazquez March 2003
8. Meralco vs. Ramoy, March 4, 2008
9. Areola vs. CA & Prudential Guarantee Insurance
10. Tanguiling vs. CA, January 2, 1997
11. Nakpil & Sons vs. CA, October 3, 1986
12. Republic vs. Luzon Stevedoring 21 SCRA 279

13. Far East Bank & Trust Co. vs. CA

14. Salugada vs. FEU April 30, 2008

15. Fil Estate Properties Inc. vs. Sps. Ronquillo G.R. No. 185798, January 13, 2014

16. Metro Concast Steel Corp. vs. Allied Bank Corp. G.R. No. 177921, Dec. 13, 2013

17. Sene vs. Franco, 24 Phil 309

18. Jimmy Co vs. CA, Broadway Motors Corp, June 22, 1998

19. Sicam vs. Jorge 529 SCRA 443

20. Austria vs. CA

21. Hernandez vs. Chairman, COA

22. Yobido vs. CA Oct. 17, 1997

23. Juntilla vs. Fontanar, May 31, 1985

24. Perla Compania de Seguros vs. Sarangay, 474 SCRA 191

25. Fil-Estate Properties vs. Go, 530 SCRA 621