G.R. No. 113003 October 17, 1997 ALBERTA YOBIDO and CRESENCIO YOBIDO, petitioners,
vs. COURT OF APPEALS, LENY TUMBOY, ARDEE TUMBOY and JASMIN TUMBOY, respondents.
ROMERO, J.:
In this petition for review on certiorari of of the decision of the Court of Appeals, the issue is whether or not the explosion of a newly installed tire of a passenger vehicle is a fortuitous event that exempts the carrier from liability for the death of a passenger. On April 26, 1988, spouses Tito and Leny Tumboy and their minor children named Ardee and Jasmin, bearded at Mangagoy, Surigao del Sur, a Yobido Liner bus bound for Davao City. Along Picop Road in Km. 17, Sta. Maria, Agusan del Sur, the left front tire of the bus exploded. The bus fell into a ravine around three (3) feet from the road and struck a tree. The incident resulted in the death of 28-year-old Tito Tumboy and physical injuries to other passengers. On November 21, 1988, a complaint for breach of contract of carriage, damages and attorney's fees was filed by Leny and her children against Alberta Yobido, the owner of the bus, and Cresencio Yobido, Yobido, its driver, before the Regional Trial Court of Davao City. When the defendants therein filed their answer to the complaint, they raised the affirmative defense of caso fortuito. They also filed a third-party complaint against Philippine Phoenix Surety and Insurance, Inc. This third-party defendant filed an answer with compulsory counterclaim. At the pre-trial conference, the parties agreed to a stipulation of facts. 1 Upon a finding that the third party defendant was not liable under the insurance contract, the lower court dismissed the third party complaint. No amicable settlement having been arrived at by the parties, trial on the merits ensued. The plaintiffs asserted that violation of the contract of carriage between them and the defendants was brought about by the driver's failure to exercise the diligence required of the carrier in transporting passenge passengers rs safely to their place of destination. According to Leny Tumboy, Tumboy, the bus left Mangagoy at 3:00 o'clock in the afternoon. The winding road it traversed was not cemented and was wet due to the rain; it was rough with crushed rocks. The bus which was full of passengers had cargoes on top. Since it was "running fast," she cautioned the driver to slow down but he merely stared at her through the mirror. At around 3:30 p.m., in Trento, she heard something explode and immediately, immediately, the bus fell into a ravine. For their part, the defendants tried to establish that the accident was due to a fortuitous event. Abundio Salce, Salce, who was the bus conductor conductor when the incident incident happened, happened, testified that the 42seater bus was not full as there were only 32 passengers, such that he himself managed to get a seat. He added that the bus was running at a speed of "60 to 50" and that it was going slow because of the zigzag road. He affirmed that the left front tire that exploded was a "brand new tire" that he mounted on the bus on April 21, 1988 or only five (5) days before the incident. The Yobido Liner secretary, Minerva Fernando, bought the new Goodyear tire from Davao Toyo Parts on April 20, 1988 and she was present when it was mounted on the bus by Salce. She stated that all driver applicants in Yobido Liner underwent actual driving tests before they were employed. Defendant Cresencio Yobido underwent such test and submitted his professional driver's license and clearances from the barangay, the fiscal and the police. decision 2 dismissing
On August 29, 1991, the lower court rendered a the action for lack of merit. On the issue of whether or not the tire blowout was a caso fortuito, it found that "the falling of the bus to the cliff was a result of no other outside factor than the tire blow-out." It held that the ruling in the La Mallorca and Pampanga Bus Co. v . De Jesus3 that a tire blowout is "a mechanical defect of the conveyance or a fault in its equipment which was easily discoverable if the bus had been subjected to a more thorough or rigid check-up before it took to the road that morning" is inapplicable to this case. It reasoned out that in said case, it was found that the blowout was caused by the established fact that the inner tube of the left front tire "was pressed between the inner circle of the left wheel and the rim which had slipped out of the wheel." In this case, however, however, "the cause of the explosion remains a mystery until at present." As such, the court
added, the tire blowout was "a caso fortuito which is completely an extraordinary circumstance circumstance independent independent of the will" of the defendants who should be relieved of "whatever liability the plaintiffs may have suffered by reason of the explosion pursuant to Article 1174 4 of the Civil Code." Dissatisfied, the plaintiffs appealed to the Court of Appeals. They ascribed to the lower court the following errors: (a) finding that the tire blowout was a caso fortuito; (b) failing to hold that the defendants did not exercise utmost and/or extraordinary diligence required of carriers under Article 1755 of the Civil Code, and and (c) deciding the the case contrary contrary to the ruling in Juntilla v . Fontanar ,5 and Necesito v . Paras.6 On August 23, 1993, the Court of Appeals rendered the Decision 7 reversing that of the lower court. It held that: To Our mind, the explosion of the tire is not in itself a fortuitous event. The cause of the blow-out, if due to a factory defect, improper mounting, excessive tire pressure, is not an unavoidable event. On the other hand, there may have been adverse conditions on the road that were unforeseeable and/or inevitable, which could make the blow-out a caso fortuito. The fact that the cause of the blow-out was not known does not relieve the carrier of liability. Owing to the statutory presumption of negligence against the carrier and its obligation to exercise the utmost diligence of very cautious persons to carry the passenger safely as far as human care and foresight can provide, it is the burden of the defendants to prove that the cause of the blow-out was a fortuitous event. It is not incumbent upon the plaintiff to prove that the cause of the blow-out is not caso-fortuito. Proving that the tire that exploded is a new Goodyear tire is not sufficient to discharge defendants' defendants' burden. As enunciated in Necesito vs. Paras, the passenger has neither choice nor control over the carrier in the selection and use of its equipment, and the good repute of the manufacturer will not necessarily relieve the carrier from liability. Moreover, Moreover, there is evidence that the bus was moving fast, and the road was wet and rough. The driver could have explained that the blow-out that precipitated the accident that caused the death of Toto Tumboy could not have been prevented even if he had exercised due care to avoid the same, but he was not presented as witness. The Court of Appeals thus disposed of the appeal as follows: WHEREFORE, the judgment of the court a quo is set aside and another one entered ordering defendants to pay plaintiffs the sum of P50,000.00 for the death of Tito Tumboy, P30,000.00 in moral damages, and P7,000.00 for funeral and burial expenses. SO ORDERED. The defendants filed a motion for reconsideration of said decision which was denied on November 4, 1993 by the Court of Appeals. Hence, the instant petition asserting the position that the tire blowout that caused the death of Tito Tumboy was a caso fortuito. Petitioners claim further that the Court of Appeals, in ruling contrary to that of the lower court, misapprehended misapprehended facts and, therefore, its findings of fact cannot be considered final which shall bind this Court. Hence, they pray that this Court review the facts of the case. The Court did re-examine the facts and evidence in this case because of the inapplicability of the established principle that the factual findings of the Court of Appeals are final and may not be reviewed on appeal by this Court. This general principle is subject to exceptions such as the one present in this case, namely, that the lower court and the Court of Appeals arrived at diverse factual findings. 8 However, upon such re-examination, we found no reason to overturn the findings and conclusions of the Court of Appeals. As a rule, when a passenger passenger boards a common common carrier, carrier, he takes the the risks incidental to to the mode of travel he has taken. After all, a carrier is not an insurer of the safety of its passengers and is not bound absolutely and at all events to carry them safely and without injury. 9 However, when a passenger is injured or dies while travelling, the law presumes that the common carrier is negligent. Thus, the Civil Code provides:
Art. 1756. In In case of death death or injuries to passengers, common common carriers are are presumed to have been at fault or to have acted negligently, unless they prove that they observed extraordinary diligence as prescribed in articles 1733 and 1755. Article 1755 provides provides that "(a) common common carrier is bound to carry carry the passengers passengers safely as far as as human care and foresight can provide, using the utmost diligence of very cautious persons, with a due regard for all the circumstances." Accordingly, Accordingly, in culpa contractual , once a passenger dies or is injured, the carrier is presumed to have been at fault or to have acted negligently. negligently. This disputable presumption presumption may only be overcome by evidence that the carrier had observed extraordinary diligence as prescribed by Articles 1733, 10 1755 and 1756 of the Civil Code or that the death or injury of the passenger was due to a fortuitous event. 11 Consequently, the court need not make an express finding of fault or negligence on the part of the carrier to hold it responsible for damages sought by the passenger. 12 In view of the foregoing, petitioners' petitioners' contention that they should be exempt from liability because the tire blowout was no more than a fortuitous event that could not have been foreseen, must fail. A fortuitous event is possessed of the following characteristics: (a) the cause of the unforeseen and unexpected unexpected occurrence, or the failure of the debtor to comply with his obligations, must be independent independent of human will; (b) it must be impossible to foresee the event which constitutes the caso fortuito, or if it can be foreseen, it must be impossible to avoid; (c) the occurrence must be such as to render it impossible for the debtor to fulfill his obligation in a normal manner; and (d) the obliger must be free from any participation in the aggravation of the injury resulting to the creditor.13 As Article 1174 provides, no person shall be responsible for a fortuitous event which could not be foreseen, or which, though foreseen, was inevitable. In other words, there must be an entire exclusion of human agency from the cause of injury or loss. 14 Under the circumstances of this case, the explosion of the new tire may not be considered a fortuitous event. There are human factors involved in the situation. The fact that the tire was new did not imply that it was entirely free from manufacturing defects or that it was properly mounted on the vehicle. Neither may the fact that the tire bought and used in the vehicle is of a brand name noted for quality, resulting in the conclusion that it could not explode within five days' use. Be that as it may, may, it is settled that an accident caused either by defects in the automobile or through the negligence of its driver is not a caso fortuito that would exempt the carrier from liability for damages. 15 Moreover, a common carrier may not be absolved from liability in case of force majeure or fortuitous event alone. The common carrier must still prove that it was not negligent negligent in causing the death or injury resulting from an accident.16 This Court has had occasion to state: While it may be true that the tire that blew-up was still good because the grooves of the tire were still visible, this fact alone does not make the explosion of the tire a fortuitous event. No evidence was presented to show that the accident was due to adverse road conditions or that precautions were taken by the jeepney driver to compensate compensate for any conditions liable to cause accidents. The sudden blowing-up, therefore, could have been caused by too much air pressure injected into the tire coupled by the fact that the jeepney was overloaded and speeding at the time of the accident.17 It is interesting to note that petitioners proved through the bus conductor, conductor, Salce, that the bus was running at "60-50" kilometers per hour only or within the prescribed lawful speed limit. However, they 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, therefore, be resolved in favor of liability in view of the presumption of negligence of the carrier i n the law. Coupled with this is the established condition of the road — rough, winding and wet due to the rain. It was incumbent upon the defense to establish that it took precautionary measures considering partially dangerous condition of the road. As stated above, proof that the tire was new and of good quality is not sufficient proof that it was not negligent. Petitioners should have shown that it undertook extraordinary extraordinary diligence in the care of its carrier, such as conducting daily routinary check-ups of the vehicle's parts. As the late Justice J.B.L. Reyes said: It may be impracticable, as appellee argues, to require of carriers to test the strength of each and every part of its vehicles before each trip; but we are of the opinion that a due regard for the carrier's obligations toward the traveling public demands adequate
periodical tests to determine the condition and strength of those vehicle portions the failure of which may endanger the safety of the passengers. 18 Having failed to discharge its duty to overthrow the presumption of negligence with clear and convincing evidence, petitioners are hereby held liable for damages. Article 1764 19 in relation to Article 220620 of the Civil Code prescribes the amount of at least three thousand pesos as damages for the death of a passenger. Under prevailing jurisprudence, the award of damages under Article 2206 has been increased to fifty thousand pesos (P50,000.00). 21 Moral damages are generally not recoverable in culpa contractual except except when bad faith had been proven. However, the same damages may be recovered when breach of contract of carriage results in the death of a passenger, passenger, 22 as in this case. Exemplary damages, awarded by way of example or correction for the public good when moral damages are awarded, 23 may likewise be recovered in contractual obligations if the defendant acted in wanton, fraudulent, reckless, oppressive, or malevolent manner. manner. 24 Because petitioners failed to exercise the extraordinary diligence required of a common carrier, which resulted in the death of Tito Tumboy, it is deemed to have acted r ecklessly. ecklessly. 25 As such, private respondents shall be entitled to exemplary damages. WHEREFORE, the Decision of the Court of Appeals is hereby AFFIRMED subject to the modification that petitioners shall, in addition to the monetary awards therein, be liable for the award of exemplary damages in the amount of P20,000.00. Costs against petitioners. SO ORDERED.
G.R. NO. 146224
January 26, 2007
VIRGINIA REAL, Petitioner,
vs. SISENANDO H. BELO, Respondent.
DECISION AUSTRIA-MARTINEZ, J .: .:
Before the Court is a petition for review on certiorari under Rule 45 of the Revised Rules of Court assailing the Resolution1 dated June 16, 2000 of the Court of Appeals (CA) which dismissed outright the petition for review of Virginia Real (petitioner) in CA-G.R. SP No. 58799, and the CA Resolution2 dated November 27, 2000 which denied her Motion for Reconsideration. The facts of the case: Petitioner owned and operated the Wasabe Wasabe Fastfood stall located at the Food Center of the Philippine Women's University (PWU) along Taft Avenue, Avenue, Malate, Manila. Sisenando H. Belo (respondent) owned and operated the BS Masters fastfood stall, also located at the Food Center of PWU. Around 7:00 o'clock in the morning of January January 25, 1996, 1996, a fire broke out at petitioner's petitioner's Wasabe Wasabe Fastfood stall. The fire spread and gutted other fastfood stalls in the area, including respondent's stall. An investigation on the cause of the fire by Fire Investigator SFO1 Arnel C. Pinca (Pinca) revealed that the fire broke out due to the leaking fumes coming from the Liquefied Petroleum Gas (LPG) stove and tank installed at petitioner's stall. For the loss of his fastfood stall due to the fire, respondent demanded demanded compensation from petitioner. However, petitioner refused to accede to respondent's demand. Hence, respondent filed a complaint for damages against petitioner before the Metropolitan Trial Court, Branch 24, Manila (MeTC), docketed as Civil Case No. 152822.3 Respondent alleged that petitioner failed to exercise due diligence in the upkeep and maintenance of her cooking equipments, as well as the selection and supervision of her employees; that petitioner's petitioner's negligence was the proximate cause of the fire that gutted the fastfood stalls. 4 In her Answer dated September 23, 1996, petitioner denied liability on the grounds that the fire was a fortuitous event and that she exercised due diligence in the selection and supervision of her employees.5
After trial, the MeTC rendered its Decision6 dated April 5, 1999 in favor of the respondent, the dispositive portion of which reads:
above decision of the Regional Trial Court and it is the latter decision that is the proper subject of the petition for review?
WHEREFORE, in light of the foregoing, judgment is hereby rendered in favor of the plaintiff and against the defendant ordering the latter:
3. Whether the submission of copies of the respective position papers of the contending parties is still an indispensable requirement in filing a petition for review before the Court of Appeals despite the fact that the contents thereof are already quoted in the body of the verified petition and in the subject judgment of the Metropolitan Trial Court?
1) To pay the plaintiff the sum of P50,000.00 representing temperate or moderate damages; and 2) To pay the plaintiff the sum of P25,000.00 as and for attorney's fees and litigation expenses. The counterclaim filed by the defendant is hereby DENIED FOR LACK OF MERIT. SO ORDERED.7 The MeTC held that the investigation conducted by the appropriate authority revealed that the fire broke out due to the leaking fumes coming from the LPG stove and tank installed at petitioner's fastfood stall; that factual circumstances circumstances did not show any sign of interference by any force of nature to infer that the fire occurred due to fortuitous event; that the petitioner failed to exercise due diligence, precaution, and vigilance in the conduct of her business, particularly, particularly, in maintaining the safety of her cooking equipment as well as in the selection and supervision of her employees; that even if petitioner passes the fault to her employees, Article Article 2180 of the Civil Code finds application; that in the absence of supporting evidence, the amount of actual damages and unrealized profits prayed for by respondent cannot be granted; that, nonetheless, respondent is entitled to temperate damages since respondent sustained pecuniary loss, though its true value cannot, from the very nature of the case, be proved with certainty. certainty. Dissatisfied, petitioner filed an appeal with the Regional Trial Court, Branch 43, Manila (RTC), docketed as Civil Case No. 99-94606, insisting that the fire was a fortuitous event. On November 26, 1999, the RTC affirmed the Decision of the MeTC but increased the amount of temperate damages awarded to the respondent from P50,000.00 to P80,000.00. 8 Petitioner filed a Motion for Reconsideration contending that the increase in the award of temperate damages damages is unreasonable since she also incurred losses from the fire. In its Order dated April 12, 2000, the RTC denied petitioner's Motion for Reconsideration Reconsideration holding that it cannot disregard evidence showing that the fire originated from petitioner's fastfood stall; that the increased amount of temperate damages awarded to respondent is not a full compensation compensation but only a fair approximate of what he lost due to the negligence of petitioner's workers.9 Petitioner then filed a Petition for Review with the CA, docketed as CA-G.R. SP No. 58799. 10 On June 16, 2000, the CA issued a Resolution dismissing the petition for being "procedurally flawed/ deficient."11 The CA held that the attached RTC Decision was not certified as a true copy by the Clerk of Court; that a certified true copy of the MeTC Decision was not attached; that material portions of the record, such as the position papers of the parties and affidavits of witnesses, as would support the material allegations of the petition were also not attached. 12 On July 14, 2000, petitioner filed her Motion for Reconsideration, Reconsideration, 13 attaching photocopies of the Decisions of the RTC and MeTC as certified correct by the Clerk of Court. 14 On November 27, 2000, the CA issued its Resolution denying petitioner's Motion for Reconsideration.15 Hence, the present petition raising the following issues:
4. Whether the herein petitioner could be held liable for damages as a result of the fire that razed not only her own food kiosk but also the adjacent foodstalls at the Food Center premises of the Philippine Women's University, University, including that of the respondent? 5. Whether the Regional Trial Court could increase the amount of damages awarded by the Metropolitan Trial Court in favor of the respondent who has not even filed an appeal therefrom? 16 Petitioner submits that rules of procedure should not be applied in a very harsh, inflexible and technically unreasonable sense. While admitting that the RTC Decision and Order were not certified by the Clerk of Court himself, petitioner insists that they were certified as authentic copies by Administrative Officer IV Gregorio B. Paraon of the RTC. As to the MeTC MeTC Decision, petitioner petitioner contends contends that the submission submission of a certified certified true copy copy thereof is not an indispensable requirement because that judgment is not the subject of the petition for review. In any case, petitioner submits that she had substantially complied with the requirements of the rule when she attached with her Motion for Reconsideration the copies of the Decisions of the RTC and MeTC as certified correct by the Clerk of Court. Anent the non-submission non-submission of the position papers of the the parties, petitioner petitioner maintains that the contents of said position papers were lengthily quoted verbatim in the petition and in the attached copy of the MeTC Decision. On the submission of affidavits of witnesses, petitioner contends that it was not necessary because the case before the MeTC was not covered by summary proceedings. On the merits of her petition before the CA, petitioner avers that she should not be held liable for a fire which was a fortuitous event since the fire could not be foreseen and the spread of the fire to the adjacent fastfood stalls was inevitable. Lastly, she argues that the RTC cannot increase the amount of temperate damages since the respondent did not appeal from the judgment of the MeTC. Respondent opted not to file a Comment, manifesting that the petition contains no new arguments which would require a comment since the arguments are but a rehash of those raised and decided by the lower courts. 17 The Court gave due course to the petition and required both parties to submit their respective memoranda. 18 In compliance therewith, petitioner submitted her Memorandum. Memorandum. 19 On the other hand, respondent filed a Manifestation stating that since no new issues have been raised by the petitioner in her petition and in order not to be redundant, he adopts as his memorandum the memoranda he filed in the MeTC and the RTC. 20
1. Whether the submitted certified true copy of the appealed decision of the Regional Trial Court as authenticated by a court employee other than the Clerk of Court who was not around at that time said copy was secured constitutes compliance with the Rules?
In his Memoranda before the MeTC and RTC, respondent emphasized the evidence he presented to establish his cause of action against petitioner, principally the testimony of Fire Investigator SFO1 Arnel G. Pinca stating that the fire originated from the LPG stove and tank in petitioner's fastfood stall.
2. Whether the submission of a certified true copy of the Metropolitan Trial Court's judgment is still an indispensable indispensable requirement requirement in filing a petition petition for review before before the Court of Appeals despite the fact that said judgment was already modified by the
The requirements as to form and content of a petition for review of a decision of the RTC are laid down in Section 2 of Rule 42 of the Revised Rules of Court, thus: Sec. 2. Form and contents. - The petition shall be filed in seven (7) legible copies, with the original copy intended for the court being indicated as such by the petitioner, and shall (a) state
the full names of the parties to the case, without impleading the lower courts or judges thereof either as petitioners or respondents; (b) indicate the specific material dates showing that it was filed on time; (c) set forth concisely a statement of the matters involved, the issues raised, the specification of errors of fact or law, or both, allegedly committed by the Regional Trial Court, and the reasons or arguments relied upon for the allowance of the appeal; (d) be accompanied by clearly legible duplicate originals or true copies of the judgments or final orders of both lower courts, certified correct by the clerk of court of the Regional Trial Court, the requisite number of plain copies thereof and of the pleadings and other material portions of the r ecord as would support the allegations of the petition. (Emphasis supplied) xxxx Under Section 3 of the same Rule, failure to comply with the above requirements "shall be sufficient ground for the dismissal thereof." However, Section 6, Rule 1 of the Revised Rules of Court also provides that rules shall be liberally construed in order to promote their objective of securing a just, speedy and inexpensive disposition of every action and proceeding. Indeed, rules of procedure should be used to promote, not frustrate justice. 21 In the present case, petitioner's submission of copies of the RTC Decision and Order certified as correct by the Administrative Officer IV of the RTC is insufficient compliance compliance with the requirements of the rule. Petitioner failed to show that the Clerk of Court was officially on l eave and the Administrative Officer was officially designated as officer-in-charge. The rule is explicit in its mandate that the legible duplicate originals or true copies of the judgments or final orders of both lower courts must be certified correct by the Clerk of Court. Nonetheless, a strict application of the rule in this case is not called for. This Court has ruled against the dismissal of appeals based solely on technicalities in several cases, especially when the appellant had substantially complied with the formal requirements. 22 There is ample jurisprudence holding holding that the the subsequent subsequent and substantial substantial compliance compliance of a party may may call for the relaxation of the rules of procedure. 23 When the CA dismisses a petition outright and the petitioner files a motion for the reconsideration of such dismissal, appending thereto the requisite pleadings, documents documents or order/resolution, order/resolution, this would constitute substantial compliance with the Revised Rules of Court. 24 Thus, in the present case, there was substantial compliance compliance when petitioner attached in her Motion for Reconsideration a photocopy of the Decision of the RTC as certified correct by the Clerk of Court of the RTC. In like manner, manner, there was substantial compliance when petitioner attached, in her Motion for Reconsideration, a photocopy of the Decision of the MeTC as certified correct by the Clerk of Court of the RTC. On the necessity of attaching position papers and affidavits of witnesses, Section 2 of Rule 42 of the Revised Rules of Court requires attachments if these would support the allegations of the petition.25 In the present case, there was no compelling need to attach the position papers of the parties since the Decisions of the MeTC and RTC already stated their respective arguments. As to the affidavits, the Court notes that they were presented by the respondent as part of the testimony of his witness Fire Investigator Pinca and therefore would not support the allegations of the petitioner. petitioner.
raised which can be resolved on the basis of the pleadings and documents filed, and the fact that petitioner herself has asked the Court to decide her petition on the merits, the Court deems it more practical and in the greater interest of justice not to remand the case to the CA but, instead, to resolve the controversy once and for all. 29 The Court shall now address the issue of whether the fire was a fortuitous event. Jurisprudence defines the elements elements of a "fortuitous event" as follows: (a) the cause of the unforeseen and unexpected unexpected occurrence must be independent of human will; (b) it must be impossible to foresee the event which constitutes the caso fortuito, or if it can be foreseen, it must be impossible to avoid; (c) the occurrence must be such as to render it impossible for the debtor to fulfill his obligation in a normal manner; and (d) the obligor must be free from any participation in the aggravation of the injury resulting to the creditor. 30 Article 1174 1174 of the Civil Code provides that that no person shall be responsible responsible for a fortuitous fortuitous event which could not be foreseen, or which, though foreseen, was inevitable. In other words, there must be an entire exclusion of human agency from the cause of injury or loss. 31 It is established by evidence that the fire originated from leaking fumes from the LPG stove and tank installed at petitioner's fastfood stall and her employees failed to prevent the fire from spreading and destroying the other fastfood stalls, including respondent's fastfood stall. Such circumstances do not support petitioner's theory of fortuitous event. Petitioner's bare allegation is far from sufficient proof for the Court to rule in her favor. It is basic in the rule of evidence that bare allegations, unsubstantiated unsubstantiated by evidence, are not equivalent to proof.32 In short, mere allegations are not evidence. 33 The Civil Code provides: Art. 2176. Whoever Whoever by act or omission causes causes damage to another, another, there being fault or negligence, is obliged to pay for the damage done. x x x Art. 2180. The obligation imposed by Article 2176 is demandable demandable not not only for one's one's own acts or omissions, but also for those of persons for whom one is responsible. xxxx The owners and managers of an establishment or enterprise are likewise responsible for damages caused by their employees in the service of the branches in which the latter are employed or on the occasion of their functions. Employers shall be liable for the damages caused by their employees and household helpers helpers acting within the scope of their assigned tasks, even though the former are not engaged in any business or industry. xxxx The responsibility treated of in this article shall cease when the persons herein mentioned prove that they observed all the diligence of a good father of a family to prevent damage.
Truly, in dismissing the petition for review, the CA had committed grave abuse of discretion amounting to lack of jurisdiction in putting a premium on technicalities at the expense of a just resolution of the case.
Whenever an employee's negligence causes damage or injury to another, another, there instantly arises a presumption juris tantum that the employer failed to exercise diligentissimi patris families in the selection (culpa in eligiendo) or supervision (culpa in vigilando) of its employees.34 To avoid liability for a quasi-delict committed by his employee, an employer must overcome the presumption by presenting convincing convincing proof that he exercised the care and diligence of a good father of a family in the selection and supervision of his employee. 35
The Court's pronouncement in Republic of the Philippines v. Court of Appeals 26 is worth echoing: "cases should be determined on the merits, after full opportunity to all parties for ventilation of their causes and defenses, rather than on technicality or some procedural imperfections. In that way, the ends of justice would be better served." 27 Thus, what should guide judicial action is that a party litigant is given the fullest opportunity to establish the merits of his action or defense rather than for him to lose life, honor or property on mere technicalities. 28
In this case, petitioner not only failed to show that she submitted proof that the LPG stove and tank in her fastfood stall were maintained in good condition and periodically checked for defects but she also failed to submit proof that she exercised the diligence of a good father of a family in the selection and supervision of her employees. For failing to prove care and diligence in the maintenance of her cooking equipment and in the selection and supervision of her employees, the necessary inference was that petitioner had been negligent. 36
The next most logical step would then be for the Court to simply set aside the challenged resolutions, remand the case to the CA and direct the latter to resolve on the merits of the petition in CA-G.R. SP No. 58799. But, that would further delay the case. Considering the issues
As to the award award of temperate temperate damages, damages, the increase in the amount amount thereof by the RTC is improper. improper. The RTC could no longer examine the amounts awarded by the MeTC since respondent did not appeal from the Decision of the MeTC. 37 It is well-settled that a party who
does not appeal from the decision may not obtain any affirmative relief from the appellate court other than what he has obtained from the lower court, if any, whose decision is brought up on appeal. 38 While there are exceptions to this rule, such as if they involve (1) errors affecting the lower court's jurisdiction over the subject matter, (2) plain errors not specified, and (3) clerical errors,39 none apply here. WHEREFORE, the petition is GRANTED. The assailed Resolutions dated June 16, 2000 and November 27, 2000 of the Court of Appeals are REVERSED and SET ASIDE. The Decision dated November 26, 1999 of the Regional Trial Court, Branch 43, Manila is AFFIRMED with MODIFICATION that the temperate damages awarded is reduced from P80,000.00 to P50,000.00 as awarded by the Metropolitan Trial Court, Branch 24, Manila in its Decision dated April 5, 1999. No costs.SO ORDERED. G.R. No. 185798
January 13, 2014
FIL-ESTATE PROPERTIES, INC. AND FIL-ESTATE NETWORK INC., Petitioners,
vs. SPOUSES CONRADO AND MARIA VICTORIA RONQUILLO, Respondents.
DECISION PEREZ, J.:
Before the Court is a petition for review on certiorari under Rule 45 of the 1997 Rules .of Civil Procedure assailing the Decision1 of the Court of Appeals in CA-G.R. SP No. 100450 which affirmed the Decision of the Office of the President in O.P. Case No. 06-F-216. As culled from the records, the facts are as follow: Petitioner Fil-Estate Properties, Inc. is the owner and developer of the Central Park Place Tower while co-petitioner Fil-Estate Network, Inc. is its authorized marketing agent. Respondent Spouses Conrado and Maria Victoria Ronquillo purchased from petitioners an 82-square meter condominium unit at Central Park Place Tower in Mandaluyong City for a pre-selling contract price of FIVE MILLION ONE HUNDRED SEVENTY-FOUR THOUSAND ONLY (!5,174,000.00). On 29 August 1997, respondents executed and signed a Reservation Application Agreement wherein they deposited !200,000.00 as reservation fee. As agreed upon, respondents paid the full downpayment of !1,552,200.00 and had been paying the !63,363.33 monthly amortizations until September 1998. Upon learning that construction works had stopped, respondents likewise stopped paying their monthly amortization. Claiming to have paid a total of !2,198,949.96 to petitioners, respondents through two (2) successive letters, demanded a full refund of their payment with interest. When their demands went unheeded, respondents were constrained to file a Complaint for Refund and Damages before the Housing and Land Use Regulatory Board (HLURB). Respondents prayed for reimbursement/refund of !2,198,949.96 representing the total amortization payments, !200,000.00 as and by way of moral damages, attorney’s fees and other litigation expenses. On 21 October 2000, the HLURB issued an Order of Default against petitioners for failing to file their Answer within the reglementary period despite service of summons. 2 Petitioners filed a motion to lift order of default and attached their position paper attributing the delay in construction to the 1997 Asian financial crisis. Petitioners denied committing fraud or misrepresentation which could entitle respondents to an award of moral damages. On 13 June 2002, the HLURB, through Arbiter Atty. Joselito F. Melchor, rendered judgment ordering petitioners to jointly and severally pay respondents the following amount: a) The amount of TWO MILLION ONE HUNDRED NINETY-EIGHT THOUSAND NINE HUNDRED FORTY NINE PESOS & 96/100 ( !2,198,949.96) with interest thereon at twelve percent (12%) per annum to be computed from the time of the complainants’ demand for refund on October 08, 1998 until fully paid, b) ONE HUNDRED THOUSAND PESOS (!100,000.00) as moral damages, c) FIFTY THOUSAND PESOS (!50,000.00) as attorney’s fees, d) The costs of suit, and
e) An administrative fine of TEN THOUSAND PESOS ( !10,000.00) payable to this Office fifteen (15) days upon receipt of this decision, for violation of Section 20 in relation to Section 38 of PD 957. 3 The Arbiter considered petitioners’ failure to develop the condominium project as a substantial breach of their obligation which entitles respondents to seek for rescission with payment of damages. The Arbiter also stated that mere economic hardship is not an excuse for contractual and legal delay. Petitioners appealed the Arbiter’s Decision through a petition for review pursuant to Rule XII of the 1996 Rules of Procedure of HLURB. On 17 February 2005, the Board of Commissioners of the HLURB denied4 the petition and affirmed the Arbiter’s Decision. The HLURB reiterated that the depreciation of the peso as a result of the Asian financial crisis is not a fortuitous event which will exempt petitioners from the performance of their contractual obligation. Petitioners filed a motion for reconsideration but it was denied5 on 8 May 2006. Thereafter, petitioners filed a Notice of Appeal with the Office of the President. On 18 April 2007, petitioners’ appeal was dismissed6 by the Office of the President for lack of merit. Petitioners moved for a reconsideration but their motion was denied 7 on 26 July 2007. Petitioners sought relief from the Court of Appeals through a petition for review under Rule 43 containing the same arguments they raised before the HLURB and the Office of the President: I. THE HONORABLE OFFICE OF THE PRESIDENT ERRED IN AFFIRMING THE DECISION OF THE HONORABLE HOUSING AND LAND USE REGULATORY BOARD AND ORDERING PETITIONERS-APPELLANTS TO REFUND RESPONDENTS-APPELLEES THE SUM OF !2,198,949.96 WITH 12% INTEREST FROM 8 OCTOBER 1998 UNTIL FULLY PAID, CONSIDERING THAT THE COMPLAINT STATES NO CAUSE OF ACTION AGAINST PETITIONERS-APPELLANTS. II. THE HONORABLE OFFICE OF THE PRESIDENT ERRED IN AFFIRMING THE DECISION OF THE OFFICE BELOW ORDERING PETITIONERS-APPELLANTS TO PAY RESPONDENTS APPELLEES THE SUM OF !100,000.00 AS MORAL DAMAGES AND !50,000.00 AS ATTORNEY’S FEES CONSIDERING THE ABSENCE OF ANY FACTUAL OR LEGAL BASIS THEREFOR. III. THE HONORABLE OFFICE OF THE PRESIDENT ERRED IN AFFIRMING THE DECISION OF THE HOUSING AND LAND USE REGULATORY BOARD ORDERING PETITIONERS APPELLANTS TO PAY !10,000.00 AS ADMINISTRATIVE FINE IN THE ABSENCE OF ANY FACTUAL OR LEGAL BASIS TO SUPPORT SUCH FINDING. 8 On 30 July 2008, the Court of Appeals denied the petition for review for lack of merit. The appellate court echoed the HLURB Arbiter’s ruling that "a buyer for a condominium/subdivision unit/lot unit which has not been developed in accordance with the approved condominium/ subdivision plan within the time limit for complying with said developmental requirement may opt for reimbursement under Section 20 in relation to Section 23 of Presidential Decree (P.D.) 957 x x x."9 The appellate court supported the HLURB Arbiter’s conclusion, which was affirmed by the HLURB Board of Commission and the Office of the President, that petitioners’ failure to develop the condominium project is tantamount to a substantial breach which warrants a refund of the total amount paid, including interest. The appellate court pointed out that petitioners failed to prove that the Asian financial crisis constitutes a fortuitous event which could excuse them from the performance of their contractual and statutory obligations. The appellate court also affirmed the award of moral damages in light of petitioners’ unjustified refusal to satisfy respondents’ claim and the legality of the administrative fine, as provided in Section 20 of Presidential Decree No. 957. Petitioners sought reconsideration but it was denied in a Resolution 10 dated 11 December 2008 by the Court of Appeals.
Aggrieved, petitioners filed the instant petition advancing substantially the same grounds for review: A. THE HONORABLE COURT OF APPEALS ERRED WHEN IT AFFIRMED IN TOTO THE DECISION OF THE OFFICE OF THE PRESIDENT WHICH SUSTAINED RESCISSION AND REFUND IN FAVOR OF THE RESPONDENTS DESPITE LACK OF CAUSE OF ACTION. B. GRANTING FOR THE SAKE OF ARGUMENT THAT THE PETITIONERS ARE LIABLE UNDER THE PREMISES, THE HONORABLE COURT OF APPEALS ERRED WHEN IT AFFIRMED THE HUGE AMOUNT OF INTEREST OF TWELVE PERCENT (12%). C. THE HONORABLE COURT OF APPEALS LIKEWISE ERRED WHEN IT AFFIRMED IN TOTO THE DECISION OF THE OFFICE OF THE PRESIDENT INCLUDING THE PAYMENT OF !100,000.00 AS MORAL DAMAGES, !50,000.00 AS ATTORNEY’S FEES AND !10,000.00 AS ADMINISTRATIVE FINE IN THE ABSENCE OF ANY FACTUAL OR LEGAL BASIS TO SUPPORT SUCH CONCLUSIONS.11 Petitioners insist that the complaint states no cause of action because they allegedly have not committed any act of misrepresentation amounting to bad faith which could entitle respondents to a refund. Petitioners claim that there was a mere delay in the completion of the project and that they only resorted to "suspension and reformatting as a testament to their commitment to their buyers." Petitioners attribute the delay to the 1997 Asian financial crisis that befell the real estate industry. Invoking Article 1174 of the New Civil Code, petitioners maintain that they cannot be held liable for a fortuitous event. Petitioners contest the payment of a huge amount of interest on account of suspension of development on a project. They liken their situation to a bank which this Court, in Overseas Bank v. Court of Appeals, 12 adjudged as not liable to pay interest on deposits during the period that its operations are ordered suspended by the Monetary Board of the Central Bank. Lastly, petitioners aver that they should not be ordered to pay moral damages because they never intended to cause delay, and again blamed the Asian economic crisis as the direct, proximate and only cause of their failure to complete the project. Petitioners submit that moral damages should not be awarded unless so stipulated except under the instances enumerated in Article 2208 of the New Civil Code. Lastly, petitioners refuse to pay the administrative fine because the delay in the project was caused not by their own deceptive intent to defraud their buyers, but due to unforeseen circumstances beyond their control. Three issues are presented for our resolution: 1) whether or not the Asian financial crisis constitute a fortuitous event which would justify delay by petitioners in the performance of their contractual obligation; 2) assuming that petitioners are liable, whether or not 12% interest was correctly imposed on the judgment award, and 3) whether the award of moral damages, attorney’s fees and administrative fine was proper. It is apparent that these issues were r epeatedly raised by petitioners in all the legal fora. The rulings were consistent that first, the Asian financial crisis is not a fortuitous event that would excuse petitioners from performing their contractual obligation; second, as a result of the breach committed by petitioners, respondents are entitled to rescind the contract and to be refunded the amount of amortizations paid including interest and damages; and third, petitioners are likewise obligated to pay attorney’s fees and the administrative fine. This petition did not present any justification for us to deviate from the rulings of the HLURB, the Office of the President and the Court of Appeals.
The injured party may choose between the fulfillment and the rescission of the obligation, with payment of damages in either case. He may also seek rescission, even after he has chosen fulfillment, if the latter should become impossible. More in point is Section 23 of Presidential Decree No. 957, the rule governing the sale of condominiums, which provides: Section 23. Non-Forfeiture of Payments. 1âwphi1 No installment payment made by a buyer in a subdivision or condominium project for the lot or unit he contracted to buy shall be forfeited in favor of the owner or developer when the buyer, after due notice to the owner or developer, desists from further payment due to the failure of the owner or developer to develop the subdivision or condominium project according to the approved plans and within the time limit for complying with the same. Such buyer may, at his option, be reimbursed the total amount paid including amortization interests but excluding delinquency interests, with interest thereon at the legal rate. (Emphasis supplied). Conformably with these provisions of law, respondents are entitled to rescind the contract and demand reimbursement for the payments they had made to petitioners. Notably, the issues had already been settled by the Court in the case of Fil-Estate Properties, Inc. v. Spouses Go 13promulgated on 17 August 2007, where the Court stated that the Asian financial crisis is not an instance of caso fortuito. Bearing the same factual milieu as the instant case, G.R. No. 165164 involves the same company, Fil-Estate, albeit about a different condominium property. The company likewise reneged on its obligation to respondents therein by failing to develop the condominium project despite substantial payment of the contract price. Fil-Estate advanced the same argument that the 1997 Asian financial crisis i s a fortuitous event which justifies the delay of the construction project. First off, the Court classified the issue as a question of fact which may not be raised in a petition for review considering that there was no variance in the factual findings of the HLURB, the Office of the President and the Court of Appeals. Second, the Court cited the previous rulings of Asian Construction and Development Corporation v. Philippine Commercial International Bank 14 and Mondragon Leisure and Resorts Corporation v. Court of Appeals 15 holding that the 1997 Asian financial crisis did not constitute a valid justification to renege on obligations. The Court expounded: Also, we cannot generalize that the Asian financial crisis in 1997 was unforeseeable and beyond the control of a business corporation. It is unfortunate that petitioner apparently met with considerable difficulty e.g. increase cost of materials and labor, even before the scheduled commencement of its real estate project as early as 1995. However, a real estate enterprise engaged in the pre-selling of condominium units is concededly a master in projections on commodities and currency movements and business risks. The fluctuating movement of the Philippine peso in the foreign exchange market is an everyday occurrence, and fluctuations in currency exchange rates happen everyday, thus, not an instance of caso fortuito. 16 The aforementioned decision becomes a precedent to future cases in which the facts are substantially the same, as in this case. The principle of stare decisis, which means adherence to judicial precedents, applies. In said case, the Court ordered the refund of the total amortizations paid by respondents plus 6% legal interest computed from the date of demand. The Court also awarded attorney’s fees. We follow that ruling in the case before us. The resulting modification of the award of legal interest is, also, in line with our recent ruling in Nacar v. Gallery Frames,17 embodying the amendment introduced by the Bangko Sentral ng Pilipinas Monetary Board in BSP-MB Circular No. 799 which pegged the interest rate at 6% regardless of the source of obligation.
Indeed, the non-performance of petitioners’ obligation entitles respondents to rescission under Article 1191 of the New Civil Code which states:
We likewise affirm the award of attorney’s fees because respondents were forced to litigate for 14 years and incur expenses to protect their rights and interest by reason of the unjustified act on the part of petitioners. 18 The imposition of !10,000.00 administrative fine is correct pursuant to Section 38 of Presidential Decree No. 957 which reads:
Article 1191. The power to rescind obligations is implied in reciprocal ones, in case one of the obligors should not comply with what is incumbent upon him.
Section 38. Administrative Fines. The Authority may prescribe and impose fines not exceeding ten thousand pesos for violations of the provisions of this Decree or of any rule or regulation
thereunder. Fines shall be payable to the Authority and enforceable through writs of execution in accordance with the provisions of the Rules of Court. Finally, we sustain the award of moral damages. In order that moral damages may be awarded in breach of contract cases, the defendant must have acted in bad faith, must be found guilty of gross negligence amounting to bad faith, or must have acted in wanton disregard of contractual obligations.19 The Arbiter found petitioners to have acted in bad faith when they breached their contract, when they failed to address respondents’ grievances and when they adamantly refused to refund respondents' payment. In fine, we find no reversible error on the merits in the impugned Court of Appeals' Decision and Resolution. WHEREFORE, the petition is PARTLY GRANTED. The appealed Decision is AFFIRMED with the MODIFICATION that the legal interest to be paid is SIX PERCENT (6%) on the amount due computed from the time of respondents' demand for refund on 8 October 1998.
Assailed in this petition for review on certiorari1 are the Decision2 dated February 12, 2007 and the Resolution3dated 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, 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 Duchiao (individual petitioners) to solidarily pay respondent Allied Bank Corporation (Allied Bank) the aggregate amount of !51,064,094.28, 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:
SO ORDERED. Date December 13, 1996
!608,603.04
Tr ust Rec ei pt No.
96- 9605 22 8
!3,753,777.40
Tr ust Rec ei pt No.
96- 9605 24 9
!4,602,648.08
March 21, 1997
Trust Receipt No.
97-204724 10
!7,289,757.79
J une 7, 199 6
Tr ust R ec ei pt N o. 9 6- 2032 80 11
!17,340,360.73
J ul y 26 , 19 95
Tr ust Rec ei pt No. 95- 2019 43 12
!670,709.24
August 31, 1995
Trust Receipt No. 95-202053 13
!313,797.41
November 16, 1995
Trust Receipt No. 96-202439 14
!13,015,109.87
July 3, 1996
Trust Receipt No. 96-203552 15
!401,608.89
June 20, 1995
Trust Receipt No. 95-201710 16
!750,089.25
December 13, 1995
Trust Receipt No. 96-379089 17
!92,919.00
December 13, 1995
Trust Receipt No. 96/202581 18
!224,713.58
Ma y 2 4, 1996
METRO CONCAST STEEL CORPORATION, SPOUSES JOSE S. DYCHIAO AND TIUOH YAN, SPOUSES GUILLERMO AND MERCEDES DYCHIAO, AND SPOUSES VICENTE AND FILOMENA DYCHIAO, Petitioners,
vs. ALLIED BANK CORPORATION, Respondent.
RESOLUTION PERLAS-BERNABE, J.:
!2,000,000.00
Trust Receipt No.
Ma y 1 3, 1996
December 4, 2013
Promissory Note No.
Amount 96-213016
96-202365 7
November 7, 1995
G.R. No. 177921
Document
The interest rate under Promissory Note No. 96-21301 was pegged at 15.25% per annum (p.a.), with penalty charge of 3% per month in case of default; while the twelve (12) trust receipts uniformly provided for an interest rate of 14% p.a. and 1% penalty charge. By way of security, the individual petitioners executed several Continuing Guaranty/Comprehensive Surety Agreements19 in favor of Allied Bank. Petitioners failed to settle their obligations under the aforementioned promissory note and trust receipts, hence, Allied Bank, through counsel, sent them demand letters, 20 all dated December 10, 1998, seeking payment of the total amount of !51,064,093.62, but to no avail. Thus, Allied Bank was prompted to file a complaint for collection of sum of money 21 (subject complaint) against petitioners before the RTC, docketed as Civil Case No. 00-1563. In their second 22 Amended Answer, 23petitioners admitted their indebtedness to Allied Bank but denied liability for the interests and penalties charged, claiming to have paid the total sum of !65,073,055.73 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. 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 !34,000,000.00, payable as follows: (a) !4,000,000.00 by way of earnest money – !2,000,000.00 to be paid in cash and the other !2,000,000.00 to be paid in two (2) post-dated checks of !1,000,000.00 each; 26 and (b) the balance of !30,000,000.00 to be paid in ten (10) monthly installments of !3,000,000.00, 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. 1âwphi1 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) testified28 during trial that it was Atty. Saw himself who drafted the MoA and subsequently received29 the !2,000,000.00 cash and the two (2) Bankwise post-dated checks worth !1,000,000.00 each from Camiling. However, Atty. Saw turned over only the two (2) checks and !1,500,000.00 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 !20,000,000.00 in favor of Metro Concast and at least !25,000,000.00 for each individual petitioner, !25,000,000.00 as exemplary damages, !1,000,000.00 as attorney’s fees, !500,000.00 for other litigation expenses, including costs of suit. The RTC Ruling After trial on the merits, the RTC, in a Decision31 dated January 17, 2006, dismissed the subject complaint, holding that the "causes of action sued upon had been paid or otherwise extinguished." It ruled that since Allied Bank was duly r epresented by its agent, Atty. Saw, in all the negotiations and transactions with Peakstar – considering that Atty. Saw (a) drafted the MoA, (b) accepted the bank guarantee issued by Bankwise, and (c) was apprised of developments regarding the sale and disposition of the scrap metal – then it stands to reason that the MoA between Metro Concast and Peakstar was binding upon said bank. The CA Ruling Allied Bank appealed to the CA which, in a Decision32 dated February 12, 2007, reversed and set aside the ruling of the RTC, ratiocinating that there was "no legal basis in fact and in law to declare that when Bankwise reneged its guarantee under the [MoA], herein [petitioners] should be deemed to be discharged from their obligations lawfully incurred in favor of [Allied Bank]." 33 The CA examined the MoA executed between Metro Concast, as seller of the ferro scrap, and Peakstar, as the buyer thereof, and found that the same did not indicate that Allied Bank
intervened or was a party thereto. It also pointed out the fact that the post-dated checks pursuant to the MoA were issued in favor of Jose Dychiao. Likewise, the CA found no sufficient evidence on record showing that Atty. Saw was duly and legally authorized to act for and on behalf of Allied Bank, opining that the RTC was "indulging in hypothesis and speculation" 34 when it made a contrary pronouncement. While Atty. Saw received the earnest money from Peakstar, the receipt was signed by him on behalf of Jose 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 Resolution38 dated May 10, 2007. Hence, this petition. The Issue Before the Court At the core of the present controversy is the sole issue of whether or not the loan obligations incurred by the petitioners under the subject promissory note and various trust receipts have already been extinguished. 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. 1âwphi1 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 unforseen by petitioners, the same us clearly not "impossible"to foresee or even an event which is independent of human will." Neither has it been shown that said occurrence rendered it impossible for petitioners to pay their loan obligations to Allied Bank and thus, negates the former’s force majeure theory altogether. 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 obligations. 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. 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 and penalty charges from the date of the extrajudicial demand or on December 10, 1998. The rest of the appellate court’s dispositions stand. SO ORDERED.
Leighton R. Liazon for petitioner.
only the private respondent who insisted on being given priority in the accommodation; that pieces of checked-in baggage and had carried items of the Ozamiz City passengers were removed from the aircraft; that the reason for their pilot's inability to land at Ozamis City airport was because the runway was wet due to rains thus posing a threat to the safety of both passengers and aircraft; and, that such reason of force majeure was a valid justification for the pilot to bypass Ozamiz City and proceed directly to Cotabato City.
Balmes L. Ocampo for private respondent.
On 4 June 1981, the trial court rendered its decision
G.R. No. L-82619 September 15, 1993 PHILIPPINE AIRLINES, INC., petitioner,
vs. COURT OF APPEALS and PEDRO ZAPATOS, respondents.
BELLOSILLO, J.:
This petition for review in certiorari seeks to annul and set aside the decision of the then Intermediate Appellant Court,1 now Court of Appeals, dated 28 February 1985, in AC-G.R. CV No. 69327 ("Pedro Zapatos v. Philippine Airlines, Inc.") affirming the decision of the then Court of first Instance, now Regional Trial Court, declaring Philippine Airlines, Inc., liable in damages for breach of contract. On 25 November 1976, private respondent filed a complaint for damages for breach of contract of carriage2 against Philippine Airlines, Inc. (PAL), before the then Court of First Instance, now Regional Trial Court, of Misamis Occidental, at Ozamiz City. According to him, on 2 August 1976, he was among the twenty-one (21) passengers of PAL Flight 477 that took off from Cebu bound for Ozamiz City. The routing of this flight was Cebu-Ozamiz-Cotabato. While on flight and just about fifteen (15) minutes before landing at Ozamiz City, the pilot received a radio message that the airport was closed due to heavy rains and inclement weather and that he should proceed to Cotabato City instead. Upon arrival at Cotabato City, the PAL Station Agent informed the passengers of their options to return to Cebu on flight 560 of the same day and thence to Ozamiz City on 4 August 1975, or take the next flight to Cebu the following day, or remain at Cotabato and take the next available flight to Ozamiz City on 5 August 1975.3 The Station Agent likewise informed them that Flight 560 bound for Manila would make a stop-over at Cebu to bring some of the diverted passengers; that there were only six (6) seats available as there were already confirmed passengers for Manila; and, that the basis for priority would be the check-in sequence at Cebu. Private respondent chose to return to Cebu but was not accommodated because he checked-in as passenger No. 9 on Flight 477. He insisted on being given priority over the confirmed passengers in the accommodation, but the Station Agent refused private respondent's demand explaining that the latter's predicament was not due to PAL's own doing but to be a force majeure.4 Private respondent tried to stop the departure of Flight 560 as his personal belongings, including a package containing a camera which a certain Miwa from Japan asked him to deliver to Mrs. Fe Obid of Gingoog City, were still on board. His plea fell on deaf ears. PAL then issued to private respondent a free ticket to Iligan city, which the latter received under protest. 5 Private respondent was left at the airport and could not even hitch a ride in the Ford Fiera loaded with PAL personnel.6 PAL neither provided private respondent with transportation from the airport to the city proper nor food and accommodation for his stay in Cotabato City. The following day, private respondent purchased a PAL ticket to Iligan City. He informed PAL personnel that he would not use the free ticket because he was filing a case against PAL. 7 In Iligan City, private respondent hired a car from the airport to Kolambugan, Lanao del Norte, reaching Ozamiz City by crossing the bay in a launch. 8 His personal effects including the camera, which were valued at P2,000.00 were no longer recovered. On 13 January 1977, PAL filed its answer denying that it unjustifiably refused to accommodate private respondent. 9It alleged that there was simply no more seat for private respondent on Flight 560 since there were only six (6) seats available and the priority of accommodation on Flight 560 was based on the check-in sequence in Cebu; that the first six (6) priority passengers on Flight 477 chose to take Flight 560; that its Station Agent explained in a courteous and polite manner to all passengers the reason for PAL's inability to transport all of them back to Cebu; that the stranded passengers agreed to avail of the options and had their respective tickets exchanged for their onward trips; that it was
10 the
dispositive portion of which states:
WHEREFORE, judgment is hereby rendered in favor of the plaintiff and against the defendant Philippine AirLines, Inc. ordering the latter to pay: (1) As actual damages, the sum of Two Hundred Pesos (P200.00) representing plaintiff's expenses for transportation, food and accommodation during his stranded stay at Cotabato City; the sum of FortyEight Pesos (P48.00) representing his flight fare from Cotabato City to Iligan city; the sum of Five Hundred Pesos (P500.00) representing plaintiff's transportation expenses from Iligan City to Ozamiz City; and the sum of Five Thousand Pesos (P5,000.00) as loss of business opportunities during his stranded stay in Cotabato City; (2) As moral damages, the sum of Fifty Thousand Pesos (P50,000.00) for plaintiff's hurt feelings, serious anxiety, mental anguish and unkind and discourteous treatment perpetrated by defendant's employees during his stay as stranded passenger in Cotabato City; (3) As exemplary damages, the sum of Ten Thousand Pesos (P10,000.00) to set a precedent to the defendant airline that it shall provide means to give comfort and convenience to stranded passengers; (4) The sum of Three Thousand Pesos (P3,000.00) as attorney's fees; (5) To pay the costs of this suit. PAL appealed to the Court of Appeals which on 28 February 1985, finding no reversible error, affirmed the judgment of the court a quo. 11 PAL then sought recourse to this Court by way of a petition for review on certiorari 12 upon the following issues: (1) Can the Court of Appeals render a decision finding petitioner (then defendant-appellant in the court below) negligent and, consequently, liable for damages on a question of substance which was neither raised on a question nor proved at the trial? (2) Can the Court of Appeals award actual and moral damages contrary to the evidence and established jurisprudence? 13 An assiduous examination of the records yields no valid reason for reversal of the judgment on appeal; only a modification of its disposition. In its petition, PAL vigorously maintains that private respondent's principal cause of action was its alleged denial of private respondent's demand for priority over the confirmed passengers on Flight 560. Likewise, PAL points out that the complaint did not impute to PAL neglect in failing to attend to the needs of the diverted passengers; and, that the question of negligence was not and never put in issue by the pleadings or proved at the trial. Contrary to the above arguments, private respondent's amended complaint touched on PAL's indifference and inattention to his predicament. The pertinent portion of the amended complaint 14 reads: 10. That by virtue of the refusal of the defendant through its agent in Cotabato to accommodate ( sic ) and allow the plaintiff to take and board the plane back to Cebu, and by accomodating ( sic ) and allowing passengers from Cotabato for Cebu in his stead and place, thus forcing the plaintiff against his will, to be left and stranded in Cotabato, exposed to the peril and danger of muslim rebels plundering at the time, the plaintiff, as a consequence, (have) suffered mental anguish, mental torture, social
humiliation, bismirched reputation and wounded feeling, all amounting to a conservative amount of thirty thousand (P30,000.00) Pesos. To substantiate this aspect of apathy, private respondent testified
15
A I did not even notice that I was I think the last passenger or the last person out of the PAL employees and army personnel that were left there. I did not notice that when I was already outside of the building after our conversation. Q What did you do next? A I banished (sic ) because it seems that there was a war not far from the airport. The sound of guns and the soldiers were plenty. Q After that what did you do? A I tried to look for a transportation that could bring me down to the City of Cotabato. Q Were you able to go there? A I was at about 7:00 o'clock in the evening more or less and it was a private jeep that I boarded. I was even questioned why I and who am ( sic ) I then. Then I explained my side that I am ( sic ) stranded passenger. Then they brought me downtown at Cotabato. Q During your conversation with the Manager were you not offered any vehicle or transportation to Cotabato airport downtown? A In fact I told him (Manager) now I am by-passed passenger here which is not my destination what can you offer me. Then they answered, "it is not my fault. Let us forget that." Q In other words when the Manager told you that offer was there a vehicle ready? A Not yet. Not long after that the Ford Fiera loaded with PAL personnel was passing by going to the City of Cotabato and I stopped it to take me a ride because there was no more available transportation but I was not accommodated. Significantly, PAL did not seem to mind the introduction of evidence which focused on its alleged negligence in caring for its stranded passengers. Well-settled is the rule in evidence that the protest or objection against the admission of evidence should be presented at the time the evidence is offered, and that the proper time to make protest or objection to the admissibility of evidence is when the question is presented to the witness or at the time the answer thereto is given. 16 There being no objection, such evidence becomes property of the case and all the parties are amenable to any favorable or unfavorable effects resulting from the evidence. 17 PAL instead attempted to rebut the aforequoted testimony. In the process, it failed to substantiate its counter allegation for want of concrete proof 18 — Atty. Rubin O. Rivera — PAL's counsel: Q You said PAL refused to help you when you were in Cotabato, is that right? Private respondent: A Yes.
Q Did you ask them to help you regarding any offer of transportation or of any other matter asked of them? A Yes, he (PAL PERSONNEL) said what is? It is not our fault. Q Are you not aware that one fellow passenger even claimed that he was given Hotel accommodation because they have no money? xxx
xxx
xxx
A No, sir, that was never offered to me. I said, I tried to stop them but they were already riding that PAL pick-up jeep, and I was not accommodated. Having joined in the issue over the alleged lack of care it exhibited towards its passengers, PAL cannot now turn around and feign surprise at the outcome of the case. When issues not raised by the pleadings are tried by express or implied consent of the parties, they shall be treated in all respects as if they had been r aised in the pleadings. 19 With regard to the award of damages affirmed by the appellate court, PAL argues that the same is unfounded. It asserts that it should not be charged with the task of looking after the passengers' comfort and convenience because the diversion of the flight was due to a fortuitous event, and that if made liable, an added burden is given to PAL which is over and beyond its duties under the contract of carriage. It submits that granting arguendo that negligence exists, PAL cannot be liable in damages in the absence of fraud or bad faith; that private respondent failed to apprise PAL of the nature of his trip and possible business losses; and, that private respondent himself is to be blamed for unreasonably refusing to use the free ticket which PAL issued. The contract of air carriage is a peculiar one. Being imbued with public interest, the law requires common carriers to carry the passengers safely as far as human care and foresight can provide, using the utmost diligence of very cautious persons, with due regard for all the circumstances. 20 In Air France v . Carrascoso, 21 we held that — A contract to transport passengers is quite different in kind and degree from any other contractual relation. And this, because of the relation which an air carrier sustains with the public. Its business is mainly with the travelling public. It invites people to avail of the comforts and advantages it offers. The contract of air carriage, therefore, generates a relation attended with a public duty . . . . ( emphasis supplied). The position taken by PAL in this case clearly illustrates its failure to grasp the exacting standard required by law. Undisputably, PAL's diversion of its flight due to inclement weather was a fortuitous event. Nonetheless, such occurrence did not terminate PAL's contract with its passengers. Being in the business of air carriage and the sole one to operate in the country, PAL is deemed equipped to deal with situations as in the case at bar. What we said i n one case once again must be stressed, i .e., the relation of carrier and passenger continues until the latter has been landed at the port of destination and has left the carrier's premises. 22 Hence, PAL necessarily would still have to exercise extraordinary diligence in safeguarding the comfort, convenience and safety of its stranded passengers until they have reached their final destination. On this score, PAL grossly failed considering the then ongoing battle between government forces and Muslim rebels in Cotabato City and the fact that the private respondent was a stranger to the place. As the appellate court correctly ruled — While the failure of plaintiff in the first instance to reach his destination at Ozamis City in accordance with the contract of carriage was due to the closure of the airport on account of rain and inclement weather which was radioed to defendant 15 minutes before landing, it has not been disputed by defendant airline that Ozamis City has no all-weather airport and has to cancel its flight to Ozamis City or by-pass it in the event of inclement weather. Knowing this fact, it becomes the duty of defendant to provide all means of comfort and convenience to its passengers when they would have
to be left in a strange place in case of such by-passing. The steps taken by defendant airline company towards this end has not been put in evidence, especially for those 7 others who were not accommodated in the return trip to Cebu, only 6 of the 21 having been so accommodated. It appears that plaintiff had to leave on the next flight 2 days later. If the cause of nonfulfillment of the contract is due to a fortuitous event, it has to be the sole and only cause (Art. 1755 CC., Art. 1733 C.C.) Since part of the failure to comply with the obligation of common carrier to deliver its passengers safely to their destination lay in the defendant's failure to provide comfort and convenience to its stranded passengers using extra-ordinary diligence, the cause of non-fulfillment is not solely and exclusively due to fortuitous event, but due to something which defendant airline could have prevented, defendant becomes liable to plaintiff. 23 While we find PAL remiss in its duty of extending utmost care to private respondent while being stranded in Cotabato City, there is no sufficient basis to conclude that PAL failed to inform him about his non-accommodation on Flight 560, or that it was inattentive to his queries relative thereto. On 3 August 1975, the Station Agent reported to his Branch Manager in Cotabato City that — 3. Of the fifteen stranded passengers two pax elected to take F478 on August 05, three pax opted to take F442 August 03. The remaining ten (10) including subject requested that they be instead accommodated ( sic ) on F446 CBO-IGN the following day where they intended to take the surface transportation to OZC. Mr. Pedro Zapatos had by then been very vocal and boiceterous (sic ) at the counter and we tactfully managed to steer him inside the Station Agent's office. Mr. Pedro Zapatos then adamantly insisted that all the diverted passengers should have been given priority over the originating passengers of F560 whether confirmed or otherwise. We explained our policies and after awhile he seemed pacified and thereafter took his ticket (in-lieued (sic ) to CBO-IGN, COCON basis), at the counter in the presence of five other passengers who were waiting for their tickets too. The rest of the diverted pax had left earlier after being assured their tickets will be ready the following day. 24 Aforesaid Report being an entry in the course of business is prima facie evidence of the facts therein stated. Private respondent, apart from his testimony, did not offer any controverting evidence. If indeed PAL omitted to give information about the options available to its diverted passengers, it would have been deluged with complaints. But, only private respondent complained — Atty. Rivera (for PAL) Q I understand from you Mr. Zapatos that at the time you were waiting at Cotabato Airport for the decision of PAL, you were not informed of the decision until after the airplane left is that correct? A Yes. COURT: Q What do you mean by "yes"? You meant you were not informed? A Yes, I was not informed of their decision, that they will only accommodate few passengers. Q Aside from you there were many other stranded passengers? A I believed, yes.
Q And you want us to believe that PAL did not explain (to) any of these passengers about the decision regarding those who will board the aircraft back to Cebu? A No, Sir. Q Despite these facts Mr. Zapatos did any of the other passengers complained ( sic ) regarding that incident? xxx
xxx
xxx
A There were plenty of argument and I was one of those talking about my case. Q Did you hear anybody complained (sic ) that he has not been informed of the decision before the plane left for Cebu? A No. 25 Admittedly, private respondent's insistence on being given priority in accommodation was unreasonable considering the fortuitous event and that there was a sequence to be observed in the booking, i .e., in the order the passengers checked-in at their port of origin. His intransigence in fact was the main cause for his having to stay at the airport longer than was necessary. Atty. Rivera: Q And, you were saying that despite the fact that according to your testimony there were at least 16 passengers who were stranded there in Cotabato airport according to your testimony, and later you said that there were no other people left there at that time, is that correct? A Yes, I did not see anyone there around. I think I was the only civilian who was left there. Q Why is it that it took you long time to leave that place? A Because I was arguing with the PAL personnel. Anent the plaint that PAL employees were disrespectful and inattentive toward private respondent, the records are bereft of evidence to support the same. Thus, the ruling of respondent Court of Appeals in this regard is without basis. 27 On the contrary, private respondent was attended to not only by the personnel of PAL but also by its Manager."
26
28
In the light of these findings, we find the award of moral damages of Fifty Thousand Pesos (P50,000.00) unreasonably excessive; hence, we reduce the same to Ten Thousand Pesos (P10,000.00). Conformably herewith, the award of exemplary damages is also reduced to five Thousand Pesos (5,000.00). Moral damages are not intended to enrich the private respondent. They are awarded only to enable the injured party to obtain means, diversion or amusements that will serve to alleviate the moral suffering he has undergone by reason of the defendant's culpable action. 29 With regard to the award of actual damages in the amount of P5,000.00 representing private respondent's alleged business losses occasioned by his stay at Cotabato City, we find the same unwarranted. Private respondent's testimony that he had a scheduled business "transaction of shark liver oil supposedly to have been consummated on August 3, 1975 in the morning" and that "since (private respondent) was out for nearly two weeks I missed to buy about 10 barrels of shark liver oil,"30 are purely speculative. Actual or compensatory damages cannot be presumed but must be duly proved with reasonable degree of certainty. A court cannot rely on speculation, conjecture or guesswork as to the fact and amount of damages, but must depend upon competent proof that they have suffered and on evidence of the actual amount thereof. 31
WHEREFORE the decision appealed from is AFFIRMED with modification however that the award of moral damages of Fifty Thousand Pesos (P50,000.00) is reduced to Ten Thousand Pesos (P10,000.00) while the exemplary damages of Ten Thousand Pesos (P10,000.00) is also reduced to Five Thousand Pesos (P5,000.00). The award of actual damages in the amount Five Thousand Pesos (P5,000.00) representing business losses occasioned by private respondent's being stranded in Cotabato City is deleted. SO ORDERED.
the general formation of the buildings becomes a big funnel-like structure, the one situated along College Road, receiving the heaviest impact of the strong winds. Hence, there are portions of the roofing, those located on both ends of the building, which remained intact after the storm. 6. Another factor and perhaps the most likely reason for the dislodging of the roofings structural trusses is the improper anchorage of the said trusses to the roof beams. The 1/2 diameter steel bars embedded on the concrete roof beams which serve as truss anchorage are not bolted nor nailed to the trusses. Still, there are other steel bars which were not even bent to the trusses, thus, those trusses are not anchored at all to the roof beams.
It then recommended that to avoid any further loss and damage to lives, limbs and property of persons living in the vicinity, the fourth floor of subject school building be declared as astructural hazard. In their Complaint [6] before the Regional Trial Court of Pasay City, Branch 117, for damages based on culpa aquiliana, private respondents alleged that the damage to their house rendered the same uninhabitable, forcing them to stay temporarily in others houses. And so they sought to recover from petitioner P117,116.00, as actual damages, P1,000,000.00, as moral damages, P300,000.00, as exemplary damages and P100,000.00, for and as attorneys fees; plus costs. In its Answer, petitioner averred that subject school building had withstood several devastating typhoons and other calamities in the past, without its roofing or any portion thereof giving way; that it has not been remiss in its responsibility to see to it that said school building, which houses school children, faculty members, and employees, is in tip-top condition; and furthermore, typhoon Saling was an act of God and therefore beyond human control such that petitioner cannot be answerable for the damages wrought thereby, absent any negligence on its part. [G.R. No. 126389. July 10, 1998]
SOUTHEASTERN COLLEGE, INC., petitioner, vs. COURT OF APPEALS, JUANITA DE JESUS VDA. DE DIMAANO, EMERITA DIMAANO, REMEDIOS DIMAANO, CONSOLACION DIMAANO and MILAGROS DIMAANO, respondents. DECISION PURISIMA, J .:
Petition for review under Rule 45 of the Rules of Court seeking to set aside the Decision[1] promulgated on July 31, 1996, and Resolution [2] dated September 12, 1996 of the Court of Appeals [3] in CA-G.R. No. 41422, entitled Juanita de Jesus vda. de Dimaano, et al. vs. Southeastern College, Inc., which reduced the moral damages awarded below from P1,000,000.00 to P200,000.00. [4] The Resolution under attack denied petitioners motion for reconsideration. Private respondents are owners of a house at 326 College Road, Pasay City, while petitioner owns a four-storey school building along the same College Road. On October 11, 1989, at about 6:30 in the morning, a powerful typhoon Saling hit Metro Manila. Buffeted by very strong winds, the roof of petitioners building was partly ripped off and blown away, landing on and destroying portions of the roofing of private respondents house. After the typhoon had passed, an ocular inspection of the destroyed buildings was conducted by a team of engineers headed by the city building official, Engr. Jesus L. Reyna. Pertinent aspects of the latters Report[5] dated October 18, 1989 stated, as follows: 5. One of the factors that may have led to this calamitous event is the formation of the buildings in the area and the general direction of the wind. Situated in the peripheral lot is an almost Ushaped formation of 4-storey building. Thus, with the strong winds having a westerly direction,
The trial court, giving credence to the ocular inspection report to the effect that subject school building had a defective roofing structure, found that, while typhoon Saling was accompanied by strong winds, the damage to private respondents house could have been avoided if the construction of the roof of [petitioners] building was not faulty. The dispositive portion of the lower courts decision [7] reads thus: WHEREFORE, in view of the foregoing, the Court renders judgment (sic) in favor of the plaintiff (sic) and against the defendants, (sic) ordering the latter to pay jointly and severally the former as follows: a) P117,116.00, as actual damages, plus litigation expenses; b) P1,000,000.00 as moral damages; c) P100,000.00 as attorneys fees; d) Costs of the instant suit. The claim for exemplary damages is denied for the reason that the defendants (sic) did not act in a wanton fraudulent, reckless, oppressive or malevolent manner.
In its appeal to the Court of Appeals, petitioner assigned as errors, [8] that: I
THE TRIAL COURT ERRED IN HOLDING THAT TYPHOON SALING, AS AN ACT OF GOD, IS NOT THE SOLE AND ABSOLUTE REASON FOR THE RIPPINGOFF OF THE SMALL PORTION OF THE ROOF OF SOUTHEASTERNS FOUR (4) STOREY SCHOOL BUILDING. II
THE TRIAL COURT ERRED IN HOLDING THAT THE CONSTRUCTION OF THE ROOF OF DEFENDANTS SCHOOL BUILDING WAS FAULTY NOTWITHSTANDING THE ADMISSION THAT THERE WERE TYPHOONS
BEFORE BUT NOT AS GRAVE AS TYPHOON SALING WHICH IS THE DIRECT AND PROXIMATE CAUSE OF THE INCIDENT. III
THE TRIAL COURT ERRED IN AWARDING ACTUAL AND MORAL DAMAGES AS WELL AS ATTORNEYS FEES AND LITIGATION EXPENSES AND COSTS OF SUIT TO DIMAANOS WHEN THEY HAVE NOT INCURRED ACTUAL DAMAGES AT ALL AS DIMAANOS HAVE ALREADY SOLD THEIR PROPERTY, AN INTERVENING EVENT THAT RENDERS THIS CASE MOOT AND ACADEMIC. IV
THE TRIAL COURT ERRED IN ORDERING THE ISSUANCE OF THE WRIT OF EXECUTION INSPITE OF THE PERFECTION OF SOUTHEASTERNS APPEAL WHEN THERE IS NO COMPELLING REASON FOR THE ISSUANCE THERETO. As mentioned earlier, respondent Court of Appeals affirmed with modification the trial courts disposition by reducing the award of moral damages from P1,000,000.00 to P200,000.00.Hence, petitioners resort to this Court, raising for resolution the issues of: 1. Whether or not the award of actual damage [sic] to respondent Dimaanos on the basis of speculation or conjecture, without proof or receipts of actual damage, [sic] legally feasible or justified. 2. Whether or not the award of moral damages to respondent Dimaanos, without the latter having suffered, actual damage has legal basis. 3. Whether or not respondent Dimaanos who are no longer the owner of the property, subject matter of the case, during its pendency, has the right to pursue their complaint against petitioner when the case was already rendered moot and academic by the sale of the property to third party. 4. Whether or not the award of attorneys fees when the case was already moot and academic [sic] legally justified. 5. Whether or not petitioner is liable for damage caused to others by typhoon Saling being an act of God. 6. Whether or not the issuance of a writ of execution pending appeal, ex-parte or without hearing, has support in law. The pivot of inquiry here, determinative of the other issues, is whether the damage on the roof of the building of private respondents resulting from the impact of the falling portions of the school buildings roof ripped off by the strong winds of typhoon Saling, was, within legal contemplation, due to fortuitous event? If so, petitioner cannot be held liable for the damages suffered by the private respondents. This conclusion finds support in Article 1174 of the Civil Code, which 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.
The antecedent of fortuitous event or caso fortuito is found in the Partidas which defines it as an event which takes place by accident and could not have been foreseen. [9] Escriche elaborates it as an unexpected event or act of God which could neither be foreseen nor resisted. [10] Civilist Arturo M. Tolentino adds that [f]ortuitous events may be produced by two general causes: (1) by nature, such as earthquakes, storms, floods, epidemics, fires, etc. and (2) by the act of man, such as an armed invasion, attack by bandits, governmental prohibitions, robbery, etc. [11] In order that a fortuitous event may exempt a person from liability, it is necessary that he be free from any previous negligence or misconduct by reason of which the loss may have been
occasioned.[12] An act of God cannot be invoked for the protection of a person who has been guilty of gross negligence in not trying to forestall its possible adverse consequences.When a persons negligence concurs with an act of God in producing damage or injury to another, such person is not exempt from liability by showing that the immediate or proximate causeof the damage or injury was a fortuitous event. When the effect is found to be partly the result of the participation of man whether it be from active intervention, or neglect, or failure to act the whole occurrence is hereby humanized, and removed from the rules applicable to acts of God. [13] In the case under consideration, the lower court accorded full credence to the finding of the investigating team that subject school buildings roofing had no sufficient anchorage to hold it in position especially when battered by strong winds. Based on such finding, the trial court imputed negligence to petitioner and adjudged it liable for damages to private respondents. After a thorough study and evaluation of the evidence on record, this Court believes otherwise, notwithstanding the general rule that factual findings by the trial court, especially when affirmed by the appellate court, are binding and conclusive upon this Court. [14] After a careful scrutiny of the records and the pleadings submitted by the parties, we find exception to this rule and hold that the lower courts misappreciated the evidence proffered. There is no question that a typhoon or storm is a fortuitous event, a natural occurrence which may be foreseen but is unavoidable despite any amount of foresight, diligence or care. [15]In order to be exempt from liability arising from any adverse consequence engendered thereby, there should have been no human participation amounting to a negligent act. [16] In other words, the person seeking exoneration from liability must not be guilty o f negligence. Negligence, as commonly understood, is conduct which naturally or reasonably creates undue risk or harm to others. It may be the failure to observe that degree of care, precaution, and vigilance which the circumstances justly demand, [17] or the omission to do something which a prudent and reasonable man, guided by considerations which ordinarily regulate the conduct of human affairs, would do. [18] From these premises, we proceed to determine whether petitioner was negligent, such that if it were not, the damage caused to private respondents house could have been avoided? At the outset, it bears emphasizing that a person claiming damages for the negligence of another has the burden of proving the existence of fault or negligence causative of his injury or loss. The facts constitutive of negligence must be affirmatively established by competent evidence,[19] not merely by presumptions and conclusions without basis in fact. Private respondents, in establishing the culpability of petitioner, merely relied on the aforementioned report submitted by a team which made an ocular inspection of petitioners school building after the typhoon. As the term imparts, an ocular inspection is one by means of actual sight or viewing.[20] What is visual to the eye though, is not always reflective of the real cause behind. For instance, one who hears a gunshot and then sees a wounded person, cannot always definitely conclude that a third person shot the victim. It could have been self-inflicted or caused accidentally by a stray bullet. The relationship of cause and effect must be clearly shown. In the present case, other than the said ocular inspection, no investigation was conducted to determine the real cause of the partial unroofing of petitioners school building. Private respondents did not even show that the plans, specifications and design of said school building were deficient and defective. Neither did they prove any substantial deviation from the approved plans and specifications. Nor did they conclusively establish that the construction of such building was basically flawed. [21] On the other hand, petitioner elicited from one of the witnesses of private respondents, city building official Jesus Reyna, that the original plans and design of petitioners school building were approved prior to its construction. Engr. Reyna admitted that it was a legal requirement before the construction of any building to obtain a permit from the city building official (city engineer, prior to the passage of the Building Act of 1977) . In like manner, after construction of the building, a certification must be secured from the same official attesting to the readiness for occupancy of the edifice. Having obtained both building permit and certificate of occupancy, these are, at the very least, prima facie evidence of the regular and proper construction of subject school building. [22]
Furthermore, when part of its roof needed repairs of the damage inflicted by typhoon Saling, the same city official gave the go-signal for such repairs without any deviation from the original design and subsequently, authorized the use of the entire fourth floor of the same building. These only prove that subject building suffers from no structural defect, contrary to the report that its U-shaped form was structurally defective. Having given his unqualified imprimatur , the city building official is presumed to have properly performed his duties [23] in connection therewith. In addition, petitioner presented its vice president for finance and administration who testified that an annual maintenance inspection and repair of subject school building were regularly undertaken. Petitioner was even willing to present its maintenance supervisor to attest to the extent of such regular inspection but private respondents agreed to dispense with his testimony and simply stipulated that it would be corroborative of the vice presidents narration. Moreover, the city building official, who has been in the city government service since 1974, admitted in open court that no complaint regarding any defect on the same structure has ever been lodged before his office prior to the institution of the case at bench. It is a matter of judicial notice that typhoons are common occurrences in this country. If subject school buildings roofing was not firmly anchored to its trusses, obviously, it could not have withstood long years and several typhoons even stronger than Saling. In light of the foregoing, we find no clear and convincing evidence to sustain the judgment of the appellate court. We thus hold that petitioner has not been shown negligent or at fault regarding the construction and maintenance of its school building in question and that typhoon Saling was the proximate cause of the damage suffered by private respondents house. With this disposition on the pivotal issue, private respondents claim for actual and moral damages as well as attorneys fees must fail. [24] Petitioner cannot be made to answer for a purely fortuitous event. [25] More so because no bad faith or willful act to cause damage was alleged and proven to warrant moral damages. Private respondents failed to adduce adequate and competent proof of the pecuniary loss they actually incurred. [26] It is not enough that the damage be capable of proof but must be actually proved with a reasonable degree of certainty, pointing out specific facts that afford a basis for measuring whatever compensatory damages are borne. [27] Private respondents merely submitted an estimated amount needed for the repair of the roof of their subject building. What is more, whether the necessary repairs were caused ONLY by petitioners alleged negligence in the maintenance of its school building, or included the ordinary wear and tear of the house itself, is an essential question that remains indeterminable. The Court deems unnecessary to resolve the other issues posed by petitioner. As regards the sixth issue, however, the writ of execution issued on April 1, 1993 by the trial court is hereby nullified and set aside. Private respondents are ordered to reimburse any amount or return to petitioner any property which they may have received by virtue of the enforcement of said writ. WHEREFORE, the petition is GRANTED and the challenged Decision is REVERSED. The complaint of private respondents in Civil Case No. 7314 before the trial court a quo is ordered DISMISSED and the writ of execution issued on April 1, 1993 in said case is SET ASIDE. Accordingly, private respondents are ORDERED to return to petitioner any amount or property received by them by virtue of said writ. Costs against the private respondents. SO ORDERED.
Agreement), which was the basis for the occupancy of the Clark Air Base and Subic Naval Base in Cubi Point, was to expire in 1991. Under Section 25, Article XVIII of the 1987 Constitution, foreign military bases, troops or facilities, which include those located at the US Naval Facility in Cubi Point, shall not be allowed in the Philippines unless a new treaty i s duly concurred in by the Senate and ratified by a majority of the votes cast by the people in a national referendum when the Congress so requires, and such new treaty is recognized as such by the US Government. Subsequently, Philcomsat installed and established the earth station at Cubi Point and the USDCA made use of the same. [G.R. No. 147324. May 25, 2004]
PHILIPPINE COMMUNICATIONS SATELLITE CORPORATION, petitioner, vs. GLOBE TELECOM, INC. (formerly and Globe Mckay Cable and Radio Corporation), respondents.
[G.R. No. 147334. May 25, 2004]
GLOBE TELECOM, INC., petitioner, vs. PHILIPPINE COMMUNICATION SATELLITE CORPORATION, respondent. DECISION TINGA, J.:
Before the Court are two Petitions for Review assailing the Decision of the Court of Appeals, dated 27 February 2001, in CA-G.R. CV No. 63619. [1] The facts of the case are undisputed. For several years prior to 1991, Globe Mckay Cable and Radio Corporation, now Globe Telecom, Inc. (Globe), had been engaged in the coordination of the provision of various communication facilities for the military bases of the United States of America (US) in Clark Air Base, Angeles, Pampanga and Subic Naval Base in Cubi Point, Zambales. The said communication facilities were installed and configured for the exclusive use of the US Defense Communications Agency (USDCA), and for security reasons, were operated only by its personnel or those of American companies contracted by it to operate said facilities. The USDCA contracted with said American companies, and the latter, in turn, contracted with Globe for the use of the communication facilities. Globe, on the other hand, contracted with local service providers such as the Philippine Communications Satellite Corporation (Philcomsat) for the provision of the communication facilities. On 07 May 1991, Philcomsat and Globe entered into an Agreement whereby Philcomsat obligated itself to establish, operate and provide an IBS Standard B earth station (earth station) within Cubi Point for the exclusive use of the USDCA. [2] The term of the contract was for 60 months, or five (5) years. [3] In turn, Globe promised to pay Philcomsat monthly rentals for each leased circuit involved.[4] At the time of the execution of the Agreement, both parties knew that the Military Bases Agreement between the Republic of the Philippines and the US (RP-US Military Bases
On 16 September 1991, the Senate passed and adopted Senate Resolution No. 141, expressing its decision not to concur in the ratification of the Treaty of Friendship, Cooperation and Security and its Supplementary Agreements that was supposed to extend the term of the use by the US of Subic Naval Base, among others. [5] The last two paragraphs of the Resolution state: FINDING that the Treaty constitutes a defective framework for the continuing relationship between the two countries in the spirit of friendship, cooperation and sovereign equality: Now, therefore, be it Resolved by the Senate, as it is hereby resolved, To express its decision not to concur in the ratification of the Treaty of Friendship, Cooperation and Security and its Supplementary Agreements, at the same time reaffirming its desire to continue friendly relations with the government and people of the United States of America. [6] On 31 December 1991, the Philippine Government sent a Note Verbale to the US Government through the US Embassy, notifying it of the Philippines termination of the RP-US Military Bases Agreement. The Note Verbale stated that since the RP-US Military Bases Agreement, as amended, shall terminate on 31 December 1992, the withdrawal of all US military forces from Subic Naval Base should be completed by said date. In a letter dated 06 August 1992, Globe notified Philcomsat of its intention to discontinue the use of the earth station effective 08 November 1992 in view of the withdrawal of US military personnel from Subic Naval Base after the termination of the RP-US Military Bases Agreement. Globe invoked as basis for the letter of termination Section 8 (Default) of the Agreement, which provides: Neither party shall be held liable or deemed to be in default for any failure to perform its obligation under this Agreement if such failure r esults directly or indirectly from force majeure or fortuitous event.Either party is thus precluded from performing its obligation until such force majeure or fortuitous event shall terminate. For the purpose of this paragraph, force majeure shall mean circumstances beyond the control of the party involved including, but not limited to, any law, order, regulation, direction or request of the Government of the Philippines, strikes or other labor difficulties, insurrection riots, national emergencies, war, acts of public enemies, fire, floods, typhoons or other catastrophies or acts of God. Philcomsat sent a reply letter dated 10 August 1992 to Globe, stating that we expect [Globe] to know its commitment to pay the stipulated rentals for the remaining terms of the Agreement even after [Globe] shall have discontinue[d] the use of the earth station after November 08, 1992. [7] Philcomsat referred to Section 7 of the Agreement, stating as follows: 7. DISCONTINUANCE OF SERVICE Should [Globe] decide to discontinue with the use of the earth station after it has been put into operation, a written notice shall be served to PHILCOMSAT at least sixty (60) days prior to the expected date of termination. Notwithstanding the non-use of the earth station, [Globe] shall continue to pay PHILCOMSAT for the rental of the actual number of T1 circuits in use, but in no case shall be less than the first two (2) T1 circuits, for the remaining life of the agreement. However, should PHILCOMSAT make use or sell the earth station subject to this agreement, the obligation of [Globe] to pay the rental for the remaining life of the agreement shall be at such monthly rate as may be agreed upon by the parties. [8]
After the US military forces left Subic Naval Base, Philcomsat sent Globe a letter dated 24 November 1993 demanding payment of its outstanding obligations under the Agreement amounting to US$4,910,136.00 plus interest and attorneys fees. However, Globe refused to heed Philcomsats demand. On 27 January 1995, Philcomsat filed with the Regional Trial Court of Makati a Complaint against Globe, praying that the latter be ordered to pay liquidated damages under the Agreement, with legal interest, exemplary damages, attorneys fees and costs of suit. The case was raffled to Branch 59 of said court. Globe filed an Answer to the Complaint, insisting that it was constrained to end the Agreement due to the termination of the RP-US Military Bases Agreement and the nonratification by the Senate of the Treaty of Friendship and Cooperation, which events constituted force majeure under the Agreement. Globe explained that the occurrence of said events exempted it from paying rentals for the remaining period of the Agreement. On 05 January 1999, the trial court rendered its Decision, the dispositive portion of which reads: WHEREFORE, premises considered, judgment is hereby rendered as follows: 1. Ordering the defendant to pay the plaintiff the amount of Ninety Two Thousand Two Hundred Thirty Eight US Dollars (US$92,238.00) or its equivalent in Philippine Currency (computed at the exchange rate prevailing at the time of compliance or payment) representing rentals for the month of December 1992 with interest thereon at the legal rate of twelve percent (12%) per annum starting December 1992 until the amount is fully paid; 2. Ordering the defendant to pay the plaintiff the amount of Three Hundred Thousand (P300,000.00) Pesos as and for attorneys fees; 3. Ordering the DISMISSAL of defendants counterclaim for lack of merit; and 4. With costs against the defendant. SO ORDERED.[9] Both parties appealed the trial courts Decision to the Court of Appeals. Philcomsat claimed that the trial court erred in ruling that: (1) the non-ratification by the Senate of the Treaty of Friendship, Cooperation and Security and its Supplementary Agreements constitutes force majeure which exempts Globe from complying with its obligations under the Agreement; (2) Globe is not liable to pay the rentals for the remainder of the term of the Agreement; and (3) Globe is not liable to Philcomsat for exemplary damages. Globe, on the other hand, contended that the RTC erred in holding it l iable for payment of rent of the earth station for December 1992 and of attorneys fees. It explained that it terminated Philcomsats services on 08 November 1992; hence, it had no reason to pay for rentals beyond that date. On 27 February 2001, the Court of Appeals promulgated its Decision dismissing Philcomsats appeal for lack of merit and affirming the trial courts finding that certain events constituting force majeure under Section 8 the Agreement occurred and justified the nonpayment by Globe of rentals for the remainder of the term of the Agreement. The appellate court ruled that the non-ratification by the Senate of the Treaty of Friendship, Cooperation and Security, and its Supplementary Agreements, and the termination by the Philippine Government of the RP-US Military Bases Agreement effective 31 December 1991 as stated in the Philippine Governments Note Verbale to the US Government, are acts, directions, or requests of the Government of the Philippines which constitute force majeure. In addition, there were circumstances beyond the control of the parties, such as the issuance of a
formal order by Cdr. Walter Corliss of the US Navy, the issuance of the letter notification from ATT and the complete withdrawal of all US military forces and personnel from Cubi Point, which prevented further use of the earth station under the Agreement. However, the Court of Appeals ruled that although Globe sought to terminate Philcomsats services by 08 November 1992, it is still liable to pay rentals for the December 1992, amounting to US$92,238.00 plus interest, considering that the US military forces and personnel completely withdrew from Cubi Point only on 31 December 1992.[10] Both parties filed their respective Petitions for Review assailing the Decision of the Court of Appeals. In G.R. No. 147324 ,[11] petitioner Philcomsat raises the following assignments of error: A. THE HONORABLE COURT OF APPEALS ERRED IN ADOPTING A DEFINITION OF FORCE MAJEURE DIFFERENT FROM WHAT ITS LEGAL DEFINITION FOUND IN ARTICLE 1174 OF THE CIVIL CODE, PROVIDES, SO AS TO EXEMPT GLOBE TELECOM FROM COMPLYING WITH ITS OBLIGATIONS UNDER THE SUBJECT AGREEMENT. B. THE HONORABLE COURT OF APPEALS ERRED IN RULING THAT GLOBE TELECOM IS NOT LIABLE TO PHILCOMSAT FOR RENTALS FOR THE REMAINING TERM OF THE AGREEMENT, DESPITE THE CLEAR TENOR OF SECTION 7 OF THE AGREEMENT. C. THE HONORABLE OCURT OF APPEALS ERRED IN DELETING THE TRIAL COURTS AWARD OF ATTORNEYS FEES IN FAVOR OF PHILCOMSAT. D. THE HONORABLE COURT OF APPEALS ERRED IN RULING THAT GLOBE TELECOM IS NOT LIABLE TO PHILCOMSAT FOR EXEMPLARY DAMAGES. [12] Philcomsat argues that the termination of the RP-US Military Bases Agreement cannot be considered a fortuitous event because the happening thereof was foreseeable. Although the Agreement was freely entered into by both parties, Section 8 should be deemed ineffective because it is contrary to Article 1174 of the Civil Code. Philcomsat posits the view that the validity of the parties definition of force majeure in Section 8 of the Agreement as circumstances beyond the control of the party involved including, but not limited to, any law, order, regulation, direction or request of the Government of the Philippines, strikes or other labor difficulties, insurrection riots, national emergencies, war, acts of public enemies, fire, floods, typhoons or other catastrophies or acts of God, should be deemed subject to Article 1174 which defines fortuitous events as events which could not be foreseen, or which, though foreseen, were inevitable.[13] Philcomsat further claims that the Court of Appeals erred in holding that Globe is not l iable to pay for the rental of the earth station for the entire term of the Agreement because it runs counter to what was plainly stipulated by the parties in Section 7 thereof. Moreover, said ruling is inconsistent with the appellate courts pronouncement that Globe is liable to pay rentals for December 1992 even though it terminated Philcomsats services effective 08 November 1992, because the US military and personnel completely withdrew from Cubi Point only in December 1992. Philcomsat points out that it was Globe which proposed the five-year term of the Agreement, and that the other provisions of the Agreement, such as Section 4.1 [14] thereof, evince the intent of Globe to be bound to pay rentals for the entire five-year term. [15] Philcomsat also maintains that contrary to the appellate courts findings, it is entitled to attorneys fees and exemplary damages.[16] In its Comment to Philcomsats Petition, Globe asserts that Section 8 of the Agreement is not contrary to Article 1174 of the Civil Code because said provision does not prohibit parties to a contract from providing for other instances when they would be exempt from fulfilling their contractual obligations. Globe also claims that the termination of the RP-US Military Bases Agreement constitutes force majeure and exempts it from complying with its obligations under the Agreement. [17] On the issue of the propriety of awarding attorneys fees and exemplary
damages to Philcomsat, Globe maintains that Philcomsat is not entitled thereto because in refusing to pay rentals for the remainder of the term of the Agreement, Globe only acted in accordance with its rights.[18] In G.R. No. 147334,[19] Globe, the petitioner therein, contends that the Court of Appeals erred in finding it liable for the amount of US$92,238.00, representing rentals for December 1992, since Philcomsats services were actually terminated on 08 November 1992. [20] In its Comment , Philcomsat claims that Globes petition should be dismissed as it raises a factual issue which is not cognizable by the Court in a petition for review on certiorari .[21] On 15 August 2001, the Court issued a Resolution giving due course to Philcomsats Petition in G.R. No. 147324 and required the parties to submit their respective memoranda. [22] Similarly, on 20 August 2001, the Court issued a Resolution giving due course to the Petition filed by Globe in G.R. No. 147334 and required both parties to submit their memoranda. [23] Philcomsat and Globe thereafter filed their respective Consolidated Memoranda in the two cases, reiterating their arguments in their respective petitions. The Court is tasked to resolve the following issues: (1) whether the termination of the RPUS Military Bases Agreement, the non-ratification of the Treaty of Friendship, Cooperation and Security, and the consequent withdrawal of US military forces and personnel from Cubi Point constitute force majeure which would exempt Globe from complying with its obligation to pay rentals under its Agreement with Philcomsat; (2) whether Globe is liable to pay rentals under the Agreement for the month of December 1992; and (3) whether Philcomsat is entitled to attorneys fees and exemplary damages. No reversible error was committed by the Court of Appeals in issuing the assailed Decision; hence the petitions are denied. There is no merit is Philcomsats argument that Section 8 of the Agreement cannot be given effect because the enumeration of events constituting force majeure therein unduly expands the concept of a fortuitous event under Article 1174 of the Civil Code and is therefore invalid. In support of its position, Philcomsat contends that under Article 1174 of the Civil Code, an event must be unforeseen in order to exempt a party to a contract from complying with its obligations therein. It insists that since the expiration of the RP-US Military Bases Agreement, the non-ratification of the Treaty of Friendship, Cooperation and Security and the withdrawal of US military forces and personnel from Cubi Point were not unforeseeable, but were possibilities known to it and Globe at the time they entered into the Agreement, such events cannot exempt Globe from performing its obligation of paying rentals for the entire five-year term thereof. However, Article 1174, which exempts an obligor from liability on account of fortuitous events or force majeure, refers not only to events that are unforeseeable, but also to those which are foreseeable, but inevitable:
Art. 1174. Except in cases 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. A fortuitous event under Article 1174 may either be an act of God, or natural occurrences such as floods or typhoons, [24] or an act of man, such as riots, strikes or wars. [25] Philcomsat and Globe agreed in Section 8 of the Agreement that the following events shall be deemed events constituting force majeure: 1. Any law, order, regulation, direction or r equest of the Philippine Government; 2. Strikes or other labor difficulties;
3. Insurrection; 4. Riots; 5. National emergencies; 6. War; 7. Acts of public enemies; 8. Fire, floods, typhoons or other catastrophies or acts of God; 9. Other circumstances beyond the control of the parties. Clearly, the foregoing are either unforeseeable, or foreseeable but beyond the control of the parties. There is nothing in the enumeration that runs contrary to, or expands, the concept of a fortuitous event under Article 1174. Furthermore, under Article 1306 [26] of the Civil Code, parties to a contract may establish such stipulations, clauses, terms and conditions as they may deem fit, as long as the same do not run counter to the law, morals, good customs, public order or public policy. [27] Article 1159 of the Civil Code also provides that [o]bligations arising from contracts have the force of law between the contracting parties and should be complied with in good faith. [28]Courts cannot stipulate for the parties nor amend their agreement where the same does not contravene law, morals, good customs, public order or public policy, for to do so would be to alter the real intent of the parties, and would run contrary to the function of the courts to give force and effect thereto. [29] Not being contrary to law, morals, good customs, public order, or public policy, Section 8 of the Agreement which Philcomsat and Globe freely agreed upon has the force of law between [30] them. In order that Globe may be exempt from non-compliance with its obligation to pay rentals under Section 8, the concurrence of the following elements must be established: (1) the event must be independent of the human will; (2) the occurrence must render it impossible for the debtor to fulfill the obligation in a normal manner; and (3) the obligor must be free of participation in, or aggravation of, the injury to the creditor.[31] The Court agrees with the Court of Appeals and the trial court that the abovementioned requisites are present in the instant case. Philcomsat and Globe had no control over the nonrenewal of the term of the RP-US Military Bases Agreement when the same expired in 1991, because the prerogative to ratify the treaty extending the life thereof belonged to the Senate. Neither did the parties have control over the subsequent withdrawal of the US military forces and personnel from Cubi Point in December 1992: Obviously the non-ratification by the Senate of the RP-US Military Bases Agreement (and its Supplemental Agreements) under its Resolution No. 141. ( Exhibit 2 ) on September 16, 1991 is beyond the control of the parties. This resolution was followed by the sending on December 31, 1991 o[f] a Note Verbale (Exhibit 3) by the Philippine Government to the US Government notifying the latter of the formers termination of the RP-US Military Bases Agreement (as amended) on 31 December 1992 and that accordingly, the withdrawal of all U.S. military forces from Subic Naval Base should be completed by said date. Subsequently, defendant [Globe] received a formal order from Cdr. Walter F. Corliss II Commander USN dated July 31, 1992 and a notification from ATT dated July 29, 1992 to terminate the provision of T1s services (via an IBS Standard B Earth Station) effective November 08, 1992. Plaintiff [Philcomsat] was furnished with copies of the said order and letter by the defendant on August 06, 1992. Resolution No. 141 of the Philippine Senate and the Note Verbale of the Philippine Government to the US Government are acts, direction or request of the Government of the Philippines and circumstances beyond the control of the defendant. The formal order from Cdr. Walter Corliss of the USN, the letter notification from ATT and the complete withdrawal of all the military forces and personnel from Cubi Point in the year-end 1992 are also acts and circumstances beyond the control of the defendant.
Considering the foregoing, the Court finds and so holds that the afore-narrated circumstances constitute force majeure or fortuitous event(s) as defined under paragraph 8 of the Agreement. From the foregoing, the Court finds that the defendant is exempted from paying the rentals for the facility for the remaining term of the contract. As a consequence of the termination of the RP-US Military Bases Agreement (as amended) the continued stay of all US Military forces and personnel from Subic Naval Base would no longer be allowed, hence, plaintiff would no longer be in any position to render the service it was obligated under the Agreement. To put it blantly (sic), since the US military forces and personnel left or withdrew from Cubi Point in the year end December 1992, there was no longer any necessity for the plaintiff to continue maintaining the IBS facility. [32] (Emphasis in the original.)
the present case, it was not shown that Globe acted wantonly or oppressively in not heeding Philcomsats demands for payment of rentals. It was established during the trial of the case before the trial court that Globe had valid grounds for refusing to comply with its contractual obligations after 1992. WHEREFORE, the Petitions are DENIED for lack of merit. The assailed Decision of the Court of Appeals in CA-G.R. CV No. 63619 is AFFIRMED. SO ORDERED.
The aforementioned events made impossible the continuation of the Agreement until the end of its five-year term without fault on the part of either party. The Court of Appeals was thus correct in ruling that the happening of such fortuitous events rendered Globe exempt from payment of rentals for the remainder of the term of the Agreement. Moreover, it would be unjust to require Globe to continue paying rentals even though Philcomsat cannot be compelled to perform its corresponding obligation under the Agreement. As noted by the appellate court: We also point out the sheer inequity of PHILCOMSATs position. PHILCOMSAT would like to charge GLOBE rentals for the balance of the lease term without there being any corresponding telecommunications service subject of the lease. It will be grossly unfair and iniquitous to hold GLOBE liable for lease charges for a service that was not and could not have been rendered due to an act of the government which was clearly beyond GLOBEs control. The binding effect of a contract on both parties is based on the principle that the obligations arising from contracts have the force of law between the contracting parties, and there must be mutuality between them based essentially on their equality under which it is repugnant to have one party bound by the contract while leaving the other party free therefrom ( Allied Banking Corporation v. Court of Appeals, 284 SCRA 357 ).[33] With respect to the issue of whether Globe is liable for payment of rentals for the month of December 1992, the Court likewise affirms the appellate courts ruling that Globe should pay the same. Although Globe alleged that it terminated the Agreement with Philcomsat effective 08 November 1992 pursuant to the formal order issued by Cdr. Corliss of the US Navy, the date when they actually ceased using the earth station subject of the Agreement was not established during the trial.[34] However, the trial court found that the US military forces and personnel completely withdrew from Cubi Point only on 31 December 1992. [35] Thus, until that date, the USDCA had control over the earth station and had the option of using the same. Furthermore, Philcomsat could not have removed or rendered ineffective said communication facility until after 31 December 1992 because Cubi Point was accessible only to US naval personnel up to that time. Hence, the Court of Appeals did not err when it affirmed the trial courts ruling that Globe is liable for payment of rentals until December 1992. Neither did the appellate court commit any error in holding that Philcomsat is not entitled to attorneys fees and exemplary damages. The award of attorneys fees is the exception rather than the rule, and must be supported by factual, legal and equitable justifications. [36] In previously decided cases, the Court awarded attorneys fees where a party acted in gross and evident bad faith in refusing to satisfy the other partys claims and compelled the former to litigate to protect his rights; [37] when the action filed is clearly unfounded, [38] or where moral or exemplary damages are awarded.[39] However, in cases where both parties have legitimate claims against each other and no party actually prevailed, such as in the present case where the claims of both parties were sustained in part, an award of attorneys fees would not be warranted.[40] Exemplary damages may be awarded in cases involving contracts or quasi-contracts, if the erring party acted in a wanton, fraudulent, reckless, oppressive or malevolent manner. [41] In
ROBERTO C. SICAM and AGENCIA G.R. NO. 159617 de R.C. SICAM, INC., Petitioners, Present: YNARES-SANTIAGO, J ., Chairperson, - versus - AUSTRIA-MARTINEZ, CHICO-NAZARIO, and NACHURA, JJ . LULU V. JORGE and CESAR JORGE, Promulgated: Respondents. August 8, 2007 x- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - x DECISION AUSTRIA-MARTINEZ, J .:
Before us is a Petition for Review on Certiorari filed by Roberto C. Sicam, Jr. (petitioner Sicam) and Agencia de R.C. Sicam, Inc. (petitioner corporation) seeking to annul the Decision [1] of the Court of Appeals dated March 31, 2003, and its Resolution [2] dated August 8, 2003, in CA G.R. CV No. 56633.
It appears that on different dates from September to October 1987, Lulu V. Jorge (respondent Lulu) pawned several pieces of jewelry with Agencia de R. C. Sicam located at No. 17 Aguirre Ave., BF Homes Paraaque, Metro Manila, to secure a loan in the total amount of P59,500.00.
Respondents subsequently filed an Amended Complaint to i nclude petitioner corporation. On October 19, 1987, two armed men entered the pawnshop and took away whatever cash and jewelry were found inside the pawnshop vault. The incident was entered in the police blotter of Thereafter, petitioner Sicam filed a Motion to Dismiss as far as he is concerned considering that the Southern Police District, Paraaque Police Station as follows: he is not the real party-in-interest. Respondents opposed the same. The RTC denied the motion in an Order dated November 8, 1989. [5] Investigation shows that at above TDPO, while victims were inside the office, two (2) male unidentified persons entered into the said office with guns drawn. Suspects(sic) (1) went straight inside and poked his gun toward Romeo Sicam and thereby tied him with an electric wire while suspects (sic) (2) poked his gun toward Divina Mata and Isabelita Rodriguez and ordered them to lay (sic) face flat on the floor. Suspects asked forcibly the case and assorted pawned jewelries items mentioned above.
After trial on the merits, the RTC rendered its Decision[6] dated January 12, 1993, dismissing respondents complaint as well as petitioners counterclaim. The RTC held that petitioner Sicam could not be made personally liable for a claim arising out of a corporate transaction; that in the Amended Complaint of respondents, they asserted that plaintiff pawned
Suspects after taking the money and jewelries fled on board a Marson Toyota unidentified plate number. [3] Petitioner Sicam sent respondent Lulu a letter dated October 19, 1987 informing her of the loss
assorted jewelries in defendants' pawnshop; and that as a consequence of the separate juridical personality of a corporation, the corporate debt or credit is not the debt or credit of a stockholder.
of her jewelry due to the robbery incident in the pawnshop. On November 2, 1987, respondent Lulu then wrote a letter [4] to petitioner Sicam expressing disbelief stating that when the robbery
The RTC further ruled that petitioner corporation could not be held liable for the loss of the
happened, all jewelry pawned were deposited with Far East Bank near the pawnshop since it
pawned jewelry since it had not been rebutted by respondents that the loss of the pledged
had been the practice that before they could withdraw, advance notice must be given to the
pieces of jewelry in the possession of the corporation was occasioned by armed robbery; that
pawnshop so it could withdraw the jewelry from the bank. Respondent Lulu then requested
robbery is a fortuitous event which exempts the victim from liability for the loss, citing the case
petitioner Sicam to prepare the pawned jewelry for withdrawal on November
of Au st ri a v. Co ur t of Ap pe al s ; [7] and that the parties transaction was that
6, 1987 but petitioner Sicam failed to return the jewelry.
of a pledgor and pledgee and under Art. 1174 of the Civil Code, the pawnshop as a pledgee is not responsible for those events which could not be foreseen.
On September 28, 1988, respondent Lulu joined by her husband, Cesar Jorge, filed a complaint
Respondents appealed the RTC Decision to the CA. In a Decision dated March 31, 2003,
against petitioner Sicam with the Regional Trial Court of Makati seeking indemnification for the
the CA reversed the RTC, the dispositive portion of which r eads as follows:
loss of pawned jewelry and payment of actual, moral and exemplary damages as well as attorney's fees. The case was docketed as Civil Case No. 88-2035.
WHEREFORE, premises considered, the instant Appeal is GRANTED, and the Decision dated January 12, 1993,of the Regional Trial Court of Makati, Branch 62, is hereby REVERSED and SET ASIDE, ordering the appellees to pay appellants the actual value of the lost jewelry amounting to P272,000.00, and attorney' fees of P27,200.00. [8]
Petitioner Sicam filed his Answer contending that he is not the real party-in-interest as the pawnshop was incorporated on April 20, 1987 and known as Agencia de R.C. Sicam, Inc; that petitioner corporation had exercised due care and diligence in the safekeeping of the articles
In finding petitioner Sicam liable together with petitioner corporation, the CA applied the doctrine
pledged with it and could not be made liable for an event that is fortuitous.
of piercing the veil of corporate entity reasoning that respondents were misled into thinking that
they were dealing with the pawnshop owned by petitioner Sicam as all the pawnshop tickets
Anent the first assigned error, petitioners point out that the CAs finding that petitioner Sicam is
issued to them bear the words Agencia de R.C. Sicam; and that there was no indication on the
personally liable for the loss of the pawned jewelries is a virtual and uncritical reproduction of the
pawnshop tickets that it was the petitioner corporation that owned the pawnshop which
arguments set out on pp. 5-6 of the Appellants brief. [10]
explained why respondents had to amend their complaintimpleading petitioner corporation. Petitioners argue that the reproduced arguments of respondents in their Appellants Brief suffer The CA further held that the corresponding diligence required of a pawnshop is that it should
from infirmities, as follows:
take steps to secure and protect the pledged items and should take steps to insure itself against the loss of articles which are entrusted to its custody as it derives earnings from the pawnshop trade which petitioners failed to do; that Austria is not applicable to this case since the robbery
(1) Respondents conclusively asserted in paragraph 2 of their Amended Complaint that Agencia de R.C. Sicam, Inc. is the present owner of Agencia de R.C. Sicam Pawnshop, and therefore, the CA cannot rule against said conclusive assertion of respondents;
incident happened in 1961 when the criminality had not as yet reached the levels attained in the present day; that they are at least guilty of contributory negligence and should be held liable for the loss of jewelries; and that robberies and hold-ups are foreseeable risks in that those engaged in the pawnshop business are expected to foresee.
(2) The issue resolved against petitioner Sicam was not among those raised and litigated in the trial court; and (3) By reason of the above infirmities, it was error for the CA to have pierced the corporate veil since a corporation has a personality distinct and separate from its individual stockholders or members. Anent the second error, petitioners point out that the CA finding on their negligence is likewise an
The CA concluded that both petitioners should be jointly and severally held liable to respondents unedited reproduction of respondents brief which had the following defects: for the loss of the pawned jewelry.
Petitioners motion for reconsideration was denied in a Resolution dated August 8, 2003.
Hence, the instant petition for review with the following assignment of errors: THE COURT OF APPEALS ERRED AND WHEN IT DID, IT OPENED ITSELF TO REVERSAL, WHEN IT ADOPTED UNCRITICALLY (IN FACT IT REPRODUCED AS ITS OWN WITHOUT IN THE MEANTIME ACKNOWLEDGING IT) WHAT THE RESPONDENTS ARGUED IN THEIR BRIEF, WHICH ARGUMENT WAS PALPABLY UNSUSTAINABLE. THE COURT OF APPEALS ERRED, AND WHEN IT DID, IT OPENED ITSELF TO REVERSAL BY THIS HONORABLE COURT, WHEN IT AGAIN ADOPTED UNCRITICALLY (BUT WITHOUT ACKNOWLEDGING IT) THE SUBMISSIONS OF THE RESPONDENTS IN THEIR BRIEF WITHOUT ADDING ANYTHING MORE THERETO DESPITE THE FACT THAT THE SAID ARGUMENT OF THE RESPONDENTS COULD NOT HAVE BEEN SUSTAINED IN VIEW OF UNREBUTTED EVIDENCE ON RECORD.[9]
(1) There were unrebutted evidence on record that petitioners had observed the diligence required of them, i.e, they wanted to open a vault with a nearby bank for purposes of safekeeping the pawned articles but was discouraged by the Central Bank (CB) since CB rules provide that they can only store the pawned articles in a vault inside the pawnshop premises and no other place; (2) Petitioners were adjudged negligent as they did not take insurance against the loss of the pledged jelweries, but it is judicial notice that due to high incidence of crimes, insurance companies refused to cover pawnshops and banks because of high probability of losses due to robberies; (3) In Hernandez v. Chairman, Commission on Audit (179 SCRA 39, 45-46), the victim of robbery was exonerated from liability for the sum of money belonging to others and lost by him to robbers. Respondents filed their Comment and petitioners filed their Reply thereto. The parties subsequently submitted their respective Memoranda.
We find no merit in the petition.
impression to respondents and the public as well, that the pawnshop was owned solely by To begin with, although it is true that indeed the CA findings were exact reproductions of the
petitioner Sicam and not by a corporation.
arguments raised in respondents (appellants) brief filed with the CA, we find the same to be not fatally infirmed. Upon examination of the Decision, we find that it expressed clearly and distinctly
Even petitioners counsel, Atty. Marcial T. Balgos, in his letter [16] dated October 15,
the facts and the law on which it is based as required by Section 8, Article VIII of the
1987 addressed to the Central Bank, expressly referred to petitioner Sicam as the proprietor of
Constitution. The discretion to decide a case one way or another is broad enough to justify the
the pawnshop notwithstanding the alleged incorporation in April 1987.
adoption of the arguments put forth by one of the parties, as long as these are legally tenable We also find no merit in petitioners' argument that since respondents had alleged in their
and supported by law and the facts on records. [11]
Amended Complaint that petitioner corporation is the present owner of the pawnshop, the CA is Our jurisdiction under Rule 45 of the Rules of Court is limited to the review of errors of law
bound to decide the case on that basis.
committed by the appellate court. Generally, the findings of fact of the appellate court are deemed conclusive and we are not duty-bound to analyze and calibrate all over again the evidence adduced by the parties in the court a quo.[12] This rule, however, is not without exceptions, such as where the factual findings of the Court of Appeals and the trial court are
Section 4 Rule 129 of the Rules of Court provides that an admission, verbal or written, made by a party in the course of the proceedings in the same case, does not require proof. The admission may be contradicted only by showing that it was made through palpable mistake or that no such admission was made.
conflicting or contradictory [13] as is obtaining in the instant case.
Thus, the general rule that a judicial admission is conclusive upon the party making it and does However, after a careful examination of the records, we find no justification to absolve
not require proof, admits of two exceptions, to wit: (1) when it is shown that such admission was made through palpable mistake, and (2) when it is shown that no such admission was in fact
petitioner Sicam from liability.
made. The latter exception allows one to contradict an admission by denying that he The CA correctly pierced the veil of the corporate fiction and adjudged petitioner Sicam liable together with petitioner corporation. The rule is that the veil of corporate fiction may be pierced when made as a shield to perpetrate fraud and/or confuse legitimate issues.
[14] The
theory of
made such an admission.[17]
The Committee on the Revision of the Rules of Court explained the second exception in this wise:
corporate entity was not meant to promote unfair objectives or otherwise to shield them. [15]
Notably, the evidence on record shows that at the time respondent Lulu pawned her jewelry, the pawnshop was owned by petitioner Sicam himself. As correctly observed by the CA, in all the pawnshop receipts issued to respondent Lulu in September 1987, all bear the words Agencia de R. C. Sicam, notwithstanding that the pawnshop was allegedly incorporated in April 1987. The receipts issued after such alleged incorporation were still in the name of Agencia de R. C. Sicam, thus inevitably misleading, or at the very least, creating the wrong
x x x if a party invokes an admission by an adverse party, but cites the admission out of context, then the one making the admission may show that he made no such admission, or that his admission was taken out of context. x x x that the party can also show that he made no such admission, i.e., not in the sense in which the admission is made to appear.
That is the reason for the modifier such because if the rule simply states that the admission may be contradicted by showing that no admission was made, the rule would not really be providing for a contradiction of the admission but just a denial. [18] (Emphasis supplied).
incorporated and known as Agencia de R.C. Sicam. In the pre-trial brief filed by petitioner Sicam, While it is true that respondents alleged in their Amended Complaint that petitioner corporation is
he submitted that as far as he was concerned, the basic issue was whether he is the real party
the present owner of the pawnshop, they did so only because petitioner Sicamalleged in his
in interest against whom the complaint should be directed. [20] In fact, he subsequently moved for
Answer to the original complaint filed against him that he was not the real party-in-interest as the
the dismissal of the complaint as to him but was not favorably acted upon by the trial court.
pawnshop was incorporated in April 1987. Moreover, a reading of the Amended Complaint in its
Moreover, the issue was squarely passed upon, although erroneously, by the trial court in its
entirety shows that respondents referred to both petitioner Sicam and petitioner corporation
Decision in this manner:
where they (respondents) pawned their assorted pieces of jewelry and ascribed to both the x x x The defendant Roberto Sicam, Jr likewise denies liability as far as he is concerned for the reason that he cannot be made personally liable for a claim arising from a corporate transaction.
failure to observe due diligence commensurate with the business which resulted in the loss of their pawned jewelry.
This Court sustains the contention of the defendant Roberto C. Sicam, Jr. The amended complaint itself asserts that plaintiff pawned assorted jewelries in defendant's pawnshop. It has been held that as a consequence of the separate juridical personality of a corporation, the corporate debt or credit is not the debt or credit of the stockholder, nor is the stockholder's debt or credit that of a corporation.[21]
Markedly, respondents, in their Opposition to petitioners Motion to Dismiss Amended Complaint, insofar as petitioner Sicam is concerned, averred as follows:
Clearly, in view of the alleged incorporation of the pawnshop, the issue of whether petitioner Sicam is personally liable is inextricably connected with the determination of the Roberto C. Sicam was named the defendant in the original complaint because the pawnshop tickets involved in this case did not show that the R.C. Sicam Pawnshop was a corporation. In paragraph 1 of his Answer, he admitted the allegations in paragraph 1 and 2 of the Complaint. He merely added that defendant is not now the real party i n interest in this case. It was defendant Sicam's omission to correct the pawnshop tickets used in the subject transactions in this case which was the cause of the instant action. He cannot now ask for the dismissal of the complaint against him simply on the mere allegation that his pawnshop business is now incorporated. It is a matter of defense, the merit of which can only be reached after consideration of the evidence to be presented in due course.[19] Unmistakably, the alleged admission made in respondents' Amended Complaint was taken out
question whether the doctrine of piercing the corporate veil should or should not apply to the case.
The next question is whether petitioners are 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 of context by petitioner Sicam to suit his own purpose. Ineluctably, the fact that negligent at all. petitioner Sicam continued to issue pawnshop receipts under his name and not under the corporation's name militates for the piercing of the corporate veil. We are not persuaded. We likewise find no merit in petitioners' contention that the CA erred in piercing the veil of corporate fiction of petitioner corporation, as it was not an issue raised and litigated before the Article 1174 of the Civil Code provides: RTC.
Petitioner Sicam had alleged in his Answer filed with the trial court that he was not the real partyin-interest because since April 20, 1987, the pawnshop business initiated by him was
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.
the possibility of robbery was not only foreseeable, but actually foreseen and anticipated. Petitioner Sicams testimony, in effect, contradicts petitioners defense of fortuitous Fortuitous events by definition are extraordinary events not foreseeable or avoidable. It is event. 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 Moreover, petitioners failed to show that they were free from any negligence by which the loss of foresee the happening is not impossibility to foresee the same.
[22]
the pawned jewelry may have been occasioned. To constitute a fortuitous event, the following elements must concur: (a) the cause of the Robbery per se, just l ike carnapping, is not a fortuitous event. It does not foreclose the possibility unforeseen and unexpected occurrence or of the failure of the debtor to comply with obligations of negligence on the part of herein petitioners. In Co v. Court of Appeals,[27]the Court held: 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
It is not a defense for a repair shop of motor vehicles to escape liability simply because the damage or loss of a thing lawfully placed in its possession was due to carnapping. Carnapping per se cannot be considered as a fortuitous event. The fact that a thing was unlawfully
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
and forcefully taken from another's 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 another's property. It must be proved and established that the event was an act of God or was done solely by third parties and that neither the claimant nor the person alleged to be negligent has any participation. In accordance with the Rules of Evidence, the burden of proving that the loss was due to a fortuitous event rests on him who invokes it which in this case is the private r e s p o n d e n t . However, other than the police report of the
or loss. [23] The burden of proving that the loss was due to a fortuitous event rests on him who invokes it. [24] 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.
[25]
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 establish 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.[28] Just like in Co, petitioners merely presented the police report of the Paraaque Police
It has been held that an act of God cannot be invoked to protect a person who has failed to take steps to forestall the possible adverse consequences of such a loss. One's negligence may have concurred with an act of God in producing damage and injury to another; nonetheless, showing that the immediate or proximate cause of the damage or injury was a fortuitous event would not exempt one from liability. When the effect is found to be partly the result of a person's
Station on the robbery committed based on the report of petitioners' employees which is not
participation -- whether by active intervention, neglect or failure to act -- the whole occurrence is
sufficient to establish robbery. Such report also does not prove that petitioners were not at fault.
humanized and removed from the rules applicable to acts of God.
[26]
On the contrary, by the very evidence of petitioners, the CA did not err in finding that petitioners Petitioner Sicam had testified that there was a security guard in their pawnshop at the time of the
are guilty of concurrent or contributory negligence as provided in Article 1170 of the Civil Code,
robbery. He likewise testified that when he started the pawnshop business in 1983, he thought of
to wit:
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
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. [29]
A. Yes, your honor. Article 2123 of the Civil Code provides that with regard to pawnshops and other establishments which are engaged in making loans secured by pledges, the special laws and regulations concerning them shall be observed, and subsidiarily, the provisions on pledge, mortgage and antichresis.
The provision on pledge, particularly Article 2099 of the Civil Code, provides that the creditor shall take care of the thing pledged with the diligence of a good father of a family. This means that petitioners must take care of the pawns the way a prudent person would as to his own
Q. Then how come that the robbers were able to enter the premises when according to you there was a security guard? A. Sir, if these robbers can rob a bank, how much more a pawnshop. Q. I am asking you how were the robbers able to enter despite the fact that there was a security guard? A. At the time of the inci dent whi ch happe ned abou t 1:00 and 2:00 o'clock in the afternoon and it happened on a Saturday and everything was quiet in the area BF Homes Paraaque they pretended to pawn an article in the pawnshop, so one of my employees allowed him to come in and it was only when it was announced that it was a hold up. Q. Did you come to know how the vault was opened? A. When the pawnshop is official (sic) open your honor the pawnshop is partly open. The combination is off.
property.
Q. No one open (sic) the vault for the robbers? A. No one your honor it was open at the time of the robbery.
In this connection, Article 1173 of the Civil Code further provides:
Q. It is clear now that at the time of the robbery the vault was open the reason why the robbers were able to get all the items pawned to you inside the vault. A. Yes sir.[32]
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.
revealing that there were no security measures adopted by petitioners in the operation of the pawnshop. Evidently, no sufficient precaution and vigilance were adopted by petitioners to
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. We expounded in Cruz v. Gangan[30] that negligence is the omission to do something
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
which a reasonable man, guided by those considerations which ordinarily regulate the conduct
pawnshop. Further, there is no showing that the alleged security guard exercised all that was
of human affairs, would do; or the doing of something which a prudent and reasonable man
necessary to prevent any untoward incident or to ensure that no suspicious individuals were
would not do.[31] It is want of care required by the circumstances.
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
A review of the records clearly shows that petitioners failed to exercise reasonable care and
pistols each, which were allegedly poked at the employees. [33] Significantly, the alleged security
caution that an ordinarily prudent person would have used in the same situation. Petitioners
guard was not presented at all to corroborate petitioner Sicam's claim; not
were guilty of negligence in the operation of their pawnshop business. Petitioner Sicam testified,
one of petitioners' employees who were present during the robbery incident testified in court.
thus: Furthermore, petitioner Sicam's admission that the vault was open at the time of robbery is Court:
clearly a proof of petitioners' failure to observe the care, precaution and vigilance that the circumstances justly demanded. Petitioner Sicam testified that once the pawnshop was open,
Q. Do you have security guards in your pawnshop?
the combination was already off. Considering petitioner Sicam's testimony that the r obbery took
place on a Saturday afternoon and the area in BF Homes Paraaque at that time was quiet, there
Commission on Audit [36] and Cruz v. Gangan[37] cited by petitioners in their pleadings, where the
was more reason for petitioners to have exercised reasonable foresight and diligence in
victims of robbery were exonerated from liability, find no application to the present case.
protecting the pawned jewelries. Instead of taking the precaution to protect them, they let open the vault, providing no difficulty for the robbers to cart away the pawned articles.
In Austria, Maria Abad received from Guillermo Austria a pendant with diamonds to be sold on commission basis, but which Abad failed to subsequently return because of a robbery committed
We, however, do not agree with the CA when it found petitioners negligent for not taking steps to
upon her in 1961. The incident became the subject of a criminal case filed against several
insure themselves against loss of the pawned jewelries.
persons. Austria filed an action against Abad and her husband (Abads) for recovery of the pendant or its value, but the Abads set up the defense that the robbery extinguished their
Under Section 17 of Central Bank Circular No. 374, Rules and Regulations for Pawnshops,
obligation. The RTC ruled in favor of Austria, as the Abadsfailed to prove robbery; or, if
which took effect on July 13, 1973, and which was issued pursuant to Presidential Decree No.
committed, that Maria Abad was guilty of negligence. The CA, however, reversed the RTC
114, Pawnshop Regulation Act, it i s provided that pawns pledged must be insured, to wit:
decision holding that the fact of robbery was duly established and declared the Abads not responsible for the loss of the jewelry on account of a fortuitous event. We
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.
held that for the Abads to be relieved from the civil liability of returning the pendant under Art. 1174 of the Civil Code, it would only be sufficient that the unforeseen event, the robbery, took place without any concurrent fault on the debtors part, and this can be done by preponderance
However, this Section was subsequently amended by CB Circular No. 764 which took effect
of evidence; that to be free from liability for reason of fortuitous event, the debtor must, in
on October 1, 1980, to wit:
addition to the casus itself, be free of any concurrent or contributory fault or negligence. [38]
Sec. 17 Insurance of Office Building and Pawns The office building/ premises and pawns of a pawnshop must be insured against fire. (emphasis supplied). where the requirement that insurance against burglary was deleted. Obviously, the Central Bank
We found in Austria that under the circumstances prevailing at the time the Decision was promulgated in 1971, the City of Manila and its suburbs had a high incidence of crimes against persons and property that rendered travel after nightfall a matter to be sedulously avoided
considered it not feasible to require insurance of pawned articles against burglary. without suitable precaution and protection; that the conduct of Maria Abad in returning alone to The robbery in the pawnshop happened in 1987, and considering the above-quoted amendment, her house in the evening carrying jewelry of considerable value would have been negligence per there is no statutory duty imposed on petitioners to insure the pawned jewelry in which case it se and would not exempt her from responsibility in the case of robbery. However we did not was error for the CA to consider it as a factor in concluding that petitioners were negligent. hold Abad liable for negligence since, the robbery happened ten years previously; i.e., 1961, when criminality had not reached the level of incidence obtaining in 1971. Nevertheless, the preponderance of evidence shows that petitioners failed to exercise the In contrast, the robbery in this case took place in 1987 when robbery was already prevalent and diligence required of them under the Civil Code. petitioners in fact had already foreseen it as they wanted to deposit the pawn with a nearby bank The diligence with which the law requires the individual at all times to govern his conduct varies for safekeeping. Moreover, unlike in Austria, where no negligence was committed, we found with the nature of the situation in which he is placed and the importance of the act which he is to petitioners negligent in securing their pawnshop as earlier discussed. perform. [34] Thus, the cases of Austria v. Court of Appeals,[35] Hernandez v. Chairman,
Unlike in Hernandez where the robbery happened in a public utility, the robbery in this case took In Hernandez , Teodoro Hernandez was the OIC and special disbursing officer of the Ternate
place in the pawnshop which is under the control of petitioners. Petitioners had the means to
Beach Project of the Philippine Tourism in Cavite. In the morning of July 1, 1983, a Friday, he
screen the persons who were allowed entrance to the premises and to protect itself from
went to Manila to encash two checks covering the wages of the employees and the operating
unlawful intrusion. Petitioners had failed to exercise precautionary measures in ensuring that the
expenses of the project. However for some reason, the processing of the check was delayed
robbers were prevented from entering the pawnshop and for keeping the vault open for the day,
and was completed at about 3 p.m. Nevertheless, he decided to encash the check because the
which paved the way for the robbers to easily cart away the pawned articles.
project employees would be waiting for their pay the following day; otherwise, the workers would have to wait until July 5, the earliest time, when the main office would open. At that time, he had
In Cruz , Dr. Filonila O. Cruz, Camanava District Director of Technological Education and Skills
two choices: (1) return to Ternate, Cavite that same afternoon and arrive early evening; or (2)
D e v e l o p m e n t A u t h o r i t y ( T E S D A ) , b o a r d e d t h e L i g h t R ai l T r a n s i t
take the money with him to his house in Marilao, Bulacan, spend the night there, and leave
fromSen. Puyat Avenue to Monumento when her handbag was slashed and the contents were
for Ternate the following day. He chose the second option, thinking it was the safer one. Thus, a
stolen by an unidentified person. Among those stolen were her wallet and the government-
little past 3 p.m., he took a passenger jeep bound for Bulacan. While the jeep was
issued cellular phone. She then reported the incident to the police authorities; however, the
on Epifanio de los Santos Avenue, the jeep was held up and the money kept by Hernandez was
thief was not located, and the cellphone was not recovered. She also reported the loss to the
taken, and the robbers jumped out of the jeep and ran. Hernandez chased the robbers and
Regional Director of TESDA, and she requested that she be freed from accountability for
caught up with one robber who was subsequently charged with robbery and pleaded guilty. The
the cellphone. The Resident Auditor denied her request on the ground that she lacked the
other robber who held the stolen money escaped. The Commission on Audit found Hernandez
diligence required in the custody of government property and was ordered to pay the purchase
negligent because he had not brought the cash proceeds of the checks to his office
value in the total amount of P4,238.00. The COA found no sufficient justification to grant the
in Ternate, Cavite for safekeeping, which is the normal procedure in the handling of funds. We
request for relief from accountability. We reversed the ruling and found that riding the LRT
held that Hernandez was not negligent in deciding to encash the check and bringing it home
cannot per se be denounced as a negligent act more so because Cruzs mode of transit was
to Marilao, Bulacan instead of Ternate, Cavite due to the lateness of the hour for the following
influenced by time and money considerations; that she boarded the LRT to be able to arrive
reasons: (1) he was moved by unselfish motive for his co-employees to collect their wages and
in Caloocan in time for her 3 pm meeting; that any prudent and rational person under similar
salaries the following day, a Saturday, a non-working, because to encashthe check on July 5, the
circumstance can reasonably be expected to do the same; that possession of
next working day after July 1, would have caused discomfort to l aborers who were dependent on
a cellphone should not hinder one from boarding the LRT coach as Cruz did considering that
their wages for sustenance; and (2) that choosing Marilao as a safer destination, being nearer,
whether she rode a jeep or bus, the risk of theft would have also been present; that because of
and in view of the comparative hazards in the trips to the two places, said decision seemed
her relatively low position and pay, she was not expected to have her own vehicle or to ride a
logical at that time. We further held that the fact that two robbers attacked him in broad daylight
taxicab; she did not have a government assigned vehicle; that placing the cellphone in a bag
in the jeep while it was on a busy highway and in the presence of other passengers could not be
away from covetous eyes and holding on to that bag as she did is ordinarily sufficient care of
said to be a result of his imprudence and negligence.
a cellphone while traveling on board the LRT; that the records did not show any specific act of negligence on her part and negligence can never be presumed.
(LRT)
Unlike in the Cruz case, the robbery in this case happened in petitioners' pawnshop and they were negligent in not exercising the precautions justly demanded of a pawnshop.
G.R. No. 172682 SULPICIO LINES, INC., Petitioner
vs. NAPOLEON SESANTE, NOW SUBSTITUTED BY MARIBEL ATILANO, KRISTEN MARIE, CHRISTIAN IONE, KENNETH KERRN AND KARISNA KATE, ALL SURNAMED SESANTE ,
Respondents WHEREFORE, except for the insurance aspect, the Decision of the Court of Appeals dated March 31, 2003 and its Resolution dated August 8, 2003, are AFFIRMED.
Costs against petitioners.
DECISION BERSAMIN, J.:
Moral damages are meant to enable the injured party to obtain the means, diversions or amusements in order to alleviate the moral suffering. Exemplary damages are designed to permit the courts to reshape behavior that is socially deleterious in its consequence by creating negative incentives or deterrents against such behavior. The Case
SO ORDERED.
This appeal seeks to undo and reverse the adverse decision promulgated on June 27, 2005, 1 whereby the Court of Appeals (CA) affirmed with modification the judgment of the Regional Trial Court (RTC), Branch 91, in Quezon City holding the petitioner liable to pay temperate and moral damages due to breach of contract of carriage. 2 Antecedents
On September 18, 1998, at around 12:55 p.m., the M/V Princess of the Orient, a passenger vessel owned and operated by the petitioner, sank near Fortune Island in Batangas. Of the 388 recorded passengers, 150 were lost. 3Napoleon Sesante, then a member of the Philippine National Police (PNP) and a lawyer, was one of the passengers who survived the sinking. He sued the petitioner for breach of contract and damages. 4 Sesante alleged in his complaint that the M/V Princess of the Orient left the Port of Manila while Metro Manila was experiencing stormy weather; that at around 11:00 p.m., he had noticed the vessel listing starboard, so he had gone to the uppermost deck where he witnessed the strong winds and big waves pounding the vessel; that at the same time, he had seen how the passengers had been panicking, crying for help and frantically scrambling for life jackets in the absence of the vessel's officers and crew; that sensing danger, he had called a certain Veney Ceballos through his cellphone to request him to inform the proper authorities of the situation; that thereafter, big waves had rocked the vessel, tossing him to the floor where he was pinned by a long steel bar; that he had freed himself only after another wave had hit the vessel; 5 that he had managed to stay afloat after the vessel had sunk, and had been carried by the waves to the coastline of Cavite and Batangas until he had been rescued; that he had suffered tremendous hunger, thirst, pain, fear, shock, serious anxiety and mental anguish; that he had sustained injuries,6and had lost money, jewelry, important documents, police uniforms and the .45 caliber pistol issued to him by the PNP; and that because it had committed bad faith in allowing the vessel to sail despite the storm signal, the petitioner should pay him actual and moral damages of !500,000.00 and !l,000,000.00, respectively. 7 In its defense, the petitioner insisted on the seaworthiness of the M/V Princess of the Orient due to its having been cleared to sail from the Port of Manila by the proper authorities; that the sinking had been due to force majeure; that it had not been negligent; and that its officers and crew had also not been negligent because they had made preparations to abandon the "'vessel because they had launched life rafts and had provided the passengers assistance in that regard. 8
Decision of the RTC
On October 12, 2001, the RTC rendered its judgment in favor of the respondent, 9 holding as follows: WHEREFORE, judgment is hereby rendered in favor of plaintiff Napoleon Sesante and against
defendant Sulpicio Lines, Inc., ordering said defendant to pay plaintiff: 1. Temperate damages in the amount of
!400,000.00;
2. Moral damages in the amount of One Million Pesos ( !l ,000,000.00); 3. Costs of suit. SO ORDERED.10 The RTC observed that the petitioner, being negligent, was liable to Sesante pursuant to Articles 1739 and 1759 of the Civil Code; that the petitioner had not established its due diligence in the selection and supervision of the vessel crew; that the ship officers had failed to inspect the stowage of cargoes despite being aware of the storm signal; that the officers and crew of the vessel had not immediately sent a distress signal to the Philippine Coast Guard; that the ship captain had not called for then "abandon ship" protocol; and that based on the report of the Board of Marine Inquiry (BMI), the erroneous maneuvering of the vessel by the captain during the extreme weather condition had been the immediate and proximate cause of the sinking.
THE ASSAILED DECISION ERRED IN APPLYING ARTICLE 1759 OF THE NEW CIVIL CODE AGAINST SULPICIO SANS A CLEAR-CUT FINDING OF SULPICIO'S BAD FAITH IN THE INCIDENT16 In other words, to be resolved are the following, namely: (1) Is the complaint for breach of contract and damages a personal action that does not survive the death of the plaintiff?; (2) Is the petitioner liable for damages under Article 1759 of the Civil Code?; and (3) Is there sufficient basis for awarding moral and temperate damages? Ruling of the Court
The appeal lacks merit. I
The petitioner sought reconsideration, but the RTC only partly granted its motion by reducing the temperate damages from !500,000.00 to !300,000.00. 11
An action for breach of contract of carriage
Dissatisfied, the petitioner appealed. 12 It was pending the appeal in the CA when Sesante passed away. He was substituted by his heirs. 13
The petitioner urges that Sesante's complaint for damages was purely personal and cannot be transferred to his heirs upon his death. Hence, the complaint should be dismissed because the death of the plaintiff abates a personal action.
Judgment of the CA
On June 27, 2005, the CA promulgated its assailed decision. It lowered the temperate damages to !120,000.00, which approximated the cost of Sesante's lost personal belongings; and held that despite the seaworthiness of the vessel, the petitioner remained civilly liable because its officers and crew had been negligent in performing their duties. 14
survives the death of the plaintiff
The petitioner's urging is unwarranted. Section 16, Rule 3 of the Rules of Court lays down the proper procedure in the event of the death of a litigant, viz.:
Issues
Section 16. Death of party; duty of counsel. - Whenever a party to a pending action dies, and the claim is not thereby extinguished , it shall be the duty of his counsel to inform the court within thirty (30) days after such death of the fact thereof, and to give the name and address of his legal representative or representatives. Failure of counsel to comply with his duty shall be a ground for disciplinary action.
The petitioner attributes the following errors to the CA, to wit:
The heirs of the deceased may be allowed to be substituted for the deceased, without
Sttill aggrieved, Sulpicio Lines moved for reconsideration, but the CA denied the motion. 15 Hence, this appeal.
I THE ASSAILED DECISION ERRED IN SUSTAINING THE AWARD OF MORAL DAMAGES, AS THE INSTANT CASE IS FOR ALLEGED PERSONAL INJURIES PREDICATED ON BREACH OF CONTRACT OF CARRIAGE, AND THERE BEING NO PROOF OF BAD FAITH ON THE PART OF SULPICIO II THE ASSAILED DECISION ERRED IN SUSTAINING THE AMOUNT OF MORAL DAMAGES AWARDED, THE SAME BEING UNREASONABLE, EXCESSIVE AND UNCONSCIONABLE, AND TRANSLATES TO UNJUST ENRICHMENT AGAINST SULPICIO III THE ASSAILED DECISION ERRED IN SUSTAINING THE AWARD OF TEMPERATE DAMAGES AS THE SAME CANNOT SUBSTITUTE FOR A FAILED CLAIM FOR ACTUAL DAMAGES, THERE BEING NO COMPETENT PROOF TO WARRANT SAID AWARD IV THE AWARD OF TEMPERATE DAMAGES IS UNTENABLE AS THE REQUISITE NOTICE UNDER THE LAW WAS NOT GIVEN TO SULPICIO IN ORDER TO HOLD IT LIABLE FOR THE ALLEGED LOSS OF SESANTE'S PERSONAL BELONGINGS V THE ASSAILED DECISION ERRED IN SUBSTITUTING THE HEIRS OF RESPONDENT SESANTE IN THE INST ANT CASE, THE SAME BEING A PERSONAL ACTION WHICH DOES NOT SURVIVE VI
requiring the appointment of an executor or administrator and the court may appoint a guardian ad litem for the minor heirs. xxxx Substitution by the heirs is not a matter of jurisdiction, but a requirement of due process. 17 It protects the right of due process belonging to any party, that in the event of death the deceased litigant continues to be protected and properly represented in the suit through the duly appointed legal representative of his estate.18 The application of the rule on substitution depends on whether or not the action survives the death of the litigant. Section 1, Rule 87 of the Rules of Court enumerates the following actions that survive the death of a party, namely: (1) recovery of real or personal property, or an interest from the estate; (2) enforcement of liens on the estate; and (3) recovery of damages for an injury to person or property. On the one hand, Section 5, Rule 86 of the Rules of Court lists the actions abated by death as including: (1) claims for funeral expenses and those for the last sickness of the decedent; (2) judgments for money; and (3) all claims for money against the deceased, arising from contract, express or implied. A contract of carriage generates a relation attended with public duty, neglect or malfeasance of the carrier's employees and gives ground for an action for damages. 19 Sesante's claim against the petitioner involved his personal injury caused by the breach of the contract of carriage. Pursuant to the aforecited rules, the complaint survived his death, and could be continued by his heirs following the rule on substitution. II The petitioner is liable for breach of contract of carriage
The petitioner submits that an action for damages based on breach of contract of carriage under Article 1759 of the Civil Code should be read in conjunction with Article 2201 of the same code; that although Article 1759 only provides for a presumption of negligence, it does not envision
automatic liability; and that it was not guilty of bad faith considering that the sinking of M/V Princess of the Orient had been due to a fortuitous event, an exempting circumstance under Article 1174 of the Civil Code. The submission has no substance. Article 1759 of the Civil Code does not establish a presumption of negligence because it explicitly makes the common carrier liable in the event of death or injury to passengers due to the negligence or fault of the common carrier's employees. It reads: Article 1759. Common carriers are liable for the death or injuries to passengers through the negligence or willful acts of the former's employees, although such employees may have acted beyond the scope of their authority or in violation of the orders of the common earners. This liability of the common carriers does not cease upon proof that they exercised all the diligence of a good father of a family in the selection and supervision of their employees. The liability of common carriers under Article 1759 is demanded by the duty of extraordinary diligence required of common carriers in safely carrying their passengers. 20 On the other hand, Article 1756 of the Civil Code lays down the presumption of negligence against the common carrier in the event of death or injury of its passenger, viz.: Article 1756. In case of death of or injuries to passengers, common carriers are presumed to have been at fault or to have acted negligently, unless they prove that they observed extraordinary diligence as prescribed in Articles 1733 and 1755. Clearly, the trial court is not required to make an express finding of the common carrier's fault or negligence.21 Even the mere proof of injury relieves the passengers from establishing the fault or negligence of the carrier or its employees. 22 The presumption of negligence applies so long as there is evidence showing that: (a) a contract exists between the passenger and the common carrier; and (b) the injury or death took place during the existence of such contract. 23 In such event, the burden shifts to the common carrier to prove its observance of extraordinary diligence, and that an unforeseen event or force majeure had caused the injury. 24 Sesante sustained injuries due to the buffeting by the waves and consequent sinking of M/V Princess of the Orient where he was a passenger. To exculpate itself from liability, the common carrier vouched for the seaworthiness of M/V Princess of the Orient, and referred to the BMI report to the effect that the severe weather condition - a force majeure – had brought about the sinking of the vessel. The petitioner was directly liable to Sesante and his heirs. A common carrier may be relieved of any liability arising from a fortuitous event pursuant to Article 117425 of the Civil Code. But while it may free a common carrier from liability, the provision still requires exclusion of human agency from the cause of injury or loss. 26 Else stated, for a common carrier to be absolved from liability in case of force majeure, it is not enough that the accident was caused by a fortuitous event. The common carrier must still prove that it did not contribute to the occurrence of the incident due to its own or its employees' negligence. 27 We explained in Schmitz Transport & Brokerage Corpora tion v. Transport Venture, Inc.,28 as follows: In order to be considered a fortuitous event, however, (1) the cause of the unforeseen and unexpected occurrence, or the failure of the debtor to comply with his obligation, must be independent of human will; (2) it must be impossible to foresee the event which constitute the caso fortuito, or if it can be foreseen it must be impossible to avoid; (3) the occurrence must be such as to render it impossible for the debtor to fulfill his obligation in any manner; and (4) the obligor must be free from any participation in the aggravation of the injury resulting to the creditor. [T]he principle embodied in the act of God doctrine strictly requires that the act must be occasioned solely by the violence of nature. Human intervention is to be excluded from creating or entering into the cause of the mischief. When the effect is found to be in part the result of the participation of man, whether due to his active intervention or neglect or
failure to act, the whole occurrence is then humanized and removed from the rules applicable to the acts of God. 29 (bold underscoring supplied for emphasis)
The petitioner has attributed the sinking of the vessel to the storm notwithstanding its position on the seaworthiness of M/V Princess of the Orient. 1âwphi1 Yet, the findings of the BMI directly contradicted the petitioner's attribution, as follows: 7. The Immediate and the Proximate Cause of the Sinking The Captain's erroneous maneuvers of the MIV Princess of the Orient minutes before she sunk [sic] had caused the accident. It should be noted that during the first two hours when the ship left North Harbor, she was navigating smoothly towards Limbones Point. During the same period, the ship was only subjected to the normal weather stress prevailing at the time. She was then inside Manila Bar. The waves were observed to be relatively small to endanger the safety of the ship. It was only when the MV Princess of the Orient had cleared Limbones Pt. while navigating towards the direction of the Fortune Island when this agonizing misfortune struck the ship. Initially, a list of three degrees was observed. The listing of the ship to her portside had continuously increased. It was at this point that the captain had misjudged the situation. While the ship continuously listed to her portside and was battered by big waves, strong southwesterly winds, prudent judgement [sic] would dictate that the Captain should have considerably reduced the ship's speed. He could have immediately ordered the Chief Engineer to slacken down the speed. Meanwhile, the winds and waves continuously hit the ship on her starboard side. The waves were at least seven to eight meters in height and the wind velocity was a[t] 25 knots. The MV Princess of the Orient being a close-type ship (seven decks, wide and high superstructure) was vulnerable and exposed to the howling winds and ravaging seas. Because of the excessive movement, the solid and liquid cargo below the decks must have shifted its weight to port, which could have contributed to the tilted position of the ship. Minutes later, the Captain finally ordered to reduce the speed of the ship to 14 knots. At the same time, he ordered to put ballast water to the starboard-heeling tank to arrest the continuous listing of the ship. This was an exercise in futility because the ship was already listing between 15 to 20 degrees to her portside. The ship had almost reached the maximum angle of her loll. At this stage, she was about to l ose her stability. Despite this critical situation, the Captain executed several starboard maneuvers. Steering the course of the Princess to starboard had greatly added to her tilting. In the open seas, with a fast speed of 14 knots, advance maneuvers such as this would tend to bring the body of the ship in the opposite side. In navigational terms, this movement is described as the centripetal force. This force is produced by the water acting on the side of the ship away from the center of the turn. The force is considered to act at the center of lateral resistance which, in this case, is the centroid of the underwater area of the ship's side away from the center of the turn. In the case of the Princess, when the Captain maneuvered her to starboard, her body shifted its weight to port. Being already inclined to an angle of 15 degrees, coupled with the instantaneous movement of the ship, the cargoes below deck could have completely shifted its position and weight towards portside. By this time, the ship being ravaged simultaneously by ravaging waves and howling winds on her starboard side, finally lost her grip. 30 Even assuming the seaworthiness of the M/VPrincess of the Orient, the petitioner could not escape liability considering that, as borne out by the aforequoted findings of the BMI, the immediate and proximate cause of the sinking of the vessel had been the gross negligence of its captain in maneuvering the vessel. The Court also notes that Metro Manila was experiencing Storm Signal No. 1 during the time of the sinking.31 The BMI observed that a vessel like the M/V Princess of the Orient, which had a volume of 13.734 gross tons, should have been capable of withstanding a Storm Signal No. I considering that the responding fishing boats of less than 500 gross tons had been able to weather through the same waves and winds to go to the succor of the sinking vessel and had actually rescued several of the latter's distressed passengers. 32 III The award of moral damages and temperate damages is proper
The petitioner argues that moral damages could be meted against a common carrier only in the following instances, to wit: (1) in the situations enumerated by Article 2201 of the Civil Code; (2) in cases of the death of a passenger; or (3)where there was bad faith on the part of the common carrier. It contends that none of these instances obtained herein; hence, the award should be deleted. We agree with the petitioner that moral damages may be recovered in an action upon breach of contract of carriage only when: (a) death of a passenger results, or ( b) it is proved that the carrier was guilty of fraud and bad faith, even if death does not result. 33 However, moral damages may be awarded if the contractual breach is found to be wanton and deliberately injurious, or if the one responsible acted fraudulently or with malice or bad faith. 34 The CA enumerated the negligent acts committed by the officers and crew of M/V Princess of the Orient, viz.: x x x. [W]hile this Court yields to the findings of the said investigation report, yet it should be observed that what was complied with by Sulpicio Lines were only the basic and minimal safety standards which would qualify the vessel as seaworthy. In the same report however it also revealed that the immediate and proximate cause of the sinking of the M/V Princess of the Orient was brought by the following: erroneous maneuvering command of Captain Esrum Mahilum and due to the weather condition prevailing at the time of the tragedy. There is no doubt that under the circumstances the crew of the vessel were negligent in manning it. In fact this was clearly established by the investigation of the Board of Marine Inquiry where it was found that: The Chief Mate, when interviewed under oath, had attested that he was not able to make stability calculation of the ship vis-à-vis her cargo. He did not even know the metacentric height (GM) of the ship whether it be positive or negative. As cargo officer of the ship, he failed to prepare a detailed report of the ship's cargo stowage plan. He likewise failed to conduct the soundings (measurement) of the ballast tanks before the ship departed from port. He readily presumed that the ship was full of ballast since the ship was fully ballasted when she left Cebu for Manila on 16 September 1998 and had never discharge[d] its contents since that time. Being the officer-in-charge for emergency situation (sic) like this, he failed to execute and supervise the actual abandonship (sic) procedure. There was no announcement at the public address system of abandonship (sic), no orderly distribution of life jackets and no orderly launching of life rafts. The witnesses have confirmed this finding on their sworn statements. There was miscalculation in judgment on the part of the Captain when he erroneously navigated the ship at her last crucial moment.x x x To aggravate his case, the Captain, having full command and responsibility of the MV Princess of the Orient, had failed to ensure the proper execution of the actual abandoning of the ship. The deck and engine officers (Second Mate, Third Mate, Chief Engineers, Second Engineer, Third Engineer and Fourth Engineer), being in charge of their respective abandonship (sic) post, failed to supervise the crew and passengers in the proper execution of abandonship (sic) procedure.
mind that moral damages are not intended to impose a penalty on the wrongdoer, or to enrich the plaintiff at the expense of the defendant. 37 The amount of the moral damages must always reasonably approximate the extent of injury and be proportional to the wrong committed. 38 The Court recognizes the mental anguish, agony and pain suffered by Sesante who fought to survive in the midst of the raging waves of the sea while facing the immediate prospect of losing his life. His claim for moral and economic vindication is a bitter remnant of that most infamous tragedy that left hundreds of families broken in its wake. The anguish and moral sufferings he sustained after surviving the tragedy would always include the memory of facing the prospect of his death from drowning, or dehydration, or being preyed upon by sharks. Based on the established circumstances, his survival could only have been a miracle wrought by God's grace, by which he was guided in his desperate swim for the safety of the shore. But even with the glory of survival, he still had to grapple with not just the memory of having come face to face with almost certain death, but also with having to answer to the instinctive guilt for the rest of his days of being chosen to live among the many who perished in the tragedy. 39 While the anguish, anxiety, pain and stress experienced by Sesante during and after the sinking cannot be quantified, the moral damages to be awarded should at least approximate the reparation of all the consequences of the petitioner's negligence. With moral damages being meant to enable the injured party to obtain the means, diversions or amusements in order to alleviate his moral and physical sufferings, 40 the Court is called upon to ensure that proper recompense be allowed to him, through his heirs. For this purpose, the amount of !l,000,000.00, as granted by the RTC and affirmed by the CA, is maintained. The petitioner contends that its liability for the loss of Sesante' s personal belongings should conform with A1iicle 1754, in relation to Articles 1998, 2000 to 2003 of the Civil Code, which provide: Article 1754. The provisions of Articles 1733 to 1753 shall apply to the passenger's baggage which is not in his personal custody or in that of his employees. As to other baggage, the rules in Articles 1998 and 2000 to 2003 concerning the responsibility of hotel-keepers shall be applicable. xxxx Article 1998. The deposit of effects made by travellers in hotels or inns shall also be regarded as necessary. The keepers of hotels or inns shall be responsible for them as depositaries, provided that notice was given to them, or to their employees, of the effects brought by the guests and that, on the part of the latter, they take the precautions which said hotel-keepers or their substitutes advised relative to the care and vigilance of their effects. xxxx Article 2000. The responsibility referred to in the two preceding articles shall include the loss of, or injury to the personal property of the guests caused by the servants or employees of the keepers of hotels or inns as well as by strangers; but not that which may proceed from any force majeure. The fact that travellers are constrained to rely on the vigilance of the keeper of the hotel or inn shall be considered in determining the degree of care required of him. Article 2001. The act of a thief or robber, who has entered the hotel is not deemed force majeure, unless it is done with the use of arms or through an irresistible force.
The Radio Officer (spark) failed to send the SOS message in the internationally accepted communication network (VHF Channel 16). Instead, he used the Single Side Band (SSB) radio in informing the company about the emergency situation. x x x x 35
Article 2002. The hotel-keeper is not liable for compensation if the loss is due to the acts of the guest, his family, servants or visitors, or if the loss arises from the character of the things brought into the hotel.
The aforestated negligent acts of the officers and crew of M/V Princess of the Orient could not be ignored in view of the extraordinary duty of the common carrier to ensure the safety of the passengers. The totality of the negligence by the officers and crew of M/V Princess of the Orient, coupled with the seeming indifference of the petitioner to render assistance to Sesante, 36 warranted the award of moral damages.
Article 2003. The hotel-keeper cannot free himself from responsibility by posting notices to the effect that he is not liable for the articles brought by the guest. Any stipulation to the contrary between the hotel-keeper and the guest whereby the responsibility of the former as set forth in Articles 1998 to 2001 is suppressed or diminished shall be void.
While there is no hard-and-fast rule in determining what is a fair and reasonable amount of moral damages, the discretion to make the determination is lodged in the trial court with the limitation that the amount should not be palpably and scandalously excessive. The trial court then bears in
The petitioner denies liability because Sesante' s belongings had remained in his custody all throughout the voyage until the sinking, and he had not notified the petitioner or its employees about such belongings. Hence, absent such notice, l iability did not attach to the petitioner.
Is notification required before the common carrier becomes liable for lost belongings that remained in the custody of the passenger? We answer in the negative. The rule that the common carrier is always responsible for the passenger's baggage during the voyage needs to be emphasized. Article 1754 of the Civil Code does not exempt the common carrier from liability in case of loss, but only highlights the degree of care required of it depending on who has the custody of the belongings. Hence, the law requires the common carrier to observe the same diligence as the hotel keepers in case the baggage remains with the passenger; otherwise, extraordinary diligence must be exercised. 41 Furthermore, the liability of the common carrier attaches even if the loss or damage to the belongings resulted from the acts of the common carrier's employees, the only exception being where such loss or damages is due to force majeure.42 In YHT Realty Corporation v. Court of Appeals,43we declared the actual delivery of the goods to the innkeepers or their employees as unnecessary before liability could attach to the hotelkeepers in the event of loss of personal belongings of their guests considering that the personal effects were inside the hotel or inn because the hotelkeeper shall remain accountable. 44 Accordingly, actual notification was not necessary to render the petitioner as the common carrier liable for the lost personal belongings of Sesante. By allowing him to board the vessel with his belongings without any protest, the petitioner became sufficiently notified of such belongings. So long as the belongings were brought inside the premises of the vessel, the petitioner was thereby effectively notified and consequently duty-bound to observe the required diligence in ensuring the safety of the belongings during the voyage. Applying Article 2000 of the Civil Code, the petitioner assumed the liability for loss of the belongings caused by the negligence of its officers or crew. In view of our finding that the negligence of the officers and crew of the petitioner was the immediate and proximate cause of the sinking of the M/V Princess of the Orient, its liability for Sesante' s lost personal belongings was beyond question.
x x x. It is argued that this Court is without jurisdiction to adjudicate this exemplary damages since there was no allegation nor prayer, nor proof, nor counterclaim of error for the same by the appellees. It is to be observed however, that in the complaint, plaintiffs "prayed for such other and further relief as this Court may deem just and equitable." Now, since the body of the complaint sought to recover damages against the defendant-carrier wherein plaintiffs prayed for indemnification for the damages they suffered as a result of the negligence of said Silverio Marchan who is appellant's employee; and since exemplary damages is intimately connected with general damages, plaintiffs may not be expected to single out by express term the kind of damages they arc trying to recover against the defendant's carrier. Suffice it to state that when plaintiffs prayed in their complaint for such other relief and remedies that may be availed of under the premises, in effect, therefore, the court is called upon to exercise and use its discretion whether the imposition of punitive or exemplary damages even though not expressly prayed or pleaded in the plaintiffs' complaint."
x x x It further appears that the amount of exemplary damages need not be proved, because its determination depends upon the amount of compensatory damages that may be awarded to the claimant. If the amount of exemplary damages need not be proved, it need not also be alleged, and the reason is obvious because it is merely incidental or dependent upon what the court may award as compensatory damages. Unless and until this premise is determined and established, what may be claimed as exemplary damages would amount to a mere surmise or speculation. It follows as a necessary consequence that the amount of exemplary damages need not be pleaded in the complaint because the same cannot be predetermined. One can merely ask that it be determined by the court if in the use of its discretion the same is warranted by the evidence, and this is just what appellee has done. (Bold underscoring supplied for emphasis)
The petitioner claims that temperate damages were erroneously awarded because Sesante had not proved pecuniary loss; and that the CA merely relied on his self-serving testimony.
And, secondly, exemplary damages are designed by our civil law to "permit the courts to reshape behavior that is socially deleterious in its consequence by creating negative incentives or deterrents against such behavior. " 51 The nature and purpose for this kind of damages have been well-stated in People v. Dalisay,52to wit:
The award of temperate damages was proper.
Also known as 'punitive' or 'vindictive' damages, exemplary or corrective damages are
Temperate damages may be recovered when some pecuniary loss has been suffered but the amount cannot, from the nature of the case, be proven with certainty. 45 Article 222446 of the Civil Code expressly authorizes the courts to award temperate damages despite the lack of certain proof of actual damages. 47 Indubitably, Sesante suffered some pecuniary loss from the sinking of the vessel, but the value of the loss could not be established with certainty. The CA, which can try facts and appreciate evidence, pegged the value of the lost belongings as itemized in the police report at P120,000.00. The valuation approximated the costs of the lost belongings. In that context, the valuation of !120,000.00 is correct, but to be regarded as temperate damages. In fine, the petitioner, as a common carrier, was required to observe extraordinary diligence in ensuring the safety of its passengers and their personal belongings. It being found herein short of the required diligence rendered it liable for the resulting injuries and damages sustained by Sesante as one of its passengers. Should the petitioner be further held liable for exemplary damages? In contracts and quasi-contracts, the Court has the discretion to award exemplary damages if the defendant acted in a wanton, fraudulent, reckless, oppressive, or malevolent manner. 48 Indeed, exemplary damages cannot be recovered as a matter of right, and it is left to the court to decide whether or not to award them. 49 In consideration of these legal premises for the exercise of the judicial discretion to grant or deny exemplary damages in contracts and quasicontracts against a defendant who acted in a wanton, fraudulent, reckless, oppressive, or malevolent manner, the Court hereby awards exemplary damages to Sesante. First of all, exemplary damages did not have to be specifically pleaded or proved, because the courts had the discretion to award them for as long as the evidence so warranted. In Marchan v. Mendoza,50 the Court has relevantly discoursed:
intended to serve as a deterrent to serious wrong doings, and as a vindication of undue sufferings and wanton invasion of the rights of an injured or a punishment for those guilty of outrageous conduct. These terms are generally, but not always, used
interchangeably. In common law, there is preference in the use of exemplary damages when the award is to account for injury to feelings and for the sense of indignity and humiliation suffered by a person as a result of an injury that has been maliciously and wantonly inflicted, the theory being that there should be compensation for the hurt caused by the highly reprehensible conduct of the defendant - associated with such circumstances as willfulness, wantonness, malice, gross negligence or recklessness, oppression, insult or fraud or gross fraud - that intensifies the injury. The terms punitive or vindictive damages are often used to refer to those species of damages that may be awarded against a person to punish him for his outrageous conduct. In either case, these damages arc intended in good measure to deter the wrongdoer and others like him from similar conduct in the future. (Bold underscoring supplied for emphasis)
The BMI found that the "erroneous maneuvers" during the ill-fated voyage by the captain of the petitioner's vessel had caused the sinking. After the vessel had cleared Limbones Point while navigating towards the direction of Fortune Island, the captain already noticed the listing of the vessel by three degrees to the portside of the vessel, but, according to the BMI, he did not exercise prudence as required by the situation in which his vessel was suffering the battering on the starboard side by big waves of seven to eight meters high and strong southwesterly winds of 25 knots. The BMI pointed out that he should have considerably reduced the speed of the vessel based on his experience about the vessel - a close-type ship of seven decks, and of a wide and high superstructure - being vulnerable if exposed to strong winds and high waves. He ought to have also known that maintaining a high speed under such circumstances would have shifted the solid and liquid cargo of the vessel to port, worsening the tilted position of the vessel. It was only after a few minutes thereafter that he finally ordered the speed to go down to 14 knots, and to put ballast water to the starboard-heeling tank to arrest the continuous listing at portside. By then, his moves became an exercise in futility because, according to the BMI, the vessel was
already listing to her portside between 15 to 20 degrees, which was almost the maximum angle of the vessel's loll. It then became inevitable for the vessel to lose her stability. The BMI concluded that the captain had executed several starboard maneuvers despite the critical situation of the vessel, and that the maneuvers had greatly added to the tilting of the vessel. It observed: x x x In the open seas, with a fast speed of 14 knots, advance maneuvers such as this would tend to bring the body of the ship in the opposite side. In navigational terms, this movement is described as the centripetal force. This force is produced by the water acting on the side of the ship away from the center of the turn. The force is considered to act at the center of lateral resistance which, in this case, is the centroid of the underwater area of the ship's side away from the center of the turn. In the case of the Princess, when the Captain maneuvered her to starboard, her body shifted its weight to port. Being already inclined to an angle of 15 degrees, coupled with the instantaneous movement of the ship, the cargoes below deck could have completely shifted its position and weight towards portside. By this time, the ship being ravaged simultaneously by ravaging waves and howling winds on her starboard side, finally lost her grip. 53
Clearly, the petitioner and its agents on the scene acted wanto nly and recklessly. Wanton and reckless are virtually synonymous in meaning as respects liability for conduct towards others. 54 Wanton means characterized by extreme recklessness and utter disregard for the rights of others; or marked by or manifesting arrogant recklessness of justice or of rights or feelings of others. 55 Conduct is reckless when it is an extreme departure from ordinary care, in a situation in which a high degree of danger is apparent. It must be more than any mere mistake resulting from inexperience, excitement, or confusion, and more than mere thoughtlessness or inadvertence, or simple inattention. 56 The actuations of the petitioner and its agents during the incident attending the unfortunate sinking of the M/V Princess of the Orient were far below the standard of care and circumspection that the law on common carriers demanded. Accordingly, we hereby fix the sum of !l , 000,000.00 in order to serve fully the objective of exemplarity among those engaged in the business of transporting passengers and cargo by sea. The amount would not be excessive, but proper. As the Court put it in Pereria v. Zarate:57 Anent the !1,000,000.00 allowed as exemplary damages, we should not reduce the amount if only to render effective the desired example for the public good. As a common carrier, the Pereñas needed to be vigorously reminded to observe their duty to exercise extraordinary diligence to prevent a similarly senseless accident from happening again. Only by an award of exemplary damages in that amount would suffice to instill in them and others similarly situated like them the ever-present need for greater and constant vigilance in the conduct of a business imbued with public interest. 58 (Bold underscoring supplied for emphasis) WHEREFORE, the Court AFFIRMS the decision promulgated on June 27, 2005 with the MODIFICATIONS that: (a) the amount of moral damages is fixed at !l,000,000.00; (b) the
amount of !l,000,000.00 is granted as exemplary damages; and (c) the sum of !l20,000.00 is allowed as temperate damages, all to be paid to the heirs of the late Napoleon Sesante. In addition, all the amounts hereby awarded shall earn interest of 6% per annum from the finality of this decision until fully paid. Costs of suit to be paid by the petitioner. SO ORDERED.
G.R. No. 183794, June 13, 2016 SPOUSES JAIME AND MATILDE POON , Petitioners, v. PRIME SAVINGS BANK REPRESENTED BY THE PHILIPPINE DEPOSIT INSURANCE CORPORATION AS STATUTORY LIQUIDATOR , Respondent . DECISION SERENO, C.J.:
Certiorari 1 assailing
Before this Court is a Petition for Review on the Court of Appeals (CA) Decision2which affirmed the Decision 3 issued by Branch 21, Regional Trial Court (RTC) of Naga City. The RTC ordered the partial rescission of the penal clause in the lease contract over the commercial building of Spouses Jaime and Matilde Poon (petitioners). It directed petitioners to return to Prime Savings Bank (respondent) the sum of P1,740,000, representing one-half of the unused portion of its advance rentals, in view of the closure of respondent's business upon order by the Bangko Sentral ng Pilipinas (BSP). Antecedent Facts
agreement had become inoperative, because respondent's closure constituted force majeure. The PDIC likewise invoked the principle of rebus sic stantibus under Article 1267 of Republic Act No. 386 (Civil Code) as alternative legal basis for demanding the refund. Petitioners, however, refused the PDIC's demand.12 They maintained that they were entitled to retain the remainder of the advance rentals following paragraph 24 of their Contract. Consequently, respondent sued petitioners before the RTC of Naga City for a partial rescission of contract and/or recovery of a sum of money. The RTC Ruling
After trial, the RTC ordered the partial rescission of the lease agreement, disposing as follows:ChanRoblesVirtualawlibrary WHEREFORE, judgment is hereby entered ordering the partial rescission of the Contract of Lease dated November 3, 1996 particularly the second paragraph of Par. 24 thereof and directing the defendant-spouses Jaime and Matilde Poon to return or refund to the Plaintiff the sum of One Million Seven Hundred Forty Thousand Pesos (P1,740,000) representing one-half of the unused portion of the advance rentals.
The facts are undisputed.
Parties' respective claims for damages and attorney's fees are dismissed.
Petitioners owned a commercial building in Naga City, which they used for their bakery business. On 3 November 2006, Matilde Poon and respondent executed a 10-year Contract of Lease 4 (Contract) over the building for the latter's use as its branch office in Naga City. They agreed to a fixed monthly rental of P60,000, with an advance payment of the rentals for the first 100 months in the amount of P6,000,000. As agreed, the advance payment was to be applied immediately, while the rentals for the remaining period of the Contract were to be paid on a monthly basis.5chanrobleslaw
No costs.13chanroblesvirtuallawlibrary
In addition, paragraph 24 of the Contract provides:ChanRoblesVirtualawlibrary 24. Should the lease[d] premises be closed, deserted or vacated by the LESSEE, the LESSOR shall have the right to terminate the lease without the necessity of serving a court order and to immediately repossess the leased premises. Thereafter the LESSOR shall open and enter the leased premises in the presence of a representative of the LESSEE (or of the proper authorities) for the purpose of taking a complete inventory of all furniture, fixtures, equipment and/or other materials or property found within the leased premises. The LESSOR shall thereupon have the right to enter into a new contract with another party. All advanced rentals shall be forfeited in favor of the LESSOR.6chanroblesvirtuallawlibrary Barely three years later, however, the BSP placed respondent under the receivership of the Philippine Deposit Insurance Corporation (PDIC) by virtue of BSP Monetary Board Resolution No. 22,7 which reads:ChanRoblesVirtualawlibrary On the basis of the report of Mr. Candon B. Guerrero, Director of Thrift Banks and Non-Bank Financial Institutions (DTBNBF1), in his memorandum dated January 3, 2000, which report showed that the Prime Savings Bank, Inc. (a) is unable to pay its liabilities as they became due in the ordinary course of business; (b) has insufficient realizable assets as determined by the Bangko Sentral ng Pilipinas to meet its liabilities; (c) cannot continue in business without involving probable losses to its depositors and creditors; and (d) has wilfully violated cease and desist orders under Section 37 that has become final, involving acts or transactions which amount to fraud or a dissipation of the assets of the institution ; x x x.8 (Emphasis supplied )
The BSP eventually ordered respondent's liquidation under Monetary Board Resolution No. 664.9chanrobleslaw On 12 May 2000, respondent vacated the leased premises and surrendered them to petitioners. 10Subsequently, the PDIC issued petitioners a demand letter 11 asking for the return of the unused advance rental amounting to P3,480,000 on the ground that paragraph 24 of the lease
The trial court ruled that the second clause in paragraph 24 of the Contract was penal in nature, and that the clause was a valid contractual agreement.14 Citing Provident Savings Bank v. CA15 as legal precedent, it ruled that the premature termination of the lease due to the BSP's closure of respondent's business was actually involuntary. Consequently, it would be iniquitous for petitioners to forfeit the entire amount of P 3,480,000. 16 Invoking its equity jurisdiction under Article 1229 of the Civil Code,17 the trial court limited the forfeiture to only one-half of that amount to answer for respondent's unpaid utility bills and E-VAT, as well as petitioner's lost business opportunity from its former bakery business.18chanrobleslaw The CA Ruling
On appeal, the CA affirmed the RTC Decision, 19 but had a different rationale for applying Article 1229. The appellate court ruled that the closure of respondent's business was not a fortuitous event. Unlike Provident Savings Bank ,20 the instant case was one in which respondent was found to have committed fraudulent acts and transactions. Lacking, therefore, was the first requisite of a fortuitous event, i.e, that the cause of the breach of obligation must be independent of the will of the debtor.21chanrobleslaw Still, the CA sustained the trial court's interpretation of the proviso on the forfeiture of advance rentals as a penal clause and the consequent application of Article 1229. The appellate court found that the forfeiture clause in the Contract was intended to prevent respondent from defaulting on the latter's obligation to finish the term of the lease. It further found that respondent had partially performed that obligation and, therefore, the reduction of the penalty was only proper. Similarly, it ruled that the RTC had properly denied petitioners' claims for actual and moral damages for lack of basis. 22chanrobleslaw On 10 July 2008, 23 the CA denied petitioners' Motion for Reconsideration. Hence, this Petition. Issues
The issues to be resolved are whether (1) respondent may be released from its contractual obligations to petitioners on grounds of fortuitous event under Article 1174 of the Civil Code and unforeseen event under Article 1267 of the Civil Code; (2) the proviso in the parties' Contract allowing the forfeiture of advance rentals was a penal clause; and (3) the penalty agreed upon by the parties may be equitably reduced under Article 1229 of the Civil Code.
COURT RULING
We DENY the Petition. Preliminarily, we address petitioners' claim that respondent had no cause of action for rescission, because this case does not fall under any of the circumstances enumerated in Articles 138124 and 1382 25cralawred of the Civil Code. The legal remedy of rescission, however, is by no means limited to the situations covered by the above provisions. The Civil Code uses rescission in two different contexts, namely: (1) rescission on account of breach of contract under Article 1191; and (2) rescission by reason of lesion or economic prejudice under Article 1381. 26 While the term "r escission" is used in Article 1191, "resolution" was the original term used in the old Civil Code, on which the article was based. Resolution is a principal action based on a breach by a party, while rescission under Article 1383 is a subsidiary action limited to cases of rescission for lesion under Article 1381 of the New Civil Code. 27chanrobleslaw It is clear from the allegations in paragraphs 12 and 13 of the Complaint 28 that respondent's right of action rested on the alleged abuse by petitioners of their right under paragraph 24 of the Contract. Respondent's theory before the trial court was that the tenacious enforcement by petitioners of their right to forfeit the advance rentals was tainted with bad faith, because they knew that respondent was already insolvent. In other words, the action instituted by respondent was for the rescission of reciprocal obligations under Article 1191. The lower courts, therefore, correctly ruled that Articles 1381 and 1382 were inapposite. We now resolve the main issues. The closure of respondent's business was neither a fortuitous nor an unforeseen event that rendered the lease agreement functus officio.
Respondent posits that it should be released from its contract with petitioners, because the closure of its business upon the BSP's order constituted a fortuitous event as the Court held in Provident Savings Bank .29chanrobleslaw The cited case, however, must always be read in the context of the earlier Decision in Central Bank v. Court of Appeals.30 The Court ruled in that case that the Monetary Board had acted arbitrarily and in bad faith in ordering the closure of Provident Savings Bank. Accordingly, in the subsequent case of Provident Savings Bank it was held that fuerza mayor had interrupted the prescriptive period to file an action for the foreclosure of the subject mortgage. 31chanrobleslaw In contrast, there is no indication or allegation that the BSP's action in this case was tainted with arbitrariness or bad faith. Instead, its decision to place respondent under receivership and liquidation proceedings was pursuant to Section 30 of Republic Act No. 7653. 32 Moreover, respondent was partly accountable for the closure of its banking business. It cannot be said, then, that the closure of its business was independent of its will as in the case of Provident Savings Bank. The legal effect is analogous to that created by contributory negligence in quasidelict actions. The period during which the bank cannot do business due to insolvency is not a fortuitous event, 33 unless it is shown that the government's action to place a bank under receivership or liquidation proceedings is tainted with arbitrariness, or that the regulatory body has acted without jurisdiction.34chanrobleslaw As an alternative justification for its premature termination of the Contract, respondent lessee invokes the doctrine of unforeseen event under Article 1267 of the Civil Code, which provides:ChanRoblesVirtualawlibrary Art. 1267. When the service has become so difficult as to be manifestly beyond the contemplation of the parties, the obligor may also be released therefrom, in whole or in part.
The theory of rebus sic stantibus in public international law is often cited as the basis of the above article. Under this theory, the parties stipulate in light of certain prevailing conditions, and the theory can be made to apply when these conditions cease to exist. 35 The Court, however, has once cautioned that Article 1267 is not an absolute application of the principle of rebus sic stantibus, otherwise, it would endanger the security of contractual relations. After all, parties to a contract are presumed to have assumed the risks of unfavorable developments. It is only in absolutely exceptional changes of circumstance, therefore, that equity demands assistance for the debtor.36chanrobleslaw Tagaytay Realty Co., Inc. v. Gacutan37 lays down the requisites for the application of Article
1267, as follows: chanRoblesvirtualLawlibrary1. The event or change in circumstance could not have been foreseen at the time of the execution of the contract. 2. It makes the performance of the contract extremely difficult but not impossible. 3. It must not be due to the act of any of the parties. 4. The contract is for a future prestation. 38chanrobleslaw The difficulty of performance should be such that the party seeking to be released from a contractual obligation would be placed at a disadvantage by the unforeseen event. Mere inconvenience, unexpected impediments, increased expenses, 39 or even pecuniary inability to fulfil an engagement, 40 will not relieve the obligor from an undertaking that it has knowingly and freely contracted. The law speaks of "service." This term should be understood as referring to the performance of an obligation or a prestation. 41 A prestation is the object of the contract; i.e., it is the conduct (to give, to do or not to do) required of the parties. 42 In a reciprocal contract such as the lease in this case, one obligation of respondent as the lessee was to pay the agreed rents for the whole contract period.43 It would be hard-pressed to complete the lease term since it was already out of business only three and a half years into the 10-year contract period. Without a doubt, the second and the fourth requisites mentioned above are present in this case. The first and the third requisites, however, are lacking. It must be noted that the lease agreement was for 10 years. As shown by the unrebutted testimony of Jaime Poon during trial, the parties had actually considered the possibility of a deterioration or loss of respondent's business within that period:ChanRoblesVirtualawlibrary ATTY. SALES Q.
Now to the offer of that real estate broker for possible lease of your property at No. 38 General Luna Street, Naga City which was then the Madam Poon Bakery, what did you tell your real estate broker?
WITNESS (JAIME POON) A.
When Mrs. Lauang approached me, she told me that she has a client who wants to lease a property in Naga City.
Q.
Did she disclose to you the identity of her client?
A.
Yes, Sir.
Q.
What was the name of her client?
Q.
So what is your answer when you were asked for the amount of the advances?
A.
That is the Prime Savings Bank.
A.
I told her I need 7 million pesos because I need to pay my debts.
Q.
After you have known that it was the Prime Savings Bank that [wanted] to lease your property located at No. 38 General Luna St., Naga City, what did you tell Mrs. Lauang[?]
xx xx
A.
I told her that if the price is good, I am willing to give up the place where this bakery of mine is situated.
Q.
So, did Mrs. Lauang give you the quotation as to the price?
A.
Yes, Sir.
Q.
What was the amount?
A.
She asked first if how much I demand for the price.
Q.
What did you tell her?
A.
I told her, if they can give me P100,000.00 for the rental, I will give up the place.
Q.
What do you mean P100,000.00 rental?
A.
That is only for the establishment [concerned].
Q.
What was the period to be covered by the P100,000.00 rental?
A.
That is monthly basis.
Q.
So after telling Mrs. Lauang that you can be amenable to lease the place for P100,000.00 monthly, what if any, did Mrs. Lauang tell you?
A.
She told me it is very high. And then she asked me if it is still negotiable, I answered, yes.
Q.
So, what happened after your clarified to her that [it is] still negotiable?
A.
She asked me if there is other condition, and I answered her, yes, if your client can give me advances I can lease my property.
xxxx
Q.
Who was with her when she came over?
A.
A certain guy name Ricci and said that he is the assistant manager of the Prime Savings Bank.
Q.
What did you and Mr. Ricci talk about?
A.
I told him the same story as I talked with Mrs. Lauang.
Q.
Was the agreement finally reached between you and Mr. Ricci?
A.
Not yet, Sir.
Q.
What happened after that?
A.
He said that he [will discuss] the matter with his higher officer, the branch manager in the person of Henry Lee.
Q.
Were you able to meet this Henry Lee?
A.
After a week later.
Q.
Who was with Henry Lee?
A.
Mrs. Lauang.
Q.
Was there a final agreement on the day when you and Henry Lee met?
A.
Not yet, he offered to reduce the rental and also the advances. Finally I gave way after 2 or 3 negotiations.
Q.
What happened after 2 or 3 negotiations?
A.
We arrived at P60,000.00 for monthly rentals and P6,000,000.00 advances for 100 months.
Q.
Was the agreement between you and the representative of the Prime Savings Bank reduced into writing?
Q.
A.
Yes Sir.
A.
And that is what is found in paragraph 24 of the Contract of Lease which I asked you to read? That is true.44
Clearly, the closure of respondent's business was not an unforeseen event. As the lease was long-term, it was not lost on the parties that such an eventuality might occur, as it was in fact covered by the terms of their Contract. Besides, as We have previously discussed, the event was not independent of respondent's will.
xx xx
The forfeiture clause in the Contract is penal in nature.
Q.
A.
Now, Mr. Poon, I would like to direct your attention to paragraphs 4 and 5 of the contract of lease which I read: Inasmuch as the leased property is presently mortgaged with the PCI Bank, the Lessor and the Lessee hereby agree that another property with a clean title shall serve as security for herein Lessee; Provided that the mortgaged property with PCI Bank is cancelled, the Lessee agrees that the above-mentioned property shall be released to herein Lessor; paragraph 5 says: It is hereby stipulated that should the leased property be foreclosed by the PCI Bank or any other banking or financial institution, all unused rentals shall be returned by the Lessor to the Lessee. Now, my question is: Who asked or requested that paragraphs 4 and 5 be incorporated in the contract of lease? Mr. Lee himself.
Q.
The representative of the plaintiff?
A.
Yes, Sir.
Q.
Q. For what purpose did Mr. Lee ask these matters to be incorporated?
A.
Q.
Because they are worried that my building might be foreclosed because it is under [mortgage] with the PCI Bank, that is why I gave them protection of a clean title. But I also asked them, what will happen to me, in case your bank will be closed?
When you asked that question, what did Mr. Lee tell you?
A.
He told me that I don't have to worry I will have P6,000,000 advances.
Q.
What was your protection as to the 6 million payment made by the plaintiff?
A.
That is the protection for me because during that time I have my bakery and I myself [spent] 2 million for the improvement of that bakery and I have sacrificed that for the sake of the offer of lease.
Q.
In what manner that you are being protected for that 6 million pesos?
A.
They said that if in case the bank will be closed that advance of 6 million pesos will be forfeited in my favor.
Petitioners claim that paragraph 24 was not intended as a penal clause. They add that respondent has not even presented any proof of that intent. It was, therefore, a reversible error on the part of the CA to construe its forfeiture provision of the Contract as penal in nature. It is settled that a provision is a penal clause if it calls for the forfeiture of any remaining deposit still in the possession of the lessor, without prejudice to any other obligation still owing, in the event of the termination or cancellation of the agreement by reason of the lessee's violation of any of the terms and conditions thereof. This kind of agreement may be validly entered into by the parties. The clause is an accessory obligation meant to ensure the performance of the principal obligation by imposing on the debtor a special prestation in case of nonperformance or inadequate performance of the principal obligation. 45chanrobleslaw It is evident from the above-quoted testimony of Jaime Poon that the stipulation on the forfeiture of advance rentals under paragraph 24 is a penal clause in the sense that it provides for liquidated damages. Notably, paragraph 5 of the Contract also provides:ChanRoblesVirtualawlibrary 5. It is hereby stipulated that should the leased property be foreclosed by PCI Bank or any other banking or financial institution, all unused rentals shall be returned by the LESSOR to the LESSEE; x x x. 46chanroblesvirtuallawlibrary In effect, the penalty for the premature termination of the Contract works both ways. As the CA correctly found, the penalty was to compel respondent to complete the 10-year term of the lease. Petitioners, too, were similarly obliged to ensure the peaceful use of their building by respondent for the entire duration of the lease under pain of losing the remaining advance rentals paid by the latter. The forfeiture clauses of the Contract, therefore, served the two functions of a penal clause, i.e., (1) to provide for liquidated damages and (2) to strengthen the coercive force of the obligation by the threat of greater responsibility in case of breach.47 As the CA correctly found, the prestation secured by those clauses was the parties' mutual obligation to observe the fixed term of the lease. For this reason, We sustain the lower courts' finding that the forfeiture clause in paragraph 24 is a penal clause, even if it is not expressly labelled as such. A reduction of the penalty agreed upon by the parties is warranted under Article 1129 of the Civil Code.
We have no reason to doubt that the forfeiture provisions of the Contract were deliberately and intelligently crafted. Under Article 1196 of the Civil Code,48 the period of the lease contract is deemed to have been set for the benefit of both parties. Its continuance, effectivity or fulfillment cannot be made to depend exclusively upon the free and uncontrolled choice of just one party. 49 Petitioners and respondent freely and knowingly committed themselves to respecting the lease period, such that a breach by either party would result in the forfeiture of the remaining advance rentals in favor of the aggrieved party. If this were an ordinary contest of rights of private contracting parties, respondent lessee would be obligated to abide by its commitment to petitioners. The general rule is that courts have no power to ease the burden of obligations voluntarily assumed by parties, just because things did
not turn out as expected at the inception of the contract. 50chanrobleslaw It must be noted, however, that this case was initiated by the PDIC in furtherance of its statutory role as the fiduciary of Prime Savings Bank.51 As the state-appointed receiver and liquidator, the PDIC is mandated to recover and conserve the assets of the foreclosed bank on behalf of the latter's depositors and creditors. 52 In other words, at stake in this case are not just the rights of petitioners and the correlative liabilities of respondent lessee. Over and above those rights and liabilities is the interest of innocent debtors and creditors of a delinquent bank establishment. These overriding considerations justify the 50% reduction of the penalty agreed upon by petitioners and respondent lessee in keeping with Article 1229 of the Civil Code, which provides:ChanRoblesVirtualawlibrary Art. 1229. The judge shall equitably reduce the penalty when the principal obligation has been partly or irregularly complied with by the debtor. Even if there has been no performance, the penalty may also be reduced by the courts if it is iniquitous or unconscionable. The reasonableness of a penalty depends on the circumstances in each case, because what is iniquitous and unconscionable in one may be totally just and equitable in another. 53 In resolving this issue, courts may consider factors including but not limited to the type, extent and purpose of the penalty; the nature of the obligation; the mode of the breach and its consequences; the supervening realities; and the standing and relationship of the parties. 54chanrobleslaw Under the circumstances, it is neither fair nor reasonable to deprive depositors and creditors of what could be their last chance to recoup whatever bank assets or receivables the PDIC can still legally recover. Besides, nothing has prevented petitioners from putting their building to other profitable uses, since respondent surrendered the premises immediately after the closure of its business. Strict adherence to the doctrine of freedom of contracts, at the expense of the rights of innocent creditors and investors, will only work injustice rather than promote justice in this case. 55 Such adherence may even be misconstrued as condoning profligate bank operations. We cannot allow this to happen. We are a Court of both law and equity; We cannot sanction grossly unfair results without doing violence to Our solemn obligation to administer justice fairly and equally to all who might be affected by our decisions. 56chanrobleslaw Neither do We find any error in the trial court's denial of the damages and attorney's fees claimed by petitioners. No proof of the supposed expenses they have incurred for the improvement of the leased premises and the payment of respondent's unpaid utility bills can be found in the records. Actual and compensatory damages must be duly proven with a reasonable degree of certainty. 57chanrobleslaw To recover moral and exemplary damages where there is a breach of contract, the breach must be palpably wanton, reckless, malicious, in bad faith, oppressive, or abusive. Attorney's fees are not awarded even if a claimant is compelled to litigate or to incur expenses where no sufficient showing of bad faith exists. 58 None of these circumstances have been shown in this case. Finally, in line with prevailing jurisprudence,59 legal interest at the rate of 6% per annum is imposed on the monetary award computed from the finality of this Decision until full payment. WHEREFORE, premises considered, the Petition for Review on Certiorari is DENIED. The Court
of Appeals Decision dated 29 November 2007 and its Resolution dated 10 July 2008 in CA-G.R. CV No. 75349 are hereby MODIFIED in that legal interest at the rate of 6% per annum is imposed on the monetary award computed from the finality of this Decision until full payment. No costs. SO ORDERED.
G.R. No. 146942
April 22, 2003
CORAZON G. RUIZ, petitioner,
vs. COURT OF APPEALS and CONSUELO TORRES, respondents. PUNO, J .:
On appeal is the decision 1 of the Court of Appeals in CA-G.R. CV No. 56621 dated 25 August 2000, setting aside the decision 2 of the trial court dated 19 May 1997 and lifting the permanent injunction on the foreclosure sale of the subject lot covered by TCT No. RT-96686, as well as its subsequent Resolution3 dated 26 January 2001, denying petitioner’s Motion for Reconsideration. The facts of the case are as follows: Petitioner Corazon G. Ruiz is engaged in the business of buying and selling jewelry. 4 She obtained loans from private respondent Consuelo Torres on different occasions, in the following amounts: P100,000.00; P200,000.00; P300,000.00; and P150,000.00. 5 Prior to their maturity, the loans were consolidated under one (1) promissory note dated March 22, 1995, which reads as follows:6 "P750,000.00
Quezon City, March 22, 1995 PROMISSORY NOTE
For value received, I, CORAZON RUIZ, as principal and ROGELIO RUIZ as surety in solidum, jointly and severally promise to pay to the order of CONSUELO P. TORRES the sum of SEVEN HUNDRED FIFTY THOUSAND PESOS (P750,000.00) Philippine Currency, to earn an interest at the rate of three per cent (3%) a month, for thirteen months, payable every _____ of the month, and to start on April 1995 and to mature on April 1996, subject to renewal. If the amount due is not paid on date due, a SURCHARGE of ONE PERCENT of the principal loan, for every month default, shall be collected. Remaining balance as of the maturity date shall earn an interest at the rate of ten percent a month, compounded monthly. It is finally agreed that the principal and surety in solidum, shall pay attorney’s fees at the rate of twenty-five percent (25%) of the entire amount to be collected, in case this note is not paid according to the terms and conditions set forth, and same is referred to a lawyer for collection. In computing the interest and surcharge, a fraction of the month shall be considered one full month. In the event of an amicable settlement, the principal and surety in solidum shall rei mbur se the expe ns (Sgd.) Corazon Ruiz Principal
__________________ Surety"
es of the plaintiff. The consolidated loan of P750,000.00 was secured by a real estate mortgage on a 240-square meter lot in New Haven Village, Novaliches, Quezon City, covered by Transfer Certificate of Title (TCT) No. RT-96686, and registered in the name of petitioner. 7 The mortgage was signed by Corazon Ruiz for herself and as attorney-in-fact of her husband Rogelio. It was executed on 20 March 1995, or two (2) days before the execution of the subject promissory note. 8 Thereafter, petitioner obtained three (3) more loans from private respondent, under the following promissory notes: (1) promissory note dated 21 April 1995, in the amount of P100,000.00; 9 (2) promissory note dated May 23, 1995, in the amount of P100,000.00; 10 and (3) promissory note
dated December 21, 1995, in the amount of P100,000.00. 11These combined loans of P300,000.00 were secured by P571,000.00 worth of jewelry pledged by petitioner to private respondent. 12 From April 1995 to March 1996, petitioner paid the stipulated 3% monthly interest on the P750,000.00 loan, 13amounting to P270,000.00. 14 After March 1996, petitioner was unable to make interest payments as she had difficulties collecting from her clients in her jewelry business. 15
Due to petitioner’s failure to pay the principal loan of P750,000.00, as well as the interest payment for April 1996, private respondent demanded payment not only of the P750,000.00 loan, but also of the P300,000.00 loan. 16 When petitioner failed to pay, private respondent sought the extra-judicial foreclosure of the aforementioned real estate mortgage. 17 On September 5, 1996, Acting Clerk of Court and Ex-Officio Sheriff Perlita V. Ele, Deputy Sheriff In-Charge Rolando G. Acal and Supervising Sheriff Silverio P. Bernas issued a Notice of Sheriff’s Sale of subject lot. The public auction was scheduled on October 8, 1996. 18 On October 7, 1996, one (1) day before the scheduled auction sale, petitioner filed a complaint with the RTC of Quezon City docketed as Civil Case No. Q-96-29024, with a prayer for the issuance of a Temporary Restraining Order to enjoin the sheriff from proceeding with the foreclosure sale and to fix her indebtedness to private respondent to P706,000.00. The computed amount of P706,000.00 was based on the aggregate loan of P750,000.00, covered by the March 22, 1995 promissory note, plus the other loans of P300,000.00, covered by separate promissory notes, plus interest, minus P571,000.00 representing the amount of jewelry pledged in favor of private respondent. 19 The trial court granted the prayer for the issuance of a Temporary Restraining Order,20 and on 29 October 1996, issued a writ of preliminary injunction. 21 In its Decision dated May 19, 1997, it ordered the Clerk of Court and Ex-Officio Sheriff to desist with the foreclosure sale of the subject property, and it made permanent the writ of preliminary injunction. It held that the real estate mortgage is unenforceable because of the lack of the participation and signature of petitioner’s husband. It noted that although the subject real estate mortgage stated that petitioner was "attorney-in-fact for herself and her husband," the Special Power of Attorney was never presented in court during the trial. 22 The trial court further held that the promissory note in question is a unilateral contract of adhesion drafted by private respondent. It struck down the contract as repugnant to public policy because it was imposed by a dominant bargaining party (private respondent) on a weaker party (petitioner).23 Nevertheless, it held that petitioner still has an obligation to pay the private respondent. Private respondent was further barred from imposing on petitioner the obligation to pay the surcharge of one percent (1%) per month from March 1996 onwards, and interest of ten percent (10%) a month, compounded monthly from September 1996 to January 1997. Petitioner was thus ordered to pay the amount of P750,000.00 plus three percent (3%) interest per month, or a total of P885,000.00, plus legal interest from date of [receipt of] the decision until the total amount of P885,000.00 is paid. 24 Aside from the foregoing, the trial court took into account petitioner’s proposal to pay her other obligations to private respondent in the amount of P392,000.00. 25 The trial court also recognized the expenses borne by private respondent with regard the foreclosure sale and attorney’s fees. As the notice of the foreclosure sale has already been published, it ordered the petitioner to reimburse private respondent the amount of P15,000.00 plus attorney’s fees of the same amount. 26 Thus, the trial court computed petitioner’s obligation to private r espondent, as follows: Principal Loan …………….
P 750,000.00
Interest……………………..
135,000.00
Other Loans……………….
392,000.00
Publication Fees…………….
15,000.00
Attorney’s Fees ……………
15,000.00
TOTAL……………………
P1,307,000.00
with legal interest from date of receipt of decision until payment of total amount of P1,307,000.00 has been made. 27 Private respondent’s motion for reconsideration was denied in an Order dated July 21, 1997. Private respondent appealed to the Court of Appeals. The appellate court set aside the decision of the trial court. It ruled that the real estate mortgage is valid despite the non-participation of petitioner’s husband in its execution because the land on which it was constituted is paraphernal property of petitioner-wife. Consequently, she may encumber the lot without the consent of her husband. 28 It allowed its foreclosure since the loan it secured was not paid. Nonetheless, the appellate court declared as invalid the 10% compounded monthly interest29 and the 10% surcharge per month stipulated in the promissory notes dated May 23, 1995 and December 1, 1995, 30 and so too the 1% compounded monthly interest stipulated in the promissory note dated 21 April 1995, 31 for being excessive, iniquitous, unconscionable, and contrary to morals. It held that the legal rate of interest of 12% per annum shall apply after the maturity dates of the notes until full payment of the entire amount due, and that the only permissible rate of surcharge is 1% per month, without compounding. 32 The appellate court also granted attorney’s fees in the amount of P50,000.00, and not the stipulated 25% of the amount due, following the ruling in the case of Medel v. Court of Appeals.33 Now, before this Court, petitioner assigns the following errors: (1) PUBLIC RESPONDENT COURT OF APPEALS GRAVELY ERRED IN RULING THAT THE PROMISSORY NOTE OF P750,000.00 IS NOT A CONTRACT OF ADHESION DESPITE THE CLEAR SHOWING THAT THE SAME IS A READY-MADE CONTRACT PREPARED BY (THE) RESPONDENT CONSUELO TORRES AND DID NOT REFLECT THEIR TRUE INTENTIONS AS IT WEIGHED HEAVILY IN FAVOR OF RESPONDENT AND AGAINST PETITIONER. (2) PUBLIC RESPONDENT COURT OF APPEALS GRAVELY ERRED IN DECLARING THAT THE PROPERTY COVERED BY THE SUBJECT DEED OF MORTGAGE OF MARCH 20, 1995 IS A PARAPHERNAL PROPERTY OF THE PETITIONER AND NOT CONJUGAL EVEN THOUGH THE ISSUE OF WHETHER OR NOT THE MORTGAGED PROPERTY IS PARAPHERNAL WAS NEVER RAISED, NOR DISCUSSED AND ARGUED BEFORE THE TRIAL COURT. (3) PUBLIC RESPONDENT COURT OF APPEALS GRAVELY ERRED IN DISREGARDING THE TRIAL COURT’S COMPUTATION OF THE ACTUAL OBLIGATIONS OF THE PETITIONER WITH (THE) RESPONDENT TORRES EVEN THOUGH THE SAME IS BASED ON EVIDENCE SUBMITTED BEFORE IT. The pertinent issues to be resolved are: (1) Whether the promissory note of P750,000.00 is a contract of adhesion; (2) Whether the real property covered by the subject deed of mortgage dated March 20, 1995 is paraphernal property of petitioner; and (3) Whether the rates of interests and surcharges on the obligation of petitioner to private respondent are valid. I We hold that the promissory note in the case at bar is not a contract of adhesion. In Sweet Lines, Inc. vs. Teves ,34this Court discussed the nature of a contract of adhesion as follows:
". . . there are certain contracts almost all the provisions of which have been drafted only by one party, usually a corporation. Such contracts are called contracts of adhesion, because the only participation of the other party is the signing of his signature or his ‘adhesion’ thereto. Insurance contracts, bills of lading, contracts of sale of lots on the installment plan fall into this category. 35 " . . . it is drafted only by one party, usually the corporation, and is sought to be accepted or adhered to by the other party . . . who cannot change the same and who are thus made to adhere hereto on the ‘take it or leave it’ basis . . . " 36 In said case of Sweet Lines,37 the conditions of the contract on the 4 x 6 inches passenger ticket are in fine print. Thus we held: " . . . it is hardly just and proper to expect the passengers to examine their tickets received from crowded/congested counters, more often than not during rush hours, for conditions that may be printed thereon, much l ess charge them with having consented to the conditions, so printed, especially if there are a number of such conditions in fine print, as in this case."38 We further stressed in the said case that the questioned ‘Condition No. 14’ was prepared solely by one party which was the corporation, and the other party who was then a passenger had no say in its preparation. The passengers have no opportunity to examine and consider the terms and conditions of the contract prior to the purchase of their tickets. 39 In the case at bar, the promissory note in question did not contain any fine print provision which could not have been examined by the petitioner. Petitioner had all the time to go over and study the stipulations embodied in the promissory note. Aside from the March 22, 1995 promissory note for P750,000.00, three other promissory notes of different dates and amounts were executed by petitioner in favor of private respondent. These promissory notes contain similar terms and conditions, with a little variance in the terms of interests and surcharges. The fact that petitioner and private respondent had entered into not only one but several loan transactions shows that petitioner was not in any way compelled to accept the terms allegedly imposed by private respondent. Moreover, petitioner, in her complaint 40 dated October 7, 1996 filed with the trial court, never claimed that she was forced to sign the subject note. Paragraph five of her complaint states: "That on or about March 22, 1995 plaintiff was required by the defendant Torres to execute a promissory note consolidating her unpaid principal loan and interests which said defendant computed to be in the sum of P750,000.00 . . ." To be required is certainly different from being compelled. She could have rejected the conditions made by private respondent. As an experienced business- woman, she ought to understand all the conditions set forth in the subject promissory note. As held by this Court in Lee, et al. vs. Court of Appeals, et al .,41 it is presumed that a person takes ordinary care of his concerns.42 Hence, the natural presumption is that one does not sign a document without first informing himself of its contents and consequences. This presumption acquires greater force in the case at bar where not only one but several documents were executed at different times by petitioner in favor of private respondent. II We also affirm the ruling of the appellate court that the real property covered by the subject deed of mortgage is paraphernal property. The property subject of the mortgage is registered in the name of "Corazon G. Ruiz, of legal age, married to Rogelio Ruiz, Filipinos." Thus, title is registered in the name of Corazon alone because the phrase "married to Rogelio Ruiz" is merely descriptive of the civil status of Corazon and should not be construed to mean that her husband is also a registered owner. Furthermore, registration of the property in the name of "Corazon G. Ruiz, of legal age, married to Rogelio Ruiz" is not proof that such property was acquired during the marriage, and thus, is presumed to be conjugal. The property could have been acquired by Corazon while she was still single, and registered only after her marriage to Rogelio Ruiz. Acquisition of title and registration thereof are two different acts.43 The presumption under Article 116 of the Family Code that properties acquired during the marriage are presumed to be conjugal cannot apply in the instant case. Before such presumption can apply, it must first be established that the property was in fact acquired during the marriage. In other words, proof of
acquisition during the marriage is a condition sine qua non for the operation of the presumption in favor of conjugal ownership. 44 No such proof was offered nor presented in the case at bar. Thus, on the basis alone of the certificate of title, it cannot be presumed that said property was acquired during the marriage and that it is conjugal property. Since there is no showing as to when the property in question was acquired, the fact that the title is in the name of the wife alone is determinative of its nature as paraphernal, i.e., belonging exclusively to said spouse. 45 The only import of the title is that Corazon is the owner of said property, the same having been registered in her name alone, and that she is married to Rogelio Ruiz. 46 III We now resolve the issue of whether the rates of interests and surcharges on the obligation of petitioner to private respondent are legal. The four (4) unpaid promissory notes executed by petitioner in favor of private respondent are in the following amounts and maturity dates: (1) P750,000.00, dated March 22, 1995 matured on April 21, 1996; (2) P100,000.00, dated April 21, 1995 matured on August 21, 1995; (3) P100,000.00, dated May 23, 1995 matured on November 23, 1995; and (4) P100,000.00, dated December 21, 1995 matured on March 1, 1996. The P750,000.00 promissory note dated March 22, 1995 has the following provisions: (1) 3% monthly interest, from the signing of the note until its maturity date; (2) 10% compounded monthly interest on the remaining balance at maturity date; (3) 1% surcharge on the principal loan for every month of default; and (4) 25% attorney’s fees. The P100,000.00 promissory note dated April 21, 1995 has the following provisions: (1) 3% monthly interest, from the signing of the note until its maturity date; (2) 10% monthly interest on the remaining balance at maturity date; (3) 1% compounded monthly surcharge on the principal loan for every month of default; and (4) 10% attorney’s fees. The two (2) other P100,000.00 promissory notes dated May 23, 1995 and December 1, 1995 have the following provisions: (1) 3% monthly interest, from the signing of the note until its maturity date; (2) 10% compounded monthly interest on the remaining balance at maturity date; (3) 10% surcharge on the principal loan for every month of default; and (4) 10% attorney’s fees. We affirm the ruling of the appellate court, striking down as invalid the 10% compounded monthly interest, the 10% surcharge per month stipulated in the promissory notes dated May 23, 1995 and December 1, 1995, and the 1% compounded monthly interest stipulated in the promissory note dated April 21, 1995. The legal rate of interest of 12% per annum shall apply after the maturity dates of the notes until full payment of the entire amount due. Also, the only permissible rate of surcharge is 1% per month, without compounding. We also uphold the award of the appellate court of attorney’s fees, the amount of which having been reasonably reduced from the stipulated 25% (in the March 22, 1995 promissory note) and 10% (in the other three promissory notes) of the entire amount due, to a fixed amount of P50,000.00. However, we equitably reduce the 3% per month or 36% per annum interest present in all four (4) promissory notes to 1% per month or 12% per annum interest.
