SSS vs. Moonwalk Devt. and Housing Corp.

G.R. No. 73345, April 7, 1993

FACTS:

Plaintiff SSS approved the application of Defendant Moonwalk for a loan of P30,000,000
for the purpose of developing and constructing a housing project. Out of P30,000,000 approved
loan, the sum of P9,595,000 was released to defendant Moonwalk. A third Amendment Deed of
Mortgage was executed for the payment of the amount of P9,595,000. Moonwalk made a total
payment of P23,657,901.84 to SSS for the loan principal of P12,254,700. After settlement of the
account, SSS issued to Moonwalk the release of Mortgage for Moonwalk’s Mortgaged
properties. In letter to Moonwalk, SSS alleged that it committed an honest mistake in releasing
defendant. That Moonwalk has still 12% penalty for failure to pay on time the amortization, which
is in the penal clause of the contract. Moonwalk’s counsel told SSS that it had completely paid
its obligation to SSS and therefore there is no recovery of any penalty.

ISSUE:
WON the 12% penalty is still demandable even after the extinguishment of the principal
obligation; WON Moonwalk was in default

HELD:
1. No. The obligation was already extinguished by the payment by Moonwalk of its
indebtedness to SSS and by the latter’s act of cancelling the real estate mortgages executed in
its favor by defendant moonwalk. What is sought to be recovered in this case is not the 12%
interest on the loan but the 12% penalty for failure to pay on time the amortization. What is
sought to be enforced therefore is a penal clause of the contract entered into between the
parties.

Penal clause is an accessory obligation which the parties attach to a principal obligation
for the purpose of insuring the performance thereof by imposing on the debtor a special
presentation in case the obligation is not fulfilled or is irregularly or inadequately fulfilled.
Accessory obligation is dependent for its existence on the existence of a principal obligation. In
the present case, the principal obligation is the loan between the parties. The accessory
obligation of a penal clause is to enforce the main obligation of payment of the loan. If
therefore the principal obligation does not exist the penalty being accessory cannot exist.

2. No. A penalty is demandable in case of non-performance or late performance of the

main obligation. There must be a breach of the obligation either by total or partial non-fulfillment
or there is non-fulfillment in the point of time, which is called mora or delay. There is no mora or
delay unless there is a demand.

In the present case, during all the period when the principal obligation was still subsisting,
although there were late amortizations, there was no demand made by the creditor, for the
payment of the penalty. Therefore up to the time of the letter of SSS there was no demand for
the payment of the penalty; hence the debtor was no in mora in the payment of the penalty.
 RCBC vs. CA
FACTS:
RCBC Binondo Branch initially granted a credit facility of P30M to Goyu & Sons,
Inc. GOYU’s applied again and through Binondo Branch key officer's Uy’s and Lao’s
recommendation, RCBC’s executive committee increased its credit facility to P50M to P90M and
finally to P117M. As security, GOYU executed 2 real estate mortgages and 2 chattel mortgages
in favor of RCBC.

GOYU obtained in its name 10 insurance policy on the mortgaged properties

from Malayan Insurance Company, Inc. (MICO). In February 1992, he was issued 8 insurance
policies in favor of RCBC. April 27, 1992: One of GOYU’s factory buildings was burned so he
claimed against MICO for the loss who denied contending that the insurance policies were
either attached pursuant to writs of attachments/garnishments or that creditors are claiming to
have a better right. GOYU filed a complaint for specific performance and damages at the RTC.
RCBC, one of GOYU’s creditors, also filed with MICO its formal claim over the proceeds of the
insurance policies, but said claims were also denied for the same reasons that MICO denied
GOYU’s claims

RTC: Confirmed GOYU’s other creditors (Urban Bank, Alfredo Sebastian, and Philippine
Trust Company) obtained their writs of attachment covering an aggregate amount
of P14,938,080.23 and ordered that 10 insurance policies be deposited with the court minus the
said amount so MICO deposited P50,505,594.60. Another Garnishment of P8,696,838.75 was
handed down. RTC: favored GOYU against MICO for the claim, RCBC for damages and to pay
RCBC its loan. CA: Modified by increasing the damages in favor of GOYU. In G.R. No.
128834, RCBC seeks right to intervene in the action between Alfredo C. Sebastian (the creditor)
and GOYU (the debtor), where the subject insurance policies were attached in favor of
Sebastian. RTC and CA: endorsements do not bear the signature of any officer of GOYU
concluded that the endorsements favoring RCBC as defective.

ISSUE:
WON RCBC as mortgagee, has any right over the insurance policies taken by GOYU, the
mortgagor, in case of the occurrence of loss.

HELD:
YES. Mortgagor and a mortgagee have separate and distinct insurable interests in the
same mortgaged property, such that each one of them may insure the same property for his
own sole benefit. Although it appears that GOYU obtained the subject insurance policies
naming itself as the sole payee, the intentions of the parties as shown by their contemporaneous
acts, must be given due consideration in order to better serve the interest of justice and equity.
 8 endorsement documents were prepared by Alchester in favor of RCBC
 MICO, a sister company of RCBC
 GOYU continued to enjoy the benefits of the credit facilities extended to it by
RCBC. GOYU is at the very least estopped from assailing their operative effects.
The two courts below erred in failing to see that the promissory notes which they ruled
should be excluded for bearing dates which are after that of the fire, are mere renewals of
previous ones. RCBC has the right to claim the insurance proceeds, in substitution of the property
lost in the fire. Having assigned its rights, GOYU lost its standing as the beneficiary of the said
insurance policies. Insurance company to be held liable for unreasonably delaying and
withholding payment of insurance proceeds, the delay must be wanton, oppressive, or
malevolent - not shown. Sebastian’s right as attaching creditor must yield to the preferential
rights of RCBC over the Malayan insurance policies as first mortgagee.
 Barzaga vs. CA
G.R. No. 115129 February 12, 1997

FACTS:
The petitioner’s wife was suffering from a debilitating ailment and with forewarning of her
impending death, she expressed her wish to be laid to rest before Christmas day to spare her
family of the long vigils as it was almost Christmas. After his wife passed away, petitioner bought
materials from herein private respondents for the construction of her niche. Private respondents
however failed to deliver on agreed time and date despite repeated follow-ups. The niche was
completed in the afternoon of the 27th of December, and Barzaga's wife was finally laid to rest.
However, it was two-and-a-half (2-1/2) days behind schedule.

ISSUE:
WON there was delay in the performance of the private respondent's obligation?

HELD:
Yes. Since the respondent was negligent and incurred delay in the performance of his
contractual obligations, the petitioner is entitled to be indemnified for the damage he suffered
as a consequence of the delay or contractual breach. There was a specific time agreed upon
for the delivery of the materials to the cemetery.

This is clearly a case of non-performance of a reciprocal obligation, as in the contract of

purchase and sale, the petitioner had already done his part, which is the payment of the price.
It was incumbent upon respondent to immediately fulfill his obligation to deliver the goods
otherwise delay would attach. An award of moral damages is incumbent in this case as the
petitioner has suffered so much.

Pantaleon vs. American Express

G.R. No. 174269, May 8 2009

FACTS:
After the Amsterdam incident that happened involving the delay of American Express
Card to approve his credit card purchases worth US$13,826.00 at the Coster store, Pantaleon
commenced a complaint for moral and exemplary damages before the RTC against American
Express. He said that he and his family experienced inconvenience and humiliation due to the
delays in credit authorization. RTC rendered a decision in favor of Pantaleon. CA reversed the
award of damages in favor of Pantaleon, holding that AmEx had not breached its obligations to
Pantaleon, as the purchase at Coster deviated from Pantaleon's established charge purchase
pattern.

ISSUE:
1. Whether or not AmEx had committed a breach of its obligations to Pantaleon.
2. Whether or not AmEx is liable for damages.

RULING:

1. Yes. The popular notion that credit card purchases are approved “within seconds,”
there really is no strict, legally determinative point of demarcation on how long must it take for a
credit card company to approve or disapprove a customer’s purchase, much less one
specifically contracted upon by the parties. One hour appears to be patently unreasonable
length of time to approve or disapprove a credit card purchase.
 The culpable failure of AmEx herein is not the failure to timely approve petitioner’s
purchase, but the more elemental failure to timely act on the same, whether favorably or
unfavorably. Even assuming that AmEx’s credit authorizers did not have sufficient basis on hand
to make a judgment, we see no reason why it could not have promptly informed Pantaleon the
reason for the delay, and duly advised him that resolving the same could take some time.

2. Yes. The reason why Pantaleon is entitled to damages is not simply because AmEx
incurred delay, but because the delay, for which culpability lies under Article 1170, led to the
particular injuries under Article 2217 of the Civil Code for which moral damages are
remunerative. The somewhat unusual attending circumstances to the purchase at Coster – that
there was a deadline for the completion of that purchase by petitioner before any delay would
redound to the injury of his several traveling companions – gave rise to the moral shock, mental
anguish, serious anxiety, wounded feelings and social humiliation sustained by Pantaleon, as
concluded by the RTC.

Lorenzo Shipping vs. BJ Marthel

443 SCRA 163, November 19, 2004

FACTS:
Petitioner Lorenzo Shipping is engaged in coastwise shipping and owns the cargo M/V
Dadiangas Express. BJ Marthel is engaged in trading, marketing an dselling various industrial
commodities. Lorenzo Shipping ordered for the second time cylinder lines from the respondent
stating the term of payment to be 25% upon delivery, the balance payable in 5 bi-monthly
equal installments, no again stating the date of the cylinder’s delivery. It was allegedly paid
through post dated checks but the same was dishonored due to insufficiency of funds. Despite
due demands by the respondent, petitioner falied contending that time was of the essence in
the delivery of the cylinders and that there was a delay since the respondent committed said
items “ within two months after receipt of fir order”. RTC held respondents bound to the
quotation with respect to the term of payment, which was reversed by the Court of appeals
ordering appellee to pay appellant P954,000 plus interest. There was no delay since there was
no demand.

ISSUE:
Whether or not respondent incurred delay in performing its obligation under the contract
of sale

HELD:
By accepting the cylinders when they were delivered to the warehouse, petitioner
waived the claimed delay in the delivery of said items. Supreme Court geld that time was not of
the essence. There having been no failure on the part of the respondent to perform its
obligations, the power to rescind the contract is unavailing to the petitioner. Petition is denied.
Court of appeals decision is affirmed.
 Solar Harvest vs. Davao Corrugated Carlon Corp.
G.R. No. 176868 (July 26, 2010)

FACTS:
The petitioner (Solar Harvest, Inc., Solar for brevity) entered into an agreement with
respondent, Davao Corrugated Carton Corporation (DCCC for brevity), for the purchase of
corrugated carton boxes, specifically designed for petitioners business of exporting fresh
bananas. The agreement was not reduced into writing. To start the production, Solar deposited
in DCCC’s US Dollar Savings Account with Westmont bank, as full payment for the ordered
boxes. Despite such payment, Solar did not receive any boxes from DCCC. Solar wrote a
demand letter for reimbursement of the amount paid. DCCC replied that the boxes had been
completed as early as April 3, 1998 and that Solar failed to pick them up from the formers
warehouse 30 days from completion, as agreed upon. It was also mentioned that Solar placed
an additional order, out of which, half had been manufactured without any advanced
payment from Solar. (Solar alleges that the agreement was for DCCC to deliver within 30 days
from payment the said cartons to Tagum Agricultural Development Corporation (TADECO)
which the latter failed to manufacture and deliver within such time.) DCCC then demanded
Solar to remove the boxes from the factory and to pay the balance for the additional boxes.

ISSUE:
Whether or not the respondent (Davao Corrugated Carton Corporation) is in default.

HELD:
No. It was unthinkable that, over a period of more than two years, Solar did not even
demand for the delivery of the boxes. Even assuming that the agreement was for DCCC to
deliver the boxes, the latter would not be liable for breach of contract as Solar had not yet
demanded from it the delivery of the boxes.

In reciprocal obligations, as in contract of sale, the general rule is that the fulfillment of
the parties respective obligation should be simultaneous. Hence, no demand is generally
necessary because, once a party fulfills his obligation and the other party does not fulfill his, the
latter automatically incurs delay. But when different dates for performance of the obligation are
fixed, the default for each obligation must be determined, that is, the other party would incur in
delay only from the moment the other party demands fulfillment of the formers obligation. Thus,
even in reciprocal obligations, if the period for the fulfillment of the formers obligation is fixed,
demand upon the obliged is still necessary before the obligor can be considered in default and
before a cause of action for rescission will accrue.

Cathay Pacific Airways vs. Sps. Vasquez

G.R. No. 150843, March 14, 2003

FACTS:
Cathay is a common carrier engaged in the business of transporting passengers and
goods by air. It services the Manila-Hongkong-Manila course, among many others. As part of its
marketing strategy, it accords its frequent flyers membership in its Marco Polo Club. Members
enjoy priority for upgrading of booking without any extra charge whenever opportunity arises. So
a frequent flyer booked in Business Class has priority for upgrading to First Class if the Business
Class Section is fully booked. Dr. Vasquez and Maria Vasquez are frequent flyers of Cathay and
are Gold Card members of the Polo Club. On Sept 1996, Vasquezes with their maid and 2
friends Cruz and De Dios went to HK for pleasure and business. For their return flight on Sept 28,
1996, they were booked on a Cathay flight at 9:20pm. 2 hours before, they checked in their
luggage and were given their boarding passes, to wit, BUSINESS CLASS for Vasquezes and 2
friends, ECONOMY for the maid. They went to the BC passenger lounge. Boarding time. They
went to the Departure Gate 28, designated for BC passengers. Dr. Vasquez presented his
boarding pass to the stewardess. It was inserted into an electronic machine reader or computer.
Another ground attendant Chiu assisted. When Chiu glanced at the monitor, she saw a
message that there was a “seat change” from BC to First Class for the Vasquezes. Dr.
Vasquez REFUSED the upgrade because they had 2 guests who will be in the BC and they would
be discussing business during the flight. The stewardess insisted saying that BC is already fully
booked and that if they would not avail, they would not be allowed to take the flight.
Vasquezes acceded and took the First Class Cabin. In a letter, the Vasquezes demanded 1M
indemnification from Cathay for “humiliation and embarrassment ”caused by its employees and
a written apology from a person from Cathay preferably with a rank of no lessthan Country
Manager and Mrs. Chiu w/in 15 days. Asst. Country Manager Robson informed them that
Cathay would investigate the incident and get back to them within a week’s time. No feedback
come deadline, so Vasquezes filed a case for DAMAGES against Cathay. Asked for temperate,
moral, exemplary and attorney’s fees.

ISSUE:
WON Cathay is guilty of breach of contractin upgrading the seats without Vasquezes’
consent? WON the upgrade was tainted with fraud or bad faith?

HELD:
THERE WAS BREACH OF CONTRACT. BUT NO BF/FRAUD, SO NO DAMAGES. A contract of
carriage existed between Cathay and the Vazquezes. They voluntarily and freely gave their
consent to an agreement whose object was the transportation of the Vazquezes from Manila to
Hong Kong and back to Manila, with seats in the Business Class Section of the aircraft, and
whose cause or consideration was the fare paid by the Vazquezes to Cathay. Breach of
contract is defined as the “failure without legal reason to comply with the terms of a contract.”
In previous cases, the breach consisted in either the bumping off of a passenger
with confirmed reservation or the downgrading of a passenger’s seat accommodation from one
class to a lower class. In this case, what happened was the reverse. In all their pleadings, the
Vazquezes never denied that they were members of Cathay’s Marco Polo Club. They knew that
as members of the Club, they had priority for upgrading of their seat accommodation at no
extra cost when an opportunity arises. But, just like other privileges, such priority could be
waived. The Vazquezes should have been consulted first whether they wanted to avail
themselves of the privilege or would consent to a change of seat accommodation before their
seat assignments were given to other passengers. . They clearly waived their priority or
preference when they asked that other passengers be given the upgrade. It should not have
been imposed on them over their vehement objection. By insisting on the upgrade, Cathay
breached its contract of carriage with the Vazquezes.
 Meralco vs. Ramoy
G.R. No. 158911, March 4, 2008
FACTS:
In the year 1987, the National Power Corporation (NPC) filed with the MTC Quezon City a
case for ejectment against several persons allegedly illegally occupying its properties in Baesa,
Quezon City.among the defendants in the ejectment case was Leoncio Ramoy, one of the
plaintiffs in the case at bar.On April 28, 1989 the MTC rendered judgment for MERALCO to
demolish or remove the building andstructure they built on the land of the plaintiff and to
vacate the premises. On June 20, 1999 NPC wroteto MERALCO requesting the immediate
disconnection of electric power supply to all residential andcommercial establishments beneath
the NPC transmission lines along Baesa, Quezon City.In a letter dated August 17, 1990 MERALCO
requested NPC for a joint survey to determine all theestablishments which are considered under
NPC property. In due time, the electric service connection of the plaintiffs was disconnected.
During the ocular inspection ordered by the Court, it was found out thatthe residence of the
plaintiffs-spouses was indeed outside the NPC property.

ISSUES:
(1) WON the Court of Appeals gravely erred when it found MERALCO negligent when it
disconnected the subject electric service of respondents.

(2) WON the Court of Appeals gravely erred when it awarded moral and exemplary
damages and attorney’s fees against MERALCO under the circumstances that the latter acted
in good faith in the disconnection of the electric services of the respondents.

HELD:
(1) No. The Court agrees with the CA that under the factual milieu of the present case,
MERALCO failed to exercise the utmost degree of care and diligence required of it, pursuant to
Articles 1170 & 1173 of the Civil Code. It was not enough for MERALCO to merely rely on the
Decision of the MTC without ascertaining whether it had become final and executory. Verily,
only upon finality of the said Decision can it be said with conclusiveness that respondents have
no right or proper interest over the subject property, thus, are not entitled to the services of
MERALCO.

(2) No. MERALCO willfully caused injury to Leoncio Ramoy by withholding from him and
his tenants the supply of electricity to which they were entitled under the Service Contract. This is
contrary to public policy because, MERALCO, being a vital public utility, is expected to exercise
utmost care and diligence in the performance of its obligation. Thus, MERALCO’s failure to
exercise utmost care and diligence in the performance of its obligation to Leoncio Ramoy is
tantamount to bad faith. Leoncio Ramoy testified thathe suffered wounded feelings because of
MERALCO’s actions. Furthermore, due to the lack of power supply, the lessees of his four
apartments on subject lot left the premises. Clearly, therefore LeoncioRamoy is entitled to moral
damages in the amount awarded by the CA. Nevertheless, Leoncio is the soleperson entitled to
moral damages as he is the only who testified on the witness stand of his wounded feelings.
Pursuant to Article 2232 of the Civil Code, exemplary damages cannot be awarded as
MERALCO’s acts cannot be considered wanton, fraudulent, reckless, oppressive or malevolent.
Since the Court does not deem it proper to award exemplary damages in this case then the
CA’s award of attorney’s fees should likewise be deleted, as pursuant to Article 2208 of the Civil
Code of which the grounds were not present.
 AREOLA vs. CA
G.R. No. 95641, September 22, 1994

FACTS:
December 17, 1984: Prudential Guarantee And Assurance, Inc. issued collector's
provisional receipt amounting to P1,609.65. June 29, 1985: 7 months after the issuance of
petitioner Santos Areola's Personal Accident Insurance Policy, Prudential Guarantee And
Assurance, Inc. unilaterally cancelled it for failing to pay his premiums through its manager
Teofilo M. Malapit.

Shocked by the cancellation of the policy, Santos approached Carlito Ang, agent of
Prudential and demanded the issuance of an official receipt. Ang told Santos that it was a
mistake and assured its rectification. July 15, 1985: Santos demanded the same terms and same
rate increase as when he paid the provincial receipt but Malapit insisted that the partial
payment he made was exhausted and that he should pay the balance or his policy will cease
to operate. July 25, 1985: Assistant Vice-President Mariano M. Ampil III apologized. August 6,
1985: had filed a complaint for breach of contract with damages before the lower court. August
13, 1985: Santos received through Carlito Ang the leeter of Assistant Vice-President Mariano M.
Ampil III finding error on their part since premiums were not remitted Malapit, proposed to
extend its lifetime to December 17, 1985.

RTC: favored Santos - Prudential in Bad Faith

CA: Reversed - not motivated by negligence, malice or bad faith in cancelling subject
policy

ISSUE:
WON the Areolas can file against damages despite the effort to rectify the cancellation

HELD:
YES. RTC reinstated Malapit's fraudulent act of misappropriating the premiums paid is
beyond doubt directly imputable to Prudential Art. 1910. The principal must comply with all the
obligations, which the agent may have contracted within the scope of his authority.

As for any obligation wherein the agent has exceeded his power, the principal is not
bound except when he ratifies it expressly or tacitly. Subsequent reinstatement could not
possibly absolve Prudential there being an obvious breach of contract. A contract of insurance
creates reciprocal obligations for both insurer and insured

Article 1191: choice between fulfillment or rescission of the obligation in case one of the
obligors fails to comply with what is incumbent upon him; entitles the injured party to payment of
damages, regardless of whether he demands fulfillment or rescission of the obligation.

Nominal damages are "recoverable where a legal right is technically violated and must
be vindicated against an invasion that has produced no actual present loss of any kind, or
where there has been a breach of contract and no substantial injury or actual damages
whatsoever have been or can be shown.
 Tanguiling vs. CA
January 2, 1997

FACTS:
Herce contracted Tanguilig to construct a windmill system for him, for consideration of
60,000.00. Pursuant to the agreement Herce paid the downpayment of 30,000.00 and installment
of 15,000.00 leaving a 15,000.00 balance.

Herce refused to pay the balance because he had already paid this amount to SPGMI
which constructed a deep well to which the windmill system was to be connected since the
deepwell, and assuming that he owed the 15,000.00 this should be offset by the defects in the
windmill system which caused the structure to collapse after strong winds hit their place.
According to Tanguilig, the 60,000.00 consideration is only for the construction of the windmill
and the construction of the deepwell was not part of it. The collapse of the windmill cannot be
attributed to him as well, since he delivered it in good and working condition and Herce
accepted it without protest. Herce contested that the collapse is attributable to a typhoon, a
force majeure that relieved him of liability. The RTC ruled in favor of Tanguilig, but this decision
was overturned by the Court of Appeals which ruled in favor of Herce.

ISSUE:
Can the collapse of the windmill be attributed to force majeure? Thus, extinguishing the
liability of Tanguilig?

HELD:
Yes, in order for a party to claim exemption from liability by reason of fortuitous event
under Art 1174 of the Civil Code the event should be the sole and proximate cause of the loss or
destruction of the object of the contract. In Nakpil vs. Court of Appeals, the S.C. held that 4
requisites must concur that there must be a (a) the cause of the breach of the obligation must
be independent of the will of debtor (b) the event must be either unforeseeable or unavoidable;
(c) the event be such to render it impossible for the debtor to fulfill his obligation in a normal
manner; and (d) the debtor must be free from any participation in or aggravation of the injury to
the creditor.

Tanguilig merely stated that there was a strong wind, and a strong wind in this case is not
fortuitous, it was not unforeseeable nor unavoidable, places with strong winds are the perfect
locations to put up a windmill, since it needs strong winds for it to work.

WHEREFORE, the appealed decision is MODIFIED. Respondent VICENTE HERCE JR. is

directed to pay petitioner JACINTO M. TANGUILIG the balance of P15,000.00 with interest at the
legal rate from the date of the filing of the complaint. In return, petitioner is ordered to
"reconstruct subject defective windmill system, in accordance with the one-year guaranty" and
to complete the same within three (3) months from the finality of this decision.

Obligations and Contracts Terms:

Fortuitous Events - Refers to an occurrence or happening which could not be foreseen, or even if
foreseen, is inevitable. It is necessary that the obligor is free from negligence. Fortuitous events
may be produced by two (2) general causes: (1) by Nature, such as but not limited to,
earthquakes, storms, floods, epidemics, fires, and (2) by the act of man, such as but not limited
to, armed invasion, attack by bandits, governmental prohibitions, robbery, provided that they
have the force of an imposition which the contractor or supplier could not have resisted.
 Nakpil & Sons vs. CA
October 3, 1986

FACTS:
Private respondents – Philippine Bar Association (PBA) – a non-profit organization formed
under the corporation law decided to put up a building in Intramuros, Manila. Hired to plan the
specifications of the building were Juan Nakpil & Sons, while United Construction was hired to
construct it. The proposal was approved by the Board of Directors and signed by the President,
Ramon Ozaeta. The building was completed in 1966.

In 1968, there was an unusually strong earthquake which caused the building heavy
damage, which led the building to tilt forward, leading the tenants to vacate the premises.
United Construction took remedial measures to sustain the building.

PBA filed a suit for damages against United Construction, but United Construction
subsequently filed a suit against Nakpil and Sons, alleging defects in the plans and
specifications.

Technical Issues in the case were referred to Mr. Hizon, as a court appointed
Commissioner. PBA moved for the demolition of the building, but was opposed. PBA eventually
paid for the demolition after the building suffered more damages in 1970 due to previous
earthquakes. The Commissioner found that there were deviations in the specifications and plans,
as well as defects in the construction of the building.

ISSUE:
Whether or not an act of God (fortuitous event) exempts from liability parties who would
otherwise be due to negligence?

HELD:
Art. 1723 dictates that the engineer/architect and contractor are liable for damages
should the building collapse within 15 years from completion. Art. 1174 of the NCC, however,
states that no person shall be responsible for events, which could not be foreseen. But to be
exempt from liability due to an act of God, the ff. must occur:
1) Cause of breach must be independent of the will of the debtor
2) Event must be unforeseeable or unavoidable
3) Event must be such that it would render it impossible for the debtor to fulfill the obligation
4) Debtor must be free from any participation or aggravation of the industry to the creditor.

In the case at bar, although the damage was ultimately caused by the earthquake
which was an act of God, the defects in the construction, as well as the deviations in the
specifications and plans aggravated the damage, and lessened the preventive measures that
the building would otherwise have had.
 Republic vs. Luzon Stevedoring Corporation
GR No. L-21749, September 29, 1967

FACTS:
A barge being towed by tugboats "Bangus" and "Barbero" all owned by Luzon
Stevedoring Corp. rammed one of the wooden piles of the Nagtahan Bailey Bridge due to the
swollen current of the Pasig after heavy rains days before. The Republic sued Luzon Stevedoring
for actual and consequential damages. Luzon Stevedoring claimed it had exercised due
diligence in the selection and supervision of its employees; that the damages to the bridge were
caused by force majeure; that plaintiff has no capacity to sue; and that the Nagtahan bailey
bridge is an obstruction to navigation.

ISSUE:
Whether or not the collision of appellant's barge with the supports or piers of the
Nagtahan bridge was in law caused by fortuitous event or force majeure.

HELD:
There is a presumption of negligence on part of the employees of Luzon Stevedoring, as
the Nagtahan Bridge is stationary. For caso fortuito or force majeure (which in law are identical
in so far as they exempt an obligor from liability) by definition, are extraordinary events not
foreseeable or avoidable, "events that could not be foreseen, or which, though foreseen, were
inevitable" (Art. 1174, CC). It is, therefore, not enough that the event should not have been
foreseen or anticipated, as is commonly believed, but it must be one impossible to foresee or to
avoid. The mere difficulty to foresee the happening is not impossibility to foresee the same. Luzon
Stevedoring knew the perils posed by the swollen stream and its swift current, and voluntarily
entered into a situation involving obvious danger; it therefore assured the risk, and cannot shed
responsibility merely because the precautions it adopted turned out to be insufficient. It is thus
liable for damages.