1. Orient Freight International v. Keihin-Everett Forwarding G.R. No. 191937, Aug.

9, 2017
FACTS

On October 16, 2001, Keihin-Everett entered into a Trucking Service Agreement with Matsushita. Under
the Trucking Service Agreement, Keihin-Everett would provide services for Matsushita's trucking
requirements. These services were subcontracted by Keihin-Everett to Orient Freight, through their own
Trucking Service Agreement executed on the same day.

When the Trucking Service Agreement between Keihin-Everett and Matsushita expired on December 31,
2001, Keihin-Everett executed an In-House Brokerage Service Agreement for Matsushita's Philippine
Economic Zone Authority export operations. Keihin-Everett continued to retain the services of Orient
Freight, which sub-contracted its work to Schmitz Transport and Brokerage Corporation.

In April 2002, Matsushita called Keihin-Everett's Sales Manager, Salud Rizada, about a column in the
April 19, 2002 issue of the tabloid newspaper Tempo. This news narrated the April 17, 2002 interception
by Caloocan City police of a stolen truck filled with shipment of video monitors and CCTV systems owned
by Matsushita.

When contacted by Keihin-Everett about this news, Orient Freight stated that the tabloid report had blown
the incident out of proportion. They claimed that the incident simply involved the breakdown and towing of
the truck, which was driven by Ricky Cudas (Cudas), with truck helper, Rubelito Aquino [9] (Aquino). The
truck was promptly released and did not miss the closing time of the vessel intended for the shipment.

Keihin-Everett directed Orient Freight to investigate the matter. During its April 20, 2002 meeting with
Keihin-Everett and Matsushita, as well as in its April 22, 2002 letter addressed to Matsushita, Orient
Freight reiterated that the truck merely broke down and had to be towed

However, when the shipment arrived in Yokohama, Japan on May 8, 2002, it was discovered that 10
pallets of the shipment's 218 cartons, worth US$34,226.14, were missing.

Keihin-Everett independently investigated the incident. During its investigation, it obtained a police report
from the Caloocan City Police Station. The report stated, among others, that at around 2:00 p.m. on April
17, 2002, somewhere in Plaza Dilao, Paco Street, Manila, Cudas told Aquino to report engine trouble to
Orient Freight. After Aquino made the phone call, he informed Orient Freight that the truck had gone
missing. When the truck was intercepted by the police along C3 Road near the corner of Dagat-Dagatan
Avenue in Caloocan City, Cudas escaped and became the subject of a manhunt. [13]

When confronted with Keihin-Everett's findings, Orient Freight wrote back on May 15, 2002 to admit that
its previous report was erroneous and that pilferage was apparently proven. [14]

In its June 6, 2002 letter, Matsushita terminated its In-House Brokerage Service Agreement with Keihin-
Everett, effective July 1, 2002. Matsushita cited loss of confidence for terminating the contract, stating that
Keihin-Everett's way of handling the April 17, 2002 incident and its nondisclosure of this incident's
relevant facts "amounted to fraud and signified an utter disregard of the rule of law." [15]

Keihin-Everett, by counsel, sent a letter dated September 16, 2002 to Orient Freight, demanding
P2,500,000.00 as indemnity for lost income. It argued that Orient Freight's mishandling of the situation
caused the termination of Keihin-Everett's contract with Matsushita. [16]

When Orient Freight refused to pay, Keihin-Everett filed a complaint dated October 24, 2002 for damages
with Branch 10, Regional Trial Court, Manila. The case was docketed as Civil Case No. 02-105018. [17] In
its complaint, Keihin-Everett alleged that Orient Freight's "misrepresentation, malice, negligence and
fraud" caused the termination of its In-House Brokerage Service Agreement with Matsushita. Keihin-
Everett prayed for compensation for lost income, with legal interest, exemplary damages, attorney's fees,
litigation expenses, and the costs of the suit.[18]

In its December 20, 2002 Answer, Orient Freight claimed, among others, that its initial ruling of pilferage
was in good faith as manifested by the information from its employees and the good condition and the
timely shipment of the cargo. It also alleged that the contractual termination was a prerogative of
Matsushita. Further, by its own Audited Financial Statements on file with the Securities and Exchange
Commission, Keihin-Everett derived income substantially less than what it sued for. Along with the
dismissal of the complaint, Orient Freight also asserted counterclaims for compensatory and exemplary
damages, attorney's fees, litigation expenses, and the costs of the suit. [19]

The Regional Trial Court rendered its February 27, 2008 Decision, [20] in favor of Keihin-Everett. It found
that Orient Freight was "negligent in failing to investigate properly the incident and make a factual report
to Keihin[-Everett] and Matsushita," despite having enough time to properly investigate the incident. [21]

The trial court also ruled that Orient Freight's failure to exercise due diligence in disclosing the true facts
of the incident to Keihin-Everett and Matsushita caused Keihin-Everett to suffer income losses due to
Matsushita's cancellation of their contract.[22] The trial court ordered Orient Freight "to pay [Keihin-Everett]
the amount of [P] 1,666,667.00 as actual damages representing net profit loss incurred" and P50,000.00
in attorney's fees.[23] However, it denied respondent's prayer for exemplary damages, finding that
petitioner did not act with gross negligence.[24]

Orient Freight appealed the Regional Trial Court Decision to the Court of Appeals. On January 21, 2010,
the Court of Appeals issued its Decision[25] affirming the trial court's decision. It ruled that Orient Freight
"not only had knowledge of the foiled hijacking of the truck carrying the . . . shipment but, more
importantly, withheld [this] information from [Keihin-Everett]." [26]

The Court of Appeals ruled that the oral and documentary evidence has established both the damage
suffered by Keihin-Everett and Orient Freight's fault or negligence. Orient Freight was negligent in not
reporting and not thoroughly investigating the April 17, 2002 incident despite Keihin-Everett's instruction
to do so.[27] It further ruled that while Keihin-Everett sought to establish its claim for lost income of
P2,500,000.00 by submitting its January 2002 to June 2002 net income statement, [28] this was refuted by
Orient Freight by presenting Keihin-Everett's own audited financial statements. The Court of Appeals held
that the trial court correctly arrived at the amount of P1,666,667.00 as the award of lost income. [29]

ISSUE

whether Orient Freight, Inc. was negligent for failing to disclose the facts surrounding the hijacking
incident on April 17, 2002, which led to the termination of the Trucking Service Agreement between
Keihin-Everett Forwarding Co., Inc. and Matsushita Communication Industrial Corporation of the
Philippines

HELD

The petition is denied.

2. Gaisano v. Insurance Company of North America, G.R. No. 147839, June 8, 2006

FACTS:

Intercapitol Marketing Corporation (IMC) is the maker of Wrangler Blue Jeans while Levi Strauss (Phils.)
Inc. (LSPI) is the local distributor of products bearing trademarks owned by Levi Strauss & Co. IMC and
LSPI separately obtained from Insurance Company of North America fire insurance policies for their book
debt endorsements related to their ready-made clothing materials which have been sold or delivered to
various customers and dealers of the Insured anywhere in the Philippines which are unpaid 45 days after
the time of the loss.

The policies also provide for the following conditions:

1. Warranted that the Company shall not be liable for any unpaid account in respect of the merchandise
sold and delivered by the Insured which are outstanding at the date of loss for a period in excess of six (6)
months from the date of the covering invoice or actual delivery of the merchandise whichever shall first
occur.

2. Warranted that the Insured shall submit to the Company within twelve (12) days after the close of every
calendar month all amount shown in their books of accounts as unpaid and thus become receivable item
from their customers and dealers.

On February 25, 1991, Gaisano Superstore Complex in Cagayan de Oro City, owned by Gaisano
Cagayan, Inc., containing the ready-made clothing materials sold and delivered by IMC and LSPI was
consumed by fire. On February 4, 1992, Insurance Company of North America filed a complaint for
damages against Gaisano Cagayan, Inc. alleges that IMC and LSPI filed their claims under their
respective fire insurance policies which it paid thus it was subrogated to their rights. The RTC rendered its
decision dismissing Insurance’s complaint. It held that the fire was purely accidental; that the cause of the
fire was not attributable to the negligence of the petitioner. Also, it said that IMC and LSPI retained
ownership of the delivered goods and must bear the loss.

The CA rendered its decision and set aside the decision of the RTC. It ordered Gaisano to pay Insurance
the P 2 million and the P 500,000 the latter paid to IMC and Levi Strauss.

Hence this petition.

ISSUE:

W/N Insurance Company of North America can claim against Gaisano Cagayan for the debt that was
isnured

HELD:

YES. petition is partly GRANTED. Order to pay P535,613 is DELETED

The insurance policy is clear that the subject of the insurance is the book debts and NOT goods sold and
delivered to the customers and dealers of the insured.

ART. 1504. Unless otherwise agreed, the goods remain at the seller’s risk until the ownership therein is
transferred to the buyer, but when the ownership therein is transferred to the buyer the goods are at the
buyer’s risk whether actual delivery has been made or not, except that:

(1) Where delivery of the goods has been made to the buyer or to a bailee for the buyer, in pursuance of
the contract and the ownership in the goods has been retained by the seller merely to secure
performance by the buyer of his obligations under the contract, the goods are at the buyer’s risk from the
time of such delivery;

IMC and LSPI did not lose complete interest over the goods. They have an insurable interest until full
payment of the value of the delivered goods. Unlike the civil law concept of res perit domino, where
ownership is the basis for consideration of who bears the risk of loss, in property insurance, one’s interest
is not determined by concept of title, but whether insured has substantial economic interest in the property

Section 13 of our Insurance Code defines insurable interest as “every interest in property, whether real or
personal, or any relation thereto, or liability in respect thereof, of such nature that a contemplated peril
might directly damnify the insured.” Parenthetically, under Section 14 of the same Code, an insurable
interest in property may consist in: (a) an existing interest; (b) an inchoate interest founded on existing
interest; or (c) an expectancy, coupled with an existing interest in that out of which the expectancy arises.

Anyone has an insurable interest in property who derives a benefit from its existence or would suffer loss
from its destruction. It is sufficient that the insured is so situated with reference to the property that he
would be liable to loss should it be injured or destroyed by the peril against which it is insured. An
insurable interest in property does not necessarily imply a property interest in, or a lien upon, or
possession of, the subject. The matter of the insurance, and neither the title nor a beneficial interest is
requisite to the existence of such an interest.

Insurance in this case is not for loss of goods by fire but for petitioner’s accounts with IMC and LSPI that
remained unpaid 45 days after the fire – obligation is pecuniary in nature. The obligor should be held
exempt from liability when the loss occurs thru a fortuitous event only holds true when the obligation
consists in the delivery of a determinate thing and there is no stipulation holding him liable even in case of
fortuitous event.

Article 1263 of the Civil Code in an obligation to deliver a generic thing, the loss or destruction of anything
of the same kind does not extinguish the obligation (Genus nunquan perit). The subrogation receipt, by
itself, is sufficient to establish not only the relationship of respondent as insurer and IMC as the insured,
but also the amount paid to settle the insurance claim.

Art. 2207. If the plaintiff’s property has been insured, and he has received indemnity from the insurance
company for the injury or loss arising out of the wrong or breach of contract complained of, the insurance
company shall be subrogated to the rights of the insured against the wrongdoer or the person who has
violated the contract.

As to LSPI, no subrogation receipt was offered in evidence. Failure to substantiate the claim of
subrogation is fatal to petitioner’s case for recovery of the amount of P535,613
3. Tanguilig v. CA, G.R. 266 SCRA 78

FACTS:

Petitioner, doing business under the name and style J.M.T. Engineering and General Merchandising,
proposed to respondent to construct a windmill system for him (respondent). They agreed on the
construction of the windmill for a consideration of P60,000.00 with a one-year guaranty from the date
of completion and acceptance by respondent of the project. Pursuant to the agreement, respondent
paid petitioner a down payment of P30,000.00 and an installment payment of P15,000.00, leaving a
balance of P15,000.00.

On 14 March 1988, due to the refusal of respondent to pay the balance, petitioner filed a complaint. In
his Answer, respondent denied the claim saying that he had already paid this amount to the San Pedro
General Merchandising Inc. (SPGMI) which constructed the deep well to which the windmill system was
to be connected. According to respondent, since the deep well formed part of the system, the payment
he tendered to SPGMI should be credited to his account by petitioner.

Moreover, assuming that he owed petitioner a balance of P15,000.00, this should be offset by the
defects in the windmill system which caused the structure to collapse after a strong wind hit their place.

Petitioner denied that the construction of a deep well was included in the agreement to build the
windmill system, for the contract price of P60,000.00 was solely for the windmill assembly and its
installation. He also disowned any obligation to repair the system and insisted that he delivered it in
good condition to respondent who accepted the same without protest. Besides, its collapse was
attributable to a typhoon, a force majeure, which relieved him of any liability.

In finding for plaintiff, the trial court held that the construction of the deep well was not part of the
windmill project and that “there is no clear and convincing proof that the windmill system fell down due
to the defect of the construction. “

The Court of Appeals reversed the trial court. It ruled that the construction of the deep well was
included in the agreement of the parties because the term “deep well” was mentioned in both
proposals. It also rejected petitioner’s claim of force majeure and ordered the latter to reconstruct

the windmill in accordance with the stipulated one-year guaranty.

ISSUES:

1) Whether or not the agreement to construct the windmill system included the installation of a deep
well.

2) Whether or not petitioner is under obligation to reconstruct the windmill after it collapsed.

RULING:

1) No, the installation of a deep well was not included in the proposals of petitioner to construct a
windmill system for respondent. Nowhere in either proposal is the installation of a deep well
mentioned, even remotely. Neither is there an itemization or description of the materials to be
used in constructing the deep well. There is absolutely no mention in the two (2) documents that a deep
well pump is a component of the proposed windmill system. The contract prices fixed in both proposals
cover only the features specifically described therein and no other.

While the words “deep well” and “deep well pump” are mentioned in both, these do not indicate that a
deep well is part of the windmill system. They merely describe the type of deep well pump for which the
proposed windmill would be suitable. Since the terms of the instruments are clear and leave no doubt as
to their meaning, they should not be disturbed.

Moreover, it is a cardinal rule in the interpretation of contracts that the intention of the parties shall be
accorded primordial consideration and, in case of doubt, their contemporaneous and subsequent acts
shall be principally considered. An examination of such contemporaneous and subsequent acts of
respondent as well as the attendant circumstances did not persuade the SC to uphold him.

2) 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. CA, four (4) requisites must concur:

(a) the cause of the breach of the obligation must be independent of the will of the debtor;

(b) the event must be either unforeseeable or unavoidable;

(c) the event must be such as to render it impossible for the debtor to fulfill his obligation in a normal
manner; and,

(d) the debtor must be free from any participation in or aggravation of the injury to the creditor.

Petitioner failed to show that the collapse of the windmill was due solely to a fortuitous event.
Interestingly, the evidence does not disclose that there was actually a typhoon on the day the windmill
collapsed. Petitioner merely stated that there was a “strong wind.” But a strong wind in this case cannot
be fortuitous — unforeseeable nor unavoidable. On the contrary, a strong

wind should be present in places where windmills are constructed, otherwise the windmills will not turn.

The appellate court correctly observed that “given the newly-constructed windmill system, the same
would not have collapsed had there been no inherent defect in it which could only be attributable to the
appellee.”

4. PHILCOMSAT v. Globe Telecom, G.R.147324, May 25, 2004

FACTS:

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. The term of the contract was for 60 months, or five (5)
years. In turn, Globe promised to pay Philcomsat monthly rentals for each leased circuit involved. 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 Agreement) was to
expire. 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 is 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.

On 16 September 1991, the Senate passed and adopted a resolution 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.

In a letter dated 06 August 1992, Globe notified Philcomsat of its intention to discontinue the use of
the earth station 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.

ISSUE:

Whether or not the non-ratification by the Senate of the Treaty of Friendship, Cooperation and
Security and its Supplementary Agreements constitutes force majeure (fortuitous event) which
exempts Globe from complying with its obligations under the Agreement.

RULING:

Yes. 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.

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 request 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.

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.

Clearly, the foregoing facts 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.

5. SBTC v. CA, 249 SCRA 206

Under Article 1182 of the Civil Code, a conditional obligation shall be void if its fulfillment depends
upon the sole will of the debtor. In the present case, the mutual agreement, the absence of which
petitioner bank relies upon to support its non-liability for the increased construction cost, is in effect a
condition dependent on petitioner bank's sole will, since private respondent would naturally and
logically give consent to such an agreement which would allow him recovery of the increased cost.

FACTS:

Private respondent Ysmael C. Ferrer was contracted by herein petitioners Security Bank and Trust
Company (SBTC) and Rosito C. Manhit to construct the building of SBTC in Davao City for the
price ofP1,760,000.00. Respondent Ferrer was able to complete the construction of the building
within the contracted period but he was compelled by a drastic increase in the cost of construction
materials to incur expenses of about P300,000.00 on top of the original cost. The additional expenses
were made known to petitioner SBTC thru its Vice-President Fely Sebastian and Supervising Architect
Rudy de la Rama. Respondent Ferrer made timely demands for payment ofthe increased cost. Said
demands were supported by receipts, invoices, payrolls and other documents proving the additional
expenses.

In March 1981, SBTC thru Assistant Vice-President Susan Guanio and a representative of an
architectural firm consulted by SBTC, verified Ferrer's claims for additional cost. A recommendation was
then made to settle Ferrer's claim but only for P200,000.00. SBTC, instead of paying the recommended
additional amount, denied ever authorizing payment of any amount beyond the original contract price.
SBTC likewise denied any liability for the additional cost based on Article IX of the building contract.
SBTC argued that under Article IX of the building contract, any increase in the price of labor and/or
materials resulting in an increase in construction cost above the stipulated contract price will not
automatically make petitioners liable to pay for such increased cost, as any payment above the
stipulated contract price has been made subject to the condition that the "appropriate adjustment" will
be made "upon mutual agreement of both parties." It is contended that since there was no mutual
agreement between the parties, petitioners' obligation to pay amounts above the original contract price
never materialized.

Ysmael C. Ferrer then filed a complaint for breach of contract with damages. The trial court ruled
for Ferrer. The Court of Appeals affirmed the trial court decision.

ISSUE:
Whether or not petitioners are liable to pay for the increased construction cost. (YES)
RULING:

It is not denied that private respondent incurred additional expenses in constructing petitioner
bank's building due to a drastic and unexpected increase in construction cost. In fact, petitioner
bank admitted liability for increased cost when a recommendation was made to settle private
respondent's claim for P200,000.00. Private respondent's claim for the increased amount was
adequately proven during the trial by receipts, invoices and other supporting documents.

Under Article 1182 of the Civil Code, a conditional obligation shall be void if its fulfillment depends
upon the sole will of the debtor. In the present case, the mutual agreement, the absence of which
petitioner bank relies upon to support its non-liability for the increased construction cost, is in
effect a condition dependent on petitioner bank's sole will, since private respondent would
naturally and logically give consent to such an agreement which would allow him recovery of the
increased cost.

Further, it cannot be denied that petitioner bank derived benefits when private respondent
completed the construction even at an increased cost.

Hence, to allow petitioner bank to acquire the constructed building at a price far below its actual
construction cost would undoubtedly constitute unjust enrichment for the bank to the prejudice of
private respondent. Such unjust enrichment is not allowed by law.

6. Manila Banking Corp. v. Silverio, G.R. 132887, Aug. 11, 2005

Full

7. Solid Homes Inc. v. Tan, 465 SCRA 137

FACTS: 

petitioner Solid Homes, Inc., sold to the spouses Joe Uy and Myrna Uy a subdivision lot with an area of
1,069 square meters, more particularly identified as Lot 18, Block 2, located at petitioner’s Loyola Grand
Villas Subdivision, Quezon City. the lot was registered in the name of the Uys under Transfer Certificate
of Title (TCT) No. 280963/T-1409 of the Register of Deeds of Quezon City.

February, 1985, the spouses Uy sold the same lot to herein respondents, the spouses Ancheta K. Tan
and Corazon de Jesus-Tan, by reason of which the former title covering the lot was cancelled and
replaced by TCT No. RT-14465 (327754) in respondents’ name.

espondents visited their property a number of times, only to find out the sad state of development
thereat. There was no infrastructure and utility systems for water, sewerage, electricity and telephone,
as announced in the approved plans and advertisements of the subdivision. Worse, squatters occupy
their lot and its surrounding areas. In short, there has been no development at all.

respondents demanded on petitioner to provide the needed utility systems and clear the area of
squatters and other obstructions by the end of January, 1996 to enable them to start the construction of
their house thereon and to allow other lot owners in the area a full access to and peaceful possession of
their respective lots, conformably with P.D. No. 957 which requires an owner or developer of a
subdivision project to develop the same within one year from the issuance of its license.

 respondents filed with the Field Office of the Housing and Land Use Regulatory Board (HLURB), NCR a
complaint for specific performance and damages therein praying, inter alia, that petitioner be ordered
to provide the needed facilities in the premises and rid the same of squatters; or, in the alternative, for
petitioner to replace respondents’ property with another lot in the same subdivision where there are
facilities and sans squatters.

the Housing and Land Use Arbiter, judgment for the respondents by directing petitioner:

a. to perform its obligation to provide subdivision facilities in the subject premises and to rid the
premises of squatters. In the alternative, at the option of complainants xxx to replace subject lot with a
lot of similar size and with available facilities, located in the subject subdivision.

b. to pay complainants ₱20,000.00 as and by way of attorney’s fees.

petitioner went on appeal to the HLURB Board of Commissioners,  affirm arb..

petitioner elevated the case to the Office of the President (O.P.)

AFFIRMED with the modification that in case Solid Homes, Inc. fails to replace subject lot with a lot of
similar size and with available facilities located in the subdivision, because it had already sold or
transferred all of its properties in the subdivision, it shall pay spouses Ancheta Tan and Corazon Tan the
total amount received from them as purchase price, with legal rate of interest from February 1985, until
fully paid. Save for this modification, the decision appealed from is hereby  AFFIRMED.

deletion of that portion thereof giving petitioner the option of merely paying them the purchase
price with interest in the event petitioner "fails to replace subject lot with a lot of similar size and with
available facilities located in the subdivision, because it had already sold or transferred all of its
properties in the subdivision." Respondents argued that it would be more in accord with equity and fair
play if they will be paid the fair market value of the lot in question and not merely its purchase price,
should there be no available lot with facilities in the area.

ISSUE:
(1) whether or not respondents’ right to bring the instant case against petitioner has already
prescribed;

HELD: 

1. No
There can be no debate at all on the legal postulate that the prescriptive period for bringing
action for specific performance, as here, prescribes in ten (10) years. This is so provided in
Article 1144 of the Civil Code. What we cannot agree on with the petitioner, and about which
petitioner is in serious error, is its submission that the 10-year prescriptive period should
commence either on April 7, 1980, when petitioner originally sold the lot to spouses Uy; or in
February, 1985, when the respondents thereafter bought the same lot from the Uy couple.
 Obviously, petitioner misread Article 1144 which specifically provides that the 10-year period
therein referred to commences to run only from the time the right of action accrues. We quote
in full the codal provision relied upon by petitioner:

If not on a written contract, petitioner’s obligation to introduce improvements on the area in question
arises from law, more specifically P.D. 957, as amended by P.D. 1216, Section 31 of which pertinently
reads:

Our earlier ruling in Banco Filipino Savings and Mortgage Bank vs. CA 9 provides the answer:

Thus, the period of prescription of any action is reckoned only from the date the cause of action
accrued. And a cause of action arises when that which should have been done is not done, or that
which should not have been done is done. The period should not be made to retroact to the date of
execution of the contract on January 15, 1975 as claimed by the petitioner for at that time, there would
be no way for the respondents to know of the violation of their rights. 

The Court of Appeals therefore correctly found that respondents’ cause of action accrued on October
30, 1978, the date they received the statement of account showing the increased rate of interest, for it
was only from that moment that they discovered the petitioner’s unilateral increase

In short, it is from the time an act is performed or an omission incurred which is violative of the
plaintiff’s right, that signals the accrual of a cause of action. And it is from that time that the 10-year
prescriptive period commences to run.

it was only on December 18, 1995 when respondents made a written demand upon petitioner to
construct subdivision roads, put up utility facilities and rid the premises of squatters, obligations which
are unquestionably in the nature of an obligation to do. And under Article 116913 of the Code, a party
who is under obligation to do something incurs delay only from the time that the obligee demands,
either judicially or extrajudicially, for the fulfillment of the obligation.

8. Autocorp Group v. Intra Strata Assurance Corp., 556 SCRA 250

FACTS: 

Autocorp Group, represented by its President, Rodriguez, secured an ordinary re-export bond from
private respondent Intra Strata Assurance Corporation (ISAC) in favor of public Bureau of Customs
(BOC), to guarantee the re-export of 2 units of car (at 2 different dates) and/or to pay the taxes and
duties thereon. Petitioners executed and signed two Indemnity Agreements with identical stipulations in
favor of ISAC, agreeing to act as surety of the subject bonds

In sum, ISAC issued the subject bonds to guarantee compliance by petitioners with their undertaking
with the BOC to re-export the imported vehicles within the given period and pay the taxes and/or duties
due thereon. In turn, petitioners agreed, as surety, to indemnify ISAC for the liability the latter may incur
on the said bonds
Autocorp failed to re-export the items guaranteed by the bonds and/or liquidate the entries or cancel
the bonds, and pay the taxes and duties pertaining to the said items, despite repeated demands made
by the BOC, as well as by ISAC. By reason thereof, the BOC considered the two bonds forfeited.

Failing to secure from petitioners the payment of the face value of the two bonds, ISAC filed with the
RTC an action against petitioners to recover a sum of money plus AF. ISAC impleaded the BOC “as a
necessary party plaintiff in order that the reward of money or judgment shall be adjudged unto the said
necessary plaintiff.”

Petitioners filed a MTD, which was denied. RTC ordered Autocorp to pay ISAC and/or BOC the face value
of the subject bonds plus AF. Autocorp’s MR was denied. CA affirmed the trial court’s decision. MR was
denied. Hence this Petition for Review on Certiorari

ISSUE:

WON these bonds are now due and demandable, as there is yet no actual forfeiture of the bonds, but
merely a recommendation of forfeiture, for no writ of execution has been issued against such bonds,
therefore the case was prematurely filed by ISAC

HELD: 

PETITION IS WITHOUT MERIT

YES

The Indemnity Agreements give ISAC the right to recover from petitioners the face value of the subject
bonds plus attorney’s fees at the time ISAC becomes liable on the said bonds to the BOC, (specifically to
re-export the imported vehicles within the period of six months from their date of entry) regardless of
whether the BOC had actually forfeited the bonds, demanded payment thereof and/or received such
payment. It must be pointed out that the Indemnity Agreements explicitly provide that petitioners shall
be liable to indemnify ISAC “whether or not payment has actually been made by the [ISAC]” and ISAC
may proceed against petitioners by court action or otherwise “even prior to making payment to the
[BOC] which may hereafter be done by [ISAC].”

Article 2071 of the Civil Code provides:

Art. 2071. The guarantor, even before having paid, may proceed against the principal debtor:

(1) When he is sued for the payment;

(2) In case of insolvency of the principal debtor;

(3) When the debtor has bound himself to relieve him from the guaranty within a specified period, and
this period has expired;

(4) When the debt has become demandable, by reason of the expiration of the period for payment;

(5) After the lapse of ten years, when the principal obligation has no fixed period for its maturity, unless
it be of such nature that it cannot be extinguished except within a period longer than ten years;

(6) If there are reasonable grounds to fear that the principal debtor intends to abscond;
(7) If the principal debtor is in imminent danger of becoming insolvent.

In all these cases, the action of the guarantor is to obtain release from the guaranty, or to demand a
security that shall protect him from any proceedings by the creditor and from the danger of insolvency
of the debtor.

NOTES:

A demand is only necessary in order to put an obligor in a due and demandable obligation in delay,
which in turn is for the purpose of making the obligor liable for interests or damages for the period of
delay. Thus, unless stipulated otherwise, an extrajudicial demand is not required before a judicial
demand, i.e., filing a civil case for collection, can be resorted to

9. Pantaleon v. Amex Co., 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:

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.

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.

10. Barzaga v. CA, 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: Was there delay in the performance of the private respondent's obligation?

Ruling: 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.

11. Cathay Pacific v. Vasquez, March 14, 2003

FACTS

Private respondents were passengers of petitioner booked on its Flight CX-905 with the route of Manila
to Hongkong and back. They, along with their maid and two friends, went to HK for pleasure and
business. While the maid’s boarding pass was for the Economy Class, the spouses’ and their two
friends’ indicated that they were on the Business Class. However, while in Kai Tak Airport, after
checking in their luggage and presenting their boarding passes to the ground stewardess, they were
informed by Ms. Chiu, a ground attendant, that there was a seat change from Business to First Class for
the spouses. It is to be noted that the Vasquezes are frequent flyers of the airline and are Gold Card
members of its Marco Polo Club. The Marco Polo Club is part of the marketing strategy of Cathay
through which it accords its frequent flyers several privileges, including priority for upgrading of booking
without any extra charge whenever an opportunity arises. Upon being informed of this change, Dr.
Vasquez refused the same, saying that it would not look nice for them as hosts to travel in First Class and
their guests, in Business Class, not to mention that they also had to discuss business matters during the
flight. He asked Ms. Chiu to have other passengers transferred instead. Shocked by this unusual reaction
to a seat upgrade, Ms. Chiu, after consulting with her supervisor, informed them that if they would not
avail of the privilege, they would not be allowed to take the flight. Eventually, after talking with his
friends, Dr. Vasquez agreed. He and his wife took the First Class Cabin. Back in Manila, after apparent
inaction on the part of Cathay, the Vasquezes filed a damage suit, asking for temperate, moral and
exemplary damages, as well as attorney’s fees. They attributed discourteous and humiliating
behavior to Ms. Chiu. Cathay answered that seat upgrading is a common practice among airlines. The
TC ruled for the spouses, awarding them nominal (P100,000 each), moral (P2M each), exemplary(P5M
each) and attorney’s fees (P1M each). The CA affirmed, but deleted the award of exemplarydamages
and reduced the awards of moral and nominal damages and attorney’s fees.

damnum absque injuria

ISSUE/s

1. WON Cathay breached its contract of carriage with the Vs when it upgraded their seat
accommodation.

2. WON the upgrading was made in bad faith or with fraud.3. WON the Vasquezes are entitled to
damages.

RULING

1. YES. 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 atno
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. Normally, one would appreciate and accept an upgrading, for it would mean a better
accommodation. But, whatever their reason was and however odd it might be, the Vazquezes had every
right to decline the upgrade and insist on the Business Class accommodation they had booked for and
which was designated in their boarding passes. They clearly waived their priority or preference

when they asked that other passengers be given the upgrade. It should not have been imposed on the
mover their vehement objection. By insisting on the upgrade, Cathay breached its contract of carriage
with the Vazquezes.

2. NO. The Vazquezes were not induced to agree to the upgrading through insidious words or
deceitful machination or through willful concealment of material facts. Upon boarding, Ms. Chiu told the
Vazquezes that their accommodations were upgraded to First Class in view of their being Gold Card
members of Cathay’s Marco Polo Club. She was honest in telling them that their seats were already
given to other passengers and the Business Class Section was fully booked. Ms. Chiu might have failed to
consider the remedy of offering the First Class seats to other passengers. But, we find no bad faith in her
failure to do so, even if that amounted to an exercise of poor judgment. Neither was the transfer of the
Vazquezes effected for some evil or devious purpose. As testified to by Mr. Robson, the First Class
Section is better than the Business Class Section in terms of comfort, quality of food, and service from
the cabin crew

3. YES. Case law establishes the following requisites for the award of moral damages: (1) there must
be an injury clearly sustained by the claimant, whether physical, mental or psychological; (2) there must
be a culpable act or omission factually established; (3) the wrongful act or omission of the defendant is
the proximate cause of the injury sustained by the claimant; and (4) the award for damages is
predicated on any of the cases stated in Article 2219 of the Civil Code. Moral damages predicated upon
a breach of contract of carriage may only be recoverable in instances where the carrier is guilty of fraud
or bad faith or where the mishap resulted in the death of a passenger. Where in breaching the contract
of carriage the airline is not shown to have acted fraudulently or in bad faith, liability for damages is
limited to the natural and probable consequences of the breach of the obligation which the parties had
foreseen or could have reasonably foreseen. In such a case the liability does not include moral and
exemplary damages. The breach of contract of carriage, which consisted in the involuntary upgrading of
the Vazquezes’ seat accommodation, was not attended by fraud or bad faith. The Court of
Appeals’ award of moral damages has, therefore, no leg to stand on. The deletion of the award for
exemplary damages by the Court of Appeals is correct. It is a requisite in the grant of exemplary
damages that the act of the offender must be accompanied by bad faith or done in wanton, fraudulent
or malevolent manner. Such requisite is absent in this case. Moreover, to been titled thereto the
claimant must first establish his right to moral, temperate, or compensatory damages. Since the
Vazquezes are not entitled to any of these damages, the award for exemplary damages has no legal
basis. And where the awards for moral and exemplary damages are eliminated, so must the award for
attorney’s fees. The most that can be adjudged in favor of the Vazquezes for Cathay’s breach of
contract is an award for nominal damages under Article 2221 of the Civil Code, which reads as follows:

Article 2221. Nominal damages are adjudicated in order that a right of the plaintiff, which has been
violated or invaded by the defendant, may be vindicated or recognized, and not for the purpose of
indemnifying the plaintiff for any loss suffered by him.

12. Meralco v. Ramoy, March 4, 2008

Oblicon Concept:

 Article 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.

 Expectation Interest - which is his interest in having the benefit of his bargain by being put in as good a
position as he would have been in had the contract been performed.

 Reliance Interest - which is his interest in being reimbursed for loss caused by reliance on the contract
by being put in as good a position as he would have been in had the contract not been made. 
Restitution Interest - which is his interest in having restored to him any benefit that he has conferred on
the other party.

Facts:

 This is a Petition for Review on Certiorari on CA‘s decision of ordering petitioner Manila Electric
Company (MERALCO) to pay Leoncio Ramoy moral and exemplary damages and attorney's fees.

 The evidence on record has established that 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.

 The MTC rendered judgment for the plaintiff [MERALCO] and "ordering the defendants to demolish or
remove the building and structures they built on the land of the plaintiff and to vacate the premises.
 On June 20, 1990 NPC wrote Meralco requesting for the immediate disconnection of electric power
supply to all residential and commercial establishments beneath the NPC transmission lines.

 Meralco requested NPC for a joint survey to determine all the establishments which are considered
under NPC property in view of the fact that "the houses in the area are very close to each other.

In due time, the electric service connection of the plaintiffs [herein respondents] was disconnected.
After the electric power in Ramoy's apartment was cut off, the plaintiffs-lessees left the premises.

 During the ocular inspection ordered by the Court and attended by the parties, it was found out that
the residence of plaintiffs-spouses Leoncio and Matilde Ramoy was indeed outside the NPC property.

 The RTC decided in favor of MERALCO by dismissing herein respondents' claim for moral damages,
exemplary damages and attorney's fees. However, the RTC ordered MERALCO to restore the electric
power supply of respondents. Issues:

 W/N Meralco acted negligently when it disconnected the subject electric service of respondents.

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

Held:

 Yes. MERALCO admits that respondents are its customers under a Service Contract whereby it is
obliged to supply respondents with electricity. Clearly, respondents' cause of action against MERALCO is
anchored on culpa contractual or breach of contract for the latter's discontinuance of its service to
respondents under Article 1170 of the Civil Code. In culpa contractual, the mere proof of the existence
of the contract and the failure of its compliance justify, prima facie, a corresponding right of relief. The
law, recognizing the obligatory force of contracts, will not permit a party to be set free from liability for
any kind of misperformance of the contractual undertaking or a contravention of the tenor thereof. o
The Court agrees with the CA that under the factual milieu of the present case, MERALCO failed to
exercise the utmost degree of care and diligence required of it. To repeat, it was not enough for
MERALCO to merely rely on the Decision of the MTC without ascertaining whether it had become final
and executory.

 Yes to Moral Damages since Ramoy testified in Court about his mental anguish. In the present case,
MERALCO wilfully 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. Electricity is a basic necessity the
generation and distribution of which is imbued with public interest, and its provider is a public utility
subject to strict regulation by the State in the exercise of police power. Failure to comply with these
regulations will give rise to the presumption of bad faith or abuse of right. o No to Exemplary Damages
since Article 2232 of the Civil Code provides that in contracts and quasi-contracts, the court may award
exemplary damages if the defendant, in this case MERALCO, acted in a wanton, fraudulent, reckless,
oppressive, or malevolent manner, while Article 2233 of the same Code provides that such damages
cannot be recovered as a matter of right and the adjudication of the same is within the discretion of the
court o No to Attorney‘s Fees since the Court does not deem it proper to award exemplary damages in
this case, then the CA's award for attorney's fees should likewise be deleted, as Article 2208 of the Civil
Code states that in the absence of stipulation, attorney's fees cannot be recovered except in cases
provided for in said Article.

13. Jimmy Co. v. CA, Broadway Motor Sales Corp., June 22, 1998
FACTS:

On July 18, 1990, petitioner entrusted his Nissan pick-up car 1988 model1 to private respondent -
which is engaged in the sale, distribution and repair of motor vehicles - for the following job repair
services and supply of parts

Private respondent undertook to return the vehicle on July 21, 1990 fully serviced and supplied in
accordance with the job contract. After petitioner paid in full the repair bill in the amount
of P1,397.00,3 private respondent issued to him a gate pass for the release of the vehicle on said
date. But came July 21, 1990, the latter could not release the vehicle as its battery was weak and
was not yet replaced. Left with no option, petitioner himself bought a new battery nearby and
delivered it to private respondent for installation on the same day. However, the battery was not
installed and the delivery of the car was rescheduled to July 24, 1990 or three (3) days later. When
petitioner sought to reclaim his car in the afternoon of July 24, 1990, he was told that it was
carnapped earlier that morning while being road-tested by private respondents employee along
Pedro Gil and Perez Streets in Paco, Manila. Private respondent said that the incident was reported
to the police.

 failed to recover his car and its accessories or the value thereof, petitioner filed a suit for damages
against private respondent anchoring his claim on the latters alleged negligence. For its part, private
respondent contended that it has no liability because the car was lost as a result of a fortuitous event
- the carnapping. 

(T)he cost of the Nissan Pick-up four (4) door when the plaintiff purchased it from the defendant
is P332,500.00 excluding accessories which were installed in the vehicle by the plaintiff consisting of
four (4) brand new tires, magwheels, stereo speaker, amplifier which amount all in all to P20,000.00.
It is agreed that the vehicle was lost on July 24, 1990 `approximately two (2) years and five (5)
months from the date of the purchase. It was agreed that the plaintiff paid the defendant the cost of
service and repairs as early as July 21, 1990 in the amount of P1,397.00 which amount was
received and duly receipted by the defendant company. It was also agreed that the present value of
a brand new vehicle of the same type at this time is P425,000.00 without accessories.

was who between the parties shall bear the loss of the vehicle which necessitates the resolution of
whether private respondent was indeed negligent.

private respondent guilty of delay in the performance of its obligation and held it liable to petitioner
for the value of the lost vehicle and its accessories plus interest and attorneys fees. 6 On appeal, the
Court of Appeals (CA) reversed the ruling of the lower court and ordered the dismissal of petitioners
damage suit.7 The CA ruled that: (1) the trial court was limited to resolving the issue of negligence as
agreed during pre-trial; hence it cannot pass on the issue of delay; and (2) the vehicle was lost due
to a fortuitous event.

ISSUES

whether a repair shop can be held liable for the loss of a customers vehicle while the same is
in its custody for repair or other job services?

RULING

in favor of the customer. First, on the technical aspect involved. Contrary to the CAs pronouncement,
the rule that the determination of issues at a pre-trial conference bars the consideration of other issues
on appeal, except those that may involve privilege or impeaching matter, 8 is inapplicable to this case.
The question of delay, though not specifically mentioned as an issue at the pre-trial may be tackled by
the court considering that it is necessarily intertwined and intimately connected with the principal issue
agreed upon by the parties, i.e. who will bear the loss and whether there was negligence. Petitioners
imputation of negligence to private respondent is premised on delay which is the very basis of the
formers complaint. Thus, it was unavoidable for the court to resolve the case, particularly the question
of negligence without considering whether private respondent was guilty of delay in the performance of
its obligation.

It is a not a defense for a repair shop of motor vehicles to escape liability simply because the damage or
loss of a thing lawfully placed in its possession was due to carnapping. Carnapping per se cannot be
considered as a fortuitous event. The fact that a thing was unlawfully and forcefully taken from anothers
rightful possession, as in cases of carnapping, does not automatically give rise to a fortuitous event.

To be considered as such, carnapping entails more than the mere forceful taking of anothers property. It
must be proved and established that the event was an act of God or was done solely by third parties and
that neither the claimant nor the person alleged to be negligent has any participation. other than the
police report of the alleged carnapping incident, no other evidence was presented by private
respondent to the effect that the incident was not due to its fault. A police report of an alleged crime, to
which only private respondent is privy, does not suffice to established the carnapping. Even
assuming arguendo that carnapping was duly established as a fortuitous event, still private respondent
cannot escape liability.

Article 116511 of the New Civil Code makes an obligor who is guilty of delay responsible even for a
fortuitous event until he has effected the delivery. In this case, private respondent was already in delay
as it was supposed to deliver petitioners car three (3) days before it was lost. Petitioners agreement to
the rescheduled delivery does not defeat his claim as private respondent had already breached its
obligation. Moreover, such accession cannot be construed as waiver of petitioners right to hold private
respondent liable because the car was unusable and thus, petitioner had no option but to leave it.

It must likewise be emphasized that pursuant to Articles 1174 and 1262 of the New Civil Code, liability
attaches even if the loss was due to a fortuitous event if the nature of the obligation requires the
assumption of risk.
Carnapping is a normal business risk for those engaged in the repair of motor vehicles. For just as the
owner is exposed to that risk so is the repair shop since the car was entrusted to it. That is why, repair
shops are required to first register with the Department of Trade and Industry (DTI) 15 and to secure an
insurance policy for the shop covering the property entrusted by its customer for repair, service or
maintenance as a pre-requisite for such registration/accreditation. 16 Violation of this statutory duty
constitutes negligence per se.17 Having taken custody of the vehicle, private respondent is obliged not
only to repair the vehicle but must also provide the customer with some form of security for his
property over which he loses immediate control.

One last thing. With respect to the value of the lost vehicle and its accessories for which the repair shop
is liable, it should be based on the fair market value that the property would command at the time it was
entrusted to it or such other value as agreed upon by the parties subsequent to the loss. Such
recoverable value is fair and reasonable considering that the value of the vehicle depreciates. This value
may be recovered without prejudice to such other damages that a claimant is entitled under applicable
laws.

14. Sicam v. Jorge, 529 SCRA 443

FACTS: On different dates, Lulu Jorge pawned several pieces of jewelry with Agencia de R. C. Sicam
located in Parañaque to secure a loan.

On October 19, 1987, two armed men entered the pawnshop and took away whatever cash and jewelry
were found inside the pawnshop vault.

On the same date, Sicam sent Lulu a letter informing her of the loss of her jewelry due to the robbery
incident in the pawnshop. Respondent Lulu then wroteback expressing disbelief, then requested Sicam
to prepare the pawned jewelry for withdrawal on November 6, but Sicam failed to return the jewelry.

Lulu, joined by her husband Cesar, filed a complaint against Sicam with the RTC of Makati seeking
indemnification for the loss of pawned jewelry and payment of AD, MD and ED as well as AF.

The RTC rendered its Decision dismissing respondents’ complaint as well as petitioners’ counterclaim.
Respondents appealed the RTC Decision to the CA which reversed the RTC, ordering the appellees to pay
appellants the actual value of the lost jewelry and AF. Petitioners MR denied, hence the instant petition
for review on Certiorari.

ISSUE: are the petitioners liable for the loss of the pawned articles in their possession? (Petitioners insist
that they are not liable since robbery is a fortuitous event and they are not negligent at all.)

HELD: The Decision of the CA is AFFIRMED.

YES

Article 1174 of the Civil Code provides:

Art. 1174. Except in cases expressly specified by the law, or when it is otherwise declared by stipulation,
or when the nature of the obligation requires the assumption of risk, no person shall be responsible for
those events which could not be foreseen or which, though foreseen, were inevitable.

Fortuitous events by definition are extraordinary events not foreseeable or avoidable. It is therefore, not
enough that the event should not have been foreseen or anticipated, as is commonly believed but it
must be one impossible to foresee or to avoid. The mere difficulty to foresee the happening is not
impossibility to foresee the same.

To constitute a fortuitous event, the following elements must concur:

(a) the cause of the unforeseen and unexpected occurrence or of the failure of the debtor to comply
with obligations must be independent of human will;

(b) it must be impossible to foresee the event that constitutes the caso fortuito or, if it can be foreseen,
it must be impossible to avoid;

(c) the occurrence must be such as to render it impossible for the debtor to fulfill obligations in a normal
manner; and,

(d) the obligor must be free from any participation in the aggravation of the injury or loss.

The burden of proving that the loss was due to a fortuitous event rests on him who invokes it. And, in
order for a fortuitous event to exempt one from liability, it is necessary that one has committed no
negligence or misconduct that may have occasioned the loss.

Sicam had testified that there was a security guard in their pawnshop at the time of the robbery. He
likewise testified that when he started the pawnshop business in 1983, he thought of opening a vault
with the nearby bank for the purpose of safekeeping the valuables but was discouraged by the Central
Bank since pawned articles should only be stored in a vault inside the pawnshop. The very measures
which petitioners had allegedly adopted show that to them the possibility of robbery was not only
foreseeable, but actually foreseen and anticipated. Sicam’s testimony, in effect, contradicts petitioners’
defense of fortuitous event.

Moreover, petitioners failed to show that they were free from any negligence by which the loss of the
pawned jewelry may have been occasioned.
Robbery per se, just like carnapping, is not a fortuitous event. It does not foreclose the possibility of
negligence on the part of herein petitioners.

Petitioners merely presented the police report of the Parañaque Police Station on the robbery
committed based on the report of petitioners’ employees which is not sufficient to establish robbery.
Such report also does not prove that petitioners were not at fault. On the contrary, by the very evidence
of petitioners, the CA did not err in finding that petitioners are guilty of concurrent or contributory
negligence as provided in Article 1170 of the Civil Code, to wit:

Art. 1170. Those who in the performance of their obligations are guilty of fraud, negligence, or delay,
and those who in any manner contravene the tenor thereof, are liable for damages.

**

Article 2123 of the Civil Code provides that with regard to pawnshops and other establishments which
are engaged in making loans secured by pledges, the special laws and regulations concerning 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 property.

In this connection, Article 1173 of the Civil Code further provides:

Art. 1173. The fault or negligence of the obligor consists in the omission of that diligence which is
required by the nature of the obligation and corresponds with the circumstances of the persons, of time
and of the place. When negligence shows bad faith, the provisions of Articles 1171 and 2201, paragraph
2 shall apply.

If the law or contract does not state the diligence which is to be observed in the performance, that
which is expected of a good father of a family shall be required.

We expounded in Cruz v. Gangan that negligence is the omission to do something which a reasonable
man, guided by those considerations which ordinarily regulate the conduct of human affairs, would do;
or the doing of something which a prudent and reasonable man would not do. It is want of care required
by the circumstances.
A review of the records clearly shows that petitioners failed to exercise reasonable care and caution that
an ordinarily prudent person would have used in the same situation. Petitioners were guilty of
negligence in the operation of their pawnshop business. Sicam’s testimony revealed 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 protect the pawnshop from unlawful intrusion.
There was no clear showing that there was any security guard at all. Or if there was one, that he had
sufficient training in securing a pawnshop. Further, there is no showing that the alleged security guard
exercised all that was necessary to prevent any untoward incident or to ensure that no suspicious
individuals were allowed to enter the premises. In fact, it is even doubtful that there was a security
guard, since it is quite impossible that he would not have noticed that the robbers were armed with
caliber .45 pistols each, which were allegedly poked at the employees. Significantly, the alleged security

guard was not presented at all to corroborate petitioner Sicam’s claim; not one of petitioners’
employees who were present during the robbery incident testified in court.

Furthermore, petitioner Sicam’s admission that the vault was open at the time of robbery is clearly a
proof of petitioners’ failure to observe the care, precaution and vigilance that the circumstances justly
demanded.

The robbery in this case happened in petitioners’ pawnshop and they were negligent in not exercising
the precautions justly demanded of a pawnshop.

NOTES:

We, however, do not agree with the CA when it found petitioners negligent for not taking steps to
insure themselves against loss of the pawned jewelries.

Under Section 17 of Central Bank Circular No. 374, Rules and Regulations for Pawnshops, which took
effect on July 13, 1973, and which was issued pursuant to Presidential Decree No. 114, Pawnshop
Regulation Act, it is provided that pawns pledged must be insured, to wit:

Sec. 17. Insurance of Office Building and Pawns- The place of business of a pawnshop and the pawns
pledged to it must be insured against fire and against burglary as well as for the latter(sic), by an
insurance company accredited by the Insurance Commissioner.

However, this Section was subsequently amended by CB Circular No. 764 which took effect on October
1, 1980, to wit:
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
considered it not feasible to require insurance of pawned articles against burglary.

The robbery in the pawnshop happened in 1987, and considering the above-quoted amendment, there
is no statutory duty imposed on petitioners to insure the pawned jewelry in which case it was error for
the CA to consider it as a factor in concluding that petitioners were negligent.

Nevertheless, the preponderance of evidence shows that petitioners failed to exercise the diligence
required of them under the Civil Code.

15. Hernandez v. Chairman COA, November 6, 1989

FACTS:

Teodoro M. Hernandez was the officer-in-charge and special disbursing officer of the Ternate Beach
Project of the Philippine Tourism Authority in Cavite. As such, he went to the main office of the
Authority in Manila on July 1, 1983, to encash two checks covering the wages of the employees and
the operating expenses of the Project. He estimated that the money would be available by ten
o'clock in the morning and that he would be back in Ternate by about two o'clock in the afternoon of
the same day. For some reason, however, the processing of the checks was delayed and was
completed only at three o'clock that afternoon. The petitioner decided nevertheless to encash them
because the Project employees would be waiting for their pay the following day. He thought he had
to do this for their benefit as otherwise they would have to wait until the following Tuesday at the
earliest when the main office would reopen. And so, on that afternoon of July 1, 1983, he collected
the cash value of the checks and left the main office with not an insubstantial amount of money in his
hands.

It was while the vehicle was along Epifanio de los Santos Avenue that two persons boarded with
knives in hand and robbery in mind. One pointed his weapon at the petitioner's side while the other
slit his pocket and forcibly took the money he was carrying. The two then jumped out of the jeep and
ran. Hernandez, after the initial shock, immediately followed in desperate pursuit. He caught up with
Virgilio Alvarez and overcame him after a scuffle. The petitioner sustained injuries in the lip arms and
knees. Alvarez was subsequently charged with robbery and pleaded guilty. But the hold-upper who
escaped is still at large and the stolen money he took with him 

the petitioner, invoking the foregoing facts, filed a request for relief from money accountability under
Section 638 of the Revised Administrative Code. This was favorably indorsed by the General
Manager of the Philippine Tourism Authority the same day 3 and by its Corporate Auditor on July 27,
1983.

The petitioner stresses that he decided to encash the checks in the afternoon of July 1, 1983, which
was a Friday, out of concern for the employees of the Project, who were depending on him to make
it possible for them to collect their pay the following day. 
On his decision to take the money home that afternoon instead of returning directly to Ternate, he
says that the first course was more prudent as he saw it, if only because his home in Marilao,
Bulacan, was much nearer than his office in Ternate, Cavite. The drive to Ternate would take three
hours, including a 30-minute tricycle ride along the dark and lonely Naic-Ternate road; and as he
would be starting after three o'clock in the afternoon, it was not likely that he would reach his
destination before nightfall. 

he had not been remiss in protecting the money in his custody; in fact, he immediately pursued the
hold-uppers and succeeded in catching one of them who was subsequently prosecuted and
convicted.

The Commission on Audit insists in this memorandum that the petitioner should not be relieved from
his money accountability because it was his own negligence that led to the loss of the cash he had
sought to take not to Ternate in Cavite but to Marilao.

Its contention is that the petitioner should not have encashed the cheeks on July 1, 1983, as the
hour was already late and he knew he could not return to Ternate before nightfall. Knowing this, he
should have prudently deferred encashing the checks until the morning of the next working day on
July 5, 1983, when he could have safely taken the money to Ternate. 

ISSUES

WN petitioner is liable for furnishing the checks he encashed and lost?

RULING

this Court inclines in favor of the petitioner. It is pointless to argue that Hernandez should have
encashed the vouchers earlier because they were dated anyway on June 29, 1983. He was not
obliged to encash the checks earlier and then again there might have been any number of reasons
why he did so only on July 1, 1983. The point is that he did encash the checks on that date and took
the money to Marilao and not Ternate in view of the lateness of the hour. The question before us is
whether these acts are so tainted with negligence or recklessness as to justify the denial of the
petitioner's request for relief from accountability for the stolen money.

It seems to us that the petitioner was moved only by the best of motives when he encashed the
checks on July 1, 1983, so his co-employees in Ternate could collect their salaries and wages the
following day. Significantly, although this was a non-working day, he was intending to make the trip
to his office the following day for the unselfish purpose of accommodating his fellow workers. The
other alternative was to encash the check is on July 5, 1983, the next working day after July 1, 1983,
which would have meant a 5-day wait for the payment of the said salaries and wages. Being a
modest employee himself, Hernandoz must have realized the great discomfort it would cause the
laborer who were dependent on their wages for their sustenance and were anxious to collect their
pay as soon as possible.

As for Hernandez's choice between Marilao, Bulacan, and Ternate, Cavite, one could easily agree
that the former was the safer destination, being nearer, and in view of the comparative hazards in
the trips to the two places. It is true that the petitioner miscalculated, but the Court feels he should
not be blamed for that. The decision he made seemed logical at that time and was one that could be
expected of a reasonable and prudent person. And if, as it happened, the two robbers attacked him
in broad daylight in the jeep while it was on a busy highway, and in the presence of other
passengers, it cannot be said that all this was the result of his imprudence and negligence. This was
undoubtedly a fortuitous event covered by the said provisions, something that could not have been
reasonably foreseen although it could have happened, and di

16. Yobido v. CA, October 17, 1997

FACTS:

In 1988, spouses Tito and Leny Tumboy and their minor children named Ardee and Jasmin, boarded
at Mangagoy, Surigao del Sur, a Yobido Liner bus bound for Davao City.
Along the way, the left front tire of the bus exploded causing it to fall 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.

As a consequence thereof, a complaint for breach of contract of carriage, damages and attorneys
fees was filed by Leny and her children against Alberta Yobido, the owner of the bus, and Cresencio
Yobido, its driver, before the RTC of Davao City.
When the defendants therein filed their answer to the complaint, they raised the affirmative defense
of caso fortuito.

In 1991, the lower court rendered a decision dismissing 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.

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 (c) deciding the case contrary to the ruling in Juntilla v. Fontanar,
and Necesito v. Paras.

In 1993, the Court of Appeals rendered the Decision reversing that of the lower court.
Proving that the tire that exploded is a new Goodyear tire is not sufficient to discharge defendant’s
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.

The defendants filed a motion for reconsideration of said decision which was denied 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.

ISSUE:

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.

RULING:

No.
As a rule, when a passenger boards a common carrier, he takes the risks incidental 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. 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 case of death 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.

Article 1755 also provides that a common carrier is bound to carry the passengers safely as far as
human care and foresight can provide, using the utmost diligence of very cautious persons, with a
due regard for all the circumstances.

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. This disputable presumption may only be overcome
by evidence that the carrier had observed extraordinary diligence as prescribed by Articles 1733,
1755 and 1756 of the Civil Code or that the death or injury of the passenger was due to a fortuitous
event. 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.

In view of the foregoing, 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. In
other words, the explosion of the new tire may not be considered a fortuitous event because 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, 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.

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 in causing the death or
injury resulting from an accident.

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 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. Juntilla v. Fontana, May 31, 1985

FACTS:

Jeepney was driven by Berfol Camoro from Danao City to Cebu City. It was Clemente Fontanar but was
actually owned by defendant Fernando Banzon.

When the jeepney reached Mandaue City, the right rear tire exploded causing the vehicle to turn turtle.
Roberto Juntilla was sitting at the front seat was thrown out of the vehicle.

Upon landing on the ground, he momentarily lost consciousness. When he came to his senses, he found
that he had a lacerated wound on his right palm. He also injured his left arm, right thigh and on his
back.

Because of his shock and injuries, he went back to Danao City but on the way, he discovered that his
"Omega" wrist watch worth P 852.70 was lost. Upon his arrival in Danao City, he immediately entered
the Danao City Hospital to attend to his injuries, and also requested his father-in-law to proceed
immediately to the place of the accident and look for the watch.

Roberto Juntilla filed for breach of contract with damages

Respondents: beyond the control since tire that exploded was newly bought and was only slightly used

RTC: favored Roberto Juntilla

CA: Reversed since accident was due to fortuitous event

ISSUE: W/N there is a fortuitous event

HELD: NO. CA reversed, RTC reinstated.

passenger jeepney was running at a very fast speed before the accident

at a regular and safe speed will not jump into a ditch when its right rear tire blows up

passenger jeepney was overloaded

3 passengers in the front seat

14 passengers in the rear

caso fortuito presents the following essential characteristics:

(1) The cause of the unforeseen and unexpected occurrence, or of the failure of the debtor to comply
with his obligation, must be independent of the human will.

(2) 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.

(3) The occurrence must be such as to render it impossible for the debtor to fulfill his obligation in a
normal manner.

(4) the obligor (debtor) must be free from any participation in the aggravation of the injury resulting to
the creditor.
In the case at bar, the cause of the unforeseen and unexpected occurrence was not independent of the
human will. The accident was caused either through the negligence of the driver or because of
mechanical defects in the tire. Common carriers should teach their drivers not to overload their vehicles,
not to exceed safe and legal speed limits, and to know the correct measures to take when a tire blows
up thus insuring the safety of passengers at all times

the source of a common carrier's legal liability is the contract of carriage, and by entering into the said
contract, it binds itself to carry the passengers safely as far as human care and foresight can provide,
using the utmost diligence of a very cautious person, with a due regard for all the circumstances. The
records show that this obligation was not met by the respondents

respondents likewise argue that the petitioner cannot recover any amount for failure to prove such
damages during the trial

findings of facts of the City Court of Cebu

18. Republic v. Luzon Stevedoring, September 29, 1967

https://emirvmendoza.wordpress.com/2017/02/13/case-digest-republic-v-luzon-stevedoring-g-r-no-l-
21749-september-29-1967/

19. Saludaga v. FEU, April 30, 2008

https://jeffsarabusing.wordpress.com/2018/08/26/case-brief-saludaga-vs-feu/