Republic of the Philippines SUPREME COURT Manila SECOND DIVISION

G.R. No. 98695 January 27, 1993 JUAN J. SY U!A, CORA"ON C. SY U!A, CAR#OTA C. SY U!A, CAR#OS C. SY U!A an$ ANT%ONY C. SY U!A, petitioners, vs. T%E %ONORA&#E COURT O' APPEA#S, an$ T%E MAN!#A MEMOR!A# PAR( CEMETERY, !NC., respondents. Pacis & Reyes Law Offices for petitioners. Augusto S. San Pedro & Ari-Ben C. Sebastian for private respondents. CAMPOS, JR., J.: erein petitioners, !uan !. S"#uia and Cora$on C. S"#uia, Carlota C. S"#uia, Carlos C. S"#uia, and %nthon" S"#uia, &ere the parents and siblin's, respectivel", of the deceased Vicente !uan S"#uia. On March (, )*+*, the" filed a co,plaint 1 in the then Court of -irst Instance a'ainst herein private respondent, Manila Me,orial Par. Ce,eter", Inc. for recover" of da,a'es arisin' fro, breach of contract and/or #uasi0 delict. 1he trial court dis,issed the co,plaint. 1he antecedent facts, as 'athered b" the respondent Court, are as follo&s2
On March (, )*+*, !uan, Cora$on, Carlota and %nthon" all surna,ed S"#uia, plaintiff0 appellants herein, filed a co,plaint for da,a'es a'ainst defendant0appellee, Manila Me,orial Par. Ce,eter", Inc. 1he co,plaint alle'ed a,on' others, that pursuant to a Deed of Sale 3Contract No. 455(6 dated %u'ust 7+, )*4* and Inter,ent Order No. +)84 dated !ul" 7), )*+5 e9ecuted bet&een plaintiff0appellant !uan !. S"#uia and defendant0appellee, the for,er, father of deceased Vicente !uan !. S"#uia authori$ed and instructed defendant0appellee to inter the re,ains of deceased in the Manila Me,orial Par. Ce,eter" in the ,ornin' of !ul" 7(, )*+5 confor,abl" and in accordance &ith defendant0appellant:s 3sic6 inter,ent procedures; that on Septe,ber <, )*+5, preparator" to transferrin' the said re,ains to a ne&l" purchased fa,il" plot also at the Manila Me,orial Par. Ce,eter", the concrete vault encasin' the coffin of the deceased &as re,oved fro, its niche under'round &ith the assistance of certain e,plo"ees of defendant0appellant 3sic6; that as the concrete vault &as bein' raised to the surface, plaintiffs0appellants discovered that the concrete vault had a hole appro9i,atel" three 3=6 inches in dia,eter near the botto, of one of the &alls closin' out the &idth of the vault on one end and that for a certain len'th of ti,e 3one hour, ,ore or less6, &ater drained out of the hole; that because of the aforesaid discover", plaintiffs0appellants beca,e a'itated and upset &ith concern that the &ater &hich had collected inside the vault ,i'ht have risen as it in fact did rise, to the level of the coffin and flooded the sa,e as &ell as the re,ains of the deceased &ith ill effects thereto; that pursuant to an authorit" 'ranted b" the Municipal Court of Para>a#ue, Metro Manila on Septe,ber )<, )*+5, plaintiffs0appellants &ith the assistance of licensed ,orticians and certain personnel of defendant0appellant 3sic6 caused the openin' of the concrete vault on Septe,ber )(, )*+5; that upon openin' the vault, the follo&in' beca,e apparent to the plaintiffs0appellants2 3a6 the interior &alls of the concrete vault sho&ed evidence of total floodin'; 3b6 the coffin &as entirel" da,a'ed b" &ater, filth and silt causin' the &ooden parts to &arp and separate and to crac. the vie&in' 'lass panel located directl" above the head and torso of the deceased; 3c6 the entire linin' of the coffin,

the clothin' of the deceased, and the e9posed parts of the deceased:s re,ains &ere da,a'ed and soiled b" the action of the &ater and silt and &ere also coated &ith filth. Due to the alle'ed unla&ful and ,alicious breach b" the defendant0appellee of its obli'ation to deliver a defect0free concrete vault desi'ned to protect the re,ains of the deceased and the coffin a'ainst the ele,ents &hich resulted in the desecration of deceased:s 'rave and in the alternative, because of defendant0appellee:s 'ross ne'li'ence confor,abl" to %rticle 7)+4 of the Ne& Civil Code in failin' to seal the concrete vault, the co,plaint pra"ed that ?ud',ent be rendered orderin' defendant0appellee to pa" plaintiffs0appellants P=8,888.88 for actual da,a'es, P(88,888.88 for ,oral da,a'es, e9e,plar" da,a'es in the a,ount deter,ined b" the court, 78@ of defendant0appellee:s total liabilit" as attorne":s fees, and e9penses of liti'ation and costs of suit. 2

In dis,issin' the co,plaint, the trial court held that the contract bet&een the parties did not 'uarantee that the ce,ent vault &ould be &aterproof; that there could be no #uasi0 delict because the defendant &as not 'uilt" of an" fault or ne'li'ence, and because there &as a pre0e9istin' contractual relation bet&een the S"#uias and defendant Manila Me,orial Par. Ce,eter", Inc.. 1he trial court also noted that the father hi,self, !uan S"#uia, chose the 'ravesite despite .no&in' that said area had to be constantl" sprin.led &ith &ater to .eep the 'rass 'reen and that &ater &ould eventuall" seep throu'h the vault. 1he trial court also accepted the e9planation 'iven b" defendant for borin' a hole at the botto, side of the vault2 A1he hole had to be bored throu'h the concrete vault because if it has no hole the vault &ill 3sic6 float and the 'rave &ould be filled &ith &ater and the di''in' &ould caved 3sic6 in the earth, the earth &ould caved 3sic6 in the 3sic6 fill up the 'rave.A 3 -ro, this ?ud',ent, the S"#uias appealed. 1he" alle'ed that the trial court erred in holdin' that the contract allo&ed the floodin' of the vault; that there &as no desecration; that the borin' of the hole &as ?ustifiable; and in not a&ardin' da,a'es. 1he Court of %ppeals in the Decision ) dated Dece,ber +, )**8 ho&ever, affir,ed the ?ud',ent of dis,issal. Petitioner:s ,otion for reconsideration &as denied in a Resolution dated %pril 7(, )**). 5 Bnsatisfied &ith the respondent Court:s decision, the S"#uias filed the instant petition. 1he" alle'e herein that the Court of %ppeals co,,itted the follo&in' errors &hen it2
). held that the contract and the Rules and Resolutions of private respondent allo&ed the floodin' of the vault and the entrance thereto of filth and silt; 7. held that the act of borin' a hole &as ?ustifiable and corollaril", &hen it held that no act of desecration &as co,,itted; =. overloo.ed and refused to consider relevant, undisputed facts, such as those &hich have been stipulated upon b" the parties, testified to b" private respondent:s &itnesses, and ad,itted in the ans&er, &hich could have ?ustified a different conclusion; <. held that there &as no tort because of a pre0e9istin' contract and the absence of fault/ne'li'ence; and (. did not a&ard the P7(,888.88 actual da,a'es &hich &as a'reed upon b" the parties, ,oral and e9e,plar" da,a'es, and attorne":s fees.

%t the botto, of the entire proceedin's is the act of borin' a hole b" private respondent on the vault of the deceased .in of the bereaved petitioners. 1he latter alle'e that such

act &as either a breach of private respondent:s contractual obli'ation to provide a sealed vault, or, in the alternative, a ne'li'ent act &hich constituted a #uasi0delict. Nonetheless, petitioners clai, that &hatever .ind of ne'li'ence private respondent has co,,itted, the latter is liable for desecratin' the 'rave of petitioners: dead. In the instant case, Ce are called upon to deter,ine &hether the Manila Me,orial Par. Ce,eter", Inc., breached its contract &ith petitioners; or, alternativel", &hether private respondent &as 'uilt" of a tort. Ce understand the feelin's of petitioners and e,pathi$e &ith the,. Bnfortunatel", ho&ever, Ce are ,ore inclined to ans&er the fore'oin' #uestions in the ne'ative. 1here is not enou'h 'round, both in fact and in la&, to ?ustif" a reversal of the decision of the respondent Court and to uphold the pleas of the petitioners. Cith respect to herein petitioners: aver,ent that private respondent has co,,itted culpa a uiliana, the Court of %ppeals found no ne'li'ent act on the part of private respondent to ?ustif" an a&ard of da,a'es a'ainst it. %lthou'h a pre0e9istin' contractual relation bet&een the parties does not preclude the e9istence of a culpa a uiliana, Ce find no reason to disre'ard the respondent:s Court findin' that there &as no ne'li'ence.
%rt. 7)+4. Choever b" act or o,ission causes da,a'e to another, there bein' fault or ne'li'ence, is obli'ed to pa" for the da,a'e done. Suc! fault or negligence" if t!ere is no pre-e#isting contractual relation between t!e parties" is called a uasi-delict . . . . 3E,phasis supplied6.

In this case, it has been established that the S"#uias and the Manila Me,orial Par. Ce,eter", Inc., entered into a contract entitled ADeed of Sale and Certificate of Perpetual CareA 6 on %u'ust 7+, )*4*. 1hat a'ree,ent 'overned the relations of the parties and defined their respective ri'hts and obli'ations. ence, had there been actual ne'li'ence on the part of the Manila Me,orial Par. Ce,eter", Inc., it &ould be held liable not for a uasi-delict or culpa a uiliana, but for culpa contractual as provided b" %rticle ))+8 of the Civil Code, to &it2
1hose &ho in the perfor,ance of their obli'ations are 'uilt" of fraud, ne'li'ence, or dela", and those &ho in an" ,anner contravene the tenor thereof, are liable for da,a'es.

1he Manila Me,orial Par. Ce,eter", Inc. bound itself to provide the concrete bo9 to be send in the inter,ent. Rule )+ of the Rules and Re'ulations of private respondent provides that2
Rule )+. Ever" earth inter,ent shall be ,ade enclosed in a concrete bo9, or in an outer &all of stone, bric. or concrete, the actual install,ent of &hich shall be ,ade b" the e,plo"ees of the %ssociation. 7

Pursuant to this above0,entioned Rule, a concrete vault &as provided on !ul" 7+, )*+5, the da" before the inter,ent, and &as, on the sa,e da", installed b" private respondent:s e,plo"ees in the 'rave &hich &as du' earlier. %fter the burial, the vault &as covered b" a ce,ent lid. Petitioners ho&ever clai, that private respondent breached its contract &ith the, as the latter held out in the brochure it distributed that the . . . lot ,a" hold sin'le or double intern,ent 3sic6 under'round in sealed concrete vault.A 8 Petitioners clai, that the vault

provided b" private respondent &as not sealed, that is, not &aterproof. Conse#uentl", &ater seeped throu'h the ce,ent enclosure and da,a'ed ever"thin' inside it. Ce do not a'ree. 1here &as no stipulation in the Deed of Sale and Certificate of Perpetual Care and in the Rules and Re'ulations of the Manila Me,orial Par. Ce,eter", Inc. that the vault &ould be &aterproof. Private respondent:s &itness, Mr. De9ter eusch.el, e9plained that the ter, AsealedA ,eant Aclosed.A 9 On the other hand, the &ord AsealA is defined as . . . an" of various closures or fastenin's . . . that cannot be opened &ithout rupture and that serve as a chec. a'ainst ta,perin' or unauthori$ed openin'.A 1* 1he ,eanin' that has been 'iven b" private respondent to the &ord confor,s &ith the cited dictionar" definition. Moreover, it is also #uite clear that AsealedA cannot be e#uated &ith A&aterproofA. Cell settled is the rule that &hen the ter,s of the contract are clear and leave no doubt as to the intention of the contractin' parties, then the literal ,eanin' of the stipulation shall control. 11 Contracts should be interpreted accordin' to their literal ,eanin' and should not be interpreted be"ond their obvious intend,ent. 12 %s ruled b" the respondent Court2
Chen plaintiff0appellant !uan !. S"#uia affi9ed his si'nature to the Deed of Sale 3E9hibit A%A6 and the attached Rules and Re'ulations 3E9hibit A)A6, it can be assu,ed that he has accepted defendant0appellee:s underta.in' to ,erel" provide a concrete vault. e can not no& clai, that said concrete vault ,ust in addition, also be &aterproofed 3sic6. It is basic that the parties are bound b" the ter,s of their contract, &hich is the la& bet&een the, 3Ri$al Co,,ercial Dan.in' Corporation vs. Court of %ppeals, et al. )+5 SCR% +=*6. Chere there is nothin' in the contract &hich is contrar" to la&, ,orals, 'ood custo,s, public order, or public polic", the validit" of the contract ,ust be sustained 3Phil. %,erican Insurance Co. vs. !ud'e Pineda, )+( SCR% <)46. Consonant &ith this rulin', a contractin' part" cannot incur a liabilit" ,ore than &hat is e9pressl" specified in his underta.in'. It cannot be e9tended b" i,plication, be"ond the ter,s of the contract 3Ri$al Co,,ercial Dan.in' Corporation vs. Court of %ppeals, supra6. %nd as a rule of evidence, &here the ter,s of an a'ree,ent are reduced to &ritin', the docu,ent itself, bein' constituted b" the parties as the e9positor of their intentions, is the onl" instru,ent of evidence in respect of that a'ree,ent &hich the la& &ill reco'ni$e, so lon' as its 3sic6 e9ists for the purpose of evidence 3Star.ie, Ev., pp. 4<5, 4((, Easheenath vs. Chund", ( C.R. 45 cited in -rancisco, Revised Rules of Court in the Phil. p. )(=, )*+= Ed.6. %nd if the ter,s of the contract are clear and leave no doubt upon the intention of the contractin' parties, the literal ,eanin' of its stipulations shall control 3Santos vs. C%, et al., F. R. No. 5=44<, Nov. )=, )*5*; Prudential Dan. G 1rust Co. vs. Co,,unit" Duilders Co., Inc., )4( SCR% 75(; Dalatero vs. I%C, )(< SCR% (=86. 13

Ce hold, therefore, that private respondent did not breach the tenor of its obli'ation to the S"#uias. Chile this ,a" be so, can private respondent be liable for culpa a uiliana for borin' the hole on the vaultH It cannot be denied that the hole ,ade possible the entr" of ,ore &ater and soil than &as natural had there been no hole. 1he la& defines ne'li'ence as the Ao,ission of that dili'ence &hich is re#uired b" the nature of the obli'ation and corresponds &ith the circu,stances of the persons, of the ti,e and of the place.A 1) In the absence of stipulation or le'al provision providin' the contrar", the dili'ence to be observed in the perfor,ance of the obli'ation is that &hich is e9pected of a 'ood father of a fa,il". 1he circu,stances surroundin' the co,,ission of the assailed act I borin' of the hole I ne'ate the alle'ation of ne'li'ence. 1he reason for the act &as e9plained b" enr" -lores, Inter,ent -ore,an, &ho said that2

J It has been established in this particular case that a certain Vicente !uan S"#uia &as interred on !ul" 7(, )*+5 at the Para>a#ue Ce,eter" of the Manila Me,orial Par. Ce,eter", Inc., &ill "ou please tell the on. Court &hat or &hether "ou have participation in connection &ith said intern,ent 3sic6H % % da" before !uan 3sic6 S"#uia &as buried our personnel du' a 'rave. %fter di''in' the ne9t ,ornin' a vault &as ta.en and placed in the 'rave and &hen the vault &as placed on the 'rave a hole &as placed on the vault so that &ater could co,e into the vault because it was raining !eavily then because the vault has no hole the vault &ill float and the 'rave &ould be filled &ith &ater and the di''in' &ould caved 3sic6 in and the earth, the earth &ould 3sic6 caved in and fill up the 'rave. 15 3E,phasis ours6

E9cept for the fore,an:s opinion that the concrete vault ,a" float should there be a heav" rainfall, fro, the above0,entioned e9planation, private respondent has e9ercised the dili'ence of a 'ood father of a fa,il" in preventin' the accu,ulation of &ater inside the vault &hich &ould have resulted in the cavin' in of earth around the 'rave fillin' the sa,e &ith earth. 1hus, findin' no evidence of ne'li'ence on the part of private respondent, Ce find no reason to a&ard da,a'es in favor of petitioners. In the li'ht of the fore'oin' facts, and construed in the lan'ua'e of the applicable la&s and ?urisprudence, Ce are constrained to %--IRM in toto the decision of the respondent Court of %ppeals dated Dece,ber +, )**8. No costs. SO ORDERED. $arvasa" C.%." &eliciano" Regalado and $ocon" %%." concur.
K

'oo+no+,) Civil Case No. J07+))7, A!uan !. S"#uia, et al. vs. Manila Me,orial Par. Ce,eter", Inc.A. 7 Rollo, pp. (*048. = 'bid." p. 4(. < Penned b" %ssociate !ustice %rturo D. Duena, concurred in b" %ssociate !ustices Minerva P. Fon$a'a0Re"es and !ainal D. Rasul. ( Rollo, p. 5+0%. 4 E9hibit ADA; Records, p. )8. + %nne9 % of %ns&er; Records, p. =). 5 Petition, p. (; Rollo, p. )=. * 1SN, Nove,ber <, )*5), p. +. )8 Cebster:s 1hird International Dictionar" 78<4 3)*+86.

)) Mercantile Insurance Co., Inc. vs. -elipe Ls,ael, !r. and Co., Inc., )4* SCR% 44 3)*5*6; Papa vs. %lon$o, )*5 SCR% (4< 3)**)6; %li, vs. C%, 788 SCR% <(8 3)**)6; Republic vs. Sandi'anba"an, 78= SCR% =)8 3)**)6. )7 Mercantile Insurance Co., Inc., vs. -elipe Ls,ael, !r. and Co., Inc., )4* SCR% 44 3)*5*6. )= Rollo, pp. 4<04(. )< CIVIM CODE, %rticle ))+=. )( 1SN, !une 75, )*57, p. 7.

Republic of the Philippines SUPREME COURT Manila EN D%NC

G.R. No. 1*816) ',.ruary 23, 1995 'AR EAST &AN( AN/ TRUST COMPANY, petitioner, vs. T%E %ONORA&#E COURT O' APPEA#S, #U!S A. #UNA an$ C#AR!TA S. #UNA, respondents. 0!TUG, J.: So,e ti,e in October )*54, private respondent Muis %. Muna applied for, and &as accorded, a -%RE%S1C%RD issued b" petitioner -ar East Dan. and 1rust Co,pan" 3A-ED1CA6 at its Pasi' Dranch. Bpon his re#uest, the ban. also issued a supple,ental card to private respondent Clarita S. Muna. In %u'ust )*55, Clarita lost her credit card. -ED1C &as forth&ith infor,ed. In order to replace the lost card, Clarita sub,itted an affidavit of loss. In cases of this nature, the ban.:s internal securit" procedures and polic" &ould appear to be to ,ean&hile so record the lost card, alon' &ith the principal card, as a A ot CardA or ACancelled CardA in its ,aster file. On 84 October )*55, Muis tendered a despedida lunch for a close friend, a -ilipino0%,erican, and another 'uest at the Dahia Rooftop Restaurant of the otel Intercontinental Manila. 1o pa" for the lunch, Muis presented his -%RE%S1C%RD to the attendin' &aiter &ho pro,ptl" had it verified

throu'h a telephone call to the ban.:s Credit Card Depart,ent. Since the card &as not honored, Muis &as forced to pa" in cash the bill a,ountin' to P(55.)=. Naturall", Muis felt e,barrassed b" this incident. In a letter, dated )) October )*55, private respondent Muis Muna, throu'h counsel, de,anded fro, -ED1C the pa",ent of da,a'es. %drian V. -este?o, a vice0president of the ban., e9pressed the ban.:s apolo'ies to Muis. In his letter, dated 8= Nove,ber )*55, -este?o, in part, said2 In cases &hen a card is reported to our office as lost, -%RE%S1C%RD underta.es the necessar" action to avert its unauthori$ed use 3such as ta''in' the card as hotlisted6, as it is al&a"s our intention to protect our cardholders. %n investi'ation of "our case ho&ever, revealed that -%RE%S1C%RD failed to infor, "ou about its securit" polic". -urther,ore, an over$ealous e,plo"ee of the Dan.:s Credit Card Depart,ent did not consider the possibilit" that it ,a" have been "ou &ho &as presentin' the card at that ti,e 3for &hich reason, the unfortunate incident occurred6. 1 -este?o also sent a letter to the Mana'er of the Dahia Rooftop Restaurant to assure the latter that private respondents &ere Aver" valued clientsA of -ED1C. Cillia, %nthon" Ein', -ood and Devera'e Mana'er of the Intercontinental otel, &rote bac. to sa" that the credibilit" of private respondent had never been Ain #uestion.A % cop" of this repl" &as sent to Muis b" -este?o. Still evidentl" feelin' a''rieved, private respondents, on 8( Dece,ber )*55, filed a co,plaint for da,a'es &ith the Re'ional 1rial Court 3AR1CA6 of Pasi' a'ainst -ED1C. On =8 March )**8, the R1C of Pasi', 'iven the fore'oin' factual settin's, rendered a decision orderin' -ED1C to pa" private respondents 3a6 P=88,888.88 ,oral da,a'es; 3b6 P(8,888.88 e9e,plar" da,a'es; and 3c6 P78,888.88 attorne":s fees. On appeal to the Court of %ppeals, the appellate court affir,ed the decision of the trial court. Its ,otion for reconsideration havin' been denied b" the appellate court, -ED1C has co,e to this Court &ith this petition for revie&. 1here is ,erit in this appeal. In culpa contractual, ,oral da,a'es ,a" be recovered &here the defendant is sho&n to have acted in bad faith or &ith ,alice in the breach of the contract. 2 1he Civil Code provides2 %rt. 7778. Cillful in?ur" to propert" ,a" be a le'al 'round for a&ardin' ,oral da,a'es if the court should find that, under the circu,stances, such da,a'es are ?ustl" due. (!e sa)e rule applies to breac!es of contract w!ere t!e defendant acted fraudulently or in bad fait!. 3E,phasis supplied6 Dad faith, in this conte9t, includes gross, but not si,ple, ne'li'ence. 3 E9ceptionall", in a contract of carriage, ,oral da,a'es are also allo&ed in case of death of a passen'er attributable to the fault 3&hich is presu,ed )6 of the co,,on carrier. 5 Concededl", the ban. &as re,iss in indeed ne'lectin' to personall" infor, Muis of his o&n card:s cancellation. Nothin' in the findin's of the trial court and the appellate court, ho&ever, can sufficientl" indicate an" deliberate intent on the part of -ED1C to cause har, to private respondents. Neither could -ED1C:s ne'li'ence in failin' to 'ive personal notice to Muis be considered so 'ross as to a,ount to ,alice or bad faith.

Malice or bad faith i,plies a conscious and intentional desi'n to do a &ron'ful act for a dishonest purpose or ,oral obli#uit"; it is different fro, the ne'ative idea of ne'li'ence in that ,alice or bad faith conte,plates a state of ,ind affir,ativel" operatin' &ith furtive desi'n or ill &ill. 6 Ce are not una&are of the previous rulin's of this Court, such as in A)erican *#press 'nternational" 'nc., vs. 'nter)ediate Appellate Court 3)4+ SCR% 78*6 and Ban+ of P!ilippine 'slands vs. 'nter)ediate Appellate Court 3784 SCR% <856, sanctionin' the application of %rticle 7), in relation to %rticle 77)+ and %rticle 77)* 7 of the Civil Code to a contractual breach si,ilar to the case at bench. %rticle 7) states2 %rt. 7). %n" person &ho &ilfull" causes loss or in?ur" to another in a ,anner that is contrar" to ,orals, 'ood custo,s or public polic" shall co,pensate the latter for the da,a'e. %rticle 7) of the Code, it should be observed, conte,plates a conscious act to cause har,. 1hus, even if &e are to assu,e that the provision could properl" relate to a breach of contract, its application can be &arranted onl" &hen the defendant:s disre'ard of his contractual obli'ation is so deliberate as to appro9i,ate a de'ree of ,isconduct certainl" no less &orse than fraud or bad faith. Most i,portantl", %rticle 7) is a ,ere declaration of a 'eneral principle in hu,an relations that clearl" ,ust, in an" case, 'ive &a" to the specific provision of %rticle 7778 of the Civil Code authori$in' the 'rant of ,oral da,a'es in culpa contractual solel" &hen the breach is due to fraud or bad faith. Mr. !ustice !ose D.M. Re"es, in his ponencia in &ores vs. ,iranda 8 e9plained &ith 'reat clarit" the predo,inance that &e should 'ive to %rticle 7778 in contractual relations; &e #uote2 %nent the ,oral da,a'es ordered to be paid to the respondent, the sa,e ,ust be discarded. Ce have repeatedl" ruled 3Cachero vs. Manila Lello& 1a9icab Co. Inc., )8) Phil. (7=; (< Off. Fa$., N74O, 4(**; Necesito, et al. vs. Paras, )8< Phil., +(; (4 Off. Fa$., N7=O <87=6, that ,oral da,a'es are not recoverable in da,a'e actions predicated on a breach of the contract of transportation, in vie& of %rticles 77)* and 7778 of the ne& Civil Code, &hich provide as follo&s2 %rt. 77)*. Moral da,a'es ,a" be recovered in the follo&in' and analo'ous cases2 3)6 % cri,inal offense resultin' in ph"sical in?uries; 376 Juasi0delicts causin' ph"sical in?uries; 999 999 999 %rt. 7778. Cilful in?ur" to propert" ,a" be a le'al 'round for a&ardin' ,oral da,a'es if the court should find that, under the circu,stances, such da,a'es are ?ustl" due. 1he sa,e rule applies to breaches of contract &here the defendant acted fraudulentl" or in bad faith. D" contrastin' the provisions of these t&o articles it i,,ediatel" beco,es apparent that2 3a6 In case of breach of contract 3includin' one of transportation6 proof of bad faith or fraud 3dolus6, i.e., &anton or deliberatel" in?urious conduct, is essential to ?ustif" an a&ard of ,oral da,a'es; and 3b6 1hat a breach of contract can not be considered included in the descriptive ter, Aanalo'ous casesA used in %rt. 77)*; not onl" because %rt. 7778 specificall" provides for

the da,a'es that are caused contractual breach, but because the definition of #uasi0delict in %rt. 7)+4 of the Code e9pressl" e9cludes the cases &here there is a Apree9isitn' contractual relations bet&een the parties.A %rt. 7)+4. Choever b" act or o,ission causes da,a'e to another, there bein' fault or ne'li'ence, is obli'ed to pa" for the da,a'e done. Such fault or ne'li'ence, if there is no pre0e9istin' contractual relation bet&een the parties, is called a #uasi0delict and is 'overned b" the provisions of this Chapter. 1he e9ception to the basic rule of da,a'es no& under consideration is a ,ishap resultin' in the death of a passen'er, in &hich case %rticle )+4< ,a.es the co,,on carrier e9pressl" sub?ect to the rule of %rt. 7784, that entitles the spouse, descendants and ascendants of the deceased passen'er to Ade,and ,oral da,a'es for ,ental an'uish b" reason of the death of the deceasedA 3Necesito vs. Paras, )8< Phil. 5<, Resolution on ,otion to reconsider, Septe,ber )), )*(56. Dut the e9ceptional rule of %rt. )+4< ,a.es it all the ,ore evident that &here the in?ured passen'er does not die, ,oral da,a'es are not recoverable unless it is proved that the carrier &as 'uilt" of ,alice or bad faith. Ce thin. it is clear that the ,ere carelessness of the carrier:s driver does not per se constitute or ?ustif" an inference of ,alice or bad faith on the part of the carrier; and in the case at bar there is no other evidence of such ,alice to support the a&ard of ,oral da,a'es b" the Court of %ppeals. 1o a&ard ,oral da,a'es for breach of contract, therefore, &ithout proof of bad faith or ,alice on the part of the defendant, as re#uired b" %rt. 7778, &ould be to violate the clear provisions of the la&, and constitute un&arranted ?udicial le'islation. 999 999 999 1he distinction bet&een fraud, bad faith or ,alice in the sense of deliberate or &anton &ron' doin' and ne'li'ence 3as ,ere carelessness6 is too funda,ental in our la& to be i'nored 3%rts. ))+80))+76; their conse#uences bein' clearl" differentiated b" the Code. %rt. 778). In contracts and #uasi0contracts, the da,a'es for &hich the obli'or &ho acted in 'ood faith is liable shall be those that are the natural and probable conse#uences of the breach of the obli'ation, and &hich the parties have foreseen or could have reasonabl" foreseen at the ti,e the obli'ation &as constituted. In case of fraud, bad faith, ,alice or &anton attitude, the obli'or shall be responsible for all da,a'es &hich ,a" be reasonabl" attributed to the non0 perfor,ance of the obli'ation. It is to be presu,ed, in the absence of statutor" provision to the contrar", that this difference &as in the ,ind of the la&,a.ers &hen in %rt. 7778 the" li,ited recover" of ,oral da,a'es to breaches of contract in bad faith. It is true that ne'li'ence ,a" be occasionall" so 'ross as to a,ount to ,alice; but the fact ,ust be sho&n in evidence, and a carrier:s bad faith is not to be li'htl" inferred fro, a ,ere findin' that the contract &as breached throu'h ne'li'ence of the carrier:s e,plo"ees. 1he Court has not in the process overloo.ed another rule that a #uasi0delict can be the cause for breachin' a contract that ,i'ht thereb" per,it the application of applicable principles on tort 9 even &here there is a pre0e9istin' contract bet&een the plaintiff and the defendant 3Phil. %irlines vs. Court of %ppeals, )84 SCR% )<=; Sin'son vs. Dan. of Phil. Islands, 7= SCR% )))+; and %ir -rance vs. Carrascoso, )5 SCR% )((6. 1his doctrine, unfortunatel", cannot i,prove private respondents: case for it can aptl" 'overn onl" &here the act or o,ission co,plained of &ould

constitute an actionable tort independentl" of the contract. 1he test 3&hether a #uasi0delict can be dee,ed to underlie the breach of a contract6 can be stated thusl"2 Chere, &ithout a pre0 e9istin' contract bet&een t&o parties, an act or o,ission can nonetheless a,ount to an actionable tort b" itself, the fact that the parties are contractuall" bound is no bar to the application of #uasi0delict provisions to the case. ere, private respondents: da,a'e clai, is predicated solel" on their contractual relationship; &ithout such a'ree,ent, the act or o,ission co,plained of cannot b" itself be held to stand as a separate cause of action or as an independent actionable tort. 1he Court finds, therefore, the a&ard of ,oral da,a'es ,ade b" the court a uo, affir,ed b" the appellate court, to be inordinate and substantiall" devoid of le'al basis. E9e,plar" or corrective da,a'es, in turn, are intended to serve as an e9a,ple or as correction for the public 'ood in addition to ,oral, te,perate, li#uidated or co,pensator" da,a'es 3%rt. 777*, Civil Code; see Prudenciado vs. %lliance 1ransport S"ste,, )<5 SCR% <<8; Mope$ vs. Pan %,erican Corld %ir&a"s, )4 SCR% <=)6. In cri)inal offenses, e9e,plar" da,a'es are i,posed &hen the cri,e is co,,itted &ith one or ,ore a''ravatin' circu,stances 3%rt. 77=8, Civil Code6. In uasi-delicts, such da,a'es are 'ranted if the defendant is sho&n to have been so 'uilt" of 'ross ne'li'ence as to appro9i,ate ,alice 3 See %rt. 77=), Civil Code; CMMC E.F. Fochan'co Cor.ers Bnion vs. NMRC, )4) SCR% 4((; Flobe Mac.a" Cable and Radio Corp. vs. C%, )+4 SCR% ++56. In contracts and uasi-contracts, the court ,a" a&ard e9e,plar" da,a'es if the defendant is found to have acted in a &anton, fraudulent, rec.less, oppressive, or ,alevolent ,anner 3%rt. 77=7, Civil Code; PND vs. Fen. %cceptance and -inance Corp., )4) SCR% <<*6. Fiven the above pre,ises and the factual circu,stances here obtainin', it &ould also be ?ust as arduous to sustain the e9e,plar" da,a'es 'ranted b" the courts belo& 3 see De Meon vs. Court of %ppeals, )4( SCR% )446. Nevertheless, the ban.:s failure, even perhaps inadvertent, to honor its credit card issued to private respondent Muis should entitle hi, to recover a ,easure of da,a'es sanctioned under %rticle 777) of the Civil Code providin' thusl"2 %rt. 777). No,inal da,a'es are ad?udicated in order that a ri'ht of the plaintiff, &hich has been violated or invaded b" the defendant, ,a" be vindicated or reco'ni$ed, and not for the purpose of inde,nif"in' the plaintiff for an" loss suffered b" hi,. Reasonable attorne":s fees ,a" be recovered &here the court dee,s such recover" to be ?ust and e#uitable 3%rt. 7785, Civil Code6. Ce see no issue of sound discretion on the part of the appellate court in allo&in' the a&ard thereof b" the trial court. C ERE-ORE, the petition for revie& is 'iven due course. 1he appealed decision is MODI-IED b" deletin' the a&ard of ,oral and e9e,plar" da,a'es to private respondents; in its stead, petitioner is ordered to pa" private respondent Muis %. Muna an a,ount of P(,888.88 b" &a" of no,inal da,a'es. In all other respects, the appealed decision is %--IRMED. No costs. SO ORDERED. $arvasa" C.%." &eliciano" Padilla" Bidin" Regalado" -avide" %r." Ro)ero" Bellosillo" ,elo" .uiason" Puno" /apunan" ,endo0a and &rancisco" %%." concur.
'oo+no+,) Rollo, p. (7.

7 Necesito vs. Paras, )8< Phil. +(; Pana" Electric Co. vs. C%, ))* SCR% <(4; S&eet Mines, Inc. vs. C%, )7) SCR% +4*; Re9 1a9icab Co., Inc. vs. Dautista, )8* Phil. +)7. = Philippine %irlines vs. Court of %ppeals, )84 SCR% )<=. < %rt. )+(4, Civil Code. ( %rt. )+4<. Da,a'es in cases co,prised in this Section shall be a&arded in accordance &ith the 1itle PVIII of this Doo., concernin' Da,a'es. %rticle 7784 shall also appl" to the death of a passen'er caused b" the breach of contract b" a co,,on carrier. 4 See Mu$on Dro.era'e, Co., Inc. vs. Mariti,e Duildin', Co., Inc., <= SCR% *=; also Dlac.:s Ma& Dictionar". + %rt. 77)+. Moral da,a'es include ph"sical sufferin', ,ental an'uish, fri'ht, serious an9iet", bes,irched reputation, &ounded feelin's, ,oral shoc., social hu,iliation, and si,ilar in?ur". 1hou'h incapable of pecuniar" co,putation, ,oral da,a'es ,a" be recovered if the" are the pro9i,ate result of the defendant:s &ron'ful act for o,ission. %rt. 77)*. Moral da,a'es ,a" be recovered in the follo&in' and analo'ous cases2 3)6 % cri,inal offense resultin' in ph"sical in?uries; 376 Juasi0delicts causin' ph"sical in?uries; 3=6 Seduction, abduction, rape, or other lascivious acts; 3<6 %dulter" or concubina'e; 3(6 Ille'al or arbitrar" detention or arrest; 346 Ille'al search; 3+6 Mibel, slander or an" other for, of defa,ation; 356 Malicious prosecution; 3*6 %cts ,entioned in article =8*; 3)86 %cts and actions referred to in articles 7), 74, 7+, 75, 7*, =8, =7, =<, and =(. 1he parents of the fe,ale seduced, abducted, raped, or abused, referred to in No. = of this article, ,a" also recover ,oral da,a'es. 1he spouse, descendants, ascendants, and brother and sisters ,a" brin' action ,entioned in No. * of this article, in the order na,ed. 5 )8( Phil. 744, 7+=07+4. * In culpa a uiliana, ,oral da,a'es ,a" be recovered &hen the act or o,ission co,plained of causes ph"sical in?uries or &here the defendant is 'uilt" of intentional tort 3%rticle 77)* N7ON)8O, Civil Code6.

Republic of the Philippines SUPREME COURT Manila

1 IRD DIVISION

G.R. No. 1*297* May 13, 1993 #U"AN S!A, petitioner, vs. COURT O' APPEA#S an$ SECUR!TY &AN( an$ TRUST COMPANY, respondents. Asuncion Law Offices for petitioner. Cauton" Banares" Carpio & Associates for private respondent. /A0!/E, JR., J.: 1he Decision of public respondent Court of %ppeals in C%0F.R. CV No. 74+=+, pro,ul'ated on 7) %u'ust )**), 1 reversin' and settin' aside the Decision, dated )* -ebruar" )**8, 2 of Dranch <+ of the Re'ional 1rial Court 3R1C6 of Manila in Civil Case No. 5+0<748), entitled AMBQ%N SI% vs. SECBRI1L D%NE and 1RBS1 CO.,A is challen'ed in this petition for revie& on certiorari under Rule <( of the Rules Court. Civil Case No. 5+0<748) is an action for da,a'es arisin' out of the destruction or loss of the sta,p collection of the plaintiff 3petitioner herein6 contained in Safet" Deposit Do9 No. (< &hich had been rented fro, the defendant pursuant to a contract deno,inated as a Mease %'ree,ent. 3 !ud',ent therein &as rendered in favor of the dispositive portion of &hich reads2
C ERE-ORE, pre,ises considered, ?ud',ent is hereb" rendered in favor of the plaintiff and a'ainst the defendant, Securit" Dan. G 1rust Co,pan", orderin' the defendant ban. to pa" the plaintiff the su, of I a6 1&ent" 1housand Pesos 3P78,888.886, Philippine Currenc", as actual da,a'es; b6 One undred 1housand Pesos 3P)88,888.886, Philippine Currenc", as ,oral da,a'es; and

c6 -ive 1housand Pesos 3P(,888.886, Philippine Currenc", as attorne":s fees and le'al e9penses. 1he counterclai, set up b" the defendant are hereb" dis,issed for lac. of ,erit. No costs. SO ORDERED.
)

1he antecedent facts of the present controvers" are su,,ari$ed b" the public respondent in its challen'ed decision as follo&s2
1he plaintiff rented on March 77, )*5( the Safet" Deposit Do9 No. (< of the defendant ban. at its Dinondo Dranch located at the -oo.ien 1i,es Duildin', Soler St., Dinondo, Manila &herein he placed his collection of sta,ps. 1he said safet" deposit bo9 leased b" the plaintiff &as at the botto, or at the lo&est level of the safet" deposit bo9es of the defendant ban. at its aforesaid Dinondo Dranch. Durin' the floods that too. place in )*5( and )*54, flood&ater entered into the defendant ban.:s pre,ises, seeped into the safet" deposit bo9 leased b" the plaintiff and caused, accordin' to the plaintiff, da,a'e to his sta,ps collection. 1he defendant ban. re?ected the plaintiff:s clai, for co,pensation for his da,a'ed sta,ps collection, so, the plaintiff instituted an action for da,a'es a'ainst the defendant ban.. 1he defendant ban. denied liabilit" for the da,a'ed sta,ps collection of the plaintiff on the basis of the ARules and Re'ulations Fovernin' the Mease of Safe Deposit Do9esA 3E9hs. A%0)A, A)0%A6, particularl" para'raphs * and )=, &hich reads 3sic62 A*. 1he liabilit" of the Dan. b" reason of the lease, is li,ited to the e9ercise of the dili'ence to prevent the openin' of the safe b" an" person other than the Renter, his authori$ed a'ent or le'al representative; 999 999 999

A)=. 1he Dan. is not a depositor" of the contents of the safe and it has neither the possession nor the control of the sa,e. 1he Dan. has no interest &hatsoever in said contents, e9cept as herein provided, and it assu,es absolutel" no liabilit" in connection there&ith.A 1he defendant ban. also contended that its contract &ith the plaintiff over safet" deposit bo9 No. (< &as one of lease and not of deposit and, therefore, 'overned b" the lease a'ree,ent 3E9hs. A%A, AMA6 &hich should be the applicable la&; that the destruction of the plaintiff:s sta,ps collection &as due to a cala,it" be"ond obli'ation on its part to notif" the plaintiff about the flood&aters that inundated its pre,ises at Dinondo branch &hich alle'edl" seeped into the safet" deposit bo9 leased to the plaintiff. 1he trial court then directed that an ocular inspection on 3 sic6 the contents of the safet" deposit bo9 be conducted, &hich &as done on Dece,ber 5, )*55 b" its cler. of court in the presence of the parties and their counsels. % report thereon &as then sub,itted on Dece,ber )7, )*55 3Records, p. *50%6 and confir,ed in open court b" both parties thru counsel durin' the hearin' on the sa,e date 3'bid., p. )876 statin'2 A1hat the Safet" Do9 Deposit No. (< &as opened b" both plaintiff Mu$an Sia and the %ctin' Dranch Mana'er !i,," D. Lnion in the presence of the undersi'ned, plaintiff:s and defendant:s counsel. Said Safet" Do9 &hen opened contains t&o albu,s of different si$es and thic.ness, len'th and &idth and a tin bo9 &ith printed &ord :1ai Pin' Shian' Roast Por. in pieces &ith Chinese desi'ns and character.A

Condition of the above0stated Ite,s I

ADoth albu,s are &et, ,old" and badl" da,a'ed. ). 1he first albu, ,easures )8 )/5 inches in len'th, 5 inches in &idth and =/< in thic.. 1he leaves of the albu, are attached to ever" pa'e and cannot be lifted &ithout destro"in' it, hence the sta,ps contained therein are no lon'er visible. 7. 1he second albu, ,easure )7 )/7 inches in len'th, * =/< in &idth ) inch thic.. So,e of its pa'es can still be lifted. 1he sta,ps therein can still be distin'uished but be"ond restoration. Others have lost its ori'inal for,. =. 1he tin bo9 is rust" inside. It contains an albu, &ith several pieces of papers stuc. up to the cover of the bo9. 1he 5 condition of the albu, is the second above,entioned albu,.A

1he SECBRI1L D%NE %ND 1RBS1 COMP%NL, hereinafter referred to as SD1C, appealed the trial court:s decision to the public respondent Court of %ppeals. 1he appeal &as doc.eted as C%0F.R. CV No. 74+=+. In ur'in' the public respondent to reverse the decision of the trial court, SD1C contended that the latter erred in 3a6 holdin' that the lease a'ree,ent is a contract of adhesion; 3b6 findin' that the defendant had failed to e9ercise the re#uired dili'ence e9pected of a ban. in ,aintainin' the safet" deposit bo9; 3c6 a&ardin' to the plaintiff actual da,a'es in the a,ount of P78,888.88, ,oral da,a'es in the a,ount of P)88,888.88 and attorne":s fees and le'al e9penses in the a,ount of P(,888.88; and 3d6 dis,issin' the counterclai,. On 7) %u'ust )**), the respondent pro,ul'ated its decision the dispositive portion of &hich reads2
C ERE-ORE, the decision appealed fro, is hereb" REVERSED and instead the appellee:s co,plaint is hereb" DISMISSED. 6 1he appellant ban.:s counterclai, is li.e&ise DISMISSED. No costs.

In reversin' the trial court:s decision and absolvin' SD1C fro, liabilit", the public respondent found and ruled that2 a6 the fine print in the AMease %'ree,ent A 3E9hibits A%A and A)A 6 constitutes the ter,s and conditions of the contract of lease &hich the appellee 3no& petitioner6 had voluntaril" and .no&in'l" e9ecuted &ith SD1C; b6 the contract entered into b" the parties re'ardin' Safe Deposit Do9 No. (< &as not a contract of deposit &herein the ban. beca,e a depositar" of the sub?ect sta,p collection; hence, as contended b" SD1C, the provisions of Doo. IV, 1itle PII of the Civil Code on deposits do not appl"; c6 1he follo&in' provisions of the #uestioned lease a'ree,ent of the safet" deposit bo9 li,itin' SD1C:s liabilit"2

*. 1he liabilit" of the ban. b" reason of the lease, is li,ited to the e9ercise of the dili'ence to prevent the openin' of the Safe b" an" person other than the Renter, his authori$ed a'ent or le'al representative. 999 999 999 )=. 1he ban. is not a depositor" of the contents of the Safe and it has neither the possession nor the control of the sa,e. 1he Dan. has no interest &hatsoever in said contents, e9cept as herein provided, and it assu,es absolutel" no liabilit" in connection there&ith.

are valid since said stipulations are not contrar" to la&, ,orals, 'ood custo,s, public order or public polic"; and d6 there is no concrete evidence to sho& that SD1C failed to e9ercise the re#uired dili'ence in ,aintainin' the safet" deposit bo9; &hat &as proven &as that the floods of )*5( and )*54, &hich &ere be"ond the control of SD1C, caused the da,a'e to the sta,p collection; said floods &ere fortuitous events &hich SD1C should not be held liable for since it &as not sho&n to have participated in the a''ravation of the da,a'e to the sta,p collection; on the contrar", it offered its services to secure the assistance of an e9pert in order to save ,ost of the sta,ps, but the appellee refused; appellee ,ust then bear the lose under the principle of Ares perit do)ino.A Bnsuccessful in his bid to have the above decision reconsidered b" the public respondent, the instant petition &herein he contends that2
I I1 C%S % FR%VE ERROR OR %N %DBSE O- DISCRE1ION ON 1 E P%R1 O- 1 E RESPONDEN1 COBR1 C EN I1 RBMED 1 %1 RESPONDEN1 SD1C DID NO1 -%IM 1O EPERCISE 1 E REJBIRED DIMIFENCE IN M%IN1%ININF 1 E S%-E1L DEPOSI1 DOP O1 E PE1I1IONER CONSIDERINF 1 %1 SBDS1%N1I%M EVIDENCE EPIS1 3sic6 PROVINF 1 E CON1R%RL. II 1 E RESPONDEN1 COBR1 SERIOBSML ERRED IN EPCBMP%1INF PRIV%1E RESPONDEN1 -ROM %NL MI%DIMI1L C %1SOEVER DL RE%SON O- 1 E PROVISIONS O- P%R%FR%P S * %ND )= O- 1 E %FREEMEN1 3EP S. A%A %ND A%0)A6. III 1 E RESPONDEN1 COBR1 SERIOBSML ERRED IN NO1 BP OMDINF 1 E %C%RDS O- 1 E 1RI%M COBR1 -OR %C1B%M %ND 8 MOR%M D%M%FES, INCMBDINF %11ORNEL:S -EES %ND MEF%M EPPENSES, IN -%VOR O- 1 E PE1I1IONER.
7

petitioner filed

Ce subse#uentl" 'ave due course the petition and re#uired both parties to sub,it their respective ,e,oranda, &hich the" co,plied &ith. 9 Petitioner insists that the trial court correctl" ruled that SD1C had failed Ato e9ercise the re#uired dili'ence e9pected of a ban. ,aintainin' such safet" deposit bo9 . . . in the li'ht of the environ,ental circu,stance of said safet" deposit bo9 after the floods of )*5( and )*54.A e ar'ues that such a conclusion is supported b" the evidence on record, to &it2 SD1C &as full" co'ni$ant of the e9act location of the safet" deposit bo9 in #uestion; it .ne& that the pre,ises &ere inundated b" flood&aters in )*5( and )*54 and considerin' that the ban. is 'uarded t&ent"0four 37<6 hours a da" , it is safe to conclude that it &as also a&are of the inundation of the pre,ises &here the safet" deposit bo9 &as located; despite such .no&led'e, ho&ever, it never bothered to infor, the petitioner of the floodin' or ta.e an" appropriate ,easures to insure the safet" and 'ood ,aintenance of the safet" deposit bo9 in #uestion. SD1C does not s#uarel" dispute these facts; rather, it relies on the rule that findin's of facts of the Court of %ppeals, &hen supported b" substantial e9idence, are not revie&able on appeal b" certiorari. 1* 1he fore'oin' rule is, of course, sub?ect to certain e9ceptions such as &hen there e9ists a disparit" bet&een the factual findin's and conclusions of the Court of %ppeals and the trial court. 11 Such a disparit" obtains in the present case. %s Ce see it, SD1C:s theor", &hich &as upheld b" the public respondent, is that the AMease %'ree,ent A coverin' Safe Deposit Do9 No. (< 3E9hibit A% and A)A6 is ?ust that I a contract of lease I and not a

contract of deposit, and that para'raphs * and )= thereof, &hich e9pressl" li,it the ban.:s liabilit" as follo&s2
*. 1he liabilit" of the ban. b" reason of the lease, is li,ited to the e9ercise of the dili'ence to prevent the openin' of the Safe b" an" person other than the Renter, his autliori$ed a'ent or le'al representative; 999 999 999 )=. 1he ban. is not a depositor" of the contents of the Safe and it has neither the possession nor the control of the sa,e. 1he Dan. has no interest &hatsoever said contents, e9cept as herein provided, and it assu,es absolutel" no liabilit" in 12 connection there&ith.

are valid and bindin' upon the parties. In the challen'ed decision, the public respondent further avers that even &ithout such a li,itation of liabilit", SD1C should still be absolved fro, an" responsibilit" for the da,a'e sustained b" the petitioner as it appears that such da,a'e &as occasioned b" a fortuitous event and that the respondent ban. &as free fro, an" participation in the a''ravation of the in?ur". Ce cannot accept this theor" and ratiocination. Conse#uentl", this Court finds the petition to be i,pressed &ith ,erit. In the recent case CA Agro-'ndustrial -evelop)ent Corp. vs. Court of Appeals" 13 this Court e9plicitl" re?ected the contention that a contract for the use of a safet" deposit bo9 is a contract of lease 'overned b" 1itle VII, Doo. IV of the Civil Code. Nor did Ce full" subscribe to the vie& that it is a contract of deposit to be strictl" 'overned b" the Civil Code provision on deposit; 1) it is, as Ce declared, a special .ind of deposit. 1he prevailin' rule in %,erican ?urisprudence I that the relation bet&een a ban. rentin' out safe deposit bo9es and its custo,er &ith respect to the contents of the bo9 is that of a bailor and bailee, the bail,ent for hire and ,utual benefit 15 I has been adopted in this ?urisdiction, thus2
In the conte9t of our la&s &hich authori$e ban.in' institutions to rent out safet" deposit bo9es, it is clear that in this ?urisdiction, the prevailin' rule in the Bnited States has been adopted. Section +7 of the Feneral Dan.in' %ct NR.%. ==+, as a,endedO pertinentl" provides2 ASec. +7. In addition to the operations specificall" authori$ed else&here in this %ct, ban.in' institutions other than buildin' and loan associations ,a" perfor, the follo&in' services2 3a6 Receive in custod" funds, docu,ents, and valuable ob?ects, and rent safet" deposit bo9es for the safe#uardin' of such effects. 999 999 999 1he ban.s shall perfor, the services per,itted under subsections 3a6, 3b6 and 3c6 of this section as depositories or as a'ents. . . .A3e,phasis supplied6 Note that the pri,ar" function is still found &ithin the para,eters of a contract of deposit, i.e., the receivin' in custod" of funds, docu,ents and other valuable ob?ects for safe.eepin'. 1he rentin' out of the safet" deposit bo9es is not independent fro,, but related to or in con?unction &ith, this principal function. % contract of deposit ,a" be entered into orall" or in &ritin' 3%rt. )*4*, Civil CodeO and, pursuant to %rticle )=84 of the Civil Code, the parties thereto ,a" establish such stipulations, clauses, ter,s and conditions as the" ,a" dee, convenient, provided the" are not contrar" to la&, ,orals, 'ood custo,s, public order or public polic". 1he depositar":s responsibilit" for the safe.eepin' of the ob?ects deposited in the case at bar is 'overned b" 1itle I, Doo. IV of the Civil Code. %ccordin'l", the depositar" &ould be liable if, in perfor,in' its obli'ation, it is found 'uilt" of fraud, ne'li'ence, dela" or contravention of the tenor of the a'ree,ent N%rt. ))+8, id.O. In the absence of an" stipulation prescribin' the de'ree of dili'ence re#uired, that of a 'ood father of a fa,il" is to be observed N%rt. ))+=, id.O. ence, an" stipulation e9e,ptin' the depositar" fro, an" liabilit" arisin' fro, the loss of the thin' deposited on account of fraud, ne'li'ence or dela" &ould be void for bein' contrar" to la& and public polic". In the instant case, petitioner ,aintains that conditions )= and l< of the #uestioned contract of lease of the safet" deposit bo9, &hich read2 A)=. 1he ban. is a depositar" of the contents of the safe and it has neither the possession nor control of the sa,e. A)<. 1he ban. has no interest &hatsoever in said contents, e9cept as herein e9pressl" provided, and it assu,es absolutel" no liabilit" in connection there&ith.A are void as the" are contrar" to la& and public polic". Ce find Ourselves in a'ree,ent &ith this proposition for indeed, said provisions are inconsistent &ith the respondent Dan.:s responsibilit" as a depositar" under Section +7 3a6 of the Feneral Dan.in' %ct. Doth e9e,pt the latter fro, an" liabilit" e9cept as conte,plated in condition 5 thereof &hich li,its its dut" to e9ercise reasonable dili'ence onl" &ith respect to &ho shall be ad,itted to an" rented safe, to &it2

A5. 1he Dan. shall use due dili'ence that no unauthori$ed person shall be ad,itted to an" rented safe and be"ond this, the Dan. &ill not be responsible for the contents of an" safe rented fro, it.A -urther,ore condition )= stands on a &ron' pre,ise and is contrar" to the actual practice of the Dan.. It is not correct to assert that the Dan. has neither the possession nor control of the contents of the bo9 since in fact, the safet" deposit bo9 itself is located in its pre,ises and is under its absolute control; ,oreover, the respondent Dan. .eeps the 'uard .e" to the said bo9. %s stated earlier, renters cannot open their respective bo9es unless the Dan. cooperates b" presentin' and usin' this 'uard .e". Clearl" then, to the e9tent above stated, the fore'oin' conditions in the contract in #uestion are void and ineffective. It has been said2 ACith respect to propert" deposited in a safe0deposit bo9 b" a custo,er of a safe0deposit co,pan", the parties, since the relation is a contractual one, ,a" b" special contract define their respective duties or provide for increasin' or li,itin' the liabilit" of the deposit co,pan", provided such contract is not in violation of la& or public polic". It ,ust clearl" appear that there actuall" &as such a special contract, ho&ever, in order to var" the ordinar" obli'ations i,plied b" la& fro, the relationship of the parties; liabilit" of the deposit co,pan" &ill not be enlar'ed or restricted b" &ords of doubtful ,eanin'. 1he co,pan", in rentin' safe0deposit bo9es, cannot e9e,pt itself fro, liabilit" for loss of the contents b" its o&n fraud or ne'li'ence or that, of its a'ents or servants, and if a provision of the contract ,a" be construed as an atte,pt to do so, it &ill be held ineffective for the purpose. %lthou'h it has been held that the lessor of a safe0deposit bo9 cannot li,it its liabilit" for loss of the contents thereof throu'h its o&n ne'li'ence, the vie& has been ta.en that such a lessor ,a" li,it its liabilit" to so,e e9tent b" a'ree,ent or stipulation .AN)8 %M !BR 7d., <44O. 3citations o,itted6 )4

It ,ust be noted that conditions No. )= and No. )< in the Contract of Mease of Safet" Deposit Do9 in CA Agro-'ndustrial -evelop)ent Corp. are stri.in'l" si,ilar to condition No. )= in the instant case. On the other hand, both condition No. 5 in CA Agro-'ndustrial -evelop)ent Corp. and condition No. * in the present case li,it the scope of the e9ercise of due dili'ence b" the ban.s involved to ,erel" seein' to it that onl" the renter, his authori$ed a'ent or his le'al representative should open or have access to the safet" deposit bo9. In short, in all other situations, it &ould see, that SD1C is not bound to e9ercise dili'ence of an" .ind at all. %ssa"ed in the li'ht of Our afore,entioned pronounce,ents in CA Agrolndustrial -evelop)ent Corp." it is not at all difficult to conclude that both conditions No. * and No. )= of the AMease %'ree,entA coverin' the safet" deposit bo9 in #uestion 3E9hibits A%A and A)A6 ,ust be stric.en do&n for bein' contrar" to la& and public polic" as the" are ,eant to e9e,pt SD1C fro, an" liabilit" for da,a'e, loss or destruction of the contents of the safet" deposit bo9 &hich ,a" arise fro, its o&n or its a'ents: fraud, ne'li'ence or dela". %ccordin'l", SD1C cannot ta.e refu'e under the said conditions. Public respondent further postulates that SD1C cannot be held responsible for the destruction or loss of the sta,p collection because the floodin' &as a fortuitous event and there &as no sho&in' of SD1C:s participation in the a''ravation of the loss or in?ur". It states2
%rticle ))+< of the Civil Code provides2 AE9cept in cases e9pressl" specified b" the la&, or &hen it is other&ise declared b" stipulation, or &hen the nature of the obli'ation re#uires the assu,ption of ris., no person shall be responsible for those events &hich could not be foreseen, or &hich, thou'h foreseen, &ere inevitable.: In its dissertation of the phrase 1caso fortuito1 the *nciclopedia %urisdicada *spa2ola
18 17

sa"s2 AIn a le'al sense and,

conse#uentl", also in relation to contracts, a 1caso fortuito1 prevents 3sic6 the follo&in' essential characteristics2 3)6 the cause of the unforeseen ands une9pected occurrence, or of the failure of the debtor to co,pl" &ith his obli'ation, ,ust be independent of the hu,an &ill; 376 it ,ust be i,possible to foresee the event &hich constitutes the 1caso fortuito"1 or if it can be foreseen, it ,ust be i,possible to avoid; 3=6 the occurrence ,ust be such as to render it i,possible for one debtor to fulfill his obli'ation in a nor,al ,anner; and 3<6 the obli'or ,ust be free fro, an" participation in the a''ravation of the 19 in?ur" resultin' to the creditor.A 3cited in Servando vs. Phil., Stea, Navi'ation Co., supra6. ere, the unforeseen or une9pected inundatin' floods &ere independent of the &ill of the appellant ban. and the latter &as not sho&n to have participated in a''ravatin' da,a'e 3 sic6 to the sta,ps collection of the appellee. In fact, the appellant ban. offered its services to secure the assistance of an e9pert to save ,ost of the then 'ood sta,ps but the appelle 2* refused and let 3sic6 these recoverable sta,ps inside the safet" deposit bo9 until the" &ere ruined.

Doth the la& and authorit" cited are clear enou'h and re#uire no further elucidation. Bnfortunatel", ho&ever, the public respondent failed to consider that in the instant case, as correctl" held b" the trial court, SD1C &as 'uilt" of ne'li'ence. 1he facts constitutin' ne'li'ence are enu,erated in the petition and have been su,,ari$ed in this ponencia. SD1C:s ne'li'ence aggravated the in?ur" or da,a'e to the sta,p collection. SD1C &as a&are of the floods of )*5( and )*54; it also .ne& that the flood&aters inundated the roo, &here Safe Deposit Do9 No. (< &as located. In vie& thereof, it should have lost no ti,e in notif"in' the petitioner in order that the bo9 could have been opened to retrieve the sta,ps, thus savin' the sa,e fro, further deterioration and loss. In this respect, it failed to e9ercise the reasonable care and prudence

e9pected of a 'ood father of a fa,il", thereb" beco,in' a part" to the a''ravation of the in?ur" or loss. %ccordin'l", the afore,entioned fourth characteristic of a fortuitous event is absent %rticle ))+8 of the Civil Code, &hich reads2
1hose &ho in the perfor,ance of their obli'ation are 'uilt" of fraud, ne'li'ence, or dela", and those &ho in an" ,anner contravene the tenor thereof, are liable for da,a'es,

thus co,es to the succor of the petitioner. 1he destruction or loss of the sta,p collection &hich &as, in the lan'ua'e of the trial court, the Aproduct of 7+ "ears of patience and dili'enceA 21 caused the petitioner pecuniar" loss; hence, he ,ust be co,pensated therefor. Ce cannot, ho&ever, place Our i,pri,atur on the trial court:s a&ard of ,oral da,a'es. Since the relationship bet&een the petitioner and SD1C is based on a contract, either of the, ,a" be held liable for ,oral da,a'es for breach thereof onl" if said part" had acted fraudulentl" or in bad faith. 22 1here is here no proof of fraud or bad faith on the part of SD1C. C ERE-ORE, the instant petition is hereb" FR%N1ED. 1he challen'ed Decision and Resolution of the public respondent Court of %ppeals of 7) %u'ust )**) and 7) Nove,ber )**), respectivel", in C%0F.R. CV No. 74+=+, are hereb" SE1 %SIDE and the Decision of )* -ebruar" )**8 of Dranch <+ of the Re'ional 1rial Court of Manila in Civil Case No. 5+0<748) is hereb" REINS1%1ED in full, e9cept as to the a&ard of ,oral da,a'es &hich is hereb" set aside. Costs a'ainst the private respondent. SO ORDERED. &eliciano" Bidin" Ro)ero and ,elo" %%." concur.
1

'oo+no+,) Rollo, =<0<). Per %ssociate !ustice Mucio M. Victor, concurred in b" %ssociate !ustices Santia'o M. Eapunan and Se'undino F. Chua. 7 'd., (70((. = E9hibit A%A and A)A, Ori'inal Records of Civil Case No. 5+0<748), 5+. < Rollo, ((. ( Rollo, =<0=4. 4 Rollo, <). + Rollo, <=0<*. 5 'd., )+. * 'd., 4=. )8 Rollo, 4), citing Fon$ales vs. Court of %ppeals, *8 SCR% )5= N)*+*O. )) Saca" vs. Sandi'anba"an, )<7 SCR% (*= N)*54O; Re,alante vs. 1ibe, )(5 SCR% )=5 N)*55O; Medina vs. %sisitio, )*) SCR% 7)5 N)**8O. )7 E9hibit A%0)A, Ori'inal Records, dorsal side of pa'e 5+. )= F.R. No. *887+, = March )**=. )< 1itle PII, Doo. IV, Civil Code. )( )8 %, !ur 7d, <<80<<).

)4 Entries in brac.ets appear as footnotes in the decision. )+ ( Enciclopedia !uridicada Espa>ola. )5 Should be presents. )* ))+ SCR% 5=7 N)*57O. 78 Rollo, <8. 7) Rollo, (<. 77 %rticle 7778, Civil Code.

Republic of the Philippines SUPREME COURT Manila T%!R/ /!0!S!ON G.R. No. 17*)79 ',.ruary 18, 2**8

AN/RE T. A#MOCERA, petitioner, vs. JO%NNY ONG, respondent. /EC!S!ON C%!CO2NA"AR!O, J.3 Defore Bs is a Petition for Revie& on Certiorari under Rule <( of the )**+ Rules of Civil Procedure &hich see.s to set aside the Decision) of the Court of %ppeals dated )5 !ul" 788( in C%0F.R. CV No. +(4)8 affir,in' in toto the Decision7 of Dranch )) of the Re'ional 1rial Court 3R1C6 of Cebu Cit" in Civil Case No. CED07=45+ and its Resolution = dated )4 Nove,ber 788( den"in' petitionerRs ,otion for reconsideration. 1he R1C decision found petitioner %ndre 1. %l,ocera, Chair,an and Chief E9ecutive Officer of -irst Duilder Multi0Purpose Cooperative 3-DMC6, solidaril" liable &ith -MDC for da,a'es.

Stripped of non0essentials, the respective versions of the parties have been su,,ari$ed b" the Court of %ppeals as follo&s2 Plaintiff !ohnn" On' tried to ac#uire fro, the defendants a Ato&nho,eA described as Bnit No. < of %triu, 1o&nho,es in Cebu Cit". %s reflected in a Contract to Sell, the sellin' price of the unit &as P=,<88,888.88 pesos, for a lot area of ei'ht"0ei'ht 3556 s#uare ,eters &ith a three0store" buildin'. Out of the purchase price, plaintiff &as able to pa" the a,ount of P),848,888.88. Prior to the full pa",ent of this a,ount, plaintiff clai,s that defendants %ndre %l,ocera and -irst Duilders fraudulentl" concealed the fact that before and at the ti,e of the perfection of the aforesaid contract to sell, the propert" &as alread" ,ort'a'ed to and encu,bered &ith the Mand Dan. of the Philippines 3MDP6. In addition, the construction of the house has lon' been dela"ed and re,ains unfinished. On March )=, )***, Mot <0a covered b" 1C1 No. )<55)5, coverin' the unit &as advertised in a local tabloid for public auction for foreclosure of ,ort'a'e. It is the assertion of the plaintiff that had it not for the fraudulent conceal,ent of the ,ort'a'e and encu,brance b" defendants, he &ould have not entered into the contract to sell. On the other hand, defendants assert that on March 78, )**(, -irst Duilders Multi0 purpose Coop. Inc., borro&ed ,one" in the a,ount of P(88,888.88 fro, 1o,," On', plaintiffRs brother. 1his a,ount &as used to finance the docu,entation re#uire,ents of the MDP for the fundin' of the %triu, 1o&n o,es. 1his loan &ill be applied in pa",ent of one 3)6 to&n house unit &hich 1o,," On' ,a" eventuall" purchase fro, the pro?ect. Chen the pro?ect &as under &a", 1o,," On' &anted to bu" another to&nhouse for his brother, !ohnn" On', plaintiff herein, &hich then, the a,ount of P)(8,888.88 &as 'iven as additional partial pa",ent. o&ever, the particular unit &as not "et identified. It &as onl" on !anuar" )8, )**+ that 1o,," On' identified Bnit No. < plaintiffRs chosen unit and a'ain tendered P=(8,888.88 as his third partial pa",ent. Chen the contract to sell for Bnit < &as bein' drafted, 1o,," On' re#uested that another contract to sell coverin' Bnit ( be ,ade so as to 'ive !ohnn" On' another option to choose &hichever unit he ,i'ht decide to have. Chen the construction &as alread" in full blast, defendants &ere infor,ed b" 1o,," On' that their final choice &as Bnit (. It &as onl" upon .no&in' that the defendants &ill be sellin' Bnit < to so,e other persons for P<,illion that plaintiff chan'ed his choice fro, Bnit ( to Bnit <.< In tr"in' to recover the a,ount he paid as do&n pa",ent for the to&nhouse unit, respondent !ohnn" On' filed a co,plaint for Da,a'es before the R1C of Cebu Cit", doc.eted as Civil Case No. CED07=45+, a'ainst defendants %ndre 1. %l,ocera and -DMC alle'in' that defendants &ere 'uilt" of fraudulent conceal,ent and breach of contract &hen the" sold to hi, a to&nhouse unit &ithout divul'in' that the sa,e, at the ti,e of the perfection of their contract, &as alread" ,ort'a'ed &ith the Mand Dan. of the Philippines 3MDP6, &ith the latter causin' the foreclosure of the ,ort'a'e and the eventual sale of the to&nhouse unit to a third person. In their %ns&er, defendants denied liabilit" clai,in' that the foreclosure of the ,ort'a'e on the to&nhouse unit &as caused b" the failure of co,plainant !ohnn" On' to pa" the balance of the price of said to&nhouse unit.

%fter the pre0trial conference &as ter,inated, trial on the ,erits ensued. Respondent and his brother, 1ho,as L. On', too. the &itness stand. -or defendants, petitioner testified. In a Decision dated 78 Ma" 7887, the R1C disposed of the case in this ,anner2 C ERE-ORE, in vie& of all the fore'oin' pre,ises, ?ud',ent is hereb" rendered in this case in favor of the plaintiff and a'ainst the defendants2 3a6 Orderin' the defendants to solidaril" pa" to the plaintiff the su, of P),848,888.88, to'ether &ith a le'al interest thereon at 4@ per annu, fro, %pril 7), )*** until its full pa",ent before finalit" of the ?ud',ent. 1hereafter, if the a,ount ad?ud'ed re,ains unpaid, the interest rate shall be )7@ per annu, co,puted fro, the ti,e &hen the ?ud',ent beco,es final and e9ecutor" until full" satisfied; 3b6 Orderin' the defendants to solidaril" pa" to the plaintiff the su, of P)88,888.88 as ,oral da,a'es, the su, of P(8,888.88 as attorne"Rs fee and the su, of P)(,4)*.58 as e9penses of liti'ation; and 3c6 Orderin' the defendants to pa" the cost of this suit.( 1he trial court ruled a'ainst defendants for not actin' in 'ood faith and for not co,pl"in' &ith their obli'ations under their contract &ith respondent. In the Contract to Sell4 involvin' Bnit < of the %triu, 1o&nho,es, defendants a'reed to sell said to&nhouse to respondent for P=,<88,888.88. 1he do&n pa",ent &as P),888,888.88, &hile the balance of P7,<88,888.88 &as to be paid in full upon co,pletion, deliver" and acceptance of the to&nhouse. Bnder the contract &hich &as si'ned on )8 !anuar" )**+, defendants a'reed to co,plete and conve" to respondent the unit &ithin si9 ,onths fro, the si'nin' thereof. 1he trial court found that respondent &as able to ,a.e a do&n pa",ent or partial pa",ent of P),848,888.88 and that the defendants failed to co,plete the construction of, as &ell as deliver to respondent, the to&nhouse &ithin si9 ,onths fro, the si'nin' of the contract. Moreover, respondent &as not infor,ed b" the defendants at the ti,e of the perfection of their contract that the sub?ect to&nhouse &as alread" ,ort'a'ed to MDP. 1he ,ort'a'e &as foreclosed b" the MDP and the to&nhouse &as eventuall" sold at public auction. It said that defendants &ere 'uilt" of fraud in their dealin' &ith respondent because the ,ort'a'e &as not disclosed to respondent &hen the contract &as perfected. 1here &as also non0co,pliance &ith their obli'ations under the contract &hen the" failed to co,plete and deliver the to&nhouse unit at the a'reed ti,e. On the part of respondent, the trial court declared he &as ?ustified in suspendin' further pa",ents to the defendants and &as entitled to the return of the do&n pa",ent. %''rieved, defendants appealed the decision to the Court of %ppeals assi'nin' the follo&in' as errors2 ). 1 E MOCER COBR1 ERRED IN OMDINF 1 %1 PM%IN1I-%C1ION -OR D%M%FES %F%INS1 DE-END%N13S6. %S % V%MID C%BSE O-

7. 1 E MOCER COBR1 ERRED IN OMDINF 1 %1 DE-END%N1 %NDRE 1. %MMOCER% IS SOMID%RIML MI%DME CI1 1 E COOPER%1IVE -OR 1 E D%M%FES 1O 1 E PM%IN1I--.+ 1he Court of %ppeals ruled that the defendants incurred dela" &hen the" failed to deliver the to&nhouse unit to the respondent &ithin si9 ,onths fro, the si'nin' of the contract to sell. It a'reed &ith the findin' of the trial court that the nonpa",ent of the balance of P7.<M b" respondent to defendants &as proper in li'ht of such dela" and the fact that the propert" sub?ect of the case &as foreclosed and auctioned. It added that the trial court did not err in 'ivin' credence to respondentRs assertion that had he .no&n beforehand that the unit &as used as collateral &ith the MDP, he &ould not have proceeded in bu"in' the to&nhouse. Mi.e the trial court, the Court of %ppeals 'ave no &ei'ht to defendantsR ar'u,ent that had respondent paid the balance of the purchase price of the to&nhouse, the ,ort'a'e could have been released. It e9plained2 Ce cannot find fault &ith the choice of plaintiff not to further dole out ,one" for a propert" that in all events, &ould never be his. Moreover, defendants could, if the" &ere reall" desirous of satisf"in' their obli'ation, de,anded that plaintiff pa" the outstandin' balance based on their contract. 1his the" had not done. Ce can fairl" sur,ise that defendants could not co,pl" &ith their obli'ation the,selves, because as testified to b" Mr. %l,ocera, the" alread" si'nified to MDP that the" cannot pa" their outstandin' loan obli'ations resultin' to the foreclosure of the to&nhouse.5 Moreover, as to the issue of petitionerRs solidar" liabilit", it said that this issue &as belatedl" raised and cannot be treated for the first ti,e on appeal. On )5 !ul" 788(, the Court of %ppeals denied the appeal and affir,ed in toto the decision of the trial court. 1he dispositive portion of the decision reads2 !N #!G%T O' A## T%E 'OREGO!NG, this appeal is /EN!E/. 1he assailed decision of the Re'ional 1rial Court, Dranch )), Cebu Cit" in Civil Case No. CED0 7=45+ is A''!RME/ in toto.* In a Resolution dated )4 Nove,ber 788(, the Court of %ppeals denied defendantsR ,otion for reconsideration. Petitioner is no& before us pleadin' his case via a Petition for Revie& on Certiorari under Rule <( of the )**+ Rules of Civil Procedure. 1he petition raises the follo&in' issues2 I. 1 E ONOR%DME COBR1 O- %PPE%MS FR%VEML ERRED IN DE-END%N1 %S INCBRRED DEM%L. OMDINF 1 %1

II. 1 E ONOR%DME COBR1 O- %PPE%MS FR%VEML ERRED IN SBS1%ININF RESPONDEN1RS RE-BS%M 1O P%L 1 E D%M%NCE O- 1 E PBRC %SE PRICE. III. 1 E ONOR%DME COBR1 O- %PPE%MS FR%VEML ERRED IN OMDINF 1 %1 DE-END%N1 %NDRE 1. %MMOCER% IS SOMID%RIML MI%DME CI1 1 E DE-END%N1 COOPER%1IVE -OR D%M%FES 1O PM%IN1I--.)8

It cannot be disputed that the contract entered into b" the parties &as a contract to sell. 1he contract &as deno,inated as such and it contained the provision that the unit shall be conve"ed b" &a" of an %bsolute Deed of Sale, to'ether &ith the attendant docu,ents of O&nership S the 1ransfer Certificate of 1itle and Certificate of Occupanc" S and that the balance of the contract price shall be paid upon the co,pletion and deliver" of the unit, as &ell as the acceptance thereof b" respondent. %ll these clearl" indicate that o&nership of the to&nhouse has not passed to respondent. In Serrano v. Caguiat,
))

&e e9plained2

% contract to sell is a.in to a conditional sale &here the efficac" or obli'ator" force of the vendorRs obli'ation to transfer title is subordinated to the happenin' of a future and uncertain event, so that if the suspensive condition does not ta.e place, the parties &ould stand as if the conditional obli'ation had never e9isted. 1he suspensive condition is co,,onl" full pa",ent of the purchase price. 1he differences bet&een a contract to sell and a contract of sale are &ell0settled in ?urisprudence. %s earl" as )*(), in Sing 3ee v. Santos N<+ O.F. 4=+7 3)*()6O, &e held that2 A9 9 9 NaO distinction ,ust be ,ade bet&een a contract of sale in &hich title passes to the bu"er upon deliver" of the thin' sold and a contract to sell 9 9 9 &here b" a'ree,ent the o&nership is reserved in the seller and is not to pass until the full pa",ent of the purchase price is ,ade. In the first case, non0pa",ent of the price is a ne'ative resolutor" condition; in the second case, full pa",ent is a positive suspensive condition. Dein' contraries, their effect in la& cannot be identical. In the first case, the vendor has lost and cannot recover the o&nership of the land sold until and unless the contract of sale is itself resolved and set aside. In the second case, ho&ever, the title re,ains in the vendor if the vendee does not co,pl" &ith the condition precedent of ,a.in' pa",ent at the ti,e specified in the contract.A In other &ords, in a contract to sell, o&nership is retained b" the seller and is not to pass to the bu"er until full pa",ent of the price. 1he Contract to Sell entered into b" the parties contains the follo&in' pertinent provisions2 <. 1ERMS O- P%LMEN12 <a. ONE MIMMION PESOS 3P),888,888.886 is hereb" ac.no&led'ed as Do&npa",ent for the above0,entioned Contract Price. <b. 1he Dalance, in the a,ount of 1CO MIMMION -OBR BNDRED PESOS 3P7,<88,888.886 shall be paid thru financin' Institution facilitated b" the SEMMER, preferabl" Mandban. of the Philippines 3MDP6. Bpon co,pletion, deliver" and acceptance of the DBLER of the 1o&nhouse Bnit, the DBLER shall have paid the Contract Price in full to the SEMMER. 9999

4. COMPME1ION D%1ES O- 1 E 1OCN OBSE BNI12 1he unit shall be co,pleted and conve"ed b" &a" of an %bsolute Deed of Sale to'ether &ith the attendant docu,ents of O&nership in the na,e of the DBLER S the 1ransfer Certificate of 1itle and Certificate of Occupanc" &ithin a period of si9 346 ,onths fro, the si'nin' of Contract to Sell.)7 -ro, the fore'oin' provisions, it is clear that petitioner and -DMC had the obli'ation to co,plete the to&nhouse unit &ithin si9 ,onths fro, the si'nin' of the contract. Bpon co,pliance there&ith, the obli'ation of respondent to pa" the balance of P7,<88,888.88 arises. Bpon pa",ent thereof, the to&nhouse shall be delivered and conve"ed to respondent upon the e9ecution of the %bsolute Deed of Sale and other relevant docu,ents. 1he evidence adduced sho&s that petitioner and -DMC failed to fulfill their obli'ation 00 to co,plete and deliver the to&nhouse &ithin the si90,onth period. Cith petitioner and -DMCRs non0fulfill,ent of their obli'ation, respondent refused to pa" the balance of the contract price. Respondent does not as. that o&nership of the to&nhouse be transferred to hi,, but ,erel" as.s that the a,ount or do&n pa",ent he had ,ade be returned to hi,. %rticle ))4* of the Civil Code reads2 %rt. ))4*. 1hose obli'ed to deliver or to do so,ethin' incur in dela" fro, the ti,e the obli'ee ?udiciall" or e9tra?udiciall" de,ands fro, the, the fulfill,ent of their obli'ation. o&ever, the de,and b" the creditor shall not be necessar" in order that dela" ,a" e9ist2 3)6 Chen the obli'ation or the la& e9pressl" so declares; or 376 Chen fro, the nature and the circu,stances of the obli'ation it appears that the desi'nation of the ti,e &hen the thin' is to be delivered or the service is to be rendered &as a controllin' ,otive for the establish,ent of the contract; or 3=6 Chen de,and &ould be useless, as &hen the obli'or has rendered it be"ond his po&er to perfor,. In reciprocal obli'ations, neither part" incurs in dela" if the other does not co,pl" or is not read" to co,pl" in a proper ,anner &ith &hat is incu,bent upon hi,. -ro, the ,o,ent one of the parties fulfills his obli'ation, dela" b" the other be'ins. 1he contract sub?ect of this case contains reciprocal obli'ations &hich &ere to be fulfilled b" the parties, i.e., to co,plete and deliver the to&nhouse &ithin si9 ,onths fro, the e9ecution of the contract to sell on the part of petitioner and -DMC, and to pa" the balance of the contract price upon co,pletion and deliver" of the to&nhouse on the part of the respondent.

In the case at bar, the obli'ation of petitioner and -DMC &hich is to co,plete and deliver the to&nhouse unit &ithin the prescribed period, is deter,inative of the respondentRs obli'ation to pa" the balance of the contract price. Cith their failure to fulfill their obli'ation as stipulated in the contract, the" incurred dela" and are liable for da,a'es.)= 1he" cannot insist that respondent co,pl" &ith his obli'ation. Chere one of the parties to a contract did not perfor, the underta.in' to &hich he &as bound b" the ter,s of the a'ree,ent to perfor,, he is not entitled to insist upon the perfor,ance of the other part".)< On the first assi'ned error, petitioner insists there &as no dela" &hen the to&nhouse unit &as not co,pleted &ithin si9 ,onths fro, the si'nin' of the contract inas,uch as the ,ere lapse of the stipulated si9 346 ,onth period is not b" itself enou'h to constitute dela" on his part and that of -DMC, since the la& re#uires that there ,ust either be ?udicial or e9tra?udicial de,and to fulfill an obli'ation so that the obli'or ,a" be declared in default. e ar'ues there &as no evidence introduced sho&in' that a prior de,and &as ,ade b" respondent before the ori'inal action &as instituted in the trial court. Ce do not a'ree. De,and is not necessar" in the instant case. De,and b" the respondent &ould be useless because the i,possibilit" of co,pl"in' &ith their 3petitioner and -DMC6 obli'ation &as due to their fault. If onl" the" paid their loans &ith the MDP, the ,ort'a'e on the sub?ect to&nhouse &ould not have been foreclosed and thereafter sold to a third person. %nent the second assi'ned error, petitioner ar'ues that if there &as an" dela", the sa,e &as incurred b" respondent because he refused to pa" the balance of the contract price. Ce find his ar'u,ent specious. %s above0discussed, the obli'ation of respondent to pa" the balance of the contract price &as conditioned on petitioner and -DMCRs perfor,ance of their obli'ation. Considerin' that the latter did not co,pl" &ith their obli'ation to co,plete and deliver the to&nhouse unit &ithin the period a'reed upon, respondent could not have incurred dela". -or failure of one part" to assu,e and perfor, the obli'ation i,posed on hi,, the other part" does not incur dela".)( Bnder the circu,stances obtainin' in this case, &e find that respondent is ?ustified in refusin' to pa" the balance of the contract price. e &as never in possession of the to&nhouse unit and he can no lon'er be its o&ner since o&nership thereof has been transferred to a third person &ho &as not a part" to the proceedin's belo&. It &ould si,pl" be the hei'ht of ine#uit" if &e are to re#uire respondent to pa" the balance of the contract price. 1o allo& this &ould result in the un?ust enrich,ent of petitioner and -DMC. 1he funda,ental doctrine of un?ust enrich,ent is the transfer of value &ithout ?ust cause or consideration. 1he ele,ents of this doctrine &hich are present in this case are2 enrich,ent on the part of the defendant; i,poverish,ent on the part of the plaintiff; and lac. of cause. 1he ,ain ob?ective is to prevent one to enrich hi,self at the e9pense of another. It is co,,onl" accepted that this doctrine si,pl" ,eans a person shall not be allo&ed to profit or enrich hi,self ine#uitabl" at another:s e9pense.)4 ence, to allo& petitioner and -DMC .eep the do&n pa",ent ,ade b" respondent a,ountin' to

P),848,888.88 &ould result in their un?ust enrich,ent at the e9pense of the respondent. 1hus, said a,ount should be returned. Chat is &orse is the fact that petitioner and -DMC intentionall" failed to infor, respondent that the sub?ect to&nhouse &hich he &as 'oin' to purchase &as alread" ,ort'a'ed to MDP at the ti,e of the perfection of their contract. 1his deliberate &ithholdin' b" petitioner and -DMC of the ,ort'a'e constitutes fraud and bad faith. 1he trial court had this sa"2 In the li'ht of the fore'oin' environ,ental circu,stances and ,ilieu, therefore, it appears that the defendants are 'uilt" of fraud in dealin' &ith the plaintiff. 1he" perfor,ed voluntar" and &illful acts &hich prevent the nor,al reali$ation of the prestation, .no&in' the effects &hich naturall" and necessaril" arise fro, such acts. 1heir acts i,port a dishonest purpose or so,e ,oral obli#uit" and conscious doin' of a &ron'. 1he said acts certainl" 'tive rise to liabilit" for da,a'es 35 Manresa +7; Dorrell0Macia 7407+; = Ca,us =<; ORMear" v. Macondra" G Co,pan", <(< Phil. 5)7; eredia v. Salinas, )8 Phil. )(+6. %rticle ))+8 of the Ne& Civil Code of the Philippines provides e9pressl" that Athose &ho in the perfor,ance of their obli'ations are 'uilt" of fraud and those &ho in an" ,anner contravene the tenor thereof are liable for da,a'es.)+ On the last assi'ned error, petitioner contends that he should not be held solidaril" liable &ith defendant -DMC, because the latter is a separate and distinct entit" &hich is the seller of the sub?ect to&nhouse. e clai,s that he, as Chair,an and Chief E9ecutive Officer of -DMC, cannot be held liable because his representin' -DMC in its dealin's is a corporate act for &hich onl" -DMC should be held liable. 1his issue of piercin' the veil of corporate fiction &as never raised before the trial court. 1he sa,e &as raised for the first ti,e before the Court of %ppeals &hich ruled that it &as too late in the da" to raise the sa,e. 1he Court of %ppeals declared2 In the case belo&, the pleadin's and the evidence of the defendants are one and the sa,e and never had it ,ade to appear that %l,ocera is a person distinct and separate fro, the other defendant. In fine, &e cannot treat this error for the first ti,e on appeal. Ce cannot in 'ood conscience, let the defendant %l,ocera raise the issue of piercin' the veil of corporate fiction ?ust because of the adverse decision a'ainst hi,. 9 9 9.)5 1o allo& petitioner to pursue such a defense &ould under,ine basic considerations of due process. Points of la&, theories, issues and ar'u,ents not brou'ht to the attention of the trial court &ill not be and ou'ht not to be considered b" a revie&in' court, as these cannot be raised for the first ti,e on appeal. It &ould be unfair to the adverse part" &ho &ould have no opportunit" to present further evidence ,aterial to the ne& theor" not ventilated before the trial court.)* %s to the a&ard of da,a'es 'ranted b" the trial court, and affir,ed b" the Court of %ppeals, &e find the sa,e to be proper and reasonable under the circu,stances. 4%ERE'ORE, the petition is /EN!E/. 1he Decision of the Court of %ppeals dated )5 !ul" 788( in C%0F.R. CV No. +(4)8 is A''!RME/. Costs a'ainst the petitioner.

SO OR/ERE/.
M!N!TA 0. C%!CO2NA"AR!O %ssociate !ustice

CE CONCBR2 CONSUE#O YNARES2SANT!AGO %ssociate !ustice Chairperson MA. A#!C!A AUSTR!A2MART!NE" %ssociate !ustice ANTON!O E/UAR/O &. NAC%URA %ssociate !ustice

RU&EN T. REYES %ssociate !ustice

ATTESTAT!ON I attest that the conclusions in the above Decision &ere reached in consultation before the case &as assi'ned to the &riter of the opinion of the CourtRs Division. CONSUE#O YNARES2SANT!AGO %ssociate !ustice Chairperson, 1hird Division

CERT!'!CAT!ON Pursuant to Section )=, %rticle VIII of the Constitution, and the Division ChairpersonRs %ttestation, it is hereb" certified that the conclusions in the above Decision &ere reached in consultation before the case &as assi'ned to the &riter of the opinion of the CourtRs Division. REYNATO S. PUNO Chief !ustice
'oo+no+,)

%ssociate !ustice Pa,pio %. %barintos &ith %ssociate !ustices Mercedes Fo$o0Dadole and Ra,on M. Dato, !r., concurrin'; rollo, pp. 7(0=7; Penned b" Id. at ==0=<. Rollo, pp. 7407+. Id. at <+. E9hibit %. Rollo, pp. )(0)4. Id. at =8. on. Isaias P. Dicdican.

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Id. at =7. Id. at )4. F.R. No. )=*)+=, 75 -ebruar" 788+, ()+ SCR% (+, 4<04(. Rollo, p. 7507*. Lea2o v. Court of Appeals , <78 Phil. 5=4, 5<5 3788)6. Agustin v. Court of Appeals , F.R. No. 5<+(), 4 !une )**8, )54 SCR% =+(, =5=. Agustin v. Court of Appeals , id., citin' Abaya v. Standard-4acuu) Oil Co., )8) Phil. )747 3)*(+6. P.C. %avier & Sons" 'nc. v. Court of Appeals , F.R. No. )7*((7, 7* !une 788(, <47 SCR% =4, <+. Rollo, p. <<. Id. at =). 4alde0 v. C!ina Ban+ing Corporation, F.R. No. )((88*, )7 %pril 788(, <(( SCR% 45+, 4*4.

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Republic of the Philippines SUPREME COURT Manila SECOND DIVISION G.R. No. #257552 O5+o.,r 1*, 1986 #U!SA '. MC#AUG%#!N, petitioner, vs. T%E COURT O' APPEA#S AN/ RAMON '#ORES, respondents. R.C. -o)ingo %r. & Associates for private respondent.

'ER!A, Actg. C.J. 1his is an appeal b" certiorari fro, the decision of the Court of %ppeals, the dispositive part of &hich reads as follo&s2 IN VIEC O- 1 E -OREFOINF PREMISES, the petition for certiorari and ,anda,us is hereb" FR%N1ED and the Orders of respondent court dated Nove,ber 7) and 7+ both )*58 are hereb" nullified and set aside and respondent !ud'e is ordered to order private respondent to accept petitioner:s Pacific Dan.in' Corporation certified ,ana'er:s Chec. No. MC0%0888=)) dated Nove,ber )+, )*58 in the a,ount of P+4,8(*.+) in full settle,ent of petitioner:s obli'ation, or another chec. of e#uivalent .ind and value, the earlier chec. havin' beco,e stale. On -ebruar" 75, )*++, petitioner Muisa -. McMau'hlin and private respondent Ra,on -lores entered into a contract of conditional sale of real propert". Para'raph one of the deed of conditional sale fi9ed the total purchase price of P)<8,888.88 pa"able as follo&s2 a6 P74,((8.88

upon the e9ecution of the deed; and b6 the balance of P))=,<(8.88 to be paid not later than Ma" =), )*++. 1he parties also a'reed that the balance shall bear interest at the rate of )@ per ,onth to co,,ence fro, Dece,ber ), )*+4, until the full purchase price &as paid. On !une )*, )*+*, petitioner filed a co,plaint in the then Court of -irst Instance of Ri$al 3Civil Case No. ==(+=6 for the rescission of the deed of conditional sale due to the failure of private respondent to pa" the balance due on Ma" =), )*++. On Dece,ber 7+, )*+*, the parties sub,itted a Co,pro,ise %'ree,ent on the basis of &hich the court rendered a decision on !anuar" 77, )*58. In said co,pro,ise a'ree,ent, private respondent ac.no&led'ed his indebtedness to petitioner under the deed of conditional sale in the a,ount of P))*,8(8.+), and the parties a'reed that said a,ount &ould be pa"able as follo&s2 a6 P(8,888.88 upon si'nin' of the a'ree,ent; and b6 the balance of P4*,8(*.+) in t&o e#ual install,ents on !une =8, )*58 and Dece,ber =), )*58. %s a'reed upon, private respondent paid P(8,888.88 upon the si'nin' of the a'ree,ent and in addition he also paid an Aescalation costA of P7(,888.88. Bnder para'raph = of the Co,pro,ise %'ree,ent, private respondent a'reed to pa" one thousand 3P l,888.886 pesos ,onthl" rental be'innin' Dece,ber (, )*+* until the obli'ation is dul" paid, for the use of the propert" sub?ect ,atter of the deed of conditional sale. Para'raphs 4 and + of the Co,pro,ise %'ree,ent further state2 1hat the parties are a'reed that in the event the defendant 3private respondent6 fails to co,pl" &ith his obli'ations herein provided, the plaintiff 3petitioner6 &ill be entitled to the issuance of a &rit of e9ecution rescindin' the Deed of Conditional Sale of Real Propert". In such eventualit", defendant 3private respondent6 hereb" &aives his ri'ht to appeal to 3fro,6 the Order of Rescission and the Crit of E9ecution &hich the Court shall render in accordance &ith the stipulations herein provided for. 1hat in the event of e9ecution all pa",ents ,ade b" defendant 3private respondent6 &ill be forfeited in favor of the plaintiff 3petitioner6 as li#uidated da,a'es. On October )(, )*58, petitioner &rote to private respondent de,andin' that the latter pa" the balance of P4*,8(*.+) on or before October =), )*58. 1his de,and included not onl" the install,ent due on !une =8, )*58 but also the install,ent due on Dece,ber =), )*58. On October =8, )*58, private respondent sent a letter to petitioner si'nif"in' his &illin'ness and intention to pa" the full balance of P4*,8(*.+), and at the sa,e ti,e de,andin' to see the certificate of title of the propert" and the ta9 pa",ent receipts. Private respondent states on pa'e )< of his brief that on Nove,ber =, )*58, the first &or.in' da" of said ,onth, he tendered pa",ent to petitioner but this &as refused acceptance b" petitioner. o&ever, this does not appear in the decision of the Court of %ppeals. On Nove,ber +, )*58, petitioner filed a Motion for Crit of E9ecution alle'in' that private respondent failed to pa" the install,ent due on !une )*58 and that since !une )*58 he had failed to pa" the ,onthl" rental of P l,888.88. Petitioner pra"ed that a6 the deed of conditional sale of real propert" be declared rescinded &ith forfeiture of all pa",ents as li#uidated da,a'es; and b6 the court order the pa",ent of Pl,888.88 bac. rentals since !une )*58 and the eviction of private respondent.

On Nove,ber )<, )*58, the trial court 'ranted the ,otion for &rit of e9ecution. On Nove,ber )+, )*58, private respondent filed a ,otion for reconsideration tenderin' at the sa,e ti,e a Pacific Dan.in' Corporation certified ,ana'er:s chec. in the a,ount of P+4,8(*.+), pa"able to the order of petitioner and coverin' the entire obli'ation includin' the install,ent due on Dece,ber =), )*58. o&ever, the trial court denied the ,otion for reconsideration in an order dated Nove,ber 7), )*58 and issued the &rit of e9ecution on Nove,ber 7(, )*58. In an order dated Nove,ber 7+, )*58, the trial court 'ranted petitioner:s e90parte ,otion for clarification of the order of e9ecution rescindin' the deed of conditional sale of real propert". On Nove,ber 75, )*58, private respondent filed &ith the Court of %ppeals a petition for certiorari and prohibition assailin' the orders dated Nove,ber 7) and 7+, )*58. %s initiall" stated above, the appellate court nullified and set aside the disputed orders of the lo&er court. In its decision, the appellate court ruled in part as follo&s2 1he issue here is &hether respondent court co,,itted a 'rave abuse of discretion in issuin' the orders dated Nove,ber 7), )*58 and Nove,ber 7+,)*58. 1he 'eneral rule is that rescission &ill not be per,itted for a sli'ht or casual breach of the contract, but onl" for such breaches as are substantial and funda,ental as to defeat the ob?ect of the parties in ,a.in' the a'ree,ent. 3Son' -o G Co. vs. a&aiian0Philippine Co., <+ Phil. 57)6 In aforesaid case, it &as held that a dela" in pa",ent for a s,all #uantit" of ,olasses, for so,e t&ent" da"s is not such a violation of an essential condition of the contract as &arrants rescission for non0perfor,ance. In 5niversal &ood Corp. vs. Court of Appeals" == SCR% ), the Son' -o rulin' &as reaffir,ed. In the case at bar, McMau'hlin &rote -lores on October )(, )*58 de,andin' that -lores pa" the balance of P4*,8(*.+) on or before October =), )*58. 1hus it is undeniable that despite -lores: failure to ,a.e the pa",ent &hich &as due on !une )*58, McMau'hlin &aived &hatever ri'ht she had under the co,pro,ise a'ree,ent as incorporated in the decision of respondent court, to de,and rescission. 999 999 999 It is si'nificant to note that on Nove,ber )+, )*58, or ?ust seventeen 3)+6 da"s after October =), )*58, the deadline set b" McMau'hlin, -lores tendered the certified ,ana'er:s chec.. Ce hold that the Son' -o rulin' is applicable herein considerin' that in the latter case, there &as a 780da" dela" in the pa",ent of the obli'ation as co,pared to a )+0da" dela" in the instant case. -urther,ore, as held in the recent case of $ew Pacific (i)ber & Supply Co." 'nc. vs. 6on. Alberto Seneris, M0<)+4<, Dece,ber )*, )*58, it is the accepted practice in business to consider a cashier:s or ,ana'er:s chec. as cash and that upon certification of a chec., it is e#uivalent to its acceptance 3Section )5+, Ne'otiable Instru,ent Ma&6 and the funds are thereb" transferred to the credit of the creditor 3%raneta v. 1uason, <* O.F. p. (*6.

In the Ne& Pacific 1i,ber G Suppl" Co., Inc. case, the Supre,e Court further held that the ob?ect of certif"in' a chec. is to enable the holder thereof to use it as ,one", citin' the rulin' in P$B vs. $ational City Ban+ of $ew 3or+" 4= Phil. +)). In the Ne& Pacific 1i,ber case, it &as also ruled that the e9ception in Section 4= of the Central Dan. %ct that the clearin' of a chec. and the subse#uent creditin' of the a,ount thereof to the account of the creditor is e#uivalent to deliver" of cash, is applicable to a pa",ent throu'h a certified chec.. Considerin' that -lores had alread" paid P)8),((8.88 under the contract to sell, e9cludin' the ,onthl" rentals paid, certainl" it &ould be the hei'ht of ine#uit" to have this a,ount forfeited in favor McMau'hlin. Bnder the #uestioned orders, McMau'hlin &ould 'et bac. the propert" and still .eep P)8),((8.88. Petitioner contends that the appellate court erred in not observin' the provisions of %rticle No. )=84 of the Civil Code of the Philippines and in havin' arbitraril" abused its ?udicial discretion b" disre'ardin' the penal clause stipulated b" the parties in the co,pro,ise a'ree,ent &hich &as the basis of the decision of the lo&er court. Ce a'ree &ith the appellate court that it &ould be ine#uitable to cancel the contract of conditional sale and to have the a,ount of P)8),((8.88 3P l<5,)74.*+ accordin' to private respondent in his brief6 alread" paid b" hi, under said contract, e9cludin' the ,onthl" rentals paid, forfeited in favor of petitioner, particularl" after private respondent had tendered the a,ount of P+4,8(*.+) in full pa",ent of his obli'ation. In the analo'ous case of De Fu$,an vs. Court of %ppeals, this Court sustained the order of the respondent ?ud'e den"in' the petitioners: ,otion for e9ecution on the 'round that the private respondent had substantiall" co,plied &ith the ter,s and conditions of the co,pro,ise a'ree,ent, and directin' the petitioners to i,,ediatel" e9ecute the necessar" docu,ents transferrin' to the private respondent the title to the properties 3!ul" 7=, )*5(, )=+ SCR% +=86. In the case at bar, there &as also substantial co,pliance &ith the co,pro,ise a'ree,ent. Petitioner invo.es the rulin' of the Court in its Resolution of Nove,ber )4, )*+5 in the case of Lu0on Bro+erage Co." 'nc. vs. ,ariti)e Building Co." 'nc. , to the effect that Republic %ct 4((7 3the Maceda Ma&6 Areco'ni$es and reaffir,s the vendor:s ri'ht to cancel the contract to sell upon breach and non0pa",ent of the stipulated install,ents but re#uires a 'race period after at least t&o "ears of re'ular install,ent pa",ents ... . A 354 SCR% =8(, =7*6 On the other hand, private respondent also invo.es said la& as an e9pression of public polic" to protect bu"ers of real estate on install,ents a'ainst onerous and oppressive conditions 3Section 7 of Republic %ct No. 4((76. Section < of Republic %ct No. 4((7 &hich too. effect on Septe,ber )<, )*+7 provides as follo&s2 In case &here less than t&o "ears of install,ents &ere paid, the seller shall 'ive the bu"er a 'race period of not less than si9t" da"s fro, the date the install,ent beca,e due. If the bu"er fails to pa" the install,ents due at the e9piration of the 'race period, the seller ,a" cancel the contract after thirt" da"s fro, receipt b" the bu"er of the notice of the cancellation or the de,and for rescission of the contract b" a notarial act. Section + of said la& provides as follo&s2 %n" stipulation in an" contract hereafter entered into contrar" to the provisions of Sections =, <, ( and 4, shall be null and void.

1he spirit of these provisions further supports the decision of the appellate court. 1he record does not contain the co,plete te9t of the co,pro,ise a'ree,ent dated Dece,ber 78, )*+* and the decision approvin' it. o&ever, assu,in' that under the ter,s of said a'ree,ent the Dece,ber =), )*58 install,ent &as due and pa"able &hen on October )(, )*58, petitioner de,anded pa",ent of the balance of P4*,8(*.+) on or before October =), )*58, petitioner could cancel the contract after thirt" da"s fro, receipt b" private respondent of the notice of cancellation. Considerin' petitioner:s ,otion for e9ecution filed on Nove,ber +, )*58 as a notice of cancellation, petitioner could cancel the contract of conditional sale after thirt" da"s fro, receipt b" private respondent of said ,otion. Private respondent:s tender of pa",ent of the a,ount of P+4,8(*.+) to'ether &ith his ,otion for reconsideration on Nove,ber )+, )*58 &as, therefore, &ell &ithin the thirt"0da" period 'rants b" la&.. 1he tender ,ade b" private respondent of a certified ban. ,ana'er:s chec. pa"able to petitioner &as a valid tender of pa",ent. 1he certified chec. covered not onl" the balance of the purchase price in the a,ount of P4*,8(*.+), but also the arrears in the rental pa",ents fro, !une to Dece,ber, )*58 in the a,ount of P+,888.88, or a total of P+4,8(*.+). On this point the appellate court correctl" applied the rulin' in the case of Ne& Pacific 1i,ber G Suppl" Co., Inc. vs. Seneris 3)8) SCR% 454, 4*704*<6 to the case at bar. Moreover, Section <*, Rule )=8 of the Revised Rules of Court provides that2 %n offer in &ritin' to pa" a particular su, of ,one" or to deliver a &ritten instru,ent or specific propert" is, if re?ected, e#uivalent to the actual production and tender of the ,one", instru,ent, or propert". o&ever, althou'h private respondent had ,ade a valid tender of pa",ent &hich preserved his ri'hts as a vendee in the contract of conditional sale of real propert", he did not follo& it &ith a consi'nation or deposit of the su, due &ith the court. %s this Court has held2 1he rule re'ardin' pa",ent of rede,ption prices is invo.ed. 1rue that consi'nation of the rede,ption price is not necessar" in order that the vendor ,a" co,pel the vendee to allo& the repurchase &ithin the ti,e provided b" la& or b" contract. 3Rosales vs. Re"es and Ordove$a, 7( Phil. <*(.6 Ce have held that in such cases a ,ere tender of pa",ent is enou'h, if ,ade on ti,e, as a basis for action a'ainst the vendee to co,pel hi, to resell. Dut that tender does not in itself relieve the vendor fro, his obli'ation to pa" the price &hen rede,ption is allo&ed b" the court. In other &ords, tender of pa",ent is sufficient to co,pel rede,ption but is not in itself a pa",ent that relieves the vendor fro, his liabilit" to pa" the rede,ption price. A 3Pae$ vs. Ma'no, 5= Phil. <8=, <8(6 On Septe,ber ), )*54, the Court issued the follo&in' resolution Considerin' the alle'ation in petitioner:s repl" brief that the Mana'er:s Chec. tendered b" private respondent on Nove,ber )+, )*58 &as subse#uentl" cancelled and converted into cash, the Court RESOMVED to REJBIRE the parties &ithin ten 3)86 da"s fro, notice to infor, the Court &hether or not the a,ount thereof &as deposited in court and &hether or not private respondent continued pa"in' the ,onthl" rental of P),888.88 stipulated in the Co,pro,ise %'ree,ent. In co,pliance &ith this resolution, both parties sub,itted their respective ,anifestations &hich confir, that the Mana'er:s Chec. in #uestion &as subse#uentl" &ithdra&n and replaced b" cash, but the cash &as not deposited &ith the court. %ccordin' to %rticle )7(4 of the Civil Code of the Philippines, if the creditor to &ho, tender of pa",ent has been ,ade refuses &ithout ?ust cause to accept it, the debtor shall be released

fro, responsibilit" b" the consi'nation of the thin' or su, due, and that consi'nation alone shall produce the sa,e effect in the five cases enu,erated therein; %rticle )7(+ provides that in order that the consi'nation of the thin' 3or su,6 due ,a" release the obli'or, it ,ust first be announced to the persons interested in the fulfill,ent of the obli'ation; and %rticle )7(5 provides that consi'nation shall be ,ade b" depositin' the thin' 3or su,6 due at the disposal of the ?udicial authorit" and that the interested parties shall also be notified thereof. %s the Court held in the case of Soco vs. ,ilitante" pro,ul'ated on !une 75, )*5=, after e9a,inin' the above0cited provisions of the la& and the ?urisprudence on the ,atter2 1ender of pa",ent ,ust be distin'uished fro, consi'nation. 1ender is the antecedent of consi'nation, that is, an act preparator" to the consi'nation, &hich is the principal, and fro, &hich are derived the i,,ediate conse#uences &hich the debtor desires or see.s to obtain. 1ender of pa",ent ,a" be e9tra?udicial, &hile consi'nation is necessaril" ?udicial, and the priorit" of the first is the atte,pt to ,a.e a private settle,ent before proceedin' to the sole,nities of consi'nation. 35 Manresa =7(6. 3)7= SCR% )48,)+=6 In the above0cited case of -e 7u0)an vs. Court of Appeals 3)=+ SCR% +=86, the vendee &as released fro, responsibilit" because he had deposited &ith the court the balance of the purchase price. Si,ilarl", in the above0cited case of $ew Pacific (i)ber & Supply Co." 'nc. vs. Seneris 3)8) SCR% 4546, the ?ud',ent debtor &as released fro, responsibilit" b" depositin' &ith the court the a,ount of the ?ud',ent obli'ation. In the case at bar, althou'h as above stated private respondent had preserved his ri'hts as a vendee in the contract of conditional sale of real propert" b" a ti,el" valid tender of pa",ent of the balance of his obli'ation &hich &as not accepted b" petitioner, he re,ains liable for the pa",ent of his obli'ation because of his failure to deposit the a,ount due &ith the court. In his ,anifestation dated Septe,ber )*, )*54, private respondent states that on Septe,ber )4, )*58, he purchased a Metroban. Cashier:s Chec. No. CC 88<7== in favor of petitioner Muisa -. McMau'hlin in the a,ount of P+4,8(*.+), a photocop" of &hich &as enclosed and ,ar.ed as %nne9 A%0 );A but that he did not continue pa"in' the ,onthl" rental of Pl,888.88 because, pursuant to the decision of the appellate court, petitioner herein &as ordered to accept the aforesaid a,ount in full pa",ent of herein respondent:s obli'ation under the contract sub?ect ,atter thereof. o&ever, inas,uch as petitioner did not accept the aforesaid a,ount, it &as incu,bent on private respondent to deposit the sa,e &ith the court in order to be released fro, responsibilit". Since private respondent did not deposit said a,ount &ith the court, his obli'ation &as not paid and he is liable in addition for the pa",ent of the ,onthl" rental of Pl,888.88 fro, !anuar" ), )*5) until said obli'ation is dul" paid, in accordance &ith para'raph = of the Co,pro,ise %'ree,ent. Bpon full pa",ent of the a,ount of P+4,8(*.+) and the rentals in arrears, private respondent shall be entitled to a deed of absolute sale in his favor of the real propert" in #uestion. C ERE-ORE, the decision of the Court of %ppeals is %--IRMED &ith the follo&in' ,odifications2 3a6 Petitioner is ordered to accept fro, private respondent the Metroban. Cashier:s Chec. No. CC 88<7== in her favor in the a,ount of P+4,8(*.+) or another certified chec. of a reputable ban. dra&n in her favor in the sa,e a,ount; 3b6 Private respondent is ordered to pa" petitioner, &ithin si9t" 3486 da"s fro, the finalit" of this decision, the rentals in arrears of P l,888.88 a ,onth fro, !anuar" ), )*5) until full pa",ent thereof; and

3c6 Petitioner is ordered to e9ecute a deed of absolute sale in favor of private respondent over the real propert" in #uestion upon full pa",ent of the a,ounts as provided in para'raphs 3a6 and 3b6 above. No costs. SO ORDERED. &ernan" Ala)pay" 7utierre0" %r. and Paras" %%." concur.

'!RST /!0!S!ON 6G.R. No. 11719*. January 2, 19977

JAC!NTO TANGU!#!G $o8n9 .u-8n,-- un$,r +:, na;, an$ -+y<, J.M.T. ENG!NEER!NG AN/ GENERA# MERC%AN/!S!NG, petitioner, vs. COURT O' APPEA#S an$ 0!CENTE %ERCE JR., respondents. DECISION DEMMOSIMMO, %.2 1his case involves the proper interpretation of the contract entered into bet&een the parties.

So,eti,e in %pril )*5+ petitioner !acinto M. 1an'uili' doin' business under the na,e and st"le %. ,. (. *ngineering and 7eneral ,erc!andising proposed to respondent Vicente erce !r. to construct a &ind,ill s"ste, for hi,. %fter so,e ne'otiations the" a'reed on the construction of the &ind,ill for a consideration of P48,888.88 &ith a one0"ear 'uarant" fro, the date of co,pletion and acceptance b" respondent erce !r. of the pro?ect. Pursuant to the a'ree,ent respondent paid petitioner a do&n pa",ent of P=8,888.88 and an install,ent pa",ent of P)(,888.88, leavin' a balance of P)(,888.88. On )< March )*55, due to the refusal and failure of respondent to pa" the balance, petitioner filed a co,plaint to collect the a,ount. In his Answer before the trial court respondent denied the clai, sa"in' that he had alread" paid this a,ount to the San Pedro Feneral Merchandisin' Inc. 3SPFMI6 &hich constructed the deep &ell to &hich the &ind,ill s"ste, &as to be connected. %ccordin' to respondent, since the deep &ell for,ed part of the s"ste, the pa",ent he tendered to SPFMI should be credited to his account b" petitioner. Moreover, assu,in' that he o&ed petitioner a balance of P)(,888.88, this should be offset b" the defects in the &ind,ill s"ste, &hich caused the structure to collapse after a stron' &ind hit their place. iN)O Petitioner denied that the construction of a deep &ell &as included in the a'ree,ent to build the &ind,ill s"ste,, for the contract price of P48,888.88 &as solel" for the &ind,ill asse,bl" and its installation, e9clusive of other incidental ,aterials needed for the pro?ect. e also diso&ned an" obli'ation to repair or reconstruct the s"ste, and insisted that he delivered it in 'ood and &or.in' condition to respondent &ho accepted the sa,e &ithout protest. Desides, its collapse &as attributable to a t"phoon, a force )a8eure" &hich relieved hi, of an" liabilit". In findin' for plaintiff, the trial court held that the construction of the deep &ell &as not part of the &ind,ill pro?ect as evidenced clearl" b" the letter proposals sub,itted b" petitioner to respondent.iiN7O It noted that ANiOf the intention of the parties is to include the construction of the deep &ell in the pro?ect, the sa,e should be stated in the proposals. In the absence of such an a'ree,ent, it could be safel" concluded that the construction of the deep &ell is not a part of the pro?ect underta.en b" the plaintiff.A iiiN=O Cith respect to the repair of the &ind,ill, the trial court found that Athere is no clear and convincin' proof that the &ind,ill s"ste, fell do&n due to the defect of the construction.A ivN<O 1he Court of %ppeals reversed the trial court. It ruled that the construction of the deep &ell &as included in the a'ree,ent of the parties because the ter, Adeep &ellA &as ,entioned in both proposals. It also 'ave credence to the testi,on" of respondent:s &itness Fuiller,o Pili, the proprietor of SPFMI &hich installed the deep &ell, that petitioner 1an'uili' told hi, that the cost of constructin' the deep &ell &ould be deducted fro, the contract price of P48,888.88. Bpon these pre,ises the appellate court concluded that respondent:s pa",ent of P)(,888.88 to SPFMI should be applied to his re,ainin' balance &ith petitioner thus effectivel" e9tin'uishin' his contractual obli'ation. o&ever, it re?ected petitioner:s clai, of force )a8eure and ordered the latter to reconstruct the &ind,ill in accordance &ith the stipulated one0"ear 'uarant". is ,otion for reconsideration havin' been denied b" the Court of %ppeals, petitioner no& see.s relief fro, this Court. e raises t&o issues2 firstly, &hether the a'ree,ent to construct the &ind,ill s"ste, included the installation of a deep &ell and, secondly" &hether petitioner is under obli'ation to reconstruct the &ind,ill after it collapsed. Ce reverse the appellate court on the first issue but sustain it on the second. 1he preponderance of evidence supports the findin' of the trial court that the installation of a deep &ell &as not included in the proposals of petitioner to construct a &ind,ill s"ste, for respondent. 1here &ere in fact t&o 376 proposals2 one dated )* Ma" )*5+ &hich pe''ed the contract price at P5+,888.88 3E9h. A)A6. 1his &as re?ected b" respondent. 1he other &as sub,itted three da"s later, i.e., on 77 Ma" )*5+ &hich contained ,ore specifications but

proposed a lo&er contract price of P48,888.88 3E9h. A%A6. 1he latter proposal &as accepted b" respondent and the construction i,,ediatel" follo&ed. 1he pertinent portions of the first letter0 proposal 3E9h. A)A6 are reproduced hereunder 0
In connection &ith "our Cind,ill S"ste, and Installation, &e &ould li.e to #uote to "ou as follo&s2 One 3)6 Set 0 Cind,ill suitable for 7 inches dia,eter deep&ell, 7 P, capacit", )< feet in dia,eter, &ith 78 pieces blade, 1o&er <8 feet hi'h, includin' ,echanis, &hich is not advisable to operate durin' e9tra0 intensit" &ind. E9cludin' c"linder pu,p. BNI1 CON1R%C1 PRICE P5+,888.88 1he second letter0proposal 3E9h. A%A6 provides as follo&s2 In connection &ith "our Cind,ill s"ste, Suppl" of Mabor Materials and Installation, operated &ater pu,p, &e &ould li.e to #uote to "ou as follo&s 0 One 3)6 set 0 Cind,ill asse,bl" for 7 inches or = inches deep0&ell pu,p, 4 Stro.e, )< feet dia,eter, )0lot blade ,aterials, <8 feet 1o&er co,plete &ith standard appurtenances up to C"linder pu,p, shaftin' B.S. ad?ustable International Metal. One 3)6 lot 0 %n'le bar, F. I. pipe, Reducer Couplin', Elbo& Fate valve, cross 1ee couplin'. One 3)6 lot 0 -loat valve. One 3)6 lot 0 Concretin' ,aterials foundation. -. O. D. Ma'una Contract Price P48,888.88

Notabl", no&here in either proposal is the installation of a deep &ell ,entioned, even re,otel". Neither is there an ite,i$ation or description of the ,aterials to be used in constructin' the deep &ell. 1here is absolutel" no ,ention in the t&o 376 docu,ents that a deep &ell pu,p is a co,ponent of the proposed &ind,ill s"ste,. 1he contract prices fi9ed in both proposals cover onl" the features specificall" described therein and no other. Chile the &ords 1deep well1 and 1deep well pu)p1 are ,entioned in both, these do not indicate that a deep &ell is part of the &ind,ill s"ste,. 1he" ,erel" describe the t"pe of deep &ell pu,p for &hich the proposed &ind,ill &ould be suitable. %s correctl" pointed out b" petitioner, the &ords 1deep well1 preceded b" the prepositions 1for1 and 1suitable for1 &ere ,eant onl" to conve" the idea that the proposed &ind,ill &ould be appropriate for a deep &ell pu,p &ith a dia,eter of 7 to = inches. -or if the real intent of petitioner &as to include a deep &ell in the a'ree,ent to construct a &ind,ill, he &ould have used instead the con?unctions 1and1 or 1wit!.1 Since the ter,s of the instru,ents are clear and leave no doubt as to their ,eanin' the" should not be disturbed. Moreover, it is a cardinal rule in the interpretation of contracts that the intention of the parties shall be accorded pri,ordial consideration vN(O and, in case of doubt, their conte,poraneous and subse#uent acts shall be principall" considered. viN4O %n e9a,ination of such conte,poraneous and subse#uent acts of respondent as &ell as the attendant circu,stances does not persuade us to uphold hi,. Respondent insists that petitioner verball" a'reed that the contract price of P48,888.88 covered the installation of a deep &ell pu,p. e contends that since petitioner did not have the capacit" to install the pu,p the latter a'reed to have a third part" do the &or. the cost of &hich &as to be deducted fro, the contract price. 1o prove his point, he presented Fuiller,o Pili of SPFMI

&ho declared that petitioner 1an'uili' approached hi, &ith a letter fro, respondent erce !r. as.in' hi, to build a deep &ell pu,p as Apart of the price/contract &hich En'ineer 3 erce6 had &ith Mr. 1an'uili'.AviiN+O Ce are disinclined to accept the version of respondent. 1he clai, of Pili that erce !r. &rote hi, a letter is unsubstantiated. 1he alle'ed letter &as never presented in court b" private respondent for reasons .no&n onl" to hi,. Dut 'rantin' that this &ritten co,,unication e9isted, it could not have si,pl" contained a re#uest for Pili to install a deep &ell; it &ould have also ,entioned the part" &ho &ould pa" for the underta.in'. It strains credulit" that respondent &ould .eep silent on this ,atter and leave it all to petitioner 1an'uili' to verball" conve" to Pili that the deep &ell &as part of the &ind,ill construction and that its pa",ent &ould co,e fro, the contract price of P48,888.88. Ce find it also unusual that Pili &ould readil" consent to build a deep &ell the pa",ent for &hich &ould co,e supposedl" fro, the &ind,ill contract price on the ,ere representation of petitioner, &ho, he had never ,et before, &ithout a &ritten co,,it,ent at least fro, the for,er. -or if indeed the deep &ell &ere part of the &ind,ill pro?ect, the contract for its installation &ould have been strictl" a ,atter bet&een petitioner and Pili hi,self &ith the for,er assu,in' the obli'ation to pa" the price. 1hat it &as respondent erce !r. hi,self &ho paid for the deep &ell b" handin' over to Pili the a,ount of P)(,888.88 clearl" indicates that the contract for the deep &ell &as not part of the &ind,ill pro?ect but a separate a'ree,ent bet&een respondent and Pili. Desides, if the price of P48,888.88 included the deep &ell, the obli'ation of respondent &as to pa" the entire a,ount to petitioner &ithout pre?udice to an" action that Fuiller,o Pili or SPFMI ,a" ta.e, if an", a'ainst the latter. Si'nificantl", &hen as.ed &h" he tendered pa",ent directl" to Pili and not to petitioner, respondent e9plained, rather la,el", that he did it Abecause he has 3sic6 the ,one", so 3he6 ?ust paid the ,one" in his possession.A viiiN5O Can respondent clai, that Pili accepted his pa",ent on behalf of petitionerH No. Chile the la& is clear that Apa",ent shall be ,ade to the person in &hose favor the obli'ation has been constituted, or his successor in interest, or an" person authori$ed to receive it,A.i9N*O It does not appear fro, the record that Pili and/or SPFMI &as so authori$ed. Respondent cannot clai, the benefit of the la& concernin' Apa",ents ,ade b" a third person.A9N)8O 1he Civil Code provisions do not appl" in the instant case because no creditor0 debtor relationship bet&een petitioner and Fuiller,o Pili and/or SPFMI has been established re'ardin' the construction of the deep &ell. Specificall", &itness Pili did not testif" that he entered into a contract &ith petitioner for the construction of respondent:s deep &ell. If SPFMI &as reall" co,,issioned b" petitioner to construct the deep &ell, an a'ree,ent particularl" to this effect should have been entered into. 1he conte,poraneous and subse#uent acts of the parties concerned effectivel" belie respondent:s assertions. 1hese circu,stances onl" sho& that the construction of the &ell b" SPFMI &as for the sole account of respondent and that petitioner ,erel" supervised the installation of the &ell because the &ind,ill &as to be connected to it. 1here is no le'al nor factual basis b" &hich this Court can i,pose upon petitioner an obli'ation he did not e9pressl" assu,e nor ratif". 1he second issue is not a novel one. In a lon' line of cases 9iN))O this Court has consistentl" held that in order for a part" to clai, e9e,ption fro, liabilit" b" reason of fortuitous event under %rt. ))+< of the Civil Code the event should be the sole and pro9i,ate cause of the loss or destruction of the ob?ect of the contract. In Na.pil vs. Court of %ppeals,9iiN)7O four 3<6 re#uisites ,ust concur2 3a6 the cause of the breach of the obli'ation ,ust be independent of the &ill of the debtor; 3b6 the event ,ust be either unforeseeable or unavoidable; 3c6 the event ,ust be such as to render it i,possible for the debtor to fulfill his obli'ation in a nor,al ,anner; and, 3d6 the debtor ,ust be free fro, an" participation in or a''ravation of the in?ur" to the creditor.

Petitioner failed to sho& that the collapse of the &ind,ill &as due solel" to a fortuitous event. Interestin'l", the evidence does not disclose that there &as actuall" a t"phoon on the da" the &ind,ill collapsed. Petitioner ,erel" stated that there &as a Astron' &ind.A Dut a stron' &ind in this case cannot be fortuitous 0 unforeseeable nor unavoidable. On the contrar", a stron' &ind should be present in places &here &ind,ills are constructed, other&ise the &ind,ills &ill not turn. 1he appellate court correctl" observed that A'iven the ne&l"0constructed &ind,ill s"ste,, the sa,e &ould not have collapsed had there been no inherent defect in it &hich could onl" be attributable to the appellee.A9iiiN)=O It e,phasi$ed that respondent had in his favor the presu,ption that Athin's have happened accordin' to the ordinar" course of nature and the ordinar" habits of life.A9ivN)<O 1his presu,ption has not been rebutted b" petitioner. -inall", petitioner:s ar'u,ent that private respondent &as alread" in default in the pa",ent of his outstandin' balance of P)(,888.88 and hence should bear his o&n loss, is untenable. In reciprocal obli'ations, neither part" incurs in dela" if the other does not co,pl" or is not read" to co,pl" in a proper ,anner &ith &hat is incu,bent upon hi,. 9vN)(O Chen the &ind,ill failed to function properl" it beca,e incu,bent upon petitioner to institute the proper repairs in accordance &ith the 'uarant" stated in the contract. 1hus, respondent cannot be said to have incurred in dela"; instead, it is petitioner &ho should bear the e9penses for the reconstruction of the &ind,ill. %rticle ))4+ of the Civil Code is e9plicit on this point that if a person obli'ed to do so,ethin' fails to do it, the sa,e shall be e9ecuted at his cost.
4%ERE'ORE, the appealed decision is MODI-IED. Respondent VICEN1E ERCE !R. is directed to pa" petitioner !%CIN1O M. 1%NFBIMIF the balance of P)(,888.88 &ith interest at the le'al rate fro, the date of the filin' of the co,plaint. In return, petitioner is ordered to Areconstruct sub?ect defective &ind,ill s"ste,, in accordance &ith the one0"ear 'uarant"A9viN)4Oand to co,plete the sa,e &ithin three 3=6 ,onths fro, the finalit" of this decision. SO ORDERED. Padilla, 3Chair,an6, Vitu', Eapunan, and er,osisi,a, !!., concur .

iN)O 1SN, 78 Dece,ber )*55, pp. )80)7. iiN7O E9h. A%A and iiiN=O Rollo, p. =4. ivN<O 'd., p. =+. vN(O /asilag v. Rodrigue0, 4* Phil. 7)+ 3)*=*6. viN4O %rt. )=+), Ne& Civil Code; 7S'S v. Court of Appeals, F.R. No. (7<+5, =8 October )*54, )<( SCR% =)); Serrano v. Court of Appeals, No.
M0<4=(+, * October )*5(, )=* SCR% )+*. E9h. A).A

viiN+O 1SN, )= %pril )*5*, pp. )50)*. viiiN5O 1SN, )= %pril )*5*, p. 77. ixN*O %rt. )7<8, Ne& Civil Code. xN)8O %rts. )7=4 and )7=+, Ne& Civil Code . xiN))O Na.pil v. Court of %ppeals"
Nos. M0<+5(), M0<+54=, M0<+5*4, = October )*54, )<< SCR% (*4; National Po&er Corporation v. Court of %ppeals" F.R. Nos. M0<+=+* and <+<5), )4 Ma" )*55, )4) SCR% ==<; National Po&er Corporation v. Court of %ppeals" F.R. Nos. )8=<<70<(, 7) Ma" )**=, 777 SCR% <)(.

xiiN)7O See Note )). xiiiN)=O Rollo, p. <<. xivN)<O Sec. =, par.
3"6, Rule )=), Revised Rules on Evidence.

xvN)(O %rt. ))4*, last par., Ne& Civil Code. xviN)4O See C% Decision,
p. +; Rollo, p. 7+.

Republic of the Philippines SUPREME COURT Manila 1 IRD DIVISION

G.R. No. 16)3)9

January 31, 2**6

RA/!O COMMUN!CAT!ONS O' T%E P%!#!PP!NES, !NC. =RCP!>,Petitioner, vs. A#'ONSO 0ERC%E", GRACE 0ERC%E"2!N'ANTE, MAR/ON!O !N'ANTE, "ENA!/A 0ERC%E"2CAT!&OG, AN/ 'ORTUNATO CAT!&OG, Respondents. /EC!S!ON CARP!O MORA#ES, J.:

On !anuar" 7), )**), Editha ebron Verche$ 3Editha6 &as confined at the Sorso'on Provincial ospital due to an ail,ent. On even date, her dau'hter Frace Verche$0Infante 3Frace6 i,,ediatel" hied to the Sorso'on Dranch of the Radio Co,,unications of the Philippines, Inc. 3RCPI6 &hose services she en'a'ed to send a tele'ra, to her sister Qenaida Verche$0Catibo' 3Qenaida6 &ho &as residin' at )5 Me'al St., FSIS Villa'e, Jue$on Cit" ) readin'2 ASend chec. ,one" Mo,," hospital.A -or RCPIRs services, Frace paid P)8.(87 for &hich she &as issued a receipt.= %s three da"s after RCPI &as en'a'ed to send the tele'ra, to Qenaida no response &as received fro, her, Frace sent a letter to Qenaida, this ti,e thru !RS Deliver" Service, repri,andin' her for not sendin' an" financial aid. I,,ediatel" after she received FraceRs letter, Qenaida, alon' &ith her husband -ortunato Catibo', left on !anuar" 74, )**) for Sorso'on. On her arrival at Sorso'on, she disclai,ed havin' received an" tele'ra,. In the ,eanti,e, Qenaida and her husband, to'ether &ith her ,other Editha left for Jue$on Cit" on !anuar" 75, )**) and brou'ht Editha to the Veterans Me,orial ospital in Jue$on Cit" &here she &as confined fro, !anuar" =8, )**) to March 7), )**). 1he tele'ra, &as finall" delivered to Qenaida 7( da"s later or on -ebruar" )(, )**). < On in#uir" fro, RCPI &h" it too. that lon' to deliver it, a ,essen'er of RCPI replied that he had nothin' to do &ith the deliver" thereof as it &as another ,essen'er &ho previousl" &as assi'ned to deliver the sa,e but the address could not be located, hence, the tele'ra, &as resent on -ebruar" 7, )**), and the second ,essen'er finall" found the address on -ebruar" )(, )**). EdithaRs husband %lfonso Verche$ 3Verche$6, b" letter of March (, )**), ( de,anded an e9planation fro, the ,ana'er of the Service Jualit" Control Depart,ent of the RCPI, Mrs. Morna D. -abian, &ho replied, b" letter of March )=, )**),4 as follo&s2 Our investi'ation on this ,atter disclosed that sub?ect tele'ra, &as dul" processed in accordance &ith our standard operatin' procedure. o&ever, deliver" &as not i,,ediatel" effected due to the occurrence of circu,stances &hich &ere be"ond the control and foresi'ht of RCPI. %,on' others, durin' the trans,ission process, the radio lin. connectin' the points of co,,unication involved encountered radio noise and interferences such that sub?ect tele'ra, did not initiall" re'istered 3sic6 in the receivin' teleprinter ,achine. Our internal ,essa'e ,onitorin' led to the discover" of the above. 1hus, a repeat trans,ission &as ,ade and subse#uent deliver" &as effected. 3Bnderscorin' supplied6 Verche$Rs la&"er thereupon &rote RCPIRs ,ana'er -abian, b" letter of !ul" 7=, )**), + re#uestin' for a conference on a specified date and ti,e, but no representative of RCPI sho&ed up at said date and ti,e. On %pril )+, )**7, Editha died. On Septe,ber 5, )**=, Verche$, alon' &ith his dau'hters Frace and Qenaida and their respective spouses, filed a co,plaint a'ainst RCPI before the Re'ional 1rial Court 3R1C6 of Sorso'on for da,a'es. In their co,plaint, the plaintiffs alle'ed that, inter alia, the dela" in deliverin' the tele'ra, contributed to the earl" de,ise of the late Editha to their da,a'e and pre?udice, 5 for &hich the" pra"ed for the a&ard of ,oral and e9e,plar" da,a'es * and attorne"Rs fees.)8 %fter its ,otion to dis,iss the co,plaint for i,proper venue)) &as denied)7 b" Dranch ( of the R1C of Sorso'on, RCPI filed its ans&er, alle'in' that e9cept &ith respect to Frace, )= the other plaintiffs

had no privit" of contract &ith it; an" dela" in the sendin' of the tele'ra, &as due to force )a8eure, Aspecificall", but not li,ited to, radio noise and interferences &hich adversel" affected the trans,ission and/or reception of the tele'raphic ,essa'eA;)< the clause in the 1ele'ra, 1rans,ission -or, si'ned b" Frace absolved it fro, liabilit" for an" da,a'e arisin' fro, the trans,ission other than the refund of tele'ra, tolls;)( it observed due dili'ence in the selection and supervision of its e,plo"ees; and at all events, an" cause of action had been barred b" laches.)4 1he trial court, observin' that Aalthou'h the dela"ed deliver" of the #uestioned tele'ra, &as not apparentl" the pro9i,ate cause of the death of Editha,A ruled out the presence of force )a8eure. Respectin' the clause in the tele'ra, relied upon b" RCPI, the trial court held that it parta.es of the nature of a contract of adhesion. -indin' that the nature of RCPIRs business obli'ated it to dispatch the tele'ra, to the addressee at the earliest possible ti,e but that it did not in vie& of the ne'li'ence of its e,plo"ees to repair its radio trans,itter and the conco,itant dela" in deliverin' the tele'ra, on ti,e, the trial court, upon the follo&in' provisions of the Civil Code, to &it2 %rticle 7)+4 S Choever b" act or o,ission causes da,a'e to another, there bein' at fault or ne'li'ence, is obli'ed to pa" for the da,a'e done. Such fault or ne'li'ence if there is no pre0 e9istin' contractual relation bet&een the parties, is called #uasi0delict and is 'overned b" the provisions of this Chapter. %rticle ))+= defines the fault of 3sic6 ne'li'ence of the obli'or as the Ao,ission of the dili'ence &hich is re#uired b" the nature of the obli'ation and corresponds &ith the circu,stances of the person, of the ti,e, or the place.A In the instant case, the obli'ation of the defendant to deliver the tele'ra, to the addressee is of an ur'ent nature. Its essence is the earl" deliver" of the tele'ra, to the concerned person. Let, due to the ne'li'ence of its e,plo"ees, the defendant failed to dischar'e of its obli'ation on ti,e ,a.in' it liable for da,a'es under %rticle 7)+4. 1he ne'li'ence on the part of the e,plo"ees 'ives rise to the presu,ption of ne'li'ence on the part of the e,plo"er.)+ 3Bnderscorin' supplied6, rendered ?ud',ent a'ainst RCPI. %ccordin'l", it disposed2 C ERE-ORE, in the li'ht of the fore'oin' pre,ises, ?ud',ent is hereb" rendered in favor of the plaintiffs and a'ainst the defendant, to &it2 Orderin' the defendant to pa" the plaintiffs the follo&in' a,ount2 ). 1he a,ount of One undred 1housand 3P)88,888.886 Pesos as ,oral da,a'es;

7. 1he a,ount of 1&ent" 1housand 3P78,888.886 Pesos as attorne"Rs fees; and =. 1o pa" the costs. SO ORDERED.)5 On appeal, the Court of %ppeals, b" Decision of -ebruar" 7+, 788<, )* affir,ed the trial courtRs decision.

ence, RCPIRs present petition for revie& on certiorari, it raisin' the follo&in' #uestions2 3)6 AIs the a&ard of ,oral da,a'es proper even if the trial court found that there &as no direct connection bet&een the in?ur" and the alle'ed ne'li'ent actsHA 78 and 376 A%re the stipulations in the T1ele'ra, 1rans,ission -or,,R in the nature Acontracts of adhesionA 3sic6H7) RCPI insists that respondents failed to prove an" causal connection bet&een its dela" in trans,ittin' the tele'ra, and EdithaRs death.77 RCPIRs stand fails. It bears notin' that its liabilit" is anchored on culpa contractual or breach of contract &ith re'ard to Frace, and on tort &ith re'ard to her co0plaintiffs0herein0co0respondents. %rticle ))+8 of the Civil Code provides2 1hose &ho in the perfor,ance of their obli'ations are 'uilt" of fraud, ne'li'ence, or dela", and those &ho in an" ,anner contravene the tenor thereof, are liable for da,a'es. 3Bnderscorin' supplied6 Passin' on this codal provision, this Court e9plained2 In culpa contractual 9 9 9 the ,ere proof of the e9istence of the contract and the failure of its co,pliance ?ustif", pri)a facie, a correspondin' ri'ht of relief. 1he la&, reco'ni$in' the obli'ator" force of contracts, &ill not per,it a part" to be set free fro, liabilit" for an" .ind of ,isperfor,ance of the contractual underta.in' or a contravention of the tenor thereof. % breach upon the contract confers upon the in?ured part" a valid cause for recoverin' that &hich ,a" have been lost or suffered. 1he re,ed" serves to preserve the interests of the pro,issee that ,a" include his ?,@A,5+a+8on 8n+,r,-+,? &hich is his interest in havin' the benefit of his bar'ain b" bein' put in as 'ood a position as he &ould have been in had the contract been perfor,ed, or his ?r,<8an5, 8n+,r,-+,? &hich is his interest in bein' rei,bursed for loss caused b" reliance on the contract b" bein' put in as 'ood a position as he &ould have been in had the contract not been ,ade; or his ?r,-+8+u+8on 8n+,r,-+,? &hich is his interest in havin' restored to hi, an" benefit that he has conferred on the other part". Indeed, a'ree,ents can acco,plish little, either for their ,a.ers or for societ", unless the" are ,ade the basis for action. 1he effect of ever" infraction is to create a ne& dut", that is, to ,a.e reco,pense to the one &ho has been in?ured b" the failure of another to observe his contractual obli'ation unless he can sho& e9tenuatin' circu,stances, li.e ArooB oB :8- ,@,r58-, oB $u, $8<89,n5, 9 9 9 or of the a++,n$an5, oB Bor+u8+ou- ,C,n+, to e9cuse hi, fro, his ensuin' liabilit".7= 3E,phasis and underscorin' supplied6 In the case at bar, RCPI bound itself to deliver the tele'ra, &ithin the shortest possible ti,e. It too. 7( da"s, ho&ever, for RCPI to deliver it. RCPI invo.es force )a8eure, specificall", the alle'ed radio noise and interferences &hich adversel" affected the trans,ission and/or reception of the tele'raphic ,essa'e. %dditionall", its ,essen'er clai,ed he could not locate the address of Qenaida and it &as onl" on the third atte,pt that he &as able to deliver the tele'ra,. -or the defense of force )a8eure to prosper, 9 9 9 it is necessar" that one has co,,itted no ne'li'ence or ,isconduct that ,a" have occasioned the loss. %n act of Fod cannot be invo.ed to protect a person &ho has failed to ta.e steps to forestall the possible adverse conse#uences of such a loss. OneRs ne'li'ence ,a" have concurred &ith an act of Fod in producin' da,a'e and in?ur" to another; nonetheless, sho&in' that the i,,ediate or pro9i,ate cause of the da,a'e or in?ur" &as a fortuitous event &ould not e9e,pt one fro, liabilit". 4:,n +:, ,BB,5+ 8- Boun$ +o ., Aar+<y +:, r,-u<+ oB a A,r-onDAar+858Aa+8on E F:,+:,r .y a5+8C, 8n+,rC,n+8on, n,9<,5+ or Ba8<ur, +o a5+ E +:, F:o<, o55urr,n5, 8- :u;an8G,$ an$ r,;oC,$ Bro; +:, ru<,- aAA<85a.<, +o a5+- oB Go$ .

9999 %rticle ))+< of the Civil Code states that no person shall be responsible for a fortuitous event that could not be foreseen or, thou'h foreseen, &as inevitable. !n o+:,r For$-, +:,r, ;u-+ ., an ,@5<u-8on oB :u;an 8n+,rC,n+8on Bro; +:, 5au-, oB 8nHury or <o-- .7< 3E,phasis and underscorin' supplied6 %ssu,in' arguendo that fortuitous circu,stances prevented RCPI fro, deliverin' the tele'ra, at the soonest possible ti,e, it should have at least infor,ed Frace of the non0trans,ission and the non0deliver" so that she could have ta.en steps to re,ed" the situation. Dut it did not. 1here lies the fault or ne'li'ence. In an earlier case also involvin' RCPI, this Court held2 Considerin' the public utilit" of RCPIRs business and its contractual obli'ation to trans,it ,essa'es, it should e9ercise due dili'ence to ascertain that ,essa'es are delivered to the persons at the 'iven address and should provide a s"ste, &hereb" in cases of undelivered ,essa'es the sender is 'iven notice of non0deliver". Messa'es sent b" 5a.<, or F8r,<,-- ;,anare usuall" ;or, 8;Aor+an+ and ur9,n+ than those &hich can &ait for the ,ail.7( 9999 People $,A,n$ on +,<,5o;;un85a+8on- 5o;Aan8,- 8n +8;,- oB $,,A ,;o+8ona< -+r,-- or Ar,--8n9 B8nan58a< n,,$-. Eno&in' that ,essa'es about the illnesses or deaths of loved ones, births or ,arria'es in a fa,il", i,portant business transactions, and notices of conferences or ,eetin's as in this case, are coursed throu'h the petitioner and si,ilar corporations, it is incu,bent upon the, to e9ercise a 'reater a,ount of care and concern than that sho&n in this case. Ever" reasonable effort to infor, senders of the non0deliver" of ,essa'es should be underta.en.74 3E,phasis and underscorin' supplied6 RCPI ar'ues, ho&ever, a'ainst the presence of ur'enc" in the deliver" of the tele'ra,, as &ell as the basis for the a&ard of ,oral da,a'es, thus27+ 1he re#uest to send 5:,5I as &ritten in the tele'raphic te9t ne'ates the e9istence of ur'enc" that private respondentsR alle'ations that Tti,e &as of the essenceR i,ports. % chec. dra&n a'ainst a Manila Dan. and trans,itted to Sorso'on, Sorso'on &ill have to be deposited in a ban. in Sorso'on and pass thru a ,ini,u, clearin' period of ( da"s before it ,a" be encashed or &ithdra&n. If the trans,ittal of the re#uested chec. to Sorso'on too. ) da" S private respondents could therefore still &ait for 4 da"s before the sa,e ,a" be &ithdra&n. Re#uestin' a chec. that &ould ta.e 4 da"s before it could be &ithdra&n therefore contradicts plaintiffRs clai, of ur'enc" or need.75 %t an" rate, an" sense of ur'enc" of the situation &as ,et &hen Frace Verche$ &as able to co,,unicate to Manila via a letter that she sent to the sa,e addressee in Manila thru !RS.7* 9999 %s far as the respondent courtRs a&ard for ,oral da,a'es is concerned, the sa,e has no basis &hatsoever since private respondent %lfonso Verche$ did not acco,pan" his late &ife &hen the latter &ent to Manila b" bus. e sta"ed behind in Sorso'on for al,ost ) &ee. before he proceeded to Manila. =8

Chen pressed on cross0e9a,ination, private respondent %lfonso Verche$ could not 'ive an" plausible reason as to the reason &h" he did not acco,pan" his ailin' &ife to Manila. =) 9999 It is also i,portant to consider in resolvin' private respondentsR clai, for ,oral da,a'es that private respondent Frace Verche$ did not acco,pan" her ailin' ,other to Manila.=7 9999 It is the co,,on reaction of a husband to be at his ailin' &ifeRs side as ,uch as possible. 1he fact that private respondent %lfonso Verche$ sta"ed behind in Sorso'on for al,ost ) &ee. convincin'l" de,onstrates that he hi,self .ne& that his &ife &as not in critical condition.== 3E,phasis and underscorin' supplied6 RCPIRs ar'u,ents fail. -or it is its breach of contract upon &hich its liabilit" is, it bears repeatin', anchored. Since RCPI breached its contract, the presu,ption is that it &as at fault or ne'li'ent. It, ho&ever, failed to rebut this presu,ption. -or breach of contract then, RCPI is liable to Frace for da,a'es. %nd for uasi-delict" RCPI is liable to FraceRs co0respondents follo&in' %rticle 7)+4 of the Civil Code &hich provides2 Choever b" act or o,ission causes da,a'e to another, there bein' fault or ne'li'ence, is obli'ed to pa" for the da,a'e done. Such fault or ne'li'ence, if there is no pre0e9istin' contractual relation bet&een the parties, is called a #uasi0delict and is 'overned b" the provisions of this Chapter. 3Bnderscorin' supplied6 RCPIRs liabilit" as an e,plo"er could of course be avoided if it could prove that it observed the dili'ence of a 'ood father of a fa,il" to prevent da,a'e. %rticle 7)58 of the Civil Code so provides2 1he obli'ation i,posed b" %rticle 7)+4 is de,andable not onl" for oneRs o&n acts or o,issions, but also for those of persons for &ho, one is responsible. 9999 1he o&ners and ,ana'ers of an establish,ent or enterprise are li.e&ise responsible for da,a'es caused b" their e,plo"ees in the service of the branches in &hich the latter are e,plo"ed or on the occasion of their functions. E,plo"ers shall be liable for the da,a'es caused b" their e,plo"ees and household helpers actin' &ithin the scope of their assi'ned tas.s, even thou'h the for,er are not en'a'ed in an" business or industr". 9999 1he responsibilit" treated of in this article shall cease &hen the persons herein ,entioned prove that the" observed all the dili'ence of a 'ood father of a fa,il" to prevent da,a'e. 3Bnderscorin' supplied6

RCPI failed, ho&ever, to prove that it observed all the dili'ence of a 'ood father of a fa,il" to prevent da,a'e. Respectin' the assailed a&ard of ,oral da,a'es, a deter,ination of the presence of the follo&in' re#uisites to ?ustif" the a&ard is in order2 9 9 9 firstly, evidence of bes,irched reputation or ph"sical, ,ental or ps"cholo'ical sufferin' sustained b" the clai,ant; secondly, a culpable act or o,ission factuall" established; t!irdly, proof that the &ron'ful act or o,ission of the defendant is the pro9i,ate cause of da,a'es sustained b" the clai,ant; and fourt!ly, that the case is predicated on an" of the instances e9pressed or envisioned b" %rticle 77)* and %rticle 7778 of the Civil Code. =< Respectin' the first re#uisite, evidence of sufferin' b" the plaintiffs0herein respondents &as correctl" appreciated b" the C% in this &ise2 1he failure of RCPI to deliver the tele'ra, containin' the ,essa'e of appellees on ti,e, disturbed their filial tran#uillit". -a,il" ,e,bers bla,ed each other for failin' to respond s&iftl" to an e,er'enc" that involved the life of the late Mrs. Verche$, &ho suffered fro, diabetes. =( %s reflected in the fore'oin' discussions, the second and third re#uisites are present. On the fourth re#uisite, %rticle 7778 of the Civil Code provides2 Cillful in?ur" to propert" ,a" be a le'al 'round for a&ardin' ,oral da,a'es if the court should find that, under the circu,stances, such da,a'es are ?ustl" due. T:, -a;, ru<, aAA<8,- +o .r,a5:,- oB 5on+ra5+ F:,r, +:, $,B,n$an+ a5+,$ Brau$u<,n+<y or 8n .a$ Ba8+:. 3E,phasis and underscorin' supplied6 %fter RCPIRs first atte,pt to deliver the tele'ra, failed, it did not infor, Frace of the non0deliver" thereof and &aited for )7 da"s before tr"in' to deliver it a'ain, .no&in' S as it should .no& S that ti,e is of the essence in the deliver" of tele'ra,s. Chen its second lon'0dela"ed atte,pt to deliver the tele'ra, a'ain failed, it, a'ain, &aited for another )7 da"s before ,a.in' a third atte,pt. Such nonchalance in perfor,in' its ur'ent obli'ation indicates 'ross ne'li'ence a,ountin' to bad faith. 1he fourth re#uisite is thus also present. In appl"in' the above0#uoted %rticle 7778, this Court has a&arded ,oral da,a'es in cases of breach of contract &here the defendant &as 'uilt" of 'ross ne'li'ence a,ountin' to bad faith, or in &anton disre'ard of his contractual obli'ation. =4 %s for RCPIRs tort0based liabilit", %rticle 77)* of the Civil Code provides2 Moral da,a'es ,a" be recovered in the follo&in' and ana<o9ou- 5a-,-2 9999 3)86 %cts and actions referred to in %rticles 7), 26, 7+, 75, 7*, =8, =7, =<, and =(. 3E,phasis supplied6 %rticle 74 of the Civil Code, in turn, provides2 Ever" person shall respect the di'nit", personalit", privac" and A,a5, oB ;8n$ of his nei'hbors and other persons. 1he follo&in' and si,ilar acts, thou'h the" ,a" not constitute a cri,inal offense, shall produce a cause of action for da,a'es, prevention, and other relief2

9999 376 Meddlin' &ith or $8-+ur.8n9 the private life or Ba;8<y r,<a+8on- of another. 3E,phasis supplied6 RCPIRs ne'li'ence in not pro,ptl" perfor,in' its obli'ation undoubtedl" disturbed the peace of ,ind not onl" of Frace but also her co0respondents. %s observed b" the appellate court, it disrupted the Afilial tran#uillit"A a,on' the, as the" bla,ed each other Afor failin' to respond s&iftl" to an e,er'enc".A 1he tortious acts and/or o,issions co,plained of in this case are, therefore, analo'ous to acts ,entioned under %rticle 74 of the Civil Code, &hich are a,on' the instances of #uasi0delict &hen courts ,a" a&ard ,oral da,a'es under %rticle 77)* of the Civil Code. In fine, the a&ard to the plaintiffs0herein respondents of ,oral da,a'es is in order, as is the a&ard of attorne"Rs fees, respondents havin' been co,pelled to liti'ate to protect their ri'hts. Clutchin' at stra&s, RCPI insists that the li,ited liabilit" clause in the A1ele'ra, 1rans,ission -or,A is not a contract of adhesion. 1hus it ar'ues2 Neither can the 1ele'ra, 1rans,ission -or, be considered a contract of adhesion as held b" the respondent court. 1he said stipulations &ere all &ritten in bold letters ri'ht in front of the 1ele'ra, 1rans,ission -or,. %s a ,atter of fact the" &ere beside the space &here the tele'ra, senders &rite their tele'raphic ,essa'es. It &ould have been different if the stipulations &ere &ritten at the bac. for surel" there is no &a" the sender &ill easil" notice the,. 1he fact that the stipulations &ere located in a particular space &here the" can easil" be seen, is sufficient notice to an" sender 3li.e Frace Verche$0Infante6 &here she could ,anifest her disapproval, leave the RCPI station and avail of the services of the other tele'ra, operators.=+ 3Bnderscorin' supplied6 RCPI ,isunderstands the nature of a contract of adhesion. Neither the readabilit" of the stipulations nor their ph"sical location in the contract deter,ines &hether it is one of adhesion. % contract of adhesion is defined as one in &hich one of the parties i,poses a read"0,ade for, of contract, &hich the other part" ,a" accept or re?ect, but &hich the latter cannot ,odif". One part" prepares the stipulation in the contract, &hile the other part" ,erel" affi9es his si'nature or his AadhesionA thereto, 98C8n9 no roo; Bor n,9o+8a+8on an$ $,Ar8C8n9 +:, <a++,r oB +:, oAAor+un8+y +o .ar9a8n on ,Jua< Boo+8n9.=5 3E,phasis and underscorin' supplied6 Chile a contract of adhesion is not necessaril" void and unenforceable, since it is construed strictl" a'ainst the part" &ho drafted it or 'ave rise to an" a,bi'uit" therein, it is stric.en do&n as void and unenforceable or subversive of public polic" &hen the &ea.er part" is i,posed upon in dealin' &ith the do,inant bar'ainin' part" and is reduced to the alternative of ta.in' it or leavin' it, co,pletel" deprived of the opportunit" to bar'ain on e#ual footin'. =* 1his Court holds that the Court of %ppealsR findin' that the partiesR contract is one of adhesion &hich is void is, 'iven the facts and circu,stances of the case, thus &ell0ta.en. 4%ERE'ORE, the petition is /EN!E/, and the challen'ed decision of the Court of %ppeals is A''!RME/. Costs a'ainst petitioner. SO OR/ERE/.

CONC%!TA CARP!O MORA#ES Associate %ustice

4E CONCUR3 #EONAR/O A. U!SUM&!NG Associate %ustice C!airperson ANTON!O T. CARP!O %ssociate !ustice /ANTE O. T!NGA %ssociate !ustice %11ES1%1ION I attest that the conclusions in the above Decision &ere reached in consultation before the case &as assi'ned to the &riter of the opinion of the CourtRs Division. #EONAR/O A. U!SUM&!NG %ssociate !ustice Chairperson CER1I-IC%1ION Pursuant to %rticle VIII, Section )= of the Constitution, and the Division Chair,anRs %ttestation, it is hereb" certified that the conclusions in the above Decision &ere reached in consultation before the case &as assi'ned to the &riter of the opinion of the Court. ARTEM!O 0. PANGAN!&AN Chief !ustice

'oo+no+,)

R1C records, p. 7. E9hibit A%,A R1C records, p. +; E9hibit AC,A records, p. *. E9hibit A%,A supra note 7. Supra note ). E9hibit AD,A R1C records, pp. )80)). E9hibit AE,A R1C records p. )7. E9hibit A-,A R1C records, p. )=. R1C records, p. <. 'd. 'd. at <0(. 'd. at )*0=8. 'd. at <7. 'd. at 4804).

<

)8

))

)7

)=

)<

'd. at 4). 'd. at 4)047. See also p. =8. 'd. at p. 47. 'd. at =*= 3citations o,itted6. 'd. at =*<. Penned b" !ustice Mariano C. Del Castillo, &ith the concurrence of !ustices Rodri'o V. Cosico and Vicente J. Ro9as. Rollo, p. *. 'bid. 'd. at )7. &75 'nsurance Corporation v. 7.P. Sar)iento (ruc+ing Corporation , <=( Phil. ===, =<)0=<7 378876 3citations o,itted6. ,inde# Resources -evelop)ent v. ,orillo , <75 Phil. *=<, *<<0*<( 378876 3citations o,itted6.

)(

)4

)+

)5

)*

78

7)

77

7=

7<

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Radio Co))unications of t!e P!ilippines" 'nc. v. Rodrigue0 , F.R. No. 5=+45, -ebruar" 75, )**8, )57 SCR% 5**, *8( 3citations o,itted6.
74

'd. at *85 3citations o,itted6. Rollo" pp. )70)(. 'd. at )=. 'd. 'd. at )< 3citations o,itted6. 'd. 3citations o,itted6. 'd. 'd. at )(.

7+

75

7*

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P!ilippine (elegrap! & (elep!one Corporation v. Court of Appeals , <=+ Phil. +4, 5< 378876; see also 7a)boa" Rodrigue0" Rivera & Co." 'nc. v. Court of Appeals, F.R. No. ))+<(4, Ma" 4, 788(, <(5 SCR% 45 3citations o,itted6.
=(

C% rollo, p. *+ 3citations o,itted6. See Sar)iento v. Sun-Cabrido, <<* Phil. )85, ))40))+ 3788=6. Rollo, p. ((. P!ilippine Co))ercial 'nternational Ban+ v. Court of Appeals , =7( Phil. (55, (*+ 3)**46.

=4

=+

=5

=*

Saludo" %r. v. Court of Appeals , F.R. No. *((=4, March 7=, )**7, 78+ SCR% <*5, (75; P!ilippine Co))ercial 'nternational Ban+ v. Court of Appeals, supra; Sweet Lines" 'nc. v. (eves, F.R. No. M0=++(8, Ma" )*, )*+5, 5= SCR% =4) 3citations o,itted6.

Republic of the Philippines SUPREME COURT Manila T%!R/ /!0!S!ON

G.R. No. 159617

Au9u-+ 8, 2**7

RO&ERTO C. S!CAM an$ AGENC!A $, R.C. S!CAM, !NC., petitioners, vs. #U#U 0. JORGE an$ CESAR JORGE, respondents. /EC!S!ON AUSTR!A2MART!NE", J.3 Defore us is a Petition for Revie& on Certiorari filed b" Roberto C. Sica,, !r. 3petitioner Sica,6 and Agencia de R.C. Sica,, Inc. 3petitioner corporation6 see.in' to annul the Decision) of the Court of %ppeals dated March =), 788=, and its Resolution 7 dated %u'ust 5, 788=, in C% F.R. CV No. (44==. It appears that on different dates fro, Septe,ber to October )*5+, Mulu V. !or'e 3respondent Mulu6 pa&ned several pieces of ?e&elr" &ith Agencia de R. C. Sica, located at No. )+ %'uirre %ve., D- o,es Para>a#ue, Metro Manila, to secure a loan in the total a,ount of P(*,(88.88. On October )*, )*5+, t&o ar,ed ,en entered the pa&nshop and too. a&a" &hatever cash and ?e&elr" &ere found inside the pa&nshop vault. 1he incident &as entered in the police blotter of the Southern Police District, Para>a#ue Police Station as follo&s2 Investi'ation sho&s that at above 1DPO, &hile victi,s &ere inside the office, t&o 376 ,ale unidentified persons entered into the said office &ith 'uns dra&n. Suspects3sic6 3)6 &ent strai'ht inside and po.ed his 'un to&ard Ro,eo Sica, and thereb" tied hi, &ith an electric &ire &hile suspects 3sic6 376 po.ed his 'un to&ard Divina Mata and Isabelita Rodri'ue$ and ordered the, to la" 3sic6 face flat on the floor. Suspects as.ed forcibl" the case and assorted pa&ned ?e&elries ite,s ,entioned above. Suspects after ta.in' the ,one" and ?e&elries fled on board a Marson 1o"ota unidentified plate nu,ber.= Petitioner Sica, sent respondent Mulu a letter dated October )*, )*5+ infor,in' her of the loss of her ?e&elr" due to the robber" incident in the pa&nshop. On Nove,ber 7,

)*5+, respondent Mulu then &rote a letter< to petitioner Sica, e9pressin' disbelief statin' that &hen the robber" happened, all ?e&elr" pa&ned &ere deposited &ith -ar East Dan. near the pa&nshop since it had been the practice that before the" could &ithdra&, advance notice ,ust be 'iven to the pa&nshop so it could &ithdra& the ?e&elr" fro, the ban.. Respondent Mulu then re#uested petitioner Sica, to prepare the pa&ned ?e&elr" for &ithdra&al on Nove,ber 4, )*5+ but petitioner Sica, failed to return the ?e&elr". On Septe,ber 75, )*55, respondent Mulu ?oined b" her husband, Cesar !or'e, filed a co,plaint a'ainst petitioner Sica, &ith the Re'ional 1rial Court of Ma.ati see.in' inde,nification for the loss of pa&ned ?e&elr" and pa",ent of actual, ,oral and e9e,plar" da,a'es as &ell as attorne":s fees. 1he case &as doc.eted as Civil Case No. 55078=(. Petitioner Sica, filed his %ns&er contendin' that he is not the real part"0in0interest as the pa&nshop &as incorporated on %pril 78, )*5+ and .no&n as Agencia de R.C. Sica,, Inc; that petitioner corporation had e9ercised due care and dili'ence in the safe.eepin' of the articles pled'ed &ith it and could not be ,ade liable for an event that is fortuitous. Respondents subse#uentl" filed an %,ended Co,plaint to include petitioner corporation. 1hereafter, petitioner Sica, filed a Motion to Dis,iss as far as he is concerned considerin' that he is not the real part"0in0interest. Respondents opposed the sa,e. 1he R1C denied the ,otion in an Order dated Nove,ber 5, )*5*. ( %fter trial on the ,erits, the R1C rendered its Decision 4 dated !anuar" )7, )**=, dis,issin' respondentsR co,plaint as &ell as petitionersR counterclai,. 1he R1C held that petitioner Sica, could not be ,ade personall" liable for a clai, arisin' out of a corporate transaction; that in the %,ended Co,plaint of respondents, the" asserted that Aplaintiff pa&ned assorted ?e&elries in defendants: pa&nshopA; and that as a conse#uence of the separate ?uridical personalit" of a corporation, the corporate debt or credit is not the debt or credit of a stoc.holder. 1he R1C further ruled that petitioner corporation could not be held liable for the loss of the pa&ned ?e&elr" since it had not been rebutted b" respondents that the loss of the pled'ed pieces of ?e&elr" in the possession of the corporation &as occasioned b" ar,ed robber"; that robber" is a fortuitous event &hich e9e,pts the victi, fro, liabilit" for the loss, citin' the case of Austria v. Court of Appeals;+ and that the partiesR transaction &as that of a pled'or and pled'ee and under %rt. ))+< of the Civil Code, the pa&nshop as a pled'ee is not responsible for those events &hich could not be foreseen. Respondents appealed the R1C Decision to the C%. In a Decision dated March =), 788=, the C% reversed the R1C, the dispositive portion of &hich reads as follo&s2 C ERE-ORE, pre,ises considered, the instant %ppeal is FR%N1ED, and the Decision dated !anuar" )7, )**=,of the Re'ional 1rial Court of Ma.ati, Dranch 47, is hereb" REVERSED and SE1 %SIDE, orderin' the appellees to pa" appellants the actual value of the lost ?e&elr" a,ountin' to P7+7,888.88, and attorne": fees of P7+,788.88.5 In findin' petitioner Sica, liable to'ether &ith petitioner corporation, the C% applied the doctrine of piercin' the veil of corporate entit" reasonin' that respondents &ere ,isled

into thin.in' that the" &ere dealin' &ith the pa&nshop o&ned b" petitioner Sica, as all the pa&nshop tic.ets issued to the, bear the &ords A Agencia de R.C. Sica,A; and that there &as no indication on the pa&nshop tic.ets that it &as the petitioner corporation that o&ned the pa&nshop &hich e9plained &h" respondents had to a,end their co,plaint i,pleadin' petitioner corporation. 1he C% further held that the correspondin' dili'ence re#uired of a pa&nshop is that it should ta.e steps to secure and protect the pled'ed ite,s and should ta.e steps to insure itself a'ainst the loss of articles &hich are entrusted to its custod" as it derives earnin's fro, the pa&nshop trade &hich petitioners failed to do; that Austria is not applicable to this case since the robber" incident happened in )*4) &hen the cri,inalit" had not as "et reached the levels attained in the present da"; that the" are at least 'uilt" of contributor" ne'li'ence and should be held liable for the loss of ?e&elries; and that robberies and hold0ups are foreseeable ris.s in that those en'a'ed in the pa&nshop business are e9pected to foresee. 1he C% concluded that both petitioners should be ?ointl" and severall" held liable to respondents for the loss of the pa&ned ?e&elr". PetitionersR ,otion for reconsideration &as denied in a Resolution dated %u'ust 5, 788=. ence, the instant petition for revie& &ith the follo&in' assi'n,ent of errors2 1 E COBR1 O- %PPE%MS ERRED %ND C EN I1 DID, I1 OPENED I1SEM- 1O REVERS%M, C EN I1 %DOP1ED BNCRI1IC%MML 3IN -%C1 I1 REPRODBCED %S I1S OCN CI1 OB1 IN 1 E ME%N1IME %CENOCMEDFINF I16 C %1 1 E RESPONDEN1S %RFBED IN 1 EIR DRIE-, C IC %RFBMEN1 C%S P%MP%DML BNSBS1%IN%DME. 1 E COBR1 O- %PPE%MS ERRED, %ND C EN I1 DID, I1 OPENED I1SEM- 1O REVERS%M DL 1 IS ONOR%DME COBR1, C EN I1 %F%IN %DOP1ED BNCRI1IC%MML 3DB1 CI1 OB1 %CENOCMEDFINF I16 1 E SBDMISSIONS O- 1 E RESPONDEN1S IN 1 EIR DRIE- CI1 OB1 %DDINF %NL1 INF MORE 1 ERE1O DESPI1E 1 E -%C1 1 %1 1 E S%ID %RFBMEN1 O- 1 E RESPONDEN1S COBMD NO1 %VE DEEN SBS1%INED IN VIEC O- BNREDB11ED EVIDENCE ON RECORD. * %nent the first assi'ned error, petitioners point out that the C%Rs findin' that petitioner Sica, is personall" liable for the loss of the pa&ned ?e&elries is Aa virtual and uncritical reproduction of the ar'u,ents set out on pp. (04 of the %ppellantsR brief.A )8 Petitioners ar'ue that the reproduced ar'u,ents of respondents in their %ppellantsR Drief suffer fro, infir,ities, as follo&s2 3)6 Respondents conclusivel" asserted in para'raph 7 of their %,ended Co,plaint that %'encia de R.C. Sica,, Inc. is the present o&ner of %'encia de R.C. Sica, Pa&nshop, and therefore, the C% cannot rule a'ainst said conclusive assertion of respondents; 376 1he issue resolved a'ainst petitioner Sica, &as not a,on' those raised and liti'ated in the trial court; and

3=6 D" reason of the above infir,ities, it &as error for the C% to have pierced the corporate veil since a corporation has a personalit" distinct and separate fro, its individual stoc.holders or ,e,bers. %nent the second error, petitioners point out that the C% findin' on their ne'li'ence is li.e&ise an unedited reproduction of respondentsR brief &hich had the follo&in' defects2 3)6 1here &ere unrebutted evidence on record that petitioners had observed the dili'ence re#uired of the,, i.e, the" &anted to open a vault &ith a nearb" ban. for purposes of safe.eepin' the pa&ned articles but &as discoura'ed b" the Central Dan. 3CD6 since CD rules provide that the" can onl" store the pa&ned articles in a vault inside the pa&nshop pre,ises and no other place; 376 Petitioners &ere ad?ud'ed ne'li'ent as the" did not ta.e insurance a'ainst the loss of the pled'ed ?el&eries, but it is ?udicial notice that due to hi'h incidence of cri,es, insurance co,panies refused to cover pa&nshops and ban.s because of hi'h probabilit" of losses due to robberies; 3=6 In 6ernande0 v. C!air)an" Co))ission on Audit 3)+* SCR% =*, <(0<46, the victi, of robber" &as e9onerated fro, liabilit" for the su, of ,one" belon'in' to others and lost b" hi, to robbers. Respondents filed their Co,,ent and petitioners filed their Repl" thereto. 1he parties subse#uentl" sub,itted their respective Me,oranda. Ce find no ,erit in the petition. 1o be'in &ith, althou'h it is true that indeed the C% findin's &ere e9act reproductions of the ar'u,ents raised in respondentsR 3appellantsR6 brief filed &ith the C%, &e find the sa,e to be not fatall" infir,ed. Bpon e9a,ination of the Decision, &e find that it e9pressed clearl" and distinctl" the facts and the la& on &hich it is based as re#uired b" Section 5, %rticle VIII of the Constitution. 1he discretion to decide a case one &a" or another is broad enou'h to ?ustif" the adoption of the ar'u,ents put forth b" one of the parties, as lon' as these are le'all" tenable and supported b" la& and the facts on records.)) Our ?urisdiction under Rule <( of the Rules of Court is li,ited to the revie& of errors of la& co,,itted b" the appellate court. Fenerall", the findin's of fact of the appellate court are dee,ed conclusive and &e are not dut"0bound to anal"$e and calibrate all over a'ain the evidence adduced b" the parties in the court a uo.)7 1his rule, ho&ever, is not &ithout e9ceptions, such as &here the factual findin's of the Court of %ppeals and the trial court are conflictin' or contradictor" )= as is obtainin' in the instant case. o&ever, after a careful e9a,ination of the records, &e find no ?ustification to absolve petitioner Sica, fro, liabilit". 1he C% correctl" pierced the veil of the corporate fiction and ad?ud'ed petitioner Sica, liable to'ether &ith petitioner corporation. 1he rule is that the veil of corporate fiction ,a" be pierced &hen ,ade as a shield to perpetrate fraud and/or confuse le'iti,ate issues. )< 1he theor" of corporate entit" &as not ,eant to pro,ote unfair ob?ectives or

other&ise to shield the,.)( Notabl", the evidence on record sho&s that at the ti,e respondent Mulu pa&ned her ?e&elr", the pa&nshop &as o&ned b" petitioner Sica, hi,self. %s correctl" observed b" the C%, in all the pa&nshop receipts issued to respondent Mulu in Septe,ber )*5+, all bear the &ords AAgencia de R. C. Sica,,A not&ithstandin' that the pa&nshop &as alle'edl" incorporated in %pril )*5+. 1he receipts issued after such alle'ed incorporation &ere still in the na,e of AAgencia de R. C. Sica,,A thus inevitabl" ,isleadin', or at the ver" least, creatin' the &ron' i,pression to respondents and the public as &ell, that the pa&nshop &as o&ned solel" b" petitioner Sica, and not b" a corporation. Even petitionersR counsel, %tt". Marcial 1. Dal'os, in his letter )4 dated October )(, )*5+ addressed to the Central Dan., e9pressl" referred to petitioner Sica, as the proprietor of the pa&nshop not&ithstandin' the alle'ed incorporation in %pril )*5+. Ce also find no ,erit in petitioners: ar'u,ent that since respondents had alle'ed in their %,ended Co,plaint that petitioner corporation is the present o&ner of the pa&nshop, the C% is bound to decide the case on that basis. Section < Rule )7* of the Rules of Court provides that an ad,ission, verbal or &ritten, ,ade b" a part" in the course of the proceedin's in the sa,e case, does not re#uire proof. 1he ad,ission ,a" be contradicted onl" b" sho&in' that it &as ,ade throu'h palpable ,ista.e or that no such ad,ission &as ,ade. 1hus, the 'eneral rule that a ?udicial ad,ission is conclusive upon the part" ,a.in' it and does not re#uire proof, ad,its of t&o e9ceptions, to &it2 3)6 &hen it is sho&n that such ad,ission &as ,ade throu'h palpable ,ista.e, and 376 &hen it is sho&n that no such ad,ission &as in fact ,ade. T:, <a++,r ,@5,A+8on a<<oF- on, +o 5on+ra$85+ an a$;8--8on .y $,ny8n9 +:a+ :, ;a$, -u5: an a$;8--8on. )+ 1he Co,,ittee on the Revision of the Rules of Court e9plained the second e9ception in this &ise2 9 9 9 if a part" invo.es an Aad,issionA b" an adverse part", but cites the ad,ission Aout of conte9t,A then the one ,a.in' the Aad,issionA ,a" sho& that he ,ade no AsuchA ad,ission, or +:a+ :8- a$;8--8on Fa- +aI,n ou+ oB 5on+,@+. @ @ @ +:a+ +:, Aar+y 5an a<-o -:oF +:a+ :, ;a$, no ?-u5: a$;8--8on?, i.e., no+ 8n +:, -,n-, 8n F:85: +:, a$;8--8on 8- ;a$, +o aAA,ar. 1hat is the reason for the ,odifier AsuchA because if the rule si,pl" states that the ad,ission ,a" be contradicted b" sho&in' that Ano ad,ission &as ,ade,A the rule &ould not reall" be providin' for a contradiction of the ad,ission but ?ust a denial.)5 3E,phasis supplied6. Chile it is true that respondents alle'ed in their %,ended Co,plaint that petitioner corporation is the present o&ner of the pa&nshop, the" did so onl" because petitioner Sica, alle'ed in his %ns&er to the ori'inal co,plaint filed a'ainst hi, that he &as not the real part"0in0interest as the pa&nshop &as incorporated in %pril )*5+. Moreover, a readin' of the %,ended Co,plaint in its entiret" sho&s that respondents referred to both

petitioner Sica, and petitioner corporation &here the" 3respondents6 pa&ned their assorted pieces of ?e&elr" and ascribed to both the failure to observe due dili'ence co,,ensurate &ith the business &hich resulted in the loss of their pa&ned ?e&elr". Mar.edl", respondents, in their Opposition to petitionersR Motion to Dis,iss %,ended Co,plaint, insofar as petitioner Sica, is concerned, averred as follo&s2 Roberto C. Sica, &as na,ed the defendant in the ori'inal co,plaint because the pa&nshop tic.ets involved in this case did not sho& that the R.C. Sica, Pa&nshop &as a corporation. In para'raph ) of his %ns&er, he ad,itted the alle'ations in para'raph ) and 7 of the Co,plaint. e ,erel" added Athat defendant is not no& the real part" in interest in this case.A It &as defendant Sica,:s o,ission to correct the pa&nshop tic.ets used in the sub?ect transactions in this case &hich &as the cause of the instant action. e cannot no& as. for the dis,issal of the co,plaint a'ainst hi, si,pl" on the ,ere alle'ation that his pa&nshop business is no& incorporated. It is a ,atter of defense, the ,erit of &hich can onl" be reached after consideration of the evidence to be presented in due course. )* Bn,ista.abl", the alle'ed ad,ission ,ade in respondents: %,ended Co,plaint &as ta.en Aout of conte9tA b" petitioner Sica, to suit his o&n purpose. Ineluctabl", the fact that petitioner Sica, continued to issue pa&nshop receipts under his na,e and not under the corporation:s na,e ,ilitates for the piercin' of the corporate veil. Ce li.e&ise find no ,erit in petitioners: contention that the C% erred in piercin' the veil of corporate fiction of petitioner corporation, as it &as not an issue raised and liti'ated before the R1C. Petitioner Sica, had alle'ed in his %ns&er filed &ith the trial court that he &as not the real part"0in0interest because since %pril 78, )*5+, the pa&nshop business initiated b" hi, &as incorporated and .no&n as Agencia de R.C. Sica,. In the pre0trial brief filed b" petitioner Sica,, he sub,itted that as far as he &as concerned, the basic issue &as &hether he is the real part" in interest a'ainst &ho, the co,plaint should be directed. 78 In fact, he subse#uentl" ,oved for the dis,issal of the co,plaint as to hi, but &as not favorabl" acted upon b" the trial court. Moreover, the issue &as s#uarel" passed upon, althou'h erroneousl", b" the trial court in its Decision in this ,anner2 9 9 9 1he defendant Roberto Sica,, !r li.e&ise denies liabilit" as far as he is concerned for the reason that he cannot be ,ade personall" liable for a clai, arisin' fro, a corporate transaction. 1his Court sustains the contention of the defendant Roberto C. Sica,, !r. 1he a,ended co,plaint itself asserts that Aplaintiff pa&ned assorted ?e&elries in defendant:s pa&nshop.A It has been held that A as a conse#uence of the separate ?uridical personalit" of a corporation, the corporate debt or credit is not the debt or credit of the stoc.holder, nor is the stoc.holder:s debt or credit that of a corporation.7) Clearl", in vie& of the alle'ed incorporation of the pa&nshop, the issue of &hether petitioner Sica, is personall" liable is ine9tricabl" connected &ith the deter,ination of

the #uestion &hether the doctrine of piercin' the corporate veil should or should not appl" to the case. 1he ne9t #uestion is &hether petitioners are liable for the loss of the pa&ned articles in their possession. Petitioners insist that the" are not liable since robber" is a fortuitous event and the" are not ne'li'ent at all. Ce are not persuaded. %rticle ))+< of the Civil Code provides2 %rt. ))+<. E9cept in cases e9pressl" specified b" the la&, or &hen it is other&ise declared b" stipulation, or &hen the nature of the obli'ation re#uires the assu,ption of ris., no person shall be responsible for those events &hich could not be foreseen or &hich, thou'h foreseen, &ere inevitable. -ortuitous events b" definition are e9traordinar" events not foreseeable or avoidable. It is therefore, not enou'h that the event should not have been foreseen or anticipated, as is co,,onl" believed but it ,ust be one i,possible to foresee or to avoid. 1he ,ere difficult" to foresee the happenin' is not i,possibilit" to foresee the sa,e. 77 1o constitute a fortuitous event, the follo&in' ele,ents ,ust concur2 3a6 the cause of the unforeseen and une9pected occurrence or of the failure of the debtor to co,pl" &ith obli'ations ,ust be independent of hu,an &ill; 3b6 it ,ust be i,possible to foresee the event that constitutes the caso fortuito or, if it can be foreseen, it ,ust be i,possible to avoid; 3c6 the occurrence ,ust be such as to render it i,possible for the debtor to fulfill obli'ations in a nor,al ,anner; and, 3d6 the obli'or ,ust be free fro, an" participation in the a''ravation of the in?ur" or loss. 7= 1he burden of provin' that the loss &as due to a fortuitous event rests on hi, &ho invo.es it.7< %nd, in order for a fortuitous event to e9e,pt one fro, liabilit", it is necessar" that one has co,,itted no ne'li'ence or ,isconduct that ,a" have occasioned the loss. 7( It has been held that an act of Fod cannot be invo.ed to protect a person &ho has failed to ta.e steps to forestall the possible adverse conse#uences of such a loss. One:s ne'li'ence ,a" have concurred &ith an act of Fod in producin' da,a'e and in?ur" to another; nonetheless, sho&in' that the i,,ediate or pro9i,ate cause of the da,a'e or in?ur" &as a fortuitous event &ould not e9e,pt one fro, liabilit". Chen the effect is found to be partl" the result of a person:s participation 00 &hether b" active intervention, ne'lect or failure to act 00 the &hole occurrence is hu,ani$ed and re,oved fro, the rules applicable to acts of Fod. 74 Petitioner Sica, had testified that there &as a securit" 'uard in their pa&nshop at the ti,e of the robber". e li.e&ise testified that &hen he started the pa&nshop business in )*5=, he thou'ht of openin' a vault &ith the nearb" ban. for the purpose of safe.eepin' the valuables but &as discoura'ed b" the Central Dan. since pa&ned articles should onl" be stored in a vault inside the pa&nshop. 1he ver" ,easures &hich petitioners had

alle'edl" adopted sho& that to the, the possibilit" of robber" &as not onl" foreseeable, but actuall" foreseen and anticipated. Petitioner Sica,Rs testi,on", in effect, contradicts petitionersR defense of fortuitous event. Moreover, petitioners failed to sho& that the" &ere free fro, an" ne'li'ence b" &hich the loss of the pa&ned ?e&elr" ,a" have been occasioned. Robber" per se, ?ust li.e carnappin', is not a fortuitous event. It does not foreclose the possibilit" of ne'li'ence on the part of herein petitioners. In Co v. Court of Appeals,7+ the Court held2 It is not a defense for a repair shop of ,otor vehicles to escape liabilit" si,pl" because the da,a'e or loss of a thin' la&full" placed in its possession &as due to carnappin'. Carnappin' per se cannot be considered as a fortuitous event. T:, Ba5+ +:a+ a +:8n9 Fa- un<aFBu<<y an$ Bor5,Bu<<y +aI,n Bro; ano+:,rKr89:+Bu< Ao--,--8on, a- 8n 5a-,- oB 5arnaAA8n9, $o,- no+ au+o;a+85a<<y 98C, r8-, +o a Bor+u8+ou- ,C,n+. To ., 5on-8$,r,$ a- -u5:, 5arnaAA8n9 ,n+a8<- ;or, +:an +:, ;,r, Bor5,Bu< +aI8n9 oB ano+:,rK- AroA,r+y. !+ ;u-+ ., AroC,$ an$ ,-+a.<8-:,$ +:a+ +:, ,C,n+ Fa- an a5+ oB Go$ or Fa- $on, -o<,<y .y +:8r$ Aar+8,- an$ +:a+ n,8+:,r +:, 5<a8;an+ nor +:, A,r-on a<<,9,$ +o ., n,9<89,n+ :a- any Aar+858Aa+8on. !n a55or$an5, F8+: +:, Ru<,- oB EC8$,n5,, +:, .ur$,n oB AroC8n9 +:a+ +:, <o-- Fa- $u, +o a Bor+u8+ou- ,C,n+ r,-+- on :8; F:o 8nCoI,- 8+ L F:85: 8n +:8- 5a-, 8- +:, Ar8Ca+, r,-Aon$,n+. o&ever, other than the police report of the alle'ed carnappin' incident, no other evidence &as presented b" private respondent to the effect that the incident &as not due to its fault. % police report of an alle'ed cri,e, to &hich onl" private respondent is priv", does not suffice to establish the carnappin'. Neither does it prove that there &as no fault on the part of private respondent not&ithstandin' the parties: a'ree,ent at the pre0trial that the car &as carnapped. Carnappin' does not foreclose the possibilit" of fault or ne'li'ence on the part of private respondent.75 !ust li.e in Co, petitioners ,erel" presented the police report of the Para>a#ue Police Station on the robber" co,,itted based on the report of petitioners: e,plo"ees &hich is not sufficient to establish robber". Such report also does not prove that petitioners &ere not at fault. On the contrar", b" the ver" evidence of petitioners, the C% did not err in findin' that petitioners are 'uilt" of concurrent or contributor" ne'li'ence as provided in %rticle ))+8 of the Civil Code, to &it2 %rt. ))+8. 1hose &ho in the perfor,ance of their obli'ations are 'uilt" of fraud, ne'li'ence, or dela", and those &ho in an" ,anner contravene the tenor thereof, are liable for da,a'es.7* %rticle 7)7= of the Civil Code provides that &ith re'ard to pa&nshops and other establish,ents &hich are en'a'ed in ,a.in' loans secured b" pled'es, the special la&s and re'ulations concernin' the, shall be observed, and subsidiaril", the provisions on pled'e, ,ort'a'e and antichresis.

1he provision on pled'e, particularl" %rticle 78** of the Civil Code, provides that the creditor shall ta.e care of the thin' pled'ed &ith the dili'ence of a 'ood father of a fa,il". 1his ,eans that petitioners ,ust ta.e care of the pa&ns the &a" a prudent person &ould as to his o&n propert". In this connection, %rticle ))+= of the Civil Code further provides2 %rt. ))+=. 1he fault or ne'li'ence of the obli'or consists in the o,ission of that dili'ence &hich is re#uired b" the nature of the obli'ation and corresponds &ith the circu,stances of the persons, of ti,e and of the place. Chen ne'li'ence sho&s bad faith, the provisions of %rticles ))+) and 778), para'raph 7 shall appl". If the la& or contract does not state the dili'ence &hich is to be observed in the perfor,ance, that &hich is e9pected of a 'ood father of a fa,il" shall be re#uired. Ce e9pounded in Cru0 v. 7angan=8 that ne'li'ence is the o,ission to do so,ethin' &hich a reasonable ,an, 'uided b" those considerations &hich ordinaril" re'ulate the conduct of hu,an affairs, &ould do; or the doin' of so,ethin' &hich a prudent and reasonable ,an &ould not do.=) It is &ant of care re#uired b" the circu,stances. % revie& of the records clearl" sho&s that petitioners failed to e9ercise reasonable care and caution that an ordinaril" prudent person &ould have used in the sa,e situation. Petitioners &ere 'uilt" of ne'li'ence in the operation of their pa&nshop business. Petitioner Sica, testified, thus2 Court2 J. Do "ou have securit" 'uards in "our pa&nshopH %. Les, "our honor. J. 1hen ho& co,e that the robbers &ere able to enter the pre,ises &hen accordin' to "ou there &as a securit" 'uardH %. Sir, if these robbers can rob a ban., ho& ,uch ,ore a pa&nshop. J. I a, as.in' "ou ho& &ere the robbers able to enter despite the fact that there &as a securit" 'uardH %. %t the ti,e of the incident &hich happened about )288 and 7288 o:cloc. in the afternoon and it happened on a Saturda" and ever"thin' &as #uiet in the area Do,es Para>a#ue the" pretended to pa&n an article in the pa&nshop, so one of ," e,plo"ees allo&ed hi, to co,e in and it &as onl" &hen it &as announced that it &as a hold up. J. Did "ou co,e to .no& ho& the vault &as openedH %. Chen the pa&nshop is official 3sic6 open "our honor the pa&nshop is partl" open. 1he co,bination is off.

J. No one open 3sic6 the vault for the robbersH %. No one "our honor it &as open at the ti,e of the robber". J. It is clear no& that at the ti,e of the robber" the vault &as open the reason &h" the robbers &ere able to 'et all the ite,s pa&ned to "ou inside the vault. %. Les sir.=7 revealin' that there &ere no securit" ,easures adopted b" petitioners in the operation of the pa&nshop. Evidentl", no sufficient precaution and vi'ilance &ere adopted b" petitioners to protect the pa&nshop fro, unla&ful intrusion. 1here &as no clear sho&in' that there &as an" securit" 'uard at all. Or if there &as one, that he had sufficient trainin' in securin' a pa&nshop. -urther, there is no sho&in' that the alle'ed securit" 'uard e9ercised all that &as necessar" to prevent an" unto&ard incident or to ensure that no suspicious individuals &ere allo&ed to enter the pre,ises. In fact, it is even doubtful that there &as a securit" 'uard, since it is #uite i,possible that he &ould not have noticed that the robbers &ere ar,ed &ith caliber .<( pistols each, &hich &ere alle'edl" po.ed at the e,plo"ees.== Si'nificantl", the alle'ed securit" 'uard &as not presented at all to corroborate petitioner Sica,:s clai,; not one of petitioners: e,plo"ees &ho &ere present durin' the robber" incident testified in court. -urther,ore, petitioner Sica,:s ad,ission that the vault &as open at the ti,e of robber" is clearl" a proof of petitioners: failure to observe the care, precaution and vi'ilance that the circu,stances ?ustl" de,anded. Petitioner Sica, testified that once the pa&nshop &as open, the co,bination &as alread" off. Considerin' petitioner Sica,:s testi,on" that the robber" too. place on a Saturda" afternoon and the area in D- o,es Para>a#ue at that ti,e &as #uiet, there &as ,ore reason for petitioners to have e9ercised reasonable foresi'ht and dili'ence in protectin' the pa&ned ?e&elries. Instead of ta.in' the precaution to protect the,, the" let open the vault, providin' no difficult" for the robbers to cart a&a" the pa&ned articles. Ce, ho&ever, do not a'ree &ith the C% &hen it found petitioners ne'li'ent for not ta.in' steps to insure the,selves a'ainst loss of the pa&ned ?e&elries. Bnder Section )+ of Central Dan. Circular No. =+<, Rules and Re'ulations for Pa&nshops, &hich too. effect on !ul" )=, )*+=, and &hich &as issued pursuant to Presidential Decree No. ))<, Pa&nshop Re'ulation %ct, it is provided that pa&ns pled'ed ,ust be insured, to &it2 Sec. )+. Insurance of Office Duildin' and Pa&ns0 1he place of business of a pa&nshop and the pa&ns pled'ed to it ,ust be insured a9a8n-+ B8r, an$ a9a8n-+ .ur9<ary as &ell as for the latter3sic6, b" an insurance co,pan" accredited b" the Insurance Co,,issioner. o&ever, this Section &as subse#uentl" a,ended b" CD Circular No. +4< &hich too. effect on October ), )*58, to &it2 Sec. )+ Insurance of Office Duildin' and Pa&ns S 1he office buildin'/pre,ises and pa&ns of a pa&nshop ,ust be insured a9a8n-+ B8r,. 3e,phasis supplied6.

&here the re#uire,ent that insurance a'ainst bur'lar" &as deleted. Obviousl", the Central Dan. considered it not feasible to re#uire insurance of pa&ned articles a'ainst bur'lar". 1he robber" in the pa&nshop happened in )*5+, and considerin' the above0#uoted a,end,ent, there is no statutor" dut" i,posed on petitioners to insure the pa&ned ?e&elr" in &hich case it &as error for the C% to consider it as a factor in concludin' that petitioners &ere ne'li'ent. Nevertheless, the preponderance of evidence sho&s that petitioners failed to e9ercise the dili'ence re#uired of the, under the Civil Code. 1he dili'ence &ith &hich the la& re#uires the individual at all ti,es to 'overn his conduct varies &ith the nature of the situation in &hich he is placed and the i,portance of the act &hich he is to perfor,.=< 1hus, the cases of Austria v. Court of Appeals,=( 6ernande0 v. C!air)an" Co))ission on Audit=4 and Cru0 v. 7angan=+ cited b" petitioners in their pleadin's, &here the victi,s of robber" &ere e9onerated fro, liabilit", find no application to the present case. In Austria, Maria %bad received fro, Fuiller,o %ustria a pendant &ith dia,onds to be sold on co,,ission basis, but &hich %bad failed to subse#uentl" return because of a robber" co,,itted upon her in )*4). 1he incident beca,e the sub?ect of a cri,inal case filed a'ainst several persons. %ustria filed an action a'ainst %bad and her husband 3%bads6 for recover" of the pendant or its value, but the %bads set up the defense that the robber" e9tin'uished their obli'ation. 1he R1C ruled in favor of %ustria, as the %bads failed to prove robber"; or, if co,,itted, that Maria %bad &as 'uilt" of ne'li'ence. 1he C%, ho&ever, reversed the R1C decision holdin' that the fact of robber" &as dul" established and declared the %bads not responsible for the loss of the ?e&elr" on account of a fortuitous event. Ce held that for the %bads to be relieved fro, the civil liabilit" of returnin' the pendant under %rt. ))+< of the Civil Code, it &ould onl" be sufficient that the unforeseen event, the robber", too. place &ithout an" concurrent fault on the debtorRs part, and this can be done b" preponderance of evidence; that to be free fro, liabilit" for reason of fortuitous event, the debtor ,ust, in addition to the casus itself, be free of an" concurrent or contributor" fault or ne'li'ence. =5 Ce found in Austria that under the circu,stances prevailin' at the ti,e the Decision &as pro,ul'ated in )*+), the Cit" of Manila and its suburbs had a hi'h incidence of cri,es a'ainst persons and propert" that rendered travel after ni'htfall a ,atter to be sedulousl" avoided &ithout suitable precaution and protection; that the conduct of Maria %bad in returnin' alone to her house in the evenin' carr"in' ?e&elr" of considerable value &ould have been ne'li'ence per se and &ould not e9e,pt her fro, responsibilit" in the case of robber". o&ever &e did not hold %bad liable for ne'li'ence since, the robber" happened ten "ears previousl"; i.e., )*4), &hen cri,inalit" had not reached the level of incidence obtainin' in )*+). In contrast, the robber" in this case too. place in )*5+ &hen robber" &as alread" prevalent and petitioners in fact had alread" foreseen it as the" &anted to deposit the pa&n &ith a nearb" ban. for safe.eepin'. Moreover, unli.e in Austria, &here no ne'li'ence &as co,,itted, &e found petitioners ne'li'ent in securin' their pa&nshop as earlier discussed.

In 6ernande0, 1eodoro ernande$ &as the OIC and special disbursin' officer of the 1ernate Deach Pro?ect of the Philippine 1ouris, in Cavite. In the ,ornin' of !ul" ), )*5=, a -rida", he &ent to Manila to encash t&o chec.s coverin' the &a'es of the e,plo"ees and the operatin' e9penses of the pro?ect. o&ever for so,e reason, the processin' of the chec. &as dela"ed and &as co,pleted at about = p.,. Nevertheless, he decided to encash the chec. because the pro?ect e,plo"ees &ould be &aitin' for their pa" the follo&in' da"; other&ise, the &or.ers &ould have to &ait until !ul" (, the earliest ti,e, &hen the ,ain office &ould open. %t that ti,e, he had t&o choices2 3)6 return to 1ernate, Cavite that sa,e afternoon and arrive earl" evenin'; or 376 ta.e the ,one" &ith hi, to his house in Marilao, Dulacan, spend the ni'ht there, and leave for 1ernate the follo&in' da". e chose the second option, thin.in' it &as the safer one. 1hus, a little past = p.,., he too. a passen'er ?eep bound for Dulacan. Chile the ?eep &as on Epifanio de los Santos %venue, the ?eep &as held up and the ,one" .ept b" ernande$ &as ta.en, and the robbers ?u,ped out of the ?eep and ran. ernande$ chased the robbers and cau'ht up &ith one robber &ho &as subse#uentl" char'ed &ith robber" and pleaded 'uilt". 1he other robber &ho held the stolen ,one" escaped. 1he Co,,ission on %udit found ernande$ ne'li'ent because he had not brou'ht the cash proceeds of the chec.s to his office in 1ernate, Cavite for safe.eepin', &hich is the nor,al procedure in the handlin' of funds. Ce held that ernande$ &as not ne'li'ent in decidin' to encash the chec. and brin'in' it ho,e to Marilao, Dulacan instead of 1ernate, Cavite due to the lateness of the hour for the follo&in' reasons2 3)6 he &as ,oved b" unselfish ,otive for his co0 e,plo"ees to collect their &a'es and salaries the follo&in' da", a Saturda", a non0 &or.in', because to encash the chec. on !ul" (, the ne9t &or.in' da" after !ul" ), &ould have caused disco,fort to laborers &ho &ere dependent on their &a'es for sustenance; and 376 that choosin' Marilao as a safer destination, bein' nearer, and in vie& of the co,parative ha$ards in the trips to the t&o places, said decision see,ed lo'ical at that ti,e. Ce further held that the fact that t&o robbers attac.ed hi, in broad da"li'ht in the ?eep &hile it &as on a bus" hi'h&a" and in the presence of other passen'ers could not be said to be a result of his i,prudence and ne'li'ence. Bnli.e in 6ernande0 &here the robber" happened in a public utilit", the robber" in this case too. place in the pa&nshop &hich is under the control of petitioners. Petitioners had the ,eans to screen the persons &ho &ere allo&ed entrance to the pre,ises and to protect itself fro, unla&ful intrusion. Petitioners had failed to e9ercise precautionar" ,easures in ensurin' that the robbers &ere prevented fro, enterin' the pa&nshop and for .eepin' the vault open for the da", &hich paved the &a" for the robbers to easil" cart a&a" the pa&ned articles. In Cru0, Dr. -ilonila O. Cru$, Ca,anava District Director of 1echnolo'ical Education and S.ills Develop,ent %uthorit" 31ESD%6, boarded the Mi'ht Rail 1ransit 3MR16 fro, Sen. Pu"at %venue to Monu,ento &hen her handba' &as slashed and the contents &ere stolen b" an unidentified person. %,on' those stolen &ere her &allet and the 'overn,ent0issued cellular phone. She then reported the incident to the police authorities; ho&ever, the thief &as not located, and the cellphone &as not recovered. She also reported the loss to the Re'ional Director of 1ESD%, and she re#uested that she be freed fro, accountabilit" for the cellphone. 1he Resident %uditor denied her re#uest on the 'round that she lac.ed the dili'ence re#uired in the custod" of 'overn,ent propert" and &as ordered to pa" the purchase value in the total a,ount of P<,7=5.88. 1he CO% found no sufficient ?ustification to 'rant the re#uest for relief fro, accountabilit". Ce reversed the rulin' and found that ridin' the MR1 cannot per se be denounced as a ne'li'ent act ,ore so because Cru$Rs ,ode of transit &as influenced b" ti,e and ,one"

considerations; that she boarded the MR1 to be able to arrive in Caloocan in ti,e for her = p, ,eetin'; that an" prudent and rational person under si,ilar circu,stance can reasonabl" be e9pected to do the sa,e; that possession of a cellphone should not hinder one fro, boardin' the MR1 coach as Cru$ did considerin' that &hether she rode a ?eep or bus, the ris. of theft &ould have also been present; that because of her relativel" lo& position and pa", she &as not e9pected to have her o&n vehicle or to ride a ta9icab; she did not have a 'overn,ent assi'ned vehicle; that placin' the cellphone in a ba' a&a" fro, covetous e"es and holdin' on to that ba' as she did is ordinaril" sufficient care of a cellphone &hile travelin' on board the MR1; that the records did not sho& an" specific act of ne'li'ence on her part and ne'li'ence can never be presu,ed. Bnli.e in the Cru0 case, the robber" in this case happened in petitioners: pa&nshop and the" &ere ne'li'ent in not e9ercisin' the precautions ?ustl" de,anded of a pa&nshop. C ERE-ORE, e9cept for the insurance aspect, the Decision of the Court of %ppeals dated March =), 788= and its Resolution dated %u'ust 5, 788=, are A''!RME/. Costs a'ainst petitioners. SO OR/ERE/. 3nares-Santiago" C!airperson" C!ico-$a0ario" $ac!ura" %%." concur.
-ootnotes
)

C% rollo, pp. 4=0+=; Penned b" !ustice Dernardo P. %besa,is 3ret.6 and concurred in b" !ustices Ser'io M. Pesta>o and Noel F. 1i?a,. 7 Id. at p. ))<. = Id. at )7); E9hibit A).A < Id. at )8+0)85; E9hibit AI.A ( Id. at 4=04(; Per !ud'e Salvador P. de Fu$,an, !r. 4 Id. at )<40)<+; Penned b" !ud'e Roberto C. Dio.no of Dranch 47 as the case &as unloaded to hi,. + )<50% Phil. <47 3)*+)6. 5 C% rollo, p. +7. * Rollo, pp. (04. )8 Rollo, p. +. )) $ue0 v. $ational Labor Relations Co))ission, F.R. No. )8+(+<, Dece,ber 75, )**<, 7=* SCR% ()5, (74. )7 Liton8ua v. &ernande0, F.R. No. )<5))4, %pril )<, 788<, <7+ SCR% <+5, <5* citin' Roble v. Arbasa, <)< Phil. =<= 3788)6. )= &uentes v. Court of Appeals, ==( Phil. ))4=, ))45 3)**+6. )< See %acinto v. Court of Appeals, F.R. No. 588<=, !une 4, )**), )*5 SCR% 7)), 7)4. )( See Sibagat (i)ber Corporation v. 7arcia, F.R. No. *5)5(, Dece,ber )), )**7, 7)4 SCR% <+8, <+<. )4 Id. at )7<0)7(; E9hibit A<A. )+ Atillo ''' v. Court of Appeals, ==< Phil. (<4, ((7 3)**+6. )5 Minutes of the ,eetin' held on October 77, )*54, p. *. )* Records, p. 4+. 78 Id. at =5. 7) Id. at )<+. 77 Republic v. Lu0on Stevedoring Corporation, )75 Phil. =)=, =)5 3)*4+6. 7= ,inde# Resources -evelop)ent Corporation v. ,orillo, <75 Phil. *=<, *<< 378876. 7< Co v. Court of Appeals, =(= Phil. =8(, =)= 3)**56. 7( ,inde# Resources -evelop)ent Corporation v. ,orillo, supra citin' 1olentino, Civil Code of the Philippines, Vol. IV, )**) ed., p. )74, citin' Sian v. 'nc!austi & Co., 77 Phil. )(7 3)*)76; %uan &. $a+pil & Sons v. Court of Appeals, 775 Phil. (4<, (+5 3)*546. Cf. ,etal &or)ing Corporation v. Office of t!e President , =)+ Phil. 5(=, 5(* 3)**(6. 74 Id. citin' $a+pil and Sons v. Court of Appeals, supra note 7(, at (+5. 7+ Supra note 7<.

75 7* =8 =) =7 == =< =( =4 =+ =5

Id. at =)70=)=. Civil Code, %rt. ))+8. <<= Phil. 5(4, 54= 3788=6 citin' ,c/ee v. 'nter)ediate Appellate Court, 7)) SCR% ()+ 3)**76. Cru0 v. 7angan, supra note =8, at 54=. 1SN, !anuar" 7), )**7, pp.)+0)5. E9hibit A),A E9cerpt fro, the Police Dlotter dated October )+, )*5+ of the Para>a#ue Police Station, p. )7). Cru0 v. 7angan, supra note =8, at 54= citin' San'co, 1orts and Da,a'es, Vol. ), )**= rev. ed. p. (. Supra note +. F.R. No. +)5+), Nove,ber 4, )*5*, )+* SCR% =*. Supra note =8. Austria v. Court of Appeals, supra note +, at <440<4+.

Republic of the Philippines SUPREME COURT Manila EN D%NC

G.R. No. #2217)9

S,A+,;.,r 29, 1967

REPU&#!C O' T%E P%!#!PP!NES, plaintiff0appellee, vs. #U"ON STE0E/OR!NG CORPORAT!ON, defendant0appellant. Office of t!e Solicitor 7eneral for plaintiff-appellee. 6. San Luis and L.4. Si)bulan for defendant-appellant. REYES, J.&.#., J.:

1he present case co,es b" direct appeal fro, a decision of the Court of -irst Instance of Manila 3Case No. <<(+76 ad?ud'in' the defendant0appellant, Mu$on Stevedorin' Corporation, liable in da,a'es to the plaintiff0appellee Republic of the Philippines. In the earl" afternoon of %u'ust )+, )*48, bar'e M0)5*7, o&ned b" the Mu$on Stevedorin' Corporation &as bein' to&ed do&n the Pasi' river b" tu'boats ADan'usA and ADarberoA) also belon'in' to the sa,e corporation, &hen the bar'e ra,,ed a'ainst one of the &ooden piles of the Na'tahan baile" brid'e, s,ashin' the posts and causin' the brid'e to list. 1he river, at the ti,e, &as s&ollen and the current s&ift, on account of the heav" do&npour of Manila and the surroundin' provinces on %u'ust )( and )4, )*48. Sued b" the Republic of the Philippines for actual and conse#uential da,a'e caused b" its e,plo"ees, a,ountin' to P788,888 3Civil Case No. <<(47, C-I of Manila6, defendant Mu$on Stevedorin' Corporation disclai,ed liabilit" therefor, on the 'rounds that it had e9ercised due dili'ence in the selection and supervision of its e,plo"ees; that the da,a'es to the brid'e &ere caused b" force )a8eure; that plaintiff has no capacit" to sue; and that the Na'tahan baile" brid'e is an obstruction to navi'ation. %fter due trial, the court rendered ?ud',ent on !une )), )*4=, holdin' the defendant liable for the da,a'e caused b" its e,plo"ees and orderin' it to pa" to plaintiff the actual cost of the repair of the Na'tahan baile" brid'e &hich a,ounted to P)*7,(4).+7, &ith le'al interest thereon fro, the date of the filin' of the co,plaint. Defendant appealed directl" to this Court assi'nin' the follo&in' errors alle'edl" co,,itted b" the court a uo, to &it2 I I 1he lo&er court erred in not holdin' that the herein defendant0appellant had e9ercised the dili'ence re#uired of it in the selection and supervision of its personnel to prevent da,a'e or in?ur" to others. 9awp!:l.n;t II I 1he lo&er court erred in not holdin' that the ra,,in' of the Na'tahan baile" brid'e b" bar'e M0)5*7 &as caused b" force )a8eure. III I 1he lo&er court erred in not holdin' that the Na'tahan baile" brid'e is an obstruction, if not a ,enace, to navi'ation in the Pasi' river. IV I 1he lo&er court erred in not bla,in' the da,a'e sustained b" the Na'tahan baile" brid'e to the i,proper place,ent of the dolphins. V I 1he lo&er court erred in 'rantin' plaintiff:s ,otion to adduce further evidence in chief after it has rested its case. VI I 1he lo&er court erred in findin' the plaintiff entitled to the a,ount of P)*7,(4).+7 for da,a'es &hich is clearl" e9orbitant and &ithout an" factual basis. o&ever, it ,ust be recalled that the established rule in this ?urisdiction is that &hen a part" appeals directl" to the Supre,e Court, and sub,its his case there for decision, he is dee,ed to have &aived the ri'ht to dispute an" findin' of fact ,ade b" the trial Court. 1he onl" #uestions that ,a" be raised are those of la& 3Savellano vs.

Dia$, M0)+<<), !ul" =), )*4=; %balle vs. Santia'o, M0)4=8+, %pril =8, )*4=; F.S.I.S. vs. Cloribel, M0777=4, !une 77, )*4(6. A converso, a part" &ho resorts to the Court of %ppeals, and sub,its his case for decision there, is barred fro, contendin' later that his clai, &as be"ond the ?urisdiction of the aforesaid Court. 1he reason is that a contrar" rule &ould encoura'e the undesirable practice of appellants: sub,ittin' their cases for decision to either court in e9pectation of favorable ?ud',ent, but &ith intent of attac.in' its ?urisdiction should the decision be unfavorable 31"son 1an, et al. vs. -ilipinas Co,pa>ia de Se'uros6 et al., M0)88*4, Res. on Motion to Reconsider, March 7=, )*446. Conse#uentl", &e are li,ited in this appeal to the issues of la& raised in the appellant:s brief. 1a.in' the aforesaid rules into account, it can be seen that the onl" revie&able issues in this appeal are reduced to t&o2 )6 Chether or not the collision of appellant:s bar'e &ith the supports or piers of the Na'tahan brid'e &as in la& caused b" fortuitous event or force )a8eure, and 76 Chether or not it &as error for the Court to have per,itted the plaintiff0appellee to introduce additional evidence of da,a'es after said part" had rested its case. %s to the first #uestion, considerin' that the Na'tahan brid'e &as an i,,ovable and stationar" ob?ect and uncontrovertedl" provided &ith ade#uate openin's for the passa'e of &ater craft, includin' bar'es li.e of appellant:s, it is undeniable that the unusual event that the bar'e, e9clusivel" controlled b" appellant, ra,,ed the brid'e supports raises a presu,ption of ne'li'ence on the part of appellant or its e,plo"ees ,annin' the bar'e or the tu's that to&ed it. -or in the ordinar" course of events, such a thin' does not happen if proper care is used. In %n'lo %,erican !urisprudence, the inference arises b" &hat is .no&n as the A res ipsa lo uiturA rule 3Scott vs. Mondon Doc.s Co., 7 G C (*4; San !uan Mi'ht G 1ransit Co. vs. Re#uena, 77< B.S. 5*, (4 M. Ed., 458; Chit&ell vs. Colf, )7+ Minn. (7*, )<* N.C. 7**; Dr"ne vs. Freat %tlantic G Pacific 1ea Co., 74* Mass. )=8; )45 N.E. (<8; Fribsb" vs. S,ith, )<4 S.C. 7d +)*6. 1he appellant stron'l" stresses the precautions ta.en b" it on the da" in #uestion2 that it assi'ned t&o of its ,ost po&erful tu'boats to to& do&n river its bar'e M0)5*7; that it assi'ned to the tas. the ,ore co,petent and e9perienced a,on' its patrons, had the to&lines, en'ines and e#uip,ent double0chec.ed and inspected; that it instructed its patrons to ta.e e9tra precautions; and concludes that it had done all it &as called to do, and that the accident, therefore, should be held due to force )a8eure or fortuitous event. 1hese ver" precautions, ho&ever, co,pletel" destro" the appellant:s defense. -or caso fortuito or force )a8eure 3&hich in la& are identical in so far as the" e9e,pt an obli'or fro, liabilit"67 b" definition, are e9traordinar" events not foreseeable or avoidable, Aevents that could not be foreseen, or &hich, thou'h foreseen, &ere inevitableA 3%rt. ))+<, Civ. Code of the Philippines6. It is, therefore, not enou'h that the event should not have been foreseen or anticipated, as is co,,onl" believed, but it ,ust be one i,possible to foresee or to avoid. 1he ,ere difficulty to foresee the happenin' is not i,possibilit" to foresee the sa,e2 Aun hecho no constitu"e caso fortuito por la sola circunstancia de #ue su e9istencia ha'a ,as dificil o ,as onerosa la accion dili'ente del presento ofensorA 3Peirano -acio, Responsibilidad *#tra-contractual, p. <4(; Ma$eaud (rait de la Responsibilite Civil, Vol. 7, sec. )(4*6. 1he ver" ,easures adopted b" appellant prove that the possibilit" of dan'er &as not onl" foreseeable, but actuall"

foreseen, and &as not caso fortuito. Other&ise stated, the appellant, Mu$on Stevedorin' Corporation, .no&in' and appreciatin' the perils posed b" the s&ollen strea, and its s&ift current, voluntaril" entered into a situation involvin' obvious dan'er; it therefore assured the ris., and can not shed responsibilit" ,erel" because the precautions it adopted turned out to be insufficient. ence, the lo&er Court co,,itted no error in holdin' it ne'li'ent in not suspendin' operations and in holdin' it liable for the da,a'es caused. It avails the appellant nau'ht to ar'ue that the dolphins, li.e the brid'e, &ere i,properl" located. Even if true, these circu,stances &ould ,erel" e,phasi$e the need of even hi'her de'ree of care on appellant:s part in the situation involved in the present case. 1he appellant, &hose bar'es and tu's travel up and do&n the river ever"da", could not safel" i'nore the dan'er posed b" these alle'edl" i,proper constructions that had been erected, and in place, for "ears. On the second point2 appellant char'es the lo&er court &ith havin' abused its discretion in the ad,ission of plaintiff:s additional evidence after the latter had rested its case. 1here is an insinuation that the dela" &as deliberate to enable the ,anipulation of evidence to pre?udice defendant0appellant. Ce find no ,erit in the contention. Chether or not further evidence &ill be allo&ed after a part" offerin' the evidence has rested his case, lies &ithin the sound discretion of the trial !ud'e, and this discretion &ill not be revie&ed e9cept in clear case of abuse. = In the present case, no abuse of that discretion is sho&n. Chat &as allo&ed to be introduced, after plaintiff had rested its evidence in chief, &ere vouchers and papers to support an ite, of P),((5.88 alle'edl" spent for the reinforce,ent of the panel of the baile" brid'e, and &hich ite, alread" appeared in E9hibit FF. %ppellant, in fact, has no reason to char'e the trial court of bein' unfair, because it &as also able to secure, upon &ritten ,otion, a si,ilar order dated Nove,ber 7<, )*47, allo&in' reception of additional evidence for the said defendant0appellant. < C ERE-ORE, findin' no error in the decision of the lo&er Court appealed fro,, the sa,e is hereb" affir,ed. Costs a'ainst the defendant0appellant. Concepcion" C.%." -i0on" ,a+alintal" <aldivar" Sanc!e0" Castro" Angeles and &ernando" %%." concur. Beng0on" %.P. %." on leave" too+ no part. 'oo+no+,)

1he lead0tu'boat ADan'usA &as pullin' the bar'e, &hile the tu'boat ADarberoA &as holdin' or restrainin' it at the bac..
7

Masa, vs. S,ith, <( Phil. 44). Mope$ vs. Miboro, 5) Phil. <7*. p. 5*, Record on %ppeal.

<

Republic of the Philippines SUPREME COURT Manila SECOND DIVISION G.R. No. 119729 January 21, 1997 ACE2AGRO /E0E#OPMENT CORPORAT!ON, petitioner, vs. COURT O' APPEA#S an$ COSMOS &OTT#!NG CORPORAT!ON, respondents. MEN/O"A, J.:

1his case ori'inated in a co,plaint for da,a'es for breach of contract &hich petitioner filed a'ainst private respondent. -ro, the decision of the Re'ional 1rial Court, Dranch +7, Malabon, Metro Manila, findin' private respondent 'uilt" of breach of contract and orderin' it to pa" da,a'es, private respondent appealed to the Court of %ppeals &hich reversed the trial court:s decision and dis,issed the co,plaint for lac. of ,erit. Petitioner in turn ,oved for a reconsideration, but its ,otion &as denied. ence, this petition for revie& on certiorari. 1he facts are as follo&s2 Petitioner %ce0%'ro Develop,ent Corporation and private respondent Cos,os Dottlin' Corporation are corporations dul" or'ani$ed and e9istin' under Philippine la&s. Private respondent Cos,os Dottlin' Corp. is en'a'ed in the ,anufacture of soft drin.s. Since )*+* petitioner %ce0%'ro Develop,ent Corp. 3%ce0%'ro6 had been cleanin' soft drin. bottles and repairin' &ooden shells for Cos,os, renderin' its services &ithin the co,pan" pre,ises in San -ernando, Pa,pan'a. 1he parties entered into service contracts &hich the" rene&ed ever" "ear. On !anuar" )5, )**8, the" si'ned a contract coverin' the period !anuar" ), )**8 to Dece,ber =), )**8. Private respondent had earlier contracted the services of %ren Enterprises in vie& of the fact that petitioner could handle onl" fro, 7,888 to 7,(88 cases a da" and could not cope &ith private respondent:s dail" production of 5,888 cases. Bnli.e petitioner, %ren Enterprises rendered service outside private respondent:s plant. On %pril 7(, )**8, fire bro.e out in private respondent:s plant, destro"in', a,on' other places, the area &here petitioner did its &or.. %s a result, petitioner:s &or. &as stopped.

On Ma" )(, )**8, petitioner as.ed private respondent to allo& it to resu,e its service, but petitioner &as advised that on account of the fire, &hich had Apracticall" burned all . . . old soft drin. bottles and &ooden shells,A private respondent &as ter,inatin' their contract. Petitioner e9pressed surprise at the ter,ination of the contract and re#uested private respondent, on !une )=, )**8, to reconsider its decision and allo& petitioner to resu,e its &or. in order to Acushion the sudden i,pact of the une,plo",ent of ,an" of NitsO &or.ers.A %s it received no repl" fro, private respondent, petitioner, on !une 78, )**8, infor,ed its e,plo"ees of the ter,ination of their e,plo",ent. Petitioner:s ,e,orandu, 1 read2
MEMOR%NDBM 1O 2 %ll Cor.ers/Bnion Me,bers 1 RB 2 Mr. %n'elito D. Catalan Mocal Chapter President Disi' Man''a'a&a sa %ce %'ro0N%-MB 1his is to infor, "ou that the Cos,os Dottlin' Corp. has sent a letter to %ce %'ro0 Develop,ent Corp. ter,inatin' our contract &ith the,. o&ever, &e are still doin' &hat &e can to save our contract and resu,e our operations, thou'h this ,i'ht ta.e so,e ti,e. Ce &ill notif" "ou &hatever &ould be the outco,e of our ne'otiation &ith the, in due ti,e. 1rul" "ours, %CE %FRO0 DEVEMOPMEN1 CORP. 3S'd.6 %N1ONIO M. %RJBIQ% Mana'er

1his led the e,plo"ees to file a co,plaint for ille'al dis,issal before the Mabor %rbiter a'ainst petitioner and private respondent. On !ul" )+, )**8, petitioner sent another letter to private respondent, reiteratin' its re#uest for reconsideration. Its letter 2 read2
COSMOS DO11MINF CORPOR%1ION San Isidro Mac%rthur i'h&a" San -ernando, Pa,pan'a %ttention2 Mr. Nor,an P. B" 7eneral Services ,anager Fentle,en2

In our letter to "ou dated !une )=, )**8 see.in' "our .ind reconsideration of "our sudden drastic decision to ter,inate our ,utuall" beneficial contract of lon' standin', it is ,ore than a ,onth no& but our office has not received a repl" fro, "ou. Our &or.ers, &ho have been an9iousl" &aitin' for the resu,ption of the operations and &ho are the ones ,ost affected b" "our sudden decision, are no& beco,in' restless due to the financial difficulties the" are no& sufferin'. Ce are, therefore, a'ain see.in' for the reconsideration of "our decision to help alleviate the sufferin's of the displaced &or.ers, &hich &e also have to consider for hu,anitarian reason. Lours ver" trul", %CE %FRO0 DEVEMOPMEN1 CORP. 3S'd.6 %N1ONIO I. %RJBIQ% Mana'er

In response, private respondent advised petitioner on %u'ust 75, )**8 that the latter could resu,e the repair of &ooden shells under ter,s si,ilar to those contained in its contract but &or. had to be done outside the co,pan" pre,ises. Private respondent:s letter 3 read2
MR. %N1ONIO I. %RJBIQ% Mana'er %CE0%FRO DEVEMOPMEN1 CORPOR%1ION )4( !.P. Dautista Street Malabon, Metro Manila Dear Mr. %r#ui$a2 Ce are pleased to infor, "ou that COSMOS DO11MINF CORPOR%1ION, San -ernando Plant is a'ain acceptin' ?ob0out contract for the repair of our &ooden shells. Cor. shall be done outside the pre,ises of the plant and under si,ilar ter,s "ou previousl" had &ith the co,pan". Ce intend to 'ive "ou priorit" so please see or contact ,e at ," office soonest for the particulars re'ardin' the ?ob. ere is loo.in' for&ard to doin' business &ith "ou at the earliest possible ti,e. 3S'd.6 D%NIMO M. DE C%S1RO Plant Feneral Mana'er

Petitioner refused the offer, clai,in' that to do its &or. outside the co,pan":s pre,ises &ould ,a.e it 3petitioner6 incur additional costs for transportation &hich A&ill eat up the ,ea'er profits that NitO reali$es fro, its ori'inal contract &ith Cos,os.A In subse#uent ,eetin's &ith Danilo M. de Castro, Dutch Ce>a and Nor,an B" of Cos,os, petitioner:s ,ana'er, %ntonio I. %r#ui$a, as.ed for an e9tension of the ter, of the contract in vie& of the suspension of &or.. Dut its re#uest &as apparentl" turned do&n. On Nove,ber +, )**8, private respondent advised petitioner that the latter could then resu,e its &or. inside the plant in accordance &ith its ori'inal contract &ith Cos,os. Private respondent:s letter ) stated2
MR. %N1ONIO I. %RJBIQ% Feneral Mana'er %ce0%'ro Develop,ent Corporation )4( !. P. Dautista St., Malabon Metro Manila Dear Mr. %r#ui$a2 1his is to officiall" infor, "ou that "ou can no& resu,e the repair of &ooden shells inside the plant accordin' to "our e9istin' contract &ith the Co,pan". Please see Mr. Ener F. Oca,po, OIC0PDFS, on "our ne& ?ob site in the Plant. Ver" trul" "ours, COSMOS DO11MINF CORPOR%1ION 3S'd.6 MIC %EM M. %MDINO VP0Mu$on/Plant Feneral Mana'er

On Nove,ber )+, )**8, petitioner re?ected private respondent:s offer, this ti,e, citin' the fact that there &as a pendin' labor case. Its letter 5 to private respondent stated2
Mr. Michael M. %lbino VP0Mu$on/Plant Feneral Mana'er Cos,os Dottlin' Corporation San -ernando, Pa,pan'a Dear Mr. %lbino, 1his is in connection &ith "our letter dated Nove,ber +, )**8 re'ardin' the resu,ption of the repair of "our &ooden shells inside San -ernando, Pa,pan'a Plant accordin' to the e9istin' contract &ith "our co,pan". %t present, there is a pendin' case before the Depart,ent of Mabor and E,plo",ent in San -ernando, Pa,pan'a &hich &as a result of the pre,ature ter,ination of the said e9istin' contract &ith "our co,pan". In vie& of that, &e find it proper for us to &or. for the resolution of the said pendin' case and include in the Co,pro,ise %'ree,ent the ,atter of the resu,ption of the repair of &ooden shells

in "our San -ernando, Pa,pan'a Plant. 1han. "ou ver" ,uch. Ver" trul" "ours, %CE %FRO0 DEVEMOPMEN1 CORP. 3S'd.6 %N1ONIO I. %RJBIQ% Mana'er

On !anuar" =, )**), petitioner brou'ht this case a'ainst private respondent for breach of contract and da,a'es in the Re'ional 1rial Court of Malabon. It co,plained that the ter,ination of its service contract &as ille'al and arbitrar" and that, as a result, it stood to lose profits and to be held liable to its e,plo"ees for bac.&a'es, da,a'es and/or separation pa". On !anuar" )4, )**), a decision &as rendered in the labor case, findin' petitioner liable for the clai,s of its e,plo"ees. Petitioner &as ordered to reinstate the e,plo"ees and pa" the, bac.&a'es. o&ever, private respondent Cos,os &as absolved fro, the e,plo"ees: clai,s on the 'round that there &as no privit" of contract bet&een the, and private respondent. On the other hand, in its decision rendered on Nove,ber 7), )**), the R1C found private respondent 'uilt" of breach of contract and ordered it to pa" da,a'es to petitioner. Petitioner:s clai, for rei,burse,ent for &hat it had paid to its e,plo"ees in the labor case &as denied. 1he dispositive portion of the trial court:s decision read2 C ERE-ORE, pre,ises considered, ?ud',ent is hereb" rendered in favor of plaintiff %ce0%'ro Develop,ent Corporation and a'ainst defendant Cos,os Dottlin' Corporation, orderin' the latter to pa" to the for,er the follo&in'2 a6 1he a,ount of P),885,<)5.8) as actual da,a'es; b6 P)88,888.88 as corrective or e9e,plar" da,a'es; c6 1he a,ount of P(8,888.88 as and for attorne":s fees; and d6 Costs and e9penses of liti'ation. Defendant:s counterclai,s are dis,issed. SO ORDERED. Private respondent appealed to the Court of %ppeals, &hich on Dece,ber 7*, )**<, reversed the trial court:s decision and dis,issed petitioner:s co,plaint. 1he appellate court found that it &as petitioner &hich had refused to resu,e &or., after failin' to secure an e9tension of its contract. Petitioner no& see.s a revie& of the Court of %ppeals:

decision. &irst. Petitioner clai,s that the appellate court erred Ain rulin' that respondent &as ?ustified in unilaterall" ter,inatin' the contract on account of a force )a8eure.A Juite possibl" it did not understand the appellate court:s decision, or it &ould not be contendin' that there &as no valid cause for the ter,ination of the contract but onl" for its suspension. 1he follo&in' is &hat the appellate court said2 6 %rticle )7=) of the Ne& Civil Code on e9tin'uish,ent of obli'ations does not specificall" ,ention unilateral ter,ination as a ,ode of e9tin'uish,ent of obli'ation but, accordin' to 1olentino, Athere are other causes of e9tin'uish,ent of obli'ations &hich are not e9pressl" provided for in this chapterA 31olentino, Civil Code of the Phils., Vol. IV, )*54 ed., p. 7+=6. e further said2 Dut in so,e contracts, either because of its indeter,inate duration or because of the nature of the prestation &hich is its ob?ect, one of the parties ,a" free hi,self fro, the contractual tie b" his o&n &ill 3unilateral e9tin'uish,ent6; . . . 3p. 7+<07+(, 'bid6 %nd that &as ?ust &hat defendant0appellant did &hen it unilaterall" ter,inated the a'ree,ent it had &ith plaintiff0appellee b" sendin' the Ma" 7=, )**8 letter. %s per its letter, the reason 'iven b" defendant0appellant for unilaterall" ter,inatin' the a'ree,ent &as because the %pril 7(, )**8 fire practicall" burned all of the softdrin. bottles and &ooden shells &hich plaintiff0appellee &as &or.in' on under the a'ree,ent. =!at defendantappellant was trying to say was t!at t!e prestation or t!e ob8ect of t!eir agree)ent !ad been lost and destroyed in t!e above-described fire . Apparently" t!e defendant-appellant would li+e t!is situation to fall wit!in w!at > according to (olentino > would be 2 . . . 3O6bli'ations ,a" be e9tin'uished b" the happenin' of unforeseen events, under &hose influence the obli'ation &ould never have been contracted, because in such cases, the ver" basis upon &hich the e9istence of the obli'ation is founded &ould be &antin'. Doth parties ad,itted that the %pril 7(, )**8 fire &as a force )a8eure or unforeseen event and that the sa,e even burned practicall" all the softdrin. bottles and &ooden shells I &hich are the ob?ects of the a'ree,ent. But t!e story did not end t!ere. 't is true t!at defendant-appellant still !ad ot!er bottles t!at needed cleaning and wooden s!ells t!at needed repairing ?pp . 99@-999" orig. rec.6; t!erefore" t!e suspension of t!e wor+ of t!e plaintiff-appellee broug!t about by t!e fire is, at best, te)porary as found by t!e trial court . ence, plaintiff0 appellee:s letters of reconsideration of the ter,ination of the a'ree,ent addressed to defendant0appellant dated !une )=, )**8 and !ul" )+, )**8.

It is obvious that &hat petitioner thou'ht &as the appellate court:s rulin' is ,erel" its su,,ar" of private respondent:s alle'ations. Precisel" the appellate court, does not a'ree &ith private respondent, that is &h", in the last para'raph of the above e9cerpt, the court sa"s that there &as no cause for ter,inatin' the contract but at ,ost a Ate,porar" suspension of &or..A 1he court thus re?ects private respondent:s clai, that, as a result of the fire, the obli'ation of contract ,ust be dee,ed to have been e9tin'uished. Nonetheless, the Court of %ppeals found that private respondent had reconsidered its decision to ter,inate the contract and tried to acco,,odate the re#uest of petitioner, first, b" notif"in' petitioner on %u'ust 75, )**8 that it could resu,e &or. provided that this &as done outside the pre,ises and, later, on Nove,ber +, )**8, b" notif"in' petitioner that it could then &or. in its pre,ises, under the ter,s of their contract. o&ever, petitioner un?ustifiabl" refused the offer because it &anted an e9tension of the contract to ,a.e up for the period of inactivit". %s the Court of %ppeals said in its decision2 7 It too. defendant0appellant ti,e to ,a.e a repl" to plaintiff0appellee:s letters. Dut &hen it did on %u'ust 75, )**8, it 'ranted plaintiff0appellee priorit" to resu,e its &or. under the ter,s of their a'ree,ent 3but outside its pre,ises6, and the plaintiff0appellee refused the sa,e on the 'round that &or.in' outside the defendant0appellant:s San -ernando Plant &ould ,ean added transportation costs that &ould offset an" profit it &ould earn. 1he appellee &as &ithout le'al 'round to refuse resu,ption of &or. as offered b" the appellant, under the ter,s of their above a'ree,ent. It could not le'all" insist on sta"in' inside propert" it did not o&n, nor &as under lease to it . . . . In its refusal to resu,e its &or. because of the additional transportation costs to be brou'ht about b" &or.in' outside the appellant:s San -ernando plant, the appellee could be held liable for da,a'es for breach of contract. 999 999 999 1hereafter, appellant sent its Nove,ber +, )**8 letter to appellee, this ti,e specificall" statin' that plaintiff0appellee can no& resu,e &or. in accordance &ith their e9istin' a'ree,ent. 1his ti,e, it could not be denied that b" the tenor of the letter, appellant &as &illin' to honor its a'ree,ent &ith appellee, that it had finall" ,ade a reconsideration of appellee:s plea to resu,e &or. under the contract. Dut a'ain, plaintiff0appellee refused this offer to resu,e &or.. Ch" did the appellee refuse to resu,e &or.H Its Nove,ber )+, )**8 letter stated that it had so,ethin' to do &ith the settle,ent of the NMRC case filed a'ainst it b" its e,plo"ees. Dut that &as not the real reason. In his cross0 e9a,ination, the &itness for appellee stated that its real reason for refusin' to resu,e &or. &ith the appellant &as I as in its previous refusal I because it &anted an e9tension of the period or duration of the contract be"ond Dece,ber =), )**), to cover the period &ithin &hich it &as unable to &or..

1he a'ree,ent bet&een the appellee and the appellant is &ith a resolutor" period, be'innin' fro, !anuar" ), )**8 and endin' on Dece,ber =), )**8. Chen the fire bro.e out on %pril 7(, )**8, there resulted a suspension of the appellee:s &or. as per a'ree,ent. Dut this suspension of &or. due to force )a8eure did not ,erit an auto,atic e9tension of the period of the a'ree,ent bet&een the,. %ccordin' to 1olentino2 1he stipulation that in the event of a fortuitous event or force ,a?eure the contract shall be dee,ed suspended durin' the said period does not ,ean that the happenin' of an" of those events stops the runnin' of the period the contract has been a'reed upon to run. It onl" relieves the parties fro, the fulfill,ent of their respective obli'ations durin' that ti,e. If durin' si9 of the thirt" "ears fi9ed as the duration of a contract, one of the parties is prevented b" force ,a?eure to perfor, his obli'ation durin' those "ears, he cannot after the e9piration of the thirt"0"ear period, be co,pelled to perfor, his obli'ation for si9 ,ore "ears to ,a.e up for &hat he failed to perfor, durin' the said si9 "ears, because it &ould in effect be an e9tension of the ter, of the contract. 1he contract is stipulated to run for thirt" "ears, and the period e9pires on the thirtieth "ear; the period of si9 "ears durin' &hich perfor,ance b" one of the parties is prevented b" force ,a?eure cannot be deducted fro, the period stipulated. In fine, the appellant &ithdre& its unilateral ter,ination of its a'ree,ent &ith appellee in its letter dated Nove,ber +, )**8. Dut the appellee:s refusal to resu,e &or. &as, in effect, a unilateral ter,ination of the parties: a'ree,ent I an act that &as &ithout basis. Chen the appellee as.ed for an e9tension of the period of the contract be"ond Dece,ber =), )**8 it &as, in effect, as.in' for a ne& contract &hich needed the consent of defendant0 appellant. 1he appellee ,i'ht be for'iven for its first refusal 3pertainin' to defendant0appellant:s %u'ust 75, )**8 letter6, but the second refusal ,ust be construed as a breach of contract b" plaintiff0appellee. . . . 1he Court of %ppeals &as ri'ht that petitioner had no basis for refusin' private respondent:s offer unless petitioner &as allo&ed to carr" out its &or. in the co,pan" pre,ises. 1hat petitioner &ould incur additional cost for transportation &as not a 'ood reason for its refusal. Petitioner has not sho&n that on %u'ust 75, )**8, &hen it &as notified of the private respondent:s offer, the latter:s pre,ises had so far been restored so as to per,it petitioner to resu,e &or. there. In fact, even &hen petitioner &as finall" allo&ed to resu,e &or. &ithin the plant, it &as not in the for,er &or. place but in a ne& one, &hich sho&s that private respondent:s reason for not 'rantin' petitioner:s re#uest &as not ?ust a prete9t. Nor &as petitioner ?ustified in refusin' to resu,e &or. on Nove,ber + &hen it &as a'ain notified b" petitioner to &or.. %lthou'h it cited the pendin' labor case as reason for turnin' do&n private respondent:s offer, it &ould appear that the real reason for petitioner:s refusal &as the fact that the ter, of the contract &as e9pirin' in t&o ,onths and its re#uest for an e9tension &as not 'ranted. Dut, as the appellate court correctl" ruled, the suspension of &or. under the contract &as brou'ht about b" force )a8eure.

1herefore, the period durin' &hich &or. &as suspended did not ?ustif" an e9tension of the ter, of the contract. 8 -or the fact is that the contract &as sub?ect to a resolutor" period &hich relieved the parties of their respective obli'ations but did not stop the runnin' of the period of their contract. 1he truth of the ,atter is that &hile private respondent had ,ade efforts to&ards acco,,odation, petitioner &as un&illin' to ,a.e ad?ust,ents as it insisted that it Acannot profitabl" resu,e operation under the sa,e ter,s and conditions NofO the ter,inated contract but &ith an outside &or. venue NasO transportation costs alone &ill eat up the ,ea'er profit that %ce0%'ro reali$es fro, its ori'inal contract.A 9 Chile this so0 called A?ob0outA offer of private respondent had the effect of var"in' the ter,s of the contract in the sense that it could increase its cost, &hat petitioner did not see, to reali$e &as that the chan'e &as brou'ht about b" circu,stances not of private respondent:s ,a.in'. %'ain &hen private respondent finall" advised petitioner on Nove,ber +, )**8 to &or. under the strict ter,s of its contract and inside the plant, petitioner thou'ht onl" of its interest b" insistin' that the contract be e9tended. Petitioner:s ,ana'er, %ntonio I. %r#ui$a, testified that he tried to secure a ter, e9tension for his co,pan" but his re#uest &as turned do&n because the ,ana'e,ent of private respondent &anted a ne& contract after the e9piration of the contract on Dece,ber =), )**8. %r#ui$a testified. 1* % NDutch Ce>aO told ,e that Cos,os is a'reeable to allo& us to resu,e our operation and &hen I in#uired about the e9tension of the contract he told ,e that I better refer the ,atter to Mr. Nor,an B". 999 999 999 J Did "ou see Mr. Nor,an B"H % Les, sir, &hen I &ent to see Mr. Nor,an B" he as.ed ,e &h" I &as there and he told ,e &h" I did not start operation I told hi, that &hat &e are e9pectin' that Mr. Ce>a &ould 'ive ,e the for,al letter re'ardin' the resu,ption of the operation and honorin' of contract and he said that our price &as so hi'h and if &e are &illin' to use said contract and &hen I said "es he told ,e that &e &ill ?ust send "ou a letter considerin' that another contractor repairin' our da,a'ed shells and cleanin' of dirt" bottles. Chen I as.ed hi, that does that ,ean that the ,eetin' I had &ith Mr. Ce>a, he told ,e that &as null and void and he told ,e that Mr. Ce>a &ant a ne& contract. %s alread" stated, because the suspension of &or. &as due to force )a8eure, there &as no ?ustification for petitioner:s de,and for an e9tension of the ter,s of the contract. Private respondent &as ?ustified in insistin' that after the e9piration of the contract, the parties ,ust ne'otiate a ne& one as the" had done ever" "ear since the start of their business relations in )*+*. Second. Petitioner sla,s the Court of %ppeals for rulin' that Ait &as Npetitioner:sO un?ustified refusal &hich finall" ter,inated the contract bet&een the parties.A 1his

contention is li.e&ise &ithout ,erit. Petitioner ,a" not be responsible for the ter,ination of the contract, but neither is private respondent, since the #uestion in this case is &hether private respondent is 'uilt" of breach of contract. 1he trial court held that private respondent co,,itted a breach of contract because, even as its %u'ust 75, )**8 letter allo&ed petitioner to resu,e &or., private respondent:s offer &as li,ited to the repairs of &ooden shells and this had to be done outside the co,pan":s pre,ises. On the other hand, the final offer ,ade on Nove,ber +, )**8, &hile allo&in' the Arepair of &ooden shells Nto be doneO inside the plant accordin' to "our contract &ith the co,pan",A &as still li,ited to the repair of the &ooden shells, &hen the fact &as that the parties: contract &as both for the repair of &ooden crates and for the cleanin' of soft drin. bottles. Dut this &as not the petitioner:s co,plaint. 1here &as never an issue &hether the co,pan":s offer included the cleanin' of bottles. Doth parties understood private respondent:s offer as includin' the cleanin' of e,pt" soft drin. bottles and the repair of the &ooden crates. Rather, the discussions bet&een petitioner and private respondent:s representatives focused first, on the insistence of petitioner that it be allo&ed to &or. inside the co,pan" plant and, later, on its re#uest for the e9tension of the life of the contract. Petitioner clai,s that private respondent had a reason to &ant to ter,inate the contract and that &as to 'ive the business to %ren Enterprises, as the latter offered its services at a ,uch lo&er rate than petitioner. %ren Enterprises: rate &as P7.(8 per shell &hile petitioner:s rates &ere P<.88 and P4.88 per shell for ordinar" and super si$ed bottles, respectivel". 11 1he contention has no basis in fact. 1he contract bet&een private respondent and %ren Enterprises had been ,ade on March 7*, )**8 I before the fire bro.e out. 1he contract bet&een petitioner and private respondent did not prohibit the hirin' b" private respondent of another service contractor. Cith private respondent hittin' production at 5,888 bottles of soft drin.s per da", petitioner could clearl" not handle the business, since it could clean onl" 7,(88 bottles a da". 12 1hese facts sho& that althou'h %ren Enterprises: rate &as lo&er than petitioner:s, the" did not affect private respondent:s business relation &ith petitioner. Despite private respondent:s contract &ith %ren Enterprises, private respondent continued doin' business &ith petitioner and &ould probabl" have done so &ere it not for the fire. On the other hand, %ren Enterprises could not be be'rud'ed for bein' allo&ed to continue renderin' service even after the fire because it &as doin' its &or. outside private respondent:s plant. -or that ,atter, after the fire, private respondent on %u'ust 75, )**8 offered to let petitioner resu,e its service provided this &as done outside the plant. Petitioner ,a" not be to bla,e for the failure to resu,e &or. after the fire, but neither is private respondent. Since the #uestion is &hether private respondent is 'uilt" of breach of contract, the fact that private respondent is bla,eless can onl" lead to the conclusion that the appealed decision is correct. C ERE-ORE, the petition for revie& is DENIED and the decision of the Court of %ppeals is %--IRMED.
SO ORDERED.

Regalado" Ro)ero" Puno and (orres" %r." %%." concur.

-ootnotes ) Records, p. 4=. 7 'd., p. 47. = 'd., p. 57. < 'd., p. 5=. ( 'd., p. 5<. 4 %t pp. ))0)= 3E,phasis added6. + %t pp. )=0)(. 5 Victorias Millin' Corp. v. Victorias Millin' Planters Cooperative, *+ Phil. =)5 3)*((6; See %,erican -ar Eastern School v. %"ala " Cia, 5* Phil. 7*7 3)*()6. * Record, p. 55. )8 1SN, !une 7+, )**), pp. 7807). )) Record, p. (* and p. *(. )7 1SN, !ul" )), )**), pp. <=0<(.