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Republic of the Philippines SUPREME COURT Manila THIRD DIVISION G.R. No.

159617 August 8, 2007

After trial on the merits, the RTC rendered its Decision6 dated January 12, 1993, dismissing respondents complaint as well as petitioners counterclaim. The RTC held that petitioner Sicam could not be made personally liable for a claim arising out of a corporate transaction; that in the Amended Complaint of respondents, they asserted that "plaintiff pawned assorted jewelries in defendants' pawnshop"; and that as a consequence of the separate juridical personality of a corporation, the corporate debt or credit is not the debt or credit of a stockholder. The RTC further ruled that petitioner corporation could not be held liable for the loss of the pawned jewelry since it had not been rebutted by respondents that the loss of the pledged pieces of jewelry in the possession of the corporation was occasioned by armed robbery; that robbery is a fortuitous event which exempts the victim from liability for the loss, citing the case of Austria v. Court of Appeals;7 and that the parties transaction was that of a pledgor and pledgee and under Art. 1174 of the Civil Code, the pawnshop as a pledgee is not responsible for those events which could not be foreseen. Respondents appealed the RTC Decision to the CA. In a Decision dated March 31, 2003, the CA reversed the RTC, the dispositive portion of which reads as follows: WHEREFORE, premises considered, the instant Appeal is GRANTED, and the Decision dated January 12, 1993,of the Regional Trial Court of Makati, Branch 62, is hereby REVERSED and SET ASIDE, ordering the appellees to pay appellants the actual value of the lost jewelry amounting to P272,000.00, and attorney' fees of P27,200.00.8 In finding petitioner Sicam liable together with petitioner corporation, the CA applied the doctrine of piercing the veil of corporate entity reasoning that respondents were misled into thinking that they were dealing with the pawnshop owned by petitioner Sicam as all the pawnshop tickets issued to them bear the words "Agencia de R.C. Sicam"; and that there was no indication on the pawnshop tickets that it was the petitioner corporation that owned the pawnshop which explained why respondents had to amend their complaint impleading petitioner corporation. The CA further held that the corresponding diligence required of a pawnshop is that it should take steps to secure and protect the pledged items and should take steps to insure itself against the loss of articles which are entrusted to its custody as it derives earnings from the pawnshop trade which petitioners failed to do; that Austria is not applicable to this case since the robbery incident happened in 1961 when the criminality had not as yet reached the levels attained in the present day; that they are at least guilty of contributory negligence and should be held liable for the loss of jewelries; and that robberies and hold-ups are foreseeable risks in that those engaged in the pawnshop business are expected to foresee. The CA concluded that both petitioners should be jointly and severally held liable to respondents for the loss of the pawned jewelry. Petitioners motion for reconsideration was denied in a Resolution dated August 8, 2003. Hence, the instant petition for review with the following assignment of errors: THE COURT OF APPEALS ERRED AND WHEN IT DID, IT OPENED ITSELF TO REVERSAL, WHEN IT ADOPTED UNCRITICALLY (IN FACT IT REPRODUCED AS ITS OWN WITHOUT IN THE MEANTIME ACKNOWLEDGING IT) WHAT THE RESPONDENTS ARGUED IN THEIR BRIEF, WHICH ARGUMENT WAS PALPABLY UNSUSTAINABLE. THE COURT OF APPEALS ERRED, AND WHEN IT DID, IT OPENED ITSELF TO REVERSAL BY THIS HONORABLE COURT, WHEN IT AGAIN ADOPTED UNCRITICALLY (BUT WITHOUT ACKNOWLEDGING IT) THE SUBMISSIONS OF THE RESPONDENTS IN THEIR BRIEF WITHOUT ADDING ANYTHING MORE THERETO DESPITE THE FACT THAT THE SAID ARGUMENT OF THE RESPONDENTS COULD NOT HAVE BEEN SUSTAINED IN VIEW OF UNREBUTTED EVIDENCE ON RECORD.9

ROBERTO C. SICAM and AGENCIA de R.C. SICAM, INC., petitioners, vs. LULU V. JORGE and CESAR JORGE, respondents. DECISION AUSTRIA-MARTINEZ, J.: Before us is a Petition for Review on Certiorari filed by Roberto C. Sicam, Jr. (petitioner Sicam) and Agencia de R.C. Sicam, Inc. (petitioner corporation) seeking to annul the Decision 1 of the Court of Appeals dated March 31, 2003, and its Resolution2 dated August 8, 2003, in CA G.R. CV No. 56633. It appears that on different dates from September to October 1987, Lulu V. Jorge (respondent Lulu) pawned several pieces of jewelry with Agencia de R. C. Sicam located at No. 17 Aguirre Ave., BF Homes Paraaque, Metro Manila, to secure a loan in the total amount of P59,500.00. On October 19, 1987, two armed men entered the pawnshop and took away whatever cash and jewelry were found inside the pawnshop vault. The incident was entered in the police blotter of the Southern Police District, Paraaque Police Station as follows: Investigation shows that at above TDPO, while victims were inside the office, two (2) male unidentified persons entered into the said office with guns drawn. Suspects(sic) (1) went straight inside and poked his gun toward Romeo Sicam and thereby tied him with an electric wire while suspects (sic) (2) poked his gun toward Divina Mata and Isabelita Rodriguez and ordered them to lay (sic) face flat on the floor. Suspects asked forcibly the case and assorted pawned jewelries items mentioned above. Suspects after taking the money and jewelries fled on board a Marson Toyota unidentified plate number.3 Petitioner Sicam sent respondent Lulu a letter dated October 19, 1987 informing her of the loss of her jewelry due to the robbery incident in the pawnshop. On November 2, 1987, respondent Lulu then wrote a letter4 to petitioner Sicam expressing disbelief stating that when the robbery happened, all jewelry pawned were deposited with Far East Bank near the pawnshop since it had been the practice that before they could withdraw, advance notice must be given to the pawnshop so it could withdraw the jewelry from the bank. Respondent Lulu then requested petitioner Sicam to prepare the pawned jewelry for withdrawal on November 6, 1987 but petitioner Sicam failed to return the jewelry. On September 28, 1988, respondent Lulu joined by her husband, Cesar Jorge, filed a complaint against petitioner Sicam with the Regional Trial Court of Makati seeking indemnification for the loss of pawned jewelry and payment of actual, moral and exemplary damages as well as attorney's fees. The case was docketed as Civil Case No. 88-2035. Petitioner Sicam filed his Answer contending that he is not the real party-in-interest as the pawnshop was incorporated on April 20, 1987 and known as Agencia de R.C. Sicam, Inc; that petitioner corporation had exercised due care and diligence in the safekeeping of the articles pledged with it and could not be made liable for an event that is fortuitous. Respondents subsequently filed an Amended Complaint to include petitioner corporation. Thereafter, petitioner Sicam filed a Motion to Dismiss as far as he is concerned considering that he is not the real party-in-interest. Respondents opposed the same. The RTC denied the motion in an Order dated November 8, 1989.5

Anent the first assigned error, petitioners point out that the CAs finding that petitioner Sicam is personally liable for the loss of the pawned jewelries is "a virtual and uncritical reproduction of the arguments set out on pp. 5-6 of the Appellants brief."10 Petitioners argue that the reproduced arguments of respondents in their Appellants Brief suffer from infirmities, as follows: (1) Respondents conclusively asserted in paragraph 2 of their Amended Complaint that Agencia de R.C. Sicam, Inc. is the present owner of Agencia de R.C. Sicam Pawnshop, and therefore, the CA cannot rule against said conclusive assertion of respondents; (2) The issue resolved against petitioner Sicam was not among those raised and litigated in the trial court; and (3) By reason of the above infirmities, it was error for the CA to have pierced the corporate veil since a corporation has a personality distinct and separate from its individual stockholders or members. Anent the second error, petitioners point out that the CA finding on their negligence is likewise an unedited reproduction of respondents brief which had the following defects: (1) There were unrebutted evidence on record that petitioners had observed the diligence required of them, i.e, they wanted to open a vault with a nearby bank for purposes of safekeeping the pawned articles but was discouraged by the Central Bank (CB) since CB rules provide that they can only store the pawned articles in a vault inside the pawnshop premises and no other place; (2) Petitioners were adjudged negligent as they did not take insurance against the loss of the pledged jelweries, but it is judicial notice that due to high incidence of crimes, insurance companies refused to cover pawnshops and banks because of high probability of losses due to robberies; (3) In Hernandez v. Chairman, Commission on Audit (179 SCRA 39, 45-46), the victim of robbery was exonerated from liability for the sum of money belonging to others and lost by him to robbers. Respondents filed their Comment and petitioners filed their Reply thereto. The parties subsequently submitted their respective Memoranda. We find no merit in the petition. To begin with, although it is true that indeed the CA findings were exact reproductions of the arguments raised in respondents (appellants) brief filed with the CA, we find the same to be not fatally infirmed. Upon examination of the Decision, we find that it expressed clearly and distinctly the facts and the law on which it is based as required by Section 8, Article VIII of the Constitution. The discretion to decide a case one way or another is broad enough to justify the adoption of the arguments put forth by one of the parties, as long as these are legally tenable and supported by law and the facts on records.11 Our jurisdiction under Rule 45 of the Rules of Court is limited to the review of errors of law committed by the appellate court. Generally, the findings of fact of the appellate court are deemed conclusive and we are not duty-bound to analyze and calibrate all over again the evidence adduced by the parties in the court a quo.12 This rule, however, is not without exceptions, such as where the factual findings of the Court of Appeals and the trial court are conflicting or contradictory13 as is obtaining in the instant case. However, after a careful examination of the records, we find no justification to absolve petitioner Sicam from liability. The CA correctly pierced the veil of the corporate fiction and adjudged petitioner Sicam liable together with petitioner corporation. The rule is that the veil of corporate fiction may be pierced

when made as a shield to perpetrate fraud and/or confuse legitimate issues. 14 The theory of corporate entity was not meant to promote unfair objectives or otherwise to shield them.15 Notably, the evidence on record shows that at the time respondent Lulu pawned her jewelry, the pawnshop was owned by petitioner Sicam himself. As correctly observed by the CA, in all the pawnshop receipts issued to respondent Lulu in September 1987, all bear the words "Agencia de R. C. Sicam," notwithstanding that the pawnshop was allegedly incorporated in April 1987. The receipts issued after such alleged incorporation were still in the name of "Agencia de R. C. Sicam," thus inevitably misleading, or at the very least, creating the wrong impression to respondents and the public as well, that the pawnshop was owned solely by petitioner Sicam and not by a corporation. Even petitioners counsel, Atty. Marcial T. Balgos, in his letter 16 dated October 15, 1987 addressed to the Central Bank, expressly referred to petitioner Sicam as the proprietor of the pawnshop notwithstanding the alleged incorporation in April 1987. We also find no merit in petitioners' argument that since respondents had alleged in their Amended Complaint that petitioner corporation is the present owner of the pawnshop, the CA is bound to decide the case on that basis. Section 4 Rule 129 of the Rules of Court provides that an admission, verbal or written, made by a party in the course of the proceedings in the same case, does not require proof. The admission may be contradicted only by showing that it was made through palpable mistake or that no such admission was made. Thus, the general rule that a judicial admission is conclusive upon the party making it and does not require proof, admits of two exceptions, to wit: (1) when it is shown that such admission was made through palpable mistake, and (2) when it is shown that no such admission was in fact made. The latter exception allows one to contradict an admission by denying that he made such an admission.17 The Committee on the Revision of the Rules of Court explained the second exception in this wise: x x x if a party invokes an "admission" by an adverse party, but cites the admission "out of context," then the one making the "admission" may show that he made no "such" admission, or that his admission was taken out of context. x x x that the party can also show that he made no "such admission", i.e., not in the sense in which the admission is made to appear. That is the reason for the modifier "such" because if the rule simply states that the admission may be contradicted by showing that "no admission was made," the rule would not really be providing for a contradiction of the admission but just a denial. 18 (Emphasis supplied). While it is true that respondents alleged in their Amended Complaint that petitioner corporation is the present owner of the pawnshop, they did so only because petitioner Sicam alleged in his Answer to the original complaint filed against him that he was not the real party-in-interest as the pawnshop was incorporated in April 1987. Moreover, a reading of the Amended Complaint in its entirety shows that respondents referred to both petitioner Sicam and petitioner corporation where they (respondents) pawned their assorted pieces of jewelry and ascribed to both the failure to observe due diligence commensurate with the business which resulted in the loss of their pawned jewelry. Markedly, respondents, in their Opposition to petitioners Motion to Dismiss Amended Complaint, insofar as petitioner Sicam is concerned, averred as follows: Roberto C. Sicam was named the defendant in the original complaint because the pawnshop tickets involved in this case did not show that the R.C. Sicam Pawnshop was a corporation. In paragraph 1 of his Answer, he admitted the allegations in

paragraph 1 and 2 of the Complaint. He merely added "that defendant is not now the real party in interest in this case." It was defendant Sicam's omission to correct the pawnshop tickets used in the subject transactions in this case which was the cause of the instant action. He cannot now ask for the dismissal of the complaint against him simply on the mere allegation that his pawnshop business is now incorporated. It is a matter of defense, the merit of which can only be reached after consideration of the evidence to be presented in due course.19 Unmistakably, the alleged admission made in respondents' Amended Complaint was taken "out of context" by petitioner Sicam to suit his own purpose. Ineluctably, the fact that petitioner Sicam continued to issue pawnshop receipts under his name and not under the corporation's name militates for the piercing of the corporate veil. We likewise find no merit in petitioners' contention that the CA erred in piercing the veil of corporate fiction of petitioner corporation, as it was not an issue raised and litigated before the RTC. Petitioner Sicam had alleged in his Answer filed with the trial court that he was not the real partyin-interest because since April 20, 1987, the pawnshop business initiated by him was incorporated and known as Agencia de R.C. Sicam. In the pre-trial brief filed by petitioner Sicam, he submitted that as far as he was concerned, the basic issue was whether he is the real party in interest against whom the complaint should be directed. 20 In fact, he subsequently moved for the dismissal of the complaint as to him but was not favorably acted upon by the trial court. Moreover, the issue was squarely passed upon, although erroneously, by the trial court in its Decision in this manner: x x x The defendant Roberto Sicam, Jr likewise denies liability as far as he is concerned for the reason that he cannot be made personally liable for a claim arising from a corporate transaction. This Court sustains the contention of the defendant Roberto C. Sicam, Jr. The amended complaint itself asserts that "plaintiff pawned assorted jewelries in defendant's pawnshop." It has been held that " as a consequence of the separate juridical personality of a corporation, the corporate debt or credit is not the debt or credit of the stockholder, nor is the stockholder's debt or credit that of a corporation.21 Clearly, in view of the alleged incorporation of the pawnshop, the issue of whether petitioner Sicam is personally liable is inextricably connected with the determination of the question whether the doctrine of piercing the corporate veil should or should not apply to the case. The next question is whether petitioners are liable for the loss of the pawned articles in their possession. Petitioners insist that they are not liable since robbery is a fortuitous event and they are not negligent at all. We are not persuaded. Article 1174 of the Civil Code provides: Art. 1174. Except in cases expressly specified by the law, or when it is otherwise declared by stipulation, or when the nature of the obligation requires the assumption of risk, no person shall be responsible for those events which could not be foreseen or which, though foreseen, were inevitable. Fortuitous events by definition are extraordinary events not foreseeable or avoidable. It is therefore, not enough that the event should not have been foreseen or anticipated, as is commonly believed but it must be one impossible to foresee or to avoid. The mere difficulty to foresee the happening is not impossibility to foresee the same. 22

To constitute a fortuitous event, the following elements must concur: (a) the cause of the unforeseen and unexpected occurrence or of the failure of the debtor to comply with obligations must be independent of human will; (b) it must be impossible to foresee the event that constitutes the caso fortuito or, if it can be foreseen, it must be impossible to avoid; (c) the occurrence must be such as to render it impossible for the debtor to fulfill obligations in a normal manner; and, (d) the obligor must be free from any participation in the aggravation of the injury or loss. 23 The burden of proving that the loss was due to a fortuitous event rests on him who invokes it. 24 And, in order for a fortuitous event to exempt one from liability, it is necessary that one has committed no negligence or misconduct that may have occasioned the loss. 25 It has been held that an act of God cannot be invoked to protect a person who has failed to take steps to forestall the possible adverse consequences of such a loss. One's negligence may have concurred with an act of God in producing damage and injury to another; nonetheless, showing that the immediate or proximate cause of the damage or injury was a fortuitous event would not exempt one from liability. When the effect is found to be partly the result of a person's participation -- whether by active intervention, neglect or failure to act -- the whole occurrence is humanized and removed from the rules applicable to acts of God. 26 Petitioner Sicam had testified that there was a security guard in their pawnshop at the time of the robbery. He likewise testified that when he started the pawnshop business in 1983, he thought of opening a vault with the nearby bank for the purpose of safekeeping the valuables but was discouraged by the Central Bank since pawned articles should only be stored in a vault inside the pawnshop. The very measures which petitioners had allegedly adopted show that to them the possibility of robbery was not only foreseeable, but actually foreseen and anticipated. Petitioner Sicams testimony, in effect, contradicts petitioners defense of fortuitous event. Moreover, petitioners failed to show that they were free from any negligence by which the loss of the pawned jewelry may have been occasioned. Robbery per se, just like carnapping, is not a fortuitous event. It does not foreclose the possibility of negligence on the part of herein petitioners. In Co v. Court of Appeals,27 the Court held: It is not a defense for a repair shop of motor vehicles to escape liability simply because the damage or loss of a thing lawfully placed in its possession was due to carnapping. Carnapping per se cannot be considered as a fortuitous event. The fact that a thing was unlawfully and forcefully taken from another's rightful possession, as in cases of carnapping, does not automatically give rise to a fortuitous event. To be considered as such, carnapping entails more than the mere forceful taking of another's property. It must be proved and established that the event was an act of God or was done solely by third parties and that neither the claimant nor the person alleged to be negligent has any participation. In accordance with the Rules of Evidence, the burden of proving that the loss was due to a fortuitous event rests on him who invokes it which in this case is the private respondent. However, other than the police report of the alleged carnapping incident, no other evidence was presented by private respondent to the effect that the incident was not due to its fault. A police report of an alleged crime, to which only private respondent is privy, does not suffice to establish the carnapping. Neither does it prove that there was no fault on the part of private respondent notwithstanding the parties' agreement at the pre-trial that the car was carnapped. Carnapping does not foreclose the possibility of fault or negligence on the part of private respondent.28 Just like in Co, petitioners merely presented the police report of the Paraaque Police Station on the robbery committed based on the report of petitioners' employees which is not sufficient to establish robbery. Such report also does not prove that petitioners were not at fault. On the contrary, by the very evidence of petitioners, the CA did not err in finding that petitioners are guilty of concurrent or contributory negligence as provided in Article 1170 of the Civil Code, to wit:

Art. 1170. Those who in the performance of their obligations are guilty of fraud, negligence, or delay, and those who in any manner contravene the tenor thereof, are liable for damages.29 Article 2123 of the Civil Code provides that with regard to pawnshops and other establishments which are engaged in making loans secured by pledges, the special laws and regulations concerning them shall be observed, and subsidiarily, the provisions on pledge, mortgage and antichresis. The provision on pledge, particularly Article 2099 of the Civil Code, provides that the creditor shall take care of the thing pledged with the diligence of a good father of a family. This means that petitioners must take care of the pawns the way a prudent person would as to his own property. In this connection, Article 1173 of the Civil Code further provides: Art. 1173. The fault or negligence of the obligor consists in the omission of that diligence which is required by the nature of the obligation and corresponds with the circumstances of the persons, of time and of the place. When negligence shows bad faith, the provisions of Articles 1171 and 2201, paragraph 2 shall apply. If the law or contract does not state the diligence which is to be observed in the performance, that which is expected of a good father of a family shall be required. We expounded in Cruz v. Gangan30 that negligence is the omission to do something which a reasonable man, guided by those considerations which ordinarily regulate the conduct of human affairs, would do; or the doing of something which a prudent and reasonable man would not do.31 It is want of care required by the circumstances. A review of the records clearly shows that petitioners failed to exercise reasonable care and caution that an ordinarily prudent person would have used in the same situation. Petitioners were guilty of negligence in the operation of their pawnshop business. Petitioner Sicam testified, thus: Court: Q. Do you have security guards in your pawnshop? A. Yes, your honor. Q. Then how come that the robbers were able to enter the premises when according to you there was a security guard? A. Sir, if these robbers can rob a bank, how much more a pawnshop. Q. I am asking you how were the robbers able to enter despite the fact that there was a security guard? A. At the time of the incident which happened about 1:00 and 2:00 o'clock in the afternoon and it happened on a Saturday and everything was quiet in the area BF Homes Paraaque they pretended to pawn an article in the pawnshop, so one of my employees allowed him to come in and it was only when it was announced that it was a hold up. Q. Did you come to know how the vault was opened? A. When the pawnshop is official (sic) open your honor the pawnshop is partly open. The combination is off. Q. No one open (sic) the vault for the robbers? A. No one your honor it was open at the time of the robbery. Q. It is clear now that at the time of the robbery the vault was open the reason why the robbers were able to get all the items pawned to you inside the vault.

A. Yes sir.32 revealing that there were no security measures adopted by petitioners in the operation of the pawnshop. Evidently, no sufficient precaution and vigilance were adopted by petitioners to protect the pawnshop from unlawful intrusion. There was no clear showing that there was any security guard at all. Or if there was one, that he had sufficient training in securing a pawnshop. Further, there is no showing that the alleged security guard exercised all that was necessary to prevent any untoward incident or to ensure that no suspicious individuals were allowed to enter the premises. In fact, it is even doubtful that there was a security guard, since it is quite impossible that he would not have noticed that the robbers were armed with caliber .45 pistols each, which were allegedly poked at the employees.33 Significantly, the alleged security guard was not presented at all to corroborate petitioner Sicam's claim; not one of petitioners' employees who were present during the robbery incident testified in court. Furthermore, petitioner Sicam's admission that the vault was open at the time of robbery is clearly a proof of petitioners' failure to observe the care, precaution and vigilance that the circumstances justly demanded. Petitioner Sicam testified that once the pawnshop was open, the combination was already off. Considering petitioner Sicam's testimony that the robbery took place on a Saturday afternoon and the area in BF Homes Paraaque at that time was quiet, there was more reason for petitioners to have exercised reasonable foresight and diligence in protecting the pawned jewelries. Instead of taking the precaution to protect them, they let open the vault, providing no difficulty for the robbers to cart away the pawned articles. We, however, do not agree with the CA when it found petitioners negligent for not taking steps to insure themselves against loss of the pawned jewelries. Under Section 17 of Central Bank Circular No. 374, Rules and Regulations for Pawnshops, which took effect on July 13, 1973, and which was issued pursuant to Presidential Decree No. 114, Pawnshop Regulation Act, it is provided that pawns pledged must be insured, to wit: Sec. 17. Insurance of Office Building and Pawns- The place of business of a pawnshop and the pawns pledged to it must be insured against fire and against burglary as well as for the latter(sic), by an insurance company accredited by the Insurance Commissioner. However, this Section was subsequently amended by CB Circular No. 764 which took effect on October 1, 1980, to wit: Sec. 17 Insurance of Office Building and Pawns The office building/premises and pawns of a pawnshop must be insured against fire. (emphasis supplied). where the requirement that insurance against burglary was deleted. Obviously, the Central Bank considered it not feasible to require insurance of pawned articles against burglary. The robbery in the pawnshop happened in 1987, and considering the above-quoted amendment, there is no statutory duty imposed on petitioners to insure the pawned jewelry in which case it was error for the CA to consider it as a factor in concluding that petitioners were negligent. Nevertheless, the preponderance of evidence shows that petitioners failed to exercise the diligence required of them under the Civil Code. The diligence with which the law requires the individual at all times to govern his conduct varies with the nature of the situation in which he is placed and the importance of the act which he is to perform.34 Thus, the cases of Austria v. Court of Appeals,35 Hernandez v. Chairman, Commission on Audit36 and Cruz v. Gangan37 cited by petitioners in their pleadings, where the victims of robbery were exonerated from liability, find no application to the present case. In Austria, Maria Abad received from Guillermo Austria a pendant with diamonds to be sold on commission basis, but which Abad failed to subsequently return because of a robbery committed upon her in 1961. The incident became the subject of a criminal case filed against several persons. Austria filed an action against Abad and her husband (Abads) for recovery of the

pendant or its value, but the Abads set up the defense that the robbery extinguished their obligation. The RTC ruled in favor of Austria, as the Abads failed to prove robbery; or, if committed, that Maria Abad was guilty of negligence. The CA, however, reversed the RTC decision holding that the fact of robbery was duly established and declared the Abads not responsible for the loss of the jewelry on account of a fortuitous event. We held that for the Abads to be relieved from the civil liability of returning the pendant under Art. 1174 of the Civil Code, it would only be sufficient that the unforeseen event, the robbery, took place without any concurrent fault on the debtors part, and this can be done by preponderance of evidence; that to be free from liability for reason of fortuitous event, the debtor must, in addition to the casus itself, be free of any concurrent or contributory fault or negligence.38 We found in Austria that under the circumstances prevailing at the time the Decision was promulgated in 1971, the City of Manila and its suburbs had a high incidence of crimes against persons and property that rendered travel after nightfall a matter to be sedulously avoided without suitable precaution and protection; that the conduct of Maria Abad in returning alone to her house in the evening carrying jewelry of considerable value would have been negligence per se and would not exempt her from responsibility in the case of robbery. However we did not hold Abad liable for negligence since, the robbery happened ten years previously; i.e., 1961, when criminality had not reached the level of incidence obtaining in 1971. In contrast, the robbery in this case took place in 1987 when robbery was already prevalent and petitioners in fact had already foreseen it as they wanted to deposit the pawn with a nearby bank for safekeeping. Moreover, unlike in Austria, where no negligence was committed, we found petitioners negligent in securing their pawnshop as earlier discussed. In Hernandez, Teodoro Hernandez was the OIC and special disbursing officer of the Ternate Beach Project of the Philippine Tourism in Cavite. In the morning of July 1, 1983, a Friday, he went to Manila to encash two checks covering the wages of the employees and the operating expenses of the project. However for some reason, the processing of the check was delayed and was completed at about 3 p.m. Nevertheless, he decided to encash the check because the project employees would be waiting for their pay the following day; otherwise, the workers would have to wait until July 5, the earliest time, when the main office would open. At that time, he had two choices: (1) return to Ternate, Cavite that same afternoon and arrive early evening; or (2) take the money with him to his house in Marilao, Bulacan, spend the night there, and leave for Ternate the following day. He chose the second option, thinking it was the safer one. Thus, a little past 3 p.m., he took a passenger jeep bound for Bulacan. While the jeep was on Epifanio de los Santos Avenue, the jeep was held up and the money kept by Hernandez was taken, and the robbers jumped out of the jeep and ran. Hernandez chased the robbers and caught up with one robber who was subsequently charged with robbery and pleaded guilty. The other robber who held the stolen money escaped. The Commission on Audit found Hernandez negligent because he had not brought the cash proceeds of the checks to his office in Ternate, Cavite for safekeeping, which is the normal procedure in the handling of funds. We held that Hernandez was not negligent in deciding to encash the check and bringing it home to Marilao, Bulacan instead of Ternate, Cavite due to the lateness of the hour for the following reasons: (1) he was moved by unselfish motive for his co-employees to collect their wages and salaries the following day, a Saturday, a non-working, because to encash the check on July 5, the next working day after July 1, would have caused discomfort to laborers who were dependent on their wages for sustenance; and (2) that choosing Marilao as a safer destination, being nearer, and in view of the comparative hazards in the trips to the two places, said decision seemed logical at that time. We further held that the fact that two robbers attacked him in broad daylight in the jeep while it was on a busy highway and in the presence of other passengers could not be said to be a result of his imprudence and negligence. Unlike in Hernandez where the robbery happened in a public utility, the robbery in this case took place in the pawnshop which is under the control of petitioners. Petitioners had the means to screen the persons who were allowed entrance to the premises and to protect itself from unlawful intrusion. Petitioners had failed to exercise precautionary measures in ensuring that the robbers were prevented from entering the pawnshop and for keeping the vault open for the day, which paved the way for the robbers to easily cart away the pawned articles.

In Cruz, Dr. Filonila O. Cruz, Camanava District Director of Technological Education and Skills Development Authority (TESDA), boarded the Light Rail Transit (LRT) from Sen. Puyat Avenue to Monumento when her handbag was slashed and the contents were stolen by an unidentified person. Among those stolen were her wallet and the government-issued cellular phone. She then reported the incident to the police authorities; however, the thief was not located, and the cellphone was not recovered. She also reported the loss to the Regional Director of TESDA, and she requested that she be freed from accountability for the cellphone. The Resident Auditor denied her request on the ground that she lacked the diligence required in the custody of government property and was ordered to pay the purchase value in the total amount of P4,238.00. The COA found no sufficient justification to grant the request for relief from accountability. We reversed the ruling and found that riding the LRT cannot per se be denounced as a negligent act more so because Cruzs mode of transit was influenced by time and money considerations; that she boarded the LRT to be able to arrive in Caloocan in time for her 3 pm meeting; that any prudent and rational person under similar circumstance can reasonably be expected to do the same; that possession of a cellphone should not hinder one from boarding the LRT coach as Cruz did considering that whether she rode a jeep or bus, the risk of theft would have also been present; that because of her relatively low position and pay, she was not expected to have her own vehicle or to ride a taxicab; she did not have a government assigned vehicle; that placing the cellphone in a bag away from covetous eyes and holding on to that bag as she did is ordinarily sufficient care of a cellphone while traveling on board the LRT; that the records did not show any specific act of negligence on her part and negligence can never be presumed. Unlike in the Cruz case, the robbery in this case happened in petitioners' pawnshop and they were negligent in not exercising the precautions justly demanded of a pawnshop. WHEREFORE, except for the insurance aspect, the Decision of the Court of Appeals dated March 31, 2003 and its Resolution dated August 8, 2003, are AFFIRMED. Costs against petitioners. SO ORDERED.

Republic of the Philippines SUPREME COURT Manila FIRST DIVISION G.R. No. 151035 June 3, 2004

ANDREA MAYOR and VERGEL ROMULO, petitioners, vs. LOURDES MASANGKAY BELEN and LEONARDO BELEN, respondents. DECISION YNARES-SANTIAGO, J.: The crux of the controversy in this petition for review is whether or not the execution of the Kasulatan ng Bilihang Tuluyan and Kasulatan ng Sanglaan covering a 179 square meter lot on which stands the house where respondents live is tainted with irregularity. Petitioners claim that said contracts are binding on respondents because the latter freely and voluntarily executed them. The respondents, however, contend that the execution of the documents was procured through fraud and undue influence. The trial court sustained respondents. The ruling of the lower court was affirmed on appeal with modifications by the appellate tribunal. Aggrieved, petitioners elevated their cause by way of this proceeding to this Court. The undisputed facts as culled from the factual findings of the appellate court 1 are as follows: Petitioner Andrea Mayor was the original owner of the a parcel of land located at Bonifacio Street, San Pablo City measuring about 179 square meters, more or less. On November 27, 1979, respondent Lourdes M. Belen purchased the subject property from Andrea Mayor in consideration of P18,000.00 payable in installments. Lourdes M. Belen was able to pay P11,445.00 out of the P18,000.00 purchase price leaving a balance of P6,555.00. On June 17, 1980, Lourdes M. Belen sold back the subject property to Andrea Mayor in consideration of P18,000.00. For this purpose, Lourdes M. Belen executed the Kasulatan ng Bilihang Tuluyan in favor of Andrea Mayor. On June 19, 1980, to secure a loan in the amount of P12,000.00 obtained from Lourdes M. Belen, Andrea Mayor executed a real estate mortgage over the subject property denominated as Kasulatan ng Sanglaan in favor of the former. On August 4, 1980, Lourdes M. Belen filed a civil suit against Andrea Mayor, docketed as Civil Case No. SP-1755, for annulment of the Kasulatang Bilihang Tuluyan and Kasulatan ng Sanglaan. In the complaint, Lourdes alleged, among others, that petitioner Andrea Mayor, through copetitioner Vergel Romulo a.k.a. Virgilio Romulo, made her believe that the sale in her favor by Andrea is void because the deed of conveyance did not reflect the true agreement of the parties as to the mode of payment of the purchase price, i.e., the purchase price was made on installments and not in cash as stipulated in the document. Lourdes further averred that she was also made to believe that she might lose what she had already paid which amounted to 70% of the purchase price. She was convinced by the representations of Andrea and Romulo that it would be best for the latter to make it appear that Andrea was merely mortgaging the subject property to her. Lourdes readily agreed to the scheme believing that it was for the protection of her rights. It turned out that the scheme was in fact a ruse employed by Romulo and Andrea to re-acquire the property, thus, Lourdess consent in the execution of the Kasulatan ng Bilihang Tuluyan and Kasulatan ng Sanglaan was obtained through fraud and undue influence. In her answer with counterclaim, Andrea Mayor denied the material allegations of the complaint insisting, in sum, that Lourdes M. Belen freely and voluntarily executed the subject contracts and the same is binding on the parties thereto.

On August 11, 1980, Leonardo Belen filed a complaint for Annulment of Deed of Absolute Sale and Real Estate Mortgage against Andrea Mayor and Lourdes Masangkay a.k.a Lourdes M. Belen. In the complaint, docketed as Civil Case No. SP-1756, he averred that he is living with Lourdes M. Belen without benefit of marriage. Lourdes bought the subject property from Andrea Mayor using their common fund. On account of the fraudulent acts of Andrea Mayor in connivance with Virgilio Romulo, Lourdes M. Belen agreed to execute the Kasulatan ng Bilihang Tuluyan and the Kasulatan ng Sanglaan. For lack of his approval or consent thereto, as coowner of the property, the said documents are null and void. Denying the allegations of the complaint, Andrea Mayor in her answer with counterclaim averred that Leonardo Belen did not have a cause of action because he was neither a party nor a privy to any of the subject contracts. Andrea also alleged that the execution thereof was Lourdess free and voluntary act. Subsequently on February 16, 1981, Leonardo Belen and Lourdes M. Belen filed a complaint for Damages against Virgilio Romulo. In the complaint, docketed as Civil Case No. SP-1821, Lourdes and Leonardo averred that they sustained damages for Virgilios fraudulent acts of inducing Lourdes to sign the subject contracts. In his answer, Virgilio Romulo insisted that he never had any transaction with Lourdes M. Belen and Leonardo Belen. For instituting a baseless action against him, Lourdes and Leonardo should be held liable for damages. The three cases were consolidated and jointly tried. After trial, the court a quo rendered judgment in favor of the Belens, the dispositive portion of which reads: WHEREFORE, judgment is hereby rendered declaring the Kasulatan ng Bilihang Tuluyan dated June 17, 1980 and the Kasulatan ng Sanglaan dated June 19, 1980 null and void and ordering: 1. the defendants to jointly and severally pay to the plaintiffs Leonardo Belen and Lourdes Masangkay Belen the sum of P15,000.00 for their attorneys fees and costs of litigation in these three cases. 2. Virgilio Romulo to pay the plaintiffs the sum of P20,000.00 as moral damages. Dissatisfied, petitioners elevated their cause to the Court of Appeals which rendered judgment 2 affirming the assailed decision but deleting the award of attorneys fees. A motion for reconsideration was subsequently denied.3 Hence, the instant petition filed by petitioners who argue: THAT WITH DUE RESPECT TO THE FINDINGS MADE BY PUBLIC RESPONDENT HONORABLE COURT OF APPEALS, THE PRIVATE RESPONDENTS WERE NOT ABLE TO PROVE THE FRAUD AND UNDUE INFLUENCE THEY CLAIMED TO HAVE BEEN EXERTED ON THEM BY THE PETITIONER IN THE EXECUTION OF THE QUESTIONED KASULATAN NG BILIHAN AND KASULATAN NG SANGLAAN. The issue for resolution is whether or not fraud attended the execution of the Kasulatan ng Bilihan and Kasulatan ng Sanglaan. The Civil Code provides that ART. 1338. There is fraud when, through insidious words or machinations of one of the contracting parties, the other is induced to enter into a contract which, without them, he would not have agreed to. As defined, fraud refers to all kinds of deception, whether through insidious machination, manipulation, concealment or misrepresentation to lead another party into error. 4 The deceit employed must be serious. It must be sufficient to impress or lead an ordinarily prudent person into error, taking into account the circumstances of each case. 5

In support of their cause, petitioners intone the shopworn legal maxim that fraus est odiosa et non praesumenda and argue that to establish the claim of fraud, evidence must be clear and more than merely preponderant. They contend, in sum, that the two deeds were duly executed by the parties thereto in accordance with the formalities required by law and as public documents the evidence to overcome their recitals is wanting. We disagree. Impressive as the arguments petitioners have advanced in support of their cause may be, the fatal flaw lies in their inability to convincingly substantiate their claim that Lourdes M. Belen signed the contracts freely and voluntarily. This brings to the fore Lourdes M. Belens limited educational attainment. While indeed petitioners point out that the deeds denominated as Kasulatan ng Bilihang Tuluyan and Kasulatan ng Sanglaan were executed in Tagalog, a close scrutiny thereof shows that they are practically literal translations of their English counterparts. Thus, the mere fact that the documents were executed in the vernacular neither clarified nor simplified matters for Lourdes who admitted on cross-examination that she merely finished Grade 3, could write a little, and understand a little of the Tagalog language.6 The appellate court could not then be faulted when it invoked Article 1332 of the Civil Code which states: ART. 1332. When one of the parties is unable to read, or if the contract is in a language not understood by him, and mistake or fraud is alleged, the person enforcing the contract must show that the terms thereof have been fully explained to the former. As aptly pointed out by the Court of Appeals, the principle that a party is presumed to know the import of a document to which he affixes his signature is modified by the foregoing article. Under the said article, where a party is unable to read or when the contract is in a language not understood by a party and mistake or fraud is alleged, the obligation to show that the terms of the contract had been fully explained to said party who is unable to read or understand the language of the contract devolves on the party seeking to enforce it. The burden rests upon the party who seeks to enforce the contract to show that the other party fully understood the contents of the document. If he fails to discharge this burden, the presumption of mistake, if not, fraud, stands unrebutted and controlling.7 In this case, petitioners alleged that Lourdes M. Belen affixed her signature on the questioned contracts freely and voluntarily. We have assiduously scoured the record but like the appellate court we have not come across convincing evidence to support their allegations. In civil cases, he who alleges a fact has the burden of proving it by a preponderance of evidence. 8 Suffice it to state that such self-serving claims are not enough to rebut the presumption of fraud provided for in Article 1332 of the Civil Code. As the party claiming affirmative relief from the court, it is incumbent upon petitioners to convincingly prove their claim. This they failed to do. Bare allegations, unsubstantiated by evidence are not equivalent to proof under our Rules. 9 In short, mere allegations are not evidence.10 Concededly, both the Kasulatan ng Bilihang Tuluyan and the Kasulatan ng Sanglaan are public documents and there is no dispute that generally, a notarized document carries the evidentiary weight conferred upon it with respect to its due execution. In addition, documents acknowledged before a notary public have in their favor the presumption of regularity. However, the presumption is not absolute and may be rebutted by clear and convincing evidence to the contrary.11 The presumption cannot be made to apply in this case because the regularity in the execution of the documents were challenged in the proceedings below where their prima facie validity was overthrown by the highly questionable circumstances pointed out by both trial and appellate courts. Furthermore, notarization per se is not a guarantee of the validity of the contents of a document. Indeed, as stated by the Supreme Court in Nazareno v. CA:12 The fact that the deed of sale was notarized is not a guarantee of the validity of its contents. As held in Suntay v. Court of Appeals:13

Though the notarization of the deed of sale in question vests in its favor the presumption of regularity, it is not the intention nor the function of the notary public to validate and make binding an instrument never, in the first place, intended to have any binding legal effect upon the parties thereto. The intention of the parties still and always is the primary consideration in determining the true nature of the contract. The impugned documents cannot be presumed as valid because of the direct challenge posed thereto by respondents, which is precisely the reason for the commencement of this case: to bring to the fore the irregularity in their execution. There are, moreover, other factual circumstances pointed out by both the trial and appellate courts which militate against the contention of petitioners. The evidence on record shows that the respondents Belens intended to stay and occupy the subject land for a considerable length of time. As borne out by the records, respondents bought from Celita Bordeos the house standing on the subject land then owned by Andrea Mayor. 14 Four years later or on November 27, 1979, respondents bought the subject land from petitioner Andrea Mayor.15 They bought the said land through installments and already paid P11,445.00 of the P18,000.00 purchase price. They also caused the transfer in their names of the tax declarations over the subject land and house. This they did even before they could have completed the payment of the purchase price. In short, their intention and desire to stay on the property is very evident. Petitioners suggestion, therefore, that respondents made a sudden volte face and decided to resell the property to them seven months from the date of the propertys acquisition, after payment of almost two-thirds of the purchase price and transferring the tax declarations thereof in respondents names, borders on the absurd and the incredible. It simply is contrary to human experience for respondents to have had a hasty change of heart to dispose of the land on which they intend to make their home and upon which they had invested so much. Petitioners advance the excuse that respondents wanted to immediately dispose of the subject property because the area would be soon converted into a park. If this were so, why would Lourdes Belen thereafter accept the very same property as security knowing fully well that it would revert to the public domain? A mortgage subjects the property upon which it is imposed, whoever the possessor may be, to the fulfillment of the obligation whose security it was constituted. 16 Thus, in case of nonpayment, the creditor may proceed against the property for the fulfillment of the obligation. No creditor would accept property as security for the fulfillment of the obligation knowing that the property offered as security would soon be out of the commerce of man. 17 Finally, the non-presentation of petitioner Andrea Mayor on the witness stand is likewise not lost on us and adds to the weakness of petitioners cause. While it is true that the non-presentation of a witness is not a reason for discrediting a partys defense, still we are inclined to take this omission against them in view of the numerous loopholes in their defense. 18 All told, we see no reason in overturning the findings of the appellate court. As has often been stated, "[t]he jurisdiction of this Court over cases brought to it from the Court of Appeals is limited to a review of questions of law since the factual conclusions thereon are conclusive. There are of course exceptions to this rule, but none obtain in the case at bar to warrant a scrutiny of the Court of Appeals conclusions which are supported by the evidence on record and carry more weight, it having affirmed the trial courts factual conclusions." 19 WHEREFORE, in view of all the foregoing, the petition is DENIED and the decision dated April 3, 2001 of the Court of Appeals in CA-G.R. CV No. 48646, is AFFIRMED in toto. SO ORDERED.

Republic of the Philippines SUPREME COURT SECOND DIVISION G.R. No. 157845 September 20, 2005 PHILIPPINE NATIONAL BANK, Petitioners, vs. NORMAN Y. PIKE, Respondent. DECISION CHICO-NAZARIO, J.: This petition for review on certiorari under Rule 45 of the 1997 Rules of Civil Procedure, as amended, seeks to reverse the Decision1 dated 19 December 2002, and the Resolution2 dated 02 April 2003, both of the Court of Appeals, in CA-G.R. CV No. 59389, which affirmed with modification the Decision3 rendered by the Regional Trial Court (RTC), Branch 07 of Manila, dated 10 January 1997, in Civil Case No. 94-68821 in favor of herein respondent Norman Pike (Pike). The case stemmed from a complaint filed by herein respondent Pike for damages against Philippine National Bank (PNB) on 04 January 1994. Complainant Pike often traveled to and from Japan as a gay entertainer in said country. Sometime in 1991, he opened U.S. Dollar Savings Account No. 0265-704591-0 with herein petitioner PNB Buendia branch for which he was issued a corresponding passbook. The complaint alleged in substance that before complainant Pike left for Japan on 18 March 1993, he kept the aforementioned passbook inside a cabinet under lock and key, in his home; that on 19 April 1993, a few hours after he arrived from Japan, he discovered that some of his valuables were missing including the passbook; that he immediately reported the incident to the police which led to the arrest and prosecution of a certain Mr. Joy Manuel Davasol; that complainant Pike also discovered that Davasol made two (2) unauthorized withdrawals from his U.S. Dollar Savings Account No. 0265-704591-0, both times at the PNB Buendia branch on the following dates: DATE 31 March 1993 05 April 1993 TOTAL AMOUNT $3,500.00 4,000.00 $7,500.00
4 5

Choreographer, Joy Davasol who shall present pre-signed withdrawal slips bearing his (Pikes) signature. . . On April 19, 1993, a certain Josephine Balmaceda, who claimed to be plaintiffs sister executed an affidavit . . . . stating therein that they discovered today (April 19, 1993) the lost (sic) of her brothers passbook issued by PNB on account of robbery, committed in the residence/office of her brother, promptly reporting the matter to the police authorities and her brother cannot report the matter to the Bank because he was currently in Japan and therefore requesting the Bank to issue a hold-order on her brothers passbook. But a copy of an alarm (Police) Report dated April 19, 1993. . . stated that plaintiff (who was the one who reported the matter) after one month in Japan, he (complainant) arrived yesterday. . . On April 26, 1993, Atty. Nathaniel Ifurung who claims to be plaintiffs counsel sent a demand letter to VP Violeta T. Suquila (then VP and Manager of PNB Buendia Branch) demanding the bank to credit back the amount of US$7,500.00 which were withdrawn on March 31, 1993 and April 5, 1993, because his clients signatures were forged and the withdrawal made thereon were unauthorized. . . On May 5, 1993, Mr. Norman Y. Pike executed an affidavit of loss (sic) Dollar Account Passbook and requested the PNB to replace the same and allow him to make withdrawals thereon. He stated that his passbook was stolen together with other valuables which he discovered only in the early morning of April 19, 1993. . . On May 6, 1993, plaintiff Norman Y. Pike wrote a letter. . . addressed to the Manager of PNB, Buendia Branch the full contents of said letter hereto quoted as follows: May 6, 1993 The Manager Philippine National Bank Buendia Branch Paseo de Roxas cor. Gil Puyat Street Makati, Metro Manila Sir: In connection with the request of my sister, Mrs. Josephine P. Balmaceda for the hold-order on my dollar savings passbook No. 265-704591-0, I am now requesting your good office to lift the same so I can withdraw the remaining balance of my passbook which was reported lost sometime in March of this year. I also promise not to hold responsible the bank and its officers for the withdrawal made on my dollar savings passbook on March 19 and April 5, 1993 respectively as a result of the lost (sic) of my passbook. Sgd. NORMAN Y. PIKE Depositor Philippine Passport No. H918022 Issued at Manila on Sept. 6, 1990 Place of Issuance On the same day May 6, 1993 Plaintiff Norman Y. Pike was allowed by defendant bank to withdraw the remaining balance from his passbook .

that on several occasions, complainant Pike went to defendant PNBs Buendia branch and verbally protested the unauthorized withdrawals and likewise demanded the return of the total withdrawn amount of U.S. $7,500.00, on the ground that he never authorized anybody to withdraw from his account as the signatures appearing on the subject withdrawal slips were clearly forgeries; that defendant PNB refused to credit said amount back to complainants U.S. Dollar Savings Account without justifiable reason, and instead, defendant bank wrote him that it exercised due diligence in the handling of said account; and that on 06 May 1993, complainant Pike wrote defendant PNB simply to request that the hold-account be lifted so that he may withdraw the remaining balance left in his U.S.$ Savings Account and nothing else. On the other hand, defendant PNB alleged, in its Motion to Dismiss 6 of 18 April 1994, a counterstatement of facts. Its factual allegations read: . . . On March 15, 1993 at PNB Buendia Branch, Mr. Norman Y. Pike, together with a certain Joy Davasol went to see PNB AVP Mr. Lorenzo T. Val (sic), Jr. purposely to withdraw the amount of $2,000.00. Mr. Pike also informed AVP Val that he is leaving for abroad (Japan) and made verbal instruction to honor all withdrawals to be transmitted by his Talent Manager and

A letter dated May 18, 1993 was sent to Plaintiffs counsel by PNB stating that the Bank regrets that it cannot accede to such request inasmuch as the Bank exercised due diligence of a good father to his family in the handling of transactions covering the deposit account of Mr. Pike . On July 2, 1993, Plaintiffs counsel sent a letter to PNB Vice Pres. Suquila denying that his client made any such promise not to hold responsible the bank and its officers for the withdrawal made . A letter dated July 29, 1993 was sent to Plaintiffs counsel by VP Suquila stating that plaintiffs withdrawal of the remaining balance of his account with the Bank effectively estops him from claiming on the alleged unauthorized withdrawals. The trial court, in its decision dated 10 January 1997, made the following findings of fact: . . . [T]hat the bank is responsible for such unauthorized withdrawals. The court is not impressed with the defense put up by the bank. Its contention that the withdrawals were authorized by the plaintiff because there was an arrangement between the bank represented by its Asst. Vice President Lorenzo Bal, Jr. and the depositor Norman Y. Pike to the effect that pre-signed withdrawal slips, that is, withdrawal slip signed by the depositor in the presence of Mr. Bal whereby it would be made to appear that it was the depositor himself who presented the same to the bank despite the fact that it was another person who presented the same should be honored by the bank cannot be sanctioned by the court. Firstly, the court is not satisfied that there was indeed such an arrangement. . . It is Mr. Bals contention that such an arrangement although not ordinarily entered into is still a legal procedure of the bank and is resorted to accommodate the depositors specially honored and valued depositor at that. ... The court compared the signatures in the questioned withdrawal slips with the known signatures of the depositor and is convinced that the signatures in the unauthorized withdrawal slips do not correspond to the true signatures of the depositor. From the evidence that it received, the court is convinced that the bank was negligent in the performance of its duties such that unauthorized withdrawals were made in the deposit of plaintiff Norman Y. Pike.7 The dispositive portion of the trial courts decision reads: WHEREFORE and considering the foregoing, judgment is hereby rendered in favor of the plaintiff and against the defendant and ordering the defendant to pay the following: 1. US$7,500.00 plus interest thereon at the rate of 12% per annum until the full amount is paid; 2. P25,000.00 for and as attorneys fees; 3. P50,000.00 as moral damages and P50,000.00 as exemplary damages; and 4. Plus the costs of suit.8 Defendant PNBs motion for reconsideration was subsequently denied by the court a quo.9 On appeal, the Court of Appeals issued the assailed decision dated 19 December 2002, affirming the findings of the RTC that indeed defendant-appellant PNB was negligent in exercising the diligence required of a business imbued with public interest such as that of the banking industry, however, it modified the rate of interest and award for damages, to wit: WHEREFORE, premises considered, the Decision dated January 10, 1997 issued by the Regional Trial Court of Manila, Branch 7, in Civil Case No. 94-68821, is hereby AFFIRMED with MODIFICATION, as follows: 1. Ordering appellant, the Philippine National Bank, Buendia Branch, to refund appellee the amount of $7,500.00 plus interest of 6% per annum to be computed from the date of the filing of

the complaint which interest rate shall become 12% per annum from the time the judgment in this case becomes final and executory until its satisfaction; 2. The award for moral damages is reduced to P20,000.00; and 3. The award for exemplary damages is likewise reduced to P20,000.00. Costs against appellant.10 The appellate court held that: Appellant claims that appellee personally talked to its officers to allow Joy Manuel Davasol to make withdrawals. Appellee even left pre-signed withdrawal slips before he went to Japan. However, appellant could have told appellee to authorize the withdrawal by a representative by indicating the same at the space provided at the back portion of the withdrawal slip. This operational flaw was observed by the trial court, when it ruled: The court cannot also understand why the bank did not require the correct, proper and the usual procedure of requiring a depositor who is withdrawing the money through a representative to fill up the back portion of the withdrawal slips, which form was issued by the bank itself. A perusal of the records discloses that appellee had previously authorized withdrawals by a representative. However, these withdrawals were properly accompanied by a "withdrawal by a representative" form aside from a handwritten request by appellee to allow such withdrawals by his representative, or a typewritten letter-request for withdrawal by a representative. Certainly, appellant lacked the due care and caution required of managers and employees of a firm engaged in so sensitive and demanding business as banking. In its desire to be exonerated from liability, appellant advances the argument that, granting negligence on its part, appellee condoned this negligence as shown in his letter dated May 6, 1993, wherein appellee purportedly undertook, not to hold the bank and its officers responsible for the unauthorized withdrawals from his account. We do not agree. It should be emphasized that while the appellee admitted signing the letter dated May 6, 1993, he, however, denied having undertook (sic) to exonerate the appellant from liability for the unauthorized withdrawals. Appellee questioned the second paragraph of the said letter as being superimposed so that his signature overlapped the text of the second paragraph of said letter. A waiver of right, in order to be valid, should be in a language that clearly manifests his desire to do so. In the instant case, appellees filing of the instant action is inconsistent with appellants contention that he had waived his right to question appellants negligent act of allowing the unauthorized withdrawals from his account. 11 Defendant-appellant PNB filed a motion for reconsideration. In a Resolution dated 02 April 2003, the Court of Appeals denied said motion. Hence, this petition. Petitioner PNB now seeks the review of the aforequoted decision and resolution of the Court of Appeals predicated on the following issues: I. WHETHER OR NOT THE PRINCIPLE OF ESTOPPEL WAS NOT PROPERLY APPLIED IN THIS CASE; II. WHETHER OR NOT RESPONDENT HAVE SUBSTANTIALLY PROVEN THAT THE SIGNATURES APPEARING ON THE TWO (2) QUESTIONED PRE-SIGNED WITHDRAWAL SLIP FORMS ARE ALL FORGERIES IN ACCORDANCE WITH SECTION 22, RULE 132 OF THE REVISED RULES OF COURT; and III.

WHETHER OR NOT MORAL AND EXEMPLARY DAMAGES CAN BE AWARDED AGAINST A PARTY IN GOOD FAITH. Petitioner PNB contends that due to the verbal instructions12 of respondent Pike, a valued depositor, it allowed the withdrawal by another person. Plus, the fact that said respondent withdrew the remaining balance in his US Savings Account and executed a waiver releasing petitioner PNB from any liability due to the loss of the funds should rightly negate a finding of negligence on its part. Accordingly, petitioner PNB claims that the appellate court, as well as the trial court erred in holding that the withdrawals in question were unauthorized as the signatures appearing on the subject withdrawal slips were forgeries. Petitioner PNB, therefore, argues that it should not be held liable for the amount withdrawn from the account of respondent Pike in the sum of $7,500.00, as well as for moral and exemplary damages. A priori, it is quite evident that the petition is anchored on a plea to review or re-examine the factual conclusions reached by the trial court and affirmed by the Court of Appeals, and for this Court to hold otherwise. Whether: 1) respondent Pikes signatures appearing on the pertinent withdrawal slips used by Joy Manuel Davasol13 to withdraw the amount of $7,500.00, were forgeries, as found by the trial court and affirmed by the Court of Appeals, or were authentic as claimed by petitioner bank; and 2) respondent Pike in fact executed a waiver absolving petitioner bank from any legal responsibility due to the unauthorized withdrawals, as maintained by petitioner bank, or the paragraph containing said waiver was intercalated by some other person, thus, amounting no waiver at all, as held by the courts a quo. are questions of fact and not of law. Inexorably, these issues call for an inquiry into the facts and evidence on record. This, as we have so often held, we cannot do. Elementary is the rule that this Court is not the appropriate venue to consider anew the factual issues as it is not a trier of facts, and, it generally does not weigh anew the evidence already passed upon by the Court of Appeals.14 When this Court is tasked to go over once more the evidence presented by both parties, and analyze, assess and weigh them to ascertain if the trial court and the appellate court were correct in according superior credit to this or that piece of evidence of one party or the other, the Court cannot and will not do the same. 15 Such task is foreclosed by the rule enunciated under Section 1 of Rule 4516 of the Rules of Court: SECTION 1. Filing of petition with Supreme Court. - . . . The petition shall raise only questions of law17 which must be distinctly set forth. We have oft "ruled that factual findings of the Court of Appeals are conclusive on the parties and not reviewable by this Court and they carry even more weight when the Court of Appeals affirms the factual findings of the trial court,"18 and in the absence of any showing that the findings complained of are totally devoid of support in the evidence on record, or that they are so glaringly erroneous as to constitute serious abuse of discretion, such findings must stand. The courts a quo are in a much better position to evaluate properly the evidence. Finding no other alternative but to affirm their finding that petitioner PNB negligently allowed the unauthorized withdrawals subject of the case at bar, the instant petition for review must necessarily fail. At this juncture, it bears emphasizing that negligence of banking institutions should never be countenanced. The negligence here lies in the lackadaisical attitude exhibited by employees of petitioner PNB in their treatment of respondent Pikes US Dollar Savings Account that resulted in the unauthorized withdrawal of $7,500.00. Nevertheless, though its employees may be the ones negligent, a banks liability as an obligor is not merely vicarious but primary, as banks are expected to exercise the highest degree of diligence in the selection and supervision of their employees,19 and having such obligation, this Court cannot ignore the circumstances surrounding the case at bar how the employees of petitioner PNB turned their heads, nay, closed their eyes to the suspicious circumstances enfolding the two withdrawals subject of the case at bar. It may even be said that they went out of their ways to disregard standard operating procedures formulated to ensure the security of each and every account that they are handling.

Petitioner PNB does not deny that the withdrawal slips used were in breach of standard operating procedures of banks in the ordinary and usual course of banking operations as testified to by one of its witnesses, Mr. Lorenzo T. Bal, Assistant Vice President of Petitioner PNBs Buendia branch, on cross-examination20 he stated thus: Q: Mr. Witness, when the original of Exhibit "B"21 was presented to you for approval, how many signatures of depositor appears thereon? A: Two (2) signatures appears (sic) on the face of the withdrawal slip. Q: When it (sic) was (sic) presented to you immediately? A: Yes, sir. Q: Are you sure of that? A: Yes, sir. Because it was pre signed withdrawal slip. Q: What does the signature appear, the word recipient means? A: Received. Q: So, what you are saying is that, the depositor here signed this even before receiving the amount? A: Because before the withdrawal was made, Mr. Pike, the depositor came to the bank when he withdrew the $2,000.00 and instructed me or requested us even the supervisor to honor all withdrawal slip. Q: And this is a regular procedure? A: Yes, sir. Q: Are you sure of that? A: Yes, sir. Q: Do you have written manual on this particular procedure, Mr. Witness? A: Of course, that includes in the Rules and regulations of the bank. Q: Are you are (sic) are very sure of that? A: And banking is a fast transaction between the depositor and the bank. Q: And then, is the use of the back portion of the withdrawal slip with a heading of authorization? A: Normally, a depositor and the bank agrees on certain terms that if you allow withdrawal from his account, his or her account, its enough that the signature of the depositor appears on both spaces in the front side of the withdrawal slip. Even if you do not have the back portion of the withdrawal slip. Q: You are very sure of that? A: Yes, sir. Q: And that has been done with the other withdrawal slip of Norman Pike as stated or as shown in the Statement of Account? A: Yes, sir. Q: That withdrawal made by representative? A: Yes, sir. From the foregoing, petitioner PNBs witness was utterly remiss in protecting the banks client, as well as the bank itself, when he allowed an account holder to make it appear as if he was the

one actually withdrawing from an account and actually receiving the withdrawn amount. Ordinarily, banks allow withdrawal by someone who is not the account holder so long as the account holder authorizes his representative to withdraw and receive from his account by signing on the space provided particularly for such transactions, usually found at the back of withdrawal slips. As fittingly found by the courts a quo, if indeed, respondent Pike signed the withdrawal slips in the presence of Mr. Lorenzo Bal, petitioner PNBs AVP at its Buendia branch, why did he not call respondent Pikes attention and refer him to the space provided for authorizing representatives to withdraw from and receive the proceeds of such withdrawal? Or, at the very least, sign or initial the same so that he could identify the pre-signed withdrawal slips made by Mr. Pike? Q: You are also saying that on March 15, 1993, you likewise met Joy Manuel Dabasol? A: Yes, sir. Q: And you (sic) also saying on March 15, 1993, you also met Norman Pike, the depositor, A: Yes, sir. Q: And when did you first met (sic) Norman Pike? A: March 15 when he withdrew $2,000.00. Q: That was the first time? A: First time, yes. Q: And Mr. Norman Pike was already transacting with you long before that day, is this correct? For how long was he transacting with you? A: That was my first time. Q: That was the first time. What I mean is, that he was transacting with the PNB, Buendia Branch long before you met him? A: Maybe. Q: And the withdrawal made on April 5, 1993 which you approved, you did not look at Exhibit "C", the Savings Signature Card Individual? A: We do not look at that, that is kept in the vault. Q: Yes or no? A: No, sir. Q: And Mr. witness, Exhibit "C-1"22 which is being kept at your vault, also contains a picture? A: Yes, sir. Q: And the picture of the depositor? A: Yes, sir. Q: And are you familiar with the identity of the depositor Norman Pike? A: What particular identity? Q: His appearance? A: He is gay looking fellow. COURT: Answer. You are familiar with his physical appearance?

A: Not so much. Because there are so much depositor (sic) in the bank.23 [Emphasis ours.] By his own testimony, the witness negated the very reason for the banks bizarre "accommodation" of the alleged verbal request of respondent Pike that he was a "valued client." From the aforequoted, it appears that the witness, Lorenzo Bal, was not even reasonably familiar with respondent Pike, yet, he was ready, willing and able to accommodate the verbal request of said depositor. Worse still, the witness still approved the withdrawal transaction without asking for any proof of identification for the reason that: 1) Davasol was in possession of a pre-signed withdrawal slip; and 2) the witness "recognized" the signature of respondent Pike even after admitting that he did not bother to counter check the signature on the slip with the specimen signature card of respondent Pike and that he met respondent Pike just once so that he cannot seem to recall what the latter looks like. The ensuing quoted testimony of the same witness will justify a finding of negligence amounting to bad faith, to wit: Q: And you also met Joy Manuel Dabasol on March 15? A: Yes, sir. Q: And can you describe Joy Manuel Dabasol? A: I cannot recall his face but then he is a Talent manager, because there are so many depositors in the bank. ... Q: Mr. witness, you are saying that Mr. Pike, the depositor gave you verbal authority to honor withdrawal by Joy Manuel Dabasol? A: Yes, sir. Q: Why did you not require then that Mr. Pike instead sign the authorization portion and that the name of Joy Manuel Dabasol appear thereon with his signature? ... A: I required Mr. Norman Pike to sign the withdrawal slip on the face of the withdrawal slip. Q: But not the authorization portion of the said withdrawal slip? ... A: No, because that is sufficient already. Q: And is this your normal procedure, Mr. witness? This particular procedure that you conducted? A: I dont think so. Q: Mr. witness, when on April 5, 1993, when Joy Dabasol came to the office and according to you, you do not remember him, is that correct? A: I cannot recall his face. ... Q: And he just showed you a withdrawal slip, is this correct? A: Yes, on April 5. Q: Did you require him to produce any Identification Card, yes or no? A: No. Q: And how did you know then that it was Joy Dabasol who was making the withdrawal on April 5? A: Because the presigned withdrawal slip was presented to me.

Q: Is that all your basis? A: Yes, sir. Because his signature appears. ... Q: Mr. witness, this alleged authority given to you by Norman Pike to honor withdrawal by Joy Manuel Dabasol, was that in writing? A: It was verbally requested. Q: And that is SPO (sic) of PNB, Buendia Branch to accept verbal authorities? A: Yes. Q: Is that Standard Operating Procedure? A: It is not SPO, but when you knew the client, Your Honor, you have to honor also the trust and confidence. Let us say if you Q: According to you, you met Norman Pike only on March 15, 1993 and immediately you allowed him to withdraw through pre-signed withdrawal slip? A: Yes, Your Honor. Because a depositor requested you to honor his signature, you have to do that or else willand besides the request is for purpose of expediency, Your Honor. Because most often than that, he is out of the country, in Japan. And his Talent Manager is the one managing the recruiting agency. The money will be used in the operating expenses. ... Q: You did not even bother to look at the Savings Signature Card Individual, yes or no? A: No, sir.24 [Emphases supplied.] Having admitted that pre-signed withdrawal slips do not constitute the normal procedure with respect to withdrawals by representatives should have already put petitioner PNBs employees on guard. Rather than readily validating and permitting said withdrawals, they should have proceeded more cautiously. Clearly, petitioner banks employee, Lorenzo T. Bal, an Assistant Vice President at that, was exceedingly careless in his treatment of respondent Pikes savings account. From the foregoing, the evidence clearly showed that the petitioner bank did not exercise the degree of diligence that it ought to have exercised in dealing with their clients. With banks, the degree of diligence required, contrary to the position of petitioner PNB, is more than that of a good father of a family considering that the business of banking is imbued with public interest due to the nature of their functions. The stability of banks largely depends on the confidence of the people in the honesty and efficiency of banks. Thus, the law imposes on banks a high degree of obligation to treat the accounts of its depositors with meticulous care, always having in mind the fiduciary nature of banking. Section 2 of Republic Act No. 8791, 25 which took effect on 13 June 2000, makes a categorical declaration that the State recognizes the "fiduciary nature of banking that requires high standards of integrity and performance." 26 Though passed long after the unauthorized withdrawals in this case, the aforequoted provision is a statutory affirmation of Supreme Court decisions already in esse at the time of such withdrawals. We elucidated in the 1990 case of Simex International, Inc. v. Court of Appeals,27 that "the bank is under obligation to treat the accounts of its depositors with meticulous care, always having in mind the fiduciary nature of their relationship."28 Likewise, in the case of The Consolidated Bank and Trust Corporation v. Court of Appeals,29 we clarified that said fiduciary relationship means that the banks obligation to observe "highest standards of integrity and performance" is deemed written into every deposit agreement between a bank and its depositor. The fiduciary nature of banking requires banks to assume a degree of diligence higher than that of a good father of a family. Article 1172 of the New Civil

Code states that the degree of diligence required of an obligor30 is that prescribed by law or contract, and absent such stipulation then the diligence of a family. In every case, the depositor expects the bank to treat his account with the utmost fidelity, whether such accounts consist only of a few hundred pesos or of millions of pesos.31 Anent the issue of the propriety of the award of damages in this case, petitioner PNB asseverates that there was no evidence to prove that respondent Pike "suffered anguish, embarrassment and mental sufferings"32 due to its acts in allowing the alleged unauthorized withdrawals. And, having relied on the instructions of a valued depositor, petitioner PNB likewise avers that its actions were made in good faith, for this reason, there is no factual basis for said award. Petitioner PNBs assertions fail to impress us. The award of moral and exemplary damages is left to the sound discretion of the court, and if such discretion is well exercised, as in this case, it will not be disturbed on appeal. 33 In the case of Philippine Telegraph & Telephone Corporation v. Court of Appeals,34 we had the occasion to reiterate the conditions to be met in order that moral damages may be recovered. In said case we stated: An award of moral damages would require, firstly, evidence of besmirched reputation, or physical, mental or psychological suffering sustained by the claimant; secondly, a culpable act or omission factually established; thirdly, proof that the wrongful act or omission of the defendant is the proximate cause of the damages sustained by the claimant; and fourthly, that the case is predicated on any of the instances expressed or envisioned by Articles 2219 35 and 222036 of the Civil Code. Specifically, in culpa contractual or breach of contract, as here, moral damages are recoverable only if the defendant has acted fraudulently or in bad faith,37 or is found guilty of gross negligence amounting to bad faith,38 or in wanton disregard of his contractual obligations. 39 Verily, the breach must be wanton, reckless, malicious, or in bad faith, oppressive or abusive. 40 There is no reason to disturb the trial courts finding of petitioner banks employees negligence in their treatment of respondent Pikes account. In the case on hand, the Court of Appeals sustained, and rightly so, that an award of moral damages is warranted. For, as found by said appellate court, citing the case of Prudential Bank v. Court of Appeals,41 "the banks negligence is a result of lack of due care and caution required of managers and employees of a firm engaged in so sensitive and demanding business, as banking, hence, the award of P20,000.00 as moral damages, is proper. The award of exemplary damages is also proper as a warning to petitioner PNB and all concerned not to recklessly disregard their obligation to exercise the highest and strictest diligence in serving their depositors. Finally, the aforestated grant of exemplary damages entitles respondent Pike the award of attorney's fees in the amount of P20,000.00 and the award of P10,000.00 for litigation expenses.42 WHEREFORE, the instant petition is DENIED. The assailed Decision dated 19 December 2002, and the Resolution dated 02 April 2003, both of the Court of Appeals, in CA-G.R. CV No. 59389, which affirmed with modification the Decision rendered by the Regional Trial Court (RTC), Branch 07 of Manila, dated 10 January 1997, in Civil Case No. 94-68821, are hereby AFFIRMED with the modification that petitioner PNB is directed to pay respondent Pike additional 1) P20,000.00 representing attorneys fees; and 2) P10,000.00 representing expenses of litigation. Costs against petitioner PNB. SO ORDERED.

Republic of the Philippines SUPREME COURT Manila THIRD DIVISION G.R. No. 146141 October 17, 2008

b. pay the [respondent] the other actual losses it suffered by reason of the non-delivery of the sugar in terms of unearned income, cost of money and opportunity lost in the amount of P50,000.00; c. pay the [respondent] the amount of P50,000.00 as and for exemplary damages; d. pay the cost of suit, litigation expenses and attorneys fees in the sum equivalent to 20% of the claim hereunder, plus the per appearance fee of P300.00. SO ORDERED.9 Aggrieved, petitioner appealed to the CA. He raised an argument that was totally new and was never raised before the RTC, to wit Hi Ball Freight Services was not the common carrier of respondent; hence, cannot be held liable for the value of the lost sugar. On November 15, 1999, the CA rendered the assailed Decision. Affirming the RTC and rejecting petitioners new theory, the CA noted that petitioner had argued his case before the court a quo without denying his contract with respondent; that it was only after the adverse judgment was rendered that petitioner began to deny his contract with respondent. It thus ruled that petitioner is estopped from presenting this issue for the first time on appeal. The CA also rejected petitioners defense of fortuitous event for lack of basis, and sustained the finding of liability against him. Petitioner filed a motion for reconsideration, but the CA struck it down on October 11, 2000. Petitioner is now before us assailing the finding of liability against him. In gist, he denied his contract of carriage with respondent and passes responsibility to All Star Transport Inc. (All Star), whose name appeared in the Waybill/Delivery Receipt. Petitioner also assails the dismissal of his counterclaim. The petition is devoid of merit. Records show that the theory of petitioner before the trial court was different from the one he espoused in the appellate court. At the trial court stage, petitioner insisted that the goods were delivered to the Pepsi Cola Plant. He further argued that the loss was either due to the fault of respondent or due to fortuitous event. After the RTC rendered an adverse decision, petitioner adopted a new theory, denying his contract with respondent and passing all the responsibility to All Star. As a rule, no question will be entertained on appeal unless it has been raised in the court below. Points of law, theories, issues and arguments not brought to the attention of the lower court ordinarily will not be considered by a reviewing court because they cannot be raised for the first time at that late stage. Basic considerations of due process underlie this rule. It would be unfair to the adverse party who would have no opportunity to present evidence in contra to the new theory, which it could have done had it been aware of it at the time of the hearing before the trial court. 10 To permit petitioner at this stage to change his theory would thus be unfair to respondent, and offend the basic rules of fair play, justice and due process.11 In this light, we agree with the following disquisition of the CA rejecting petitioners maneuver: None whatsoever can be unraveled from the records which would show that [petitioner] was in no way a party to the contract. There is nothing on record as well that would tend to show that a certain All Star merely hired [petitioner]. As a matter of fact, during the trial the [respondents] witness specifically testified that [petitioners] services have been engaged by All Commodities Marketing Corporation for five years. Again, this was never disputed nor rebutted by the [petitioner].

ERNESTO CANADA, doing business under the name and style of HI-BALL FREIGHT SERVICES, petitioners, vs. ALL COMMODITIES MARKETING CORPORATION, respondents. DECISION NACHURA, J.: At bar is a petition for review on certiorari under Rule 45 of the Rules of Court filed by Ernesto P. Canada, challenging the November 15, 1999 Decision 1 and the October 11, 2000 Resolution2 of the Court of Appeals (CA) in CA-G.R. CV No. 43476. The facts: Petitioner Ernesto P. Canada (petitioner) is engaged in business of providing trucking and hauling services under the name Hi-Ball Freight Services. Respondent All Commodities Marketing Corporation (respondent) has been a valued client of petitioner for several years. On October 27, 1986, respondent contracted petitioners services to haul and deliver one thousand (1,000) sacks of sugar from Pier 18, North Harbor in Tondo, Manila to the Pepsi Cola Plant at Muntinlupa, Metro Manila (now Muntinlupa City). The transaction was covered by Way Bills/ Delivery Receipt Nos. 53403 and 53414 of All Star Transport, Inc. (All Star), but duly signed by petitioners driver. As agreed, petitioner loaded respondents 1,000 sacks of sugar into his two (2) trucks; however, the same were never delivered to the Pepsi Cola Plant. The drivers of the trucks, along with the helpers, had since vanished into thin air. Respondent demanded payment of the value of the sugar, but the demand was not heeded. Consequently, respondent filed a complaint 5 against petitioner with the Regional Trial Court (RTC) of Makati to recover the value of the lost sugar. The case was docketed as Civil Case No. 18826. In his answer, petitioner admitted that respondent contracted him to haul and deliver 1,000 sacks of sugar, but denied that the cargo did not reach their destination. He averred that the cargo were delivered to the Pepsi Cola Plant in Muntinlupa City on October 27, 1986. He rejected responsibility for the claim arguing that the loss of the goods was either due to respondents negligence or due to fortuitous event. 7 By way of counterclaim, petitioner asserted his right to payment of P350,000.00, representing the value of the truck that was allegedly seized by respondent. In due course, the RTC rendered judgment8 against petitioner, decreeing that: IN VIEW THEREOF, this case is hereby resolved in favor of the [respondent] and [petitioner] is hereby ordered to: a. pay the [respondent] the sum of P350,000.00 representing the value of the sugar lost, plus the interest that have accrued thereon from the filing of this complaint until its actual payment;
6

[Petitioner] as a matter of fact had fought its case before the lower court without denying its relationship or contract with the [respondent] until [the] judgment was rendered against him. He raised the defense that the truck was hijacked. That it is only now that he belie the claim of the [respondent] of the contract between them. Simply put, this was an issue never brought out before the court a quo, hence, [petitioner] is now estopped to present as such before this Court.12 Just as meaningful, petitioner had admitted his contract of carriage with respondent in the court a quo. To recall, petitioner in his answer admitted paragraphs 5 and 6 of the complaint 13 which referred to the contract between him and respondent.14 During the trial, petitioner also admitted that the truck drivers and helpers who loaded the goods were his employees. 15 He even tried to settle the case amicably, but negotiations for settlement had failed. These were unmistakable admissions of petitioners contractual relation with respondent. We have always adhered to the familiar doctrine that an admission made in the course of the trial, either by verbal or written manifestations, or stipulations, cannot be controverted by the party making such admission; they become conclusive on him, and all proofs submitted by him contrary thereto or inconsistent therewith should be ignored, whether an objection is interposed by the adverse party or not. 16 This doctrine is embodied in Section 4, Rule 129 of the Rules of Court: SEC. 4. Judicial admissions. An admission, verbal or written, made by a party in the course of the proceedings in the same case, does not require proof. The admission may be contradicted only by showing that it was made through palpable mistake or that no such admission was made. In the absence of a compelling reason to the contrary, petitioners admission of his contract with respondent is definitely binding on him. Accordingly, we sustain the CA in rejecting petitioners newly-contrived assertion that he carried the goods for and in behalf of All Star. Petitioner also attempted to exculpate himself from liability by insisting that the incident was a caso fortuito. We disagree. The exempting circumstance of caso fortuito may be availed of only when: (a) the cause of the unforeseen and unexpected occurrence was independent of the human will; (b) it was impossible to foresee the event which constituted the caso fortuito or, if it could be foreseen, it was impossible to avoid; (c) the occurrence must be such as to render it impossible to perform an obligation in a normal manner; and (d) the person tasked to perform the obligation must not have participated in any course of conduct that aggravated the accident.17 None of these elements is present in this case. Other than petitioners bare-faced assertion that the cargo were lost due to fortuitous event, no evidence was offered to substantiate it. On the contrary, we find supported by evidence on record the conclusions of the trial court and the CA that the loss of the sugar was due to the negligence of petitioner. The CA, therefore, committed no reversible error in sustaining the finding of liability against petitioner. However, it is error for the RTC and the CA to award actual damages of P350,000.00 for the value of the lost sugar, and P50,000.00 for the actual losses that respondent allegedly suffered by reason of the non-delivery of the cargo. A perusal of the records discloses that no sufficient evidence was proffered to support respondents plea for actual damages. Indeed, the statement in the complaint would suffice as a claim for damages.18 However, mere allegation is not proof. 19 It is elementary

that to recover damages there must be pleading and proof of actual damages suffered. Thus: A party is entitled to an adequate compensation for such pecuniary loss actually suffered by him as he has duly proved. Such damages, to be recoverable, must not only be capable of proof, but must actually be proved with a reasonable degree of certainty. We have emphasized that these damages cannot be presumed and courts, in making an award must point out specific facts which could afford a basis for measuring whatever compensatory or actual damages are borne. 20 No actual damages can thus be awarded to respondent. However, respondent may still be awarded damages in the concept of temperate or moderate damages. When the court finds that some pecuniary loss has been suffered but the amount cannot, from the nature of the case, be proven with certainty, temperate damages may be recovered. Temperate damages may be allowed in cases where from the nature of the case, definite proof of pecuniary loss cannot be adduced, although the court is convinced that the aggrieved party suffered some pecuniary loss. 21 Undoubtedly, pecuniary loss had been suffered by respondent in this case. But due to the insufficiency of evidence before us, we cannot establish the amount of such loss with certainty. In this regard, considering the attendant circumstances, we find the amount of P250,000.00 to be sufficient. The grant of temperate damages paves the way for the award of exemplary damages. Under Article 2234 of the Civil Code, a showing that the plaintiff is entitled to temperate damages allows the award of exemplary damages. 22 Thus, we uphold the award of P50,000.00 as exemplary damages. Similarly, we uphold respondents entitlement to attorneys fees, but we fix the amount at P50,000.00. Finally, we sustain the dismissal of petitioners counterclaim for lack of merit. On this score, we are in full accord with the CA. WHEREFORE, the instant petition for certiorari is DENIED. The November 15, 1999 Decision of the Court of Appeals in CA-G.R. CV No. 43476 is AFFIRMED with MODIFICATIONS. The award of actual damages is deleted and, in lieu thereof, temperate damages amounting to P250,000.00 are awarded. Petitioner is also ordered to pay P50,000.00 as exemplary damages and P50,000.00 by way of attorneys fees. Petitioner shall also pay legal interest of 6% interest per annum on all sums awarded from the date of the promulgation of the decision of the trial court, and 12% interest per annum from the time the Decision of this Court attains finality until their full satisfaction. Costs against petitioner. SO ORDERED.

Republic of the Philippines SUPREME COURT Manila FIRST DIVISION G.R. No. 147349 February 13, 2004

1.2 The CONTRACTOR guarantees and warrants the availability, quality and genuineness of all the materials it will supply, deliver and use in the construction. 1.3 The CONTRACTOR warrants further that all works stipulated in the Contract shall be done in good and acceptable condition and to make good at the CONTRACTORs expense any imperfections or defects which the MIAA or its representative may discover during the progress of the work within one (1) year from and after acceptance in writing of the said work by the MIAA, as provided in the General Conditions and Specifications. xxx ARTICLE IV CONTRACT PRICE/MANNER OF PAYMENT 4.1 In consideration of the full, satisfactory and faithful performance by the CONTRACTOR of all its undertakings and obligations defined in and provided for under this agreement, the MIAA agrees to pay the CONTRACTOR the total amount of PESOS: THIRTY TWO MILLION [AND] 00/100 (P32,000,000.00) Philippine Currency, payable as follows: 4.1.1 Initial payment shall be made upon submission of work accomplishment of not less than 15%; 4.1.2 Subsequent payments shall be for work accomplished as measured, verified and approved by MIAA. Such progress billings shall indicate actual work accomplishments and shall be subject to the approval of MIAA, which approval shall not be unreasonably withheld. 4.1.3 Progress billings shall be paid by the MIAA periodically but not more than once a month within 30 calendar days from receipt hereof. "The contract contains escalation clauses and price adjustments. [Respondent] made the necessary repairs and waterproofing. After submission of its progress billings to [petitioner], [respondent] received partial payments. Progress billing No. 6 remained unpaid despite repeated demands by [respondent]. "On June 30, 1994, [petitioner] unilaterally rescinded the contract on the ground that [respondent] failed to complete the project within the agreed completion date. On September 16, 1994, [petitioner] advised [respondent] of a committee formed to determine the extent of the work done which was given until September 30, 1994 to submit its findings. Just the same, [respondent] was not fully paid. "On October 20, 1994, [respondent] objected to the rescission made by [petitioner] and reiterated its claims. As of the filing of the complaint for sum of money and damages on July 18, 1995, [respondent] was seeking to recover from [petitioner] P10,376,017.00 as the latters outstanding obligation and P1,642,112.84 due from the first to [the] fifth progress billings. "With the filing of [respondents] sur-rejoinder to [petitioners] rejoinder, the trial Court directed the parties to proceed to arbitration on July 16, 1996. The Court a quos ruling is based on Article XXVII of the contract that provides for arbitration. xxx xxx

MANILA INTERNATIONAL AIRPORT AUTHORITY (MIAA), petitioner vs. ALA INDUSTRIES CORPORATION, respondent. DECISION PANGANIBAN, J.: Foreseeable difficulties that occur during the Christmas season and cause a delay do not constitute a fortuitous event. The difficulties in processing claims during that period are not "acts of God" that would excuse noncompliance with judicially approved obligations. The Case Before us is a Petition for Review under Rule 45 of the Rules of Court, assailing the 2 February 28, 2001 Decision of the Court of Appeals (CA) in CA-GR CV No. 59518. The dispositive part of the Decision reads: "WHEREFORE, the appealed final order is hereby REVERSED. The Court a quo is ordered to issue a Writ of Execution directing the branch sheriff to enforce [Respondent] ALA Industries unpaid claim against [Petitioner] Manila International 3 Airport Authority (MIAA) in the total amount of P7,171,835.53." The Facts The facts of the case are narrated by the CA as follows: "[Petitioner] MIAA conducted a public bidding for a contract involving the structural repair and waterproofing of the International Passenger Terminal (IPT) and International Container Terminal (ICT) buildings of the Ninoy Aquino International Airport (NAIA). Out of eleven bidders, [Respondent] ALA submitted the second lowest and most advantageous bid. The contract was awarded to [respondent] in the amount 4 of P32,000,000.00 when it agreed to reduce the price from P36,000.00. On June 28, 1993, the contract was executed providing, inter alia, the following terms: ARTICLE I SCOPE OF WORK 1.1 The CONTRACTOR shall furnish all materials, labor, tools, plans, equipment and other services and [perform] all operations necessary to complete the structural repair and waterproofing of IPT and ICT buildings, all in accordance with the plans and specifications and subject to the terms and conditions of the Bid Documents. The CONTRACTOR shall likewise be responsible for the removal, hauling, disposal of materials used in the work area including cleaning thereof during and after completion of the work.
1

"Both parties executed a compromise agreement, assisted by their counsels, and jointly filed in court a motion for judgment based on compromise agreement. RTC Disposition "On November 4, 1997, the Court a quo rendered judgment approving the compromise agreement. The pertinent portions of the compromise read as follows: 1. As full and complete payment of its claims against [petitioner] arising from their waterproofing contract subject of this case, [respondent] accepts [petitioner]s offer of payment in the amount of FIVE MILLION NINE HUNDRED FORTY SIX THOUSAND TWO HUNDRED NINETY FOUR AND 31/100 (P5,946,294.31). 2. [Petitioner] shall pay [respondent] said amount of FIVE MILLION NINE HUNDRED FORTY SIX THOUSAND TWO HUNDRED NINETY FOUR AND 31/100 (P5,946,294.31) within a period of thirty (30) days from receipt of a copy of the Order of the Court approving this Compromise Agreement. 3. Failure of the [petitioner] to pay said amount to [respondent] within the period above stipulated shall entitle the [respondent] to a writ of execution 5 from this Honorable Court to enforce all its claims pleaded in the Complaint. 4. In consideration of the Implementation of this Compromise Agreement, [respondent] agrees to waive all its claims against the [petitioner] as pleaded in the Complaint, and [petitioner] also agrees to waive all its claims, rights and interests pleaded in the answer, and all such other claims that it has or may have in connection with, related to or arising from the Waterproofing Contract subject of this case with [respondent]. Finding the aforesaid COMPROMISE AGREEMENT not to be contrary to law, moral[s], good customs, public order, and public policy, the Court hereby approves the same and renders judgment in conformity with the terms and conditions of the said COMPROMISE AGREEMENT, enjoining the parties to comply with the provisions thereof strictly and in good faith without pronouncement as to costs. SO ORDERED. "For [petitioners] failure to pay within the period above stipulated, [respondent] filed a motion for execution to enforce its claim in the total amount of P13,118,129.84. [Petitioner] filed a comment and attributed the delays to its being a government agency. In its effort to render [respondents] motion for execution moot and academic, [petitioner] paid [respondent] P5,946,294.31 on February 2, 1998. "On February 16, 1998, the trial court denied [respondents] motion for execution. It also denied the motion for reconsideration, ruling as follows: The delay in complying with the Compromise Agreement having been satisfactorily explained by the Office of the Government Counsel, the Motion for Reconsideration of the order denying [respondents] Motion for Execution is denied. "SO ORDERED."
6

was immediately executory, and that a delay of almost two months was not substantial compliance therewith. Hence this Petition. Issues Petitioner raises the following issues for our consideration: "I. Whether or not the slight delay of petitioner in complying with its obligation under the Compromise Agreement is a valid ground for the enforcement of private respondents claim under the Complaint. "II. Whether or not the delay of petitioner in complying with its obligation under the Compromise Agreement is justified under the principle that no person shall be responsible for those events which could not be foreseen, or which though foreseen, were inevitable. "III. Whether or not private respondent is estopped from enforcing its claim under the Complaint considering that it already enjoyed the benefits of the Compromise 8 Agreement." The foregoing may be summed up in one issue: Whether there was a fortuitous event that excused petitioner from complying with the terms and conditions of the judicially approved Compromise Agreement. The Courts Ruling The Petition has no merit. Sole Issue: Delay in Payment by Reason of a Fortuitous Event A compromise agreement is a contract whereby the parties make reciprocal 9 10 concessions to resolve their differences, thus avoiding litigation or putting an end to 11 12 one that has already commenced. Generally favored in law, such agreement is a bilateral act or transaction that is binding on the contracting parties and is expressly 13 acknowledged by the Civil Code as a juridical agreement between them. Provided it 14 is not contrary to law, morals, good customs, public order or public policy, it is 15 immediately executory. Judicial Compromise Final and Executory In a long line of cases, we have consistently held that "x x x a compromise once 16 approved by final orders of the court has the force of res judicata between the parties and should not be disturbed except for vices of consent or forgery. Hence, a 17 decision on a compromise agreement is final and executory x x x." Such agreement 18 19 has the force of law and is conclusive between the parties. It transcends its identity as a mere contract binding only upon the parties thereto, as it becomes a
7

Ruling of the Court of Appeals Reversing the trial court, the CA ordered it to issue a writ of execution to enforce respondents claim to the extent of petitioners remaining balance. The appellate court ratiocinated that a judgment rendered in accordance with a compromise agreement

judgment that is subject to execution in accordance with the Rules. Judges 21 therefore have the ministerial and mandatory duty to implement and enforce it. To be valid, a compromise agreement is merely required by law, first, to be based on 22 real claims; second, to be actually agreed upon in good faith. Both conditions are present in this case. The claims of the parties are valid, and the agreement done without any fraud or vice of consent. Without a doubt, each of the parties herein entered into Compromise Agreement freely and voluntarily. When they carefully negotiated the terms and provisions thereof, they were adequately assisted by their respective counsels -- petitioner, no 23 less than by the Office of the Government Corporate Counsel (OGCC). Each party agreed to something that neither might have actually wanted, except for the peace that would be brought by the avoidance of a protracted litigation. Hence, the Agreement must govern their relations. The Christmas Season Not a Fortuitous Event The failure to pay on the date stipulated was clearly a violation of the Agreement. Within thirty days from receipt of the judicial Order approving it -- on December 20, 1997 -- payment should have been made, but was not. Thus, nonfulfillment of the 24 terms of the compromise justified execution. It is the height of absurdity for petitioner to attribute to a fortuitous event its delayed payment. Petitioners 25 explanation is clearly "a gratuitous assertion that borders on callousness." The Christmas season cannot be cited as an act of God that would excuse a delay in the processing of claims by a government entity that is subject to routine accounting and auditing rules. A fortuitous event is one that cannot be foreseen or, though foreseen, is inevitable. It has the following characteristics:
26

20

lost or destroyed, but merely delayed, thus causing injury to respondent. Granting arguendo such loss or destruction, the Christmas season could not have been the sole and proximate cause thereof. Third, the occurrence of the Christmas season did not at all render impossible the normal fulfillment of the obligation of petitioner; otherwise, few claims would ever be paid during this period. It ought to have taken appropriate measures to ensure that a delay would be avoided. When it entered into the Agreement, it knew fully well that the 30-day period for it to pay its obligation would end during the Christmas season. Thus, it cannot now be allowed to renege on its commitment. Fourth, petitioner cannot argue that it is free from any participation in the delay. It should have laid out on the compromise table the problems that would be caused by a deadline falling during the Christmas season. Furthermore, it should have explained to respondent that government accounts would be examined carefully and thoroughly to the last detail, in 29 strict compliance with accounting and auditing rules issued by and 30 pursuant to the constitutional mandate of the Commission on Audit. Indeed, the liquidation of government obligations involves a long process beginning with the preparation of disbursement vouchers; followed by the processing of requests for allotment as supported by vouchers, job orders and requisitions; and 31 ending with the issuance of the corresponding checks. Without first securing the necessary certification as to the availability of funds and allotment against which 32 expenditures may be properly charged, no funds shall be disbursed; and no expenditures chargeable against any authorized allotments shall be incurred or authorized by agency heads. Moreover, it is important to note that under government accounting principles, "no contract involving the expenditure of public funds shall be made until there is an appropriation therefor, the unexpended balance of which, free of other obligations, is 33 sufficient to cover the proposed expenditure." In the present case, there was already an antecedent appropriation for the contract when petitioner entered into it. Obviously, prior planning had not taken into account the liquidation process in the conduct of the compromise. The sheer neglect shown by petitioner in failing to consider these matters aggravated the resulting injury suffered by respondent. The former cannot be allowed to hide now behind its government cloak. Fortuitous Event Negated by Negligence The act-of-God doctrine requires all human agencies to be excluded from creating the 34 cause of the mischief. Such doctrine cannot be invoked to protect a person who has 35 failed to take steps to forestall the possible adverse consequences of loss or injury. Since the delay in payment in the present case was partly a result of human participation -- whether from active intervention or neglect -- the whole occurrence was humanized and was therefore outside the ambit of a caso fortuito. Furthermore, none of the requisites we have earlier mentioned are present in this 36 case, a fact that clearly prevents petitioner from being excused from liability. Under

"x x x (a) [T]he cause of the unforeseen and unexpected occurrence, or the failure of the debtor to comply with his obligations, must be independent of human will; (b) it must be impossible to foresee the event which constitutes the caso fortuito, or if it can be foreseen, it must be impossible to avoid; (c) the occurrence must be such as to render it impossible for the debtor to fulfill his obligation in a normal manner; and (d) the obligor must be free from any participation in the aggravation of the injury 27 resulting to the creditor." None of these elements appears in this case. First, processing claims against the government and subjecting these to the usual accounting and auditing procedures are certainly not only foreseeable and expectable, but also dependent upon the human will. Liquidation and payment resulting therefrom can be deliberately delayed or speeded up. Second, the Christmas season is not a caso fortuito, but a regularly occurring event. It is in fact foreseeable, and its occurrence has absolutely nothing to do with the processing of claims. Further, in order to claim exemption from liability by reason of a fortuitous event, such event should be the sole and proximate cause of the injury to or 28 the loss or destruction of the object of the contract or compromise, which was the payment to be made by petitioner. Certainly, this payment was not

the rules of evidence, the burden of proving that a loss is due to a caso fortuito rests 37 upon the party invoking it. This responsibility, it failed to discharge. Verily, an assiduous scrutiny of the records convinces us that it was negligent, and that it thereby incurred a delay in the performance of its contractual obligation under the judicial compromise. It thus created an undue risk or injury to respondent by failing to exercise that reasonable degree of care, precaution or vigilance that the 39 circumstances justly demanded, and that an ordinarily prudent person would have 40 done. Court Without Power to Alter a Judicial Compromise "The principle of autonomy of contracts must be respected." The Compromise 42 Agreement was a contract perfected by mere consent; hence, it should have been respected. Item 3 thereof provided that failure of petitioner to pay within the stipulated period would entitle respondent to a writ of execution to enforce all the claims that had been pleaded by the latter in the Complaint. This provision must be upheld, because the Agreement supplanted the Complaint itself. Although judicial approval was not required for the perfection of that Agreement once it was granted, it could not 43 and must not be disturbed except for vices of consent or forgery. No such infirmity can be found in the subject Compromise Agreement. Its terms are clear and leave no doubt as to their intention. Thus, the literal meaning of its 44 stipulations must control. It "must be strictly interpreted and x x x understood as including only matters specifically determined therein or which, by necessary 45 inference from its wording, must be deemed included." The lower court was without power to relieve petitioner from an obligation it had voluntarily assumed, simply because the Agreement later turned out to be unwise, 46 disastrous or foolish. It had no authority to impose upon the parties a judgment 47 different from or against the terms and conditions of their Compromise Agreement. It could not alter a contract by construction or make a new one for the parties; "its duty is confined to the interpretation of the one which they have made for themselves without regard to its wisdom or folly as the court cannot supply material stipulations or 48 read into the contract words which it does not contain." It could not even set aside its judgment without declaring in an incidental hearing that the Agreement was 49 vitiated by any of the grounds enumerated in Article 2038 of the Civil Code. Above all, neither the Agreement nor the courts approval of it was ever questioned or assailed by the parties. Basic is the rule that if a party fails or refuses to abide by a compromise agreement, the other may either enforce it or regard it as rescinded and insist upon the original 50 demand. For failure of petitioner to abide by the judicial compromise, respondent chose to enforce it. The latters course of action was in accordance with the very 51 stipulations in the Agreement that the lower court could not change. Respondent is thus entitled to a writ of execution for the total amount contained in the Compromise Agreement. The Court cannot reduce it. The partial payment made by 52 petitioner does not at all contravene Article 1229 of the Civil Code, which is applicable only to contracts that are the subjects of litigation, not to final and 53 executory judgments. Estoppel Inapplicable
41 38

Petitioners attempt to put respondent in estoppel must be struck down. "In estoppel, a person, who by his act or conduct has induced another to act in a particular manner, is barred from adopting an inconsistent position, attitude or course of 54 conduct that thereby causes loss or injury to another." No such inconsistency is present here. From the very start, respondent was already asking the courts to enforce all its claims, pursuant to the Agreement. It has not shown any act or conduct that would leads us to believe that by accepting petitioners partial payment, it has dropped all claims to which it is entitled. Certainly, an obligation may be extinguished by payment, but this rule applies when 56 the creditor "receives and acknowledges full payment" from the debtor. Respondent has neither acknowledged full payment nor led petitioner to believe that it has. Lack of reservation or protest does not ipso facto constitute a waiver of claims. Because estoppel should be applied with caution, the action that gives rise to it must be 57 deliberate and unequivocal. In the present case, respondent continued to pursue the execution of its total demand of P13,118,129.84, even after receiving P5,946,294.31 from petitioner. This continued pursuit signified the formers intent not to waive its total claim. Hence, it cannot be considered estopped from enforcing such claim. The appellate court was correct in strictly following the Agreement by deducting the amount received by respondent from the latters total claim. Besides, "questions raised on appeal must be within the issues framed by the parties and, consequently, 58 issues not raised in the trial court cannot be raised for the first time on appeal." Any 59 assertion of equity must finally be struck down "when dilatory schemes exist." WHEREFORE, the Petition is hereby DENIED, and the assailed Decision AFFIRMED. Costs against petitioner. SO ORDERED.
55

Republic of the Philippines SUPREME COURT Manila SECOND DIVISION G.R. No. 147324 May 25, 2004

On 16 September 1991, the Senate passed and adopted Senate Resolution No. 141, expressing its decision not to concur in the ratification of the Treaty of Friendship, Cooperation and Security and its Supplementary Agreements that was supposed to extend the term of the use by the US of Subic Naval Base, among others. 5 The last two paragraphs of the Resolution state: FINDING that the Treaty constitutes a defective framework for the continuing relationship between the two countries in the spirit of friendship, cooperation and sovereign equality: Now, therefore, be it Resolved by the Senate, as it is hereby resolved, To express its decision not to concur in the ratification of the Treaty of Friendship, Cooperation and Security and its Supplementary Agreements, at the same time reaffirming its desire to continue friendly relations with the government and people of the United States of America.6 On 31 December 1991, the Philippine Government sent a Note Verbale to the US Government through the US Embassy, notifying it of the Philippines termination of the RPUS Military Bases Agreement. The Note Verbale stated that since the RP-US Military Bases Agreement, as amended, shall terminate on 31 December 1992, the withdrawal of all US military forces from Subic Naval Base should be completed by said date. In a letter dated 06 August 1992, Globe notified Philcomsat of its intention to discontinue the use of the earth station effective 08 November 1992 in view of the withdrawal of US military personnel from Subic Naval Base after the termination of the RP-US Military Bases Agreement. Globe invoked as basis for the letter of termination Section 8 (Default) of the Agreement, which provides: Neither party shall be held liable or deemed to be in default for any failure to perform its obligation under this Agreement if such failure results directly or indirectly from force majeure or fortuitous event. Either party is thus precluded from performing its obligation until such force majeure or fortuitous event shall terminate. For the purpose of this paragraph, force majeure shall mean circumstances beyond the control of the party involved including, but not limited to, any law, order, regulation, direction or request of the Government of the Philippines, strikes or other labor difficulties, insurrection riots, national emergencies, war, acts of public enemies, fire, floods, typhoons or other catastrophies or acts of God. Philcomsat sent a reply letter dated 10 August 1992 to Globe, stating that "we expect [Globe] to know its commitment to pay the stipulated rentals for the remaining terms of the Agreement even after [Globe] shall have discontinue[d] the use of the earth station after November 08, 1992."7 Philcomsat referred to Section 7 of the Agreement, stating as follows: 7. DISCONTINUANCE OF SERVICE Should [Globe] decide to discontinue with the use of the earth station after it has been put into operation, a written notice shall be served to PHILCOMSAT at least sixty (60) days prior to the expected date of termination. Notwithstanding the non-use of the earth station, [Globe] shall continue to pay PHILCOMSAT for the rental of the actual number of T1 circuits in use, but in no case shall be less than the first two (2) T1 circuits, for the remaining life of the agreement. However, should PHILCOMSAT make use or sell the earth station subject to this agreement, the obligation of [Globe] to pay the rental for the remaining life of the agreement shall be at such monthly rate as may be agreed upon by the parties. 8 After the US military forces left Subic Naval Base, Philcomsat sent Globe a letter dated 24 November 1993 demanding payment of its outstanding obligations under the Agreement

PHILIPPINE COMMUNICATIONS SATELLITE CORPORATION, petitioner, vs. GLOBE TELECOM, INC. (formerly Globe Mckay Cable and Radio Corporation), respondents. x-----------------------------x GLOBE TELECOM, INC., petitioner, vs. PHILIPPINE COMMUNICATION SATELLITE CORPORATION, respondent. DECISION TINGA, J.: Before the Court are two Petitions for Review assailing the Decision of the Court of Appeals, dated 27 February 2001, in CA-G.R. CV No. 63619.1 The facts of the case are undisputed. For several years prior to 1991, Globe Mckay Cable and Radio Corporation, now Globe Telecom, Inc. (Globe), had been engaged in the coordination of the provision of various communication facilities for the military bases of the United States of America (US) in Clark Air Base, Angeles, Pampanga and Subic Naval Base in Cubi Point, Zambales. The said communication facilities were installed and configured for the exclusive use of the US Defense Communications Agency (USDCA), and for security reasons, were operated only by its personnel or those of American companies contracted by it to operate said facilities. The USDCA contracted with said American companies, and the latter, in turn, contracted with Globe for the use of the communication facilities. Globe, on the other hand, contracted with local service providers such as the Philippine Communications Satellite Corporation (Philcomsat) for the provision of the communication facilities. On 07 May 1991, Philcomsat and Globe entered into an Agreement whereby Philcomsat obligated itself to establish, operate and provide an IBS Standard B earth station (earth station) within Cubi Point for the exclusive use of the USDCA. 2 The term of the contract was for 60 months, or five (5) years.3 In turn, Globe promised to pay Philcomsat monthly rentals for each leased circuit involved. 4 At the time of the execution of the Agreement, both parties knew that the Military Bases Agreement between the Republic of the Philippines and the US (RP-US Military Bases Agreement), which was the basis for the occupancy of the Clark Air Base and Subic Naval Base in Cubi Point, was to expire in 1991. Under Section 25, Article XVIII of the 1987 Constitution, foreign military bases, troops or facilities, which include those located at the US Naval Facility in Cubi Point, shall not be allowed in the Philippines unless a new treaty is duly concurred in by the Senate and ratified by a majority of the votes cast by the people in a national referendum when the Congress so requires, and such new treaty is recognized as such by the US Government. Subsequently, Philcomsat installed and established the earth station at Cubi Point and the USDCA made use of the same.

amounting to US$4,910,136.00 plus interest and attorneys fees. However, Globe refused to heed Philcomsats demand. On 27 January 1995, Philcomsat filed with the Regional Trial Court of Makati a Complaint against Globe, praying that the latter be ordered to pay liquidated damages under the Agreement, with legal interest, exemplary damages, attorneys fees and costs of suit. The case was raffled to Branch 59 of said court. Globe filed an Answer to the Complaint, insisting that it was constrained to end the Agreement due to the termination of the RP-US Military Bases Agreement and the nonratification by the Senate of the Treaty of Friendship and Cooperation, which events constituted force majeure under the Agreement. Globe explained that the occurrence of said events exempted it from paying rentals for the remaining period of the Agreement. On 05 January 1999, the trial court rendered its Decision, the dispositive portion of which reads: WHEREFORE, premises considered, judgment is hereby rendered as follows: 1. Ordering the defendant to pay the plaintiff the amount of Ninety Two Thousand Two Hundred Thirty Eight US Dollars (US$92,238.00) or its equivalent in Philippine Currency (computed at the exchange rate prevailing at the time of compliance or payment) representing rentals for the month of December 1992 with interest thereon at the legal rate of twelve percent (12%) per annum starting December 1992 until the amount is fully paid; 2. Ordering the defendant to pay the plaintiff the amount of Three Hundred Thousand (P300,000.00) Pesos as and for attorneys fees; 3. Ordering the DISMISSAL of defendants counterclaim for lack of merit; and 4. With costs against the defendant. SO ORDERED.9 Both parties appealed the trial courts Decision to the Court of Appeals. Philcomsat claimed that the trial court erred in ruling that: (1) the non-ratification by the Senate of the Treaty of Friendship, Cooperation and Security and its Supplementary Agreements constitutes force majeure which exempts Globe from complying with its obligations under the Agreement; (2) Globe is not liable to pay the rentals for the remainder of the term of the Agreement; and (3) Globe is not liable to Philcomsat for exemplary damages. Globe, on the other hand, contended that the RTC erred in holding it liable for payment of rent of the earth station for December 1992 and of attorneys fees. It explained that it terminated Philcomsats services on 08 November 1992; hence, it had no reason to pay for rentals beyond that date. On 27 February 2001, the Court of Appeals promulgated its Decision dismissing Philcomsats appeal for lack of merit and affirming the trial courts finding that certain events constituting force majeure under Section 8 the Agreement occurred and justified the non-payment by Globe of rentals for the remainder of the term of the Agreement. The appellate court ruled that the non-ratification by the Senate of the Treaty of Friendship, Cooperation and Security, and its Supplementary Agreements, and the termination by the Philippine Government of the RP-US Military Bases Agreement effective 31 December 1991 as stated in the Philippine Governments Note Verbale to the US Government, are

acts, directions, or requests of the Government of the Philippines which constitute force majeure. In addition, there were circumstances beyond the control of the parties, such as the issuance of a formal order by Cdr. Walter Corliss of the US Navy, the issuance of the letter notification from ATT and the complete withdrawal of all US military forces and personnel from Cubi Point, which prevented further use of the earth station under the Agreement. However, the Court of Appeals ruled that although Globe sought to terminate Philcomsats services by 08 November 1992, it is still liable to pay rentals for the December 1992, amounting to US$92,238.00 plus interest, considering that the US military forces and personnel completely withdrew from Cubi Point only on 31 December 1992. 10 Both parties filed their respective Petitions for Review assailing the Decision of the Court of Appeals. In G.R. No. 147324,11 petitioner Philcomsat raises the following assignments of error: A. THE HONORABLE COURT OF APPEALS ERRED IN ADOPTING A DEFINITION OF FORCE MAJEURE DIFFERENT FROM WHAT ITS LEGAL DEFINITION FOUND IN ARTICLE 1174 OF THE CIVIL CODE, PROVIDES, SO AS TO EXEMPT GLOBE TELECOM FROM COMPLYING WITH ITS OBLIGATIONS UNDER THE SUBJECT AGREEMENT. B. THE HONORABLE COURT OF APPEALS ERRED IN RULING THAT GLOBE TELECOM IS NOT LIABLE TO PHILCOMSAT FOR RENTALS FOR THE REMAINING TERM OF THE AGREEMENT, DESPITE THE CLEAR TENOR OF SECTION 7 OF THE AGREEMENT. C. THE HONORABLE OCURT OF APPEALS ERRED IN DELETING THE TRIAL COURTS AWARD OF ATTORNEYS FEES IN FAVOR OF PHILCOMSAT. D. THE HONORABLE COURT OF APPEALS ERRED IN RULING THAT GLOBE TELECOM IS NOT LIABLE TO PHILCOMSAT FOR EXEMPLARY DAMAGES.12 Philcomsat argues that the termination of the RP-US Military Bases Agreement cannot be considered a fortuitous event because the happening thereof was foreseeable. Although the Agreement was freely entered into by both parties, Section 8 should be deemed ineffective because it is contrary to Article 1174 of the Civil Code. Philcomsat posits the view that the validity of the parties definition of force majeure in Section 8 of the Agreement as "circumstances beyond the control of the party involved including, but not limited to, any law, order, regulation, direction or request of the Government of the Philippines, strikes or other labor difficulties, insurrection riots, national emergencies, war, acts of public enemies, fire, floods, typhoons or other catastrophies or acts of God," should be deemed subject to Article 1174 which defines fortuitous events as events which could not be foreseen, or which, though foreseen, were inevitable. 13 Philcomsat further claims that the Court of Appeals erred in holding that Globe is not liable to pay for the rental of the earth station for the entire term of the Agreement because it runs counter to what was plainly stipulated by the parties in Section 7 thereof. Moreover, said ruling is inconsistent with the appellate courts pronouncement that Globe is liable to pay rentals for December 1992 even though it terminated Philcomsats services effective 08 November 1992, because the US military and personnel completely withdrew from Cubi Point only in December 1992. Philcomsat points out that it was Globe which proposed the five-year term of the Agreement, and that the other provisions of the Agreement, such as Section 4.114 thereof, evince the intent of Globe to be bound to pay rentals for the entire five-year term.15 Philcomsat also maintains that contrary to the appellate courts findings, it is entitled to attorneys fees and exemplary damages.16

In its Comment to Philcomsats Petition, Globe asserts that Section 8 of the Agreement is not contrary to Article 1174 of the Civil Code because said provision does not prohibit parties to a contract from providing for other instances when they would be exempt from fulfilling their contractual obligations. Globe also claims that the termination of the RP-US Military Bases Agreement constitutes force majeure and exempts it from complying with its obligations under the Agreement.17 On the issue of the propriety of awarding attorneys fees and exemplary damages to Philcomsat, Globe maintains that Philcomsat is not entitled thereto because in refusing to pay rentals for the remainder of the term of the Agreement, Globe only acted in accordance with its rights.18 In G.R. No. 147334,19 Globe, the petitioner therein, contends that the Court of Appeals erred in finding it liable for the amount of US$92,238.00, representing rentals for December 1992, since Philcomsats services were actually terminated on 08 November 1992.20 In its Comment, Philcomsat claims that Globes petition should be dismissed as it raises a factual issue which is not cognizable by the Court in a petition for review on certiorari.21 On 15 August 2001, the Court issued a Resolution giving due course to Philcomsats Petition in G.R. No. 147324 and required the parties to submit their respective memoranda.
22

Art. 1174. Except in cases specified by the law, or when it is otherwise declared by stipulation, or when the nature of the obligation requires the assumption of risk, no person shall be responsible for those events which, could not be foreseen, or which, though foreseen were inevitable. A fortuitous event under Article 1174 may either be an "act of God," or natural occurrences such as floods or typhoons,24 or an "act of man," such as riots, strikes or wars. 25 Philcomsat and Globe agreed in Section 8 of the Agreement that the following events shall be deemed events constituting force majeure: 1. Any law, order, regulation, direction or request of the Philippine Government; 2. Strikes or other labor difficulties; 3. Insurrection; 4. Riots; 5. National emergencies; 6. War; 7. Acts of public enemies; 8. Fire, floods, typhoons or other catastrophies or acts of God; 9. Other circumstances beyond the control of the parties. Clearly, the foregoing are either unforeseeable, or foreseeable but beyond the control of the parties. There is nothing in the enumeration that runs contrary to, or expands, the concept of a fortuitous event under Article 1174. Furthermore, under Article 130626 of the Civil Code, parties to a contract may establish such stipulations, clauses, terms and conditions as they may deem fit, as long as the same do not run counter to the law, morals, good customs, public order or public policy. 27 Article 1159 of the Civil Code also provides that "[o]bligations arising from contracts have the force of law between the contracting parties and should be complied with in good faith."28 Courts cannot stipulate for the parties nor amend their agreement where the same does not contravene law, morals, good customs, public order or public policy, for to do so would be to alter the real intent of the parties, and would run contrary to the function of the courts to give force and effect thereto.29 Not being contrary to law, morals, good customs, public order, or public policy, Section 8 of the Agreement which Philcomsat and Globe freely agreed upon has the force of law between them.30 In order that Globe may be exempt from non-compliance with its obligation to pay rentals under Section 8, the concurrence of the following elements must be established: (1) the event must be independent of the human will; (2) the occurrence must render it impossible for the debtor to fulfill the obligation in a normal manner; and (3) the obligor must be free of participation in, or aggravation of, the injury to the creditor. 31 The Court agrees with the Court of Appeals and the trial court that the abovementioned requisites are present in the instant case. Philcomsat and Globe had no control over the non-renewal of the term of the RP-US Military Bases Agreement when the same expired in 1991, because the prerogative to ratify the treaty extending the life thereof belonged to the Senate. Neither did the parties have control over the subsequent withdrawal of the US military forces and personnel from Cubi Point in December 1992:

Similarly, on 20 August 2001, the Court issued a Resolution giving due course to the Petition filed by Globe in G.R. No. 147334 and required both parties to submit their memoranda.23 Philcomsat and Globe thereafter filed their respective Consolidated Memoranda in the two cases, reiterating their arguments in their respective petitions. The Court is tasked to resolve the following issues: (1) whether the termination of the RPUS Military Bases Agreement, the non-ratification of the Treaty of Friendship, Cooperation and Security, and the consequent withdrawal of US military forces and personnel from Cubi Point constitute force majeure which would exempt Globe from complying with its obligation to pay rentals under its Agreement with Philcomsat; (2) whether Globe is liable to pay rentals under the Agreement for the month of December 1992; and (3) whether Philcomsat is entitled to attorneys fees and exemplary damages. No reversible error was committed by the Court of Appeals in issuing the assailed Decision; hence the petitions are denied. There is no merit is Philcomsats argument that Section 8 of the Agreement cannot be given effect because the enumeration of events constituting force majeure therein unduly expands the concept of a fortuitous event under Article 1174 of the Civil Code and is therefore invalid. In support of its position, Philcomsat contends that under Article 1174 of the Civil Code, an event must be unforeseen in order to exempt a party to a contract from complying with its obligations therein. It insists that since the expiration of the RP-US Military Bases Agreement, the non-ratification of the Treaty of Friendship, Cooperation and Security and the withdrawal of US military forces and personnel from Cubi Point were not unforeseeable, but were possibilities known to it and Globe at the time they entered into the Agreement, such events cannot exempt Globe from performing its obligation of paying rentals for the entire five-year term thereof. However, Article 1174, which exempts an obligor from liability on account of fortuitous events or force majeure, refers not only to events that are unforeseeable, but also to those which are foreseeable, but inevitable:

Obviously the non-ratification by the Senate of the RP-US Military Bases Agreement (and its Supplemental Agreements) under its Resolution No. 141. (Exhibit "2") on September 16, 1991 is beyond the control of the parties. This resolution was followed by the sending on December 31, 1991 o[f] a "Note Verbale" (Exhibit "3") by the Philippine Government to the US Government notifying the latter of the formers termination of the RP-US Military Bases Agreement (as amended) on 31 December 1992 and that accordingly, the withdrawal of all U.S. military forces from Subic Naval Base should be completed by said date. Subsequently, defendant [Globe] received a formal order from Cdr. Walter F. Corliss II Commander USN dated July 31, 1992 and a notification from ATT dated July 29, 1992 to terminate the provision of T1s services (via an IBS Standard B Earth Station) effective November 08, 1992. Plaintiff [Philcomsat] was furnished with copies of the said order and letter by the defendant on August 06, 1992. Resolution No. 141 of the Philippine Senate and the Note Verbale of the Philippine Government to the US Government are acts, direction or request of the Government of the Philippines and circumstances beyond the control of the defendant. The formal order from Cdr. Walter Corliss of the USN, the letter notification from ATT and the complete withdrawal of all the military forces and personnel from Cubi Point in the year-end 1992 are also acts and circumstances beyond the control of the defendant. Considering the foregoing, the Court finds and so holds that the afore-narrated circumstances constitute "force majeure or fortuitous event(s) as defined under paragraph 8 of the Agreement. From the foregoing, the Court finds that the defendant is exempted from paying the rentals for the facility for the remaining term of the contract. As a consequence of the termination of the RP-US Military Bases Agreement (as amended) the continued stay of all US Military forces and personnel from Subic Naval Base would no longer be allowed, hence, plaintiff would no longer be in any position to render the service it was obligated under the Agreement. To put it blantly (sic), since the US military forces and personnel left or withdrew from Cubi Point in the year end December 1992, there was no longer any necessity for the plaintiff to continue maintaining the IBS facility. 32 (Emphasis in the original.) The aforementioned events made impossible the continuation of the Agreement until the end of its five-year term without fault on the part of either party. The Court of Appeals was thus correct in ruling that the happening of such fortuitous events rendered Globe exempt from payment of rentals for the remainder of the term of the Agreement. Moreover, it would be unjust to require Globe to continue paying rentals even though Philcomsat cannot be compelled to perform its corresponding obligation under the Agreement. As noted by the appellate court: We also point out the sheer inequity of PHILCOMSATs position. PHILCOMSAT would like to charge GLOBE rentals for the balance of the lease term without there being any corresponding telecommunications service subject of the lease. It will be grossly unfair and iniquitous to hold GLOBE liable for lease charges for a service that was not and could not have been rendered due to an act of the government which was clearly beyond GLOBEs control. The binding effect of a contract on both parties is based on the principle that the obligations arising from contracts have the force of law between the contracting parties, and there must be mutuality between them based essentially on their equality under which it is

repugnant to have one party bound by the contract while leaving the other party free therefrom (Allied Banking Corporation v. Court of Appeals, 284 SCRA 357).33 With respect to the issue of whether Globe is liable for payment of rentals for the month of December 1992, the Court likewise affirms the appellate courts ruling that Globe should pay the same. Although Globe alleged that it terminated the Agreement with Philcomsat effective 08 November 1992 pursuant to the formal order issued by Cdr. Corliss of the US Navy, the date when they actually ceased using the earth station subject of the Agreement was not established during the trial.34 However, the trial court found that the US military forces and personnel completely withdrew from Cubi Point only on 31 December 1992. 35 Thus, until that date, the USDCA had control over the earth station and had the option of using the same. Furthermore, Philcomsat could not have removed or rendered ineffective said communication facility until after 31 December 1992 because Cubi Point was accessible only to US naval personnel up to that time. Hence, the Court of Appeals did not err when it affirmed the trial courts ruling that Globe is liable for payment of rentals until December 1992. Neither did the appellate court commit any error in holding that Philcomsat is not entitled to attorneys fees and exemplary damages. The award of attorneys fees is the exception rather than the rule, and must be supported by factual, legal and equitable justifications.36 In previously decided cases, the Court awarded attorneys fees where a party acted in gross and evident bad faith in refusing to satisfy the other partys claims and compelled the former to litigate to protect his rights; 37 when the action filed is clearly unfounded,38 or where moral or exemplary damages are awarded.39 However, in cases where both parties have legitimate claims against each other and no party actually prevailed, such as in the present case where the claims of both parties were sustained in part, an award of attorneys fees would not be warranted. 40 Exemplary damages may be awarded in cases involving contracts or quasi-contracts, if the erring party acted in a wanton, fraudulent, reckless, oppressive or malevolent manner. 41 In the present case, it was not shown that Globe acted wantonly or oppressively in not heeding Philcomsats demands for payment of rentals. It was established during the trial of the case before the trial court that Globe had valid grounds for refusing to comply with its contractual obligations after 1992. WHEREFORE, the Petitions are DENIED for lack of merit. The assailed Decision of the Court of Appeals in CA-G.R. CV No. 63619 is AFFIRMED. SO ORDERED.

Republic of the Philippines SUPREME COURT Manila SECOND DIVISION G.R. No. 165164 August 17, 2007

1. Ordering the respondent, Fil-Estate Properties, Inc., to refund to the complainants, P3,439,000.07 (the amount proved) plus 12% interest thereon reckoned from 09 August 1999 (the date the respondent received the demand letter) until the same is fully paid. 2. Ordering the respondent to pay to the complainants P25,000.00 attorneys fees as and by way of damages. All other claims and counterclaims are dismissed. IT IS SO ORDERED.
5

FIL-ESTATE PROPERTIES, INC., Petitioner, vs. SPOUSES GONZALO and CONSUELO GO, Respondents. RESOLUTION QUISUMBING, J.: For review on certiorari are the Decision dated June 9, 2004 of the Court of Appeals 2 in CA-G.R. SP No. 79624, and its Resolution dated August 3, 2004, denying the motion for reconsideration. The basic facts in this case are undisputed. On December 29, 1995, petitioner Fil-Estate Properties, Inc. (Fil-Estate) entered into a contract to sell a condominium unit to respondent spouses Gonzalo and Consuelo Go at "Eight Sto. Domingo Place," a condominium project of petitioner located on Sto. Domingo Avenue, Quezon City. The spouses paid a total of P3,439,000.07 of the full contract price set at P3,620,000.00. Because petitioner failed to develop the condominium project, on August 4, 1999, the spouses demanded the refund of the amount they paid, plus interest. When petitioner did not refund the spouses, the latter filed a complaint against petitioner for reimbursement of P3,620,000 representing the lump sum price of the condominium unit, plus interest, P100,000 attorneys fees, and expenses of litigation before the Housing and Land Use Regulatory Board (HLURB). In answer, petitioner claimed that respondents had no cause of action since the delay in the construction of the condominium was caused by the financial crisis that hit the Asian region, a fortuitous event over which petitioner had no control. On July 18, 2000, the HLURB Regional Director approved the decision of the Housing and Land Use Arbiter in favor of the spouses Go. The HLURB ratiocinated that the Asian financial crisis that resulted in the depreciation of the peso is not a fortuitous event as any fluctuation in the value of the peso is a daily occurrence which is foreseeable and its deleterious effects avoided by economic measures. The HLURB went on to say that when petitioner discontinued the development of its condominium project, it failed to fulfill its contractual obligations to the spouses. And following Article 3 1475 of the Civil Code, upon perfection of the contract, the parties, here the spouses 4 Go, may demand performance. And under Article 1191 of the same code, should one of the parties, in this instance Fil-Estate, fail to comply with the obligation, the aggrieved party may choose between fulfillment or rescission of the obligation, with damages in either case. Inasmuch as Fil-Estate could no longer fulfill its obligation, the spouses Go may ask for rescission of the contract with damages. The dispositive portion of the decision reads: WHEREFORE, the foregoing considered, judgment is hereby rendered as follows:
1

The Board of Commissioners of the HLURB denied petitioners petition for review and 6 consequent motion for reconsideration. The Office of the President dismissed 7 petitioners appeal and denied its motion for reconsideration. On appeal, asserting that both the HLURB and the Office of the President committed reversible errors, Fil-Estate asked the Court of Appeals to set aside the orders it is appealing. The Court of Appeals affirmed the actions taken by the HLURB and the Office of the President and declared that the Asian financial crisis could not be considered a 8 fortuitous event and that respondents right is provided for in Section 23 of Presidential Decree (P.D.) No. 957, otherwise known as "The Subdivision and Condominium Buyers Protective Decree." The appellate court also noted that there was yet no crisis in 1995 and 1996 when the project should have been started, and petitioner cannot blame the 1997 crisis for failure of the project, nor for even not starting it, because the project should have been completed by 1997. The appellate court denied petitioners motion for reconsideration. Hence, this petition raising two issues for our resolution as follows: I. THE HONORABLE COURT OF APPEALS ERRED IN HOLDING THAT THE ASIAN FINANCIAL CRISIS IS NOT A FORTUITOUS EVENT THAT WOULD EXCUSE THE DELIVERY BY PETITIONER OF THE SUBJECT CONDOMINIUM UNIT TO RESPONDENTS. II. THE HONORABLE COURT OF APPEALS ERRED IN HOLDING 9 PETITIONER LIABLE FOR THE PAYMENT OF ATTORNEYS FEES. On the first issue, did the Court of Appeals err in ruling that the Asian financial crisis was not a fortuitous event? Petitioner, citing Article 1174 of the Civil Code, argues that the Asian financial crisis was a fortuitous event being unforeseen or inevitable. Petitioner likewise cites 11 Servando v. Philippine Steam Navigation Co., to bolster its case. Petitioner explains that the extreme economic exigency and extraordinary currency fluctuations could not have been reasonably foreseen and were beyond the contemplation of both parties when they entered the contract. Petitioner further asserts that the resultant economic collapse of the real estate industry was unforeseen by the whole Asia and if it was indeed foreseeable, then all those engaged in the real estate business should have foreseen the impending fiasco. Petitioner adds that it had not committed any fraud; that it had all the required government permits; and that it had not abandoned the
10

project but only suspended the work. It also admits its obligation to complete the 12 project. It says that it had in fact asked the HLURB for extension to complete it. In their Comment, respondents submit that the instant petition be rejected outright for the reason that petitioner has not raised any question of law in the instant petition. The questions of whether or not the Asian financial crisis is a fortuitous event, and whether or not attorneys fees should be granted, are questions of facts which the Court of Appeals recognized as such. Respondent spouses reiterate that contrary to what petitioner avers, the delay in the construction of the building was not attributable to the Asian financial crisis which 13 happened in 1997 because petitioner did not even start the project in 1995 when it should have done, so that it could have finished it in 1997, as stipulated in the contract. Preliminarily, respondents bring to the attention of this Court the strange discrepancy in the dates of notarization of the Certification of Non-Forum Shopping and the Affidavit of Service both notarized on September 24, 2004, while the Secretarys Certification was notarized a day earlier on September 23, 2004. However, we shall not delve into technicalities, but we shall proceed with the resolution of the issues raised on the merits.1awph!l Indeed, the question of whether or not an event is fortuitous is a question of fact. As a general rule, questions of fact may not be raised in a petition for review for as long as there is no variance between the findings of the lower court and the appellate court, as in this case where the HLURB, the Office of the President, and the Court of Appeals were agreed on the fact. Worthy of note, in a previous case, Asian Construction and Development Corporation 14 v. Philippine Commercial International Bank, the Court had said that the 1997 financial crisis that ensued in Asia did not constitute a valid justification to renege on obligations. We emphatically stressed the same view in Mondragon Leisure and 15 Resorts Corporation v. Court of Appeals, that the Asian financial crisis in 1997 is not among the fortuitous events contemplated under Article 1174 of the Civil Code.1avvphi1 Also, we cannot generalize that the Asian financial crisis in 1997 was unforeseeable and beyond the control of a business corporation. It is unfortunate that petitioner apparently met with considerable difficulty e.g. increase cost of materials and labor, even before the scheduled commencement of its real estate project as early as 1995. However, a real estate enterprise engaged in the pre-selling of condominium units is concededly a master in projections on commodities and currency movements and business risks. The fluctuating movement of the Philippine peso in the foreign exchange market is an everyday occurrence, and fluctuations in currency exchange rates happen everyday, thus, not an instance of caso fortuito. Are respondents entitled to reimbursement of the amount paid, plus interest and attorneys fees? Yes. Section 23 of P.D. No. 957 is clear on this point. It will be noted that respondents sent a demand letter dated August 4, 1999 to FilEstate asking for the return of "the total amount paid including amortization interests" 16 and "legal interest due thereon." The latter did not respond favorably, and so the spouses filed a complaint demanding the reimbursement of P3,620,000 representing

the lump sum price of the condominium unit with interest at the legal rate, and P100,000 attorneys fees. But the respondents actually sought the refund of P3,620,000.00, the lump sum cost of the condominium, more than their actual payment of P3,439,000.07. We are thus constrained to award only P3,439,000.07, representing the sum of their actual payments plus amortization interests and interest at legal rate which is 6% per annum from the date of demand on August 4, 1999. We are not unaware that the appellate court pegged the interest rate at 12% on the basis of Resolution No. R-421, Series of 1988 of the HLURB. But, conformably with our 17 ruling in Eastern Shipping Lines, Inc. v. Court of Appeals, the award of 12% interest on the amount of refund must be reduced to 6%. Moreover, we are constrained to modify the Court of Appeals grant of attorneys fees from P25,000 to P100,000 as just and equitable since respondents were compelled to secure the services of counsel over eight years to protect their interest due to petitioners delay in the performance of their clear obligation. WHEREFORE, the petition is DENIED for lack of merit. Petitioner is hereby ordered (1) to reimburse respondents P3,439,000.07 at 6% interest starting August 4, 1999 until full payment, and (2) to pay respondents P100,000.00 attorneys fees. Costs against petitioner. SO ORDERED.

Republic of the Philippines SUPREME COURT Manila FIRST DIVISION [G.R. No. 137909. December 11, 2003] FIDELA DEL BERNARDINO respondents. CASTILLO NAGUIAT Vda. and DE MISTICA, petitioner, vs. Spouses MARIA PAULINA GERONA-NAGUIAT,

Na magbibigay ng paunang bayad ang BUMIBILI SA NAGBIBILI na halagang DALAWANG LIBONG PISO (P2,000.00) Kualtang Pilipino, sa sandaling lagdaan ang kasulatang ito. Na ang natitirang halagang LABING WALONG LIBONG PISO (P18,000.00) Kualtang Pilipino, ay babayaran ng BUM[I]BILI sa loob ng Sampung (10) taon, na magsisimula sa araw din ng lagdaan ang kasulatang ito. Sakaling hindi makakabayad ang Bumibili sa loob ng panahon pinagkasunduan, an[g] BUMIBILI ay magbabayad ng pakinabang o interes ng 12% isang taon, sa taon nilakaran hanggang sa itoy mabayaran tuluyan ng Bumibili: Sa katunayan ng lahat ay nilagdaan ng Magkabilang Panig ang kasulatang ito, ngayon ika 5 ng Abril, 1979, sa Bayan ng Meycauayan. Lalawigan ng Bulacan, Pilipinas. (signed) BERNARDINO NAGUIAT Bumibili (signed) EULALIO MISTICA Nagbibili

DECISION PANGANIBAN, J.: The failure to pay in full the purchase price stipulated in a deed of sale does not ipso facto grant the seller the right to rescind the agreement. Unless otherwise stipulated by the parties, rescission is allowed only when the breach of the contract is substantial and fundamental to the fulfillment of the obligation. The Case Before us is a Petition for Review[1] under Rule 45 of the Rules of Court, seeking to nullify the October 31, 1997 Decision[2] and the February 23, 1999 Resolution[3] of the Court of Appeals (CA) in CA-GR CV No. 51067. The assailed Decision disposed as follows: WHEREFORE, modified as indicated above, the decision of the Regional Trial Court is hereby AFFIRMED.[4] The assailed Resolution denied petitioners Motion for Reconsideration. The Facts The facts of the case are summarized by the CA as follows: Eulalio Mistica, predecessor-in-interest of herein [petitioner], is the owner of a parcel of land located at Malhacan, Meycauayan, Bulacan. A portion thereof was leased to [Respondent Bernardino Naguiat] sometime in 1970. On 5 April 1979, Eulalio Mistica entered into a contract to sell with [Respondent Bernardino Naguiat] over a portion of the aforementioned lot containing an area of 200 square meters. This agreement was reduced to writing in a document entitled Kasulatan sa Pagbibilihan which reads as follows: NAGSASALAYSAY: Na ang NAGBIBILI ay nagmamay-aring tunay at naghahawak ng isang lagay na lupa na nasa Nayon ng Malhacan, Bayan ng Meycauayan, Lalawigan ng Bulacan, na ang kabuuan sukat at mga kahangga nito gaya ng sumusunod: xxx xxx xxx

Pursuant to said agreement, [Respondent Bernardino Naguiat] gave a downpayment of P2,000.00. He made another partial payment of P1,000.00 on 7 February 1980. He failed to make any payments thereafter. Eulalio Mistica died sometime in October 1986. On 4 December 1991, [petitioner] filed a complaint for rescission alleging inter alia: that the failure and refusal of [respondents] to pay the balance of the purchase price constitutes a violation of the contract which entitles her to rescind the same; that [respondents] have been in possession of the subject portion and they should be ordered to vacate and surrender possession of the same to [petitioner] ; that the reasonable amount of rental for the subject land is P200.00 a month; that on account of the unjustified actuations of [respondents], [petitioner] has been constrained to litigate where she incurred expenses for attorneys fees and litigation expenses in the sum of P20,000.00. In their answer and amended answer, [respondents] contended that the contract cannot be rescinded on the ground that it clearly stipulates that in case of failure to pay the balance as stipulated, a yearly interest of 12% is to be paid. [Respondent Bernardino Naguiat] likewise alleged that sometime in October 1986, during the wake of the late Eulalio Mistica, he offered to pay the remaining balance to [petitioner] but the latter refused and hence, there is no breach or violation committed by them and no damages could yet be incurred by the late Eulalio Mistica, his heirs or assigns pursuant to the said document; that he is presently the owner in fee simple of the subject lot having acquired the same by virtue of a Free Patent Title duly awarded to him by the Bureau of Lands; and that his title and ownership had already become indefeasible and incontrovertible. As counterclaim, [respondents] pray for moral damages in the amount of P50,000.00; exemplary damages in the amount of P30,000.00; attorneys fees in the amount of P10,000.00 and other litigation expenses. On 8 July 1992, [respondents] also filed a motion to dismiss which was denied by the court on 29 July 1992. The motion for reconsideration was likewise denied per its Order of 17 March 1993.

Na alang-alang sa halagang DALAWANG PUNG LIBONG PISO (P20,000.00) Kualtang Pilipino, ang NAGBIBILI ay nakipagkasundo ng kanyang ipagbibili ang isang bahagi o sukat na DALAWANG DAAN (200) METROS PARISUKAT, sa lupang nabanggit sa itaas, na ang mga kahangga nito ay gaya ng sumusunod: xxx xxx xxx

After the presentation of evidence, the court on 27 January 1995 rendered the now assailed judgment, the dispositive portion of which reads: WHEREFORE, premises considered, judgment is hereby rendered: 1. Dismissing the complaint and ordering the [petitioner] to pay the [respondents] attorneys fee in the amount of P10,000.00 and costs of the suit; 2. Ordering the [respondents]:

The Petition is without merit. First Issue: Rescission in Article 1191 Petitioner claims that she is entitled to rescind the Contract under Article 1191 of the Civil Code, because respondents committed a substantial breach when they did not pay the balance of the purchase price within the ten-year period. She further avers that the proviso on the payment of interest did not extend the period to pay. To interpret it in that way would make the obligation purely potestative and, thus, void under Article 1182 of the Civil Code. We disagree. The transaction between Eulalio Mistica and respondents, as evidenced by the Kasulatan, was clearly a Contract of Sale. A deed of sale is considered absolute in nature when there is neither a stipulation in the deed that title to the property sold is reserved to the seller until the full payment of the price; nor a stipulation giving the vendor the right to unilaterally resolve the contract the moment the buyer fails to pay within a fixed period.[9] In a contract of sale, the remedy of an unpaid seller is either specific performance or rescission.[10] Under Article 1191 of the Civil Code, the right to rescind an obligation is predicated on the violation of the reciprocity between parties, brought about by a breach of faith by one of them.[11] Rescission, however, is allowed only where the breach is substantial and fundamental to the fulfillment of the obligation.[12] In the present case, the failure of respondents to pay the balance of the purchase price within ten years from the execution of the Deed did not amount to a substantial breach. In the Kasulatan, it was stipulated that payment could be made even after ten years from the execution of the Contract, provided the vendee paid 12 percent interest. The stipulations of the contract constitute the law between the parties; thus, courts have no alternative but to enforce them as agreed upon and written.[13] Moreover, it is undisputed that during the ten-year period, petitioner and her deceased husband never made any demand for the balance of the purchase price. Petitioner even refused the payment tendered by respondents during her husbands funeral, thus showing that she was not exactly blameless for the lapse of the ten-year period. Had she accepted the tender, payment would have been made well within the agreed period. If petitioner would like to impress upon this Court that the parties intended otherwise, she has to show competent proof to support her contention. Instead, she argues that the period cannot be extended beyond ten years, because to do so would convert the buyers obligation to a purely potestative obligation that would annul the contract under Article 1182 of the Civil Code. This contention is likewise untenable. The Code prohibits purely potestative, suspensive, conditional obligations that depend on the whims of the debtor, because such obligations are usually not meant to be fulfilled.[14] Indeed, to allow the fulfillment of conditions to depend exclusively on the debtors will would be to sanction illusory obligations.[15] The Kasulatan does not allow such thing. First, nowhere is it stated in the Deed that payment of the purchase price is dependent upon whether respondents want to pay it or not. Second, the fact that they already made partial payment thereof only shows that the parties intended to be bound by the Kasulatan.

a. To pay [petitioner] and the heirs of Eulalio Mistica the balance of the purchase price in the amount of P17,000.00, with interest thereon at the rate of 12% per annum computed from April 5, 1989 until full payment is made, subject to the application of the consigned amount to such payment; b. To return to [petitioner] and the heirs of Eulalio Mistica the extra area of 58 square meters from the land covered by OCT No. 4917 (M), the corresponding price therefor based on the prevailing market price thereof.[5] (Citations omitted) CAs Decision Disallowing rescission, the CA held that respondents did not breach the Contract of Sale. It explained that the conclusion of the ten-year period was not a resolutory term, because the Contract had stipulated that payment -- with interest of 12 percent - could still be made if respondents failed to pay within the period. According to the appellate court, petitioner did not disprove the allegation of respondents that they had tendered payment of the balance of the purchase price during her husbands funeral, which was well within the ten-year period. Moreover, rescission would be unjust to respondents, because they had already transferred the land title to their names. The proper recourse, the CA held, was to order them to pay the balance of the purchase price, with 12 percent interest. As to the matter of the extra 58 square meters, the CA held that its reconveyance was no longer feasible, because it had been included in the title issued to them. The appellate court ruled that the only remedy available was to order them to pay petitioner the fair market value of the usurped portion. Hence, this Petition.[6] Issues In her Memorandum,[7] petitioner raises the following issues: 1. Whether or not the Honorable Court of Appeals erred in the application of Art. 1191 of the New Civil Code, as it ruled that there is no breach of obligation inspite of the lapse of the stipulated period and the failure of the private respondents to pay. 2. Whether or not the Honorable Court of Appeals [e]rred in ruling that rescission of the contract is no longer feasible considering that a certificate of title had been issued in favor of the private respondents. 3. Whether or not the Honorable Court of Appeals erred in ruling that since the 58 sq. m. portion in question is covered by a certificate of title in the names of private respondents reconveyance is no longer feasible and proper.[8] The Courts Ruling

Both the trial and the appellate courts arrived at this finding. Well-settled is the rule that findings of fact by the CA are generally binding upon this Court and will not be disturbed on appeal, especially when they are the same as those of the trial court.[16] Petitioner has not given us sufficient reasons to depart from this rule. Second Issue: Rescission Unrelated to Registration The CA further ruled that rescission in this case would be unjust to respondents, because a certificate of title had already been issued in their names. Petitioner nonetheless argues that the Court is still empowered to order rescission. We clarify. The issuance of a certificate of title in favor of respondents does not determine whether petitioner is entitled to rescission. It is a fundamental principle in land registration that such title serves merely as an evidence of an indefeasible and incontrovertible title to the property in favor of the person whose name appears therein.[17] While a review of the decree of registration is no longer possible after the expiration of the one-year period from entry, an equitable remedy is still available to those wrongfully deprived of their property.[18] A certificate of title cannot be subject to collateral attack and can only be altered, modified or canceled in direct proceedings in accordance with law.[19] Hence, the CA correctly held that the propriety of the issuance of title in the name of respondents was an issue that was not determinable in these proceedings. Third Issue: Reconveyance of the Portion Importunately Included Petitioner argues that it would be reasonable for respondents to pay her the value of the lot, because the CA erred in ruling that the reconveyance of the extra 58-square meter lot, which had been included in the certificate of title issued to them, was no longer feasible. In principle, we agree with petitioner. Registration has never been a mode of acquiring ownership over immovable property, because it does not create or vest title, but merely confirms one already created or vested.[20] Registration does not give holders any better title than what they actually have.[21] Land erroneously included in the certificate of title of another must be reconveyed in favor of its true and actual owner.[22] Section 48 of Presidential Decree 1529, however, provides that the certificate of title shall not be subject to collateral attack, alteration, modification, or cancellation except in a direct proceeding.[23] The cancellation or removal of the extra portion from the title of respondents is not permissible in an action for rescission of the contract of sale between them and petitioners late husband, because such action is tantamount to allowing a collateral attack on the title. It appears that an action for cancellation/annulment of patent and title and for reversion was already filed by the State in favor of petitioner and the heirs of her husband.[24] Hence, there is no need in this case to pass upon the right of respondents to the registration of the subject land under their names. For the same reason, there is no necessity to order them to pay petitioner the fair market value of the extra 58-square meter lot importunately included in the title.

WHEREFORE, the assailed Decision and Resolution are AFFIRMED with the MODIFICATION that the payment for the extra 58-square meter lot included in respondents title is DELETED. SO ORDERED.