Oblicon Cases

[G.R. NO. 147324 : May 25, 2004] TINGA, J.
:
PHILIPPINE COMMUNICATIONS SATELLITE CORPORATION, Petitioner, v. GLOBE Before the Court are two Petitions for Review assailing the Decision of the Court of Appeals,
1
TELECOM, INC. (formerly and Globe Mckay Cable and Radio Corporation), Respondents. dated 27 February 2001, in CA-G.R. CV No. 63619. ςrνll
[G.R. NO. 147334 : May 25, 2004] The facts of the case are undisputed.
GLOBE TELECOM, INC., Petitioner, v. PHILIPPINE COMMUNICATION SATELLITE For several years prior to 1991, Globe Mckay Cable and Radio Corporation, now Globe
CORPORATION, Respondent. 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
D E C I S I O N
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
Civil Law;; Contracts;; Force Majeure;; Article 1174 exempts an obligor from liability not only personnel or those of American companies contracted by it to operate said facilities. The
to events that are unforeseeable, but also to those which are foreseeable, but inevitable.—Article USDCA contracted with said American companies, and the latter, in turn, contracted with Globe
1174, which exempts an obligor from liability on account of fortuitous events or force for the use of the communication facilities. Globe, on the other hand, contracted with local
majeure, refers not only to events that are unforeseeable, but also to those which are foreseeable, service providers such as the Philippine Communications Satellite Corporation (Philcomsat) for
but inevitable: Art. 1174. Except in cases specified by the law, or when it is otherwise declared by the provision of the communication facilities.
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
On 07 May 1991, Philcomsat and Globe entered into an Agreement whereby Philcomsat
inevitable. A fortuitous event under Article 1174 may either be an “act of God,” or natural
obligated itself to establish, operate and provide an IBS Standard B earth station (earth station)
occurrences such as floods or typhoons, or an “act of man,” such as riots, strikes or wars. 2
within Cubi Point for the exclusive use of the USDCA. The term of the contract was for 60
3
months, or five (5) years. In turn, Globe promised to pay Philcomsat monthly rentals for each
Same;; Same;; Same;; Terms and Conditions;; Parties may stipulate on terms and conditions leased circuit involved.
as they may see fit, and these have the force of law between them.—Under Article 1306 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, At the time of the execution of the Agreement, both parties knew that the Military Bases
public order or public policy. Article 1159 of the Civil Code also provides that “[o]bligations arising Agreement between the Republic of the Philippines and the US (RP-US Military Bases
from contracts have the force of law between the contracting parties and should be complied with Agreement), which was the basis for the occupancy of the Clark Air Base and Subic Naval Base
in good faith.” Courts cannot stipulate for the parties nor amend their agreement where the same in Cubi Point, was to expire in 1991. Under Section 25, Article XVIII of the 1987 Constitution,
does not contravene law, morals, good customs, public order or public policy, for to do so would foreign military bases, troops or facilities, which include those located at the US Naval Facility in
be to alter the real intent of the parties, and would run contrary to the function of the courts to give Cubi Point, shall not be allowed in the Philippines unless a new treaty is duly concurred in by the
force and effect thereto. Not being contrary to law, morals, good customs, public order, or public Senate and ratified by a majority of the votes cast by the people in a national referendum when
policy, Section 8 of the Agreement which Philcomsat and Globe freely agreed upon has the force the Congress so requires, and such new treaty is recognized as such by the US Government.
of law between them.
Subsequently, Philcomsat installed and established the earth station at Cubi Point and the
Same;; Same;; Same;; Requisites;; The concurrence of the following elements must be USDCA made use of the same.
established.—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 On 16 September 1991, the Senate passed and adopted Senate Resolution No. 141, expressing
debtor to fulfill the obligation in a normal manner;; and (3) the obligor must be free of participation its decision not to concur in the ratification of the Treaty of Friendship, Cooperation and Security
in, or aggravation of, the injury to the creditor. and its Supplementary Agreements that was supposed to extend the term of the use by the US
5
of Subic Naval Base, among others. The last two paragraphs of the Resolution
Same;; Same;; Damages;; Attorney’s Fees;; In cases where both parties have legitimate state:ςηαñrοblεš νιr†υαl lαω lιbrαrÿ
claims against each other, an award of attorney’s fees would not be warranted.—The award of
attorney’s fees is the exception rather than the rule, and must be supported by factual, legal and FINDING that the Treaty constitutes a defective framework for the continuing relationship
equitable justifications. In previously decided cases, the Court awarded attorney’s fees where a between the two countries in the spirit of friendship, cooperation and sovereign equality: Now,
party acted in gross and evident bad faith in refusing to satisfy the other party’s claims and therefore, be it
compelled the former to litigate to protect his rights;; when the action filed is clearly unfounded, or
where moral or exemplary damages are awarded. However, in cases where both parties have
legitimate claims against each other and no party actually prevailed, such as in the present case Resolved by the Senate, as it is hereby resolved, To express its decision not to concur in the
where the claims of both parties were sustained in part, an award of attorney’s fees would not be ratification of the Treaty of Friendship, Cooperation and Security and its Supplementary
warranted. Agreements, at the same time reaffirming its desire to continue friendly relations with the
government and people of the United States of America. l

On 31 December 1991, the Philippine Government sent a Note Verbale to the US Government WHEREFORE, premises considered, judgment is hereby rendered as follows:
through the US Embassy, notifying it of the Philippines termination of the RP-US Military Bases
Agreement. The Note Verbale stated that since the RP-US Military Bases Agreement, as
1.Ordering the defendant to pay the plaintiff the amount of Ninety Two Thousand Two Hundred
amended, shall terminate on 31 December 1992, the withdrawal of all US military forces from
Thirty Eight US Dollars (US$92,238.00) or its equivalent in Philippine Currency (computed at the
Subic Naval Base should be completed by said date.
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
In a letter dated 06 August 1992, Globe notified Philcomsat of its intention to discontinue the use annum starting December 1992 until the amount is fully paid;;
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.
2.Ordering the defendant to pay the plaintiff the amount of Three Hundred Thousand
Globe invoked as basis for the letter of termination Section 8 (Default) of the Agreement, which
(P300,000.00) Pesos as and for attorneys fees;;
provides:
3.Ordering the DISMISSAL of defendants counterclaim for lack of merit;; and
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 4.With costs against the defendant.
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, 9
SO ORDERED.
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. Both parties appealed the trial courts Decision to the Court of Appeals.
Philcomsat sent a reply letter dated 10 August 1992 to Globe, stating that we expect [Globe] to Philcomsat claimed that the trial court erred in ruling that: (1) the non-ratification by the Senate
know its commitment to pay the stipulated rentals for the remaining terms of the Agreement of the Treaty of Friendship, Cooperation and Security and its Supplementary Agreements
even after [Globe] shall have discontinue[d] the use of the earth station after November 08, constitutes force majeure which exempts Globe from complying with its obligations under the
7
1992. Philcomsat referred to Section 7 of the Agreement, stating as follows: 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.
7.DISCONTINUANCE OF SERVICE
Globe, on the other hand, contended that the RTC erred in holding it liable for payment of rent of
Should [Globe] decide to discontinue with the use of the earth station after it has been put into 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
operation, a written notice shall be served to PHILCOMSAT at least sixty (60) days prior to the
that date.
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. On 27 February 2001, the Court of Appeals promulgated its Decision dismissing Philcomsats
However, should PHILCOMSAT make use or sell the earth station subject to this agreement, the appeal for lack of merit and affirming the trial courts finding that certain events constituting force
obligation of [Globe] to pay the rental for the remaining life of the agreement shall be at such majeure under Section 8 the Agreement occurred and justified the non-payment by Globe of
8
monthly rate as may be agreed upon by the parties. ςrνll rentals for the remainder of the term of the Agreement.
After the US military forces left Subic Naval Base, Philcomsat sent Globe a letter dated 24 The appellate court ruled that the non-ratification by the Senate of the Treaty of Friendship,
November 1993 demanding payment of its outstanding obligations under the Agreement Cooperation and Security, and its Supplementary Agreements, and the termination by the
amounting to US$4,910,136.00 plus interest and attorneys fees. However, Globe refused to Philippine Government of the RP-US Military Bases Agreement effective 31 December 1991 as
heed Philcomsats demand. 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
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 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
the Agreement, with legal interest, exemplary damages, attorneys fees and costs of suit. The
prevented further use of the earth station under the Agreement.
case was raffled to Branch 59 of said court.
However, the Court of Appeals ruled that although Globe sought to terminate Philcomsats
Globe filed an Answer to the Complaint, insisting that it was constrained to end the Agreement
services by 08 November 1992, it is still liable to pay rentals for the December 1992, amounting
due to the termination of the RP-US Military Bases Agreement and the non-ratification by the
Senate of the Treaty of Friendship and Cooperation, which events constituted force to US$92,238.00 plus interest, considering that the US military forces and personnel completely
10
withdrew from Cubi Point only on 31 December 1992.
majeure under the Agreement. Globe explained that the occurrence of said events exempted it
from paying rentals for the remaining period of the Agreement.
Both parties filed their respective Petitions for Review assailing the Decision of the Court of
Appeals.
On 05 January 1999, the trial court rendered its Decision, the dispositive portion of which reads:
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In G.R. No. 147324, petitioner Philcomsat raises the following assignments of error: In G.R. No. 147334, 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
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Philcomsats services were actually terminated on 08 November 1992. ςrνll
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 In its Comment, Philcomsat claims that Globes petition should be dismissed as it raises a factual
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WITH ITS OBLIGATIONS UNDER THE SUBJECT AGREEMENT. issue which is not cognizable by the Court in a Petition for Review on Certiorari . ςrνll
B.THE HONORABLE COURT OF APPEALS ERRED IN RULING THAT GLOBE TELECOM IS On 15 August 2001, the Court issued a Resolution giving due course to Philcomsats Petition
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NOT LIABLE TO PHILCOMSAT FOR RENTALS FOR THE REMAINING TERM OF THE in G.R. No. 147324 and required the parties to submit their respective memoranda. ςrνll
AGREEMENT, DESPITE THE CLEAR TENOR OF SECTION 7 OF THE AGREEMENT.
Similarly, on 20 August 2001, the Court issued a Resolution giving due course to the Petition
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C.THE HONORABLE OCURT OF APPEALS ERRED IN DELETING THE TRIAL COURTS filed by Globe in G.R. No. 147334and required both parties to submit their memoranda. ςrνll
AWARD OF ATTORNEYS FEES IN FAVOR OF PHILCOMSAT.
Philcomsat and Globe thereafter filed their respective Consolidated Memoranda in the two
D.THE HONORABLE COURT OF APPEALS ERRED IN RULING THAT GLOBE TELECOM IS cases, reiterating their arguments in their respective petitions.
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NOT LIABLE TO PHILCOMSAT FOR EXEMPLARY DAMAGES. ςrνll
The Court is tasked to resolve the following issues: (1) whether the termination of the RP-US
Philcomsat argues that the termination of the RP-US Military Bases Agreement cannot be Military Bases Agreement, the non-ratification of the Treaty of Friendship, Cooperation and
considered a fortuitous event because the happening thereof was foreseeable. Although the Security, and the consequent withdrawal of US military forces and personnel from Cubi Point
Agreement was freely entered into by both parties, Section 8 should be deemed ineffective constitute force majeure which would exempt Globe from complying with its obligation to pay
because it is contrary to Article 1174 of the Civil Code. Philcomsat posits the view that the rentals under its Agreement with Philcomsat;; (2) whether Globe is liable to pay rentals under the
validity of the parties definition of force majeure in Section 8 of the Agreement as circumstances Agreement for the month of December 1992;; and (3) whether Philcomsat is entitled to attorneys
beyond the control of the party involved including, but not limited to, any law, order, regulation, fees and exemplary damages.
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
No reversible error was committed by the Court of Appeals in issuing the
other catastrophies or acts of God, should be deemed subject to Article 1174 which defines
assailed Decision;; hence the petitions are denied.
fortuitous events as events which could not be foreseen, or which, though foreseen, were
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inevitable. ςrνll
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
Philcomsat further claims that the Court of Appeals erred in holding that Globe is not liable to
concept of a fortuitous event under Article 1174 of the Civil Code and is therefore invalid.
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 In support of its position, Philcomsat contends that under Article 1174 of the Civil Code, an event
December 1992 even though it terminated Philcomsats services effective 08 November 1992, must be unforeseen in order to exempt a party to a contract from complying with its obligations
because the US military and personnel completely withdrew from Cubi Point only in December therein. It insists that since the expiration of the RP-US Military Bases Agreement, the non-
1992. Philcomsat points out that it was Globe which proposed the five-year term of the ratification of the Treaty of Friendship, Cooperation and Security and the withdrawal of US
14
Agreement, and that the other provisions of the Agreement, such as Section 4.1 thereof, military forces and personnel from Cubi Point were not unforeseeable, but were possibilities
15
evince the intent of Globe to be bound to pay rentals for the entire five-year term. ςrνll 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.
Philcomsat also maintains that contrary to the appellate courts findings, it is entitled to attorneys
16
fees and exemplary damages. ςrνll 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:
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 Art. 1174. Except in cases specified by the law, or when it is otherwise declared by stipulation, or
contractual obligations. Globe also claims that the termination of the RP-US Military Bases when the nature of the obligation requires the assumption of risk, no person shall be responsible
Agreement constitutes force majeure and exempts it from complying with its obligations under for those events which, could not be foreseen, or which, though foreseen were inevitable.
17
the Agreement. 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 A fortuitous event under Article 1174 may either be an act of God, or natural occurrences such
24 25
18 as floods or typhoons, or an act of man, such as riots, strikes or wars. ςrνll
accordance with its rights. ςrνll
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;; 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,
2.Strikes or other labor difficulties;;
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
3.Insurrection;; 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
4.Riots;;
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
5.National emergencies;; copies of the said order and letter by the defendant on August 06, 1992.
6.War;; 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
7.Acts of public enemies;; 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
8.Fire, floods, typhoons or other catastrophies or acts of God;; control of the defendant.
9.Other circumstances beyond the control of the parties. 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.
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 From the foregoing, the Court finds that the defendant is exempted from paying the rentals for
fortuitous event under Article 1174. the facility for the remaining term of the contract.
26
Furthermore, under Article 1306 of the Civil Code, parties to a contract may establish such As a consequence of the termination of the RP-US Military Bases Agreement (as amended) the
stipulations, clauses, terms and conditions as they may deem fit, as long as the same do not run continued stay of all US Military forces and personnel from Subic Naval Base would no longer be
27
counter to the law, morals, good customs, public order or public policy. ςrνll 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
Article 1159 of the Civil Code also provides that [o]bligations arising from contracts have the 32
the plaintiff to continue maintaining the IBS facility. (Emphasis in the original.)
28
force of law between the contracting parties and should be complied with in good faith. 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 The aforementioned events made impossible the continuation of the Agreement until the end of
intent of the parties, and would run contrary to the function of the courts to give force and effect its five-year term without fault on the part of either party. The Court of Appeals was thus correct
29
thereto. ςrνll 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.
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 Moreover, it would be unjust to require Globe to continue paying rentals even though Philcomsat
30
them. ςrνll cannot be compelled to perform its corresponding obligation under the Agreement. As noted by
the appellate court:
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 We also point out the sheer inequity of PHILCOMSATs position. PHILCOMSAT would like to
independent of the human will;; (2) the occurrence must render it impossible for the debtor to charge GLOBE rentals for the balance of the lease term without there being any corresponding
fulfill the obligation in a normal manner;; and (3) the obligor must be free of participation in, or telecommunications service subject of the lease.It will be grossly unfair and iniquitous to hold
31
aggravation of, the injury to the creditor. ςrνll 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
The Court agrees with the Court of Appeals and the trial court that the abovementioned have the force of law between the contracting parties, and there must be mutuality between
requisites are present in the instant case. Philcomsat and Globe had no control over the non- them based essentially on their equality under which it is repugnant to have one party bound by
renewal of the term of the RP-US Military Bases Agreement when the same expired in 1991, the contract while leaving the other party free therefrom (Allied Banking Corporation v. Court
because the prerogative to ratify the treaty extending the life thereof belonged to the Senate. of Appeals, 284 SCRA 357 ).
33
Neither did the parties have control over the subsequent withdrawal of the US military forces and
personnel from Cubi Point in December 1992:
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
34
trial. However, the trial court found that the US military forces and personnel completely
35
withdrew from Cubi Point only on 31 December 1992. 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
36
factual, legal and equitable justifications. 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
37
partys claims and compelled the former to litigate to protect his rights;; when the action filed is
38 39
clearly unfounded, or where moral or exemplary damages are awarded. 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
40
attorneys fees would not be warranted. ςrνll

Exemplary damages may be awarded in cases involving contracts or quasi-contracts, if the
41
erring party acted in a wanton, fraudulent, reckless, oppressive or malevolent manner. 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.

G.R. No. 159617 August 8, 2007 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.
ROBERTO C. SICAM and AGENCIA de R.C. SICAM, INC., petitioners,
To constitute a fortuitous event, the following elements must concur: (a) the cause of the
vs.
unforeseen and unexpected occurrence or of the failure of the debtor to comply with obligations
LULU V. JORGE and CESAR JORGE, respondents.
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
D E C I S I O N 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.
Courts;; Judgments;; 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 Same;; Same;; In order for a fortuitous event to exempt one from liability, it is necessary that
tenable and supported by law and the facts on records.—To begin with, although it is true that one has committed no negligence or misconduct that may have occasioned the loss;; When the
effect is found to be partly the result of a person’s participation—whether by active intervention,
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 neglect or failure to act—the whole occurrence is humanized and removed from the rules
of the Decision, we find that it expressed clearly and distinctly the facts and the law on which it is applicable to acts of God.—The burden of proving that the loss was due to a fortuitous event rests
on him who invokes it. And, in order for a fortuitous event to exempt one from liability, it is
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 necessary that one has committed no negligence or misconduct that may have occasioned the
the parties, as long as these are legally tenable and supported by law and the facts on records. loss. 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,
Corporation Law;; Piercing the Veil of Corporate Fiction;; The rule is that the veil of corporate
showing that the immediate or proximate cause of the damage or injury was a fortuitous event
fiction may be pierced when made as a shield to perpetrate fraud and/or confuse legitimate would not exempt one from liability. When the effect is found to be partly the result of a person’s
issues—the theory of corporate entity was not meant to promote unfair objectives or otherwise to
participation—whether by active intervention, neglect or failure to act—the whole occurrence is
shield them.—The CA correctly pierced the veil of the corporate fiction and adjudged petitioner
humanized and removed from the rules applicable to acts of God.
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. The theory
of corporate entity was not meant to promote unfair objectives or otherwise to shield them. Notably, Same;; Same;; Pawnshops;; Robbery;; Robbery per se, just like carnapping, is not a fortuitous
event;; Merely presenting the police report on the robbery committed based on the report of the
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 employees of the pawnshop owner is not sufficient to establish robbery.—Robbery per se, just like
receipts issued to respondent Lulu in September 1987, all bear the words “Agencia de R.C. 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, 291 SCRA 111 (1998), the Court held: It is not a
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 defense for a repair shop of motor vehicles to escape liability simply because the damage or loss
inevitably misleading, or at the very least, creating the wrong impression to respondents and the 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
public as well, that the pawnshop was owned solely by petitioner Sicam and not by a corporation.
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
Actions;; Judicial Admissions;; The general rule that a judicial admission is conclusive upon of another’s property. It must be proved and established that the event was an act of God or was
the party making it and does not require proof, admits of two exceptions, to wit—(1) when it is
done solely by third parties and that neither the claimant nor the person alleged to be negligent
shown that such admission was made through palpable mistake, and (2) when it is shown that no
has any participation. In accordance with the Rules of Evidence, the burden of proving that the
such admission was in fact made;; If a party invokes an “admission” by an adverse party, but cites loss was due to a fortuitous event rests on him who invokes it—which in this case is the private
the admission “out of context,” then the one making the “admission” may show that he made no
respondent. However, other than the police report of the alleged carnapping incident, no other
“such” admission, or that his admission was taken out of context.—The general rule that a judicial
evidence was presented by private respondent to the effect that the incident was not due to its
admission is conclusive upon the party making it and does not require proof, admits of two fault. A police report of an alleged crime, to which only private respondent is privy, does not suffice
exceptions, to wit: (1) when it is shown that such admission was made through palpable mistake,
to establish the carnapping. Neither does it prove that there was no fault on the part of private
and (2) when it is shown that no such admission was in fact made. The latter exception allows one
respondent notwithstanding the parties’ agreement at the pre-trial that the car was carnapped.
to contradict an admission by denying that he made such an admission. The Committee on the Carnapping does not foreclose the possibility of fault or negligence on the part of private
Revision of the Rules of Court explained the second exception in this wise: x x x if a party invokes
respondent. Just like in Co, petitioners merely presented the police report of the Parañaque Police
an “admission” by an adverse party, but cites the admission “out of context,” then the one making
Station on the robbery committed based on the report of petitioners’ employees which is not
the “admission” may show that he made no “such” admission, or that his admission was taken out sufficient to establish robbery. Such report also does not prove that petitioners were not at fault.
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
Same;; Same;; Same;; Article 2123 of the Civil Code provides that with regard to pawnshops
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 and other establishments which are engaged in making loans secured by pledges, the special
denial. (Emphasis supplied). laws and regulations concerning them shall be observed, and subsidiarily, the provisions on
pledge, mortgage and antichresis.—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
Obligations and Contracts;; Fortuitous Events;; Elements;; Words and Phrases;; Fortuitous
special laws and regulations concerning them shall be observed, and subsidiarily, the provisions
events by definition are extraordinary events not foreseeable or avoidable—it is therefore, not on pledge, mortgage and antichresis. The provision on pledge, particularly Article 2099 of the Civil
enough that the event should not have been foreseen or anticipated, as is commonly believed but
Code, provides that the creditor shall take care of the thing pledged with the diligence of a good
it must be one impossible to foresee or to avoid.—Fortuitous events by definition are extraordinary
father of a family. This means that petitioners must take care of the pawns the way a prudent On October 19, 1987, two armed men entered the pawnshop and took away whatever cash and
person would as to his own property. jewelry were found inside the pawnshop vault. The incident was entered in the police blotter of
the Southern Police District, Parañaque Police Station as follows:
Same;; Same;; Same;; Negligence;; Words and Phrases;; Negligence is the omission to do
something which a reasonable man, guided by those considerations which ordinarily regulate the Investigation shows that at above TDPO, while victims were inside the office, two (2)
conduct of human affairs, would do, or the doing of something which a prudent and reasonable male unidentified persons entered into the said office with guns drawn. Suspects(sic)
man would not do.—We expounded in Cruz v. Gangan, 211 SCRA 517 (1992), that negligence is (1) went straight inside and poked his gun toward Romeo Sicam and thereby tied him
the omission to do something which a reasonable man, guided by those considerations which with an electric wire while suspects (sic) (2) poked his gun toward Divina Mata and
ordinarily regulate the conduct of human affairs, would do;; or the doing of something which a Isabelita Rodriguez and ordered them to lay (sic) face flat on the floor. Suspects asked
prudent and reasonable man would not do. It is want of care required by the circumstances. A forcibly the case and assorted pawned jewelries items mentioned above.
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. Suspects after taking the money and jewelries fled on board a Marson Toyota
3
unidentified plate number.
Same;; Same;; Same;; Same;; The Central Bank considered it not feasible to require insurance
of pawned articles against burglary—there was no statutory duty imposed on the pawnshop owner Petitioner Sicam sent respondent Lulu a letter dated October 19, 1987 informing her of the loss
to insure the pawned jewelry.—Under Section 17 of Central Bank Circular No. 374, Rules and of her jewelry due to the robbery incident in the pawnshop. On November 2, 1987, respondent
Regulations for Pawnshops, which took effect on July 13, 1973, and which was issued pursuant 4
Lulu then wrote a letter to petitioner Sicam expressing disbelief stating that when the robbery
to Presidential Decree No. 114, Pawnshop Regulation Act, it is provided that pawns pledged must happened, all jewelry pawned were deposited with Far East Bank near the pawnshop since it
be insured, to wit: Sec. 17. Insurance of Office Building and Pawns.—The place of business of a had been the practice that before they could withdraw, advance notice must be given to the
pawnshop and the pawns pledged to it must be insured against fire and against burglary as pawnshop so it could withdraw the jewelry from the bank. Respondent Lulu then requested
well as for the latter(sic), by an insurance company accredited by the Insurance Commissioner. petitioner Sicam to prepare the pawned jewelry for withdrawal on November 6, 1987 but
However, this Section was subsequently amended by CB Circular No. 764 which took effect on petitioner Sicam failed to return the jewelry.
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 On September 28, 1988, respondent Lulu joined by her husband, Cesar Jorge, filed a complaint
considered it not feasible to require insurance of pawned articles against burglary. The robbery in against petitioner Sicam with the Regional Trial Court of Makati seeking indemnification for the
the pawnshop happened in 1987, and considering the above-quoted amendment, there is no loss of pawned jewelry and payment of actual, moral and exemplary damages as well as
statutory duty imposed on petitioners to insure the pawned jewelry in which case it was error for attorney's fees. The case was docketed as Civil Case No. 88-2035.
the CA to consider it as a factor in concluding that petitioners were negligent.
Petitioner Sicam filed his Answer contending that he is not the real party-in-interest as the
Same;; Same;; Same;; Same;; The diligence with which the law requires the individual at all pawnshop was incorporated on April 20, 1987 and known as Agencia de R.C. Sicam, Inc;; that
times to govern his conduct varies with the nature of the situation in which he is placed and the petitioner corporation had exercised due care and diligence in the safekeeping of the articles
importance of the act which he is to perform.—The preponderance of evidence shows that pledged with it and could not be made liable for an event that is fortuitous.
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. Thus, Respondents subsequently filed an Amended Complaint to include petitioner corporation.
the cases of Austria v. Court of Appeals, 39 SCRA 527 (1971), Hernandez v. Chairman,
Commission on Audit, 179 SCRA 39 (1989), and Cruz v. Gangan, 211 SCRA 517 (1992), cited by Thereafter, petitioner Sicam filed a Motion to Dismiss as far as he is concerned considering that
petitioners in their pleadings, where the victims of robbery were exonerated from liability, find no he is not the real party-in-interest. Respondents opposed the same. The RTC denied the motion
application to the present case. in an Order dated November 8, 1989.
5
6
After trial on the merits, the RTC rendered its Decision dated January 12, 1993, dismissing
respondents’ complaint as well as petitioners’ counterclaim. The RTC held that petitioner Sicam
AUSTRIA-MARTINEZ, J.: 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
Before us is a Petition for Review on Certiorari filed by Roberto C. Sicam, Jr. (petitioner Sicam) corporation, the corporate debt or credit is not the debt or credit of a stockholder.
1
and Agencia de R.C. Sicam, Inc. (petitioner corporation) seeking to annul the Decision of the
2
Court of Appeals dated March 31, 2003, and its Resolution dated August 8, 2003, in CA G.R.
CV No. 56633. 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
It appears that on different dates from September to October 1987, Lulu V. Jorge (respondent robbery is a fortuitous event which exempts the victim from liability for the loss, citing the case
Lulu) pawned several pieces of jewelry with Agencia de R. C. Sicam located at No. 17 Aguirre 7
of Austria v. Court of Appeals;; and that the parties’ transaction was that of a pledgor and
Ave., BF Homes Parañaque, Metro Manila, to secure a loan in the total amount of P59,500.00. 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 (1) Respondents conclusively asserted in paragraph 2 of their Amended Complaint
CA reversed the RTC, the dispositive portion of which reads as follows: 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;;
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 (2) The issue resolved against petitioner Sicam was not among those raised and
actual value of the lost jewelry amounting to P272,000.00, and attorney' fees litigated in the trial court;; and
8
of P27,200.00.
(3) By reason of the above infirmities, it was error for the CA to have pierced the
In finding petitioner Sicam liable together with petitioner corporation, the CA applied the doctrine corporate veil since a corporation has a personality distinct and separate from its
of piercing the veil of corporate entity reasoning that respondents were misled into thinking that individual stockholders or members.
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
Anent the second error, petitioners point out that the CA finding on their negligence is likewise
pawnshop tickets that it was the petitioner corporation that owned the pawnshop which
an unedited reproduction of respondents’ brief which had the following defects:
explained why respondents had to amend their complaint impleading petitioner corporation.
(1) There were unrebutted evidence on record that petitioners had observed the
The CA further held that the corresponding diligence required of a pawnshop is that it should
diligence required of them, i.e, they wanted to open a vault with a nearby bank for
take steps to secure and protect the pledged items and should take steps to insure itself against
purposes of safekeeping the pawned articles but was discouraged by the Central
the loss of articles which are entrusted to its custody as it derives earnings from the pawnshop
Bank (CB) since CB rules provide that they can only store the pawned articles in a
trade which petitioners failed to do;; that Austria is not applicable to this case since the robbery
vault inside the pawnshop premises and no other place;;
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 (2) Petitioners were adjudged negligent as they did not take insurance against the loss
engaged in the pawnshop business are expected to foresee. 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;;
The CA concluded that both petitioners should be jointly and severally held liable to respondents
for the loss of the pawned jewelry.
(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
Petitioners’ motion for reconsideration was denied in a Resolution dated August 8, 2003.
lost by him to robbers.
Hence, the instant petition for review with the following assignment of errors:
Respondents filed their Comment and petitioners filed their Reply thereto. The parties
subsequently submitted their respective Memoranda.
THE COURT OF APPEALS ERRED AND WHEN IT DID, IT OPENED ITSELF TO
REVERSAL, WHEN IT ADOPTED UNCRITICALLY (IN FACT IT REPRODUCED AS
We find no merit in the petition.
ITS OWN WITHOUT IN THE MEANTIME ACKNOWLEDGING IT) WHAT THE
RESPONDENTS ARGUED IN THEIR BRIEF, WHICH ARGUMENT WAS PALPABLY
UNSUSTAINABLE. 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 COURT OF APPEALS ERRED, AND WHEN IT DID, IT OPENED ITSELF TO
the facts and the law on which it is based as required by Section 8, Article VIII of the
REVERSAL BY THIS HONORABLE COURT, WHEN IT AGAIN ADOPTED
Constitution. The discretion to decide a case one way or another is broad enough to justify the
UNCRITICALLY (BUT WITHOUT ACKNOWLEDGING IT) THE SUBMISSIONS OF
adoption of the arguments put forth by one of the parties, as long as these are legally tenable
THE RESPONDENTS IN THEIR BRIEF WITHOUT ADDING ANYTHING MORE 11
and supported by law and the facts on records.
THERETO DESPITE THE FACT THAT THE SAID ARGUMENT OF THE
RESPONDENTS COULD NOT HAVE BEEN SUSTAINED IN VIEW OF
9
UNREBUTTED EVIDENCE ON RECORD. 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
Anent the first assigned error, petitioners point out that the CA’s finding that petitioner Sicam is 12
evidence adduced by the parties in the court a quo. This rule, however, is not without
personally liable for the loss of the pawned jewelries is "a virtual and uncritical reproduction of
10 exceptions, such as where the factual findings of the Court of Appeals and the trial court are
the arguments set out on pp. 5-6 of the Appellants’ brief." 13
conflicting or contradictory as is obtaining in the instant case.
Petitioners argue that the reproduced arguments of respondents in their Appellants’ Brief suffer
However, after a careful examination of the records, we find no justification to absolve petitioner
from infirmities, as follows:
Sicam from liability.
The CA correctly pierced the veil of the corporate fiction and adjudged petitioner Sicam liable where they (respondents) pawned their assorted pieces of jewelry and ascribed to both the
together with petitioner corporation. The rule is that the veil of corporate fiction may be pierced failure to observe due diligence commensurate with the business which resulted in the loss of
14
when made as a shield to perpetrate fraud and/or confuse legitimate issues. The theory of their pawned jewelry.
15
corporate entity was not meant to promote unfair objectives or otherwise to shield them.
Markedly, respondents, in their Opposition to petitioners’ Motion to Dismiss Amended Complaint,
Notably, the evidence on record shows that at the time respondent Lulu pawned her jewelry, the insofar as petitioner Sicam is concerned, averred as follows:
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
Roberto C. Sicam was named the defendant in the original complaint because the
"Agencia de R. C. Sicam," notwithstanding that the pawnshop was allegedly incorporated in April
pawnshop tickets involved in this case did not show that the R.C. Sicam Pawnshop
1987. The receipts issued after such alleged incorporation were still in the name of
was a corporation. In paragraph 1 of his Answer, he admitted the allegations in
"Agencia de R. C. Sicam," thus inevitably misleading, or at the very least, creating the wrong
paragraph 1 and 2 of the Complaint. He merely added "that defendant is not now the
impression to respondents and the public as well, that the pawnshop was owned solely by
real party in interest in this case."
petitioner Sicam and not by a corporation.
16 It was defendant Sicam's omission to correct the pawnshop tickets used in the subject
Even petitioners’ counsel, Atty. Marcial T. Balgos, in his letter dated October 15, 1987
transactions in this case which was the cause of the instant action. He cannot now ask
addressed to the Central Bank, expressly referred to petitioner Sicam as the proprietor of the
for the dismissal of the complaint against him simply on the mere allegation that his
pawnshop notwithstanding the alleged incorporation in April 1987.
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
19
We also find no merit in petitioners' argument that since respondents had alleged in their course.
Amended Complaint that petitioner corporation is the present owner of the pawnshop, the CA is
bound to decide the case on that basis.
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
Section 4 Rule 129 of the Rules of Court provides that an admission, verbal or written, made by continued to issue pawnshop receipts under his name and not under the corporation's name
a party in the course of the proceedings in the same case, does not require proof. The militates for the piercing of the corporate veil.
admission may be contradicted only by showing that it was made through palpable mistake or
that no such admission was made.
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
Thus, the general rule that a judicial admission is conclusive upon the party making it and does RTC.
not require proof, admits of two exceptions, to wit: (1) when it is shown that such admission was
made through palpable mistake, and (2) when it is shown that no such admission was in fact
Petitioner Sicam had alleged in his Answer filed with the trial court that he was not the real party-
made. The latter exception allows one to contradict an admission by denying that he
17 in-interest because since April 20, 1987, the pawnshop business initiated by him was
made such an admission.
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
20
The Committee on the Revision of the Rules of Court explained the second exception in this in interest against whom the complaint should be directed. In fact, he subsequently moved for
wise: 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 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 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.
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.
This Court sustains the contention of the defendant Roberto C. Sicam, Jr. The
amended complaint itself asserts that "plaintiff pawned assorted jewelries in
That is the reason for the modifier "such" because if the rule simply states that the
defendant's pawnshop." It has been held that " as a consequence of the separate
admission may be contradicted by showing that "no admission was made," the rule
juridical personality of a corporation, the corporate debt or credit is not the debt or
would not really be providing for a contradiction of the admission but just a 21
18 credit of the stockholder, nor is the stockholder's debt or credit that of a corporation.
denial. (Emphasis supplied).
Clearly, in view of the alleged incorporation of the pawnshop, the issue of whether petitioner
While it is true that respondents alleged in their Amended Complaint that petitioner corporation is
Sicam is personally liable is inextricably connected with the determination of the question
the present owner of the pawnshop, they did so only because petitioner Sicam alleged in his
whether the doctrine of piercing the corporate veil should or should not apply to the case.
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
The next question is whether petitioners are liable for the loss of the pawned articles in their Robbery per se, just like carnapping, is not a fortuitous event. It does not foreclose the possibility
27
possession. of negligence on the part of herein petitioners. In Co v. Court of Appeals, the Court held:
Petitioners insist that they are not liable since robbery is a fortuitous event and they are not It is not a defense for a repair shop of motor vehicles to escape liability simply
negligent at all. 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
We are not persuaded.
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
Article 1174 of the Civil Code provides: 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
Art. 1174. Except in cases expressly specified by the law, or when it is otherwise
participation. In accordance with the Rules of Evidence, the burden of proving
declared by stipulation, or when the nature of the obligation requires the assumption of that the loss was due to a fortuitous event rests on him who invokes it — which
risk, no person shall be responsible for those events which could not be foreseen or
in this case is the private respondent. However, other than the police report of the
which, though foreseen, were inevitable.
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
Fortuitous events by definition are extraordinary events not foreseeable or avoidable. It is crime, to which only private respondent is privy, does not suffice to establish the
therefore, not enough that the event should not have been foreseen or anticipated, as is carnapping. Neither does it prove that there was no fault on the part of private
commonly believed but it must be one impossible to foresee or to avoid. The mere difficulty to respondent notwithstanding the parties' agreement at the pre-trial that the car was
22
foresee the happening is not impossibility to foresee the same. carnapped. Carnapping does not foreclose the possibility of fault or negligence on the
28
part of private respondent.
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 Just like in Co, petitioners merely presented the police report of the Parañaque Police Station on
must be independent of human will;; (b) it must be impossible to foresee the event that the robbery committed based on the report of petitioners' employees which is not sufficient to
constitutes the caso fortuito or, if it can be foreseen, it must be impossible to avoid;; (c) the establish robbery. Such report also does not prove that petitioners were not at fault.
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
23 On the contrary, by the very evidence of petitioners, the CA did not err in finding that petitioners
or loss. are guilty of concurrent or contributory negligence as provided in Article 1170 of the Civil Code,
to wit:
The burden of proving that the loss was due to a fortuitous event rests on him who invokes
24
it. And, in order for a fortuitous event to exempt one from liability, it is necessary that one has Art. 1170. Those who in the performance of their obligations are guilty of fraud,
25
committed no negligence or misconduct that may have occasioned the loss.
negligence, or delay, and those who in any manner contravene the tenor thereof, are
29
liable for damages.
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
Article 2123 of the Civil Code provides that with regard to pawnshops and other establishments
concurred with an act of God in producing damage and injury to another;; nonetheless, showing
which are engaged in making loans secured by pledges, the special laws and regulations
that the immediate or proximate cause of the damage or injury was a fortuitous event would not concerning them shall be observed, and subsidiarily, the provisions on pledge, mortgage and
exempt one from liability. When the effect is found to be partly the result of a person's
antichresis.
participation -- whether by active intervention, neglect or failure to act -- the whole occurrence is
26
humanized and removed from the rules applicable to acts of God.
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
Petitioner Sicam had testified that there was a security guard in their pawnshop at the time of the
that petitioners must take care of the pawns the way a prudent person would as to his own
robbery. He likewise testified that when he started the pawnshop business in 1983, he thought of property.
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 In this connection, Article 1173 of the Civil Code further provides:
the possibility of robbery was not only foreseeable, but actually foreseen and anticipated.
Petitioner Sicam’s testimony, in effect, contradicts petitioners’ defense of fortuitous event.
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
Moreover, petitioners failed to show that they were free from any negligence by which the loss of circumstances of the persons, of time and of the place. When negligence shows bad
the pawned jewelry may have been occasioned. 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.
30
We expounded in Cruz v. Gangan that negligence is the omission to do something which a the premises. In fact, it is even doubtful that there was a security guard, since it is quite
reasonable man, guided by those considerations which ordinarily regulate the conduct of human impossible that he would not have noticed that the robbers were armed with caliber .45 pistols
33
affairs, would do;; or the doing of something which a prudent and reasonable man would not each, which were allegedly poked at the employees. Significantly, the alleged security guard
31
do. It is want of care required by the circumstances. 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.
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 Furthermore, petitioner Sicam's admission that the vault was open at the time of robbery is
were guilty of negligence in the operation of their pawnshop business. Petitioner Sicam testified, clearly a proof of petitioners' failure to observe the care, precaution and vigilance that the
thus: 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 Parañaque at that time was quiet,
Court:
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
Q. Do you have security guards in your pawnshop? the vault, providing no difficulty for the robbers to cart away the pawned articles.
A. Yes, your honor. 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.
Q. Then how come that the robbers were able to enter the premises when according
to you there was a security guard? 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:
A. Sir, if these robbers can rob a bank, how much more a pawnshop.
Sec. 17. Insurance of Office Building and Pawns- The place of business of a
Q. I am asking you how were the robbers able to enter despite the fact that there was
pawnshop and the pawns pledged to it must be insured against fire and against
a security guard?
burglary as well as for the latter(sic), by an insurance company accredited by the
Insurance Commissioner.
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
However, this Section was subsequently amended by CB Circular No. 764 which took effect on
Homes Parañaque they pretended to pawn an article in the pawnshop, so one of my October 1, 1980, to wit:
employees allowed him to come in and it was only when it was announced that it was
a hold up.
Sec. 17 Insurance of Office Building and Pawns – The office building/premises and
pawns of a pawnshop must be insured against fire. (emphasis supplied).
Q. Did you come to know how the vault was opened?
where the requirement that insurance against burglary was deleted. Obviously, the Central Bank
A. When the pawnshop is official (sic) open your honor the pawnshop is partly open. considered it not feasible to require insurance of pawned articles against burglary.
The combination is off.
The robbery in the pawnshop happened in 1987, and considering the above-quoted amendment,
Q. No one open (sic) the vault for the robbers? 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.
A. No one your honor it was open at the time of the robbery.
Nevertheless, the preponderance of evidence shows that petitioners failed to exercise the
Q. It is clear now that at the time of the robbery the vault was open the reason why the diligence required of them under the Civil Code.
robbers were able to get all the items pawned to you inside the vault.
The diligence with which the law requires the individual at all times to govern his conduct varies
32
A. Yes sir. with the nature of the situation in which he is placed and the importance of the act which he is to
34 35
perform. Thus, the cases of Austria v. Court of Appeals, Hernandez v. Chairman,
36 37
Commission on Audit and Cruz v. Gangan cited by petitioners in their pleadings, where the
revealing that there were no security measures adopted by petitioners in the operation of the victims of robbery were exonerated from liability, find no application to the present case.
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. In Austria, Maria Abad received from Guillermo Austria a pendant with diamonds to be sold on
Further, there is no showing that the alleged security guard exercised all that was necessary to commission basis, but which Abad failed to subsequently return because of a robbery committed
prevent any untoward incident or to ensure that no suspicious individuals were allowed to enter 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 screen the persons who were allowed entrance to the premises and to protect itself from
pendant or its value, but the Abads set up the defense that the robbery extinguished their unlawful intrusion. Petitioners had failed to exercise precautionary measures in ensuring that the
obligation. The RTC ruled in favor of Austria, as the Abads failed to prove robbery;; or, if robbers were prevented from entering the pawnshop and for keeping the vault open for the day,
committed, that Maria Abad was guilty of negligence. The CA, however, reversed the RTC which paved the way for the robbers to easily cart away the pawned articles.
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
In Cruz, Dr. Filonila O. Cruz, Camanava District Director of Technological Education and Skills
Abads to be relieved from the civil liability of returning the pendant under Art. 1174 of the Civil
Development Authority (TESDA), boarded the Light Rail Transit (LRT) from Sen. Puyat Avenue
Code, it would only be sufficient that the unforeseen event, the robbery, took place without any
to Monumento when her handbag was slashed and the contents were stolen by an unidentified
concurrent fault on the debtor’s part, and this can be done by preponderance of evidence;; that to
person. Among those stolen were her wallet and the government-issued cellular phone. She
be free from liability for reason of fortuitous event, the debtor must, in addition to the casus itself,
38 then reported the incident to the police authorities;; however, the thief was not located, and the
be free of any concurrent or contributory fault or negligence.
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
We found in Austria that under the circumstances prevailing at the time the Decision was denied her request on the ground that she lacked the diligence required in the custody of
promulgated in 1971, the City of Manila and its suburbs had a high incidence of crimes against government property and was ordered to pay the purchase value in the total amount
persons and property that rendered travel after nightfall a matter to be sedulously avoided of P4,238.00. The COA found no sufficient justification to grant the request for relief from
without suitable precaution and protection;; that the conduct of Maria Abad in returning alone to accountability. We reversed the ruling and found that riding the LRT cannot per se be
her house in the evening carrying jewelry of considerable value would have been negligence per denounced as a negligent act more so because Cruz’s mode of transit was influenced by time
se and would not exempt her from responsibility in the case of robbery. However we did not hold and money considerations;; that she boarded the LRT to be able to arrive in Caloocan in time for
Abad liable for negligence since, the robbery happened ten years previously;; i.e., 1961, when her 3 pm meeting;; that any prudent and rational person under similar circumstance can
criminality had not reached the level of incidence obtaining in 1971. 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,
In contrast, the robbery in this case took place in 1987 when robbery was already prevalent and
she was not expected to have her own vehicle or to ride a taxicab;; she did not have a
petitioners in fact had already foreseen it as they wanted to deposit the pawn with a nearby bank
government assigned vehicle;; that placing the cellphone in a bag away from covetous eyes and
for safekeeping. Moreover, unlike in Austria, where no negligence was committed, we found
holding on to that bag as she did is ordinarily sufficient care of a cellphone while traveling on
petitioners negligent in securing their pawnshop as earlier discussed.
board the LRT;; that the records did not show any specific act of negligence on her part and
negligence can never be presumed.
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
Unlike in the Cruz case, the robbery in this case happened in petitioners' pawnshop and they
went to Manila to encash two checks covering the wages of the employees and the operating
were negligent in not exercising the precautions justly demanded of a pawnshop.
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 WHEREFORE, except for the insurance aspect, the Decision of the Court of Appeals dated
have to wait until July 5, the earliest time, when the main office would open. At that time, he had March 31, 2003 and its Resolution dated August 8, 2003, are AFFIRMED.
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
Costs against petitioners.
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 SO ORDERED.
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
Republic of the Philippines Same;; Same;; Same;; Same;; The question of whether or not there was negligence on the
SUPREME COURT part of NPC is a question of fact which falls within the jurisdiction of the CA.—Furthermore, the
Manila question of whether or not there was negligence on the part of NPC is a question of fact which
properly falls within the jurisdiction of the Court of Appeals and will not be disturbed by this Court
unless the same is clearly unfounded, Thus, in Tolentino v. Court of Appeals, (150 SCRA 26, 36)
THIRD DIVISION
we ruled: “Moreover, the findings of fact of the Court of Appeals are generally final and conclusive
upon the Supreme Court (Leonardo v. Court of Appeals, 120 SCRA 890 [1983]. In fact it is settled
G.R. No. L-47379 May 16, 1988 that the Supreme Court is not supposed to weigh evidence but only to determine its substantially
(Nunez v. Sandiganbayan, 100 SCRA 433 [1982] and will generally not disturb said findings of
fact when supported by substantial evidence (Aytona v. Court of appeals, 113 SCRA 575 [1985];;
NATIONAL POWER CORPORATION, petitioner, Collector of Customs of Manila v. Intermediate Appellate Court, 137 SCRA 3 [1985]. On the other
vs.
hand substantial evidence is defined as such relevant evidence as a reasonable mind might accept
HONORABLE COURT OF APPEALS and ENGINEERING CONSTRUCTION,
as adequate to support a conclusion (Philippine Metal Products, Inc. v. Court of Industrial
INC., respondents. Relations, 90 SCRA 135 [1979];; Police Commission v. Lood, 127 SCRA 757 [1984];; Canete v.
WCC, 136 SCRA 302 [1985])."
G.R. No. L-47481 May 16, 1988
ENGINEERING CONSTRUCTION, INC., petitioner,

vs. Same;; Same;; Same;; Same;; Consequential damages;; Court of Ap-peals did not err in
COUTRT OF APPEALS and NATIONAL POWER CORPORATION, respondents. reducing the consequential damages from P333,200.00 to P19,000.00;; Reasons.—Likewise, it did
not err in re-ducing the consequential damages from P333,200.00 to P19,000.00. As shown by
the records, while there was no categorical statement or admission on the part of ECI that it bought
Raymundo A. Armovit for private respondent in L-47379. a new crane to replace the damaged one, a sales contract was presented to the effect that the
new crane would be delivered to it by Asian Enterprises within 60 days from the opening of the
The Solicitor General for petitioner. letter of credit at the cost of P1 06,336.75. The offer was made by Asian Enterprises a few days
after the flood. As compared to the amount of P106,336.75 for a brand new crane and paying the
alleged amount of P4,000.00 a day as rental for the use of a temporary crane, which use petitioner
ECI alleged to have lasted for a period of one year, thus, totalling P1 20,000.00, plus the fact that
there was already a sales contract between it and Asian Enterprises, there is no reason why ECI
Civil Law;; Torts and Damages;; Negligence;; NPC cannot escape liability because its should opt to rent a temporary crane for a period of one year. The appellate court also found that
negligence was the proximate cause of the loss and damage even though the typhoon was an act the damaged crane was subsequently repaired and re-activated and the cost of repair was
of God.—It is clear from the appellate court’s decision that based on its findings of fact and that of P77,000.00. Therefore, it included the said amount in the award of compensatory damages, but
the trial court’s, petitioner NPC was undoubtedly negligent because it opened the spillway gates not the value of the new crane. We do not find anything erroneous in the decision of the appellate
of the Angat Dam only at the height of typhoon “Welming” when it knew very well that it was safer court that the consequential damages should represent only the service of the temporary crane
to have opened the same gradually and earlier, as it was also undeniable that NPC knew of the for one month. A contrary ruling would result in the unjust enrichment of ECI.
coming typhoon at least four days before it actually struck. And even though the typhoon was an
act of God or what we may call force majeure, NPC cannot escape liability because its negligence
was the proximate cause of the loss and damage. As we have ruled in Juan F. Nakpil & Sons v.
Court of Appeals (144 SCRA 596, 606–607): Thus, if upon the happening of a fortuitous event or
an act of God, there concurs a corresponding fraud, negligence, delay or violation or contravention Same;; Same;; Same;; Same;; Exemplary Damages;; Appellate court is correct in eliminating
in any manner of the tenor of the obligation as provided for in Article 1170 of the Civil Code, which exemplary damages since there was no bad faith and gross negligence on the part of NPC.—As
results in loss or damage, the obligor cannot escape liability. The principle embodied in the act of to the question of exemplary damages, we sustain the appellate court in eliminating the same
God doctrine strictly requires that the act must be one occasioned exclusively by the violence of since it found that there was no bad faith on the part of NPC and that neither can the latter’s
nature and human agencies are to be excluded from creating or entering into the cause of the negligence be considered gross. In Dee Hua Liong Electrical Equipment Corp. v. Reyes, (145
mischief. When the effect, the cause of which is to be considered, is found to be in part the result SCRA 713, 719) we ruled: “Neither may private respondent recover exemplary damages since he
of the participation of man, whether it be from active intervention or neglect, or failure to act, the is not entitled to moral or compensatory damages, and again because the petitioner is not shown
whole occurrence is thereby humanized, as it was, and removed from the rules applicable to the to have acted in a wanton, fraudulent, reckless or oppressive manner (Art. 2234, Civil Code;; Yutuk
acts of God. (1 Corpus Juris, pp. 1174–1175). Thus, it has been held that when the negligence of v. Manila Electric Co., 2 SCRA 377;; Francisco v. Government Service Insurance System, 7 SCRA
a person concur s with an act of God in producing a loss, such person is not exempt from liability 577;; Gutierrez v. Villegas, 8 SCRA 527;; Air France v. Carrascoso, 18 SCRA 155;; Pan Pacific
by showing that the immediate cause of the damage was the act of God. To be exempt from (Phil.) v. Phil. Advertising Corp., 23 SCRA 977;; Marchan v. Mendoza, 24 SCRA 888).
liability for loss because of an act of God, he must be free from any previous negligence or
misconduct by which the lose or damage may have been occasioned. (Fish & Elective Co. v. Phil.
Motors, 55 Phil. 129;; Tucker v. Milan, 49 O.G. 4379;; Limpangco & Sons v. Yangco Steamship
Co., 34 Phil. 594, 604;; Lasam v. Smith, 45 Phil. 657)." GUTIERREZ, JR., J.:
These consolidated petitions seek to set aside the decision of the respondent Court of Appeals
which adjudged the National Power Corporation liable for damages against Engineering
Construction, Inc. The appellate court, however, reduced the amount of damages awarded by to open them gradually. But the spillway gates were opened only when
the trial court. Hence, both parties filed their respective petitions: the National Power Corporation typhoon Welming was already at its height, in a vain effort to race against
(NPC) in G.R. No. 47379, questioning the decision of the Court of Appeals for holding it liable for time and prevent the overflow of water from the dam as it 'was rising
damages and the Engineering Construction, Inc. (ECI) in G.R. No. 47481, questioning the same dangerously at the rate of sixty centimeters per hour. 'Action could have
decision for reducing the consequential damages and attorney's fees and for eliminating the been taken as early as November 3, 1967, when the water in the reservoir
exemplary damages. was still low. At that time, the gates of the dam could have been opened in a
regulated manner. Let it be stressed that the appellant knew of the coming
of the typhoon four days before it actually hit the project area. (p. 53, L-
The facts are succinctly summarized by the respondent Court of Appeals, as follows:
47379, Rollo)
On August 4, 1964, plaintiff Engineering Construction, Inc., being a

As to the award of damages, the appellate court held:
successful bidder, executed a contract in Manila with the National
Waterworks and Sewerage Authority (NAWASA), whereby the former
undertook to furnish all tools, labor, equipment, and materials (not furnished We come now to the award of damages. The appellee submitted a list of
by Owner), and to construct the proposed 2nd lpo-Bicti Tunnel, Intake and estimated losses and damages to the tunnel project (Ipo side) caused by
Outlet Structures, and Appurtenant Structures, and Appurtenant Features, the instant flooding of the Angat River (Exh. J-1). The damages were
at Norzagaray, Bulacan, and to complete said works within eight hundred itemized in four categories, to wit: Camp Facilities P55,700.00;; Equipment,
(800) calendar days from the date the Contractor receives the formal notice Parts and Plant — P375,659.51;; Materials P107,175.80;; and Permanent
to proceed (Exh. A). Structures and accessories — P137,250.00, with an aggregate total amount
of P675,785.31. The list is supported by several vouchers which were all
submitted as Exhibits K to M-38 a, N to O, P to U-2 and V to X- 60-a (Vide:
The project involved two (2) major phases: the first phase comprising, the
Folders Nos. 1 to 4). The appellant did not submit proofs to traverse the
tunnel work covering a distance of seven (7) kilometers, passing through the
aforementioned documentary evidence. We hold that the lower court did not
mountain, from the Ipo river, a part of Norzagaray, Bulacan, where the Ipo
commit any error in awarding P 675,785.31 as actual or compensatory
Dam of the defendant National Power Corporation is located, to Bicti;; the
damages.
other phase consisting of the outworks at both ends of the tunnel.
However, We cannot sustain the award of P333,200.00 as consequential
By September 1967, the plaintiff corporation already had completed the first
damages. This amount is broken down as follows: P213,200.00 as and for
major phase of the work, namely, the tunnel excavation work. Some
the rentals of a crane to temporarily replace the one "destroyed beyond
portions of the outworks at the Bicti site were still under construction. As
repair," and P120,000.00 as one month bonus which the appellee failed to
soon as the plaintiff corporation had finished the tunnel excavation work at
realize in accordance with the contract which the appellee had with
the Bicti site, all the equipment no longer needed there were transferred to
NAWASA. Said rental of the crane allegedly covered the period of one year
the Ipo site where some projects were yet to be completed.
at the rate of P40.00 an hour for 16 hours a day. The evidence, however,
shows that the appellee bought a crane also a crawler type, on November
The record shows that on November 4,1967, typhoon 'Welming' hit Central 10, 1967, six (6) days after the incident in question (Exh N) And according
Luzon, passing through defendant's Angat Hydro-electric Project and Dam to the lower court, which finding was never assailed, the appellee resumed
at lpo, Norzagaray, Bulacan. Strong winds struck the project area, and its normal construction work on the Ipo- Bicti Project after a stoppage of only
heavy rains intermittently fell. Due to the heavy downpour, the water in the one month. There is no evidence when the appellee received the crane from
reservoir of the Angat Dam was rising perilously at the rate of sixty (60) the seller, Asian Enterprise Limited. But there was an agreement that the
centimeters per hour. To prevent an overflow of water from the dam, since shipment of the goods would be effected within 60 days from the opening of
the water level had reached the danger height of 212 meters above sea the letter of credit (Exh. N).<äre||anº•1àw> It appearing that the contract of
level, the defendant corporation caused the opening of the spillway gates." sale was consummated, We must conclude or at least assume that the
(pp. 45-46, L-47379, Rollo) crane was delivered to the appellee within 60 days as stipulated. The
appellee then could have availed of the services of another crane for a
period of only one month (after a work stoppage of one month) at the rate of
The appellate court sustained the findings of the trial court that the evidence preponlderantly
P 40.00 an hour for 16 hours a day or a total of P 19,200.00 as rental.
established the fact that due to the negligent manner with which the spillway gates of the Angat
Dam were opened, an extraordinary large volume of water rushed out of the gates, and hit the
installations and construction works of ECI at the lpo site with terrific impact, as a result of which But the value of the new crane cannot be included as part of actual
the latter's stockpile of materials and supplies, camp facilities and permanent structures and damages because the old was reactivated after it was repaired. The cost of
accessories either washed away, lost or destroyed. the repair was P 77,000.00 as shown in item No. 1 under the Equipment,
Parts and Plants category (Exh. J-1), which amount of repair was already
included in the actual or compensatory damages. (pp. 54-56, L-47379,
The appellate court further found that:
Rollo)
It cannot be pretended that there was no negligence or that the appellant
The appellate court likewise rejected the award of unrealized bonus from NAWASA in the
exercised extraordinary care in the opening of the spillway gates of the
amount of P120,000.00 (computed at P4,000.00 a day in case construction is finished before the
Angat Dam. Maintainers of the dam knew very well that it was far more safe specified time, i.e., within 800 calendar days), considering that the incident occurred after more
than three (3) years or one thousand one hundred seventy (1,170) days. The court also Tucker v. Milan 49 O.G. 4379;; Limpangco & Sons v. Yangco Steamship
eliminated the award of exemplary damages as there was no gross negligence on the part of Co., 34 Phil. 594, 604;; Lasam v. Smith, 45 Phil. 657).
NPC and reduced the amount of attorney's fees from P50,000.00 to P30,000.00.
Furthermore, the question of whether or not there was negligence on the part of NPC is a
In these consolidated petitions, NPC assails the appellate court's decision as being erroneous question of fact which properly falls within the jurisdiction of the Court of Appeals and will not be
on the ground that the destruction and loss of the ECI's equipment and facilities were due to disturbed by this Court unless the same is clearly unfounded. Thus, in Tolentino v. Court of
force majeure. It argues that the rapid rise of the water level in the reservoir of its Angat Dam appeals, (150 SCRA 26, 36) we ruled:
due to heavy rains brought about by the typhoon was an extraordinary occurrence that could not
have been foreseen, and thus, the subsequent release of water through the spillway gates and
Moreover, the findings of fact of the Court of Appeals are generally final and
its resultant effect, if any, on ECI's equipment and facilities may rightly be attributed to force
conclusive upon the Supreme Court (Leonardo v. Court of Appeals, 120
majeure.
SCRA 890 [1983]. In fact it is settled that the Supreme Court is not
supposed to weigh evidence but only to determine its substantially (Nuñez
On the other hand, ECI assails the reduction of the consequential damages from P333,200.00 to v. Sandiganbayan, 100 SCRA 433 [1982] and will generally not disturb said
P19,000.00 on the grounds that the appellate court had no basis in concluding that ECI acquired findings of fact when supported by substantial evidence (Aytona v. Court of
a new Crawler-type crane and therefore, it only can claim rentals for the temporary use of the Appeals, 113 SCRA 575 [1985];; Collector of Customs of Manila v.
leased crane for a period of one month;; and that the award of P4,000.00 a day or P120,000.00 a Intermediate Appellate Court, 137 SCRA 3 [1985]. On the other hand
month bonus is justified since the period limitation on ECI's contract with NAWASA had dual substantial evidence is defined as such relevant evidence as a reasonable
effects, i.e., bonus for earlier completion and liquidated damages for delayed performance;; and mind might accept as adequate to support a conclusion (Philippine Metal
in either case at the rate of P4,000.00 daily. Thus, since NPC's negligence compelled work Products, Inc. v. Court of Industrial Relations, 90 SCRA 135 [1979];; Police
stoppage for a period of one month, the said award of P120,000.00 is justified. ECI further Commission v. Lood, 127 SCRA 757 [1984];; Canete v. WCC, 136 SCRA
assailes the reduction of attorney's fees and the total elimination of exemplary damages. 302 [1985])
Both petitions are without merit. Therefore, the respondent Court of Appeals did not err in holding the NPC liable for damages.
It is clear from the appellate court's decision that based on its findings of fact and that of the trial Likewise, it did not err in reducing the consequential damages from P333,200.00 to P19,000.00.
court's, petitioner NPC was undoubtedly negligent because it opened the spillway gates of the As shown by the records, while there was no categorical statement or admission on the part of
Angat Dam only at the height of typhoon "Welming" when it knew very well that it was safer to ECI that it bought a new crane to replace the damaged one, a sales contract was presented to
have opened the same gradually and earlier, as it was also undeniable that NPC knew of the the effect that the new crane would be delivered to it by Asian Enterprises within 60 days from
coming typhoon at least four days before it actually struck. And even though the typhoon was an the opening of the letter of credit at the cost of P106,336.75. The offer was made by Asian
act of God or what we may call force majeure, NPC cannot escape liability because its Enterprises a few days after the flood. As compared to the amount of P106,336.75 for a brand
negligence was the proximate cause of the loss and damage. As we have ruled in Juan F. new crane and paying the alleged amount of P4,000.00 a day as rental for the use of a
Nakpil & Sons v. Court of Appeals, (144 SCRA 596, 606-607): temporary crane, which use petitioner ECI alleged to have lasted for a period of one year, thus,
totalling P120,000.00, plus the fact that there was already a sales contract between it and Asian
Enterprises, there is no reason why ECI should opt to rent a temporary crane for a period of one
Thus, if upon the happening of a fortuitous event or an act of God, there
year. The appellate court also found that the damaged crane was subsequently repaired and
concurs a corresponding fraud, negligence, delay or violation or
reactivated and the cost of repair was P77,000.00. Therefore, it included the said amount in the
contravention in any manner of the tenor of the obligation as provided for in
award of of compensatory damages, but not the value of the new crane. We do not find anything
Article 1170 of the Civil Code, which results in loss or damage, the obligor
erroneous in the decision of the appellate court that the consequential damages should
cannot escape liability.
represent only the service of the temporary crane for one month. A contrary ruling would result in
the unjust enrichment of ECI.
The principle embodied in the act of God doctrine strictly requires that the
act must be one occasioned exclusively by the violence of nature and
The P120,000.00 bonus was also properly eliminated as the same was granted by the trial court
human agencies are to be excluded from creating or entering into the cause
on the premise that it represented ECI's lost opportunity "to earn the one month bonus from
of the mischief. When the effect, the cause of which is to be considered, is
NAWASA ... ." As stated earlier, the loss or damage to ECI's equipment and facilities occurred
found to be in part the result of the participation of man, whether it be from
long after the stipulated deadline to finish the construction. No bonus, therefore, could have
active intervention or neglect, or failure to act, the whole occurrence is
been possibly earned by ECI at that point in time. The supposed liquidated damages for failure
thereby humanized, as it was, and removed from the rules applicable to the
to finish the project within the stipulated period or the opposite of the claim for bonus is not
acts of God. (1 Corpus Juris, pp. 1174-1175).
clearly presented in the records of these petitions. It is not shown that NAWASA imposed them.
Thus, it has been held that when the negligence of a person concurs with an
As to the question of exemplary damages, we sustain the appellate court in eliminating the same
act of God in producing a loss, such person is not exempt from liability by
since it found that there was no bad faith on the part of NPC and that neither can the latter's
showing that the immediate cause of the damage was the act of God. To be
negligence be considered gross. In Dee Hua Liong Electrical Equipment Corp. v. Reyes, (145
exempt from liability for loss because of an act of God, he must be free from
SCRA 713, 719) we ruled:
any previous negligence or misconduct by which the loss or damage may
have been occasioned. (Fish & Elective Co. v. Phil. Motors, 55 Phil. 129;;
Neither may private respondent recover exemplary damages since he is not
entitled to moral or compensatory damages, and again because the
petitioner is not shown to have acted in a wanton, fraudulent, reckless or

oppressive manner (Art. 2234, Civil Code;; Yutuk v. Manila Electric Co., 2
SCRA 377;; Francisco v. Government Service Insurance System, 7 SCRA
577;; Gutierrez v. Villegas, 8 SCRA 527;; Air France v. Carrascoso, 18 SCRA
155;; Pan Pacific (Phil.) v. Phil. Advertising Corp., 23 SCRA 977;; Marchan v.
Mendoza, 24 SCRA 888).

We also affirm the reduction of attorney's fees from P50,000.00 to P30,000.00. There are no
compelling reasons why we should set aside the appellate court's finding that the latter amount
suffices for the services rendered by ECI's counsel.

WHEREFORE, the petitions in G.R. No. 47379 and G.R. No. 47481 are both DISMISSED for
LACK OF MERIT. The decision appealed from is AFFIRMED.
SO ORDERED.

Republic of the Philippines 176 AS JR 1215PM 9 PAID MANDALUYONG JUL 22-66 LORETO
SUPREME COURT DIONELA CABANGAN LEGASPI CITY
Manila
WIRE ARRIVAL OF CHECK FER
SECOND DIVISION
LORETO DIONELA-CABANGAN-WIRE ARRIVAL OF CHECK-PER
G.R. No. L-44748 August 29, 1986
115 PM
RADIO COMMUNICATIONS OF THE PHILS., INC. (RCPI). petitioner,
vs.
SA IYO WALANG PAKINABANG DUMATING KA DIYAN-WALA-KANG
COURT OF APPEALS and LORETO DIONELA, respondents.
PADALA DITO KAHIT BULBUL MO
O. Pythogoras Oliver for respondents.

(p. 19, Annex "A")
Civil Law;; Damages;; Breach of contract;; Inclusion of extraneous and libelous matter in
Plaintiff-respondent Loreto Dionela alleges that the defamatory words on the telegram sent to
telegraphic message constitutes breach of contract.—Petitioner is a domestic corporation
him not only wounded his feelings but also caused him undue embarrassment and affected
engaged in the business of receiving and transmitting messages. Everytime a person transmits a
adversely his business as well because other people have come to know of said defamatory
message through the facilities of the petitioner, a contract is entered into. Upon receipt of the rate
words. Defendant corporation as a defense, alleges that the additional words in Tagalog was a
or fee fixed, the petitioner undertakes to transmit the message accurately. There is no question
private joke between the sending and receiving operators and that they were not addressed to or
that in the case at bar, libelous matters were included in the message transmitted, without the
intended for plaintiff and therefore did not form part of the telegram and that the Tagalog words
consent or knowledge of the sender. There is a clear case of breach of contract by the petitioner
are not defamatory. The telegram sent through its facilities was received in its station at Legaspi
in adding extraneous and libelous matters in the message sent to the private respondent.
City. Nobody other than the operator manned the teletype machine which automatically receives
telegrams being transmitted. The said telegram was detached from the machine and placed
Same;; Same;; Same;; Same;; Telegraph corporation, as employer is liable directly for the acts inside a sealed envelope and delivered to plaintiff, obviously as is. The additional words in
of its employees;; Action based on Arts. 19 and 20 of the Civil Code, not on subsidiary liability of Tagalog were never noticed and were included in the telegram when delivered.
corporation under Article 1161, New Civil Code.—As a corporation, the petitioner can act only
through its employees. Hence the acts of its employees in receiving and transmitting messages
are the acts of the petitioner. To hold that the petitioner is not liable directly for the acts of its The trial court in finding for the plaintiff ruled as follows:
employees in the pursuit of petitioner’s business is to deprive the general public availing of the
services of the petitioner of an effective and adequate remedy. The action for damages was filed There is no question that the additional words in Tagalog are libelous. They
in the lower court directly against respondent corporation not as an employer subsidiarily liable
clearly impute a vice or defect of the plaintiff. Whether or not they were
under the provisions of Article 1161 of the New Civil Code in relation to Art. 103 of the Revised intended for the plaintiff, the effect on the plaintiff is the same. Any person
Penal Code. The cause of action of the private respondent is based on Arts. 19 and 20 of the New reading the additional words in Tagalog will naturally think that they refer to
Civil Code (supra). As well as on respondent’s breach of contract thru the negligence of its own
the addressee, the plaintiff. There is no indication from the face of the
employees. telegram that the additional words in Tagalog were sent as a private joke
between the operators of the defendant.
Same;; Same;; Same;; Same;; Res ipsa loquitur;; Since negligence may be hard to substantiate
in some cases, the application of the doctrine of res ipsa loquitur is proper;; Case at bar.—In most
cases, negligence must be proved in order that plaintiff may recover. However, since negligence The defendant is sued directly not as an employer. The business of the
may be hard to substantiate in some cases, we may apply the doctrine of RES IPSA LOQUITUR defendant is to transmit telegrams. It will open the door to frauds and allow
(the thing speaks for itself), by considering the presence of facts or circumstances surrounding the the defendant to act with impunity if it can escape liability by the simple
injury. expedient of showing that its employees acted beyond the scope of their
assigned tasks.
PARAS, J.:
The liability of the defendant is predicated not only on Article 33 of the Civil
Code of the Philippines but on the following articles of said Code:
Before Us, is a Petition for Review by certiorari of the decision of the Court of Appeals, modifying
the decision of the trial court in a civil case for recovery of damages against petitioner
corporation by reducing the award to private respondent Loreto Dionela of moral damages from ART. 19.- Every person must, in the exercise of his rights and in the
P40,000 to Pl5,000, and attorney's fees from P3,000 to P2,000. performance of his duties, act with justice, give everyone his due, and
observe honesty and good faith.
The basis of the complaint against the defendant corporation is a telegram sent through its
Manila Office to the offended party, Loreto Dionela, reading as follows: ART. 20.-Every person who, contrary to law, wilfully or negligently causes
damage to another, shall indemnify the latter for the same.
There is sufficient publication of the libelous Tagalog words. The office file The Honorable Court of Appeals erred in holding that there was sufficient
of the defendant containing copies of telegrams received are open and held publication of the alleged libelous telegram in question, as contemplated by
together only by a metal fastener. Moreover, they are open to view and law on libel.
inspection by third parties.
III
It follows that the plaintiff is entitled to damages and attorney's fees. The
plaintiff is a businessman. The libelous Tagalog words must have affected
The Honorable Court of Appeals erred in holding that the liability of
his business and social standing in the community. The Court fixes the
petitioner-company-employer is predicated on Articles 19 and 20 of the Civil
amount of P40,000.00 as the reasonable amount of moral damages and the
Code, Articles on Human Relations.
amount of P3,000.00 as attorney's fee which the defendant should pay the
plaintiff. (pp. 15-16, Record on Appeal)
IV
The respondent appellate court in its assailed decision confirming the aforegoing findings of the
lower court stated: The Honorable Court of Appeals erred in awarding Atty's. fees. (p. 4,
Record)
The proximate cause, therefore, resulting in injury to appellee, was the
failure of the appellant to take the necessary or precautionary steps to avoid Petitioner's contentions do not merit our consideration. The action for damages was filed in the
the occurrence of the humiliating incident now complained of. The company lower court directly against respondent corporation not as an employer subsidiarily liable under
had not imposed any safeguard against such eventualities and this void in the provisions of Article 1161 of the New Civil Code in relation to Art. 103 of the Revised Penal
its operating procedure does not speak well of its concern for their Code. The cause of action of the private respondent is based on Arts. 19 and 20 of the New Civil
clientele's interests. Negligence here is very patent. This negligence is Code (supra). As well as on respondent's breach of contract thru the negligence of its own
1
imputable to appellant and not to its employees. employees.
The claim that there was no publication of the libelous words in Tagalog is Petitioner is a domestic corporation engaged in the business of receiving and transmitting
also without merit. The fact that a carbon copy of the telegram was filed messages. Everytime a person transmits a message through the facilities of the petitioner, a
among other telegrams and left to hang for the public to see, open for contract is entered into. Upon receipt of the rate or fee fixed, the petitioner undertakes to
inspection by a third party is sufficient publication. It would have been transmit the message accurately. There is no question that in the case at bar, libelous matters
otherwise perhaps had the telegram been placed and kept in a secured were included in the message transmitted, without the consent or knowledge of the sender.
place where no one may have had a chance to read it without appellee's There is a clear case of breach of contract by the petitioner in adding extraneous and libelous
permission. matters in the message sent to the private respondent. As a corporation, the petitioner can act
only through its employees. Hence the acts of its employees in receiving and transmitting
messages are the acts of the petitioner. To hold that the petitioner is not liable directly for the
The additional Tagalog words at the bottom of the telegram are, as correctly
acts of its employees in the pursuit of petitioner's business is to deprive the general public
found by the lower court, libelous per se, and from which malice may be
availing of the services of the petitioner of an effective and adequate remedy. In most cases,
presumed in the absence of any showing of good intention and justifiable
negligence must be proved in order that plaintiff may recover. However, since negligence may
motive on the part of the appellant. The law implies damages in this
be hard to substantiate in some cases, we may apply the doctrine of RES IPSA LOQUITUR (the
instance (Quemel vs. Court of Appeals, L-22794, January 16, 1968;; 22
thing speaks for itself), by considering the presence of facts or circumstances surrounding the
SCRA 44). The award of P40,000.00 as moral damages is hereby reduced
injury.
to P15,000.00 and for attorney's fees the amount of P2,000.00 is awarded.
(pp. 22-23, record)
WHEREFORE, premises considered, the judgment of the appellate court is hereby AFFIRMED.
After a motion for reconsideration was denied by the appellate court, petitioner came to Us with
the following: SO ORDERED.
ASSIGNMENT OF ERRORS
I
The Honorable Court of Appeals erred in holding that Petitioner-employer
should answer directly and primarily for the civil liability arising from the
criminal act of its employee.

II
Republic of the Philippines ESCOLIN, J.:
SUPREME COURT
Manila
SECOND DIVISION Put to test in this petition for review on certiorari is the sufficiency of the averments contained in
the complaint for alleged breach of contract filed by petitioner Victorino D. Magat against
respondent Santiago A. Guerrero in Civil Case No. 17827 of the Court of First Instance of Rizal,
G.R. No. L-37120 April 20, 1983 presided by respondent Judge Leo D. Medialdea, now Deputy Judicial Administrator, which
complaint was dismissed for failure to state a cause of action.
VICTORINO D. MAGAT, petitioner,
vs. The pertinent allegations in the complaint, subject of inquiry, are as follows:
1
HON. LEO D. MEDIALDEA and SANTIAGO A. GUERRERO, respondents.
3. That sometime in September 1972, the defendant entered into a contract
Sinesio S. Vergara for petitioner. with the U.S. Navy Exchange, Subic Bay, Philippines, for the operation of a
fleet of taxicabs, each taxicab to be provided with the necessary taximeter
Eladio B. Samson for respondents. and a radio transceiver for receiving and sending of messages from mobile
taxicab to fixed base stations within the Naval Base at Subic Bay,
Philippines;;

ÅAction;; Contracts;; A complaint that alleges that the defendant violated his prestations 4. That Isidro Q. Aligada, acting as agent of the defendant herein conducted
under a contract such that by reason thereof the plaintiff will suffer damages, sufficiently states a the necessary project studies on how best the defendant may meet the
valid cause of action.—After a thorough examination of the complaint at bar, We find the test of requirements of his contract with the U.S. Navy Exchange, Subic Bay,
legal sufficiency of the cause of action adequately satisfied. In a methodical and logical sequence, Philippines, and because of the experience of the plaintiff in connection with
the complaint recites the circumstances that led to the perfection of the contract entered into by his various, contracts with the U.S. Navy, Subic Bay, Philippines, and his
the parties. It further avers that while petitioner had fulfilled his part of the bargain [paragraph 8 of goodwill already established with the Naval personnel of Subic Bay,
the Complaint], private respondent failed to comply with his correlative obligation by refusing to Philippines, especially in providing the U.S. Navy with needed materials or
open a letter of credit to cover payment of the goods ordered by him [paragraphs 11 & 12 of the goods on time as specified by the U.S. Navy, be they of local origin or
Complaint], and that consequently, petitioner suffered not only loss of his expected profits, but imported either from the United States or from Japan, the said Isidro Q.
moral and exemplary damages as well. From these allegations, the essential elements of a cause Aligada approached the plaintiff herein in behalf of the defendant and
of action are present, to wit: [1] the existence of a legal right to the plaintiff;; [2] a correlative duty proposed to import from Japan thru the plaintiff herein or thru plaintiff's
of the defendant and [3] an act or omission of the defendant in violation of the plaintiff’s right, with Japanese business associates, all taximeters and radio transceivers needed
consequent injury or damage to the latter for which he may maintain an action for recovery of by the defendant in connection with his contract with the U.S. Navy
damages or other appropriate relief. Exchange, Subic Bay, Philippines;;
Same;; Same;; Same.—Indisputably, the parties, both businessmen, entered into the
aforesaid contract with the evident intention of deriving some profits therefrom. Upon breach of 5. That the defendant herein and his aforesaid agent Isidro Q. Aligada were
the contract by either of them, the other would necessarily suffer loss of his expected profits. Since able to import from Japan with the assistance of the plaintiff and his
the loss comes into being at the very moment of breach, such loss is real, “fixed and vested” and, Japanese business associates the necessary taximeters for defendant's
therefore, recoverable under the law. taxicabs in partial fulfillment of defendant's commitments with the U.S. Navy
Exchange, Subic Bay, Philippines, the plaintiff's assistance in this matter
Same;; Same;; Damages;; Damages cover not only actual loss (daño emergente), but also
having been given to the defendant gratis et amore;;
profits that may be lost (lucro cesante). An averment that plaintiff stand, to lose expected profits,
goodwill, etc. due to defendant’s breach of contract sufficiently states a cause of action.—The
damages which the obligor is liable for includes not only the value of the loss suffered by the 6. That Isidro Q. Aligada, also acting as agent of the defendant, made
obligee [daño emergente] but also the profits which the latter failed to obtain [lucro cesante]. If the representations with the plaintiff herein to the effect that defendant desired
obligor acted in good faith, he shall be liable for those damages that are the natural and probable to procure from Japan thru the plaintiff herein the needed radio transceivers
consequences of the breach of the obligation and which the parties have foreseen or could have and to this end, Isidro Q. Aligada secured a firm offer in writing dated
reasonably foreseen at the time the obligation was constituted;; and in case of fraud, bad faith, September 25, 1972, a copy of which is hereto attached marked as Annex
malice or wanton attitude, he shall be liable for all damages which may be reasonably attributed 'A' and made an integral part of this complaint, wherein the plaintiff quoted
to the non-performance of the obligation. in his offer a total price of $77,620.59 [U.S. dollars] FOB Yokohama, the
goods or articles therein offered for sale by the plaintiff to the defendant to
be delivered sixty to ninety [60-90] days after receipt of advice from the
defendant of the radio frequency assigned to the defendant by the proper
authorities;;

7. That the plaintiff received notice of the fact that the defendant accepted
plaintiff's offer to sell to the defendant the items specified in Annex 'A', as
well as the terms and conditions of said offer, as shown by the signed 14. That on March 27, 1973, plaintiff wrote a letter thru his counsel, copy
conformity of the defendant appearing on Annex 'A' which was duly attached marked as Annex 'E', to ascertain from the defendant as to
delivered by the defendant's agent to the plaintiff herein, whereupon all that whether it is his intention to fulfill his part of the agreement with the plaintiff
the plaintiff had to do in the meantime was to await advice from the herein or whether he desired to have the contract between them definitely
defendant as to the radio frequency to be assigned by the proper authorities cancelled, but defendant did not even have the courtesy to answer plaintiff's
to the defendant;; demand;;
8. That believing that the defendant would faithfully fulfill his contract with 15. That the defendant herein entered into a contract with the plaintiff herein
the plaintiff herein, considering his signed conformity appearing in Annex 'A' as set forth in Annex 'A' without the least intention of faithfully complying
hereof as well as the letter dated October 4, 1972, of his agent with his obligation is thereunder, but he did so only in order to obtain the
aforementioned which is attached hereto and marked as Annex 'B' and concession from the U.S. Navy Exchange, Subic Bay, Philippines, of
made an integral part of this complaint, and in order that plaintiff's promised operating a fleet of taxicabs inside the U.S. Naval Base to his financial
delivery would not be delayed, the plaintiff herein took steps to advise the benefit and at the expense and prejudice of third parties such as the plaintiff
Japanese entity entrusted with the manufacture of the items listed in Annex herein;;
'A' to the effect that the contract between the defendant herein and the
plaintiff has been perfected and that advice with regards to radio frequency
16. That in view of the defendant's failure to fulfill his contractual obligations
would follow as soon as same is received by the plaintiff from the defendant;;
with the plaintiff herein, the plaintiff will suffer the following damages:
9. That in his letter dated October 6, 1972, a copy of which is hereto
[a] As the radio transceivers ordered by the defendant
attached marked as Annex 'C', the defendant advised his aforementioned
are now in the hands of the plaintiff's Japanese
agent to the effect that the U.S. Navy provided him with the radio frequency
representative, the plaintiff will have to pay for them,
of 34.2 MHZ [Megahertz] and defendant requested his said agent to
thus he will have to suffer as total loss to him the
proceed with his order placed with the plaintiff herein, which fact was duly
amount of P523,938.98 (converting the amount of
communicated to the plaintiff by the defendant's aforementioned agent;;
$77,620.59 to pesos at the rate of P6.75 to the dollar)
as said radio transceivers were purposely made or
10. That by his letter dated October 7, 1972, addressed to the plaintiff by the manufactured solely for the use of the defendant herein
defendant's agent, a copy of which is hereto attached and marked as Annex and cannot possibly be marketed by the plaintiff herein
'D', defendant's agent qualified defendant's instructions contained in his to the general public;;
letter of October 6, 1972 [Annex 'C'] in the sense that plaintiff herein should
proceed to fulfill defendant's order only upon receipt by the plaintiff of the
[b] The amount of P 52,393.89 or 10% of the purchase
defendant's letter of credit;;
price by way of loss of expected profits from the
transaction or contract between plaintiff and the
11. That it being normal business practice in case of foreign importation that defendant;;
the buyer opens a letter of credit in favor of the foreign supplier before
delivery of the goods sold, the plaintiff herein awaited the opening of such a
[c] Loss of confidence in him and goodwill of the plaintiff
letter of credit by the defendant;;
which will result in the impairment of his business
dealings with Japanese firms, thereby resulting also in
12. That the defendant and his agent have repeatedly assured plaintiff loss of possible profits in the future which plaintiff
herein of the defendant's financial capabilities to pay for the goods ordered assess at no less than P200,000.00;;
by him and in fact he accomplished the necessary application for a letter of
credit with his banker, but he subsequently instructed his banker not to give
[d] That in view of the defendant's bad faith in inducing
due course to his application for a letter of credit and that for reasons only
plaintiff to enter into the contract with him as set forth
known to the defendant, he fails and refuses to open the necessary letter of
hereinabove, defendant should be assessed by his
credit to cover payment of the goods ordered by him;;
Honorable Court in favor of the plaintiff the sum of
P200,000.00 as moral and exemplary damages;;
13. That it has come to the knowledge of the plaintiff herein that the
defendant has been operating his taxicabs without the required radio
[e] That in view of the defendant's fault and to protect
transceivers and when the U.S. Navy Authorities of Subic Bay, Philippines,
his interests, plaintiff herein is constrained to retain the
were pressing defendant for compliance with his commitments with respect
services of counsel with whom he agreed to pay by way
to the installations of radio transceivers on his taxicabs, he impliedly laid the
of attorney's fees the sum of P50,000.00".
blame for the delay upon the plaintiff herein, thus destroying the reputation
of the plaintiff herein with the said Naval Authorities of Subic Bay,
Philippines, with whom plaintiff herein transacts business;; Respondent Guerrero filed a motion to dismiss said complaint for lack of cause of action, which
2
ground is propounded by respondent's counsel thus:
... it is clear that plaintiff was merely anticipating his loss or damage which Those who in the performance of their obligation are guilty of fraud,
might result from the alleged failure of defendant to comply with the terms of negligence, or delay, and those who in any manner contravene the tenor
the alleged contract. Hence, plaintiff's right of recovery under his cause of thereof are liable for damages.
action is premised not on any loss or damage actually suffered by him but
on a non-existing loss or damage which he is expecting to incur in the near
The phrase "in any manner contravene the tenor" of the obligation includes any ilicit act or
future. Plaintiff's right therefore under his cause of action is not yet fixed or
omission which impairs the strict and faithful fulfillment of the obligation and every kind of
vested. 8
defective performance.
Inasmuch as there is no other allegation in the present Complaint wherein
The damages which the obligor is liable for includes not only the value of the loss suffered by the
the same could be maintained against defendant, the present Complaint 9
obligee [daño emergente] but also the profits which the latter failed to obtain [lucro cesante] . If
should be dismissed for its failure to state a cause of action against
the obligor acted in good faith, he shall be liable for those damages that are the natural and
defendant.
probable consequences of the breach of the obligation and which the parties have foreseen or
could have reasonably foreseen at the time the obligation was constituted;; and in case of fraud,
The respondent judge, over petitioner's opposition, issued a minute order dismissing the bad faith, malice or wanton attitude, he shall be liable for all damages which may be reasonably
3 10
complaint as follows: attributed to the non-performance of the obligation .
Acting upon the 'Motion to Dismiss' filed by the defendant, through counsel, The same is true with respect to moral and exemplary damages. The applicable legal provisions
dated June 7, 1973, as well as the opposition thereto filed by the plaintiff, on the matter, Articles 2220 and 2232 of the Civil Code, allow the award of such damages in
through counsel, dated June 14, 1973, for the reasons therein alleged, this breaches of contract where the defendant acted in bad faith. To Our mind, the complaint
Court hereby grants said motion and, as prayed for, the complaint in the sufficiently alleges bad faith on the part of the defendant.
above-entitled case is dismissed.
In fine, We hold that on the basis of the facts alleged in the complaint, the court could render a
SO ORDERED. valid judgment in accordance with the prayer thereof.
Both parties are in accord with the view that when a motion to dismiss is based on the ground of ACCORDINGLY, the questioned order of dismissal is hereby set aside and the case ordered
lack of cause of action, the sufficiency of the case of action can only be determined on the basis remanded to the court of origin for further proceedings. No costs.
4
of the facts alleged in the complaint ;; that the facts alleged are deemed hypothetically admitted,
5
including those which are fairly deducible therefrom ;; and that, admitting the facts as alleged,
SO ORDERED.
whether or not the Court can render a valid judgment against the defendant upon said facts in
6
accordance with the prayer in the complaint .

After a thorough examination of the complaint at bar, We find the test of legal sufficiency of the
cause of action adequately satisfied. In a methodical and logical sequence, the complaints
recites the circumstances that led to the perfection of the contract entered into by the parties. It
further avers that while petitioner had fulfilled his part of the bargain [paragraph 8 of the

Complaint], private respondent failed to comply with his correlative obligation by refusing to open

a letter of credit to cover payment of the goods ordered by him [paragraphs 11 & 12 of the
Complaint], and that consequently, petitioner suffered not only loss of his expected profits, but

moral and exemplary damages as well. From these allegations, the essential elements of a

cause of action are present, to wit: [1] the existence of a legal right to the plaintiff;; [2] a
correlative duty of the defendant and [3] an act or omission of the defendant in violation of the

plaintiff's right, with consequent injury or damage to the latter for which he may maintain an
7
action for recovery of damages or other appropriate relief.

Indisputably, the parties, both businessmen, entered into the aforesaid contract with the evident
intention of deriving some profits therefrom. Upon breach of the contract by either of them, the
other would necessarily suffer loss of his expected profits. Since the loss comes into being at the

very moment of breach, such loss is real, "fixed and vested" and, therefore, recoverable under
the law.

Article 1170 of the Civil Code provides:

Republic of the Philippines Same;; Same;; The lower courts found, among others, that spirals in column A5, ground floor
SUPREME COURT were cut.—The cutting of the spirals in column A5, ground floor is the subject of great contention
Manila between the parties and deserves special consideration. The proper placing of the main
reinforcements and spirals in column A5, ground floor, is the responsibility of the general
contractor which is the UCCI. The burden of proof, therefore, that this cutting was done by others
SECOND DIVISION
is upon the defendants. Other than a strong allegation and assertion that it is the plumber or his
men who may have done the cutting (and this was flatly denied by the plumber) no conclusive
G.R. No. L-47851 October 3, 1986 proof was presented. The engineering experts for the defendants asserted that they could have
no motivation for cutting the bar because they can simply replace the spirals by wrapping around
a new set of spirals. This is not quite correct. There is evidence to show that the pouring of concrete
JUAN F. NAKPIL & SONS, and JUAN F. NAKPIL, petitioners, for columns was sometimes done through the beam and girder reinforcements which were already
vs.
in place as in the case of column A4 second floor. If the reinforcement for the girder and column
THE COURT OF APPEALS, UNITED CONSTRUCTION COMPANY, INC., JUAN J. CARLOS,
is to subsequently wrap around the spirals, this would not do for the elasticity of steel would
and the PHILIPPINE BAR ASSOCIATION, respondents. prevent the making of tight column spirals and loose or improper spirals would result. The proper
way is to produce correct spirals down from the top of the main column bars, a procedure which
G.R. No. L-47863 October 3, 1986 can not be done if either the beam or girder reinforcement is already in place. The engineering
experts for the defendants strongly assert and apparently believe that the cutting of the spirals did
not materially diminish the strength of the column. This belief together with the difficulty of slipping
THE UNITED CONSTRUCTION CO., INC., petitioner, the spirals on the top of the column once the beam reinforcement is in place may be a sufficient
vs. motivation for the cutting of the spirals themselves. The defendants, therefore, should be held
COURT OF APPEALS, ET AL., respondents. responsible for the consequences arising from the loss of strength or ductility in column A5 which
may have contributed to the damages sustained by the building.
G.R. No. L-47896 October 3, 1986
Same;; Same;; One who creates a dangerous condition cannot escape liability although an
act of God may have intervened.—Relative thereto, the ruling of the Supreme Court in Tucker v.
PHILIPPINE BAR ASSOCIATION, ET AL., petitioners,
Milan (49 O.G. 4379, 4380) which may be in point in this case, reads: “One who negligently creates
vs.
a dangerous condition cannot escape liability for the natural and probable consequences thereof,
COURT OF APPEALS, ET AL., respondents.
although the act of a third person, or an act of God for which he is not responsible, intervenes to
precipitate the loss.” As already discussed, the destruction was not purely an act of God. Truth to
Obligations and Contracts;; Damages;; Requisites for exemption from liability due to an “act tell hundreds of ancient buildings in the vicinity were hardly affected by the earthquake. Only one
of God.”—To exempt the obligor from liability under Article 1174 of the Civil Code, for a breach of thing spells out the fatal difference;; gross negligence and evident bad faith, without which the
an obligation due to an “act of God,’ the following must concur: (a) the cause of the breach of the damage would not have occurred.
obligation must be independent of the will of the debtor;; (b) the event must be either unforseeable
or unavoidable;; (c) the event must be such as to render it impossible for the debtor to fulfill his Same: Same;; Liability of architect and contractor for collapse of building is solidary.—
obligation in a normal manner;; and (d) the debtor must be free from any participation in, or WHEREFORE, the decision appealed from is hereby MODIFIED and considering the special and
aggravation of the injury to the creditor. environmental circumstances of this case, We deem it reasonable to render a decision imposing,
as We do hereby impose, upon the defendant and the third-party defendants (with the exception
Same;; Same;; Having made substantial deviations from plans and specifications, having of Roman Ozaeta) a solidary (Art. 1723, Civil Code, Supra, p. 10) indemnity in favor of the
failed to observe requisite workmanship in construction, and the architect made plans that contain Philippine Bar Association of FIVE MILLION (P5,000,000.00) Pesos to cover all damages (with
defects and inadequacies, both contractor and architect cannot escape liability for damages the exception of attorney’s fees) occasioned by the loss of the building (including interest charges
sustained by the building that collapsed in the wake of an earthquake on Aug. 2, 1968.—The and lost rentals) and an additional ONE HUNDRED THOUSAND (P100,000.00) Pesos as and for
negligence of the defendant and the third-party defendants petitioners was established beyond attorney’s fees, the total sum being payable upon the finality of this decision. Upon failure to pay
dispute both in the lower court and in the Intermediate Appellate Court. Defendant United on such finality, twelve (12%) per cent interest per annum shall be imposed upon afore-mentioned
Construction Co., Inc. was found to have made substantial deviations from the plans and amounts from finality until paid. Solidary costs against the defendant and third-party defendants
specifications, and to have failed to observe the requisite workmanship in the construction as well (except Roman Ozaeta).
as to exercise the requisite degree of supervision;; while thethird-party defendants were found to
have inadequacies or defects in the plans and specifications prepared by them. As correctly
PARAS, J.:
assessed by both courts, the defects in the construction and in the plans and specifications were
the proximate causes that rendered the PBA building unable to withstand the earthquake of August
2, 1968. For this reason the defendant and third-party defendants cannot claim exemption from These are petitions for review on certiorari of the November 28, 1977 decision of the Court of
liability. Appeals in CA-G.R. No. 51771-R modifying the decision of the Court of First Instance of Manila,
Branch V, in Civil Case No. 74958 dated September 21, 1971 as modified by the Order of the
Same;; Same;; Fact that all other buildings withstood the earthquake, except the one at bar, lower court dated December 8, 1971. The Court of Appeals in modifying the decision of the
cannot be ignored.—In any event, the relevant and logical observations of the trial court as lower court included an award of an additional amount of P200,000.00 to the Philippine Bar
affirmed by the Court of Appeals that “while it is not possible to state with certainty that the building Association to be paid jointly and severally by the defendant United Construction Co. and by the
would not have collapsed were those defects not present, the fact remains that several buildings third-party defendants Juan F. Nakpil and Sons and Juan F. Nakpil.
in the same area withstood the earthquake to which the building of the plaintiff was similarly
subjected,” cannot be ignored.
The dispositive portion of the modified decision of the lower court reads: the comer of Aduana and Arzobispo Streets, Intramuros, Manila. The construction was
undertaken by the United Construction, Inc. on an "administration" basis, on the suggestion of
Juan J. Carlos, the president and general manager of said corporation. The proposal was
WHEREFORE, judgment is hereby rendered:
approved by plaintiff's board of directors and signed by its president Roman Ozaeta, a third-party
defendant in this case. The plans and specifications for the building were prepared by the other
(a) Ordering defendant United Construction Co., Inc. and third-party third-party defendants Juan F. Nakpil & Sons. The building was completed in June, 1966.
defendants (except Roman Ozaeta) to pay the plaintiff, jointly and severally,
the sum of P989,335.68 with interest at the legal rate from November 29,
In the early morning of August 2, 1968 an unusually strong earthquake hit Manila and its
1968, the date of the filing of the complaint until full payment;;
environs and the building in question sustained major damage. The front columns of the building
buckled, causing the building to tilt forward dangerously. The tenants vacated the building in
(b) Dismissing the complaint with respect to defendant Juan J. Carlos;; view of its precarious condition. As a temporary remedial measure, the building was shored up
by United Construction, Inc. at the cost of P13,661.28.
(c) Dismissing the third-party complaint;;
On November 29, 1968, the plaintiff commenced this action for the recovery of damages arising
from the partial collapse of the building against United Construction, Inc. and its President and
(d) Dismissing the defendant's and third-party defendants' counterclaims for
General Manager Juan J. Carlos as defendants. Plaintiff alleges that the collapse of the building
lack of merit;; was accused by defects in the construction, the failure of the contractors to follow plans and
specifications and violations by the defendants of the terms of the contract.
(e) Ordering defendant United Construction Co., Inc. and third-party
defendants (except Roman Ozaeta) to pay the costs in equal shares. Defendants in turn filed a third-party complaint against the architects who prepared the plans
and specifications, alleging in essence that the collapse of the building was due to the defects in
SO ORDERED. (Record on Appeal p. 521;; Rollo, L- 47851, p. 169). the said plans and specifications. Roman Ozaeta, the then president of the plaintiff Bar
Association was included as a third-party defendant for damages for having included Juan J.
Carlos, President of the United Construction Co., Inc. as party defendant.
The dispositive portion of the decision of the Court of Appeals reads:
On March 3, 1969, the plaintiff and third-party defendants Juan F. Nakpil & Sons and Juan F.
WHEREFORE, the judgment appealed from is modified to include an award Nakpil presented a written stipulation which reads:
of P200,000.00 in favor of plaintiff-appellant Philippine Bar Association, with
interest at the legal rate from November 29, 1968 until full payment to be
paid jointly and severally by defendant United Construction Co., Inc. and 1. That in relation to defendants' answer with counterclaims and third- party
third party defendants (except Roman Ozaeta). In all other respects, the complaints and the third-party defendants Nakpil & Sons' answer thereto,
judgment dated September 21, 1971 as modified in the December 8, 1971 the plaintiff need not amend its complaint by including the said Juan F.
Order of the lower court is hereby affirmed with COSTS to be paid by the Nakpil & Sons and Juan F. Nakpil personally as parties defendant.
defendant and third party defendant (except Roman Ozaeta) in equal
shares.
2. That in the event (unexpected by the undersigned) that the Court should
find after the trial that the above-named defendants Juan J. Carlos and
SO ORDERED. United Construction Co., Inc. are free from any blame and liability for the
collapse of the PBA Building, and should further find that the collapse of
said building was due to defects and/or inadequacy of the plans, designs,
Petitioners Juan F. Nakpil & Sons in L-47851 and United Construction Co., Inc. and Juan J. and specifications p by the third-party defendants, or in the event that the
Carlos in L-47863 seek the reversal of the decision of the Court of Appeals, among other things, Court may find Juan F. Nakpil and Sons and/or Juan F. Nakpil contributorily
for exoneration from liability while petitioner Philippine Bar Association in L-47896 seeks the negligent or in any way jointly and solidarily liable with the defendants,
modification of aforesaid decision to obtain an award of P1,830,000.00 for the loss of the PBA judgment may be rendered in whole or in part. as the case may be, against
building plus four (4) times such amount as damages resulting in increased cost of the building, Juan F. Nakpil & Sons and/or Juan F. Nakpil in favor of the plaintiff to all
P100,000.00 as exemplary damages;; and P100,000.00 as attorney's fees. intents and purposes as if plaintiff's complaint has been duly amended by
including the said Juan F. Nakpil & Sons and Juan F. Nakpil as parties
These petitions arising from the same case filed in the Court of First Instance of Manila were defendant and by alleging causes of action against them including, among
consolidated by this Court in the resolution of May 10, 1978 requiring the respective respondents others, the defects or inadequacy of the plans, designs, and specifications
to comment. (Rollo, L-47851, p. 172). prepared by them and/or failure in the performance of their contract with
plaintiff.
The facts as found by the lower court (Decision, C.C. No. 74958;; Record on Appeal, pp. 269-
348;; pp. 520-521;; Rollo, L-47851, p. 169) and affirmed by the Court of Appeals are as follows: 3. Both parties hereby jointly petition this Honorable Court to approve this
stipulation. (Record on Appeal, pp. 274-275;; Rollo, L-47851,p.169).
The plaintiff, Philippine Bar Association, a civic-non-profit association, incorporated under the
Corporation Law, decided to construct an office building on its 840 square meters lot located at
Upon the issues being joined, a pre-trial was conducted on March 7, 1969, during which among of the latter to observe the requisite workmanship in the construction of the building and of the
others, the parties agreed to refer the technical issues involved in the case to a Commissioner. contractors, architects and even the owners to exercise the requisite degree of supervision in the
Mr. Andres O. Hizon, who was ultimately appointed by the trial court, assumed his office as construction of subject building.
Commissioner, charged with the duty to try the following issues:
All the parties registered their objections to aforesaid findings which in turn were answered by
1. Whether the damage sustained by the PBA building during the August 2, the Commissioner.
1968 earthquake had been caused, directly or indirectly, by:
The trial court agreed with the findings of the Commissioner except as to the holding that the
(a) The inadequacies or defects in the plans and specifications prepared by owner is charged with full nine supervision of the construction. The Court sees no legal or
third-party defendants;; contractual basis for such conclusion. (Record on Appeal, pp. 309-328;; Ibid).
(b) The deviations, if any, made by the defendants from said plans and Thus, on September 21, 1971, the lower court rendered the assailed decision which was
specifications and how said deviations contributed to the damage sustained;; modified by the Intermediate Appellate Court on November 28, 1977.
(c) The alleged failure of defendants to observe the requisite quality of All the parties herein appealed from the decision of the Intermediate Appellate Court. Hence,
materials and workmanship in the construction of the building;; these petitions.
(d) The alleged failure to exercise the requisite degree of supervision On May 11, 1978, the United Architects of the Philippines, the Association of Civil Engineers,
expected of the architect, the contractor and/or the owner of the building;; and the Philippine Institute of Architects filed with the Court a motion to intervene as amicus
curiae. They proposed to present a position paper on the liability of architects when a building
collapses and to submit likewise a critical analysis with computations on the divergent views on
(e) An act of God or a fortuitous event;; and
the design and plans as submitted by the experts procured by the parties. The motion having
been granted, the amicus curiae were granted a period of 60 days within which to submit their
(f) Any other cause not herein above specified. position.
2. If the cause of the damage suffered by the building arose from a After the parties had all filed their comments, We gave due course to the petitions in Our
combination of the above-enumerated factors, the degree or proportion in Resolution of July 21, 1978.
which each individual factor contributed to the damage sustained;;
The position papers of the amicus curiae (submitted on November 24, 1978) were duly noted.
3. Whether the building is now a total loss and should be completely
demolished or whether it may still be repaired and restored to a tenantable
The amicus curiae gave the opinion that the plans and specifications of the Nakpils were not
condition. In the latter case, the determination of the cost of such restoration
defective. But the Commissioner, when asked by Us to comment, reiterated his conclusion that
or repair, and the value of any remaining construction, such as the
the defects in the plans and specifications indeed existed.
foundation, which may still be utilized or availed of (Record on Appeal, pp.
275-276;; Rollo, L-47851, p. 169).
Using the same authorities availed of by the amicus curiae such as the Manila Code (Ord. No.
4131) and the 1966 Asep Code, the Commissioner added that even if it can be proved that the
Thus, the issues of this case were divided into technical issues and non-technical issues. As
defects in the construction alone (and not in the plans and design) caused the damage to the
aforestated the technical issues were referred to the Commissioner. The non-technical issues
building, still the deficiency in the original design and jack of specific provisions against torsion in
were tried by the Court.
the original plans and the overload on the ground floor columns (found by an the experts
including the original designer) certainly contributed to the damage which occurred. (Ibid, p.
Meanwhile, plaintiff moved twice for the demolition of the building on the ground that it may 174).
topple down in case of a strong earthquake. The motions were opposed by the defendants and
the matter was referred to the Commissioner. Finally, on April 30, 1979 the building was
In their respective briefs petitioners, among others, raised the following assignments of errors:
authorized to be demolished at the expense of the plaintiff, but not another earthquake of high
Philippine Bar Association claimed that the measure of damages should not be limited to
intensity on April 7, 1970 followed by other strong earthquakes on April 9, and 12, 1970, caused
P1,100,000.00 as estimated cost of repairs or to the period of six (6) months for loss of rentals
further damage to the property. The actual demolition was undertaken by the buyer of the
while United Construction Co., Inc. and the Nakpils claimed that it was an act of God that caused
damaged building. (Record on Appeal, pp. 278-280;; Ibid.)
the failure of the building which should exempt them from responsibility and not the defective
construction, poor workmanship, deviations from plans and specifications and other
After the protracted hearings, the Commissioner eventually submitted his report on September imperfections in the case of United Construction Co., Inc. or the deficiencies in the design, plans
25, 1970 with the findings that while the damage sustained by the PBA building was caused and specifications prepared by petitioners in the case of the Nakpils. Both UCCI and the Nakpils
directly by the August 2, 1968 earthquake whose magnitude was estimated at 7.3 they were also object to the payment of the additional amount of P200,000.00 imposed by the Court of Appeals.
caused by the defects in the plans and specifications prepared by the third-party defendants' UCCI also claimed that it should be reimbursed the expenses of shoring the building in the
architects, deviations from said plans and specifications by the defendant contractors and failure
amount of P13,661.28 while the Nakpils opposed the payment of damages jointly and solidarity from creating or entering into the cause of the mischief. When the effect, the cause of which is to
with UCCI. be considered, is found to be in part the result of the participation of man, whether it be from
active intervention or neglect, or failure to act, the whole occurrence is thereby humanized, as it
were, and removed from the rules applicable to the acts of God. (1 Corpus Juris, pp. 1174-
The pivotal issue in this case is whether or not an act of God-an unusually strong earthquake-
1175).
which caused the failure of the building, exempts from liability, parties who are otherwise liable
because of their negligence.
Thus it has been held that when the negligence of a person concurs with an act of God in
producing a loss, such person is not exempt from liability by showing that the immediate cause
The applicable law governing the rights and liabilities of the parties herein is Article 1723 of the
of the damage was the act of God. To be exempt from liability for loss because of an act of God,
New Civil Code, which provides:
he must be free from any previous negligence or misconduct by which that loss or damage may
have been occasioned. (Fish & Elective Co. v. Phil. Motors, 55 Phil. 129;; Tucker v. Milan, 49
Art. 1723. The engineer or architect who drew up the plans and O.G. 4379;; Limpangco & Sons v. Yangco Steamship Co., 34 Phil. 594, 604;; Lasam v. Smith, 45
specifications for a building is liable for damages if within fifteen years from Phil. 657).
the completion of the structure the same should collapse by reason of a
defect in those plans and specifications, or due to the defects in the ground.
The negligence of the defendant and the third-party defendants petitioners was established
The contractor is likewise responsible for the damage if the edifice fags
beyond dispute both in the lower court and in the Intermediate Appellate Court. Defendant
within the same period on account of defects in the construction or the use
United Construction Co., Inc. was found to have made substantial deviations from the plans and
of materials of inferior quality furnished by him, or due to any violation of the
specifications. and to have failed to observe the requisite workmanship in the construction as
terms of the contract. If the engineer or architect supervises the
well as to exercise the requisite degree of supervision;; while the third-party defendants were
construction, he shall be solidarily liable with the contractor.
found to have inadequacies or defects in the plans and specifications prepared by them. As
correctly assessed by both courts, the defects in the construction and in the plans and
Acceptance of the building, after completion, does not imply waiver of any of specifications were the proximate causes that rendered the PBA building unable to withstand the
the causes of action by reason of any defect mentioned in the preceding earthquake of August 2, 1968. For this reason the defendant and third-party defendants cannot
paragraph. claim exemption from liability. (Decision, Court of Appeals, pp. 30-31).
The action must be brought within ten years following the collapse of the It is well settled that the findings of facts of the Court of Appeals are conclusive on the parties
building. and on this court (cases cited in Tolentino vs. de Jesus, 56 SCRA 67;; Cesar vs. Sandiganbayan,
January 17, 1985, 134 SCRA 105, 121), unless (1) the conclusion is a finding grounded entirely
on speculation, surmise and conjectures;; (2) the inference made is manifestly mistaken;; (3)
On the other hand, the general rule is that no person shall be responsible for events which could
there is grave abuse of discretion;; (4) the judgment is based on misapprehension of facts;; (5)
not be foreseen or which though foreseen, were inevitable (Article 1174, New Civil Code).
the findings of fact are conflicting , (6) the Court of Appeals went beyond the issues of the case
and its findings are contrary to the admissions of both appellant and appellees (Ramos vs.
An act of God has been defined as an accident, due directly and exclusively to natural causes Pepsi-Cola Bottling Co., February 8, 1967, 19 SCRA 289, 291-292;; Roque vs. Buan, Oct. 31,
without human intervention, which by no amount of foresight, pains or care, reasonably to have 1967, 21 SCRA 648, 651);; (7) the findings of facts of the Court of Appeals are contrary to those
been expected, could have been prevented. (1 Corpus Juris 1174). of the trial court;; (8) said findings of facts are conclusions without citation of specific evidence on
which they are based;; (9) the facts set forth in the petition as well as in the petitioner's main and
reply briefs are not disputed by the respondents (Garcia vs. CA, June 30, 1970, 33 SCRA 622;;
There is no dispute that the earthquake of August 2, 1968 is a fortuitous event or an act of God. Alsua-Bett vs. Court of Appeals, July 30, 1979, 92 SCRA 322, 366);; (10) the finding of fact of the
Court of Appeals is premised on the supposed absence of evidence and is contradicted by
To exempt the obligor from liability under Article 1174 of the Civil Code, for a breach of an evidence on record (Salazar vs. Gutierrez, May 29, 1970, 33 SCRA 243, 247;; Cited in G.R. No.
obligation due to an "act of God," the following must concur: (a) the cause of the breach of the 66497-98, Sacay v. Sandiganbayan, July 10, 1986).
obligation must be independent of the will of the debtor;; (b) the event must be either
unforseeable or unavoidable;; (c) the event must be such as to render it impossible for the debtor It is evident that the case at bar does not fall under any of the exceptions above-mentioned. On
to fulfill his obligation in a normal manner;; and (d) the debtor must be free from any participation the contrary, the records show that the lower court spared no effort in arriving at the correct
in, or aggravation of the injury to the creditor. (Vasquez v. Court of Appeals, 138 SCRA 553;; appreciation of facts by the referral of technical issues to a Commissioner chosen by the parties
Estrada v. Consolacion, 71 SCRA 423;; Austria v. Court of Appeals, 39 SCRA 527;; Republic of whose findings and conclusions remained convincingly unrebutted by the intervenors/amicus
the Phil. v. Luzon Stevedoring Corp., 21 SCRA 279;; Lasam v. Smith, 45 Phil. 657). curiae who were allowed to intervene in the Supreme Court.
Thus, if upon the happening of a fortuitous event or an act of God, there concurs a In any event, the relevant and logical observations of the trial court as affirmed by the Court of
corresponding fraud, negligence, delay or violation or contravention in any manner of the tenor Appeals that "while it is not possible to state with certainty that the building would not have
of the obligation as provided for in Article 1170 of the Civil Code, which results in loss or collapsed were those defects not present, the fact remains that several buildings in the same
damage, the obligor cannot escape liability. area withstood the earthquake to which the building of the plaintiff was similarly subjected,"
cannot be ignored.
The principle embodied in the act of God doctrine strictly requires that the act must be one
occasioned exclusively by the violence of nature and all human agencies are to be excluded
The next issue to be resolved is the amount of damages to be awarded to the PBA for the partial earthquakes and unusually strong earthquakes and on ordinary fortuitous
collapse (and eventual complete collapse) of its building. events and extraordinary fortuitous events leads to its argument that the
August 2, 1968 earthquake was of such an overwhelming and destructive
character that by its own force and independent of the particular negligence
The Court of Appeals affirmed the finding of the trial court based on the report of the
alleged, the injury would have been produced. If we follow this line of
Commissioner that the total amount required to repair the PBA building and to restore it to
speculative reasoning, we will be forced to conclude that under such a
tenantable condition was P900,000.00 inasmuch as it was not initially a total loss. However,
situation scores of buildings in the vicinity and in other parts of Manila would
while the trial court awarded the PBA said amount as damages, plus unrealized rental income
have toppled down. Following the same line of reasoning, Nakpil and Sons
for one-half year, the Court of Appeals modified the amount by awarding in favor of PBA an
alleges that the designs were adequate in accordance with pre-August 2,
additional sum of P200,000.00 representing the damage suffered by the PBA building as a result
1968 knowledge and appear inadequate only in the light of engineering
of another earthquake that occurred on April 7, 1970 (L-47896, Vol. I, p. 92).
information acquired after the earthquake. If this were so, hundreds of
ancient buildings which survived the earthquake better than the two-year old
The PBA in its brief insists that the proper award should be P1,830,000.00 representing the total PBA building must have been designed and constructed by architects and
value of the building (L-47896, PBA's No. 1 Assignment of Error, p. 19), while both the NAKPILS contractors whose knowledge and foresight were unexplainably auspicious
and UNITED question the additional award of P200,000.00 in favor of the PBA (L- 47851, and prophetic. Fortunately, the facts on record allow a more down to earth
NAKPIL's Brief as Petitioner, p. 6, UNITED's Brief as Petitioner, p. 25). The PBA further urges explanation of the collapse. The failure of the PBA building, as a unique and
that the unrealized rental income awarded to it should not be limited to a period of one-half year distinct construction with no reference or comparison to other buildings, to
but should be computed on a continuing basis at the rate of P178,671.76 a year until the weather the severe earthquake forces was traced to design deficiencies and
judgment for the principal amount shall have been satisfied L- 47896, PBA's No. 11 Assignment defective construction, factors which are neither mysterious nor esoteric.
of Errors, p. 19). The theological allusion of appellant United that God acts in mysterious
ways His wonders to perform impresses us to be inappropriate. The
evidence reveals defects and deficiencies in design and construction. There
The collapse of the PBA building as a result of the August 2, 1968 earthquake was only partial is no mystery about these acts of negligence. The collapse of the PBA
and it is undisputed that the building could then still be repaired and restored to its tenantable
building was no wonder performed by God. It was a result of the
condition. The PBA, however, in view of its lack of needed funding, was unable, thru no fault of
imperfections in the work of the architects and the people in the construction
its own, to have the building repaired. UNITED, on the other hand, spent P13,661.28 to shore up company. More relevant to our mind is the lesson from the parable of the
the building after the August 2, 1968 earthquake (L-47896, CA Decision, p. 46). Because of the
wise man in the Sermon on the Mount "which built his house upon a rock;;
earthquake on April 7, 1970, the trial court after the needed consultations, authorized the total
and the rain descended and the floods came and the winds blew and beat
demolition of the building (L-47896, Vol. 1, pp. 53-54). upon that house;; and it fen not;; for it was founded upon a rock" and of the
"foolish upon the sand. And the rain descended and man which built his
There should be no question that the NAKPILS and UNITED are liable for the damage resulting house the floods came, and the winds blew, and beat upon that house;; and
from the partial and eventual collapse of the PBA building as a result of the earthquakes. it fell and great was the fall of it. (St. Matthew 7: 24-27)." The requirement
that a building should withstand rains, floods, winds, earthquakes, and
natural forces is precisely the reason why we have professional experts like
We quote with approval the following from the erudite decision penned by Justice Hugo E. architects, and engineers. Designs and constructions vary under varying
Gutierrez (now an Associate Justice of the Supreme Court) while still an Associate Justice of the circumstances and conditions but the requirement to design and build well
Court of Appeals: does not change.
There is no question that an earthquake and other forces of nature such as The findings of the lower Court on the cause of the collapse are more
cyclones, drought, floods, lightning, and perils of the sea are acts of God. It rational and accurate. Instead of laying the blame solely on the motions and
does not necessarily follow, however, that specific losses and suffering forces generated by the earthquake, it also examined the ability of the PBA
resulting from the occurrence of these natural force are also acts of God. building, as designed and constructed, to withstand and successfully
We are not convinced on the basis of the evidence on record that from the weather those forces.
thousands of structures in Manila, God singled out the blameless PBA
building in Intramuros and around six or seven other buildings in various
parts of the city for collapse or severe damage and that God alone was The evidence sufficiently supports a conclusion that the negligence and fault
responsible for the damages and losses thus suffered. of both United and Nakpil and Sons, not a mysterious act of an inscrutable
God, were responsible for the damages. The Report of the Commissioner,
Plaintiff's Objections to the Report, Third Party Defendants' Objections to
The record is replete with evidence of defects and deficiencies in the the Report, Defendants' Objections to the Report, Commissioner's Answer
designs and plans, defective construction, poor workmanship, deviation to the various Objections, Plaintiffs' Reply to the Commissioner's Answer,
from plans and specifications and other imperfections. These deficiencies Defendants' Reply to the Commissioner's Answer, Counter-Reply to
are attributable to negligent men and not to a perfect God. Defendants' Reply, and Third-Party Defendants' Reply to the
Commissioner's Report not to mention the exhibits and the testimonies
The act-of-God arguments of the defendants- appellants and third party show that the main arguments raised on appeal were already raised during
defendants-appellants presented in their briefs are premised on legal the trial and fully considered by the lower Court. A reiteration of these same
generalizations or speculations and on theological fatalism both of which arguments on appeal fails to convince us that we should reverse or disturb
ignore the plain facts. The lengthy discussion of United on ordinary
the lower Court's factual findings and its conclusions drawn from the facts, earthquake forces mitigates in a large measure the responsibility or liability
among them: of the architect and engineer designer.
The Commissioner also found merit in the allegations of the defendants as The Third-party defendants, who are the most concerned with this portion of
to the physical evidence before and after the earthquake showing the the Commissioner's report, voiced opposition to the same on the grounds
inadequacy of design, to wit: that (a) the finding is based on a basic erroneous conception as to the
design concept of the building, to wit, that the design is essentially that of a
heavy rectangular box on stilts with shear wan at one end;; (b) the finding
Physical evidence before the earthquake providing (sic) inadequacy of
that there were defects and a deficiency in the design of the building would
design;;
at best be based on an approximation and, therefore, rightly belonged to the
realm of speculation, rather than of certainty and could very possibly be
1. inadequate design was the cause of the failure of the building. outright error;; (c) the Commissioner has failed to back up or support his
finding with extensive, complex and highly specialized computations and
analyzes which he himself emphasizes are necessary in the determination
2. Sun-baffles on the two sides and in front of the building;;
of such a highly technical question;; and (d) the Commissioner has analyzed
the design of the PBA building not in the light of existing and available
a. Increase the inertia forces that move the building laterally toward the earthquake engineering knowledge at the time of the preparation of the
Manila Fire Department. design, but in the light of recent and current standards.
b. Create another stiffness imbalance. The Commissioner answered the said objections alleging that third-party
defendants' objections were based on estimates or exhibits not presented
during the hearing that the resort to engineering references posterior to the
3. The embedded 4" diameter cast iron down spout on all exterior columns date of the preparation of the plans was induced by the third-party
reduces the cross-sectional area of each of the columns and the strength defendants themselves who submitted computations of the third-party
thereof. defendants are erroneous.
4. Two front corners, A7 and D7 columns were very much less reinforced. The issue presently considered is admittedly a technical one of the highest
degree. It involves questions not within the ordinary competence of the
Physical Evidence After the Earthquake, Proving Inadequacy of design;; bench and the bar to resolve by themselves. Counsel for the third-party
defendants has aptly remarked that "engineering, although dealing in
mathematics, is not an exact science and that the present knowledge as to
1. Column A7 suffered the severest fracture and maximum sagging. Also the nature of earthquakes and the behaviour of forces generated by them
D7. still leaves much to be desired;; so much so "that the experts of the different
parties, who are all engineers, cannot agree on what equation to use, as to
2. There are more damages in the front part of the building than towards the what earthquake co-efficients are, on the codes to be used and even as to
rear, not only in columns but also in slabs. the type of structure that the PBA building (is) was (p. 29, Memo, of third-
party defendants before the Commissioner).
3. Building leaned and sagged more on the front part of the building.
The difficulty expected by the Court if tills technical matter were to be tried
and inquired into by the Court itself, coupled with the intrinsic nature of the
4. Floors showed maximum sagging on the sides and toward the front questions involved therein, constituted the reason for the reference of the
corner parts of the building. said issues to a Commissioner whose qualifications and experience have
eminently qualified him for the task, and whose competence had not been
5. There was a lateral displacement of the building of about 8", Maximum questioned by the parties until he submitted his report. Within the
sagging occurs at the column A7 where the floor is lower by 80 cm. than the pardonable limit of the Court's ability to comprehend the meaning of the
highest slab level. Commissioner's report on this issue, and the objections voiced to the same,
the Court sees no compelling reasons to disturb the findings of the
Commissioner that there were defects and deficiencies in the design, plans
6. Slab at the corner column D7 sagged by 38 cm. and specifications prepared by third-party defendants, and that said defects
and deficiencies involved appreciable risks with respect to the accidental
The Commissioner concluded that there were deficiencies or defects in the forces which may result from earthquake shocks.
design, plans and specifications of the PBA building which involved
appreciable risks with respect to the accidental forces which may result from (2) (a) The deviations, if any, made by the defendants from the plans and
earthquake shocks. He conceded, however, that the fact that those specifications, and how said deviations contributed to the damage sustained
deficiencies or defects may have arisen from an obsolete or not too by the building.
conservative code or even a code that does not require a design for
(b) The alleged failure of defendants to observe the requisite quality of Columns are first (or ground) floor, unless otherwise stated.
materials and workmanship in the construction of the building.
(1) Column D4 — Spacing of spiral is changed from 2" to 5" on centers,
These two issues, being interrelated with each other, will be discussed
together.
(2) Column D5 — No spiral up to a height of 22" from the ground floor,
The findings of the Commissioner on these issues were as follows:
(3) Column D6 — Spacing of spiral over 4 l/2,
We now turn to the construction of the PBA Building and the alleged
(4) Column D7 — Lack of lateral ties,
deficiencies or defects in the construction and violations or deviations from
the plans and specifications. All these may be summarized as follows:
(5) Column C7 — Absence of spiral to a height of 20" from the ground level,
Spirals are at 2" from the exterior column face and 6" from the inner column
a. Summary of alleged defects as reported by Engineer Mario M. Bundalian.
face,
(1) Wrongful and defective placing of reinforcing bars.

(6) Column B6 — Lack of spiral on 2 feet below the floor beams,
(2) Absence of effective and desirable integration of the 3 bars in the
(7) Column B5 — Lack of spirals at a distance of 26' below the beam,
cluster.
(8) Column B7 — Spirals not tied to vertical reinforcing bars, Spirals are
(3) Oversize coarse aggregates: 1-1/4 to 2" were used. Specification
uneven 2" to 4",
requires no larger than 1 inch.
(9) Column A3 — Lack of lateral ties,

(4) Reinforcement assembly is not concentric with the column, eccentricity
being 3" off when on one face the main bars are only 1 1/2' from the
surface. (10) Column A4 — Spirals cut off and welded to two separate clustered
vertical bars,
(5) Prevalence of honeycombs,
(11) Column A4 — (second floor Column is completely hollow to a height of
30"
(6) Contraband construction joints,
(12) Column A5 — Spirals were cut from the floor level to the bottom of the
(7) Absence, or omission, or over spacing of spiral hoops,
spandrel beam to a height of 6 feet,
(8) Deliberate severance of spirals into semi-circles in noted on Col. A-5,
(13) Column A6 — No spirals up to a height of 30' above the ground floor
ground floor,
level,
(9) Defective construction joints in Columns A-3, C-7, D-7 and D-4, ground
(14) Column A7— Lack of lateralties or spirals,
floor,
c. Summary of alleged defects as reported by the experts of the Third-Party
(10) Undergraduate concrete is evident,
defendants.
(11) Big cavity in core of Column 2A-4, second floor,
Ground floor columns.
(12) Columns buckled at different planes. Columns buckled worst where
(1) Column A4 — Spirals are cut,
there are no spirals or where spirals are cut. Columns suffered worst
displacement where the eccentricity of the columnar reinforcement
assembly is more acute. (2) Column A5 — Spirals are cut,
b. Summary of alleged defects as reported by Engr. Antonio Avecilla. (3) Column A6 — At lower 18" spirals are absent,
(4) Column A7 — Ties are too far apart, There is no excuse for the cavity or hollow portion in the column A4, second
floor, and although this column did not fail, this is certainly an evidence on
the part of the contractor of poor construction.
(5) Column B5 — At upper fourth of column spirals are either absent or
improperly spliced,
The effect of eccentricities in the columns which were measured at about 2
1/2 inches maximum may be approximated in relation to column loads and
(6) Column B6 — At upper 2 feet spirals are absent,
column and beam moments. The main effect of eccentricity is to change the
beam or girder span. The effect on the measured eccentricity of 2 inches,
(7) Column B7 — At upper fourth of column spirals missing or improperly therefore, is to increase or diminish the column load by a maximum of about
spliced. 1% and to increase or diminish the column or beam movements by about a
maximum of 2%. While these can certainly be absorbed within the factor of
safety, they nevertheless diminish said factor of safety.
(8) Column C7— Spirals are absent at lowest 18"
The cutting of the spirals in column A5, ground floor is the subject of great
(9) Column D5 — At lowest 2 feet spirals are absent,
contention between the parties and deserves special consideration.
(10) Column D6 — Spirals are too far apart and apparently improperly The proper placing of the main reinforcements and spirals in column A5,
spliced,
ground floor, is the responsibility of the general contractor which is the
UCCI. The burden of proof, therefore, that this cutting was done by others is
(11) Column D7 — Lateral ties are too far apart, spaced 16" on centers. upon the defendants. Other than a strong allegation and assertion that it is
the plumber or his men who may have done the cutting (and this was flatly
denied by the plumber) no conclusive proof was presented. The engineering
There is merit in many of these allegations. The explanations given by the experts for the defendants asserted that they could have no motivation for
engineering experts for the defendants are either contrary to general cutting the bar because they can simply replace the spirals by wrapping
principles of engineering design for reinforced concrete or not applicable to around a new set of spirals. This is not quite correct. There is evidence to
the requirements for ductility and strength of reinforced concrete in show that the pouring of concrete for columns was sometimes done through
earthquake-resistant design and construction. the beam and girder reinforcements which were already in place as in the
case of column A4 second floor. If the reinforcement for the girder and
We shall first classify and consider defects which may have appreciable column is to subsequently wrap around the spirals, this would not do for the
bearing or relation to' the earthquake-resistant property of the building. elasticity of steel would prevent the making of tight column spirals and loose
or improper spirals would result. The proper way is to produce correct
spirals down from the top of the main column bars, a procedure which can
As heretofore mentioned, details which insure ductility at or near the not be done if either the beam or girder reinforcement is already in place.
connections between columns and girders are desirable in earthquake The engineering experts for the defendants strongly assert and apparently
resistant design and construction. The omission of spirals and ties or hoops believe that the cutting of the spirals did not materially diminish the strength
at the bottom and/or tops of columns contributed greatly to the loss of of the column. This belief together with the difficulty of slipping the spirals on
earthquake-resistant strength. The plans and specifications required that the top of the column once the beam reinforcement is in place may be a
these spirals and ties be carried from the floor level to the bottom sufficient motivation for the cutting of the spirals themselves. The
reinforcement of the deeper beam (p. 1, Specifications, p. 970, Reference defendants, therefore, should be held responsible for the consequences
11). There were several clear evidences where this was not done especially arising from the loss of strength or ductility in column A5 which may have
in some of the ground floor columns which failed. contributed to the damages sustained by the building.
There were also unmistakable evidences that the spacings of the spirals The lack of proper length of splicing of spirals was also proven in the visible
and ties in the columns were in many cases greater than those called for in spirals of the columns where spalling of the concrete cover had taken place.
the plans and specifications resulting again in loss of earthquake-resistant This lack of proper splicing contributed in a small measure to the loss of
strength. The assertion of the engineering experts for the defendants that strength.
the improper spacings and the cutting of the spirals did not result in loss of
strength in the column cannot be maintained and is certainly contrary to the
general principles of column design and construction. And even granting The effects of all the other proven and visible defects although nor can
that there be no loss in strength at the yield point (an assumption which is certainly be accumulated so that they can contribute to an appreciable loss
very doubtful) the cutting or improper spacings of spirals will certainly result in earthquake-resistant strength. The engineering experts for the defendants
in the loss of the plastic range or ductility in the column and it is precisely submitted an estimate on some of these defects in the amount of a few
this plastic range or ductility which is desirable and needed for earthquake- percent. If accumulated, therefore, including the effect of eccentricity in the
resistant strength. column the loss in strength due to these minor defects may run to as much
as ten percent.
To recapitulate: the omission or lack of spirals and ties at the bottom and/or The objection regarding the cutting of the spirals in Column A-5, groundfloor, was answered by
at the top of some of the ground floor columns contributed greatly to the the Commissioner by reiterating the observation in his report that irrespective of who did the
collapse of the PBA building since it is at these points where the greater part cutting of the spirals, the defendants should be held liable for the same as the general contractor
of the failure occurred. The liability for the cutting of the spirals in column of the building. The Commissioner further stated that the loss of strength of the cut spirals and
A5, ground floor, in the considered opinion of the Commissioner rests on the inelastic deflections of the supposed lattice work defeated the purpose of the spiral containment
shoulders of the defendants and the loss of strength in this column in the column and resulted in the loss of strength, as evidenced by the actual failure of this
contributed to the damage which occurred. column.
It is reasonable to conclude, therefore, that the proven defects, deficiencies Again, the Court concurs in the findings of the Commissioner on these issues and fails to find
and violations of the plans and specifications of the PBA building any sufficient cause to disregard or modify the same. As found by the Commissioner, the
contributed to the damages which resulted during the earthquake of August "deviations made by the defendants from the plans and specifications caused indirectly the
2, 1968 and the vice of these defects and deficiencies is that they not only damage sustained and that those deviations not only added but also aggravated the damage
increase but also aggravate the weakness mentioned in the design of the caused by the defects in the plans and specifications prepared by third-party defendants. (Rollo,
structure. In other words, these defects and deficiencies not only tend to Vol. I, pp. 128-142)
add but also to multiply the effects of the shortcomings in the design of the
building. We may say, therefore, that the defects and deficiencies in the
The afore-mentioned facts clearly indicate the wanton negligence of both the defendant and the
construction contributed greatly to the damage which occurred.
third-party defendants in effecting the plans, designs, specifications, and construction of the PBA
building and We hold such negligence as equivalent to bad faith in the performance of their
Since the execution and supervision of the construction work in the hands of respective tasks.
the contractor is direct and positive, the presence of existence of all the
major defects and deficiencies noted and proven manifests an element of
Relative thereto, the ruling of the Supreme Court in Tucker v. Milan (49 O.G. 4379, 4380) which
negligence which may amount to imprudence in the construction work. (pp.
may be in point in this case reads:
42-49, Commissioners Report).
One who negligently creates a dangerous condition cannot escape liability for the natural and
As the parties most directly concerned with this portion of the Commissioner's report, the
probable consequences thereof, although the act of a third person, or an act of God for which he
defendants voiced their objections to the same on the grounds that the Commissioner should
is not responsible, intervenes to precipitate the loss.
have specified the defects found by him to be "meritorious";; that the Commissioner failed to
indicate the number of cases where the spirals and ties were not carried from the floor level to
the bottom reinforcement of the deeper beam, or where the spacing of the spirals and ties in the As already discussed, the destruction was not purely an act of God. Truth to tell hundreds of
columns were greater than that called for in the specifications;; that the hollow in column A4, ancient buildings in the vicinity were hardly affected by the earthquake. Only one thing spells out
second floor, the eccentricities in the columns, the lack of proper length of splicing of spirals, and the fatal difference;; gross negligence and evident bad faith, without which the damage would not
the cut in the spirals in column A5, ground floor, did not aggravate or contribute to the damage have occurred.
suffered by the building;; that the defects in the construction were within the tolerable margin of
safety;; and that the cutting of the spirals in column A5, ground floor, was done by the plumber or
his men, and not by the defendants. WHEREFORE, the decision appealed from is hereby MODIFIED and considering the special
and environmental circumstances of this case, We deem it reasonable to render a decision
imposing, as We do hereby impose, upon the defendant and the third-party defendants (with the
Answering the said objections, the Commissioner stated that, since many of the defects were exception of Roman Ozaeta) a solidary (Art. 1723, Civil Code, Supra, p. 10) indemnity in favor of
minor only the totality of the defects was considered. As regards the objection as to failure to the Philippine Bar Association of FIVE MILLION (P5,000,000.00) Pesos to cover all damages
state the number of cases where the spirals and ties were not carried from the floor level to the (with the exception of attorney's fees) occasioned by the loss of the building (including interest
bottom reinforcement, the Commissioner specified groundfloor columns B-6 and C-5 the first charges and lost rentals) and an additional ONE HUNDRED THOUSAND (P100,000.00) Pesos
one without spirals for 03 inches at the top, and in the latter, there were no spirals for 10 inches as and for attorney's fees, the total sum being payable upon the finality of this decision. Upon
at the bottom. The Commissioner likewise specified the first storey columns where the spacings failure to pay on such finality, twelve (12%) per cent interest per annum shall be imposed upon
were greater than that called for in the specifications to be columns B-5, B-6, C-7, C-6, C-5, D-5 afore-mentioned amounts from finality until paid. Solidary costs against the defendant and third-
and B-7. The objection to the failure of the Commissioner to specify the number of columns party defendants (except Roman Ozaeta).
where there was lack of proper length of splicing of spirals, the Commissioner mentioned
groundfloor columns B-6 and B-5 where all the splices were less than 1-1/2 turns and were not
welded, resulting in some loss of strength which could be critical near the ends of the columns. SO ORDERED.
He answered the supposition of the defendants that the spirals and the ties must have been
looted, by calling attention to the fact that the missing spirals and ties were only in two out of the
25 columns, which rendered said supposition to be improbable.

The Commissioner conceded that the hollow in column A-4, second floor, did not aggravate or
contribute to the damage, but averred that it is "evidence of poor construction." On the claim that
the eccentricity could be absorbed within the factor of safety, the Commissioner answered that,
while the same may be true, it also contributed to or aggravated the damage suffered by the
building.
G.R. No. 135645 March 8, 2002 by substantial evidence are persuasive, considering that said administrative body is an expert in
matters concerning marine casualties.
THE PHILIPPINE AMERICAN GENERAL INSURANCE CO., INC., petitioner,
vs.
MGG MARINE SERVICES, INC. and DOROTEO GAERLAN, respondents.
KAPUNAN, J.:
Common Carriers;; Owing to the high degree of diligence required of them, common carriers,
as a general rule, are presumed to have been at fault or negligent if the goods transported by them
This petition for review seeks the reversal of the Decision, dated September 23, 1998, of the
are lost, destroyed or if the same deteriorated.—Common carriers, from the nature of their 1
Court of Appeals in CA-G.R. CV No. 43915, which absolved private respondents MCG Marine
business and for reasons of public policy, are mandated to observe extraordinary diligence in the
Services, Inc. and Doroteo Gaerlan of any liability regarding the loss of the cargo belonging to
vigilance over the goods and for the safety of the passengers transported by them. Owing to this
San Miguel Corporation due to the sinking of the M/V Peatheray Patrick-G owned by Gaerlan
high degree of diligence required of them, common carriers, as a general rule, are presumed to
with MCG Marine Services, Inc. as agent.
have been at fault or negligent if the goods transported by them are lost, destroyed or if the same
deteriorated.
On March 1, 1987, San Miguel Corporation insured several beer bottle cases with an aggregate
2
Same;; In order that a common carrier may be absolved from liability where the loss, value of P5,836,222.80 with petitioner Philippine American General Insurance Company. The
destruction or deterioration of the goods is due to a natural disaster or calamity, it must further be cargo were loaded on board the M/V Peatheray Patrick-G to be transported from Mandaue City
shown that such natural disaster or calamity was the proximate and only cause of the loss;; Even to Bislig, Surigao del Sur.
in cases where a natural disaster is the proximate and only cause of the loss, a common carrier is
still required to exercise due diligence to prevent or minimize loss before, during and after the After having been cleared by the Coast Guard Station in Cebu the previous day, the vessel left
occurrence of the natural disaster, for it to be exempt from liability under the law for the loss of the the port of Mandaue City for Bislig, Surigao del Sur on March 2, 1987. The weather was calm
goods.—In order that a common carrier may be absolved from liability where the loss, destruction
when the vessel started its voyage.
or deterioration of the goods is due to a natural disaster or calamity, it must further be shown that
such natural disaster or calamity was the proximate and only cause of the loss;; there must be “an
entire exclusion of human agency from the cause of the injury or the loss.” Moreover, even in The following day, March 3, 1987, M/V Peatheray Patrick-G listed and subsequently sunk off
cases where a natural disaster is the proximate and only cause of the loss, a common carrier is Cawit Point, Cortes, Surigao del Sur. As a consequence thereof, the cargo belonging to San
still required to exercise due diligence to prevent or minimize loss before, during and after the Miguel Corporation was lost.
occurrence of the natural disaster, for it to be exempt from liability under the law for the loss of the
goods. If a common carrier fails to exercise due diligence—or that ordinary care which the
Subsequently, San Miguel Corporation claimed the amount of its loss from petitioner.
circumstances of the particular case demand—to preserve and protect the goods carried by it on
the occasion of a natural disaster, it will be deemed to have been negligent, and the loss will not
be considered as having been due to a natural disaster under Article 1734(1). Upon petitioner's request, on March 18, 1987, Mr. Eduardo Sayo, a surveyor from the Manila
Adjusters and Surveyors Co., went to Taganauan Island, Cortes, Surigao del Sur where the
Same;; Words and Phrases;; A fortuitous event has been defined as one which could not be vessel was cast ashore, to investigate the circumstances surrounding the loss of the cargo. In
foreseen, or which though foreseen, is inevitable.—The findings of the Board of Marine Inquiry his report, Mr. Sayo stated that the vessel was structurally sound and that he did not see any
indicate that the attendance of strong winds and huge waves while the M/V Peatheray Patrick-G damage or crack thereon. He concluded that the proximate cause of the listing and subsequent
was sailing through Cortes, Surigao del Norte on March 3, 1987 was indeed fortuitous. A fortuitous sinking of the vessel was the shifting of ballast water from starboard to portside. The said shifting
event has been defined as one which could not be foreseen, or which though foreseen, is of ballast water allegedly affected the stability of the M/V Peatheray Patrick-G.
inevitable. An event is considered fortuitous if the following elements concur: x x x (a) the cause
of the unforeseen and unexpected occurrence, or the failure of the debtor to comply with his Thereafter, petitioner paid San Miguel Corporation the full amount of P5,836,222.80 pursuant to
obligations, must be independent of human will;; (b) it must be impossible to foresee the event the terms of their insurance contract.1âwphi1.nêt
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 On November 3, 1987, petitioner as subrogee of San Miguel Corporation filed with the Regional
resulting to the creditor. x x x Trial Court (RTC) of Makati City a case for collection against private respondents to recover the
amount it paid to San Miguel Corporation for the loss of the latter's cargo.
Same;; Ships and Shipping;; Administrative Law;; Board of Marine Inquiry;; The Court of
Appeals did not commit any error in relying on the factual findings of the Board of Marine Inquiry, Meanwhile, the Board of Marine Inquiry conducted its own investigation of the sinking of the M/V
considering that said administrative body is an expert in matters concerning marine casualties.— Peatheray Patrick-G to determine whether or not the captain and crew of the vessel should be
Although the Board of Marine Inquiry ruled only on the administrative liability of the captain and 3
held responsible for the incident. On May 11, 1989, the Board rendered its decision exonerating
crew of the M/V Peatheray Patrick-G, it had to conduct a thorough investigation of the the captain and crew of the ill-fated vessel for any administrative liability. It found that the cause
circumstances surrounding the sinking of the vessel and the loss of its cargo in order to determine of the sinking of the vessel was the existence of strong winds and enormous waves in Surigao
their responsibility, if any. The results of its investigation as embodied in its decision on the del Sur, a fortuitous event that could not have been for seen at the time the M/V Peatheray
administrative case clearly indicate that the loss of the cargo was due solely to the attendance of Patrick-G left the port of Mandaue City. It was further held by the Board that said fortuitous event
strong winds and huge waves which caused the vessel to accumulate water, tilt to the port side was the proximate and only cause of the vessel's sinking.
and to eventually keel over. There was thus no error on the part of the Court of Appeals in relying
on the factual findings of the Board of Marine Inquiry, for such factual findings, being supported
On April 15, 1993, the RTC of Makati City, Branch 134, promulgated its Decision finding private (4) The character of the goods or defects in the packing or in the containers;;
respondents solidarily liable for the loss of San Miguel Corporation's cargo and ordering them to
pay petitioner the full amount of the lost cargo plus legal interest, attorney's fees and costs of
4 (5) Order or act of competent public authority.
suit.
In order that a common carrier may be absolved from liability where the loss, destruction or
Private respondents appealed the trial court's decision to the Court of Appeals. On September
deterioration of the goods is due to a natural disaster or calamity, it must further be shown that
23, 1998, the appellate court issued the assailed Decision, which reversed the ruling of the RTC. 9
the such natural disaster or calamity was the proximate and only cause of the loss;; there must
It held that private respondents could not be held liable for the loss of San Miguel Corporation's 10
be "an entire exclusion of human agency from the cause of the injury of the loss."
cargo because said loss occurred as a consequence of a fortuitous event, and that such
5
fortuitous event was the proximate and only cause of the loss.
Moreover, even in cases where a natural disaster is the proximate and only cause of the loss, a
common carrier is still required to exercise due diligence to prevent or minimize loss before,
Petitioner thus filed the present petition, contending that:
during and after the occurrence of the natural disaster, for it to be exempt from liability under the
11
law for the loss of the goods. If a common carrier fails to exercise due diligence--or that
12
(A) ordinary care which the circumstances of the particular case demand -- to preserve and protect
the goods carried by it on the occasion of a natural disaster, it will be deemed to have been
negligent, and the loss will not be considered as having been due to a natural disaster under
IN REVERSING AND SETTING ASIDE THE DECISION OF RTC BR. 134 OF
Article 1734 (1).
MAKATI CITY ON THE BASIS OF THE FINDINGS OF THE BOARD OF MARINE
INQUIRY, APPELLATE COURT DECIDED THE CASE AT BAR NOT IN ACCORD
WITH LAW OR WITH THE APPLICABLE DECISIONS OF THE HONORABLE In the case at bar, the issues may be narrowed down to whether the loss of the cargo was due
COURT;; to the occurrence of a natural disaster, and if so, whether such natural disaster was the sole and
proximate cause of the loss or whether private respondents were partly to blame for failing to
exercise due diligence to prevent the loss of the cargo.
(B)
The parties do not dispute that on the day the M/V Peatheray Patrick-G sunk, said vessel
IN REVERSING THE TRIAL COURT'S DECISION, THE APPELLATE COURT
encountered strong winds and huge waves ranging from six to ten feet in height. The vessel
GRAVELY ERRED IN CONTRADICTING AND IN DISTURBING THE FINDINGS OF
listed at the port side and eventually sunk at Cawit Point, Cortes, Surigao del Sur.
THE FORMER;;
The Court of Appeals, citing the decision of the Board of Marine Inquiry in the administrative
(C)
case against the vessel's crew (BMI--646-87), found that the loss of the cargo was due solely to
the existence of a fortuitous event, particularly the presence of strong winds and huge waves at
THE APPELLATE COURT GRAVELY ERRED IN REVERSING THE DECISION OF Cortes, Surigao del Sur on March 3, 1987:
6
THE TRIAL COURT AND IN DISMISSING THE COMPLAINT.
x x x
Common carriers, from the nature of their business and for reasons of public policy, are
mandated to observe extraordinary diligence in the vigilance over the goods and for the safety of
7 III. WHAT WAS THE PROXIMATE CAUSE OF SINKING?
the passengers transported by them. Owing to this high degree of diligence required of them,
common carriers, as a general rule, are presumed to have been at fault or negligent if the goods
8
transported by them are lost, destroyed or if the same deteriorated. Evidence shows that when "LCT Peatheray Patrick-G" left the port of Mandawe, Cebu
for Bislig, Surigao del Sur on March 2, 1987 the Captain had observed the fair
atmospheric condition of the area of the pier and confirmed this good weather
However, this presumption of fault or negligence does not arise in the cases enumerated under
condition with the Coast Guard Detachment of Mandawe City. However, on March 3,
Article 1734 of the Civil Code:
1987 at about 10:00 o'clock in the evening, when the vessel had already passed
Surigao Strait. the vessel started to experience waves as high as 6 to 7 feet and that
Common carriers are responsible for the loss, destruction, or deterioration of the the Northeasterly wind was blowing at about five (5) knot velocity. At about 11:00
goods, unless the same is due to any of the following causes only: o'clock P.M. when the vessel was already about 4.5 miles off Cawit Point, Cortes,
Surigao del Sur, the vessel was discovered to be listing 15 degrees to port side and
that the strength of the wind had increased to 15 knots and the waves were about ten
(1) Flood, storm, earthquake, lightning or other natural disaster or calamity;; (10) feet high [Ramilo TSN 10-27-87 p. 32). Immediately thereafter, emergency
measures were taken by the crew. The officers had suspected that a leak or crack
(2) Act of the public enemy in war, whether international or civil;; might had developed at the bottom hull particularly below one or two of the empty
wing tanks at port side serving as buoyancy tanks resulting in ingress of sea water in
the tanks was confirmed when the Captain ordered to use the cargo pump. The
(3) Act or omission of the shipper or owner of the goods;; suction valves to the said tanks of port side were opened in order to suck or draw out
any amount of water that entered into the tanks. The suction pressure of the pump
had drawn out sea water in large quantity indicating therefore, that a leak or crack had
developed in the hull as the vessel was continuously batted and pounded by the huge 2588-86 issued by the Philippine coast Guard on December 5, 1986 which expired on
waves. Bailing out of the water through the pump was done continuously in an effort of November 8, 1987.
the crew to prevent the vessel from sinking. but then efforts were in vain. The vessel
still continued to list even more despite the continuous pumping and discharging of
LCT Peatheray Patrick-G was skippered by Mr. Manuel P. Ramilo, competent and
sea water from the wing tanks indicating that the amount of the ingress of sea water
experienced licensed Major Patron who had been in command of the vessel for more
was greater in volume that that was being discharged by the pump. Considering
than three (3) years from July 1984 up to the time of sinking March 3, 1987. His Chief
therefore, the location of the suspected source of the ingress of sea water which was
Mate Mr. Mariano Alalin also a licensed Major Patron had been the Chief Mate of "
a crack or hole at the bottom hull below the buoyancy tank's port side which was not
LCT Peatheray Patrick-G" for one year and three months at the time of the accident.
accessible (sic) for the crew to check or control the flow of sea water into the said
Further Chief Mate Alalin had commanded a tanker vessel named M/T Mercedes of
tank. The accumulation of sea water aggravated by the continuous pounding, rolling
MGM Corporation for almost two (2) years from 1983-1985 (Alalin TSN-4-13-88 pp.
and pitching of the vessel against huge waves and strong northeasterly wind, the
13 32-33).
Captain then had no other recourse except to order abandonship to save their lives.
That the vessel was granted SOLAS clearance by the Philippine Coast Guard on
The presence of a crack in the ill-fated vessel through which water seeped in was confirmed by
March 1, 1987 to depart from Mandawe City for Bislig, Surigao del Sur as evidenced
the Greutzman Divers who were commissioned by the private respondents to conduct an
by a certification issued to D.C. Gaerlan Oil Products by Coast Guard Station Cebu
underwater survey and inspection of the vessel to determine the cause and circumstances of its
dated December 23, 1987.1âwphi1.nêt
sinking. In its report, Greutzman Divers stated that "along the port side platings, a small hole and
14
two separate cracks were found at about midship."
Based on the foregoing circumstances, "LCT Peatheray Patrick-G" should be
considered seaworthy vessel at the time she undertook that fateful voyage on March
The findings of the Board of Marine Inquiry indicate that the attendance of strong winds and
2, 1987.
huge waves while the M/V Peatheray Patrick-G was sailing through Cortes, Surigao del Norte on
March 3, 1987 was indeed fortuitous. A fortuitous event has been defined as one which could
15
not be foreseen, or which though foreseen, is inevitable. An event is considered fortuitous if the To be seaworthy, a vessel must not only be staunch and fit in the hull for the voyage
following elements concur: to be undertaken but also must be properly equipped and for that purpose there is a
duty upon the owner to provide a competent master and a crew adequate in number
and competent for their duty and equals in disposition and seamanship to the ordinary
xxx (a) the cause of the unforeseen and unexpected occurrence, or the failure of the
in that calling. (Ralph 299 F-52, 1924 AMC 942). American President 2td v. Ren Fen
debtor to comply with his obligations, must be independent of human will;; (b) it must 17
Fed 629. AMC 1723 LCA 9 CAL 1924).
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 Overloading was also eliminated as a possible cause of the sinking of the vessel, as the
obligor must be free from any participation in the aggravation of the injury resulting to evidence showed that its freeboard clearance was substantially greater than the authorized
16 18
the creditor. xxx freeboard clearance.
In the case at bar, it was adequately shown that before the M/V Peatheray Patrick-G left the port Although the Board of Marine Inquiry ruled only on the administrative liability of the captain and
of Mandaue City, the Captain confirmed with the Coast Guard that the weather condition would crew of the M/V Peatheray Patrick-G, it had to conduct a thorough investigation of the
permit the safe travel of the vessel to Bislig, Surigao del Sur. Thus, he could not be expected to circumstances surrounding the sinking of the vessel and the loss of its cargo in order to
have foreseen the unfavorable weather condition that awaited the vessel in Cortes, Surigao del determine their responsibility, if any. The results of its investigation as embodied in its decision
Sur. It was the presence of the strong winds and enormous waves which caused the vessel to on the administrative case clearly indicate that the loss of the cargo was due solely to the
list, keel over, and consequently lose the cargo contained therein. The appellate court likewise attendance of strong winds and huge waves which caused the vessel accumulate water, tilt to
found that there was no negligence on the part of the crew of the M/V Peatheray Patrick-G, the port side and to eventually keel over. There was thus no error on the part of the Court of
citing the following portion of the decision of the Board of Marine Inquiry: Appeals in relying on the factual findings of the Board of Marine Inquiry, for such factual findings,
being supported by substantial evidence are persuasive, considering that said administrative
19
body is an expert in matters concerning marine casualties.
I. WAS LCT PEATHERAY PATRICK-G SEAWORTHY WHEN SHE LEFT THE PORT
OF MANDAWE, CEBU AND AT THE TIME OF SINKING?
Since the presence of strong winds and enormous waves at Cortes, Surigao del Sur on March 3,
1987 was shown to be the proximate and only cause of the sinking of the M/V Peatheray
Evidence clearly shows that the vessel was propelled with three (3) diesel engines of
Patrick-G and the loss of the cargo belonging to San Miguel Corporation, private respondents
250 BHP each or a total of 750 BHP. It had three (3) propellers which were operating
cannot be held liable for the said loss.
satisfactorily from the time the vessel left the port of Mandawe up to the time when the
hull on the double bottom tank was heavily floaded (sic) by uncontrollable entry of sea
water resulting in the stoppage of engines. The vessel was also equipped with WHEREFORE, the assailed Decision of the Court of Appeals is hereby AFFIRMED and the
operating generator pumps for emergency cases. This equipment was also operating petition is hereby DENIED.
satisfactorily up to the time when the engine room was heavily floaded (sic) with sea
water. Further, the vessel had undergone emergency drydocking and repair before the
SO ORDERED.
accident occurred (sic) on November 9, 1986 at Trigon Shipyard, San Fernando, Cebu
as shown by the billing for the Drydocking and Repair and certificate of Inspection No.

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[G.R. NO. 147324 : May 25, 2004] TINGA, J.

ENGINEERING CONSTRUCTION, INC., petitioner,

On August 4, 1964, plaintiff Engineering Construction, Inc., being a

O. Pythogoras Oliver for respondents.

ASSIGNMENT OF ERRORS

HON. LEO D. MEDIALDEA and SANTIAGO A. GUERRERO, respondents.

(1) Wrongful and defective placing of reinforcing bars.

(9) Column A3 — Lack of lateral ties,

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