1. SSS vs. Moonwalk Devt. and Housing Corp.

,
Facts:
1. Plaintiff (SSS) approved the application of the defendant (Moonwalk) for an interim loan.
2. The loan was released to the Moonwalk.
3. Moonwalk made a payment to SSS for the loan principal released to it.
4. The last payment made by Moonwalk was based on the Statement of Account prepared by the
SSS.
5. After the settlement of the account, SSS issued to Moonwalk the Release of Mortgage of
Moonwalk’s mortgaged properties.
6. In the letters to Moonwalk, SSS alleged that it committed an honest mistake in releasing
Moonwalk (in the mortgage).
7. Moonwalk replied in a letter that it had completely paid its obligations to SSS.
Issue/s:
1. Whether or not the 12% penalty demandable even after the extinguishment of the principal
obligation
2. Whether or not Moonwalk was in default (mora)
Ruling:
1. No. Obligation was already extinguished by the payment by Moonwalk of its indebtedness to SSS
and by the latter’s act of cancelling the real estate mortgages executed in its favor by defendant
moonwalk.
What is sought to be recovered in this case is not the 12% interest on the loan but the 12% penalty for
failure to pay on time the amortization. What is sought to be enforced therefore is a penal clause of the
contract entered into between the parties.
 Penal clause is an accessory obligation which the parties attach to a principal obligation for the purpose
of insuring the performance thereof by imposing on the debtor a special presentation in case the
obligation is not fulfilled or is irregularly or inadequately fulfilled. Accessory obligation is dependent for
its existence on the existence of a principal obligation. In the present case, the principal obligation is the
loan between the parties. The accessory obligation of a penal clause is to enforce the main obligation of
payment of the loan. If therefore the principal obligation does not exist the penalty being accessory cannot
exist.
2. No. A penalty is demandable in case of non performance or late performance of the main
obligation. There must be a breach of the obligation either by total or partial non fulfillment or
there is non-fulfillment in the point of time which is called mora or delay. There is no mora or
delay unless there is a demand.
In the present case, during all the period when the principal obligation was still subsisting, although there
was late amortizations there was no demand made by the creditor, for the payment of the penalty.
Therefore up to the time of the letter of SSS there was no demand for the payment of the penalty, hence
the debtor was no in mora in the payment of the penalty.
SSS issued its statement of account showing total obligation of Moonwalk, and forthwith demanded
payment from Moonwalk. Because of the demand for payment, Moonwalk made a complete payment of
its obligation. Because of this payment the obligation of Moonwalk was considered extinguished, and
pursuant to said extinguishment, the real estate mortgages given by Moonwalk were released. For all
purposes therefor the principal obligation of Moonwalk was deemed extinguished as well as the accessory
obligation of real estate mortgages.
The demand for payment of the penal clause made by SSS in its demand letter (November 28, 1989) are
therefore ineffective as there was nothing to demand. If the demand for the payment of the penalty was
made prior to the extinguishment because then the obligation of Moonwalk would consist of (1) principal
obligation, (2) an interest of 12% on the principal obligation, and (3) the penalty of 12% for the late
payment for after demand.
Moonwalk is not in default since there was no mora prior to the demand.
2.RCBC VS. CA
Facts: In March 1991, private respondent Atty. Felipe Lustre purchased a Toyota Corolla. He made a
down payment of P164,620.00, the balance of which was to be paid in 24 equal monthly installments
thru RCBC as the financing agent. He issued 24 postdated checks in the amount of P14,976.00 each. All
the checks were thereafter encashed and debited from private respondent's account, except for the check
representing the payment for August 1991 which was unsigned and because of which the amount
representing it was recalled and re-credited to private respondent's account. Because  of the recall, the last
two checks dated February 10, 1993 and March 10, 1993 were no longer presented for payment,
purportedly in conformity with petitioner bank's procedure. It demanded payment of the balance
including liquidated damages, but private respondent refused to pay, prompting petitioner to file an action
for replevin and damages before the RTC. Private respondent in his answer interposed a counterclaim for
damages. The RTC decided against petitioner (plaintiff) and granted the counterclaim of private
respondent for moral and exemplary damages and attorney's fees. The Court of Appeals affirmed the RTC
decision. In its appeal before the Supreme Court, petitioner contended that private respondent's check
representing the fifth installment was "not encashed," such that the installment for August 1991 was not
paid, hence, by virtue of the acceleration clause in the Chattel Mortgage executed by private respondent,
petitioner was justified in treating the entire balance as due and demandable, and despite its demand
private respondent refused to pay. In sum, petitioner imputed delay on private respondents.
Issue:
Ruling: Article 1170 of the Civil Code states that those who in the performance of their obligations are
guilty of delay are liable for damages. The delay in the performance of the obligation, however, must
either be malicious or negligent. Thus, assuming that private respondent was guilty of delay in the
payment of the value of the unsigned check, private respondent can not be held liable for damages. There
is no imputation, much less evidence, that private respondent acted with malice or negligence in failing to
sign the check. If there was omission on his part, such was a mere "inadvertence."
||| (RCBC v. Court of Appeals, G.R. No. 133107, [March 25, 1999], 364 PHIL 947-957)
3. BARZAGA VS. CA
Facts:
Petitioner bought from the hardware store of respondent Alviar of certain materials to be used in the
construction of a niche after he was assured that it will be delivered upon the date agreed upon, December
22. This is in consonance with the wife’s wish to be buried before the Christmas day. However, said
respondent failed thereby delaying likewise the interment of his wife. Petitioner sent a letter for
recompense of the damages he and his family incurred due to the owner of the hardware’s negligence.
Alviar did not respond. Subsequently, petitioner filed a case before the RTC.
Issue:
Whether or not the respondent is guilt of delay.
Ruling:

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

This is clearly a case of non-performance of a reciprocal obligation, as in the contract of purchase and
sale, the petitioner had already done his part, which is the payment of the price. It was incumbent upon
respondent to immediately fulfill his obligation to deliver the goods otherwise delay would attach. An
award of moral damages is incumbent in this case as the petitioner has suffered so much.
4. PANTALEON V. AMERICAN EXPRESS
Facts:
1. The petitioner (Pantaleon) and his family, joined an escorted tour of Western Europe.
2. In Coster Diamond House, Amsterdam, Mrs. Pantaleon (wife) was about to bought a 2.5 karat
diamond brilliant cut, a pendant and a chain, all of which totaled U.S. $13,826.00.
3. To pay these purchases, around 9:15am, Pantaleon presented his American Express Credit Card
together with his passport.
4. By 9:40am, Pantaleon was already worried about further inconveniencing the tour group, he
asked the store clerk to cancel the sale. the store manager though asked him to wait a few more
minutes.
5. Around 10:00am (around 45 minutes after Pantaleon had presented his AmexCard), Coster
decided to release the items even without American Express International, Inc.’s (herein
respondent, Amex for brevity) approval of the purchase. This was 30 minutes after the tour group
was supposed to have left the store.
6. The spouses Pantelon returned. Their offers of apology were met by their tourmates with stony
silence. The tour group’s visible irritation was aggravated when the tour guide announced that the
city tour of Amsterdam was to be canceled due to lack of remaing time. Mrs. Pantaleon ended up
weeping.
7. After the star-crossed tour had ended, the Pantaleon family proceeded to the United States before
returning to Manila. While in the United States, Pantaleon continued to use his AmEx card,
 several times without hassle or delay, but with two other incidents similar to the Amsterdam
brouhaha.
Issue/s:
1. Whether or not Amex was in default or mora.
2. Whether Amex (Credit Card Company) is in mora solvendi or in mora accipiendi.
Ruling:
1. Yes. The Court is convinced that Amex’s delay constituted breach of its contractual obligation to
act on his use of the card abroad “with special handling.:
Notwithstanding the popular notion that credit card purchases are approved “WITHIN SECONDS,” there
really is no strict, legally determinative point of demarcation on how long must it take for a credit car
company to approve or disapprove a customer’s purchase, much less one specifically contracted upon by
the parties. yet this is one of those instances when “you’d know it what you’d see it,” and one hour
appears to be an awfully long, patently unreasonable length of time to approve or disapprove a credit card
purchases. It is long enough time for the customer to walk to a bank a kilometer away, withdraw money
over the counter, and return to the store.
The Credit Authorization System (CAS) record on the Amsterdam transaction shows how Amexco
Netherlands viewed the delay as unusually frustrating. In sequence expressed in Phoenix time from 01:20
when the charge purchased was referred for authorization:
01:22 – the authorization is referred to manila Amexco.
01:32 – Netherlands gives information that the identification of the card member has been presented and
he is buying jewelries worth US $13,826
01:33 – Netherlands asks “How long will this take?”
02:08 – Netherlands is still asking “How long will this take?”
 The Amex has a right to verify whether the credit it is extending upon on a particular purchase was
indeed contracted by the cardholder, and that the cardholder is within his means to make such transaction.
The culpable failure of respondent herein is not the failure to timely approve petitioner’s purchase, but the
more elemental failure to timely act on the same, whether favorably or unfavorably. Even assuming the
respondent’s credit authorizers did not have sufficient basis on hand to make a judgment, we see no
reason why Amex could not have promptly informed petitioner the reason for the delay, and duly advised
him that resolving the same could take some time. In that way, petitioner would have had informed basis
on whether or not to pursue the transaction at Coster, given the attending circumstances. instead,
Pantaleon was left uncomfortably dangling in the chilly autumn winds in a foreign land and soon forced
to confront the wrath of foreign folk.
The delay committed by Amex was clearly attended by unjustified neglect and bad faith, since it alleges
to have consumed more than one hour to simply go over Pantaleon’s pas credit history with Amex, his
payment record and his credit and bank references, when all such data are already stored and readily
available from its computer. There is nothing in Pantaleon’s billing history that would warrant the
imprudent suspension of action by Amex in processing the purchase.
 2. Amex is in mora solvendi. Generally, the relationship between a credit card provided and its card
holder is that of creditor-debtore, with the card company as a the creditor extending loans and
credit to the card holder, who as debtor is obliged to repay the creditor. The relationship already
takes exception to the general rule that as between a bank and its depositors, the bank is deemed
as the debtor while the depositor is considered as the creditor. In the present case, we should shift
perspectives and again see the credit card company as the debtor/obligor, insofar as it has the
obligation to the customer as creditor/obligee to act promptly on its purchases on credit.
If there was delay on the part of Amex in its normal role as creditor to the cardholder, such delay would
not have been in acceptance of the performance of the debtor’s obligation (i.e., the repayment of the
debt), but it would be delay in the extension of the credit in the first place. Such delay would not fall
under mora accipiendi, which contemplates that the obligation of the debtor, such as the actual purchases
on credit has already been instituted. The establishment of the debt itself (purchases on credit of the
jewelry) had not yet been perfected, as it remained pending the approval or consent of the credit card
company
5. LORENZO SHIPPING VS. BJ MARTHEL
Topic: Article 1169 (Delay)
FACTS: From 1987 up to the filling of the case, respondent supplied spare parts to petitioner, a domestic
corporation engaged in coastwise shipping. Sometime in 1989, petitioner asked respondent for a quotation
for various machine parts; on May 31, 1989, respondent provided a quotation which stated, along with the
items and prices, the following: delivery - within 2 months after receipt of firm order, terms- 25% upon
delivery, balance payable in 5 bi-monthly equal and installment[s] not to exceed 90 days. After
approximately 6 months, petitioners issued a purchase order for one set of cylinder liner valued at
P477,000, to be used for M/V Dadiangas Express. In the purchase order, it was indicated that the term of
payment shall be “25% down payment”, but it did not state the date of the cylinder liner's delivery.
Instead of paying the down payment, petitioner issued 10 postdated checks as full payment. On 15
January 1990, petitioner issued another purchase order for another set of cylinder liner, and said purchase
order also did not have delivery date. Respondent encountered issues with the postdated checks as the
first one was dishonored due to insufficiency of funds. After returning the 9 remaining postdated checks
to petitioner, respondent opened a letter of credit and placed an order to its principal supplier in Japan. On
20 April 1990, the two sets of cylinder liners were delivered to petitioner’s warehouse. The payment for
the two cylinder liners remained unsettled, and respondent issued a demand letter to which petitioner
responded by stating that it would only pay P150,000 because of the delay in delivery. Respondent filed a
case because petitioner refused to settle its obligation. Petitioner countered by claiming that time was of
the essence in the delivery of the cylinder liners, and respondent failed to comply with the "within two (2)
months after receipt of firm order" stipulation; thus, there was a cancellation of orders, and the contract
was validly rescinded by petitioner. The trial court ruled in favor of petitioner, but the Court of Appeals
reversed the ruling and held that there was no incurred delay in the delivery of cylinder liners for there
was no demand, judicial or extrajudicial pursuant to Article 1169 of the Civil Code. 67
ISSUES: 1. Whether or not respondent incurred delay in performing its obligation under the contract of
sale 2. Whether or not said contract was validly rescinded by petitioner.
HELD: 1. No, the respondent did not incur delay. The Court held that time is not of the essence in the
contract, as inferred from the lack of delivery date in both purchase orders issued by petitioner.
Furthermore, the petitioner did not advise the respondent of the target date of maintenance of M/V
Dadiangas Express which was supposed to be on the later part of December 1989 to early January 1990.
The Court reiterated its ruling in Smith, Bell & Co., Ltd. v. Matti which stated that “[w]hen the time of
delivery is not fixed or is stated in general and indefinite terms, time is not of the essence of the
contract…” In such cases, the delivery must be made within a reasonable time in the absence of any
showing that an immediate delivery was intended. The Court held that respondent’s delivery of the
cylinder liners were considered as “within reasonable time” given that the principal supplier was in Japan,
and the respondent was facing volume of work. 2. No, the Supreme Court held that "[e]ven where time is
of the essence, a breach of the contract in that respect by one of the parties may be waived by the other
party's subsequently treating the contract as still in force." Petitioner, despite claiming that it had already
considered the orders cancelled and the contract rescinded, still received the cylinder liners delivered to
its warehouse which shows that the contract was still considered as subsisting up to that point. The Court
stated that if petitioner cancelled the order, it had no reason to receive said delivery and by receiving said
cylinders, “petitioner indisputably waived the claimed delay in the delivery of said items.”
6. SOLAR HARVEST VS. DAVAO CORRUGATED
FACTS: In the first quarter of 1998, petitioner Solar Harvest Inc entered into an agreement, albeit not
formalized in writing, with respondent Davao Corrugated Carton Corporation, for the purchase of
corrugated carton boxes specifically designed for use of petitioner’s business of exporting bananas, at US
$1.10 each. The petitioner deposited US$40,150.00 as full payment in respondent’s US Dollar Savings
Account with Westmount Bank to get production underway. However, no delivery of the boxes was
made. As such, petitioner wrote a demand letter to respondent, asking for reimbursement of the deposit
made, to which the respondent replied that the boxes had been completed beforehand and that petitioner
failed to pick up the boxes from their warehouse as agreed upon. Further, respondent also mentioned that
petitioner placed an additional order of 24,000 boxes. 14,000 of those boxes were manufactured without
initial deposit from petitioner. Respondent then demanded for the petitioner to pay for the costs of the
additional boxes and storage fees as well as for the petitioner to remove the boxes from their warehouse.
Petitioner then filed for a Complaint for sum of money and damages against respondent, averring that the
parties agreed that the boxes will be delivered within 30 days from payment but respondent failed to
manufacture and deliver boxes within such time, and that despite repeated follow-up, the defendant would
only show sample boxes and make repeated promises as to the delivery of the boxes. Respondents again
denied such, and averred that the petitioner’s representative, Bobby Que, went to the factory once and
saw that the boxes were ready for pickup, and then visited again and advised respondent to sell the boxes
to recoup the costs of the additional boxes because the petitioner’s shipment of bananas to China did not
materialize. During the trial, Que testified that he ordered the boxes and deposited the money as payment.
When he visited the factory, he saw that the boxes had no logo. He then asked his partner Alfred Ong to
cancel the order as it was too late to deliver shipments to China. The ship from Chinese company China
Food Zero did not proceed to get the bananas, and at the time, the bananas from Tagum Agricultural
Development Corporation were already there. Bienvenido Estanislao testified for the respondent and said
that he met Que when the latter was visiting the factory to get samples of the boxes. Que told him that he
cannot pick the boxes up because the ship from the Chinese company, China Food Zero, did not arrive.
Jaime Tan, President of respondent company, also testified to such as being the reason why the boxes
were not picked up. Both the RTC and the CA on appeal denied the petition.
ISSUE: Whether or not petitioner may claim reimbursements from respondent because of the delay in the
fulfillment of obligation 117
HELD: No. Without a previous demand for the fulfillment of the obligation, as is evident in the instant
petition when Que only made ‘follow-ups’ and not ‘demands’, petitioner would not have a cause for
rescission against respondent as the latter would not yet be considered in breach of contractual
obligations. The claim for reimbursement by petitioner is actually one for rescission or resolution of
contract, governed by Article 1191 of the Civil Code. The right to rescind a contract arises once the party
defaults in the performance of his obligation. This must be taken in conjunction with Article 1169. In
reciprocal obligations, as in a contract of sale, the general rule is that the fulfillment of the parties’
respective obligations should be simultaneous. However, when different dates are set for the performance
of the obligations, the default for each must be determined according to the first paragraph of 1169. Thus,
the party would incur in delay only from the moment the other party demands fulfillment of the
obligation. Demand would be necessary upon the obligee in such cases before the obligor can be
considered in default and before a cause of action for rescission will accrue.
Notes: In reciprocal obligations, as in a contract of sale, the general rule is that the fulfillment of the
parties' respective obligations should be simultaneous. Hence, no demand is generally necessary because,
once a party fulfills his obligation and the other party does not fulfill his, the latter automatically incurs in
delay. But when different dates for performance of the obligations are fixed, the default for each
obligation must be determined by the rules given in the first paragraph of the present article, 19 that is, the
other party would incur in delay only from the moment the other party demands fulfillment of the
former's obligation. Thus, even in reciprocal obligations, if the period for the fulfillment of the obligation
is fixed, demand upon the obligee is still necessary before the obligor can be considered in default and
before a cause of action for rescission will accrue.
7. CATHAY PACIFIC AIRWAYS, LTD. vs. SPOUSES DANIEL VAZQUEZ and MARIA LUISA
MADRIGAL VAZQUEZ
Topic: Article 1171
FACTS: Cathay is a common carrier engaged in the business of transporting passengers and goods by
air. As part of its marketing strategy, Cathay accords its frequent flyers membership in its Marco Polo
Club. The members enjoy several privileges, such as priority for upgrading of booking without any extra
charge whenever an opportunity arises. Thus, a frequent flyer booked in the Business Class has priority
for upgrading to First Class if the Business Class Section is fully booked. Respondent-spouses Dr. Daniel
Earnshaw Vazquez and Maria Luisa Madrigal Vazquez together with two friends went to Hong Kong for
business and pleasure. On their return flight to Manila, they were booked on Cathay Pacific’s flight CX-
905. Upon boarding, Dr. Vazquez was informed by ground attendant Ms. Chiu that they were being
upgraded to First Class from Business Class because Business Class was fully booked. Dr. Vazquez
refused the upgrade, explaining that it would not look good for them as hosts to travel in First Class while
their guests remained in the Business Class section. Moreover, they were going to discuss business
matters during the flight. He also told Ms. Chiu that she could have other passengers transferred to the
First Class Section instead of them. Ms. Chiu informed them that since they were Marco Polo Club
members they are priority to be upgraded to First Class. Dr. Vazquez continued to refuse, so Ms. Chiu
told them that if they would not avail of the privilege, they would not be allowed to take the flight.
Eventually, Dr. Vazquez gave in and proceeded to the First Class.
ISSUE: Whether or not the upgrading of booking of Sps. Vazquez was tainted with fraud or bad faith.
HELD: No. The Supreme Court are not, however, convinced that the upgrading or the breach of contract
was attended by fraud or bad faith. The Court finds no persuasive proof of fraud or bad faith in this case.
The Vazquezes were not induced to agree to the upgrading through insidious words or deceitful
machination or through willful concealment of material facts. Upon boarding, Ms. Chiu told the
Vazquezes that their accommodations were upgraded to First Class in view of their being Gold Card
members of Cathays Marco Polo Club. She was honest in telling them that their seats were already given
to other passengers and the Business Class Section was fully booked. Ms. Chiu might have failed to
consider the remedy of offering the First Class seats to other passengers. But, the Court finds no bad faith
in her failure to do so, even if that amounted to an exercise of poor judgment.
8. MANILA ELECTRIC COMPANY, Petitioner,
vs. MATILDE MACABAGDAL RAMOY, BIENVENIDO RAMOY, ROMANA RAMOY-
RAMOS, ROSEMARIE RAMOY, OFELIA DURIAN and CYRENE PANADO, Respondents
FACTS: In the year 1987, the National Power Corporation (NPC) filed with the MTC Quezon City a
case for ejectment against several persons allegedly illegally occupying its properties in Baesa, Quezon
City. among the defendants in the ejectment case was Leoncio Ramoy, one of the plaintiffs in the case at
bar. On April 28, 1989 the MTC rendered judgment for MERALCO to demolish or remove the building
and structure they built on the land of the plaintiff and to vacate the premises. On June 20, 1999 NPC
wrote to MERALCO requesting the immediate disconnection of electric power supply to all residential
and commercial establishments beneath the NPC transmission lines along Baesa, Quezon City.
In a letter dated August 17, 1990 MERALCO requested NPC for a joint survey to determine all the
establishments which are considered under NPC property. In due time, the electric service connection of
the plaintiffs was disconnected. During the ocular inspection ordered by the Court, it was found out that
the residence of the plaintiffs-spouses was indeed outside the NPC property.
ISSUES: (1) WON the Court of Appeals gravely erred when it found MERALCO negligent when
it disconnected the subject electric service of respondents.
(2) WON the Court of Appeals gravely erred when it awarded moral and exemplary damages and
attorney’s fees against MERALCO under the circumstances that the latter acted in good faith in
the disconnection of the electric services of the respondents.
RULING:

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

(2) No. MERALCO willfully caused injury to Leoncio Ramoy by withholding from him and his tenants
the supply of electricity to which they were entitled under the Service Contract. This is contrary to public
policy because, MERALCO, being a vital public utility, is expected to exercise utmost care and diligence
i the performance of its obligation. Thus, MERALCO’s failure to exercise utmost care and diligence in
the performance of its obligation to Leoncio Ramoy is tantamount to bad faith. Leoncio Ramoy testified
that he suffered wounded feelings because of MERALCO’s actions. Furthermore, due to the lack of
power supply, the lessees of his four apartments on subject lot left the premises. Clearly, therefore
Leoncio Ramoy is entitled to moral damages in the amount awarded by the CA. Nevertheless, Leoncio is
the sole person entitled to moral damages as he is the only who testified on the witness stand of his
wounded feelings. Pursuant to Article 2232 of the Civil Code, exemplary damages cannot be awarded as
MERALCO’s acts cannot be considered wanton, fraudulent, reckless, oppressive or malevolent. Since the
Court does not deem it proper to award exemplary damages in this case then the CA’s award of attorney’s
fees should likewise be deleted, as pursuant to Article 2208 of the Civil Code of which the grounds were
not present.
Notes: The effect of every infraction is to create a new duty, that is, to make recompense to the one who
has been injured by the failure of another to observe his contractual obligation unless he can show
extenuating circumstances, like proof of his exercise of due diligence . . . or of the attendance of
fortuitous event, to excuse him from his ensuing liability.
9. AREOLA VS COURT OF APPEALS
Topic: Article 1191 (Rescission)
FACTS: Santos Areola, a lawyer from Dagupan City, availed of a Personal Accident Insurance Policy
from Prudential, but seven months after the issuance of the policy, On June 29, 1985, Prudential
unilaterally cancelled the policy because company records revealed that Areola failed to pay his
premiums. A few days later, however, Prudential found out that Areola actually paid the premiums and
that the branch manager, Teofilo Malapit, failed to remit them. Thus, Prudential offered to reinstate the
policy and even proposed to extend its lifetime to December 17, 1985. Areola filed a suit for breach of
contract and damages against Prudential. Obtained from Baguio branch of Prudential, for one year (Nov
1984-Nov 1985), premium of 1470 but total monthly was 1609.5 (doc stamp 110.25, 2% premium tax of
29.4). The policy states that the Statement of Account is not a receipt and an official receipt will be given
after payment but if payment is done through a representative, payor will be given a provisional receipt.
Areola was given provisional receipt but Malapit just failed to remit and therefore Areola received no
official receipt. Areola sent demand letters for immediate reinstatement, bank apologized but did not
immediately reinstate, so he filed the case. The insurance agent was Carlito Ang.
ISSUES: 1) WON Prudential is liable for damages for unilaterally cancelling the policy 2) WON
Prudential's reinstatement of the policy absolved it from damages
HELD: The Court held that the Branch Manager was agent of corporation and the receipt of payment was
well within his authority. Therefore, his receipt of the premiums was, in effect, receipt by the corporation
itself. Thus, Areola fulfilled his obligations under the contract i.e. the payment of premiums. The
cancellation, therefore, was unwarranted and injurious to Areola; that it was perpetrated by the Branch
Manager is not material, a corporation can only act through its individual employees. It must therefore
bear the negligence of the Branch manager in misappropriating the premiums.
10. Tanguilig v. CA
Facts: The parties agreed on the construction of the windmill for a consideration of P60,000.00 with a
one-year-guaranty from the date of completion and acceptance by respondent. Petitioner a down payment
of P30,000.00and an installment payment of P15,000.00, leaving a balance of P15,000.00. On 14 March
1988, due to the refusal and failure of respondent to pay the balance, petitioner filed a complaint to collect
the amount. Respondent denied the claim saying that he had already paid this amount to the San Pedro
General Merchandising Inc. (SPGMI) which constructed the deep well to which the windmill system was
to be connected. The balance of P15,000.00 should be offset by the defects in the windmill system which
caused the structure to collapse after a strong wind hit their place. Petitioner contended that the collapse
was attributable toa typhoon, af orce majeure, which relieved him of any liability. The trial court held that
the construction of the deep well was not part of the windmill project. The Court of Appeals reversed the
trial court.
Issue: WON petitioner is liable to reconstruct the windmill after it collapsed.
Held: SC has consistently held that in order for a party to claim exemption from liability by reason of
fortuitous event under Art. 1174 of the Civil Code the event should be the sole and proximate cause of the
loss or destruction of the object of the contract. In Nakpil vs. Court of Appeals,12four (4) requisites must
concur: (a) the cause of the breach of the obligation must be independent of the will of the debtor; (b) the
event must be either unforeseeable or unavoidable; (c) the event must be such as to render it impossible
for the debtor to fulfill his obligation in a normal manner; and, (d) the debtor must be free from any
participation in or aggravation of the injury to the creditor. Petitioner failed to show that the collapse of
the windmill was due solely to a fortuitous event. But a strong wind in this case cannot be fortuitous —
unforeseeable nor unavoidable. On the contrary, a strong wind should be present in places where
windmills are constructed, otherwise the windmills will not turn. When the wind mill failed to function
properly it became incumbent upon petitioner to institute the proper repairs in accordance with the
guaranty stated in the contract. It is petitioner who should bear the expenses for the reconstruction ofthe
windmill. Article 1167 of the Civil Code is explicit on this point that if a person obliged to do something
fails to do it, the same shall be executed at his cost. Respondent is directed to pay the 15,00.00 balance
with legal interest and petitioner ordered is to "reconstruct subject defective windmill system, in
accordance with the one-year guaranty.
11. NAKPIL & SONS v. CA
To be exempt from liability due to an act of God, the engineer/architect/contractor must not have
been negligent in the construction of the building.
FACTS:
Private respondents – Philippine Bar Association (PBA) – a non-profit organization formed under the
corporation law decided to put up a building in Intramuros, Manila. Hired to plan the specifications of the
building were Juan Nakpil & Sons, while United Construction was hired to construct it. The proposal was
approved by the Board of Directors and signed by the President, Ramon Ozaeta. The building was
completed in 1966.

In 1968, there was an unusually strong earthquake which caused the building heavy damage, which led
the building to tilt forward, leading the tenants to vacate the premises. United Construction took remedial
measures to sustain the building.
PBA filed a suit for damages against United Construction, but United Construction subsequently filed a
suit against Nakpil and Sons, alleging defects in the plans and specifications.

Technical Issues in the case were referred to Mr. Hizon, as a court appointed Commissioner. PBA moved
for the demolition of the building, but was opposed. PBA eventually paid for the demolition after the
building suffered more damages in 1970 due to previous earthquakes. The Commissioner found that there
were deviations in the specifications and plans, as well as defects in the construction of the building.
ISSUE:
Whether or not an act of God (fortuitous event) exempts from liability parties who would otherwise be
due to negligence?
HELD:
Art. 1723 dictates that the engineer/architect and contractor are liable for damages should the building
collapse within 15 years from completion.

Art. 1174 of the NCC, however, states that no person shall be responsible for events, which could not be
foreseen. But to be exempt from liability due to an act of God, the ff must occur:

1) cause of breach must be independent of the will of the debtor

2) event must be unforeseeable or unavoidable
3) event must be such that it would render it impossible for the debtor to fulfill the obligation
4) debtor must be free from any participation or aggravation of the industry to the creditor.

In the case at bar, although the damage was ultimately caused by the earthquake which was an act of God,
the defects in the construction, as well as the deviations in the specifications and plans aggravated the
damage, and lessened the preventive measures that the building would otherwise have had.

12. Luzon Stevedoring Corporation vs. Court of Appeals 

(156 SCRA 169) 

Facts: A maritime collision occurred between the tanker CAVITE owned by LSCO and MV Fernando
Escano (a passenger ship) owned by Escano, as a result the passenger ship sunk. An action in admiralty
was filed by Escano against Luzon. The trial court held that LSCO Cavite was solely to blame for the
collision and held that Luzon’s claim that its liability should be limited under Article 837 of the Code of
Commerce has not been established. The Court of Appeals affirmed the trial court. The SC also affirmed
the CA. Upon two motions for reconsideration, the Supreme Court gave course to the petition. 

Issue: Whether or not in order to claim limited liability under Article 837 of the Code of Commerce, it is
necessary that the owner abandon the vessel 

Held: Yes, abandonment is necessary to claim the limited liability wherein it shall be limited to the value
of the vessel with all the appurtenances and freightage earned in the voyage. However, if the injury was
due to the ship owner’s fault, the ship owner may not avail of his right to avail of limited liability by
abandoning the vessel. 

The real nature of the liability of the ship owner or agent is embodied in the Code of Commerce. Articles
587, 590 and 837 are intended to limit the liability of the ship owner, provided that the owner or agent
abandons the vessel. Although Article 837 does not specifically provide that in case of collision there
should be abandonment, to enjoy such limited liability, said article is a mere amplification of the
provisions of Articles 587 and 590 which makes it a mere superfluity. 

The exception to this rule in Article 837 is when the vessel is totally lost in which case there is no vessel
to abandon, thus abandonment is not required. Because of such loss, the liability of the owner or agent is
extinguished. However, they are still personally liable for claims under the Workmen’s Compensation
Act and for repairs on the vessel prior to its loss. 

In case of illegal or tortious acts of the captain, the liability of the owner and agent is subsidiary. In such
cases, the owner or agent may avail of Article 837 by abandoning the vessel. But if the injury is caused by
the owner’s fault as where he engages the services of an inexperienced captain or engineer, he cannot
avail of the provisions of Article 837 by abandoning the vessel. He is personally liable for such damages. 

In this case, the Court held that the petitioner is a t fault and since he did not abandon the vessel, he
cannot invoke the benefit of Article 837 to limit his liability to the value of the vessel, all appurtenances
and freightage earned during the voyage.

13. Far East Bank and Trust Company, petitioner

vs Court of Appeals, 

Facts: Luis Luna applied for a far east card issued by far east bank at its Pasig branch. Upon his request,
the bank also issued a supplemental card to private respondent Clarita Luna. Then Clarita lost her credit
card and submitted an affidavit of loss. Later on October 6, 1988 in a restaurant, Luis' credit card was not
honored.

Luis thru a counsel then demanded from far east to pay damages for the humiliation he felt. The vice-
president of the bank expressed bank's apologies to Luis.

Still evidently feeling aggrieved, private respondents, on 05 December 1988, filed a complaint for
damages with the Regional Trial Court ("RTC") of Pasig against FEBTC.
On 30 March 1990, the RTC of Pasig, given the foregoing factual settings, rendered a decision ordering
FEBTC to pay private respondents (a) P300,000.00 moral damages; (b) P50,000.00 exemplary damages;
and (c) P20,000.00 attorney's fees.
On appeal to the Court of Appeals, the appellate court affirmed the decision of the trial court.
Its motion for reconsideration having been denied by the appellate court, FEBTC has come to this Court
with this petition for review.

There is merit in this appeal.

In culpa contractual, moral damages may be recovered where the defendant is shown to have acted in bad
faith or with malice in the breach of the contract. The Civil Code provides:
Art. 2220. Willful injury to property may be a legal ground for awarding moral damages if the court
should find that, under the circumstances, such damages are justly due. The same rule applies to breaches
of contract where the defendant acted fraudulently or in bad faith.

Bad faith, in this context, includes gross, but not simple, negligence. Exceptionally, in a contract of
carriage, moral damages are also allowed in case of death of a passenger attributable to the fault (which is
presumed) of the common carrier.

Issue:
Whether or not quasi-delict is attendant in the case at bar.

Held:
The Court has not in the process overlooked another rule that a quasi-delict can be the cause for breaching
a contract that might thereby permit the application of applicable principles on tort 9 even where there is a
pre-existing contract between the plaintiff and the defendant. This doctrine, unfortunately, cannot
improve private respondents' case for it can aptly govern only where the act or omission complained of
would constitute an actionable tort independently of the contract. The test (whether a quasi-delict can be
deemed to underlie the breach of a contract) can be stated thusly: Where, without a pre-existing contract
between two parties, an act or omission can nonetheless amount to an actionable tort by itself, the fact
that the parties are contractually bound is no bar to the application of quasi-delict provisions to the case.
Here, private respondents' damage claim is predicated solely on their contractual relationship; without
such agreement, the act or omission complained of cannot by itself be held to stand as a separate cause of
action or as an independent actionable tort.

14. Saludaga v. FEU and De Jesus, G.R. No. 179337, 30 April 2008. 

FACTS: Petitioner Joseph Saludaga was a sophomore law student of respondent Far Eastern University
(FEU) when he was shot by Alejandro Rosete (Rosete), one of the security guards on duty at the school
premises on August 18, 1996. Petitioner was rushed to FEU-Dr. Nicanor Reyes Medical Foundation
(FEU-NRMF) due to the wound he sustained. Meanwhile, Rosete was brought to the police station where
he explained that the shooting was accidental. Saludaga  thereafter filed a complaint for damages against
respondents on the ground that they breached their obligation to provide students with a safe and secure
environment and an atmosphere conducive to learning. Respondents, in turn, filed a Third-Party
Complaint against Galaxy Development and Management Corporation (Galaxy), the agency contracted
by respondent FEU to provide security services within its premises and Mariano D. Imperial (Imperial),
Galaxys President, to indemnify them for whatever would be adjudged in favor of petitioner, if any; and
to pay attorneys fees and cost of the suit.
ISSUE#1: What is the source of FEU’s obligation to indemnify Saludaga? What is needed to prove that
this obligation of FEU exists?
ISSUE#2: In the alternative, is FEU vicariously liable under Article 2180 of the Civil Code.
HELD#1: Culpa contractual.
It is settled that in culpa contractual, the mere proof of the existence of the contract and the failure of its
compliance justify, prima facie, a corresponding right of relief. In the instant case, we find that, when
petitioner was shot inside the campus by no less the security guard who was hired to maintain peace and
secure the premises, there is a prima facie showing that respondents failed to comply with its obligation to
provide a safe and secure environment to its students.
HELD#2: NO.
[R]espondents cannot be held liable for damages under Article 2180 of the Civil Code because
respondents are not the employers of Rosete. The latter was employed by Galaxy. The instructions issued
by respondents Security Consultant to Galaxy and its security guards are ordinarily no more than requests
commonly envisaged in the contract for services entered into by a principal and a security agency. They
cannot be construed as the element of control as to treat respondents as the employers of Rosete.
15. Fil-Estate Properties vs. Spouses Ronquillo
FACTS:
                Petitioner Fil-Estate Properties, Inc. is the owner and developer of the Central Park Place Tower
while co-petitioner Fil-Estate Network, Inc. is its authorized marketing agent. Respondent Spouses
Conrado and Maria Victoria Ronquillo purchased from petitioners an 82-square meter condominium unit
for a pre-selling contract price of P5,174,000.00. On 29 August 1997, respondents executed and signed a
Reservation Application Agreement wherein they deposited P200,000.00 as reservation fee. As agreed
upon, respondents paid the full downpayment of P1,552,200.00 and had been paying the P63,363.33
monthly amortizations until September 1998.
                Upon learning that construction works had stopped, respondents likewise stopped paying their
monthly amortization. Claiming to have paid a total of P2,198,949.96 to petitioners, respondents through
two (2) successive letters, demanded a full refund of their payment with interest. When their demands
went unheeded, respondents were constrained to file a Complaint for Refund and Damages before the
Housing and Land Use Regulatory Board (HLURB). Respondents prayed for reimbursement/refund of
P2,198,949.96 representing the total amortization payments, P200,000.00 as and by way of moral
damages, attorney’s fees and other litigation expenses.
                On 13 June 2002, the HLURB in favor of herein respondents. The Arbiter considered
petitioners’ failure to develop the condominium project as a substantial breach of their obligation which
entitles respondents to seek for rescission with payment of damages. The Arbiter also stated that mere
economic hardship is not an excuse for contractual and legal delay.
ISSUES:
1. Whether or not the Asian financial crisis constitute a fortuitous event which would justify delay
by petitioners in the performance of their contractual obligation;
2. Assuming that petitioners are liable, whether or not 12% interest was correctly imposed on the
judgment award
HELD:
FIRST ISSUE: NO
                The Supreme Court held that the Asian financial crisis is not a fortuitous event that would
excuse petitioners from performing their contractual obligation.
                The Court ruled that “we cannot generalize that the Asian financial crisis in 1997 was
unforeseeable and beyond the control of a business corporation. It is unfortunate that petitioner apparently
met with considerable difficulty e.g. increase cost of materials and labor, even before the scheduled
commencement of its real estate project as early as 1995. However, a real estate enterprise engaged in the
pre-selling of condominium units is concededly a master in projections on commodities and currency
movements and business risks. The fluctuating movement of the Philippine peso in the foreign exchange
market is an everyday occurrence, and fluctuations in currency exchange rates happen everyday, thus, not
an instance of caso fortuito.”
SECOND ISSUE: NO
                The Court held that 6% is the proper legal interest rate.
                The resulting modification of the award of legal interest is, also, in line with our recent ruling in
Nacar v. Gallery Frames, embodying the amendment introduced by the Bangko Sentral ng Pilipinas
Monetary Board in BSP-MB Circular No. 799 which pegged the interest rate at 6% regardless of the
source of obligation.
16. Metro Concast Steel Corp., vs. Allied Bank Corp.
Facts:
On various dates and for different amounts, Metro Concast, a corporation duly organized and existing
under and by virtue of Philippine laws and engaged in the business of manufacturing steel, through its
officers obtained several loans from Allied Bank. These loan transactions were covered by a promissory
note and separate letters of credit/trust receipts.
Petitioners failed to settle their obligations under the aforementioned promissory note and trust receipts,
hence, Allied Bank, through counsel, sent them demand letters,20 all dated December 10, 1998, seeking
payment but to no avail. Thus, Allied Bank was prompted to file a complaint for collection of sum of
money against petitioners before the RTC.
The petitioners purported that the economic reverses suffered by the economy and the devaluation of the
peso against the US dollar contributed to the downfall of the steel industry, directly affecting the business
of Metro Concast and eventually leading to its cessation.
Petitioners offered the sale of Metro Concast’s remaining assets, consisting of machineries and
equipment, to Allied Bank, which the latter refused. Instead, Allied Bank advised them to sell the
equipment and apply the proceeds of the sale to their outstanding obligations. Petitioners offered the
equipment for sale, but there were no takers, and it was reduced into scrap metal.
Peakstar Oil Corporation (Peakstar), represented by one Crisanta Camiling (Camiling), expressed interest
in buying the scrap metal. A Memorandum of Agreement dated November 8, 2002 (MoA) was drawn
between Metro Concast, represented by petitioner Jose Dychiao, and Peakstar, through Camiling, under
which Peakstar obligated itself to purchase the scrap metal.
Unfortunately, Peakstar defaulted on all its obligations under the MoA. In this regard, petitioners averred
that their failure to pay their outstanding loan obligations to Allied Bank must be considered as force
majeure, and therefore extinguished.
Issue:
Whether or not the loan obligations incurred by the petitioners under the subject promissory note and
various trust receipts have already been extinguished due to force majeure or fortuitous event.
Held:
No. The loan obligation was not extinguished.  
Article 1231 of the Civil Code states that obligations are extinguished either by payment or performance,
the loss of the thing due, the condonation or remission of the debt, the confusion or merger of the rights of
creditor and debtor, compensation or novation.
In the present case, petitioners argued that their loan obligations to Allied Bank had already been
extinguished due to Peakstar’s failure to perform its own obligations to Metro Concast pursuant to the
MoA.
Petitioners classify Peakstar’s default as a form of force majeure in the sense that they have, beyond their
control, lost the funds they expected to have received from the Peakstar which they would, in turn, use to
pay their own loan obligations to Allied Bank.
While it may be argued that Peakstar’s breach of the MoA was unforseen by petitioners, the same us
clearly not “impossible”to foresee or even an event which is independent of human will.” Neither has it
been shown that said occurrence rendered it impossible for petitioners to pay their loan obligations to
Allied Bank and thus, negates the former’s force majeure theory altogether.
17. VICTORIA SEOANE VS. CATALINA FRANCO
Facts: The mortgagor agreeing to pay the sum “little by little”, the mortgage in question was executed on
13th of October 1884 to secure the payment of the sum of P 4, 876.01. The claim appears to have been
presented to plaintiff’s intestate on the 8th of August 1911. Nothing has been paid either of principal or
interest. This case is an appeal from a judgment of the Court of First Instance of Zamboanga holding that
the prescription ended upon the right of action upon the mortgage debt.
Issue: Whether or not the obligation intends to fix a period
Ruling: Article 1198 of the New Civil Code provides that “When an obligation does not fix a term, but it
can be inferred from its nature and circumstance that there was an intention of granting it to the debtor the
courts shall fix the duration of such a term. The courts shall also fix the duration of a term when it may
have been left at the will of the debtor.” The Supreme court ruled that the obligation in question seems to
leave the duration of the period for the payment to the will of the debtor. The instrument’s intention was
to give the debtor the time within which to pay the obligation. The Court ruled that in speaking in general
of obligations with a term, in case of deficiency with respect to the duration of the term when it has been
left to the will of the debtor, the court shall fix the same. As such, an action should be brought to the court
for having the date be fixed when the instrument agreed upon should become due and payable.
143
SEOANE VS FRANCO February 12, 1913 Topic: Obligations with a Period
FACTS: This is an appeal from a judgment of the Court of First Instance of Zamboanga in favor of the
plaintiff, holding that the right of action upon the mortgage debt which was the basis of the claim
presented against the plaintiff's estate had prescribed. The mortgage in question was executed on the 13th
of October, 1884, to secure the payment of the sum of P4,876.01, the mortgagor agreeing to pay the sum
"little by little." The claim appears to have been presented to the plaintiff's intestate on the 8th of August,
1911. Nothing has been paid either of principal or of interest.
ISSUE: Whether or not the courts may fix the period.
HELD: Yes. This case clearly falls within the provision of Art. 1197 of the New Civil Code, which reads
as follows: .
If the obligation does not fix a period, but from its nature and the circumstances it can be inferred that a
period was intended, the courts may fix the duration thereof.
The courts shall also fix the duration of the period when it depends upon the will of the debtor.
In every case, the courts shall determine such period as may under the circumstances have been probably
contemplated by the parties. Once fixed by the courts, the period cannot be changed by them.
The obligation in question seems to leave the duration of the period for the payment thereof to the will of
the debtor. It appears also that it was the intention of the instrument to give the debtor time within which
to pay the obligation. In such cases this court has held, on several occasions, that the obligation is not due
and payable until an action has been commenced by the mortgagee against the mortgagor for the purpose
of having the court fix the date on and after which the instrument shall be payable and the date of
maturity is fixed in pursuance thereof. It is clear that the instrument sued upon in the case at bar is one
which leaves the period of payment at the will of the mortgagor. Such being the case, an action should
have been brought for the purpose of having the court set a date on which the instrument should become
due and payable. Until such action was prosecuted no suit could be brought for the recovery of the
amount named in the instrument. It is, therefore, clear that this action is premature. The instrument has
been sued upon before it is due. The action must accordingly be dismissed
18. JIMMY CO VS. CA
Facts:
On July 18, 1990, petitioner entrusted his car to private respondent for some repair including battery
replacement, the latter undertaking to return the vehicle on July 21, 1990 fully serviced and supplied in
accordance with the job contract. But came July 21, 1990, the latter could not release the vehicle as its
battery was weak and was not yet replaced. Left with no option, petitioner himself bought a new battery
nearby and delivered it to private respondent for installation on the same day. However, the battery was
not installed and the delivery of the car was rescheduled to July 24, 1990. When petitioner sought to
reclaim his car in the afternoon of July 24, 1990, he was told that it was carnapped earlier that morning
while being road-tested by an employee of private respondent.
The RTC, in a suit for damages led by petitioner against private respondent, found the latter guilty of
delay in the performance of its obligation and held it liable to petitioner for the value of the lost vehicle
and its accessories plus interest and attorney's fees. On appeal, the Court of Appeals reversed the lower
court's ruling. It ruled that the vehicle was lost due to a fortuitous event. Hence this petition for review.
Issue: Whether or not respondent is liable for the loss of a petitioner's vehicle while the same is in its
custody for repair or other job services.
Ruling:
In reversing the Court of Appeals, the Supreme Court held that carnapping per se cannot be considered as
a fortuitous event. To be considered as such, carnapping entails more than the mere forceful taking of
another's property. It must be proved and established that the event was an act of God or was done solely
by third parties and that neither the claimant nor the person alleged to be negligent has any participation.
In accordance with the Rules of Evidence, the burden of proving that the loss was due to a fortuitous
event rests on him who invokes it. Even assuming arguendo that carnapping was duly established as a
fortuitous event, still private respondent cannot escape liability. Article 1165 of the New Civil Code
makes an obligor who is guilty of delay responsible even for a fortuitous event until he has effected the
delivery.
19. Sicam vs. Jorge
FACTS: On different dates, Lulu Jorge pawned several pieces of jewelry with Agencia de R. C. Sicam
located in Parañaque to secure a loan.
On October 19, 1987, two armed men entered the pawnshop and took away whatever cash and jewelry
were found inside the pawnshop vault.
On the same date, Sicam sent Lulu a letter informing her of the loss of her jewelry due to the robbery
incident in the pawnshop. Respondent Lulu then wroteback expressing disbelief, then requested Sicam to
prepare the pawned jewelry for withdrawal on November 6, but Sicam failed to return the jewelry.
Lulu, joined by her husband Cesar, filed a complaint against Sicam with the RTC of Makati seeking
indemnification for the loss of pawned jewelry and payment of AD, MD and ED as well as AF.
The RTC rendered its Decision dismissing respondents’ complaint as well as petitioners’ counterclaim.
Respondents appealed the RTC Decision to the CA which reversed the RTC, ordering the appellees to
pay appellants the actual value of the lost jewelry and AF. Petitioners MR denied, hence the instant
petition for review on Certiorari.
ISSUE: Whether the petitioners liable for the loss of the pawned articles in their possession? (Petitioners
insist that they are not liable since robbery is a fortuitous event and they are not negligent at all.)
HELD: The Decision of the CA is AFFIRMED.
YES
Article 1174 of the Civil Code provides:
Art. 1174. Except in cases expressly specified by the law, or when it is otherwise declared by stipulation,
or when the nature of the obligation requires the assumption of risk, no person shall be responsible for
those events which could not be foreseen or which, though foreseen, were inevitable.
Fortuitous events by definition are extraordinary events not foreseeable or avoidable. It is therefore, not
enough that the event should not have been foreseen or anticipated, as is commonly believed but it must
be one impossible to foresee or to avoid. The mere difficulty to foresee the happening is not impossibility
to foresee the same.
To constitute a fortuitous event, the following elements must concur:
(a) the cause of the unforeseen and unexpected occurrence or of the failure of the debtor to comply with
obligations must be independent of human will;
(b) it must be impossible to foresee the event that constitutes the caso fortuito or, if it can be foreseen, it
must be impossible to avoid;
(c) the occurrence must be such as to render it impossible for the debtor to fulfill obligations in a normal
manner; and,
(d) the obligor must be free from any participation in the aggravation of the injury or loss.
The burden of proving that the loss was due to a fortuitous event rests on him who invokes it. And, in
order for a fortuitous event to exempt one from liability, it is necessary that one has committed no
negligence or misconduct that may have occasioned the loss.
Sicam had testified that there was a security guard in their pawnshop at the time of the robbery. He
likewise testified that when he started the pawnshop business in 1983, he thought of opening a vault with
the nearby bank for the purpose of safekeeping the valuables but was discouraged by the Central Bank
since pawned articles should only be stored in a vault inside the pawnshop. The very measures which
petitioners had allegedly adopted show that to them the possibility of robbery was not only foreseeable,
but actually foreseen and anticipated. Sicam’s testimony, in effect, contradicts petitioners’ defense of
fortuitous event.
Moreover, petitioners failed to show that they were free from any negligence by which the loss of the
pawned jewelry may have been occasioned.
Robbery per se, just like carnapping, is not a fortuitous event. It does not foreclose the possibility of
negligence on the part of herein petitioners.
Petitioners merely presented the police report of the Parañaque Police Station on the robbery committed
based on the report of petitioners’ employees which is not sufficient to establish robbery. Such report also
does not prove that petitioners were not at fault. On the contrary, by the very evidence of petitioners, the
CA did not err in finding that petitioners are guilty of concurrent or contributory negligence as provided
in Article 1170 of the Civil Code, to wit:
Art. 1170. Those who in the performance of their obligations are guilty of fraud, negligence, or delay, and
those who in any manner contravene the tenor thereof, are liable for damages.
20. Austria vs. CA
FACTS:
On January 30, 1961, Maria G. Abad acknowledged that she received from Guillermo Austria one (1)
pendant with diamonds to be sold on a commission basis or to be returned on demand. However, on
February 1, 1961, while walking home to her residence, Abad was said to have been accosted by two
men, one of whom hit her on the face, while the other snatched her purse containing jewelry and cash,
and ran away.
Since Abad failed to return the jewelry or pay for its value notwithstanding demands, Austria brought in
the Court of First Instance of Manila an action against her and her husband for recovery of the pendant or
of its value, and damages. On their answer, the defendant spouses set up the defense that the alleged
robbery had extinguished their obligation.
The trial court rendered judgment in favor for the plaintiff which is Austria. It held that defendant failed
to prove the fact of robbery, or, if indeed it was committed, the defendant was guilty of negligence. The
defendants appealed to the Court of Appeals and secured a reversal of judgment. It declared respondents
not responsible for the loss of the jewelry on account of fortuitous event, and relieved them from liability
for damages to the owner. Hence, this case contending that for robbery to fall under the category of
fortuitous event and relieve the obligor form his obligation under a contract, there ought to be prior
judgment on the guilt of the persons responsible therefor.
ISSUE:
Whether in a contract of agency (consignment of goods for sale) it is necessary that there be prior
conviction for robbery before the loss of the article shall exempt the consignee from liability for such
loss.
RULING:
NO, the law provides that except in case expressly specified by law, or when it is otherwise declared by
stipulation, or when the nature of the obligation require the assumption of risk, no person shall be
responsible for those events which could not be foreseen, or which, though foreseen, were inevitable.
It must be noted that to avail of the exemption granted in the law, it is not necessary that the persons
responsible for the occurrence should be punished; it would only be sufficient to establish that the
enforceable event, the robbery in this case did take place without any concurrent fault on the debtor`s
part, and this can be done by preponderant evidence.
It must also be noted that a court finding that a robbery has happened would not necessarily mean that
those accused in the criminal action should be found guilty of the crime; nor would be a ruling that those
actually accused did not commit the robbery be inconsistent with a finding that a robbery did take place.
The evidence to establish these facts would not necessarily be the same.
21. Hernandez vs. COA

Facts:

Teodoro Hernandez, the officer-in-charge and special disbursing officer of the Ternate Beach
Project of the Philippine Tourism Authority in Cavite, was tasked to go to the main office in
Manila on July 1, 1993. He was told to encash two (2) checks to pay for the wages and expenses
of the said operation. He estimated finishing at around 10:00 pm and getting back to Cavite at
around 2:00pm. However, because some processes got delayed, he knew he would be finishing
at 3:00pm. Thinking that the workers would be disappointed in having to wait for the salaries, as
the next 3 days were non-working days, he decided to encash the checks anyway.

Hernandez weighed his options – whether to return to Cavite and arrive in the evening, or to go
home to Bulacan and leave for Cavite first thing in the morning. He decided to go to Bulacan,
thinking it was quicker, safer, and less risky. En route to Cavite were dark roads, where chances
of robberies were more prominent.

Unluckily enough, while the jeep he rode was stuck in EDSA traffic, two men came in and stole
the money. Hernandez immediately ran after Alvarez, one of the thieves – who was later on
convicted for the crime; but was unable to catch up with the man who had the money.

Issues:

1. Whether or not the Francisco Tantuico, in his capacity as the COA Chairman, acted in grave
abuse of discretion [amounting from excess jurisdiction] ; and
2. Whether or not Hernandez should be held accountable for the stolen money

Held:

No, Hernandez should not be held liable for the stolen money. Pursuant to Section 638 of the
RAC, the money lost during transit due to a casualty, given that a request of relief must be given
to and approved by the Auditor General or provincial auditor. Because Hernandez complied with
the said requirements, the Chairman therefore acted outside of his jurisdiction. The petition is
granted.

Ratio:

Section 638 of the Revised Administrative Code provides that:

When a loss of government funds or property occurs while the same is in transit
or is caused by fire, theft, or other casualty, the officer accountable therefor or
having custody thereof shall immediately notify the Auditor General, or the
provincial auditor, according as a matter is within the original jurisdiction of the
one or the other, and within thirty days or such longer period as the Auditor, or
provincial auditor, may in the particular case allow, shall present his application
for relief, with the available evidence in support thereof. An officer who fails to
comply with this requirement shall not be relieved of liability or allowed credit
for any such loss in the settlement of his accounts.

Hernandez was able to complete request for relief from accountability within the given time
period. The Auditor was able to absolve Hernandez form accountability on January 27, 1984.
Chairman Tantuico was not in the position to revoke such decision. Even if he were, the facts
were that Hernandez had in mind, only the best interest for the workers. The events were
fortuitous, and no one could have known otherwise.

22. Yobido vs. CA

Facts:

On April 26, 1988, spouses Tito and Leny Tumboy and their minor children, Ardee and Jasmin,
boarded at Mangagoy, Surigao del Sur, a Yobido bus bound for Davao City. Along Picop road in
Km. 17, Sta. Maria, Agusan del Sur, the left front tire of the bus suddenly exploded. The bus fell
into a ravine around three (3) feet from the road and struck a tree which resulted in the death of
Tito Tumboy and physical injuries to other passengers. Thereafter, a complaint for breach of
contract of carriage, damages and attorney's fees was filed by Leny and her children against
Alberta Yobido, the owner of the bus, and Cresencio Yobido, its driver in the Regional Trial
Court of Davao City. After trial, the lower court rendered a decision dismissing the action for
lack of merit. Respondents appealed to the Court of Appeals. On August 23, 1993, respondent
court rendered a decision reversing that of the lower court. In this instant petition, petitioners
assert that the tire blowout that caused the death of Tito Tumboy was a caso fortuito and herein
respondent court misapprehended the facts of the case, therefore, its findings cannot be
considered final which shall bind the Court.

Issue: Whether or not the Yobido (bus-owner) be exempt from liability because the tire blowout
was no more than a fortuitous event that could not have foreseen.

Ruling:
The Supreme Court ruled that there is no reason to overturn the findings and conclusions of the Court of
Appeals. Petitioners' contention that they are exempted from liability because the tire blowout was a
fortuitous event that could not have been foreseen, must fail. It is settled that an accident caused either by
defects in the automobile or through the negligence of its driver is not a caso fortuito that would exempt
the carrier from liability for damages. Accordingly, the challenged decision is affirmed subject to
modification that petitioners shall additionally pay herein, respondents P20,000.00 as exemplary
damages.
1. No. Under the circumstances of the present case, the explosion of the new tire may not be
considered a fortuitous event. It is settled that an accident caused either by defects in the
automobile or through the negligence of its driver is not a caso fortuito that would exempt the
carrier from liability for damages.
A common carrier may not be absolved from liability in case of force majeure or fortuitous event alone.
The common carrier must still prove that it was not negligent in causing the death or injury resulting from
an accident.
In culpa contractual, once a passenger dies or injured, the carrier is presumed to have been at fault or to
have acted negligently. This presumption may only be overcome by evidence that the carrier had
observed extraordinary diligence.
The Yobido failed to rebut the testimony of Leny Tumboy that the bus was running so fast that she
cautioned the driver to slow down. These contradictory facts must, be resolved in favor of liability in
view of the presumption of negligence of the carrier in the law. Coupled with this is the established
condition of the road tough, winding and wet due to rain. It was incumbent upon the defense to establish
that it took precautionary measures considering partially dangerous condition of the road.
Yobido failed to discharge its duty to overthrow the presumption of negligence with clear and convincing
evidence.
23. Juntilla vs Fontanar 
(136 SCRA 624) 
Facts: Herein plaintiff was a passenger of the public utility jeepney on course from Danao City to Cebu
City. The jeepney was driven by driven by defendant Berfol Camoro and registered under the franchise of
Clemente Fontanar. When the jeepney reached Mandaue City, the right rear tire exploded causing the
vehicle to turn turtle. In the process, the plaintiff who was sitting at the front seat was thrown out of the
vehicle. Plaintiff suffered a lacerated wound on his right palm aside from the injuries he suffered on his
left arm, right thigh, and on his back. 

Plaintiff filed a case for breach of contract with damages before the City Court of Cebu City. Defendants,
in their answer, alleged that the tire blow out was beyond their control, taking into account that the tire
that exploded was newly bought and was only slightly used at the time it blew up. 
Issue: Whether or not the tire blow-out is a fortuitous event? 
Held: No. In the case at bar, the cause of the unforeseen and unexpected occurrence was not independent
of the human will. The accident was caused either through the negligence of the driver or because of
mechanical defects in the tire. Common carriers should teach drivers not to overload their vehicles, not to
exceed safe and legal speed limits, and to know the correct measures to take when a tire blows up thus
insuring the safety of passengers at all times.
24. Perla Compania de Seguros vs. Sarangaya
FACTS:
 1986: Spouses Gaudencio Sarangaya III and Primitiva Sarangaya erected Super A Building,
a semi-concrete, semi-narra, one-storey commercial building fronting the provincial road of
Santiago, Isabela
 It has three doors which were leased out
 The two-storey residence of the Sarangayas was behind the second and third doors of the
building
 On the left side of the commercial building stood the office of the Matsushita Electric Philippine
Corporation (Matsushita)
 1988: Perla Compania de Seguros, Inc. through its branch manager Bienvenido Pascual, entered
into a contract of lease of the first door beside the Matsushita office
 It was converted into a two door so he had a garage where he parked a company car 1981
model 4-door Ford Cortina which he used to supervise different towns
 July 7, 1988: Pascual went to San Fernando, Pampanga leaving the car
 3 days later: When he returned and warmed up the car, it made an odd sound.  On the second try,
there was again an odd sound and a small flames came out of its engine so he was startled,
stopped the car, went out and pushed it out of the garage
 Soon, fire spewed out of its rear compartment and burned the whole garage where he was
trapped so he suffered burns in the face, legs and arms
 The spouses were busy atching TV when they heard 2 loud explosions, smelt of gasoline and fire
burned all their belongings
 city fire marshall investigated and concluded that the fire was accidental
 Spouses filed a complaint against Pascual for gross negligence and Perla for lacking the required
diligence in the selection and supervision of its employee. 
 RTC: Pascual and Perla liable jointly and solidarily
 Pascual was held liable under the doctrine of res ipsa loquitur
 CA: affirmed but modified the amount of damages
ISSUE: 
1. W/N the doctrine of res ipsa loquitur is applicable - YES
2. W/N Perla lacked the required diligence in the selection and supervision of its employee. - NO
HELD:

1. YES.
 Res ipsa loquitur 
 Latin phrase which literally means “the thing or the transaction speaks for itself.
 It relates to the fact of an injury that sets out an inference to the cause thereof or
establishes the plaintiff’s prima facie case
 The doctrine rests on inference and not on presumption
 facts of the occurrence warrant the supposition of negligence and they furnish
circumstantial evidence of negligence when direct evidence is lacking
 based on the theory that the defendant either knows the cause of the accident or has the
best opportunity of ascertaining it and the plaintiff, having no knowledge thereof, is
compelled to allege negligence in general terms
 plaintiff relies on proof of the happening of the accident alone to establish negligence
 provides a means by which a plaintiff can pin liability on a defendant who, if innocent,
should be able to explain the care he exercised to prevent the incident complained of
 defendant’s responsibility to show that there was no negligence on his part
 Requisites of Res Ipsa Loquitur
 1) the accident is of a kind which does not ordinarily occur unless someone is negligent
 “Ordinary” refers to the usual course of events
 Flames spewing out of a car engine, when it is switched on, is obviously
not a normal event. Neither does an explosion usually occur when a car
engine is revved.
 Pascual, as the caretaker of the car, failed to submit any proof that he had
it periodically checked - negligence
 2) the cause of the injury was under the exclusive control of the person in charge and
 3) the injury suffered must not have been due to any voluntary action or contribution on
the part of the person injured.
 When there is caso fortuito:
 (a) the cause of the unforeseen and unexpected  occurrence  was  independent  of  the
human will
 human agency must be entirely excluded as the proximate cause or contributory
cause of the injury or loss -Not because car not maintained 
 (b) it was impossible to foresee the event which constituted the caso fortuito or, if it could
be foreseen, it was impossible to avoid -  NOT under the control of pascual
 (c) the occurrence must be such as to render it impossible to perform an obligation in a
normal manner - Spouses had no access nor obligation for the maintenance
 (d) the person tasked to perform the obligation must not have participated in any course
of conduct that aggravated the accident
2. YES.
  Perla did not include any rule or regulation that Pascual should have observed in performing his
functions
 There was no guidelines for the maintenance and upkeep of company property like the vehicle
that caught fire
 Did not require periodic reports on or inventories of its properties 
 Article 2180 of the Civil Code states that employers shall be liable for the damage caused
by their employees. The liability is imposed on all those who by their industry, profession
or other enterprise have other persons in their service or supervision
 Nowhere does it state that the liability is limited to employers in the transportation
business.

25. Fil-Estate Properties, Inc. vs. Spouses Go

Facts: On 1995, petitioner Fil-Estate Properties, Inc. (Fil-Estate) entered into a contract to sell a
condominium unit to respondent spouses Gonzalo and Consuelo Go located on Sto. Domingo Avenue,
Quezon City. The spouses paid a total of P3,439,000.07 of the full contract price set at P3,620,000.00.
Because petitioner failed to develop the condominium project, on the agreed date, the spouses demanded
the refund of the amount they paid, plus interest. When petitioner did not refund the spouses, the latter
filed a complaint against petitioner for reimbursement of P3,620,000 representing the lump sum price of
the condominium unit, plus interest, P100,000 attorney's fees, and expenses of litigation before the
Housing and Land Use Regulatory Board (HLURB). HLURB granted the respondent’s petition and
likewise affirmed by the CA.
Issue: Whether or not Asian Financial Crisis is a fortuitous event.
Ruling: No. we cannot generalize that the Asian financial crisis in 1997 was unforeseeable and beyond
the control of a business corporation. It is unfortunate that petitioner apparently met with considerable
difficulty e.g.increase cost of materials and labor, even before the scheduled commencement of its
real estate project as early as 1995. However, a real estate enterprise engaged in the pre-selling of
condominium units is concededly a master in projections on commodities and currency movements and
business risks. The fluctuating movement of the Philippine peso in the foreign exchange market is an
everyday occurrence, and fluctuations in currency exchange rates happen everyday, thus, not an instance
of caso fortuito.