Noell Whessoe, Inc. v. Independent Testing
However, it averred that it later
Consultants, Inc., G.R. No. 199851,
November 7, 2018 ( Art. 1729)
Facts:
Independent Testing Consultants is engaged in
the business of conducting non-destructive
testing on the gas pipes and vessels of its
industrial customers.
Sometime in June 1998, Petrotech, a
subcontractor of Liquigaz, engaged the services
of Independent Testing Consultants to conduct
non-destructive testing on Liquigaz's piping
systems and liquefied petroleum gas storage
tanks located in Barangay Alas-Asin, Mariveles,
Bataan. Independent Testing Consultants
conducted the agreed tests. It later billed
Petrotech, on separate invoices, the amounts of
P474,617.22 and P588,848.48 for its services.
However, despite demand, Petrotech refused to
pay. Independent Testing Consultants filed a
Complaint for collection of sum of money with
damages against Petrotech, Liquigaz, and Noell
Whessoe for P1,063,465.70 plus legal interest. It
joined Noell Whessoe as a defendant, alleging
that it was Liquigaz's contractor that
subcontracted Petrotech
In its Answer,Liquigaz argued that Independent
Testing Consultants had no cause of action
against it since there were no contractual
relations between them and that any contract that
Independent Testing Consultants had was with
its subcontractors.Noell Whessoe, on the other
hand, denied that it was Liquigaz's contractor
and that its basic role was merely to supervise
the construction of its gas plants. It argued that
any privity of contract was only with Petrotech.
Thus, it asserted that Petrotech alone should be
liable to Independent Testing Consultants... or
its part, Petrotech alleged that upon Noell
Whessoe's approval, Independent Testing
Consultants was chosen to conduct the non-
destructive testing on Liquigaz's liquefied
petroleum gas storage vessel under the
supervision of OIS, an inspection firm from the
United Kingdom, and of Nick Stephenson
(Stephenson).
received a letter from Noell Whessoe
withdrawing its approval for Independent
Testing Consultants' continued services.
Independent Testing Consultants' services
allegedly failed to satisfy the standards set by
the OIS and Stephenson. Petrotech further
claimed that due to Independent Testing
Consultants' poor performance, it incurred
additional costs. Thus, it prayed that
Independent Testing Consultants be ordered to
pay the additional costs as actual damages.
Issue: WON petitioner is solidarily liable with
Liquigaz and Petrotech.
Ruling:
No. Under Article 1729, respondent Independent
Testing Consultants had a cause of action
against Liquigaz and petitioner, even if its
contract was only with Petrotech. The Regional
Trial Court and the Court of Appeals, therefore,
did not err in concluding that petitioner was
solidarily liable with Liquigaz and Petrotech for
unpaid fees to respondent Independent Testing
Consultants. Article 1729 creates a solidary
liability between the owner, the contractor, and
the subcontractor. A solidary obligation is "one
in which each debtor is liable for the entire
obligation, and each creditor is entitled to
demand the whole obligation."[84] Respondent
Independent Testing Consultants may demand
payment for all of its unpaid fees from Liquigaz,
petitioner, or Petrotech, even if its contract was
only with the latter. However, Article 1729,
while serving as an exception to the general rule
on the privity of contracts, likewise provides for
an exception to this exception. The contractor is
solidarily liable with the owner and
subcontractor for any liabilities against a
supplier despite the absence of contract between
the contractor and the supplier, except when the
subcontractor has already been fully paid for its
services. Here, the Court of Appeals found that
there was "uncontroverted evidence that
PETROTECH had already been paid for its
services
Since Whessoe UK and petitioner should be
considered the same entity for the purposes of
the Mariveles Terminal Expansion Project,
Whessoe UK's full payment to Petrotech would
serve as a valid defense against petitioner's
solidary liability. Thus, petitioner still cannot be
held solidarily liable with Liquigaz and
Petrotech for any remaining receivables from
respondent Independent Testing Consultants.
Any remaining obligations to it should be
solidarily borne by the owner, Liquigaz, and the
subcontractor, Petrotech.
Q: Sometime in June 1998, Ulysses Corp, a
subcontractor engaged the services of Rolly
Brothers Co. to conduct non-destructive testing
on Quinta Corp’s piping systems and liquefied
petroleum gas storage tanks located in Barangay
Alas-Asin, Mariveles, Bataan. Rolly Corp
conducted the agreed tests. It later billed
Ulysses Corp, on separate invoices, the amounts
of P474,617.22 and P588,848.48 for its services.
However, despite demand, Ulysses Corp
refused to pay. WON Rolly and Ulysses Corp are
liable against Quinta Corp.
ANS: Article 1729 creates a solidary liability
between the owner, the contractor, and the
subcontractor. A solidary obligation is "one in
which each debtor is liable for the entire
obligation, and each creditor is entitled to
demand the whole obligation." Rolly Corp may
demand payment for all of its unpaid fees from
Ulysses, or Rolly Corp, even if its contract was
only with the latter.
2. Metro Bottled Water Corp. v. Andrada
Construction & Development Corp., Inc.,
G.R. No. 202430, March 6, 2019 (1724)
Facts:
Metro Bottled Water and Andrada Construction
entered into a Construction Agreement for the
construction of a reinforced concrete
manufacturing plant in Gateway Business Park,
General Trias, Cavite for the contract price of
P45,570,237.90. The Construction Agreement
covered all materials, labor, equipment, and
tools, including any other works required. The
project was to be completed within 150 calendar
days or by October 10, 1995, to be reckoned
from Andrada Construction’s posting of a
Performance Bond to answer for liquidated
damages, costs to complete the project, and third
party claims. The Performance Bond was issued
by Intra Strata Assurance Corporation (Intra
Strata).On May 10, 1995, Metro Bottled Water
extended the period of completion to November
30, 1995 upon Andrada Construction’s request,
due to the movement of one (1) bay of the plant
building, weather conditions, and change
orders.On November 14, 1995, E.S. De Castro
and Associates, Metro Bottled Water’s
consultant for the project, recommended the
forfeiture of the Performance Bond to answer for
the completion and correction of the project, as
well as liquidated damages for delay.On May 2,
1996, Metro Bottled Water filed a claim against
the Performance Bond issued by Intra Strata.
Andrada Construction opposed the claim for
lack of legal and factual basis.On September 6,
1996, Andrada Construction wrote to Metro
Bottled Water contesting E.S. De Castro and
Associates’ Special Report. The works
performed by Andrada Construction were
inspected by Metro Bottled Water and E.S. De
Castro and Associates. Punch lists were
prepared to monitor Andrada Construction’s
rectifications.[ Andrada Construction sent letters
to Metro Bottled Water requesting for payment
of unpaid work accomplishments amounting to
P7,292,721.27. Metro Bottled Water refused to
pay.On August 6, 2001, Andrada Construction
filed a Request for Arbitration before the
Construction Industry Arbitration Commission,
alleging that Metro Bottled Water refused to pay
its unpaid work accomplishment amounting to
P7,954,961.10, with interest of P494,297.31.
Petitioner argues that the Court of Appeals erred
in applying the principle of unjust enrichment,
considering that Article 1724 of the Civil
Code provides the requisites for the recovery of
the costs of additional work. It contends that
Article 1724 requires both the written authority
of the owner allowing the changes and a written
agreement by the parties as to the increase in
costs, neither of which were present in this case.
Even the Construction Agreement, it asserts,
requires a written order to the contractor signed
by the owner, authorizing work changes or
adjustments on the contract price or contract
period—to which respondent did not comply.
Issue: Whether or not the Construction Industry
Arbitration Commission and the Court of
Appeals erred in finding that petitioner Metro
Bottled Water Corporation was liable to
respondent Andrada Consumption &
Development Corporation, Inc. for unpaid work
accomplishment.
Ruling:
No. Petitioner contends that the arbitral tribunal
should first apply Article 1724 when resolving
the issue of whether respondent should be
compensated for costs incurred in Change Order
Nos. 39 to 109. Petitioner, however, fails to
recognize that there was no need to apply Article
1724, since salient points of the provision had
already been embodied in the Construction
Agreement. It is settled that the contract is the
law between the parties. Without any ambiguity
in Item No. 8 of the Construction Agreement,
there was no need to resort to other aids in
interpretation, such as Article 1724 of the Civil
Code, to resolve the issue.
Q: On November 2019, Rolly Corp undertook a
structure for a stipulated price of Php 14 million
in comformity of the plans agreed upon with the
land owner Ulysses. On February 2020, Rolly
Corp  demand an increase in the price on
account of the higher cost of labor or materials.
Can Rolly deman a n amount higher than what is
stipulated and agreed upon in the contract?
ANS: No. Article 1724. The contractor who
undertakes to build a structure or any other work
for a stipulated price, in conformity with plans
and specifications agreed upon with the land-
owner, can neither withdraw from the contract
nor demand an increase in the price on account
of the higher cost of labor or materials, save
when there has been a change in the plans and
specifications, provided:(1) Such change has
been authorized by the proprietor in writing; and
(2) The additional price to be paid to the
contractor has been determined in writing by
both parties. In this case neither of the
exceptions are present therefore, Rolly cannot
demand for a higher price other than that agreed
upon in the contract
3. CE Construction Corp. v. Araneta
Center, Inc., G.R. No. 192725, [August 9,
2017], 816 PHIL 221-287 (Arts 1715, 1724)
Facts:
Petitioner CECON was a construction
contractor, which, for more than 25 years, had
been doing business with respondent ACI, the
developer of Araneta Center, Cubao, Quezon
City.
In June 2002, ACI sent invitations to different
construction companies, including CECON, for
them to bid on a project identified as "Package
#4 Structure/Mechanical, Electrical, and
Plumbing/Finishes (excluding Part A
Substructure)," a part of its redevelopment plan
for Araneta Center Complex. The project would
eventually be the Gateway Mall. As described
by ACI, "[t]he Project involved the design,
coordination, construction and completion of all
architectural and structural portions of Part B of
the Works[;] and the construction of the
architectural and structural portions of Part A of
the Works known as Package 4 of the Araneta
Center Redevelopment Project. Despite ACI's
undertaking, no formal contract documents were
delivered to CECON or otherwise executed
between ACI and CECON. With many changes
to the project and ACI's delays in delivering
drawings and specifications, CECON
increasingly found itself unable to complete the
project on January 10, 2004. It noted that it had
to file a total of 15 Requests for Time Extension
from June 10, 2003 to December 15, 2003, all of
which ACI failed to timely act on. of the higher cost of labor or materials, save
when there has been a change in the plans and
Exasperated, CECON served notice upon ACI specifications, provided:(1) Such change has
that it would avail of arbitration. On January 29, been authorized by the proprietor in writing; and
2004, it filed with the CIAC its Request for (2) The additional price to be paid to the
Adjudication. It prayed that a total sum of contractor has been determined in writing by
P183,910,176.92 representing adjusted project both parties. In this case neither of the
costs be awarded in its favor. exceptions are present therefore, Rolly cannot
demand for a higher price other than that agreed
Issue: Whether or not the Court of Appeals
upon in the contract
correctly held that the CIAC Arbitral Tribunal
acted beyond its jurisdiction in holding that the
price of P1,540,000,000.00 did not bind the
4. Loadstar Shipping Co., Inc. v. Malayan
parties as an immutable lump-sum.
Insurance Co., Inc., G.R. No. 185565
Ruling: (Resolution), [April 26, 2017], 809 PHIL 736-
750 (Arts 1732-1735)
No. No extraordinary technical or legal
proficiency is required to see that it would be the Facts:
height of absurdity and injustice to insist on the
Loadstar International Shipping, Inc. (Loadstar
payment of an amount the consideration of
Shipping) and Philippine Associated Smelting
which has been reduced to a distant memory.
and Refining Corporation (PASAR) entered into
ACI's invocation of Article 1724 is useless as
a Contract of Affreightment for domestic bulk
the premises for its application are absent. ACI's
transport of the latter’s copper concentrates
position is an invitation for this Court to lend its
which were loaded in Cargo Hold Nos. 1 and 2
imprimatur to unjust enrichment enabled by the
of MV “Bobcat”, a marine vessel owned by
gradual wilting of what should have been a
Loadstar International Shipping Co., Inc.
reliable contractual relation. Basic decency
(Loadstar International) and operated by
impels this Court to not give in to ACI's
Loadstar Shipping under a charter party
advances and instead sustain the CIAC Arbitral
agreement.  The cargo was insured with
Tribunal's conclusion that the amount due to
Malayan Insurance Company, Inc. (Malayan). 
CECON has become susceptible to reasonable
adjustment. The vessel’s chief officer on routine inspection
found a crack on starboard side of the main deck
Q: On November 2019, Rolly Corp undertook a
which caused seawater to enter and wet the
structure for a stipulated price of Php 14 million
cargo. Upon inspection, the Elite Adjusters and
in comformity of the plans agreed upon with the
Surveyor, Inc. (Elite Surveyor) confirmed that
land owner Ulysses. On February 2020, Rolly
samples of copper concentrates from Cargo
Corp  demand an increase in the price on
Hold No. 2 were contaminated by seawater.
account of the higher cost of labor or materials.
Can Rolly deman a n amount higher than what is PASAR sent a formal notice of claim in the
stipulated and agreed upon in the contract? amount of [P]37,477,361.31 to Loadstar
Shipping. On the basis of the Elite Surveyor’s
ANS: No. Article 1724. The contractor who
recommendation, Malayan paid PASAR the
undertakes to build a structure or any other work
amount of [P]32,351,102.32. PASAR signed a
for a stipulated price, in conformity with plans
subrogation receipt in favor of Malayan.  To
and specifications agreed upon with the land-
recover the amount paid and in the exercise of
owner, can neither withdraw from the contract
its right of subrogation, Malayan demanded
nor demand an increase in the price on account
reimbursement from Loadstar Shipping, which
refused to comply.  Consequently, on September
19, 2001, Malayan instituted with the RTC a
complaint for damages. In its complaint,
Malayan mainly alleged that as a direct and
natural consequence of the unseaworthiness of
the vessel, PASAR suffered loss of the cargo.
Loadstar Shipping and Loadstar International
denied respondent’s allegations and averred that
respondent’s payment to PASAR, on the basis of
the latter’s fraudulent claim, does not entitle
respondent automatic right of recovery by virtue
of subrogation.
Issue:
WON respondent is entitled to the right of
recovery by virtue of subrogation against
petitioners, on the basis of PASAR’s claim.
Ruling:
Malayan’s claim against the petitioners is based
on subrogation to the rights possessed by
PASAR as consignee of the allegedly damaged
goods. The right of subrogation stems from
Article 2207 of the New Civil Code. The rights
of a subrogee cannot be superior to the rights
possessed by a subrogor. In other words, a
subrogee cannot succeed to a right not possessed
by the subrogor.  A subrogee in effect steps into
the shoes of the insured and can recover only if
the insured likewise could have recovered.
Consequently, an insurer indemnifies the insured
based on the loss or injury the latter actually
suffered from.  If there is no loss or injury, then
there is no obligation on the part of the insurer to
indemnify the insured. Should the insurer pay
the insured and it turns out that indemnification
is not due, or if due, the amount paid is
excessive, the insurer takes the risk of not being
able to seek recompense from the alleged
wrongdoer.  This is because the supposed
subrogor did not possess the right to be
indemnified and therefore, no right to collect is
passed on to the subrogee.
As regards the determination of actual damages,
“[i]t is axiomatic that actual damages must be
proved with reasonable degree of certainty and a
party is entitled only to such compensation for
the pecuniary loss that was duly proven. As
Malayan is claiming for actual damages, it bears
the burden of proof to substantiate its claim.
Actual damages are not presumed.  The claimant
must prove the actual amount of loss with a
reasonable degree of certainty premised upon
competent proof and on the best evidence
obtainable.  Specific facts that could afford a
basis for measuring whatever compensatory or
actual damages are borne must be pointed out. 
Actual damages cannot be anchored on mere
surmises, speculations or conjectures.
It is not disputed that the copper concentrates
carried by M/V Bobcat from Poro Point, La
Union to Isabel, Leyte were indeed
contaminated with seawater.  The issue lies on
whether such contamination resulted to damage,
and the costs thereof, if any, incurred by the
insured PASAR. In this case, Malayan, as the
insurer of PASAR, neither stated nor proved that
the goods are rendered useless or unfit for the
purpose intended by PASAR due to
contamination with seawater.  Hence, there is no
basis for the goods’ rejection under Article 365
of the Code of Commerce.  Clearly, it is
erroneous for Malayan to reimburse PASAR as
though the latter suffered from total loss of
goods in the absence of proof that PASAR
sustained such kind of loss.
Q: X has a Tamaraw FX among other cars.
Every other day during the workweek, he goes
to hisoffice in Quezon City using his Tamaraw
FX and picks up friends as passengers at
designatedpoints along the way. His passengers
pay him a flat fee for the ride, usually P20 per
person, oneway. Although a lawyer, he never
bothered to obtain a license to engage in this
type of income-generating activity. He believes
that he is not a common carrier within the
purview of the law. Doyou agree with him?
Explain.  Company X on the basis of the contract of
ANS: No. I do not agree with X. A common
carrier holds himself out to the public as
engaged in the business oftransporting persons
or property from place to place, for
compensation, offering his services to thepublic
generally. The fact that X has a limited clientele
does not exclude him from the definition of
acommon carrier. The law does not make any
distinction between one whose principal
business activityis the carrying of persons or
goods or both, and the one who does such
carrying only as an ancillary activity or in the
local idiom, as a “sideline”
Q: Mabuhay Lines, Inc. a common carrier,
entered into a contract with Company X,
whereby it agreed to furnish Company X, for a
fixed amount, a bus for a company excursion on
its anniversary day.It was agreed that Company
X would have the use of the bus and its driver
from 7:00 am to 7:00pm on the stipulated date,
and that the bus driver would be obliged to
follow the instructions of the company’s general
manager as to the places to be visited. Company
X agreed to bear the cost
of the gasoline consumed.The transportation
contract signed by Company X contained a
stipulation that Mabuhay Lines,Inc. would be
exempt from liability on account of acts
or omissions of its employees.On the return trip
from the excursion site, the bus had an accident
and several employees ofCompany X were
injured.State the liability, if any, of Mabuhay
Lines, Inc.  license no. 104-99-069007.
ANS:Although a common carrier, Mabuhay
Lines, Inc. was not acting as such in the instant
case but as aprivate carrier. Accordingly, the
provision applicable to a common carrier in
respect of extraordinarydiligence cannot be
imposed upon the bus company.The stipulation
limiting the liability of Mabuhay Lines, Inc. is
valid and the bus company cannot be heldliable
for the injuries suffered by the employees of
carriage.However, the employees who were
injured may proceed against the bus company on
the basis of a quasi-delict  (culpa aquiliana) but
the party charging negligence or wrong doing
has the burden ofproving the same.It has been
held that a common carrier is exempt from the
application of the strict public policygoverning
common carriers where the carrier is not acting
as such but as a private carrier. Such strict public
policy has no force where the public at large is
not involved, as when the carrier charters its
bustotally for the use of a single party. 
5. Heirs of Mendoza v. ES Trucking and
Forwarders, G.R. No. 243237, February 17,
2020 (Art 1732)
Facts:
On June 13, 2013, at around noontime, Catalina
P. Mendoza (Catalina) was walking along Sta.
Maria Road after visiting a lotto outlet nearby.
While she was at the center of the road and
attempting to cross its second half, she was
sideswiped by a 14-wheeler prime mover truck
at the junction of Gov. Ramos Street and Sta.
Maria Road in Zamboanga City. The prime
mover truck bore body no. 5 and green plate no.
NAO 152, while the trailer attached to it had
yellow plate no. JZA163. The vehicle is
registered under the name of ES Trucking and
Forwarders (ES Trucking) with Sumarni Asprer
Ruste as its sole proprietor. At the time of the
incident, the vehicle was driven by Clin Timtim
(Timtim), a holder of professional driver's
Moments before the incident, Timtim claimed
that he stopped the vehicle at the crossing lane
as the tricycle in front of the prime mover truck
stopped and only began to accelerate once the
tricycle started moving.
The two sons of Catalina picked her up from
under the fuel tank of the prime mover truck
behind its front left tire and brought her to
Ciudad Medical Zamboanga where she was
pronounced dead.11 Catalina suffered multiple
abrasions and contusions in the clavicle area,
lacerated wound on the cheek, and multiple
abrasions on the abdomen.12 She also suffered
multiple rib fractures.13 The immediate cause of
death, stated in her Certificate of Death,14 is
"Cardio-Pulmonary Arrest Sec. to Vehicular
Accident."
Issue: Whether ES Trucking is a common
carrier required by law to observe extraordinary
diligence in the carriage of passengers and
goods.
Ruling:
Yes. Article 1732 of the Civil Code defines
common carriers as persons, corporations, firms
or associations engaged in the business of
carrying or transporting passengers or goods or
both, by land, water, or air, for compensation,
offering their services to the public. In this case,
the Heirs of Catalina established through
preponderance of evidence that, at the time of
the incident, the vehicle was being used as a
truck for hire without securing the necessary
franchise from the LTFRB. ES Trucking
engaged in a truck for hire business, offering
their vehicles to transport the cargo of its
customers. Noticeably, Edgardo Ruste admitted
that they filed an application to have the vehicle
included in their Certificate of Public
Convenience yet their application was never
granted. This is inconsistent with his own claim
that ES Trucking does not need to register with
the LTFRB because it is not a common carrier
but a private company. The fact that they
considered applying for the inclusion of the
vehicle in their Certificate of Public
Convenience signifies that they are aware of the
franchise requirement of the LTFRB. ES
Trucking cannot be excused simply because it is
not registered with the LTFRB and it is a private
company. ES Trucking cannot be exonerated
from liability and benefit from its own violation
of the laws and rules governing trucks for hire.
6. Federal Express Corporation, v.
Luwalhati R. Antonino and Eliza Bettina
Ricasa Antonino GR. No. 199455, June 27,
2018 (1733)
Facts: On December 15, 2003, Luwalhati and
Eliza were in the Philippines. As the monthly
common charges on the Unit had become due,
they decided to send several Citibank checks to
Veronica Z. Sison, who was based in New York.
Citibank checks allegedly amounting to
US$17,726.18 for the payment of monthly
charges and US$11,619.35 for the payment of
real estate taxes were sent by Luwalhati through
FedEx with Account No. x2546-4948-1 and
Tracking No. 8442 4588 4268. The package was
addressed to Sison who was tasked to deliver the
checks payable to Maxwell-Kates, Inc. and to
the New York County Department of Finance.
Sison allegedly did not receive the package,
resulting in the non-payment of Luwalhati and
Eliza's obligations and the foreclosure of the
Unit.
Upon learning that the checks were sent on
December 15, 2003, Sison contacted FedEx on
February 9, 2004 to inquire about the non-
delivery. She was informed that the package was
delivered to her neighbor but there was no
signed receipt.
On March 14, 2004, Luwalhati and Eliza,
through their counsel, sent a demand letter to
FedEx for payment of damages due to the non-
delivery of the package, but FedEx refused to
heed their demand. Hence, on April 5, 2004,
they filed their Complaint for damages.
Issue: Whether or not petitioner Federal Express
Corporation may be held liable for damages on
account of its failure to deliver the checks
shipped by respondents Luwalhati R. Antonino
and Eliza Bettina Ricasa Antonino to the
consignee Veronica Sison
Ruling:
Yes. Petitioner is liable for this loss. It failed to
ensure that the package was delivered to the
named consignee. The Civil Code mandates
common carriers to observe extraordinary
diligence in caring for the goods they are
transporting:Article 1733. Common carriers,
from the nature of their business and for reasons
of public policy, are bound to observe
extraordinary diligence in the vigilance over the
goods and for the safety of the passengers
transported by them, according to all the
circumstances of each case."Extraordinary
diligence is that extreme measure of care and
caution which persons of unusual prudence and
circumspection use for securing and preserving
their own property or rights." Consistent with
the mandate of extraordinary diligence, the Civil
Code stipulates that in case of loss or damage to
goods, common carriers are presumed to be
negligent or at fault. Petitioner is unable to
prove that it exercised extraordinary diligence in
ensuring delivery of the package to its
designated consignee. It claims to have made a
delivery but it even admits that it was not to the
designated consignee. It asserts instead that it
was authorized to release the package without
the signature of the designated recipient and that
the neighbor of the consignee, one identified
only as "LGAA 385507," received it This fails
to impress.
The assertion that receipt was made by "LGAA
385507" amounts to little, if any, value in
proving petitioner's successful discharge of its
duty. "LGAA 385507" is nothing but an
alphanumeric code that outside of petitioner's
personnel and internal systems signifies nothing.
This code does not represent a definite, readily
identifiable person, contrary to how commonly
accepted identifiers, such as numbers attached to
official, public, or professional identifications
like social security numbers and professional
license numbers, function. Reliance on this code
is tantamount to reliance on nothing more than
petitioner's bare, self-serving allegations.
Certainly, this cannot satisfy the requisite of
extraordinary diligence consummated through
delivery to none but "the person who has a right
to receive" the package.
Q: Nelson owned and controlled Sonnel
Construction Company. Acting for the company,
Nelson contracted the construction of a building.
Without first installing a protective net atop the
sidewalks adjoining the construction site, the
company proceeded with the construction work.
One day a heavy piece of lumber fell from the
building. It smashed a taxicab which at that time
had gone offroad and onto the sidewalk in order
to avoid traffic. The taxicab passenger died as a
result. Could the heirs hold the taxicab owner
and driver liable? Explain.
ANS: Yes, the taxicab company can be liable for
damages because it failed to comply with its
obligation as a common carrier to use
extraordinary diligence in transporting the
passenger, and because at the time of death of
the passenger, the cab driver was violating a
traffic regulation. Under Art. 2185 of Civil
Code, it is presumed that a person driving a
motor vehicle has been negligent if at time of
mishap he was violating a traffic regulation,
such as when he was driving on the wrong side
of the road
Q: B, while drunk, accepted a passenger in his
taxicab. B then drove the taxi recklessly, and
inevitably, it crashed into an electric post,
resulting in serious physical injuries to the
passengers. The latter then filed a suit for tort
against B's operator, A, but A raised the defense
of having exercised extraordinary diligence in
the safety of the passenger. Is his defense
tenable?
ANS: No. Article 1733 of the civil code
mandates common carriers, from the nature of
their business and for reasons of public policy,
are bound to observe extraordinary diligence in
the vigilance over the goods and for the safety of
the passengers transported by them, according to
all the circumstances of each case. The state of
being drunk is a manifestation of recklessness.
Hence, extraordinary diligence was not
observed.
 7. Unitrans International Forwarders,
Inc. v. Insurance Company of North
America, G.R. No. 203865, March 13, 2019
(Art 1735 in relation to 1733)
Facts:
In Melbourne, Australia, South East Asia
Container Line (SEACOL) solicited and
received shipment of musical instruments from
shipper Dominant Musical Instrument for
transportation to and delivery at the port of
Manila. The aforesaid shipment was insured
with respondent Insurance Company of North
America (ICNA) against all risk in favor of the
consignee, San Miguel Foundation for the
Performing Arts (San Miguel). SEACOL then
loaded the insured shipment on board M/S
Buxcrown for transportation from Melbourne to
Singapore. In Singapore, the shipment was
transferred from M/S Buxcrown to M/S Doris
Wullf for final transportation to the port of
Manila.
Upon arrival in Manila, the container van was
discharged from the vessel and was received by
petitioner Unitrans International Forwarders
(Unitrans), and upon stripping, it was found that
two of the cartons containing the musical
instruments were in a bad condition. Despite
such, Unitrans delivered the subject shipment to
the consignee. After further inspection, it was
found out that two units of musical instruments
were damaged and could no longer be used for
their intended purpose, hence were declared a
total loss. Despite repeated demands, Unitrans
refused to pay the damages sustained.
Subsequently, ICNA, as the insurer, paid for and
was subrogated the rights to collect from
Unitrans. ICNA filed an amended complaint for
collection of sum of money against South East
Asia Container Line (SEACOL) and the
unknown owner/charterer of the vessel M/S
Buxcrown, both doing business in the
Philippines through its local ship agent,
petitioner Unitrans International Forwarders
(Unitrans); and against the unknown charterer of
M/S Doris Wullf, doing business through its
local ship agent respondent TMS Ship Agencies
(TSA).
Issue: Whether or not Unitrans was able to
exercise the diligence necessary under the
foregoing circumstances to exculpate them from
liability
Ruling:
No. A common carrier is presumed to have been
negligent if it fails to prove that it exercised
extraordinary vigilance over the goods it
transported. When the goods shipped are either
lost or arrived in damaged condition, a
presumption arises against the carrier of its
failure to observe that diligence, and there need
not be an express finding of negligence to hold it
liable. To overcome the presumption of
negligence, the common carrier must establish
by adequate proof that it exercised extraordinary
diligence over the goods. It must do more than
merely show that some other party could be
responsible for the damage. In the instant case,
considering that it is undisputed that the subject
goods were severely damaged, the presumption
of negligence on the part of the common carrier,
i.e., Unitrans, arose. Hence, it had to discharge
the burden, by way of adequate proof, that it
exercised extraordinary diligence over the
goods; it is not enough to show that some other
party might have been responsible for the
damage. Unitrans failed to discharge this
burden. Hence, it cannot escape liability
Q: B, while drunk, accepted a passenger in his
taxicab. B then drove the taxi recklessly, and
inevitably, it crashed into an electric post,
resulting in serious physical injuries to the
passengers. The latter then filed a suit for tort
against B's operator, A, but A raised the defense
of having exercised extraordinary diligence in
the safety of the passenger. Is his defense
tenable?
ANS: No. Article 1733 of the civil code
mandates common carriers, from the nature of
their business and for reasons of public policy,
are bound to observe extraordinary diligence in
the vigilance over the goods and for the safety of to transport and deliver the same to its
the passengers transported by them, according to warehouse in Biñan, Laguna. Meanwhile,
all the circumstances of each case. The state of Keihin-Everett had an Accreditation Agreement
being drunk is a manifestation of recklessness. with Sunfreight Forwarders whereby the latter
Hence, extraordinary diligence was not undertook to render common carrier services for
observed. the former and to transport inland goods within
the Philippines. Shipment was released from the
Q: Nelson owned and controlled Sonnel
pier by Keihin-Everett and turned over to
Construction Company. Acting for the company,
Sunfreight Forwarders for delivery to Honda
Nelson contracted the construction of a building.
Trading. En route to the latter's warehouse, the
Without first installing a protective net atop the
truck carrying the containers was hijacked and
sidewalks adjoining the construction site, the
the container van with Serial No. TEXU
company proceeded with the construction work.
389360-5 was reportedly taken away. Honda
One day a heavy piece of lumber fell from the
Trading suffered losses in the total amount of
building. It smashed a taxicab which at that time
P2,121,917.04, representing the value of the lost
had gone offroad and onto the sidewalk in order
40 bundles of Aluminum Alloy Ingots. Claiming
to avoid traffic. The taxicab passenger died as a
to have paid Honda Trading's insurance claim
result. Could the heirs hold the taxicab owner
for the loss it suffered, Tokio Marine filed a
and driver liable? Explain.
complaint for damages against Keihin-Everett.
ANS: Yes, the taxicab company can be liable for
Issue: WON Keihin-Everett is liable?
damages because it failed to comply with its
obligation as a common carrier to use Ruling:
extraordinary diligence in transporting the
Yes. Keihin-Everett is liable notwithstanding
passenger, and because at the time of death of
that the cargoes were in the possession of
the passenger, the cab driver was violating a
Sunfreight Forwarders when they were hijacked.
traffic regulation. Under Art. 2185 of Civil
Code, it is presumed that a person driving a As correctly held by the CA, there was no
motor vehicle has been negligent if at time of privity of contract between Honda Trading (to
mishap he was violating a traffic regulation, whose rights Tokio Marine was subrogated) and
such as when he was driving on the wrong side Sunfreight Forwarders. Hence, Keihin-Everett,
of the road as the common carrier, remained responsible to
Honda Trading for the lost cargoes.
In this light, Keihin-Everett, as a common
8. Keihin-Everett Forwarding Co., Inc. v.
carrier, is mandated to observe, under Article
Tokio Marine Malayan Insurance Co., Inc.,
1733 of the Civil Code, extraordinary diligence
G.R. No. 212107, [January 28, 2019]) (1733-
in the vigilance over the goods it transports
1736)
according to all the circumstances of each case.
Facts: In the event that the goods are lost, destroyed or
deteriorated, it is presumed to have been at fault
Honda Trading Phils. Ecozone Corporation
or to have acted negligently, unless it proves that
(Honda Trading) ordered 80 bundles of
it observed extraordinary diligence. To be sure,
Aluminum Alloy Ingots from PT Molten
under Article 1736 of the Civil Code, a common
Aluminum Producer Indonesia. Honda Trading
carrier's extraordinary responsibility over the
insured the entire shipment with Tokio Marine
shipper's goods lasts from the time these goods
& Nichido Fire Insurance Co., Inc. (TMNFIC).
are unconditionally placed in the possession of,
It also engaged the services of Keihin-Everett to
and received by, the carrier for transportation,
clear and withdraw the cargo from the pier and
until they are delivered, actually or
constructively, by the carrier to the consignee, or
to the person who has a right to receive them.
Hence, at the time Keihin-Everett turned over
the custody of the cargoes to Sunfreight
Forwarders for inland transportation, it is still
required to observe extraordinary diligence in
the vigilance of the goods. Failure to
successfully establish this carries with it the
presumption of fault or negligence, thus,
rendering Keihin-Everett liable to Honda
Trading for breach of contract.
Q: B, while drunk, accepted a passenger in his
taxicab. B then drove the taxi recklessly, and
inevitably, it crashed into an electric post,
resulting in serious physical injuries to the
passengers. The latter then filed a suit for tort
against B's operator, A, but A raised the defense
of having exercised extraordinary diligence in
the safety of the passenger. Is his defense
tenable?
ANS: No. Article 1733 of the civil code
mandates common carriers, from the nature of
their business and for reasons of public policy,
are bound to observe extraordinary diligence in
the vigilance over the goods and for the safety of
the passengers transported by them, according to
all the circumstances of each case. The state of
being drunk is a manifestation of recklessness.
Hence, extraordinary diligence was not
observed.
Q: On October 30, 2007, M/V Pacific, a
Philippine registered vessel owned by Cebu
Shipping Company (CSC), sank on her voyage
from Hong Kong to Manila. Empire Assurance
Company (Emprie) is the insurer of the lost
cargoes loaded on board the vessel which were
consigned to Debenhams Company. After it
indemnified Debenhams, Empire as subrogee
filed an action for damages against CSC. (A)
Assume that the vessel was seaworthy. Before
departing, the vessel was advised by theJapanese
Meteorological Center that it was safe to travel
to its destination. But while at sea, the vessel
received a report of a typhoon moving within its
general path. To avoid the typhoon, the vessel
changed its course. However, it was still at the
fringe of the typhoon when it was repeatedly hit
by huge waves, were saved three (3) who
perished. Is CSC liable to empire? Explain
ANS: The common carrier incurs no liability for
the loss of the cargo during a fortuitous event,
because the following circumstances were
present: (1) the typhoon was the cause of the
cargo loss; (2) the carrier did not contribute to
the loss; and (3) the carrier exercised
extraordinary diligence in order to minimize the
attendant damage before, during and after the
typhoon
9. Faj Construction v. Saulog, G.R. No.
200759, March 25, 2015 (Art. 1715)
Facts:
On June 15, 1999, petitioner FAJ Construction
and Development Corporation and respondent
Susan M. Saulog entered into an
Agreement6 (construction agreement) for the
construction of a residential building in San
Lorenzo Village, Makati City for a contract
price of P12,500,000.00. Payment to petitioner
contractor shall be on a progress billing basis,
after inspection of the work by respondent.
Construction of the building commenced, and
respondent made a corresponding total payment
to petitioner in the amount of P10,592,194.80.
However, for the October 31 and November 6,
2000 progress billing statements sent by
petitioner in the total amount of P851,601.58,
respondent refused to pay. After performing
additional work, petitioner made another request
for payment, but respondent again refused to
pay, prompting petitioner to terminate the
construction contract pursuant to Article 27(b)
of the Uniform General Conditions of Contract
for Private Construction (or Document 102) of
the Construction Industry Authority of the
Philippines, Department of Trade and Industry.7
Petitioner then sent demand letters to respondent
on November 24, 2000 and September 28, 2001.
In reply, respondent claimed that petitioner’s
work was defective, and that it should instead be
made liable thereon.
Issue: WON Saulog adequately prove her right
to actual damages for rectification of appellant’s
defective work
Ruling:
Yes. Article 1715 of the Civil Code provides
that the contractor shall execute the work in such
a manner that it has the qualities agreed upon
and has no defects which destroy or lessen its
value or fitness for its ordinary or stipulated use.
Should the work be not of such quality, the
employer may require that the contractor remove
the defect or execute another work. If the
contractor fails or refuses to comply with this
obligation, the employer may have the defect
removed or another work executed, at the
contractor’s cost.Evidently, Article 1715 gives
the employer the options to require the removal
of the work, to rectify the flaws in their work, or
to have the work done at the expense of the
contractor.
Here, the defective workmanship was amply
proven by Architect Rhodora Calinawan’s
testimony and documentary evidence i.e.,
photographs, receipts, and list of the expenses
needed to rectify appellant’s poorly crafted
work. Hence, We sustain the award of actual
damages based on these testimonial and
documentary evidence.
Regarding the penalty for delay in the amount of
One Million Three Hundred Eighty Seven
Thousand Five Hundred Pesos (P1,387,500.00),
the same should also be sustained. A contract is
the law between the parties, and they are bound
by its stipulations so long as they are not
contrary to law, customs, public policy and
public morals. The penalty for delay is agreed
upon by the parties themselves. The fact that
appellant was already delayed in the completion
of the duplex is undisputed. In fact, record
shows that on January 24, 2000, appellee
approved the extension requested by appellant.
This request for extension, by itself, is already
proof of delay. Thus, at the time appellant
abandoned the project, it already incurred delay.
Verily, it is only proper that appellant be made
to pay the penalty for delay after appellee no
longer agreed to any further extension.
Q: XYZ Construction and spouses Dimaano
entered into an Agreement construction
agreement) for the construction of a residential
building in San Lorenzo Village, Makati City for
a contract price of P12,500,000.00.  Payment to
XYZ contractor shall be on a progress billing
basis, after inspection of the work by spouses
Dimaano. Construction of the building
commenced, and respondent made a
corresponding total payment to XYZ
Construction in the amount of P10,592,194.80. 
However, for the October 31 and November 6,
2000 progress billing statements sent by XYZ
in the total amount of P851,601.58, spuuses
Dimaano refused to pay for defective
workmanship proven by an architect.  After
performing additional work, XYZ made another
request for payment, but spouses Dimaano again
refused to pay, prompting XYZ to terminate the
construction contract. XYZ then sent demand
letters to respondent on November 24, 2000 and
September 28, 2001.  In reply, spouses Dimaano
claimed that petitioner’s work was defective,
and that it should instead be made liable thereon.
Decide
ANS: Article 1715 gives the Spouses Dimaano
the options to require the removal of the work,
to rectify the flaws in their work, or to have the
work done at the expense of the contractor.Here,
the defective workmanship was amply proven
by an architect.  Hence, Spuses Dimaano should
not be held liable
10. Shangri-La Properties, Inc. v. BF Corp.,
G.R. Nos. 187552-53 & 187608-09, October
15, 2019 (Art. 1724)
Facts:
The present controversy originated from the
agreement of Shangri-la Properties, Inc. (SLPI)
and BF Corporation (BFC) for the execution of
the builder's work for Phases I and II, and the
Car Parking Structure (Carpark) of the EDSA
Plaza Project (Project) in Mandaluyong City,
embodied in the parties' contract documents.
SLPI was the project owner and BFC was the
trade contractor. BFC sued SLPI and the
members of the latter's board of directors
(Alfredo C. Ramos, Rufo B. Colayco, Antonio
B. Olbes, Gerardo O. Lanuza Jr., Maximo G.
Licauco III and Benjamin C. Ramos) for the
collection of P228,630,807.80. The case was
docketed as Civil Case No. 63400 in the
Regional Trial Court of Pasig City (Branch 157).
The proceedings before the trial court was
stayed by this court, as affirmed by the Supreme
Court, until termination of an arbitration
proceeding as required in their contract.
BFC filed a request for arbitration with the
Construction Industry Arbitration Commission
(CIAC), but the same was eventually dismissed,
without prejudice, on the ground that the
arbitration between BFC and SLPI must be
undertaken in accordance with Republic Act No.
876. Subsequently, the trial court revived the
case and directed the parties to proceed with the
arbitration proceeding in accordance with
R.A. No. 876. Engr. Eliseo Evangelista, Ms.
Alicia Tiongson and Atty. Mario Eugenio Lim
were tasked to resolve the controversy as
members of the Arbitral Tribunal.
Issue: WON the court of appeals gravely erred
when it denied the claims of bfc for variation
works it was compelled to perform upon the
instructions of SLPI.
Ruling:
Yes. The Court upholds the Arbitral Tribunal. In
our view, the. CA wrongly disregarded the
specific variation orders that carried the
conformity of SLPI, which, when coupled with
the letter dated May 9, 1991, satisfied the
requisites under Article 1724. Accordingly, the
Court reinstates the Arbitral Tribunal's awards in
favor of BFC for variation orders included in
progress billings amounting to
P9,513,987.91 and for change orders not
included in progress billings amounting to
P6,201,278.50. The Arbitral Tribunal correctly
ruled that BFC had complied with the twin
requirements imposed by Article 1724 of the
Civil Code. Article 1724 governs the recovery of
costs for any additional work because of a
subsequent change in the original plans. The
underlying purpose of the provision is to prevent
unnecessary litigation for additional costs
incurred by reason of additions or changes in the
original plan. The provision was undoubtedly
adopted to serve as a safeguard or as a
substantive condition precedent to recovery.  As
such, added costs can only be allowed upon: (a)
the written authority from the developer or
project owner ordering or allowing the changes
in work; and (b) upon written agreement of the
parties on the increase in price or cost due to the
change in work or design modification.
Compliance with the requisites is a condition
precedent for recovery; the absence of one
requisite bars the claim for additional costs.
Notably, neither the authority for the changes
made nor the additional price to be paid therefor
may be proved by any evidence other than the
written authority and agreement as above-stated.
Q: On November 2019, Rolly Corp undertook a
structure for a stipulated price of Php 14 million
in comformity of the plans agreed upon with the
land owner Ulysses. On February 2020, Rolly
Corp  demand an increase in the price on
account of the higher cost of labor or materials.
Can Rolly deman a n amount higher than what is
stipulated and agreed upon in the contract?
ANS: No. Article 1724. The contractor who
undertakes to build a structure or any other work
for a stipulated price, in conformity with plans
and specifications agreed upon with the land-
owner, can neither withdraw from the contract
nor demand an increase in the price on account
of the higher cost of labor or materials, save
when there has been a change in the plans and
specifications, provided:(1) Such change has
been authorized by the proprietor in writing; and
(2) The additional price to be paid to the
contractor has been determined in writing by
both parties. In this case neither of the
exceptions are present therefore, Rolly cannot
demand for a higher price other than that agreed
upon in the contract