MEMORANDUM

STATEMENT OF FACTS
The parties in this case are Vic Traders Corporation (VTC) and Mighty Glue Corporation
(MGC). MGC retains our firms service as its legal counsel and its President and principal stockholder
Mr. Ruben Santos sought our assistance as regards the case for damages filed by VTC against the
company.

MGC is a corporation which manufactures industrial glues, vulcanizing cement, rubber cement,
leather dressings, leather varnishes and cutting dies. Prior to 17 August 2005, its principal office was at
355 Aurora Boulevard, Quezon City. VTC is a merchandising and trading corporation. Prior to 17 August
2005, its principal office was at No. 353 Aurora Boulevard, Quezon City.

On 17 August 2005, at about 11:30 in the morning, a fire which was preceded by an explosion, broke out
from the Adhesives Department of MGC. The fire gutted the principal offices of MGC and VTC. On 1
January 2006, VTC filed a complaint for damages against MGC with the Regional Trial Court of Quezon
City. VTC alleged that the fire was caused by the fault or negligence of MGC and/or its employees in not
taking precautions to avoid damage to others and in failing to comply with the requirements relative to the
use and storage of highly inflammable goods and materials needed in the manufacture of its products.
Highly inflammable and flammable solvents, such as Tuluol, Pegasol and Barsol, are used to produce the
products of MGC. Specifically, the manufacture of leather dressings and leather varnishes requires the use
of nitrocellulose. To support the alleged fault or negligence of MGC, VTC claimed that:

Prior to the fire incident, MGC was in possession of nitrocellulose. This information is based on the
statement of principal witness, Manuel de los Santos who was a former employee of MGC. According to
Mr. de los Santos, he was the one who supervised the importation by MGC of four (4) drums of
nitrocellulose which was stored in MGCs Adhesive Manufacturing Department. As the one who
supervised the use of nitrocellulose, he had been advising MGC to store the drums of nitrocellulose in a
separate building outside its main building. He further stated that when he left MGC in June 2005, there
were still two (2) drums of unused nitrocellulose stored within MGC premises.

VTCs other principal witness, a former MGC employee named Reynaldo Reyes, stated that on the
date of the fire incident, he saw that something was smoking inside one of the drums stored in the
premises. He informed his supervisor, a certain Mr. Oscar Cervantes, about the smoking drum who
immediately went to check on it. Mr. Cervantes informed him and his co-employees that its content was
nitrocellulose and gave them instructions to remove anything located around the drum and to stay away
from it as well because it might explode. Shortly after the warning, the drum exploded.

The complainant seeks from MGC the payment of compensatory damages in the amount of P25 million
with legal interest from the filing of the complaint, plus exemplary damages, counsel fees, expenses of
litigation and the cost of suit.

MGC denied the presence of nitrocellulose within their premises at the time of the fire. It claimed that the
cause of the fire was of undetermined origin, probably due to an electrical short circuit. MGC has
witnesses supporting this claim.

According to Mr. Nicolas Salas, MGC had long stopped the manufacture of leather dressings which
required the use of nitrocellulose and at the time of the fire, MGCs nitrocellulose supply had already
been consumed.

Another witness, Mr. Pedro Garcia, will testify that on 17 August 2005 at about 11:00 in the
morning, he heard the ringing of the alarm bell while conferring with his supervisor. They hurriedly went
out of the conference room and saw three (3) electrical wires in MGCs premises parallel to the two (2)
meter wide alley at the height of about 8 to 10 meters burning and their insulations were peeling off and
were burning rapidly towards their opposite ends.

An expert witness named Mr. Gil Salas will testify that the excessive heating of electrical wires
carrying electrical current beyond its rated capacity may cause fire.

STATEMENT OF LAWS

VTC is accusing MGC of fault or negligence that fall under quasi-delicts. In Article 2176 of the
New Civil Code states that whoever by act or omission causes damage to another, there being fault or
negligence, is obliged to pay for the damage done. Such fault or negligence, if there is no pre-existing
contractual relation between the parties, is called a quasi-delict.

There being no contractual relation between MGC and TVC, TVC seeks payment for compensatory
damages because of the damages it suffered when its office got burned by the fire that allegedly started at
the premises of MGC.

In the case of Real v. Belo,[1] the Court ruled that the petitioner was liable because of failure to submit
proof that it exercised diligence in the operation of its business. This case could be applied to the present
case because both involved a fire incident that damaged nearby or adjoining establishment/ food stalls.
MGC could prove that it exercised due diligence in the operation of its business.

That the fire broke out due to the explosion of nitrocellulose stored in the premises of MGC is not
clearly established based on the allegations of TVCs principal witnesses.

While Manuel de los Santos, a former MGC employee, confirmed that MGC once used
nitrocellulose and that as of his separation to MGC in June 2005, there were still two (2) nitrocellulose
drums left and stored within the premises of MGC, another witness, Mr. Nicolas Salas, will testify that
MGC had stopped the production of leather dressings which required the use of nitrocellulose and that all
of MGCs nitrocellulose supply had already been used up at the time the fire occurred.

Considering having these two (2) different statements, the cause of the fire should not be limited to the
presence of nitrocellulose, if any. Mr. de los Santos had left MGC for almost two (2) months prior to the
fire incident. Several business activities/operations have already transpired which are unknown to him. He
might not be aware that MGC had already ceased the production of leather dressings and consequently,
the use of nitrocellulose. He might not be aware that all supplies of said chemical had already been used
up.

Also, MGC could prove that it was not negligent in keeping and storing the nitrocellulose supply by
showing how it was kept or stored within its premises; how it assigned employees to manage the storage
of the chemical, and how it used or consumed nitrocellulose accordingly.

Another witness for VTC was a former employee of MGC, Reynaldo Reyes, who said that he was
only told by his former supervisor that the smoking drum contained nitrocellulose. He has no personal
knowledge that the content of the drum was indeed nitrocellulose. His information primarily came from
his former boss, Mr. Oscar Cervantes who apparently, refuses to testify.

Witness for MGC, Mr. Pedro Garcia, saw burning electrical wires within MGC premises on the
date of the fire incident at almost the same time when the fire broke out. His testimony proves the
presence of an electric wiring defect and the possibility that such was the reason why a fire broke out and
not because of the nitrocellulose.


The complainant did not present a certification from the Fire Bureau or a Fire Investigation Report
pinpointing that indeed, the cause of the fire was the said nitrocellulose explosion.

RECOMMENDATION

The team recommends that MGC be extended assistance in defending its case against VTC. Being a
company that retains our services as legal counsel, we are duty-bound to protect the rights of those who or
which lay their trust on us. Canon 15 of the Code of Professional Responsibility obliges the observance of
candor, fairness and loyalty in dealing with clients. Canon 14 of the same Code prescribes the duty to
serve the needy. MGC needs to defend its cause and thereby, must be given the opportunity to be
represented by a counsel.

MGCs defense shall be grounded on its exercise of extraordinary diligence with regard to the handling
and storing of all the flammable instances within its premises. Being in the business of manufacturing for
more than five (5) years now, MGC has already taken extreme precautions to maintain the safety within
its premises. MGC has secured a Fire Safety Evaluation Clearance and Fire Safety Inspection
Clearance[2] from the Bureau of Fire Protection. It also conducts a biannual inspection of its premises as
recommended by the said Bureau to ensure that all fire safety devices installed are properly working, and
that the guidelines as to handling and storage of flammable materials are properly observed.

Also, the only evidence presented by VTC to prove its claim that it was the explosion of the drum
containing nitrocellulose that caused the fire were mere testimonies by former employees of MGC. No
evidence from the Fire department or any other investigating body was given which could conclude that it
was actually the said flammable material which could have caused the said fire. When one of the
witnesses said that his supervisor said that it was a drum containing nitrocellulose that was smoking but
he did not have personal knowledge of the contents of the said drum. His testimony can be excluded
based on Hearsay.[3]

This being the case, MGC has a defense in this case and need not settle with VTC if it does not prefer to.
We can take the matter up in court and defend MGC with the proper evidence to disprove the case of
VTC against them.

[1] Real v. Belo. G.R. No. 146224. January 26, 2007

[2] Fire Code of the Philippines (RA 9514)
[3] Section 36, Rule 130, Rules of Admissibility, Rules of Court.