Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. L-19495
February 2, 1924
HONORIO LASAM, ET AL., plaintiffs-appellants,
vs.
FRANK SMITH, JR., defendant-appellant.
Palma and Leuterio for plaintiffs-appellants.
Mariano Alisangco for defendant-appellant.
OSTRAND, J.:
The plaintiff are husband and wife and this action is brought to recover damages in the sum of P20,000 for physical injuries
sustained by them in an automobile accident. The trial court rendered a judgment in their favor for the sum of P1,254.10, with
legal interest from the date of the judgment. Both the plaintiffs and the defendant appeal, the former maintaining that the
damages awarded are insufficient while the latter denies all liability for any damages whatever.
It appears from the evidence that on February 27, 1918, the defendant was the owner of a public garage in the town of San
Fernando, La Union, and engaged in the business of carrying passengers for hire from the one point to another in the Province
of La Union and the surrounding provinces. On the date mentioned, he undertook to convey the plaintiffs from San Fernando
to Currimao, Ilocos Norte, in a Ford automobile. On leaving San Fernando, the automobile was operated by a licensed
chauffeur, but after having reached the town of San Juan, the chauffeur allowed his assistant, Remigio Bueno, to drive the car.
Bueno held no driver's license, but had some experience in driving, and with the exception of some slight engine trouble while
passing through the town of Luna, the car functioned well until after the crossing of the Abra River in Tagudin, when, according
to the testimony of the witnesses for the plaintiffs, defects developed in the steering gear so as to make accurate steering
impossible, and after zigzagging for a distance of about half a kilometer, the car left the road and went down a steep
embankment.
The defendant, in his testimony, maintains that there was no defect in the steering gear, neither before nor after the accident,
and expresses the opinion that the swaying or zigzagging of the car must have been due to its having been driven at an
excessive rate of speed. This may possibly be true, but it is, from our point of view, immaterial whether the accident was
caused by negligence on the part of the defendant's employees, or whether it was due to defects in the automobile; the result
would be practically the same in either event.
In going over the bank of the road, the automobile was overturned and the plaintiffs pinned down under it. Mr. Lasam escaped
with a few contusions and a "dislocated" rib , but his wife, Joaquina Sanchez, received serious injuries, among which was a
compound fracture of one of the bones in her left wrist. She also appears to have suffered a nervous breakdown from which
she had not fully recovered at the time of the trial.
The complaint in the case was filed about a year and a half after the occurrence above related. It alleges, among other things,
that the accident was due to defects in the automobile as well as to the incompetence and negligence of the chauffeur, and the
case appears to have been tried largely upon the theory that it sounds in tort and that the liability of the defendant is governed
by article 1903 of the Civil Code. The trial court held, however, that the cause of action rests on the defendant's breach of the
contract of carriage and that, consequently, articles 1101-1107 of the Civil Code, and not article 1903, are applicable. The
court further found that the breach of the contract was not due to fortuitous events and that, therefore, the defendant was liable
in damages.
In our opinion, the conclusions of the court below are entirely correct. That upon the facts stated the defendant's liability, if any,
is contractual, is well settled by previous decisions of the court, beginning with the case of Rakes vs. Atlantic, Gulf & Pacific Co.
(7 Phil., 359), and the distinction between extra-contractual liability and contractual liability has been so ably and exhaustively
discussed in various other cases, that nothing further need here be said upon that subject. (See Cangco vs. Manila Railroad
Co., 38 Phil., 768; Manila Railroad Co. vs. Compania Trasatlantica and Atlantic, Gulf & Pacific Co., 38 Phil., 875; De Guia vs.
Manila Electric Railroad & Light Co., 40 Phil., 706.) It is sufficient to reiterate that the source of the defendant's legal liability is
the contract of carriage; that by entering into that contract he bound himself to carry the plaintiffs safely and securely to their
destination; and that having failed to do so he is liable in damages unless he shows that the failure to fulfill his obligation was
due to causes mentioned in article 1105 of the Civil Code, which reads as follows:
No one shall be liable for events which could not be foreseen or which, even if foreseen, were inevitable, with the
exception of the cases in which the law expressly provides otherwise and those in which the obligation itself imposes
such liability.
This brings us to the principal question in the case:
What is meant by "events which cannot be foreseen and which, having been foreseen, are inevitable?" The Spanish
authorities regard the language employed as an effort to define the term caso fortuito and hold that the two expressions are
synonymous. (Manresa, Comentarios al Codigo Civil Espaol, vol. 8, pp. 88 et seq.; Scvola, Codigo Civil, vol. 19, pp. 526 et
seq.)
The antecedent to article 1105 is found in Law 11, Title 33, Partida 7, which defines caso fortuito as "occasion que a case por
aventura de que non se puede ante ver. E son estos, derrivamientos de casas e fuego que se enciende a so ora, e
quebrantamiento de navio, fuerca de ladrones. . . . (An event that takes place by accident and could not have been foreseen.
Examples of this are destruction of houses, unexpected fire, shipwreck, violence of robbers. . . .)"

Escriche defines caso fortuito as "an unexpected event or act of God which could either be foreseen nor resisted, such as
floods, torrents, shipwrecks, conflagrations, lightning, compulsion, insurrections, destructions, destruction of buildings by
unforseen accidents and other occurrences of a similar nature."
In discussing and analyzing the term caso fortuito the Enciclopedia Juridica Espaola says: "In a legal sense and,
consequently, also in relation to contracts, a caso fortuito presents the following essential characteristics: (1) The cause of the
unforeseen and unexpected occurrence, or of the failure of the debtor to comply with his obligation, must be independent of
the human will. (2) It must be impossible to foresee the event which constitutes the caso fortuito, or if it can be foreseen, it
must be impossible to avoid. (3) The occurrence must be such as to render it impossible for the debtor to fulfill his obligation in
a normal manner. And (4) the obligor (debtor) must be free from any participation in the aggravation of the injury resulting to
the creditor." (5 Enciclopedia Juridica Espaola, 309.)
As will be seen, these authorities agree that some extraordinary circumstance independent of the will of the obligor, or of his
employees, is an essential element of a caso fortuito. Turning to the present case, it is at once apparent that this element is
lacking. It is not suggested that the accident in question was due to an act of God or to adverse road conditions which could
not have been foreseen. As far as the records shows, the accident was caused either by defects in the automobile or else
through the negligence of its driver. That is not a caso fortuito.
We agree with counsel that neither under the American nor Spanish law is a carrier of passengers an absolute insurer against
the risks of travel from which the passenger may protect himself by exercising ordinary care and diligence. The case of Alba vs.
Sociedad Anonima de Tranvias, Jurisprudencia Civil, vol. 102, p. 928, cited by the defendant in support of his contentions,
affords a good illustration of the application of this principle. In that case Alba, a passenger on a street car, was standing on
the platform of the car while it was in motion. The car rounded a curve causing Alba to lose his balance and fall off the platform,
sustaining severe injuries. In an action brought by him to recover damages, the supreme court of Spain held that inasmuch as
the car at the time of the accident was travelling at a moderate rate of speed and there was no infraction of the regulations,
and the plaintiff was exposed to no greater danger than that inherent in that particular mode of travel, the plaintiff could not
recover, especially so since he should have been on his guard against a contingency as natural as that of losing his balance to
a greater or less extent when the car rounded the curve.
But such is not the present case; here the passengers had no means of avoiding the danger or escaping the injury.
The plaintiffs maintain that the evidence clearly establishes that they are entitled to damages in the sum of P7,832.80 instead
of P1,254.10 as found by the trial court, and their assignments of error relate to this point only.
There can be no doubt that the expenses incurred by the plaintiffs as a result of the accident greatly exceeded the amount of
the damages awarded. But bearing in mind that in determining the extent of the liability for losses or damages resulting from
negligence in the fulfillment of a contractual obligation, the courts have "a discretionary power to moderate the liability
according to the circumstances" (De Guia vs. Manila Electric Railroad & Light Co., 40 Phil., 706; art. 1103, Civil Code), we do
not think that the evidence is such as to justify us in interfering with the discretion of the court below in this respect. As pointed
out by that court in its well-reasoned and well-considered decision, by far the greater part of the damages claimed by the
plaintiffs resulted from the fracture of a bone in the left wrist of Joaquina Sanchez and from her objections to having a
decaying splinter of the bone removed by a surgical operation. As a consequence of her refusal to submit such an operation, a
series of infections ensued and which required constant and expensive medical treatment for several years. We agree with the
court below that the defendant should not be charged with these expenses.
For the reasons stated, the judgment appealed from is affirmed, without costs in this instance. So ordered.
Araullo, C.J., Street, Malcolm, Johns and Romualdez, JJ., concur.

Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. L-21749
September 29, 1967
REPUBLIC OF THE PHILIPPINES, plaintiff-appellee,
vs.
LUZON STEVEDORING CORPORATION, defendant-appellant.
Office of the Solicitor General for plaintiff-appellee.
H. San Luis and L.V. Simbulan for defendant-appellant.
REYES, J.B.L., J.:
The present case comes by direct appeal from a decision of the Court of First Instance of Manila (Case No. 44572) adjudging
the defendant-appellant, Luzon Stevedoring Corporation, liable in damages to the plaintiff-appellee Republic of the Philippines.
In the early afternoon of August 17, 1960, barge L-1892, owned by the Luzon Stevedoring Corporation was being towed down
the Pasig river by tugboats "Bangus" and "Barbero"1 also belonging to the same corporation, when the barge rammed against
one of the wooden piles of the Nagtahan bailey bridge, smashing the posts and causing the bridge to list. The river, at the time,
was swollen and the current swift, on account of the heavy downpour of Manila and the surrounding provinces on August 15
and 16, 1960.
Sued by the Republic of the Philippines for actual and consequential damage caused by its employees, amounting to
P200,000 (Civil Case No. 44562, CFI of Manila), defendant Luzon Stevedoring Corporation disclaimed liability therefor, on the
grounds that it had exercised due diligence in the selection and supervision of its employees; that the damages to the bridge
were caused by force majeure; that plaintiff has no capacity to sue; and that the Nagtahan bailey bridge is an obstruction to
navigation.
After due trial, the court rendered judgment on June 11, 1963, holding the defendant liable for the damage caused by its
employees and ordering it to pay to plaintiff the actual cost of the repair of the Nagtahan bailey bridge which amounted to
P192,561.72, with legal interest thereon from the date of the filing of the complaint.
Defendant appealed directly to this Court assigning the following errors allegedly committed by the court a quo, to wit:
I The lower court erred in not holding that the herein defendant-appellant had exercised the diligence required of it
in the selection and supervision of its personnel to prevent damage or injury to others.1awphl.nt
II The lower court erred in not holding that the ramming of the Nagtahan bailey bridge by barge L-1892 was
caused by force majeure.
III The lower court erred in not holding that the Nagtahan bailey bridge is an obstruction, if not a menace, to
navigation in the Pasig river.
IV The lower court erred in not blaming the damage sustained by the Nagtahan bailey bridge to the improper
placement of the dolphins.
V The lower court erred in granting plaintiff's motion to adduce further evidence in chief after it has rested its case.
VI The lower court erred in finding the plaintiff entitled to the amount of P192,561.72 for damages which is clearly
exorbitant and without any factual basis.
However, it must be recalled that the established rule in this jurisdiction is that when a party appeals directly to the Supreme
Court, and submits his case there for decision, he is deemed to have waived the right to dispute any finding of fact made by
the trial Court. The only questions that may be raised are those of law (Savellano vs. Diaz, L-17441, July 31, 1963; Aballe vs.
Santiago, L-16307, April 30, 1963; G.S.I.S. vs. Cloribel, L-22236, June 22, 1965). A converso, a party who resorts to the Court
of Appeals, and submits his case for decision there, is barred from contending later that his claim was beyond the jurisdiction
of the aforesaid Court. The reason is that a contrary rule would encourage the undesirable practice of appellants' submitting
their cases for decision to either court in expectation of favorable judgment, but with intent of attacking its jurisdiction should
the decision be unfavorable (Tyson Tan, et al. vs. Filipinas Compaia de Seguros) et al., L-10096, Res. on Motion to
Reconsider, March 23, 1966). Consequently, we are limited in this appeal to the issues of law raised in the appellant's brief.
Taking the aforesaid rules into account, it can be seen that the only reviewable issues in this appeal are reduced to two:
1) Whether or not the collision of appellant's barge with the supports or piers of the Nagtahan bridge was in law
caused by fortuitous event or force majeure, and
2) Whether or not it was error for the Court to have permitted the plaintiff-appellee to introduce additional evidence of
damages after said party had rested its case.
As to the first question, considering that the Nagtahan bridge was an immovable and stationary object and uncontrovertedly
provided with adequate openings for the passage of water craft, including barges like of appellant's, it is undeniable that the
unusual event that the barge, exclusively controlled by appellant, rammed the bridge supports raises a presumption of
negligence on the part of appellant or its employees manning the barge or the tugs that towed it. For in the ordinary course of
events, such a thing does not happen if proper care is used. In Anglo American Jurisprudence, the inference arises by what is
known as the "res ipsa loquitur" rule (Scott vs. London Docks Co., 2 H & C 596; San Juan Light & Transit Co. vs. Requena,

224 U.S. 89, 56 L. Ed., 680; Whitwell vs. Wolf, 127 Minn. 529, 149 N.W. 299; Bryne vs. Great Atlantic & Pacific Tea Co., 269
Mass. 130; 168 N.E. 540; Gribsby vs. Smith, 146 S.W. 2d 719).
The appellant strongly stresses the precautions taken by it on the day in question: that it assigned two of its most powerful
tugboats to tow down river its barge L-1892; that it assigned to the task the more competent and experienced among
its patrons, had the towlines, engines and equipment double-checked and inspected; that it instructed its patrons to take extra
precautions; and concludes that it had done all it was called to do, and that the accident, therefore, should be held due to force
majeure or fortuitous event.
These very precautions, however, completely destroy the appellant's defense. For caso fortuito or force majeure(which in law
are identical in so far as they exempt an obligor from liability)2 by definition, are extraordinary events not foreseeable or
avoidable, "events that could not be foreseen, or which, though foreseen, were inevitable" (Art. 1174, Civ. Code of the
Philippines). 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: "un hecho no constituye caso fortuito por la sola circunstancia de que su existencia haga mas dificil o mas onerosa
la accion diligente del presento ofensor" (Peirano Facio, Responsibilidad Extra-contractual, p. 465; Mazeaud Trait de la
Responsibilite Civil, Vol. 2, sec. 1569). The very measures adopted by appellant prove that the possibility of danger was not
only foreseeable, but actually foreseen, and was not caso fortuito.
Otherwise stated, the appellant, Luzon Stevedoring Corporation, knowing and appreciating the perils posed by the swollen
stream and its swift current, voluntarily entered into a situation involving obvious danger; it therefore assured the risk, and can
not shed responsibility merely because the precautions it adopted turned out to be insufficient. Hence, the lower Court
committed no error in holding it negligent in not suspending operations and in holding it liable for the damages caused.
It avails the appellant naught to argue that the dolphins, like the bridge, were improperly located. Even if true, these
circumstances would merely emphasize the need of even higher degree of care on appellant's part in the situation involved in
the present case. The appellant, whose barges and tugs travel up and down the river everyday, could not safely ignore the
danger posed by these allegedly improper constructions that had been erected, and in place, for years.
On the second point: appellant charges the lower court with having abused its discretion in the admission of plaintiff's
additional evidence after the latter had rested its case. There is an insinuation that the delay was deliberate to enable the
manipulation of evidence to prejudice defendant-appellant.
We find no merit in the contention. Whether or not further evidence will be allowed after a party offering the evidence has
rested his case, lies within the sound discretion of the trial Judge, and this discretion will not be reviewed except in clear case
of abuse.3
In the present case, no abuse of that discretion is shown. What was allowed to be introduced, after plaintiff had rested its
evidence in chief, were vouchers and papers to support an item of P1,558.00 allegedly spent for the reinforcement of the panel
of the bailey bridge, and which item already appeared in Exhibit GG. Appellant, in fact, has no reason to charge the trial court
of being unfair, because it was also able to secure, upon written motion, a similar order dated November 24, 1962, allowing
reception of additional evidence for the said defendant-appellant.4
WHEREFORE, finding no error in the decision of the lower Court appealed from, the same is hereby affirmed. Costs against
the defendant-appellant.
Concepcion, C.J., Dizon, Makalintal, Zaldivar, Sanchez, Castro, Angeles and Fernando, JJ., concur.
Bengzon, J.P. J., on leave, took no part.

Republic of the Philippines

SUPREME COURT
Manila
EN BANC
G.R. No. L-29640 June 10, 1971
GUILLERMO AUSTRIA, petitioner,
vs.
THE COURT OF APPEALS (Second Division), PACIFICO ABAD and MARIA G. ABAD, respondents.
Antonio Enrile Inton for petitioner.
Jose A. Buendia for respondents.
REYES, J.B.L., J.:
Guillermo Austria petitions for the review of the decision rendered by the Court of Appeal (in CA-G.R. No. 33572-R), on the
sole issue of 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.
In a receipt dated 30 January 1961, Maria G. Abad acknowledged having received from Guillermo Austria one (1) pendant
with diamonds valued at P4,500.00, to be sold on commission basis or to be returned on demand. On 1 February 1961,
however, while walking home to her residence in Mandaluyong, Rizal, 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. Among the pieces
of jewelry allegedly taken by the robbers was the consigned pendant. The incident became the subject of a criminal case filed
in the Court of First Instance of Rizal against certain persons (Criminal Case No. 10649, People vs. Rene Garcia, et al.).
As 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. Answering the
allegations of the complaint, defendants spouses set up the defense that the alleged robbery had extinguished their obligation.
After due hearing, the trial court rendered judgment for the plaintiff, and ordered defendants spouses, jointly and severally, to
pay to the former the sum of P4,500.00, with legal interest thereon, plus the amount of P450.00 as reasonable attorneys' fees,
and the costs. It was held that defendants failed to prove the fact of robbery, or, if indeed it was committed, that defendant
Maria Abad was guilty of negligence when she went home without any companion, although it was already getting dark and
she was carrying a large amount of cash and valuables on the day in question, and such negligence did not free her from
liability for damages for the loss of the jewelry.
Not satisfied with his decision, the defendants went to the Court of Appeals, and there secured a reversal of the judgment. The
appellate court overruling the finding of the trial court on the lack of credibility of the two defense witnesses who testified on the
occurrence of the robbery, and holding that the facts of robbery and defendant Maria Abad's possesion of the pendant on that
unfortunate day have been duly published, declared respondents not responsible for the loss of the jewelry on account of a
fortuitous event, and relieved them from liability for damages to the owner. Plaintiff thereupon instituted the present proceeding.
It is now contended by herein petitioner that the Court of Appeals erred in finding that there was robbery in the case, although
nobody has been found guilty of the supposed crime. It is petitioner's theory that for robbery to fall under the category of a
fortuitous event and relieve the obligor from his obligation under a contract, pursuant to Article 1174 of the new Civil Code,
there ought to be prior finding on the guilt of the persons responsible therefor. In short, that the occurrence of the robbery
should be proved by a final judgment of conviction in the criminal case. To adopt a different view, petitioner argues, would be
to encourage persons accountable for goods or properties received in trust or consignment to connive with others, who would
be willing to be accused in court for the robbery, in order to be absolved from civil liability for the loss or disappearance of the
entrusted articles.
We find no merit in the contention of petitioner.
It is recognized in this jurisdiction that to constitute a caso fortuito that would exempt a person from responsibility, it is
necessary that (1) the event must be independent of the human will (or rather, of the debtor's or obligor's); (2) the occurrence
must render it impossible for the debtor to fulfill the obligation in a normal manner; and that (3) the obligor must be free of
participation in or aggravation of the injury to the creditor. 1 A fortuitous event, therefore, can be produced by nature, e.g.,
earthquakes, storms, floods, etc., or by the act of man, such as war, attack by bandits, robbery, 2 etc., provided that the event
has all the characteristics enumerated above.
It is not here disputed that if respondent Maria Abad were indeed the victim of robbery, and if it were really true that the
pendant, which she was obliged either to sell on commission or to return to petitioner, were taken during the robbery, then the
occurrence of that fortuitous event would have extinguished her liability. The point at issue in this proceeding is how the fact of
robbery is to be established in order that a person may avail of the exempting provision of Article 1174 of the new Civil Code,
which reads as follows:
ART. 1174. Except in cases expressly specified by 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.
It may be noted the reform that the emphasis of the provision is on the events, not on the agents or factors responsible for
them. To avail of the exemption granted in the law, it is not necessary that the persons responsible for the occurrence should

be found or punished; it would only be sufficient to established 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. To require in the
present action for recovery the prior conviction of the culprits in the criminal case, in order to establish the robbery as a fact,
would be to demand proof beyond reasonable doubt to prove a fact in a civil case.
It is undeniable that in order to completely exonerate the debtor for reason of a fortutious event, such debtor must, in addition
to the cams itself, be free of any concurrent or contributory fault or negligence. 3 This is apparent from Article 1170 of the Civil
Code of the Philippines, providing that:
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.
It is clear that under the circumstances prevailing at present in the City of Manila and its suburbs, with their high incidence of
crimes against persons and property that renders travel after nightfall a matter to be sedulously avoided without suitable
precaution and protection, the conduct of respondent Maria G. Abad, in returning alone to her house in the evening, carrying
jewelry of considerable value would be negligent per se and would not exempt her from responsibility in the case of a robbery.
We are not persuaded, however, that the same rule should obtain ten years previously, in 1961, when the robbery in question
did take place, for at that time criminality had not by far reached the levels attained in the present day.
There is likewise no merit in petitioner's argument that to allow the fact of robbery to be recognized in the civil case before
conviction is secured in the criminal action, would prejudice the latter case, or would result in inconsistency should the
accused obtain an acquittal or should the criminal case be dismissed. It must be realized 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
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.
WHEREFORE, finding no error in the decision of the Court of Appeals under review, the petition in this case is hereby
dismissed with costs against the petitioner.
Concepcion, C.J., Dizon, Makalintal, Zaldivar, Fernando, Teehankee, Barredo, Villamor and Makasiar, JJ., concur.
Castro, J., took no part.

Republic of the Philippines

SUPREME COURT
Manila
SECOND DIVISION
G.R. No. L-47772 August 31, 1978
INOCENCIO TUGADE, petitioner,
vs.
COURT OF PEALS, and PEOPLE OF THE PHILIPPINES, respondents.
Manuel M. Camacho for petitioner.
Solicitor General Estelito P. Mendoza, Assistant Solicitor General Nathanael P. de Pano, Jr. and Solicitor Francisco J. Bautista
for respondents.
FERNANDO, J.:
There is nothing impressive about this petition sinking to justify a review of a decision of respondent Court of Appeals on the
ground that instead of relying on what counsel considers applicable rulings of: respondent Court,. the judgment was based, on
a case decided by this Tribunal Moreover, counsel for petitioner ignored earlier doctrines of this Court consistently holding that
a mishap caused by defective brakes could not be considered as fortuitous in character and thus caged for an acquittal of the
driver if subsequently haled to court. This Court, nonetheless, was persuaded to give due course to the petition primarily for
clarifying the state of the law and thus hopefully avoid any further lurking doubt on the matter. It is quite evident that the
reversal of the decision sought to be reviewed is not justified.
The decision of respondent Court, with Justice Julia Agrava as ponente, set forth the relevant facto thus: "At about 9:15 o'clock
in the morning of January 4,, 1972, Rodolfo [Rayan- dayan] was driving a Hodlen Kingswood car (the [Holden] car), plate No.
52-19V (L-Rizal '71) owned by the Sta. Ines Corp. and assigned for use of its manager, an Ayala Avenue in Makati, Rizal,
going northwards. At the intersection of Ayala Avenue will Mabati Avenue, [Rayan-dayan] was going to turn left on Makati
Avenue but he stopped to wait for the left-turn signal and because a jeep in front of him was also at a stop ... While in that sup
position, the [Holden] car was bumped from behind by Blue Car Taxi bearing Plate No. 55-71R (TX-QC '71) and by Inocencio
[Tugade] causing damage to the [Holden] car, the repairs of which cost P778.10 ... [Tugade] was then charged with Reckless
Imprudence Resulting in Damage to Property. He pleaded not guilty and while admitting that the collision was caused by faulty
brakes of his taxicab, sought to expeculate himself with an explanation that this fault could not and should not be traced to him.
after trial, the lower court held: '[Accordingly], the court finds that accused Inocencio Tugade guilty beyond reasonable doubt of
the crime of reckless imprudence resulting in damage to property and hereby sentences him to pay a [fine of one thousand
(P1,000.00) pesos], with subsidiary imprisonment in case of insolvency in accordance with the provisions of Article 39 of the
Revised, Penal Code, as amended, to indemnify the Sta. Ines Mining Corporation in the amount of P778.10 by way of actual
damages; and to pay the costs.' While [Tugade] admitted the facts of the case as set out above, he, nevertheless, appealed
from the judgment reiterating that 'the malfunctioning of the brakes at the time of the accident was due to a mechanical defect
which even the exercise of due diligence of a good father of a family cannot have prevented.' As the lower court had found:
"this witness ([Tugade]) testified that after the accident, he admitted that his taxicab bumped the car on his front because the
brakes of his vehicle malfunctioned; and that the document, ..., is the handwritten statement he prepared to this
effect." 1 Respondent Court of Appeals, after stating that upon review of the record, it agreed with the trial court, its decision
affirming in toto their judgment appealed from.
As noted at the outset, petitioner is not entitled to acquittal. His plea for the reversal of the decision reached by respondent
Court is not impressed with merit. At the most, as was likewise previously mentioned, the fine imposed could be reduced.
1. Counsel for petitioner vigorously contends that respondent Court of Appeals ought not to have applied the pronouncement
in La Mallorca and Pampanga Bus Co. vs. De Jesus 2 on the ground that it was obiter dictum. That is not the case at all. A little
more time and attention in the study of the above decision could have resulted in its correct appraisal He would have realized
then that respondent Court acted correctly. This Tribunal passed squarely on the specific issue raised. The opinion penned by
the then Justice, later Chief Justice, Makalintal, is categorical: "Petitioner maintains that a tire blow-out is a fortuitous event
and gives rise to no liability for negligence, citing the rulings of the Court of Appeals in Rodriguez V. Red Line Transportation
Co., CA-G.R. No. 8136, December 29, 1954, and People v. Palapal, CA-G.R. No. 18480, June 27, 1958. These rulings,
however, not only are not binding on this Court but were based on considerations, quite different from those that obtain in the
case at bar." 3 The above doctrine is controlling. The reference to the Court of appeals decisions is of no moment. 4 It may be
printed out that they were not ignored in the opinion of Justice Agrava, six of its nine pages being devoted to distinguishing
them. Even without the La Mallorca ruling then, the decision of respondent Court sought to be reviewed can stand the test of
strict scrutiny. It is this Tribunal, not respondent Court of Appeals, that speaks authoritatively.
2. Respondent Court of Appeals really was devoid of any choice at all. It could not have ruled in any other way on the legal
question raised. This Tribunal having spoken, its duty was to obey. It is as simple as that. There is relevance to this excerpt
from Barrera v. Barrera: 5 "The delicate task of ascertaining the significance that attaches to a constitutional or statutory
provision, an executive order, a procedural norm or a municipal ordinance is committed to the judiciary. It thus discharges a
role no less crucial than that appertaining to the other two departments in the maintenance of the rule of law. To assure
stability in legal relations and avoid confusion, it has to speak with one voice. It does so with finality, logically and rightly,
through the highest judicial organ, this Court. What it says then should be definitive and authoritative, binding on those

occupying the lower ranks in the judicial heirarchy. They have to defer and to submit." 6 The ensuing paragraph of the opinion
in Barrera further emphasizes the point: "Such a thought was reiterated in an opinion of Justice J.B.L. Reyes and further
emphasized in these words: "Judge Gaudencio Cloribel need not be reminded that the Supreme Court, by tradition and in our
system of judicial administration, has the last word on what the law is it is the final arbiter of any justifiable controversy. There
is only one Supreme Court from whose decisions all other courts should take their bearings." 7
3. The lack of merit in this petition becomes even more obvious when it is recalled that the La Mallorca decision did not
enunciate a new principle. As far back as Lasam v. Smith, 8 promulgated more than half a century ago, in 1924 to be exact,
this Court has been committed to such a doctrine. Thus; "As will be seen, these authorities agree that some extraordinary
circumstance independent of the will of the obligor, or of his employees, is an essential element of a caso fortuito. Turning to
the present case, it is at once apparent that this element is lacking. It is not suggested that the accident in question was due to
an act of God or to adverse road conditions which could not have been foreseen. As far as the record shows, the accident was
caused either by defects in the automobile or else through the negligence of its driver. That is not a caso fortuito." 9 Lasam
was cited with approval in the two subsequent cases of Son v. Cebu Autobus Co. 10 and Necesito v. Paras. 11
WHEREFORE, The decision of respondent Court of Appeals of December 15, 1977 is affirmed. No costs.
Barredo, Antonio, Aquino, Concepcion, Jr., and Santos, JJ., concur.

THIRD DIVISION
[G.R. No. 126389. July 10, 1998]
SOUTHEASTERN COLLEGE, INC., petitioner, vs. COURT OF APPEALS, JUANITA DE JESUS VDA. DE DIMAANO,
EMERITA
DIMAANO,
REMEDIOS
DIMAANO,
CONSOLACION
DIMAANO
and
MILAGROS
DIMAANO, respondents.
DECISION
PURISIMA, J.:
Petition for review under Rule 45 of the Rules of Court seeking to set aside the Decision[1] promulgated on July 31, 1996,
and Resolution[2] dated September 12, 1996 of the Court of Appeals[3] in CA-G.R. No. 41422, entitled Juanita de Jesus vda. de
Dimaano, et al. vs. Southeastern College, Inc., which reduced the moral damages awarded below fromP1,000,000.00
to P200,000.00.[4] The Resolution under attack denied petitioners motion for reconsideration.
Private respondents are owners of a house at 326 College Road, Pasay City, while petitioner owns a four-storey school
building along the same College Road. On October 11, 1989, at about 6:30 in the morning, a powerful typhoon Saling hit
Metro Manila. Buffeted by very strong winds, the roof of petitioners building was partly ripped off and blown away, landing on
and destroying portions of the roofing of private respondents house. After the typhoon had passed, an ocular inspection of the
destroyed buildings was conducted by a team of engineers headed by the city building official, Engr. Jesus L. Reyna. Pertinent
aspects of the latters Report[5] dated October 18, 1989 stated, as follows:
5. One of the factors that may have led to this calamitous event is the formation of the buildings in the area and the general
direction of the wind. Situated in the peripheral lot is an almost U-shaped formation of 4-storey building. Thus, with the strong
winds having a westerly direction, the general formation of the buildings becomes a big funnel-like structure, the one situated
along College Road, receiving the heaviest impact of the strong winds. Hence, there are portions of the roofing, those located
on both ends of the building, which remained intact after the storm.
6. Another factor and perhaps the most likely reason for the dislodging of the roofings structural trusses is the improper
anchorage of the said trusses to the roof beams. The 1/2 diameter steel bars embedded on the concrete roof beams which
serve as truss anchorage are not bolted nor nailed to the trusses. Still, there are other steel bars which were not even bent to
the trusses, thus, those trusses are not anchored at all to the roof beams.
It then recommended that to avoid any further loss and damage to lives, limbs and property of persons living in the vicinity, the
fourth floor of subject school building be declared as a structural hazard.
In their Complaint[6] before the Regional Trial Court of Pasay City, Branch 117, for damages based on culpa
aquiliana, private respondents alleged that the damage to their house rendered the same uninhabitable, forcing them to stay
temporarily in others houses. And so they sought to recover from petitioner P117,116.00, as actual damages, P1,000,000.00,
as moral damages, P300,000.00, as exemplary damages and P100,000.00, for and as attorneys fees; plus costs.
In its Answer, petitioner averred that subject school building had withstood several devastating typhoons and other
calamities in the past, without its roofing or any portion thereof giving way; that it has not been remiss in its responsibility to
see to it that said school building, which houses school children, faculty members, and employees, is in tip-top condition; and
furthermore, typhoon Saling was an act of God and therefore beyond human control such that petitioner cannot be answerable
for the damages wrought thereby, absent any negligence on its part.
The trial court, giving credence to the ocular inspection report to the effect that subject school building had a defective
roofing structure, found that, while typhoon Saling was accompanied by strong winds, the damage to private respondents
house could have been avoided if the construction of the roof of [petitioners] building was not faulty. The dispositive portion of
the lower courts decision[7] reads thus:
WHEREFORE, in view of the foregoing, the Court renders judgment (sic) in favor of the plaintiff (sic) and against the
defendants, (sic) ordering the latter to pay jointly and severally the former as follows:
a) P117,116.00, as actual damages, plus litigation expenses;
b) P1,000,000.00 as moral damages;
c) P100,000.00 as attorneys fees;
d) Costs of the instant suit.
The claim for exemplary damages is denied for the reason that the defendants (sic) did not act in a wanton fraudulent,
reckless, oppressive or malevolent manner.
In its appeal to the Court of Appeals, petitioner assigned as errors,[8] that:
I
THE TRIAL COURT ERRED IN HOLDING THAT TYPHOON SALING, AS AN ACT OF GOD, IS NOT THE
SOLE AND ABSOLUTE REASON FOR THE RIPPING-OFF OF THE SMALL PORTION OF THE ROOF OF
SOUTHEASTERNS FOUR (4) STOREY SCHOOL BUILDING.
II
THE TRIAL COURT ERRED IN HOLDING THAT THE CONSTRUCTION OF THE ROOF OF DEFENDANTS
SCHOOL BUILDING WAS FAULTY NOTWITHSTANDING THE ADMISSION THAT THERE WERE TYPHOONS
BEFORE BUT NOT AS GRAVE AS TYPHOON SALING WHICH IS THE DIRECT AND PROXIMATE CAUSE OF
THE INCIDENT.
III

THE TRIAL COURT ERRED IN AWARDING ACTUAL AND MORAL DAMAGES AS WELL AS ATTORNEYS
FEES AND LITIGATION EXPENSES AND COSTS OF SUIT TO DIMAANOS WHEN THEY HAVE NOT
INCURRED ACTUAL DAMAGES AT ALL AS DIMAANOS HAVE ALREADY SOLD THEIR PROPERTY, AN
INTERVENING EVENT THAT RENDERS THIS CASE MOOT AND ACADEMIC.
IV
THE TRIAL COURT ERRED IN ORDERING THE ISSUANCE OF THE WRIT OF EXECUTION INSPITE OF
THE PERFECTION OF SOUTHEASTERNS APPEAL WHEN THERE IS NO COMPELLING REASON FOR THE
ISSUANCE THERETO.
As mentioned earlier, respondent Court of Appeals affirmed with modification the trial courts disposition by reducing the
award of moral damages from P1,000,000.00 to P200,000.00. Hence, petitioners resort to this Court, raising for resolution the
issues of:
1. Whether or not the award of actual damage [sic] to respondent Dimaanos on the basis of speculation or conjecture, without
proof or receipts of actual damage, [sic] legally feasible or justified.
2. Whether or not the award of moral damages to respondent Dimaanos, without the latter having suffered, actual damage has
legal basis.
3. Whether or not respondent Dimaanos who are no longer the owner of the property, subject matter of the case, during its
pendency, has the right to pursue their complaint against petitioner when the case was already rendered moot and academic
by the sale of the property to third party.
4. Whether or not the award of attorneys fees when the case was already moot and academic [sic] legally justified.
5. Whether or not petitioner is liable for damage caused to others by typhoon Saling being an act of God.
6. Whether or not the issuance of a writ of execution pending appeal, ex-parte or without hearing, has support in law.
The pivot of inquiry here, determinative of the other issues, is whether the damage on the roof of the building of private
respondents resulting from the impact of the falling portions of the school buildings roof ripped off by the strong winds of
typhoon Saling, was, within legal contemplation, due to fortuitous event? If so, petitioner cannot be held liable for the damages
suffered by the private respondents. This conclusion finds support in Article 1174 of the Civil Code, which 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.
The antecedent of fortuitous event or caso fortuito is found in the Partidas which defines it as an event which takes place
by accident and could not have been foreseen.[9]Escriche elaborates it as an unexpected event or act of God which could
neither be foreseen nor resisted.[10] Civilist Arturo M. Tolentino adds that [f]ortuitous events may be produced by two general
causes: (1) by nature, such as earthquakes, storms, floods, epidemics, fires, etc. and (2) by the act of man, such as an armed
invasion, attack by bandits, governmental prohibitions, robbery, etc.[11]
In order that a fortuitous event may exempt a person from liability, it is necessary that he be free from any previous
negligence or misconduct by reason of which the loss may have been occasioned.[12] An act of God cannot be invoked for the
protection of a person who has been guilty of gross negligence in not trying to forestall its possible adverse
consequences. When a persons negligence concurs with an act of God in producing damage or injury to another, such person
is not exempt from liability by showing that the immediate or proximate cause of the damage or injury was a fortuitous
event. When the effect is found to be partly the result of the participation of man whether it be from active intervention, or
neglect, or failure to act the whole occurrence is hereby humanized, and removed from the rules applicable to acts of God.[13]
In the case under consideration, the lower court accorded full credence to the finding of the investigating team that
subject school buildings roofing had no sufficient anchorage to hold it in position especially when battered by strong
winds. Based on such finding, the trial court imputed negligence to petitioner and adjudged it liable for damages to private
respondents.
After a thorough study and evaluation of the evidence on record, this Court believes otherwise, notwithstanding the
general rule that factual findings by the trial court, especially when affirmed by the appellate court, are binding and conclusive
upon this Court.[14] After a careful scrutiny of the records and the pleadings submitted by the parties, we find exception to this
rule and hold that the lower courts misappreciated the evidence proffered.
There is no question that a typhoon or storm is a fortuitous event, a natural occurrence which may be foreseen but is
unavoidable despite any amount of foresight, diligence or care.[15] In order to be exempt from liability arising from any adverse
consequence engendered thereby, there should have been no human participation amounting to a negligent act.[16] In other
words, the person seeking exoneration from liability must not be guilty of negligence. Negligence, as commonly understood, is
conduct which naturally or reasonably creates undue risk or harm to others. It may be the failure to observe that degree of
care, precaution, and vigilance which the circumstances justly demand,[17] or the omission to do something which a prudent
and reasonable man, guided by considerations which ordinarily regulate the conduct of human affairs, would do.[18] From these
premises, we proceed to determine whether petitioner was negligent, such that if it were not, the damage caused to private
respondents house could have been avoided?
At the outset, it bears emphasizing that a person claiming damages for the negligence of another has the burden of
proving the existence of fault or negligence causative of his injury or loss. The facts constitutive of negligence must be
affirmatively established by competent evidence,[19] not merely by presumptions and conclusions without basis in fact.Private
respondents, in establishing the culpability of petitioner, merely relied on the aforementioned report submitted by a team which
made an ocular inspection of petitioners school building after the typhoon. As the term imparts, an ocular inspection is one by

means of actual sight or viewing.[20] What is visual to the eye though, is not always reflective of the real cause behind. For
instance, one who hears a gunshot and then sees a wounded person, cannot always definitely conclude that a third person
shot the victim. It could have been self-inflicted or caused accidentally by a stray bullet. The relationship of cause and effect
must be clearly shown.
In the present case, other than the said ocular inspection, no investigation was conducted to determine the real cause of
the partial unroofing of petitioners school building.Private respondents did not even show that the plans, specifications and
design of said school building were deficient and defective. Neither did they prove any substantial deviation from the approved
plans and specifications. Nor did they conclusively establish that the construction of such building was basically flawed.[21]
On the other hand, petitioner elicited from one of the witnesses of private respondents, city building official Jesus Reyna,
that the original plans and design of petitioners school building were approved prior to its construction. Engr. Reyna admitted
that it was a legal requirement before the construction of any building to obtain a permit from the city building official (city
engineer, prior to the passage of the Building Act of 1977). In like manner, after construction of the building, a certification
must be secured from the same official attesting to the readiness for occupancy of the edifice. Having obtained both building
permit and certificate of occupancy, these are, at the very least, prima facie evidence of the regular and proper construction of
subject school building.[22]
Furthermore, when part of its roof needed repairs of the damage inflicted by typhoon Saling, the same city official gave
the go-signal for such repairs without any deviation from the original design and subsequently, authorized the use of the entire
fourth floor of the same building. These only prove that subject building suffers from no structural defect, contrary to the report
that its U-shaped form was structurally defective. Having given his unqualified imprimatur, the city building official is presumed
to have properly performed his duties[23] in connection therewith.
In addition, petitioner presented its vice president for finance and administration who testified that an annual maintenance
inspection and repair of subject school building were regularly undertaken. Petitioner was even willing to present its
maintenance supervisor to attest to the extent of such regular inspection but private respondents agreed to dispense with his
testimony and simply stipulated that it would be corroborative of the vice presidents narration.
Moreover, the city building official, who has been in the city government service since 1974, admitted in open court that
no complaint regarding any defect on the same structure has ever been lodged before his office prior to the institution of the
case at bench. It is a matter of judicial notice that typhoons are common occurrences in this country. If subject school buildings
roofing was not firmly anchored to its trusses, obviously, it could not have withstood long years and several typhoons even
stronger than Saling.
In light of the foregoing, we find no clear and convincing evidence to sustain the judgment of the appellate court. We thus
hold that petitioner has not been shown negligent or at fault regarding the construction and maintenance of its school building
in question and that typhoon Saling was the proximate cause of the damage suffered by private respondents house.
With this disposition on the pivotal issue, private respondents claim for actual and moral damages as well as attorneys
fees must fail.[24] Petitioner cannot be made to answer for a purely fortuitous event.[25] More so because no bad faith or willful
act to cause damage was alleged and proven to warrant moral damages.
Private respondents failed to adduce adequate and competent proof of the pecuniary loss they actually incurred.[26] It is
not enough that the damage be capable of proof but must be actually proved with a reasonable degree of certainty, pointing
out specific facts that afford a basis for measuring whatever compensatory damages are borne.[27] Private respondents merely
submitted an estimated amount needed for the repair of the roof of their subject building. What is more, whether the necessary
repairs were caused ONLY by petitioners alleged negligence in the maintenance of its school building, or included the ordinary
wear and tear of the house itself, is an essential question that remains indeterminable.
The Court deems unnecessary to resolve the other issues posed by petitioner.
As regards the sixth issue, however, the writ of execution issued on April 1, 1993 by the trial court is hereby nullified and
set aside. Private respondents are ordered to reimburse any amount or return to petitioner any property which they may have
received by virtue of the enforcement of said writ.
WHEREFORE, the petition is GRANTED and the challenged Decision is REVERSED. The complaint of private
respondents in Civil Case No. 7314 before the trial court a quois ordered DISMISSED and the writ of execution issued on April
1, 1993 in said case is SET ASIDE. Accordingly, private respondents are ORDERED to return to petitioner any amount or
property received by them by virtue of said writ. Costs against the private respondents.
SO ORDERED.
Narvasa, C.J., (Chairman), Romero, and Kapunan, JJ., concur.

THIRD DIVISION
[G.R. No. 138123. March 12, 2002]
MINDEX RESOURCES DEVELOPMENT, petitioner, vs. EPHRAIM MORILLO, respondent.
DECISION
PANGANIBAN, J.:
Attorneys fees cannot be granted simply because one was compelled to sue to protect and enforce ones right. The grant
must be proven by facts; it cannot depend on mere speculation or conjecture -- its basis must be stated in the text of the
decision.
The Case
Before us is a Petition for Review under Rule 45 of the Rules of Court, assailing the March 26, 1999 Decision[1] of the
Court of Appeals (CA) in CA-GR CV No. 46967. The dispositive portion of the challenged Decision reads as follows:
WHEREFORE, the appealed decision is AFFIRMED with MODIFICATION that the legal interest to be paid on the rentals
of P76,000.00 and costs of repair in the amount of P132,750.00 is six (6%) percent per annum from June 22, 1994, the date of
the decision of the court a quo to the date of its finality. Thereafter, if the amounts adjudged remain unpaid, the interest rate
shall be twelve (12%) percent per annum from the date of finality of the decision until fully paid.[2]
The Facts
The factual antecedents of the case are summarized by the CA in this wise:
On February 1991, a verbal agreement was entered into between Ephraim Morillo and Mindex Resources Corporation
(MINDEX for brevity) for the lease of the formers 6 x 6 ten-wheeler cargo truck for use in MINDEXs mining operations in
Binaybay, Bigaan, San Teodoro, Oriental Mindoro, at the stipulated rental of P300.00 per hour for a minimum of eight hours a
day or a total of P2,400.00 daily. MINDEX had been paying the rentals until April 10, 1991.
Unknown to Morillo, on April 11, 1991, the truck was burned by unidentified persons while it was parked unattended at Sitio
Aras, Bigaan, San Teodoro, Oriental Mindoro, due to mechanical trouble. The findings of the Mindoro Oriental Integrated
National Police in their investigation report read:
3. On 121005H April 1991, Mr Alexander Roxas, project coordinator of MINDEX MINING CORP. reported to this office that on
the morning of 12 April 1991 while he was supposed to report for his Work at their office at Sitio Tibonbon, Bigaan, San
Teodoro, Oriental Mindoro, he x x x noticed that their hired 6 x 6 Ten wheeler Cargo Truck temporarily parked at Sitio Aras,
Bigaan, San Teodoro, Oriental Mindoro for aplha Engine Trouble was burned on the night of April 11, 1991 by still unidentified
person.
xxxxxxxxx
5. x x x Based also on the facts gathered and incident scene searched it was also found out that said 6 x 6 Ten Wheeler Cargo
Truck was burned by means of using coconut leaves and as a result of which said 6 x 6 was totally burned excluding the
engine which was partially damaged by still undetermined amount.
Upon learning of the burning incident, Morillo offered to sell the truck to MINDEX but the latter refused. Instead, it replaced the
vehicles burned tires and had it towed to a shop for repair and overhauling.
On April 15, 1991, Morillo sent a letter to Mr. Arni Isberg, the Finance Manager of MINDEX, thru Mr. Ramoncito Gozar, Project
Manager, proposing the following:
xxxxxxxxx
I have written to let you know that I am entrusting to you the said vehicle in the amount of P275,000.00 which is its cost price. I
will not charge your company for the encumbrance of P76,800+ since you used it as my friendly gesture on account of the
unforeseen adversity.
In view of the tragic happening, I am asking you to pay us, in a way which will not be hard for you to settle to pay us in four
installment monthly as follows:
First payment - April 25/91 P[1]50,000.00
Second payment - May 15/91 50,000.00
Third payme(n)t - June 15/91 50,000.00
Fourth payme(n)t - July 15/91 25,000.00
TOTAL P275,000.00
I promise to relinquish all the necessary documents upon full payment of said account.
xxxxxxxxx
Through Mr. Gozar, MINDEX responded by a handwritten letter to his cousin Malou (wife of Ephraim Morillo), expressing their
reservations on the above demands due to their tight financial situation. However, he made the following counter offers:
a) Pay the rental of the 6 x 6 truck (actual) in the amount of P76,000.00.
b) Repair and overhaul the truck on our own expenses and;
c) Return it to you on (A1) good running condition after repair.
Morillo replied on April 18, 1991, (1) that he will relinquish to MINDEX the damaged truck; (2) that he is amenable to receive
the rental in the amount of P76,000.00; and (3) that MINDEX will pay fifty thousand pesos (P50,000.00) monthly until the
balance of P275,000.00 is fully paid. It is noteworthy that except for his acceptance of the proffered P76,000.00 unpaid rentals,
Morillos stand has virtually not been changed as he merely lowered the first payment on the P275,000.00 valuation of the truck
from P150,000.00 to P50,000.00.

The parties had since remained intransigent and so on August 1991, Morillo pulled out the truck from the repair shop of
MINDEX and had it repaired elsewhere for which he spent the total amount of P132,750.00.[3] (Citations omitted)
Ruling of the Trial Court
After evaluating the evidence adduced by both parties, the Regional Trial Court (RTC) found petitioner responsible for
the destruction or loss of the leased 6 x 6 truck and ordered it to pay respondent (1) P76,000 as balance of the unpaid rental
for the 6 x 6 truck with interest of 12 percent from June 22, 1994 (the rendition of the judgment) up to the payment of the
amount; (2) P132,750 representing the costs of repair and overhaul of the said truck, with interest rate of 12 percent until fully
paid; and (3) P20,000 as attorneys fees for compelling respondent to secure the services of counsel in filing his Complaint.
Ruling of the Court of Appeals
The appellate court sustained the RTCs finding that petitioner was not without fault for the loss and destruction of the
truck and, thus, liable therefor. The CA said:
The burning of the subject truck was impossible to foresee, but not impossible to avoid. MINDEX could have prevented the
incident by immediately towing the truck to a motor shop for the needed repair or by having it guarded day and night. Instead,
the appellant just left the vehicle where its transfer case broke down. The place was about twelve (12) kilometers away from
the camp site of the appellant corporation and was sparsely populated. It was guarded only during daytime. It stayed in that
place for two (2) weeks until it was burned on April 11, 1991 while its transfer case was being repaired elsewhere. It was only
after it had been burned that the appellant had it towed to a repair shop.
The appellant [respondent] was thus not free from fault for the burning of the truck. It miserably failed to overcome the
presumption of negligence against it. Neither did it rescind the lease over the truck upon its burning. On the contrary, it offered
to pay P76,000.00 as rentals. It did not also complete the needed repair. Hence, the appellee was forced to pull out the truck
and had it repaired at his own expense. Since under the law, the lessee shall return the thing leased, upon the termination of
the lease, just as he receive it, the appellant stands liable for the expenses incurred for the repair in the aggregate amount
of P132,750.00.[4]
Nevertheless, the appellate court modified the Decision of the trial court. The 12 percent interest rate on the P76,000
rentals and the P132,750 repair costs, imposed by the RTC, was changed by the CA to 6 percent per annum from June 22,
1994 to the date of finality of the said Decision; and 12 percent per annum thereafter, if the amounts adjudged would remain
unpaid from such date of finality until the rentals and the repair costs were fully paid. It affirmed the award of attorneys fees.
Hence, this Petition.[5]
Issues
In its Memorandum, petitioner raises the following issues for the Courts consideration:
4.1. Whether or not the Court of Appeals gravely erred in finding that petitioner failed to overcome the presumption of
negligence against it considering that the facts show, as admitted by the respondent, that the burning of the truck was a
fortuitous event.
4.2. Whether or not the Court of Appeals gravely erred in affirming the decision of the trial court finding petitioner liable to pay
unpaid rentals and cost of repairs.
4.3. Whether or not the Court of Appeals also erred in affirming the decision of the trial court finding petitioner liable to pay
attorneys fees.[6]
This Courts Ruling
The Petition is partly meritorious; the award of attorneys fees should be deleted.
First Issue:
Petitioners Negligence
Petitioner claims that the burning of the truck was a fortuitous event, for which it should not be held liable pursuant to
Article 1174[7] of the Civil Code. Moreover, the letter of respondent dated April 15, 1991, stating that the burning of the truck
was an unforeseen adversity, was an admission that should exculpate the former from liability.
We are not convinced. Both the RTC and the CA found petitioner negligent and thus liable for the loss or destruction of
the leased truck. True, both parties may have suffered from the burning of the truck; however, as found by both lower courts,
the negligence of petitioner makes it responsible for the loss. Well-settled is the rule that factual findings of the trial court,
particularly when affirmed by the Court of Appeals, are binding on the Supreme Court. Contrary to its allegations, petitioner
has not adequately shown that the RTC and the CA overlooked or disregarded significant facts and circumstances that, when
considered, would alter the outcome of the disposition.[8] Article 1667 of the Civil Code[9] holds lessees responsible for the
deterioration or loss of the thing leased, unless they prove that it took place without their fault.
Fortuitous Event
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.[10] An act of God cannot be invoked to protect a person who has failed to take
steps to forestall the possible adverse consequences of such a loss. Ones negligence may have concurred with an act of God
in producing damage and injury to another; nonetheless, showing that the immediate or proximate cause of the damage or
injury was a fortuitous event would not exempt one from liability. When the effect is found to be partly the result of a persons
participation -- whether by active intervention, neglect or failure to act -- the whole occurrence is humanized and removed from
the rules applicable to acts of God.[11]
This often-invoked doctrine of fortuitous event or caso fortuito has become a convenient and easy defense to exculpate
an obligor from liability. 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.[12]
Article 1174 of the Civil Code states that no person shall be responsible for a fortuitous event that could not be foreseen
or, though foreseen, was inevitable. In other words, there must be an exclusion of human intervention from the cause of injury
or loss.[13]
A review of the records clearly shows that petitioner failed to exercise reasonable care and caution that an ordinarily
prudent person would have used in the same situation. Witness Alexander Roxas testified how petitioner fell short of ordinary
diligence in safeguarding the leased truck against the accident, which could have been avoided in the first place. Pertinent
portions of his testimony are reproduced hereunder:
ATTY. ACERON
Q Now, this Barangay Aras where the 6 x 6 truck had transmission trouble, how far is it from the camp site of the
defendant corporation?
ALEXANDER ROXAS
A Twelve (12) kilometers, more or less, sir.
Q Is this Barangay Aras populated?
A Not so many, sir.
Q The place where the 6 x 6 truck had transmission trouble, how far is the nearest house from it?
A Perhaps three hundred meters, sir.
Q And how many houses are within the three hundred meter radius from the place where the truck had engine trouble?
A Ten, more or less, in scattered.
Q You said that after hauling several sand to be used in the camp site the 6 x 6 truck had transmission trouble, what did
the company do after the truck had that engine trouble?
A For at least two weeks the truck was installed in the place where the said truck had engine trouble.
Q Meaning in Barangay Aras?
A Yes, sir.
Q Was there any guard in that place by the company during the time that the truck was in that place?
A Yes, sir, during daytime but at nighttime, there was no guard.
Q What happened to that 6 x 6 truck?
A In the month of March, 1991, the company dismissed thirteen (13) to seventeen (17) employees and these employees
came from Barangays Aras, Botolan, Calsapa, Camatis and Tibonbon and on Aril 11, 1991, the 6 x 6 truck was
burned.
Q How did you come to know that the 6 x 6 truck was burned on April 11, 1991?
A I together with my daughter, I met the service of the company near the ORMECO and I was informed by the Project
Engineer that the 6 x 6 truck was burned, so, we returned to San Teodoro and have the incident blottered at the
police station.
Q Aside from that, what other action did you undertake in connection with the burning of the 6 x 6 truck?
A When we were at the police station, the Project Manager of the company arrived and from the police station we
proceeded to the place where the 6 x 6 truck was burned and the Project Manager took pictures of the 6 x 6 truck.
Q Now, did you come to know who was responsible or who were responsible for the burning of the 6 x 6 truck?
A The responsible is the Mindex Resources Development Corporation, and as far as I know, the persons who actually
burned the said 6 x 6 truck were the dismissed employees of the Mindex Resources Development Corporation.
Q These dismissed employees of the corporation, why were they employed by the corporation?
A Because we have to make a road going to the mining site and in the process of opening the road these dismissed
employees happened to be the owners of the land where the road will pass, so, we paid the land. The corporation
likewise gave jobs to the owners of the land.[14]
As can be gleaned from the foregoing testimony, petitioner failed to employ reasonable foresight, diligence and care that
would have exempted it from liability resulting from the burning of the truck. Negligence, as commonly understood, is that
conduct that naturally or reasonably creates undue risk or harm to others. It may be a failure to observe that degree of care,
precaution or vigilance that the circumstances justly demand;[15] or to do any other act that would be done by a prudent and
reasonable person, who is guided by considerations that ordinarily regulate the conduct of human affairs.[16]
Second Issue:
Unpaid Rentals and Cost of Repairs
Petitioner proceeds to argue that it should be deemed to have already paid the unpaid rentals in the amount
of P76,000.00, and that it should not be made to pay the P132,750 repair and overhaul costs. Nothing in the records, not even
in the documentary evidence it presented, would show that it already paid the aforesaid amounts. In fact, it seeks to avoid
payment of the rental by alleging that respondent already condoned it in his letter dated April 15, 1991. However, a perusal of
the letter would show that his offer not to charge petitioner for the P76,000 rental was premised on the condition that it would
buy the truck.[17]
Moreover, the RTC based the P76,000 rental and the costs of repair and overhaul on Exhibit B, wherein Chito Gozar, the
Project Manager of Mindex Resources Development Corporation, proposed through a letter dated April 17, 1991, the following:

(1) to pay the P76,000 rental, (2) to repair the truck at the expense of petitioner, and (3) to return the truck in good running
condition after the repair.
Likewise, the nonpayment of the said amount was corroborated by Roxas thus:
Q During that time when the 6 x 6 truck was already burned and when you went to the Petron Gasoline Station to inform
plaintiff about the burning, was the plaintiff paid any amount for the rental of the 6 x 6 truck?
A :Before the burning of the 6 x 6 truck, the plaintiff Morillo was already paid partially and there was a balance of
P76,000.00.[18]
The P132,750 repair and overhaul costs was correctly granted by the lower courts. Article 1667 of the Civil Code holds
the lessee responsible for the deterioration or loss of the thing leased. In addition, Article 1665 of the same Code provides that
the lessee shall return the thing leased, upon the termination of the lease, just as he received it, save what has been lost or
impaired by the lapse of time, or by ordinary wear and tear, or from an inevitable cause.
Courts begin with the assumption that compensatory damages are for pecuniary losses that result from an act or
omission of the defendant. Having been found to be negligent in safeguarding the leased truck, petitioner must shoulder its
repair and overhaul costs to make it serviceable again. Such expenses are duly supported by receipts; thus, the award
of P132,750 is definitely in order.
Third Issue:
Attorneys Fees
We find the award of attorneys fees to be improper. The reason which the RTC gave -- because petitioner had compelled
respondent to file an action against it -- falls short of our requirement in Scott Consultants and Resource Development v.
CA,[19] from which we quote:
It is settled that the award of attorneys fees is the exception rather than the rule and counsels fees are not to be awarded
every time a party wins suit. The power of the court to award attorneys fees under Article 2208 of the Civil Code demands
factual, legal, and equitable justification; its basis cannot be left to speculation or conjecture. Where granted, the court must
explicitly state in the body of the decision, and not only in the dispositive portion thereof, the legal reason for the award of
attorneys fees.
Moreover, a recent case[20] ruled that in the absence of stipulation, a winning party may be awarded attorneys fees only
in case plaintiffs action or defendants stand is so untenable as to amount to gross and evident bad faith.
Indeed, respondent was compelled to file this suit to vindicate his rights. However, such fact by itself will not justify an
award of attorneys fees, when there is no sufficient showing of petitioners bad faith in refusing to pay the said rentals as well
as the repair and overhaul costs.[21]
WHEREFORE, the Petition is DENIED, but the assailed CA Decision is MODIFIED by DELETING the award of attorneys
fees. Costs against petitioner.
SO ORDERED.
Melo, (Chairman), Vitug, Sandoval-Gutierrez, and Carpio, JJ., concur.

SECOND DIVISION
[G. R. No. 119086. January 25, 2002]
EMMANUEL G. HERBOSA and ROSEMARIE L. HERBOSA, petitioners, vs. COURT OF APPEALS (Fifteenth Division),
and PROFESSIONAL VIDEO EQUIPMENT a Division of Solid Distributors, Inc., respondents.
[G. R. No. 119087. January 25, 2002]
EMMANUEL G. HERBOSA and ROSEMARIE L. HERBOSA, petitioners, vs. COURT OF APPEALS (Fifteenth Division)
and SOLID CORPORATION, respondents.
DECISION
DE LEON, JR., J.:
This is a Petition for Review on Certiorari of the decision[1] of the Court of Appeals in CA-G.R. CV Nos. 15346 and 15093
promulgated on October 20, 1994 which reversed the decision of the trial court in Civil Case No. R-82-4389[2] while affirming in
toto the decision of the trial court in Civil Case No. R-83-21786,[3] respectively, and the resolution[4]promulgated on February 7,
1995 which denied the subsequent motion for reconsideration.
The facts show that on January 25, 1982 petitioner spouses sued Professional Video Equipment (PVE for brevity), a
division of private respondent Solid Distributors, Inc., for breach of contract with damages[5] with the Regional Trial Court of
Manila, Branch 39, docketed as Civil Case No. R-82-4389. The case stemmed from the failure of PVE to record on video the
petitioners wedding celebration allegedly due to the gross negligence of its crew as well as the lack of supervision on the part
of the general manager of the PVE.Petitioners also alleged that said failure on the part of PVE to perform its obligation caused
deep disappointment, anxiety and an irreparable break in the continuity of an established family tradition of recording by film or
slide historical and momentous family events especially wedding celebrations and for which they were entitled to be paid
actual, moral and exemplary damages including attorneys fees.
In its Answer,[6] PVE claimed that it had diligently supervised its VTR crew in the video recording of petitioners wedding
and reception and that its crew acted in good faith and with due care and proper diligence of a good father of a family.
After trial the lower court rendered a decision[7] on January 3, 1983 in favor of the petitioners, the dispositive portion of
which reads:
FOR ALL THE FOREGOING CONSIDERATIONS, the Court hereby renders judgment, ordering defendant to pay the plaintiffs
actual, moral and exemplary damages in the amount of P100,000.00, P10,000.00 for attorneys fees and to pay the costs of
these proceedings.
For insufficiency of evidence, the counterclaim is hereby DISMISSED.
SO ORDERED.
Complications arose when the petitioners moved for execution on June 23, 1983 of the above judgment for failure of PVE
to file a motion for reconsideration despite, as petitioners alleged, the mailing to its former counsel a copy of the decision by
registered mail.[8]
PVE opposed the motion,[9] and on July 27, 1983 filed a petition for relief from judgment[10] under Rule 38 of the Rules of
Court essentially alleging that it failed to receive notice of the said judgment sought to be executed and that said failure was
due to fraud and accident when the mail matter was posted in a post office box which was not registered in the name of PVEs
former counsel.
In an order[11] dated November 10, 1983, the trial court denied the petition for relief from judgment and ordered the
issuance of a writ of execution.
Consequently, PVE filed a notice of appeal[12] from the order of November 10, 1983. In addition, it filed a motion for
reconsideration[13] of the said order insofar as it directed the issuance of a writ of execution.
The trial court gave due course to PVEs appeal[14] but it took no action on the motion for reconsideration of the order,
thus a writ of execution was issued and an auction sale of certain personal properties levied upon by the deputy sheriff of the
trial court was scheduled on December 8, 1983.
On December 3, 1983 PVE filed a petition for injunction with the Court of Appeals, docketed as AC-G.R. SP No. 02155,
to restrain the scheduled auction sale. Although a temporary restraining order was issued by the appellate court, the same
was served one hour late, at 4:30 oclock in the afternoon on the day of the auction sale on December 8, 1983. As a result, the
personal properties which had been levied upon were sold to Atty. Santiago Gabionza, Jr. as the highest bidder.[15]
In view of the auction sale held on December 8, 1983, the trial court recalled[16] on May 10, 1984 its previous order giving
due course to the appeal from its order dated November 10, 1983. The action taken by the trial court prompted PVE to file a
separate petition for mandamus[17] with the Court of Appeals, docketed as AC-G.R. SP No.03470, to compel the respondent
trial court to give due course to its appeal.
Meanwhile, on December 13, 1983, private respondent Solid Corporation, filed a complaint for damages[18] with the
Regional Trial Court of Manila, Branch 54, docketed as Civil Case No. R-83-21786, against Deputy Sheriff Angel Borja and the
petitioners. Solid Corporation essentially alleged in its complaint that it was the true owner of the electronic appliances valued
at One Hundred Thirty Nine Thousand Eight Hundred Pesos (P139,800.00) which were levied upon and subsequently sold at
public auction on December 8, 1983 for the satisfaction of the judgment in Civil Case No. R-82-4389 in favor of the petitioners;
that the levy on execution and the subsequent auction sale were illegal; and that it suffered actual and compensatory damages
in the sum of One Hundred Thirty Nine Thousand Eight Hundred Pesos (P139,800.00), moral damages in the sum of One
Million Pesos (P1,000,000.00), exemplary damages in the sum of One Million Pesos (P1,000,000.00) and attorneys fees of
Two Hundred Thousand Pesos (P200,000.00).

On January 18, 1984, petitioners filed an Answer[19] specifically denying that Solid Corporation was the owner of the
personal properties levied upon and subsequently sold at public auction on December 8, 1983. They claimed that the
showroom and offices located at 1000 J. Bocobo Street corner Kalaw Street, Ermita, Manila where the subject personal
properties were then on display were owned and operated by respondent Solid Distributors, Inc., a sister company of Solid
Corporation, Inc.; and that both corporations had interlocking directors, officers and principal stockholders.
On September 6, 1984, the Court of Appeals rendered a consolidated decision[20] in AC - G.R. SP No. 02155 and AC G.R. SP No. 03470, the dispositive portion of which reads:
WHEREFORE, the petition for injunction and mandamus are GRANTED and (1) the sheriffs sale is nullified and the
respondents Emmanuel and Rosemarie Herbosa are ordered to deliver the proceeds of the sale to the Solid Corporation, Inc.
and (2) the respondent court is hereby ordered to give due course to the petitioners appeal in Civil Case No. 137541. Costs
against the private respondents.
Petitioners appealed the above judgment of the appellate court to this Court through a petition for review on certiorari,
docketed as G. R. Nos. 69008-09, but which we denied in a resolution dated December 17, 1984 for lack of merit. Forthwith,
the trial court granted on June 23, 1987 the subsequent motion of herein respondent Solid Corporation for summary judgment
in Civil Case No. R-83-21786. The dispositive portion of the decision[21] of the trial court reads:
WHEREFORE, summary judgment is hereby rendered in favor of the plaintiff, ordering the private defendants Emmanuel G.
Herbosa and Rosemarie L. Herbosa to deliver to the plaintiff the amount of P139,800.(00) as the proceeds of the sale of
plaintiffs properties and attorneys fees of P10,000.00, plus costs.
Considering that the defendant First Integrated Bonding Co., Inc. is not a party in the aforesaid Court of Appeals cases, the
judgment therein does not bind the defendant and therefore the case as against it is hereby dismissed.
SO ORDERED.
The appeal taken by the petitioner spouses to the Court of Appeals of the said Decision of the trial court in Civil Case No.
R-83-21786 and the earlier appeal filed by respondent Solid Distributors, Inc. in Civil Case No. R-82-4389, respectively
docketed as CA-G.R. CV Nos. 15093 and 15346, were ordered consolidated by the appellate court in its Resolution[22] dated
February 23, 1988.
On October 20, 1994 the Court of Appeals rendered its consolidated Decision,[23] in CA-G.R. CV Nos. 15093 and 15346,
the dispositive portion of which reads:
WHEREFORE, the Court renders judgment:
(1) In CA-G.R. CV No. 15346, REVERSING the appealed decision, and, accordingly, DISMISSING plaintiffs complaint and
defendants counterclaim;
(2) In CA-G.R. CV No. 15093, AFFIRMING in toto the decision appealed from. The Court sentences defendants Emmanuel G.
Herbosa and Rosemarie L. Herbosa to pay plaintiff Solid Corporation the amount of One Hundred Thirty Nine Thousand Eight
Hundred (P139,800.00), pesos, as the proceeds of the sale of plaintiffs property, and Ten Thousand (P10,000.00), pesos, as
attorneys fees, plus costs.
In both cases, we make no special pronouncement as to costs in this instance.
SO ORDERED.
The Court of Appeals denied the motion for reconsideration filed by the petitioner spouses on November 14, 1994 for
having been allegedly filed out of time.[24]
Dissatisfied, petitioner spouses filed the instant petition[25] raising the following assignment of errors:
I
THE COURT OF APPEALS ERRED IN HOLDING THAT THE PETITIONERS MOTION FOR RECONSIDERATION DATED
NOVEMBER 11, 1994 WAS FILED OUT OF TIME WHEN IT RELIED ON THE CASE OF IMPERIAL VICTORY SHIPPING
AGENCY vs. NLRC (200 SCRA 178) WHICH IS CLEARLY INAPPLICABLE IN THE CASE AT BAR.
II
THE COURT OF APPEALS ERRED WHEN, IN CA-G.R. CV NO. 15346, IT REVERSED THE FINDING OF THE TRIAL
COURT THAT PRIVATE RESPONDENT PVE IS GUILTY OF GROSS NEGLIGENCE IN THE PERFORMANCE OF ITS
OBLIGATION BY SOLELY RELYING ON THE TRIAL COURTS STATEMENT THAT PRIVATE RESPONDENT PVE FAILED
TO PRESENT AN IOTA OF PROOF THAT IT EXERCISED EXTRAORDINARY CARE IN THE PROPER MAINTENANCE OF
ITS EQUIPMENT USED IN THE COVERAGE.
III
THE COURT OF APPEALS ERRED WHEN, IN CA-G.R. CV NO. 15346, IT TOTALLY SET ASIDE THE TRIAL COURTS
AWARD OF ACTUAL, MORAL, AND EXEMPLARY DAMAGES IN THE AMOUNT OF P100,000.00 AS WELL AS
ATTORNEYS FEES IN THE AMOUNT OF P10,000.00 PLUS COSTS OF SUIT, IN FAVOR OF THE SPOUSES HERBOSA
FOR HAVING ALLEGEDLY NO BASIS BOTH IN FACT AND IN LAW.
IV
THE COURT OF APPEALS ALSO ERRED WHEN, WITHOUT ANY LAWFUL BASIS, IT ERRONEOUSLY AFFIRMED, IN CAG.R. CV NO. 15093, THE DECISION OF THE TRIAL COURT WHICH RENDERED SUMMARY JUDGMENT IN THE ENTIRE
CASE NOTWITHSTANDING THE APPARENT EXISTENCE OF A GENUINE ISSUE OF FACT CONCERNING THE
OWNERSHIP OF PERSONAL PROPERTY LEVIED UPON WHICH ISSUE CLEARLY REMAINS UNAFFECTED BY THE
DECISION OF THE COURT OF APPEALS IN CA-G.R. SP NOS. 02155 AND 03470.

Petitioners contend that their motion for reconsideration was filed within the reglementary period inasmuch as the ruling
in the case of Imperial Victory Shipping Agency v. NLRC[26] cited in the questioned resolution of the appellate court dated
February 7, 1995 was superseded by the decision of the Supreme Court in the case of Ramon Aquino v. NLRC.[27]
They also contend that the ruling of the Court of Appeals in CA-G.R. CV No. 15346 to the effect that the degree of
diligence required under the contract was that of diligence of a good father of a family, and not extraordinary diligence as
opined by the trial court, does not negate the finding of the lower court that breach of contract due to gross negligence on the
part of PVE was duly proven by the petitioners. Due to the presence of gross negligence on the part of PVE (a division of
respondent Solid Distributors, Inc.), petitioners are entitled to an award of actual, moral and exemplary damages including
attorneys fees and costs.
Additionally, petitioners contend that the summary judgment rendered by the trial court in Civil Case No. R-83-21786 was
improper since the question of ownership of the levied personal properties to satisfy the judgment in Civil Case No. R-82-4389
remains unaffected by the decision of the Court of Appeals in AC-G.R. SP Nos. 02155 and 03470 which merely declared that
the execution of the said judgment was void for being premature.
On the other hand, both private respondents Solid Distributors, Inc. and Solid Corporation invoke the ruling in the case
of Azores v. SEC[28] which affirmed our ruling in the cases of Bank of America, NT and SA v. Gerochi, Jr., et
al.,[29] and Imperial Victory Shipping Agency v. NLRC[30] such that if the last day to appeal fell on a Saturday, the act was still
due on that day. While private respondents concede that rules of procedure are intended to promote substantial justice, they
emphasized that the perfection of appeal in the manner and within the period permitted by law is not only mandatory but
jurisdictional.
Private respondents also invoke the well-settled rule that only questions of law may be entertained on appeal. By
questioning in the instant petition public respondent appellate courts appreciation of the evidence on the issue of diligence,
petitioners, in effect, raised questions of fact which cannot be done by the Supreme Court, on appeal, as it is not a trier of
facts. After having determined by the Court of Appeals that no cause of action exists against private respondent PVE, there
appears to be no basis for an award of damages contrary to the contention of the petitioners in the third assignment of error.
Lastly, private respondents maintain that summary judgment was properly rendered in Civil Case No. R-83-21786 in view
of the Decision of the Court of Appeals in AC-G.R. SP Nos. 02155 and 03470 promulgated on September 6, 1984 which was
affirmed by the Supreme Court in a resolution dated December 17, 1984. The said decision, which is the law of the case,
mandates that the petitioners were to deliver the proceeds of the sheriffs auction sale to herein private respondent Solid
Corporation.
Hence, the issues are:
1. Whether or not the motion for reconsideration filed by the petitioners on November 14, 1994 was filed beyond the
reglementary period.
2. Whether or not the petitioners are entitled to award of damages arising from breach of contract of service in Civil
Case No. R-82-4389.
3. Whether or not the trial court correctly rendered summary judgment in Civil Case No. R-83-21786 in favor of
respondent Solid Corporation.
In denying petitioners motion for reconsideration filed on November 14, 1994, the Court of Appeals ruled that the
petitioners had only until November 12, 1994, which was a Saturday, within which to file a motion for reconsideration of its
Decision dated October 20, 1994 in CA-G.R. CV Nos. 15346 and 15093 inasmuch as they had been furnished notice of its
said decision on October 28, 1994. The appellate court cited the case of Imperial Victory Shipping where it was held that if the
last day to appeal fell on a Saturday, the act was still due on that day and not on the next succeeding business day.
It should be noted, however, that even in the cases[31] invoked by the private respondents, we have already made
pronouncements therein that, as early as January 23, 1993, this Court had issued an order directing court offices closed on
Saturdays so that when the last day for filing of a pleading should fall on a Saturday, the same should be done on the following
Monday, provided the latter is not a holiday. Significantly, the motion for reconsideration which was filed by the petitioners on
November 14, 1994 came after the issuance of our said order. Consequently, respondent appellate court should not have
denied outright petitioners motion for reconsideration since the last day for the filing thereof fell on November 12, 1994, which
was a Saturday, when the Receiving and Docket Section and the Cashier Section of the Court of Appeals were closed.
Likewise, respondent PVE or respondent Solid Distributors, Inc. may not validly thwart the petitioners instant petition for
review of the decision of the Court of Appeals in CA-G.R. CV No. 15346 by arguing that the principal issue as to the existence
of negligence involves a question of fact which cannot be raised on appeal. The general rule that only questions of law may be
raised on appeal in a petition for review under Rule 45 of the Rules of Court admits of certain exceptions, namely: a) when the
conclusion is a finding grounded entirely on speculations, surmises, or conjectures; b) when the inference made is manifestly
mistaken, absurd, or impossible; c) where there is a grave abuse of discretion; d) when the judgment is based on a
misapprehension of facts; e) when the findings of fact are conflicting; f) when the Court of Appeals, in making its findings, went
beyond the issues of the case and the same are contrary to the admissions of both appellant and appellee; g) when the
findings of the Court of Appeals are contrary to those of the trial court; h) when the findings of fact are conclusions without
citation of specific evidence on which they are based; I) when the finding of fact of the Court of Appeals is premised on the
supposed absence of evidence but is contradicted by the evidence on record; and j) when the Court of Appeals manifestly
overlooked certain relevant facts not disputed by the parties and which, if properly considered, would justify a different
conclusion.[32] Notably, the Court of Appeals and the trial court arrived at conflicting findings of fact in Civil Case No. R-82-4389

which is an action for breach of contract and damages and the appeal therefrom, thus necessitating further review of the
evidence by this Court.
It appears from the evidence adduced that the petitioner spouses contracted the services of PVE (a division of
respondent Solid Distributors, Inc.) for the betamax coverage of their then forthcoming wedding celebration scheduled in the
morning of October 11, 1980. Pursuant to the contract[33] PVE undertook to record on betamax format the wedding celebration
of the petitioners starting with the pre-departure activities of the bride at her residence, followed by the wedding ceremony and
the reception which had an approximate playback time of sixty (60) to ninety (90) minutes. Petitioners paid PVE the amount of
One Thousand Four Hundred Twenty-Three Pesos (P1,423.00) as downpayment while the balance of One Thousand Five
Hundred Thirty- Two Pesos (P1,532.00) was to be paid upon receipt of the finished video tape.
Accordingly, on October 11, 1980 at around 6:30 oclock in the morning[34] the PVE crew composed of the cameraman,
Vedastro Sulit, VTR (video tape recorder) operator, Michael Rodriguez, and the driver and lightman, Felix Baguio, arrived at
the residence of the bride at 1694 M. H. Del Pilar Street, Ermita, Manila. They recorded the pre-departure activities of the bride
before leaving for the Malate Church along Mabini Street, Malate, Manila where the wedding ceremonies were held at 9:00
oclock in the morning. Thereafter, the crew proceeded to the Manila Hotel in Intramuros, Manila, where the wedding reception
followed at 10:30 oclock in the morning.
On October 13, 1980, however, Ben Zarate, studio manager of PVE, informed the petitioners that the videotape
coverage of their wedding celebration was damaged due to mechanical defect in their equipment. On October 19, 1980 PVE
general manager, Eric Sycip, confirmed the damage and proposed to do a video tape production of their wedding celebration
through photographs or a video coverage of any event of similar significance.[35] In addition, Eric Sycip sent a
check[36] representing the amount of the downpayment which the petitioners did not accept. Deeply aggrieved, the petitioners
rejected both of the proposed alternatives since, according to them, a video tape production through photographs was not
going to compensate for the betamax or film coverage of their actual wedding celebration and that there could be no event of
similar significance insofar as petitioners are concerned.
PVE, a division of respondent Solid Distributors, Inc., disclaimed any liability for the damaged videotape by invoking
force majeure or fortuitous event and asserted that a defective transistor caused the breakdown in its video tape
recorder. However, said respondent failed to substantiate its bare allegation by presenting in evidence the alleged defective
transistor before the trial court. Instead, it presented another component[37] of the same kind. Having invoked fortuitous event,
it was incumbent upon said respondent to adduce sufficient and convincing proof to establish its defense.
At any rate, in order that fortuitous event may exempt PVE or respondent Solid Distributors, Inc. from liability, it is
necessary that it be free from negligence.[38] The record shows, however, that the alleged malfunctioning of the video tape
recorder occurred at the beginning of the video coverage at the residence of the bride. The PVE crew miserably failed to
detect the defect in the video tape recorder and that they discovered the same rather too late after the wedding reception at
the Manila Hotel.
There appeared to be no valid reason why the alleged defect in the video tape recorder had gone undetected. There was
more than sufficient time for the PVE crew to check the video tape recorder for the reason that they arrived at the brides
residence at 6:30 oclock in the morning while they departed for the wedding ceremonies at the Malate Church at 9:00 oclock in
the morning. Besides, PVE was admittedly furnished earlier by the petitioners with a copy of the script[39] of the scenes to be
recorded so that it could prepare and organize its contracted task. PVE studio manager Ben Zarate even testified that
ordinarily, the standard playback test to monitor the functioning of the video tape recorder was required at every opportunity. In
the instant case, a playback test on three (3) occasions, preferably at the beginning, middle and towards the end portions of
the video coverage would have been sufficient.[40]
Based on the investigation allegedly conducted by its officers, PVE or respondent Solid Distributors, Inc. claimed that its
crew, whom it never presented to testify during the trial of the case, allegedly conducted a playback test at the residence of the
bride and that the next playback test was conducted after the wedding reception at the Manila Hotel where the defect in the
video tape recorder was allegedly discovered for the first time.[41] A review of the records however, raised doubts as to whether
the crew actually conducted a playback test at the residence of the bride. A very minimal portion, lasting only for two and one
half (2 ) minutes, of the pre-departure activities at the residence of the bride had been recorded while the rest of the video tape
was damaged. This strongly suggests that any alleged defect in the video tape recorder could have easily been detected by
the PVE crew at the residence of the bride had a sufficient playback test been conducted therein prior to their departure for the
wedding ceremonies at the Malate Church. The pertinent portion of the stenographic notes of the trial is reproduced, thus:
Interpreter:
We are about to witness the video coverage of the Herbosa Wedding on the television set. (V)iew on (sic) the M. H.
del Pilar and what is in focus is a residence No. 1694. What is shown is the facade of the De Leon residence,
the residence of the bride, Rosemarie de Leon; next in focus is apparently a bedroom of the bride. What is
shown on screen now is that she was being made up by her artist and hairdresser in preparation for the
forthcoming wedding. She is wearing an electric blue dressing gown.
Court:
It would seem that at this juncture, the picture is clear as shown on the television.
Interpreter:
Then, the other members of the entourage is also in focus. They are shown to be made-up by the artist. At this
juncture, it is still visible that the screen is clear, then suddenly, there is complete darkness, and snatches on
the screen which has a span of about

Atty. Agcaoili:
May we stipulate that the good tape your Honor, lasted for only two and a half minutes?
Atty. Mendoza:
Agreed, your Honor.
Atty. Agcaoili:
And that from this point, the cassette is blurred and you cannot see any visible figure on the cassette tape. May we
note the ringing sound apparently a telephone ringing which will indicate that the audio pick-up is being taken
or at least, the audio was working. After four minutes of complete blurred, there appears to be snatches of the
brides face and again, it has faded into complete non-appearance of the subject being taken.
Court:
In other words, no pictures registered after the few snatches of the bride.[42]
The misfortune that befell the then newly-wed couple, petitioners herein, could have been avoided by a timely exercise of
minimum prudence by the crew of PVE who are all employees of respondent Solid Distributors, Inc. to check any possible
mechanical defect in the video tape recorder. The defect could have been detected earlier and remedial measures could have
been made to ensure full video tape coverage of the petitioners wedding celebration. But PVE or respondent Solid Distributors,
Inc. did not. We take judicial notice of the short distance between the office of PVE or respondent Solid Distributors, Inc. at
1000 J. Bocobo corner Kalaw Streets, Ermita, Manila, on one hand, and the locations of the required video tape coverage at
the residence of the bride at M. H. Del Pilar Street, Ermita, Manila, the Malate Church and the Manila Hotel. The failure to
record on videotape the wedding celebration of the petitioners constitutes malicious breach of contract as well as gross
negligence on the part of respondent Solid Distributors, Inc.
PVE or respondent Solid Distributors, Inc. cannot seek refuge under Article 2180 of the New Civil Code by claiming that it
exercised due care in the selection and supervision of its employees and that its employees are experienced in their
respective trade. That defense, as provided in the last paragraph of Article 2180 of the New Civil Code, may be availed of only
where the liability arises from culpa aquilana and not from culpa contractual such as in the case at bar.[43]
However, the award of damages to the petitioners cannot be lumped together as was done by the trial court. It is basic
that the claim for actual, moral and exemplary damages as well as attorneys fees must each be independently identified and
justified.[44] In this connection, Article 1170 of the New Civil Code provides that 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. For failure of PVE, a division of respondent Solid Distributors, Inc., to comply with its obligation under the video tape
coverage contract, petitioners are entitled to actual damages at least in the amount of One Thousand Four Hundred TwentyThree Pesos (P1,423.00) representing their downpayment in that contract.
Ordinarily, moral damages cannot be recovered in an action for breach of contract because such an action is not among
those expressly mentioned in Article 2219[45] of the New Civil Code. However, moral damages are recoverable for breach of
contract where the breach was wanton, reckless, malicious or in bad faith, oppressive or abusive.[46] The wanton and reckless
failure and neglect to timely check and remedy the video tape recorder by the PVE crew who are all employees of respondent
Solid Distributors, Inc. indicates a malicious breach of contract and gross negligence on the part of said respondent in the
discharge of its contractual obligations. Consequently, the petitioners who suffered mental anguish and tortured feelings
thereby, are entitled to an award of One Hundred Thousand Pesos (P100,000.00) as moral damages.
In the case of Go v. Court of Appeals[47] we emphasized that (i)n our society, the importance of a wedding ceremony
cannot be underestimated as it is the matrix of the family and, therefore, an occasion worth reliving in the succeeding
years. Further, we reiterate the following pronouncements therein where we also awarded moral damages on account of a
malicious breach of contract similar to the case at bar, to wit:
Considering the sentimental value of the tapes and the fact that the event therein recordeda wedding which in our culture is a
significant milestone to be cherished and rememberedcould no longer be reenacted and was lost forever, the trial court was
correct in awarding the appellees moral damages albeit in the amount of P75,000.00 xxx in compensation for the mental
anguish, tortured feelings, sleepless nights and humiliation that the appellees suffered and which under the circumstances
could be awarded as allowed under Articles 2271 and 2218 of the Civil Code.
The award of exemplary damages which is hereby fixed in the amount of Forty Thousand Pesos (P40,000.00) is justified,
under the premises, to serve as a warning to all entities engaged in the same business to observe good faith and due
diligence in the fulfillment of their contractual obligations. Additionally, the award of attorneys fees in the amount of Ten
Thousand Pesos (P10,000.00) is also proper in accordance with Article 2208[48] of the Civil Code.
Anent the third issue, we hold that the Court of Appeals, in CA-G.R. CV No. 15346, did not err in sustaining the summary
judgment rendered by the trial court in Civil Case No. R-83-21786. The test for propriety of a motion for summary judgment is
whether the pleadings, affidavits and exhibits in support of the motion are sufficient to overcome the opposing papers and to
justify the finding that, as a matter of law, there is no defense to the action or claim which is clearly meritorious.[49]
The decision of the Court of Appeals in AC G.R. SP Nos. 02155 and 03470, for injunction and mandamus, specifically
commands herein petitioners to deliver the proceeds of the (auction) sale to Solid Corporation due to the nullity of the sheriffs
sale on December 8, 1983 for being premature. The said decision of the Court of Appeals became final and executory after
this Court, in G.R. Nos. 69008 and 69009, denied on December 17, 1984 the appeal therefrom instituted by herein petitioners.
WHEREFORE, judgment is hereby rendered as follows:
(1) In G.R. No. 119086, the appealed decision of the Court of Appeals in CA-G.R. CV No. 15346 is REVERSED. Private
respondent Solid Distributors, Inc. is ordered to pay the petitioners One Thousand Four Hundred Twenty-Three Pesos

(P1,423.00) as actual damages, One Hundred Thousand Pesos (P100,000.00) as moral damages, Forty Thousand Pesos
(P40,000.00) as exemplary damages, and Ten Thousand Pesos (P10,000.00) by way of attorneys fees; and
(2) In G.R. No. 119087, the appealed decision of the Court of Appeals in CA-G.R. CV No. 15093 is AFFIRMED.
No pronouncement as to costs.
SO ORDERED.
Bellosillo, (Chairman), Mendoza, Quisumbing, and Buena, JJ., concur.

SECOND DIVISION
[G.R. No. 137775. March 31, 2005]
FGU INSURANCE CORPORATION, petitioner, vs. THE COURT OF APPEALS, SAN MIGUEL CORPORATION, and
ESTATE OF ANG GUI, represented by LUCIO, JULIAN, and JAIME, all surnamed ANG, and CO
TO, respondents.
[G.R. No. 140704. March 31, 2005]
ESTATE OF ANG GUI, Represented by LUCIO, JULIAN and JAIME, all surnamed ANG, and CO TO, petitioners, vs.
THE HONORABLE COURT OF APPEALS, SAN MIGUEL CORP., and FGU INSURANCE CORP., respondents.
DECISION
CHICO-NAZARIO, J.:
Before Us are two separate Petitions for review assailing the Decision[1] of the Court of Appeals in CA-G.R. CV No.
49624 entitled, San Miguel Corporation, Plaintiff-Appellee versus Estate of Ang Gui, represented by Lucio, Julian and Jaime,
all surnamed Ang, and Co To, Defendants-Appellants, ThirdParty Plaintiffs versus FGU Insurance Corporation, Third-Party
Defendant-Appellant, which affirmed in toto the decision[2] of the Regional Trial Court of Cebu City, Branch 22. The dispositive
portion of the Court of Appeals decision reads:
WHEREFORE, for all the foregoing, judgment is hereby rendered as follows:
1)
Ordering defendants to pay plaintiff the sum of P1,346,197.00 and an interest of
6% per annum to be reckoned from the filing of this case on October 2, 1990;
2)
Ordering defendants to pay plaintiff the sum of P25,000.00 for attorneys fees and
an additional sum of P10,000.00 as litigation expenses;
3)
With cost against defendants.
For the Third-Party Complaint:
1) Ordering third-party defendant FGU Insurance Company to pay and reimburse defendants the amount of P632,700.00.[3]
The Facts
Evidence shows that Anco Enterprises Company (ANCO), a partnership between Ang Gui and Co To, was engaged in
the shipping business. It owned the M/T ANCO tugboat and the D/B Lucio barge which were operated as common carriers.
Since the D/B Lucio had no engine of its own, it could not maneuver by itself and had to be towed by a tugboat for it to move
from one place to another.
On 23 September 1979, San Miguel Corporation (SMC) shipped from Mandaue City, Cebu, on board the D/B Lucio, for
towage by M/T ANCO, the following cargoes:
Bill of Lading No. Shipment Destination
1 25,000 cases Pale Pilsen Estancia, Iloilo
350 cases Cerveza Negra Estancia, Iloilo
2 15,000 cases Pale Pilsen San Jose, Antique
200 cases Cerveza Negra San Jose, Antique
The consignee for the cargoes covered by Bill of Lading No. 1 was SMCs Beer Marketing Division (BMD)-Estancia Beer
Sales Office, Estancia, Iloilo, while the consignee for the cargoes covered by Bill of Lading No. 2 was SMCs BMD-San Jose
Beer Sales Office, San Jose, Antique.
The D/B Lucio was towed by the M/T ANCO all the way from Mandaue City to San Jose, Antique. The vessels arrived at
San Jose, Antique, at about one oclock in the afternoon of 30 September 1979. The tugboat M/T ANCO left the barge
immediately after reaching San Jose, Antique.
When the barge and tugboat arrived at San Jose, Antique, in the afternoon of 30 September 1979, the clouds over the
area were dark and the waves were already big. The arrastre workers unloading the cargoes of SMC on board the D/B Lucio
began to complain about their difficulty in unloading the cargoes. SMCs District Sales Supervisor, Fernando Macabuag,
requested ANCOs representative to transfer the barge to a safer place because the vessel might not be able to withstand the
big waves.
ANCOs representative did not heed the request because he was confident that the barge could withstand the waves.
This, notwithstanding the fact that at that time, only the M/T ANCO was left at the wharf of San Jose, Antique, as all other
vessels already left the wharf to seek shelter. With the waves growing bigger and bigger, only Ten Thousand Seven Hundred
Ninety (10,790) cases of beer were discharged into the custody of the arrastre operator.
At about ten to eleven oclock in the evening of 01 October 1979, the crew of D/B Lucio abandoned the vessel because
the barges rope attached to the wharf was cut off by the big waves. At around midnight, the barge run aground and was
broken and the cargoes of beer in the barge were swept away.
As a result, ANCO failed to deliver to SMCs consignee Twenty-Nine Thousand Two Hundred Ten (29,210) cases of Pale
Pilsen and Five Hundred Fifty (550) cases of Cerveza Negra. The value per case of Pale Pilsen was Forty-Five Pesos and
Twenty Centavos (P45.20). The value of a case of Cerveza Negra was Forty-Seven Pesos and Ten Centavos (P47.10), hence,
SMCs claim against ANCO amounted to One Million Three Hundred Forty-Six Thousand One Hundred Ninety-Seven Pesos
(P1,346,197.00).
As a consequence of the incident, SMC filed a complaint for Breach of Contract of Carriage and Damages against ANCO
for the amount of One Million Three Hundred Forty-Six Thousand One Hundred Ninety-Seven Pesos (P1,346,197.00) plus
interest, litigation expenses and Twenty-Five Percent (25%) of the total claim as attorneys fees.

Upon Ang Guis death, ANCO, as a partnership, was dissolved hence, on 26 January 1993, SMC filed a second amended
complaint which was admitted by the Court impleading the surviving partner, Co To and the Estate of Ang Gui represented by
Lucio, Julian and Jaime, all surnamed Ang. The substituted defendants adopted the original answer with counterclaim of
ANCO since the substantial allegations of the original complaint and the amended complaint are practically the same.
ANCO admitted that the cases of beer Pale Pilsen and Cerveza Negra mentioned in the complaint were indeed loaded
on the vessel belonging to ANCO. It claimed however that it had an agreement with SMC that ANCO would not be liable for
any losses or damages resulting to the cargoes by reason of fortuitous event. Since the cases of beer Pale Pilsen and
Cerveza Negra were lost by reason of a storm, a fortuitous event which battered and sunk the vessel in which they were
loaded, they should not be held liable. ANCO further asserted that there was an agreement between them and SMC to insure
the cargoes in order to recover indemnity in case of loss. Pursuant to that agreement, the cargoes to the extent of Twenty
Thousand (20,000) cases was insured with FGU Insurance Corporation (FGU) for the total amount of Eight Hundred FiftyEight Thousand Five Hundred Pesos (P858,500.00) per Marine Insurance Policy No. 29591.
Subsequently, ANCO, with leave of court, filed a Third-Party Complaint against FGU, alleging that before the vessel of
ANCO left for San Jose, Antique with the cargoes owned by SMC, the cargoes, to the extent of Twenty Thousand (20,000)
cases, were insured with FGU for a total amount of Eight Hundred Fifty-Eight Thousand Five Hundred Pesos (P858,500.00)
under Marine Insurance Policy No. 29591. ANCO further alleged that on or about 02 October 1979, by reason of very strong
winds and heavy waves brought about by a passing typhoon, the vessel run aground near the vicinity of San Jose, Antique, as
a result of which, the vessel was totally wrecked and its cargoes owned by SMC were lost and/or destroyed. According to
ANCO, the loss of said cargoes occurred as a result of risks insured against in the insurance policy and during the existence
and lifetime of said insurance policy. ANCO went on to assert that in the remote possibility that the court will order ANCO to
pay SMCs claim, the third-party defendant corporation should be held liable to indemnify or reimburse ANCO whatever
amounts, or damages, it may be required to pay to SMC.
In its answer to the Third-Party complaint, third-party defendant FGU admitted the existence of the Insurance Policy
under Marine Cover Note No. 29591 but maintained that the alleged loss of the cargoes covered by the said insurance policy
cannot be attributed directly or indirectly to any of the risks insured against in the said insurance policy. According to FGU, it is
only liable under the policy to Third-party Plaintiff ANCO and/or Plaintiff SMC in case of any of the following:
a) total loss of the entire shipment;
b) loss of any case as a result of the sinking of the vessel; or
c) loss as a result of the vessel being on fire.
Furthermore, FGU alleged that the Third-Party Plaintiff ANCO and Plaintiff SMC failed to exercise ordinary diligence or
the diligence of a good father of the family in the care and supervision of the cargoes insured to prevent its loss and/or
destruction.
Third-Party defendant FGU prayed for the dismissal of the Third-Party Complaint and asked for actual, moral, and
exemplary damages and attorneys fees.[1]
The trial court found that while the cargoes were indeed lost due to fortuitous event, there was failure on ANCOs part,
through their representatives, to observe the degree of diligence required that would exonerate them from liability. The trial
court thus held the Estate of Ang Gui and Co To liable to SMC for the amount of the lost shipment. With respect to the ThirdParty complaint, the court a quo found FGU liable to bear Fifty-Three Percent (53%) of the amount of the lost cargoes.
According to the trial court:
. . . Evidence is to the effect that the D/B Lucio, on which the cargo insured, run-aground and was broken and the beer
cargoes on the said barge were swept away. It is the sense of this Court that the risk insured against was the cause of the loss.
...
Since the total cargo was 40,550 cases which had a total amount of P1,833,905.00 and the amount of the policy was only for
P858,500.00, defendants as assured, therefore, were considered co-insurers of third-party defendant FGU Insurance
Corporation to the extent of 975,405.00 value of the cargo. Consequently, inasmuch as there was partial loss of only
P1,346,197.00, the assured shall bear 53% of the loss[4] [Emphasis ours]
The appellate court affirmed in toto the decision of the lower court and denied the motion for reconsideration and the
supplemental motion for reconsideration.
Hence, the petitions.
The Issues
In G.R. No. 137775, the grounds for review raised by petitioner FGU can be summarized into two: 1) Whether or not
respondent Court of Appeals committed grave abuse of discretion in holding FGU liable under the insurance contract
considering the circumstances surrounding the loss of the cargoes; and 2) Whether or not the Court of Appeals committed an
error of law in holding that the doctrine of res judicata applies in the instant case.
In G.R. No. 140704, petitioner Estate of Ang Gui and Co To assail the decision of the appellate court based on the
following assignments of error: 1) The Court of Appeals committed grave abuse of discretion in affirming the findings of the
lower court that the negligence of the crewmembers of the D/B Lucio was the proximate cause of the loss of the cargoes; and
2) The respondent court acted with grave abuse of discretion when it ruled that the appeal was without merit despite the fact
that said court had accepted the decision in Civil Case No. R-19341, as affirmed by the Court of Appeals and the Supreme
Court, as res judicata.
Ruling of the Court

First, we shall endeavor to dispose of the common issue raised by both petitioners in their respective petitions for review,
that is, whether or not the doctrine of res judicataapplies in the instant case.
It is ANCOs contention that the decision in Civil Case No. R-19341,[5] which was decided in its favor, constitutes res
judicata with respect to the issues raised in the case at bar.
The contention is without merit. There can be no res judicata as between Civil Case No. R-19341 and the case at bar. In
order for res judicata to be made applicable in a case, the following essential requisites must be present: 1) the former
judgment must be final; 2) the former judgment must have been rendered by a court having jurisdiction over the subject matter
and the parties; 3) the former judgment must be a judgment or order on the merits; and 4) there must be between the first and
second action identity of parties, identity of subject matter, and identity of causes of action.[6]
There is no question that the first three elements of res judicata as enumerated above are indeed satisfied by the
decision in Civil Case No. R-19341. However, the doctrine is still inapplicable due to the absence of the last essential requisite
of identity of parties, subject matter and causes of action.
The parties in Civil Case No. R-19341 were ANCO as plaintiff and FGU as defendant while in the instant case, SMC is
the plaintiff and the Estate of Ang Gui represented by Lucio, Julian and Jaime, all surnamed Ang and Co To as defendants,
with the latter merely impleading FGU as third-party defendant.
The subject matter of Civil Case No. R-19341 was the insurance contract entered into by ANCO, the owner of the vessel,
with FGU covering the vessel D/B Lucio, while in the instant case, the subject matter of litigation is the loss of the cargoes of
SMC, as shipper, loaded in the D/B Lucio and the resulting failure of ANCO to deliver to SMCs consignees the lost cargo.
Otherwise stated, the controversy in the first case involved the rights and liabilities of the shipowner vis--vis that of the insurer,
while the present case involves the rights and liabilities of the shipper vis--vis that of the shipowner. Specifically, Civil Case No.
R-19341 was an action for Specific Performance and Damages based on FGU Marine Hull Insurance Policy No. VMF-MH13519 covering the vessel D/B Lucio, while the instant case is an action for Breach of Contract of Carriage and Damages filed
by SMC against ANCO based on Bill of Lading No. 1 and No. 2, with defendant ANCO seeking reimbursement from FGU
under Insurance Policy No. MA-58486, should the former be held liable to pay SMC.
Moreover, the subject matter of the third-party complaint against FGU in this case is different from that in Civil Case No.
R-19341. In the latter, ANCO was suing FGU for the insurance contract over the vessel while in the former, the third-party
complaint arose from the insurance contract covering the cargoes on board the D/B Lucio.
The doctrine of res judicata precludes the re-litigation of a particular fact or issue already passed upon by a court of
competent jurisdiction in a former judgment, in another action between the same parties based on a different claim or cause of
action. The judgment in the prior action operates as estoppel only as to those matters in issue or points controverted, upon the
determination of which the finding or judgment was rendered.[7] If a particular point or question is in issue in the second action,
and the judgment will depend on the determination of that particular point or question, a former judgment between the same
parties or their privies will be final and conclusive in the second if that same point or question was in issue and adjudicated in
the first suit.[8]
Since the case at bar arose from the same incident as that involved in Civil Case No. R-19341, only findings with respect
to matters passed upon by the court in the former judgment are conclusive in the disposition of the instant case. A careful
perusal of the decision in Civil Case No. R-19341 will reveal that the pivotal issues resolved by the lower court, as affirmed by
both the Court of Appeals and the Supreme Court, can be summarized into three legal conclusions: 1) that the D/B Lucio
before and during the voyage was seaworthy; 2) that there was proper notice of loss made by ANCO within the reglementary
period; and 3) that the vessel D/B Lucio was a constructive total loss.
Said decision, however, did not pass upon the issues raised in the instant case. Absent therein was any discussion
regarding the liability of ANCO for the loss of the cargoes. Neither did the lower court pass upon the issue of the alleged
negligence of the crewmembers of the D/B Lucio being the cause of the loss of the cargoes owned by SMC.
Therefore, based on the foregoing discussion, we are reversing the findings of the Court of Appeals that there is res
judicata.
Anent ANCOs first assignment of error, i.e., the appellate court committed error in concluding that the negligence of
ANCOs representatives was the proximate cause of the loss, said issue is a question of fact assailing the lower courts
appreciation of evidence on the negligence or lack thereof of the crewmembers of the D/B Lucio. As a rule, findings of fact of
lower courts, particularly when affirmed by the appellate court, are deemed final and conclusive. The Supreme Court cannot
review such findings on appeal, especially when they are borne out by the records or are based on substantial evidence.[9] As
held in the case of Donato v. Court of Appeals,[10] in this jurisdiction, it is a fundamental and settled rule that findings of fact by
the trial court are entitled to great weight on appeal and should not be disturbed unless for strong and cogent reasons because
the trial court is in a better position to examine real evidence, as well as to observe the demeanor of the witnesses while
testifying in the case.[11]
It is not the function of this Court to analyze or weigh evidence all over again, unless there is a showing that the findings
of the lower court are totally devoid of support or are glaringly erroneous as to constitute palpable error or grave abuse of
discretion.[12]
A careful study of the records shows no cogent reason to fault the findings of the lower court, as sustained by the
appellate court, that ANCOs representatives failed to exercise the extraordinary degree of diligence required by the law to
exculpate them from liability for the loss of the cargoes.
First, ANCO admitted that they failed to deliver to the designated consignee the Twenty Nine Thousand Two Hundred
Ten (29,210) cases of Pale Pilsen and Five Hundred Fifty (550) cases of Cerveza Negra.

Second, it is borne out in the testimony of the witnesses on record that the barge D/B Lucio had no engine of its own and
could not maneuver by itself. Yet, the patron of ANCOs tugboat M/T ANCO left it to fend for itself notwithstanding the fact that
as the two vessels arrived at the port of San Jose, Antique, signs of the impending storm were already manifest. As stated by
the lower court, witness Mr. Anastacio Manilag testified that the captain or patron of the tugboat M/T ANCO left the barge D/B
Lucio immediately after it reached San Jose, Antique, despite the fact that there were already big waves and the area was
already dark. This is corroborated by defendants own witness, Mr. Fernando Macabueg.[13]
The trial court continued:
At that precise moment, since it is the duty of the defendant to exercise and observe extraordinary diligence in the vigilance
over the cargo of the plaintiff, the patron or captain of M/T ANCO, representing the defendant could have placed D/B Lucio in a
very safe location before they left knowing or sensing at that time the coming of a typhoon. The presence of big waves and
dark clouds could have warned the patron or captain of M/T ANCO to insure the safety of D/B Lucio including its cargo. D/B
Lucio being a barge, without its engine, as the patron or captain of M/T ANCO knew, could not possibly maneuver by itself.
Had the patron or captain of M/T ANCO, the representative of the defendants observed extraordinary diligence in placing the
D/B Lucio in a safe place, the loss to the cargo of the plaintiff could not have occurred. In short, therefore, defendants through
their representatives, failed to observe the degree of diligence required of them under the provision of Art. 1733 of the Civil
Code of the Philippines.[14]
Petitioners Estate of Ang Gui and Co To, in their Memorandum, asserted that the contention of respondents SMC and
FGU that the crewmembers of D/B Lucio should have left port at the onset of the typhoon is like advising the fish to jump from
the frying pan into the fire and an advice that borders on madness.[15]
The argument does not persuade. The records show that the D/B Lucio was the only vessel left at San Jose, Antique,
during the time in question. The other vessels were transferred and temporarily moved to Malandong, 5 kilometers from wharf
where the barge remained.[16] Clearly, the transferred vessels were definitely safer in Malandong than at the port of San Jose,
Antique, at that particular time, a fact which petitioners failed to dispute
ANCOs arguments boil down to the claim that the loss of the cargoes was caused by the typhoon Sisang, a fortuitous
event (caso fortuito), and there was no fault or negligence on their part. In fact, ANCO claims that their crewmembers
exercised due diligence to prevent or minimize the loss of the cargoes but their efforts proved no match to the forces
unleashed by the typhoon which, in petitioners own words was, by any yardstick, a natural calamity, a fortuitous event, an act
of God, the consequences of which petitioners could not be held liable for.[17]
The Civil Code provides:
Art. 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.
Such extraordinary diligence in vigilance over the goods is further expressed in Articles 1734, 1735, and 1745 Nos. 5, 6, and
7...
Art. 1734. Common carriers are responsible for the loss, destruction, or deterioration of the goods, unless the same is due to
any of the following causes only:
(1) Flood, storm, earthquake, lightning, or other natural disaster or calamity;
...
Art. 1739. In order that the common carrier may be exempted from responsibility, the natural disaster must have been
the proximate and only cause of the loss. However, the common carrier must exercise due diligence to prevent or minimize
loss before, during and after the occurrence of flood, storm, or other natural disaster in order that the common carrier may be
exempted from liability for the loss, destruction, or deterioration of the goods . . . (Emphasis supplied)
Caso fortuito or force majeure (which in law are identical insofar as they exempt an obligor from liability)[18] by definition,
are extraordinary events not foreseeable or avoidable, events that could not be foreseen, or which though foreseen, were
inevitable. 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.[19]
In this case, the calamity which caused the loss of the cargoes was not unforeseen nor was it unavoidable. In fact, the
other vessels in the port of San Jose, Antique, managed to transfer to another place, a circumstance which prompted SMCs
District Sales Supervisor to request that the D/B Lucio be likewise transferred, but to no avail. The D/B Lucio had no engine
and could not maneuver by itself. Even if ANCOs representatives wanted to transfer it, they no longer had any means to do so
as the tugboat M/T ANCO had already departed, leaving the barge to its own devices. The captain of the tugboat should have
had the foresight not to leave the barge alone considering the pending storm.
While the loss of the cargoes was admittedly caused by the typhoon Sisang, a natural disaster, ANCO could not escape
liability to respondent SMC. The records clearly show the failure of petitioners representatives to exercise the extraordinary
degree of diligence mandated by law. To be exempted from responsibility, the natural disaster should have been the proximate
and only cause of the loss.[20] There must have been no contributory negligence on the part of the common carrier. As held in
the case of Limpangco Sons v. Yangco Steamship Co.:[21]
. . . To be exempt from liability because of an act of God, the tug must be free from any previous negligence or misconduct by
which that loss or damage may have been occasioned. For, although the immediate or proximate cause of the loss in any
given instance may have been what is termed an act of God, yet, if the tug unnecessarily exposed the two to such accident by
any culpable act or omission of its own, it is not excused.[22]

Therefore, as correctly pointed out by the appellate court, there was blatant negligence on the part of M/T ANCOs
crewmembers, first in leaving the engine-less barge D/B Lucio at the mercy of the storm without the assistance of the tugboat,
and again in failing to heed the request of SMCs representatives to have the barge transferred to a safer place, as was done
by the other vessels in the port; thus, making said blatant negligence the proximate cause of the loss of the cargoes.
We now come to the issue of whether or not FGU can be held liable under the insurance policy to reimburse ANCO for
the loss of the cargoes despite the findings of the respondent court that such loss was occasioned by the blatant negligence of
the latters employees.
One of the purposes for taking out insurance is to protect the insured against the consequences of his own negligence
and that of his agents. Thus, it is a basic rule in insurance that the carelessness and negligence of the insured or his agents
constitute no defense on the part of the insurer.[23] This rule however presupposes that the loss has occurred due to causes
which could not have been prevented by the insured, despite the exercise of due diligence.
The question now is whether there is a certain degree of negligence on the part of the insured or his agents that will
deprive him the right to recover under the insurance contract. We say there is. However, to what extent such negligence must
go in order to exonerate the insurer from liability must be evaluated in light of the circumstances surrounding each case. When
evidence show that the insureds negligence or recklessness is so gross as to be sufficient to constitute a willful act, the insurer
must be exonerated.
In the case of Standard Marine Ins. Co. v. Nome Beach L. & T. Co.,[24] the United States Supreme Court held that:
The ordinary negligence of the insured and his agents has long been held as a part of the risk which the insurer takes upon
himself, and the existence of which, where it is the proximate cause of the loss, does not absolve the insurer from liability. But
willful exposure, gross negligence, negligence amounting to misconduct, etc., have often been held to release the insurer from
such liability.[25][Emphasis ours]
...
In the case of Williams v. New England Insurance Co., 3 Cliff. 244, Fed. Cas. No. 17,731, the owners of an insured vessel
attempted to put her across the bar at Hatteras Inlet. She struck on the bar and was wrecked. The master knew that the depth
of water on the bar was such as to make the attempted passage dangerous. Judge Clifford held that, under the circumstances,
the loss was not within the protection of the policy, saying:
Authorities to prove that persons insured cannot recover for a loss occasioned by their own wrongful acts are hardly necessary,
as the proposition involves an elementary principle of universal application. Losses may be recovered by the insured, though
remotely occasioned by the negligence or misconduct of the master or crew, if proximately caused by the perils insured
against, because such mistakes and negligence are incident to navigation and constitute a part of the perils which those who
engage in such adventures are obliged to incur; but it was never supposed that the insured could recover indemnity for a loss
occasioned by his own wrongful act or by that of any agent for whose conduct he was responsible.[26] [Emphasis ours]
From the above-mentioned decision, the United States Supreme Court has made a distinction between ordinary
negligence and gross negligence or negligence amounting to misconduct and its effect on the insureds right to recover under
the insurance contract. According to the Court, while mistake and negligence of the master or crew are incident to navigation
and constitute a part of the perils that the insurer is obliged to incur, such negligence or recklessness must not be of such
gross character as to amount to misconduct or wrongful acts; otherwise, such negligence shall release the insurer from liability
under the insurance contract.
In the case at bar, both the trial court and the appellate court had concluded from the evidence that the crewmembers of
both the D/B Lucio and the M/T ANCO were blatantly negligent. To wit:
There was blatant negligence on the part of the employees of defendants-appellants when the patron (operator) of the tug
boat immediately left the barge at the San Jose, Antique wharf despite the looming bad weather. Negligence was likewise
exhibited by the defendants-appellants representative who did not heed Macabuags request that the barge be moved to a
more secure place. The prudent thing to do, as was done by the other sea vessels at San Jose, Antique during the time in
question, was to transfer the vessel to a safer wharf. The negligence of the defendants-appellants is proved by the fact that on
01 October 1979, the only simple vessel left at the wharf in San Jose was the D/B Lucio.[27] [Emphasis ours]
As stated earlier, this Court does not find any reason to deviate from the conclusion drawn by the lower court, as
sustained by the Court of Appeals, that ANCOs representatives had failed to exercise extraordinary diligence required of
common carriers in the shipment of SMCs cargoes. Such blatant negligence being the proximate cause of the loss of the
cargoes amounting to One Million Three Hundred Forty-Six Thousand One Hundred Ninety-Seven Pesos (P1,346,197.00)
This Court, taking into account the circumstances present in the instant case, concludes that the blatant negligence of
ANCOs employees is of such gross character that it amounts to a wrongful act which must exonerate FGU from liability under
the insurance contract.
WHEREFORE, premises considered, the Decision of the Court of Appeals dated 24 February 1999 is hereby AFFIRMED
with MODIFICATION dismissing the third-party complaint.
SO ORDERED.
Puno, (Chairman), Austria-Martinez, Callejo, Sr., and Tinga, JJ., concur.

THIRD DIVISION
[G.R. No. 150255. April 22, 2005]
SCHMITZ TRANSPORT & BROKERAGE CORPORATION, petitioner, vs. TRANSPORT VENTURE, INC., INDUSTRIAL INSURANC
COMPANY, LTD., and BLACK SEA SHIPPING AND DODWELL now INCHCAPE SHIPPING SERVICES, respondents.
DECISION
CARPIO-MORALES, J.:
On petition for review is the June 27, 2001 Decision[1] of the Court of Appeals, as well as its Resolution[2] dated September 28, 200
denying the motion for reconsideration, which affirmed that of Branch 21 of the Regional Trial Court (RTC) of Manila in Civil Case No. 92
63132[3] holding petitioner Schmitz Transport Brokerage Corporation (Schmitz Transport), together with Black Sea Shipping Corporatio
(Black Sea), represented by its ship agent Inchcape Shipping Inc. (Inchcape), and Transport Venture (TVI), solidarily liable for the loss of 3
hot rolled steel sheets in coil that were washed overboard a barge.
On September 25, 1991, SYTCO Pte Ltd. Singapore shipped from the port of Ilyichevsk, Russia on board M/V Alexander Saveliev (a
vessel of Russian registry and owned by Black Sea) 545 hot rolled steel sheets in coil weighing 6,992,450 metric tons.
The cargoes, which were to be discharged at the port of Manila in favor of the consignee, Little Giant Steel Pipe Corporation (Littl
Giant),[4] were insured against all risks with Industrial Insurance Company Ltd. (Industrial Insurance) under Marine Policy No. M-91-3747
TIS.[5]
The vessel arrived at the port of Manila on October 24, 1991 and the Philippine Ports Authority (PPA) assigned it a place of berth at the
outside breakwater at the Manila South Harbor.[6]
Schmitz Transport, whose services the consignee engaged to secure the requisite clearances, to receive the cargoes from the shipside
and to deliver them to its (the consignees) warehouse at Cainta, Rizal,[7] in turn engaged the services of TVI to send a barge and tugboat a
shipside.
On October 26, 1991, around 4:30 p.m., TVIs tugboat Lailani towed the barge Erika V to shipside.[8]
By 7:00 p.m. also of October 26, 1991, the tugboat, after positioning the barge alongside the vessel, left and returned to the por
terminal.[9] At 9:00 p.m., arrastre operator Ocean Terminal Services Inc. commenced to unload 37 of the 545 coils from the vessel unto th
barge.
By 12:30 a.m. of October 27, 1991 during which the weather condition had become inclement due to an approaching storm, the
unloading unto the barge of the 37 coils was accomplished.[10] No tugboat pulled the barge back to the pier, however.
At around 5:30 a.m. of October 27, 1991, due to strong waves,[11] the crew of the barge abandoned it and transferred to the vessel. The
barge pitched and rolled with the waves and eventually capsized, washing the 37 coils into the sea.[12] At 7:00 a.m., a tugboat finally arrive
to pull the already empty and damaged barge back to the pier.[13]
Earnest efforts on the part of both the consignee Little Giant and Industrial Insurance to recover the lost cargoes proved futile.[14]
Little Giant thus filed a formal claim against Industrial Insurance which paid it the amount of P5,246,113.11. Little Giant thereupo
executed a subrogation receipt[15] in favor of Industrial Insurance.
Industrial Insurance later filed a complaint against Schmitz Transport, TVI, and Black Sea through its representative Inchcape (th
defendants) before the RTC of Manila, for the recovery of the amount it paid to Little Giant plus adjustment fees, attorneys fees, and litigatio
expenses.[16]
Industrial Insurance faulted the defendants for undertaking the unloading of the cargoes while typhoon signal No. 1 was raised in Metro
Manila.[17]
By Decision of November 24, 1997, Branch 21 of the RTC held all the defendants negligent for unloading the cargoes outside of the
breakwater notwithstanding the storm signal.[18] The dispositive portion of the decision reads:
WHEREFORE, premises considered, the Court renders judgment in favor of the plaintiff, ordering the defendants to pay plaintiff jointly an
severally the sum of P5,246,113.11 with interest from the date the complaint was filed until fully satisfied, as well as the sum of P5,000.0
representing the adjustment fee plus the sum of 20% of the amount recoverable from the defendants as attorneys fees plus the costs of suit
The counterclaims and cross claims of defendants are hereby DISMISSED for lack of [m]erit.[19]
To the trial courts decision, the defendants Schmitz Transport and TVI filed a joint motion for reconsideration assailing the finding tha
they are common carriers and the award of excessive attorneys fees of more than P1,000,000. And they argued that they were not motivated
by gross or evident bad faith and that the incident was caused by a fortuitous event. [20]
By resolution of February 4, 1998, the trial court denied the motion for reconsideration. [21]
All the defendants appealed to the Court of Appeals which, by decision of June 27, 2001, affirmed in toto the decision of the tria
court, [22] it finding that all the defendants were common carriers Black Sea and TVI for engaging in the transport of goods and cargoes ove
the seas as a regular business and not as an isolated transaction,[23] and Schmitz Transport for entering into a contract with Little Giant t
transport the cargoes from ship to port for a fee.[24]
In holding all the defendants solidarily liable, the appellate court ruled that each one was essential such that without each other
contributory negligence the incident would not have happened and so much so that the person principally liable cannot be distinguished wit
sufficient accuracy.[25]
In discrediting the defense of fortuitous event, the appellate court held that although defendants obviously had nothing to do with the
force of nature, they however had control of where to anchor the vessel, where discharge will take place and even when the discharging wi
commence.[26]
The defendants respective motions for reconsideration having been denied by Resolution[27] of September 28, 2001, Schmitz Transpor
(hereinafter referred to as petitioner) filed the present petition against TVI, Industrial Insurance and Black Sea.

Petitioner asserts that in chartering the barge and tugboat of TVI, it was acting for its principal, consignee Little Giant, hence, the
transportation contract was by and between Little Giant and TVI.[28]
By Resolution of January 23, 2002, herein respondents Industrial Insurance, Black Sea, and TVI were required to file their respectiv
Comments.[29]
By its Comment, Black Sea argued that the cargoes were received by the consignee through petitioner in good order, hence, it canno
be faulted, it having had no control and supervision thereover.[30]
For its part, TVI maintained that it acted as a passive party as it merely received the cargoes and transferred them unto the barge upo
the instruction of petitioner.[31]
In issue then are:
(1) Whether the loss of the cargoes was due to a fortuitous event, independent of any act of negligence on the part of petitioner Blac
Sea and TVI, and
(2) If there was negligence, whether liability for the loss may attach to Black Sea, petitioner and TVI.
When a fortuitous event occurs, Article 1174 of the Civil Code absolves any party from any and all liability arising therefrom:
ART. 1174. Except in cases expressly specified by the law, or when it is otherwise declared by stipulation, or when the nature of th
obligation requires the assumption of risk, no person shall be responsible for those events which could not be foreseen, or which thoug
foreseen, were inevitable.
In order, to be considered a fortuitous event, however, (1) the cause of the unforeseen and unexpected occurrence, or the failure of the
debtor to comply with his obligation, must be independent of human will; (2) it must be impossible to foresee the event which constitute th
caso fortuito, or if it can be foreseen it must be impossible to avoid; (3) the occurrence must be such as to render it impossible for the debto
to fulfill his obligation in any manner; and (4) the obligor must be free from any participation in the aggravation of the injury resulting to th
creditor.[32]
[T]he principle embodied in the act of God doctrine strictly requires that the act must be occasioned solely by the violence of nature. Huma
intervention is to be excluded from creating or entering into the cause of the mischief. When the effect is found to be in part the result of the
participation of man, whether due to his active intervention or neglect or failure to act, the whole occurrence is then humanized and remove
from the rules applicable to the acts of God.[33]
The appellate court, in affirming the finding of the trial court that human intervention in the form of contributory negligence by all th
defendants resulted to the loss of the cargoes,[34] held that unloading outside the breakwater, instead of inside the breakwater, while a storm
signal was up constitutes negligence.[35] It thus concluded that the proximate cause of the loss was Black Seas negligence in deciding to
unload the cargoes at an unsafe place and while a typhoon was approaching.[36]
From a review of the records of the case, there is no indication that there was greater risk in loading the cargoes outside the breakwate
As the defendants proffered, the weather on October 26, 1991 remained normal with moderate sea condition such that port operation
continued and proceeded normally.[37]
The weather data report,[38] furnished and verified by the Chief of the Climate Data Section of PAG-ASA and marked as a commo
exhibit of the parties, states that while typhoon signal No. 1 was hoisted over Metro Manila on October 23-31, 1991, the sea condition at the
port of Manila at 5:00 p.m. - 11:00 p.m. of October 26, 1991 was moderate. It cannot, therefore, be said that the defendants were negligent in
not unloading the cargoes upon the barge on October 26, 1991 inside the breakwater.
That no tugboat towed back the barge to the pier after the cargoes were completely loaded by 12:30 in the morning[39] is, however,
material fact which the appellate court failed to properly consider and appreciate[40] the proximate cause of the loss of the cargoes. Had th
barge been towed back promptly to the pier, the deteriorating sea conditions notwithstanding, the loss could have been avoided. But the
barge was left floating in open sea until big waves set in at 5:30 a.m., causing it to sink along with the cargoes.[41] The loss thus falls outsid
the act of God doctrine.
The proximate cause of the loss having been determined, who among the parties is/are responsible therefor?
Contrary to petitioners insistence, this Court, as did the appellate court, finds that petitioner is a common carrier. For it undertook t
transport the cargoes from the shipside of M/V Alexander Saveliev to the consignees warehouse at Cainta, Rizal. As the appellate court put
as long as a person or corporation holds [itself] to the public for the purpose of transporting goods as [a] business, [it] is already considered
common carrier regardless if [it] owns the vehicle to be used or has to hire one.[42] That petitioner is a common carrier, the testimony of it
own Vice-President and General Manager Noel Aro that part of the services it offers to its clients as a brokerage firm includes th
transportation of cargoes reflects so.
Atty. Jubay: Will you please tell us what [are you] functions x x x as Executive Vice-President and General Manager of said
Company?
Mr. Aro: Well, I oversee the entire operation of the brokerage and transport business of the company. I also handle the variou
division heads of the company for operation matters, and all other related functions that the President may assign to me from
time to time, Sir.
Q: Now, in connection [with] your duties and functions as you mentioned, will you please tell the Honorable Court if you came t
know the company by the name Little Giant Steel Pipe Corporation?
A: Yes, Sir. Actually, we are the brokerage firm of that Company.
Q: And since when have you been the brokerage firm of that company, if you can recall?
A: Since 1990, Sir.
Q: Now, you said that you are the brokerage firm of this Company. What work or duty did you perform in behalf of this company?
A: We handled the releases (sic) of their cargo[es] from the Bureau of Customs. We [are] also in-charged of the delivery of the
goods to their warehouses. We also handled the clearances of their shipment at the Bureau of Customs, Sir.
xxx

Q: Now, what precisely [was] your agreement with this Little Giant Steel Pipe Corporation with regards to this shipment? Wha
work did you do with this shipment?
A: We handled the unloading of the cargo[es] from vessel to lighter and then the delivery of [the] cargo[es] from lighter to
BASECO then to the truck and to the warehouse, Sir.
Q: Now, in connection with this work which you are doing, Mr. Witness, you are supposed to perform, what equipment do (sic) yo
require or did you use in order to effect this unloading, transfer and delivery to the warehouse?
A: Actually, we used the barges for the ship side operations, this unloading [from] vessel to lighter, and on this we hired or we sub
contracted with [T]ransport Ventures, Inc. which [was] in-charged (sic) of the barges. Also, in BASECO compound we are
leasing cranes to have the cargo unloaded from the barge to trucks, [and] then we used trucks to deliver [the cargoes] to the
consignees warehouse, Sir.
Q: And whose trucks do you use from BASECO compound to the consignees warehouse?
A: We utilized of (sic) our own trucks and we have some other contracted trucks, Sir.
xxx
ATTY. JUBAY: Will you please explain to us, to the Honorable Court why is it you have to contract for the barges of Transpor
Ventures Incorporated in this particular operation?
A: Firstly, we dont own any barges. That is why we hired the services of another firm whom we know [al]ready for quite sometime
which is Transport Ventures, Inc. (Emphasis supplied)[43]
It is settled that under a given set of facts, a customs broker may be regarded as a common carrier. Thus, this Court, in A.F. Sanche
Brokerage, Inc. v. The Honorable Court of Appeals,[44] held:
The appellate court did not err in finding petitioner, a customs broker, to be also a common carrier, as defined under Article 1732 of the Civ
Code, to wit,
Art. 1732. Common carriers are persons, corporations, firms or associations engaged in the business of carrying or transporting passenger
or goods or both, by land, water, or air, for compensation, offering their services to the public.
xxx
Article 1732 does not distinguish between one whose principal business activity is the carrying of goods and one who does such carryin
only as an ancillary activity. The contention, therefore, of petitioner that it is not a common carrier but a customs broker whose principa
function is to prepare the correct customs declaration and proper shipping documents as required by law is bereft of merit. It suffices tha
petitioner undertakes to deliver the goods for pecuniary consideration.[45]
And in Calvo v. UCPB General Insurance Co. Inc.,[46] this Court held that as the transportation of goods is an integral part of a custom
broker, the customs broker is also a common carrier. For to declare otherwise would be to deprive those with whom [it] contracts th
protection which the law affords them notwithstanding the fact that the obligation to carry goods for [its] customers, is part and parcel o
petitioners business.[47]
As for petitioners argument that being the agent of Little Giant, any negligence it committed was deemed the negligence of its principa
it does not persuade.
True, petitioner was the broker-agent of Little Giant in securing the release of the cargoes. In effecting the transportation of the cargoe
from the shipside and into Little Giants warehouse, however, petitioner was discharging its own personal obligation under a contact o
carriage.
Petitioner, which did not have any barge or tugboat, engaged the services of TVI as handler[48] to provide the barge and the tugboat. In
their Service Contract,[49] while Little Giant was named as the consignee, petitioner did not disclose that it was acting on commission and wa
chartering the vessel for Little Giant.[50] Little Giant did not thus automatically become a party to the Service Contract and was not, therefore
bound by the terms and conditions therein.
Not being a party to the service contract, Little Giant cannot directly sue TVI based thereon but it can maintain a cause of action fo
negligence.[51]
In the case of TVI, while it acted as a private carrier for which it was under no duty to observe extraordinary diligence, it was sti
required to observe ordinary diligence to ensure the proper and careful handling, care and discharge of the carried goods.
Thus, Articles 1170 and 1173 of the Civil Code provide:
ART. 1170. Those who in the performance of their obligations are guilty of fraud, negligence, or delay, and those who in any manne
contravene the tenor thereof, are liable for damages.
ART. 1173. The fault or negligence of the obligor consists in the omission of that diligence which is required by the nature of the obligatio
and corresponds with the circumstances of the persons, of the time and of the place. When negligence shows bad faith, the provisions o
articles 1171 and 2202, paragraph 2, shall apply.
If the law or contract does not state the diligence which is to be observed in the performance, that which is expected of a good father of a
family shall be required.
Was the reasonable care and caution which an ordinarily prudent person would have used in the same situation exercised by TVI?[52]
This Court holds not.
TVIs failure to promptly provide a tugboat did not only increase the risk that might have been reasonably anticipated during the shipsid
operation, but was the proximate cause of the loss. A man of ordinary prudence would not leave a heavily loaded barge floating for
considerable number of hours, at such a precarious time, and in the open sea, knowing that the barge does not have any power of its own
and is totally defenseless from the ravages of the sea. That it was nighttime and, therefore, the members of the crew of a tugboat would be
charging overtime pay did not excuse TVI from calling for one such tugboat.

As for petitioner, for it to be relieved of liability, it should, following Article 1739[53] of the Civil Code, prove that it exercised due diligenc
to prevent or minimize the loss, before, during and after the occurrence of the storm in order that it may be exempted from liability for the los
of the goods.
While petitioner sent checkers[54] and a supervisor[55] on board the vessel to counter-check the operations of TVI, it failed to take a
available and reasonable precautions to avoid the loss. After noting that TVI failed to arrange for the prompt towage of the barge despite the
deteriorating sea conditions, it should have summoned the same or another tugboat to extend help, but it did not.
This Court holds then that petitioner and TVI are solidarily liable[56] for the loss of the cargoes. The following pronouncement of th
Supreme Court is instructive:
The foundation of LRTAs liability is the contract of carriage and its obligation to indemnify the victim arises from the breach of that contract b
reason of its failure to exercise the high diligence required of the common carrier. In the discharge of its commitment to ensure the safety o
passengers, a carrier may choose to hire its own employees or avail itself of the services of an outsider or an independent firm to undertak
the task. In either case, the common carrier is not relieved of its responsibilities under the contract of carriage.
Should Prudent be made likewise liable? If at all, that liability could only be for tort under the provisions of Article 2176 and related provisions
in conjunction with Article 2180 of the Civil Code. x x x [O]ne might ask further, how then must the liability of the common carrier, on on
hand, and an independent contractor, on the other hand, be described? It would be solidary. A contractual obligation can be breached by tor
and when the same act or omission causes the injury, one resulting in culpa contractual and the other in culpa aquiliana, Article 2194 of th
Civil Code can well apply. In fine, a liability for tort may arise even under a contract, where tort is that which breaches the contract. State
differently, when an act which constitutes a breach of contract would have itself constituted the source of a quasi-delictual liability had n
contract existed between the parties, the contract can be said to have been breached by tort, thereby allowing the rules on tort to apply.[57]
As for Black Sea, its duty as a common carrier extended only from the time the goods were surrendered or unconditionally placed in it
possession and received for transportation until they were delivered actually or constructively to consignee Little Giant.[58]
Parties to a contract of carriage may, however, agree upon a definition of delivery that extends the services rendered by the carrier. I
the case at bar, Bill of Lading No. 2 covering the shipment provides that delivery be made to the port of discharge or so near thereto as sh
may safely get, always afloat.[59] The delivery of the goods to the consignee was not from pier to pier but from the shipside of M/V Alexande
Saveliev and into barges, for which reason the consignee contracted the services of petitioner. Since Black Sea had constructively delivered
the cargoes to Little Giant, through petitioner, it had discharged its duty.[60]
In fine, no liability may thus attach to Black Sea.
Respecting the award of attorneys fees in an amount over P1,000,000.00 to Industrial Insurance, for lack of factual and legal basis, thi
Court sets it aside. While Industrial Insurance was compelled to litigate its rights, such fact by itself does not justify the award of attorney
fees under Article 2208 of the Civil Code. For no sufficient showing of bad faith would be reflected in a partys persistence in a case othe
than an erroneous conviction of the righteousness of his cause.[61] To award attorneys fees to a party just because the judgment is rendered
in its favor would be tantamount to imposing a premium on ones right to litigate or seek judicial redress of legitimate grievances.[62]
On the award of adjustment fees: The adjustment fees and expense of divers were incurred by Industrial Insurance in its voluntary bu
unsuccessful efforts to locate and retrieve the lost cargo. They do not constitute actual damages.[63]
As for the court a quos award of interest on the amount claimed, the same calls for modification following the ruling in Eastern Shippin
Lines, Inc. v. Court of Appeals[64] that when the demand cannot be reasonably established at the time the demand is made, the interest sha
begin to run not from the time the claim is made judicially or extrajudicially but from the date the judgment of the court is made (at which th
time the quantification of damages may be deemed to have been reasonably ascertained).[65]
WHEREFORE, judgment is hereby rendered ordering petitioner Schmitz Transport & Brokerage Corporation, and Transport Ventur
Incorporation jointly and severally liable for the amount of P5,246,113.11 with the MODIFICATION that interest at SIX PERCENT per annum
of the amount due should be computed from the promulgation on November 24, 1997 of the decision of the trial court.
Costs against petitioner.
SO ORDERED.
Panganiban, (Chairman), Sandoval-Gutierrez, Corona, and Garcia, JJ., concur.

Republic of the Philippines

SUPREME COURT
Manila
SECOND DIVISION
G.R. No. 185798
January 13, 2014
FIL-ESTATE PROPERTIES, INC. AND FIL-ESTATE NETWORK INC., Petitioners,
vs.
SPOUSES CONRADO AND MARIA VICTORIA RONQUILLO, Respondents.
DECISION
PEREZ, J.:
Before the Court is a petition for review on certiorari under Rule 45 of the 1997 Rules .of Civil Procedure assailing the
Decision1 of the Court of Appeals in CA-G.R. SP No. 100450 which affirmed the Decision of the Office of the President in O.P.
Case No. 06-F-216.
As culled from the records, the facts are as follow:
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 at Central Park Place Tower in Mandaluyong City for a pre-selling contract
price of FIVE MILLION ONE HUNDRED SEVENTY-FOUR THOUSAND ONLY (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, attorneys fees
and other litigation expenses.
On 21 October 2000, the HLURB issued an Order of Default against petitioners for failing to file their Answer within the
reglementary period despite service of summons.2
Petitioners filed a motion to lift order of default and attached their position paper attributing the delay in construction to the
1997 Asian financial crisis. Petitioners denied committing fraud or misrepresentation which could entitle respondents to an
award of moral damages.
On 13 June 2002, the HLURB, through Arbiter Atty. Joselito F. Melchor, rendered judgment ordering petitioners to jointly and
severally pay respondents the following amount:
a) The amount of TWO MILLION ONE HUNDRED NINETY-EIGHT THOUSAND NINE HUNDRED FORTY NINE
PESOS & 96/100 (P2,198,949.96) with interest thereon at twelve percent (12%) per annum to be computed from the
time of the complainants demand for refund on October 08, 1998 until fully paid,
b) ONE HUNDRED THOUSAND PESOS (P100,000.00) as moral damages,
c) FIFTY THOUSAND PESOS (P50,000.00) as attorneys fees,
d) The costs of suit, and
e) An administrative fine of TEN THOUSAND PESOS (P10,000.00) payable to this Office fifteen (15) days upon
receipt of this decision, for violation of Section 20 in relation to Section 38 of PD 957.3
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.
Petitioners appealed the Arbiters Decision through a petition for review pursuant to Rule XII of the 1996 Rules of Procedure of
HLURB. On 17 February 2005, the Board of Commissioners of the HLURB denied4 the petition and affirmed the Arbiters
Decision. The HLURB reiterated that the depreciation of the peso as a result of the Asian financial crisis is not a fortuitous
event which will exempt petitioners from the performance of their contractual obligation.
Petitioners filed a motion for reconsideration but it was denied5 on 8 May 2006. Thereafter, petitioners filed a Notice of Appeal
with the Office of the President. On 18 April 2007, petitioners appeal was dismissed6 by the Office of the President for lack of
merit. Petitioners moved for a reconsideration but their motion was denied7 on 26 July 2007.
Petitioners sought relief from the Court of Appeals through a petition for review under Rule 43 containing the same arguments
they raised before the HLURB and the Office of the President:
I.
THE HONORABLE OFFICE OF THE PRESIDENT ERRED IN AFFIRMING THE DECISION OF THE HONORABLE
HOUSING AND LAND USE REGULATORY BOARD AND ORDERING PETITIONERS-APPELLANTS TO REFUND
RESPONDENTS-APPELLEES THE SUM OF P2,198,949.96 WITH 12% INTEREST FROM 8 OCTOBER 1998 UNTIL FULLY
PAID, CONSIDERING THAT THE COMPLAINT STATES NO CAUSE OF ACTION AGAINST PETITIONERS-APPELLANTS.
II.

THE HONORABLE OFFICE OF THE PRESIDENT ERRED IN AFFIRMING THE DECISION OF THE OFFICE BELOW
ORDERING PETITIONERS-APPELLANTS TO PAY RESPONDENTS-APPELLEES THE SUM OF P100,000.00 AS MORAL
DAMAGES AND P50,000.00 AS ATTORNEYS FEES CONSIDERING THE ABSENCE OF ANY FACTUAL OR LEGAL BASIS
THEREFOR.
III.
THE HONORABLE OFFICE OF THE PRESIDENT ERRED IN AFFIRMING THE DECISION OF THE HOUSING AND LAND
USE REGULATORY BOARD ORDERING PETITIONERS-APPELLANTS TO PAY P10,000.00 AS ADMINISTRATIVE FINE IN
THE ABSENCE OF ANY FACTUAL OR LEGAL BASIS TO SUPPORT SUCH FINDING.8
On 30 July 2008, the Court of Appeals denied the petition for review for lack of merit. The appellate court echoed the HLURB
Arbiters ruling that "a buyer for a condominium/subdivision unit/lot unit which has not been developed in accordance with the
approved condominium/subdivision plan within the time limit for complying with said developmental requirement may opt for
reimbursement under Section 20 in relation to Section 23 of Presidential Decree (P.D.) 957 x x x."9 The appellate court
supported the HLURB Arbiters conclusion, which was affirmed by the HLURB Board of Commission and the Office of the
President, that petitioners failure to develop the condominium project is tantamount to a substantial breach which warrants a
refund of the total amount paid, including interest. The appellate court pointed out that petitioners failed to prove that the Asian
financial crisis constitutes a fortuitous event which could excuse them from the performance of their contractual and statutory
obligations. The appellate court also affirmed the award of moral damages in light of petitioners unjustified refusal to satisfy
respondents claim and the legality of the administrative fine, as provided in Section 20 of Presidential Decree No. 957.
Petitioners sought reconsideration but it was denied in a Resolution10 dated 11 December 2008 by the Court of Appeals.
Aggrieved, petitioners filed the instant petition advancing substantially the same grounds for review:
A.
THE HONORABLE COURT OF APPEALS ERRED WHEN IT AFFIRMED IN TOTO THE DECISION OF THE OFFICE OF
THE PRESIDENT WHICH SUSTAINED RESCISSION AND REFUND IN FAVOR OF THE RESPONDENTS DESPITE LACK
OF CAUSE OF ACTION.
B.
GRANTING FOR THE SAKE OF ARGUMENT THAT THE PETITIONERS ARE LIABLE UNDER THE PREMISES, THE
HONORABLE COURT OF APPEALS ERRED WHEN IT AFFIRMED THE HUGE AMOUNT OF INTEREST OF TWELVE
PERCENT (12%).
C.
THE HONORABLE COURT OF APPEALS LIKEWISE ERRED WHEN IT AFFIRMED IN TOTO THE DECISION OF THE
OFFICE OF THE PRESIDENT INCLUDING THE PAYMENT OF P100,000.00 AS MORAL DAMAGES, P50,000.00 AS
ATTORNEYS FEES AND P10,000.00 AS ADMINISTRATIVE FINE IN THE ABSENCE OF ANY FACTUAL OR LEGAL BASIS
TO SUPPORT SUCH CONCLUSIONS.11
Petitioners insist that the complaint states no cause of action because they allegedly have not committed any act of
misrepresentation amounting to bad faith which could entitle respondents to a refund. Petitioners claim that there was a mere
delay in the completion of the project and that they only resorted to "suspension and reformatting as a testament to their
commitment to their buyers." Petitioners attribute the delay to the 1997 Asian financial crisis that befell the real estate industry.
Invoking Article 1174 of the New Civil Code, petitioners maintain that they cannot be held liable for a fortuitous event.
Petitioners contest the payment of a huge amount of interest on account of suspension of development on a project. They
liken their situation to a bank which this Court, in Overseas Bank v. Court of Appeals,12 adjudged as not liable to pay interest
on deposits during the period that its operations are ordered suspended by the Monetary Board of the Central Bank.
Lastly, petitioners aver that they should not be ordered to pay moral damages because they never intended to cause delay,
and again blamed the Asian economic crisis as the direct, proximate and only cause of their failure to complete the project.
Petitioners submit that moral damages should not be awarded unless so stipulated except under the instances enumerated in
Article 2208 of the New Civil Code. Lastly, petitioners refuse to pay the administrative fine because the delay in the project
was caused not by their own deceptive intent to defraud their buyers, but due to unforeseen circumstances beyond their
control.
Three issues are presented for our resolution: 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, and 3) whether the award of moral damages,
attorneys fees and administrative fine was proper.
It is apparent that these issues were repeatedly raised by petitioners in all the legal fora. The rulings were consistent that first,
the Asian financial crisis is not a fortuitous event that would excuse petitioners from performing their contractual obligation;
second, as a result of the breach committed by petitioners, respondents are entitled to rescind the contract and to be refunded
the amount of amortizations paid including interest and damages; and third, petitioners are likewise obligated to pay attorneys
fees and the administrative fine.
This petition did not present any justification for us to deviate from the rulings of the HLURB, the Office of the President and
the Court of Appeals.
Indeed, the non-performance of petitioners obligation entitles respondents to rescission under Article 1191 of the New Civil
Code which states:
Article 1191. The power to rescind obligations is implied in reciprocal ones, in case one of the obligors should not comply with
what is incumbent upon him.

The injured party may choose between the fulfillment and the rescission of the obligation, with payment of damages in either
case. He may also seek rescission, even after he has chosen fulfillment, if the latter should become impossible.
More in point is Section 23 of Presidential Decree No. 957, the rule governing the sale of condominiums, which provides:
Section 23. Non-Forfeiture of Payments.1wphi1 No installment payment made by a buyer in a subdivision or condominium
project for the lot or unit he contracted to buy shall be forfeited in favor of the owner or developer when the buyer, after due
notice to the owner or developer, desists from further payment due to the failure of the owner or developer to develop the
subdivision or condominium project according to the approved plans and within the time limit for complying with the same.
Such buyer may, at his option, be reimbursed the total amount paid including amortization interests but excluding delinquency
interests, with interest thereon at the legal rate. (Emphasis supplied).
Conformably with these provisions of law, respondents are entitled to rescind the contract and demand reimbursement for the
payments they had made to petitioners.
Notably, the issues had already been settled by the Court in the case of Fil-Estate Properties, Inc. v. Spouses
Go13 promulgated on 17 August 2007, where the Court stated that the Asian financial crisis is not an instance of caso fortuito.
Bearing the same factual milieu as the instant case, G.R. No. 165164 involves the same company, Fil-Estate, albeit about a
different condominium property. The company likewise reneged on its obligation to respondents therein by failing to develop
the condominium project despite substantial payment of the contract price. Fil-Estate advanced the same argument that the
1997 Asian financial crisis is a fortuitous event which justifies the delay of the construction project. First off, the Court classified
the issue as a question of fact which may not be raised in a petition for review considering that there was no variance in the
factual findings of the HLURB, the Office of the President and the Court of Appeals. Second, the Court cited the previous
rulings of Asian Construction and Development Corporation v. Philippine Commercial International Bank14 and Mondragon
Leisure and Resorts Corporation v. Court of Appeals15 holding that the 1997 Asian financial crisis did not constitute a valid
justification to renege on obligations. The Court expounded:
Also, we cannot generalize that the Asian financial crisis in 1997 was unforeseeable and beyond the control of a business
corporation. It is unfortunate that petitioner apparently met with considerable difficulty e.g. increase cost of materials and labor,
even before the scheduled commencement of its real estate project as early as 1995. However, a real estate enterprise
engaged in the pre-selling of condominium units is concededly a master in projections on commodities and currency
movements and business risks. The fluctuating movement of the Philippine peso in the foreign exchange market is an
everyday occurrence, and fluctuations in currency exchange rates happen everyday, thus, not an instance of caso fortuito.16
The aforementioned decision becomes a precedent to future cases in which the facts are substantially the same, as in this
case. The principle of stare decisis, which means adherence to judicial precedents, applies.
In said case, the Court ordered the refund of the total amortizations paid by respondents plus 6% legal interest computed from
the date of demand. The Court also awarded attorneys fees. We follow that ruling in the case before us.
The resulting modification of the award of legal interest is, also, in line with our recent ruling in Nacar v. Gallery
Frames,17 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.
We likewise affirm the award of attorneys fees because respondents were forced to litigate for 14 years and incur expenses to
protect their rights and interest by reason of the unjustified act on the part of petitioners.18 The imposition of P10,000.00
administrative fine is correct pursuant to Section 38 of Presidential Decree No. 957 which reads:
Section 38. Administrative Fines. The Authority may prescribe and impose fines not exceeding ten thousand pesos for
violations of the provisions of this Decree or of any rule or regulation thereunder. Fines shall be payable to the Authority and
enforceable through writs of execution in accordance with the provisions of the Rules of Court.
Finally, we sustain the award of moral damages. In order that moral damages may be awarded in breach of contract cases,
the defendant must have acted in bad faith, must be found guilty of gross negligence amounting to bad faith, or must have
acted in wanton disregard of contractual obligations.19 The Arbiter found petitioners to have acted in bad faith when they
breached their contract, when they failed to address respondents grievances and when they adamantly refused to refund
respondents' payment.
In fine, we find no reversible error on the merits in the impugned Court of Appeals' Decision and Resolution.
WHEREFORE, the petition is PARTLY GRANTED. The appealed Decision is AFFIRMED with the MODIFICATION that the
legal interest to be paid is SIX PERCENT (6%) on the amount due computed from the time of respondents' demand for refund
on 8 October 1998.
SO ORDERED.