1
SECOND DIVISION indemnity for the loss of the Vitara; the Vitara was lost due to the
G.R. No. 179419 : January 12, 2011
DURBAN APARTMENTS CORPORATION, doing business under the
name and style of City Garden Hotel, Petitioner, v. PIONEER
INSURANCE AND SURETY CORPORATION, Respondent.
DECISION
NACHURA, J.:
For review is the Decision1 of the Court of Appeals (CA) in CA-G.R. CV
No. 86869, which affirmed the decision2 of the Regional Trial Court
(RTC), Branch 66, Makati City, in Civil Case No. 03-857, holding
petitioner Durban Apartments Corporation solely liable to respondent
Pioneer Insurance and Surety Corporation for the loss of Jeffrey See's
(See's) vehicle.
The facts, as found by the CA, are simple.
On July 22, 2003, [respondent] Pioneer Insurance and Surety
Corporation x x x, by right of subrogation, filed [with the RTC of Makati
City] a Complaint for Recovery of Damages against [petitioner] Durban
Apartments Corporation, doing business under the name and style of
City Garden Hotel, and [defendant before the RTC] Vicente Justimbaste
x x x. [Respondent averred] that: it is the insurer for loss and damage of
Jeffrey S. See's [the insured's] 2001 Suzuki Grand Vitara x x x with Plate
No. XBH-510 under Policy No. MC-CV-HO-01-0003846-00-D in the
amount of P 1, 175, 000.00; on April 30, 2002, See arrived and checked
in at the City Garden Hotel in Makati corner Kalayaan Avenues, Makati
City before midnight, and its parking attendant, defendant x x x
Justimbaste got the key to said Vitara from See to park it[. O]n May 1,
2002, at about 1:00 o'clock in the morning, See was awakened in his
room by [a] telephone call from the Hotel Chief Security Officer who
informed him that his Vitara was carnapped while it was parked
unattended at the parking area of Equitable PCI Bank along Makati
Avenue between the hours of 12:00 [a.m.] and 1:00 [a.m.]; See went to
see the Hotel Chief Security Officer, thereafter reported the incident to
the Operations Division of the Makati City Police Anti-Carnapping Unit,
and a flash alarm was issued; the Makati City Police Anti-Carnapping
Unit investigated Hotel Security Officer, Ernesto T. Horlador, Jr. x x x
and defendant x x x Justimbaste; See gave his Sinumpaang Salaysay to
the police investigator, and filed a Complaint Sheet with the PNP Traffic
Management Group in Camp Crame, Quezon City; the Vitara has not
yet been recovered since July 23, 2002 as evidenced by a Certification
of Non- Recovery issued by the PNP TMG; it paid the P 1, 163, 250.00
money claim of See and mortgagee ABN AMRO Savings Bank, Inc. as
[petitioner] Durban Apartments and Justimbaste, but did not file their
negligence of [petitioner] Durban Apartments and [defendant]
Justimbaste because it was discovered during the investigation that
this was the second time that a similar incident of carnapping
happened in the valet parking service of [petitioner] Durban
Apartments and no necessary precautions were taken to prevent its
repetition; [petitioner] Durban Apartments was wanting in due
diligence in the selection and supervision of its employees particularly
defendant x x x Justimbaste; and defendant x x x Justimbaste and
[petitioner] Durban Apartments failed and refused to pay its valid, just,
and lawful claim despite written demands.
Upon service of Summons, [petitioner] Durban Apartments and
[defendant] Justimbaste filed their Answer with Compulsory
Counterclaim alleging that: See did not check in at its hotel, on the
contrary, he was a guest of a certain Ching Montero x x x; defendant x x
x Justimbaste did not get the ignition key of See's Vitara, on the
contrary, it was See who requested a parking attendant to park the
Vitara at any available parking space, and it was parked at the
Equitable Bank parking area, which was within See's view, while he and
Montero were waiting in front of the hotel; they made a written denial
of the demand of [respondent] Pioneer Insurance for want of legal
basis; valet parking services are provided by the hotel for the
convenience of its customers looking for a parking space near the hotel
premises; it is a special privilege that it gave to Montero and See; it
does not include responsibility for any losses or damages to motor
vehicles and its accessories in the parking area; and the same holds
true even if it was See himself who parked his Vitara within the
premises of the hotel as evidenced by the valet parking customer's
claim stub issued to him; the carnapper was able to open the Vitara
without using the key given earlier to the parking attendant and
subsequently turned over to See after the Vitara was stolen; defendant
x x x Justimbaste saw the Vitara speeding away from the place where it
was parked; he tried to run after it, and blocked its possible path but to
no avail; and See was duly and immediately informed of the carnapping
of his Vitara; the matter was reported to the nearest police precinct;
and defendant x x x Justimbaste, and Horlador submitted themselves
to police investigation.
During the pre-trial conference on November 28, 2003, counsel for
[respondent] Pioneer Insurance was present. Atty. Monina Lee x x x,
counsel of record of [petitioner] Durban Apartments and Justimbaste
was absent, instead, a certain Atty. Nestor Mejia appeared for
pre-trial brief.
On November 5, 2004, the lower court granted the motion of
[respondent] Pioneer Insurance, despite the opposition of [petitioner]
Durban Apartments and Justimbaste, and allowed [respondent]
Pioneer Insurance to present its evidence ex parte before the Branch
Clerk of Court.
See testified that: on April 30, 2002, at about 11:30 in the evening, he
drove his Vitara and stopped in front of City Garden Hotel in Makati
Avenue, Makati City; a parking attendant, whom he had later known to
be defendant x x x Justimbaste, approached and asked for his ignition
key, told him that the latter would park the Vitara for him in front of
the hotel, and issued him a valet parking customer's claim stub; he and
Montero, thereafter, checked in at the said hotel; on May 1, 2002, at
around 1:00 in the morning, the Hotel Security Officer whom he later
knew to be Horlador called his attention to the fact that his Vitara was
carnapped while it was parked at the parking lot of Equitable PCI Bank
which is in front of the hotel; his Vitara was insured with [respondent]
Pioneer Insurance; he together with Horlador and defendant x x x
Justimbaste went to Precinct 19 of the Makati City Police to report the
carnapping incident, and a police officer came accompanied them to
the Anti-Carnapping Unit of the said station for investigation, taking of
their sworn statements, and flashing of a voice alarm; he likewise
reported the said incident in PNP TMG in Camp Crame where another
alarm was issued; he filed his claim with [respondent] Pioneer
Insurance, and a representative of the latter, who is also an adjuster of
Vesper Insurance Adjusters-Appraisers [Vesper], investigated the
incident; and [respondent] Pioneer Insurance required him to sign a
Release of Claim and Subrogation Receipt, and finally paid him the sum
of P 1, 163, 250.00 for his claim.
Ricardo F. Red testified that: he is a claims evaluator of [petitioner]
Pioneer Insurance tasked, among others, with the receipt of claims and
documents from the insured, investigation of the said claim, inspection
of damages, taking of pictures of insured unit, and monitoring of the
processing of the claim until its payment; he monitored the processing
of See's claim when the latter reported the incident to [respondent]
Pioneer Insurance; [respondent] Pioneer Insurance assigned the case
to Vesper who verified See's report, conducted an investigation,
obtained the necessary documents for the processing of the claim, and
tendered a settlement check to See; they evaluated the case upon

receipt of the subrogation documents and the adjuster's report, and
eventually recommended for its settlement for the sum of P 1, 163,
250.00 which was accepted by See; the matter was referred and
forwarded to their counsel, R.B. Sarajan & Associates, who prepared
and sent demand letters to [petitioner] Durban Apartments and
[defendant] Justimbaste, who did not pay [respondent] Pioneer
Insurance notwithstanding their receipt of the demand letters; and the
services of R.B. Sarajan & Associates were engaged, for P 100, 000.00
as attorney's fees plus P 3, 000.00 per court appearance, to prosecute
the claims of [respondent] Pioneer Insurance against [petitioner]
Durban Apartments and Justimbaste before the lower court.
Ferdinand Cacnio testified that: he is an adjuster of Vesper;
[respondent] Pioneer Insurance assigned to Vesper the investigation of
See's case, and he was the one actually assigned to investigate it; he
conducted his investigation of the matter by interviewing See, going to
the City Garden Hotel, required subrogation documents from See, and
verified the authenticity of the same; he learned that it is the standard
procedure of the said hotel as regards its valet parking service to assist
their guests as soon as they get to the lobby entrance, park the cars for
their guests, and place the ignition keys in their safety key box;
considering that the hotel has only twelve (12) available parking slots,
it has an agreement with Equitable PCI Bank permitting the hotel to
use the parking space of the bank at night; he also learned that a
Hyundai Starex van was carnapped at the said place barely a month
before the occurrence of this incident because Liberty Insurance
assigned the said incident to Vespers, and Horlador and defendant x x x
Justimbaste admitted the occurrence of the same in their sworn
statements before the Anti-Carnapping Unit of the Makati City Police;
upon verification with the PNP TMG [Unit] in Camp Crame, he learned
that See's Vitara has not yet been recovered; upon evaluation, Vesper
recommended to [respondent] Pioneer Insurance to settle See's claim
for P 1, 045, 750.00; See contested the recommendation of Vesper by
reasoning out that the 10% depreciation should not be applied in this
case considering the fact that the Vitara was used for barely eight (8)
months prior to its loss; and [respondent] Pioneer Insurance acceded
to See's contention, tendered the sum of P 1, 163, 250.00 as
settlement, the former accepted it, and signed a release of claim and
subrogation receipt.
The lower court denied the Motion to Admit Pre-Trial Brief and Motion
4. Ultimately, whether petitioner is liable to respondent for the loss of
for Reconsideration field by [petitioner] Durban Apartments and
See's vehicle.
Justimbaste in its Orders dated May 4, 2005 and October 20, 2005,
respectively, for being devoid of merit.3
Thereafter, on January 27, 2006, the RTC rendered a decision,
disposing, as follows:
WHEREFORE, judgment is hereby rendered ordering [petitioner Durban did not err in holding petitioner liable for the loss of See's vehicle.
Apartments Corporation] to pay [respondent Pioneer Insurance and
Surety Corporation] the sum of P 1, 163, 250.00 with legal interest
thereon from July 22, 2003 until the obligation is fully paid and
attorney's fees and litigation expenses amounting to P 120, 000.00.
SO ORDERED.4
On appeal, the appellate court affirmed the decision of the trial
court, viz.:
WHEREFORE, premises considered, the Decision dated January 27,
2006 of the RTC, Branch 66, Makati City in Civil Case No. 03-857 is
hereby AFFIRMED insofar as it holds [petitioner] Durban Apartments
Corporation solely liable to [respondent] Pioneer Insurance and Surety
Corporation for the loss of Jeffrey See's Suzuki Grand Vitara.
SO ORDERED.5
Hence, this recourse by petitioner.
The issues for our resolution are:
1. Whether the lower courts erred in declaring petitioner as in default
for failure to appear at the pre-trial conference and to file a pre-trial
brief;
2. Corollary thereto, whether the trial court correctly allowed
respondent to present evidence ex-parte;
3. Whether petitioner is liable to respondent for attorney's fees in the
amount of P 120, 000.00; and
2
The petition must fail.
We are in complete accord with the common ruling of the lower courts
that petitioner was in default for failure to appear at the pre-trial
conference and to file a pre-trial brief, and thus, correctly allowed
respondent to present evidence ex-parte. Likewise, the lower courts
Well-entrenched in jurisprudence is the rule that factual findings of the
trial court, especially when affirmed by the appellate court, are
accorded the highest degree of respect and are considered conclusive
between the parties.6 A review of such findings by this Court is not
warranted except upon a showing of highly meritorious circumstances,
such as: (1) when the findings of a trial court are grounded entirely on
speculation, surmises, or conjectures; (2) when a lower court's
inference from its factual findings is manifestly mistaken, absurd, or
impossible; (3) when there is grave abuse of discretion in the
appreciation of facts; (4) when the findings of the appellate court go
beyond the issues of the case, or fail to notice certain relevant facts
which, if properly considered, will justify a different conclusion; (5)
when there is a misappreciation of facts; (6) when the findings of fact
are conclusions without mention of the specific evidence on which they
are based, are premised on the absence of evidence, or are
contradicted by evidence on record.7 None of the foregoing exceptions
permitting a reversal of the assailed decision exists in this instance.
Petitioner urges us, however, that "strong [and] compelling reason[s]"
such as the prevention of miscarriage of justice warrant a suspension
of the rules and excuse its and its counsel's non-appearance during the
pre-trial conference and their failure to file a pre-trial brief.
We are not persuaded.
Rule 18 of the Rules of Court leaves no room for equivocation;
appearance of parties and their counsel at the pre-trial conference,
along with the filing of a corresponding pre-trial brief, is mandatory,
nay, their duty. Thus, Section 4 and Section 6 thereof provide:
SEC. 4. Appearance of parties.-It shall be the duty of the parties and
their counsel to appear at the pre-trial. The non-appearance of a party
may be excused only if a valid cause is shown therefor or if a
representative shall appear in his behalf fully authorized in writing to
enter into an amicable settlement, to submit to alternative modes of

dispute resolution, and to enter into stipulations or admissions of facts trial court, as affirmed by the appellate court, did not err in allowing
and documents. respondent to present evidence ex-parte.
SEC. 6. Pre-trial brief.-The parties shall file with the court and serve on
the adverse party, in such manner as shall ensure their receipt thereof
at least three (3) days before the date of the pre-trial, their respective
pre-trial briefs which shall contain, among others:
x x x Failure to file the pre-trial brief shall have the same effect as
failure to appear at the pre-trial.
Contrary to the foregoing rules, petitioner and its counsel of record
were not present at the scheduled pre-trial conference. Worse, they
did not file a pre-trial brief. Their non-appearance cannot be excused
as Section 4, in relation to Section 6, allows only two exceptions: (1) a
valid excuse; and (2) appearance of a representative on behalf of a
party who is fully authorized in writing to enter into an amicable
settlement, to submit to alternative modes of dispute resolution, and
to enter into stipulations or admissions of facts and documents.
Petitioner is adamant and harps on the fact that November 28, 2003
was merely the first scheduled date for the pre-trial conference, and a
certain Atty. Mejia appeared on its behalf. However, its assertion is
belied by its own admission that, on said date, this Atty. Mejia "did not
have in his possession the Special Power of Attorney issued by
petitioner's Board of Directors."
As pointed out by the CA, petitioner, through Atty. Lee, received the
notice of pre-trial on October 27, 2003, thirty-two (32) days prior to the
scheduled conference. In that span of time, Atty. Lee, who was charged
with the duty of notifying petitioner of the scheduled pre-trial
conference, 8 petitioner, and Atty. Mejia should have discussed which
lawyer would appear at the pre-trial conference with petitioner, armed
with the appropriate authority therefor. Sadly, petitioner failed to
comply with not just one rule; it also did not proffer a reason why it
likewise failed to file a pre-trial brief. In all, petitioner has not shown
any persuasive reason why it should be exempt from abiding by the
rules.
The appearance of Atty. Mejia at the pre-trial conference, without a
pre-trial brief and with only his bare allegation that he is counsel for
petitioner, was correctly rejected by the trial court. Accordingly, the
Former Chief Justice Andres R. Narvasa's words continue to resonate,
thus:
Everyone knows that a pre-trial in civil actions is mandatory, and has
been so since January 1, 1964. Yet to this day its place in the scheme of
things is not fully appreciated, and it receives but perfunctory
treatment in many courts. Some courts consider it a mere technicality,
serving no useful purpose save perhaps, occasionally to furnish ground
for non-suiting the plaintiff, or declaring a defendant in default, or,
wistfully, to bring about a compromise. The pre-trial device is not thus
put to full use. Hence, it has failed in the main to accomplish the chief
objective for it: the simplification, abbreviation and expedition of the
trial, if not indeed its dispensation. This is a great pity, because the
objective is attainable, and with not much difficulty, if the device were
more intelligently and extensively handled.
x x x Consistently with the mandatory character of the pre-trial, the
Rules oblige not only the lawyers but the parties as well to appear for
this purpose before the Court, and when a party "fails to appear at a
pre-trial conference (he) may be non-suited or considered as in
default." The obligation "to appear" denotes not simply the personal
appearance, or the mere physical presentation by a party of one's self,
but connotes as importantly, preparedness to go into the different
subject assigned by law to a pre-trial. And in those instances where a
party may not himself be present at the pre-trial, and another person
substitutes for him, or his lawyer undertakes to appear not only as an
attorney but in substitution of the client's person, it is imperative for
that representative of the lawyer to have "special authority" to make
such substantive agreements as only the client otherwise has capacity
to make. That "special authority" should ordinarily be in writing or at
the very least be "duly established by evidence other than the self-
serving assertion of counsel (or the proclaimed representative)
himself." Without that special authority, the lawyer or representative
cannot be deemed capacitated to appear in place of the party; hence,
it will be considered that the latter has failed to put in an appearance
at all, and he [must] therefore "be non-suited or considered as in
default, " notwithstanding his lawyer's or delegate's presence.9
We are not unmindful that defendant's (petitioner's) preclusion from
presenting evidence during trial does not automatically result in a
3
judgment in favor of plaintiff (respondent). The plaintiff must still
substantiate the allegations in its complaint.10 Otherwise, it would be
inutile to continue with the plaintiff's presentation of evidence each
time the defendant is declared in default.
In this case, respondent substantiated the allegations in its
complaint, i.e., a contract of necessary deposit existed between the
insured See and petitioner. On this score, we find no error in the
following disquisition of the appellate court:
[The] records also reveal that upon arrival at the City Garden Hotel, See
gave notice to the doorman and parking attendant of the said hotel, x x
x Justimbaste, about his Vitara when he entrusted its ignition key to
the latter. x x x Justimbaste issued a valet parking customer claim stub
to See, parked the Vitara at the Equitable PCI Bank parking area, and
placed the ignition key inside a safety key box while See proceeded to
the hotel lobby to check in. The Equitable PCI Bank parking area
became an annex of City Garden Hotel when the management of the
said bank allowed the parking of the vehicles of hotel guests thereat in
the evening after banking hours.11
Article 1962, in relation to Article 1998, of the Civil Code defines a
contract of deposit and a necessary deposit made by persons in hotels
or inns:
Art. 1962. A deposit is constituted from the moment a person receives
a thing belonging to another, with the obligation of safely keeping it
and returning the same. If the safekeeping of the thing delivered is not
the principal purpose of the contract, there is no deposit but some
other contract.
Art. 1998. The deposit of effects made by travelers in hotels or inns
shall also be regarded as necessary. The keepers of hotels or inns shall
be responsible for them as depositaries, provided that notice was given
to them, or to their employees, of the effects brought by the guests
and that, on the part of the latter, they take the precautions which said
hotel-keepers or their substitutes advised relative to the care and
vigilance of their effects.
Plainly, from the facts found by the lower courts, the insured See
deposited his vehicle for safekeeping with petitioner, through the
latter's employee, Justimbaste. In turn, Justimbaste issued a claim stub
to See. Thus, the contract of deposit was perfected from See's delivery,

when he handed over to Justimbaste the keys to his vehicle, which
Justimbaste received with the obligation of safely keeping and
returning it. Ultimately, petitioner is liable for the loss of See's vehicle.
Lastly, petitioner assails the lower courts' award of attorney's fees to
respondent in the amount of P 120, 000.00. Petitioner claims that the
award is not substantiated by the evidence on record.
We disagree.
While it is a sound policy not to set a premium on the right to
litigate, 12 we find that respondent is entitled to reasonable attorney's
fees. Attorney's fees may be awarded when a party is compelled to
litigate or incur expenses to protect its interest, 13 or when the court
deems it just and equitable.14 In this case, petitioner refused to answer
for the loss of See's vehicle, which was deposited with it for
safekeeping. This refusal constrained respondent, the insurer of See,
and subrogated to the latter's right, to litigate and incur expenses.
However, we reduce the award of P 120, 000.00 to P 60, 000.00 in view
of the simplicity of the issues involved in this case.
WHEREFORE , the petition is DENIED. The Decision of the Court of
Appeals in CA-G.R. CV No. 86869 is AFFIRMED with the
MODIFICATION that the award of attorney's fees is reduced to P 60,
000.00. Costs against petitioner.
SO ORDERED .
SECOND DIVISION
[G.R. No. 135657. January 17, 2001.]
JOSE V. LAGON, Petitioner, v. HOOVEN COMALCO INDUSTRIES,
INC., Respondent.
DECISION
BELLOSILLO, J.:
This petition for review on certiorari seeks to set aside the Decision of
the Court of Appeals of 28 April 1997 which in turn set aside the
decision of the Regional Trial Court of Davao City and ordered
petitioner Jose V. Lagon to pay respondent Hooven Comalco Industries,
Inc. (HOOVEN) the amount of P69,329.00 with interest at twelve
percent (12%) per annum computed from the filing of the complaint
until fully paid, plus attorney’s fees and costs, 1 as well as the
Resolution of the appellate court denying reconsideration thereof. 2
Petitioner Jose V. Lagon is a businessman and owner of a commercial
building in Tacurong, Sultan Kudarat. Respondent HOOVEN on the
4
other hand is a domestic corporation known to be the biggest 2) on Exhibit "B" and submarkings, there are only twenty-three (23)
manufacturer and installer of aluminum materials in the country with light aluminum boxes, 14 aluminum boxes in the ceiling of the
branch office at E. Quirino Avenue, Davao City. mezzanine and 9 on the ceiling of the ground floor (Ocular Inspection,
TSN, p. 7); 3) on Exhibit "C-1," the items are missing in the area where
Sometime in April 1981 Lagon and HOOVEN entered into two (2) they were supposed to be installed; 4) on Exhibit "C-2," admitted by
contracts, both denominated Proposal, whereby for a total defendant Lagon when he stated that "I will admit that these were
consideration of P104,870.00 HOOVEN agreed to sell and install various installed by the plaintiff but I do not know exactly the materials, but I
aluminum materials in Lagon’s commercial building in Tacurong, Sultan really accept that these were installed sometime in 1981, before the
Kudarat. 3 Upon execution of the contracts, Lagon paid HOOVEN occupation of the DBP. But I have paid that already in 1981. I could not
P48,00.00 in advance. 4 identify the materials delivered in 1981 because I do not know the
exact names of those materials." (Ocular Inspection, TSN, p. 12); 5) on
On 24 February 1987 respondent HOOVEN commenced an action for Exhibit "C-2," the glasses are not tinted but plain white; on Exhibit "C-
sum of money with damages and attorney’s fees against petitioner 3," the materials cannot be formed (sic) in the place where they are
Lagon before the Regional Trial Court of Davao City. HOOVEN alleged in supposed to be (Ocular Inspection, TSN, p. 7); 6) Exhibit "D" and "D-1,"
its complaint that on different occasions, it delivered and installed that the materials were supplied by plaintiff but they did not install
several construction materials in the commercial building of Lagon them. It was the defendant who caused the installation thereof (Ocular
pursuant to their contracts; that the total cost of the labor and Inspection, TSN, p. 13.); and 7) Exhibit "E-1," as NU-Main and Cross-
materials amounted to P117,329.00 out of which P69,329.00 remained Runners and supplied by plaintiff but plaintiff did not install. They had
unpaid even after the completion of the project; and, despite repeated it installed (Ocular Inspection, TSN, p. 14).
demands, Lagon failed and refused to liquidate his indebtedness.
HOOVEN also prayed for attorney’s fees and litigation expenses, and in In due course the trial court rendered a decision partly on the basis of
support thereof, presented its OIC, Alberto Villanueva, and its the result of the ocular inspection finding that the total actual
employee, Ernesto Argente, and other witnesses, as well as several deliveries and installations made by HOOVEN cost P87,140.00.
documentary evidence consisting mainly of the two (2) proposals, Deducting therefrom P48,000.00 which Lagon paid in advance upon
invoices and delivery receipts. execution of their contracts with no further payments appearing to
have been made thereafter, only P39,140.00 remained unpaid and
Lagon, in his answer, denied liability and averred that HOOVEN was the where Lagon incurred in delay. The trial court also awarded HOOVEN
party guilty of breach of contract by failing to deliver and install some P3,255.00 as attorney’s fees, but sustained Lagon’s counterclaims and
of the materials specified in the proposals; that as a consequence he awarded him P26,120.00 as actual damages representing the value of
was compelled to procure the undelivered materials from other the undelivered and uninstalled materials, and P30,000.00 as
sources; that as regards the materials duly delivered and installed by attorney’s fees in addition to litigation expenses of P45,534.50.
HOOVEN, they were fully paid. He counterclaimed for actual, moral, According to the court a quo 5 —
exemplary, temperate and nominal damages, as well as for attorney’s
fees and expenses of litigation. As a result of the partial breach of contract on plaintiff’s (Hooven
Comalco) part, the defendant is entitled to actual damages only to the
On 9 October 1987, upon request of both parties, the trial court extent of the undelivered materials and undone labor or to the amount
conducted an ocular inspection of Lagon’s commercial building to of P26,120.00. This P26,120.00 will be partially offsetted (sic) to the
determine whether the items alleged in the complaint and appearing in P39,140.00 unpaid balance of the defendant (Lagon), so that the
the invoices and delivery receipts had been delivered and installed on difference that remain (sic) payable to plaintiff is P13,020.00. Evidence
the premises. The result of the ocular inspection was — is insufficient to show that bad faith existed in the filing of the instant
complaint for collection against the defendant. Plaintiff’s obstinate
1) with respect to the items covered by Exhibit "A" and submarkings conduct in prosecuting its claim spending for litigation expenses and
that there are only seventeen (17) light diffusers, 13 in the ceiling of for its lawyers negate the existence of bad faith. The fact alone that the
the ground and 4 on the mezzanine (Ocular Inspection, TSN, pp. 5 to 6); findings of fact show an unpaid account of the defendant is proof that
 5

the complaint is not completely unfounded though evidence shows — describe and detail the nature and contents of the vital documentary
also that plaintiff is guilty of partial breach of contract by reason of exhibits upon which respondent HOOVEN based its claims, thus —
failure to completely deliver and install the materials defendant ACCORDINGLY, finding the decision of August 26, 1991 appealed from
ordered pursuant to the contract so that plaintiff is liable for damages. afflicted by reversible errors, the same is hereby SET ASIDE, and a new Exhibit "F" — Undated Proposal:
As plaintiff acted in good faith in the filing of the instant complaint in one entered ordering the defendant-appellant (Lagon) to pay plaintiff- I. For the supply of materials and installation of suspended aluminum
the belief that it has a valid cause of action against the defendant to appellant (Hooven Comalco): ceiling runners:
enforce its claim, engaging a lawyer to prosecute it, plaintiff is entitled Area: 2,290 sq. ft.
to a reasonable attorney’s fees equivalent to 25% of the collectible The amount of P69,329.00 plus interest of 12% per annum computed Materials: NU-Main & Cross runners
amount of P13,020.00 or the amount of P3,225.00. Defendant’s claim from the date of the filing of the complaint, until fully paid. NU-5 Perimeter mouldings
of attorney’s fees in the amount of P152,629.15 is in the opinion of the G.I. wire hangers
court clearly unreasonable and unconscionable considering the nature Fifteen percent (15%) of the amount due, as and by way of attorney’s Aluminum straps stiffeners
of the action and the amount involved. The court has the power to fees. Blind Rivets and Screws P14,110.00
reduce it to render it reasonable and conscionable whether the Labor charge 4,230.00
contract for attorney’s fees is written or oral. The attorney’s fees is Defendant-appellant to pay costs. —————
fixed at P30,000.00. The defendant presented evidence of litigation 18,440.00
expenses incurred in the course of the trial for plane fare of its lawyer Petitioner’s motion for reconsideration having been denied he now II. One (1) set: 65 x 68 YP aluminum cladding 1,150.00
in coming to Davao City from Manila from 1987 up to July 1990 in the hopes to secure relief from this Court by contending that: (a) The Court —————
total amount of P34,730.50 as evidenced by Exhibit "11" to "11-E." The of Appeals erred in holding that the trial court could not rely on the P19,590.00
records show that the defendant’s counsel came to Davao City from results of the ocular inspection conducted on his commercial building
Manila to attend eleven (11) hearings of the case and the plane fare in Tacurong, Sultan Kudarat; and, (b) The assailed decision of the Delivery and Installation charge 1,860.00
from 1987 up to August, 1989 is P2,524.50 and from August 1989 to appellate court is based on speculations and contrary to the evidence —————
June 1990 is P3,007.50. Hotel expenses of defendant’s counsel at the adduced during the trial. P21,450.00
Maguindanao Hotel where he was billeted everytime he came to
Davao City to attend the trial amounted to P11,824.00 as evidenced by The arguments in the petition ultimately boil down to the sole issue ofExhibit "F-1" — Proposal dated 3 April 1981
Exhibit "17," the certification issued by the said hotel management. So whether all the materials specified in the contracts had been delivered"Hooven" Aluminum Casement Windows Anolok Finish
that the total amount of the actual damage suffered by defendant is and installed by respondent in petitioner’s commercial building in Manually Operated, with 6.0 mm Bronzepane Tinted Glass
P45,534.50. Said amount of P45,534.50 is partially offsetted (sic) by the Tacurong, Sultan Kudarat. The question is basically factual involving as
Five (5) sets: 65" x 126-1/2" (w/ transom)
amount of P13,020.00 representing the unpaid obligation of the it does an evaluation of the conflicting evidence presented by the One (1) set: 65" x 126-1/2" (w/ AC provision)
defendant to the plaintiff so that the plaintiff is still liable to pay the contending parties, including the existence and relevance of specific Two (2) sets: 39-1/2" x 125-1/2" -do-
defendant the difference in the amount of P32,514.50. surrounding circumstances, to determine the truth or falsity of allegedOne (1) set: 39-1/2" x 87" -do-
facts. One (1) set: 39-1/2" x 223" -do-
Both parties appealed to the Court of Appeals. In its Decision of 28 One (1) set: 65" x 57-1/2" (w/ transom)
April 1997, the appellate court set aside the judgment of the trial court While factual issues are not within the province of this Court, as it is One (1) set: 65" x 4" -do-
and resolved the case in favor of HOOVEN. It held that the trial court not a trier of facts and is not required to examine or contrast the oral P42,530.00
erred in relying solely on the results of the ocular inspection since the and documentary evidence de novo, 6 nevertheless, the Court has the "Hooven" Aluminum Entrances and Fixed Windows
delivery and installation of the materials in question started as early as authority to review and, in proper cases, reverse the factual findings of Anolok Finish. with 6.0 mm Bronzepane Tinted Glass
1981, while the ocular inspection was conducted only in 1987 or six (6) lower courts in these instances: (a) when the findings of fact of the trial One (1) set: 100-1/2" x 76-1/2", double sash,
years later, after the entire mezzanine was altered and the whole court are in conflict with those of the appellate court; (b) when the double acting swing door, with transom.
building renovated. The appellate court also stressed that the judgment of the appellate court is based on misapprehension of facts; Two (2) sets: 80" x 278", fixed panels 21,740.00
testimonies of HOOVEN’s witnesses were straightforward, categorical and, (c) when the appellate court manifestly overlooked certain "Hooven" Aluminum Sliding Windows Fabricated
and supported by documentary evidence of the disputed transactions, relevant facts which, if properly considered, would justify a different From SD-Sections. Anolok Finish. with 6.0 mm
and that all Lagon could offer was a mere denial, uncorroborated and conclusion. 7 This case falls squarely within the foregoing exceptions. Bronzepane Tinted Glass
self-serving statements regarding his transactions with HOOVEN. The One (1) set: 54 x 191
decretal portion of the assailed decision of the Court of Appeals reads Before delving into the merits of this case, we find it necessary to One (1) set: 45 x 302 11,650.00

—————
75,920.00
Add: Delivery and Installation charge 7,500.00
—————
P83,420.00
Exhibit "A" — Invoice No. 11094 dated 29 December 1982
Eighty Six (86) Pieces, 2.0 mm Hishilite Diffusers P3,440.00
Exhibit "B" — Invoice No. 11095 dated 29 December 1982
Forty-Three Pieces: For the Supply and
Installation of Light Boxes Fabricated from
GA. 032 Aluminum Plain Sheet
Delivery and Installers’ subsistence P5,718.50
Exhibit "C" — Invoice No. 14349 dated 29 December 1984
Five (5) sets 1.651m 3.213m Hooven Aluminum Casement windows,
Anolok finish, manually operated with
6.0 Bronzepane tinted glass.
One (1) set 1.651 m 3.367m - do with a/c provision
Two (2) sets 1.00 m 3.188m - do - - do -
One (1) set 1.00 m 2.210 m - do - - do -
One (1) set 1.00 m 5.664 m - do - - do -
One (1) set 1.651m 1.461 m - do - - do- with transom
One (1) set 1.651m 1.880 m - do - with transom
One (1) set 1.651m 1.524 m - do - - do -
One (1) set 2.553m 1.943 m Hooven aluminum double sash,
double acting swing door, with transom,
with 6.0 mm Bronze-pane tinted glass.
Two (2)sets 2.032m 7.061 m Fixed windows, Anolok finish.
One (1) set .737 m 7.061 m Aluminum tubulars with aluminum YP- 100
cladding, Anolok finish.
One (1) set 1.143m 4.851m Hooven aluminum sliding windows
fabricated from SD sections, Anolok finish, with
6.0 mm Bronzepane tinted glass, with
1.88 m tubular posts.
One (1) set 1.143m 7.671m - do - P75,291.83
4% tax 3,011.67
—————
78,303.50
Delivery & Subs. 7,500.00
—————
P85,803.50
Exhibit "D" — Invoice No. 14265 dated 29 September 1984
For the supply of materials and installation
of aluminum stucco embossed sheet on
spiral staircase P5,310.00
Exhibit "E" — Invoice No. 14264 dated 29 November 1984
For the supply of materials and installation of
suspended aluminum ceiling system.
Materials: NU-4 main and cross runners
NU-5 perimeter mouldings
GI wire hangers
Alum strap stiffeners
Blind rivets and screws P17,057.00
Exhibit "A-1" — Delivery Receipt dated 9 June 1981
Twenty (20) pieces Light boxes fabricated from aluminum sheets
Forty (40) pieces 2.0 mm x 24" x 24" Hishilite Diffusers
Lump sum cost including discount and Delivery and
Installer Subsistence P4,340.00
Exhibit "A-2" — Delivery Receipt dated 8 August 1981
Twenty (20) pieces Light boxes fabricated
from .032" aluminum plain sheet
Twenty Seven (27) 2.0 mm x 24" x 24" Hishilite Diffusers
Add: Delivery & Installers Subsistence P180.00
Exhibit "A-3" — Delivery Receipt, dated 8 December 1981
19 pcs. 2.0 mm x 2" x2" Hishilite Diffusers P40.00
Exhibit "B-1" — Delivery Receipt dated 25 June 1981
Additional three (3) pcs. Light boxes fabricated
from .032 Aluminum sheets P140.00
Exhibit "C-1" — Delivery Receipt dated 25 August 1983
To change alum tubular frames for sliding windows
(item 10 & 11) from 45" L x to 94" x 74." virtua1aw library
To change width of one (1) set: item 1
from 126-1/2 to 132-1/2.
To add: one (1) set 65 "H x 60" aluminum casement
windows with 6.0 mm tinted glass.
To extend alum tubulars of fixed windows on
2nd floor by 29 "L and installation of YP-aluminum
cladding P8,640.00
6
Exhibit "C-2" — Delivery Receipt dated 25 August 1983
Hooven Alum Casement Windows Anolok Finish
Manually Operated with 6.0 mm Bronzepane
Tinted Glass:
Five (5) sets: 65" x 126-1/2" with transom
One (1) set: 65" x 126-1/2 with AC provision
Two (2) sets: 39-1/2 x 125-1/2 - do -
One (1) set: 39-1/2" x 87" - do -
One (1) set: 39-1/2" x 223" - do -
One (1) set: 65" x 57-1/2" with transom
One (1) set: 65" x 74" - do -
P42,530.00
Hooven Alum Entrances & Fixed Windows Anolok
Finish with 6.0 mm Bronzepane Tinted Glass:
One (1) set: 100-1/2 x 76-1/2, double sash,
double acting swing door, with transom
Two (2) sets: 80" x 278" fixed panels P21,740.00
Exhibit "C-3" — Delivery Receipt dated 25 August 1983
Hoven Alum Sliding Windows Fabricated from
SD Sections Anolok Finish with 6.0 mm
Bronzepane Tinted Glass:
One (1) set: 45" x 191"
One (1) set: 45" x 302" P11,650.00
Add: Delivery and Installation 7,500.00
Less: 7% Discount 6,256.50
—————
P77,163.50
Exhibit "D-1" — Delivery Receipt dated 25 August 1983
For the supply of materials and installation of
aluminum stucco embossed sheet on spiral
staircase: One (1) set 32" H x 304" WL P5,310.00
Exhibit "E-1" — Delivery Receipt dated 25 August 1983
NU- main and cross runners
NU-5 Perimeter mouldings
G.I. Wire Hangers
Aluminum straps stiffeners
Blind rivets and screws P17,057.00
We have carefully and diligently considered the foregoing exhibits and
we are fully convinced that the mass of documentary evidence

adduced by respondent suffers from patent irregularities and material
inconsistencies on their faces, raising serious questions requiring
cogent explanations. These flaws inevitably deplete the weight of its
evidence, with the result that for lack of the requisite quantum of
evidence, respondent dismally failed in the lower court to discharge its
burden necessary to prevail in this case.
Firstly, the quantity of materials and the amounts stated in the delivery
receipts do not tally with those in the invoices covering them,
notwithstanding that, according to HOOVEN OIC Alberto Villanueva,
the invoices were based merely on the delivery receipts. 8 For instance,
only eleven (11) items were listed in Exhs. "C-2" and "C-3" with a total
worth of P77,163.50. But in Exh. "C," which was the invoice for Exhs.
"C-2" and "C-3," there were thirteen (13) items enumerated for a total
worth of P85,803.50. If Exh. "C" is supposed to be based on Exhs. "C-2"
and "C-3," we cannot understand the apparent discrepancy in the
items listed in those documents when they all referred to the same
materials.
Secondly, the total value of the materials as reflected in all the invoices
is P117,329.00 while under the delivery receipts it is only P112,870.50,
or a difference of P4,458.00. Moreover, the materials listed in the two
(2) Proposals, upon which HOOVEN based its claims, is only for the
total sum of P104,870.00. Curiously then, why would the materials
supposedly delivered by HOOVEN be more than what was contracted
and purchased by Lagon? This circumstance underscores the need to
reexamine the strength, if not weakness, of respondent’s cause.
Thirdly, under the Proposals HOOVEN bound itself to invoice the
materials "when complete and ready for shipment." Oddly, the records
show that the invoices were prepared several years after the materials
were allegedly delivered and installed completely on petitioner’s
building. Alberto Villanueva testified that their project with petitioner
was completed sometime in August 1981 and that thereafter no
further installation was done in the building. 9 But the disputed
invoices marked Exhs. "A" and "B" were prepared only on 29 December
1982; Exhs. "C" and "D" were prepared only on 29 December 1984;
and, Exh. "E" was prepared only on 29 November 1984. As for the
delivery receipts, Exhs. "C-1," "C-2," "C-3" and "E-1" were prepared
only on 25 August 1983 or two (2) years after the completion of the
project, while Exh. "A-3" was prepared only on 8 December 1981 or
some four (4) months after the date of completion.
Even more strange is the fact that HOOVEN instituted the present
7
action for collection of sum of money against Lagon only on 24 clearly showed that the deliveries were made to a certain Jose Rubin,
February 1987, or more than five (5) years after the supposed claimed to be petitioner’s driver, Armando Lagon, and a certain
completion of the project. Indeed, it is contrary to common experience bookkeeper. Unfortunately for HOOVEN, the identities of these
that a creditor would take its own sweet time in collecting its credit, persons were never been established, and there is no way of
more so in this case when the amount involved is not miniscule but determining now whether they were indeed authorized
substantial. representatives of petitioner. Paragraph 3 of each Proposal is explicit
on this point —
Fourthly, the demand letter of 25 August 1983 10 sent to petitioner by
respondent further betrays the falsity of its claims — 3. . . . the seller’s responsibility ends with delivery of the merchandise
to carrier in good condition, to buyer, or to buyer’s authorized
Dear Mr. Lagon: "Receiver/Depository" named on the face of this proposal (Emphasis
supplied).
The bearer, Mr. Fermin Pinero, is an authorized representative of this
company. He will arrange for your acceptance of the complete As above specifically stated, deliveries must be made to the buyer or
aluminum and glass installation we have undertaken for your building. his duly authorized representative named in the contracts. In other
He has with him the delivery receipts for your signature so with a words, unless the buyer specifically designated someone to receive the
statement of account showing your balance. Kindly favor us with a delivery of materials and his name is written on the Proposals opposite
partial payment to cover our operation costs. Also kindly relay to him the words "Authorized Receiver/Depository," the seller is under
all other installations you wish us to undertake. obligation to deliver to the buyer only and to no other person;
otherwise, the delivery would be invalid and the seller would not be
Hoping for your favorable action, we shall remain. discharged from liability. In the present case, petitioner did not name
Very Truly Yours, any person in the Proposals who would receive the deliveries in his
Hooven Comalco Industries, Inc. behalf, which meant that HOOVEN was bound to deliver exclusively to
Davao Branch petitioner.
(Sgd.) Alberto P. Villanueva
Sixthly, it is also obvious from the contested delivery receipts that
If, as claimed by HOOVEN, all the materials were completely delivered some important details were not supplied or were left in blank, i.e.,
and installed in petitioner’s building as early as August 1981, why then truck numbers, persons who delivered the materials, invoice and s. o.
would it demand partial payment only two (2) years later? This numbers. The persons who delivered the materials were potential
circumstance is very significant especially considering that under the witnesses who could shed light on the circumstances surrounding the
Proposals the terms of payment should be 50% down "and the balance alleged deliveries of the materials to petitioner. Moreover, it could
to be paid in full" upon completion. Moreover, it is surprising that the have been easier for HOOVEN to pinpoint responsibility to any of its
partial payment demanded was only "to cover operation costs." As employees for the non-delivery of the materials.
correctly observed by petitioner, demand for payment of operation
costs is typical of a still on-going project where the contractor needs We are not unaware of the slipshod manner of preparing receipts,
funds to defray his expenses. If there was complete installation, why order slips and invoices, which unfortunately has become a common
would respondent demand payment for operation costs only? Why not business practice of traders and businessmen. In most cases, these
enforce the whole amount of indebtedness? All these clearly suggest commercial forms are not always fully accomplished to contain all the
that there was no full and complete delivery and installation of necessary information describing the whole business transaction. The
materials ordered by petitioner. sales clerks merely indicate a description and the price of each item
sold without bothering to fill up all the available spaces in the
Fifthly, all the delivery receipts did not appear to have been signed by particular receipt or invoice, and without proper regard for any legal
petitioner or his duly authorized representative acknowledging receipt repercussion for such neglect. Certainly, it would not hurt if
of the materials listed therein. A closer examination of the receipts businessmen and traders would strive to make the receipts and

invoices they issue complete, as far as practicable, in material
particulars. These documents are not mere scraps of paper bereft of
probative value but vital pieces of evidence of commercial
transactions. They are written memorials of the details of the
consummation of contracts.
Given this pathetic state of respondent’s evidence, how could it be said
that respondent had satisfactorily proved its case? Essentially,
respondent has the burden of establishing its affirmative allegations of
complete delivery and installation of the materials, and petitioner’s
failure to pay therefor. In this regard, its evidence on its discharge of
that duty is grossly anemic. We emphasize that litigations cannot be
properly resolved by suppositions, deductions, or even presumptions,
with no basis in evidence, for the truth must have to be determined by
the hard rules of admissibility and proof.
The Court of Appeals however faulted the trial court for supposedly
relying solely on the results of the ocular inspection on the premises,
which were not conclusive since the inspection was conducted several
years after the disputed materials were allegedly installed therein.
We disagree. The ocular inspection was made by the judge himself, at
the request of both petitioner and respondent, for the exclusive
purpose of determining whether the materials subject of this case
were actually delivered and installed. There is therefore no basis to
give little evidentiary value on the results of the ocular inspection, as
the Court of Appeals would, and charge the trial court with error for
relying thereon. It is now rather late for any of the parties to disclaim
them, especially when they are not in his or its favor. Furthermore, a
cursory reading of the decision of the court a quo will at once show
that it was not premised solely on the results of the ocular inspection
but was likewise predicated on other evidence presented by the parties
and well-considered facts and circumstances discussed by the trial
court in its ratio decidendi. We cannot ignore the factual findings of the
trial court, which must carry great weight in the evaluation of
evidentiary facts, and in the absence of any indication showing grave
error committed by trial court, the appellate court is bound to respect
such findings of fact.
We hasten to add however that petitioner is not entirely free from any
liability to Respondent. Petitioner admitted the delivery of materials
under Exhs. "A" and its submarkings, "B" and its submarkings, "D," "D-
1" and "E." With respect to Exh. "C-2," petitioner acknowledged his
obligation under the first heading, Items Nos. 3, 4 and 5, and the
8
second heading, and denied the rest. Consequently, he should be made (1) Items under Exh. "A," consisting of 17
liable therefor in the total amount of P58,786.65. From this amount, light diffusers at P40.00 each P680.00
petitioner’s down payment of P48,000.00 should be deducted. (2) Items under Exh. "B," consisting of 23
light boxes at P40.00 each 3,220.00
It is insisted by petitioner in his appeal brief filed before the Court of (3) Third, fourth and fifth items under the first
Appeals that the second item under the second heading of Exh. "C-2" heading of Exh. "C-2" which on the basis of
should be excluded in the computation since he never admitted liability their measurements constitute only 1/3 of
therefor. the total costs of materials listed therein 14,176.65
(4) Items under the second heading of
We are not persuaded. The transcript of stenographic notes shows that Exh. "C-2" 21,740.00
during the ocular inspection counsel for respondent manifested in (5) Items under Exhs. "D" and "D-1" 4,860.00
effect that petitioner admitted the delivery and installation of the (6) Items under Exh. "E-1" 14,110.00
second item in his building, and petitioner did not interpose any —————
objection to respondent’s manifestation — P58,786.65
Less: Stipulated 7% discount 4,408.99
ATTY. QUIÑONES: —————
We would like to make of record that defendant (Lagon) admits that P54,377.66
plaintiff (Hooven Cornalco) delivered and installed Item No. 1 under Less: Advance payment made by petitioner
the second column of Exhibit "C-2" which is the front door of the to Hooven Comalco 48,000.00
ground floor. —————
ATTY. RICO: Unpaid Balance of petitioner P6,377.66
Defendant however adds that these were installed in 1981 and had
already paid for the said item. Notwithstanding the breach of contract by respondent in failing to
ATTY. QUIÑONES: deliver and install in the premises of petitioner all the stipulated
I would like to make of record also that defendant admits the delivery materials, we nevertheless accede to the right of respondent to
and installation of Item No. 2 under the second column of Exhibit "C-2" recover the unpaid balance from petitioner for the materials actually
as having been delivered and installed by the plaintiff in 1981 with the delivered.
qualification, however, that he had already paid the same.
COURT: The next point of inquiry is the propriety of awarding damages,
Are you stating that all these installed items on the ground floor were attorney’s fees and litigation expenses.
all paid by you?
MR. LAGON: We are not in accord with the trial court’s ruling that petitioner is
Yes, Your Honor. 11 entitled to actual damages to the extent of the undelivered materials
and undone labor in the amount of P26,120.00. There is no proof that
Petitioner cannot now be heard to complain against its inclusion in the petitioner already paid for the value of the undelivered and uninstalled
computation of his liability since his silence virtually amounted to materials to Respondent. Therefore, petitioner may not be deemed to
acquiescence. The silence of one of the contracting parties and his have suffered any such damage. We have declared in no uncertain
failure to protest against the claims of the other party, when he is terms that actual or compensatory damages cannot be presumed but
chargeable with the duty to do so, strongly suggest an admission of the must be proved with reasonable degree of certainty. 12 A court cannot
veracity and validity of the other party’s claims. rely on speculations, conjectures or guesswork as to the fact of damage
but must depend upon competent proof that they have indeed been
In sum, petitioner’s total liability to respondent may be computed as suffered by the injured party and on the basis of the best evidence
follows: obtainable as to the actual amount thereof. 13 It must point out
specific facts that could provide the gauge for measuring whatever
 9

compensatory or actual damages were borne. HONORABLE COURT OF APPEALS, and BIENVENIDO C. petitioners instructed respondent to stop selling subdivision lots and
MERCADO, respondents. collecting payments from lot buyers. Petitioners also demanded the
But we agree with petitioner that he is entitled to moral damages. CARPIO, J.: turnover to them of all official receipts in the name of Franda Village
HOOVEN’s bad faith lies not so much on its breach of contract — as The Case Subdivision.5 Nonetheless, respondent continued to collect payments
there was no showing that its failure to comply with its part of the Before this Court is a petition for review1 assailing the Decision2 of 21 from lot buyers until September 1986.
bargain was motivated by ill will or done with fraudulent intent — but November 1994 as well as the Resolution of 17 January 1995 of the
rather on its appalling temerity to sue petitioner for payment of an Court of Appeals in CA-G.R. CV No. 34084. The Court of Appeals upheld On 18 September 1986, petitioners wrote respondent that their
alleged unpaid balance of the purchase price notwithstanding the Decision of 10 June 1991 of the Regional Trial Court3 of San accountant was not satisfied with respondent's report which did not
knowledge of its failure to make complete delivery and installation of Fernando, Pampanga, in Civil Case No. 7909 rescinding the subdivision include the necessary supporting documents. Petitioners required
all the materials under their contracts. It is immaterial that, after the development contract between the parties and awarding damages to respondent to submit a proper statement of collections with
trial, petitioner was found to be liable to respondent to the extent of respondent Bienvenido C. Mercado. supporting receipts and documents, and reiterated that respondent
P6,377.66. Petitioner’s right to withhold full payment of the purchase Antecedent Facts should stop selling subdivision lots and collecting payments from lot
price prior to the delivery and installation of all the merchandise On 3 February 1984, the spouses Lorenzo and Lorenza Francisco buyers. For the first time, petitioners also alleged that respondent
cannot be denied since under the contracts the balance of the ("petitioners") and Engineer Bienvenido C. Mercado ("respondent") violated certain provisions of the Contract. Petitioners mentioned the
purchase price became due and demandable only upon the completion entered into a Contract of Development4 ("Contract") for the complaint of lot buyers that respondent was not developing the
of the project. Consequently, the resulting social humiliation and development into a subdivision of several parcels of land in Pampanga. subdivision within the agreed period. Another complaint was that
damage to petitioner’s reputation as a respected businessman in the respondent issued two kinds of receipts, one in the name of B. C.
community, occasioned by the filing of this suit provide sufficient Under the Contract, respondent agreed to undertake at his expense Mercado and the other in the name of Franda Subdivision.6
grounds for the award of P50,000.00 as moral damages. the development work for the Franda Village Subdivision. Respondent
committed to complete the construction within 27 months. On 7 October 1986, petitioners informed the HSRC of the lot buyers'
Moreover, considering the fact that petitioner was drawn into this Respondent also advanced P200,000.00 for the initial expenses of the complaints that respondent completed only 5% of the development
litigation by respondent and was compelled to hire an attorney to development work. In return, respondent would receive 50% of the work and that he was issuing two kinds of receipts. Petitioners also
protect and defend his interest, and taking into account the work done total gross sales of the subdivision lots and other income of the claimed that respondent was in serious violation of the Contract
by said attorney throughout the proceedings, as reflected in the subdivision. Respondent also enjoyed the exclusive and irrevocable because he did not properly remit to petitioners the proceeds from the
record, we deem it just and equitable to award attorney’s fees for authority to manage, control and supervise the sales of the lots within lot sales.
petitioner in the amount of P30,000.00. 14 In addition, we agree with the subdivision. The Contract required respondent to submit to
the trial court that petitioner is entitled to recover P46,554.50 as actual petitioners, within the first 15 days of every month, a report on
In a letter dated 25 November 1986,7 respondent requested petitioners
damages including litigation expenses as this amount is sufficiently payments collected from lot buyers with copies of all the contracts to
to provide him with the format of the statement of collections they
supported by the evidence. 15 sell. However, respondent failed to submit the monthly report. wanted or, alternatively, to send an accountant to audit his records. He
assured them that he could account for all the proceeds from the lot
WHEREFORE, the assailed Decision of the Court of Appeals dated 28 From 16 October 1985 to sometime in March 1986, within the 27- sales. He countered that he could have finished the development of
April 1997 is MODIFIED. Petitioner Jose V. Lagon is ordered to pay month period granted to respondent, petitioners also contracted a the subdivision on time had petitioners not hampered him with their
respondent Hooven Comalco Industries, Inc., P6,377.66 representing certain Nicasio Rosales, Sr. ("Rosales") to undertake the partial verbal demands to stop the development and "fill up" the lots first.
the value of the unpaid materials admittedly delivered to him. On the development of the subdivision. On 16 July 1986, Rosales submitted his
Respondent suggested that he and petitioners settle their differences
other hand, respondent is ordered to pay petitioner P50,000.00 as accomplishment report. On the same day, petitioners demanded that either by mutually canceling the Contract and giving to each party its
moral damages, P30,000.00 as attorney’s fees and P46,554.50 as actual respondent submit within 15 days an accounting of his operation of the
corresponding share, or by continuing with the arrangement. In the
damages and litigation expenses. subdivision from the beginning of the project up to 15 July 1986. meantime, respondent informed petitioners that he would continue
SO ORDERED Petitioners also requested for copies of contracts to sell, receipts of the operation of the subdivision in accordance with the Contract.
FIRST DIVISION collections and receipts of disbursements for development expenses.
G.R. No. 118749 April 25, 2003
On 20 January 1987, petitioners granted respondent an authority 8 to
SPOUSES LORENZO G. FRANCISCO and LORENZA D.
On 5 August 1986, respondent secured from the Human Settlements resume the sale of subdivision lots and the collection of payments
FRANCISCO, petitioners,
Regulatory Commission ("HSRC") an extension of time to finish the subject to the following conditions: (1) all collections shall be deposited
vs.
subdivision development until 30 July 1987. On 8 August 1986, in a joint account with China Banking Corporation, San Fernando,
 10

Pampanga branch; (2) withdrawals shall be limited to 50% of the total respondent did not incur delay even if he completed only 28% of the conformity of respondent. However, the appellate court refused to
collections or to respondent's share, which can only be used for development work. Further, the HSRC extended the Contract up to July take cognizance of the Memorandum of Agreement, as petitioners did
development expenses, and any withdrawal shall be subject to the 1987. Since the Contract had not expired at the time respondent filed not formally offer it in evidence.
approval of petitioners; (3) only Franda Village Subdivision receipts, the action for rescission, petitioners' defense that respondent did not
duly countersigned by petitioners, shall be used; (4) collections shall be finish the development work on time was without basis. The Court of Appeals adopted the findings of fact of the trial court.
subject to a weekly or monthly audit; and (5) any violation of these Declaring that there was no reversible error, the appellate court in its
conditions shall result in the automatic cancellation of the authority. The trial court also found that respondent did not fail to pay the 50% Decision of 21 November 199411 affirmed the ruling of the trial court in
share of petitioners from the proceeds of the lot sales. The trial court toto.
On 28 January 1987, respondent informed HSRC that he had stopped viewed respondent's failure to submit the required report as only a
development work on the subdivision because the conditional slight infraction not warranting petitioners' interference with Petitioners filed a motion for reconsideration, which the Court of
authority issued by petitioners violated the Contract. Specifically, respondent's right to sell the lots and collect payments from sales Appeals denied in its Resolution of 17 January 1995.12
respondent referred to the following provisions of the Contract that pursuant to Article X (3) of the Contract. The trial court noted that
the conditional authority contravened: (1) his exclusive and irrevocable petitioners had tolerated the non-submission of the monthly report On 21 March 1995, petitioners filed with the Supreme Court a petition
right to manage, control, and supervise the sale of lots; (2) his authority until petitioners made the demand for accounting on 16 July 1986, for review assailing the appellate court's decision and resolution.
to issue receipts as the developer without the participation of the which respondent readily complied. The trial court stressed that Petitioners prayed that the Court: (1) reverse the decision of the Court
landowners; and (3) his right to withdraw his 50% share without the respondent's right under the Contract to sell lots and collect payments of Appeals; (2) award to petitioners P4,403,895.00 as additional cost of
approval of the landowners.9Respondent attributed the delay in the was exclusive and irrevocable. the development of the subdivision, P57,864.00 as their unremitted
development of the subdivision to petitioners who contracted the share, P304,152.00 to reimburse them for the amounts paid to Rosales,
services of another person during the effectivity of the Contract. The trial court found unproven the charge that respondent sold one P50,000.00 as attorney's fees, P10,000.00 as appearance fees, and
Petitioners also stopped respondent, without justification, from selling subdivision lot to two buyers. The trial court considered the issue of a moral and exemplary damages; and (3) other equitable reliefs and
the lots and collecting payments from lot buyers. double sale immaterial, as respondent did not violate any provision of remedies.13
the Contract and the aggrieved parties in such event would be the The Issues
On 27 February 1987, respondent filed with the trial court an action to buyers and not petitioners. Petitioners assign the following errors:
rescind the Contract with a prayer for damages. Petitioners countered
that respondent breached the Contract by failing to finish the In its Decision10 of 10 June 1991, the trial court decreed the rescission 1. THE COURT OF APPEALS ERRED WHEN IT HELD THAT DELAY IS NOT
subdivision within the 27 months agreed upon, and therefore of the Contract and awarded damages to respondent, as follows: AN ISSUE IN THIS CASE;
respondent was in delay. Petitioners also alleged that respondent sold
one subdivision lot to two different buyers. Premises considered, judgement is hereby rendered in favor of plaintiff 2. THE COURT OF APPEALS ERRED WHEN IT HELD THAT THE CONTRACT
granting the rescission of the Contract of Development between him OF DEVELOPMENT HAS NOT EXPIRED AND WAS EXTENDED UP TO JULY
Subsequently, petitioners obtained permission from the Housing and and defendants' and ordering defendants to pay unto plaintiff the 30, 1997 BY PETITIONER;
Land Use Regulatory Board to takeover the development of the following:
subdivision.
3. THE COURT OF APPEALS ERRED WHEN IT HELD THAT PRIVATE
1. Expenses of operation of the subdivision in the total amount of RESPONDENT WAS ENTITLED TO THE RESCISSION OF THE CONTRACT
The Ruling of the Trial Court P1,808,756.01 and return of advance payment of P200,000.00; OF DEVELOPMENT AND DAMAGES BECAUSE OF INTERVENTION OF
After trial on the merits, the trial court found for respondent. The trial 2. Attorney's fees of P25,000.00; NICASIO ROSALES, SR. IN THE DEVELOPMENT OF THE SUBDIVISION
court ruled that petitioners breached the Contract by: (1) hiring Rosales 3. P50,000.00 and P30,000.00 as temperate and exemplary damages; DURING THE EXISTENCE OF THE CONTRACT, AND THAT THE
to do development work on the subdivision within the 27-month and MEMORANDUM OF AGREEMENT OR SUPPLEMENTAL AGREEMENT
period exclusively granted to respondent; (2) interfering with the 4. Cost of suit. WHICH BEARS THE CONFORMITY OF PLAINTIFF WAS NOT OFFERED OR
latter's development work; and (3) stopping respondent from SO ORDERED. PRODUCED IN THE TRIAL COURT AND THEREFORE COULD NOT BE
managing the sale of lots and collection of payments. The Ruling of the Court of Appeals CONSIDERED ON APPEAL, WHEN IN FACT IT WAS REFERENCED AND
On appeal to the Court of Appeals, petitioners presented for the first MADE PART OF THE EVIDENCE OF THE PRIVATE RESPONDENT;
Because petitioners were the first to breach the Contract and even time a supplemental Memorandum of Agreement dated 9 October
interfered with the development work, the trial court declared that 1985 allegedly entered into by petitioners and Rosales with the

4. THE COURT OF APPEALS ERRED WHEN IT HELD THAT PRIVATE the Court merely acknowledged the exceptional circumstances which
RESPONDENT WAS ENTITLED TO THE RESCISSION OF THE CONTRACT may warrant such a review, thus:
AND DAMAGES BECAUSE PRIVATE RESPONDENT'S NON-SUBMISSION
OF THE MONTHLY COLLECTION REPORT WAS NOT A SERIOUS AND “It is readily discernible that petitioners are asking Us to re-examine all
SUBSTANTIAL BREACH OF THE CONTRACT OF DEVELOPMENT; the evidence already presented before the respondent court and trial
court and evaluated by them. These evidence served as basis in arriving
5. THE COURT OF APPEALS ERRED WHEN IT HELD THAT PRIVATE at their findings of fact. We shall not analyze such evidence all over
RESPONDENT WAS ENTITLED TO THE RESCISSION OF THE CONTRACT again. Instead, We put finis to the factual findings in this case. It is
AND DAMAGES BECAUSE PRIVATE RESPONDENT'S EXECUTION OF firmly settled that only questions of law may be raised in a petition for
DOUBLE SALE OF A LOT IN THE SUBDIVISION SUBJECT OF THE review on certiorari under Rule 45 of the Rules of Court. Certainly, We
CONTRACT OF DEVELOPMENT IN FAVOR OF TWO DIFFERENT PERSONS recognize exceptions to this rule. The case of Medina, et. al. v. Asistio,
IS AT BEST A PERIPHERAL ISSUE TO THE MAIN ISSUE OF RESCISSION. etc., et al., G.R. No. 75450, November 8, 1990, 191 SCRA 218, 223-224
enumerates several instances when findings of fact may be passed
6. THE COURT OF APPEALS ERRED WHEN IT HELD THAT IT AFFIRMED upon and reviewed by this Court, none of which obtain herein:
THE DECISION DATED JUNE 10, 1991 OF THE TRIAL COURT INSTEAD OF
REVERSING THE SAME AND AWARDING DAMAGES TO PETITIONERS.14 "(1) When the conclusion is a finding grounded entirely on speculation,
surmises or conjecture (Joaquin v. Navarro, 93 Phil. 257 [1953]; (2)
The Ruling of the Court When the inference made is manifestly mistaken, absurd or impossible
It is evident from the assigned errors that petitioners are asking the (Luna v. Linatok, 74 Phil. 14 [1942]; (3) Where there is a grave abuse of
Court to reexamine certain findings of fact of the trial court. Petitioners discretion (Buyco v. People, 95 Phil. 453 [1955]; (4) When judgment is
submit that this case constitutes an exception to Rule 45 of the Rules of based on a misapprehension of facts (Cruz v. Sosing, L-4875, Nov. 27,
Court limiting to questions of law the issues that may be raised in an 1953); (5) When the findings of fact are conflicting (Casica v. Villaseca,
appeal by certiorari to this Court. L-9590 Ap. 30, 1957; unrep.);** (6) When the Court of Appeals, in
making its findings, went beyond the issues of the case and the same is
To bolster this argument, the petition for review, prepared by Atty. contrary to the admissions of both appellant and appellee (Evangelista
Pedro D. Diwa as counsel for petitioners, cited what is supposed to be v. Alto Surety and Insurance Co., 103 Phil. 401 [1958]; (7) The findings
the Court's ruling in Misa v. Court of Appeals.15 However, petitioner's of the Court of Appeals are contrary to those of the trial court (Garcia
counsel misquoted the ruling in Misa. We reproduce the erroneous v. Court of Appeals, 33 SCRA 622 [1970]; Sacay v. Sandiganbayan, 142
excerpt - which petitioner's counsel even underscored – as follows: SCRA 593 [1986]) ** (8) When the findings of fact are conclusions
without citation of specific evidence on which they are based (Ibid.,);
(9) When the facts set forth in the petition as well as in the petitioners'
And finally, Mr. Justice Medialdea of this COURT in the case of Misa vs.
main and reply briefs are not disputed by the respondents (Ibid.,); and
Court of Appeals, G.R. No. 97291, August 5, 1992, by way of exception
(10) The finding of fact of the Court of Appeals is premised on the
to the settled rule that only questions of law may be raised in a petition
supposed absence of evidence and is contradicted by the evidence on
for review on certiorari under Rule 45 of the Rules of Court, held as
record (Salazar v. Gutierrez, 33 SCRA 242 [1970]).17 (Emphasis and
follows:
underscoring supplied)”
"It is firmly settled that only questions of law may be raised in a
We frown on the obvious carelessness of Atty. Diwa. Since only
petition for review on certiorari under Rule 45 of the Rules of Court.
decisions of the Court establish jurisprudence and doctrines in this
However, there are several instances when findings of fact may be
jurisdiction,18 it is the duty of all officers of the court to cite the rulings
passed upon and reviewed by the Supreme Court, to wit: xxx"16
and decisions of the Supreme Court accurately, even "word-for-word
and punctuation mark-for-punctuation mark."19 Otherwise, "if not
Contrary to the quotation made in the petition for review, the Court in
faithfully and exactly quoted, the decisions and rulings of this Court
Misa refused to review the factual findings of the lower court. There
11
may lose their proper and correct meaning, to the detriment of other
courts, lawyers and the public who may thereby be misled."20
In any event, the issues about the alleged extension of the Contract,
the double sale, the interference with the development of the
subdivision, are matters requiring the introduction and evaluation of
evidence. They are questions of fact, which arise when doubt or
difference exists about the truth or falsehood of alleged facts. 21
As a rule, only questions of law may be appealed to the Court
by certiorari. The Court is not a trier of facts, its jurisdiction being
limited to errors of law.22 Moreover, where as in this case the Court of
Appeals affirms the factual findings of the trial court, such findings
generally become conclusive and binding upon the Court. 23 The Court
will not disturb the factual findings of the trial and appellate courts
unless there are compelling or exceptional reasons, and there is none
in the instant petition.
The trial and appellate courts found that the HSRC granted respondent
an extension of up to 30 July 1987 to complete the development work
under the Contract. Petitioners did not contest HSRC's extension of
time to respondent. Thus, the Court finds no merit in petitioner's claim
that respondent incurred delay in the performance of his obligation
under the Contract. At that time, the law authorized HSRC to grant
extensions of time for completion of subdivision projects.24
The law provides that delay may exist when the obligor fails to fulfill his
obligation within the time expressly stipulated.25 In this case, the HSRC
extended the period for respondent to finish the development work
until 30 July 1987. Respondent did not incur delay since the period
granted him to fulfill his obligation had not expired at the time
respondent filed the action for rescission on 27 February 1987.
Petitioners argue the Court of Appeals naively assumed that
respondent could complete the development work in five months
when he only finished 28.67% of the work in some 36 months.26 This
argument is speculative and deserves scant consideration. It cannot
prevail over the express grant to respondent of a period within which
to fulfill his obligation.
Moreover, as the trial and appellate courts found, petitioners
hampered and interfered with respondent's development work.
Petitioners also stopped respondent from selling lots and collecting

payments from lot buyers, which was the primary source of
development funds. In effect, petitioners rendered respondent
incapable, or at least made it difficult for him, to develop the
subdivision within the allotted period. In reciprocal obligations, neither
party incurs in delay if the other does not comply or is not ready to
comply with what is incumbent upon him. It is only when one of the
parties fulfills his obligation that delay by the other begins.27
Petitioners argue that the alleged Memorandum of Agreement may be
treated as a judicial admission in accordance with Geagonia v. Court of
Appeals.28 We do not agree. In Geagonia, the Court of Appeals
considered a letter written by Geagonia, although not formally offered
in evidence, because it was originally annexed to Geagonia's initial
complaint filed with the Insurance Commissioner. The Court upheld the
appellate court's reversal of the Insurance Commissioner's decision on
the ground that the letter constituted a judicial admission by Geagonia.
Findings of the Insurance Commissioner and the Court of Appeals were
divergent in Geagonia, an exceptional circumstance that allowed the
Court to reexamine the factual findings of the Insurance Commissioner.
In the instant case, petitioners never presented the Memorandum of
Agreement before the trial court. Petitioners merely annexed to their
petition for review before the Court of Appeals an unauthenticated
photocopy of the alleged Memorandum of Agreement. Petitioners
argue that this agreement was "referenced and testified to" by
respondent during his cross-examination on 1 August 1989 before the
trial court. However, in that testimony, respondent merely admitted to
signing an amended or supplemental agreement, the contents of which
he could not recall.29Respondent's testimony does not identify or admit
that the Memorandum of Agreement presented by petitioners was the
agreement or contract respondent had signed. Atty. Gorospe, then
counsel for petitioners, even manifested during the cross-examination
of respondent that no supplemental agreement or contract was
appended to the complaint.30
Further, petitioners failed to explain adequately why the alleged
Memorandum of Agreement was never presented before the trial
court. As succinctly explained by the Court of Appeals:
Appellants' advertence to an alleged supplemental Memorandum of
Agreement (Annex "A", Appellant's brief) to prop up their cause
deserves scant consideration. The said document was neither
produced nor offered in evidence in the proceedings below, although it
12
could have been easily produced in court by compulsory process. This however, moral and not temperate damages may be awarded for
lapse has not been satisfactorily explained by appellants. besmirched reputation and similar injury.37 Temperate damages may
xxx31 (Emphasis supplied) be awarded only when pecuniary loss has been suffered but the
amount cannot be proved with certainty from the nature of the
38
On the fourth assigned error, we find no reversible error in the ruling of case. Hence, the award of P50,000.00 in temperate damages should
the trial and appellate courts that respondent's non-submission of the be deleted for lack of legal basis.
monthly report was merely a slight infraction of the Contract.
Respondent's failure to submit the monthly report cannot serve as We likewise find without basis the trial court's award of exemplary
sufficient basis for the cancellation of the Contract. The cancellation of damages. In contracts, exemplary damages may be awarded if the
a contract will not be permitted for a slight or casual breach. Only a defendant acted in a wanton, fraudulent, reckless, oppressive or
substantial and fundamental breach, which defeats the very object of malevolent manner.39 Nothing in the trial and appellate courts'
the parties in making the contract, will justify a cancellation.32 In the decisions indicates that petitioners behaved in such manner as to
instant case, the development work continued for more than two years warrant the grant of exemplary damages.
despite the lack of a monthly report.
On the award of attorney's fees, the general rule is that attorney's fees
Petitioners further contend that, considering respondent's non- cannot be recovered as part of damages because no premium should
submission of collection reports, they were merely enforcing their be placed on the right to litigate.40 Article 2208 of the Civil Code
33
rights under Article X (3) of the Contract in demanding that provides that attorney's fees and expenses of litigation should not be
respondent stop selling the subdivision lots and collecting payments granted unless stipulated, except in certain cases where "the
from lot buyers. defendant acted in gross and evident bad faith in refusing to satisfy the
plaintiff's plainly valid, just and demandable claim."41
Whether petitioners could have justifiably invoked Article X (3) of the
Contract based on respondent's failure to submit the required reports That petitioners required respondent to submit a statement of
is beside the point. It is clear from the records that petitioners did not collection on the same day that Rosales submitted his accomplishment
seek to stop respondent's activities due to the latter's failure to submit report does not sufficiently show, by itself, gross and evident bad faith.
the required reports. The non-submission of the required reports was The Contract itself required the submission of a collection report.
never mentioned in any of petitioners' letters. Indeed, petitioners' Although early on petitioners may have tolerated the non-submission
letter of 8 August 1986, which first instructed respondent to stop of the report, they should not be penalized for demanding later on that
selling the lots and collecting payments, did not mention any violation respondent comply with a condition of the Contract.
at all,34 while the subsequent letters referred only to the complaints of
lot buyers. Article X (3) of the Contract required the "innocent party" to WHEREFORE, the Decision of 21 November 1994 of the Court of
serve a written notice of "a violation of the terms and conditions of this Appeals in CA-G.R. CV No. 34084 upholding the Decision of 10 June
contract."35 Absent such written notice, this provision cannot be 1991 of the Regional Trial Court of San Fernando, Pampanga, Branch
invoked, much less enforced. XLV, in Civil Case No. 7909 is AFFIRMED, with the MODIFICATION that
the award of attorney's fees, temperate and exemplary damages is
On the fifth assigned error, it is unnecessary for this Court to rule on DELETED.
the materiality of the alleged double sale in the face of the trial and
appellate courts' finding that no double sale took place. SO ORDERED.
FIRST DIVISION
On the award of damages, however, we find some modification is in [G.R. No. 117190. January 2, 1997.]
order. The trial court awarded P50,000.00 in temperate damages to JACINTO TANGUILIG doing business under the name and style J.M.T.
respondent for his "besmirched reputation on his goodwill and image ENGINEERING AND GENERAL MERCHANDISING, Petitioner, v. COURT
as a good and able engineer and contractor."36 Under the law, OF APPEALS and VICENTE HERCE JR., Respondents.
 13

Ricardo C. Valmonte for Petitioner. project undertaken by the plaintiff." 3 With respect to the repair of the
Restituto M. Mendoza for Private Respondent. windmill, the trial court found that "there is no clear and convincing
SYLLABUS This case involves the proper interpretation of the contract entered proof that the windmill system fell down due to the defect of the
1. CIVIL LAW; CONTRACT; INTERPRETATION; INTENTION OF THE into between the parties. construction. " 4
PARTIES SHALL BE ACCORDED PRIMORDIAL CONSIDERATION. — It is a
cardinal rule in the interpretation of contracts that the intention of the Sometime in April 1987 petitioner Jacinto M. Tanguilig doing business The Court of Appeals reversed the trial court. It ruled that the
parties shall be accorded primordial consideration and, in case of under the name and style J.M.T. Engineering and General construction of the deep well was included in the agreement of the
doubt, their contemporaneous and subsequent acts shall be principally Merchandising proposed to respondent Vicente Herce Jr. to construct a parties because the term "deep well" was mentioned in both
considered. chanrobles.com.ph : virtual law library windmill system for him. After some negotiations they agreed on the proposals. It also gave credence to the testimony of respondent’s
construction of the windmill for a consideration of P60,000.00 with a witness Guillermo Pili, the proprietor of SPGMI which installed the
2. OBLIGATION; NATURE AND EFFECTS; EXEMPTION FROM LIABILITY BY one-year guaranty from the date of completion and acceptance by deep well, that petitioner Tanguilig told him that the cost of
REASON OF FORTUITOUS EVENTS; REQUISITES. — This Court has respondent Herce Jr. of the project. Pursuant to the agreement constructing the deep well would be deducted from the contract price
consistently held that in order for a party to claim exemption from respondent paid petitioner a down payment of P30,000.00 and an of P60,000.00. Upon these premises the appellate court concluded that
liability by reason of fortuitous event under Art. 1174 of the Civil Code installment payment of P15,000.00, leaving a balance of P15,000.00. respondent’s payment of P15,000.00 to SPGMI should be applied to his
the event should be the sole and proximate cause of the loss or remaining balance with petitioner thus effectively extinguishing his
destruction of the object of the contract. In Nakpil v. Court of Appeals, On 14 March 1988, due to the refusal and failure of respondent to pay contractual obligation. However, it rejected petitioner’s claim of force
Nos. L-47851 and L- 47896, 3 October 1986, 144 SCRA 596, four (4) the balance, petitioner filed a complaint to collect the amount. In his majeure and ordered the latter to reconstruct the windmill in
requisites must concur: (a) the cause of the breach of the obligation Answer before the trial court respondent denied the claim saying that accordance with the stipulated one-year guaranty.
must be independent of the will of the debtor; (b) the event must be he had already paid this amount to the San Pedro General
either unforseeable or unavoidable; (c) the event must be such as to Merchandising Inc. (SPGMI) which constructed the deep well to which His motion for reconsideration having been denied by the Court of
render it impossible for the debtor to fulfill his obligation in a normal the windmill system was to be connected. According to respondent, Appeals, petitioner now seeks relief from this Court. He raises two
manner; and, (d) the debtor must be free from any participation in or since the deep well formed part of the system the payment he issues: firstly, whether the agreement to construct the windmill system
aggravation of the injury to the creditor. tendered to SPGMI should be credited to his account by petitioner. included the installation of a deep well and, secondly, whether
Moreover, assuming that he owed petitioner a balance of P15,000.00, petitioner is under obligation to reconstruct the windmill after it
3. ID.; ID.; ID.; APPLICATION OF ART. 1167 OF THE CIVIL CODE; WHEN A this should be offset by the defects in the windmill system which collapsed.
PERSON OBLIGED TO DO SOMETHING FAILS TO DO IT, THE SAME SHALL caused the structure to collapse after a strong wind hit their place. 1
BE EXECUTED AT HIS COST. — In reciprocal obligations, neither party We reverse the appellate court on the first issue but sustain it on the
incurs in delay if the other does not comply or is not ready to comply in Petitioner denied that the construction of a deep well was included in second.
a proper manner with what is incumbent upon him. (Art. 1169, last the agreement to build the windmill system, for the contract price of
par., New Civil Code) When the windmill failed to function properly it P60,000.00 was solely for the windmill assembly and its installation, The preponderance of evidence supports the finding of the trial court
became incumbent upon petitioner to institute the proper repairs in exclusive of other incidental materials needed for the project. He also that the installation of a deep well was not included in the proposals of
accordance with the guaranty stated in the contract Thus, respondent disowned any obligation to repair or reconstruct the system and petitioner to construct a windmill system for respondent. There were
cannot be said to have incurred in delay; instead, it is petitioner who insisted that he delivered it in good and working condition to in fact two (2) proposals: one dated 19 May 1987 which pegged the
should bear the expenses for the reconstruction of the windmill. Article respondent who accepted the same without protest. Besides, its contract price at P87,000.00 (Exh. "1"). This was rejected by
1167 of the Civil Code is explicit on this point that if a person obliged to collapse was attributable to a typhoon, a force majeure, which relieved respondent. The other was submitted three days later, i.e., on 22 May
do something fails to do it, the same shall be executed at his him of any liability. 1987 which contained more specifications but proposed a lower
cost. chanrobles lawlibrary : rednad contract price of P60,000.00 (Exh. "A"). The latter proposal was
In finding for plaintiff, the trial court held that the construction of the accepted by respondent and the construction immediately followed.
deep well was not part of the windmill project as evidenced clearly by The pertinent portions of the first letter-proposal (Exh. "1") are
DECISION the letter proposals submitted by petitioner to respondent. 2 It noted reproduced hereunder —
that "[i]f the intention of the parties is to include the construction of
the deep well in the project, the same should be stated in the In connection with your Windmill System and Installation, we would
BELLOSILLO, J.: proposals. In the absence of such an agreement, it could be safely like to quote to you as follows:
concluded that the construction of the deep well is not a part of the
 14

One (1) Set — Windmill suitable for 2 inches diameter deepwell, 2 HP, agreement to construct a windmill, he would have used instead the respondent and Pili. Besides, if the price of P60,000.00 included the
capacity, 14 feet in diameter, with 20 pieces blade, Tower 40 feet high, conjunctions "and" or "with." Since the terms of the instruments are deep well, the obligation of respondent was to pay the entire amount
including mechanism which is not advisable to operate during extra- clear and leave no doubt as to their meaning they should not be to petitioner without prejudice to any action that Guillermo Pili or
intensity wind. Excluding cylinder pump. disturbed. chanrobles.com : virtual lawlibrary SPGMI may take, if any, against the latter. Significantly, when asked
why he tendered payment directly to Pili and not to petitioner,
UNIT CONTRACT PRICE P87,000.00 Moreover, it is a cardinal rule in the interpretation of contracts that the respondent explained, rather lamely, that he did it "because he has
intention of the parties shall be accorded primordial consideration 5 (sic) the money, so (he) just paid the money in his possession. 8
The second letter-proposal (Exh. "A") provides as follows: and, in case of doubt, their contemporaneous and subsequent acts
shall be principally considered. 6 An examination of such Can respondent claim that Pili accepted his payment on behalf of
In connection with your Windmill system, Supply of Labor Materials contemporaneous and subsequent acts of respondent as well as the petitioner? No. While the law is clear that "payment shall be made to
and Installation, operated water pump, we would like to quote to you attendant circumstances does not persuade us to uphold him. the person in whose favor the obligation has been constituted, or his
as follows — successor in interest, or any person authorized to receive it, " 9 it does
Respondent insists that petitioner verbally agreed that the contract not appear from the record that Pili and/or SPGMI was so authorized.
One (1) set — Windmill assembly for 2 inches or 3 inches deep-well price of P60,000.00 covered the installation of a deep well pump. He
pump, 6 Stroke, 14 feet diameter, 1-lot blade materials, 40 feet Tower contends that since petitioner did not have the capacity to install the Respondent cannot claim the benefit of the law concerning payments
complete with standard appurtenances up to Cylinder pump, shafting pump the latter agreed to have a third party do the work the cost of made by a third person." 10 The Civil Code provisions do not apply in
U.S. adjustable International Metal. which was to be deducted from the contract price. To prove his point, the instant case because no creditor-debtor relationship between
he presented Guillermo Pili of SPGMI who declared that petitioner petitioner and Guillermo Pili and/or SPGMI has been established
One (1) lot — Angle bar, G. I. pipe, Reducer Coupling, Elbow Gate valve, Tanguilig approached him with a letter from respondent Herce Jr. regarding the construction of the deep well. Specifically, witness Pili did
cross Tee coupling. asking him to build a deep well pump as "part of the price/contract not testify that he entered into a contract with petitioner for the
which Engineer (Herce) had with Mr. Tanguilig." 7 construction of respondent’s deep well. If SPGMI was really
One (1) lot— Float valve. commissioned by petitioner to construct the deep well, an agreement
We are disinclined to accept the version of respondent. The claim of particularly to this effect should have been entered into.
One (1) lot — Concreting materials foundation. Pili that Herce Jr. wrote him a letter is unsubstantiated. The alleged
letter was never presented in court by private respondent for reasons The contemporaneous and subsequent acts of the parties concerned
F. O. B. Laguna known only to him. But granting that this written communication effectively belie respondent’s assertions. These circumstances only
existed, it could not have simply contained a request for Pili to install a show that the construction of the well by SPGMI was for the sole
Contract Price P60,000.00 deep well; it would have also mentioned the party who would pay for account of respondent and that petitioner merely supervised the
the undertaking. It strains credulity that respondent would keep silent installation of the well because the windmill was to be connected to it.
Notably, nowhere in either proposal is the installation of a deep well on this matter and leave it all to petitioner Tanguilig to verbally convey There is no legal nor factual basis by which this Court can impose upon
mentioned, even remotely. Neither is there an itemization or to Pili that the deep well was part of the windmill construction and that petitioner an obligation he did not expressly assume nor ratify.
description of the materials to be used in constructing the deep well. its payment would come from the contract price of P60,000.00.
There is absolutely no mention in the two (2) documents that a deep The second issue is not a novel one. In a long line of cases 11 this Court
well pump is a component of the proposed windmill system. The We find it also unusual that Pili would readily consent to build a deep has consistently held that in order for a party to claim exemption from
contract prices fixed in both proposals cover only the features well the payment for which would come supposedly from the windmill liability by reason of fortuitous event under Art. 1174 of the Civil Code
specifically described therein and no other. While the words "deep contract price on the mere representation of petitioner, whom he had the event should be the sole and proximate cause of the loss or
well" and "deep well pump" are mentioned in both, these do not never met before, without a written commitment at least from the destruction of the object of the contract. In Nakpil v. Court of Appeals,
indicate that a deep well is part of the windmill system. They merely former. For if indeed the deep well were part of the windmill project, 12 four (4) requisites must concur: (a) the cause of the breach of the
describe the type of deep well pump for which the proposed windmill the contract for its installation would have been strictly a matter obligation must be independent of the will of the debtor; (b) the event
would be suitable. As correctly pointed out by petitioner, the words between petitioner and Pili himself with the former assuming the must be either unforeseeable or unavoidable; (c) the event must be
"deep well" preceded by the prepositions "for" and "suitable for" were obligation to pay the price. That it was respondent Herce Jr. himself such as to render it impossible for the debtor to fulfill his obligation in a
meant only to convey the idea that the proposed windmill would be who paid for the deep well by handing over to Pili the amount of normal manner; and, (d) the debtor must be free from any
appropriate for a deep well pump with a diameter of 2 to 3 inches. For P15,000.00 clearly indicates that the contract for the deep well was not participation in or aggravation of the injury to the creditor.
if the real intent of petitioner was to include a deep well in the part of the windmill project but a separate agreement between
 15

Petitioner failed to show that the collapse of the windmill was due
solely to a fortuitous event. Interestingly, the evidence does not
disclose that there was actually a typhoon on the day the windmill
collapsed. Petitioner merely stated that there was a "strong wind." But
a strong wind in this case cannot be fortuitous—unforeseeable nor
unavoidable. On the contrary, a strong wind should be present in
places where windmills are constructed, otherwise the windmills will
not turn.

The appellate court correctly observed that "given the newly-

constructed windmill system, the same would not have collapsed had
there been no inherent defect in it which could only be attributable to
the appellee." 13 It emphasized that respondent had in his favor the
presumption that "things have happened according to the ordinary
course of nature and the ordinary habits of life." 14 This presumption
has not been rebutted by petitioner.

Finally, petitioner’s argument that private respondent was already in

default in the payment of his outstanding balance of P15,000.00 and
hence should bear his own loss, is untenable. In reciprocal obligations,
neither party incurs in delay if the other does not comply or is not
ready to comply in a proper manner with what is incumbent upon him.
15 When the windmill failed to function properly it became incumbent
upon petitioner to institute the proper repairs in accordance with the
guaranty stated in the contract. Thus, respondent cannot be said to
have incurred in delay; instead, it is petitioner who should bear the
expenses for the reconstruction of the windmill. Article 1167 of the
Civil Code is explicit on this point that if a person obliged to do
something fails to do it, the same shall be executed at his cost

WHEREFORE, the appealed decision is MODIFIED. Respondent VICENTE

HERCE JR. is directed to pay petitioner JACINTO M. TANGUILIG the
balance of P15,000.00 with interest at the legal rate from the date of
the filing of the complaint. In return, petitioner is ordered to
"reconstruct subject defective windmill system, in accordance with the
one-year guaranty" 16 and to complete the same within three (3)
months from the finality of this decision.

SO ORDERED;/