SUPREME COURT REPORTS ANNOTATED
—In order for a fortuitous
Mindex Resources Development vs. Morillo
G.R. No. 138123. March 12, 2002.*
MINDEX RESOURCES DEVELOPMENT, petitioner, vs.
EPHRAIM MORILLO, respondent.
Appeals; Evidence; Well-settled is the rule that factual findings
of the trial court, particularly when affirmed by the Court of
Appeals, are binding on the Supreme Court.—Both the RTC and
the CA found petitioner negligent and thus liable for the loss or
destruction of the leased truck. True, both parties may have
suffered from the burning of the truck; however, as found by
both lower courts, the negligence of petitioner makes it
responsible for the loss. Well-settled is the rule that factual
findings of the trial court, particularly when affirmed by the
Court of Appeals, are binding on the Supreme Court. Contrary to
its allegations, petitioner has not adequately shown that the RTC
and the CA overlooked or disregarded significant facts and
circumstances that, when considered, would alter the outcome
of the disposition. Article 1667 of the Civil Code holds lessees
responsible for the deterioration or loss of the thing leased,
unless they prove that it took place without their fault.
Obligations and Contracts; Fortuitous Events; An act of God
cannot be invoked to protect a person who has failed to take
steps to forestall the possible adverse consequences of such a
loss-when the effect is found to be partly the result of a person’s
participation, whether by active intervention, neglect or failure
to act, the whole occurrence is humanized and removed from
the rules applicable to acts of God.
event to exempt one from liability, it is necessary that one has
committed no negligence or misconduct that may have
occasioned the loss. An act of God cannot be invoked to protect a
person who has failed to take steps to forestall the possible
adverse consequences of such a loss. One’s negligence may have
concurred with an act of God in producing damage and injury to
another; nonetheless, showing that the immediate or proximate
cause of the damage or injury was a fortuitous event would not
exempt one from liability. When the effect is found to be partly
the result of a person’s participation—whether by active
intervention, neglect or failure to act—the whole occurrence is
humanized and removed from the rules applicable to acts of
God.
Same; Same; Requisites; The often-invoked doctrine of
“fortuitous event” or “caso fortuito” has become a convenient
and easy defense to exculpate an obligor from liability.—This
often-invoked doctrine of “fortuitous event” or “caso fortuito”
has become a convenient and easy defense to exculpate an
obligor from liability. To constitute a fortuitous event, the
following elements must concur: (a) the cause of the unforeseen
and unexpected occurrence or of the failure of the debtor to
comply with obligations must be independent of human will; (b)
it must be impossible to foresee the event that constitutes the
caso fortuito or, if it can be foreseen, it must be impossible to
avoid; (c) the occurrence must be such as to render it impossible
for the debtor to fulfill obligations in a normal manner; and (d)
the obligor must be free from any participation in the
aggravation of the injury or loss.
Same; Same; Words and Phrases; Negligence, as commonly
understood, is that conduct that naturally or reasonably creates
undue risk or harm to others.—As can be gleaned from the
foregoing testimony, petitioner failed to employ reasonable
foresight, diligence and care that would have exempted it from
liability resulting from the burning of the truck. Negligence, as
commonly understood, is that conduct that naturally or
reasonably creates undue risk or harm to others. It may be a
failure to observe that degree of care, precaution or vigilance
that the circumstances justly demand; or to do any other act that
would be done by a prudent and reasonable person, who is
guided by considerations that ordinarily regulate the conduct of
human affairs.
Same; Same; Leases; Damages; Article 1667 of the Civil Code
holds the lessee responsible for the deterioration or loss of the
thing leased; Courts begin with the assumption that
compensatory damages are for pecuniary losses that result from
an act or omission of the defendant.—The P132,750 repair and
overhaul costs was correctly granted by the lower courts. Article
1667 of the Civil Code holds the lessee responsible for the
deterioration or loss of the thing leased. In addition, Article 1665
of the same Code provides that “the lessee shall return the thing
leased, upon the termination of the lease, just as he received it,
save what has been lost or impaired by the lapse of time, or by
ordinary wear and tear, or from an inevitable cause.” Courts
begin with the assumption that compensatory damages are for
pecuniary losses that result from an act or omission of the
defendant. Having been found to be negligent in safeguarding
the leased truck, petitioner must shoulder its repair and
overhaul costs to make it serviceable again. Such expenses are
duly supported by receipts; thus, the award of P132,750 is
definitely in order.
Attorney’s Fees; Where granted, the court must explicitly state
in the body of the decision, and not only in the dispositive
portion thereof, the legal reason for the award of attorney’s fees.
—We find the award of attorney’s fees to be improper. The
reason which the RTC gave—because petitioner had compelled
respondent to file an action against it—falls short of our
requirement in Scott Consultants and Resource Development v.
CA, from which we quote: “It is settled that the award of
attorney’s fees is the exception rather than the rule and
counsel’s fees are not to be awarded every time a party wins
suit. The power of the court to award attorney’s fees under
Article 2208 of the Civil Code demands factual, legal, and
equitable justification; its basis cannot be left to speculation or
conjecture. Where granted, the court must explicitly state in the
body of the decision, and not only in the dispositive portion
thereof, the legal reason for the award of attorney’s fees.”
Same; In the absence of stipulation, a winning party may be
awarded attorney’s fees only in case plaintiff’s action or
defendant’s stand is so untenable as to amount to gross and
evident bad faith.—Moreover, a recent case ruled that “in the
absence of stipulation, a winning party may be awarded
attorney’s fees only in case plaintiff’s action or defendant’s stand
is so untenable as to amount to gross and evident bad faith.”
Indeed, respondent was compelled to file this suit to vindicate
his rights. However, such fact by itself will not justify an award
of attorney’s fees, when there is no sufficient showing of
petitioner’s bad faith in refusing to pay the said rentals as well
as the repair and overhaul costs.
PETITION for review on certiorari of a decision of the Court of
Appeals.
The facts are stated in the opinion of the Court.
     Quisumbing and Torres for petitioner.
     Westwood Law and Edgardo C. Aceron for private
respondent.
PANGANIBAN, J.:
Attorney’s fees cannot be granted simply because one was
compelled to sue to protect and enforce one’s right. The grant
must be proven by facts; it cannot depend on mere speculation
or conjecture—its basis must be stated in the text of the
decision.
The Case
Before us is a Petition for Review under Rule 45 of the Rules of
Court, assailing the March 26, 1999 Decision1 of the Court of
Appeals (CA) in CA-GR CV No. 46967. The dispositive portion of
the challenged Decision reads as follows:
“WHEREFORE, the appealed decision is AFFIRMED with
MODIFICATION that the legal interest to be paid on the rentals
of P76,000.00 and costs of repair in the amount of P132,750.00
is six (6%) percent per annum from June 22, 1994, the date of
the decision of the court a quo to the date of its finality.
Thereafter, if the amounts adjudged remain unpaid, the interest
rate shall be twelve (12%) percent per annum from the date of
finality of the decision until fully paid.”2
The Facts
The factual antecedents of the case are summarized by the CA in
this wise:
“On February 1991, a verbal agreement was entered into
between Ephraim Morillo and Mindex Resources Corporation
(MINDEX for brevity) for the lease of the former’s 6 x 6 ten-
wheeler cargo truck for use in MINDEX’s mining operations in
Binaybay, Bigaan, San Teodoro, Oriental Mindoro, at the
stipulated rental of ‘P300.00 per hour for a minimum of eight
hours a day or a total of P2,400.00 daily.’ MINDEX had been
paying the rentals until April 10, 1991.
“Unknown to Morillo, on April 11, 1991, the truck was burned by
unidentified persons while it was parked unattended at Sitio
Aras, Bigaan, San Teodoro, Oriental Mindoro, due to mechanical
trouble. The findings of the Mindoro Oriental Integrated
National Police in their investigation report read:
‘3. On 121005H April 1991, Mr. Alexander Roxas, project
coordinator of MINDEX MINING CORP. reported to this office
that on the morning of 12 April 1991 while he was supposed to
report for his work at their office at Sitio Tibonbon, Bigaan, San
Teodoro, Oriental Mindoro, he x x x noticed that their hired 6 x 6
Ten wheeler Cargo Truck temporarily parked at Sitio Aras,
Bigaan, San Teodoro, Oriental Mindoro for Alpha Engine Trouble
was burned on the night of April 11, 1991 by still unidentified
person.
‘x x x      x x x      x x x
‘5. x x x Based also on the facts gathered and incident scene
searched it was also found out that said 6 x 6 Ten Wheeler Cargo
Truck was burned by means of using coconut leaves and as a
result of which said 6 x 6 was totally burned excluding the
engine which was partially damaged by still undetermined
amount.’
“Upon learning of the burning incident, Morillo offered to sell
the truck to MINDEX but the latter refused. Instead, it replaced
the vehicle’s burned tires and had it towed to a shop for repair
and overhauling.
“On April 15, 1991, Morillo sent a letter to Mr. Ami Isberg, the
Finance Manager of MINDEX, thru Mr. Ramoncito Gozar, Project
Manager, proposing the following:
‘x x x      x x x      x x x
‘I have written to let you know that I am entrusting to you the
said vehicle in the amount of P275,000.00 which is its cost price.
I will not charge your company for the encumbrance of P76,800
+ since you used it as my friendly gesture on account of the
unforeseen adversity.
‘In view of the tragic happening, I am asking you to pay us, in a
way which will not be hard for you to settle to pay us in four
installment monthly as follows:
     ‘First payment
- April 25/91
P[1]50,000.00
     ‘Second payment
- May 15/91
50,000.00
     ‘Third payme(n)t
- June 15/91
50,000.00
     ‘Fourth payme(n)t
- July 15/91
25,000.00
 
     TOTAL
P275,000.00
‘I promise to relinquish all the necessary documents upon full
payment of said account.
‘x x x      x x x      x x x
“Through Mr. Gozar, MINDEX responded by a handwritten letter
to his cousin Malou (wife of Ephraim Morillo), expressing their
reservations on the above demands due to their tight financial
situation. However, he made the following counter offers:
‘a) Pay the rental of the 6 x 6 truck (actual) in the amount of
P76,000.00.
‘b) Repair and overhaul the truck on our own expenses and;
‘c) Return it to you on (A1) good running condition after repair.’
“Morillo replied on April 18, 1991, (1) that he will relinquish to
MINDEX the damaged truck; (2) that he is amenable to receive
the rental in the amount of P76,000.00; and (3) that MINDEX
will pay fifty thousand pesos (P50,000.00) monthly until the
balance of P275,000.00 is fully paid. It is noteworthy that except
for his acceptance of the proffered P76,000.00 unpaid rentals,
Morillo’s stand has virtually not been changed as he merely
lowered the first payment on the P275,000.00 valuation of the
truck from P150,000.00 to P50,000.00.
“The parties had since remained intransigent and so on August
1991, Morillo pulled out the truck from the repair shop of
MINDEX and had it repaired elsewhere for which he spent the
total amount of P132,750.00.”3 (Citations omitted)
Ruling of the Trial Court
After evaluating the evidence adduced by both parties, the
Regional Trial Court (RTC) found petitioner responsible for the
destruction or loss of the leased 6x6 truck and ordered it to pay
respondent (1) P76,000 as balance of the unpaid rental for the 6
x 6 truck with interest of 12 percent from June 22, 1994 (the
rendition of the judgment) up to the payment of the amount; (2)
P132,750 representing the costs of repair and overhaul of the
said truck, with interest rate of 12 percent until fully paid; and
(3) P20,000 as attorney’s fees for compelling respondent to
secure the services of counsel in filing his Complaint.
Ruling of the Court of Appeals
The appellate court sustained the RTC’s finding that petitioner
was not without fault for the loss and destruction of the truck
and, thus, liable therefor. The CA said:
“The burning of the subject truck was impossible to foresee, but
not impossible to avoid. MINDEX could have prevented the
incident by immediately towing the truck to a motor shop for
the needed repair or by having it guarded day and night. Instead,
the appellant just left the vehicle where its transfer case broke
down. The place was about twelve (12) kilometers away from
the camp site of the appellant corporation and was sparsely
populated. It was guarded only during daytime. It stayed in that
place for two (2) weeks until it was burned on April 11, 1991
while its transfer case was being repaired elsewhere. It was only
after it had been burned that the appellant had it towed to a
repair shop.
“The appellant [respondent] was thus not free from fault for the
burning of the truck. It miserably failed to overcome the
presumption of negligence against it. Neither did it rescind the
lease over the truck upon its burning. On the contrary, it offered
to pay P76,000.00 as rentals. It did not also complete the needed
repair. Hence, the appellee was forced to pull out the truck and
had it repaired at his own expense. Since under the law, the
‘lessee shall return the thing leased, upon the termination of the
lease, just as he receive it,’ the appellant stands liable for the
expenses incurred for the repair in the aggregate amount of
P132,750.00.”
Nevertheless, the appellate court modified the Decision of the
trial court. The 12 percent interest rate on the P76,000 rentals
and the P132,750 repair costs, imposed by the RTC, was
changed by the CA to 6 percent per annum from June 22, 1994 to
the date of finality of the said Decision; and 12 percent per
annum thereafter, if the amounts adjudged would remain
unpaid from such date of finality until the rentals and the repair
costs were fully paid. It affirmed the award of attorney’s fees.
Hence, this Petition.5

Issues
In its Memorandum, petitioner raises the following issues for the
Court’s consideration:
“4.1. Whether or not the Court of Appeals gravely erred in
finding that petitioner failed to overcome the presumption of
negligence against it considering that the facts show, as
admitted by the respondent, that the burning of the truck was a
fortuitous event.
“4.2. Whether or not the Court of Appeals gravely erred in
affirming the decision of the trial court finding petitioner liable
to pay unpaid rentals and cost of repairs.
“4.3. Whether or not the Court of Appeals also erred in affirming
the decision of the trial court finding petitioner liable to pay
attorney’s fees.”6
This Court’s Ruling
The Petition is partly meritorious; the award of attorney’s fees
should be deleted.
First Issue:
Petitioner’s Negligence
Petitioner claims that the burning of the truck was a fortuitous
event, for which it should not be held liable pursuant to Article
11747 of the Civil Code. Moreover, the letter of respondent
dated April 15, 1991, stating that the burning of the truck was an
“unforeseen adversity,” was an admission that should exculpate
the former from liability.
We are not convinced. Both the RTC and the CA found petitioner
negligent and thus liable for the loss or destruction of the leased
truck. True, both parties may have suffered from the burning of
the truck; however, as found by both lower courts, the
negligence of petitioner makes it responsible for the loss. Well-
settled is the rule that factual findings of the trial court,
particularly when affirmed by the Court of Appeals, are binding
on the Supreme Court. Contrary to its allegations, petitioner has
not adequately shown that the RTC and the CA overlooked or
disregarded significant facts and circumstances that, when
considered, would alter the outcome of the disposition.8 Article
1667 of the Civil Code9 holds lessees responsible for the
deterioration or loss of the thing leased, unless they prove that it
took place without their fault.
______________
7 Article 1174 provides:
“Except in cases expressly specified by the law, or when it is
otherwise declared by stipulation or when the nature of the
obligation requires the assumption of risk, no person shall be
responsible for those events which could not be foreseen, or
which though foreseen, were inevitable.”
8 Spouses Belo v. Philippine National Bank, G.R. No. 134330,
March 1, 2001, 353 SCRA 359; Republic v. CA, 349 SCRA 451,
January 18, 2001; Halili v. CA, 287 SCRA 465, March 12, 1998.
9 “Art. 1667. The lessee is responsible for the deterioration or
loss of the thing leased, unless he proves that it took place
without his fault. This burden of proof on the lessee does not
apply when the destruction is due to earthquake, flood, storm or
other natural calamity.”
Fortuitous Event
In order for a fortuitous event to exempt one from liability, it is
necessary that one has committed no negligence or misconduct
that may have occasioned the loss.10 An act of God cannot be
invoked to protect a person who has failed to take steps to
forestall the possible adverse consequences of such a loss. One’s
negligence may have concurred with an act of God in producing
damage and injury to another; nonetheless, showing that the
immediate or proximate cause of the damage or injury was a
fortuitous event would not exempt one from liability. When the
effect is found to be partly the result of a person’s participation
—whether by active intervention, neglect or failure to act—the
whole occurrence is humanized and removed from the rules
applicable to acts of God.11
This often-invoked doctrine of “fortuitous event” or “caso
fortuito” has become a convenient and easy defense to exculpate
an obligor from liability. To constitute a fortuitous event, the
following elements must concur: (a) the cause of the unforeseen
and unexpected occurrence or of the failure of the debtor to
comply with obligations must be independent of human will; (b)
it must be impossible to foresee the event that constitutes the
caso fortuito or, if it can be foreseen, it must be impossible to
avoid; (c) the occurrence must be such as to render it impossible
for the debtor to fulfill obligations in a normal manner; and (d)
the obligor must be free from any participation in the
aggravation of the injury or loss.12
Article 1174 of the Civil Code states that no person shall be
responsible for a fortuitous event that could not be foreseen or,
though foreseen, was inevitable. In other words, there must be
an exclusion of human intervention from the cause of injury or
loss.13
A review of the records clearly shows that petitioner failed to
exercise reasonable care and caution that an ordinarily prudent
person would have used in the same situation. Witness
Alexander Roxas testified how petitioner fell short of ordinary
diligence in safeguarding the leased truck against the accident,
which could have been avoided in the first place. Pertinent
portions of his testimony are reproduced hereunder:
“ATTY. ACERON
Q
Now, this Barangay Aras where the 6 x 6 truck had transmission
trouble, how far is it from the camp site of the defendant
corporation?
ALEXANDER ROXAS
A
Twelve (12) kilometers, more or less, sir.
Q
Is this Barangay Aras populated?
A
Not so many, sir.
Q
The place where the 6 x 6 truck had transmission trouble, how
far is the nearest house from it?
A
Perhaps three hundred meters, sir. Q
Q How did you come to know that the 6 x 6 truck was burned on
And how many houses are within the three hundred meter April 11, 1991?
radius from the place where the truck had engine trouble? A
A I together with my daughter, I met the service of the company
Ten, more or less, in scattered. near the ORMECO and I was informed by the Project Engineer
Q that the 6 x 6 truck was burned, so, we returned to San Teodoro
You said that after hauling several sand to be used in the camp and have the incident blottered at the police station.
site the 6 x 6 truck had transmission trouble, what did the Q
company do after the truck had that engine trouble? Aside from that, what other action did you undertake in
A connection with the burning of the 6 x 6 truck?
For at least two weeks the truck was installed in the place where A
the said truck had engine trouble. When we were at the police station, the Project Manager of the
Q company arrived and from the police station we proceeded to
Meaning in Barangay Aras? the place where the 6 x 6 truck was burned and the Project
A Manager took pictures of the 6 x 6 truck.
Yes, sir. Q
Q Now, did you come to know who was responsible or who were
Was there any guard in that place by the company during the responsible for the burning of the 6 x 6 truck?
time that the truck was in that place? A
A The responsible is the Mindex Resources Development
Yes, sir, during daytime but at nighttime, there was no guard. Corporation, and as far as I know, the persons who actually
Q burned the said 6 x 6 truck were the dismissed employees of the
What happened to that 6 x 6 truck? Min-dex Resources Development Corporation.
A Q
In the month of March, 1991, the company dismissed thirteen These dismissed employees of the corporation, why were they
(13) to seventeen (17) employees and these employees came employed by the corporation?
from Barangays Aras, Botolan, Calsapa, Camatis and Tibon- bon A
and on April 11, 1991, the 6 x 6 truck was burned.
Because we have to make a road going to the mining site and in
the process of opening the road these dismissed employees
happened to be the owners of the land where the road will pass,
so, we paid the land. The corporation likewise gave jobs to the
owners of the land.”14
As can be gleaned from the foregoing testimony, petitioner failed
to employ reasonable foresight, diligence and care that would
have exempted it from liability resulting from the burning of the
truck. Negligence, as commonly understood, is that conduct that
naturally or reasonably creates undue risk or harm to others. It
may be a failure to observe that degree of care, precaution or
vigilance that the circumstances justly demand;15 or to do any
other act that would be done by a prudent and reasonable
person, who is guided by considerations that ordinarily regulate
the conduct of human affairs.16
Second Issue:
Unpaid Rentals and Cost of Repairs
Petitioner proceeds to argue that “it should be deemed to have
already paid the unpaid rentals in the amount of P76,000.00,”
and that it should not be made to pay the P132,750 repair and
overhaul costs. Nothing in the records, not even in the
documentary evidence it presented, would show that it already
paid the aforesaid amounts. In fact, it seeks to avoid payment of
the rental by alleging that respondent already condoned it in his
letter dated April 15, 1991. However, a perusal of the letter
would show that his offer not to charge petitioner for the
P76,000 rental was premised on the condition that it would buy
the truck.17
Moreover, the RTC based the P76,000 rental and the costs of
repair and overhaul on Exhibit “B,” wherein Chito Gozar, the
Project Manager of Mindex Resources Development
Corporation, proposed through a letter dated April 17, 1991, the
following: (1) to pay the P76,000 rental, (2) to repair the truck
at the expense of petitioner, and (3) to return the truck in good
running condition after the repair.
Likewise, the nonpayment of the said amount was corroborated
by Roxas thus:
“Q
During that time when the 6 x 6 truck was already burned and
when you went to the Petron Gasoline Station to inform plaintiff
about the burning, was the plaintiff paid any amount for the
rental of the 6 x 6 truck?
A
Before the burning of the 6 x 6 truck, the plaintiff Morillo was
already paid partially and there was a balance of P76,000.00.”18
The P132,750 repair and overhaul costs was correctly granted
by the lower courts. Article 1667 of the Civil Code holds the
lessee responsible for the deterioration or loss of the thing
leased. In addition, Article 1665 of the same Code provides that
“the lessee shall return the thing leased, upon the termination of
the lease, just as he received it, save what has been lost or
impaired by the lapse of time, or by ordinary wear and tear, or
from an inevitable cause.”
Courts begin with the assumption that compensatory damages
are for pecuniary losses that result from an act or omission of
the defendant. Having been found to be negligent in
safeguarding the leased truck, petitioner must shoulder its
repair and overhaul costs to make it serviceable again. Such
expenses are duly supported by receipts; thus, the award of
P132,750 is definitely in order.
Third Issue:
Attorney’s Fees
We find the award of attorney’s fees to be improper. The reason
which the RTC gave—because petitioner had compelled
respondent to file an action against it—falls short of our
requirement in Scott Consultants and Resource Development v.
CA,19 from which we quote:
“It is settled that the award of attorney’s fees is the exception
rather than the rule and counsel’s fees are not to be awarded
every time a party wins suit. The power of the court to award
attorney’s fees under Article 2208 of the Civil Code demands
factual, legal, and equitable justification; its basis cannot be left
to speculation or conjecture. Where granted, the court must
explicitly state in the body of the decision, and not only in the
dispositive portion thereof, the legal reason for the award of
attorney’s fees.”
Moreover, a recent case20 ruled that “in the absence of
stipulation, a winning party may be awarded attorney’s fees only
in case plaintiff’s action or defendant’s stand is so untenable as
to amount to gross and evident bad faith.”
Indeed, respondent was compelled to file this suit to vindicate
his rights. However, such fact by itself will not justify an award
of attorney’s fees, when there is no sufficient showing of
petitioner’s bad faith in refusing to pay the said rentals as well
as the repair and overhaul costs.21
WHEREFORE, the Petition is DENIED, but the assailed CA
Decision is MODIFIED by DELETING the award of attorney’s
fees. Costs against petitioner.
SO ORDERED.
     Melo (Chairman), Vitug, Sandoval-Gutierrez and Carpio, JJ.,
concur.
Petition denied, judgment modified.
Notes.—In order that a fortuitous event may exempt a person
from liability, it is necessary that he be free from negligence—an
act of God cannot be urged for the protection of a person who
has been guilty of gross negligence in not trying to avert its
results. (Metal Forming Corporation vs. Office of the President,
247 SCRA 731 [1995])
Factual findings of the trial court shall not be disturbed on
appeal unless the trial court has overlooked or ignored some
fact or circumstance of sufficient weight or significance which, if
considered, would alter the situation. (AHS/Philippines, Inc. vs.
Court of Appeals, 257 SCRA 319 [1996])
——o0o——
SUPREME COURT REPORTS ANNOTATED
Southeastern College, Inc. vs. Court of Appeals
G.R. No. 126389. July 10, 1998.*
SOUTHEASTERN COLLEGE, INC., petitioner, vs. COURT OF
APPEALS, JUANITA DE JESUS VDA. DE DIMAANO, EMERITA
DIMAANO, REMEDIOS DIMAANO, CONSOLACION DIMAANO
and MILAGROS DIMAANO, respondents.
Obligations and Contracts; Fortuitous Events; Words and
Phrases; The antecedent of fortuitous event or caso fortuito is
found in the Partidas which defines it as “an event which takes
place by accident and could not have been foreseen.”—The
antecedent of fortuitous event or caso fortuito is found in the
Partidas which defines it as “an event which takes place by
accident and could not have been foreseen.” Escriche elaborates
it as “an unexpected event or act of God which could neither be
foreseen nor resisted.” Civilist Arturo M. Tolentino adds that
“[f]ortuitous events may be produced by two general causes: (1)
by nature, such as earthquakes, storms, floods, epidemics, fires,
etc. and (2) by the act of man, such as an armed invasion, attack
by bandits, governmental prohibitions, robbery, etc.”
Same; Same; An act of God cannot be invoked for the protection
of a person who has been guilty of gross negligence in not trying
to forestall its possible adverse consequences.—In order that a
fortuitous event may exempt a person from liability, it is
necessary that he be free from any previous negligence or
misconduct by reason of which the loss may have been
occasioned. An act of God cannot be invoked for the protection
of a person who has been guilty of gross negligence in not trying
to forestall its possible adverse consequences. When a person’s
negligence concurs with an act of God in producing damage or
injury to another, such person is not exempt from liability by
showing that the immediate or proximate cause of the damage
or injury was a fortuitous event. When the effect is found to be
partly the result of the participation of man—whether it be from
active intervention, or neglect, or failure to act—the whole
occurrence is hereby humanized, and removed from the rules
applicable to acts of God.
Same; Same; Typhoons; Words and Phrases; “Negligence,”
Explained; There is no question that a typhoon or storm is a
fortuitous event, a natural occurrence which may be foreseen
but is unavoidable despite any amount of foresight, diligence or
care.—There is no question that a typhoon or storm is a
fortuitous event, a natural occurrence which may be foreseen
but is unavoidable despite any amount of foresight, diligence or
care. In order to be exempt from liability arising from any
adverse consequence engendered thereby, there should have
been no human participation amounting to a negligent act. In
other words, the person seeking exoneration from liability must
not be guilty of negligence. Negligence, as commonly
understood, is conduct which naturally or reasonably creates
undue risk or harm to others. It may be the failure to observe
that degree of care, precaution, and vigilance which the
circumstances justly demand, or the omission to do something
which a prudent and reasonable man, guided by considerations
which ordinarily regulate the conduct of human affairs, would
do. From these premises, we proceed to determine whether
petitioner was negligent, such that if it were not, the damage
caused to private respondents’ house could have been avoided?
Same; Same; Same; Same; Ocular Inspections; Damages; A
person claiming damages for the negligence of another has the
burden of proving the existence of fault or negligence causative
of his injury or loss; As the term imparts, an ocular inspection is
one by means of actual sight or viewing—what is visual to the
eye though, is not always reflective of the real cause behind.—At
the outset, it bears emphasizing that a person claiming damages
for the negligence of another has the burden of proving the
existence of fault or negligence causative of his injury or loss.
The facts constitutive of negligence must be affirmatively
established by competent evidence, not merely by presumptions
and conclusions without basis in fact. Private respondents, in
establishing the culpability of petitioner, merely relied on the
aforementioned report submitted by a team which made an
ocular inspection of petitioner’s school building after the
typhoon. As the term imparts, an ocular inspection is one by
means of actual sight or viewing. What is visual to the eye
though, is not always reflective of the real cause behind. For
instance, one who hears a gunshot and then sees a wounded
person, cannot always definitely conclude that a third person
shot the victim. It could have been self-inflicted or caused
accidentally by a stray bullet. The relationship of cause and
effect must be clearly shown.
Same; Same; Same; Building Permits; Having obtained both
building permit and certificate of occupancy, these are, at the
very least, prima facie evidence of the regular and proper
construction of a building.—On the other hand, petitioner
elicited from one of the witnesses of private respondents, city
building official Jesus Reyna, that the original plans and design
of petitioner’s school building were approved prior to its
construction. Engr. Reyna admitted that it was a legal
requirement before the construction of any building to obtain a
permit from the city building official (city engineer, prior to the
passage of the Building Act of 1977). In like manner, after
construction of the building, a certification must be secured
from the same official attesting to the readiness for occupancy of
the edifice. Having obtained both building permit and certificate
of occupancy, these are, at the very least, prima facie evidence of
the regular and proper construction of subject school building.
Same; Same; Same; Judicial Notice; It is a matter of judicial
notice that typhoons are common occurrences in this country.—
Moreover, the city building official, who has been in the city
government service since 1974, admitted in open court that no
complaint regarding any defect on the same structure has ever
been lodged before his office prior to the institution of the case
at bench. It is a matter of judicial notice that typhoons are
common occurrences in this country. If subject school building’s
roofing was not firmly anchored to its trusses, obviously, it could
not have withstood long years and several typhoons even
stronger than “Saling.”
Same; Same; Damages; It is not enough that the damage be
capable of proof but must be actually proved with a reasonable
degree of certainty, pointing out specific facts that afford a basis
for measuring whatever compensatory damages are borne.—
Private respondents failed to adduce adequate and competent
proof of the pecuniary loss they actually incurred. It is not
enough that the damage be capable of proof but must be actually
proved with a reasonable degree of certainty, pointing out
specific facts that afford a basis for measuring whatever
compensatory damages are borne. Private respondents merely
submitted an estimated amount needed for the repair of the roof
of their subject building. What is more, whether the “necessary
repairs” were caused ONLY by petitioner’s alleged negligence in
the maintenance of its school building, or included the ordinary
wear and tear of the house itself, is an essential question that
remains indeterminable.
PETITION for review on certiorari of a decision of the Court of
Appeals.
The facts are stated in the opinion of the Court.
     Eladio B. Samson for petitioner.
     Galileo P. Brion for private respondents.
PURISIMA, J.:
Petition for review under Rule 45 of the Rules of Court seeking
to set aside the Decision1 promulgated on July 31, 1996, and
Resolution2 dated September 12, 1996 of the Court of Appeals3
in CA-G.R. No. 41422, entitled “Juanita de Jesus vda. de Dimaano,
et al. vs. Southeastern College, Inc.,” which reduced the moral
damages awarded below from P1,000,000.00 to P200,000.00.4
The Resolution under attack denied petitioner’s motion for
reconsideration.
Private respondents are owners of a house at 326 College Road,
Pasay City, while petitioner owns a four-storey school building
along the same College Road. On October 11, 1989, at about 6:30
in the morning, a powerful typhoon “Saling” hit Metro Manila.
Buffeted by very strong winds, the roof of petitioner’s building
was partly ripped off and blown away, landing on and
destroying portions of the roofing of private respondents’ house.
After the typhoon had passed, an ocular inspection of the
destroyed buildings was conducted by a team of engineers
headed by the city buildings official, Engr. Jesus L. Reyna.
Pertinent aspects of the latter’s Report5 dated October 18, 1989
stated, as follows:
“5. One of the factors that may have led to this calamitous event
is the formation of the buildings in the area and the general
direction of the wind. Situated in the peripheral lot is an almost
U-shaped formation of 4-storey building. Thus, with the strong
winds having a westerly direction, the general formation of the
buildings becomes a big funnel-like structure, the one situated
along College Road, receiving the heaviest impact of the strong
winds. Hence, there are portions of the roofing, those located on
both ends of the building, which remained intact after the storm.
6. Another factor and perhaps the most likely reason for the
dislodging of the roofings structural trusses is the improper
anchorage of the said trusses to the roof beams. The 1/2”
diameter steel bars embedded on the concrete roof beams which
serve as truss anchorage are not bolted nor nailed to the trusses.
Still, there are other steel bars which were not even bent to the
trusses, thus, those trusses are not anchored at all to the roof
beams.”
It then recommended that “to avoid any further loss and damage
to lives, limbs and property of persons living in the vicinity,” the
fourth floor of subject school building be declared as a
“structural hazard.”
In their Complaint6 before the Regional Trial Court of Pasay
City, Branch 117, for damages based on culpa aquiliana, private
respondents alleged that the damage to their house rendered
the same uninhabitable, forcing them to stay temporarily in
other’s houses. And so they sought to recover from petitioner
P117,116.00, as actual damages, P1,000,000.00, as moral
damages, P300,000.00, as exemplary damages and P100,000.00,
for and as attorney’s fees; plus costs.
In its Answer, petitioner averred that subject school building
had withstood several devastating typhoons and other
calamities in the past, without its roofing or any portion thereof
giving way; that it has not been remiss in its responsibility to see
to it that said school building, which houses school children,
faculty members, and employees, is “in tip-top condition”; and
furthermore, typhoon “Saling” was “an act of God and therefore
beyond human control” such that petitioner cannot be
answerable for the damages wrought thereby, absent any
negligence on its part.
The trial court, giving credence to the ocular inspection report to
the effect that subject school building had a “defective roofing
structure,” found that, while typhoon “Saling” was accompanied
by strong winds, the damage to private respondents’ house
“could have been avoided if the construction of the roof of
[petitioner’s] building was not faulty.” The dispositive portion of
the lower court’s decision7 reads, thus:
“WHEREFORE, in view of the foregoing, the Court renders
judgment (sic) in favor of the plaintiff (sic) and against the
defendants, (sic) ordering the latter to pay jointly and severally
the former as follows:
a) P117,116.00 as actual damages, plus litigation expenses;
b) P1,000,000.00 as moral damages;
c) P100,000.00 as attorney’s fees;
d) Costs of the instant suit.
The claim for exemplary damages is denied for the reason that
the defendants (sic) did not act in a wanton, fraudulent, reckless,
oppressive or malevolent manner.”
In its appeal to the Court of Appeals, petitioner assigned as
errors,8 that:
I
THE TRIAL COURT ERRED IN HOLDING THAT TYPHOON
“SALING,” AS AN ACT OF GOD, IS NOT “THE SOLE AND
ABSOLUTE REASON” FOR THE RIPPING-OFF OF THE SMALL
PORTION OF THE ROOF OF SOUTHEASTERN’S FOUR (4)
STOREY SCHOOL BUILDING.
_______________
II
THE TRIAL COURT ERRED IN HOLDING THAT “THE
CONSTRUCTION OF THE ROOF OF DEFENDANT’S SCHOOL
BUILDING WAS FAULTY” NOTWITHSTANDING THE ADMISSION
THAT THERE WERE TYPHOONS BEFORE BUT NOT AS GRAVE
AS TYPHOON “SALING” WHICH IS THE DIRECT AND
PROXIMATE CAUSE OF THE INCIDENT.
III
THE TRIAL COURT ERRED IN AWARDING ACTUAL AND MORAL
DAMAGES AS WELL AS ATTORNEY’S FEES AND LITIGATION
EXPENSES AND COSTS OF SUIT TO DIMAANOS WHEN THEY
HAVE NOT INCURRED ACTUAL DAMAGES AT ALL AS
DIMAANOS HAVE ALREADY SOLD THEIR PROPERTY, AN
INTERVENING EVENT THAT RENDERS THIS CASE MOOT AND
ACADEMIC.
IV
THE TRIAL COURT ERRED IN ORDERING THE ISSUANCE OF
THE WRIT OF EXECUTION INSPITE OF THE PERFECTION OF
SOUTHEASTERN’S APPEAL WHEN THERE IS NO COMPELLING
REASON FOR THE ISSUANCE THERETO.
As mentioned earlier, respondent Court of Appeals affirmed
with modification the trial court’s disposition by reducing the
award of moral damages from P1,000,000.00 to P200,000.00.
Hence, petitioner’s resort to this Court, raising for resolution the
issues of:
“1. Whether or not the award of actual damage [sic] to
respondent Dimaanos on the basis of speculation or conjecture,
without proof or receipts of actual damage, [sic] legally feasible
or justified.
2. Whether or not the award of moral damages to respondent
Dimaanos, without the latter having suffered, actual damage has
legal basis.
3. Whether or not respondent Dimaanos who are no longer the
owner of the property, subject matter of the case, during its
pendency, has the right to pursue their complaint against
petitioner when the case was already rendered moot and
academic by the sale of the property to third party.
4. Whether or not the award of attorney’s fees when the case
was already moot and academic [sic] legally justified.
5. Whether or not petitioner is liable for damage caused to
others by typhoon “Saling” being an act of God.
6. Whether or not the issuance of a writ of execution pending
appeal, ex-parte or without hearing, has support in law.”
The pivot of inquiry here, determinative of the other issues, is
whether the damage on the roof of the building of private
respondents resulting from the impact of the falling portions of
the school building’s roof ripped off by the strong winds of
typhoon “Saling,” was, within legal contemplation, due to
fortuitous event? If so, petitioner cannot be held liable for the
damages suffered by the private respondents. This conclusion
finds support in Article 1174 of the Civil Code, which provides:
“Art. 1174. Except in cases expressly specified by the law, or
when it is otherwise declared by stipulation, or when the nature
of the obligation requires the assumption of risk, no person shall
be responsible for those events which could not be foreseen, or
which, though foreseen, were inevitable.”
The antecedent of fortuitous event or caso fortuito is found in
the Partidas which defines it as “an event which takes place by
accident and could not have been foreseen.”9 Escriche
elaborates it as “an unexpected event or act of God which could
neither be foreseen nor resisted.”10 Civilist Arturo M. Tolentino
adds that “[f]ortuitous events may be produced by two general
causes: (1) by nature, such as earthquakes, storms, floods,
epidemics, fires, etc. and (2) by the act of man, such as an armed
invasion, attack by bandits, governmental prohibitions, robbery,
etc.”11
In order that a fortuitous event may exempt a person from
liability, it is necessary that he be free from any previous
negligence or misconduct by reason of which the loss may have
been occasioned.12 An act of God cannot be invoked for the
protection of a person who has been guilty of gross negligence in
not trying to forestall its possible adverse consequences. When a
person’s negligence concurs with an act of God in producing
damage or injury to another, such person is not exempt from
liability by showing that the immediate or proximate cause of
the damage or injury was a fortuitous event. When the effect is
found to be partly the result of the participation of man—
whether it be from active intervention, or neglect, or failure to
act—the whole occurrence is hereby humanized, and removed
from the rules applicable to acts of God.13
In the case under consideration, the lower court accorded full
credence to the finding of the investigating team that subject
school building’s roofing had “no sufficient anchorage to hold it
in position especially when battered by strong winds.” Based on
such finding, the trial court imputed negligence to petitioner and
adjudged it liable for damages to private respondents.
After a thorough study and evaluation of the evidence on record,
this Court believes otherwise, notwithstanding the general rule
that factual findings by the trial court, especially when affirmed
by the appellate court, are binding and conclusive upon this
Court.14 After a careful scrutiny of the records and the
pleadings submitted by the parties, we find exception to this
rule and hold that the lower courts misappreciated the evidence
proffered.
There is no question that a typhoon or storm is a fortuitous
event, a natural occurrence which may be foreseen but is
unavoidable despite any amount of foresight, diligence or
care.15 In order to be exempt from liability arising from any
adverse consequence engendered thereby, there should have
been no human participation amounting to a negligent act.16 In
other words, the person seeking exoneration from liability must
not be guilty of negligence. Negligence, as commonly
understood, is conduct which naturally or reasonably creates
undue risk or harm to others. It may be the failure to observe
that degree of care, precaution, and vigilance which the
circumstances justly demand,17 or the omission to do
something which a prudent and reasonable man, guided by
considerations which ordinarily regulate the conduct of human
affairs, would do.18 From these premises, we proceed to
determine whether petitioner was negligent, such that if it were
not, the damage caused to private respondents’ house could
have been avoided?
At the outset, it bears emphasizing that a person claiming
damages for the negligence of another has the burden of
proving the existence of fault or negligence causative of his
injury or loss. The facts constitutive of negligence must be
affirmatively established by competent evidence,19 not merely
by presumptions and conclusions without basis in fact. Private
respondents, in establishing the culpability of petitioner, merely
relied on the aforementioned report submitted by a team which
made an ocular inspection of petitioner’s school building after
the typhoon. As the term imparts, an ocular inspection is one by
means of actual sight or viewing.20 What is visual to the eye
though, is not always reflective of the real cause behind. For
instance, one who hears a gunshot and then sees a wounded
person, cannot always definitely conclude that a third person
shot the victim. It could have been self-inflicted or caused
accidentally by a stray bullet. The relationship of cause and
effect must be clearly shown.
In the present case, other than the said ocular inspection, no
investigation was conducted to determine the real cause of the
partial unroofing of petitioner’s school building. Private
respondents did not even show that the plans, specifications and
design of said school building were deficient and defective.
Neither did they prove any substantial deviation from the
approved plans and specifications. Nor did they conclusively
establish that the construction of such building was basically
flawed.21
On the other hand, petitioner elicited from one of the witnesses
of private respondents, city building official Jesus Reyna, that the
original plans and design of petitioner’s school building were
approved prior to its construction. Engr. Reyna admitted that it
was a legal requirement before the construction of any building
to obtain a permit from the city building official (city engineer,
prior to the passage of the Building Act of 1977). In like manner,
after construction of the building, a certification must be secured
from the same official attesting to the readiness for occupancy of
the edifice. Having obtained both building permit and certificate
of occupancy, these are, at the very least, prima facie evidence of
the regular and proper construction of subject school
building.22
Furthermore, when part of its roof needed repairs of the damage
inflicted by typhoon “Saling,” the same city official gave the go-
signal for such repairs—without any deviation from the original
design—and subsequently, authorized the use of the entire
fourth floor of the same building. These only prove that subject
building suffers from no structural defect, contrary to the report
that its “U-shaped” form was “structurally defective.” Having
given his unqualified imprimatur, the city building official is
presumed to have properly performed his duties23 in
connection therewith.
In addition, petitioner presented its vice president for finance
and administration who testified that an annual maintenance
inspection and repair of subject school building were regularly
undertaken. Petitioner was even willing to present its
maintenance supervisor to attest to the extent of such regular
inspection but private respondents agreed to dispense with his
testimony and simply stipulated that it would be corroborative
of the vice president’s narration.
Moreover, the city building official, who has been in the city
government service since 1974, admitted in open court that no
complaint regarding any defect on the same structure has ever
been lodged before his office prior to the institution of the case
at bench. It is a matter of judicial notice that typhoons are
common occurrences in this country. If subject school building’s
roofing was not firmly anchored to its trusses, obviously, it could
not have withstood long years and several typhoons even
stronger than “Saling.”
In light of the foregoing, we find no clear and convincing
evidence to sustain the judgment of the appellate court. We thus
hold that petitioner has not been shown negligent or at fault
regarding the construction and maintenance of its school
building in question and that typhoon “Saling” was the
proximate cause of the damage suffered by private respondents’
house.
With this disposition on the pivotal issue, private respondents’
claim for actual and moral damages as well as attorney’s fees
must fail.24 Petitioner cannot be made to answer for a purely
fortuitous event.25 More so because no bad faith or willful act to
cause damage was alleged and proven to warrant moral
damages.
Private respondents failed to adduce adequate and competent
proof of the pecuniary loss they actually incurred.26 It is not
enough that the damage be capable of proof but must be actually
proved with a reasonable degree of certainty, pointing out
specific facts that afford a basis for measuring whatever
compensatory damages are borne.27 Private respondents
merely submitted an estimated amount needed for the repair of
the roof of their subject building. What is more, whether the
“necessary repairs” were caused ONLY by petitioner’s alleged
negligence in the maintenance of its school building, or included
the ordinary wear and tear of the house itself, is an essential
question that remains indeterminable.
The Court deems unnecessary to resolve the other issues posed
by petitioner.
As regards the sixth issue, however, the writ of execution issued
on April 1, 1993 by the trial court is hereby nullified and set
aside. Private respondents are ordered to reimburse any
amount or return to petitioner any property which they may
have received by virtue of the enforcement of said writ.
WHEREFORE, the petition is GRANTED and the challenged
Decision is REVERSED. The complaint of private respondents in
Civil Case No. 7314 before the trial court a quo is ordered
DISMISSED and the writ of execution issued on April 1, 1993 in
said case is SET ASIDE. Accordingly, private respondents are
ORDERED to return to petitioner any amount or property
received by them by virtue of said writ. Costs against the private
respondents.
SO ORDERED.
     Narvasa (C.J., Chairman), Romero and Kapunan, JJ., concur.
Petition granted, judgment reversed.
Notes.—Considering the weather situation in the country where
storms and typhoons are not a rare or unusual occurrence, these
terms ought to, as they should only be, understood as
comprehending and referring practically to the same thing, at
least insofar as the jural effects of petitioner’s
misrepresentations are concerned. (Metal Forming Corporation
vs. Office of the President, 247 SCRA 731 [1995])
It is within a judge’s right to conduct an ocular inspection since
it is an exercise of his judicial prerogative. (Webb vs. People, 276
SCRA 243 [1997]) [Southeastern College, Inc. vs. Court of
Appeals, 292 SCRA 422(1998)]
Mondragon Leisure and Resorts Corporation vs. Court of
Appeals
G.R. No. 154188. June 15, 2005.*
MONDRAGON LEISURE AND RESORTS CORPORATION,
petitioner, vs. COURT OF APPEALS, ASIAN BANK
CORPORATION, FAR EAST BANK AND TRUST COMPANY, and
UNITED COCONUT PLANTERS BANK, respondents.
Civil Law; Contracts; Defaults; The four remedies are alternative,
with the right of choice given to the lenders, in this case the
respondents.—As a consequence of default, the unpaid amount
shall earn default interest, and the respondent-banks have four
alternative remedies without prejudice to the application of the
provisions on collaterals and any other steps or action which
may be adopted by the majority lender. The four remedies are
alternative, with the right of choice given to the lenders, in this
case the respondents. Under Article 1201 of the Civil Code, the
choice shall produce no effect except from the time it has been
communicated. This is the reason why a written notice is
required under Section 6.02 of the Omnibus Agreement.
Same; Same; Breach; Fortuitous Event; Requisites; To exempt
the obligor from liability for a breach of an obligation by reason
of a fortuitous event, the following requisites must concur.—
Said event, the Asian financial crisis of 1997, is not among the
fortuitous events contemplated under Article 1174[19] of the
Civil Code. To exempt the obligor from liability for a breach of an
obligation by reason of a fortuitous event, the following
requisites must concur: (a) the cause of the breach of the
obligation must be independent of the will of the debtor; (b) the
event must be either unforeseeable or unavoidable; (c) the event
must be such as to render it impossible for the debtor to fulfill
his obligation in a normal manner; and (d) the debtor must be
free from any participation in, or aggravation of the injury to the
creditor.
PETITION for review on certiorari of the decision and resolution
of the Court of Appeals.
The facts are stated in the opinion of the Court.
     Angara, Abello, Concepcion, Regala and Cruz for private
respondents.
QUISUMBING, J.:
In its Decision1 dated March 12, 2002, the Court of Appeals in
CA-G.R. SP No. 61047 dismissed the petition for certiorari filed
by Mondragon Leisure and Resorts Corporation against the
Order2 dated March 9, 2000, of the Regional Trial Court of
Angeles City, Branch 61, in Civil Case No. 9527. Likewise, in its
Resolution dated July 3, 2002, the CA denied the motion for
reconsideration.
The facts of the case are undisputed.
On February 28, 1994, Mondragon International Philippines, Inc.
(MIPI), Mondragon Securities Corporation (MSC) and herein
petitioner entered into a lease agreement with the Clark
Development Corporation (CDC) for the development of what is
now known as the Mimosa Leisure Estate.
To help finance the project, petitioner, on June 30, 1997, entered
into an Omnibus Loan and Security Agreement3 (hereafter
Omnibus Agreement) with respondent banks for a syndicated
term loan in the aggregate principal amount of US$20M. Under
the agreement, as amended on January 19, 1999,4 the proceeds
of the loan were to be released through advances evidenced by
promissory notes to be executed by petitioner in favor of each
lender-bank, and to be paid within a six-year period from the
date of initial advance inclusive of a one year and two quarters
grace period.
To secure the repayment of the loan, petitioner pledged in favor
of respondents US$20M worth of MIPI shares of stocks;
assigned, transferred and delivered all rights, title to and
interest in the pledged shares; and assigned by way of security
its leasehold rights over the project and all the rights, title,
interests and benefits in, to and under any and all agreements in
connection with the project.
On July 3, 1997, petitioner fully availed of and received the full
amount of the syndicated loan agreement. Petitioner, which had
regularly paid the monthly interests due on the promissory
notes until October 1998, thereafter failed to make payments.
Consequently, on January 6 and February 5,1999, written
notices of default, acceleration of payment and demand letters
were sent by the lenders to the petitioner. Then on August 27,
1999, respondents filed a complaint, docketed as Civil Case No.
9527, for the foreclosure of leasehold rights against petitioner.
Petitioner moved for the dismissal of the complaint on the
following grounds: (1) a condition precedent for the filing of the
complaint has not been complied with and/or the instant
complaint failed to state a cause of action, or otherwise the filing
was premature; (2) the certification of non-forum shopping
appended to the complaint was fatally defective since one of the
plaintiffs, UCPB, deliberately failed to mention that it had
previously filed another complaint; and (3) plaintiffs had
engaged in forum shopping in filing the instant complaint.
The trial court denied the motion and ruled as follows:
...
“After a careful study of the arguments of the parties, this court
finds that the motion to dismiss is without merit. As correctly
pointed out by the plaintiffs under par. 6.01, the borrower
defaults when interests due at stated maturity are not paid and
the lenders are authorized to accelerate any amount payable
under the loan agreements. One of the consequences of such
default is the foreclosure of collaterals. This is the action taken
by the herein plaintiffs-lenders.
This court also finds the alleged force majeure baseless. The
same are not those provided for under Sec. 1, Article 41 of the
loan agreement.
As to the allegation of forum shopping, the herein parties Asian
Bank Corporation and Far East Bank and Trust Company are not
parties to this case in 9510 (sic). The subject matter of Civil Case
No. 9527 is not the same with the subject matter in Civil Case
No. 9510.
Wherefore, premises considered, the motion to dismiss is
denied. The defendant is given 15 days from receipt hereof
within which to file its answer and/or responsive pleading.
SO ORDERED.”5
Petitioner moved for the reconsideration of the order and
argued that the complaint is premature, since it had not been
validly declared in default.6 The trial court denied the motion
for reconsideration. Seasonably, petitioner filed a special civil
action for certiorari with the Court of Appeals.
Before the appellate court, petitioner reiterated its arguments in
its motion to dismiss before the trial court, including the failure
of the respondents to attach the board resolutions authorizing
them to file the complaint.7
The Court of Appeals dismissed the petition and denied the
subsequent motion for reconsideration. Hence, this appeal by
certiorari8 imputing the following errors:
I
THE RESPONDENT-APPELLEE COURT OF APPEALS
COMMITTED A SERIOUS ERROR OF LAW AND ACTED WITH
GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OR
EXCESS OF JURISDICTION IN RULING THAT THE COMPLAINT IN
CIVIL CASE NO. 9527 COMPLIED WITH THE MANDATORY
REQUIREMENTS OF CERTIFICATION OF NON-FORUM
SHOPPING.
II
THE RESPONDENT-APPELLEE COURT OF APPEALS
COMMITTED A SERIOUS ERROR OF LAW AND ACTED WITH
GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OR
EXCESS OF JURISDICTION IN NOT RULING THAT A CONDITION
PRECEDENT FOR THE FILING OF THE COMPLAINT IN CIVIL
CASE NO. 9527 HAS NOT BEEN COMPLIED WITH, OR THAT IT IS
OTHERWISE PREMATURE, AND/OR THAT IT FAILS TO STATE A
CAUSE OF ACTION AGAINST PETITIONER-APPELLANT.
III
THE RESPONDENT-APPELLEE COURT OF APPEALS
COMMITTED A SERIOUS ERROR OF LAW AND ACTED WITH
GRAVE ABUSE OF DISCRETION AMOUNTING TO LACK OR
EXCESS OF JURISDICTION IN NOT RULING THAT RESPONDENT-
APPELLEE BANKS, IN FILING THE COMPLAINT IN CIVIL CASE
NO. 9527, DELIBERATELY ENGAGED IN FORUM SHOPPING.9
In brief, three issues are presented for resolution, namely, (1)
Was the certificate of non-forum shopping defective? (2) Did
respondents engage in forum shopping? and (3) Do respondents
have a cause of action against the petitioner?
On the first issue, petitioner asserts that the verification and
certificate of forum shopping were defective because there was
no proof as to the authority of the signatories to file the
complaint. Petitioner avers that UCPB Resolution 48-87, which
was only presented in the Court of Appeals, merely authorized
the signatory to “appear, act for, or otherwise represent the
bank in all judicial, quasi-judicial or administrative hearings or
incidents, including pre-trial conference, and in connection
therewith, to do any and all of the following acts and deeds . . .”
and clearly pertains to a pending proceeding.
Respondents, on the other hand, contend that the lack of
authority of the persons who verified and certified the
complaint was neither raised in the motion to dismiss nor in the
motion for reconsideration of the petitioner. They aver that the
verification and certification of non-forum shopping contained a
statement by the persons who signed it that they had been so
authorized by the board of directors of their respective
corporations.
Considering the submissions of the parties, we are constrained
to agree with the respondents’ contention. The trial court did
not err in denying the motion to dismiss. The issue concerning
the signatories’ authorization was never raised before it.
Likewise, the appellate court did not err in refusing to take
cognizance of the issue, since the parties did not raise it
beforehand. Issues not raised in the trial court cannot be raised
for the first time on appeal.10
On the second issue, petitioner claims that respondent UCPB
engaged in forum shopping since it earlier instituted an action
for foreclosure of mortgage and/or collection, docketed as Civil
Case No. 9510.11 This claim, in our view, is untenable. A
comparison of the two complaints would show its utter lack of
merit.
Civil Case No. 9510 pertains to an Omnibus Credit and Security
Agreement executed by and between the petitioner and
respondent UCPB on November 23, 1995. This is separate and
distinct from the Omnibus Agreement involved in Civil Case No.
9527. Moreover, respondents Asian Bank and Far East Bank are
not among the parties to Civil Case No. 9510.
As pointed out by the Court of Appeals, forum shopping exists
when both actions involve the same transactions, with the same
essential facts and circumstances; and where identical causes of
actions, subject matter and issues are raised. The test to
determine the existence of forum shopping is whether the
elements of litis pendentia are present, or whether a final
judgment in one case will amount to res judicata in another.12
The requisites in order that an action may be dismissed on the
ground of litis pendentia are (a) the identity of parties, or at
least such as representing the same interest in both actions; (b)
the identity of rights asserted and relief prayed for, the relief
being founded on the same facts; and (c) the identity of the two
cases such that judgment in one, regardless of which party is
successful, would amount to res judicata in the other.13 Such
requisites are not present in this controversy.
Apropos the third issue, petitioner contends the subject
obligation of the instant case is not yet due and demandable
because the Omnibus Agreement allows a full six-year term of
payment. Even if it failed to pay some installments, petitioner
insists it is not in default because respondents merely sent
collection and demand letters, but failed to give the written
notice of default required under their agreement. Moreover,
petitioner avers that the provisions on default in the Omnibus
Agreement have been rendered inapplicable and unenforceable
by fortuitous events, namely the Asian economic crisis and the
closure of the Mimosa Regency Casino, which was petitioner’s
primary source of revenues.
Respondents counter that the Omnibus Agreement defines, as an
event of default, the failure of petitioner to pay when due at
stated maturity, by acceleration or otherwise, any amount
payable under the loan documents. Since petitioner is also
required to pay interest, respondents posit that non-payment
thereof constituted a clear and unmistakable case of default.
Respondents add that they had properly advised the petitioner
that it had been declared in default, referring to the January 6
and February 5, 1999 letters as their compliance with the notice
requirement.
On this issue, we are unable to agree with the petitioner.
Section 2.06 (a) of Part B of the Omnibus Agreement provides
that the borrower shall pay interest on the advances
outstanding from time to time on each interest payment date,
while Section 6 of Part A reads
6.01 Events of Default
Each of the following events shall constitute an Event of Default
under this Omnibus Agreement:
(a) Payment Default—The BORROWER defaults in the payment
when due at stated maturity, by acceleration or otherwise, of
any amount payable under the Loan Documents.14
...
Clearly, under the foregoing provisions of the Agreement,
petitioner may be validly declared in default for failure to pay
the interest. As a consequence of default, the unpaid amount
shall earn default interest,15 and the respondent-banks have
four alternative remedies without prejudice to the application of
the provisions on collaterals and any other steps or action which
may be adopted by the majority lender.16
Notwithstanding anything in this Omnibus Agreement to the
contrary, if the BORROWER fails to make payment when due of
any sum hereunder (whether at stated maturity, by acceleration
or otherwise), the BORROWER shall, in addition to the interest
then applicable as determined pursuant to Section 2.06(b) of
Part B, pay to the LENDERS default interest on such past due
and unpaid amount from due date until date of full payment
(both before as well as after judgment) to be computed at the
rate of two percent (2%) per month.
16 Ibid.
(Part B) 6.02 Consequences of Default
If an event of Default shall have occurred then at any time
thereafter, if any such event shall then be continuing, the
Majority Lenders, upon written notice to the Borrower, may [i]
declare all Commitments to be terminated whereupon the
obligation of the LENDERS to make or maintain the Advances
The four remedies are alternative, with the right of choice given
to the lenders, in this case the respondents. Under Article 1201
of the Civil Code, the choice shall produce no effect except from
the time it has been communicated. This is the reason why a
written notice is required under Section 6.02 of the Omnibus
Agreement.
In the present case, we find that written notices were sent to the
petitioner by the respondents. The notices clearly indicate
respondents’ choice of remedy: to accelerate all payments
payable under the loan agreement. On January 6, 1999,
respondents notified petitioner that it was in default, and
demanded payment of the stated amount within five days from
receipt of the letter, otherwise all outstanding availments of the
US$20M term loan together with interests and other sum
_______________
hereunder shall forthwith terminate, [ii] accelerate payment and
declare the Loan, all interest accrued and unpaid thereon and all
other amounts payable hereunder, and default interest
hereunder, to be forthwith due and payable, whereupon the
same shall become immediately due and payable, without
demand, protest or further notice of any kind, all of which are
hereby expressly waived by the BORROWER, [iii] foreclose on
the Collaterals or take such other necessary steps conformably
with the Collaterals, or [iv] immediately, without notice to the
BORROWER, apply and compensate or set-off toward the partial
or full liquidation of such amount or amounts, any funds,
securities, or other property of the BORROWER held by the
LENDERS in deposit or under any other concept without
prejudice to the adoption by the Majority Lenders of any other
steps or action, which, in the Majority Lender’s sole discretion, is
needed to protect the LENDERS’ rights and interests, and
without prejudice to the application of the provisions of the
Collaterals, as provided in Section 3 of Part A. For purposes of
this provision, the BORROWER hereby appoints each LENDER as
its attorney-in-fact with full power and authority to do any and
all acts required to give full force and effect to this provision.
[Emphasis supplied] payable shall be declared due and
demandable.17 The letter clearly indicated the choice of remedy
by the respondents, pursuant to the Omnibus Agreement.
Even though subsequent demand is waived by the petitioner in
Section 6.02 of Part B of the Omnibus Agreement, on February 5,
1999, the respondents nevertheless actually made their demand
in writing for the payment of the principal plus interest and
penalty charges due on or before February 28, 1999, with
express notice that they would take all legal remedies available
to protect the interests of their clients.18 Clearly, respondents
have more than complied with the requirement concerning
notice to the petitioner.
It should be noted that the agreement also provides that the
choice of remedy is without prejudice to the action on the
collaterals. Thus, respondents could properly file an action for
foreclosure of the leasehold rights to obtain payment for the
amount demanded.
Petitioner’s claim, that the respondents could not be held in
default because of a fortuitous event, is untenable. Said event,
the Asian financial crisis of 1997, is not among the fortuitous
events contemplated under Article 117419 of the Civil Code. To
exempt the obligor from liability for a breach of an obligation by
reason of a fortuitous event, the following requisites must
concur: (a) the cause of the breach of the obligation must be
independent of the will of the debtor; (b) the event must be
either unforeseeable or unavoidable; (c) the event must be such
as to render it impossible for the debtor to fulfill his obligation
in a normal manner; and (d) the debtor must be
_______________
19 Art. 1174. Except in cases expressly specified by the law, or
when it is otherwise declared by stipulation, or when the nature
of the obligation requires the assumption of risk, no person shall
be responsible for those events which could not be foreseen, or
which, though foreseen, were inevitable.
free from any participation in, or aggravation of the injury to the
creditor.20
---------------
As pointed out by the respondents, the loan agreement was
entered into on June 30, 1997, or when the Asian economic
crisis had already started. Petitioner, as a long established
corporation, should have been well aware of the economic
environment at that time, yet it still took the risk to expand
operations. Likewise, the closure of the Mimosa Regency Casino
was not an unforeseeable or unavoidable event, in the context of
the contract of lease between petitioner and CDC. Every
business venture involves risks. Risks are not unforeseeable;
they are inherent in business.
Worthy of note, risk is an exception to the general rule on
fortuitous events. Under the law, these exceptions are: (1) when
the law expressly so specifies; (2) when it is otherwise declared
by the parties; and (3) when the nature of the obligation
requires the assumption of risks.21 We find that in the Omnibus
Agreement, the parties expressly agreed that any enactment,
official action, act of war, act of nature or other force majeure or
other similar circumstances shall in no way affect the obligation
of the borrowers to make payments.22
In sum, the appellate court did not err in dismissing petitioner’s
action for certiorari and in denying the motion for
reconsideration. It committed no reversible error, much less
(Part A) 7.13 Force Majeure
The LENDERS shall not be responsible for any damage resulting
from any enactment, official action, act of war, strike, lockout,
boycott, blockade, act of nature or other force majeure or other
similar occurrence beyond the control of the LENDERS. Any
such circumstances shall in no way affect the obligations of the
BORROWER to make payments which are or may become due
under this Omnibus Agreement.

Information Technology Foundation of the Philippines vs.

Commission on Elections
any grave abuse of discretion amounting to lack or excess of
jurisdiction, contrary to petitioner’s contentions.
WHEREFORE, the appeal is DENIED for lack of merit. The
Decision dated March 12, 2002 and the Resolution dated July 3,
2002 of the Court of Appeals in CA-G.R. SP No. 61047 are hereby
AFFIRMED.
Costs against petitioner.
SO ORDERED.
     Davide, Jr. (C.J., Chairman), Ynares-Santiago, Carpio and
Azcuna, JJ., concur.
Appeal denied, judgment and resolution affirmed.
Note.—In determining the intention of the parties, the language
that is used is primordial. (Mondragon International Philippines,
Inc. vs. Blanco, 356 SCRA 608 [2001])
——o0o—— [Mondragon Leisure and Resorts Corporation vs.
Court of Appeals, 460 SCRA 279(2005)]