DIGESTS
Art. 1170. Those who in the performance of their obligations
Spouses Guanio vs. Makait Shanri-La Hotel and Resort, Inc. (G.R.)
190601, Feb. 7, 2011.
Facts:
Spouses Luigi and Anna Guanio (petitioner) entered into contract
with Makai Shangri-La (respondent) for the latter to render its catering
services to the former’s wedding reception.
Reportedly during the reception, respondent’s representative,
Catering Director Bea Maruez and Sales Manager Tessa Alvarez did not
show up; there was a delay in the service of the dinner; certain items in the
published menu were unavailable; respondent’s waiters were rude and
unapologetic when confronted by the guest about the delay; wine and liquor
brought by the petitioners in accordance with their open bar agreement were
not served to the guests and thus the guests were forced to pay for their
drinks. Despite Sales Manager Alvarez’s promise that would be no charge for
the extension of the reception beyond 12 midnight, the petitioners were billed
P8,000/hour for the 3 hour extension of the even which they couple paid.
In view of the foregoing petitioners sent a letter of complaint to the
respondent hotel and received an apologetic letter from the Hotel Executive
Assistant Krister Svenson. Nevertheless the spouses filed a complained for
breach of contract and damages before the RTC of Makati.
In its answer, respondent claimed that the Marquez and Alvarez were
present during the event, albeit they were not permanently stationed thereat
as they were also attending to three functions. The said delay in the service
dinner was due to the sudden increase of guests to 470 from the guaranteed
expected number from 350-380 guests. The increase in number of guests
were not relayed by the petitioners/spouses to the respondent hotel 48 hours
before the scheduled date and time of the event per the stipulation in their
Banquet and Meeting Services between the parties.
RTC of Makati rendered a decision in favor of the spouses awarding
them actual, moral, and exemplary damages plus attorney’s fees.
The Court of Appeals reversed the decision of the RTC on appeal.
The CA held that the proximate cause of petitioners’ injury was the increase
in their guests which respondent did not expect.
Issue:
WoN the doctrine of proximate cause is applicable to actions
involving breach of contract.
Held:
The Supreme Court held that the proximate cause is applicable in
actions for quasi delicts, not in action involving breach of contract. What
applies in the instant case is A. 1170 of the Civil Code:
are guilty of fraud, negligence or delay, and those who in any
manner contravene the tenor thereof, are liable for damages.
The existence of the contract and the failure of its compliance justify
a corresponding right of relief by the injured contracting party.
Breach of contract is defined as the failure without legal reason to
comply with the terms of a contract. It is also defined as the [f]ailure, without
legal excuse, to perform any promise which forms the whole or part of the
contract
However, the petitioner’s failure to inform the respondent of the
change in the number of guests is a clear failure on the part of the petitioners
to discharge such obligation as stipulated in the parties’ Banquet and
Meeting Services.
Notwithstanding the failure of the petitioners to notify the respondent
of the change in the number of guest, the Court noted that the respondent
Hotel could have managed the situation better in view of its vast experience
in the business which warrants the safe presumption that this is not the first
time they have encountered booked events that exceeded the guaranteed
cover. It is therefore reasonable to expect certain measures are placed in
case such predicaments, as in the instant case, come up. As such the Court
deemed it just to award the petitioner’s nominal damages in the amount of
P50,000.
Anent the apology letter of Exec. Asst. Svenson as being an
admission of liability, the Court held that it is only customary for hotel
management to try to smooth ruffled feathers to preserve goodwill among its
clientele therefore it is not an admission of liability on the party of the
respondent.
SOCIAL SECURITY SYSTEM (SSS), petitioner,
vs.
MOONWALK DEVELOPMENT (Moonwalk) & HOUSING CORPORATION,
respondent
G.R. No. 73345. April 7, 1993.
Facts:
On October 6, 1971, plaintiff SSS approved the application of
respondent Moonwalk for an interim loan in the amount of THIRTY MILLION
PESOS (P30,000,000.00) for the purpose of developing and constructing a
housing project in the provinces of Rizal and Cavite.
Moonwalk made a total payment of P23,657,901.84 to SSS for the
loan principal of P12,254,700.00 released to SSS. The last payment made by
Moonwalk in the amount of P15,004,905.74.
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 After settlement of the account, plaintiff issued to respondent
Moonwalk the Release of Mortgage for Moonwalk's mortgaged properties in
Cavite and Rizal, on October 9, 1979 and October 11, 1979 respectively.
In letters to defendant Moonwalk, dated November 28, 1979 and
followed up by another letter dated December 17, 1979, plaintiff alleged that
it committed an honest mistake in releasing defendant from the mortgage.
In a letter of response dated December 21, 1979, respondent's
counsel told plaintiff that it had completely paid its obligations to SSS.
SSS filed a complaint in the Court of First Instance of Rizal against
Moonwalk Development & Housing Corporation, Moonwalk for short, alleging
that the former had committed an error in failing to compute the 12% interest
due on delayed payments on the loan of Moonwalk — resulting in a chain of
errors in the application of payments made by Moonwalk and, in an unpaid
balance on the principal loan agreement in the amount of P7,053.77 also in
not reflecting in its statement or account an unpaid balance on the said
penalties for delayed payments in the amount of P7,517,178.21 as of
October 10, 1979.
CFI of Rizal dismissed the complaint on the ground that the
obligation was already extinguished by the payment by Moonwalk of its
indebtedness to SSS and by the latter's act of cancelling the real estate
mortgages executed in its favor by defendant Moonwalk.
The Intermediate Appellate Court (IAC) affirmed in toto the decision
of the trial court.
Issue:
WoN the penalty demandable even after the extinguishment of the
principal obligation?
Held:
Yes. The Court agreed with the IAC’s decision in ruling that the
penalty demandable is also extinguished upon the extinguishment of the
principal obligation. This extinguishment of the main obligation includes any
delayed payment the respondent may or may not have made at the time
when petitioner did not demand the payment of the delayed monthly
payments.
It reasoned, at the time of the demand made in the letters of
November 28, 1979 and December 17, 1979, as far as the penalty is
concerned, the defendant-appellee was not in default since there was no
mora prior to the demand. The demand made after the extinguishment of the
principal obligation which carried with it the extinguishment of the penal
clause being merely an accessory obligation, was an exercise in futility. At
the time of the payment made of the full obligation on October 10, 1979
together with the 12% interest by defendant-appellee Moonwalk, its
obligation was extinguished. It being extinguished, there was no more need
for the penal clause.
Article 1226 of the Civil Code provides:
Art. 1226. In obligations with a penal clause…The penalty may
be enforced only when it is demandable in accordance with the
provisions of this Code.
A penal clause is an accessory undertaking to assume greater
liability in case of breach. Its function: (1) to provide for liquidated damages,
and (2) to strengthen the coercive force of the obligation by the threat of
greater responsibility in the event of breach. It is intended to prevent the
obligor from defaulting in the performance of his obligation.
A penalty is demandable in case of non performance or late
performance of the main obligation. In other words in order that the penalty
may arise there must be a breach of the obligation either by total or partial
non fulfillment or there is non fulfillment in point of time which is called mora
or delay.
According to Art. 1169 delay begins from the time the obligee
judicially or extrajudicially demands from the obligor the performance of the
obligation, except for cases under three exceptions. In the instant case, none
of the exception applicable to SSS and Moonwalk’s Loan Agreement.
In order that the debtor may be in default (delay) it is necessary that
the following requisites be present: (1) that the obligation be demandable and
already liquidated; (2) that the debtor delays performance; and (3) that the
creditor requires the performance judicially and extrajudicially. Default
generally begins from the moment the creditor demands the performance of
the obligation.
There is no mora or delay unless there is a demand. It is noteworthy
that in the present case during all the period when the principal obligation
was still subsisting, although there were late amortizations by the respondent
Moonwalk there was no demand made by the creditor, plaintiff-appellant for
the payment of the penalty.
SANTOS VENTURA HOCORMA FOUNDATION, INC. VS ERNESTO
SANTOS & RIVERLAND, INC.
G.R. No. 1530004
November 5, 2004
Facts:
On October 26, 1990, the parties executed a Compromise Agreement which
ended all their pending litigations. The pertinent portions of the Agreement,
include the following: (1) Defendant Foundation shall pay Plaintiff Santos
P14.5 Million on (a) P1.5 Million immediately upon the execution of this
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agreement and (b) The balance of P13 Million shall be paid, whether in one
lump sum or in installments, at the discretion of the Foundation, within a
period of not more than two years from the execution of this agreement; (2)
Immediately upon the execution of this agreement (and [the] receipt of the
P1.5 Million), plaintiff Santos shall cause the dismissal with prejudice of Civil
Cases; (3) Failure of compliance of any of the foregoing terms and conditions
by either or both parties to this agreement shall ipso facto and ipso jure
automatically entitle the aggrieved party to a writ of execution for the
enforcement of this agreement.
In compliance with the Compromise Agreement, respondent Santos moved
for the dismissal of the said civil cases. He also caused the lifting of the
notices of lis pendens on the real properties involved. For its part, petitioner
SVHFI, paid P1.5 million to respondent Santos, leaving a balance of P13
million.
1992, respondent Santos sent another letter to petitioner inquiring when it
would pay the balance of P13 million. There was no response from petitioner.
Then, respondent Santos applied with the Regional Trial Court of Makati City,
for the issuance of a writ of execution of its compromise judgment dated
September 30, 1991. The RTC granted the writ. Petitioner, however, filed
numerous motions to block the enforcement of the said writ. The challenge of
the execution of the compromise judgment even reached the Supreme Court.
All these efforts, however, were futile.
1994, petitioner's real properties located in Mabalacat, Pampanga were
auctioned. In the said auction, Riverland, Inc. was the highest bidder for P12
million and it was issued a Certificate of Sale covering the real properties
subject of the auction sale, then, another auction sale was held on 1995, for
the sale of real properties of petitioner in Bacolod City. Again, Riverland, Inc.
was the highest bidder. The Certificates of Sale issued for both properties
provided for the right of redemption within one year from the date of
registration of the said properties.
1995, Santos and Riverland Inc. filed a Complaint for Declaratory Relief and
Damages alleging that there was delay on the part of petitioner in paying the
balance of P13 million.
Issues:
a)W/N the CA committed reversible error when it awarded legal interest in
favor of the respondents notwithstanding the fact that neither in the
compromise agreement nor in the compromise of judgment by the judge
provides for payment of interest to the respondent?
b)W/N the CA erred in awarding legal interest to the respondents although
the obligation of the petitioner to the respondent is to pay a sum of money
that had been converted into an obligation to pay in kind?
c)W/N respondents are barred from demanding payment of interest by
reason of the waiver provision in the compromise agreement, which became
the law among the parties.
Held:
On October 4, 1996, the trial court rendered a Decision dismissing the
respondents' complaint and ordering them to pay attorney's fees and
exemplary damages to petitioner. Respondents then appealed to the Court of
Appeals.
The only issue to be resolved is whether the respondents are entitled to legal
interest.
The appellate court reversed the ruling of the trial court: WHEREFORE,
finding merit in the appeal, the appealed Decision is hereby REVERSED and
judgment is hereby rendered ordering appellee SVHFI to pay appellants
Santos and Riverland, Inc.: (1) legal interest on the principal amount of P13
million at the rate of 12% per annum from the date of demand on October 28,
1992 up to the date of actual payment of the whole obligation; and (2)
P20,000 as attorney's fees and costs of suit. SO ORDERED.
Delay
Delay as used in this article is synonymous to default or mora which means
delay in the fulfillment of obligations. It is the non-fulfillment of the obligation
with respect to time. In the case at bar, the obligation was already due and
demandable after the lapse of the two-year period from the execution of the
contract. The two-year period ended on 1992. When the respondents gave a
demand letter on 1992, to the petitioner, the obligation was already due and
demandable. Furthermore, the obligation is liquidated because the debtor
knows precisely how much he is to pay and when he is to pay it.
In the case at bar, the Compromise Agreement was entered into by the
parties on 1990. It was judicially approved on 1991. Applying existing
jurisprudence, the compromise agreement as a consensual contract became
binding between the parties upon its execution and not upon its court
approval. From the time a compromise is validly entered into, it becomes the
source of the rights and obligations of the parties thereto. The purpose of the
compromise is precisely to replace and terminate controverted claims.
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As to the remaining P13 million, the terms and conditions of the compromise
agreement are clear and unambiguous. It provides that the balance of P13
Million shall be paid, whether in one lump sum or in installments, at the
discretion of the Foundation, within a period of not more than two (2) years
from the execution of this agreement.
WHEREFORE, the petition is DENIED for lack of merit. The Decision dated
January 30, 2002 of the Court of Appeals and its April 12, 2002 Resolution in
CA-G.R. CV No. 55122 are AFFIRMED. Costs against petitioner. SO
ORDERED
PANTALEON VS. AMERICAN EXPRESS
Facts:
The petitioner, lawyer Polo Pantaleon, his wife Julialinda, daughter Anna
Regina and son Adrian Roberto, joined an escorted tour of Western Europe
organized by Trafalgar Tours of Europe, Ltd., in October of 1991. The tour
group arrived in Amsterdam in the afternoon of 25 October 1991, the next
day, the group was led to the store’s showroom to allow them to select items
for purchase. Mrs. Pantaleon had already planned to purchase even before
the tour began a 2.5 karat diamond brilliant cut, and she found a diamond
close enough in approximation that she decided to buy. 2 Mrs. Pantaleon also
selected for purchase a pendant and a chain, 3 all of which totaled U.S.
$13,826.00.
To pay for these purchases, Pantaleon presented his American Express
credit card with his passport to the Coster sales clerk. Ten minutes later, the
store clerk informed Pantaleon that his AmexCard had not yet been
approved. His son, who had already boarded the tour bus, soon returned to
Coster and informed the other members of the Pantaleon family that the
entire tour group was waiting for them, and he was already worried about
further inconveniencing the tour group, Pantaleon asked the store clerk to
cancel the sale. The store manager though asked plaintiff to wait a few more
minutes. the store manager informed Pantaleon that respondent had
demanded bank references. Pantaleon supplied the names of his depositary
banks, and then instructed his daughter to return to the bus and apologize to
the tour group for the delay. After Pantaleon had presented his AmexCard,
and minutes after the tour group was supposed to have left the store, Coster
decided to release the items even without respondent’s approval of the
purchase. The spouses Pantaleon returned to the bus. It is alleged that their
offers of apology.4 The tour group’s visible irritation was aggravated when the
tour guide announced that the city tour of Amsterdam was to be canceled
due to lack of remaining time
It later emerged that Pantaleon’s purchase was first transmitted for approval
to respondent’s Amsterdam office at 9:20 a.m., Amsterdam time, then
referred to respondent’s Manila office at 9:33 a.m, then finally approved at
10:19 a.m., Amsterdam time.6 The Approval Code was transmitted to
respondent’s Amsterdam office at 10:38 a.m., several minutes after petitioner
had already left Coster, and 78 minutes from the time the purchases were
electronically transmitted by the jewelry store to respondent’s Amsterdam
office.
After the tour, the Pantaleon family proceeded to the United States before
returning to Manila. While in the United States, Pantaleon continued to use
his AmEx card, several times without hassle or delay, but with two other
incidents similar to the Amsterdam brouhaha. Pantaleon purchased golf
equipment using his AmEx card, but he cancelled his credit card purchase
and borrowed money instead from a friend, after more than 30 minutes had
transpired without the purchase having been approved and another,
Pantaleon used the card to purchase children’s shoes and it took 20 minutes
before this transaction was approved by respondent.
After the Amsterdam incident that happened involving the delay of American
Express Card to approve his credit card purchases worth US$13,826.00 at
the Coster store, Pantaleon commenced a complaint for moral and
exemplary damages before the RTC against American Express. He said that
he and his family experienced inconvenience and humiliation due to the
delays in credit authorization. RTC rendered a decision in favor of Pantaleon.
CA reversed the award of damages in favor of Pantaleon, holding that AmEx
had not breached its obligations to Pantaleon, as the purchase at Coster
deviated from Pantaleon's established charge purchase pattern.
ISSUE:
1. Whether or not AmEx had committed a breach of its obligations to
Pantaleon.
2. Whether or not AmEx is liable for damages.
HELD:
1. Yes. The popular notion that credit card purchases are approved “within
seconds,” there really is no strict, legally determinative point of demarcation on
how long must it take for a credit card company to approve or disapprove a
customer’s purchase, much less one specifically contracted upon by the parties. One
hour appears to be patently unreasonable length of time to approve or disapprove a
credit card purchase.
The culpable failure of AmEx herein is not the failure to timely approve petitioner’s
purchase, but the more elemental failure to timely act on the same, whether favorably
or unfavorably. Even assuming that AmEx’s credit authorizers did not have sufficient
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basis on hand to make a judgment, we see no reason why it could not have promptly
informed Pantaleon the reason for the delay, and duly
SOLAR HARVEST, INC. VS.
DAVAO CORRUGATED CARTON CORPORATION
FACTS:
In 1998, petitioner Solar Harvest, Inc. entered into an agreement with
respondent, Davao Corrugated Carton Corporation, for the purchase of
carton boxes specifically designed for petitioner’s business of exporting
bananas. This agreement was not reduced into writing. To get the production
underway, petitioner deposited $40,150.00 in the US Dollar Savings Account
of the respondents, serving as the full payment for the ordered boxes.
Despite such payment, petitioner did not receive any boxes from the
respondent. Petitioner wrote the respondents a demand letter on January 3,
2001 for reimbursement of the amount they paid. Respondents then replied
that the boxes had been completed as early as April 3, 1998, and that
petitioner failed to pick them up from their warehouse 30 days from
completion, as agreed upon. Respondents also aver that petitioners even
placed an additional order of 24,000 boxes, 14,000 of which they have
already manufactured without receiving nay advanced payment from
petitioner.
Petitioners then filed a complaint for sum of money and damages
against respondent. In this Complaint, petitioners averred that the parties
agreed that the boxes will be delivered within 30 days form payment but
respondent failed to manufacture and deliver the boxes within such time; and
that repeated follow-up was made by the plaintiff for the immediate
production of the ordered boxes, but every time, defendant would only show
samples of boxes and make repeated promises to deliver the said ordered
boxes; and that because of the failure of the defendant to deliver the ordered
boxes, plaintiff ha[d] to cancel the same and demand payment and/or refund
from the defendant but the latter refused to pay and/or refund the
US$40,150.00 payment made by the former for the ordered boxes.
In its Answer, respondent stated that petitioner was to pick up the
boxes at the factory as agree upon, but petitioner failed to do so. Respondent
also averred that on October 1998, the representative for the petitioners
(Bobby Que) went to the factory and saw that the boxes were ready for pick
up. Que further testified that China Zero Food, the Chinese company that
ordered the bananas, was sending a ship to Davao to get the bananas, but
since there were no cartons, the ship could not proceed. He said that, at that
time, bananas from Tagum Agricultural Development Corporation (TADECO)
were already there. He denied that petitioner made an additional order of
24,000 boxes. He explained that it took three years to refer the matter to
counsel because respondent promised to pay.
For respondent, Bienvenido Estanislao (Estanislao) testified that he
met Que in Davao in October 1998 to inspect the boxes and that the latter
got samples of them. In February 2000, they inspected the boxes again and
Que got more samples. Estanislao said that petitioner did not pick up the
boxes because the ship did not arrive. He said that the agreement was for
respondent to produce the boxes and for petitioner to pick them up from the
warehouse. He also said that the reason why petitioner did not pick up the
boxes was that the ship that was to carry the bananas did not arrive.
The RTC ruled that respondent did not commit any breach of faith
that would justify rescission of the contract and the consequent
reimbursement of the amount paid by petitioner. The RTC said that
respondent was able to produce the ordered boxes but petitioner failed to
obtain possession thereof because its ship did not arrive. Petitioner fuled a
notice of appeal with the CA, but CA denied the appeal for lack of merit. The
appellate court held that petitioner failed to discharge its burden of proving
what it claimed to be the parties agreement with respect to the delivery of the
boxes. According to the CA, it was unthinkable that, over a period of more
than two years, petitioner did not even demand for the delivery of the boxes.
The CA added that even assuming that the agreement was for respondent to
deliver the boxes, respondent would not be liable for breach of contract as
petitioner had not yet demanded from it the delivery of the boxes.
ISSUE:
WON there was default on the part of Davao Corrugated Carton to
deliver the boxes and thus make it liable for breach of contract to Solar
Harvest
HELD:
NO. Petitioner’s claim for reimbursement is actually one for
rescission of contract under Article 1191 of the Civil Code:
Art. 1191. The power to rescind obligations is implied in
reciprocal ones, in case one of the obligors should not
comply with what is incumbent upon him. x x x
The right to rescind a contract arises once the other party
defaults in the performance of his obligation. In determining when
default occurs, Art. 1191 should be taken in conjunction with Art. 1169
of the same law, which provides:
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 Art. 1169. Those obliged to deliver or to do something incur in
delay from the time the obligee judicially or extrajudicially
demands from them the fulfillment of their obligation.
xxx
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. From the
moment one of the parties fulfills his obligation, delay by
the other begins.
In reciprocal obligations, as in a contract of sale, the general
rule is that the fulfillment of the parties respective obligations should be
simultaneous. Hence, no demand is generally necessary because,
once a party fulfills his obligation and the other party does not fulfill his,
the latter automatically incurs in delay. But when different dates for
performance of the obligations are fixed, the default for each obligation
must be determined by the rules given in the first paragraph of the
present article, that is, the other party would incur in delay only from
the moment the other party demands fulfillment of the formers
obligation. Thus, even in reciprocal obligations, if the period for the
fulfillment of the obligation is fixed, demand upon the obligee is still
necessary before the obligor can be considered in default and before a
cause of action for rescission will accrue.
Evident from the records and even from the allegations in
the complaint was the lack of demand by petitioner upon
respondent to fulfill its obligation to manufacture and deliver the
boxes. The Complaint only alleged that petitioner made a follow-
up upon respondent, which, however, would not qualify as a
demand for the fulfillment of the obligation. Petitioners witness also
testified that they made a follow-up of the boxes, but not a demand.
Note is taken of the fact that, with respect to their claim for
reimbursement, the Complaint alleged and the witness testified that a
demand letter was sent to respondent. Without a previous demand for
the fulfillment of the obligation, petitioner would not have a cause of
action for rescission against respondent as the latter would not yet be
considered in breach of its contractual obligation.
Even assuming that a demand had been previously made
before filing the present case, petitioners claim for reimbursement
would still fail, as the circumstances would show that respondent was
not guilty of breach of contract.
TANKEH VS. DEVELOPMENT BANK OF THE PHILIPPINES
FACTS:
Respondent Ruperto Tankeh is the president of Sterling Shipping
Lines, Inc., incorporated in 1979 to operate ocean-going vessels engaged
primarily in foreign trade. Tankeh applied for a $3.5 million loan from public
respondent Development Bank of the Philippines for the partial financing of
an ocean-going vessel. To authorize the loan, DBP required several
conditions to be met, some of which are 1) A first mortgage must be obtained
over the vessel, which by then had been renamed the M/V Sterling Ace; and
2) Ruperto V. Tankeh, petitioner Dr. Alejandro V. Tankeh, Jose Marie Vargas,
as well as respondents Sterling Shipping Lines, Inc. and Vicente Arenas
should become liable jointly and severally for the amount of the loan.
According to petitioner Dr. Alejandro V. Tankeh, Ruperto V. Tankeh
approached him sometime in 1980, and informed petitioner that he was
operating a new shipping line business. Petitioner claimed that respondent,
who is also petitioner’s younger brother, had told him that petitioner would be
given one thousand (1,000) shares to be a director of the business, worth
P1,000,000.00.
In 1981, petitioner signed the Assignment of Shares of Stock with
Voting Rights and a promissory note where he bound himself solidarily liable
with other corporate officers as regards the loan obtained by Ruperto for the
purchase of a vessel in order to start the shipping line business. However,
the corporation failed to meet their obligations. Sometime in 1987, the DBP
sold the vessel to a Singaporean enterprise. DBP then informed petitioner
that it would still pursue its claim over the unpaid liabilities of the corporation.
Hence, petitioner filed a Complaint for the annulment of the contracts he
signed in 1981 on the ground that he was fraudulently deceived by Ruperto,
the other corporate officers and DBP into signing the said contracts.
ISSUE:
WON the fraud perpetrated by respondents is serious enough to warrant
annulment of the contract.
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HELD:
No. Only incidental fraud exists in this case. Therefore it is not
sufficient to warrant the annulment of the contracts petitioner entered into but
respondent Ruperto is liable to pay him damages. The distinction between
fraud as a ground for rendering a contract voidable or as basis for an award
of damages is provided in Article 1344: In order that fraud may make a
contract voidable, it should be serious and shouldnot have been employed
by both contracting parties. Incidental fraud only obliges the person
employing it to pay damages.
There are two types of fraud contemplated in the performance of
contracts: dolo incidente or incidental fraud and dolo causante or fraud
serious enough to render a contract voidable. If there is fraud in the
performance of the contract, then this fraud will give rise to damages. If the
fraud did not compel the imputing party to give his or her consent, it
may not serve as the basis to annul the contract, which exhibits dolo
causante. However, the party alleging the existence of fraud may prove the
existence of dolo incidente. This may make the party against whom fraud is
alleged liable for damages. Jurisprudence has shown that in order to
constitute fraud that provides basis to annul contracts, it must fulfill two
conditions. First, the fraud must be dolo causante or it must be fraud in
obtaining the consent of the party.
Second, this fraud must be proven by clear and convincing evidence.
In this case, it cannot be said that fraud was serious enough to warrant the
annulment of the contract because petitioner knew of the contents of the
contracts that he signed. The required standard of proof – clear and
convincing evidence– was not met. There was no dolo causante or fraud
used to obtain the petitioner’s consent to enter into the contract. Petitioner
had the opportunity to become aware of the facts that attended the signing of
the promissory note. He even admitted that he has a lawyer-son who the
petitioner had hoped would assist him in the administration of Sterling
Shipping Lines, Inc. The totality of the facts on record belies petitioner’s claim
that fraud was used to obtain his consent to the contract given his personal
circumstances and the applicable law.
However, in refusing to allow petitioner to participate in the
management of the business, respondent Ruperto V. Tankeh was liable for
the commission of incidental fraud. The Court, in a previous case, defined
incidental fraud as "those which are not serious in character and
without which the other party would still have entered into the
contract." Although there was no fraud that had been undertaken to obtain
petitioner’s consent,there was fraud in the performance of the contract. The
records showed that petitioner had been unjustly excluded from participating
in the management of the affairs of the corporation. This exclusion from the
management in the affairs of Sterling Shipping Lines, Inc. constituted fraud
incidental to the performance of the obligation. Respondent Ruperto V.
Tankeh’s bare assertion that petitioner had access to the records cannot
discredit the fact that the petitioner had been effectively deprived of the
opportunity to actually engage in the operations of Sterling Shipping Lines,
Inc. Petitioner had a reasonable expectation that the same level of
engagement would be present for the duration of their working relationship.
This would include an undertaking in good faith by respondent Ruperto V.
Tankeh to be transparent with his brother that he would not automatically be
made part of the company’s administration.
GUTIERREZ VS GUTIERREZ G.R. NO. 34840 SEPTEMBER 23, 1931
FACTS:
On February 2, 1930, a passenger truck and an automobile of private
ownership
collided while attempting to pass each other on a bridge. The truck was
driven by
the chauffeur Abelardo Velasco, and was owned by saturnine Cortez. The
automobile was being operated by Bonifacio Gutierrez, a lad 18 years of age,
and
was owned by Bonifacio’s father and mother, Mr. and Mrs. Manuel Gutierrez.
At
the time of the collision, the father was not in the car, but the mother, together
with
several other members of the Gutierrez family were accommodated therein.
The collision between the bus and the automobile resulted in Narciso
Gutierrez
suffering a fractured right leg which required medical attendance for a
considerable
period of time.
ISSUE:
Whether or not both the driver of the truck and automobile are liable for
damages and indemnification due to their negligence. What are the legal
obligations of the defendants?
HELD:
7
Bonifacio Gutierrez’s obligation arises from culpa aquiliana. On the other
hand, Saturnino Cortez’s and his chauffeur Abelardo Velasco’s obligation rise
from culpa contractual.
The youth Bonifacio was na incompetent chauffeur, that he was driving at an
excessive rate of speed, and that, on approaching the bridge and the truck,
he lost his head and so contributed by his negligence to the accident. The
guaranty given by the father at the time the son was granted a license to
operate motor vehicles made the father responsible for the acts of his son.
Based on these facts, pursuant to the provisions of Art. 1903 of the Civil
Code, the father alone and not the minor or the mother would be liable for the
damages caused by the minor.
The liability of Saturnino Cortez, the owner of the truck, and his chauffeur
Abelardo Velasco rests on a different basis, namely, that of contract.
-------------------------------------------------------------------------------------------
ANTONIO VASQUEZ VS, FRANCISCO DE BORJA 74 PHIL 560
SUPERFACTS! Borja sued Vazquez, manager of a corporation, for
failing to deliver palay to Borja as stated in their contract. Vazquez
argued that he did not enter into the contract in his individual
capacity. SC ruled that it was the corporation who was a party to the contract;
thus, Borja’s complaint should have been dismissed.
A corporation is an artificial being invested by law with a personality
of its own, separate and distinct from that of its stockholders and officers. Th
e mere fact that its personality is owing to a legal
fiction and that it necessarily has to act through its agents, does not make th
e latter personally liable on a contract duly entered into by
them on behalf of the corporation.
FACTS:
Francisco de Borja (Borja) filed an action against Antonio Vazquez
and Fernando Busuego (defendants) to recover from them P4702,
alleging: defendants jointly and severally obligated themselves to sellBorja 4,
000 cavans of palay to be delivered on February 1932;
defendants received payment of P8,400; defendants delivered
through February, March and April only 2,488 cavans and refused to deliver t
he balance of 1,512.
Thus, Borja suffered damages amounting to P1000. Borja delivered
to defendants 4000 empty sacks, of which they returned only P2490
and refused to deliver the balance of 1,510 worth P377 Vazquez
denied entering into the contract in his own individual and personal capacity,
alleging that the agreement was made by Borja with
NatividadVasquez Sabani Devlopment Co. (corporation), of which
Vazquez was the acting manager at the time of the transaction.
Counterclaim: suffered damages on account of the filing of the action becaus
e Borja had full knowledge that he (Vazquez) had nothing to do with the trans
actions in his own individual and personal capacity. Trial court ruled in favor
Borja, absolving Busuego (treasurer of the
corporation). CA originally affirmed (with modification/reduction as to amount
of damages), saying that the sale in favor of Borja was in his capacity as acti
ng president and manager of the corporation, but
afterwards remanded the case for further proceedings, to determine whether
the corporation had sufficient stock of palay at the time. Vazquez then filed p
etition for certiorari.
ISSUE: Did Borja enter into a contract with Vazquez in his personal capacity?
NO
RULING: CA decision REVERSED. Complaint DISMISSED.
HELD:The action being on a contract, and it appearing that the party liable o
n the contract is the corporation, which is not a party herein,
the complaint should have been dismissed. Borja’s contentions were based o
n the fact that he had contracted with the corporation through Vazquez, and t
hat Vazquez had received the payment from Borja.
But such argument is invalid and insufficient to show that the president of the
corporation is personally liable on the contract duly and
lawfully entered into by him in its behalf. A corporation is an artificial being in
vested by law with a personality of its own, separate and
distinct from that of its stockholders and officers. The mere fact that its perso
nality is owing to a legal fiction and that it necessarily has to
act through its agents, does not make the latter personally liable on a contrac
t duly entered into, or for an act lawfully performed, by them
in behalf of the corporation. Without this legal fiction, no corporate
entities may exist and no corporate business may be transacted.
Such legal fiction may be disregarded only when an attempt is made to use it
as a cloak to hide an unlawful or fraudulent purpose. No
such thing has been alleged or proven in this case. It has not been
alleged nor even intimated that Vazquez personally benefited by the contract
of sale in question and that he is merely invoking the legal
fiction to avoid personal liability. We find no legal and factual basis
upon which to hold him liable on the contract either principally or
subsidiarily.
8

The trial court found Vazquez guilty of negligence in the performance of the c
ontract and held him personally liable on that account.
The lower courts failed to distinguish these two:
CONTRACTUAL OBLIGATION: obligation arising from contract. The fault an
d negligence referred to here are those incidental to the fulfillment or nonfullfi
llment of a contractual obligation;
EXTRACONTRACTUAL OBLIGATION: obligation arising from culpa aquilian
a. The fault or negligence referred to here are those that give rise to an oblig
ation independently of any contract. The fact that the corporation, acting thro
ugh Vazquez as its manager, was guilty of negligence in the fulfillment of the
contract, did not make Vazquez
principally or subsidiarily liable for such negligence. Since it was the corporati
on's contract, its nonfulfillment, whether due to negligence or fault or to any o
ther cause, made the corporation and not its agent
liable. On the other hand if independently of the contract Vazquez by his fault
or negligence caused damage to Borja, he would be liable
to the latter under extracontractual obligatoins. But then Borja’s
cause of action should be based on culpa aquiliana and not on the
contract alleged in his complaint herein; and Vazquez' liability would be princi
pal and not merely subsidiary. No such cause of action was alleged in the co
mplaint. Hence the trial court had no jurisdiction over the issue and could not
adjudicate upon it. Consequently it was error for the Court of Appeals to rem
and the case to the trial court to try
and decide such issue. With regard to Vazquez’s counterclaim: the
Court found that just because Vazquez was
sued in his personal capacity, does not warrant his contention that
the suit against him is malicious and tortious; thus, there is no
sufficient basis upon which to sustain his counterclaim. Although he was not
personally liable for the fulfillment of the contract entered
into by him on behalf of the corporation of which he was the acting
president and manager, it was his moral duty towards the party with whom h
e contracted in said capacity to see to it that the corporation
fulfilled the contract by delivering the palay it had sold, the price of
which it had already received. Paras, J., dissenting: Borja is entitled
to a judgment against Vazquez. Vazquez, as acting president and
manager, entered into the contract with full knowledge of the then
insolvent status of his company (the company in fact was dissolved
thereafter). Notwithstanding the receipt from Borja of the full purchas price, V
azquez still did not deliver all the cavans, and even refused to deliver the em
pty sacks or their value. Such failure resulted from
his fault or negligence.
Even though Borja’s cause of action is based on a contract between Borja an
d the corporation (which is not a party to the case), it was
still proven that Vazquez was guilty of fraud and negligence in that
he prevented the performance of the contract and caused damage to Borja.
The error of procedure should not be a hindrance to the
rendition of a decision in accordance with evidence introduced by the parties,
especially when in such a situation we may order the
necessary amendment of the pleadings.
Radio Communications of the Philippines v Verchez
FACTS:
Editha Hebron Verchez (Editha) was confined at the Sorsogon
Provincial Hospital due to an ailment. Her daughter Grace Verchez-Infante
(Grace) immediately went to the Sorsogon Branch of the Radio
Communications of the Philippines, Inc. (RCPI) to send a telegram to her
sister Zenaida Verchez-Catibog (Zenaida) who was residing at Quezon City
reading: "Send check money Mommy hospital." Grace paid P10.5 for the
services.
Receiving no reply, Grace got mad and sent another telegram to
Zenaida thru JRS Delivery. Upon receiving the letter, Zenaida left for
Sorsogon and disclaimed having received any telegram.
The telegram received 25 days letter. So, Editha’s husband Alfonso
demanded an explanation from the manager of RCPI. In their reply, they
claimed that the delivery was not immediately effected due to some event
beyond the control and foresight of RCPI.
The Verchez party filed a civil action against RCPI invoking Art 1173
which defines negligence of the obligor as the "omission of the diligence
which is required by the nature of the obligation and corresponds with the
circumstances of the person, of the time, or the place."
The trial court ruled in favor of the plaintiff and the CA affirmed their
decision.
ISSUE:
Is the award of moral damages proper even if the trial court found
that there was no direct connection between the injury and the alleged
negligent act?
HELD:
Yes.
Article 1170 of the Civil Code provides: Those who in the
performance of their obligations are guilty of fraud, negligence, or delay, and
those who in any manner contravene the tenor thereof, are liable for
damages. (Underscoring supplied)
9
 In culpa contractual x x x the mere proof of the existence of the
contract and the failure of its compliance justify, prima facie, a corresponding
right of relief. The law, recognizing the obligatory force of contracts, will not
permit a party to be set free from liability for any kind of misperformance of
the contractual undertaking or a contravention of the tenor thereof. A breach
upon the contract confers upon the injured party a valid cause for recovering
that which may have been lost or suffered.
As to the defense of RCPI, 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.
Assuming that there some fortuitous event preened RCPI from
delivering the telegram, they could have atleast informed Grace of the non-
delivery of the telegram. Considering the public utility of RCPI’s business and
its contractual obligation to transmit messages, it should exercise due
diligence to ascertain that messages are delivered to the persons at the
given address and should provide a system whereby in cases of undelivered
messages the sender is given notice of non-delivery. But it did not. There lies
the fault or negligence.
Article 2176 of the Civil Code which provides: Whoever by act or
omission causes damage to another, there being fault or negligence, is
obliged to pay for the damage done. Such fault or negligence, if there is no
pre-existing contractual relation between the parties, is called a quasi-delict
and is governed by the provisions of this Chapter. (Underscoring supplied)
In this case, RCPI failed to observe the proper diligence of a good
father of a family to prevent damage. Thus, RCPI is liable to Grace for
damages
-------------------------------------------------------------------------------------------
Francisco v CBCI
FACTS:
Francisco is the ownerand manager of a Caltex station in Rizal.
Sometie in 1993, four employees, including Gregorio Bacsa, introduced
themselves as employees of Chemical Bulk Carriers, Incorporated (CBCI) ad
offered to sell to Francisco diesel fuel.
Francisco agreed to purchase CBCIs diesel fuel. Francisco imposed
the following conditions for the purchase: (1) that Petron Corporation (Petron)
should deliver the diesel fuel to Francisco at his business address which
should be properly indicated in Petrons invoice; (2) that the delivery tank is
sealed; and (3) that Bacsa should issue a separate receipt to Francisco.
In February 1996, CBCI sent a demand letter to Francisco regarding
the diesel fuel delivered to him but which had been paid for by CBCI. CBCI
demanded that Francisco pay CBCI P1,053,527 for the diesel fuel. Francisco
rejected CBCIs demand.
So, CBCI filed a complaint for sum of money and damages against
Francisco and other unnamed defendants. According to CBCI, Petron sold
diesel fuel to CBCI but these were delivered to and received by Francisco.
Francisco then sold the diesel fuel to third persons from whom he received
payment. CBCI alleged that Francisco acquired possession of the diesel fuel
without authority from CBCI and deprived CBCI of the use of the diesel fuel it
had paid for. CBCI demanded payment from Francisco but he refused to pay.
CBCI argued that Francisco should have known that since only Petron, Shell
and Caltex are authorized to sell and distribute petroleum products in the
Philippines, the diesel fuel came from illegitimate, if not illegal or criminal,
acts
Francisco explained that he operates the Caltex station with the help
of his family because, in February 1978, he completely lost his eyesight due
to sickness. Francisco claimed that he asked Jovito, his son, to look into and
verify the identity of Bacsa, who introduced himself as a radio operator and
confidential secretary of a certain Mr. Inawat (Inawat), CBCIs manager for
operations. Francisco said he was satisfied with the proof presented by
Bacsa. When asked to explain why CBCI was selling its fuel, Bacsa allegedly
replied that CBCI was in immediate need of cash for the salary of its daily
paid workers and for petty cash. Francisco maintained that Bacsa assured
him that the diesel fuel was not stolen property and that CBCI enjoyed a big
credit line with Petron. Francisco agreed to purchase the diesel fuel offered
by Bacsa on the following conditions aforementioned. At the time of deliver,
he asked his son to check whether the delivery was made by Petron. He
maintained that he acquired the diesel fuel in good faith.
The trial court dismissed the complaint, CA reversed their decision.
ISSUE:
WoN Francisco exercised the required diligence of a blind Person in
the conduct of his business.
HELD:
No.
Standard of conduct is the level of expected conduct that is
required by the nature of the obligation and corresponding to the
circumstances of the person, time and place. The most common standard of
conduct is that of a good father of a family or that of a reasonably prudent
person. However, one who is physically disabled is required to use the same
degree of care that a reasonably careful person who has the same physical
disability would use. Thus, the standard of conduct for a blind person
becomes that of a reasonable person who is blind.
However, Francisco failed to exercise the standard of conduct
expected of a reasonable person who is blind. First, Francisco merely relied
on the identification card of Bacsa to determine if he was authorized by
CBCI. Francisco did not do any other background check on the identity and
10
authority of Bacsa. Second, Francisco already expressed his misgivings
about the diesel fuel, fearing that they might be stolen property, yet he did not
verify with CBCI the authority of Bacsa to sell the diesel fuel. Third,
Francisco relied on the receipts issued by Bacsa which were typewritten on a
half sheet of plain bond paper. If Francisco exercised reasonable diligence,
he should have asked for an official receipt issued by CBCI. Fourth, the
delivery to Francisco, as indicated in Petron’s invoice, does not show that
CBCI authorized Bacsa to sell the diesel fuel to Francisco. Clearly, Francisco
failed to exercise the standard of conduct expected of a reasonable person
who is blind.
Load Masters Customs Services, Inc. vs. Glodel Brokers (CHRISTINE)
Chrisostomo vs. CA (2003) (CHRISTINE)
TOMASA SARMIENTO, petitioner, vs. SPS. LUIS & ROSE SUN-CABRIDO
and MARIA LOURDES SUN, respondents.
Facts:
Tomasa Sarmiento (Petitioner), states that sometime in April 1994, a
friend, Dra. Virginia Lao, requested her to find somebody to reset a pair of
diamond earrings into two gold rings. Sarmiento then sent a certain Tita
Payag with the pair of earrings to Dingdings Jewelry Shop, owned and
managed by respondent spouses Luis and Rose Cabrido, which accepted
the job order for P400.
Petitioner Sarmiento provided 12 grams of gold to be used in crafting
the pair of ring settings. After 3 days, Tita Payag delivered to the jewelry
shop one of Dra. Laos diamond earrings which was earlier appraised as
worth .33 carat and almost perfect in cut and clarit. Respondent Ma. Lourdes
(Marilou) Sun went on to dismount the diamond from its original setting.
Unsuccessful, she asked their goldsmith, Zenon Santos, to do it. Santos
removed the diamond by twisting the setting with a pair of pliers, breaking the
gem in the process.
Petitioner required the respondents to replace the diamond with the
same size and quality but the respondent spouses refused, so the petitioner
Sarmiento was forced to buy a replacement in the amount of P30,000.
Respondent Marilou denied having transaction with Payag because of
her refusal to replace the diamond. And Santos, who accidentally broke the
stone denied being an employee of Dingdings Jewelry shop. Consequently,
petitioner filed a complaint for damages on June 28, 1994.
Issue:
Whether or not there is an obligation to pay for damages on the part
of the respondents under the verbal contract of service they made with the
petioner.
Held:
Yes. it is beyond doubt that Santos acted negligently in dismounting
the diamond from its original setting. It appears to be the practice of the trade
to use a miniature wire saw in dismounting precious gems, such as
diamonds, from their original settings. However, Santos employed a pair of
pliers in clipping the original setting, thus resulting in breakage of the
diamond.The jewelry shop failed to perform its obligation with the ordinary
diligence required by the circumstances. It should be pointed out that Marilou
examined the diamond before dismounting it from the original setting and
found the same to be in order. Its subsequent breakage in the hands of
Santos could only have been caused by his negligence in using the wrong
equipment. Res ipsa loquitur. (the thing speaks for itself)
Obligations arising from contracts have the force of law between the
contracting parties. Corollarily, those who in the performance of their
obligations are guilty of fraud, negligence or delay and those who in any
manner contravene the tenor thereof, are liable for damages. The fault or
negligence of the obligor consists in the omission of that diligence which is
required by the nature of the obligation and corresponds with the
circumstances of the persons, of the time and of the place
Private respondents Luis Cabrido and Rose Sun-Cabrido are hereby ordered
to pay, jointly and severally, the amount of P30,000 as actual damages and
P10,000 as moral damages in favor of the petitioner
METRO MANILA TRANSIT CORPORATION and APOLINARIO
AJOC, petitioners, vs. THE COURT OF APPEALS and COL.
MARTIN P. SABALBURO, NAPOLEON G. SABALBURO, MARTIN
G. SABALBURO, JR., BABY MARIFLOR G. SABALBURO, and
MIRASOL G. SABALBURO, respondents.
Facts:
Plaintiff’s witness, Maria Zenaida Baylon, tends to show that in the
afternoon of December 24, 1986, she, her daughter Maria Zenia and the
victim, Florentina Sabalburo, were on their way to Baclaran to buy foodstuffs
for their Noche Buena. For some time, they stood on the island at the
11
intersection of St. Andrews Street and Domestic Road, [Pasay City] waiting
for the traffic light to change so they could cross to the other side of St.
Andrews Street where they intended to take a ride for Baclaran. When the
traffic light turned red and the vehicles along St. Andrews Street had
stopped, the three of them stepped off the island. Just as they started to
cross the street, she (Baylon) saw an MMTC bus coming from their right
(Tramo) which was moving at a fast speed. The next moment, the left front
portion of the bus hit the victim on the right side of her head. The impact was
of such force that the victims right ear was slashed off and she thereupon fell
on the cement and became unconscious. The victim was brought by the bus
driver, Apolinario Ajoc and the bus conductress to the San Juan de Dios
Hospital where she was given medical attention. Florentina Sabalburo never
regained consciousness and it was on January 3, 1987 that she succumbed
to her injuries.
The private respondents filed a complaint for damages against
MMTC and its driver, Ajoc, with the Regional Trial Court of Makati. Docketed
as Civil Case No. 16062, the complaint essentially alleged that Ajoc drove
the MMTC bus in a wanton and reckless manner, in gross violation of traffic
rules and regulations, without due regard for the safety of others, thus
causing the untimely death of the victim.
Petitioners denied the material allegations of the complaint,
disclaimed any liability for the incident, and insisted that the accident was
solely due to the victims own negligence.
Issue:
Whether or not MMTC is liable for the damages of the victim for it did
not exercised the care and diligence of a good father of a family as an
employer of Apolinario Ajoc.
Held:
No. The MMTC failed to present a convincing proof that it has
exercised care and diligence of a good father of a family as an employer of
its driver Ajoc. Whenever an employees negligence causes damage or injury
to another, there instantly arises a presumption juris tantum that there was
negligence on the part of the employer, either in the selection of the
employee (culpa in eligiendo) or the supervision over him after the selection
(culpa in vigilando). Hence, to escape solidary liability for a quasi-delict
committed by his employee, an employer must rebut the presumption by
presenting convincing proof that in the selection and supervision of his
employee, he has exercised the care and diligence of a good father of a
family. As found by the trial court, and affirmed by the appellate court,
petitioner MMTC failed to show that its driver, Ajoc, had actually undergone
such screening or had attended said seminars. As previously held, the mere
formulation of various company policies on safety without showing that they
were being complied with is not sufficient to exempt (an employer) from
liability arising from negligence of its employees. It is incumbent upon
petitioner to show that in recruiting and employing the erring driver the
recruitment procedures and company policies on efficiency and safety were
followed. In this case, MMTC has made no satisfactory showing that it had
paid more than lip service to its guidelines and policies in hiring and
supervision. Its failure to do so cannot but warrant the proper sanctions from
the Court, considering that MMTC is a government-owned public utility
organized for the public welfare.
Thus, having failed to rebut the presumption of negligence on its
part, MMTC is primarily and directly liable for the damages caused by its
employee, the erring driver, Ajoc, pursuant to Article 2180 of the Civil Code.
Spouses Teodoro v. Parena 2012
FACTS:
*The operator of a school bus service is a common carrier in the
eyes of the law. He is bound to observe extraordinary diligence
in the conduct of his business. He is presumed to be negligent
when death occurs to a passenger. His liability may include
indemnity for loss of earning capacity even if the deceased
passenger may only be an unemployed high school student at
the time of the accident.
The Pereñas were engaged in the business of transporting
students from their respective residences in Parañaque City to
Don Bosco in Pasong Tamo, Makati City, and back. In their
business, the Pereñas used a KIA Ceres Van (capacity of 14
students) and Clemente Alfaro as the driver.
In June 1996, the Zarates contracted the Pereñas who to transport Aaron to
and from Don Bosco. On August 22, 1996, as on previous school days, the
van picked Aaron up around 6:00 a.m. from the Zarates’ residence. Aaron
took his place on the left side of the van near the rear door. The van, with its
air-conditioning unit turned on and the stereo playing loudly, ultimately
carried all the 14 student riders on their way to Don Bosco. Considering that
the students were due at Don Bosco by 7:15 a.m., and that they were
already running late because of the heavy vehicular traffic on the South
Superhighway, Alfaro took the van to an alternate route at about 6:45 a.m. by
traversing the narrow path underneath the Magallanes Interchange. At the
time, the narrow path was marked by piles of construction materials and
parked passenger jeepneys, and the railroad crossing in the narrow path had
no railroad warning signs, or watchmen, or other responsible persons
12
manning the crossing. In fact, the bamboo barandilla was up, leaving the
railroad crossing open to traversing motorists.
At about the time the van was to traverse the railroad crossing, PNR
Commuter No. 302 (train), operated by Jhonny Alano (Alano), was in the
vicinity of the Magallanes Interchange travelling northbound. As the train
neared the railroad crossing, Alfaro drove the van eastward across the
railroad tracks, closely tailing a large passenger bus. His view of the
oncoming train was blocked because he overtook the passenger bus on its
left side. The train blew its horn to warn motorists of its approach. When the
train was about 50 meters away from the passenger bus and the van, Alano
applied the ordinary brakes of the train. He applied the emergency brakes
only when he saw that a collision was imminent. The passenger bus
successfully crossed the railroad tracks, but the van driven by Alfaro did not.
The train hit the rear end of the van, and the impact threw nine of the 12
students in the rear, including Aaron, out of the van. Aaron landed in the path
of the train, which dragged his body and severed his head, instantaneously
killing him. Alano fled the scene on board the train, and did not wait for the
police investigator to arrive.
The Zarates sued PNR and the Pereñas (Alfaro became at-large). Their
cause of action against PNR was based on quasi-delict. Their cause of
action against the Pereñas was based on breach of contract of common
carriage.
In their defense, the Pereñas invoked that as private carriers they were not
negligent in selecting Alfaro as their driver as they made sure that he had a
driver’s license and that he was not involved in any accident prior to his being
hired. In short, they observed the diligence of a good father in selecting their
employee.
ISSUES:
Whether or not the defense of due diligence of a good father by the Pereñas
is untenable
HELD:
Yes. This defense is not tenable in this case. The Pereñas are common
carriers. They are not merely private carriers. (Prior to this case, the status of
private transport for school services or school buses is not well settled as to
whether or not they are private or common carriers – but they were generally
regarded as private carriers). Private transport for schools are common
carriers. The Pereñas, as the operators of a school bus service were: (a)
engaged in transporting passengers generally as a business, not just as a
casual occupation; (b) undertaking to carry passengers over established
roads by the method by which the business was conducted; and (c)
transporting students for a fee. Despite catering to a limited clientèle, the
Pereñas operated as a common carrier because they held themselves out as
a ready transportation indiscriminately to the students of a particular school
living within or near where they operated the service and for a fee.
Being a common carrier, what is required of the Pereñas is not mere
diligence of a good father. What is specifically required from them by law is
extraordinary diligence – a fact which they failed to prove in court. Verily, their
obligation as common carriers did not cease upon their exercise of diligently
choosing Alfaro as their employee.
(It is recommended that you read the full text, the Supreme Court made an
elaborate and extensive definition of common and private carriers as well as
their distinctions.)
Reyes v. Puyat-Reyes 2001
Facts: Godofredo, cashier of the Philippine Racing Club (PCRI), went to
respondent bank to apply for a demand draft in the amount AU$1,610.00
payable to the order of the 20th Asian Racing Conference Secretariat of
Sydney, Australia. He was attended to by respondent bank’s assistant
cashier, Mr. Yasis, who at first denied the application for the reason that
respondent bank did not have an Australian dollar account in any bank in
Sydney. Godofredo asked if there could be a way for respondent bank to
accommodate PRCI’s urgent need to remit Australian dollars to Sydney.
Yasis of respondent bank then informed Godofredo of a roundabout way of
effecting the requested remittance to Sydney thus: the respondent bank
would draw a demand draft against Westpac Bank in Sydney, Australia
(Westpac-Sydney) and have the latter reimburse itself from the U.S. dollar
account of the respondent in Westpac Bank in New York, U.S.A. (Westpac-
New York).
However, upon due presentment of the foreign exchange demand draft, the
same was dishonored, with the notice of dishonor stating that there is “No
account held with Westpac.” Meanwhile, Wespac-New York sent a cable to
respondent bank informing the latter that its dollar account in the sum of AU$
1,610.00 was debited. In response to PRCI’s complaint about the dishonor of
the said foreign exchange demand draft, respondent bank informed
Westpac-Sydney of the issuance of the said demand draft, drawn against the
Wespac-Sydney and informing the latter to be reimbursed from the
13
respondent bank’s dollar account in Westpac-New York. The respondent
bank on the same day likewise informed Wespac-New York requesting the
latter to honor the reimbursement claim of Wespac-Sydney. Upon its second
presentment for payment, the demand draft was again dishonored by
Westpac-Sydney for the same reason, that is, that the respondent bank has
no deposit dollar account with the drawee Wespac-Sydney. Gregorio Reyes
and Consuelo Puyat-Reyes arrived in Sydney on a separate date and both
were humiliated and embarrassed in the presence of international audience
after being denied registration of the conference secretariat since the foreign
exchange draft was dishonored. Petitioners were only able to attend the
conference after promising to pay in cash instead which they fulfilled
Issue: Whether or not respondent bank is liable for damages due to the
dishonor of the foreign exchange demand drafts.
Held: Yes. The evidence also shows that the respondent bank exercised
that degree of diligence expected of an ordinary prudent person under the
circumstances obtaining; the respondent bank advised Westpac-New York to
honor the reimbursement claim of Westpac-Sydney and to debit the dollar
account of respondent bank with the former. The degree of diligence required
of banks, is more than that of a good father of a family where the fiduciary
nature of their relationship with their depositors is concerned. In other words
banks are duty bound to treat the deposit accounts of their depositors with
the highest degree of care. But the said ruling applies only to cases where
banks act under their fiduciary capacity, that is, as depositary of the deposits
of their depositors. But the same higher degree of diligence is not expected
to be exerted by banks in commercial transactions that do not involve their
fiduciary relationship with their depositors. The case at bar does not involve
the handling of petitioners’ deposit, if any, with the respondent bank. Instead,
the relationship involved was that of a buyer and seller.
ROSENDO O. CHAVES, Plaintiff-Appellant, v. FRUCTUOSO
GONZALES, Defendant-Appellee.
Chaves, Elio, Chaves & Associates, for Plaintiff-Appellant.
Sulpicio E. Platon, for Defendant-Appellee.
On July, 1963, the plaintiff delivered to the defendant, who is a typewriter repairer, a
portable typewriter for routine cleaning and servicing. The defendant was not able to
finish the job after some time despite repeated reminders made by the plaintiff. The
defendant merely gave assurances, but failed to comply with the same.
In October, 1963, the defendant asked from the plaintiff the sum of P6.00 for the
purchase of spare parts, which amount the plaintiff gave to the defendant.
On October 26, 1963, after getting exasperated with the delay of the repair of the
typewriter, the plaintiff went to the house of the defendant and asked for the return of
the typewriter. The defendant delivered the typewriter in a wrapped package.
On October 29, 1963. the plaintiff sent a letter to the defendant formally demanding
the return of the missing parts, the interior cover and the sum of P6.00. The following
day, the defendant returned to the plaintiff some of the missing parts, the interior
cover and the P6.00.
On August 29, 1964, the plaintiff had his typewriter repaired by Freixas Business
Machines, and the repair job cost him a total of P89.85, including labor and materials.
On August 23, 1965, the plaintiff commenced this action before the City Court of
Manila, demanding from the defendant the payment of P90.00 as actual and
compensatory damages, P100.00 for temperate damages, P500.00 for moral
damages, and P500.00 as attorney’s fees.
In his answer as well as in his testimony given before this court, the defendant made
no denials of the facts narrated above, except the claim of the plaintiff that the
typewriter was delivered to the defendant through a certain Julio Bocalin, which the
defendant denied allegedly because the typewriter was delivered to him personally by
the plaintiff.
The repair done on the typewriter by Freixas Business Machines with the total cost of
P89.85 should not, however, be fully chargeable against the defendant. The repair
invoice shows that the missing parts had a total value of only P31.10.
The RTC ruled in favor of the plaintiff and ordered that the defendant pay the value of
P31.10.
Rosendo Chavez alleged that the trial court erred in awarding only the value of the
missing parts of the typewriter, instead of the whole cost of labor and materials that
went into the repair of the machine, as provided for in Article 1167 of the Civil Code
ART. 1167. If a person obliged to do something fails to do it, the same shall be
executed at his cost.
This same rule shall be observed if he does it in contravention of the tenor of the
obligation. Furthermore it may be decreed that what has been poorly done he
undone.
The defendant invoked the Art 1197 of the Civil code and alleged that he is not liable
at all, not even for the sum of P31.10, because his contract with plaintiff-appellant did
not contain a period, so that plaintiff-appellant should have first filed a petition for the
court to fix the period.
Because the plaintiff appealed directly to the Supreme Court and the appellee did not
interpose any appeal, the facts, as found by the trial court, are now conclusive and
non-reviewable.
The inferences derivable from these findings of fact are that the appellant and the
appellee had a perfected contract for cleaning and servicing a typewriter; that they
intended that the defendant was to finish it at some future time although such time
was not specified; and that such time had passed without the work having been
accomplished, far the defendant returned the typewriter cannibalized and unrepaired,
14
which in itself is a breach of his obligation, without demanding that he should be given
more time to finish the job, or compensation for the work he had already done. The
time for compliance having evidently expired, and there being a breach of contract by
non-performance, it was academic for the plaintiff to have first petitioned the court to
fix a period for the performance of the contract before filing his complaint in this case.
Defendant cannot invoke Article 1197 of the Civil Code for he virtually admitted non-
performance by returning the typewriter that he was obliged to repair in a non-working
condition, with essential parts missing. The fixing of a period would thus be a mere
formality and would serve no purpose than to delay
It is clear that the defendant-appellee contravened the tenor of his obligation because
he not only did not repair the typewriter but returned it "in shambles", according to the
appealed decision. For such contravention, as appellant contends, he is liable under
Article 1167 of the Civil Code.
The cost of the execution of the obligation in this case should be the cost of the labor
or service expended in the repair of the typewriter, which is in the amount of P58.75.
because the obligation or contract was to repair it.
In addition, the defendant-appellee is likewise liable, under Article 1170 of the Code,
for the cost of the missing parts, in the amount of P31.10, for in his obligation to repair
the typewriter he was bound, but failed or neglected, to return it in the same condition
it was when he received it.
The court ordered the defendant to pay the plaintiff-appellant the sum of P89.85, with
interest at the legal rate from the filing of the complaint.
---------------------------------------------------------------------------------------------------
G.R. No. L-47851 October 3, 1986
JUAN F. NAKPIL & SONS, and JUAN F. NAKPIL, petitioners,
vs.
THE COURT OF APPEALS, UNITED CONSTRUCTION COMPANY, INC., JUAN J.
CARLOS, and the PHILIPPINE BAR ASSOCIATION, respondents.
G.R. No. L-47863 October 3, 1986
The Philippine Bar Association wanted to erect a building in its lot in Intramuros. They
were able to obtain a contract with the United Construction Company Inc for the
construction of the building and the design was obtained from Juan M. Nakpil & Sons
and Juan F. Nakpil. The Building was completed in June 1966.
On August 2, 1968 a massive earthquake hit Manila with an intensity of about 7.3.
This earthquake caused damage to the building and caused it to lean forward
dangerously which led to the vacation of the building.
United Construction Company in turn shored up the building and incurred 13,661.28
php as costs.
The PBA then instituted a case against UCC for damages due to its negligence
regarding the construction of the said building thru its failure to follow the designs
coming from the architects.
UCC then filed a complint against the architects of Nakpil & Sons alleging that it was
the designs that are flawed and that caused the building’s inability to withstand an
earthquake. UCC also included the president of PBA for including them in their
petition.
Nakpil & Sons answer that the petitioners need not to change the defendants in their
petition as UCC deviated from the plans which caused the damages to the building. In
the course of the trial a commissioner was appointed by both parties to give a report
regarding the technical aspects of the case. His report concluded that indeed there
were faults arising from the negligence of both defendants. The report stated that the
design was flawed and that UCC deviated from the designs which aggravated the
problem.
The defendants then put up the Act of God defense.
Issue:
Whether or not the defendants could escape liability from the building due to a
fortuitous event which is unforeseeable and inevitable even if their negligence is
established

THE UNITED CONSTRUCTION CO., INC., petitioner, Held:

vs. The defendants cannot validly invoke the Act of God defense. This is because of the
COURT OF APPEALS, ET AL., respondents. report submitted by the appointed Commissioner which established their negligence.

Acceptance of the building, after completion, does not imply waiver of any of
G.R. No. L-47896 October 3, 1986 thecauses of action by reason of any defect. To exempt the obligor from its liability
these requisites should first concur:
PHILIPPINE BAR ASSOCIATION, ET AL., petitioners,
vs. (a) the cause of the breach of the obligation must be independent of the will of the
COURT OF APPEALS, ET AL., respondents. debtor;
(b) the event must be either unforseeable or unavoidable;
(c) the event must be such as to render it impossible for the debtor to fulfill his
Facts:
obligation in a normal manner; and

15
(d) the debtor must be free from any participation in, or aggravation of the injury to the
creditor.
The report of the Commissioner established that the defects that occurred to the
building could be attributed to the act of man specifically that of the architects and the
engineers as well as thebuilders. This was because of the fact that UCC deviated
from the plans submitted by the architects and their failure to observe the required
marksmanship in constructing the building as well as the required degree of
supervision.
Nakpil & Sons are also liable for the inadequacies and defect in their submitted plan
and specifications. These circumstances are the proximate causes of the damages
that the PBA building incurred. The costs are to be paid by the defendants amounting
to 5M which includes all appreciable damages as well as indemnity plus 100,000php
for the attorneys fee.
One who negligently creates a dangerous condition cannot escape liability for the
natural and probable consequences thereof, although the act of a third person, or
an act of God for which he is not responsible, intervenes to precipitate the loss.
NATIONAL POWER CORPORATION (NPC) VS. CA
THE CASE:
These consolidated petitions seek to set aside the decision of the respondent
Court of Appeals which adjudged the National Power Corporation liable for
damages against Engineering Construction, Inc. The appellate court,
however, reduced the amount of damages awarded by the trial court. Hence,
both parties filed their respective petitions: the National Power Corporation
(NPC) in G.R. No. 47379, questioning the decision of the Court of Appeals
for holding it liable for damages and the Engineering Construction, Inc. (ECI)
in G.R. No. 47481, questioning the same decision for reducing the
consequential damages and attorney's fees and for eliminating the
exemplary damages.
FACTS:
August 4, 1964- Engineering Construction Inc., executed a contract in
Manila with National Waterworks and Sewerage Authority (NAWASA),
whereby the former will provide all tools, labor and equipment, and construct
the 2nd Ipo-Bicti Tunnel at Norzagaray, Bulacan, within 800 calendar days
from the date Contractor receives the formal notice to proceed. The project
involved two major phases: (1) the tunnel work from Ipo River (where Ipo
Dam of NPC is located) to Bicti; and (2) outworks at both ends of the tunnel.
September 1967- Engineering Construction Inc. already completed the first
phase. All the equipment no longer needed were transferred to Ipo Site
where some projects were yet to be completed.
November 4, 1967- Typhoon Welming hit Central Luzon passing through
Angat Hydro-electric Project and Dam at Ipo, Norzagaray. Due to heavy
rains, the water in the said Dam rose at the rate of 60 cm per hour and to
prevent the overflow, NPC opened the spillway gates.
CA upheld the ruling of the trial court with modifications, and held that NPC is
negligent in opening the spillway gate that released extraordinary volume of
water and caused the Engineering Construction Inc’s materials and facilities
to be destroyed.
NPC contends that CA is wrong on the ground that the destruction and loss
of the ECI’s equipment and facilities were due to force majeure. On the other
hand, ECI contends that reduction of consequential damages (from 333, 200
to 19,000PHP) has no basis and that the award of 120,000PHP a month
bonus is justified because NPC’s negligence compelled work to stop for 1
month.
ISSUE: WoN NPC’s liability is extinguished by the fortuitious event.
HELD:
No. NPC only opened the spillway gates only at the height of the typhoon
when it knew that the typhoon was coming 4 days before it struck. NPC
should have opened the spillway gate gradually and earlier. The fortuitous
event cannot absolve the NPC from liability because its negligence was the
proximate cause of the loss and damage. As held in Napkil case, if upon a
fortuitous event or an Act of God, negligence concurs, as provided for in
Article 1170, which results to loss or damage, the obligor cannot escape
liability. To be exempt from liability for loss because of a fortuitous event, he
must be free from any previous negligence or misconduct by which the loss
or damage may have been occasioned.
REPUBLIC VS. LUZON STEVEDORING CORPORATION
THE CASE:
Direct appeal from decision of CFI Manila adjudging Luzon Stevedoring
Corporation (LSC) liable for damages to Republic of the Philippines.
FACTS:
August 17, 1960- a barge owned by LSC was being towed down the Pasig
by 2 tugboats (which belongs to LSC) when the barge rammed against one
of the wooden piles of Nagtahan bailey bridge, smashing the posts and
causing the bridge to list. The river at the time was swollen and the current
swift on account of the heavy downpour on August 15 and 16.
The Republic sued LSC for actual and consequential damages amounting to
PHP200,000. LSC disclaimed liability on the ground that it exercised
16
diligence in the selection and supervision of employees and that the
damages were caused by fortuitous event. The trial court held that LSC is
liable for damage cause by its employees and ordering it to pay actual cost of
the repair of the bridge which amounted to PHP 192, 561.72 with legal
interest.
ISSUE:
WoN the destruction of Nagtahan bailey bridge was caused by fortuitous
event.
HELD:
No. Those precautions that LSC did completely destroys LSC’s defense. For
caso forutuito or force majeure by definition, are extraordinary events NOT
foreseeable or avoidable, or which though foreseen, were inevitable. It is
therefore not enough that the event should not have been foreseen or
anticipated but it must be one impossible to foresee or to avoid. Mere
difficulty to foresee the happening is not impossibility to foresee the same.
The very measures adopted by appellant prove that the possibility of danger
was not only foreeable, but actuall foreseen, and thus, was not a caso
fortuito.
GLOBE TELECOM, INC., petitioner,
vs. PHILIPPINE COMMUNICATION SATELLITE CORPORATION,
respondent.
Facts:
Globe Telecom, Inc., formerly known as Globe McKay Cable and Radio
Corporation installed and configured communication facilities for the
exclusive use of the US Defense Communications Agency (USDCA) in Clark
Air Base and Subic Naval Base. Globe Telecom later contracted the
Philippine Communications Satellite Corporation (Philcomsat) for the
provision of the communication facilities. As both companies entered into an
Agreement, Globe obligated itself to operate and provide an IBS Standard B
earth station with Cubi Point for the use of the USDCA. The term of the
contract was for 60 months, or five (5) years. In turn, Globe promised to pay
Philcomsat monthly rentals for each leased circuit involved.
As the saga continues, the Philippine Senate passed and adopted Senate
Resolution No. 141 and decided not to ratify the Treaty of Friendship,
Cooperation and Security, and its Supplementary Agreements to extend the
term of the use by the US of Subic Naval Base, among others. In other
words, the RP-US Military Bases Agreement was suddenly terminated.
Because of this event, Globe notified Philcomsat of its intention to
discontinue the use of the earth station effective 08 November 1992 in view
of the withdrawal of US military personnel from Subic Naval Base after the
termination of the RP-US Military Bases Agreement.
After the US military forces left Subic Naval Base, Philcomsat sent Globe a
letter in 1993 demanding payment of its outstanding obligations under the
Agreement amounting to US$4,910,136.00 plus interest and attorney’s fees.
However, Globe refused to heed Philcomsat’s demand. On the other hand,
the latter with the Regional Trial Court of Makati a Complaint against Globe,
however, Globe filed an Answer to the Complaint, insisting that it was
constrained to end the Agreement due to the termination of the RP-US
Military Bases Agreement and the non-ratification by the Senate of the Treaty
of Friendship and Cooperation, which events constituted force majeure under
the Agreement. Globe explained that the occurrence of said events
exempted it from paying rentals for the remaining period of the Agreement.
Four years after, the trial court its decision but both parties appealed to the
Court of Appeals.
Issues:
1. Whether or not the non-ratification by the Senate of the Treaty of
Friendship, Cooperation and Security and its Supplementary Agreements
constitutes force majeure which exempts Globe from complying with its
obligations under the Agreement;
2. Whether Globe is not liable to pay the rentals for the remainder of the term
of the Agreement; and
3. Whether Globe is liable to Philcomsat for exemplary damages.
Held:
Decision on Issue No. 1: Fortuitous Event under Article 1174
The appellate court ruled that the non-ratification by the Senate of the Treaty
of Friendship, Cooperation and Security, and its Supplementary Agreements,
and the termination by the Philippine Government of the RP-US Military
Bases Agreement effective 31 December 1991 as stated in the Philippine
Government’s Note Verbale to the US Government, are acts, directions, or
requests of the Government of the Philippines which constitute force
majeure.
However, the Court of Appeals ruled that although Globe sought to terminate
Philcomsat’s services by 08 November 1992, it is still liable to pay rentals for
the December 1992, amounting to US$92,238.00 plus interest, considering
that the US military forces and personnel completely withdrew from Cubi
Point only on 31 December 1992.
No reversible error was committed by the Court of Appeals in issuing the
assailed Decision; hence the petitions are denied.
17
Article 1174, which exempts an obligor from liability on account of fortuitous Exemplary damages may be awarded in cases involving contracts or quasi-
events or force majeure, refers not only to events that are unforeseeable, but contracts, if the erring party acted in a wanton, fraudulent, reckless,
also to those which are foreseeable, but inevitable: oppressive or malevolent manner.
A fortuitous event under Article 1174 may either be an "act of God," or natural In the present case, it was not shown that Globe acted wantonly or
occurrences such as floods or typhoons,24 or an "act of man," such as riots, oppressively in not heeding Philcomsat’s demands for payment of rentals. It
strikes or wars. was established during the trial of the case before the trial court that Globe
Philcomsat and Globe agreed in Section 8 of the Agreement that the had valid grounds for refusing to comply with its contractual obligations after
following events shall be deemed events constituting force majeure: 1992.
1. Any law, order, regulation, direction or request of the Philippine
Government; WHEREFORE, the Petitions are DENIED for lack of merit. The assailed
2. Strikes or other labor difficulties; Decision of the Court of Appeals in CA-G.R. CV No. 63619 is AFFIRMED.
3. Insurrection; SO ORDERED.
4. Riots;
5. National emergencies; Yobido vs. Court of Appeals
6. War;
7. Acts of public enemies; FACTS:
8. Fire, floods, typhoons or other catastrophes or acts of God; On April 26, 1988, spouses Tito and Leny Tumboy and their minor children,
9. Other circumstances beyond the control of the parties. Ardee and Jasmin, boarded at Mangagoy, Surigao del Sur, a Yobido bus
bound for Davao City. Along Picop road in Km. 17, Sta. Maria, Agusan del
Clearly, the foregoing are either unforeseeable, or foreseeable but beyond Sur, the left front tire of the bus suddenly exploded. The bus fell into a ravine
the control of the parties. There is nothing in the enumeration that runs around three (3) feet from the road and struck a tree which resulted in the
contrary to, or expands, the concept of a fortuitous event under Article 1174. death of Tito Tumboy and physical injuries to other passengers. Thereafter, a
complaint for breach of contract of carriage, damages and attorney's fees
The Supreme Court agrees with the Court of Appeals and the trial court that was filed by Leny and her children against Alberta Yobido, the owner of the
the abovementioned requisites are present in the instant case. Philcomsat bus, and Cresencio Yobido, its driver in the Regional Trial Court of Davao
and Globe had no control over the non-renewal of the term of the RP-US City.
Military Bases Agreement when the same expired in 1991, because the
prerogative to ratify the treaty extending the life thereof belonged to the Abundio Salce, who was the bus conductor when the incident happened,
Senate. Neither did the parties have control over the subsequent withdrawal testified that
of the US military forces and personnel from Cubi Point in December 1992.
1. the 42-seater bus was not full as there were only 32 passengers, such that
Decision on Issue No. 2: Exemption of Globe from Paying Rentals for the he himself managed to get a seat:
Facility 2. the bus was running at a speed of "60 to 50" and that it was going slow
The Supreme Court finds that the defendant is exempted from paying the because of the zigzag road.
rentals for the facility for the remaining term of the contract. As a 3. the left front tire that exploded was a "brand new tire" that he mounted on
consequence of the termination of the RP-US Military Bases Agreement (as the bus on April 21, 1988 or only five (5) days before the incident.
amended) the continued stay of all US Military forces and personnel from
Subic Naval Base would no longer be allowed, hence, plaintiff would no The Trial Court ruled in dismissing the action for lack of merit and the Court
longer be in any position to render the service it was obligated under the of Appeals rendered a decision reversing that of the lower court
Agreement.
The Court of Appeals was correct in ruling that the happening of such ISSUE:
fortuitous events rendered Globe exempt from payment of rentals for the Whether the tire blow-out is a fortuitous event?
remainder of the term of the Agreement.
Decision on Issue No 3: No Exemplary Damages RULING:
No.
18
 strength of those vehicle portions the failure of which may endanger the
A fortuitous event is possessed of the following characteristics: safety of the passengers."
(a) the cause of the unforeseen and unexpected occurrence, or the failure of
the debtor to comply with his obligations must be independent of human will;
(b) it must be impossible to foresee the event which constitutes the caso It is interesting to note that petitioners proved through the bus conductor,
fortuito, or if it can be foreseen, it must be impossible to avoid; Salce, that the bus was running at "60-50" kilometers per hour only within the
(c) the occurrence must be such as to render it impossible for the debtor to prescribed lawful speed limit. However, they failed to rebut the testimony of
fulfill his obligation in a normal manner; and Leny Tumboy that the bus was running so fast that she cautioned the driver
(d) the obligor must be free from any participation in the aggravation of the to slow down. These contradictory facts must, therefore, be resolved in favor
injury resulting to the creditor. of liability in view of the presumption of negligence of the carrier in the law.

As Article 1174 provides, no person shall be responsible for a fortuitous event

which could not be foreseen, or which, though foreseen was inevitable. In
other words, there must be an entire exclusion of human agency from the
cause of injury or loss.

There is no reason to overturn the findings and conclusions of the Court of

Appeals. Petitioners' contention that they are exempted from liability because
the tire blowout was a fortuitous event that could not have been foreseen,
must fail. It is settled that an accident caused either by defects in the
automobile or through the negligence of its driver is not a caso fortuito that
would exempt the carrier from liability for damages. Accordingly, the
challenged decision is affirmed subject to modification that petitioners shall
additionally pay herein, respondents P20,000.00 as exemplary damages.
The explosion of the new tire may not be considered a fortuitous event.
There are human factors involved in the situation. The fact that the tire was
new did not imply that it was entirely free from manufacturing defects or that
it was properly mounted on the vehicle. Neither may the fact that the tire
bought and used in the vehicle is of a brand name noted for quality, resulting
in the conclusion that it could not explode within five days' use. Be that as it
may, it is settled that an accident caused either by defects in the automobile
or through the negligence of its driver is not a caso fortuito that would exempt
the carrier from liability for damages.

It was incumbent upon the defense to establish that it took precautionary

measures considering partially dangerous condition of the road. As stated
above, proof that the tire was new and of good quality is not sufficient proof
that it was not negligent. Petitioners should have shown that it undertook
extraordinary diligence in the care of its carrier such as conducting daily
routine check-ups of the vehicle's parts. As the late Justice J.B.L. Reyes said:
"It may be impracticable, as appellee argues, to require of carriers to test the
strength of each and every part of its vehicles before each trip, but we are of
the opinion that a due regard for the carrier's obligations toward the traveling
public demands adequate periodical tests to determine the condition and

19