BACOLOD-MURCIA MILLING CO., INC., vs.

HON. COURT OF APPEALS AND ALONSO GATUSLAO

G.R. Nos. 81100-01 February 7, 1990

Facts: BMMC constructed a railroad track system to transport

sugar cane from the plantation to the milling station for period of
45 years beginning the years 1920-1921. However by the year
1964-1965, the railroad tracks over at Hacienda Helvetia was
closed due to the expiration of the milling contract. The residents of
the Angela Estates/ Hacienda Helvetia decided not to renew the
contract. Despite this, BMMC continues to have milling and
transportation
contracts
by
railroad
with
Agro-Industrial
Development of Silay-Saravia (AIDSISA) for 17 years until 1973-74.
Due the non-renewal of the right of way contract with Angela
Estates, BMMC was unable to transport sugar canes of Alonso
Gatuslao or of AIDSISA beginning 1968. Gatuslao on various dates
requested transportation facilities from BMMC to no avail. Gatuslao
filed for a Breach of Contract against BMMC and asks for rescission
of contract and damages. BMMC argues that the inability to use its
railways system is due to force majeure. In order to comply they
hired private trucks as movers of to haul the sugar canes.
Gatuslao/AIDSISA, seriously believing that BMMC is particularly
unable to transport and mill their sugar canes, opted to use trucks
provided by Bacolod-Murcia Agricultural Cooperative Marketing
Association, Inc. (BM-ACMA). Further, its inability to do so in effect
rescinds the milling contract.
BMMC also filed a complaint against AIDSISA and BM-ACMA seeking
specific performance of milling contract. It alleges that
Gatuslao/AIDSISA violated the contract by hiring the services of BMACMA. The 2 complaints were consolidated fro trial the CFI- Negros
Occidental. Lower court rendered judgment rescinding the milling
contract and damages of Php2,625 and Php5,000 attorneys fees.
BMMC appealed. CA affirmed the CFI decision.
Issue: Whether or not the inability of BMMC to comply with milling
contract due to the closure of the railroad track right of way over
Helvetia is force majeure

Held: No, The closure of the railroad track way at Hacienda

Helvetia is due to the expiration of their contract with the
Hacienda. The requisites of force majeure: (a) breach is
independent of the will of obligor. (b) Event is
unforeseeable or unavoidable, (c) and the event renders
the fulfillment of obligation impossible. Applying the criteria,
the closure of the railroad track is not force majeure. BMMC should
have anticipated it and provided for the eventuality. BMMC took the
risk that the Hacienda Helvetia will not renew their contract. Thus,
the closure of the track in the Hacienda, paralyzed the whole
transportation system. It was die to the contract termination, which
BMMC has knowledge that caused the Breach of Contract with the
other plantations. Since the closure of the rail road track is a not a
case of fortuitous event, the issue is whether or not BMMC is
capable of providing adequate and efficient transportation facilities
of the canes of AIDSIA and other planters. Evidence shows that
BMMC is the one who committed breach of contract. A letter from
BMMC was even quoted by the SC. The letter was suggesting
planters to explore other solutions to the problem of milling and
transportation. Thus, AIDSIA hiring BM-ACMA is a matter of selfpreservation and is not in anyway a breach of contract
PHILIPPINE COMMUNICATIONS SATELLITE CORPORATION, vs.
GLOBE TELECOM, INC. (formerly Globe Mckay Cable and
Radio Corporation)
G.R. No. 147324 May 25, 2004
Facts:
On May 7, 1991 Philcomsat & Globe entered into an agreement
whereby Philcomsat obliged itself to establish, operate & provide
an IBS standard B earth station for the exclusive use of US defense
communications Agency (USDCA). The term was for 60 months or 5
yrs In turn, Globe promised to pay Philcomsat monthly rentals.
At the execution of the agreement, both parties knew that military
Bases Agreement was to expire in 1991. Subsequently, Philcomsat
installed the earth station & USDCA made use of the same.
The senate passed a resolution expressing its decision not to
concur in the ratification of the treaty of friendship. So the RP-US
Military bases Agreement terminate it on Dec. 31, 1992.
Globe notified Philcomsat its instruction to discontinue effective
Nov. 8, 1992, in view of the withdrawal of US military personnel.

Philcomsat sent a reply to pay the stipulated rentals even after

Globe shall have discontinued the use of earth station after Nov. 8
1992.
After the US military force left Subic, Philcomsat sent a letter
demanding payment. However, Globe refused to heed Philcomsat s
demand because the termination of the US military bases
agreement constitute force majeure and said event exempted it
from paying rentals.
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
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 Governments 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 Philcomsats 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.
Article 1174, which exempts an obligor from liability on account of
fortuitous events or force majeure, refers not only to events that
are unforeseeable, but also to those which are foreseeable, but
inevitable:
A fortuitous event under Article 1174 may either be an "act of
God," or natural occurrences such as floods or typhoons,24 or an

"act of man," such as riots, strikes or wars.

The Supreme Court agrees with the Court of Appeals and the trial
court that the abovementioned requisites are present in the instant
case. Philcomsat and Globe had no control over the non-renewal of
the term of the RP-US Military Bases Agreement when the same
expired in 1991, because the prerogative to ratify the treaty
extending the life thereof belonged to the Senate. Neither did the
parties have control over the subsequent withdrawal of the US
military forces and personnel from Cubi Point in December 1992.
Decision on Issue No. 2: Exemption of Globe from Paying Rentals
for the Facility

The Supreme Court finds that the defendant is exempted from

paying the rentals for the facility for the remaining term of the
contract. As a consequence of the termination of the RP-US Military
Bases Agreement (as amended) the continued stay of all US
Military forces and personnel from Subic Naval Base would no
longer be allowed, hence, plaintiff would no longer be in any
position to render the service it was obligated under the
Agreement.
LEA MER INDUSTRIES V. MALAYAN INSURANCE
G.R. No. 161745, September 30, 2005
FACTS
* Ilian Silica Mining entered into a contract of carriage with Lea Mer
Industries for the shipment of silica sand valued at P565,000. It was
Consigned to Vulcan Industrial and Mining Corporation, the cargo
was to be transported from Palawan to Manila. On October 25,
1991, the silica sand was placed on board Judy VII, a barge leased
by Lea Mer. During the voyage, the vessel sank, resulting in the
loss of the cargo.
* Malayan Insurance Co., Inc., as insurer, paid Vulcan the value of
the lost cargo. Malayan demanded reimbursement from Lea Mer,
which refused to comply. Consequently, Malayan instituted a
Complaint for the collection of P565,000.
ISSUES & ARGUMENTS
(1) Whether petitioner is liable for the loss of the cargo.

(2) Whether the loss of the cargo was due to a fortuitous event.
HELD
1. YES. Lea Mer is liable to pay Malayan Insurance.
2. No. Lea Mer was negligent.
RATIONALE
I. * Common carriers are persons, corporations, firms or
associations engaged in the business of carrying or transporting
passengers or goods, or both, when this service is offered to the
public for compensation.
* Petitioner is clearly a common carrier, because it offers to
the public its business of transporting goods through its vessels.
Thus, the Court corrects the trial courts finding that petitioner
became a private carrier when Vulcan chartered it.
* The Contract in the present case was one of affreightment,
as shown by the fact that it was petitioners crew that manned the
tugboat M/V Ayalit and controlled the barge Judy VII. Necessarily,
petitioner was a common carrier, and the pertinent law governs the
present factual circumstances.
II.
* As the common carrier, petitioner bore the burden of proving that
it had exercised extraordinary diligence to avoid the loss, or that
the loss had been occasioned by a fortuitous event. It was not
enough for Lea Mer to show that there was an unforeseen or
unexpected occurrence. It had to show that it was free from any
fault -- a fact it miserably failed to prove:
First, petitioner presented no evidence that it had attempted to
minimize or prevent the loss before, during or after the alleged
fortuitous event.
Second, the alleged fortuitous event was not the sole and
proximate cause of the loss. There is a preponderance of evidence
that the barge was not seaworthy when it sailed for Manila.
Respondent was able to prove that, in the hull of the barge, there
were holes that might have caused or aggravated the sinking.

ERNESTO CANADA v. ALL COMMODITIES MARKETING CORP.

G.R. No. 146141, October 17, 2008
Ernesto P. Canada is engaged in business of providing trucking and
hauling services under the name Hi-Ball Freight Services.
Respondent All Commodities Marketing Corporation has been a
valued client of petitioner for several years.
On October 27, 1986, respondent contracted petitioners services to
haul and deliver one thousand (1,000) sacks of sugar from Pier
18, North Harbor in Tondo, Manila to the Pepsi Cola Plant at
Muntinlupa, Metro Manila (now Muntinlupa City). The transaction
was covered by Way Bills/ Delivery Receipt Nos. 5340 [3] and
5341[4] of All Star Transport, Inc. (All Star), but duly signed by
petitioners driver. As agreed, petitioner loaded respondents 1,000
sacks of sugar into his two (2) trucks; however, the same were
never delivered to the Pepsi Cola Plant. The drivers of the trucks,
along with the helpers, had since vanished into thin air.
Respondent demanded payment of the value of the sugar, but the
demand was not heeded. Consequently, respondent filed a
complaint[5] against petitioner
In his answer,[6] petitioner admitted that respondent contracted him
to haul and deliver 1,000 sacks of sugar, but denied that the cargo
did not reach their destination. He averred that the cargo were
delivered to the Pepsi Cola Plant in Muntinlupa City on October 27,
1986. He rejected responsibility for the claim arguing that the loss
of the goods was either due to respondents negligence or due to
fortuitous event.[7] By way of counterclaim, petitioner asserted his
right to payment of P350,000.00, representing the value of the
truck that was allegedly seized by respondent.
RULING
Petitioner attempted to exculpate himself from liability by
insisting that the incident was a caso fortuito. We disagree.
The exempting circumstance of caso fortuito may be availed
of only when: (a) the cause of the unforeseen and unexpected
occurrence was independent of the human will; (b) it was
impossible to foresee the event which constituted the caso
fortuito or, if it could be foreseen, it was impossible to avoid; (c) the
occurrence must be such as to render it impossible to perform an

obligation in a normal manner; and (d) the person tasked to

perform the obligation must not have participated in any course of
conduct that aggravated the accident.[17]
None of these elements is present in this case. Other than
petitioners bare-faced assertion that the cargo were lost due to
fortuitous event, no evidence was offered to substantiate it. On the
contrary, we find supported by evidence on record the conclusions
of the trial court and the CA that the loss of the sugar was due to
the negligence of petitioner. The CA, therefore, committed no
reversible error in sustaining the finding of liability against
petitioner.

There were no new negotiations entered into between the plaintiff

and the defendants after the failure of defendants to secure the
contract at the opening of the bids on May 2, 1905, but on the 1st
of July the plaintiff Lorchas Chata and Lolin were furnished to the
quartermaster under the defendants' contract for the emergency
service, and were thus employed in that service for the first twentythree and twenty-seven days of August, when they were released
by the quartermaster, and the plaintiff immediately notified by the
defendants that they were at his disposal.
Plaintiff claims that defendants made use of these lorchas, under
the terms of the contract of April 20; that is, that the lorchas shall
be rented from July 1 to Dec. 31, 1905.
ISSUE:
Is the respondent obliged to pay the rentals for the days that the
lorchas were not used?
RULING:

FAUSTINO LICHAUCO VS. FIGUERAS HERMANOS

G.R. No. L-3308, January 19, 1907
FACTS:
The Quartermaster's Department of the Army of the United States
advertises semi-annually for proposals to furnish lighterage for its
use in the port of Manila. The service required is divided into two
classes, regular and emergency. The price paid for emergency
service is naturally higher than that paid for regular service wherein
the lorcha are steadily employed for the entire contract period of
six months.
The defendants submitted a bid for the quartermaster's contract of
lighterage for the semiannual period from the 1st of July to the 31st
of December, 1905, but when the proposals were opened on the
2nd of May, 1905, their bid and all others were rejected. On the
16th of May, 1905, the letting of the contract was again advertised,
and the defendant and other submitted new proposals which were
opened on the 27th of May, 1905, and on this occasion the contract
was divided and the defendants bid for the emergency service was
accepted, while a third party was awarded the contract for the
regular service.

No. It was plainly conditioned upon the defendants'

securing the entire contract of lighterage and not upon their
securing a part thereof. There is nothing in the contract between
the parties to indicate that either one had in mind the division of
the lighterage contract and indeed the language of the entire
amendment suggests that both parties had in contemplation no
other thing that the complete success or the complete failure of
defendants to secure the lighterage contract with the Government.
In conditional obligations, the acquisition of rights, as well as the
extinction or loss of those already acquired, shall depend upon the
event constituting the condition.
The defendants, by taking and using these lorchas for the purpose
of carrying out their contract with the quartermaster without any
new agreement the obligation with the plaintiffs, impliedly and
tacitly assumed the obligation of the original contract together with
the amendment, so that their use of the lorcha was subject to its
terms. They required no new contract with the plaintiff, express or
implied, to authorize them to do so, and no sufficient reason has
been suggested to justify the inference that they assumed an
oppressive and dangerous risk when all that they did was in exact
compliance with a written contract securing to them the right to
use these lorchas on favorable and reasonable terms.

JAVIER, vs. CA and LEONARDO TIRO

G.R. No. L-48194 March 15, 1990

Leonardo Tiro is a holder of an ordinary timber license issued by the

Bureau of Forestry covering 2,535 hectares in the town of Medina,
Misamis Oriental. On February 15, 1966 he executed a "Deed of
Assignment" 4 in favor of Jose and Estrella Javier, for and in
consideration of a sum.

At the time the said deed of assignment was executed, private

respondent had a pending application, dated October 21, 1965, for
an additional forest concession covering an area of 2,000 hectares
southwest of and adjoining the area of the concession subject of
the deed of assignment. Hence, on February 28, 1966, private
respondent and petitioners entered into another "Agreement"

That for and in consideration of the transfer of

r i g h t s , P e t i t i o n e r u n d e r t a k e t o p a y P r i v a t e Respondent
subject to the condition that the application of
P r i v a t e Re s p o n d e n t f o r a n additional area for forest
concession be approved by Bureau of Forestry. However, Private
Respondent did not obtain the approval.
Held
When a contract is subject to a suspensive condition, its birth and
effectivity can take place only if and when the event which
constitutes the condition happens or is fulfilled. If the suspensive
condition does not take place, the parties would stand as if
the conditional obligation had never existed.
URSAL VERSUS CA
G.R. No. 142411
October 14, 2005
FACTS:

In January 1985, Winifreda Ursal and spouses Jesus and Cristita

Moneset entered into a Contract to Sell Lot & House. The amount
agreed upon was P130,000.00. Ursal is to pay P50k as down
payment and will continue to pay P3k monthly starting the next
month until the balance is paid off. After 6 months, Ursal stopped
paying the Monesets for the latter failed to give her the transfer of
certificate title.
In November 1985, the Monesets executed an absolute deed of
sale with one Dr. Canora. In September 1986, the Monesets
mortgaged the same property to the Rural Bank of Larena for
P100k. The Monesets failed to pay the P100k hence the bank filed
for foreclosure.
Trial ensued and the RTC ruled in favor of Ursal. The trial court ruled
that there was fraud on the part of the Monesets for executing
multiple sales contracts. That the bank is not liable for fraud but
preference to redeem should be given to Ursal. The Monesets are
ordered to reimburse Ursal plus to pay damages and fees. Ursal
was not satisfied as she believed that the bank was also at fault.
ISSUE: Whether or not the Contract to Sell vested ownership in
Ursal.
HELD: No. There should be no special preference granted to Ursal
in redeeming the property. What she had with the Monesets was
contract to sell in which case ownership was not transferred to her
due the suspensive condition of full payment. Further, the property
was sold to other properties already.
A contract to sell is a bilateral contract whereby the prospective
seller, while expressly reserving the ownership of the subject
property despite delivery thereof to the prospective buyer, binds
himself to sell the said property exclusively to the prospective
buyer upon fulfillment of the condition agreed upon, that is, full
payment of the purchase price.
In such contract, the prospective seller expressly reserves the
transfer of title to the prospective buyer, until the happening of an
event, which in this case is the full payment of the purchase price.
What the seller agrees or obligates himself to do is to fulfill his
promise to sell the subject property when the entire amount of the
purchase price is delivered to him. Stated differently, the full
payment of the purchase price partakes of a suspensive condition,
the non-fulfillment of which prevents the obligation to sell from
arising and thus, ownership is retained by the prospective seller
without further remedies by the prospective buyer.

Since the contract in this case is a contract to sell, the ownership of

the property remained with the Monesets even after petitioner has
paid the down payment and took possession of the property.