DUMLAO, Cheyenne Hope OBLICON Assignment #2 COMPILED DIGESTS
1 SSS VS. MOONWALK DEVELOPMENT AND HOUSING
CORPORATION
FACTS:
o Plaintiff SSS approved the application of Defendant
Moonwalk for a loan of P30,000,000 for the purpose
of developing and constructing a housing project.
o Out of P30,000,000 approved loan, the sum of
P9,595,000 was released to defendant Moonwalk.
o A third Amendment Deed of Mortgage was
executed for the payment of the amount of
P9,595,000.
o Moonwalk made a total payment of P23,657,901.84
to SSS for the loan principal of P12,254,700.
o After settlement of the account, SSS issued to
Moonwalk the release of Mortgage for Moonwalk’s
Mortgaged properties.
o In letter to Moonwalk, SSS alleged that it committed
an honest mistake in releasing defendant.
o That Moonwalk has still 12% penalty for failure to
pay on time the amortization which is in the
penal clause of the contract.
o Moonwalk’s counsel told SSS that it had completely paid its
obligation to SSS and therefore there is no recovery
of any penalty.
ISSUE: Is the penalty demandable even after the
extinguishment of the principal obligation?
HELD: No. There has been a waiver of the penal clause as
it was not demanded before the full obligation was fully paid
and extinguished. Default begins from the moment the
creditor demands the performance of the obligation. In
this case, although there were late amortizations
there was no demand made by SSS for the payment of the
penalty hence Moonwalk is not in delay in the payment of
the penalty. No delay occurred and there was no
occasion when the penalty became demandable and
enforceable. Since there was no default in the
performance of the main obligation-payment of the loan-
SSS was never entitled to recover any penalty.
If the demand for the payment of the penalty was made
prior to the extinguishment of the obligation which
are: 1. principal obligation 2. The interest of 12% on the
principal obligation 3.The penalty of 12% for late
payment for after demand, Moonwalk would be in delay
and therefore liable for the penalty.
2 RCBC vs. CA
Short version/ Summary: RCBC filed an action for
replevin and damages against Felipe Lustre on the
ground that he defaulted in his payments of 3 PDCs
issued for installment payments of a Toyota Corolla.
The 4th PDC issued by Lustre was recalled for signature.
The subject check, however, was recalled only after the
amount covered thereby had been deducted from
Lustre’s account. It was subsequently re-credited back to
Lustre’s account for lack of signature. RCBC did not
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notify Lustre until 16 months later when it wrote its
demand letter to Lustre.
SC: Lustre cannot be held liable for damages. Article
1170 of the Civil Code states that: those who in the
performance of their obligations are guilty of delay are
liable for damages. The delay in the performance of the
obligation, however, must be either malicious or
negligent. ICAB, there is no imputation, much less
evidence, that Lustre acted with malice or negligence in
failing to sign the check. Such omission was mere
inadvertence on the part of Lustre.
FACTS:
Atty. Felipe Lustre purchased a Toyota Corolla from
Toyota Shaw, Inc. He made a down payment, and the
balance of the purchase price to be paid in 24 equal
monthly installments. Lustre thus issued 24 postdated
checks. The 1st was dated 10 April 1991, subsequent
checks were dated every 10th of each succeeding
month.
As security, Lustre executed a contract of chattel
mortgage over the vehicle. Paragraph 11 thereof
provided for an acceleration clause stating that should
the mortgagor default in the payment of any installment,
the whole amount remaining unpaid shall become due.
In addition, the mortgagor shall be liable for 25% of the
principal due as liquidated damages.
Toyota Shaw assigned all its rights and interests in the
chattel mortgage to RCBC.
The first 22 PDCs were encashed and debited by RCBC
from Lustre’s account, except the PDC dated 10 August
1991 (5th PDC out of 24 PDCs), which was unsigned.
Previously, the amount of the 5th PDC was debited from
Lustre’s account but was later recalled and re-credited to
Lustre’s account. Because of the recall, RCBC refused
to encash the last 2 PDCs (pursuant to RCBC policy).
Lustre was not informed of RCBC’s actions.
On 21 January 1993, RCBC sent a demand letter to
Lustre, demanding payment of balance of the debt (3
installment payments), including liquidated damages.
Lustre refused. RCBC filed an action for replevin and
damages against Lustre. Lustre interposed a
counterclaim for damages.
Procedure:
RTC: Dismissed RCBC’s complaint. RTC ordered RCBC
to accept the payment equivalent to the 3 checks and to
release/cancel the mortgage on the car. On the
counterclaim, RCBC ordered to pay Lustre moral
damages, exemplary damages and attorney’s fees.
CA: Affirmed RTC.
Issue/s: WON Lustre is liable for damages on the
ground of delay in the performance of his obligation. NO.
Held/Ratio:
Assuming that Lustre was guilty of delay in payment of
the value of the unsigned check, he cannot be held liable
for damages. Article 1170 of the Civil Code states that:
those who in the performance of their obligations are
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guilty of delay are liable for damages. The delay in the
performance of the obligation, however, must be
either malicious or negligent. ICAB, there is no
imputation, much less evidence, that Lustre acted with
malice or negligence in failing to sign the check. Such
omission was mere inadvertence on the part of Lustre.
Toyota salesperson testified that he verified whether
Lustre had signed all checks and in fact returned 3 or 4
unsigned checks to him for signing. Lustre signed these
returned checks, and only then did the Toyota
salesperon release the car to Lustre.
SC noted that RCBC did not object to the unsigned
check when all the PDCs were delivered to it by Toyota
Shaw.
In view of the lack of malice or negligence on the part of
Lustre, RCBC’s blind and mechanical invocation of
paragraph 11 of the contract of chattel mortgage was
unwarranted.
SC also said that this whole controversy could have
been avoided if only RCBC bothered to call up Lustre
and ask him to sign the check! RCBC failed to act with
good faith and is therefore liable for moral damages
suffered by Lustre, who has been a client of RCBC for
20 years. Lustre also suffered shame and
embarrassment after the case was filed as he was a
lawyer, married to another lawyer, and known to the
community of golfers. SC also allowed exemplary
damages and attorney’s fees.
3 BARZAGA VS. CA
Facts: Ignacio Barzaga’s wife succumbed to a
debilitating ailment and died on December 19, 1990.
Forewarned, she expressed her wish to be buried before
Christmas. After her death on December 21, 1990 3pm,
Ignacio Barzaga (Petitioner) went to the hardware store
of Angelito Alviar (Respondent) to inquire about the
availability of certain materials to be used in building his
wife’s niche. Also asking if materials could be delivered
at once, the Respondent’s employee replied that if the
store had pending deliveries that afternoon then all
subsequent purchases made would be delivered the
following day.
Petitioner left that day and returned the following day on
December 22, 1990, 7am. Petitioner came to follow up
his purchase of construction materials, stressing to the
employees of the hardware store that he would need the
materials to be delivered to the cemetery (only a
kilometer away from the hardware store) by 8 am as he
would have hired workers who would start working at the
site. Respondent’s employee agreed to deliver at the
specified time, date and place and with such assurance
Barzaga purchased the materials and paid in full P
2,100.00.
San Beda College of Law - Mendiola
However, the materials were not delivered on time. The
petitioner went to the store several times to ask for the
delivery. Eventually, the Petitioner was forced to dismiss
his hired workers since his materials did not arrive.
Petitioner determined to fulfill his wife’s request,
purchased materials from other stores. After his wife was
buried, Petitioner sued the Respondent for damages of
delay. Respondent claims that delay happened because
of a fortuitous event since the truck tires were flat.
Issue: Was there a delay in the performance of the
Respondent’s obligation?
Held: Yes. The Respondent was negligent and incurred
delay in performing his obligations. The Petitioner
suffered as a consequence of the delay or contractual
breach. There was a specific time, date and place
agreed upon the delivery of the materials. The said
condition was agreed upon by both the Petitioner and
the Respondent.
There is a non performance of a reciprocal obligation
since according to Article 1169, the moment one of the
parties fulfill his obligation, delay by the other begins. In
this contract of purchase and sale, the Petitioner had
already accomplished his part which is the payment of
the price. It falls onto the Respondent now to
immediately fulfill his obligation to deliver the goods
otherwise delay would attach. An award of moral
damages is incumbent in this case as the Petitioner has
suffered gravely.
4 PANTALEON VS. AMEX
FACTS: AMEX is a corporation engaged in providing
credit services through the operation of a charge card
system. Pantaleon was a cardholder since 1980.
Pantaleon, his wife, daughter and son went on a guided
European tour and subsequently arrived in Amsterdam.
While in Coster Diamond House,his wife wanted to
purchase some diamond pieces, amounting to $13, 826.
Pantaleon presented his credit card which was swiped.
He was then asked to sign the charge slip which was
electronically transferred to AMEX’s Amsterdam office.
However, Coster was not able to receive approval from
AMEX for the purchase so Pantaleon asked the clerk to
cancel the sale. The store manager convinced
Pantaleon to wait for a few minutes and subsequently
told Pantaleon that AMEX was asking for bank
references and Pantaleon responded by giving names of
his Phil. depository banks. Still, it was not approved. But
Coster decided to release the items even without
AMEX’s approval since the tour couldn’t go on without
them.
In all, it took AMEX a total of 78 minutes to approve
Pantaleon’s purchase and to transmit the approval to the
jewelry store.
This was followed by two similar incidents when the
family then had another trip to the US. They also
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experienced inconvenience using the AMEX credit card
in purchasing golf equipment and children’s shoes.
When they got to Manila, Pantaleon sent a letter to
AMEX, demanding an apology for the humiliation and
inconvenience. AMEX responded that the delay in
Amsterdam was due to the amount involved, saying that
the purchase deviated from his established charge
purchase pattern. Dissatisfied, Pantaleon filed an action
for damages in RTC.
The testimony of AMEX’s credit authorizer Edgardo
Jaurique, the approval time for credit card charges would
be three to four seconds under regular circumstances.
Here, it took AMEX 78 minutes to approve the
Amsterdam purchase. SC attributed the unwarranted
delay to Jaurique, who had to go over Pantaleon’s past
credit history, his payment record and his credit and
bank references before he approved the purchase.
In 2009, the SC reversed the ruling in CA; and said that
AMEX was guilty of mora solvendi or debtor’s default.
AMEX as debtor had an obligation as the credit provider
to act on Pantaleon’s purchase requests, whether to
approve or disapprove them, with "timely dispatch."
ISSUES:
1. Whether or not AmEx had committed a breach of its
obligations to Pantaleon.
2. Whether or not AmEx is liable for damages.
RULING:
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 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 advised him that resolving the same
could take some time.
2. Yes. The reason why Pantaleon is entitled to
damages is not simply because AmEx incurred delay,
but because the delay, for which culpability lies under
Article 1170, led to the particular injuries under Article
2217 of the Civil Code for which moral damages are
remunerative. The somewhat unusual attending
circumstances to the purchase at Coster – that there
was a deadline for the completion of that purchase by
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petitioner before any delay would redound to the injury of
his several traveling companions – gave rise to the
moral shock, mental anguish, serious anxiety, wounded
feelings and social humiliation sustained by Pantaleon,
as concluded by the RTC.
5 LORENZO SHIPPING vs. BJ MARTHEL
FACTS: Petitioner Lorenzo Shipping is engaged in
coastwise shipping and owns the cargo M/V Dadiangas
Express. BJ Marthel is engaged in trading, marketing an
dselling various industrial commodities. Lorenzo
Shipping ordered for the second time cylinder lines from
the respondent stating the term of payment to be 25%
upon delivery, the balance payable in 5 bi-monthly equal
installments, no again stating the date of the cylinder’s
delivery. It was allegedly paid through post dated checks
but the same was dishonored due to insufficiency of
funds. Despite due demands by the respondent,
petitioner failed contending that time was of the essence
in the delivery of the cylinders and that there was a delay
since the respondent committed said items “within two
months after receipt of fir order”. RTC held respondents
bound to the quotation with respect to the term of
payment, which was reversed by the Court of appeals
ordering appellee to pay appellant P954,000 plus
interest. There was no delay since there was no
demand.
ISSUE: Whether or not respondent incurred delay in
performing its obligation under the contract of sale
RULING: By accepting the cylinders when they were
delivered to the warehouse, petitioner waived the
claimed delay in the delivery of said items. Supreme
Court geld that time was not of the essence. There
having been no failure on the part of the respondent to
perform its obligations, the power to rescind the contract
is unavailing to the petitioner.
Petition is denied. Court of appeals decision is affirmed.
6 SOLAR HARVEST vs. DAVAO CORRUGATED
FACTS:
Solar Harvest, Inc., entered into an agreement with
Davao Corrugated Carton Corp., for the purchase of
corrugated carton boxes, specifically designed for
petitioner’s business of exporting fresh bananas.
Petitioner deposited their full payment but alleged that
they did not receive any boxes from respondent,
hence, they wrote a demand letter for reimbursement.
Respondent, meanwhile, stated that the boxes had been
completed and that petitioner failed to pick them up from
the former’s warehouse as agreed upon. Respondent
also averred that petitioner even placed an additional
order of 24,000 boxes without any advanced payment
from petitioner. Respondent then demanded petitioner to
remove the boxes from the factory and to pay the
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balance for the additional boxes as well as for the
storage fee.
RTC ruled in favor of respondent. CA affirmed and
averred that respondent would not be liable for breach of
contract as petitioner had not yet demanded from it the
delivery of the boxes.
ISSUE: Whether petitioner’s claim for reimbursement is
actually one for rescission of contract under Article 1191
of the Civil Code.
HELD:
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.
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:
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.
However, the demand by the creditor shall not be
necessary in order that delay may exist:
1. When the obligation or the law expressly so declares;
or
2. When from the nature and the circumstances of the
obligation it appears that the designation of the time
when the thing is to be delivered or the service is to
be rendered was a controlling motive for the
establishment of the contract; or
3. When demand would be useless, as when the obligor
has rendered it beyond his power to perform.
Evident from the records was the lack of demand by
petitioner upon respondent to fulfill its obligation to
manufacture and deliver the boxes. 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.
7 CATHAY PACIFIC VS. SPS. VASQUEZ
FACTS: Private respondents were passengers of
petitioner booked on its Flight CX-905 with the route of
Manila to Hongkong and back. They, along with their
maid and two friends, went to HK for pleasure and
business. While the maid’s boarding pass was for
the Economy Class, the spouses’ and their two
friends’ indicated that they were on the Business
Class. However, while in Kai Tak Airport, after checking
in their luggage and presenting their boarding passes to
the ground stewardess, they were informed by Ms. Chiu,
a ground attendant, that there was a seat change from
Business to First Class for the spouses. It is to be noted
that the Vasquezes are frequent flyers of the airline and
are Gold Card members of its Marco Polo Club. The
Marco Polo Club is part of the marketing strategy of
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Cathay through which it accords its frequent flyers
several privileges, including priority for upgrading of
booking without any extra charge whenever an
opportunity arises. Upon being informed of this change,
Dr. Vasquez refused the same, saying that it would not
look nice for them as hosts to travel in First Class and
their guests, in Business Class, not to mention that they
also had to discuss business matters during the flight.
He asked Ms. Chiu to have other passengers transferred
instead. Shocked by this unusual reaction to a seat
upgrade, Ms. Chiu, after consulting with her supervisor,
informed them that if they would not avail of the
privilege, they would not be allowed to take the flight.
Eventually, after talking with his friends, Dr. Vasquez
agreed. He and his wife took the First Class Cabin. Back
in Manila, after apparent inaction on the part of Cathay,
the Vasquezes filed a damage suit, asking for
temperate, moral and exemplary damages, as well as
attorney’s fees. They attributed discourteous and
humiliating behavior to Ms. Chiu. Cathay answered that
seat upgrading is a common practice among airlines.
The TC ruled for the spouses, awarding them nominal
(P100,000 each), moral (P2M each), exemplary (P5M
each) and attorney’s fees (P1M each). The CA
affirmed, but deleted the award of exemplary damages
and reduced the awards of moral and nominal damages
and attorney’s fees.
ISSUES:
1. WON Cathay breached its contract of carriage with
the Vs when it upgraded their seat accommodation.
2. WON the upgrading was made in bad faith or with
fraud.
3. WON the Vasquezes are entitled to damages.
RULING
1. YES. The Vazquezes never denied that they were
members of Cathay’s Marco Polo Club. They knew
that as members of the Club, they had priority for
upgrading of their seat accommodation at no extra cost
when an opportunity arises. But, just like other
privileges, such priority could be waived. The Vazquezes
should have been consulted first whether they wanted to
avail themselves of the privilege or would consent to a
change of seat accommodation before their seat
assignments were given to other passengers. Normally,
one would appreciate and accept an upgrading, for it
would mean a better accommodation. But, whatever
their reason was and however odd it might be, the
Vazquezes had every right to decline the upgrade and
insist on the Business Class accommodation they had
booked for and which was designated in their boarding
passes. They clearly waived their priority or preference
when they asked that other passengers be given the
upgrade. It should not have been imposed on them over
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their vehement objection. By insisting on the upgrade,
Cathay breached its contract of carriage with the
Vazquezes.
2. NO. The Vazquezes were not induced to agree to
the upgrading through insidious words or deceitful
machination or through willful concealment of material
facts. Upon boarding, Ms. Chiu told the Vazquezes that
their accommodations were upgraded to First Class in
view of their being Gold Card members of Cathay’s
Marco Polo Club. She was honest in telling them that
their seats were already given to other passengers and
the Business Class Section was fully booked. Ms. Chiu
might have failed to consider the remedy of offering the
First Class seats to other passengers. But, we find no
bad faith in her failure to do so, even if that amounted to
an exercise of poor judgment. Neither was the transfer of
the Vazquezes effected for some evil or devious
purpose. As testified to by Mr. Robson, the First Class
Section is better than the Business Class Section in
terms of comfort, quality of food, and service from the
cabin crew.
3. YES. Case law establishes the following requisites
for the award of moral damages: (1) there must be an
injury clearly sustained by the claimant, whether
physical, mental or psychological; (2) there must be a
culpable act or omission factually established; (3) the
wrongful act or omission of the defendant is the
proximate cause of the injury sustained by the claimant;
and (4) the award for damages is predicated on any of
the cases stated in Article 2219 of the Civil Code.
Moral damages predicated upon a breach of contract of
carriage may only be recoverable in instances where the
carrier is guilty of fraud or bad faith or where the mishap
resulted in the death of a passenger. Where in breaching
the contract of carriage the airline is not shown to have
acted fraudulently or in bad faith, liability for damages is
limited to the natural and probable consequences of the
breach of the obligation which the parties had foreseen
or could have reasonably foreseen. In such a case the
liability does not include moral and exemplary damages.
The breach of contract of carriage, which consisted in
the involuntary upgrading of the Vazquezes’ seat
accommodation, was not attended by fraud or bad faith.
The Court of Appeals’ award of moral damages has,
therefore, no leg to stand on.
The deletion of the award for exemplary damages by the
Court of Appeals is correct. It is a requisite in the grant of
exemplary damages that the act of the offender must be
accompanied by bad faith or done in wanton, fraudulent
or malevolent manner. Such requisite is absent in this
case. Moreover, to be entitled thereto the claimant must
first establish his right to moral, temperate, or
compensatory damages. Since the Vazquezes are not
entitled to any of these damages, the award for
exemplary damages has no legal basis. And where the
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awards for moral and exemplary damages are
eliminated, so must the award for attorney’s fees.
The most that can be adjudged in favor of the
Vazquezes for Cathay’s breach of contract is an
award for nominal damages under Article 2221 of the
Civil Code, which reads as follows:
Article 2221. Nominal damages are adjudicated in order
that a right of the plaintiff, which has been violated or
invaded by the defendant, may be vindicated or
recognized, and not for the purpose of indemnifying the
plaintiff for any loss suffered by him.
MERALCO vs. RAMOY
FACTS: The National Power Corporation (NPC) won an
ejectment case against several persons allegedly
illegally occupying its properties in Baesa, Quezon City.
To execute such, NPC requested from MERALCO that
the electrical service connection of those residential and
commercial establishments beneath the NPC lines be
immediately disconnected and MERALCO agreed upon
determination of the affected establishments by NPC.
One of which includes the residence of the plaintiffs- the
Ramoys.
ISSUE: WON MERALCO is liable for damages to the
Ramoys for the sudden disconnection of their electric
power supply.
HELD: Yes. MERALCO is liable for damages to the
Ramoys for the sudden disconnection of their electric
power supply which turned out to be without any valid
ground, pursuant to Articles 1170 and 1173 of the Civil
Code. Therefore, MERALCO failed to exercise the
required utmost diligence as a public utility service
provider, hence, liable for culpa-contractual being
negligent in its performance of its obligation derived from
the Service Contract between MERALCO and its
consumers, one of which is the Ramoys.
9 AREOLA vs. CA
FACTS: Prudential Guarantee cancelled Areola’s
personal accident insurance on the grounds that the
latter failed to pay his premiums 7 months after issuing
the policy. Areola was supposed to pay the total amount
of P1,609.65 which included the premium of P1,470.00,
documentary stamp of P110.25 and 2% premium tax of
P29.40. The statement of account had a stipulation not
considering it a receipt. It also reminded the customer to
ask for a receipt after payment. There was also a
stipulation calling for a demand for a provisional receipt
after payment to an agent. A provisional receipt was sent
to petitioner telling him that the provisional receipt would
be confirmed by an official one. The company then
cancelled the policy for non-payment of premiums. After
being surprised, Areola confronted a company agent and
demanded an official receipt. The latter told him that it
was a mistake, but never gave him an official receipt.
Areola sent a letter demanding that he be reinstated or
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he would file for damages if his demand was not met.
The company then told him that his payments weren’t in
full yet. The company replied to Areola by telling him that
there was reason to believe that no payment has been
made since no official receipt was issued. The company
then told him that they would still hold him under the
policy. The company then confirmed that he paid the
premium and that they would extend the policy by one
year.
Thereby, the company offered to reinstate same policy it
had previously cancelled and even proposed to extend
its lifetime on finding that the cancellation was erroneous
and that the premiums were paid in full by petitioner-
insured but were not remitted by the
company's branch manager, Mr. Malapit.
However, they were too late for Areola already filed an
action for breach of contract in the trial court.
The company’s defense lay in rectifying its omission;
hence, there was no breach of contract.
The court ruled in favor of Areola and asked Prudential
to pay 250,000 pesos in moral and exemplary damages.
The court held that the company was in bad faith in
cancelling the policy. Had the insured met an accident at
that time, he wouldn’t be covered by the policy.
This ruling was challenged on appeal by respondent
insurance company, denying bad faith in unilaterally
cancelling the policy. The AC absolved Prudential on the
grounds that it was not motivated by negligence, malice
or bad faith in cancelling subject policy. Rather, the
cancellation of the insurance policy was based on what
the existing records showed. The court even added that
the errant manager who didn’t remit the profits was
forced to resign. Areola then filed for a petition in the
Supreme Court.
ISSUES: 1. Did the erroneous act of cancelling subject
insurance policy entitle petitioner-insured to payment of
damages?
2. Did the subsequent act of reinstating the wrongfully
cancelled insurance policy by respondent insurance
company, in an effort to rectify such error, obliterate
whatever liability for damages it may have to bear, thus
absolving it?
HELD: Yes. No. Petition granted.
RATIO:
1. Petitioner alleged that the manager’s misappropriation
of his premium payments is the proximate cause of the
cancellation of the insurance policy. Subsequent
reinstatement could not possibly absolve respondent
insurance company from liability, due to the breach of
contract. He contended that damage had already been
done.
San Beda College of Law - Mendiola
Prudential averred that the equitable relief sought by
petitioner-insured was granted to the filing of the
complaint, petitioner-insured is left without a cause of
action. Reinstatement effectively restored petitioner-
insured to all his rights under the policy.
The court held that Malapit's fraudulent act of
misappropriating the premiums paid by petitioner-
insured is directly imputable to respondent insurance
company. A corporation, such as respondent insurance
company, acts solely thru its employees. The latters'
acts are considered as its own. Malapit represented its
interest and acted in its behalf. His act of receiving the
premiums collected is well within the province of his
authority. Thus, his receipt of said premiums is receipt
by private respondent insurance company who, by
provision of law is bound by the acts of its agent.
Article 1910 thus reads:
Art. 1910. The principal must comply with all the
obligations which the agent may have contracted within
the scope of his authority.
As for any obligation wherein the agent has exceeded
his power, the principal is not bound except when he
ratifies it expressly or tacitly.
Malapit's failure to remit the premiums he received
cannot constitute a defense for private respondent
insurance company; no exoneration from liability could
result therefrom. The fact that private respondent
insurance company was itself defrauded due to the
anomalies that took place does not free the same from
its obligation to petitioner Areola. As held in Prudential
Bank v. Court of Appeals
“A bank is liable for wrongful acts of its officers done in
the interests of the bank or in the course of dealings of
the officers in their representative capacity but not for
acts outside the scope of their authority. Accordingly,
a banking corporation is liable to innocent third persons
where the representation is made in the course of its
business by an agent acting within the general scope of
his authority even though the agent is secretly abusing
his authority and attempting to perpetrate a fraud upon
his principal or some other person.”
Prudential is liable for damages for the fraudulent acts
committed by Malapit. Reinstating the insurance policy
cannot obliterate the injury inflicted. A contract of
insurance creates reciprocal obligations for both insurer
and insured. Reciprocal obligations are those which
arise from the same cause and in which each party is
both a debtor and a creditor of the other, such that the
obligation of one is dependent upon the obligation of the
other.
2. Due to the agreement to enter into a contract of
insurance where Prudential promised to extend
protection to petitioner-insured against the risk insured,
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DUMLAO, Cheyenne Hope OBLICON Assignment #2 COMPILED DIGESTS
there was a debtor creditor relationship between the two
parties. Under Article 1191, the injured party is given a
choice between fulfillment or rescission of the obligation
in case one of the obligors fails to comply with what is
incumbent upon him. However, said article entitles the
injured party to payment of damages, regardless of
whether he demands fulfillment or rescission of the
obligation.
The damages would be nominal because the insurance
company took steps to rectify the contract. There was
also no actual or substantial damage inflicted. Nominal
damages are "recoverable where a legal right is
technically violated and must be vindicated against an
invasion that has produced no actual present loss of any
kind, or where there has been a breach of contract and
no substantial injury or actual damages whatsoever have
been or can be shown.”
10 TANGUILIG vs. CA
FACTS: Herce contracted Tanguilig to construct a
windmill system for him, for consideration of 60,000.00.
Pursuant to the agreement Herce paid the downpayment
of 30,000.00 and installment of 15,000.00 leaving a
15,000.00 balance. Herce refused to pay the balance
because he had already paid this amount to SPGMI
which constructed a deep well to which the windmill
system was to be connected since the deepwell, and
assuming that he owed the 15,000.00 this should be
offset by the defects in the windmill system which
caused the structure to collapse after strong winds hit
their place. According to Tanguilig, the 60,000.00
consideration is only for the construction of the windmill
and the construction of the deepwell was not part of it.
The collapse of the windmill cannot be attributed to him
as well, since he delivered it in good and working
condition and Herce accepted it without protest. Herce
contested that the collapse is attributable to a typhoon, a
force majeure that relieved him of liability. The RTC
ruled in favor of Tanguilig, but this decision was
overturned by the Court of Appeals which ruled in favor
of Herce.
ISSUE: Can the collapse of the windmill be attributed to
force majeure? Thus, extinguishing the liability of
Tanguilig? - Yes, in order for a party to claim exemption
from liability by reason of fortuitous event under Art 1174
of the Civil Code the event should be the sole and
proximate cause of the loss or destruction of the object
of the contract. - In Nakpil vs. Court of Appeals, the S.C.
held that 4 requisites must concur that there must be a
(a) the cause of the breach of the obligation must be
independent of the will of debtor (b) the event must be
either unforeseeable or unavoidable; (c) the event be
such to render it impossible for the debtor to fulfill his
obligation in a normal manner; and (d) the debtor must
be free from any participation in or aggravation of the
injury to the creditor. - Tanguilig merely stated that there
San Beda College of Law - Mendiola
was a strong wind, and a strong wind in this case is not
fortuitous, it was neither unforeseeable nor unavoidable,
places with strong winds are the perfect locations to put
up a windmill, since it needs strong winds for it to work.
HELD: WHEREFORE, the appealed decision is
MODIFIED. Respondent VICENTE HERCE JR. is
directed to pay petitioner JACINTO M. TANGUILIG the
balance of P15,000.00 with interest at the legal rate from
the date of the filing of the complaint. In return, petitioner
is ordered to "reconstruct subject defective windmill
system, in accordance with the one-year guaranty" and
to complete the same within three (3) months from the
finality of this decision.
Obligations and Contracts Terms: Fortuitous Events-
Refers to an occurrence or happening which could not
be foreseen, or even if foreseen, is inevitable. It is
necessary that the obligor is free from negligence.
Fortuitous events may be produced by two (2) general
causes: (1) by Nature, such as but not limited to,
earthquakes, storms, floods, epidemics, fires, and (2) by
the act of man, such as but not limited to, armed
invasion, attack by bandits, governmental prohibitions,
robbery, provided that they have the force of an
imposition which the contractor or supplier could not
have resisted.
11 NAKPIL & SONS vs. CA
FACTS: Private respondents – Philippine Bar
Association (PBA) – a non-profit organization formed
under the corporation law decided to put up a building in
Intramuros, Manila. Hired to plan the specifications of
the building were Juan Nakpil & Sons, while United
Construction was hired to construct it. The proposal was
approved by the Board of Directors and signed by the
President, Ramon Ozaeta. The building was completed
in 1966.
In 1968, there was an unusually strong earthquake
which caused the building heavy damage, which led the
building to tilt forward, leading the tenants to vacate the
premises. United Construction took remedial measures
to sustain the building.
PBA filed a suit for damages against United
Construction, but United Construction subsequently filed
a suit against Nakpil and Sons, alleging defects in the
plans and specifications.
Technical Issues in the case were referred to Mr. Hizon,
as a court appointed Commissioner. PBA moved for the
demolition of the building, but was opposed. PBA
eventually paid for the demolition after the building
suffered more damages in 1970 due to previous
earthquakes. The Commissioner found that there were
deviations in the specifications and plans, as well as
defects in the construction of the building.
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DUMLAO, Cheyenne Hope OBLICON Assignment #2 COMPILED DIGESTS
ISSUE: Whether or not an act of God (fortuitous event)
exempts from liability parties who would otherwise be
due to negligence?
HELD: Art. 1723 dictates that the engineer/architect and
contractor are liable for damages should the building
collapse within 15 years from completion.
Art. 1174 of the NCC, however, states that no person
shall be responsible for events, which could not be
foreseen. But to be exempt from liability due to an act of
God, the ff must occur:
1) cause of breach must be independent of the will of the
debtor
2) event must be unforeseeable or unavoidable
3) event must be such that it would render it impossible
for the debtor to fulfill the obligation
4) debtor must be free from any participation or
aggravation of the industry to the creditor.
In the case at bar, although the damage was ultimately
caused by the earthquake which was an act of God, the
defects in the construction, as well as the deviations in
the specifications and plans aggravated the damage,
and lessened the preventive measures that the building
would otherwise have had.
12 REPUBLIC vs. LUZON STEVEDORING
FACTS: A barge being towed by tugboats "Bangus" and
"Barbero" all owned by Luzon Stevedoring Corp.
rammed one of the wooden piles of the Nagtahan Bailey
Bridge due to the swollen current of the Pasig after
heavy rains days before. The Republic sued Luzon
Stevedoring for actual and consequential damages.
Luzon Stevedoring claimed it had exercised due
diligence in the selection and supervision of its
employees; that the damages to the bridge were caused
by force majeure; that plaintiff has no capacity to sue;
and that the Nagtahan Bailey bridge is an obstruction to
navigation.
ISSUE: Whether or not the collision of appellant's barge
with the supports or piers of the Nagtahan bridge was in
law caused by fortuitous event or force majeure.
HELD: There is a presumption of negligence on part of
the employees of Luzon Stevedoring, as the Nagtahan
Bridge is stationary. For caso fortuito or force
majeure (which in law are identical in so far as they
exempt an obligor from liability) by definition, are
extraordinary events not foreseeable or avoidable,
"events that could not be foreseen, or which, though
foreseen, were inevitable" (Art. 1174, Civ. Code of the
Philippines). It is, therefore, not enough that the event
should not have been foreseen or anticipated, as is
commonly believed, but it must be one impossible to
foresee or to avoid. The mere difficulty to foresee the
happening is not impossibility to foresee the same.
San Beda College of Law - Mendiola
Luzon Stevedoring knew the perils posed by the swollen
stream and its swift current, and voluntarily entered into
a situation involving obvious danger; it therefore assured
the risk, and cannot shed responsibility merely because
the precautions it adopted turned out to be insufficient. It
is thus liable for damages.
 FAR EAST BANK & TRUST CO. vs. CA
FACTS: Private respondent Luis A. Luna applied for,
and was accorded, a Fareast card issued by petitioner
FEBTC.
Clarita informed FEBTC that she lost her credit card. In
order to replace the lost card, Clarita submitted an
affidavit of loss. In cases of this nature, the bank's
internal security procedures and policy would
be torecord the lost card, along with the principal card,
as a "HotCard" or "Cancelled Card" in its master file.
Luis then tendered a despedida lunch for a close friend.
When he presented his fareast card to pay for the lunch,
the card was not honored, forcing him to pay in cash the
bill. Naturally, Luis felt embarrassed by this incident.
Private respondent Luis Luna, through counsel,
demanded from FEBTC the payment of damages.
Adrian V. Festejo, a vice-president of the bank,
expressed the bank's apologies, admitting that they have
failed to inform Luis about its security policy.
Private respondents then filed a complaint for damages
in the RTC, which rendered a decision ordering FEBTC
to pay private respondents moral damages, exemplary
damages, and attorney’s fees.
ISSUE: Whether or not private respondents are entitled
of moral damages.
HELD: NO. In culpa contractual, moral damages may
be recovered where the defendant is shown to have
acted in bad faith or with malice in the breach of the
contract.
Concededly, the bank was negligent for failing to inform
Luis of his own card's cancellation. Nothing in the
findings of the trial court and the appellate court can
sufficiently indicate any deliberate intent on the part of
FEBTC to cause harm to private respondents. The
failure to inform Luis is not considered to be so gross
that it would amount to malice or bad faith. Malice or bad
faith implies a conscious and intentional design to do a
wrongful act for a dishonest purpose or moral obliguity; it
is different from the negative idea of negligence in that
malice or bad faith contemplates a state of mind
affirmatively operating with furtive design or ill-will.
Article 21 of the Code contemplates a conscious act to
cause harm. In relation to a breach of contract, its
application can be warranted only when the defendant's
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DUMLAO, Cheyenne Hope OBLICON Assignment #2 COMPILED DIGESTS
disregard of his contractual obligation is so deliberate as
to approximate a degree of misconduct certainly no less
worse than fraud or bad faith. Most importantly, Article
21 is a mere declaration of a general principle in human
relations that clearly must, in any case, give way to the
specific provision of Article 2220 of the Civil Code
authorizing the grant of moral damages in culpa
contractual solely when the breach is due to fraud or bad
faith.
The decision is modified by deleting the award of moral
and exemplary damages to private respondents; in its
stead, petitioner is ordered to pay nominal damages
sanctioned under Article 2221 of the Civil Code
14 SALUGADA vs. FEU
FACTS: Petitioner Joseph Saludaga was a sophomore
law student of respondent Far Eastern University (FEU)
when he was shot by Alejandro Rosete (Rosete), one of
the security guards on duty at the school premises on
August 18, 1996. Petitioner was rushed to FEU-Dr.
Nicanor Reyes Medical Foundation (FEU-NRMF) due to
the wound he sustained. Meanwhile, Rosete was
brought to the police station where he explained that the
shooting was accidental. Saludaga thereafter filed a
complaint for damages against respondents on the
ground that they breached their obligation to provide
students with a safe and secure environment and an
atmosphere conducive to learning. Respondents, in turn,
filed a Third-Party Complaint against Galaxy
Development and Management Corporation (Galaxy),
the agency contracted by respondent FEU to provide
security services within its premises and Mariano D.
Imperial (Imperial), Galaxys President, to indemnify them
for whatever would be adjudged in favor of petitioner, if
any; and to pay attorneys fees and cost of the suit.
ISSUES: What is the source of FEU’s obligation to
indemnify Saludaga? What is needed to prove that this
obligation of FEU exists?
In the alternative, is FEU vicariously liable under Article
2180 of the Civil Code.
HELD: Culpa contractual. It is settled that in culpa
contractual, the mere proof of the existence of the
contract and the failure of its compliance justify, prima
facie, a corresponding right of relief. In the instant case,
we find that, when petitioner was shot inside the campus
by no less the security guard who was hired to maintain
peace and secure the premises, there is a prima facie
showing that respondents failed to comply with its
obligation to provide a safe and secure environment to
its students.
No. Respondents cannot be held liable for damages
under Article 2180 of the Civil Code because
respondents are not the employers of Rosete. The latter
was employed by Galaxy. The instructions issued by
San Beda College of Law - Mendiola
respondents Security Consultant to Galaxy and its
security guards are ordinarily no more than requests
commonly envisaged in the contract for services entered
into by a principal and a security agency. They cannot
be construed as the element of control as to treat
respondents as the employers of Rosete.
15 FIL ESTATE PROPERTIES vs. SPS RONQUILLO
FACTS: On December 29, 1995, petitioner Fil-Estate
Properties, Inc. (Fil-Estate) entered into a contract to sell
a condominium unit to respondent spouses Gonzalo and
Consuelo Go. The spouses paid a total of P3,
439,000.07 of the full contract price set at P3,
620,000.00.
Fil-Estate failed to develop the condominium project. On
August 4, 1999, the spouses demanded the refund of
the amount they paid, plus interest. When Fil-Estate did
not refund the spouses, the latter filed a complaint
against petitioner for reimbursement plus interest before
the Housing and Land Use Regulatory Board (HLURB).
In answer, Fil-Estate claimed that respondents had no
cause of action since the delay in the construction of the
condominium was caused by the financial crisis that hit
the Asian region, a fortuitous event over which petitioner
had no control.
HLURB Regional Director approved the decision of the
Housing and Land Use Arbiter in favor of the spouses
Go. The Court of Appeals affirmed the actions taken by
the HLURB and the Office of the President and declared
that the Asian financial crisis could not be considered a
fortuitous event.
Fil-Estate explained that the extreme economic exigency
and extraordinary currency fluctuations could not have
been reasonably foreseen and were beyond the
contemplation of both parties when they entered the
contract. It further asserted that the resultant economic
collapse of the real estate industry was unforeseen by
the whole Asia and if it was indeed foreseeable, then all
those engaged in the real estate business should have
foreseen the impending fiasco.
ISSUE: Whether or not the Asian financial crisis could be
considered a fortuitous event.
HELD: No. The Supreme Court held that the Asian
financial crisis cannot be generalized as unforeseeable
and beyond the control of the business corporation. A
real estate enterprise engaged in the pre-selling of
condominium units is concededly a master in projections
on commodities and currency movements and business
risks. The fluctuating movement of the Philippine peso in
the foreign exchange market is an everyday occurrence,
and fluctuations in currency exchange rates happen
every day, thus, not an instance of caso fortuito.
17 SEONE vs. FRANCO
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DUMLAO, Cheyenne Hope OBLICON Assignment #2 COMPILED DIGESTS
FACTS: This is an appeal from a judgment of the Court
of First Instance of Zamboanga in favor of the plaintiff,
holding that the right of action upon the mortgage debt
which was the basis of the claim presented against the
plaintiff’s estate had already prescribed. The mortgage in
question, which is to secure the payment of the sum of
P4,876.01, the debtor agreeing to pay the sum “little by
little.” After 27 years, nothing has been paid either of the
principal or of the interest. The obligation seems to leave
the duration of the period for the payment thereof to the
will of the debtor. It appears also that it was the intention
of the instrument to give the debtor time within which to
pay the obligation.
ISSUE: Whether or not the creditor may demand
immediate performance of the obligation, given that
there is no date stipulated by the parties as to when it
should become due and payable.
HELD: In such cases this court has held, on several
occasions, that the obligation is not due and payable
until an action has been commenced by the mortgagee
against the mortgagor for the purpose of having the
court fix the date on and after which the instrument shall
be payable and the date of maturity is fixed in pursuance
thereof. Such being the case, as action should have
been brought for the purpose of having the court set a
date on which the instrument should become due and
payable. Until such action was prosecuted no suit could
be instrument. It is, therefore, clear that this action is
premature. The instrument has been sued upon before it
is due. The action must accordingly be dismissed.
Ordinarily when an action of this sort is dismissed the
plaintiff may at once begin his action for the purpose of
fixing a date upon which the instrument shall become
due. From the undisputed facts in this case and from the
facts and conditions that very probably cannot be
charged hereafter, it is our present opinion that such
action is itself prescribed. The judgment was affirmed,
with cost against the appellant.
19 SICAM vs. JORGE
FACTS: On different dates, Lulu Jorge pawned several
pieces of jewelry with Agencia de R. C. Sicam located in
Parañaque to secure a loan.
On October 19, 1987, two armed men entered the
pawnshop and took away whatever cash and jewelry
were found inside the pawnshop vault.
On the same date, Sicam sent Lulu a letter informing her
of the loss of her jewelry due to the robbery incident in
the pawnshop. Respondent Lulu then wroteback
expressing disbelief, then requested Sicam to prepare
the pawned jewelry for withdrawal on November 6, but
Sicam failed to return the jewelry.
San Beda College of Law - Mendiola
Lulu, joined by her husband Cesar, filed a complaint
against Sicam with the RTC of Makati seeking
indemnification for the loss of pawned jewelry and
payment of AD, MD and ED as well as AF.
The RTC rendered its Decision dismissing respondents’
complaint as well as petitioners’ counterclaim.
Respondents appealed the RTC Decision to the CA
which reversed the RTC, ordering the appellees to pay
appellants the actual value of the lost jewelry and AF.
Petitioners MR denied, hence the instant petition for
review on Certiorari.
ISSUE: Are the petitioners liable for the loss of the
pawned articles in their possession? (Petitioners insist
that they are not liable since robbery is a fortuitous event
and they are not negligent at all.)
HELD: The Decision of the CA is AFFIRMED. YES
Article 1174 of the Civil Code provides:
Art. 1174. Except in cases expressly specified
by the law, or when it is otherwise declared by
stipulation, or when the nature of the obligation requires
the assumption of risk, no person shall be responsible
for those events which could not be foreseen or which,
though foreseen, were inevitable.
Fortuitous events by definition are extraordinary events
not foreseeable or avoidable. It is therefore, not enough
that the event should not have been foreseen or
anticipated, as is commonly believed but it must be one
impossible to foresee or to avoid. The mere difficulty to
foresee the happening is not impossibility to foresee the
same.
To constitute a fortuitous event, the following elements
must concur:
(a) the cause of the unforeseen and unexpected
occurrence or of the failure of the debtor to comply with
obligations must be independent of human will;
(b) it must be impossible to foresee the event that
constitutes the caso fortuito or, if it can be foreseen, it
must be impossible to avoid;
(c) the occurrence must be such as to render it
impossible for the debtor to fulfill obligations in a normal
manner; and,
(d) the obligor must be free from any participation in the
aggravation of the injury or loss.
The burden of proving that the loss was due to a
fortuitous event rests on him who invokes it. And, in
order for a fortuitous event to exempt one from liability, it
is necessary that one has committed no negligence or
misconduct that may have occasioned the loss.
Sicam had testified that there was a security guard in
their pawnshop at the time of the robbery. He likewise
testified that when he started the pawnshop business in
1983, he thought of opening a vault with the nearby bank
for the purpose of safekeeping the valuables but was
10
DUMLAO, Cheyenne Hope OBLICON Assignment #2 COMPILED DIGESTS
discouraged by the Central Bank since pawned articles
should only be stored in a vault inside the pawnshop.
The very measures which petitioners had allegedly
adopted show that to them the possibility of robbery was
not only foreseeable, but actually foreseen and
anticipated. Sicam’s testimony, in effect, contradicts
petitioners’ defense of fortuitous event.
Moreover, petitioners failed to show that they were free
from any negligence by which the loss of the pawned
jewelry may have been occasioned.
Robbery per se, just like carnapping, is not a fortuitous
event. It does not foreclose the possibility of negligence
on the part of herein petitioners.
Petitioners merely presented the police report of the
Parañaque Police Station on the robbery committed
based on the report of petitioners’ employees which is
not sufficient to establish robbery. Such report also does
not prove that petitioners were not at fault. On the
contrary, by the very evidence of petitioners, the CA did
not err in finding that petitioners are guilty of concurrent
or contributory negligence as provided in Article 1170 of
the Civil Code, to wit:
Art. 1170. Those who in the performance of their
obligations are guilty of fraud, negligence, or delay, and
those who in any manner contravene the tenor thereof,
are liable for damages.
**
Article 2123 of the Civil Code provides that with regard
to pawnshops and other establishments which are
engaged in making loans secured by pledges, the
special laws and regulations concerning them shall be
observed, and subsidiarily, the provisions on pledge,
mortgage and antichresis.
The provision on pledge, particularly Article 2099 of the
Civil Code, provides that the creditor shall take care of
the thing pledged with the diligence of a good father of a
family. This means that petitioners must take care of the
pawns the way a prudent person would as to his own
property.
In this connection, Article 1173 of the Civil Code further
provides:
Art. 1173. 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 time and of the place.
When negligence shows bad faith, the provisions of
Articles 1171 and 2201, paragraph 2 shall apply.
If the law or contract does not state the diligence which
is to be observed in the performance, that which is
expected of a good father of a family shall be required.
San Beda College of Law - Mendiola
We expounded in Cruz v. Gangan that negligence is the
omission to do something which a reasonable man,
guided by those considerations which ordinarily regulate
the conduct of human affairs, would do; or the doing of
something which a prudent and reasonable man would
not do. It is want of care required by the circumstances.
A review of the records clearly shows that petitioners
failed to exercise reasonable care and caution that an
ordinarily prudent person would have used in the same
situation. Petitioners were guilty of negligence in the
operation of their pawnshop business. Sicam’s testimony
revealed that there were no security measures adopted
by petitioners in the operation of the pawnshop.
Evidently, no sufficient precaution and vigilance were
adopted by petitioners to protect the pawnshop from
unlawful intrusion. There was no clear showing that
there was any security guard at all. Or if there was one,
that he had sufficient training in securing a pawnshop.
Further, there is no showing that the alleged security
guard exercised all that was necessary to prevent any
untoward incident or to ensure that no suspicious
individuals were allowed to enter the premises. In fact, it
is even doubtful that there was a security guard, since it
is quite impossible that he would not have noticed that
the robbers were armed with caliber .45 pistols each,
which were allegedly poked at the employees.
Significantly, the alleged security guard was not
presented at all to corroborate petitioner Sicam’s claim;
not one of petitioners’ employees who were present
during the robbery incident testified in court.
Furthermore, petitioner Sicam’s admission that the vault
was open at the time of robbery is clearly a proof of
petitioners’ failure to observe the care, precaution and
vigilance that the circumstances justly demanded.
The robbery in this case happened in petitioners’
pawnshop and they were negligent in not exercising the
precautions justly demanded of a pawnshop.
NOTES:
We, however, do not agree with the CA when it found
petitioners negligent for not taking steps to insure
themselves against loss of the pawned jewelries.
Under Section 17 of Central Bank Circular No. 374,
Rules and Regulations for Pawnshops, which took effect
on July 13, 1973, and which was issued pursuant to
Presidential Decree No. 114, Pawnshop Regulation Act,
it is provided that pawns pledged must be insured, to wit:
Sec. 17. Insurance of Office Building and Pawns- The
place of business of a pawnshop and the pawns pledged
to it must be insured against fire and against burglary as
well as for the latter(sic), by an insurance company
accredited by the Insurance Commissioner.
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DUMLAO, Cheyenne Hope OBLICON Assignment #2 COMPILED DIGESTS
However, this Section was subsequently amended by
CB Circular No. 764 which took effect on October 1,
1980, to wit:
Sec. 17 Insurance of Office Building and Pawns – The
office building/premises and pawns of a pawnshop must
be insured against fire. (emphasis supplied).
where the requirement that insurance against burglary
was deleted. Obviously, the Central Bank considered it
not feasible to require insurance of pawned articles
against burglary.
The robbery in the pawnshop happened in 1987, and
considering the above-quoted amendment, there is no
statutory duty imposed on petitioners to insure the
pawned jewelry in which case it was error for the CA to
consider it as a factor in concluding that petitioners were
negligent.
Nevertheless, the preponderance of evidence shows
that petitioners failed to exercise the diligence required
of them under the Civil Code.
20 AUSTRIA v. CA (1991)
FACTS:
- Maria Abad received from Austria one pendant with
diamonds valued at P4,500 to be sold on a commission
basis or to be returned on demand. On 1
- On 1 February 1961, however, while walking home to
her residence in Mandaluyong, Rizal, Abad was said to
have been accosted by two men, one of whom hit her on
the face, while the other snatched her purse containing
jewelry (including the pendant) and cash, and ran away.
The incident became the subject of a criminal case filed
in CFI Rizal against certain persons (People vs. Rene
Garcia, et al.)
- Austria, upon Abad’s failure to return the jewelry or pay
for its value notwithstanding demands, filed an action
against her and her husband for recovery of the pendant
or of its value, and damages.
- CFI Manila ordered Abads, jointly and severally, to pay
Austria P4,500.00, with legal interest thereon, plus
P450.00 as reasonable attorneys' fees, and the costs. It
held that Abads failed to prove the fact of robbery, or, if
indeed it was committed, that Maria was guilty of
negligence when she went home without any
companion, although it was already getting dark and she
was carrying a large amount of cash and valuables, and
such negligence did not free her from liability for
damages for the loss of the jewelry.
- CA overruled the finding of CFI on the lack of credibility
of the two defense witnesses who testified on the
occurrence of the robbery, and holding that the facts of
robbery and Abad’s possession of the pendant on that
unfortunate day have been duly established, declared
Abads not responsible for the loss of the jewelry on
account of a fortuitous event, and relieved them from
liability for damages to the owner.
San Beda College of Law - Mendiola
- Austria’s theory is for robbery to fall under the category
of a fortuitous event and relieve the obligor from his
obligation under a contract, pursuant to A1174, NCC,
there ought to be prior finding on the guilt of the persons
responsible therefor. To adopt a different view, he
argued, would be to encourage persons accountable for
goods or properties received in trust or consignment to
connive with others, who would be willing to be accused
in court for the robbery, in order to be absolved from civil
liability for the loss or disappearance of the entrusted
articles.
ISSUES:
• WON in a contract of agency (consignment of
goods for sale) it is necessary that there be prior
conviction for robbery before the loss of the article shall
exempt the consignee from liability for such loss.
RULING
o NO. To constitute a caso fortuito that would
exempt a person from responsibility, it is necessary that
(1) the event must be independent of the human will (or
rather, of the debtor's or obligor's); (2) the occurrence
must render it impossible for the debtor to fulfill the
obligation in a normal manner, and that (3) the obligor
must be free of participation in, or aggravation of, the
injury to the creditor.
o A fortuitous event, therefore, can be produced
by nature, e.g., earthquakes, storms, floods, etc., or by
the act of man, such as war, attack by bandits, robbery,
etc., provided that the event has all the characteristics
enumerated above.
o A1174’s emphasis of the provision is on the
events, not on the agents or factors responsible for
them. To avail of the exemption granted in the law, it is
not necessary that the persons responsible for the
occurrence should be found or punished; it would only
be sufficient to establish that the unforeseeable event,
the robbery in this case, did take place without any
concurrent fault on the debtor's part, and this can be
done by preponderant evidence. To require in the
present action for recovery the prior conviction of the
culprits in the criminal case, in order to establish the
robbery as a fact, would be to demand proof beyond
reasonable doubt to prove a fact in a civil case.
o Re: third requirement: Under the circumstances
prevailing at present in the City of Manila and its
suburbs, with their high incidence of crimes against
persons and property, that renders travel after nightfall a
matter to be sedulously avoided without suitable
precaution and protection, Maria’s conduct, in returning
alone to her house in the evening, carrying jewelry of
considerable value, would be negligent per se, and
would not exempt her from responsibility in the case of a
robbery. The SC was not persuaded, however, that the
same rule should obtain ten years previously, in 1961,
when the robbery in question did take place, for at that
time criminality had not by far reached the levels
attained in the present day.
12
DUMLAO, Cheyenne Hope OBLICON Assignment #2 COMPILED DIGESTS
o There is also no merit in Austria’s argument that
to allow the fact of robbery to be recognized in the civil
case before conviction is secured in the criminal action,
would prejudice the latter case, or would result in
inconsistency should the accused obtain an acquittal or
should the criminal case be dismissed. A court finding
that a robbery has happened would not necessarily
mean that those accused in the criminal action should be
found guilty of the crime; nor would a ruling that those
actually accused did not commit the robbery be
inconsistent with a finding that a robbery did take place.
The evidence to establish these facts would not
necessarily be the same.
22 YOBIDO vs. CA
FACTS: Spouses Tito and Leny Tumboy and their minor
children named Ardee and Jasmin, boarded a Yobido
Liner bus bound for Davao City. Along the trip, the left
front tire of the bus exploded. The bus fell into a ravine
around 3 ft. from the road and struck a tree. The incident
resulted in the death of Tito and physical injuries to other
passengers.
Factual backdrop based on testimony of Leny: the
winding road the bus traversed was not cemented and
was wet due to the rain; it was rough with crushed rocks.
The bus which was full of passengers had cargoes on
top. Since it was running fast, (at a speed of 50-60kph
based on another witness’ testimony) she cautioned the
driver to slow down but he merely stared at her through
the mirror.
A complaint for breach of contract of carriage was filed
by Leny and her children against Alberta Yobido, the
owner of the bus, and Cresencio Yobido, its driver;
Yobidos raised the affirmative defense of caso fortuito;
they also filed a third-party complaint against Philippine
Phoenix Surety and Insurance, Inc.
Upon a finding that the third party defendant was not
liable under the insurance contract, the lower court
dismissed the third party complaint.
ISSUE: Whether the tire blow-out is a fortuitous event
HELD: No.
 Characteristics of fortuitous event:
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 fortuito, or if it can be foreseen, it
must be impossible to avoid;
c) The occurrence must be such as to render it
impossible for the debtor to fulfill his obligation in a
normal manner; and
d) the obligor must be free from any participation in the
aggravation of the injury resulting to the creditor
San Beda College of Law - Mendiola
 Art 1174: no person shall be responsible for a
fortuitous event which could not be foreseen, or
which, though foreseen, was inevitable
 tire blowout - mechanical defect of the conveyance
or a fault in its equipment which was easily
discoverable if the bus had been subjected to a
more thorough or rigid check-up before it took to the
road
 When a passenger boards a common carrier, he
takes the risks incidental to the mode of travel he
has taken. After all, a carrier is not an insurer of the
safety of its passengers and is not bound absolutely
and at all events to carry them safely and without
injury. However, when a passenger is injured or
dies while travelling, the law presumes that the
common carrier is negligent. (see Art. 1756)
 Art. 1755 provides that a common carrier is bound
to carry the passengers safely as far as human care
and foresight can provide, using the utmost
diligence of very cautious persons, with a due
regard for all the circumstances. In culpa
contractual, once a passenger dies or is injured, the
carrier is presumed to have been at fault or to have
acted negligently. This disputable presumption may
only be overcome by evidence that the carrier had
observed extraordinary diligence as prescribed by
Arts. 1733, 1755 and 1756 or that the death or
injury of the passenger was due to a fortuitous
event.
 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.
23 JUNTILLA vs. FONTANAR
Facts: Herein plaintiff was a passenger of the public
utility jeepney on course from Danao City to Cebu City.
The jeepney was driven by driven by defendant Berfol
Camoro and registered under the franchise of Clemente
Fontanar. When the jeepney reached Mandaue City, the
right rear tire exploded causing the vehicle to turn turtle.
In the process, the plaintiff who was sitting at the front
seat was thrown out of the vehicle. Plaintiff suffered a
lacerated wound on his right palm aside from the injuries
he suffered on his left arm, right thigh, and on his back.
Plaintiff filed a case for breach of contract with damages
before the City Court of Cebu City. Defendants, in their
answer, alleged that the tire blow out was beyond their
control, taking into account that the tire that exploded
was newly bought and was only slightly used at the time
it blew up.
Issue: Whether or not the tire blow-out is a fortuitous
event?
13
DUMLAO, Cheyenne Hope OBLICON Assignment #2 COMPILED DIGESTS
Held: No. In the case at bar, the cause of the unforeseen
and unexpected occurrence was not independent of the
human will. The accident was caused either through the
negligence of the driver or because of mechanical
defects in the tire. Common carriers should teach drivers
not to overload their vehicles, not to exceed safe and
legal speed limits, and to know the correct measures to
take when a tire blows up thus insuring the safety of
passengers at all times.
24 PERLA COMPANIA DE SEGUROS vs. SARANGAY
FACTS: Milagros Cayas was the registered owner of a
Mazda bus. Said passenger vehicle was insured with
Perla Compania de Seguros, Inc. (PCSI) under a policy
issued on February 3, 1978. On December 17, 1978, the
bus figured in an accident in Naic, Cavite injuring several
of its passengers. One of them, 19-year old Edgardo
Perea, sued Milagros Cayas for damages in the Court of
First Instance; while three others, namely: Rosario del
Carmen, Ricardo Magsarili and Charlie Antolin, agreed
to a settlement of P4,000.00 each. At the pre-trial,
Milagros Cayas failed to appear and hence, she was
declared as in default. After trial, the court rendered a
decision in favor of Perea to compensate the Perea with
damages of Pl0,000.00 for medical fees; P10,000.00 for
exemplary damages; P5,000.00 for moral damages;
P7,000.00 for Attorney's fees.
On November 11, 1981, Milagros Cayas filed a
complaint for a sum of money and damages against
PCSI in the Court of First Instance. Milagros Cayas filed
a motion to declare PCSI in default for its failure to file
an answer. The motion was granted and Cayas was
allowed to adduce evidence ex-parte. On July 13, 1982,
the court rendered judgment by default ordering PCSI to
pay Milagros Cayas P50,000 as compensation for the
injured passengers, P5,000 as moral damages and
P5,000 as attorney's fees.
Said decision was set aside after the PCSI filed a motion
therefor. In due course, the court promulgated a decision
in favor of Cayas, but removed the award of moral
damages.
PCSI appealed to the Court of Appeals, which, in its
decision of May 8, 1987 the lower court's decision. Its
motion for reconsideration having been denied, PCSI
filed the instant petition charging the Court of Appeals
with having erred in affirming in toto the decision of the
lower court.
ISSUE: Whether or not the amount of award of damages
was proper.
RULING: NO. PCSI seeks to limit its liability only to the
payment made by Cayas to Perea and only up to the
amount of P12,000.00. It altogether denies liability for
the payments made by Cayas to the other three (3)
injured passengers Rosario del Carmen, Ricardo
San Beda College of Law - Mendiola
Magsarili and Charlie Antolin in the amount of P4,000.00
each or a total of P12,000.00.
The insurance policy involved explicitly limits PCSI's
liability to P12,000.00 per person and to P50,000.00 per
accident.
We have ruled in Stokes vs. Malayan Insurance Co.,
Inc., that the terms of the contract constitute the
measure of the insurer's liability and compliance
therewith is a condition precedent to the insured's right
of recovery from the insurer.
In the case at bar, the insurance policy clearly and
categorically placed PCSI's liability for all damages
arising out of death or bodily injury sustained by one
person as a result of any one accident at P12,000.00.
Said amount complied with the minimum fixed by the law
then prevailing, Section 377 of Presidential Decree No.
612 (which was retained by P.D. No. 1460, the
Insurance Code of 1978), which provided that the liability
of land transportation vehicle operators for bodily injuries
sustained by a passenger arising out of the use of their
vehicles shall not be less than P12,000. In other words,
under the law, the minimum liability is P12,000 per
passenger. PCSI's liability under the insurance contract
not being less than P12,000.00, and therefore not
contrary to law, morals, good customs, public order or
public policy, said stipulation must be upheld as
effective, valid and binding as between the parties.
In like manner, we rule as valid and binding upon Cayas
the condition in the policy in requiring her to secure the
written permission of PCSI before effecting any payment
in settlement of any claim against her. There is nothing
unreasonable, arbitrary or objectionable in this
stipulation as would warrant its nullification. The same
was obviously designed to safeguard the insurer's
interest against collusion between the insured and the
claimants.
In her cross-examination before the trial court, Milagros
Cayas admitted that PCSI did not give any written
authority that Cayas were supposed to pay those claims.
It being specifically required that PCSI's written consent
be first secured before any payment in settlement of any
claim could be made, Cayas is precluded from seeking
reimbursement of the payments made to del Carmen,
Magsarili and Antolin in view of her failure to comply with
the condition contained in the insurance policy.
Clearly, the fundamental principle that contracts are
respected as the law between the contracting parties
finds application in the present case. Thus, it was error
on the part of the trial and appellate courts to have
disregarded the stipulations of the parties and to have
substituted their own interpretation of the insurance
policy.
14
DUMLAO, Cheyenne Hope OBLICON Assignment #2 COMPILED DIGESTS
We observe that although Milagros Cayas was able to
prove a total loss of only P44,000.00, PCSI was made
liable for the amount of P50,000.00, the maximum
liability per accident stipulated in the policy. This is
patent error. An insurance indemnity, being merely an
assistance or restitution insofar as can be fairly
ascertained, cannot be availed of by any accident victim
or claimant as an instrument of enrichment by reason of
an accident.
WHEREFORE, the decision of the Court of Appeals is
hereby modified in that petitioner shall pay Milagros
Cayas the amount of Twelve Thousand Pesos (P12,000.
00) plus legal interest from the promulgation of the
decision of the lower court until it is fully paid and
attorney's fees in the amount of P5,000.00. No
pronouncement as to costs.
San Beda College of Law - Mendiola
HELD: No. The Supreme Court held that the Asian
financial crisis cannot be generalized as unforeseeable
and beyond the control of the business corporation. A
real estate enterprise engaged in the pre-selling of
condominium units is concededly a master in projections
on commodities and currency movements and business
risks. The fluctuating movement of the Philippine peso in
the foreign exchange market is an everyday occurrence,
and fluctuations in currency exchange rates happen
every day, thus, not an instance of caso fortuito.

25 FIL-ESTATE PROPERTIES vs. GO

FACTS: On December 29, 1995, petitioner Fil-Estate
Properties, Inc. (Fil-Estate) entered into a contract to sell
a condominium unit to respondent spouses Gonzalo and
Consuelo Go. The spouses paid a total of P3,
439,000.07 of the full contract price set at P3,
620,000.00.

Fil-Estate failed to develop the condominium project. On

August 4, 1999, the spouses demanded the refund of
the amount they paid, plus interest. When Fil-Estate did
not refund the spouses, the latter filed a complaint
against petitioner for reimbursement plus interest before
the Housing and Land Use Regulatory Board (HLURB).
In answer, Fil-Estate claimed that respondents had no
cause of action since the delay in the construction of the
condominium was caused by the financial crisis that hit
the Asian region, a fortuitous event over which petitioner
had no control.

HLURB Regional Director approved the decision of the

Housing and Land Use Arbiter in favor of the spouses
Go. The Court of Appeals affirmed the actions taken by
the HLURB and the Office of the President and declared
that the Asian financial crisis could not be considered a
fortuitous event.

Fil-Estate explained that the extreme economic exigency

and extraordinary currency fluctuations could not have
been reasonably foreseen and were beyond the
contemplation of both parties when they entered the
contract. It further asserted that the resultant economic
collapse of the real estate industry was unforeseen by
the whole Asia and if it was indeed foreseeable, then all
those engaged in the real estate business should have
foreseen the impending fiasco.

ISSUE: Whether or not the Asian financial crisis could be

considered a fortuitous event.

15