1

.R. No. L-21749

September 29, 1967

REPUBLIC OF THE PHILIPPINES, plaintiff-appellee, vs. LUZON STEVEDORING CORPORATION, defendant-appellant. Office of the Solicitor General for plaintiff-appellee. H. San Luis and L.V. Simbulan for defendant-appellant. REYES, J.B.L., J.: The present case comes by direct appeal from a decision of the Court of First Instance of Manila (Case No. 44572) adjudging the defendantappellant, Luzon Stevedoring Corporation, liable in damages to the plaintiff-appellee Republic of the Philippines. In the early afternoon of August 17, 1960, barge L-1892, owned by the Luzon Stevedoring Corporation was being towed down the Pasig river by tugboats "Bangus" and "Barbero"1 also belonging to the same corporation, when the barge rammed against one of the wooden piles of the Nagtahan bailey bridge, smashing the posts and causing the bridge to list. The river, at the time, was swollen and the current swift, on account of the heavy downpour of Manila and the surrounding provinces on August 15 and 16, 1960. Sued by the Republic of the Philippines for actual and consequential damage caused by its employees, amounting to P200,000 (Civil Case No. 44562, CFI of Manila), defendant Luzon Stevedoring Corporation disclaimed liability therefor, on the grounds that 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. After due trial, the court rendered judgment on June 11, 1963, holding the defendant liable for the damage caused by its empl oyees and ordering it to pay to plaintiff the actual cost of the repair of the Nagtahan bailey bridge which amounted to P192,561.72, with legal interest thereon from the date of the filing of the complaint. Defendant appealed directly to this Court assigning the following errors allegedly committed by the court a quo, to wit: I The lower court erred in not holding that the herein defendant-appellant had exercised the diligence required of it in the selection and supervision of its personnel to prevent damage or injury to others. 1awphl.nt II The lower court erred in not holding that the ramming of the Nagtahan bailey bridge by barge L-1892 was caused by force majeure. III The lower court erred in not holding that the Nagtahan bailey bridge is an obstruction, if not a menace, to navigation in the Pasig river. IV The lower court erred in not blaming the damage sustained by the Nagtahan bailey bridge to the improper placement of the dolphins. V The lower court erred in granting plaintiff's motion to adduce further evidence in chief after it has rested its case. VI The lower court erred in finding the plaintiff entitled to the amount of P192,561.72 for damages which is clearly exorbitant and without any factual basis. However, it must be recalled that the established rule in this jurisdiction is that when a party appeals directly to the Supreme Court, and submits his case there for decision, he is deemed to have waived the right to dispute any finding of fact made by the trial Court. The only questions that may be raised are those of law (Savellano vs. Diaz, L-17441, July 31, 1963; Aballe vs. Santiago, L-16307, April 30, 1963; G.S.I.S. vs. Cloribel, L-22236, June 22, 1965). A converso, a party who resorts to the Court of Appeals, and submits his case for decision there, is barred from contending later that his claim was beyond the jurisdiction of the aforesaid Court. The reason is that a contrary rule would encourage the undesirable practice of appellants' submitting their cases for decision to either court in expectation of favorable judgment, but with intent of attacking its jurisdiction should the decision be unfavorable (Tyson Tan, et al. vs. Filipinas Compaia de Seguros) et al., L-10096, Res. on Motion to Reconsider, March 23, 1966). Consequently, we are limited in this appeal to the issues of law raised in the appellant's brief. Taking the aforesaid rules into account, it can be seen that the only reviewable issues in this appeal are reduced to two: 1) 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, and 2) Whether or not it was error for the Court to have permitted the plaintiff-appellee to introduce additional evidence of damages after said party had rested its case. As to the first question, considering that the Nagtahan bridge was an immovable and stationary object and uncontrovertedly provided with adequate openings for the passage of water craft, including barges like of appellant's, it is undeniable that the unusual event that the barge, exclusively controlled by appellant, rammed the bridge supports raises a presumption of negligence on the part of appellant or its employees manning the barge or the tugs that towed it. For in the ordinary course of events, such a thing does not happen if proper care is used. In Anglo American Jurisprudence, the inference arises by what is known as the "res ipsa loquitur" rule (Scott vs. London Docks Co., 2 H & C 596; San Juan Light & Transit Co. vs. Requena, 224 U.S. 89, 56 L. Ed., 680; Whitwell vs. Wolf, 127 Minn. 529, 149 N.W. 299; Bryne vs. Great Atlantic & Pacific Tea Co., 269 Mass. 130; 168 N.E. 540; Gribsby vs. Smith, 146 S.W. 2d 719).

The appellant strongly stresses the precautions taken by it on the day in question: that it assigned two of its most powerful tugboats to tow down river its barge L-1892; that it assigned to the task the more competent and experienced among its patrons, had the towlines, engines and equipment double-checked and inspected; that it instructed its patrons to take extra precautions; and concludes that it had done all it was called to do, and that the accident, therefore, should be held due to force majeure or fortuitous event. These very precautions, however, completely destroy the appellant's defense. For caso fortuito or force majeure (which in law are identical in so far as they exempt an obligor from liability) 2 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: "un hecho no constituye caso fortuito por la sola circunstancia de que su existencia haga mas dificil o mas onerosa la accion diligente del presento ofensor" (Peirano Facio, Responsibilidad Extra-contractual, p. 465; Mazeaud Trait de la Responsibilite Civil, Vol. 2, sec. 1569). The very measures adopted by appellant prove that the possibility of danger was not only foreseeable, but actually foreseen, and was not caso fortuito. Otherwise stated, the appellant, Luzon Stevedoring Corporation, knowing and appreciating the perils posed by the swollen stream and its swift current, voluntarily entered into a situation involving obvious danger; it therefore assured the risk, and can not shed responsibility merely because the precautions it adopted turned out to be insufficient. Hence, the lower Court committed no error in holding it negligent in not suspending operations and in holding it liable for the damages caused. It avails the appellant naught to argue that the dolphins, like the bridge, were improperly located. Even if true, these circumstances would merely emphasize the need of even higher degree of care on appellant's part in the situation involved in the present case. The appellant, whose barges and tugs travel up and down the river everyday, could not safely ignore the danger posed by these allegedly improper constructions that had been erected, and in place, for years. On the second point: appellant charges the lower court with having abused its discretion in the admission of plaintiff's additional evidence after the latter had rested its case. There is an insinuation that the delay was deliberate to enable the manipulation of evidence to prejudice defendant-appellant. We find no merit in the contention. Whether or not further evidence will be allowed after a party offering the evidence has rested his case, lies within the sound discretion of the trial Judge, and this discretion will not be reviewed except in clear case of abuse.3 In the present case, no abuse of that discretion is shown. What was allowed to be introduced, after plaintiff had rested its evidence in chief, were vouchers and papers to support an item of P1,558.00 allegedly spent for the reinforcement of the panel of the bailey bridge, and which item already appeared in Exhibit GG. Appellant, in fact, has no reason to charge the trial court of being unfair, because it was also able to secure, upon written motion, a similar order dated November 24, 1962, allowing reception of additional evidence for the said defendant-appellant.4 WHEREFORE, finding no error in the decision of the lower Court appealed from, the same is hereby affirmed. Costs against the defendantappellant. Concepcion, C.J., Dizon, Makalintal, Zaldivar, Sanchez, Castro, Angeles and Fernando, JJ., concur. Bengzon, J.P. J., on leave, took no part.

G.R. No. L-12986

March 31, 1966

THE SPOUSES BERNABE AFRICA and SOLEDAD C. AFRICA, and the HEIRS OF DOMINGA ONG,petitioners-appellants, vs. CALTEX (PHIL.), INC., MATEO BOQUIREN and THE COURT OF APPEALS, respondents-appellees. Ross, Selph, Carrascoso and Janda for the respondents. Bernabe Africa, etc. for the petitioners. MAKALINTAL., J.: This case is before us on a petition for review of the decision of the Court of Appeals, which affirmed that of the Court of First Instance of Manila dismissing petitioners' second amended complaint against respondents. The action is for damages under Articles 1902 and 1903 of the old Civil Code. It appears that in the afternoon of March 18, 1948 a fire broke out at the Caltex service station at the corner of Antipolo street and Rizal Avenue, Manila. It started while gasoline was being hosed from a tank truck into the underground storage, right at the opening of the receiving tank where the nozzle of the hose was inserted. The fire spread to and burned several neighboring houses, including the personal properties and effects inside them. Their owners, among them petitioners here, sued respondents Caltex (Phil.), Inc. and Mateo Boquiren, the first as alleged owner of the station and the second as its agent in charge of operation. Negligence on the part of both of them was attributed as the cause of the fire. The trial court and the Court of Appeals found that petitioners failed to prove negligence and that respondents had exercised due care in the premises and with respect to the supervision of their employees. The first question before Us refers to the admissibility of certain reports on the fire prepared by the Manila Police and Fire Departments and by a certain Captain Tinio of the Armed Forces of the Philippines. Portions of the first two reports are as follows: 1. Police Department report:

Investigation disclosed that at about 4:00 P.M. March 18, 1948, while Leandro Flores was transferring gasoline from a tank truck, plate No. T-5292 into the underground tank of the Caltex Gasoline Station located at the corner of Rizal Avenue and Antipolo Street, this City, an unknown Filipino lighted a cigarette and threw the burning match stick near the main valve of the said underground tank. Due to the gasoline fumes, fire suddenly blazed. Quick action of Leandro Flores in pulling off the gasoline hose connecting the truck with the underground tank prevented a terrific explosion. However, the flames scattered due to the hose from which the gasoline was spouting. It burned the truck and the following accessorias and residences. 2. The Fire Department report: In connection with their allegation that the premises was (sic) subleased for the installation of a coca-cola and cigarette stand, the complainants furnished this Office a copy of a photograph taken during the fire and which is submitted herewith. it appears in this picture that there are in the premises a coca-cola cooler and a rack which according to information gathered in the neighborhood contained cigarettes and matches, installed between the gasoline pumps and the underground tanks. The report of Captain Tinio reproduced information given by a certain Benito Morales regarding the history of the gasoline station and what the chief of the fire department had told him on the same subject. The foregoing reports were ruled out as "double hearsay" by the Court of Appeals and hence inadmissible. This ruling is now assigned as error. It is contended: first, that said reports were admitted by the trial court without objection on the part of respondents; secondly, that with respect to the police report (Exhibit V-Africa) which appears signed by a Detective Zapanta allegedly "for Salvador Capacillo," the latter was presented as witness but respondents waived their right to cross-examine him although they had the opportunity to do so; and thirdly, that in any event the said reports are admissible as an exception to the hearsay rule under section 35 of Rule 123, now Rule 130. The first contention is not borne out by the record. The transcript of the hearing of September 17, 1953 (pp. 167-170) shows that the reports in question, when offered as evidence, were objected to by counsel for each of respondents on the ground that they were hearsay and that they were "irrelevant, immaterial and impertinent." Indeed, in the court's resolution only Exhibits J, K, K-5 and X-6 were admitted without objection; the admission of the others, including the disputed ones, carried no such explanation. On the second point, although Detective Capacillo did take the witness stand, he was not examined and he did not testify as to the facts mentioned in his alleged report (signed by Detective Zapanta). All he said was that he was one of those who investigated "the location of the fire and, if possible, gather witnesses as to the occurrence, and that he brought the report with him. There was nothing, therefore, on which he need be cross-examined; and the contents of the report, as to which he did not testify, did not thereby become competent evidence. And even if he had testified, his testimony would still have been objectionable as far as information gathered by him from third persons was concerned. Petitioners maintain, however, that the reports in themselves, that is, without further testimonial evidence on their contents, fall within the scope of section 35, Rule 123, which provides that "entries in official records made in the performance of his duty by a public officer of the Philippines, or by a person in the performance of a duty specially enjoined by law, are prima facie evidence of the facts therein stated." There are three requisites for admissibility under the rule just mentioned: (a) that the entry was made by a public officer, or by another person specially enjoined by law to do so; (b) that it was made by the public officer in the performance of his duties, or by such other person in the performance of a duty specially enjoined by law; and (c) that the public officer or other person had sufficient knowledge of the facts by him stated, which must have been acquired by him personally or through official information (Moran, Comments on the Rules of Court, Vol. 3 [1957] p. 398). Of the three requisites just stated, only the last need be considered here. Obviously the material facts recited in the reports as to the cause and circumstances of the fire were not within the personal knowledge of the officers who conducted the investigation. Was knowledge of such facts, however, acquired by them through official information? As to some facts the sources thereof are not even identified. Others are attributed to Leopoldo Medina, referred to as an employee at the gas station were the fire occurred; to Leandro Flores, driver of the tank truck from which gasoline was being transferred at the time to the underground tank of the station; and to respondent Mateo Boquiren, who could not, according to Exhibit V-Africa, give any reason as to the origin of the fire. To qualify their statements as "official information" acquired by the officers who prepared the reports, the persons who made the statements not only must have personal knowledge of the facts stated but must have the duty to give such statements for record.1 The reports in question do not constitute an exception to the hearsay rule; the facts stated therein were not acquired by the reporting officers through official information, not having been given by the informants pursuant to any duty to do so. The next question is whether or not, without proof as to the cause and origin of the fire, the doctrine of res ipsa loquitur should apply so as to presume negligence on the part of appellees. Both the trial court and the appellate court refused to apply the doctrine in the instant case on the grounds that "as to (its) applicability ... in the Philippines, there seems to he nothing definite," and that while the rules do not prohibit its adoption in appropriate cases, "in the case at bar, however, we find no practical use for such doctrine." The question deserves more than such summary dismissal. The doctrine has actually been applied in this jurisdiction, in the case of Espiritu vs. Philippine Power and Development Co. (CA-G.R. No. 3240-R, September 20, 1949), wherein the decision of the Court of Appeals was penned by Mr. Justice J.B.L. Reyes now a member of the Supreme Court. The facts of that case are stated in the decision as follows: In the afternoon of May 5, 1946, while the plaintiff-appellee and other companions were loading grass between the municipalities of Bay and Calauan, in the province of Laguna, with clear weather and without any wind blowing, an electric transmission wire, installed and maintained by the defendant Philippine Power and Development Co., Inc. alongside the road, suddenly parted, and one of the broken ends hit the head of the plaintiff as he was about to board the truck. As a result, plaintiff received the full shock of 4,400 volts carried by the wire and was knocked unconscious to the ground. The electric charge coursed through his body and caused extensive and serious multiple burns from skull to legs, leaving the bone exposed in some parts and causing intense pain and wounds that were not completely healed when the case was tried on June 18, 1947, over one year after the mishap. The defendant therein disclaimed liability on the ground that the plaintiff had failed to show any specific act of negligence, but the appellate court overruled the defense under the doctrine of res ipsa loquitur. The court said:

The first point is directed against the sufficiency of plaintiff's evidence to place appellant on its defense. While it is the rule, as contended by the appellant, that in case of noncontractual negligence, or culpa aquiliana, the burden of proof is on the plaintiff to establish that the proximate cause of his injury was the negligence of the defendant, it is also a recognized principal that "where the thing which caused injury, without fault of the injured person, is under the exclusive control of the defendant and the injury is such as in the ordinary course of things does not occur if he having such control use proper care, it affords reasonable evidence, in the absence of the explanation, that the injury arose from defendant's want of care." And the burden of evidence is shifted to him to establish that he has observed due care and diligence. (San Juan Light & Transit Co. v. Requena, 244, U.S. 89, 56 L. ed. 680.) This rule is known by the name of res ipsa loquitur (the transaction speaks for itself), and is peculiarly applicable to the case at bar, where it is unquestioned that the plaintiff had every right to be on the highway, and the electric wire was under the sole control of defendant company. In the ordinary course of events, electric wires do not part suddenly in fair weather and injure people, unless they are subjected to unusual strain and stress or there are defects in their installation, maintenance and supervision; just as barrels do not ordinarily roll out of the warehouse windows to injure passersby, unless some one was negligent. (Byrne v. Boadle, 2 H & Co. 722; 159 Eng. Reprint 299, the leading case that established that rule). Consequently, in the absence of contributory negligence (which is admittedly not present), the fact that the wire snapped suffices to raise a reasonable presumption of negligence in its installation, care and maintenance. Thereafter, as observed by Chief Baron Pollock, "if there are any facts inconsistent with negligence, it is for the defendant to prove." It is true of course that decisions of the Court of Appeals do not lay down doctrines binding on the Supreme Court, but we do not consider this a reason for not applying the particular doctrine of res ipsa loquitur in the case at bar. Gasoline is a highly combustible material, in the storage and sale of which extreme care must be taken. On the other hand, fire is not considered a fortuitous event, as it arises almost invariably from some act of man. A case strikingly similar to the one before Us is Jones vs. Shell Petroleum Corporation, et al., 171 So. 447: Arthur O. Jones is the owner of a building in the city of Hammon which in the year 1934 was leased to the Shell Petroleum Corporation for a gasoline filling station. On October 8, 1934, during the term of the lease, while gasoline was being transferred from the tank wagon, also operated by the Shell Petroleum Corporation, to the underground tank of the station, a fire started with resulting damages to the building owned by Jones. Alleging that the damages to his building amounted to $516.95, Jones sued the Shell Petroleum Corporation for the recovery of that amount. The judge of the district court, after hearing the testimony, concluded that plaintiff was entitled to a recovery and rendered judgment in his favor for $427.82. The Court of Appeals for the First Circuit reversed this judgment, on the ground the testi mony failed to show with reasonable certainty any negligence on the part of the Shell Petroleum Corporation or any of its agents or employees. Plaintiff applied to this Court for a Writ of Review which was granted, and the case is now before us for decision. 1wph1.t In resolving the issue of negligence, the Supreme Court of Louisiana held: Plaintiff's petition contains two distinct charges of negligence one relating to the cause of the fire and the other relating to the spreading of the gasoline about the filling station. Other than an expert to assess the damages caused plaintiff's building by the fire, no witnesses were placed on the stand by the defendant. Taking up plaintiff's charge of negligence relating to the cause of the fire, we find it established by the record that the filling station and the tank truck were under the control of the defendant and operated by its agents or employees. We further find from the uncontradicted testimony of plaintiff's witnesses that fire started in the underground tank attached to the filling station while it was being filled from the tank truck and while both the tank and the truck were in charge of and being operated by the agents or employees of the defendant, extended to the hose and tank truck, and was communicated from the burning hose, tank truck, and escaping gasoline to the building owned by the plaintiff. Predicated on these circumstances and the further circumstance of defendant's failure to explain the cause of the fire or to show its lack of knowledge of the cause, plaintiff has evoked the doctrine of res ipsa loquitur. There are many cases in which the doctrine may be successfully invoked and this, we think, is one of them. Where the thing which caused the injury complained of is shown to be under the management of defendant or his servants and the accident is such as in the ordinary course of things does not happen if those who have its management or control use proper care, it affords reasonable evidence, in absence of explanation by defendant, that the accident arose from want of care. (45 C.J. #768, p. 1193). This statement of the rule of res ipsa loquitur has been widely approved and adopted by the courts of last resort. Some of the cases in this jurisdiction in which the doctrine has been applied are the following, viz.: Maus v. Broderick, 51 La. Ann. 1153, 25 So. 977; Hebert v. Lake Charles Ice, etc., Co., 111 La. 522, 35 So. 731, 64 L.R.A. 101, 100 Am. St. Rep. 505; Willis v. Vicksburg, etc., R. Co., 115 La. 63, 38 So. 892; Bents v. Page, 115 La. 560, 39 So. 599. The principle enunciated in the aforequoted case applies with equal force here. The gasoline station, with all its appliances, equipment and employees, was under the control of appellees. A fire occurred therein and spread to and burned the neighboring houses. The persons who knew or could have known how the fire started were appellees and their employees, but they gave no explanation thereof whatsoever. It is a fair and reasonable inference that the incident happened because of want of care. In the report submitted by Captain Leoncio Mariano of the Manila Police Department (Exh. X-1 Africa) the following appears: Investigation of the basic complaint disclosed that the Caltex Gasoline Station complained of occupies a lot approximately 10 m x 10 m at the southwest corner of Rizal Avenue and Antipolo. The location is within a very busy business district near the Obrero Market, a railroad crossing and very thickly populated neighborhood where a great number of people mill around t until gasoline

tever be theWactjvities of these peopleor lighting a cigarette cannot be excluded and this constitute a secondary hazard to its operation which in turn endangers the entire neighborhood to conflagration. Furthermore, aside from precautions already taken by its operator the concrete walls south and west adjoining the neighborhood are only 21/2 meters high at most and cannot avoid the flames from leaping over it in case of fire. Records show that there have been two cases of fire which caused not only material damages but desperation and also panic in the neighborhood. Although the soft drinks stand had been eliminated, this gasoline service station is also used by its operator as a garage and repair shop for his fleet of taxicabs numbering ten or more, adding another risk to the possible outbreak of fire at this already small but crowded gasoline station. The foregoing report, having been submitted by a police officer in the performance of his duties on the basis of his own personal observation of the facts reported, may properly be considered as an exception to the hearsay rule. These facts, descriptive of the location and objective circumstances surrounding the operation of the gasoline station in question, strengthen the presumption of negligence under the doctrine of res ipsa loquitur, since on their face they called for more stringent measures of caution than those which would satisfy the standard of due diligence under ordinary circumstances. There is no more eloquent demonstration of this than the statement of Leandro Flores before the police investigator. Flores was the driver of the gasoline tank wagon who, alone and without assistance, was transferring the contents thereof into the underground storage when the fire broke out. He said: "Before loading the underground tank there were no people, but while the loading was going on, there were people who went to drink coca-cola (at the coca-cola stand) which is about a meter from the hole leading to the underground tank." He added that when the tank was almost filled he went to the tank truck to close the valve, and while he had his back turned to the "manhole" he, heard someone shout "fire." Even then the fire possibly would not have spread to the neighboring houses were it not for another negligent omission on the part of defendants, namely, their failure to provide a concrete wall high enough to prevent the flames from leaping over it. As it was the concrete wall was only 2-1/2 meters high, and beyond that height it consisted merely of galvanized iron sheets, which would predictably crumple and melt when subjected to intense heat. Defendants' negligence, therefore, was not only with respect to the cause of the fire but also with respect to the spread thereof to the neighboring houses. There is an admission on the part of Boquiren in his amended answer to the second amended complaint that "the fire was caused through the acts of a stranger who, without authority, or permission of answering defendant, passed through the gasoline station and negligently threw a lighted match in the premises." No evidence on this point was adduced, but assuming the allegation to be true certainly any unfavorable inference from the admission may be taken against Boquiren it does not extenuate his negligence. A decision of the Supreme Court of Texas, upon facts analogous to those of the present case, states the rule which we find acceptable here. "It is the rule that those who distribute a dangerous article or agent, owe a degree of protection to the public proportionate to and commensurate with a danger involved ... we think it is the generally accepted rule as applied to torts that 'if the effects of the actor's negligent conduct actively and continuously operate to bring about harm to another, the fact that the active and substantially simultaneous operation of the effects of a third person's innocent, tortious or criminal act is also a substantial factor in bringing about the harm, does not protect the actor from liability.' (Restatement of the Law of Torts, vol. 2, p. 1184, #439). Stated in another way, "The intention of an unforeseen and unexpected cause, is not sufficient to relieve a wrongdoer from consequences of negligence, if such negligence directly and proximately cooperates with the independent cause in the resulting injury." (MacAfee, et al. vs. Traver's Gas Corporation, 153 S.W. 2nd 442.) The next issue is whether Caltex should be held liable for the damages caused to appellants. This issue depends on whether Boquiren was an independent contractor, as held by the Court of Appeals, or an agent of Caltex. This question, in the light of the facts not controverted, is one of law and hence may be passed upon by this Court. These facts are: (1) Boquiren made an admission that he was an agent of Caltex; (2) at the time of the fire Caltex owned the gasoline station and all the equipment therein; (3) Caltex exercised control over Boquiren in the management of the state; (4) the delivery truck used in delivering gasoline to the station had the name of CALTEX painted on it; and (5) the license to store gasoline at the station was in the name of Caltex, which paid the license fees. (Exhibit T-Africa; Exhibit U-Africa; Exhibit X-5 Africa; Exhibit X-6 Africa; Exhibit Y-Africa). In Boquiren's amended answer to the second amended complaint, he denied that he directed one of his drivers to remove gasoline from the truck into the tank and alleged that the "alleged driver, if one there was, was not in his employ, the driver being an employee of the Caltex (Phil.) Inc. and/or the owners of the gasoline station." It is true that Boquiren later on amended his answer, and that among the changes was one to the effect that he was not acting as agent of Caltex. But then again, in his motion to dismiss appellants' second amended complaint the ground alleged was that it stated no cause of action since under the allegations thereof he was merely acting as agent of Caltex, such that he could not have incurred personal liability. A motion to dismiss on this ground is deemed to be an admission of the facts alleged in the complaint. Caltex admits that it owned the gasoline station as well as the equipment therein, but claims that the business conducted at the service station in question was owned and operated by Boquiren. But Caltex did not present any contract with Boquiren that would reveal the nature of their relationship at the time of the fire. There must have been one in existence at that time. Instead, what was presented was a license agreement manifestly tailored for purposes of this case, since it was entered into shortly before the expiration of the one-year period it was intended to operate. This so-called license agreement (Exhibit 5-Caltex) was executed on November 29, 1948, but made effective as of January 1, 1948 so as to cover the date of the fire, namely, March 18, 1948. This retroactivity provision is quite significant, and gives rise to the conclusion that it was designed precisely to free Caltex from any responsibility with respect to the fire, as shown by the clause that Caltex "shall not be liable for any injury to person or property while in the property herein licensed, it being understood and agreed that LICENSEE (Boquiren) is not an employee, representative or agent of LICENSOR (Caltex)." But even if the license agreement were to govern, Boquiren can hardly be considered an independent contractor. Under that agreement Boquiren would pay Caltex the purely nominal sum of P1.00 for the use of the premises and all the equipment therein. He could sell only Caltex Products. Maintenance of the station and its equipment was subject to the approval, in other words control, of Caltex. Boquiren could not assign or transfer his rights as licensee without the consent of Caltex. The license agreement was supposed to be from January 1, 1948 to December 31, 1948, and thereafter until terminated by Caltex upon two days prior written notice. Caltex could at any time cancel and terminate the agreement in case Boquiren ceased to sell Caltex products, or did not conduct the business with due diligence, in the judgment of Caltex. Termination of the contract was therefore a right granted only to Caltex but not to Boquiren. These provisions of the contract show the extent of the control of Caltex over Boquiren. The control was such that the latter was virtually an employee of the former. Taking into consideration the fact that the operator owed his position to the company and the latter could remove him or terminate his services at will; that the service station belonged to the company and bore its tradename and the operator sold only the products of the company; that the equipment used by the operator belonged to the company and were just loaned to the operator and the company took charge of their repair and maintenance; that an employee of the company supervised the operator and conducted periodic inspection of the company's gasoline and service station; that the price of the products sold by the operator was fixed by the company and not by the

operator; and that the receipts signed by the operator indicated that he was a mere agent, the finding of the Court of Appeals that the operator was an agent of the company and not an independent contractor should not be disturbed. To determine the nature of a contract courts do not have or are not bound to rely upon the name or title given it by the contracting parties, should thereby a controversy as to what they really had intended to enter into, but the way the contracting parties do or perform their respective obligations stipulated or agreed upon may be shown and inquired into, and should such performance conflict with the name or title given the contract by the parties, the former must prevail over the latter. (Shell Company of the Philippines, Ltd. vs. Firemens' Insurance Company of Newark, New Jersey, 100 Phil. 757). The written contract was apparently drawn for the purpose of creating the apparent relationship of employer and independent contractor, and of avoiding liability for the negligence of the employees about the station; but the company was not satisfied to allow such relationship to exist. The evidence shows that it immediately assumed control, and proceeded to direct the method by which the work contracted for should be performed. By reserving the right to terminate the contract at will, it retained the means of compelling submission to its orders. Having elected to assume control and to direct the means and methods by which the work has to be performed, it must be held liable for the negligence of those performing service under its direction. We think the evidence was sufficient to sustain the verdict of the jury. (Gulf Refining Company v. Rogers, 57 S.W. 2d, 183). Caltex further argues that the gasoline stored in the station belonged to Boquiren. But no cash invoices were presented to show that Boquiren had bought said gasoline from Caltex. Neither was there a sales contract to prove the same. As found by the trial court the Africas sustained a loss of P9,005.80, after deducting the amount of P2,000.00 collected by them on the insurance of the house. The deduction is now challenged as erroneous on the ground that Article 2207 of the New Civil Code, which provides for the subrogation of the insurer to the rights of the insured, was not yet in effect when the loss took place. However, regardless of the silence of the law on this point at that time, the amount that should be recovered be measured by the damages actually suffered, otherwise the principle prohibiting unjust enrichment would be violated. With respect to the claim of the heirs of Ong P7,500.00 was adjudged by the lower court on the basis of the assessed value of the property destroyed, namely, P1,500.00, disregarding the testimony of one of the Ong children that said property was worth P4,000.00. We agree that the court erred, since it is of common knowledge that the assessment for taxation purposes is not an accurate gauge of fair market value, and in this case should not prevail over positive evidence of such value. The heirs of Ong are therefore entitled to P10,000.00. Wherefore, the decision appealed from is reversed and respondents-appellees are held liable solidarily to appellants, and ordered to pay them the aforesaid sum of P9,005.80 and P10,000.00, respectively, with interest from the filing of the complaint, and costs. Bengzon, C.J., Bautista Angelo, Concepcion, Reyes, J.B.L., Barrera, Regala, Bengzon, J.P., Zaldivar and Sanchez, JJ., concur. Dizon, J., took no part.

[G. R. No. 141089. August 1, 2002]

METRO MANILA TRANSIT CORPORATION and APOLINARIO AJOC, petitioners, vs. THE COURT OF APPEALS and COL. MARTIN P. SABALBURO, NAPOLEON G. SABALBURO, MARTIN G. SABALBURO, JR., BABY MARIFLOR G. SABALBURO, and MIRASOL G. SABALBURO, respondents. DECISION QUISUMBING, J.: On appeal is the decision[1] of the Court of Appeals promulgated on August 25, 1999 in CA-G.R. CV No. 45002, which affirmed in toto the judgment of the Regional Trial Court of Makati, Branch 62, in Civil Case No. 16062. The trial court found herein petitioners liable for the death of Florentina Sabalburo in a vehicular accident involving a passenger bus owned by petitioner Metro Manila Transit Corporation (MMTC) and driven by petitioner Apolinario Ajoc, and ordered them to pay damages to private respondents. The factual backdrop of this case, as found by the Court of Appeals, is as follows: The eyewitness account of plaintiffs witness, Maria Zenaida Baylon, tends to show that in the afternoon of December 24, 1986, she, her daughter Maria Zenia and the victim, Florentina Sabalburo, were on their way to Baclaran to buy foodstuffs for their Noche Buena. For some time, they stood on the island at the intersection of St. Andrews Street [2] and Domestic Road, [Pasay City] waiting for the traffic light to change so they could cross to the other side of St. Andrews Street where they intended to take a ride for Baclaran. When the traffic light turned red and the vehicles along St. Andrews Street had stopped, the three of them stepped off the island. Just as they started to cross the street, she (Baylon) saw an MMTC bus coming from their right (Tramo) which was moving at a fast speed. The next moment, the left front portion of the bus hit the victim on the right side of her head. The impact was of such force that the victims right ear was slashed off and she thereupon fell on the cement and became unconscious. The victim was brought by the bus driver, Apolinario Ajoc and the bus conductress to the San Juan de Dios Hospital where she was given medical attention. Florentina Sabalburo never regained consciousness and it was on January 3, 1987 that she succumbed to her injuries. [3] On February 16, 1987, private respondents filed a complaint[4] for damages against MMTC and its driver, Ajoc, with the Regional Trial Court of Makati. Docketed as Civil Case No. 16062, the complaint essentially alleged that Ajoc drove the MMTC bus in a wanton and reckless manner, in gross violation of traffic rules and regulations, without due regard for the safety of others, thus causing the untimely death of the victim. Petitioners denied the material allegations of the complaint, disclaimed any liability for the incident, and insisted that the accident was solely due to the victims own negligence. The appellate court summed up their version of the incident as follows: xxx

That at the time material to this case, bus no. 033, with defendant Ajoc driving, then bound towards the direction of Baclaran proper, was slowly accelerating speed on the outer right lane of the road, in response to the go signal of the traffic light situated in the intersection of Domestic Road [and Andrew Avenue], while the vehicles on the inner right lane which were going to turn left towards Domestic Road were at a stop position, the deceased FLORENTINA G. SABALBURO, whose stationary position was then covered from Ajocs peripheral v ision by a big truck then bound to MIA Road [that] was at a stop position, suddenly, without regard to her own safety and in total defiance of traffic signs designed to protect pedestrian[s], suddenly darted across the road; Ajoc, thus caught by surprise, tried to prevent impact by releasing his accelerator pedal and applying his brakes but the time lag between the deceaseds negligent act and Ajocs prudent and diligent reaction to the former made the impact a certainty. [5] As special and affirmative defenses, petitioners also claimed that: (1) MMTC hires its drivers, conductors and other employees only after they have successfully passed rigid and extensive t heoretical and practical examinations designed to determine their skills and competenceand imposes upon its drivers the duty to undergo regular semin ars in defensive driving techniques and road safety habits;[6] (2) MMTC had taken every human care and foresight possible in carrying their passengers safely to their respective place (si c) of destination as well as in avoiding harm to the life and limbs or risk against pedestrians so that they not be held liable; [7] and (3) [T]he buses of the defendant corporation, including its bus no. 033 were all properly maintainedbefore the buses left the garage for their respective routes on that particular day, as in all other days, they were rigidly inspected and examined and properly certifi ed as roadworthy.[8] The trial court found private respondents version more credible and on August 12, 1993, decided the case as follows: WHEREFORE, premises considered, judgment is hereby rendered in favor of the plaintiff and against defendants as follows: 1. Ordering defendants to jointly and severally pay plaintiff Martin Sabalburo actual damages in the sum of P63,943.88 representing the unpaid expenses of plaintiff in connection with the death of Florentina Sabalburo; 2. Ordering defendants to jointly and severally pay plaintiffs the sum of P180,000.00 for the loss of the earning capacity of the deceased for a period of ten (10) years; 3. Ordering defendants to jointly and severally pay plaintiff Martin Sabalburo the amount of P500,000.00 as moral damages; 4. Ordering defendants to jointly and severally pay plaintiff Martin Sabalburo the sum of P50,000.00 as exemplary damages; 5. Ordering defendants [to] jointly and severally pay plaintiff Martin Sabalburo the sum of P50,000.00 as attor neys fees; 6. Ordering defendants jointly and severally to pay plaintiffs the costs of this suit. SO ORDERED.[9] Petitioners seasonably appealed to the Court of Appeals, which docketed their appeal as CA-G.R. CV No. 45002. Before the appellate court, petitioners insisted that the accident was solely the fault of the victim since she suddenly crossed a very busy street with complete disregard for her safety and in violation of traffic rules and regulations designed to protect pedestrians. As earlier stated, the appellate court, in CA-G.R. CV No. 45002, affirmed the trial courts decision, thus: IN JUDGMENT, we hold that the appeal interposed by appellants is not meritorious and the judgment of the lower court which we find to be in accordance with law and the evidence is therefore AFFIRMED in toto. Costs against appellants. SO ORDERED.[10] Petitioners then moved for reconsideration, but the appellate court denied their motion in its resolution of December 10, 1999.[11] Hence, the present petition. Petitioners submit as sole issue for our resolution the following: WHETHER OR NOT ARTICLE 2179[12] AS AN EXCEPTION TO ARTICLE 2176[13] OF THE CIVIL CODE IS APPLICABLE IN THE INSTANT CASE. Petitioners insist that a closer look at the facts established by the trial court would show that the incident happened at around 3:30 in the afternoon of December 24, 1986 or barely eight (8) hours before Christmas Eve. Thus, the victims thoughts were naturally directed towards the Noche Buena. The victim then crossed busy Andrew Avenue for the purpose of getting a ride to Baclaran to buy food for the Christmas Eve celebration. Since her thoughts were on the Christmas Eve feast, she crossed where there was no pedestrian lane and while the green light for vehicular traffic was on. Petitioner MMTC submits that petitioner Ajoc cannot be charged with negligence considering that he cannot see what is in the mind of a pedestrian. Considering that the victims own negligence was the direct and proximate cause of her injuries and untimely demise, it was error for the Court of Appeals not to have applied Article 2179 of the Civil Code to the instant case. Petitioners claim that at the time of the incident, the victims mind was preoccupied with the preparations for the Noche Buena, is naught but pure conjecture and speculation, with nary a scintilla of proof to support it, according to respondents. Both the trial and appellate courts established that the immediate and proximate cause of the victims death was the negligent and careless driving by petition er Ajoc. Therefore, the full force of Article 2176 of the Civil Code applies, concluded respondents. In asking us to apply Article 2179 of the Civil Code, we note that petitioners are asking us to make a finding that the victi ms own negligence was the direct and proximate cause of her death. This we cannot do. The issue of whether a person is negligent or not is a question of fact. [14] The Supreme

Court is not a trier of facts,[15] although it has the power and authority to review and reverse the factual findings of lower courts where these do not conform to the evidence[16] or where the courts below came up with contradictory factual findings. [17] We have thoroughly perused the records of this case, and nowhere do we find evidence to support petitioners claim that the v ictim was so engrossed in thinking about Noche Buena while crossing a busy street. Petitioners stance regarding the victims alleged negligence is non sequitur. It simply does not follow that one who is run over by a vehicle on Christmas Eve (or any other holiday for that matter) is negligent because his thoughts were on the holiday festivities. Instead, the records support private respondents claim that the MMTC bus was being driven carelessly. As found by the trial court and affirmed by the Court of Appeals, the victim and her companions were standing on the island of Andrew Avenue, waiting for the traffic light to change so they could cross. Upon seeing the red light, the victim and her companions started to cross. It was then when petitioner Ajoc, who was trying to beat the red light, hit the victim. As the court a quo noted, Ajocs claim that he failed to see the victim and her companions proves his recklessness and lack of caution in driving his vehicle.[18] Findings of fact of the trial court, especially when affirmed by the Court of Appeals, are binding and conclusive on the Supreme Court.[19]More so, as in this case, where petitioners have not adequately shown that the courts below overlooked or disregarded certain facts or circumstances of such import as would have altered the outcome of the case. Contrary to petitioners insistence, the applicab le law in this case is Article 2176 of the Civil Code and not Article 2179. Petitioner MMTC next contends that the Court of Appeals erred in finding it solidarily liable for damages with its driver/employee, Ajoc, pursuant to the relevant paragraphs of Article 2180[20]of the Civil Code. It argues that the act of Ajoc in bringing the victim to a hospital reflects MMTCs diligence in the selection and supervision of its drivers, particularly with regard to safety measures. Hence, having exercised the diligence of a good father of a family in the selection and supervision of its employees to prevent damage, MMTC should not be held vicariously liable. It should be stressed, however, that whenever an employees negligence causes damage or injury to another, there instantly arises a presumption juris tantum that there was negligence on the part of the employer, either in the selection of the employee (culpa in eligiendo) or the supervision over him after the selection (culpa in vigilando).[21] Hence, to escape solidary liability for aquasi-delict committed by his employee, an employer must rebut the presumption by presenting convincing proof that in the selection and supervision of his employee, he has exercised the care and diligence of a good father of a family.[22] In the present case, petitioner MMTC failed to rebut the presumption of negligence on its part. The claim that Ajocs act of bringing the victim to the nearest medical facility shows adequate supervision by MMTC over its employees deserves but scant consideration. For one, the act was after the fact of negligence on Ajocs part. For another, the evidence on record shows that Ajocs act was neither voluntary nor spontaneous; he had to be prevailed upon by the victims companions to render assistance to his v ictim.[23] Moreover, the evidence to show that MMTC had exercised due diligence in the selection and supervision of its employees consisted merely of the pertinent guidelines for the screening and selection of its drivers, as well as periodic seminars on road safety. As found by the trial court, and affirmed by the appellate court, petitioner MMTC failed to show that its driver, Ajoc, had actually undergone such screening or had attended said seminars. As previously held, [t]he mere formulation of various company policies on safety without showing that they were being complied with is not sufficient to exempt (an employer) from liability arising from negligence of its employees. It is incumbent upon petitioner to show that in recruiting and employing the erring driver the recruitment procedures and company policies on efficiency and safety were followed. [24] In this case, MMTC has made no satisfactory showing that it had paid more than lip service to its guidelines and policies in hiring and supervision. Its failure to do so cannot but warrant the proper sanctions from this Court, considering that MMTC is a government-owned public utility organized for the public welfare. Having failed to rebut the presumption of negligence on its part, MMTC is primarily and directly liable for the damages caused by its employee, the erring driver, Ajoc, pursuant to Article 2180 of the Civil Code, which provides as follows: ART. 2180. The obligation imposed by Article 2176 is demandable not only for ones own acts or omissions -, but also for those of persons for whom one is responsible. The father and, in case of his death or incapacity, the mother, are responsible for the damages caused by the minor children who live in their company. Guardians are liable for damages caused by the minors or incapacitated persons who are under their authority and live in their company. The owners and managers of an establishment or enterprise are likewise responsible for damages caused by their employees in the service of the branches in which the latter are employed or on the occasion of their functions. Employers shall be liable for the damages caused by their employees and household helpers acting within the scope of their assigned tasks, even though the former are not engaged in any business or industry. The State is responsible in like manner when it acts through a special agent; but not when the damage has been caused by the official to whom the task done properly pertains, in which case what is provided in Article 2176 shall be applicable. Lastly, teachers or heads of establishments of arts and trades shall be liable for damages caused by their pupils and students or apprentices, so long as they remain in their custody. The responsibility treated of in this article shall cease when the persons herein mentioned prove that they observed all the diligence of a good father of a family to prevent damage. The owners of public utilities fall within the scope of this article. [25] As earlier stated, MMTC is a public utility, organized and owned by the government for public transport service. Hence, its liability to private respondents, for the negligent and reckless acts of its driver, Ajoc, under Article 2180 of the Civil Code is both manifest and clear. WHEREFORE, the instant petition is DISMISSED. The assailed decision of the Court of Appeals in CA-G.R. CV No. 45002 is AFFIRMED. Costs against petitioners. SO ORDERED. Bellosillo, (Chairman), Mendoza, and Corona, JJ., concur. MR. & MRS. ENGRACIO FABRE, JR.* and PORFIRIO CABIL, petitioners, vs. COURT OF APPEALS, THE WORD FOR THE WORLD CHRISTIAN FELLOWSHIP, INC., AMYLINE ANTONIO, JOHN RICHARDS, GONZALO GONZALES, VICENTE V. QUE, JR., ICLI CORDOVA, ARLENE GOJOCCO, ALBERTO ROXAS CORDERO, RICHARD BAUTISTA, JOCELYN GARCIA, YOLANDA CORDOVA, NOEL ROQUE, EDWARD TAN, ERNESTO NARCISO, ENRIQUETA LOCSIN, FRANCIS NORMAN O. LOPEZ, JULIUS CAESAR GARCIA, ROSARIO MA. V. ORTIZ, MARIETTA C. CLAVO, ELVIE SENIEL, ROSARIO MARA-MARA, TERESITA REGALA, MELINDA TORRES, MARELLA MIJARES, JOSEFA

CABATINGAN, MARA NADOC, DIANE MAYO, TESS PLATA, MAYETTE JOCSON, ARLENE Y. MORTIZ, LIZA MAYO, CARLOS RANARIO, ROSAMARIA T. RADOC and BERNADETTE FERRER, respondents. DECISION MENDOZA, J.: This is a petition for review on certiorari of the decision of the Court of Appeals[1] in CA-GR No. 28245, dated September 30, 1992, which affirmed with modification the decision of the Regional Trial Court of Makati, Branch 58, ordering petitioners jointly and severally to pay damages to private respondent Amyline Antonio, and its resolution which denied petitioners motion for reconsideration for lack of merit. Petitioners Engracio Fabre, Jr. and his wife were owners of a 1982 model Mazda minibus. They used the bus principally in connection with a bus service for school children which they operated in Manila. The couple had a driver, Porfirio J. Cabil, whom they hired in 1981, after trying him out for two weeks. His job was to take school children to and from the St. Scholasticas College in Malate, Manila. On November 2, 1984 private respondent Word for the World Christian Fellowship Inc. (WWCF) arranged with petitioners for the transportation of 33 members of its Young Adults Ministry from Manila to La Union and back in consideration of which private respondent paid petitioners the amount of P3,000.00. The group was scheduled to leave on November 2, 1984, at 5:00 oclock in the afternoon. However, as several members of the party were late, the bus did not leave the Tropical Hut at the corner of Ortigas Avenue and EDSA until 8:00 oclock in the evening. Petitioner Porfirio Cabil drove the minibus. The usual route to Caba, La Union was through Carmen, Pangasinan. However, the bridge at Carmen was under repair, so that petitioner Cabil, who was unfamiliar with the area (it being his first trip to La Union), was forced to take a detour through the town of Ba-ay in Lingayen, Pangasinan. At 11:30 that night, petitioner Cabil came upon a sharp curve on the highway, running on a south to east direction, which he des cribed as siete. The road was slippery because it was raining, causing the bus, which was running at the speed of 50 kilometers per hour, to skid to the left road shoulder. The bus hit the left traffic steel brace and sign along the road and rammed the fence of one Jesus Escano, then turned over and landed on its left side, coming to a full stop only after a series of impacts. The bus came to rest off the road. A coconut tree which it had hit fell on it and smashed its front portion. Several passengers were injured. Private respondent Amyline Antonio was thrown on the floor of the bus and pinned down by a wooden seat which came off after being unscrewed. It took three persons to safely remove her from this position. She was in great pain and could not move. The driver, petitioner Cabil, claimed he did not see the curve until it was too late. He said he was not familiar with the area and he could not have seen the curve despite the care he took in driving the bus, because it was dark and there was no sign on the road. He said that he saw the curve when he was already within 15 to 30 meters of it. He allegedly slowed down to 30 kilometers per hour, but it was too late. The Lingayen police investigated the incident the next day, November 3, 1984. On the basis of their finding they filed a criminal complaint against the driver, Porfirio Cabil. The case was later filed with the Lingayen Regional Trial Court. Petitioners Fabre paid Jesus Escano P1,500.00 for the damage to the latters fence. On the basis of Escanos affidavit of desistance the case against petitioners Fabre was dismissed. Amyline Antonio, who was seriously injured, brought this case in the RTC of Makati, Metro Manila. As a result of the accident, she is now suffering from paraplegia and is permanently paralyzed from the waist down. During the trial she described the operations she underwent and adduced evidence regarding the cost of her treatment and therapy. Immediately after the accident, she was taken to the Nazareth Hospital in Ba-ay, Lingayen. As this hospital was not adequately equipped, she was transferred to the Sto. Nio Hospital, also in the town of Ba-ay, where she was given sedatives. An x-ray was taken and the damage to her spine was determined to be too severe to be treated there. She was therefore brought to Manila, first to the Philippine General Hospital and later to the Makati Medical Center where she underwent an operation to correct the dislocation of her spine. In its decision dated April 17, 1989, the trial court found that: No convincing evidence was shown that the minibus was properly checked for travel to a long distance trip and that the driver was properly screened and tested before being admitted for employment. Indeed, all the evidence presented have shown the negligent act of the defendants which ultimately resulted to the accident subject of this case. Accordingly, it gave judgment for private respondents holding: Considering that plaintiffs Word for the World Christian Fellowship, Inc. and Ms. Amyline Antonio were the only ones who adduced evidence in support of their claim for damages, the Court is therefore not in a position to award damages to the other plaintiffs. WHEREFORE, premises considered, the Court hereby renders judgment against defendants Mr. & Mrs. Engracio Fabre, Jr. and Porfirio Cabil y Jamil pursuant to articles 2176 and 2180 of the Civil Code of the Philippines and said defendants are ordered to pay jointly and severally to the plaintiffs the following amount: 1) P93,657.11 as compensatory and actual damages; 2) P500,000.00 as the reasonable amount of loss of earning capacity of plaintiff Amyline Antonio; 3) P20,000.00 as moral damages; 4) P20,000.00 as exemplary damages; and 5) 25% of the recoverable amount as attorneys fees; 6) Costs of suit. SO ORDERED. The Court of Appeals affirmed the decision of the trial court with respect to Amyline Antonio but dismissed it with respect to the other plaintiffs on the ground that they failed to prove their respective claims. The Court of Appeals modified the award of damages as follows:

10

1) P93,657.11 as actual damages; 2) P600,000.00 as compensatory damages; 3) P50,000.00 as moral damages; 4) P20,000.00 as exemplary damages; 5) P10,000.00 as attorneys fees; and 6) Costs of suit. The Court of Appeals sustained the trial courts finding that petitioner Cabil failed to exercise due care and precaution in the operation of his vehicle considering the time and the place of the accident. The Court of Appeals held that the Fabres were themselves presumptively negligent. Hence, this petition. Petitioners raise the following issues: I. II. WHETHER OR NOT PETITIONERS WERE NEGLIGENT. WHETHER OR NOT PETITIONERS WERE LIABLE FOR THE INJURIES SUFFERED BY PRIVATE RESPONDENTS.

III. WHETHER OR NOT DAMAGES CAN BE AWARDED AND IN THE POSITIVE, UP TO WHAT EXTENT. Petitioners challenge the propriety of the award of compensatory damages in the amount of P600,000.00. It is insisted that, on the assumption that petitioners are liable, an award of P600,000.00 is unconscionable and highly speculative. Amyline Antonio testified that she was a casual employee of a company called Suaco, earning P1,650.00 a month, and a dealer of Avon products, earning an average of P1,000.00 monthl y. Petitioners contend that as casual employees do not have security of tenure, the award of P 600,000.00, considering Amyline Antonios earnings, is without factual basis as there is no assurance that she would be regularly earning these amounts. With the exception of the award of damages, the petition is devoid of merit. First, it is unnecessary for our purpose to determine whether to decide this case on the theory that petitioners are liable for breach of contract of carriage or culpa contractual or on the theory of quasi delict or culpa aquiliana as both the Regional Trial Court and the Court of Appeals held, for although the relation of passenger and carrier is contractual both in origin and nature, nevertheless the act that breaks the contract may be also a tort.[2] In either case, the question is whether the bus driver, petitioner Porfirio Cabil, was negligent. The finding that Cabil drove his bus negligently, while his employer, the Fabres, who owned the bus, failed to exercise the diligence of a good father of the family in the selection and supervision of their employee is fully supported by the evidence on record. These factual findings of the two courts we regard as final and conclusive, supported as they are by the evidence. Indeed, it was admitted by Cabil that on the night in question, it was raining, and, as a consequence, the road was slippery, and it was dark. He averred these facts to justify his failure to see that there lay a sharp curve ahead. However, it is undisputed that Cabil drove his bus at the speed of 50 kilometers per hour and only slowed down when he noticed the curve some 15 to 30 meters ahead.[3] By then it was too late for him to avoid falling off the road. Given the conditions of the road and considering that the trip was Cabils first one outside of Manila, Cabil should have driven his vehicle at a moderate speed. There is testimony[4] that the vehicles passing on that portion of the road should only be running 20 kilometers per hour, so that at 50 kilometers per hour, Cabil was running at a very high speed. Considering the foregoing the fact that it was raining and the road was slippery, that it was dark, that he drove his bus at 50 kilometers an hour when even on a good day the normal speed was only 20 kilometers an hour, and that he was unfamiliar with the terrain, Cabil was grossly negligent and should be held liable for the injuries suffered by private respondent Amyline Antonio. Pursuant to Arts. 2176 and 2180 of the Civil Code his negligence gave rise to the presumption that his employers, the Fabres, were themselves negligent in the selection and supervision of their employee. Due diligence in selection of employees is not satisfied by finding that the applicant possessed a professional drivers lice nse. The employer should also examine the applicant for his qualifications, experience and record of service.[5] Due diligence in supervision, on the other hand, requires the formulation of rules and regulations for the guidance of employees and the issuance of proper instructions as well as actual implementation and monitoring of consistent compliance with the rules.[6] In the case at bar, the Fabres, in allowing Cabil to drive the bus to La Union, apparently did not consider the fact that Cabil had been driving for school children only, from their homes to the St. Scholasticas College in Metro Manila. [7] They had hired him only after a two-week apprenticeship. They had tested him for certain matters, such as whether he could remember the names of the children he would be taking to school, which were irrelevant to his qualification to drive on a long distance travel, especially considering that the trip to La Union was his first. The existence of hiring procedures and supervisory policies cannot be casually invoked to overturn the presumption of negligence on the part of an employer.[8] Petitioners argue that they are not liable because (1) an earlier departure (made impossible by the congregations delayed meeting) could have averted the mishap and (2) under the contract, the WWCF was directly responsible for the conduct of the trip. Neither of these contentions hold water. The hour of departure had not been fixed. Even if it had been, the delay did not bear directly on the cause of the accident. With respect to the second contention, it was held in an early case that: [A] person who hires a public automobile and gives the driver directions as to the place to which he wishes to be conveyed, but exercises no other control over the conduct of the driver, is not responsible for acts of negligence of the latter or prevented from recovering for injuries suffered from a collision between the automobile and a train, caused by the negligence either of the locomotive engineer or the automobile driver.[9] As already stated, this case actually involves a contract of carriage. Petitioners, the Fabres, did not have to be engaged in the business of public transportation for the provisions of the Civil Code on common carriers to apply to them. As this Court has held:[10] Art. 1732. Common carriers are persons, corporations, firms or associations engaged in the business of carrying or transporting passengers or goods or both, by land, water, or air for compensation, offering their services to the public. The above article makes no distinction between one whose principal business activity is the carrying of persons or goods or both, and one who does such carrying only as an ancillary activity (in local idiom, as a sideline). Article 1732 also carefully avoids making any distinction between a person or enterprise offering transportation service on a regular or scheduled basis and one offering such service on an occasional, episodic or unscheduled basis. Neither does Article 1732 distinguish between a carrier offering i ts services to the general public, i.e., the general community or population, and one who offers services or solicits business only from a narrow segment of the general population. We think that Article 1732 deliberately refrained from making such distinctions.

11

As common carriers, the Fabres were bound to exercise extraordinary diligence for the safe transportation of the passengers to their destination. This duty of care is not excused by proof that they exercised the diligence of a good father of the family in the selection and supervision of their employee. As Art. 1759 of the Code provides: Common carriers are liable for the death of or injuries to passengers through the negligence or wilful acts of the formers e mployees, although such employees may have acted beyond the scope of their authority or in violation of the orders of the common carriers. This liability of the common carriers does not cease upon proof that they exercised all the diligence of a good father of a family in the selection and supervision of their employees. The same circumstances detailed above, supporting the finding of the trial court and of the appellate court that petitioners are liable under Arts. 2176 and 2180 for quasi delict, fully justify finding them guilty of breach of contract of carriage under Arts. 1733, 1755 and 1759 of the Civil Code. Secondly, we sustain the award of damages in favor of Amyline Antonio. However, we think the Court of Appeals erred in increasing the amount of compensatory damages because private respondents did not question this award as inadequate.[11] To the contrary, the award of P500,000.00 for compensatory damages which the Regional Trial Court made is reasonable considering the contingent nature of her income as a casual employee of a company and as distributor of beauty products and the fact that the possibility that she might be able to work again has not been foreclosed. In fact she testified that one of her previous employers had expressed willingness to employ her again. With respect to the other awards, while the decisions of the trial court and the Court of Appeals do not sufficiently indicate the factual and legal basis for them, we find that they are nevertheless supported by evidence in the records of this case. Viewed as an action for quasi delict, this case falls squarely within the purview of Art. 2219(2) providing for the payment of moral damages in cases of quasi delict. On the theory that petitioners are liable for breach of contract of carriage, the award of moral damages is authorized by Art. 1764, in relation to Art. 2220, since Ca bils gross negligence amounted to bad faith.[12] Amyline Antonios testimony, as well as the testimonies of her father and co -passengers, fully establish the physical suffering and mental anguish she endured as a result of the injuries caused by petitioners negligence. The award of exemplary damages and attorneys fees was also properly made. However, for the same reason that it was error for the appellate court to increase the award of compensatory damages, we hold that it was also error for it to increase the award of moral damages and reduce the award of attorneys fees, inasmuch as private respondents, in whose favor the awards were made, have not appealed. [13] As above stated, the decision of the Court of Appeals can be sustained either on the theory of quasi delict or on that of breach of contract. The question is whether, as the two courts below held, petitioners, who are the owners and driver of the bus, may be made to respond jointly and severally to private respondent. We hold that they may be. In Dangwa Trans. Co. Inc. v. Court of Appeals,[14] on facts similar to those in this case, this Court held the bus company and the driver jointly and severally liable for damages for injuries suffered by a passenger. Again, in Bachelor Express, Inc. v. Court of Appeals[15] a driver found negligent in failing to stop the bus in order to let off passengers when a fellow passenger ran amuck, as a result of which the passengers jumped out of the speeding bus and suffered injuries, was held also jointly and severally liable with the bus company to the injured passengers. The same rule of liability was applied in situations where the negligence of the driver of the bus on which plaintiff was riding concurred with the negligence of a third party who was the driver of another vehicle, thus causing an accident. In Anuran v. Buo,[16] Batangas Laguna Tayabas Bus Co. v. Intermediate Appellate Court,[17] and Metro Manila Transit Corporation v. Court of Appeals ,[18] the bus company, its driver, the operator of the other vehicle and the driver of the vehicle were jointly and severally held liable to the injured passenger or the latters heirs. The basis of this allocation of liability was explained in Viluan v. Court of Appeals,[19] thus: Nor should it make any difference that the liability of petitioner [bus owner] springs from contract while that of respondents [owner and driver of other vehicle] arises from quasi-delict. As early as 1913, we already ruled in Gutierrez vs. Gutierrez, 56 Phil. 177, that in case of injury to a passenger due to the negligence of the driver of the bus on which he was riding and of the driver of another vehicle, the drivers as well as the owners of the two vehicles are jointly and severally liable for damages. Some members of the Court, though, are of the view that under the circumstances they are liable on quasidelict.[20] It is true that in Philippine Rabbit Bus Lines, Inc. v. Court of Appeals [21] this Court exonerated the jeepney driver from liability to the injured passengers and their families while holding the owners of the jeepney jointly and severally liable, but that is because that case was expressly tried and decided exclusively on the theory of culpa contractual. As this Court there explained: The trial court was therefore right in finding that Manalo [the driver] and spouses Mangune and Carreon [the jeepney owners] were negligent. However, its ruling that spouses Mangune and Carreon are jointly and severally liable with Manalo is erroneous. The driver cannot be held jointly and severally liable with the carrier in case of breach of the contract of carriage. The rationale behind this is readily discernible. Firstly, the contract of carriage is between the carrier and the passenger, and in the event of contractual liability, the carrier is exclusively responsible therefore to the passenger, even if such breach be due to the negligence of his driver (see Viluan v. The Court of Appeals, et al., G.R. Nos. L-21477-81, April 29, 1966, 16 SCRA 742) . . .[22] As in the case of BLTB, private respondents in this case and her co-plaintiffs did not stake out their claim against the carrier and the driver exclusively on one theory, much less on that of breach of contract alone. After all, it was permitted for them to allege alternative causes of action and join as many parties as may be liable on such causes of action [23] so long as private respondent and her co-plaintiffs do not recover twice for the same injury. What is clear from the cases is the intent of the plaintiff there to recover from both the carrier and the driver, thus justifying the holding that the carrier and the driver were jointly and severally liable because their separate and distinct acts concurred to produce the same injury. WHEREFORE, the decision of the Court of Appeals is AFFIRMED with MODIFICATION as to the award of damages. Petitioners are ORDERED to PAY jointly and severally the private respondent Amyline Antonio the following amounts: 1) P93,657.11 as actual damages; 2) P500,000.00 as the reasonable amount of loss of earning capacity of plaintiff Amyline Antonio; 3) P20,000.00 as moral damages; 4) P20,000.00 as exemplary damages; 5) 25% of the recoverable amount as attorneys fees; and 6) costs of suit. SO ORDERED. Regalado, (Chairman), Romero, Puno, and Torres, Jr., JJ., concur.

12

[G.R. No. 147349. February 13, 2004]

MANILA INTERNATIONAL AIRPORT AUTHORITY (MIAA), petitioner, vs. ALA INDUSTRIES CORPORATION, respondent. DECISION PANGANIBAN, J.: Foreseeable difficulties that occur during the Christmas season and cause a delay do not constitute a fortuitous event. The difficulties in processing claims during that period are not acts of God that would excuse noncompliance with judicially app roved obligations.

The Case

Before us is a Petition for Review[1] under Rule 45 of the Rules of Court, assailing the February 28, 2001 Decision [2] of the Court of Appeals (CA) in CA-GR CV No. 59518. The dispositive part of the Decision reads: WHEREFORE, the appealed final order is hereby REVERSED. The Court a quo is ordered to issue a Writ of Execution directing the branch sheriff to enforce [Respondent] ALA Industries unpaid claim against [Petitioner] Manila International Airport Authority (MIAA) in the t otal amount of P7,171,835.53.[3]

The Facts

The facts of the case are narrated by the CA as follows: [Petitioner] MIAA conducted a public bidding for a contract involving the structural repair and waterproofing of the International Passenger Terminal (IPT) and International Container Terminal (ICT) buildings of the Ninoy Aquino International Airport (NAIA). Out of eleven bidders, [Respondent] ALA submitted the second lowest and most advantageous bid. The contract was awarded to [respondent] in the amount ofP32,000,000.00 when it agreed to reduce the price from P36,000.00.[4] On June 28, 1993, the contract was executed providing, inter alia, the following terms: ARTICLE I SCOPE OF WORK 1.1 The CONTRACTOR shall furnish all materials, labor, tools, plans, equipment and other services and [perform] all operations necessary to complete the structural repair and waterproofing of IPT and ICT buildings, all in accordance with the plans and specifications and subject to the terms and conditions of the Bid Documents. The CONTRACTOR shall likewise be responsible for the removal, hauling, disposal of materials used in the work area including cleaning thereof during and after completion of the work. 1.2 The CONTRACTOR guarantees and warrants the availability, quality and genuineness of all the materials it will supply, deliver and use in the construction. 1.3 The CONTRACTOR warrants further that all works stipulated in the Contract shall be done in good and acceptable condition and to make good at the CONTRACTORs expense any imperfections or defects which the MIAA or its representative may discover during the progress of the work within one (1) year from and after acceptance in writing of the said work by the MIAA, as provided in the General Conditions and Specifications. xxx xxx ARTICLE IV CONTRACT PRICE/MANNER OF PAYMENT 4.1 In consideration of the full, satisfactory and faithful performance by the CONTRACTOR of all its undertakings and obligations defined in and provided for under this agreement, the MIAA agrees to pay the CONTRACTOR the total amount of PESOS: THIRTY TWO MILLION [AND] 00/100 (P32,000,000.00) Philippine Currency, payable as follows: 4.1.1 Initial payment shall be made upon submission of work accomplishment of not less than 15%; xxx

4.1.2 Subsequent payments shall be for work accomplished as measured, verified and approved by MIAA. Such progress billings shall indicate actual work accomplishments and shall be subject to the approval of MIAA, which approval shall not be unreasonably withheld.

13

4.1.3

Progress billings shall be paid by the MIAA periodically but not more than once a month within 30 calendar days from receipt hereof.

The contract contains escalation clauses and price adjustments. [Respondent] made the necessary repairs and waterproofing. After submission of its progress billings to [petitioner], [respondent] received partial payments. Progress billing No. 6 remained unpaid despite repeated demands by [respondent]. On June 30, 1994, [petitioner] unilaterally resci nded the contract on the ground that [respondent] failed to complete the project within the agreed completion date. On September 16, 1994, [petitioner] advised [respondent] of a committee formed to determine the extent of the work done which was given until September 30, 1994 to submit its findings. Just the same, [respondent] was not fully paid. On October 20, 1994, [respondent] objected to the rescission made by [petitioner] and reiterated its claims. As of the filing of the complaint for sum of money and damages on July 18, 1995, [respondent] was seeking to recover from [petitioner] P10,376,017.00 as the latters outstanding obligation and P1,642,112.84 due from the first to [the] fifth progress billings. With the filing of [respondents] sur-rejoinder to [petitioners] rejoinder, the trial Court directed the parties to proceed to arbitration on July 16, 1996. The Court a quos ruling is based on Article XXVII of the contract that provides for arbitration. Both parties executed a compromise agreemen t, assisted by their counsels, and jointly filed in court a motion for judgment based on compromise agreement. RTC Disposition On November 4, 1997, the Court a quo rendered judgment approving the compromise agreement. The pertinent portions of the compromise read as follows: 1. As full and complete payment of its claims against [petitioner] arising from their waterproofing contract subject of this case, [respondent] accepts [petitioner]s offer of payment in the amount of FIVE MILLION NINE HUND RED FORTY SIX THOUSAND TWO HUNDRED NINETY FOUR AND 31/100 (P5,946,294.31). 2. [Petitioner] shall pay [respondent] said amount of FIVE MILLION NINE HUNDRED FORTY SIX THOUSAND TWO HUNDRED NINETY FOUR AND 31/100 (P5,946,294.31) within a period of thirty (30) days from receipt of a copy of the Order of the Court approving this Compromise Agreement. 3. Failure of the [petitioner] to pay said amount to [respondent] within the period above stipulated shall entitle the [respondent] to a writ of execution from this Honorable Court to enforce all its claims [5] pleaded in the Complaint. 4. In consideration of the Implementation of this Compromise Agreement, [respondent] agrees to waive all its claims against the [petitioner] as pleaded in the Complaint, and [petitioner] also agrees to waive all its claims, rights and interests pleaded in the answer, and all such other claims that it has or may have in connection with, related to or arising from the Waterproofing Contract subject of this case with [respondent]. Finding the aforesaid COMPROMISE AGREEMENT not to be contrary to law, moral[s], good customs, public order, and public polic y, the Court hereby approves the same and renders judgment in conformity with the terms and conditions of the said COMPROMISE AGREEMENT, enjoining the parties to comply with the provisions thereof strictly and in good faith without pronouncement as to costs. SO ORDERED. For [petitioners] failure to pay within the period above stipulated, [respondent] filed a motion for execution to enforce i ts claim in the total amount of P13,118,129.84. [Petitioner] filed a comment and attributed the delays to its being a government agency. In its effort to render [respondents] motion for execution moot and academic, [petitioner] paid [respondent] P5,946,294.31 on February 2, 1998. On February 16, 1998, the trial court denied [respondents] motion for execution. It also denied the motion for reconsideration, ruling as follows: The delay in complying with the Compromise Agreement having been satisfactorily explained by the Office of the Government Co unsel, the Motion for Reconsideration of the order denying [respondents] Motion for Execution is denied. SO ORDERED.[6]

Ruling of the Court of Appeals

Reversing the trial court, the CA ordered it to issue a writ of execution to en force respondents claim to the extent of petitioners remaining balance. The appellate court ratiocinated that a judgment rendered in accordance with a compromise agreement was immediately executory, and that a delay of almost two months was not substantial compliance therewith. Hence this Petition.[7]

Issues

14

Petitioner raises the following issues for our consideration: I. Whether or not the slight delay of petitioner in complying with its obligation under the Compromise Agreement is a valid ground for the enforcement of private respondents claim under the Complaint. II. Whether or not the delay of petitioner in complying with its obligation under the Compromise Agreement is justified under the principle that no person shall be responsible for those events which could not be foreseen, or which though foreseen, were inevitable. III. Whether or not private respondent is estopped from enforcing its claim under the Complaint considering that it already enjoyed the benefits of the Compromise Agreement.[8] The foregoing may be summed up in one issue: Whether there was a fortuitous event that excused petitioner from complying with the terms and conditions of the judicially approved Compromise Agreement.

The Courts Ruling

The Petition has no merit.

Sole Issue: Delay in Payment by Reason of a Fortuitous Event

A compromise agreement is a contract whereby the parties make reciprocal concessions to resolve their differences, [9] thus avoiding litigation[10] or putting an end to one that has already commenced.[11] Generally favored in law,[12] such agreement is a bilateral act or transaction that is binding on the contracting parties and is expressly acknowledged by the Civil Code as a juridical agreement between them.[13] Provided it is not contrary to law, morals, good customs, public order or public policy,[14] it is immediately executory.[15]

Judicial Compromise Final and Executory

In a long line of cases, we have consistently held that x x x a compromise once approved by final orders of the court has the force of res judicata[16] between the parti es and should not be disturbed except for vices of consent or forgery. Hence, a decision on a compromise agreement is final and executory x x x.[17] Such agreement has the force of law[18] and is conclusive between the parties.[19] It transcends its identity as a mere contract binding only upon the parties thereto, as it becomes a judgment that is subject to execution in accordance with the Rules.[20]Judges therefore have the ministerial and mandatory duty to implement and enforce it. [21] To be valid, a compromise agreement is merely required by law, first, to be based on real claims; second, to be actually agreed upon in good faith.[22] Both conditions are present in this case. The claims of the parties are valid, and the agreement done without any fraud or vice of consent. Without a doubt, each of the parties herein entered into Compromise Agreement freely and voluntarily. When they carefully negotiated the terms and provisions thereof, they were adequately assisted by their respective counsels -- petitioner, no less than by the Office of the Government Corporate Counsel (OGCC).[23] Each party agreed to something that neither might have actually wanted, except for the peace that would be brought by the avoidance of a protracted litigation. Hence, the Agreement must govern their relations.

The Christmas Season Not a Fortuitous Event

The failure to pay on the date stipulated was clearly a violation of the Agreement. Within thirty days from receipt of the judicial Order approving it -- on December 20, 1997 -- payment should have been made, but was not. Thus, nonfulfillment of the terms of the compromise justified execution.[24] It is the height of absurdity for petitioner to attribute to a fortuitous event its delayed payment. Petitioners explanation is clearly a gratuitous assertion that borders on callousness.[25] The Christmas season cannot be cited as an act of God that would excuse a delay in the processing of claims by a government entity that is subject to routine accounting and auditing rules. A fortuitous event is one that cannot be foreseen or, though foreseen, is inevitable. [26] It has the following characteristics:

15

x x x (a) [T]he cause of the unforeseen and unexpected occurrence, or the failure of the debtor to comply with his obligatio ns, 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. [27] None of these elements appears in this case. First, processing claims against the government and subjecting these to the usual accounting and auditing procedures are certainly not only foreseeable and expectable, but also dependent upon the human will. Liquidation and payment resulting therefrom can be deliberately delayed or speeded up. Second, the Christmas season is not a caso fortuito, but a regularly occurring event. It is in fact foreseeable, and its occurrence has absolutely nothing to do with the processing of claims. Further, in order to claim exemption from liability by reason of a fortuitous event, such event should be the sole and proximate cause of the injury to or the loss or destruction of the object of the contract [28] or compromise, which was the payment to be made by petitioner. Certainly, this payment was not lost or destroyed, but merely delayed, thus causing injury to respondent. Granting arguendo such loss or destruction, the Christmas season could not have been the sole and proximate cause thereof. Third, the occurrence of the Christmas season did not at all render impossible the normal fulfillment of the obligation of petitioner; otherwise, few claims would ever be paid during this period. It ought to have taken appropriate measures to ensure that a delay would be avoided. When it entered into the Agreement, it knew fully well that the 30-day period for it to pay its obligation would end during the Christmas season. Thus, it cannot now be allowed to renege on its commitment. Fourth, petitioner cannot argue that it is free from any participation in the delay. It should have laid out on the compromise table the problems that would be caused by a deadline falling during the Christmas season. Furthermore, it should have explained to respondent that government accounts would be examined carefully and thoroughly to the last detail, in strict compliance [29]with accounting and auditing rules issued by and pursuant to the constitutional mandate of the Commission on Audit.[30] Indeed, the liquidation of government obligations involves a long process beginning with the preparation of disbursement vouchers; followed by the processing of requests for allotment as supported by vouchers, job orders and requisitions; and ending with the issuance of the corresponding checks.[31] Without first securing the necessary certification as to the availability of funds and allotment against which expenditures may be properly charged,[32] no funds shall be disbursed; and no expenditures chargeable against any authorized allotments shall be incurred or authorized by agency heads. Moreover, it is important to note that under government accounting principles, no contract involving the expenditure of publ ic funds shall be made until there is an appropriation therefor, the unexpended balance of which, free of other obligations, is sufficient to cover the proposed expenditure.[33] In the present case, there was already an antecedent appropriation for the contract when petitioner entered into it. Obviously, prior planning had not taken into account the liquidation process in the conduct of the compromise. The sheer neglect shown by petitioner in failing to consider these matters aggravated the resulting injury suffered by respondent. The former cannot be allowed to hide now behind its government cloak.

Fortuitous Event Negated by Negligence

The act-of-God doctrine requires all human agencies to be excluded from creating the cause of the mischief. [34] Such doctrine cannot be invoked to protect a person who has failed to take steps to forestall the possible adverse consequences of loss [35] or injury. Since the delay in payment in the present case was partly a result of human participation -- whether from active intervention or neglect -- the whole occurrence was humanized and was therefore outside the ambit of a caso fortuito. Furthermore, none of the requisites we have earlier mentioned are present in this case, a fact that clearly prevents petitioner from being excused from liability.[36] Under the rules of evidence, the burden of proving that a loss is due to a caso fortuito rests upon the party invoking it.[37] This responsibility, it failed to discharge. Verily, an assiduous scrutiny of the records convinces us that it was negligent, [38] and that it thereby incurred a delay in the performance of its contractual obligation under the judicial compromise. It thus created an undue risk or injury to respondent by failing to exercise that reasonable degree of care, precaution or vigilance that the circumstances justly demanded,[39] and that an ordinarily prudent person would have done. [40]

Court Without Power to Alter a Judicial Compromise

The principle of autonomy of contracts must be respected. [41] The Compromise Agreement was a contract perfected by mere consent; [42] hence, it should have been respected. Item 3 thereof provided that failure of petitioner to pay within the stipulated period would entitle respondent to a writ of execution to enforce all the claims that had been pleaded by the latter in the Complaint. This provision must be upheld, because the Agreement supplanted the Complaint itself. Although judicial approval was not required for the perfection of that Agreement once it was granted, it could not and must not be disturbed except for vices of consent or forgery.[43] No such infirmity can be found in the subject Compromise Agreement. Its terms are clear and leave no doubt as to their intention. Thus, the literal meaning of its stipulations must control.[44] It must be strictly interpreted and x x x understood as including only matters specifically determined therein or which, by necessary inference from its wording, must be deemed in cluded.[45] The lower court was without power to relieve petitioner from an obligation it had voluntarily assumed, simply because the Agreement later turned out to be unwise, disastrous or foolish.[46] It had no authority to impose upon the parties a judgment different from or against the terms and conditions of their Compromise Agreement.[47] It could not alter a contract by construction or make a new one for the parties; its duty is confined to the interpretation of the one which they have made for themselves without regard to its wisdom or folly as the court cannot supply material stipulations or read into the contract words which it does not contain.[48] It could not even set aside its judgment without declaring in an incidental hearing that the Agreement was

16

vitiated by any of the grounds enumerated in Article 2038 of the Civil Code. [49] Above all, neither the Agreement nor the courts approval of it was ever questioned or assailed by the parties. Basic is the rule that if a party fails or refuses to abide by a compromise agreement, the other may either enforce it or regard it as rescinded and insist upon the original demand.[50] For failure of petitioner to abide by the judicial compromise, respondent chose to enforce it. The latters course of action was in accordance with the very stipulations in the Agreement that the lower court could not change. [51] Respondent is thus entitled to a writ of execution for the total amount contained in the Compromise Agreement. The Court cannot reduce it. The partial payment made by petitioner does not at all contravene Article 1229 of the Civil Code,[52] which is applicable only to contracts that are the subjects of litigation, not to final and executory judgments.[53]

Estoppel Inapplicable

Petitioners attempt to put respondent in estoppel must be struck down. In estoppel, a person, who by his act or conduct has induced another to act in a particular manner, is barred from adopting an inconsistent position, attitude or course of conduct that thereby causes loss or injury to another.[54] No such inconsistency is present here. From the very start, respondent was already asking the courts to enforce all its claims, pursuant to the Agreement. It has not shown any act or conduct that would leads us to believe that by accepting petitioners partial payment, it has dropped all claims to which it is entitled. Certainly, an obligation may be extinguished by payment,[55] but this rule applies when the creditor receives and acknowledges full payment[56] from the debtor. Respondent has neither acknowledged full payment nor led petitioner to believe that it has. Lack of reservation or protest does not ipso facto constitute a waiver of claims. Because estoppel should be applied with caution, the action that gives rise to it must be deliberate and unequivocal.[57] In the present case, respondent continued to pursue the execution of its total demand of P13,118,129.84, even after receiving P5,946,294.31 from petitioner. This continued pursuit signified the formers in tent not to waive its total claim. Hence, it cannot be considered estopped from enforcing such claim. The appellate court was correct in strictly following the Agreement by deducting the amount received by respondent from the l atters total claim. Besides, questions raised on appeal must be within the issues framed by the parties and, consequently, issues not raised in the tr ial court cannot be raised for the first time on appeal.[58] Any assertion of equity must finally be struck down when dilatory schemes exist. [59] WHEREFORE, the Petition is hereby DENIED, and the assailed Decision AFFIRMED. Costs against petitioner. SO ORDERED. Davide, Jr., C.J., (Chairman), Ynares-Santiago, Carpio, and Azcuna, JJ., concur.

G.R. No. L-47772 August 31, 1978 INOCENCIO TUGADE, petitioner, vs. COURT OF PEALS, and PEOPLE OF THE PHILIPPINES, respondents. Manuel M. Camacho for petitioner. Solicitor General Estelito P. Mendoza, Assistant Solicitor General Nathanael P. de Pano, Jr. and Solicitor Francisco J. Bautista for respondents.

FERNANDO, J.: There is nothing impressive about this petition sinking to justify a review of a decision of respondent Court of Appeals on the ground that instead of relying on what counsel considers applicable rulings of: respondent Court,. the judgment was based, on a case decided by this Tribunal Moreover, counsel for petitioner ignored earlier doctrines of this Court consistently holding that a mishap caused by defective brakes could not be considered as fortuitous in character and thus caged for an acquittal of the driver if subsequently haled to court. This Court, nonetheless, was persuaded to give due course to the petition primarily for clarifying the state of the law and thus hopefully avoid any further lurking doubt on the matter. It is quite evident that the reversal of the decision sought to be reviewed is not justified. The decision of respondent Court, with Justice Julia Agrava as ponente, set forth the relevant facto thus: "At about 9:15 o'clock in the morning of January 4,, 1972, Rodolfo [Rayan- dayan] was driving a Hodlen Kingswood car (the [Holden] car), plate No. 52-19V (L-Rizal '71) owned by the Sta. Ines Corp. and assigned for use of its manager, an Ayala Avenue in Makati, Rizal, going northwards. At the intersection of Ayala Avenue will Mabati Avenue, [Rayandayan] was going to turn left on Makati Avenue but he stopped to wait for the left-turn signal and because a jeep in front of him was also at a stop ... While in that sup position, the [Holden] car was bumped from behind by Blue Car Taxi bearing Plate No. 55-71R (TX-QC '71) and by Inocencio [Tugade] causing damage to the [Holden] car, the repairs of which cost P778.10 ... [Tugade] was then charged with Reckless Imprudence Resulting in Damage to Property. He pleaded not guilty and while admitting that the collision was caused by faulty brakes of his taxicab, sought to expeculate himself with an explanation that this fault could not and should not be traced to him. after trial, the lower court held: '[Accordingly], the court finds that accused Inocencio Tugade guilty beyond reasonable doubt of the crime of reckless imprudence resulting in damage to property and hereby sentences him to pay a [fine of one thousand (P1,000.00) pesos], with subsidiary imprisonment in case of insolvency in accordance with the provisions of Article 39 of the Revised, Penal Code, as amended, to indemnify the Sta. Ines Mining Corporation in the amount of P778.10 by way of actual damages; and to pay the costs.' While [Tugade] admitted the facts of the case as set out above, he, nevertheless, appealed from the judgment reiterating that 'the malfunctioning of the brakes at the time of the accident was due to a mechanical defect which even the exercise of due diligence of a good father of a family cannot have prevented.' As the lower court had found: "this witness ([Tugade]) testified that after the accident, he admitted that his taxicab bumped the car on his front because the brakes of his vehicle malfunctioned; and that the document, ..., is the handwritten statement he prepared to this effect." 1 Respondent Court of Appeals, after stating that upon review of the record, it agreed with the trial court, its decision affirming in toto their judgment appealed from.

17

As noted at the outset, petitioner is not entitled to acquittal. His plea for the reversal of the decision reached by respondent Court is not impressed with merit. At the most, as was likewise previously mentioned, the fine imposed could be reduced. 1. Counsel for petitioner vigorously contends that respondent Court of Appeals ought not to have applied the pronouncement in La Mallorca and Pampanga Bus Co. vs. De Jesus 2 on the ground that it was obiter dictum. That is not the case at all. A little more time and attention in the study of the above decision could have resulted in its correct appraisal He would have realized then that respondent Court acted correctly. This Tribunal passed squarely on the specific issue raised. The opinion penned by the then Justice, later Chief Justice, Makalintal, is categorical: "Petitioner maintains that a tire blow-out is a fortuitous event and gives rise to no liability for negligence, citing the rulings of the Court of Appeals in Rodriguez V. Red Line Transportation Co., CA-G.R. No. 8136, December 29, 1954, and People v. Palapal, CA-G.R. No. 18480, June 27, 1958. These rulings, however, not only are not binding on this Court but were based on considerations, quite different from those that obtain in the case at bar." 3 The above doctrine is controlling. The reference to the Court of appeals decisions is of no moment. 4 It may be printed out that they were not ignored in the opinion of Justice Agrava, six of its nine pages being devoted to distinguishing them. Even without the La Mallorca ruling then, the decision of respondent Court sought to be reviewed can stand the test of strict scrutiny. It is this Tribunal, not respondent Court of Appeals, that speaks authoritatively. 2. Respondent Court of Appeals really was devoid of any choice at all. It could not have ruled in any other way on the legal question raised. This Tribunal having spoken, its duty was to obey. It is as simple as that. There is relevance to this excerpt from Barrera v. Barrera: 5 "The delicate task of ascertaining the significance that attaches to a constitutional or statutory provision, an executive order, a procedural norm or a municipal ordinance is committed to the judiciary. It thus discharges a role no less crucial than that appertaining to the other two departments in the maintenance of the rule of law. To assure stability in legal relations and avoid confusion, it has to speak with one voice. It does so with finality, logically and rightly, through the highest judicial organ, this Court. What it says then should be definitive and authoritative, binding on those occupying the lower ranks in the judicial heirarchy. They have to defer and to submit." 6 The ensuing paragraph of the opinion in Barrera further emphasizes the point: "Such a thought was reiterated in an opinion of Justice J.B.L. Reyes and further emphasized in these words: "Judge Gaudencio Cloribel need not be reminded that the Supreme Court, by tradition and in our system of judicial administration, has the last word on what the law is it is the final arbiter of any justifiable controversy. There is only one Supreme Court from whose decisions all other courts should take their bearings." 7 3. The lack of merit in this petition becomes even more obvious when it is recalled that the La Mallorca decision did not enunciate a new principle. As far back as Lasam v. Smith, 8 promulgated more than half a century ago, in 1924 to be exact, this Court has been committed to such a doctrine. Thus; "As will be seen, these authorities agree that some extraordinary circumstance independent of the will of the obligor, or of his employees, is an essential element of a caso fortuito. Turning to the present case, it is at once apparent that this element is lacking. It is not suggested that the accident in question was due to an act of God or to adverse road conditions which could not have been foreseen. As far as the record shows, the accident was caused either by defects in the automobile or else through the negligence of its driver. That is not a caso fortuito." 9 Lasam was cited with approval in the two subsequent cases of Son v. Cebu Autobus Co. 10 and Necesito v. Paras. 11 WHEREFORE, The decision of respondent Court of Appeals of December 15, 1977 is affirmed. No costs. Barredo, Antonio, Aquino, Concepcion, Jr., and Santos, JJ., concur.

G.R. No. L-42926 September 13, 1985 PEDRO VASQUEZ, SOLEDAD ORTEGA, CLETO B. BAGAIPO, AGUSTINA VIRTUDES, ROMEO VASQUEZ and MAXIMINA CAINAY, petitioners, vs. THE COURT OF APPEALS and FILIPINAS PIONEER LINES, INC., respondents. Emilio D. Castellanes for petitioners. Apolinario A. Abantao for private respondents.

MELENCIO-HERRERA, J.: This litigation involves a claim for damages for the loss at sea of petitioners' respective children after the shipwreck of MV Pioneer Cebu due to typhoon "Klaring" in May of 1966. The factual antecedents, as summarized by the trial Court and adopted by respondent Court, and which we find supported by the record, read as follows: When the inter-island vessel MV "Pioneer Cebu" left the Port of Manila in the early morning of May 15, 1966 bound for Cebu, it had on board the spouses Alfonso Vasquez and Filipinas Bagaipo and a four-year old boy, Mario Marlon Vasquez, among her passengers. The MV "Pioneer Cebu" encountered typhoon "Klaring" and struck a reef on the southern part of Malapascua Island, located somewhere north of the island of Cebu and subsequently sunk. The aforementioned passengers were unheard from since then. Plaintiffs Pedro Vasquez and Soledad Ortega are the parents of Alfonso Vasquez; plaintiffs Cleto Bagaipo and Agustina Virtudes are the parents of Filipinas Bagaipo; and plaintiffs Romeo Vasquez and Maxima Cainay are the parents of the child, Mario Marlon Vasquez. They seek the recovery of damages due to the loss of Alfonso Vasquez, Filipinas Bagaipo and Mario Marlon Vasquez during said voyage. At the pre-trial, the defendant admitted its contract of carriage with Alfonso Vasquez, Filipinas Bagaipo and Mario Marlon Vasquez, and the fact of the sinking of the MV "Pioneer Cebu". The issues of the case were limited to the defenses alleged by the defendant

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that the sinking of the vessel was caused by force majeure, and that the defendant's liability had been extinguished by the total loss of the vessel. The evidence on record as to the circumstances of the last voyage of the MV "Pioneer Cebu" came mainly, if not exclusively, from the defendant. The MV "Pioneer Cebu" was owned and operated by the defendant and used in the transportation of goods and passengers in the inter-island shipping. Scheduled to leave the Port of Manila at 9:00 p.m. on May 14, 1966, it actually left port at 5:00 a.m. the following day, May 15, 1966. It had a passenger capacity of three hundred twenty-two (322) including the crew. It undertook the said voyage on a special permit issued by the Collector of Customs inasmuch as, upon inspection, it was found to be without an emergency electrical power system. The special permit authorized the vessel to carry only two hundred sixty (260) passengers due to the said deficiency and for lack of safety devices for 322 passengers (Exh. 2). A headcount was made of the passengers on board, resulting on the tallying of 168 adults and 20 minors, although the passengers manifest only listed 106 passengers. It has been admitted, however, that the headcount is not reliable inasmuch as it was only done by one man on board the vessel. When the vessel left Manila, its officers were already aware of the typhoon Klaring building up somewhere in Mindanao. There being no typhoon signals on the route from Manila to Cebu, and the vessel having been cleared by the Customs authorities, the MV "Pioneer Cebu" left on its voyage to Cebu despite the typhoon. When it reached Romblon Island, it was decided not to seek shelter thereat, inasmuch as the weather condition was still good. After passing Romblon and while near Jintotolo island, the barometer still indicated the existence of good weather condition continued until the vessel approached Tanguingui island. Upon passing the latter island, however, the weather suddenly changed and heavy rains felt Fearing that due to zero visibility, the vessel might hit Chocolate island group, the captain ordered a reversal of the course so that the vessel could 'weather out' the typhoon by facing the winds and the waves in the open. Unfortunately, at about noontime on May 16, 1966, the vessel struck a reef near Malapascua island, sustained leaks and eventually sunk, bringing with her Captain Floro Yap who was in command of the vessel. Due to the loss of their children, petitioners sued for damages before the Court of First Instance of Manila (Civil Case No. 67139). Respondent defended on the plea of force majeure, and the extinction of its liability by the actual total loss of the vessel. After proper proceedings, the trial Court awarded damages, thus: WHEREFORE, judgment is hereby rendered ordering the defendant to pay: (a) Plaintiffs Pedro Vasquez and Soledad Ortega the sums of P15,000.00 for the loss of earning capacity of the deceased Alfonso Vasquez, P2,100.00 for support, and P10,000.00 for moral damages; (b) Plaintiffs Cleto B. Bagaipo and Agustina Virtudes the sum of P17,000.00 for loss of earning capacity of deceased Filipinas Bagaipo, and P10,000.00 for moral damages; and (c) Plaintiffs Romeo Vasquez and Maximina Cainay the sum of P10,000.00 by way of moral damages by reason of the death of Mario Marlon Vasquez. On appeal, respondent Court reversed the aforementioned judgment and absolved private respondent from any and all liability. Hence, this Petition for Review on Certiorari, the basic issue being the liability for damages of private respondent for the presumptive death of petitioners' children. The trial Court found the defense of caso fortuito untenable due to various decisive factors, thus: ... It is an admitted fact that even before the vessel left on its last voyage, its officers and crew were already aware of the typhoon brewing somewhere in the same general direction to which the vessel was going. The crew of the vessel took a calculated risk when it proceeded despite the typhoon advisory. This is quite evident from the fact that the officers of the vessel had to conduct conferences amongst themselves to decide whether or not to proceed. The crew assumed a greater risk when, instead of seeking shelter in Romblon and other islands the vessel passed en route, they decided to take a change on the expected continuation of the good weather the vessel was encountering, and the possibility that the typhoon would veer to some other directions. The eagerness of the crew of the vessel to proceed on its voyage and to arrive at its destination is readily understandable. It is undeniably lamentable, however, that they did so at the risk of the lives of the passengers on board. Contrariwise, respondent Appellate Court believed that the calamity was caused solely and proximately by fortuitous event which not even extraordinary diligence of the highest degree could have guarded against; and that there was no negligence on the part of the common carrier in the discharge of its duties. Upon the evidence and the applicable law, we sustain the trial Court. "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; (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." 1 In the language of the law, the event must have been impossible to foresee, or if it could be foreseen, must have been impossible to avoid. 2There must be an entire exclusion of human agency from the cause of injury or loss. 3 Turning to this case, before they sailed from the port of Manila, the officers and crew were aware of typhoon "Klaring" that was reported building up at 260 kms. east of Surigao. In fact, they had lashed all the cargo in the hold before sailing in anticipation of strong winds and rough waters. 4 They proceeded on their way, as did other vessels that day. Upon reaching Romblon, they received the weather report that the typhoon was 154 kms. east southeast of Tacloban and was moving west northwest. 5 Since they were still not within the radius of the typhoon and the weather was clear, they deliberated and decided to proceed with the course. At Jintotolo Island, the typhoon was already reported to be reaching the mainland of Samar. 6 They still decided to proceed noting that the weather was still "good" although, according to the Chief Forecaster of the Weather Bureau, they were already within the typhoon zone. 7 At Tanguingui Island, about 2:00 A.M. of May 16, 1966, the typhoon was in an area quite close to Catbalogan, placing Tanguingui also within the typhoon zone. Despite knowledge of that fact, they again decided to proceed relying on the forecast that the typhoon would

19

weaken upon crossing the mainland of Samar. 8 After about half an hour of navigation towards Chocolate Island, there was a sudden fall of the barometer accompanied by heavy downpour, big waves, and zero visibility. The Captain of the vessel decided to reverse course and face the waves in the open sea but because the visibility did not improve they were in total darkness and, as a consequence, the vessel ran aground a reef and sank on May 16, 1966 around 12:45 P.M. near Malapascua Island somewhere north of the island of Cebu. Under the circumstances, while, indeed, the typhoon was an inevitable occurrence, yet, having been kept posted on the course of the typhoon by weather bulletins at intervals of six hours, the captain and crew were well aware of the risk they were taking as they hopped from island to island from Romblon up to Tanguingui. They held frequent conferences, and oblivious of the utmost diligence required of very cautious persons, 9 they decided to take a calculated risk. In so doing, they failed to observe that extraordinary diligence required of them explicitly by law for the safety of the passengers transported by them with due regard for an circumstances 10 and unnecessarily exposed the vessel and passengers to the tragic mishap. They failed to overcome that presumption of fault or negligence that arises in cases of death or injuries to passengers. 11 While the Board of Marine Inquiry, which investigated the disaster, exonerated the captain from any negligence, it was because it had considered the question of negligence as "moot and academic," the captain having "lived up to the true tradition of the profession." While we are bound by the Board's factual findings, we disagree with its conclusion since it obviously had not taken into account the legal responsibility of a common carrier towards the safety of the passengers involved. With respect to private respondent's submission that the total loss of the vessel extinguished its liability pursuant to Article 587 of the Code of Commerce 12 as construed in Yangco vs. Laserna, 73 Phil. 330 [1941], suffice it to state that even in the cited case, it was held that the liability of a shipowner is limited to the value of the vessel or to the insurance thereon. Despite the total loss of the vessel therefore, its insurance answers for the damages that a shipowner or agent may be held liable for by reason of the death of its passengers. WHEREFORE, the appealed judgment is hereby REVERSED and the judgment of the then Court of First Instance of Manila, Branch V, in Civil Case No. 67139, is hereby reinstated. No costs. SO ORDERED.

G.R. Nos. 81100-01 February 7, 1990 BACOLOD-MURCIA MILLING CO., INC., petitioner, vs. HON. COURT OF APPEALS AND ALONSO GATUSLAO, respondents. BACOLOD-MURCIA MILLING CO., INC., petitioner, vs. HON. COURT OF APPEALS, ALONSO GATUSLAO, AGRO-INDUSTRIAL DEVELOPMENT OF SILAY-SARAVIA (AIDSISA) AND BACOLOD-MURCIA AGRICULTURAL COOPERATIVE MARKETING ASSOCIATION (BM-ACMA), respondents. Jalandoni, Herrera, Del Castillo & Associates for petitioner. Taada, Vico & Tan for respondent AIDSISA. San Juan, Gonzalez, San Agustin & Sinense for respondents Alfonso Gatuslao and BM-ACMA. PARAS, J.: This is a petition for review on certiorari of the decision of the Court of Appeals in CA-G.R. CV Nos. 59716-59717 promulgated on September 11, 1987 affirming in toto the decision of the Court of First Instance of Negros Occidental in two consolidated civil cases, the dispositive portion of which reads as follows: PREMISES CONSIDERED, the decision appealed from is hereby affirmed in toto. The uncontroverted facts of the case
1

are as follows:

1. xxx xxx xxx 2. BMMC is the owner and operator of the sugar central in Bacolod City, Philippines; 3. ALONSO GATUSLAO is a registered planter of the Bacolod-Murcia Mill District with Plantation Audit No. 3-79, being a registered owner of Lot Nos. 310, 140, 141 and 101-A of the Cadastral Survey of Murcia, Negros Occidental, otherwise known as Hda. San Roque; 4. On May 24, 1957 BMMC and Alonso Gatuslao executed an 'Extension and Modification of Milling Contract (Annex 'A' of the complaint in both cases) which was registered on September 17, 1962 in the Office of the Register of Deeds of Negros Occidental, and annotated on Transfer Certificates of Title Nos. T-24207, RT-2252, RT-12035, and RT-12036 covering said Lot Nos. 310, 140, 141 and 101-A; 5. That since the crop year 1957-1958 up to crop year 1967-1968, inclusive, Alonso Gatuslao has been milling all the sugarcane grown and produced on said Lot Nos. 310, 140, 141 and 101-A with the Mill of BMMC;.

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6. Since the crop year 1920-21 to crop year 1967-1968, inclusive, the canes of planters adhered to the mill of BMMC were transported from the plantation to the mill by means of cane cars and through railway system operated by BMMC; 7. The loading points at which planters Alonso Gatuslao was and should deliver and load all his canes produced in his plantation, Hda. San Roque, were at the Arimas Line, Switch 2, and from which loading stations, BMMC had been hauling planter Gatuslao's sugar cane to its mill or factory continuously until the crop year 1967-68; 8. BMMC had not been able to use its cane cars and railway system for the cargo crop year 1968-1969; 9. Planter Alonso Gatuslao on various dates requested transportation facilities of BMMC to be sent to his loading stations or switches for purposes of hauling and milling his sugarcane crops of crop year 1968-1969; 10. The estimated gross production of Hda. San Roque for the crop year 1968-1969 is 4,500 piculs. The records show that since the crop year 1920-1921 to the crop year 1967-1968, the canes of the adhered planters were transported from the plantation to the mill of BMMC by means of cane cars and through a railway system operated by BMMC which traversed the land of the adherent planters, corresponding to the rights of way on their lands granted by the planters to the Central for the duration of the milling contracts which is for "un periodo de cuarenta y cinco anos o cosechas a contar desde la cosecha de 1920-1921" 2 (a period of 45 years or harvests, beginning with a harvest of 19201921). BMMC constructed the railroad tracks in 1920 and the adherent planters granted the BMMC a right of way over their lands as provided for in the milling contracts. The owners of the hacienda Helvetia were among the signatories of the milling contracts. When their milling contracts with petitioner BMMC expired at the end of the 1964-1965 crop year, the corresponding right of way of the owners of the hacienda Helvetia granted to the Central also expired. Thus, the BMMC was unable to use its railroad facilities during the crop year 1968-1969 due to the closure in 1968 of the portion of the railway traversing the hacienda Helvetia as per decision of the Court in Angela Estate, Inc. and Fernando F. Gonzaga, Inc. v. Court of First Instance of Negros Occidental, G.R. No. L-27084, (24 SCRA 500 [1968]). In the same case the Court ruled that the Central's conventional right of way over the hacienda Helvetia ceased with the expiration of its amended milling contracts with the landowners of the hacienda at the end of the 1964-1965 crop year and that in the absence of a renewal contract or the establishment of a compulsory servitude of right of way on the same spot and route which must be predicated on the satisfaction of the preconditions required by law, there subsists no right of way to be protected. Consequently, the owners of the hacienda Helvetia required the Central to remove the railway tracks in the hacienda occupying at least 3,245 lineal meters with a width of 7 meters or a total of 22,715 square meters, more or less. That was the natural consequence of the expiration of the milling contracts with the landowners of the hacienda Helvetia (Angela Estate, Inc. and Fernando Gonzaga, Inc. v. Court of First Instance of Negros Occidental, ibid). BMMC filed a complaint for legal easement against the owners of the hacienda, with the Court of First Instance of Negros Occidental which issued on October 4, 1965 an ex parte writ of preliminary injunction restraining the landowners from reversing and/or destroying the railroad tracks in question and from impeding, obstructing or in any way preventing the passage and operation of plaintiffs locomotives and cane cars over defendants' property during the pendency of the litigation and maintained the same in its subsequent orders of May 31, and November 26, 1966. The outcome of the case, however, was not favorable to the plaintiff BMMC. In the same case the landowners asked this Court to restrain the lower court from enforcing the writ of preliminary injunction it issued, praying that after the hearing on the merits, the restraining order be made permanent and the orders complained of be annulled and set aside. The Court gave due course to the landowner's petition and on August 10, 1967 issued the writ of preliminary injunction enjoining the lower court from enforcing the writ of preliminary injunction issued by the latter on October 4, 1965. The writ of preliminary injunction issued by the Court was lifted temporarily on motion that through the mediation of the President of the Philippines the Angela Estate and the Gonzaga Estate agreed with the Central to allow the use of the railroad tracks passing through the hacienda Helvetia during the 1967-1968 milling season only, for the same purpose for which they had been previously used, but it was understood that the lifting of the writ was without prejudice to the respective rights and positions of the parties in the case and not deemed a waiver of any of their respective claims and allegations in G.R. No. L-27084 or in any other case between the same parties, future or pending. The Court resolved to approve the motion only up to and including June 30, 1968 to give effect to the agreement but to be deemed automatically reinstated beginning July 1, 1968 (Angela Estate, Inc. and Fernando F. Gonzaga, Inc. v. Court of First Instance of Negros Occidental, ibid.). The temporary lifting of the writ of preliminary injunction assured the milling of the 1967-1968 crop but not the produce of the succeeding crop years which situation was duly communicated by the President and General Manager of the BMMC to the President of Bacolod-Murcia Sugar Farmers Corporation (BMSFC) on January 2, 1968. 3 On October 30, 1968, Alonso Gatuslao, one of private respondents herein, and his wife, Maria H. Gatuslao, filed Civil Case No. 8719 in the Court of First Instance of Negros Occidental, against petitioner herein, Bacolod-Murcia Milling Co., Inc. (BMMC), for breach of contract, praying among others, for the issuance of a writ of preliminary mandatory injunction ordering defendant to immediately send transportation facilities and haul the already cut sugarcane to the mill site and principally praying after hearing, that judgment be rendered declaring the rescission of the milling contract executed by plaintiffs and defendant in 1957 for seventeen (17) years or up to crop year 1973-74, invoking as ground the alleged failure and/or inability of defendant to comply with its specific obligation of providing the necessary transportation facilities to haul the sugarcane of Gatuslao from plaintiffs plantation specifically for the crop year 1967-1968. Plaintiffs further prayed for the recovery of actual and compensatory damages as well as moral and exemplary damages and attorney's fees. 4 In answer, defendant BMMC claimed that despite its inability to use its railways system for its locomotives and cane cars to haul the sugarcanes of all its adhered planters including plaintiffs for the 1968-69 crop year allegedly due to force majeure, in order to comply with its obligation, defendant hired at tremendous expense, private trucks as prime movers for its trailers to be used for hauling of the canes, especially for those who applied for and requested transportation facilities. Plaintiffs, being one of said planters, instead of loading their cut canes for the 1968-69 crop on the cargo trucks of defendant, loaded their cut canes on trucks provided by the Bacolod-Murcia Agricultural Cooperative Marketing Association, Inc. (B-M ACMA) which transported plaintiffs' canes of the 1968-69 sugarcanes crop. Defendant prayed in its counterclaim for the dismissal of Civil Case No. 8719 for the recovery of actual damages, moral and exemplary damages and for attorney's fees. 5 On November 21, 1968, BMMC filed in the same court Civil Case No. 8745 against Alonso Gatuslao, the Agro-Industrial Development of Silay-Saravia (AIDSISA) and the Bacolod-Murcia Agricultural Cooperative Marketing Associations, Inc. (B-M ACMA), seeking specific performance under the mining contract executed on May 24, 1957 between plaintiff and defendant Alonso Gatuslao praying for the issuance of writs of preliminary mandatory injunction

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to stop the alleged violation of the contract by defendant Alonso Gatuslao in confederation, collaboration and connivance with defendant BM-ACMA, AIDSISA, and for the recovery of actual, moral and exemplary damages and attorney's fees. 6 Defendant Alonso Gatuslao and the Bacolod-Murcia Agricultural Cooperative Marketing Association, Inc. filed their answer on January 27, 1969 with compulsory counter-claims, stating by way of special and affirmative defense, among others, that the case is barred by another action pending between the same parties for the same cause of action. 7 Defendant Agro-Industrial Development Corporation of Silay-Saravia, Inc. filed its answer on February 8, 1969, alleging among others by way of affirmative defense that before it agreed to mill the sugarcane of its co-defendant Alonso Gatuslao, it carefully ascertained and believed in good faith that: (a) plaintiff was incapable of the sugarcane of AIDSISA's co-defendant planters as well as the sugarcane of other planters formerly adherent to plaintiff, (b) plaintiff had in effect agreed to a rescission of its milling contracts with its adhered planters, including the defendant planter, because of inadequate means of transportation. and had warned and advised them to mill their sugarcane elsewhere, and had thus induced them to believe and act on the belief, that it could not mill their sugarcane and that it would not object to their milling with other centrals; and (c) up to now plaintiff is incapable of hauling the sugarcane of AIDSISA's co-defendants to plaintiffs mill site for milling purposes. The two cases, Civil Cases Nos. 8719 and 8745 were consolidated for joint trial before Branch II of the Court of First Instance of Negros Occidental. 8 On September 8, 1969, the parties in both civil cases filed their partial stipulation of facts which included a statement of the issues raised by the parties. 9 On February 6, 1976, the lower court rendered judgment declaring the milling contract dated May 24, 1957 rescinded. The dispositive portion of the decision 10 reads: WHEREFORE, judgment is hereby rendered as follows: (1) In Civil Case No. 8719 the milling contract (Exh. "121") dated May 24, 1957 is hereby declared rescinded or resolved and the defendant Bacolod-Murcia Company, Inc. is hereby ordered to pay plaintiffs Alonso Gatuslao and Maria H. Gatuslao the amount of P2,625.00 with legal interest from the time of the filing of the complaint by way of actual damages; P5,000.00 as attorney's fees and the costs of the suit; defendant's counterclaim is dismissed; and (2) The complaint in Civil Case No. 8745 as well as the counterclaims therein are ordered dismissed, without costs. Bacolod-Murcia Milling Co., Inc. defendant in Civil Case No. 8719 and plaintiff in Civil Case No. 8745 appealed the case to respondent Court of Appeals which affirmed in toto (Rollo, p. 81) the decision of the lower court. The motion for reconsideration filed by defendant-appellant Bacolod-Murcia Milling Company, petitioner herein, was denied by the appellate court for lack of merit. 11 Hence, this petition. The issues
12

raised by petitioner are as follows: I WHETHER OR NOT THE CLOSURE OF PETITIONER'S RAIL ROAD LINES CONSTITUTEFORCE MAJEURE. II WHETHER OR NOT PRIVATE RESPONDENT GATUSLAO HAS THE RIGHT TO RESCIND THE MILLING CONTRACT WITH PETITIONER UNDER ARTICLE 1191 OF THE CIVIL CODE. III WHETHER OR NOT PRIVATE RESPONDENT GATUSLAO WAS JUSTIFIED IN VIOLATING HIS MILLING CONTRACT WITH PETITIONER. IV WHETHER OR NOT PRIVATE RESPONDENTS GATUSLAO AND B-M ACMA ARE GUILTY OF BAD FAITH IN THE EXERCISE OF THEIR DUTIES AND ARE IN ESTOPPEL TO QUESTION THE ADEQUACY OF THE TRANSPORTATION FACILITIES OF PETITIONER AND ITS CAPACITY TO MILL AND HAUL THE CANES OF ITS ADHERENT PLANTERS.

The crux of the issue is whether or not the termination of petitioner's right of way over the hacienda Helvetia caused by the expiration of its amended milling contracts with the landowners of the lands in question is a fortuitous event or force majeure which will exempt petitioner BMMC from fulfillment of its contractual obligations. It is the position of petitioner Bacolod-Murcia Milling Co., Inc. (BMMC) that the closure of its railroad lines constitute force majeure, citing Article 1174 of the Civil Code, exempting a person from liability for events which could not be foreseen or which though foreseen were inevitable. This Court has consistently ruled that when an obligor is exempted from liability under the aforecited provision of the Civil Code for a breach of an obligation due to an act of God, the following elements must concur: (a) the cause of the breach of the obligation must be independent of the wig of the debtor; (b) the event must be either unforseeable or unavoidable; (c) the event must be such as to render it impossible for the debtor to fulfill his obligation in a normal manner; (d) the debtor must be free from any participation in, or aggravation of the injury to the creditor (Vasquez v. Court of Appeals, 138 SCRA 553 [1985]; Juan F. Nakpil & Sons v. Court of Appeals, 144 SCRA 596 [1986]). Applying the criteria to the instant case, there can be no other conclusion than that the closure of the railroad tracks does not constitute force majeure.

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The terms of the milling contracts were clear and undoubtedly there was no reason for BAMC to expect otherwise. The closure of any portion of the railroad track, not necessarily in the hacienda Helvetia but in any of the properties whose owners decided not to renew their milling contracts with the Central upon their expiration, was forseeable and inevitable. Petitioner Central should have anticipated and should have provided for the eventuality before committing itself. Under the circumstances it has no one to blame but itself and cannot now claim exemption from liability. In the language of the law, the event must have been impossible to foresee, or if it could be foreseen, must have been impossible to avoid. There must be an entire exclusion of human agency from the cause of the injury or loss (Vasquez v. Court of Appeals, supra). In the case at bar, despite its awareness that the conventional contract of lease would expire in Crop Year 1964-1965 and that refusal on the part of any one of the landowners to renew their milling contracts and the corresponding use of the right of way on their lands would render impossible compliance of its commitments, petitioner took a calculated risk that all the landowners would renew their contracts. Unfortunately, the sugar plantation of Angela Estate, Inc. which is located at the entrance of the mill was the one which refused to renew its milling contract. As a result, the closure of the railway located inside said plantation paralyzed the entire transportation system. Thus, the closure of the railway lines was not an act of God nor does it constitute force majeure. It was due to the termination of the contractual relationships of the parties, for which petitioner is charged with knowledge. Verily, the lower court found that the Angela Estate, Inc. notified BMMC as far back as August or September 1965 of its intention not to allow the passage of the railway system thru its land after the aforesaid crop year. Adequate measures should have been adopted by BMMC to forestall such paralyzation but the records show none. All its efforts were geared toward the outcome of the court litigation but provided no solutions to the transport problem early enough in case of an adverse decision. The last three issues being inter-related will be treated as one. Private respondent Gatuslao filed an action for rescission while BMMC filed in the same court an action against Gatuslao, the Agro Industrial Development Silay Saravia (AIDSISA) and the Bacolod-Murcia Agricultural Cooperative Marketing Associations, Inc. (B-M ACMA) for specific performance under the milling contract. There is no question that the contract in question involves reciprocal obligations; as such party is a debtor and creditor of the other, such that the obligation of one is dependent upon the obligation of the other. They are to be performed simultaneously so that the performance of one is conditioned upon the simultaneous fulfillment of the other (Boysaw v. Interphil Promotions, Inc., 148 SCRA 643 [1987]). Under Article 1191 of the Civil Code, 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. In fact, it is well established that the party who deems the contract violated may consider it revoked or rescinded pursuant to their agreement and act accordingly, even without previous court action (U.P. v. de los Angeles, 35 SCRA 102 [1970]; Luzon Brokerage Co., Inc. v. Maritime Building Co., Inc., 43 SCRA 94 [1972]). It is the general rule, however, that rescission of a contract will not be permitted for a slight or casual breach, but only for such substantial and fundamental breach as would defeat the very object of the parties in making the agreement. The question of whether a breach of a contract is substantial depends upon the attendant circumstances (Universal Food Corporation v. Court of Appeals, et al., 33 SCRA 1 [1970]). The issue therefore, hinges on who is guilty of the breach of the milling contract. Both parties are agreed that time is of the essence in the sugar industry; so that the sugarcanes have to be milled at the right time, not too early or too late, if the quantity and quality of the juice are to be assured. As found by the trial court, upon the execution of the amended milling contract on May 24, 1957 for a period of 17 crop years, BMMC undertook expressly among its principal prestations not only to mill Gatuslao's canes but to haul them by railway from the loading stations to the mill. Atty. Solidum, Chief Legal Counsel and in Charge of the Legal-Crop Loan Department of the BMMC Bacolod City admits that the mode of transportation of canes from the fields to the mill is a vital factor in the sugar industry; precisely for this reason the mode of transportation or hauling the canes is embodied in the milling contract. 13 But BMMC is now unable to haul the canes by railways as stipulated because of the closure of the railway lines; so that resolution of this issue ultimately rests on whether or not BMMC was able to provide adequate and efficient transportation facilities of the canes of Gatuslao and the other planters milling with BMMC during the crop year 1968-1969. As found by both the trial court and the Court of Appeals, the answer is in the negative. Armando Guanzon, Dispatcher of the Transportation Department of BMMC testified that when the Central was still using the railway lines, it had between 900 to 1,000 cane cars and 10 locomotives, each locomotive pulling from 30 to 50 cane cars with maximum capacity of 8 tons each. 14 This testimony was corroborated by Rodolfo Javelosa, Assistant Crop Loan Inspector in the Crop Loan Department of petitioner. 15 After the closure of the railway lines, petitioner on February 5, 1968 through its President and General Manager, informed the National Committee of the National Federation of Sugarcane Planters that the trucking requirement for hauling adherent planters produce with a milling average of 3,500 tons of canes daily at an average load of 5 tons per truck is not less than 700 trucks daily plus another 700 empty trucks to be shuttled back to the plantations to be available for loading the same day. 16 Guanzon, however, testified that petitioner had only 280 units of trailers, 20 tractors and 3 trucks plus 20 trucks more or less hired by the Central and given as repartos (allotments) to the different planters. 17 The 180 trailers that the Central initially had were permanently leased to some planters who had their own cargo trucks while out of the 250 BMMC trailers existing during the entire milling season only 70 were left available to the rest of the planters pulled by 3 trucks. 18 It is true that BMMC purchased 20 units John Deere Tractors (prime movers) and 230 units, Vanguard Trailers with land capacity of 3 tons each but that was only on October 1968 as registered in the Land Transportation Commission, Bacolod City. 19 The evidence shows that great efforts had been exerted by the planters to enter into some concrete understanding with BMMC wi th a view of obtaining a reasonable assurance that the latter would be able to haul and mill their canes for the 1968-1969 crop year, but to no avail. 20 As admitted by BMMC itself, in its communications with the planters, it is not in a position to provide adequate transportation for the canes in compliance with its commitment under the milling contract. Said communications 21 were quoted by the Court of Appeals as follows: We are sorry to inform you that unless we can work out a fair and equitable solution to this problem of closure of our railroad lines, the milling of your canes for the crop year 1968-69 would be greatly hampered to the great detriment of our economy and the near elimination of the means of livelihood of most planters and the possible starvation of thousands of laborers working in the sugar District of Bacolod-Murcia Milling Co. and

23

We are fully conscious of our contractual obligations to our existing Milling Contract. But, if prevented by judicial order we will find ourselves unable to serve you in the hauling of the canes through our railroad lines. It is for this reason that we suggest you explore other solutions to the problem in the face of such an eventuality so that you may be able to proceed with the planting of your canes with absolute peace of mind and the certainty that the same will be properly milled and not left to rot in the fields. also, In the meantime, and before July 1, 1968, the end of the temporary arrangement we have with Fernando Gonzaga, Inc. and the Angela Estate, Inc. for the use of the rights of ways, our lawyers are studying the possibility of getting a new injunction from the Supreme Court or the Court of First Instance of Negros Occidental based on the new grounds interposed in said memorandum not heretofore raised previously nor in the Capitol Subdivision case. And if we are doing this, it is principally to prevent any injury to your crops or foreclosure of your property, which is just in line with the object of your plans. On March 26, 1968 the President of the Bacolod-Murcia Sugar Farmer's Corporation writing on behalf of its planter-members demanded to know the plans of the Central for the crop year 1968-1969, stating that if they fail to hear from the Central on or before the 15th of April they will feel free to make their own plans in order to save their crops and the possibility of foreclosure of their properties. 22 In its letter dated April 1, 1968, the president of BMMC simply informed the Bacolod-Murcia Sugar Farmer's Corporation that they were studying the possibility of getting a new injunction from the court before expiration of their temporary arrangement with Fernando Gonzaga, Inc. and the Angela Estate, Inc. 23 Pressing for a more definite commitment (not a mere hope or expectation), on May 30, 1968 the Bacolod-Murcia Sugar Farmer's Corporation requested the Central to put up a performance bond in the amount of P13 million within a 5-day period to allay the fears of the planters that their sugar canes can not be milled at the Central in the coming milling season. 24 BMMC's reply was only to express optimism over the final outcome of its pending cases in court. Hence, what actually happened afterwards is that petitioner failed to provide adequate transportation facilities to Gatuslao and other adherent planters. As found by the trial court, the experience of Alfonso Gatuslao at the start of the 1968-1969 milling season is reflective of the inadequacies of the reparto or trailer allotment as well as the state of unpreparedness on the part of BMMC to meet the problem posed by the closure of the railway lines. It was established that after Gatuslao had cut his sugarcanes for hauling, no trailers arrived and when two trailers finally arrived on October 20, 1968 after several unheeded requests, they were left on the national highway about one (1) kilometer away from the loading station. Such fact was confirmed by Carlos Butog the driver of the truck that hauled the trailers. 25 Still further, Javelosa, Assistant Crop Loan Inspector, testified that the estimated production of Gatuslao for the crop year 1968-1969 was 4,400 piculs hauled by 10 cane cars a week with a maximum capacity of 8 tons. 26 Compared with his later schedule of only one trailer a week with a maximum capacity of only 3 to 4 tons, 27 there appears to be no question that the means of transportation provided by BMMC is very inadequate to answer the needs of Gatuslao.

G.R. No. 147324

May 25, 2004

PHILIPPINE COMMUNICATIONS SATELLITE CORPORATION, petitioner, vs. GLOBE TELECOM, INC. (formerly Globe Mckay Cable and Radio Corporation), respondents. x-----------------------------x GLOBE TELECOM, INC., petitioner, vs. PHILIPPINE COMMUNICATION SATELLITE CORPORATION, respondent. DECISION TINGA, J.: Before the Court are two Petitions for Review assailing the Decision of the Court of Appeals, dated 27 February 2001, in CA-G.R. CV No. 63619.1 The facts of the case are undisputed. For several years prior to 1991, Globe Mckay Cable and Radio Corporation, now Globe Telecom, Inc. (Globe), had been engaged in the coordination of the provision of various communication facilities for the military bases of the United States of America (US) in Clark Air Base, Angeles, Pampanga and Subic Naval Base in Cubi Point, Zambales. The said communication facilities were installed and configured for the exclusive use of the US Defense Communications Agency (USDCA), and for security reasons, were operated only by its personnel or those of American companies contracted by it to operate said facilities. The USDCA contracted with said American companies, and the latter, in turn, contracted with Globe for the use of the communication facilities. Globe, on the other hand, contracted with local service providers such as the Philippine Communications Satellite Corporation (Philcomsat) for the provision of the communication facilities.

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On 07 May 1991, Philcomsat and Globe entered into an Agreement whereby Philcomsat obligated itself to establish, operate and provide an IBS Standard B earth station (earth station) within Cubi Point for the exclusive use of the USDCA.2 The term of the contract was for 60 months, or five (5) years. 3 In turn, Globe promised to pay Philcomsat monthly rentals for each leased circuit involved. 4 At the time of the execution of the Agreement, both parties knew that the Military Bases Agreement between the Republic of the Philippines and the US (RP-US Military Bases Agreement), which was the basis for the occupancy of the Clark Air Base and Subic Naval Base in Cubi Point, was to expire in 1991. Under Section 25, Article XVIII of the 1987 Constitution, foreign military bases, troops or facilities, which include those located at the US Naval Facility in Cubi Point, shall not be allowed in the Philippines unless a new treaty is duly concurred in by the Senate and ratified by a majority of the votes cast by the people in a national referendum when the Congress so requires, and such new treaty is recognized as such by the US Government. Subsequently, Philcomsat installed and established the earth station at Cubi Point and the USDCA made use of the same. On 16 September 1991, the Senate passed and adopted Senate Resolution No. 141, expressing its decision not to concur in the ratification of the Treaty of Friendship, Cooperation and Security and its Supplementary Agreements that was supposed to extend the term of the use by the US of Subic Naval Base, among others.5The last two paragraphs of the Resolution state: FINDING that the Treaty constitutes a defective framework for the continuing relationship between the two countries in the spirit of friendship, cooperation and sovereign equality: Now, therefore, be it Resolved by the Senate, as it is hereby resolved, To express its decision not to concur in the ratification of the Treaty of Friendship, Cooperation and Security and its Supplementary Agreements, at the same time reaffirming its desire to continue friendly relations with the government and people of the United States of America. 6 On 31 December 1991, the Philippine Government sent a Note Verbale to the US Government through the US Embassy, notifying it of the Philippines termination of the RP-US Military Bases Agreement. The Note Verbalestated that since the RP-US Military Bases Agreement, as amended, shall terminate on 31 December 1992, the withdrawal of all US military forces from Subic Naval Base should be completed by said date. In a letter dated 06 August 1992, Globe notified Philcomsat of its intention to discontinue the use of the earth station effective 08 November 1992 in view of the withdrawal of US military personnel from Subic Naval Base after the termination of the RP-US Military Bases Agreement. Globe invoked as basis for the letter of termination Section 8 (Default) of the Agreement, which provides: Neither party shall be held liable or deemed to be in default for any failure to perform its obligation under this Agreement if such failure results directly or indirectly from force majeure or fortuitous event. Either party is thus precluded from performing its obligation until such force majeure or fortuitous event shall terminate. For the purpose of this paragraph, force majeure shall mean circumstances beyond the control of the party involved including, but not limited to, any law, order, regulation, direction or request of the Government of the Philippines, strikes or other labor difficulties, insurrection riots, national emergencies, war, acts of public enemies, fire, floods, typhoons or other catastrophies or acts of God. Philcomsat sent a reply letter dated 10 August 1992 to Globe, stating that "we expect [Globe] to know its commitment to pay the stipulated rentals for the remaining terms of the Agreement even after [Globe] shall have discontinue[d] the use of the earth station after November 08, 1992."7 Philcomsat referred to Section 7 of the Agreement, stating as follows: 7. DISCONTINUANCE OF SERVICE Should [Globe] decide to discontinue with the use of the earth station after it has been put into operation, a written notice shall be served to PHILCOMSAT at least sixty (60) days prior to the expected date of termination. Notwithstanding the non-use of the earth station, [Globe] shall continue to pay PHILCOMSAT for the rental of the actual number of T1 circuits in use, but in no case shall be less than the first two (2) T1 circuits, for the remaining life of the agreement. However, should PHILCOMSAT make use or sell the earth station subject to this agreement, the obligation of [Globe] to pay the rental for the remaining life of the agreement shall be at such monthly rate as may be agreed upon by the parties.8 After the US military forces left Subic Naval Base, Philcomsat sent Globe a letter dated 24 November 1993 demanding payment of its outstanding obligations under the Agreement amounting to US$4,910,136.00 plus interest and attorneys fees. However, Globe refused to hee d Philcomsats demand. On 27 January 1995, Philcomsat filed with the Regional Trial Court of Makati a Complaint against Globe, praying that the latter be ordered to pay liquidated damages under the Agreement, with legal interest, exemplary damages, attorneys fees and costs of suit. The case was raffled to Branch 59 of said court. Globe filed an Answer to the Complaint, insisting that it was constrained to end the Agreement due to the termination of the RP-US Military Bases Agreement and the non-ratification by the Senate of the Treaty of Friendship and Cooperation, which events constituted force majeure under the Agreement. Globe explained that the occurrence of said events exempted it from paying rentals for the remaining period of the Agreement. On 05 January 1999, the trial court rendered its Decision, the dispositive portion of which reads: WHEREFORE, premises considered, judgment is hereby rendered as follows: 1. Ordering the defendant to pay the plaintiff the amount of Ninety Two Thousand Two Hundred Thirty Eight US Dollars (US$92,238.00) or its equivalent in Philippine Currency (computed at the exchange rate prevailing at the time of compliance or payment) representing rentals for the month of December 1992 with interest thereon at the legal rate of twelve percent (12%) per annum starting December 1992 until the amount is fully paid; 2. Ordering the defendant to pay the plaintiff the amount of Three Hundred Thousand (P300,000.00) Pesos as and for attorneys fees;

25

3. Ordering the DISMISSAL of defendants counterclaim for lack of merit; and 4. With costs against the defendant. SO ORDERED.9 Both parties appealed the trial courts Decision to the Court of Appeals. Philcomsat claimed that the trial court erred in ruling that: (1) 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) Globe is not liable to pay the rentals for the remainder of the term of the Agreement; and (3) Globe is not liable to Philcomsat for exemplary damages. Globe, on the other hand, contended that the RTC erred in holding it liable for payment of rent of the earth station for Dece mber 1992 and of attorneys fees. It explained that it terminated Philcomsats services on 08 November 1992; hence, it had no reason to pay for rentals beyond that date. On 27 February 2001, the Court of Appeals promulgated its Decision dismissing Philcomsats appeal for lack of merit and affirming the trial courts finding that certain events constituting force majeure under Section 8 the Agreement occurred and justified the non-payment by Globe of rentals for the remainder of the term of the Agreement. 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. In addition, there were circumstances beyond the control of the parties, such as the issuance of a formal order by Cdr. Walter Corliss of the US Navy, the issuance of the letter notification from ATT and the complete withdrawal of all US military forces and personnel from Cubi Point, which prevented further use of the earth station under the Agreement. 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 1992.10 Both parties filed their respective Petitions for Review assailing the Decision of the Court of Appeals. In G.R. No. 147324,11 petitioner Philcomsat raises the following assignments of error: A. THE HONORABLE COURT OF APPEALS ERRED IN ADOPTING A DEFINITION OF FORCE MAJEURE DIFFERENT FROM WHAT ITS LEGAL DEFINITION FOUND IN ARTICLE 1174 OF THE CIVIL CODE, PROVIDES, SO AS TO EXEMPT GLOBE TELECOM FROM COMPLYING WITH ITS OBLIGATIONS UNDER THE SUBJECT AGREEMENT. B. THE HONORABLE COURT OF APPEALS ERRED IN RULING THAT GLOBE TELECOM IS NOT LIABLE TO PHILCOMSAT FOR RENTALS FOR THE REMAINING TERM OF THE AGREEMENT, DESPITE THE CLEAR TENOR OF SECTION 7 OF THE AGREEMENT. C. THE HONORABLE OCURT OF APPEALS ERRED IN DELETING THE TRIAL COURTS AWARD OF ATTORNEYS FEES IN FAVOR OF PHILCOMSAT. D. THE HONORABLE COURT OF APPEALS ERRED IN RULING THAT GLOBE TELECOM IS NOT LIABLE TO PHILCOMSAT FOR EXEMPLARY DAMAGES.12 Philcomsat argues that the termination of the RP-US Military Bases Agreement cannot be considered a fortuitous event because the happening thereof was foreseeable. Although the Agreement was freely entered into by both parties, Section 8 should be deemed ineffective because it is contrary to Article 1174 of the Civil Code. Philcomsat posits the view that the validity of the parties definition of force majeure in Section 8 of the Agreement as "circumstances beyond the control of the party involved including, but not limited to, any law, order, regulation, direction or request of the Government of the Philippines, strikes or other labor difficulties, insurrection riots, national emergencies, war, acts of public enemies, fire, floods, typhoons or other catastrophies or acts of God," should be deemed subject to Article 1174 which defines fortuitous events as events which could not be foreseen, or which, though foreseen, were inevitable.13 Philcomsat further claims that the Court of Appeals erred in holding that Globe is not liable to pay for the rental of the earth station for the entire term of the Agreement because it runs counter to what was plainly stipulated by the parties in Section 7 thereof. Moreover, said ruling is inconsistent with the appellate courts pronouncement that Globe is liable to pay rentals for December 1992 even though it terminated Philcomsats services effective 08 November 1992, because the US military and personnel completely withdrew from Cubi Point only in December 1992. Philcomsat points out that it was Globe which proposed the five-year term of the Agreement, and that the other provisions of the Agreement, such as Section 4.1 14 thereof, evince the intent of Globe to be bound to pay rentals for the entire five-year term.15 Philcomsat also maintains that contrary to the appellate courts findings, it is entitled to attorneys fees and exemplary damages. 16 In its Comment to Philcomsats Petition, Globe asserts that Section 8 of the Agreement is not contrary to Article 1174 of the Civil Code because said provision does not prohibit parties to a contract from providing for other instances when they would be exempt from fulfilling their contractual obligati ons. Globe also claims that the termination of the RP-US Military Bases Agreement constitutes force majeure and exempts it from complying with its obligations under the Agreement.17 On the issue of the propriety of awarding attorneys fees and exemplary damages to Philcomsat, Globe maintains that Philcomsat is not entitled thereto because in refusing to pay rentals for the remainder of the term of the Agreement, Globe only acted in accordance with its rights.18

26

In G.R. No. 147334,19 Globe, the petitioner therein, contends that the Court of Appeals erred in finding it liable for the amount of US$92,238.00, representing rentals for December 1992, since Philcomsats services were actually terminated on 08 November 1992. 20 In its Comment, Philcomsat claims that Globes petition should be dismissed as it raises a factual issue which is not cognizable by the Cou rt in a petition for review on certiorari.21 On 15 August 2001, the Court issued a Resolution giving due course to Philcomsats Petition in G.R. No. 147324 and required the parties to submit their respective memoranda.22 Similarly, on 20 August 2001, the Court issued a Resolution giving due course to the Petition filed by Globe inG.R. No. 147334 and required both parties to submit their memoranda.23 Philcomsat and Globe thereafter filed their respective Consolidated Memoranda in the two cases, reiterating their arguments in their respective petitions. The Court is tasked to resolve the following issues: (1) whether the termination of the RP-US Military Bases Agreement, the non-ratification of the Treaty of Friendship, Cooperation and Security, and the consequent withdrawal of US military forces and personnel from Cubi Point constitute force majeure which would exempt Globe from complying with its obligation to pay rentals under its Agreement with Philcomsat; (2) whether Globe is liable to pay rentals under the Agreement for the month of D ecember 1992; and (3) whether Philcomsat is entitled to attorneys fees and exemplary damages. No reversible error was committed by the Court of Appeals in issuing the assailed Decision; hence the petitions are denied. There is no merit is Philcomsats argument that Section 8 of the Agreement cannot be given effect because the enumeration of events constituting force majeure therein unduly expands the concept of a fortuitous event under Article 1174 of the Civil Code and is therefore invalid. In support of its position, Philcomsat contends that under Article 1174 of the Civil Code, an event must be unforeseen in order to exempt a party to a contract from complying with its obligations therein. It insists that since the expiration of the RP-US Military Bases Agreement, the non-ratification of the Treaty of Friendship, Cooperation and Security and the withdrawal of US military forces and personnel from Cubi Point were not unforeseeable, but were possibilities known to it and Globe at the time they entered into the Agreement, such events cannot exempt Globe from performing its obligation of paying rentals for the entire five-year term thereof. However, 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: Art. 1174. Except in cases 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. 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.25 Philcomsat and Globe agreed in Section 8 of the Agreement that the following events shall be deemed events constituting force majeure: 1. Any law, order, regulation, direction or request of the Philippine Government; 2. Strikes or other labor difficulties; 3. Insurrection; 4. Riots; 5. National emergencies; 6. War; 7. Acts of public enemies; 8. Fire, floods, typhoons or other catastrophies or acts of God; 9. Other circumstances beyond the control of the parties. Clearly, the foregoing are either unforeseeable, or foreseeable but beyond the control of the parties. There is nothing in the enumeration that runs contrary to, or expands, the concept of a fortuitous event under Article 1174. Furthermore, under Article 130626 of the Civil Code, parties to a contract may establish such stipulations, clauses, terms and conditions as they may deem fit, as long as the same do not run counter to the law, morals, good customs, public order or public policy. 27

27

Article 1159 of the Civil Code also provides that "[o]bligations arising from contracts have the force of law between the contracting parties and should be complied with in good faith."28 Courts cannot stipulate for the parties nor amend their agreement where the same does not contravene law, morals, good customs, public order or public policy, for to do so would be to alter the real intent of the parties, and would run contrary to the function of the courts to give force and effect thereto.29 Not being contrary to law, morals, good customs, public order, or public policy, Section 8 of the Agreement which Philcomsat and Globe freely agreed upon has the force of law between them.30 In order that Globe may be exempt from non-compliance with its obligation to pay rentals under Section 8, the concurrence of the following elements must be established: (1) the event must be independent of the human will; (2) the occurrence must render it impossible for the debtor to fulfill the obligation in a normal manner; and (3) the obligor must be free of participation in, or aggravation of, the injury to the creditor. 31 The 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: Obviously the non-ratification by the Senate of the RP-US Military Bases Agreement (and its Supplemental Agreements) under its Resolution No. 141. (Exhibit "2") on September 16, 1991 is beyond the control of the parties. This resolution was followed by the sending on December 31, 1991 o[f] a "Note Verbale"(Exhibit "3") by the Philippine Government to the US Government notifying the latter of the formers termination of the RP-US Military Bases Agreement (as amended) on 31 December 1992 and that accordingly, the withdrawal of all U.S. military forces from Subic Naval Base should be completed by said date. Subsequently, defendant [Globe] received a formal order from Cdr. Walter F. Corliss II Commander USN dated July 31, 1992 and a notification from ATT dated July 29, 1992 to terminate the provision of T1s services (via an IBS Standard B Earth Station) effective November 08, 1992. Plaintiff [Philcomsat] was furnished with copies of the said order and letter by the defendant on August 06, 1992. Resolution No. 141 of the Philippine Senate and the Note Verbale of the Philippine Government to the US Government are acts, direction or request of the Government of the Philippines and circumstances beyond the control of the defendant. The formal order from Cdr. Walter Corliss of the USN, the letter notification from ATT and the complete withdrawal of all the military forces and personnel from Cubi Point in the year-end 1992 are also acts and circumstances beyond the control of the defendant. Considering the foregoing, the Court finds and so holds that the afore-narrated circumstances constitute "force majeure or fortuitous event(s) as defined under paragraph 8 of the Agreement. From the foregoing, the 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. To put it blantly (sic), since the US military forces and personnel left or withdrew from Cubi Point in the year end December 1992, there was no longer any necessity for the plaintiff to continue maintaining the IBS facility. 32 (Emphasis in the original.) The aforementioned events made impossible the continuation of the Agreement until the end of its five-year term without fault on the part of either party. The Court of Appeals was thus correct in ruling that the happening of such fortuitous events rendered Globe exempt from payment of rentals for the remainder of the term of the Agreement. Moreover, it would be unjust to require Globe to continue paying rentals even though Philcomsat cannot be compelled to perform its corresponding obligation under the Agreement. As noted by the appellate court: We also point out the sheer inequity of PHILCOMSATs position. PHILCOMSAT would like to charge GLOBE rentals for the balance of the lease term without there being any corresponding telecommunications service subject of the lease. It will be grossly unfair and iniquitous to hold GLOBE liable for lease charges for a service that was not and could not have been rendered due to an act of the government which was clearly beyond GLOBEs control. The binding effect of a contract on both parties is based on the principle that the obligatio ns arising from contracts have the force of law between the contracting parties, and there must be mutuality between them based essentially on their equality under which it is repugnant to have one party bound by the contract while leaving the other party free therefrom (Allied Banking Corporation v. Court of Appeals, 284 SCRA 357).33 With respect to the issue of whether Globe is liable for payment of rentals for the month of December 1992, the Court likewise affirms the appellate courts ruling that Globe should pay the same. Although Globe alleged that it terminated the Agreement with Philcomsat effective 08 November 1992 pursuant to the formal order issued by Cdr. Corliss of the US Navy, the date when they actually ceased using the earth station subject of the Agreement was not established during the trial.34 However, the trial court found that the US military forces and personnel completely withdrew from Cubi Point only on 31 December 1992. 35 Thus, until that date, the USDCA had control over the earth station and had the option of using the same. Furthermore, Philcomsat could not have removed or rendered ineffective said communication facility until after 31 December 1992 because Cubi Point was accessible only to US naval personnel up to that time. Hence, the Court of Appeals did not err when it affirmed the trial courts ruling that Globe is liable for payment of rentals until December 1 992. Neither did the appellate court commit any error in holding that Philcomsat is not entitled to attorneys fees and ex emplary damages. The award of attorneys fees is the exception rather than the rule, and must be supported by factual, legal and equitable jus tifications.36 In previously decided cases, the Court awarded attorneys fees where a party acted in gross and evident bad faith in refusing to satisfy the other partys claims and

28

compelled the former to litigate to protect his rights; 37 when the action filed is clearly unfounded,38 or where moral or exemplary damages are awarded.39 However, in cases where both parties have legitimate claims against each other and no party actually prevailed, such as in the present case where the claims of both parties were sustained in part, an award of attorneys fees would not be warranted. 40 Exemplary damages may be awarded in cases involving contracts or quasi-contracts, if the erring party acted in a wanton, fraudulent, reckless, oppressive or malevolent manner.41 In the present case, it was not shown that Globe acted wantonly or oppressively in not heeding Philcomsats demands for payment of rentals. It was established during the trial of the case before the trial court that Globe had valid grounds for refusing to comply with its contractual obligations after 1992. WHEREFORE, the Petitions are DENIED for lack of merit. The assailed Decision of the Court of Appeals in CA-G.R. CV No. 63619 is AFFIRMED. SO ORDERED.

IMMY CO, doing business under the name & style DRAGON METAL MANUFACTURING, Petitioner, vs. COURT OF APPEALS and BROADWAY MOTOR SALES CORPORATION, Respondents. DECISION MARTINEZ, J.: On July 18, 1990, petitioner entrusted his Nissan pick-up car 1988 model [1] to private respondent - which is engaged in the sale, distribution and repair of motor vehicles - for the following job repair services and supply of parts: - Bleed injection pump and all nozzles; - Adjust valve tappet; - Change oil and filter; - Open up and service four wheel brakes, clean and adjust; - Lubricate accelerator linkages; - Replace aircon belt; and - Replace battery[2] Private respondent undertook to return the vehicle on July 21, 1990 fully serviced and supplied in accordance with the job contract. After petitioner paid in full the repair bill in the amount ofP1,397.00,[3] private respondent issued to him a gate pass for the release of the vehicle on said date. But came July 21, 1990, the latter could not release the vehicle as its battery was weak and was not yet replaced. Left with no option, petitioner himself bought a new battery nearby and delivered it to private respondent for installation on the same day. However, the battery was not installed and the delivery of the car was rescheduled to July 24, 1990 or three (3) days later. When petitioner sought to reclaim his car in the afternoon of July 24, 1990, he was told that it was carnapped earlier that morning while being road-tested by private respondents employee along Pedro Gil and Perez Streets in Paco, Manila. Private respondent said that the incident was reported to the police. Having failed to recover his car and its accessories or the value thereof, petitioner filed a suit for damages against private respondent anchoring his claim on the latters alleged negligence. For its part, private respondent contended that it has no liability because the car was lost as a result of a fortuitous event - the carnapping. During pre-trial, the parties agreed that: (T)he cost of the Nissan Pick-up four (4) door when the plaintiff purchased it from the defendant is P332,500.00 excluding accessories which were installed in the vehicle by the plaintiff consisting of four (4) brand new tires, magwheels, stereo speaker, amplifier which amount all in all to P20,000.00. It is agreed that the vehicle was lost on July 24, 1990 `approximately two (2) years and five (5) months from the date of the purchase. It was agreed that the plaintiff paid the defendant the cost of service and repairs as early as July 21, 1990 in the amount of P1,397.00 which amount was received and duly receipted by the defendant company. It was also agreed that the present value of a brand new vehicle of the same type at this time is P425,000.00 without accessories.[4] They likewise agreed that the sole issue for trial was who between the parties shall bear the loss of the vehicle which necessitates the resolution of whether private respondent was indeed negligent.[5] After trial, the court a quo found private respondent guilty of delay in the performance of its obligation and held it liable to petitioner for the value of the lost vehicle and its accessories plus interest and attorney s fees.[6] On appeal, the Court of Appeals (CA) reversed the ruling of the lower court and ordered the dismissal of petitioners damage suit. [7] The CA ruled that: (1) the trial court was limited to resolving the issue of negligence as agreed during pre-trial; hence it cannot pass on the issue of delay; and (2) the vehicle was lost due to a fortuitous event. In a petition for review to this Court, the principal query raised is whether a repair shop can be held liable for the loss o f a customers vehicle while the same is in its custody for repair or other job services? The Court resolves the query in favor of the customer. First, on the technical aspect involved. Contrary to the CAs pronouncement, the rule that the determination of issues at a pre-trial conference bars the consideration of other issues on appeal, except those that may involve privilege or impeaching matter,[8] is inapplicable to this case. The question of delay, though not specifically mentioned as an issue at the pre-trial may be tackled by the court considering that it is necessarily intertwined and intimately connected with the principal issue agreed upon by the parties, i.e. who will bear the loss and whether there was negligence. Petitioners imputation of negligence to pr ivate respondent is premised on delay which is the very basis of the formers complaint. Thus, it was unavoidable for the court to resolve the case, particularly the question of negligence witho ut considering whether private respondent was guilty of delay in the performance of its obligation.

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On the merits. It is a not a defense for a repair shop of motor vehicles to escape liability simply because the damage or loss of a thing lawfully placed in its possession was due to carnapping. Carnapping per se cannot be considered as a fortuitous event. The fact that a thing was unlawfully and forcefully taken from anothers rightful possession, as in cases of carnapping, does not automatically give rise to a fortuit ous event. To be considered as such, carnapping entails more than the mere forceful taking of anothers property. It must be proved and established that the event was an act of God or was done solely by third parties and that neither the claimant nor the person alleged to be negligent has any participation.[9] In accordance with the Rules of evidence, the burden of proving that the loss was due to a fortuitous event rests on him who invokes it [10]- which in this case is the private respondent. However, other than the police report of the alleged carnapping incident, no other evidence was presented by private respondent to the effect that the incident was not due to its fault. A police report of an alleged crime, to which only private respondent is privy, does not suffice to established the carnapping. Neither does it prove that there was no fault on the part of priv ate respondent notwithstanding the parties agreement at the pre -trial that the car was carnapped. Carnapping does not foreclose the possibility of fault or negligence on the part of private respondent. Even assuming arguendo that carnapping was duly established as a fortuitous event, still private respondent cannot escape liability. Article 1165[11] of the New Civil Code makes an obligor who is guilty of delay responsible even for a fortuitous event until he has effected the delivery. In this case, private respondent was already in delay as it was supposed to deliver petitioners car three (3) days before it was lost. Petitioners agreement to the rescheduled delivery does not defeat his claim as private respondent had already breached its obligation. Moreover, such accession cannot be construed as waiver of petitioners right to hold private respondent liable because the car was unusable and thus, petitioner h ad no option but to leave it. Assuming further that there was no delay, still working against private respondent is the legal presumption under Article 1265 that its possession of the thing at the time it was lost was due to its fault. [12] This presumption is reasonable since he who has the custody and care of the thing can easily explain the circumstances of the loss. The vehicle owner has no duty to show that the repair shop was at fault. All that petitioner needs to prove, as claimant, is the simple fact that private respondent was in possession of the vehicle at the time it was lost. In this case, private respondents possession at the time of the loss is undisputed. Consequently, the burden shifts to the possessor who needs to present controverting evidence sufficient enough to overcome that presumption. Moreover, the exempting circumstances - earthquake, flood, storm or other natural calamity - when the presumption of fault is not applicable[13] do not concur in this case. Accordingly, having failed to rebut the presumption and since the case does not fall under the exceptions, private respondent is answerable for the loss. It must likewise be emphasized that pursuant to Articles 1174 and 1262 of the New Civil Code, liability attaches even if the loss was due to a fortuitous event if the nature of the obligation requires the assumption of risk.[14] Carnapping is a normal business risk for those engaged in the repair of motor vehicles. For just as the owner is exposed to that risk so is the repair shop since the car was entrusted to it. That is why, repair shops are required to first register with the Department of Trade and Industry (DTI) [15] and to secure an insurance policy for the shop covering the property entrusted by its customer for repair, service or maintenance as a pre-requisite for such registration/accreditation.[16] Violation of this statutory duty constitutes negligence per se.[17] Having taken custody of the vehicle, private respondent is obliged not only to repair the vehicle but must also provide the customer with some form of security for his property over which he loses immediate control. An owner who cannot exercise the seven (7) juses or attributes of ownership the right to possess, to use and enjoy, to abuse or consume, to accessories, to dispose or alienate, to recover or vindicate and to the fruits -[18] is a crippled owner. Failure of the repair shop to provide security to a motor vehicle owner would leave the latter at the mercy of the former. Moreover, on the assumption that private respondents repair business is duly registered, it pre supposes that its shop is covered by insurance from which it may recover the loss. If private respondent can recover from its insurer, then it would be unjustly enriched if it will not compensate petitioner to whom no fault can be attributed. Otherwise, if the shop is not registered, then the presumption of negligence applies. One last thing. With respect to the value of the lost vehicle and its accessories for which the repair shop is liable, it should be based on the fair market value that the property would command at the time it was entrusted to it or such other value as agreed upon by the parties subsequent to the loss. Such recoverable value is fair and reasonable considering that the value of the vehicle depreciates. This value may be recovered without prejudice to such other damages that a claimant is entitled under applicable laws. WHEREFORE, premises considered, the decision of the Court Appeals is REVERSED and SET ASIDE and the decision of the court a quo is REINSTATED. SO ORDERED.

[G.R. No. 126389. July 10, 1998]

SOUTHEASTERN COLLEGE, INC., petitioner, vs. COURT OF APPEALS, JUANITA DE JESUS VDA. DE DIMAANO, EMERITA DIMAANO, REMEDIOS DIMAANO, CONSOLACION DIMAANO and MILAGROS DIMAANO, respondents. DECISION PURISIMA, J.: Petition for review under Rule 45 of the Rules of Court seeking to set aside the Decision [1] promulgated on July 31, 1996, and Resolution [2] dated September 12, 1996 of the Court of Appeals [3] in CA-G.R. No. 41422, entitled Juanita de Jesu s vda. de Dimaano, et al. vs. Southeastern College, Inc., which reduced the moral damages awarded below from P1,000,000.00 toP200,000.00.[4] The Resolution under attack denied petitioners motion for reconsideration. Private respondents are owners of a house at 326 College Road, Pasay City, while petitioner owns a four-storey school building along the same College Road. On October 11, 1989, at about 6:30 in t he morning, a powerful typhoon Saling hit Metro Manila. Buffeted by very strong winds, the roof of petitioners building was partly ripped off and blown away, landing on and destroying portions of the roofing of private respondents house. After the typhoon had passed, an ocular inspection of the destroyed buildings was conducted by a team of engineers headed by the city building official, Engr. Jesus L. Reyna. Pertinent aspects of the latters Report[5] dated October 18, 1989 stated, as follows: 5. One of the factors that may have led to this calamitous event is the formation of the buildings in the area and the general direction of the wind. Situated in the peripheral lot is an almost U-shaped formation of 4-storey building. Thus, with the strong winds having a westerly direction, the general formation of the buildings becomes a big funnel-like structure, the one situated along College Road, receiving the heaviest impact of the strong winds. Hence, there are portions of the roofing, those located on both ends of the building, which remained intact after the storm.

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6. Another factor and perhaps the most likely reason for the dislodging of the roofings structural trusses is the improper anchorage of the said trusses to the roof beams. The 1/2 diameter steel bars embedded on the concrete roof beams which serve as truss anchorage are not bolte d nor nailed to the trusses. Still, there are other steel bars which were not even bent to the trusses, thus, those trusses are not anchored at all to the roof beams. It then recommended that to avoid any further loss and damage to lives, limbs and property of persons living in the vicinity, the fourth floor of subject school building be declared as a structural hazard. In their Complaint[6] before the Regional Trial Court of Pasay City, Branch 117, for damages based on culpa aquiliana, private respondents alleged that the damage to their house rendered the same uninhabitable, forcing them to stay temporarily in others houses. And so they sought to recover from petitioner P117,116.00, as actual damages, P1,000,000.00, as moral damages,P300,000.00, as exemplary damages and P100,000.00, for and as attorneys fees; plus costs. In its Answer, petitioner averred that subject school building had withstood several devastating typhoons and other calamities in the past, without its roofing or any portion thereof giving way; that it has not been remiss in its responsibility to see to it that said school building, which houses school children, faculty members, and employees, is in tip-top condition; and furthermore, typhoon Saling was an act of God and therefore beyond human control such that petitioner cannot be answerable for the damages wrought thereby, absent any negligence on its part. The trial court, giving credence to the ocular inspection report to the effect th at subject school building had a defective roofing structure, found that, while typhoon Saling was accompanied by strong winds, the damage to private respondents house could have been avoid ed if the construction of the roof of [petitioners] building was not faulty. The dispositive portion of the lower courts decision [7] reads thus: WHEREFORE, in view of the foregoing, the Court renders judgment (sic) in favor of the plaintiff (sic) and against the defendants, (sic) ordering the latter to pay jointly and severally the former as follows: a) P117,116.00, as actual damages, plus litigation expenses; b) P1,000,000.00 as moral damages; c) P100,000.00 as attorneys fees; d) Costs of the instant suit. The claim for exemplary damages is denied for the reason that the defendants (sic) did not act in a wanton fraudulent, reckless, oppressive or malevolent manner. In its appeal to the Court of Appeals, petitioner assigned as errors,[8] that: I THE TRIAL COURT ERRED IN HOLDING THAT TYPHOON SALING, AS AN ACT OF GOD, IS NOT THE SOLE AND ABSOLUTE REASON FOR THE RIPPING-OFF OF THE SMALL PORTION OF THE ROOF OF SOUTHEASTERNS FOUR (4) STOREY SCHOOL BUILDING. II THE TRIAL COURT ERRED IN HOLDING THAT THE CONSTRUCTION OF THE ROOF OF DEFENDANTS SCHOOL BUILDING WAS FAULTY NOTWITHSTANDING THE ADMISSION THAT THERE WERE TY PHOONS BEFORE BUT NOT AS GRAVE AS TYPHOON SALING WHICH IS THE DIRECT AND PROXIMATE CAUSE OF THE INCIDENT. III THE TRIAL COURT ERRED IN AWARDING ACTUAL AND MORAL DAMAGES AS WELL AS ATTORNEYS FEES AND LITIGATION EXPENSES AND COSTS OF SUIT TO DIMAANOS WHEN THEY HAVE NOT INCURRED ACTUAL DAMAGES AT ALL AS DIMAANOS HAVE ALREADY SOLD THEIR PROPERTY, AN INTERVENING EVENT THAT RENDERS THIS CASE MOOT AND ACADEMIC. IV THE TRIAL COURT ERRED IN ORDERING THE ISSUANCE OF THE WRIT OF EXECUTION INSPITE OF THE PERFECTION OF SOUTHEASTERNS APPEAL WHEN THERE IS NO COMPELLING REASON FOR THE ISSUANCE THERETO. As mentioned earlier, respondent Court of Appeals affirmed with modification the trial courts disposition by reducing the aw ard of moral damages from P1,000,000.00 to P200,000.00. Hence, petitioners resort to this Court, raising for resolution the issues of: 1. Whether or not the award of actual damage [sic] to respondent Dimaanos on the basis of speculation or conjecture, without proof or receipts of actual damage, [sic] legally feasible or justified. 2. Whether or not the award of moral damages to respondent Dimaanos, without the latter having suffered, actual damage has legal basis. 3. Whether or not respondent Dimaanos who are no longer the owner of the property, subject matter of the case, during its pendency, has the right to pursue their complaint against petitioner when the case was already rendered moot and academic by the sale of the property to third party. 4. Whether or not the award of attorneys fees when the case was already moot and academic [sic] legally justified. 5. Whether or not petitioner is liable for damage caused to others by typhoon Saling being an act of God. 6. Whether or not the issuance of a writ of execution pending appeal, ex-parte or without hearing, has support in law.

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The pivot of inquiry here, determinative of the other issues, is whether the damage on the roof of the building of private respondents resulting from the impact of the falling portions of the school buildings roof ripped off by the strong winds of typhoon Saling, was, within legal contemplation, due to fortuitous event? If so, petitioner cannot be held liable for the damages suffered by the private respondents. This conclusion finds support in Article 1174 of the Civil Code, which provides: Art 1174. Except in cases expressly specified by the law, or when it is otherwise declared by stipulation, or when the nature of the obligation requires the assumption of risk, no person shall be responsible for those events which could not be foreseen, or which, though foreseen, were inevitable. The antecedent of fortuitous event or caso fortuito is found in the Partidas which defines it as an event which takes place by accident and could not have been foreseen.[9] Escriche elaborates it as an unexpected event or act of God which could neither be foreseen nor resisted. [10] Civilist Arturo M. Tolentino adds that [f]ortuitous events may be produced by two general causes: (1) by nature, such as earthquakes, storms, floods, epidemics, fires, etc. and (2) by the act of man, such as an armed invasion, attack by bandits, governmental prohibitions, robbery, etc.[11] In order that a fortuitous event may exempt a person from liability, it is necessary that he be free from any previous negligence or misconduct by reason of which the loss may have been occasioned.[12] An act of God cannot be invoked for the protection of a person who has been guilty of gross negligence in not trying to forestall its possible adverse consequences. When a persons negligence concurs with an act of God in producing damage or injury to another, such person is not exempt from liability by showing that the immediate or proximate cause of the damage or injury was a fortuitous event. When the effect is found to be partly the result of the participation of man whether it be from active intervention, or neglect, or failure to act the whole occurrence is hereby humanized, and removed from the rules applicable to acts of God. [13] In the case under consideration, the lower court accorded full credence to the finding of the investigating team that subject school buildings roofing had no sufficient anchorage to hold it in position especially when battered by strong winds. Based on such finding, the trial court imputed negligence to petitioner and adjudged it liable for damages to private respondents. After a thorough study and evaluation of the evidence on record, this Court believes otherwise, notwithstanding the general rule that factual findings by the trial court, especially when affirmed by the appellate court, are binding and conclusive upon this Court. [14] After a careful scrutiny of the records and the pleadings submitted by the parties, we find exception to this rule and hold that the lower courts misappreciated the evidence proffered. There is no question that a typhoon or storm is a fortuitous event, a natural occurrence which may be foreseen but is unavoidable despite any amount of foresight, diligence or care.[15] In order to be exempt from liability arising from any adverse consequence engendered thereby, there should have been no human participation amounting to a negligent act. [16] In other words, the person seeking exoneration from liability must not be guilty of negligence. Negligence, as commonly understood, is conduct which naturally or reasonably creates undue risk or harm to others. It may be the failure to observe that degree of care, precaution, and vigilance which the circumstances justly demand, [17] or the omission to do something which a prudent and reasonable man, guided by considerations which ordinarily regulate the conduct of human affairs, would do. [18] From these premises, we proceed to determine whether petitioner was negligent, such that if it were not, the damage caused to private respondents house could h ave been avoided? At the outset, it bears emphasizing that a person claiming damages for the negligence of another has the burden of proving the existence of fault or negligence causative of his injury or loss. The facts constitutive of negligence must be affirmatively established by competent evidence,[19] not merely by presumptions and conclusions without basis in fact. Private respondents, in establishing the culpability of petitioner, merely relied on the aforementioned report submitted by a team which made an ocular inspection of petitioners school building after the typhoon. As the term imparts, an ocular inspection is one by means of actual sight or viewing.[20] What is visual to the eye though, is not always reflective of the real cause behind. For instance, one who hears a gunshot and then sees a wounded person, cannot always definitely conclude that a third person shot the victim. It could have been self-inflicted or caused accidentally by a stray bullet. The relationship of cause and effect must be clearly shown. In the present case, other than the said ocular inspection, no investigation was conducted to determine the real cause of the partial unroofing of petitioners school building. Private respondents did not even show that the plans, specifications and design of said school building were deficient and defective. Neither did they prove any substantial deviation from the approved plans and specifications. Nor did they conclusively establish that the construction of such building was basically flawed.[21] On the other hand, petitioner elicited from one of the witnesses of private respondents, city building official Jesus Reyna, that the original plans and design of petitioners school building were approved prior to its construction. Engr. Reyna admitted that it was a legal requirement before the construction of any building to obtain a permit from the city building official (city engineer, prior to the passage of the Building Act of 1977). In like manner, after construction of the building, a certification must be secured from the same official attesting to the readiness for occupancy of the edifice. Having obtained both building permit and certificate of occupancy, these are, at the very least, prima facie evidence of the regular and proper construction of subject school building.[22] Furthermore, when part of its roof needed repairs of the dama ge inflicted by typhoon Saling, the same city official gave the go-signal for such repairs without any deviation from the original design and subsequently, authorized the use of the entire fourth floor of the same building. These only prove that subject building suffers from no structural defect, contrary to the report that its U -shaped form was structurally defective. Having given his unqualified imprimatur, the city building official is presumed to have properly performed his duties [23] in connection therewith. In addition, petitioner presented its vice president for finance and administration who testified that an annual maintenance inspection and repair of subject school building were regularly undertaken. Petitioner was even willing to present its maintenance supervisor to attest to the extent of such regular inspection but private respondents agreed to dispense with his testimony and simply stipulated that it would be corroborative of the vice presidents narration. Moreover, the city building official, who has been in the city government service since 1974, admitted in open court that no complaint regarding any defect on the same structure has ever been lodged before his office prior to the institution of the case at bench. It is a matter of judicial notice that typhoons are common occurrences in this country. If subject school buildings roofing was not firmly anchored to its trusses, obviou sly, it could not have withstood long years and several typhoons even stronger than Saling. In light of the foregoing, we find no clear and convincing evidence to sustain the judgment of the appellate court. We thus hold that petitioner has not been shown negligent or at fault regarding the construction and maintenance of its school building in question and that typhoon Saling was the proximate cause of the damage suffered by private respondents house. With this disposition on the pivotal issue, private respondents claim for actual and moral damages as well as attorneys fees must fail.[24] Petitioner cannot be made to answer for a purely fortuitous event.[25] More so because no bad faith or willful act to cause damage was alleged and proven to warrant moral damages. Private respondents failed to adduce adequate and competent proof of the pecuniary loss they actually incurred. [26] It is not enough that the damage be capable of proof but must be actually proved with a reasonable degree of certainty, pointing out specific facts that afford a basis for measuring whatever compensatory damages are borne.[27] Private respondents merely submitted an estimated amount needed for the repair of the roof of their subject building. What is more, whether the necessary repairs were caused ONLY by petitioners alleged negligence in the maintenance of its school building, or included the ordinary wear and tear of the house itself, is an essential question that remains indeterminable. The Court deems unnecessary to resolve the other issues posed by petitioner.

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As regards the sixth issue, however, the writ of execution issued on April 1, 1993 by the trial court is hereby nullified and set aside. Private respondents are ordered to reimburse any amount or return to petitioner any property which they may have received by virtue of the enforcement of said writ. WHEREFORE, the petition is GRANTED and the challenged Decision is REVERSED. The complaint of private respondents in Civil Case No. 7314 before the trial court a quo is ordered DISMISSED and the writ of execution issued on April 1, 1993 in said case is SET ASIDE. Accordingly, private respondents are ORDERED to return to petitioner any amount or property received by them by virtue of said writ. Costs against the private respondents. SO ORDERED. Narvasa, C.J., (Chairman), Romero, and Kapunan, JJ., concur.

G.R. No. L-16477

May 31, 1961

MANILA TRADING & SUPPLY CO., plaintiff-appellee, vs. MARIANO MEDINA, defendant-appellant. Ross, Selph and Carrascoso for plaintiff-appellee. Campos, Mirasol Mediodic for defendant-appellant. REYES, J.B.L., J.: This case was certified to us by the Court of Appeals because the claims involved totaled more than P200,000.00 (Resolution, C.A., 14 Nov. 1959). The facts appear to be that prior to May 7, 1956, the defendant-appellant Mariano Medina had certain accounts with appellee, Manila Trading & Supply CO. These accounts were on said date consolidated into a total balance due of P60,000.00, for which Medina executed a promissory note (Exh. "A") for Sixty Thousand Pesos (P60,000.00), with interest at 12% per annum, payable in monthly installments of P4,000.00 plus interest. The note provided that upon failure to pay any of the installments "the whole sum remaining then unpaid will immediately become due and payable, at the option of the holder of this note", together with 33-1/3% of the amount due for attorney's fees and expenses of collection, in addition to the costs of the suit. On January 8, 1957, the payee Manila Trading & Supply Co. filed a complaint against appellant Medina in the Court of First Instance of Manila, claiming that the said debtor had failed to meet the installments due on the note for the months of September, 1956 up to and including January 7, 1957, and that due to such default, the balance of the note amounting to P43,596.22, plus 12% interest thereon and 33-1/3% thereof by way of attorney's fees and collection expenses, had become due and demandable; and prayed for judgment in the amounts stated. On January 4, 1957, upon petition of plaintiff, a writ of attachment was issued and levied upon eleven of defendant's buses. On March 10, 1957, Medina filed an answer (Record on Appeal, p. 11), admitting the allegations of paragraphs 2, 3 and 4 of the complaint (i.e., the execution of the note; the failure to pay the monthly installments for September, 1956 up to January, 1957; the maturity of the balance due of P43,596.22; and the lack of sufficient security). He also admitted the allegations of the complaint concerning the 12% interest on the principal, but contended that the 33-1/3% attorney's fees were exorbitant and unconscionable. Medina further pleaded, by way of defense, that he was induced to pay P4,000.00 additional on January 24, 1957 upon promise that he would not be sued, and that he would be allowed to pay the balance "paulatinamente", and that instead, his trucks were attached. By way of counterclaim, Medina asked for damages due to lost earnings of the trucks attached, at the rate of P900.00 per day. These defenses and counterclaim were traversed by the plaintiff. Trial was set for September 10, 1957, and because of non-appearance of defendant and his counsel, the court commissioned the Clerk to receive plaintiff's evidence, which showed that from June 6, 1956 to January 21, 1957, defendants had made twenty-one payments totalling P24,311.34 of which P4,413.76 corresponded to interest and the balance (P19,982.15) to the principal. Upon seasonable motion of defendant Medina, the Court reopened the case to give him opportunity to present his evidence. Thereupon, he testified and asserted that in addition to the twenty-one payments acknowledged by plaintiff company, he had made ten other payments that, added to the former, showed that he (Medina) had paid more than P4,000.00 a month since the execution of the note up to the filing of the complaint, and was, therefore, not in default. To bolster his claim, Medina exhibited ten additional receipts signed by the plaintiff's cashier, but without numbers or year dates, because they were allegedly eaten by anay; however, defendant wrote thereon the supposed numbers that the receipts originally bore, based on a memorandum book where he purported to have noted his payments to plaintiff. Medina also testified that by reason of the attachment of his buses, he had lost net earnings of P550.00 per day, and his business in building truck bodies had been affected to the extent of P50,000.00; and that he had been forced to engage counsel at stipulated fees of P7,000.00. Considering that the attachment was maintained for over two years, the damages claimed by defendant would amount to over P300,000.00. In rebuttal, the assistant accountant of the Manila Trading denied that the ten additional receipts exhibited by the defendant corresponded to the period covered by the promissory note Exh. "A"; that the numbers attributed to them by plaintiff were not in the proper sequence, because as of July 28, 1956, the company has adopted a new numbering of its receipts; and that in the absence of the correct numbers and the years of issue, it was impossible to locate the record of the payments claimed. After considering the evidence, the trial court entertained doubts as to the veracity of the receipts produced by the defendant, and refused to credit him with the amounts shown therein. It, therefore, gave judgment for the plaintiff for the balance due of P40,102.42 on the note, plus 12% interest from January 21, 1957 until payment but reduced the attorney's fees from 33-1/3% of the sum due to only P1,000.00. Defendant appealed from the decision. Our examination of the evidence satisfied us that the ten additional receipts produced by the defendant (Exhs. 3-D, 3-F, 3-H, 3-L, 3-S, 3-U, 3-W, 3-Z, 3BB, and 3-CC), while issued by plaintiff, were not for payments made on the dates claimed by defendant, nor are they chargeable to the balance of the promissory note Exh. "A". As pointed out by the trial court, it is highly suspicious that these receipts should be mutilated precisely at the places where the serial numbers and the year of issue must appear, while the receipts for intervening payments recognized by the plaintiff remained intact. Moreover, these contested receipts appear identical in shape, size, and color to those issued by plaintiff company prior to July 28, 1956, before the form of its receipts were changed, such as Exhs. 3 to 3-C, and Exhs. 7 to 7-D; but differ radically in color, size and particulars from those issued after July 28, 1956.

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In addition, the numbers that Medina attributed to them are not in sequence, as can be seen from the list Exh. 4. Thus, defendant claims that Exh. 3-D was issued in June (or July) 29, 1956 and bore No. 2898; yet the acknowledged receipt for July 28, 1956 is numbered 0096; receipt Exh. 3-F, allegedly for August 1, 1956, is numbered, according to defendant, 3438, while the admittedly authentic receipt Exh. 3-G for August 3 has a lower number, 0813. Moreover, receipt Exh. 3-H that defendant claims to be dated August 18, 1956, is numbered 1584, a number lower than that of Exh. 3-F dated August 1st (No. 3438), when the latter was issued earlier. The same inconsistency between dates and serial numbers is true with the other contested receipts. It is difficult to believe that a trading company should issue receipts numbered at random, since it would make auditing control impossible. The lower court also correctly noted that the genuine receipts from and after July 28 invariably specify the amount charged to interest as well as that credited to the principal for each payment, while the disputed receipts contain no such specification. These differences between the defendant's disputed receipts and those admitted by plaintiff, when coupled with the fact that appellant Medina's answer expressly admitted the balance due as well as his failure to meet the monthly installments from September, 1956 to January 1957; his lack of corroboration; and the further circumstance that the admissions in his answer were never withdrawn, nor was the answer containing them ever amended, irresistibly show that the trial court's rejection of the genuineness and validity of the disputed receipts constituted no error. The authenticity of the signatures appended to them does not prove that they were issued in 1956 or 1957, as claimed by the appellant, nor that they should be credited to the note Exh. "A". It is not at all improbable that these mutilated receipts were among those issued to the appellant prior to the consolidation of his accounts and the execution of the promissory note. Appellant avers that the genuine receipts dated January, 1957 raise the presumption that prior installments were paid. This might be true if such receipts recited that they were issued for the installments corresponding to the month of January, 1957; but nowhere does that fact appear. And even if such recital had been made, the resulting presumption would only be prima facie, and the evidence before us is clear that the payments made do not correspond to the installments falling due on the dates of the genuine receipts. We find no error in the judgment appealed from, and therefore the same is hereby affirmed. Costs in both instances against appellant Mariano Medina. Padilla, Bautista Angelo, Labrador, Concepcion, Barrera, Paredes, Dizon, De Leon and Natividad, JJ., concur. Bengzon, C.J., took no part.