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CETUS DEVELOPMENT, INC., petitioner,vs.COURT OF APPEALS and FLORA NAGU!A respondents.

This is a petition for review on certiorari of the decision datedJanuary 30, 1987 of the Court of Appeals in CA-! "os# $%-079&'-'0 entitled, (Cetus )evelop*ent, +nc#, %etitioner vs# on#Conrado T# i*caoco, %residin. Jud.e, !e.ional Trial Court of /anila, ranch derlina "avalta, et# al#, respondents#

The followin. facts appear in the records2

The private respondents, derlina "avalta, n. Ten., Jose

iwana., eandro Canlas, 4ictoria $udario, and 5lora "a.6uyawere the lessees of the pre*ises located at "o# '1 ueonoulevard, uiapo, /anila, ori.inally owned 6y the $usana !ealty#These individual ver6al leases were on a *onth-to *onth 6asis atthe followin. rates2 derlina "avalta at the rate of %80#'0: n.Ten. at the rate of %9;#10: Jose iwana. at the rate of %&0#3':eandro Canlas at the rate of %80#'': 4ictoria $udario at the rate of %'0#&' and 5lora "a.6uya at the rate of %80#''# The pay*ents of the rentals were paid 6y the lessees to a collector of the $usana!ealty who went to the pre*ises *onthly#

$o*eti*e in /arch, 198&, the $usana !ealty sold the leasedpre*ises to the petitioner, Cetus )evelop*ent, +nc#, a corporationduly or.anied and e<istin. under the laws of the %hilippines# 5ro* April to June, 198&, the private respondents continued to pay their *onthly rentals to a collector sent 6y the petitioner# +n thesucceedin. *onths of July, Au.ust and $epte*6er 198&, therespondents failed to pay their *onthly individual rentals as nocollector ca*e#

n cto6er 9, 198&, the petitioner sent a letter to each of theprivate respondents de*andin. that they vacate the su6=ectpre*ises and to pay the 6ac> rentals for the *onths of July, Au.ustand $epte*6er, 198&, within fifteen ?1'@ days fro* the receiptthereof# +**ediately upon the receipt of the said de*and letters oncto6er 10, 198&, the private respondents paid their respectivearreara.es in rent which were accepted 6y the petitioner su6=ect tothe unilateral condition that the acceptance was without pre=udice tothe filin. of an e=ect*ent suit# $u6seuent *onthly rental pay*ents

were li>ewise accepted 6y the petitioner under the sa*e condition#

5or failure of the private respondents to vacate the pre*ises asde*anded in the letter dated cto6er 9, 198&, the petitioner filedwith the /etropolitan Trial Court of /anila co*plaints for e=ect*enta.ainst the *anner, as follows2 ?1@ 10'97-C4, a.ainst derlina"avalta ?@ 10'973-C4, a.ainst Jose iwana.: ?3@ 10'97&-C4,a.ainst 5lora "a.6uya: ?&@ 10'97'-C4, a.ainst eandro Canlas: ?'@10'97;-C4, a.ainst 4ictoria $udario and ?;@ 10'977-C4, a.ainstn. Ten.#

+n their respective answers, the si< ?;@ private respondentsinterposed a co**on defense# They clai*ed that since theoccupancy of the pre*ises they paid their *onthly rental re.ularlythrou.h a collector of the lessor: that their non-pay*ent of the

rentals for the *onths of July, Au.ust and $epte*6er, 198&, wasdue to the failure of the petitioner ?as the new owner@ to send itscollector: that they were at a loss as to where they should pay their rentals: that so*eti*e later, one of the respondents called theoffice of the petitioner to inuire as to where they would *a>e suchpay*ents and he was told that a collector would 6e sent to receivethe sa*e: that no collector was ever sent 6y the petitioner: and thatinstead they received a unifor* de*and letter dated cto6er 9,198&#

The private respondents, thru counsel, later filed a *otion for consolidation of the si< cases and as a result thereof, the saidcases were consolidated in the /etropolitan Trial Court of /anila,ranch B++, presided over 6y Jud.e duardo $# uintos, Jr# nJune &, 198', the trial court rendered its decision dis*issin. the si<

cases, a pertinent portion of which reads, as follows2

The records of this case show that at the ti*e of the filin. of thisco*plaint, the rentals had all 6een paid# ence, the plaintiff cannote=ect the defendants fro* the leased pre*ises, 6ecause at the ti*ethese cases were instituted, there are no rentals in arrears#

The acceptance of the 6ac> rental 6y the plaintiff 6efore the filin. of the co*plaint, as in these case, the alle.ed rental arreara.es werepaid i**ediately after receipt of the de*and letter, re*oves its

cause of action in an unlawful detainer case, even if the acceptancewas without pre=udice#

< < <#

5urther*ore, the court has o6served that the account involvedwhich constitutes the rentals of the tenants are relatively s*all towhich the e=ect*ent *ay not lie on .rounds of euity and for hu*anitarian reasons#

)efendants counterclai* for liti.ation e<penses has no le.al andfactual 6asis for assessin. the sa*e a.ainst plaintiff#

D!5!, =ud.*ent is here6y rendered dis*issin. thesecases, without pronounce*ent as to costs#

)efendants counterclai* is li>ewise dis*issed#

$ !)!)# ?pp# 3-33, !ollo, #!# "o# 77;&7@

"ot satisfied with the decision of the /etropolitan Trial Court, thepetitioner appealed to the !e.ional Trial Court of /anila and thesa*e was assi.ned to ranch +B thereof presided over 6y Jud.eConrado T# i*caoco ?now Associate Justice of the Court of Appeals@#lEwphF1#GHt +n its decision dated "ove*6er 19, 198', the!e.ional Trial Court dis*issed the appeal for lac> of *erit#

+n due ti*e, a petition for review of the decision of the !e.ionalTrial Court was filed 6y the petitioner with the Court of Appeals#$aid petition was dis*issed on January 30, 1987, for lac> of *erit#

A..rieved 6y the decision of the Court of Appeals, petitioner nowco*es to Is in this petition, assi.nin. the followin. errors2

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CA$$ )+) "T B+$T D" T C/%A+"T$ D! 5+)CAI$ %!+4AT !$%")"T$ T")!), A")%T+T+"! ACC%T), T %AK/"T 5 T T! ?3@/"T$ !"TA +" A!!A!$ D+T+" T 5+5T" ?1'@ )AK%!+) 5!/ %!+4AT !$%")"T$ !C+%T 5%T+T+"!$ )/A") TT!$ T 4ACAT T $IJCT%!/+$$ A") T %AK T !"TA$ +" A!!A!$#

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!$%")"T CI!T 5 A%%A$ C//+TT) A !A4 AI$ 5 )+$C!T+", A/I"T+" T AC 5JI!+$)+CT+", D" +T !!) +" )+" TAT T$CA$$ A! CA$$+C BA/%$ T C+!CI/4"T T !"TC"T! AD# ?pp# 1;&-1;', !ollo, #!# "o# 77;&7@

The Court of Appeals defined the 6asic issue in this case asfollows2 whether or not there e<ists a cause of action when theco*plaints for unlawful detainer were filed considerin. the fact thatupon de*and 6y petitioner fro* private respondents for pay*ent of

their 6ac> rentals, the latter i**ediately tendered pay*ent whichwas accepted 6y petitioner#

+n holdin. that there was no cause of action, the respondent Courtrelied on $ection , !ule 70 of the !ules of Court, which provides2

$ec# # andlord to proceed a.ainst tenant only after de*and# L"o landlord or his le.al representative or assi.n, shall 6e suchaction a.ainst a tenant for failure to pay rent due or to co*ply withthe conditions of his lease, unless the tenant shall have failed to

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pay such rent or co*ply with such conditions for a period of fifteen?1'@ days or five ?'@ days in case of 6uildin., after de*and therefor,*ade upon * personally, or 6y servin. written notice of suchde*and upon the person found on the pre*ises, or 6y postin. suchnotice on the pre*ises if no persons 6e found thereon#

+t interpreted the said provision as follows2

#####the ri.ht to 6rin. an action of e=ect*ent or unlawful detainer *ust 6e counted fro* the ti*e the defendants failed to pay rentafter the de*and therefor# +t is not the failure per se to pay rent asa.reed in the contract, 6ut the failure to pay the rent after a de*andtherefor is *ade, that entitles the lessor to 6rin. an action for

unlawful detainer# +n other words, the de*and conte*plated 6y thea6ove-uoted provision is not a de*and to vacate, 6ut a de*and*ade 6y the landlord upon his tenant for the latter to pay the rentdue if the tenant fails to co*ply with the said de*and with theperiod provided, his possession 6eco*es unlawful and the landlord*ay then 6rin. the action for e=ect*ent# ?p# 8, , #!# "o# 77;&7@

De hold that the de*and reuired and conte*plated in $ection ,aforeuoted, is a =urisdictional reuire*ent for the purpose of 6rin.in. an unlawful detainer suit for failure to pay rent or co*plywith the conditions of lease# +t parta>es of an e<tra=udicial re*edythat *ust 6e pursued 6efore resortin. for =udicial action so *uch sothat when there is full co*pliance with the de*and, there arises nonecessity for court action#

As to whether this de*and is *erely a de*and to pay rent or co*ply with the conditions of the lease or also a de*and to vacate,the answer can 6e .leaned fro* said $ection # This sectionpresupposes the e<istence of a cause of action for unlawfuldetainer as it spea>s of (failure to pay rent due or co*ply with theconditions of the lease#( The e<istence of said cause of action .ivesthe lessor the ri.ht under Article 1;'9 of the "ew Civil Code to as>for the rescission of the contract of lease and inde*nification for da*a.es, or only the latter, allowin. the contract to re*ain in force# Accordin.ly, if the option chosen is for specific perfor*ance, thenthe de*and referred to is o6viously to pay rent or to co*ply withthe conditions of the lease violated# owever, if rescission is theoption chosen, the de*and *ust 6e for the lessee to pay rents or toco*ply with the conditions of the lease and to vacate# Accordin.ly,

the rule that has 6een followed in our =urisprudence whererescission is clearly the option ta>en, is that 6oth de*ands to payrent and to vacate are necessary to *a>e a lessee a deforciant inorder that an e=ect*ent suit *ay 6e filed ?Casilan et al# vs# To*assi,-1;'7&, 5e6ruary 8,19;&, 10 $C!A ;1: !ic>ards vs# onales,109 %hil# &3, )i>it vs# +casiano, 89 %hil# &&@#lEwphF1#GHt

Thus, for the purpose of 6rin.in. an e=ect*ent suit, two reuisites*ust concur, na*ely2 ?1@ there *ust 6e failure to pay rent or co*plywith the conditions of the lease and ?@ there *ust 6e de*and 6othto pay or to co*ply and vacate within the periods specified in$ection , !ule 70, na*ely 1' days in case of lands and ' days incase of 6uildin.s# The first reuisite refers to the e<istence of thecause of action for unlawful detainer while the second refers to the =urisdictional reuire*ent of de*and in order that said cause of

action *ay 6e pursued#

+t is very clear that in the case at 6ar, no cause of action for e=ect*ent has accrued# There was no failure yet on the part of private respondents to pay rents for three consecutive *onths# Asthe ter*s of the individual ver6al leases which were on a *onth-to-*onth 6asis were not alle.ed and proved, the .eneral rule onnecessity of de*and applies, to wit2 there is default in the fulfill*entof an o6li.ation when the creditor de*ands pay*ent at the *aturityof the o6li.ation or at anyti*e thereafter# This is e<plicit in Article11;9, "ew Civil Code which provides that (?t@hose o6li.ed to deliver or to do so*ethin. incur in delay fro* the ti*e the o6li.ee =udiciallyor e<tra=udicially de*ands fro* the* the fulfill*ent of their o6li.ation#( %etitioner has not shown that its case falls on any of thefollowin. e<ceptions where de*and is not reuired2 ?a@ when the

o6li.ation or the law so declares: ?6@ when fro* the nature andcircu*stances of the o6li.ation it can 6e inferred that ti*e is of theessence of the contract: and ?c@ when de*and would 6e useless,as when the o6li.or has rendered it 6eyond his power to perfor*#

The de*and reuired in Article 11;9 of the Civil Code *ay 6e inany for*, provided that it can 6e proved# The proof of this de*andlies upon the creditor# Dithout such de*and, oral or written, theeffects of default do not arise# This de*and is different fro* thede*and reuired under $ection , !ule 70, which is *erely a

=urisdictional reuire*ent 6efore an e<istin. cause of action *ay 6epursued#

The facts on record fail to show proof that petitioner de*anded thepay*ent of the rentals when the o6li.ation *atured# Coupled withthe fact that no collector was sent as previously done in the past,the private respondents cannot 6e held .uilty of *ora solvendi or delay in the pay*ent of rentals# Thus, when petitioner firstde*anded the pay*ent of the 3-*onth arreara.es and privaterespondents lost no ti*e in *a>in. tender and pay*ent, whichpetitioner accepted, no cause of action for e=ect*ent accrued#ence, its de*and to vacate was pre*ature as it was an e<erciseof a non-e<istin. ri.ht to rescind#

+n contradistinction, where the ri.ht of rescission e<ists, pay*ent of the arreara.es in rental after the de*and to pay and to vacateunder $ection , !ule 70 does not e<tin.uish the cause of actionfor e=ect*ent as the lessor is not only entitled to recover the unpaidrents 6ut also to e=ect the lessee#

%etitioner correctly ar.ues that acceptance of tendered pay*entdoes not constitute a waiver of the cause of action for e=ect*entespecially when accepted with the written condition that it was(without pre=udice to the filin. of an e=ect*ent suit(# +ndeed, it isillo.ical or ridiculous not to accept the tender of pay*ent of rentals*erely to preserve the ri.ht to file an action for unlawful detainer#owever, this line of ar.u*ent presupposes that a cause of actionfor e=ect*ent has already accrued, which is not true in the instantcase#

%etitioner li>ewise clai*s that its failure to send a collector to collectthe rentals cannot 6e considered a valid defense for the reason thatsendin. a collector is not one of the o6li.ations of the lessor under Article 1;'&# Dhile it is true that a lessor is not o6li.ated to send acollector, it has 6een duly esta6lished that it has 6een custo*aryfor private respondents to pay the rentals throu.h a collector#esides Article 1'7, "ew Civil Code provides that where noa.ree*ent has 6een desi.nated for the pay*ent of the rentals, theplace of pay*ent is at the do*icile of the defendants# ence, itcould not 6e said that they were in default in the pay*ent of their rentals as the delay in payin. the sa*e was not i*puta6le to the*#!ather, it was attri6uta6le to petitioners o*ission or ne.lect to

collect#

%etitioner also ar.ues that neither is its refused to accept therentals a defense for non-pay*ent as Article 1'; provides that (MiNf the creditor to who* the tender of pay*ent has 6een *ade refuseswithout =ust cause to accept it, the de6tor shall 6e released fro*responsi6ility 6y the consi.nation of the thin. due#( +t 6earse*phasis that in this case there was no un=ustified refusal on thepart of petitioner or non-acceptance without reason that wouldconstitute *ora accipiendi and warrant consi.nation# There wassi*ply lac> of de*and for pay*ent of the rentals#

+n su*, De hold that respondent Court of Appeals did not co**it.rave a6use of discretion a*ountin. to lac> of =urisdiction in itsconclusion affir*in. the trial courts decision dis*issin. petitioners

co*plaint for lac> of cause of action# De do not a.ree, however,with the reasons relied upon#

ACC!)+"K, the petition for review on certiorari is here6y)"+) for lac> of *erit and the decision dated January 30, 1987of respondent Court of Appeals is here6y A55+!/)#

ROMULO A. CORONEL, ALARICO A. CORONEL, ANNETTE A.CORONEL, ANNAELLE C. GON"ALES #$or %erse&$ and on'e%a&$ o$ F&orida C. T(pper, as attorne)*in*$a+t, CIELITO A.CORONEL, FLORAIDA A. ALMONTE, and CATALINA ALAISMAANAG, petitioners,vs.T-E COURT OF APPEALS, CONCEPCION D. ALCARA", andRAMONA PATRICIA ALCARA", assisted ') GLORIA F. NOEL as

attorne)*in*$a+t, respondents.

The petition 6efore us has its roots in a co*plaint for specificperfor*ance to co*pel herein petitioners ?e<cept the last na*ed,Catalina alais /a6ana.@ to consu**ate the sale of a parcel of land with its i*prove*ents located alon. !oosevelt Avenue inueon City entered into 6y the parties so*eti*e in January 198'for the price of %1,&0,000#00#

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The undisputed facts of the case were su**aried 6y respondentcourt in this wise2

n January 19, 198', defendants-appellants !o*ulo Coronel, et al#?hereinafter referred to as Coronels@ e<ecuted a docu*ent entitled(!eceipt of )own %ay*ent( ?<h# (A(@ in favor of plaintiff !a*ona%atricia Alcara ?hereinafter referred to as !a*ona@ which isreproduced hereunder2

!C+%T 5 )D" %AK/"T

%1,&0,000#00 L Total a*ount

'0,000 L )own pay*entLLLLLLLLLLL%1,190,000#00 L alance

!eceived fro* /iss !a*ona %atricia Alcara of 1&; Ti*o.,ueon City, the su* of 5ifty Thousand %esos purchase price of our inherited house and lot, covered 6y TCT "o# 119;7 of the!e.istry of )eeds of ueon City, in the total a*ount of %1,&0,000#00#

De 6ind ourselves to effect the transfer in our na*es fro* our deceased father, Constancio %# Coronel, the transfer certificate of title i**ediately upon receipt of the down pay*ent a6ove-stated#

n our presentation of the TCT already in or na*e, De willi**ediately e<ecute the deed of a6solute sale of said property and/iss !a*ona %atricia Alcara shall i**ediately pay the 6alance of the %1,190,000#00#

Clearly, the conditions appurtenant to the sale are the followin.2

1# !a*ona will *a>e a down pay*ent of 5 ifty Thousand?%'0,000#00@ %esos upon e<ecution of the docu*ent aforestated:

# The Coronels will cause the transfer in their na*es of thetitle of the property re.istered in the na*e of their deceased father upon receipt of the 5ifty Thousand ?%'0,000#00@ %esos downpay*ent:

3# Ipon the transfer in their na*es of the su6=ect property,the Coronels will e<ecute the deed of a6solute sale in favor of !a*ona and the latter will pay the for*er the whole 6alance of ne/illion ne undred "inety Thousand ?%1,190,000#00@ %esos#

n the sa*e date ?January 1', 198'@, plaintiff-appelleeConcepcion )# Alcara ?hereinafter referred to as Concepcion@,*other of !a*ona, paid the down pay*ent of 5ifty Thousand?%'0,000#00@ %esos ?<h# ((, <h# ((@#

n 5e6ruary ;, 198', the property ori.inally re.istered in the na*eof the Coronels father was transferred in their na*es under TCT"o# 370&3 ?<h# ()(: <h# (&(@

n 5e6ruary 18, 198', the Coronels sold the property covered 6y

TCT "o# 370&3 to intervenor-appellant Catalina # /a6ana.?hereinafter referred to as Catalina@ for ne /illion 5ive undredi.hty Thousand ?%1,'80,000#00@ %esos after the latter has paidThree undred Thousand ?%300,000#00@ %esos ?<hs# (5-3(: <h#(;-C(@

5or this reason, Coronels canceled and rescinded the contract?<h# (A(@ with !a*ona 6y depositin. the down pay*ent paid 6yConcepcion in the 6an> in trust for !a*ona %atricia Alcara#

n 5e6ruary , 198', Concepcion, et al#, filed a co*plaint for specific perfor*ance a.ainst the Coronels and caused theannotation of a notice of lis pendens at the 6ac> of TCT "o# 37&03?<h# ((: <h# ('(@#

n April , 198', Catalina caused the annotation of a notice of adverse clai* coverin. the sa*e property with the !e.istry of )eeds of ueon City ?<h# (5(: <h# (;(@#

n April ', 198', the Coronels e<ecuted a )eed of A6solute $aleover the su6=ect property in favor of Catalina ?<h# ((: <h# (7(@#

n June ', 198', a new title over the su6=ect property was issuedin the na*e of Catalina under TCT "o# 3'1'8 ?<h# ((: <h# (8(@#

?!ollo, pp# 13&-13;@

+n the course of the proceedin.s 6efore the trial court ?ranch 83,!TC, ueon City@ the parties a.reed to su6*it the case for decision solely on the 6asis of docu*entary e<hi6its# Thus, plaintiffstherein ?now private respondents@ proffered their docu*entaryevidence accordin.ly *ar>ed as <hi6its (A( throu.h (J(, inclusiveof their correspondin. su6*ar>in.s# Adoptin. these sa*e e<hi6itsas their own, then defendants ?now petitioners@ accordin.ly offeredand *ar>ed the* as <hi6its (1( throu.h (10(, li>ewise inclusive of their correspondin. su6*ar>in.s# Ipon *otion of the parties, thetrial court .ave the* thirty ?30@ days within which to si*ultaneouslysu6*it their respective *e*oranda, and an additional 1' days

within which to su6*it their correspondin. co**ent or replythereof, after which, the case would 6e dee*ed su6*itted for resolution#

n April 1&, 1988, the case was su6*itted for resolution 6eforeJud.e !eynaldo !oura, who was then te*porarily detailed topreside over ranch 8 of the !TC of ueon City# n /arch 1,1989, =ud.*ent was handed down 6y Jud.e !oura fro* his re.ular 6ench at /aca6e6e, %a*pan.a for the ueon City 6ranch,disposin. as follows2

D!5!, =ud.*ent for specific perfor*ance is here6yrendered orderin. defendant to e<ecute in favor of plaintiffs a deedof a6solute sale coverin. that parcel of land e*6raced in andcovered 6y Transfer Certificate of Title "o# 37&03 ?now TCT "o#331'8@ of the !e.istry of )eeds for ueon City, to.ether with allthe i*prove*ents e<istin. thereon free fro* all liens andencu*6rances, and once acco*plished, to i**ediately deliver thesaid docu*ent of sale to plaintiffs and upon receipt thereof, the saiddocu*ent of sale to plaintiffs and upon receipt thereof, the plaintiffsare ordered to pay defendants the whole 6alance of the purchaseprice a*ountin. to %1,190,000#00 in cash# Transfer Certificate of Title "o# 331'8 of the !e.istry of )eeds for ueon City in thena*e of intervenor is here6y canceled and declared to 6e withoutforce and effect# )efendants and intervenor and all other personsclai*in. under the* are here6y ordered to vacate the su6=ectproperty and deliver possession thereof to plaintiffs# %laintiffs clai*for da*a.es and attorneys fees, as well as the counterclai*s of defendants and intervenors are here6y dis*issed#

"o pronounce*ent as to costs#

$o rdered#

/aca6e6e, %a*pan.a for ueon City, /arch 1, 1989#

?!ollo, p# 10;@

A *otion for reconsideration was filed 6y petitioner 6efore the newpresidin. =ud.e of the ueon City !TC 6ut the sa*e was denied6y Jud.e strella T# strada, thusly2

The prayer contained in the instant *otion, i#e#, to annul thedecision and to render anew decision 6y the undersi.ned %residin.

Jud.e should 6e denied for the followin. reasons2 ?1@ The instantcase 6eca*e su6*itted for decision as of April 1&, 1988 when theparties ter*inated the presentation of their respective docu*entaryevidence and when the %residin. Jud.e at that ti*e was Jud.e!eynaldo !oura# The fact that they were allowed to file *e*orandaat so*e future date did not chan.e the fact that the hearin. of thecase was ter*inated 6efore Jud.e !oura and therefore the sa*eshould 6e su6*itted to hi* for decision: ?@ Dhen the defendantsand intervenor did not o6=ect to the authority of Jud.e !eynaldo!oura to decide the case prior to the rendition of the decision, whenthey *et for the first ti*e 6efore the undersi.ned %residin. Jud.eat the hearin. of a pendin. incident in Civil Case "o# -&;1&' on"ove*6er 11, 1988, they were dee*ed to have acuiesced theretoand they are now estopped fro* uestionin. said authority of Jud.e !oura after they received the decision in uestion which

happens to 6e adverse to the*: ?3@ Dhile it is true that Jud.e!eynaldo !oura was *erely a Jud.e-on-detail at this ranch of theCourt, he was in all respects the %residin. Jud.e with full authorityto act on any pendin. incident su6*itted 6efore this Court durin.his incu*6ency# Dhen he returned to his fficial $tation at/aca6e6e, %a*pan.a, he did not lose his authority to decide or resolve such cases su6*itted to hi* for decision or resolution6ecause he continued as Jud.e of the !e.ional Trial Court and isof co-eual ran> with the undersi.ned %residin. Jud.e# Thestandin. rule and supported 6y =urisprudence is that a Jud.e to

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who* a case is su6*itted for decision has the authority to decidethe case notwithstandin. his transfer to another 6ranch or re.ion of the sa*e court ?$ec# 9, !ule 13', !ule of Court@#

Co*in. now to the twin prayer for reconsideration of the )ecisiondated /arch 1, 1989 rendered in the instant case, resolution of which now pertains to the undersi.ned %residin. Jud.e, after a*eticulous e<a*ination of the docu*entary evidence presented 6ythe parties, she is convinced that the )ecision of /arch 1, 1989 issupported 6y evidence and, therefore, should not 6e distur6ed#

+" 4+D 5 T 5!+", the (/otion for !econsiderationandOor to Annul )ecision and !ender Anew )ecision 6y the

+ncu*6ent %residin. Jud.e( dated /arch 0, 1989 is here6y)"+)#

$ !)!)#

ueon City, %hilippines, July 1, 1989#

?!ollo, pp# 108-109@

%etitioners thereupon interposed an appeal, 6ut on )ece*6er 1;,1991, the Court of Appeals ?uena, ona.a-!eyes, A6ad $antos?%@, JJ#@ rendered its decision fully a.reein. with the trial court#

ence, the instant petition which was filed on /arch ', 199# Thelast pleadin., private respondents !eply /e*orandu*, was filedon $epte*6er 1', 1993# The case was, however, re-raffled toundersi.ned ponente only on Au.ust 8, 199;, due to the voluntaryinhi6ition of the Justice to who* the case was last assi.ned#

Dhile we dee* it necessary to introduce certain refine*ents in thedisuisition of respondent court in the affir*ance of the trial courtsdecision, we definitely find the instant petition 6ereft of *erit#

The heart of the controversy which is the ulti*ate >ey in theresolution of the other issues in the case at 6ar is the precisedeter*ination of the le.al si.nificance of the docu*ent entitled(!eceipt of )own %ay*ent( which was offered in evidence 6y 6othparties# There is no dispute as to the fact that said docu*ente*6odied the 6indin. contract 6etween !a*ona %atricia Alcara

on the one hand, and the heirs of Constancio %# Coronel on theother, pertainin. to a particular house and lot covered 6y TCT "o#119;7, as defined in Article 130' of the Civil Code of the%hilippines which reads as follows2

Art# 130'# A contract is a *eetin. of *inds 6etween twopersons where6y one 6inds hi*self, with respect to the other, to.ive so*ethin. or to render so*e service#

Dhile, it is the position of private respondents that the (!eceipt of )own %ay*ent( e*6odied a perfected contract of sale, whichperforce, they see> to enforce 6y *eans of an action for specificperfor*ance, petitioners on their part insist that what the docu*entsi.nified was a *ere e<ecutory contract to sell, su6=ect to certainsuspensive conditions, and 6ecause of the a6sence of !a*ona %#

Alcara, who left for the Inited $tates of A*erica, said contractcould not possi6ly ripen into a contract a6solute sale#

%lainly, such variance in the contendin. parties contentions is6rou.ht a6out 6y the way each interprets the ter*s andOor conditions set forth in said private instru*ent# Dithal, 6ased onwhatever relevant and ad*issi6le evidence *ay 6e availa6le onrecord, this, Court, as were the courts 6elow, is now called upon toad=ud.e what the real intent of the parties was at the ti*e the saiddocu*ent was e<ecuted#

The Civil Code defines a contract of sale, thus2

Art# 1&'8# y the contract of sale one of the contractin.parties o6li.ates hi*self to transfer the ownership of and to deliver

a deter*inate thin., and the other to pay therefor a price certain in*oney or its euivalent#

$ale, 6y its very nature, is a consensual contract 6ecause it isperfected 6y *ere consent# The essential ele*ents of a contract of sale are the followin.2

a@ Consent or *eetin. of the *inds, that is, consent totransfer ownership in e<chan.e for the price:

6@ )eter*inate su6=ect *atter: and

c@ %rice certain in *oney or its euivalent#

Inder this definition, a Contract to $ell *ay not 6e considered as aContract of $ale 6ecause the first essential ele*ent is lac>in.# +n acontract to sell, the prospective seller e<plicity reserves the transfer of title to the prospective 6uyer, *eanin., the prospective seller does not as yet a.ree or consent to transfer ownership of theproperty su6=ect of the contract to sell until the happenin. of anevent, which for present purposes we shall ta>e as the full pay*entof the purchase price# Dhat the seller a.rees or o6li.es hi*self todo is to fulfill is pro*ise to sell the su6=ect property when the entire

a*ount of the purchase price is delivered to hi*# +n other words thefull pay*ent of the purchase price parta>es of a suspensivecondition, the non-fulfill*ent of which prevents the o6li.ation to sellfro* arisin. and thus, ownership is retained 6y the prospectiveseller without further re*edies 6y the prospective 6uyer# +n !ouevs# apu ?9; $C!A 7&1 M1980N@, this Court had occasion to rule2

ence, De hold that the contract 6etween the petitioner and therespondent was a contract to sell where the ownership or title isretained 6y the seller and is not to pass until the full pay*ent of theprice, such pay*ent 6ein. a positive suspensive condition andfailure of which is not a 6reach, casual or serious, 6ut si*ply anevent that prevented the o6li.ation of the vendor to convey titlefro* acuirin. 6indin. force#

$tated positively, upon the fulfill*ent of the suspensive conditionwhich is the full pay*ent of the purchase price, the prospectivesellers o6li.ation to sell the su6=ect property 6y enterin. into acontract of sale with the prospective 6uyer 6eco*es de*anda6leas provided in Article 1&79 of the Civil Code which states2

Art# 1&79# A pro*ise to 6uy and sell a deter*inate thin. for a price certain is reciprocally de*anda6le#

An accepted unilateral pro*ise to 6uy or to sell a deter*inate thin.for a price certain is 6indin. upon the pro*issor if the pro*ise issupported 6y a consideration distinct fro* the price#

A contract to sell *ay thus 6e defined as a 6ilateral contract

where6y the prospective seller, while e<pressly reservin. theownership of the su6=ect property despite delivery thereof to theprospective 6uyer, 6inds hi*self to sell the said property e<clusivelyto the prospective 6uyer upon fulfill*ent of the condition a.reedupon, that is, full pay*ent of the purchase price#

A contract to sell as defined hereina6ove, *ay not even 6econsidered as a conditional contract of sale where the seller *ayli>ewise reserve title to the property su6=ect of the sale until thefulfill*ent of a suspensive condition, 6ecause in a conditionalcontract of sale, the first ele*ent of consent is present, althou.h itis conditioned upon the happenin. of a contin.ent event which *ayor *ay not occur# +f the suspensive condition is not fulfilled, theperfection of the contract of sale is co*pletely a6ated ?cf# o*esiteand housin. Corp# vs# Court of Appeals, 133 $C!A 777 M198&N@#

owever, if the suspensive condition is fulfilled, the contract of saleis there6y perfected, such that if there had already 6een previousdelivery of the property su6=ect of the sale to the 6uyer, ownershipthereto auto*atically transfers to the 6uyer 6y operation of lawwithout any further act havin. to 6e perfor*ed 6y the seller#

+n a contract to sell, upon the fulfill*ent of the suspensive conditionwhich is the full pay*ent of the purchase price, ownership will notauto*atically transfer to the 6uyer althou.h the property *ay have6een previously delivered to hi*# The prospective seller still has toconvey title to the prospective 6uyer 6y enterin. into a contract of a6solute sale#

+t is essential to distin.uish 6etween a contract to sell and aconditional contract of sale specially in cases where the su6=ect

property is sold 6y the owner not to the party the seller contractedwith, 6ut to a third person, as in the case at 6ench# +n a contract tosell, there 6ein. no previous sale of the property, a third person6uyin. such property despite the fulfill*ent of the suspensivecondition such as the full pay*ent of the purchase price, for instance, cannot 6e dee*ed a 6uyer in 6ad faith and theprospective 6uyer cannot see> the relief of reconveyance of theproperty# There is no dou6le sale in such case# Title to the propertywill transfer to the 6uyer after re.istration 6ecause there is no

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defect in the owner-sellers title per se, 6ut the latter, of course, *ay6e used for da*a.es 6y the intendin. 6uyer#

+n a conditional contract of sale, however, upon the fulfill*ent of thesuspensive condition, the sale 6eco*es a6solute and this willdefinitely affect the sellers title thereto# +n fact, if there had 6eenprevious delivery of the su6=ect property, the sellers ownership or title to the property is auto*atically transferred to the 6uyer suchthat, the seller will no lon.er have any title to transfer to any thirdperson# Applyin. Article 1'&& of the Civil Code, such second 6uyer of the property who *ay have had actual or constructive >nowled.eof such defect in the sellers title, or at least was char.ed with theo6li.ation to discover such defect, cannot 6e a re.istrant in .ood

faith# $uch second 6uyer cannot defeat the first 6uyers title# +n casea title is issued to the second 6uyer, the first 6uyer *ay see>reconveyance of the property su6=ect of the sale#

Dith the a6ove postulates as .uidelines, we now proceed to thetas> of decipherin. the real nature of the contract entered into 6ypetitioners and private respondents#

+t is a canon in the interpretation of contracts that the words usedtherein should 6e .iven their natural and ordinary *eanin. unless atechnical *eanin. was intended ?Tan vs# Court of Appeals, 1$C!A '8; M199N@# Thus, when petitioners declared in the said(!eceipt of )own %ay*ent( that they L

!eceived fro* /iss !a*ona %atricia Alcara of 1&; Ti*o.,ueon City, the su* of 5ifty Thousand %esos purchase price of our inherited house and lot, covered 6y TCT "o# 1199;7 of the!e.istry of )eeds of ueon City, in the total a*ount of %1,&0,000#00#

without any reservation of title until full pay*ent of the entirepurchase price, the natural and ordinary idea conveyed is that theysold their property#

Dhen the (!eceipt of )own %ay*ent( is considered in its entirety, it6eco*es *ore *anifest that there was a clear intent on the part of petitioners to transfer title to the 6uyer, 6ut since the transfer certificate of title was still in the na*e of petitioners father, theycould not fully effect such transfer althou.h the 6uyer was then

willin. and a6le to i**ediately pay the purchase price# Therefore,petitioners-sellers undertoo> upon receipt of the down pay*entfro* private respondent !a*ona %# Alcara, to cause the issuanceof a new certificate of title in their na*es fro* that of their father,after which, they pro*ised to present said title, now in their na*es,to the latter and to e<ecute the deed of a6solute sale whereupon,the latter shall, in turn, pay the entire 6alance of the purchase price#

The a.ree*ent could not have 6een a contract to sell 6ecause thesellers herein *ade no e<press reservation of ownership or title tothe su6=ect parcel of land# 5urther*ore, the circu*stance whichprevented the parties fro* enterin. into an a6solute contract of salepertained to the sellers the*selves ?the certificate of title was not intheir na*es@ and not the full pay*ent of the purchase price# Inder the esta6lished facts and circu*stances of the case, the Court *ay

safely presu*e that, had the certificate of title 6een in the na*es of petitioners-sellers at that ti*e, there would have 6een no reasonwhy an a6solute contract of sale could not have 6een e<ecuted andconsu**ated ri.ht there and then#

/oreover, unli>e in a contract to sell, petitioners in the case at 6ar did not *erely pro*ise to sell the properly to private respondentupon the fulfill*ent of the suspensive condition# n the contrary,havin. already a.reed to sell the su6=ect property, they undertoo>to have the certificate of title chan.ed to their na*es andi**ediately thereafter, to e<ecute the written deed of a6solute sale#

Thus, the parties did not *erely enter into a contract to sell wherethe sellers, after co*pliance 6y the 6uyer with certain ter*s andconditions, pro*ised to sell the property to the latter# Dhat *ay 6e

perceived fro* the respective underta>in.s of the parties to thecontract is that petitioners had already a.reed to sell the house andlot they inherited fro* their father, co*pletely willin. to transfer fullownership of the su6=ect house and lot to the 6uyer if thedocu*ents were then in order# +t =ust happened, however, that thetransfer certificate of title was then still in the na*e of their father# +twas *ore e<pedient to first effect the chan.e in the certificate of title so as to 6ear their na*es# That is why they undertoo> to causethe issuance of a new transfer of the certificate of title in their na*es upon receipt of the down pay*ent in the a*ount of

%'0,000#00# As soon as the new certificate of title is issued in their na*es, petitioners were co**itted to i**ediately e<ecute thedeed of a6solute sale# nly then will the o6li.ation of the 6uyer topay the re*ainder of the purchase price arise#

There is no dou6t that unli>e in a contract to sell which is *ostco**only entered into so as to protect the seller a.ainst a 6uyer who intends to 6uy the property in install*ent 6y withholdin.ownership over the property until the 6uyer effects full pay*enttherefor, in the contract entered into in the case at 6ar, the sellerswere the one who were una6le to enter into a contract of a6solutesale 6y reason of the fact that the certificate of title to the propertywas still in the na*e of their father# +t was the sellers in this case

who, as it were, had the i*pedi*ent which prevented, so to spea>,the e<ecution of an contract of a6solute sale#

Dhat is clearly esta6lished 6y the plain lan.ua.e of the su6=ectdocu*ent is that when the said (!eceipt of )own %ay*ent( wasprepared and si.ned 6y petitioners !o*eo A# Coronel, et al#, theparties had a.reed to a conditional contract of sale, consu**ationof which is su6=ect only to the successful transfer of the certificateof title fro* the na*e of petitioners father, Constancio %# Coronel,to their na*es#

The Court si.nificantly notes this suspensive condition was, in fact,fulfilled on 5e6ruary ;, 198' ?<h# ()(: <h# (&(@# Thus, on saiddate, the conditional contract of sale 6etween petitioners andprivate respondent !a*ona %# Alcara 6eca*e o6li.atory, the onlyact reuired for the consu**ation thereof 6ein. the delivery of theproperty 6y *eans of the e<ecution of the deed of a6solute sale ina pu6lic instru*ent, which petitioners uneuivocally co**ittedthe*selves to do as evidenced 6y the (!eceipt of )own %ay*ent#(

Article 1&7', in correlation with Article 1181, 6oth of the Civil Code,plainly applies to the case at 6ench# Thus,

Art# 1&7'# The contract of sale is perfected at the *o*entthere is a *eetin. of *inds upon the thin. which is the o6=ect of thecontract and upon the price#

5ro* the *o*ent, the parties *ay reciprocally de*andperfor*ance, su6=ect to the provisions of the law .overnin. the

for* of contracts#

Art# 1181# +n conditional o6li.ations, the acuisition of ri.hts, as well as the e<tin.uish*ent or loss of those alreadyacuired, shall depend upon the happenin. of the event whichconstitutes the condition#

$ince the condition conte*plated 6y the parties which is theissuance of a certificate of title in petitioners na*es was fulfilled on5e6ruary ;, 198', the respective o6li.ations of the parties under the contract of sale 6eca*e *utually de*anda6le, that is,petitioners, as sellers, were o6li.ed to present the transfer certificate of title already in their na*es to private respondent!a*ona %# Alcara, the 6uyer, and to i**ediately e<ecute thedeed of a6solute sale, while the 6uyer on her part, was o6li.ed to

forthwith pay the 6alance of the purchase price a*ountin. to%1,190,000#00#

+t is also si.nificant to note that in the first para.raph in pa.e 9 of their petition, petitioners conclusively ad*itted that2

3# The petit ioners-sellers Coronel 6ound the*selves (toeffect the transfer in our na*es fro* our deceased father Constancio %# Coronel, the transfer certificate of title i**ediatelyupon receipt of the downpay*ent a6ove-stated(# The sale was stillsu6=ect to this suspensive condition# ?*phasis supplied#@

?!ollo, p# 1;@

%etitioners the*selves reco.nied that they entered into a contract

of sale su6=ect to a suspensive condition# nly, they contend,continuin. in the sa*e para.raph, that2

# # # ad petitioners-sellers not co*plied with this condition of firsttransferrin. the title to the property under their na*es, there could6e no perfected contract of sale# ?*phasis supplied#@

?+6id#@

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not aware that they set their own trap for the*selves, for Article118; of the Civil Code e<pressly provides that2

Art# 118;# The condition shall 6e dee*ed fulfilled when theo6li.or voluntarily prevents its fulfill*ent#

esides, it should 6e stressed and e*phasied that what is *orecontrollin. than these *ere hypothetical ar.u*ents is the fact thatthe condition herein referred to was actually and indisputa6lyfulfilled on 5e6ruary ;, 198', when a new title was issued in thena*es of petitioners as evidenced 6y TCT "o# 37&03 ?<h# ()(:<h# (&(@#

The inevita6le conclusion is that on January 19, 198', asevidenced 6y the docu*ent deno*inated as (!eceipt of )own%ay*ent( ?<h# (A(: <h# (1(@, the parties entered into a contract of sale su6=ect only to the suspensive condition that the sellers shalleffect the issuance of new certificate title fro* that of their fathersna*e to their na*es and that, on 5e6ruary ;, 198', this conditionwas fulfilled ?<h# ()(: <h# (&(@#

De, therefore, hold that, in accordance with Article 1187 whichpertinently provides L

Art# 1187# The effects of conditional o6li.ation to .ive, oncethe condition has 6een fulfilled, shall retroact to the day of theconstitution of the o6li.ation # # #

+n o6li.ation to do or not to do, the courts shall deter*ine, in eachcase, the retroactive effect of the condition that has 6een co*pliedwith#

the ri.hts and o6li.ations of the parties with respect to theperfected contract of sale 6eca*e *utually due and de*anda6leas of the ti*e of fulfill*ent or occurrence of the suspensivecondition on 5e6ruary ;, 198'# As of that point in ti*e, reciprocalo6li.ations of 6oth seller and 6uyer arose#

%etitioners also ar.ue there could 6een no perfected contract onJanuary 19, 198' 6ecause they were then not yet the a6soluteowners of the inherited property#

De cannot sustain this ar.u*ent#

Article 77& of the Civil Code defines $uccession as a *ode of transferrin. ownership as follows2

Art# 77&# $uccession is a *ode of acuisition 6y virtue of which theproperty, ri.hts and o6li.ations to 6e e<tent and value of theinheritance of a person are trans*itted throu.h his death to another or others 6y his will or 6y operation of law#

%etitioners-sellers in the case at 6ar 6ein. the sons and dau.htersof the decedent Constancio %# Coronel are co*pulsory heirs whowere called to succession 6y operation of law# Thus, at the pointtheir father drew his last 6reath, petitioners stepped into his shoesinsofar as the su6=ect property is concerned, such that any ri.hts or

o6li.ations pertainin. thereto 6eca*e 6indin. and enforcea6leupon the*# +t is e<pressly provided that ri.hts to the succession aretrans*itted fro* the *o*ent of death of the decedent ?Article 777,Civil Code: Cuison vs# 4illanueva, 90 %hil# 8'0 M19'N@#

e it also noted that petitioners clai* that succession *ay not 6edeclared unless the creditors have 6een paid is rendered *oot 6ythe fact that they were a6le to effect the transfer of the title to theproperty fro* the decedents na*e to their na*es on 5e6ruary ;,198'#

Aside fro* this, petitioners are precluded fro* raisin. their supposed lac> of capacity to enter into an a.ree*ent at that ti*eand they cannot 6e allowed to now ta>e a posture contrary to thatwhich they too> when they entered into the a.ree*ent with private

respondent !a*ona %# Alcara# The Civil Code e<pressly statesthat2

Art# 1&31# Throu.h estoppel an ad*ission or representationis rendered conclusive upon the person *a>in. it, and cannot 6edenied or disproved as a.ainst the person relyin. thereon#

avin. represented the*selves as the true owners of the su6=ectproperty at the ti*e of sale, petitioners cannot clai* now that theywere not yet the a6solute owners thereof at that ti*e#

%etitioners also contend that althou.h there was in fact a perfectedcontract of sale 6etween the* and !a*ona %# Alcara, the latter 6reached her reciprocal o6li.ation when she rendered i*possi6lethe consu**ation thereof 6y .oin. to the Inited $tates of A*erica,without leavin. her address, telephone nu*6er, and $pecial %ower of Attorney ?%ara.raphs 1& and 1', Answer with Co*pulsoryCounterclai* to the A*ended Co*plaint, p# : !ollo, p# &3@, for which reason, so petitioners conclude, they were correct inunilaterally rescindin. rescindin. the contract of sale#

De do not a.ree with petitioners that there was a valid rescission of the contract of sale in the instant case# De note that these

supposed .rounds for petitioners rescission, are *ere alle.ationsfound only in their responsive pleadin.s, which 6y e<pressprovision of the rules, are dee*ed controverted even if no reply isfiled 6y the plaintiffs ?$ec# 11, !ule ;, !evised !ules of Court@# Therecords are a6solutely 6ereft of any supportin. evidence tosu6stantiate petitioners alle.ations# De have stressed ti*e anda.ain that alle.ations *ust 6e proven 6y sufficient evidence ?".Cho Cio vs# ". )ion., 110 %hil# 88 M19;1N: !ecaro vs# *6isan, $C!A '98 M19;1N# /ere alle.ation is not an evidence ?a.asca vs#)e 4era, 79 %hil# 37; M19&7N@#

ven assu*in. ar.uendo that !a*ona %# Alcara was in the Inited$tates of A*erica on 5e6ruary ;, 198', we cannot =ustify petitioner-sellers act of unilaterally and e<tradicially rescindin. the contract of sale, there 6ein. no e<press stipulation authoriin. the sellers toe<tar=udicially rescind the contract of sale# ?cf# )i.nos vs# CA, 1'8$C!A 37' M1988N: Ta.u6a vs# 4da# de eon, 13 $C!A 7 M198&N@

/oreover, petitioners are estopped fro* raisin. the alle.eda6sence of !a*ona %# Alcara 6ecause althou.h the evidence onrecord shows that the sale was in the na*e of !a*ona %# Alcaraas the 6uyer, the sellers had 6een dealin. with Concepcion )# Alcara, !a*onas *other, who had acted for and in 6ehalf of her dau.hter, if not also in her own 6ehalf# +ndeed, the down pay*entwas *ade 6y Concepcion )# Alcara with her own personal chec>?<h# ((: <h# ((@ for and in 6ehalf of !a*ona %# Alcara# There isno evidence showin. that petitioners ever uestioned Concepcionsauthority to represent !a*ona %# Alcara when they accepted her personal chec># "either did they raise any o6=ection as re.ards

pay*ent 6ein. effected 6y a third person# Accordin.ly, as far aspetitioners are concerned, the physical a6sence of !a*ona %# Alcara is not a .round to rescind the contract of sale#

Corollarily, !a*ona %# Alcara cannot even 6e dee*ed to 6e indefault, insofar as her o6li.ation to pay the full purchase price isconcerned# %etitioners who are precluded fro* settin. up thedefense of the physical a6sence of !a*ona %# Alcara as a6ove-e<plained offered no proof whatsoever to show that they actuallypresented the new transfer certificate of title in their na*es andsi.nified their willin.ness and readiness to e<ecute the deed of a6solute sale in accordance with their a.ree*ent# !a*onascorrespondin. o6li.ation to pay the 6alance of the purchase pricein the a*ount of %1,190,000#00 ?as 6uyer@ never 6eca*e due andde*anda6le and, therefore, she cannot 6e dee*ed to have 6een in

default#

Article 11;9 of the Civil Code defines when a party in a contractinvolvin. reciprocal o6li.ations *ay 6e considered in default, to wit2

Art# 11;9# Those o6li.ed to deliver or to do so*ethin., incur in delay fro* the ti*e the o6li.ee =udicially or e<tra=udiciallyde*ands fro* the* the fulfill*ent of their o6li.ation#

<<< <<< <<<

+n reciprocal o6li.ations, neither party incurs in delay if the other does not co*ply or is not ready to co*ply in a proper *anner withwhat is incu*6ent upon hi*# 5ro* the *o*ent one of the partiesfulfill his o6li.ation, delay 6y the other 6e.ins# ?*phasis supplied#@

There is thus neither factual nor le.al 6asis to rescind the contractof sale 6etween petitioners and respondents#

Dith the fore.oin. conclusions, the sale to the other petitioner,Catalina # /a6ana., .ave rise to a case of dou6le sale where Article 1'&& of the Civil Code will apply, to wit2

Art# 1'&&# +f the sa*e thin. should have 6een sold todifferent vendees, the ownership shall 6e transferred to the person

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who *ay have first ta>en possession thereof in .ood faith, if itshould 6e *ova6le property#

$hould if 6e i**ova6le property, the ownership shall 6elon. to theperson acuirin. it who in .ood faith first recorded it in !e.istry of %roperty#

$hould there 6e no inscription, the ownership shall pertain to theperson who in .ood faith was first in the possession: and, in thea6sence thereof to the person who presents the oldest title,provided there is .ood faith#

The record of the case shows that the )eed of A6solute $ale dated

April ', 198' as proof of the second contract of sale wasre.istered with the !e.istry of )eeds of ueon City .ivin. rise tothe issuance of a new certificate of title in the na*e of Catalina #/a6ana. on June ', 198'# Thus, the second para.raph of Article1'&& shall apply#

The a6ove-cited provision on dou6le sale presu*es title or ownership to pass to the first 6uyer, the e<ceptions 6ein.2 ?a@ whenthe second 6uyer, in .ood faith, re.isters the sale ahead of the first6uyer, and ?6@ should there 6e no inscription 6y either of the two6uyers, when the second 6uyer, in .ood faith, acuires possessionof the property ahead of the first 6uyer# Inless, the second 6uyer satisfies these reuire*ents, title or ownership will not transfer tohi* to the pre=udice of the first 6uyer#

+n his co**entaries on the Civil Code, an accepted authority onthe su6=ect, now a distin.uished *e*6er of the Court, Justice JoseC# 4itu., e<plains2

The .overnin. principle is prius te*pore, potior =ure ?first in ti*e,stron.er in ri.ht@# nowled.e 6y the first 6uyer of the second salecannot defeat the first 6uyers ri.hts e<cept when the second 6uyer first re.isters in .ood faith the second sale ?livares vs# onales,1'9 $C!A 33@# Conversely, >nowled.e .ained 6y the second 6uyer of the first sale defeats his ri.hts even if he is first to re.ister, since>nowled.e taints his re.istration with 6ad faith ?see also Astor.a vs#Court of Appeals, #!# "o# '8'30, ; )ece*6er 198&@# +n Cru vs#Ca6ana ?#!# "o# ';3, June 198&, 19 $C!A ;';@, it hasheld that it is essential, to *erit the protection of Art# 1'&&, second

para.raph, that the second realty 6uyer *ust act in .ood faith inre.isterin. his deed of sale ?citin. Car6onell vs# Court of Appeals,;9 $C!A 99, Crisosto*o vs# CA, #!# "o# 9'8&3, 0 $epte*6er 199@#?J# 4itu. Co*pendiu* of Civil aw and Jurisprudence, 1993dition, p# ;0&@#

%etitioner point out that the notice of lis pendens in the case at 6ar was annoted on the title of the su6=ect property only on 5e6ruary, 198', whereas, the second sale 6etween petitioners Coronelsand petitioner /a6ana. was supposedly perfected prior thereto or on 5e6ruary 18, 198'# The idea conveyed is that at the ti*epetitioner /a6ana., the second 6uyer, 6ou.ht the property under aclean title, she was unaware of any adverse clai* or previous sale,for which reason she is 6uyer in .ood faith#

De are not persuaded 6y such ar.u*ent#

+n a case of dou6le sale, what finds relevance and *ateriality is notwhether or not the second 6uyer was a 6uyer in .ood faith 6utwhether or not said second 6uyer re.isters such second sale in.ood faith, that is, without >nowled.e of any defect in the title of theproperty sold#

As clearly 6orne out 6y the evidence in this case, petitioner /a6ana. could not have in .ood faith, re.istered the sale enteredinto on 5e6ruary 18, 198' 6ecause as early as 5e6ruary , 198',a notice of lis pendens had 6een annotated on the transfer certificate of title in the na*es of petitioners, whereas petitioner /a6ana. re.istered the said sale so*eti*e in April, 198'# At the

ti*e of re.istration, therefore, petitioner /a6ana. >new that thesa*e property had already 6een previously sold to privaterespondents, or, at least, she was char.ed with >nowled.e that aprevious 6uyer is clai*in. title to the sa*e property# %etitioner /a6ana. cannot close her eyes to the defect in petitioners title tothe property at the ti*e of the re.istration of the property#

This Court had occasions to rule that2

+f a vendee in a dou6le sale re.isters that sale after he hasacuired >nowled.e that there was a previous sale of the sa*eproperty to a third party or that another person clai*s said propertyin a pervious sale, the re.istration will constitute a re.istration in6ad faith and will not confer upon hi* any ri.ht# ?$alvoro vs#Tane.a, 87 $C!A 3&9 M1978N: citin. %alarca vs# )irector of and,&3 %hil# 1&;: Ca.aoan vs# Ca.aoan, &3 %hil# ''&: 5ernande vs#/ercader, &3 %hil# '81#@

Thus, the sale of the su6=ect parcel of land 6etween petitioners and!a*ona %# Alcara, perfected on 5e6ruary ;, 198', prior to that6etween petitioners and Catalina # /a6ana. on 5e6ruary 18,198', was correctly upheld 6y 6oth the courts 6elow#

Althou.h there *ay 6e a*ple indications that there was in fact ana.ency 6etween !a*ona as principal and Concepcion, her *other,as a.ent insofar as the su6=ect contract of sale is concerned, theissue of whether or not Concepcion was also actin. in her own6ehalf as a co-6uyer is not suarely raised in the instant petition,nor in such assu*ption disputed 6etween *other and dau.hter#Thus, De will not touch this issue and no lon.er distur6 the lower courts rulin. on this point#

D!5!, pre*ises considered, the instant petition is here6y)+$/+$$) and the appealed =ud.*ent A55+!/)#

AEROSPACE C-EMICAL INDUSTRIES, INC., petitioner,vs.COURT OF APPEALS, P-ILIPPINE P-OSP-ATE FERTILI"ER,CORP., respondents

This petition for review assails the )ecision 1 dated Au.ust 19,199, of the Court of Appeals, which set aside the =ud.*ent of the!e.ional Trial Court of %asi., ranch 1'1# The case ste**ed fro*a co*plaint filed 6y the 6uyer ?herein petitioner@ a.ainst the seller ?private respondent@ for alle.ed 6reach of contract# Althou.hpetitioner prevailed in the trial court, the appellate court reversedand instead found petitioner .uilty of delay and therefore lia6le for da*a.es, as follows2

D!5!, the )ecision of the court a uo is $T A$+) and a

new one rendered, dis*issin. the co*plaint with costs a.ainst theplaintiff ?herein petitioner@ and, on the counterclai*, orderin. theplaintiff Aerospace Che*ical +ndustries, +nc# to pay the defendant,%hilippine %hosphate 5ertilier Corporation the su* of %3&,'1;#;3representin. the 6alance of the *aintenance cost and tan> rentalchar.es incurred 6y the defendant for the failure of the plaintiff tohaul the rest of the rest of the sulfuric acid on the desi.nated date#

Costs a.ainst plaintiff-appellee#

As .leaned fro* the records, the followin. are the antecedents2

n June 7, 198;, petitioner Aerospace +ndustries, +nc#?Aerospace@ purchased five hundred ?'00@ *etric tons of sulfuricacid fro* private respondent %hilippine %hosphate 5ertilier

Corporation ?%hilphos@# The contract 3 was in letter-for* as follows2

7 June 198;

A!$%AC +")I$T!+$ +"C#

03 # 5ernande $t#

$an Juan, /etro /anila

Attention2 /r# /elecio ernande

/ana.er

$u6=ect 2$ulfuric Acid $hip*ent

entle*en2

This is to confir* our a.ree*ent to supply your $ulfuric Acidreuire*ent under the followin. ter*s and conditions2

A# Co**odity 2 $ulfuric Acid in ul>

# Concentration 2 98-99P $&

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C# uantity 2 '00 /T-100 /T <-asay

&00 /T <-$an.i

)# %rice 2 I$Q '0#00O/T-5 Cotcot,

asay, "e.ros r#

I$Q '&#00O/T-5 $an.i, Ce6u

# %ay*ent2 Cash in %hilippine currency

paya6le to %hilippine %hosphate

5ertilier Corp# ?/AAT+@ at

%C+ sellin. rate at the ti*e of

pay*ent at least five ?'@ days prior

to ship*ent date#

5# $hippin. Conditions

1# aycan 2 July

# oad port 2 Cotcot, asay, "e.ros r# and

Atlas %ier, $an.i, Ce6u

<<< <<< <<<

11# ther ter*s and Conditions2 To 6e *utually a.reed upon#

4ery truly yours,

%hilippine %hosphate 5ertilier Corp#

$i.ned2 er*an J# !ustia

$r# /ana.er, /aterials R o.istics

C"5!/2

A!$%AC +")I$T!+$, +"C#

$i.ned2 /r# /elecio ernande

/ana.er

+nitially set 6e.innin. July 198;, the a.ree*ent provided that the6uyer shall pay its purchases in euivalent %hilippine currencyvalue, five days prior to the ship*ent date# %etitioner as 6uyer co**itted to secure the *eans of transport to pic>-up thepurchases fro* private respondents loadports# %er a.ree*ent, onehundred *etric tons ?100 /T@ of sulfuric acid should 6e ta>en fro*asay, "e.ros riental stora.e tan>, while the re*ainin. four

hundred *etric tons ?&00 /T@ should 6e retrieved fro* $an.i,Ce6u#

n Au.ust ;, 198;, private respondent sent an advisory letter & topetitioner to withdraw the sulfuric acid purchased at asay 6ecauseprivate respondent had 6een incurrin. incre*ental e<pense of twothousand ?%,000#00@ pesos for each day of delay in ship*ent#

n cto6er 3, 198;, petitioner paid five hundred fifty-threethousand, two hundred ei.hty ?%''3,80#00@ pesos for '00 /T of sulfuric acid#

n "ove*6er 19, 198;, petitioner chartered /OT $ultanayu*an..i, owned 6y Ace ul> ead $ervices# The vessel wasassi.ned to carry the a.reed volu*es of frei.ht fro* desi.nated

loadin. areas# /OT ayu*an..i withdrew only 70#009 /T of sulfuric acid fro* asay 6ecause said vessel heavily tilted on itsport side# Conseuently, the *aster of the ship stopped further loadin.# Thereafter, the vessel underwent repairs#

+n a de*and letter ' dated )ece*6er 1, 198;, private respondentas>ed petitioner to retrieve the re*ainin. sulfuric acid in asaytan>s so that said tan>s could 6e e*ptied on or 6efore )ece*6er 1', 198;# %rivate respondent said that it would char.e petitioner thestora.e and conseuential costs for the asay tan>s, includin. all

other incre*ental e<penses due to loadin. delay, if petitioner failedto co*ply#

n )ece*6er 18, 198;, /OT $ultan ayu*an..i doc>ed at $an.i,Ce6u, 6ut withdrew only 1'7#'1 /T of sulfuric acid# A.ain, thevessel tilted# 5urther loadin. was a6orted# Two survey reportsconducted 6y the $ociete enerale de $urveillance ?$$@ 5ar asti*ited, dated )ece*6er 17, 198; and January , 1987, attested tothese occurrences#

ater, on a date not specified in the record, /OT $ultan ayu*an..isan> with a total of 7#'1 /T of sulfuric acid on 6oard#1Ewphi1#nSt

%etitioner chartered another vessel, /OT )on 4ictor, with a capacityof appro<i*ately '00 /T# ; n January ; and /arch 0, 1987,/elecio ernande, actin. for the petitioner, addressed letters toprivate respondent, concernin. additional orders of sulfuric acid toreplace its sun>en purchases, which letters are hereunder e<cerpted2

January ;, 1987

<<< <<< <<<

De recently charter another vessel /OT )" 4+CT! who will 6eauthoried 6y us to lift the 6alance appro<i*ately 7#&9 /T#

De reuest your .oodselves to .rant us for another %urchaserder with uantity of 7#'1 /T and we are willin. to pay theadditional order at the prevailin. *ar>et price, provided the liftin. of the total '00 /T 6e centeredOconfined to only one safe 6erth whichis Atlas %ier, $an.i, Ce6u# 7

/arch 0, 1987

This refers to the re*ainin. 6alance of the a6ove product uantitywhich were not loaded to the authoried car.o vessel, /OT $ultanayu*an..i at your load port L $an.i, Toledo City#

%lease 6e advised that we will 6e .ettin. the a6ove productuantity within the *onth of April 1987 and we are arran.in. for a'00 /T $ulfuric Acid inclusive of which the re*ainin. 6alance2

7#&9 /T an additional product uantity thereof of 7#'1 /T# 8

%etitioners letter 9 dated /ay 1', 1987, reiterated the sa*ereuest to private respondent#

n January ', 1988, petitioners counsel, Atty# %edro T# $antos,Jr#, sent a de*and letter 10 to private respondent for the delivery of the 7#&9 /T of sulfuric acid paid 6y his client, or the return of thepurchase price of three hundred seven thousand five hundred thirty?%307,'30#00@ pesos# %rivate respondent in reply, 11 on /arch 8,1988, instructed petitioner to lift the re*ainin. 30 /T of sulfuricacid fro* asay, or pay *aintenance and stora.e e<pensesco**encin. Au.ust 1, 198;#

n July ;, 1988, petitioner wrote another letter, insistin. on pic>in.

up its purchases consistin. of 7#&9 /T and an additional of 7#'1 /T of sulfuric acid# Accordin. to petitioner it had paid thechartered vessel for the full capacity of '00 /T, statin. that2

Dith re.ard to our 6alance of sulfuric acid L product at your shoretan>Oplant for 7#&9 *etric ton that was left 6y /OT $ultanaayu*an..i due to her sin>in., we reuest for an additionaluantity of 7#'1 *etric ton of sulfuric acid, 98P concentration#

The additional uantity is reuested in order to co*plete theship*ent, as the chartered vessel schedule to lift the hi.h .radesulfuric acid product is contracted for her full capacityOload which is'00 *etric tons *ore or less#

De are willin. to pay the additional uantity L 7#'1 *etric tons

hi.h .rade sulfuric acid in the prevailin. price of the said product#1

<<< <<< <<<

y telephone, petitioner reuested private respondents $hippin./ana.er, il elen, to .et its additional order of 7#'1 /T of sulfuric acid at +sa6el, eyte# 13 elen relayed the infor*ation to hisassociate, er*an !ustia, the $enior /ana.er for +*ports and

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+nternational $ales of private respondent# +n a letter dated July ,1988, !ustia replied2

$u6=ect2 $ulfuric Acid <-+sa6el

entle*en2

Confir*in. earlier telcon with our /r# ## elen, we re.ret toinfor* you that we cannot acco**odate your reuest to lift $ulfuric Acid e<-+sa6el due to %yrite li*itation and delayed arrival of i*ported $ulfuric Acid fro* Japan# 1&

n July ', 1988, petitioners counsel wrote to private respondent

another de*and letter for the delivery of the purchases re*ainin.,or suffer tedious le.al action his client would co**ence#

n /ay &, 1989, petitioner filed a co*plaint for specificperfor*ance andOor da*a.es 6efore the !e.ional Trial Court of %asi., ranch 1'1# %rivate respondent filed its answer withcounterclai*, statin. that it was the petitioner who was re*iss inthe perfor*ance of its o6li.ation in arran.in. the shippin.reuire*ents of its purchases and, as a conseuence, should payda*a.es as co*puted 6elow2

Advanced %ay*ent 6y Aerospace ?ct# 3, 198;@ %''3,80#00

ess $hip*ents

70#009 /T sulfuric acid %7,830#3;

1'1#'1 /T sulfuric acid 17;,9;;#7 ?&9,79;#;3@

LLLLLL LLLLLL

alance %303,&83#37

ess Char.es

asay /aintenance <pense

fro* Au.# 1' to )ec# 1', 198;

?%,000#00Oday < 1 days@ %&&,000#00

$an.i L Tan> !ental

fro* Au.# 1', 198; to Au.# 1', 1987

?%3,000#00O*o# < 1 *os#@ 38&,000#00 ?;8,000#00@

LLLLLL LLLLLL

!eceiva6leOCounterclai* ?%3&,'1;#;3@

Trial ensued and after due proceedin.s, =ud.*ent was rendered 6y

the trial court in petitioners favor, disposin. as follows2

D!5!, =ud.*ent is here6y rendered in favor of plaintiff anda.ainst defendant, directin. the latter to pay the for*er thefollowin. su*s2

1# %30;,0;0#77 L representin. the value of the undelivered7#&9 *etric tons of sulfuric acid plaintiff paid to defendant:

# %91,818#3 L representin. unrealied profits, 6oth ite*swith 1P interest per annu* fro* /ay &, 1989, when the co*plaintwas filed until fully paid:

3# %30,000#00 L as e<e*plary da*a.es: and

&# %30,000#00 L as attorneys fees and liti.ation e<penses,6oth last ite*s also with 1P interest per annu* fro* date hereof until fully paid#

)efendants counterclai*s are here6y dis*issed for lac> of *erit#

Costs a.ainst defendant# 1'

+n findin. for the petitioner, the trial court held that the petitioner was a6solved in its o6li.ation to pic>-up the re*ainin. sulfuric acid

6ecause its failure was due to force *a=eure# Accordin. to the trialcourt, it was private respondent who co**itted a 6reach of contract when it failed to acco**odate the additional order of thepetitioner, to replace those that san> in the sea, thus2

To 6e.in with, even if we assu*e that it is incu*6ent upon theplaintiff to (lift( the sulfuric acid it ordered fro* defendant, the factthat force *a=eure intervened when the vessel which was previouly?sic@ listin., 6ut which the parties, includin. a representative of thedefendant, did not *ind, sun>, has the effect of a6solvin. plaintiff fro* (liftin.( the sulfuric acid at the desi.nated load port# ut evenassu*in. the plaintiff cannot 6e held entirely 6la*eless, thealle.ation that plaintiff a.reed to a pay*ent of a ,000-peso

incre*ental e<penses per day to defendant for delayed (liftin. hasnot 6een proven#( # # #

Also, if it were true that plaintiff is inde6ted to defendant, why diddefendant accept a second additional order after the transaction inliti.ationU Dhy also, did defendant not send plaintiff state*ents of account until after 3 yearsU

All these convince the Court that indeed, defendant *ust returnwhat plaintiff has paid it for the .oods which the latter did notactually receive# 1;

n appeal 6y private respondent, the Court of Appeals reversed thedecision of the trial court, as follows2

ased on the facts of this case as hereina6ove set forth, it is clear that the plaintiff had the o6li.ation to withdraw the full a*ount of '00 /T of sulfuric acid fro* the defendants loadport at asay and$an.i on or 6efore Au.ust 1', 198;# As early as Au.ust ;, 198; ithad 6een accordin.ly warned 6y the defendant that any delay inthe haulin. of the co**odity would *ean e<penses on the part of the defendant a*ountin. to %,000#00 a day# The plaintiff sent itsvessel, the (/OT $ultan ayu*an..i(, only on "ove*6er 19, 1987#The vessel, however: was not capa6le of loadin. the entire '00 /Tand in fact, with its load of only 7#'19 /T, it san>#

Contrary to the position of the trial court, the sin>in. of the (/OT$ultan ayu*an..i( did not a6solve the plaintiff fro* its o6li.ationto lift the rest of the 7#&81 /T of sulfuric acid at the a.reed ti*e#

+t was the plaintiffs duty to charter another vessel for the purpose# +tdid contract for the services of a new vessel, the (/OT )on 4ictor(,6ut did not want to lift the 6alance of 7#&81 /T only 6ut insistedthat its additional order of 7#'1 /T 6e also .iven 6y thedefendant to co*plete '00 /T# apparently so that the vessel *ay6e availed of in its full capacity#

<<< <<< <<<

De find no 6asis for the decision of the trial court to *a>e thedefendant lia6le to the plaintiff not only for the cost of the sulfuricacid, which the plaintiff itself failed to haul, 6ut also for unrealiedprofits as well as e<e*plary da*a.es and attorneys fees# 17

!espondent Court of Appeals found the petitioner .uilty of delay

and ne.li.ence in the perfor*ance of its o6li.ation# +t dis*issed theco*plaint of petitioner and ordered it to pay da*a.es representin.the counterclai* of private respondent#

The *otion for reconsideration filed 6y petitioner was denied 6yrespondent court in its !esolution dated )ece*6er 1, 199, for lac> of *erit#

%etitioner now co*es 6efore us, assi.nin. the followin. errors2

+#

!$%")"T CI!T 5 A%%A$ !!) +" "T )+"%!+4AT !$%")"T T A4 C//+TT) A !AC 5C"T!ACT D" +T +$ "T )+$%IT) TAT %T+T+"!

%A+) +" 5I T 4AI 5 '00 /T 5 $I5I!+C AC+) T%!+4AT !$%")"T IT T ATT! DA$ A T)+4! T %T+T+"! "K 7#'1 /#T#

++#

!$%")"T CI!T 5 A%%A$ !A4K !!) +")+" %T+T+"! +A 5! )A/A$ T %!+4AT!$%")"T " T A$+$ 5 A B!B C%K 5 A" A) A!/"T T ) %T+T+"! +A 5!

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)A/A$ 5! T )AK D" %!+4AT !$%")"T5A+) T %!)IC T !++"A +" C"T!A4"T+" 5T !I$ " 4+)"C#

+++#

!$%")"T CI!T 5 A%%A$ !!) +" 5A++" TC"$+)! T I")+$%IT) 5ACT$ TAT %T+T+"!$%AK/"T 5! T )$ DA$ !C+4) K %!+4AT!$%")"T D+TIT A"K IA+5+CAT+" A") TAT%!+4AT !$%")"T "T!) +"T A"T! C"T!ACTT $I%%K %T+T+"! 7#'19 /T 5 $I5I!+C AC+) +" A))+T+" T T I")+4!) AA"C A$ %!5 TAT

A"K )AK 5 %T+T+"! DA$ )/) DA+4) K $A+) ACT$ 5 !$%")"T#

+4#

!$%")"T CI!T 5 A%%A$ !!) +" "TC"$+)!+" T AD TAT D" T $A +"44$5I"+ )$ A$ +" T+$ CA$ T B%"$$ 5!$T!A A") /A+"T"A"C A! 5! T ACCI"T 5T $! ?A!T+C 1'0& C+4+ C)@#

4#

!$%")"T CI!T 5 A%%A$ !!) +" 5A++" T!")! JI)/"T 5! %T+T+"! A55+!/+" T)C+$+" 5 T T!+A CI!T#

5ro* the assi.ned errors, we synthesie the pertinent issues raised6y the petitioner as follows2

1# )id the respondent court err in holdin. that the petitioner co**itted 6reach of contract, considerin. that2

a@ the petitioner alle.edly paid the full value of its purchases,yet received only a portion of said purchasesU

6@ petitioner and private respondent alle.edly had alsoa.reed for the purchase and supply of an additional 7#'19 /T of sulfuric acid, hence prior delay, if any, had 6een waivedU

# )id the respondent court err in awardin. da*a.es toprivate respondentU

3# $hould e<penses for the stora.e and preservation of thepurchased fun.i6le .oods, na*ely sulfuric acid, 6e on sellersaccount pursuant to Article 1'0& of the Civil CodeU

To resolve these issues, petitioner ur.es us to review factualfindin.s of respondent court and its conclusion that the petitioner was .uilty of delay in the perfor*ance of its o6li.ation# Accordin. topetitioner, that conclusion is contrary to the factual evidence# +tadds that respondent court disre.arded the rule that findin.s of thetrial court are .iven wei.ht, with the hi.hest de.ree of respect#Clai*in. that respondent courts findin.s conflict with those of the

trial court, petitioner prays that the trial courts findin.s 6e upheldover those of the appellate court#

%etitioner ar.ues that it paid the purchase price of sulfuric acid, five?'@ days prior to the withdrawal thereof, or on cto6er 3, 198;,hence, it had co*plied with the pri*ary condition set in the salescontract# %etitioner clai*s its failure to pic>-up the re*ainin.purchases on ti*e was due to a stor*, a force *a=eure, which san>the vessel# +t thus clai*s e<e*ption fro* lia6ility to pay da*a.es#%etitioner also contends that it was actually the privaterespondents shippin. officer, who advised petitioner to 6uy theadditional 7#'1 /T of sulfuric acid, so as to fully utilie thecapacity of the vessel it chartered# %etitioner insists that when itsship was ready to pic>-up the re*ainin. 6alance of 7#&9 /T of sulfuric acid, private respondent could not co*ply with the contract

co**it*ent due to (pyrite li*itation#(

Dhile we a.ree with petitioner that when the findin.s of the Court of Appeals are contrary to those of the trial court, 18 this Court *ayreview those findin.s, we find the appellate courts conclusion thatpetitioner violated the su6=ect contract a*ply supported 6ypreponderant evidence# %etitioners clai* was predicated *erely onthe alle.ations of its e*ployee, /elecio ernande, that the stor*or force *a=eure caused the petitioners delay and failure to lift thecar.o of sulfuric acid at the desi.nated loadports# +n contrast, the

appellate court discounted ernande assertions# 5or on record,the stor* was not the pro<i*ate cause of petitioners failure totransport its purchases on ti*e# The survey report su6*itted 6y athird party surveyor, $$ 5ar ast i*ited, revealed that thevessel, which was unsta6le, was incapa6le of carryin. the full loadof sulfuric acid# "ote that there was a pre*ature ter*ination of loadin. in asay, "e.ros riental# The vessel had to under.oseveral repairs 6efore continuin. its voya.e to pic>-up the 6alanceof car.o at $an.i, Ce6u# )espite repairs, the vessel still failed tocarry the whole lot of '00 /T of sulfuric acid due to ship defectsli>e listin. to one side# +ts unfortunate sin>in. was not due to force*a=eure# +t sun> 6ecause it was, 6ased on $$ survey report,unsta6le and unseaworthy#

Ditness surveyor u.enio !a6es incident report, dated )ece*6er 13, 198; in asay, "e.ros riental, elucidated this point2

oadin. was started at 1'00hrs# "ove*6er 19# At 1;00rs#"ove*6er 0, loadin. operation was te*porarily stopped 6y thevessels *aster due to ships sta6ility was heavily tilted to port side,ships had tried to transfer the loaded acid to st6dside 6ut failed todo so, due to their au<iliary pu*p on 6oard does not wor> out for acid#

<<< <<< <<<

"ote# Attendin. surveyor arrived /C asay on "ove*6er ,due to delayed advice of said vessel )eclared uantity loadedon6oard 6ased on datas provided 6y %+%$ representative#

n "ove*6er ;, two representative of shippin. co*pany arrivedasay to assist the situation, at 1300rs repairin. andOor weldin. of tan> nu*6er ' started at 1000rs "ove*6er 7, repairin. andOor weldin. was suspended due to the e<plosion of tan> no# '#<plosion ripped a6out two feet of the dou6le 6otto* tan>#

"ove*6er 7 up to date no pro.ress of said vessel# 19

Dhile at $an.i, Ce6u, the vessels condition ?listin.@ did noti*prove as the survey report therein noted2

)eclared uantity loaded on 6oard was 6ased on shore tan>

withdrawal due to ships inco*plete tan> cali6ration ta6le# ar.edisplace*ent cannot 6e applied due to ship was listin. to $t6oardside which has 6een loaded with roc>s to control her sta6ility# 0

These two vital pieces of infor*ation were totally i.nored 6y trialcourt# The appellate court correctly too> these into account,si.nificantly# As to the weather condition in asay, the appellatecourt accepted surveyor !a6es testi*ony, thus2

# "ow, /r# Ditness, what was the weather condition then atasay, "e.ros riental durin. the loadin. operation of sulfuric acidon 6oard the $ultana ayu*an..iU

A# 5air, sir# 1

$ince the third party surveyor was neither petitioners nor privaterespondents e*ployee, his professional report should carry *orewei.ht than that of /elecio ernande, an e*ployee of petitioner#%etitioner, as the 6uyer, was o6li.ated under the contract tounderta>e the shippin. reuire*ents of the car.o fro* the privaterespondents loadports to the petitioners desi.nated warehouse# +twas petitioner which chartered /OT $ultan ayu*an..i# The vesselwas petitioners a.ent# Dhen it failed to co*ply with the necessaryloadin. conditions of sulfuric acid, it was incu*6ent upon petitioner to i**ediately replace /OT $ultan ayu*an..i with another seaworthy vessel# owever, despite repeated de*ands, petitioner did not co*ply seasona6ly#

Additionally, petitioner clai*s that private respondents e*ployee,il elen, had reco**ended to petitioner to fully utilie the vessel,

hence petitioners reuest for additional order to co*plete thevessels '00 /T capacity# This clai* has no pro6ative pertinencenor solid 6asis# A party who asserts that a contract of sale has 6eenchan.ed or *odified has the 6urden of provin. the chan.e or *odification 6y clear and convincin. evidence# !epeatedreuests and additional orders were contained in petitioners lettersto private respondent# +n contrast, elens alle.ed action was onlyver6al: it was not su6stantiated at all durin. the trial# "ote that,usin. the vessel to full capacity could redound to petitionersadvanta.e, not the other partys# +f additional orders were at the

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instance of private respondent, the sa*e *ust 6e properly provedto.ether with its relevance to the uestion of delay# $ettled is theprinciple in law that proof of ver6al a.ree*ents offered to vary theter*s of written a.ree*ents is inad*issi6le, under the parolevidence rule# 3 elens purported reco**endation could not 6eta>en at face value and, o6viously, cannot e<cuse petitionersdefault#

!espondent court found petitioners default un=ustified, and on thisconclusion we a.ree2

+t is not true that the defendant was not in a position to deliver the7#&81 /T which was the 6alance of the ori.inal '00 /T

purchased 6y the plaintiff# The whole lot of '00 /T was ready for liftin. as early as Au.ust 1', 198;# Dhat the defendant could notsell to the plaintiff was the additional 7#'1 /T which said plaintiff was orderin., for the reason that the defendant was short of thesupply needed# The defendant, however, had no o6li.ation to a.reeto this additional order and *ay not 6e faulted for its ina6ility to*eet the said additional reuire*ents of the plaintiff# And thedefendants incapacity to a.ree to the delivery of another 7#'1/T is not a le.al =ustification for the plaintiffs refusal to lift there*ainin. 7#&81#

+t is clear fro* the plaintiffs letters to the defendant that it wanted tosend the (/OT )on 4ictor( only if the defendant would confir* that itwas ready to deliver '00 /T# ecause the defendant could not sellanother 7#'1 /T to the plaintiff, the latter did not send a newvessel to pic> up the 6alance of the '00 /T ori.inally contracted for 6y the parties# This, inspite the representations *ade 6y thedefendant for the haulin. thereof as scheduled and its re*indersthat any e<penses for the delay would 6e for the account of theplaintiff# &

De are therefore constrained to declare that the respondent courtdid not err when it a6solved private respondent fro* any 6reach of contract#

ur ne<t inuiry is whether da*a.es have 6een properly awardeda.ainst petitioner for its un=ustified delay in the perfor*ance of itso6li.ation under the contract# Dhere there has 6een 6reach of contract 6y the 6uyer, the seller has a ri.ht of action for da*a.es#

5ollowin. this rule, a cause of action of the seller for da*a.es *ayarise where the 6uyer refuses to re*ove the .oods, such that 6uyer has to re*ove the*# ' Article 1170 of the Civil Code provides2

Those who in the perfor*ance of their o6li.ations are .uilty of fraud, ne.li.ence, or delay and those who in any *anner contravene the tenor thereof, are lia6le for da*a.es#

)elay 6e.ins fro* the ti*e the o6li.ee =udicially or e<tra=udiciallyde*ands fro* the o6li.or the perfor*ance of the o6li.ation# ; Art#11;9 states2

Art# 11;9# Those o6li.ed to deliver or to do so*ethin. incur in delay fro* the ti*e the o6li.ee =udicially or e<tra=udiciallyde*ands fro* the* the fulfill*ent of their o6li.ation#

+n order that the de6tor *ay 6e in default, it is necessary that thefollowin. reuisites 6e present2 ?1@ that the o6li.ation 6ede*anda6le and already liuidated: ?@ that the de6tor delaysperfor*ance: and ?3@ that the creditor reuires the perfor*ance =udicially or e<tra=udicially# 7

+n the present case, private respondent reuired petitioner to shipout or lift the sulfuric acid as a.reed, otherwise petitioner would 6echar.ed for the conseuential da*a.es owin. to any delay# Asstated in private respondents letter to petitioner, dated )ece*6er 1, 198;2

$u6=ect2 /OT (AKI/A"+(

entle*en2

This is to reiterate our telephone advice and our letter J!-8;1-031 dated )ece*6er 198; re.ardin. your sulfuric acid vessel,/OT (AKI/A"+(#

As we have, in various instances, advised you, our asay wharf willhave to 6e vacated 1'th )ece*6er 198; as we are e<pectin. thearrival of our chartered vessel purportedly to haul our euip*entsand all other re*ainin. assets in asay# This includes our sulfuric

acid tan>s# De re.ret, therefore, that if these tan>s are not e*ptiedon or 6efore the 1'th of )ece*6er, we either have to char.e youfor the tan>s waitin. ti*e at asay and its conseuential costs ?i#e#charterin. of another vessel for its second pic>-up at asay,handlin., etc#@ as well as all other incre*ental costs on account of the protracted loadin. delay# 8 ?*phasis supplied@

+ndeed the a6ove de*and, which was unheeded, =ustifies thefindin. of delay# ut when did such delay 6e.inU The a6ove letter constitutes private respondents e<tra=udicial de*and for thepetitioner to fulfill its o6li.ation, and its dateline is si.nificant# ivenits date, however, we cannot sustain the findin. of the respondentcourt that petitioners delay started on Au.ust ;, 198;# The Court of

Appeals had relied on private respondents earlier letter to petitioner of that date for co*putin. the co**ence*ent of delay# ut asaverred 6y petitioner, said letter of Au.ust ;th is not a cate.oricalde*and# Dhat it showed was a *ere state*ent of fact, that (M5Nfor your infor*ation any delay in $ulfuric Acid withdrawal shall cost usincre*ental e<penses of %,000#00 per day#( "oteworthy, privaterespondent accepted the full pay*ent 6y petitioner for purchaseson cto6er 3, 198;, without ualification, lon. after the Au.ust ;thletter# +n contrast to the Au.ust ;th letter, that of )ece*6er 1thwas a cate.orical de*and#

!ecords reveal that a tan>er ship had to pic>-up sulfuric acid inasay, then proceed to .et the re*ainin. stoc>s in $an.i, Ce6u# Aperiod of three days appears to us reasona6le for a vessel to travel6etween asay and $an.i# o.ically, the co*putation of da*a.esarisin. fro* the shippin. delay would then have to 6e fro*)ece*6er 1', 198;, .iven said reasona6le period after the)ece*6er 1th letter# /ore i*portant, private respondent wasforced to vacate asay wharf only on )ece*6er 1'th# +ts asaye<penses incurred 6efore )ece*6er 1', 198;, were necessary andre.ular 6usiness e<penses for which the petitioner should not 6eo6li.ed to pay#

"ote that private respondent e<tended its lease a.ree*ent for $an.i, Ce6u stora.e tan> until Au.ust 31, 1987, solely for petitioners sulfuric acid# +t stands to reason that petitioner shouldrei*6urse private respondents rental e<penses of %3,000*onthly, co**encin. )ece*6er 1', 198;, up to Au.ust 31, 1987,the period of the e<tended lease# "ote further that there is nothin.

on record refutin. the a*ount of e<penses a6ovecited# %rivaterespondent presented in court two supportin. docu*ents2 first, thelease a.ree*ent pertainin. to the euip*ent, and second a letter dated June 1', 1987, sent 6y Atlas 5ertilier Corporation to privaterespondent representin. the rental char.es incurred# %rivaterespondent is entitled to recover the pay*ent for these char.es# +tshould 6e rei*6ursed the a*ount of two hundred seventy twothousand?%7,000#00@ 9 pesos, correspondin. to the total a*ount of rentals fro* )ece*6er 1', 198; to Au.ust 31, 1987 of the $an.i,Ce6u stora.e tan>#

5inally, we note also that petitioner tries to e<e*pt itself fro*payin. rental e<penses and other da*a.es 6y ar.uin. thate<penses for the preservation of fun.i6le .oods *ust 6e assu*ed

6y the seller# !ental e<penses of storin. sulfuric acid should 6e atprivate respondents account until ownership is transferred,accordin. to petitioner# owever, the .eneral rule that 6eforedelivery, the ris> of loss is 6orne 6y the seller who is still the owner,is not applica6le in this case 6ecause petitioner had incurred delayin the perfor*ance of its o6li.ation# Article 1'0& of the Civil Codeclearly states2

Inless otherwise a.reed, the .oods re*ain at the sellers ris> untilthe ownership therein is transferred to the 6uyer, 6ut when theownership therein is transferred to the 6uyer the .oods are at the6uyers ris> whether actual delivery has 6een *ade or not, e<ceptthat2

<<< <<< <<<

?@ Dhere actual delivery has 6een delayed throu.h the faultof either the 6uyer or seller the .oods are at the ris> of the party atfault# ?e*phasis supplied@

n this score, we uote with approval the findin.s of the appellatecourt, thus2

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# # # The defendant Mherein private respondentN was not re*iss inre*indin. the plaintiff that it would have to 6ear the said e<pensesfor failure to lift the co**odity for an unreasona6le len.th of ti*e#

ut even assu*in. that the plaintiff did not consent to 6e so 6ound,the provisions of Civil Code co*e in to *a>e it lia6le for theda*a.es sou.ht 6y the defendant#

Art# 1170 of the Civil Code provides2

Those who in the perfor*ance of their o6li.ations are .uilty of fraud, ne.li.ence, or delay and those who in any *anner contravene the tenor thereof, are lia6le for da*a.es#

Certainly, the plaintiff Mherein petitionerN was .uilty of ne.li.enceand delay in the perfor*ance of its o6li.ation to lift the sulfuric acidon Au.ust 1', 198; and had contravened the tenor of its letter-contract with the defendant# 30

As pointed out earlier, petitioner is .uilty of delay, after privaterespondent *ade the necessary e<tra=udicial de*and 6y reuirin.petitioner to lift the car.o at its desi.nated loadports# Dhenpetitioner failed to co*ply with its o6li.ations under the contract it6eca*e lia6le for its shortco*in.s# %etitioner is indu6ita6ly lia6lefor proven da*a.es#

Considerin., however, that petitioner *ade an advance pay*entfor the unlifted sulfuric acid in the a*ount of three hundred threethousand, four hundred ei.hty three pesos and thirty sevencentavos ?%303,&83#37@, it is proper to set-off this a*ount a.ainstthe rental e<penses initially paid 6y private respondent# +t is worthnotin. that the ad=ust*ent and allowance of private respondentscounterclai* or set-off in the present action, rather than 6y another independent action, is encoura.ed 6y the law# $uch practice servesto avoid circuitry of action, *ultiplicity of suits, inconvenience,e<pense, and unwarranted consu*ption of the courts ti*e# 31 Thetrend of =udicial decisions is toward a li6eral e<tension of the ri.ht toavail of counterclai*s or set-offs# 3 The rules on counterclai*s aredesi.ned to achieve the disposition of a whole controversyinvolvin. the conflictin. clai*s of interested parties at one ti*e andin one action, provided all parties can 6e 6rou.ht 6efore the courtand the *atter decided without pre=udicin. the ri.ht of any party# 33

$et-off in this case is proper and reasona6le# +t involves deductin.%7,000#00 ?rentals@ fro* %303,&83#37 ?advance pay*ent@, whichwill leave the a*ount of %31,&83#37 refunda6le to petitioner#

D!5!, the petition is here6y )"+)# The assaileddecision of the Court of Appeals in CA #!# C4 "o# 3380 is A55+!/), with /)+5+CAT+" that the a*ount of da*a.esawarded in favor of private respondent is !)IC) to Twohundred seventy two thousand pesos ?%7,000#00@# +t is also!)!) that said a*ount of da*a.es 6e 55$T a.ainstpetitioners advance pay*ent of Three hundred three thousand four hundred ei.hty three pesos and thirty-seven centavos?%303,&83#37@ representin. the price of the 7#&81 /T of sulfuricacid not lifted# astly, it is !)!) that the e<cess a*ount of thirty one thousand, four hundred ei.hty three pesos and thirty

seven centavos ?%31,&83#37@ 6e !TI!") soonest 6y privaterespondent to herein petitioner#1Ewphi1#nSt

Costs a.ainst the petitioner#

DESAMPARADOS M. SOLIVA, S('stit(ted ') So&e -eir PERLITA SOLIVA GALDO, petitioner,vs.T%e INTESTATE ESTATE o$ MARCELO M. VILLALA andVALENTA ALICUA VILLALA, respondents.

There is a valid sale even thou.h the purchase price is not paid infull# The unpaid sellerVs re*edy is an action to collect the 6alanceor to rescind the contract within the ti*e allowed 6y law# +n thiscase, laches 6arrin. the clai* of petitioner to recover the property

has already set in# owever, in the interest of su6stantial =ustice,and pursuant to the euita6le principle proscri6in. un=ustenrich*ent, she is entitled to receive the unpaid 6alance of thepurchase price plus le.al interest thereon#

The Case

efore us is a %etition for !eview1 under !ule &' of the !ules of Court, see>in. to nullify the "ove*6er 9, 001 )ecision and the

/ay 3, 003 !esolution of the Court of Appeals ?CA@ in CA-!C4 "o# &0&# The assailed )ecision disposed as follows2

(D!5!, the )ecision appealed fro* is A55+!/)#(&

The assailed !esolution denied petitionerVs /otion for !econsideration#

The 5acts

The facts are narrated 6y the CA, as follows2

(n /ay ', 198, M%etitionerN )esa*parados /# $oliva filed a

co*plaint for recovery of ownership, possession and da*a.esa.ainst M!espondentN 4alenta alicua 4illal6a < < < alle.in. that sheis the owner of a parcel of a.ricultural land situated at inaplanan,Claveria, /isa*is riental, containin. an area of 1;,'& suare*eters and covered 6y ri.inal Certificate of Title "o# 8'81: that onJanuary &, 19;;, the late Capt# /arcelo 4illal6a as>ed her per*ission to occupy her house on said land, pro*ised to 6uy thehouse and lot upon receipt of his *oney fro* /anila and .ave her %;00#00 for the occupation of the house: that Capt# 4illal6a died in1978 without havin. paid the consideration for the house and lot:and that after MtheN death of Capt# 4illal6a, his widow, M!espondent4alentaN, refused to vacate the house and lot despite de*ands,destroyed the house thereon and constructed a new one#

(5or failure to file an answer, M!espondent 4alentaN was declared indefault and MpetitionerN was allowed to present her evidence e<-parte#

(n /arch ;, 198&, the court a uo rendered =ud.*ent restorin.to MpetitionerN her ri.ht of ownership and possession of the propertyand orderin. M!espondent 4alentaN to pay MherN %',000#00 asactual da*a.es and %',000#00 as attorneyVs fees# $aid decision6eca*e final and MpetitionerN was placed in possession of thesu6=ect property#

(A petition for relief fro* =ud.*ent was filed 6y M!espondent4alentaN on June ', 198& alle.in. that her failure to file an answer to the co*plaint was caused 6y her confusion as to whether theproperty for*ed part of the estate of her late hus6and, /arcelo

4illal6a: that she referred the *atter to Atty# leno a6anlit, thead*inistrator of the estate, 6ut the latter infor*ed her that theproperty was not included in the inventory of the estate: and thatshe has a *eritorious defense as her late hus6and had alreadypaid the a*ount of %,'0#00 out of the purchase price of %3,'00#00 for the house and lot#

(The petition for relief was denied 6y the court a uo in an rder dated $epte*6er 3, 198& on the .rounds that the failure of M!espondent 4alentaN to file an answer was not due to e<cusa6lene.li.ence and that she does not see* to have a valid and*eritorious defense#

(M!espondent 4alentaN appealed to Mthe CAN, which rendered a)ecision on 5e6ruary 1, 1990 findin. that the failure of

M!espondent 4alentaN to file an answer to the co*plaint was due toe<cusa6le ne.li.ence: that she has a *eritorious defense, and thatthe co*plaint should have 6een filed not a.ainst her 6ut a.ainst thead*inistrator of the estate of deceased /arcelo 4illal6a# Thedispositive portion of said )ecision reads2

WD!5!, the order appealed fro* is here6y !4!$):the =ud.*ent 6y default in Civil Case "o# 8'1', su6=ect *atter of the petition for relief, is $T A$+): the trial court is !)!) tocontinue with the proceedin.s in said case: and M%etitionerN)esa*parados /# $oliva < < < is !)!) to a*end MherNco*plaint 6y su6stitutin. the ad*inistrator of the intestate testate?sic@ of the late /arcelo /# 4illal6a for 4alenta aricua-4illal6aMrespondentN as defendant in said a*ended co*plaint# "opronounce*ent as to costs#

W$ !)!)#V

(Conseuently, an a*ended co*plaint was filed in Civil Case "o#8'1' 6y su6stitutin. the +ntestate state of /arcelo /# 4illal6a,represented 6y its Ad*inistrator, Atty# leno /# a6anlit, for M!espondent 4alentaN, as defendant therein#

(Answerin. the co*plaint, the Ad*inistrator alle.ed that the houseand lot were sold to the late /arcelo 4illal6a 6y /a.daleno $oliva,

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Ipon the facts found 6y the trial and the appellate courts, petitioner did not e<ercise her ri.ht either to see> specific perfor*ance or torescind the ver6al contract of sale until /ay 198, when she filedher co*plaint for recovery of ownership and possession of theproperty# This factual findin. 6rin.s to the fore the uestion of whether 6y 198, she was already 6arred fro* recoverin. theproperty due to laches and prescription#

Action arred 6y aches

+n .eneral, laches is the failure or ne.lect, for an unreasona6le andune<plained len.th of ti*e, to do that which -- 6y the e<ercise of

due dili.ence -- could or should have 6een done earlier#19 +t is thene.li.ence or o*ission to assert a ri.ht within a reasona6le period,warrantin. the presu*ption that the party entitled to assert it haseither a6andoned or declined to assert it#0

Inder this ti*e-honored doctrine, relief has 6een denied to liti.antswho, 6y sleepin. on their ri.hts for an unreasona6le len.th of ti*e-- either 6y ne.li.ence, folly or inattention -- have allowed their clai*s to 6eco*e stale#1 4i.ilanti6us, sed non dor*ienti6us, =urasu6veniunt# The laws aid the vi.ilant, not those who slu*6er ontheir ri.hts#

The followin. are the essential ele*ents of laches2

?1@ Conduct on the part of the defendant that .ave rise to thesituation co*plained of: or the conduct of another which thedefendant clai*s .ave rise to the sa*e:

?@ )elay 6y the co*plainant in assertin. his ri.ht after he has had>nowled.e of the defendantVs conduct and after he has had anopportunity to sue:

?3@ ac> of >nowled.e 6y or notice to the defendant that theco*plainant will assert the ri.ht on which he 6ases his suit: and

?&@ +n=ury or pre=udice to the defendant in the event relief isaccorded to the co*plainant#3

%etitioner co*plied with her o6li.ation to deliver the property in

19;;#& owever, respondentVs hus6and failed to co*ply with hisreciprocal o6li.ation to pay, when the *oney he had 6eene<pectin. fro* /anila never *aterialied#' e also failed to *a>efurther install*ents after /ay 13, 19;;#; As early as 19;;,therefore, petitioner already had the ri.ht to co*pel pay*ent or toas> for rescission, pursuant to Article 11;9 of the Civil Code, whichreads2

(Art# 11;9# Those o6li.ed to deliver or to do so*ethin. incur indelay fro* the ti*e the o6li.ee =udicially or e<tra=udicially de*andsfro* the* the fulfill*ent of their o6li.ation#

(owever, the de*and 6y the creditor shall not 6e necessary inorder that delay *ay e<ist2

< < < < < < < < <

(+n reciprocal o6li.ations, neither party incurs in delay if the other does not co*ply or is not ready to co*ply in a proper *anner withwhat is incu*6ent upon hi*# 5ro* the *o*ent one of the partiesfulfills his o6li.ation, delay 6y the other 6e.ins#( ?+talics supplied@

"onetheless, petitioner failed to sue for collection or rescission#)ue to insufficiency of evidence, the lower courts 6rushed aside her assertions that she had availed herself of e<tra=udicial re*edies tocollect the 6alance or to serve an e<tra=udicial de*and on 4illal6a,prior to her le.al action in 198# /eanwhile, respondent had spenta considera6le su* in renovatin. the house and introducin.i*prove*ents on the pre*ises#7

+n view thereof, the appellate court aptly ruled that petitionerVs clai*was already 6arred 6y laches# +t has 6een consistently held thatlaches does not concern itself with the character of the defendantVstitle, 6ut only with the issue of whether or not the plaintiff -- 6yreason of lon. inaction or ine<cusa6le ne.lect -- should 6e 6arredentirely fro* assertin. the clai*, 6ecause to allow such actionwould 6e ineuita6le and un=ust to the defendant#8

i>ewise, it *ust 6e stressed that unli>e prescription, laches is notconcerned *erely with the fact of delay, 6ut even *ore with the

effect of unreasona6le delay#9 +n 4da# de Ca6rera v# CA,30 wee<plained2

(+n our =urisdiction, it is an enshrined rule that even a re.isteredowner of property *ay 6e 6arred fro* recoverin. possession of property 6y virtue of laches# Inder the and !e.istration Act ?nowthe %roperty !e.istration )ecree@, no title to re.istered land indero.ation to that of the re.istered owner shall 6e acuired 6yprescription or adverse possession# The sa*e is not true withre.ard to laches# As we have stated earlier in /e=ia de ucas vs#a*ponia, while the defendant *ay not 6e considered as havin.acuired title 6y virtue of his and his predecessorVs lon. continuedpossession ?37 years@ the ori.inal ownerVs ri.ht to recover < < < the

possession of the property and the title thereto fro* the defendanthas, 6y the latterVs lon. period of possession and 6y patenteeVsinaction and ne.lect, 6een converted into a stale de*and#(31

The contention of petitioner that her ri.ht to recover isi*prescripti6le 6ecause the property was re.istered under theTorrens syste*3 also fails to convince us# +t was the findin. of thetrial court that the property was not yet covered 6y a free patent onJanuary &, 19;;, when Captain 4illal6a acuired possessionthereof# +ndeed, the evidence shows that as of that date, thedocu*ents relatin. to the property were still in the na*e of %ilar Castrence, fro* who* petitioner purchased the property on April7, 19;;:33 that she applied for a free patent therefor 6etweenJanuary & and April 7, 19;;:3& and that the ori.inal certificate of title over the lot was issued to her under 5ree %atent "o# ?<-1@ 373only on Au.ust 1;, 197&#3'

+t is apparent, then, that petitioner sold the house and lot torespondent on January &, 19;;, 6efore she had even acuired thetitle to convey it# /oreover, she applied for a free patent after shelost, 6y operation of law,3; the title she had 6elatedly acuired fro*Castrence# These circu*stances raise serious uestions over thefor*erVs .ood faith in delayin. the assertion of her ri.hts to theproperty# They 6ar her fro* see>in. relief under the principle that(one who co*es to court *ust co*e with clean hands#(37

Action arred 6y %rescription

/oreover, we find that the !TC and the CA correctly appreciated

the operation of ordinary acuisitive prescription in respondentVsfavor#1Ewphi1 To acuire ownership and other real ri.hts over i**ova6les under Article 113& of the Civil Code, possession *ust6e for 10 years# +t *ust also 6e in .ood faith and with =ust title#38

ood faith consists of the reasona6le 6elief that the person fro*who* the possessor received the thin. was its owner, 6ut could nottrans*it the ownership thereof#39 n the other hand, there is =usttitle when the adverse clai*ant ca*e into possession of theproperty throu.h one of the *odes reco.nied 6y law for theacuisition of ownership or other real ri.hts, 6ut the .rantor was notthe owner or could not trans*it any ri.ht#&0

The !TC and the CA held that the 4illal6asV had continuouslypossessed the property fro* January &, 19;; until /ay ', 198&1

or for a total of 1; years# Capt# 4illal6a ca*e into possessionthrou.h a sale 6y petitioner, who* he 6elieved was the owner,thou.h -- at the ti*e of the sale -- she was not# Clearly, all theele*ents of ordinary acuisitive prescription were present#

%etitioner is thus precluded fro* invo>in. the 30-year prescriptiveperiod for co**encin. real action over i**ova6les# %rescription of the action is without pre=udice to acuisitive prescription, accordin.to Article 11&1 of the Civil Code, which we uote2

(Art# 11&1# !eal actions over i**ova6les prescri6e after thirtyyears#

(This provision is without pre=udice to what is esta6lished for theacuisition of ownership and other real ri.hts 6y prescription#(

?+talics supplied@

$econd +ssue2

In=ust nrich*ent

Dhile petitioner is now 6arred fro* recoverin. the su6=ect property,all is not lost for her# y !espondent 4illal6aVs own ad*ission,& a6alance of %1,'0 of the total purchase price re*ains unpaid#!eason and fairness su..est that petitioner 6e allowed to collect

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this su*# +t is a 6asic rule in law that no one shall un=ustly enrichoneself at the e<pense of another# "i.uno non deue enriuecersetortia*ente condaGo de otro# 5or indeed, to allow respondent to>eep the property without payin. fully for it a*ounts to un=ustenrich*ent on her part#

$ince the o6li.ation consists of the pay*ent of a su* of *oney,and !espondent 4illal6a has incurred delay in satisfyin. thato6li.ation, le.al interest at si< percent ?;P@ per annu*&3 is here6yi*posed on the 6alance of %1,'0, to 6e co*puted startin. /ay ',198 -- when the clai* was *ade =udicially -- until the finality of thisCourtVs =ud.*ent# 5ollowin. our rulin. in astern $hippin. ines,+nc# v# CA,&& the su* so awarded shall li>ewise 6ear interest at the

rate of 1 percent per annu* fro* the ti*e this =ud.*ent 6eco*esfinal and e<ecutory until its satisfaction#

D!5!, the %etition is partly !A"T)# The )ecision of the Court of Appeals is A55+!/), with the /)+5+CAT+" thatrespondent is ordered to pay the 6alance of the purchase price of %1,'0 plus ; percent interest per annu*, fro* /ay ', 198 untilthe finality of this =ud.*ent# Thereafter, interest of 1 percent per year shall then 6e i*posed on that a*ount upon the finality of this)ecision until the pay*ent thereof# "o costs#

POLO S. PANTALEON, Petitioner,vs.AMERICAN EPRESS INTERNATIONAL, INC., Respondent.

The petitioner, lawyer %olo %antaleon, his wife Julialinda, dau.hter Anna !e.ina and son Adrian !o6erto, =oined an escorted tour of Destern urope or.anied 6y Trafal.ar Tours of urope, td#, incto6er of 1991# The tour .roup arrived in A*sterda* in theafternoon of ' cto6er 1991, the second to the last day of thetour# As the .roup had arrived late in the city, they failed to en.a.ein any si.ht-seein.# +nstead, it was a.reed upon that they wouldstart early the ne<t day to see the entire city 6efore endin. the tour#

The followin. day, the last day of the tour, the .roup arrived at theCoster )ia*ond ouse in A*sterda* around 10 *inutes 6efore9200 a#*# The .roup had a.reed that the visit to Coster should end6y 9230 a#*# to allow enou.h ti*e to ta>e in a .uided city tour of A*sterda*# The .roup was ushered into Coster shortly 6efore 9200

a#*#, and listened to a lecture on the art of dia*ond polishin. thatlasted for around ten *inutes#1 Afterwards, the .roup was led tothe storeVs showroo* to allow the* to select ite*s for purchase#/rs# %antaleon had already planned to purchase even 6efore thetour 6e.an a #' >arat dia*ond 6rilliant cut, and she found adia*ond close enou.h in appro<i*ation that she decided to 6uy#/rs# %antaleon also selected for purchase a pendant and a chain,3all of which totaled I#$# Q13,8;#00#

To pay for these purchases, %antaleon presented his A*erican<press credit card to.ether with his passport to the Coster salescler># This occurred at around 921' a#*#, or 1' *inutes 6efore thetour .roup was slated to depart fro* the store# The sales cler> too>the cardVs i*print, and as>ed %antaleon to si.n the char.e slip# Thechar.e purchase was then referred electronically to respondentVs

A*sterda* office at 920 a#*#

Ten *inutes later, the store cler> infor*ed %antaleon that his A*e<Card had not yet 6een approved# is son, who had already6oarded the tour 6us, soon returned to Coster and infor*ed theother *e*6ers of the %antaleon fa*ily that the entire tour .roupwas waitin. for the*# As it was already 92&0 a#*#, and he wasalready worried a6out further inconveniencin. the tour .roup,%antaleon as>ed the store cler> to cancel the sale# The store*ana.er thou.h as>ed plaintiff to wait a few *ore *inutes# After 1'*inutes, the store *ana.er infor*ed %antaleon that respondenthad de*anded 6an> references# %antaleon supplied the na*es of his depositary 6an>s, then instructed his dau.hter to return to the6us and apolo.ie to the tour .roup for the delay#

At around 10200 a#*, or around &' *inutes after %antaleon hadpresented his A*e<Card, and 30 *inutes after the tour .roup wassupposed to have left the store, Coster decided to release the ite*seven without respondentVs approval of the purchase# The spouses%antaleon returned to the 6us# +t is alle.ed that their offers of apolo.y were *et 6y their tour*ates with stony silence#& The tour .roupVs visi6le irritation was a..ravated when the tour .uideannounced that the city tour of A*sterda* was to 6e canceled dueto lac> of re*ainin. ti*e, as they had to catch a 3200 p#*# ferry at

Calais, el.iu* to ondon#' /rs# %antaleon ended up weepin.,while her hus6and had to ta>e a tranuilier to cal* his nerves#

+t later e*er.ed that %antaleonVs purchase was first trans*itted for approval to respondentVs A*sterda* office at 920 a#*#, A*sterda* ti*e, then referred to respondentVs /anila office at 9233a#*, then finally approved at 10219 a#*#, A*sterda* ti*e#; The Approval Code was trans*itted to respondentVs A*sterda* officeat 10238 a#*#, several *inutes after petitioner had already leftCoster, and 78 *inutes fro* the ti*e the purchases wereelectronically trans*itted 6y the =ewelry store to respondentVs A*sterda* office#

After the star-crossed tour had ended, the %antaleon fa*ilyproceeded to the Inited $tates 6efore returnin. to /anila on 1"ove*6er 199# Dhile in the Inited $tates, %antaleon continued touse his A*< card, several ti*es without hassle or delay, 6ut withtwo other incidents si*ilar to the A*sterda* 6rouhaha# n 30cto6er 1991, %antaleon purchased .olf euip*ent a*ountin. toI$ Q1,&7'#00 usin. his A*< card, 6ut he cancelled his credit cardpurchase and 6orrowed *oney instead fro* a friend, after *orethan 30 *inutes had transpired without the purchase havin. 6eenapproved# n 3 "ove*6er 1991, %antaleon used the card topurchase childrenVs shoes worth Q87#00 at a store in oston, and ittoo> 0 *inutes 6efore this transaction was approved 6yrespondent#

n & /arch 199, after co*in. 6ac> to /anila, %antaleon sent aletter7 throu.h counsel to the respondent, de*andin. an apolo.yfor the (inconvenience, hu*iliation and e*6arrass*ent he and hisfa*ily there6y suffered( for respondentVs refusal to provide creditauthoriation for the afore*entioned purchases#8 +n response,respondent sent a letter dated & /arch 199,9 statin. a*on.others that the delay in authoriin. the purchase fro* Coster wasattri6uta6le to the circu*stance that the char.ed purchase of I$Q13,8;#00 (was out of the usual char.e purchase patternesta6lished#(10 $ince respondent refused to accede to %antaleonVsde*and for an apolo.y, the a..rieved cardholder instituted anaction for da*a.es with the !e.ional Trial Court ?!TC@ of /a>atiCity, ranch 1&'#11 %antaleon prayed that he 6e awarded%,000,000#00, as *oral da*a.es: %'00,000#00, as e<e*plaryda*a.es: %100,000#00, as attorneyVs fees: and %'0,000#00 as

liti.ation e<penses#1

n ' Au.ust 199;, the /a>ati City !TC rendered a decision13 infavor of %antaleon, awardin. hi* %'00,000#00 as *oral da*a.es,%300,000#00 as e<e*plary da*a.es, %100,000#00 as attorneyVsfees, and %8',33#01 as e<penses of liti.ation# !espondent filed a"otice of Appeal, while %antaleon *oved for partialreconsideration, prayin. that the trial court award the increaseda*ount of *oral and e<e*plary da*a.es he had prayed for#1& The!TC denied %antaleonVs *otion for partial reconsideration, andthereafter .ave due course to respondentVs "otice of Appeal#1'

n 18 Au.ust 00;, the Court of Appeals rendered a decision1;reversin. the award of da*a.es in favor of %antaleon, holdin. thatrespondent had not 6reached its o6li.ations to petitioner# ence,

this petition#

The >ey uestion is whether respondent, in connection with theafore*entioned transactions, had co**itted a 6reach of itso6li.ations to %antaleon# +n addition, %antaleon su6*its that evenassu*in. that respondent had not 6een in 6reach of its o6li.ations,it still re*ained lia6le for da*a.es under Article 1 of the CivilCode#

The !TC had concluded, 6ased on the testi*onial representationsof %antaleon and respondentVs credit authorier, d.ardo Jauri.ue,that the nor*al approval ti*e for purchases was (a *atter of seconds#( ased on that standard, respondent had 6een in clear delay with respect to the three su6=ect transactions# As it appears,the Court of Appeals conceded that there had 6een delay on the

part of respondent in approvin. the purchases# owever, it *adetwo critical conclusions in favor of respondent# 5irst, the appellatecourt ruled that the delay was not attended 6y 6ad faith, *alice, or .ross ne.li.ence# $econd, it ruled that respondent (had e<erciseddili.ent efforts to effect the approval( of the purchases, which were(not in accordance with the char.e pattern( petitioner hadesta6lished for hi*self, as e<e*plified 6y the fact that at Coster, hewas (*a>in. his very first sin.le char.e purchase of I$Q13,8;,(and (the record of MpetitionerNVs past spendin. with MrespondentN at

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the ti*e does not favora6ly support his a6ility to pay for suchpurchase#(17

n the pre*ise that there was an o6li.ation on the part of respondent (to approve or disapprove with dispatch the char.epurchase,( petitioner ar.ues that the failure to ti*ely approve or disapprove the purchase constituted *ora solvendi on the part of respondent in the perfor*ance of its o6li.ation# 5or its part,respondent characteries the depiction 6y petitioner of its o6li.ationto hi* as (to approve purchases instantaneously or in a *atter of seconds#(

%etitioner correctly cites that under *ora solvendi, the three

reuisites for a findin. of default are that the o6li.ation isde*anda6le and liuidated: the de6tor delays perfor*ance: andthe creditor =udicially or e<tra=udicially reuires the de6torVsperfor*ance#18 %etitioner asserts that the Court of Appeals hadwron.ly applied the principle of *ora accipiendi, which relates todelay on the part of the o6li.ee in acceptin. the perfor*ance of theo6li.ation 6y the o6li.or# The reuisites of *ora accipiendi are2 anoffer of perfor*ance 6y the de6tor who has the reuired capacity:the offer *ust 6e to co*ply with the prestation as it should 6eperfor*ed: and the creditor refuses the perfor*ance without =ustcause#19 The error of the appellate court, ar.ues petitioner, is inrelyin. on the invocation 6y respondent of (=ust cause( for the delay,since while =ust cause is deter*inative of *ora accipiendi, it is notso with the case of *ora solvendi#

De can see the possi6le source of confusion as to which type of *ora to appreciate# enerally, the relationship 6etween a creditcard provider and its card holders is that of creditor-de6tor,0 withthe card co*pany as the creditor e<tendin. loans and credit to thecard holder, who as de6tor is o6li.ed to repay the creditor# Thisrelationship already ta>es e<ception to the .eneral rule that as6etween a 6an> and its depositors, the 6an> is dee*ed as thede6tor while the depositor is considered as the creditor#1%etitioner is as>in. us, not 6aselessly, to a.ain shift perspectivesand a.ain see the credit card co*pany as the de6torOo6li.or,insofar as it has the o6li.ation to the custo*er as creditorOo6li.ee toact pro*ptly on its purchases on credit#

Ilti*ately, petitionerVs perspective appears *ore sensi6le than if

we were to still re.ard respondent as the creditor in the conte<t of this cause of action# +f there was delay on the part of respondent inits nor*al role as creditor to the cardholder, such delay would nothave 6een in the acceptance of the perfor*ance of the de6torVso6li.ation ?i#e#, the repay*ent of the de6t@, 6ut it would 6e delay inthe e<tension of the credit in the first place# $uch delay would notfall under *ora accipiendi, which conte*plates that the o6li.ationof the de6tor, such as the actual purchases on credit, has already6een constituted# erein, the esta6lish*ent of the de6t itself ?purchases on credit of the =ewelry@ had not yet 6een perfected, asit re*ained pendin. the approval or consent of the respondentcredit card co*pany#

$till, in order for us to appreciate that respondent was in *orasolvendi, we will have to first reco.nie that there was indeed an

o6li.ation on the part of respondent to act on petitionerVs purchaseswith (ti*ely dispatch,( or for the purposes of this case, within aperiod si.nificantly less than the one hour it apparently too> 6eforethe purchase at Coster was finally approved#

The findin.s of the trial court, to our *ind, a*ply esta6lished thatthe tardiness on the part of respondent in actin. on petitionerVspurchase at Coster did constitute culpa6le delay on its part inco*plyin. with its o6li.ation to act pro*ptly on its custo*erVspurchase reuest, whether such action 6e favora6le or unfavora6le#De uote the trial court, thus2

As to the first issue, 6oth parties have testified that nor*al approvalti*e for purchases was a *atter of seconds#

%laintiff testified that his personal e<perience with the use of thecard was that e<cept for the three char.e purchases su6=ect of thiscase, approvals of his char.e purchases were always o6tained in a*atter of seconds#

)efendantVs credit authorier d.ardo Jauriue li>ewise testified2

# X Kou also testified that on nor*al occasions, the nor*alapproval ti*e for char.es would 6e 3 to & secondsU

A# X Kes, /aVa*#

oth parties li>ewise presented evidence that the processin. andapproval of plaintiffVs char.e purchase at the Coster )ia*ondouse was way 6eyond the nor*al approval ti*e of a (*atter of seconds(#

%laintiff testified that he presented his A*e<Card to the sales cler>at Coster, at 921' a#*# and 6y the ti*e he had to leave the store at1020' a#*#, no approval had yet 6een received# +n fact, the Credit Authoriation $yste* ?CA$@ record of defendant at %hoeni< A*e<shows that defendantVs A*sterda* office received the reuest toapprove plaintiffVs char.e purchase at 920 a#*#, A*sterda* ti*e

or 0120, %hoeni< ti*e, and that the defendant relayed its approvalto Coster at 10238 a#*#, A*sterda* ti*e, or 238, %hoeni< ti*e, or a total ti*e lapse of one hour and M18N *inutes# And even then, theapproval was conditional as it directed in co*puterese MsicN(%ositive +dentification of Card holder necessary further char.esreuire 6an> infor*ation due to hi.h e<posure# y Jac> /anila#(

The delay in the processin. is apparent to 6e undue as shown fro*the frantic successive ueries of A*e<co A*sterda* which reads2(I$Q13,8;# Card*e*6er 6uyin. =ewels# +) seen# Advise how lon.will this ta>eU( They were sent at 01233, 01237, 012&0, 012&', 012'and 0208, all ti*es %hoeni<# /anila A*e<co could 6e unaware of the need for speed in resolvin. the char.e purchase referred to it,yet it sat on its hand, unconcerned#

< < <

To repeat, the Credit Authoriation $yste* ?CA$@ record on the A*sterda* transaction shows how A*e<co "etherlands viewedthe delay as unusually frustratin.# +n seuence e<pressed in%hoeni< ti*e fro* 0120 when the char.e purchased was referredfor authoriation, defendants own record shows2

012 X the authoriation is referred to /anila A*e<co

0123 X "etherlands .ives infor*ation that the identification of thecard*e*6er has 6een presented and he is 6uyin. =ewelries worthI$ Q13,8;#

01233 X "etherlands as>s (ow lon. will this ta>eU(

0208 X "etherlands is still as>in. (ow lon. will this ta>eU(

The Court is convinced that defendants delay constituteMsN 6reachof its contractual o6li.ation to act on his use of the card a6road(with special handlin.#( ?Citations o*itted@

<<<

"otwithstandin. the popular notion that credit card purchases areapproved (within seconds,( there really is no strict, le.allydeter*inative point of de*arcation on how lon. *ust it ta>e for acredit card co*pany to approve or disapprove a custo*erVspurchase, *uch less one specifically contracted upon 6y the

parties# Ket this is one of those instances when (youVd >now it whenyouVd see it,( and one hour appears to 6e an awfully lon., patentlyunreasona6le len.th of ti*e to approve or disapprove a credit cardpurchase# +t is lon. enou.h ti*e for the custo*er to wal> to a 6an>a >ilo*eter away, withdraw *oney over the counter, and return tothe store#

"ota6ly, petitioner fra*es the o6li.ation of respondent as (toapprove or disapprove( the purchase (in ti*ely dispatch,( and not(to approve the purchase instantaneously or within seconds#(Certainly, had respondent disapproved petitionerVs purchase (withinseconds( or within a ti*ely *anner, this particular action wouldhave never seen the li.ht of day# %etitioner and his fa*ily wouldhave returned to the 6us without delay X internally hu*iliatedperhaps over the re=ection of his card X yet spared the sha*e of

6ein. held accounta6le 6y newly-*ade friends for *a>in. the**iss the chance to tour the city of A*sterda*#

De do not wish do dispute that respondent has the ri.ht, if not theo6li.ation, to verify whether the credit it is e<tendin. upon on aparticular purchase was indeed contracted 6y the cardholder, andthat the cardholder is within his *eans to *a>e such transaction#The culpa6le failure of respondent herein is not the failure to ti*elyapprove petitionerVs purchase, 6ut the *ore ele*ental failure toti*ely act on the sa*e, whether favora6ly or unfavora6ly# ven

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assu*in. that respondentVs credit authoriers did not havesufficient 6asis on hand to *a>e a =ud.*ent, we see no reasonwhy respondent could not have pro*ptly infor*ed petitioner thereason for the delay, and duly advised hi* that resolvin. the sa*ecould ta>e so*e ti*e# +n that way, petitioner would have hadinfor*ed 6asis on whether or not to pursue the transaction atCoster, .iven the attendin. circu*stances# +nstead, petitioner wasleft unco*forta6ly dan.lin. in the chilly autu*n winds in a forei.nland and soon forced to confront the wrath of forei.n fol>#

/oral da*a.es avail in cases of 6reach of contract where thedefendant acted fraudulently or in 6ad faith, and the court shouldfind that under the circu*stances, such da*a.es are due# The

findin.s of the trial court are a*ple in esta6lishin. the 6ad faith andun=ustified ne.lect of respondent, attri6uta6le in particular to the(dilly-dallyin.( of respondentVs /anila credit authorier, d.ardoJauriue#3 Drote the trial court2

Dhile it is true that the Card*e*6ership A.ree*ent, whichdefendant prepared, is silent as to the a*ount of ti*e it should ta>edefendant to .rant authoriation for a char.e purchase, defendantac>nowled.ed that the nor*al ti*e for approval should only 6ethree to four seconds# $pecially so with cards used a6road whichreuires (special handlin.(, *eanin. with priority# therwise, theo6=ect of credit or char.e cards would 6e lost: it would 6e soinconvenient to use that 6uyers and consu*ers would 6e 6etter off carryin. 6undles of currency or travellerVs chec>s, which can 6edelivered and accepted uic>ly# $uch ri.ht was not accorded toplaintiff in the instances co*plained off for reasons >nown only todefendant at that ti*e# This, to the CourtVs *ind, a*ounts to awanton and deli6erate refusal to co*ply with its contractualo6li.ations, or at least a6use of its ri.hts, under the contract#&

< < <

The delay co**itted 6y defendant was clearly attended 6yun=ustified ne.lect and 6ad faith, since it alle.es to have consu*ed*ore than one hour to si*ply .o over plaintiffVs past credit historywith defendant, his pay*ent record and his credit and 6an>references, when all such data are already stored and readilyavaila6le fro* its co*puter# This Court also ta>es note of the factthat there is nothin. in plaintiffVs 6illin. history that would warrant

the i*prudent suspension of action 6y defendant in processin. thepurchase# )efendantVs witness Jauriue ad*its2

# X ut did you discover that he did not have any outstandin.accountU

A# X "othin. in arrears at that ti*e#

# X Kou were well aware of this fact on this very dateU

A# X Kes, sir#

/r# Jauriue further testified that there were no (delinuencies( inplaintiffVs account#'

+t should 6e e*phasied that the reason why petitioner is entitled toda*a.es is not si*ply 6ecause respondent incurred delay, 6ut6ecause the delay, for which culpa6ility lies under Article 1170, ledto the particular in=uries under Article 17 of the Civil Code for which *oral da*a.es are re*unerative#; /oral da*a.es do notavail to soothe the plaints of the si*ply i*patient, so this decisionshould not 6e cause for relief for those who ti*e the len.th of their credit card transactions with a stopwatch# The so*ewhat unusualattendin. circu*stances to the purchase at Coster X that there wasa deadline for the co*pletion of that purchase 6y petitioner 6eforeany delay would redound to the in=ury of his several travelin.co*panions X .ave rise to the *oral shoc>, *ental an.uish,serious an<iety, wounded feelin.s and social hu*iliation sustained6y the petitioner, as concluded 6y the !TC#7 Those circu*stancesare fairly unusual, and should not .ive rise to a .eneral entitle*ent

for da*a.es under a *ore *undane set of facts#

De sustain the a*ount of *oral da*a.es awarded to petitioner 6ythe !TC# There is no hard-and-fast rule in deter*inin. what would6e a fair and reasona6le a*ount of *oral da*a.es, since eachcase *ust 6e .overned 6y its own peculiar facts, however, it *ust6e co**ensurate to the loss or in=ury suffered#8 %etitionerVsori.inal prayer for %',000,000#00 for *oral da*a.es is e<cessiveunder the circu*stances, and the a*ount awarded 6y the trial courtof %'00,000#00 in *oral da*a.es *ore see*ly#1avvphi1

i>ewise, we dee* e<e*plary da*a.es availa6le under thecircu*stances, and the a*ount of %300,000#00 appropriate# Thereis si*ilarly no cause thou.h to distur6 the deter*ined award of %100,000#00 as attorneyVs fees, and %8',33#01 as e<penses of liti.ation#

D!5!, the petition is !A"T)# The assailed )ecision of the Court of Appeals is !4!$) and $T A$+)# The )ecisionof the !e.ional Trial Court of /a>ati, ranch 1&' in Civil Case "o#9-1;;' is here6y !+"$TAT)# Costs a.ainst respondent#

/ PLUS ASIA DEVELOPMENT CORPORATION, Petitioner,

vs.UTILIT! ASSURANCE CORPORATION, Respondent.

efore the Court is a petition for review on certiorari under !ule &'of the 1997 !ules of Civil %rocedure, as a*ended, assailin. the)ecision1 dated January 7,011 and !esolution dated)ece*6er 8, 011 of the Court of Appeals ?CA@ in CA-#!# $% "o#11808#develop*entThe 5acts

n )ece*6er &, 007, petitioner J %lus Asia )evelop*entCorporation represented 6y its Chair*an, Joo an ee, and /artin# /a6unay, doin. 6usiness under the na*e and style of $even$hades of lue Tradin. and $ervices, entered into a Construction A.ree*ent3 where6y the latter undertoo> to 6uild the for*ers 7-roo* condo*iniu*Ohotel ?Condotel uildin. '@ located at the5airways R luewaters olf R !esort in oracay +sland, /alay, A>lan# The pro=ect, costin. %&,000,000#00, was to 6e co*pletedwithin one year or 3;' days rec>oned fro* the first calendar dayafter si.nin. of the "otice of Award and "otice to %roceed andreceipt of down pay*ent ?0P of contract price@# The%8,&00,000#00 down pay*ent was fully paid on January 1&, 008#&%ay*ent of the 6alance of the contract price will 6e 6ased on actualwor> finished within 1' days fro* receipt of the *onthly pro.ress6illin.s# %er the a.reed wor> schedule, the co*pletion date of thepro=ect was )ece*6er 008#' /a6uhay also su6*itted thereuired %erfor*ance ond; issued 6y respondent Itility Assurance Corporation ?ITA$$C@ in the a*ount euivalent to

0P down pay*ent or %8#& *illion#

/a6unay co**enced wor> at the pro=ect site on January 7, 008#%etitioner paid up to the 7th *onthly pro.ress 6illin. sent 6y/a6unay# As of $epte*6er 1;, 008, petitioner had paid the totala*ount of %1',979,&7#03 inclusive of the 0P down pay*ent#owever, as of said date, /a6unay had acco*plished only 7#'Pof the pro=ect#7

+n the Joint Construction valuation !esult and $tatus !eport8si.ned 6y /a6unay assisted 6y Arch# lwin lavario, and Joo anee assisted 6y !oy 4# /ovido, the followin. findin.s wereaccepted as true, accurate and correct2

+++ $TATI$ 5 %!JCT A$ 5 1& "4/! 008

1@ After conductin. a =oint inspection and evaluation of the pro=ectto deter*ine the actual percenta.e of acco*plish*ent, thecontractin. parties, assisted 6y their respective technical .roups,$$ assisted 6y Arch# lwin lavario and J%I$ assisted 6yn.rs# Joey !o=as and $hiela otardo, concluded and a.reed thatas of 1& "ove*6er 008, the pro=ect is only Thirty ne point Thirty"ine %ercent ?31#39P@ co*plete#

@ 5urther*ore, the value of construction *aterials allocated for theco*pletion of the pro=ect and currently on site has 6een deter*inedand a.reed to 6e " /++" 5!TK "+" TI$A")T! I")!) $+BTK 5I! %$$ A") 5!TK 5+4C"TA4$ ?%1,0&9,3;&#&'@

3@ The additional acco*plish*ent of $$, reflected in its reconciledand consolidated 8th and 9th 6illin.s, is Three point i.hty 5ive%ercent ?3#8'P@ with a .ross value of %1,';3,''3#3& a*ountcredita6le to $$ after deductin. the withholdin. ta< is%1,'38,&&#8&

&@ The unrecouped a*ount of the down pay*ent is %,379,&&1#'3after deductin. the cost of *aterials on site and the net 6illa6lea*ount reflected in the reconciled and consolidated 8th and 9th6illin.s# The unco*pleted portion of the pro=ect is ;8#;1P with an

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esti*ated value per construction a.ree*ent si.ned is%7,880,&19#'#9 ?*phasis supplied#@

n "ove*6er 19, 008, petitioner ter*inated the contract and sentde*and letters to /a6unay and respondent surety# As its de*andswent unheeded, petitioner filed a !euest for Ar6itration10 6eforethe Construction +ndustry Ar6itration Co**ission ?C+AC@# %etitioner prayed that /a6unay and respondent 6e ordered to pay the su*sof %8,980,'7'#89 as liuidated da*a.es and %,379,&&1#'3correspondin. to the unrecouped down pay*ent or overpay*entpetitioner *ade to /a6unay#11

+n his Answer,1 /a6unay clai*ed that the delay was caused 6y

retrofittin. and other revision wor>s ordered 6y Joo an ee# easserted that he actually had until April 30, 009 to finish the pro=ectsince the 3;' days period of co*pletion started only on /ay ,008 after clearin. the retrofitted old structure# ence, theter*ination of the contract 6y petitioner was pre*ature and thefilin. of the co*plaint a.ainst hi* was 6aseless, *alicious and in6ad faith#

!espondent, on the other hand, filed a *otion to dis*iss on the.round that petitioner has no cause of action and the co*plaintstates no cause of action a.ainst it# The C+AC denied the *otion todis*iss# !espondentVs *otion for reconsideration was li>ewisedenied#13

+n its Answer < A6undante Ad Cautela* Dith Co*pulsoryCounterclai*s and Cross-clai*s,1& respondent ar.ued that theperfor*ance 6ond *erely .uaranteed the 0P down pay*ent andnot the entire o6li.ation of /a6unay under the Construction A.ree*ent# $ince the value of the pro=ectVs acco*plish*entalready e<ceeded the said a*ount, respondentVs o6li.ation under the perfor*ance 6ond had 6een fully e<tin.uished# As to the clai*for alle.ed overpay*ent to /a6unay, respondent contended that itshould not 6e credited a.ainst the 0P down pay*ent which wasalready e<hausted and such application 6y petitioner is tanta*ountto revivin. an o6li.ation that had 6een le.ally e<tin.uished 6ypay*ent# !espondent also set up a cross-clai* a.ainst /a6unaywho e<ecuted in its favor an +nde*nity A.ree*ent where6y/a6unay undertoo> to inde*nify respondent for whatever a*ountsit *ay 6e ad=ud.ed lia6le to pay petitioner under the surety 6ond#

oth petitioner and respondent su6*itted their respectivedocu*entary and testi*onial evidence# /a6unay failed to appear inthe scheduled hearin.s and to present his evidence despite duenotice to his counsel of record# The C+AC thus declared that/a6unay is dee*ed to have waived his ri.ht to presentevidence#1'

n 5e6ruary , 010, the C+AC rendered its )ecision1; and *adethe followin. award2

Accordin.ly, in view of our fore.oin. discussions and dispositions,the Tri6unal here6y ad=ud.es, orders and directs2

1# !espondents /a6unay and Itassco to =ointly and severally pay

clai*ant the followin.2

a@ %&,&;9,9;9#90, as liuidated da*a.es, plus le.al interestthereon at the rate of ;P per annu* co*puted fro* the date of thisdecision up to the ti*e this decision 6eco*es final, and 1P per annu* co*puted fro* the date this decision 6eco*es final untilfully paid, and

6@ %,379,&&1#'3 as unrecouped down pay*ent plus interestthereon at the rate of ;P per annu* co*puted fro* the date of thisdecision up to the ti*e this decision 6eco*es final, and 1P per annu* co*puted fro* the date this decision 6eco*es final untilfully paid#

+t 6ein. understood that respondent ItasscoVs lia6ility shall in no

case e<ceed %8#& *illion#

# !espondent /a6unay to pay to clai*ant the a*ount of %98,&3'#89, which is respondent /a6unayVs share in the ar6itrationcost clai*ant had advanced, with le.al interest thereon fro*January 8, 010 until fully paid#

3# !espondent /a6unay to inde*nify respondent Itassco of thea*ounts respondent Itassco will have paid to clai*ant under thisdecision, plus interest thereon at the rate of 1P per annu*

co*puted fro* the date he is notified of such pay*ent *ade 6yrespondent Itassco to clai*ant until fully paid, and to pay Itassco%100,000#00 as attorneyVs fees#

$ !)!)#17

)issatisfied, respondent filed in the CA a petition for review under !ule &3 of the 1997 !ules of Civil %rocedure, as a*ended#

+n the assailed decision, the CA a.reed with the C+AC that thespecific condition in the %erfor*ance ond did not clearly state theli*itation of the suretyVs lia6ility# %ursuant to Article 137718 of theCivil Code, the CA said that the provision should 6e construed in

favor of petitioner considerin. that the o6scurely phrased provisionwas drawn up 6y respondent and /a6unay# 5urther, the appellatecourt stated that respondent could not possi6ly .uarantee the downpay*ent 6ecause it is not /a6unay who owed the down pay*entto petitioner 6ut the other way around# Conseuently, theco*pletion 6y /a6unay of 31#39P of the construction would notlead to the e<tin.uish*ent of respondentVs lia6ility# The %8#& *illionwas a li*it on the a*ount of respondentVs lia6ility and not ali*itation as to the o6li.ation or underta>in. it .uaranteed#

owever, the CA reversed the C+ACVs rulin. that /a6unay hadincurred delay which entitled petitioner to the stipulated liuidatedda*a.es and unrecouped down pay*ent# Citin. AerospaceChe*ical +ndustries, +nc# v# Court of Appeals,19 the appellate courtsaid that not all reuisites in order to consider the o6li.or or de6tor in default were present in this case# +t held that it is only fro*)ece*6er &, 008 ?co*pletion date@ that we should rec>ondefault 6ecause the Construction A.ree*ent provided only for delay in the co*pletion of the pro=ect and not delay on a *onthly6asis usin. the wor> schedule approved 6y petitioner as thereference point# ence, petitionerVs ter*ination of the contract waspre*ature since the delay in this case was *erely speculative: theo6li.ation was not yet de*anda6le#

The dispositive portion of the CA )ecision reads2

D!5!, pre*ises considered, the instant petition for reviewis !A"T)# The assailed )ecision dated 13 January 010rendered 6y the C+AC Ar6itral Tri6unal in C+AC Case "o# 03-009

is here6y !4!$) and $T A$+)# Accordin.ly, the Drit of <ecution dated & "ove*6er 010 issued 6y the sa*e tri6unal ishere6y A""I) and $T A$+)#

$ !)!)#0

%etitioner *oved for reconsideration of the CA decision whilerespondent filed a *otion for partial reconsideration# oth *otionswere denied#

The +ssues

efore this Court petitioner see>s to reverse the CA insofar as itdenied petitionerVs clai*s under the %erfor*ance ond and toreinstate in its entirety the 5e6ruary , 010 C+AC )ecision#

$pecifically, petitioner alle.ed that X

A# T CI!T 5 A%%A$ $!+I$K !!) +" "T)+" TAT T AT!"AT+4 )+$%IT !$IT+" ACT A") T $%C+A !I$ " AT!"AT+4 )+$%IT!$IT+" A4 $T!+%%) T CI!T 5 A%%A$ 5JI!+$)+CT+" T !4+D A!+T!A ADA!)$#

# T CI!T 5 A%%A$ $!+I$K !!) +"!4!$+" T A!+T!A ADA!) " A" +$$I TAT DA$"T !A+$) +" T A"$D!# "T +)"T+5+) +" TT!/$ 5 !5!"C, "T A$$+") A$ A"!!!, A")"T A!I) +" A"K 5 T %A)+"$ 5+) 5! TCI!T#

C# T CI!T 5 A%%A$ $!+I$K !!) +" !K+"" T CA$ 5 A!$%AC C/+CA +")I$T!+$, +"C#v# CI!T 5 A%%A$, 31' $C!A 9&, D+C A$ "T+"T ) D+T C"$T!ICT+" A!/"T$#1

ur !ulin.

n the procedural issues raised, we find no *erit in petitionerVscontention that with the institutionaliation of alternative disputeresolution under !epu6lic Act ?!#A#@ "o# 98', otherwise >nown

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as the Alternative )ispute !esolution Act of 00&, the CA wasdivested of =urisdiction to review the decisions or awards of theC+AC# %etitioner erroneously relied on the provision in said lawallowin. any party to a do*estic ar6itration to file in the !e.ionalTrial Court ?!TC@ a petition either to confir*, correct or vacate ado*estic ar6itral award#

De hold that !#A# "o# 98' did not confer on re.ional trial courts =urisdiction to review awards or decisions of the C+AC inconstruction disputes# n the contrary, $ection &0 thereof e<presslydeclares that confir*ation 6y the !TC is not reuired, thus2

$C# &0# Confir*ation of Award# X The confir*ation of a do*estic

ar6itral award shall 6e .overned 6y $ection 3 of !#A# 87;#

A do*estic ar6itral award when confir*ed shall 6e enforced in thesa*e *anner as final and e<ecutory decisions of the !e.ional TrialCourt#

The confir*ation of a do*estic award shall 6e *ade 6y there.ional trial court in accordance with the !ules of %rocedure to 6epro*ul.ated 6y the $upre*e Court#

A C+AC ar6itral award need not 6e confir*ed 6y the re.ional trialcourt to 6e e<ecutory as provided under ## "o# 1008# ?*phasissupplied#@

<ecutive rder ?@ "o# 1008 vests upon the C+AC ori.inal ande<clusive =urisdiction over disputes arisin. fro*, or connected with,contracts entered into 6y parties involved in construction in the%hilippines, whether the dispute arises 6efore or after theco*pletion of the contract, or after the a6andon*ent or 6reachthereof# y e<press provision of $ection 19 thereof, the ar6itralaward of the C+AC is final and unappeala6le, e<cept on uestionsof law, which are appeala6le to the $upre*e Court# Dith thea*end*ents introduced 6y !#A# "o# 790 and pro*ul.ation of the1997 !ules of Civil %rocedure, as a*ended, the C+AC was includedin the enu*eration of uasi=udicial a.encies whose decisions or awards *ay 6e appealed to the CA in a petition for review under !ule &3# $uch review of the C+AC award *ay involve either uestions of fact, of law, or of fact and law#3

%etitioner *isread the provisions of A#/# "o# 07-11-08-$C ?$pecial A)! !ules@ pro*ul.ated 6y this Court and which too> effect oncto6er 30, 009# $ince !#A# "o# 98' e<plicitly e<cluded C+ACawards fro* do*estic ar6itration awards that need to 6e confir*edto 6e e<ecutory, said awards are therefore not covered 6y !ule 11of the $pecial A)! !ules,& as they continue to 6e .overned 6y "o# 1008, as a*ended and the rules of procedure of the C+AC#The C+AC !evised !ules of %rocedure overnin. Construction Ar6itration' provide for the *anner and *ode of appeal fro*C+AC decisions or awards in $ection 18 thereof, which reads2

$CT+" 18# %etition for review# X A petition for review fro* afinal award *ay 6e ta>en 6y any of the parties within fifteen ?1'@days fro* receipt thereof in accordance with the provisions of !ule&3 of the !ules of Court#

As to the alle.ed error co**itted 6y the CA in decidin. the caseupon an issue not raised or liti.ated 6efore the C+AC, this assertionhas no 6asis# Dhether or not /a6unay had incurred delay in theperfor*ance of his o6li.ations under the Construction A.ree*entwas the very first issue stipulated in the Ter*s of !eference;?T!@, which is distinct fro* the issue of the e<tent of respondentVslia6ility under the %erfor*ance ond#

+ndeed, resolution of the issue of delay was crucial upon whichdepends petitionerVs ri.ht to the liuidated da*a.es pursuant to theConstruction A.ree*ent# Contrary to the C+ACVs findin.s, the CAopined that delay should 6e rec>oned only after the lapse of theone-year contract period, and conseuently /a6unayVs lia6ility for liuidated da*a.es arises only upon the happenin. of such

condition#

De reverse the CA#

)efault or *ora on the part of the de6tor is the delay in thefulfill*ent of the prestation 6y reason of a cause i*puta6le to thefor*er# +t is the non-fulfill*ent of an o6li.ation with respect toti*e#7

Article 11;9 of the Civil Code provides2

A!T# 11;9# Those o6li.ed to deliver or to do so*ethin. incur indelay fro* the ti*e the o6li.ee =udicially or e<tra=udicially de*andsfro* the* the fulfill*ent of their o6li.ation#

< < < <

+t is a .eneral rule that one who contracts to co*plete certain wor>within a certain ti*e is lia6le for the da*a.e for not co*pletin. itwithin such ti*e, unless the delay is e<cused or waived#8

The Construction A.ree*ent provides in Article 10 thereof thefollowin. conditions as to co*pletion ti*e for the pro=ect

1# The C"T!ACT! shall co*plete the wor>s called for under this A.ree*ent within " ?1@ KA! or 3;' )ays rec>oned fro*the 1st calendar day after si.nin. of the "otice of Award and "oticeto %roceed and receipt of down pay*ent#

# +n this re.ard the C"T!ACT! shall su6*it a detailed wor>schedule for approval 6y D"! within $even ?7@ days after si.nin. of this A.ree*ent and full pay*ent of 0P of the a.reedcontract price# $aid detailed wor> schedule shall follow the .eneralschedule of activities and shall serve as 6asis for the evaluation of the pro.ress of wor> 6y C"T!ACT!#9

+n this =urisdiction, the followin. reuisites *ust 6e present in order that the de6tor *ay 6e in default2 ?1@ that the o6li.ation 6ede*anda6le and already liuidated: ?@ that the de6tor delaysperfor*ance: and ?3@ that the creditor reuires the perfor*ance =udicially or e<tra=udicially#30

+n holdin. that /a6unay has not at all incurred delay, the CApointed out that the o6li.ation to perfor* or co*plete the pro=ectwas not yet de*anda6le as of "ove*6er 19, 008 when petitioner ter*inated the contract, 6ecause the a.reed co*pletion date wasstill *ore than one *onth away ?)ece*6er &, 008@# $ince theparties conte*plated delay in the co*pletion of the entire pro=ect,the CA concluded that the failure of the contractor to catch up withschedule of wor> activities did not constitute delay .ivin. rise to thecontractorVs lia6ility for da*a.es#

De cannot sustain the appellate courtVs interpretation as it isinconsistent with the ter*s of the Construction A.ree*ent# Article137& of the Civil Code reuires that the various stipulations of acontract shall 6e interpreted to.ether, attri6utin. to the dou6tfulones that sense which *ay result fro* all of the* ta>en =ointly#ere, the wor> schedule approved 6y petitioner was intended, notonly to serve as its 6asis for the pay*ent of *onthly pro.ress6illin.s, 6ut also for evaluation of the pro.ress of wor> 6y thecontractor# Article 13#01 ?.@ ?iii@ of the Construction A.ree*entprovides that the contractor shall 6e dee*ed in default if, a*on.others, it had delayed without =ustifia6le cause the co*pletion of thepro=ect (6y *ore than thirty ?30@ calendar days 6ased on officialwor> schedule duly approved 6y the D"!#(31

!ecords showed that as early as April 008, or within four *onths

after /a6unay co**enced wor> activities, the pro=ect was already6ehind schedule for reasons not attri6uta6le to petitioner# +n thesucceedin. *onths, /a6unay was still una6le to catch up with hisacco*plish*ent even as petitioner constantly advised hi* of thedelays, as can 6e .leaned fro* the followin. notices of delay sent6y petitionerVs en.ineer and construction *ana.er, n.r# $heila "#otardo2

April 30, 008

$even $hades of lueoracay +sland/alay, A>lan

1Ewphi1

Attention2 /r# /artin /a6unayeneral /ana.er Thru 2 n.r# !eynaldo apasin%ro=ect 2 4illa eatri$u6=ect 2 "otice of )elay)ear /r# /a6unay2

This is to for*alie our discussion with your n.ineers durin. our *eetin. last April 3, 008 re.ardin. the delay in thei*ple*entation of *a=or activities 6ased on your su6*itted

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delays in e<ecutin. the scheduled wor> activities and repeatedfailure to provide sufficient *anpower to e<pedite constructionwor>s# The events of default and re*edies of the wner are setforth in Article 13, which reads2

A!T+C 13 X )5AIT 5 C"T!ACT!2

13#01 Any of the followin. shall constitute an vent of )efault onthe part of the C"T!ACT!#

< < < <

.# +n case the C"T!ACT! has done any of the followin.2

?i#@ has a6andoned the %ro=ect

?ii#@ without reasona6le cause, has failed to co**ence theconstruction or has suspended the pro.ress of the %ro=ect for twenty-ei.ht days

?iii#@ without =ustifia6le cause, has delayed the co*pletion of the%ro=ect 6y *ore than thirty ?30@ calendar days 6ased on officialwor> schedule duly approved 6y the D"!

?iv#@ despite previous written warnin. 6y the D"!, is note<ecutin. the construction wor>s in accordance with the A.ree*entor is persistently or fla.rantly ne.lectin. to carry out its o6li.ationsunder the A.ree*ent#

?v#@ has, to the detri*ent of .ood wor>*anship or in defiance of thewnerVs instructions to the contrary, su6let any part of the A.ree*ent#

13#0 +f the C"T!ACT! has co**itted any of the a6overeasons cited in +te* 13#01, the D"! *ay after .ivin. fourteen?1&@ calendar days notice in writin. to the C"T!ACT!, enter upon the site and e<pel the C"T!ACT! therefro* withoutvoidin. this A.ree*ent, or releasin. the C"T!ACT! fro* anyof its o6li.ations, and lia6ilities under this A.ree*ent# Also withoutdi*inishin. or affectin. the ri.hts and powers conferred on theD"! 6y this A.ree*ent and the D"! *ay hi*self co*pletethe wor> or *ay e*ploy any other contractor to co*plete the wor>#

+f the D"! shall enter and e<pel the C"T!ACT! under thisclause, the D"! shall 6e entitled to confiscate the perfor*ance6ond of the C"T!ACT! to co*pensate for all >inds of da*a.es the D"! *ay suffer# All e<penses incurred to finishthe %ro=ect shall 6e char.ed to the C"T!ACT! andOor his 6ond#5urther, the D"! shall not 6e lia6le to pay the C"T!ACT!until the cost of e<ecution, da*a.es for the delay in the co*pletion,if any, and all: other e<penses incurred 6y the D"! have 6eenascertained which a*ount shall 6e deducted fro* any *oney dueto the C"T!ACT! on account of this A.ree*ent# TheC"T!ACT! will not 6e co*pensated for any loss of profit, lossof .oodwill, loss of use of any euip*ent or property, loss of 6usiness opportunity, additional financin. cost or overhead or opportunity losses related to the unacco*plished portions of thewor>#&0 ?*phasis supplied#@

As already de*onstrated, the contractorVs default in this casepertains to his failure to su6stantially perfor* the wor> on accountof tre*endous delays in e<ecutin. the scheduled wor> activities#Dhere a party to a 6uildin. construction contract fails to co*plywith the duty i*posed 6y the ter*s of the contract, a 6reach resultsfor which an action *ay 6e *aintained to recover the da*a.essustained there6y, and of course, a 6reach occurs where thecontractor ine<cusa6ly fails to perfor* su6stantially in accordancewith the ter*s of the contract#&1

The plain and una*6i.uous ter*s of the Construction A.ree*entauthorie petitioner to confiscate the %erfor*ance ond to answer for all >inds of da*a.es it *ay suffer as a result of the contractorVsfailure to co*plete the 6uildin.# avin. elected to ter*inate the

contract and e<pel the contractor fro* the pro=ect site under Article13 of the said A.ree*ent, petitioner is clearly entitled to theproceeds of the 6ond as inde*nification for da*a.es it sustaineddue to the 6reach co**itted 6y /a6unay# $uch stipulation allowin.the confiscation of the contractorVs perfor*ance 6ond parta>es of the nature of a penalty clause# A penalty clause, e<presslyreco.nied 6y law, is an accessory underta>in. to assu*e .reater lia6ility on the part of the o6li.or in case of 6reach of an o6li.ation#+t functions to stren.then the coercive force of o6li.ation and toprovide, in effect, for what could 6e the liuidated da*a.es

resultin. fro* such a 6reach# The o6li.or would then 6e 6ound topay the stipulated inde*nity without the necessity of proof on thee<istence and on the *easure of da*a.es caused 6y the 6reach# +tis well-settled that so lon. as such stipulation does not contravenelaw, *orals, or pu6lic order, it is strictly 6indin. upon the o6li.or#&

!espondent, however, insists that it is not lia6le for the 6reachco**itted 6y /a6unay 6ecause 6y the ter*s of the surety 6ond itissued, its lia6ility is li*ited to the perfor*ance 6y said contractor tothe e<tent euivalent to 0P of the down pay*ent# +t stresses thatwith the 3#38P co*pletion of the pro=ect 6y /a6unay, its lia6ilitywas e<tin.uished 6ecause the value of such acco*plish*entalready e<ceeded the su* euivalent to 0P down pay*ent ?%8#&

*illion@#

The appellate court correctly re=ected this theory of respondentwhen it ruled that the %erfor*ance ond .uaranteed the full andfaithful co*pliance of /a6unayVs o6li.ations under the Construction A.ree*ent, and that nowhere in law or =urisprudence does it statethat the o6li.ation or underta>in. 6y a surety *ay 6e apportioned#

The pertinent portions of the %erfor*ance ond provide2

The conditions of this o6li.ation are as follows2

Dhereas the J%I$ A$+A, reuires the principal $4" $A)$5 I C"$T!ICT+" A") )4%/"T, +"C# to post a6ond of the a6ovestated su* to .uarantee 0P down pay*ent for the construction of uildin. ' ?4illa eatri@ 7-!oo* Condotel,The od.in.s inside 5airways and luewater, oracay +sland,/alay, A>lan#

Dhereas, said contract reuired said %rincipal to .ive a .ood andsufficient 6ond in the a6ove-stated su* to secure the full andfaithful perfor*ance on his part of said contract#

+t is a special provision of this underta>in. that the lia6ility of thesurety under this 6ond shall in no case e<ceed the su* of %8,&00,000#00 %hilippine Currency#

"ow, Therefore, if the %rincipal shall well and truly perfor* andfulfill all the underta>in.s, covenants, ter*s, conditions and

a.ree*ents stipulated in said contract, then this o6li.ation shall 6enull and void: otherwise to re*ain in full force and effect#&3?*phasis supplied#@

Dhile the a6ove condition or specific .uarantee is unclear, the restof the recitals in the 6ond uneuivocally declare that it secures thefull and faithful perfor*ance of /a6unayVs o6li.ations under theConstruction A.ree*ent with petitioner# y its nature, aperfor*ance 6ond .uarantees that the contractor will perfor* thecontract, and usually provides that if the contractor defaults andfails to co*plete the contract, the surety can itself co*plete thecontract or pay da*a.es up to the li*it of the 6ond#&& /oreover,the rule is that if the lan.ua.e of the 6ond is a*6i.uous or uncertain, it will 6e construed *ost stron.ly a.ainst a co*pensatedsurety and in favor of the o6li.ees or 6eneficiaries under the 6ond,

in this case petitioner as the %ro=ect wner, for whose 6enefit it wasostensi6ly e<ecuted#&'

The i*position of interest on the clai*s of petitioner is li>ewise inorder# As we held in Co**onwealth +nsurance Corporation v# Courtof Appeals&;

%etitioner ar.ues that it should not 6e *ade to pay interest 6ecauseits issuance of the surety 6onds was *ade on the condition that itslia6ility shall in no case e<ceed the a*ount of the said 6onds#

De are not persuaded# %etitionerVs ar.u*ent is *isplaced#

Jurisprudence is clear on this *atter# As early as Ta.awa vs# Aldanese and Inion urantee Co# and reiterated in %laridel $urety

R +nsurance Co#, +nc# vs# %## alan. /achinery Co#, +nc#, and*ore recently, in !epu6lic vs# Court of Appeals and ! R $uretyand +nsurance Co*pany, +nc#, we have sustained the principle thatif a surety upon de*and fails to pay, he can 6e held lia6le for interest, even if in thus payin., its lia6ility 6eco*es *ore than theprincipal o6li.ation# The increased lia6ility is not 6ecause of thecontract 6ut 6ecause of the default and the necessity of =udicialcollection#

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%etitionerVs lia6ility under the suretyship contract is different fro* itslia6ility under the law#1Ewphi1 There is no uestion that as a surety,petitioner should not 6e *ade to pay *ore than its assu*edo6li.ation under the surety 6onds# owever, it is clear fro* thea6ove-cited =urisprudence that petitionerVs lia6ility for the pay*entof interest is not 6y reason of the suretyship a.ree*ent itself 6ut6ecause of the delay in the pay*ent of its o6li.ation under the saida.ree*ent#&7 ?*phasis supplied: citations o*itted#@

D!5!, the petition for review on certiorari is !A"T)#The )ecision dated January 7, 011 and !esolution dated)ece*6er 8, 011 of the Court of Appeals in CA-#!# $% "o#11808 are here6y !4!$) and $T A$+)#

The Award *ade in the )ecision dated 5e6ruary , 010 of theConstruction +ndustry Ar6itration Co**ission +s here6y!+"$TAT) with the followin. /)+5+CAT+"$2

(Accordin.ly, in view of our fore.oin. discussions and dispositions,the Tri6unal here6y ad=ud.es, orders and directs2

1@ !espondent Itassco to pay to petitioner J %lus Asia)evelop*ent Corporation the full a*ount of the %erfor*ance ond,%8,&00,000#00, pursuant to Art# 13 of the Construction A.ree*entdated )ece*6er &, 007, with interest at the rate of ;P per annu* co*puted fro* the date of the filin. of the co*plaint untilthe finality of this decision, and 1P per annu* co*puted fro* thedate this decision 6eco*es final until fully paid: and

@ !espondent /a6unay to inde*nify respondent Itassco of thea*ounts respondent Itassco will have paid to clai*ant under thisdecision, plus interest thereon at the rate of 1P per annu*co*puted fro* the date he is notified of such pay*ent *ade 6yrespondent Itassco to clai*ant until fully paid, and to pay Itassco%100,000#00 as attorneys fees#

DEVELOPMENT AN0 OF T-E P-ILIPPINES, Petitioner,vs.GUARI1A AGRICULTURAL AND REALT! DEVELOPMENTCORPORATION, Respondent.

The foreclosure of a *ort.a.e prior to the *ort.a.ors default on

the principal o6li.ation is pre*ature, and should 6e undone for 6ein. void and ineffectual# The *ort.a.ee who has 6een*eanwhile .iven possession of the *ort.a.ed property 6y virtue of a writ of possession issued to it as the purchaser at the foreclosuresale *ay 6e reuired to restore the possession of the property tothe *ort.a.or and to pay reasona6le rent for the use of theproperty durin. the intervenin. period#

The Case

+n this appeal, )evelop*ent an> of the %hilippines ?)%@ see>sthe reversal of the adverse decision pro*ul.ated on /arch ;,003 in C#A#-#!# C4 "o# '9&91,1 where6y the Court of Appeals?CA@ upheld the =ud.*ent rendered on January ;, 1998 6y the!e.ional Trial Court, ranch ', in +loilo City ?!TC@ annullin. the

e<tra-=udicial foreclosure of the real estate and chattel *ort.a.es atthe instance of )% 6ecause the de6tor-*ort.a.or, uariGa A.ricultural and !ealty )evelop*ent Corporation ?uariGaCorporation@, had not yet defaulted on its o6li.ations in favor of )%#

Antecedents

+n July 197;, uariGa Corporation applied for a loan fro* )% tofinance the develop*ent of its resort co*ple< situated in Trapiche,ton, +loilo# The loan, in the a*ount of %3,387,000#00, wasapproved on Au.ust ', 197;#3 uariGa Corporation e<ecuted apro*issory note that would 6e due on "ove*6er 3, 1988#& ncto6er ', 197;, uariGa Corporation e<ecuted a real estate*ort.a.e over several real properties in favor of )% as security

for the repay*ent of the loan# n /ay 17, 1977, uariGaCorporation e<ecuted a chattel *ort.a.e over the personalproperties e<istin. at the resort co*ple< and those yet to 6eacuired out of the proceeds of the loan, also to secure theperfor*ance of the o6li.ation#' %rior to the release of the loan,)% reuired uariGa Corporation to put up a cash euity of %1,&70,9'1#00 for the construction of the 6uildin.s and other i*prove*ents on the resort co*ple<#

The loan was released in several instal*ents, and uariGaCorporation used the proceeds to defray the cost of additionali*prove*ents in the resort co*ple<# +n all, the a*ount releasedtotalled %3,003,;17#&9, fro* which )% withheld %1&8,10#98 asinterest#;

uariGa Corporation de*anded the release of the 6alance of theloan, 6ut )% refused# +nstead, )% directly paid so*e suppliers of uariGa Corporation over the latters o6=ection# )% found uponinspection of the resort pro=ect, its develop*ents and i*prove*entsthat uariGa Corporation had not co*pleted the constructionwor>s#7 +n a letter dated 5e6ruary 7, 1978,8 and a tele.ra* datedJune 9, 1978,9 )% thus de*anded that uariGa Corporation

e<pedite the co*pletion of the pro=ect, and warned that it wouldinitiate foreclosure proceedin.s should uariGa Corporation not doso#10

Insatisfied with the non-action and o6=ection of uariGaCorporation, )% initiated e<tra=udicial foreclosure proceedin.s# Anotice of foreclosure sale was sent to uariGa Corporation# Thenotice was eventually pu6lished, leadin. the clients and patrons of uariGa Corporation to thin> that its 6usiness operation had sloweddown, and that its resort had already closed#11

n January ;, 1979, uariGa Corporation sued )% in the !TC tode*and specific perfor*ance of the latters o6li.ations under theloan a.ree*ent, and to stop the foreclosure of the *ort.a.es ?CivilCase "o# 1707@#1 owever, )% *oved for the dis*issal of theco*plaint, statin. that the *ort.a.ed properties had already 6eensold to satisfy the o6li.ation of uariGa Corporation at a pu6licauction held on January 1', 1979 at the Costa /ario !esort each!esort in ton, +loilo#13 )ue to this, uariGa Corporation a*endedthe co*plaint on 5e6ruary ;, 19791& to see> the nullification of theforeclosure proceedin.s and the cancellation of the certificate of sale# )% filed its answer on )ece*6er 17, 1979,1' and trialfollowed upon the ter*ination of the pre-trial without any a.ree*ent6ein. reached 6y the parties#1;

+n the *eanti*e, )% applied for the issuance of a writ of possession 6y the !TC# At first, the !TC denied the application 6utlater .ranted it upon )%s *otion for reconsideration# A..rieved,uariGa Corporation assailed the .rantin. of the application 6efore

the CA on certiorari ?C#A#-#!# "o# 1;70-$% entitled uariGa A.ricultural and !ealty )evelop*ent Corporation v# )evelop*entan> of the %hilippines@# After the CA dis*issed the petition for certiorari, )% sou.ht the i*ple*entation of the order for theissuance of the writ of possession# ver uariGa Corporationsopposition, the !TC issued the writ of possession on June 1;,198#17

Jud.*ent of the !TC

n January ;, 1998, the !TC rendered its =ud.*ent in Civil Case"o# 1707, disposin. as follows2

D!5!, pre*ises considered, the court here6y resolvesthat the e<tra-=udicial sales of the *ort.a.ed properties of the

plaintiff 6y the ffice of the %rovincial $heriff of +loilo on January 1',1979 are null and void, so with the conseuent issuance of certificates of sale to the defendant of said properties, there.istration thereof with the !e.istry of )eeds and the issuance of the transfer certificates of title involvin. the real property in itsna*e#

+t is also resolved that defendant .ive 6ac> to the plaintiff or itsrepresentative the actual possession and en=oy*ent of all theproperties foreclosed and possessed 6y it# To pay the plaintiff thereasona6le rental for the use of its 6each resort durin. the periodstartin. fro* the ti*e it ?defendant@ too> over its occupation anduse up to the ti*e possession is actually restored to the plaintiff#

And, on the part of the plaintiff, to pay the defendant the loan it

o6tained as soon as it ta>es possession and *ana.e*ent of the6each resort and resu*e its 6usiness operation#

5urther*ore, defendant is ordered to pay plaintiffs attorneys fee of %'0,000#00#

$o !)!)#18

)ecision of the CA

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n appeal ?C#A#-#!# C4 "o# '9&91@, )% challen.ed the =ud.*ent of the !TC, and insisted that2

+

T T!+A CI!T !!) A") C//+TT) !4!$+!!! +" )CA!+" )%$ 5!C$I! 5 T/!TA) %!%!T+$ A$ +"4A+) A") I"CA) 5!#

++

T T!+A CI!T !+4I$K !!) +" )+" T!I")$ +"4) K )% T JI$T+5K 5!C$I! A$

("T $I55+C+"T#( " T C"T!A!K, T /!TADA$ 5!C$) K B%!$$ AIT!+TK 5%A!A!A% "# & 5 T /!TA C"T!ACT A")$CT+" 5 %#)# 38' +" A))+T+" T T I$T+")%A!# "# ; %!+"T) AT T AC 5 T 5+!$T %A 5T /!TA C"!ACT#

+++

T T!+A CI!T !!) +" )+" T $A$ 5 T/!TA) %!%!T+$ T )% A$ +"4A+) I")! A!T+C$ 113 A") 1&1 5 T C+4+ C)#

+4

T T!+A CI!T !A4K !!) A") C//+TT)M!4!$+N !!! +" !)!+" )% T !TI!" T%A+"T+55 T ACTIA %$$$$+" A") "JK/"T 5 A T 5!C$) %!%!T+$ A") T %AK %A+"T+55!A$"A !"TA 5! T I$ 5 T 5!C$)AC !$!T#

4

T T!+A CI!T !!) +" ADA!)+" ATT!"K$ 5$ AA+"$T )% D+C /!K B!C+$) +T$ !+T$I")! T /!TA C"T!ACT#19

+n its decision pro*ul.ated on /arch ;, 003,0 however, the CA

sustained the !TCs =ud.*ent 6ut deleted the award of attorneysfees, decreein.2

D!5!, in view of the fore.oin., the )ecision datedJanuary ;, 1998, rendered 6y the !e.ional Trial Court of +loilo City,ranch ' in Civil Case "o# 1707 for $pecific %erfor*ance with%reli*inary +n=unction is here6y A55+!/) with /)+5+CAT+",in that the award for attorneys fees is deleted#

$ !)!)#1

)% ti*ely filed a *otion for reconsideration, 6ut the CA denied its*otion on cto6er 9, 003#

ence, this appeal 6y )%#

+ssues

)% su6*its the followin. issues for consideration, na*ely2

DT! ! "T T )C+$+" 5 T CI!T 5 A%%A$ )AT) /A!C ;, 003 A") +T$ !$IT+")AT) CT! 9, )"K+" %T+T+"!$ /T+" 5!!C"$+)!AT+" D! +$$I) +" ACC!)A"C D+TAD, %!4A++" JI!+$%!I)"T+A )C+$+" A")$I%%!T) K 4+)"C:

DT! ! "T T "!A CI!T 5 A%%A$ A)!) T T I$IA CI!$ 5 JI)+C+A

%!C)+"$ +" )C+)+" C#A#-#!# C4 "# '9&91 A")T!5! +" ACC!)A"C D+T T (AD 5 T CA$)CT!+"#(

!ulin.

The appeal lac>s *erit#

1#5indin.s of the CA were supported 6y the

evidence as well as 6y law and =urisprudence

)% su6*its that the loan had 6een .ranted under its supervisedcredit financin. sche*e for the develop*ent of a 6each resort, andthe releases of the proceeds would 6e su6=ect to conditions thatincluded the verification of the pro.ress of wor>s in the pro=ect toforestall diversion of the loan proceeds: and that under $tipulation"o# ; of the *ort.a.e contract, further loan releases would 6eter*inated and the account would 6e considered due andde*anda6le in the event of a deviation fro* the purpose of theloan,3 includin. the failure to put up the reuired euity and thediversion of the loan proceeds to other purposes#& +t assails thedeclaration 6y the CA that uariGa Corporation had not yet 6een in

default in its o6li.ations despite violations of the ter*s of the*ort.a.e contract securin. the pro*issory note#

uariGa Corporation counters that it did not violate the ter*s of thepro*issory note and the *ort.a.e contracts 6ecause )% had fullycollected the interest notwithstandin. that the principal o6li.ationdid not yet fall due and 6eco*e de*anda6le#'

The su6*issions of )% lac> *erit and su6stance#

The a.ree*ent 6etween )% and uariGa Corporation was a loan#Inder the law, a loan reuires the delivery of *oney or any other consu*a6le o6=ect 6y one party to another who acuires ownershipthereof, on the condition that the sa*e a*ount or uality shall 6epaid#; oan is a reciprocal o6li.ation, as it arises fro* the sa*ecause where one party is the creditor, and the other the de6tor#7The o6li.ation of one party in a reciprocal o6li.ation is dependentupon the o6li.ation of the other, and the perfor*ance should ideally6e si*ultaneous# This *eans that in a loan, the creditor shouldrelease the full loan a*ount and the de6tor repays it when it6eco*es due and de*anda6le#8

+n its assailed decision, the CA found and held thusly2

< < < <

< < < +t is undisputed that appellee o6tained a loan fro* appellant,and as security, e<ecuted real estate and chattel *ort.a.es#owever, it was never esta6lished that appellee was already in

default# Appellant, in a tele.ra* to the appellee re*inded the latter to *a>e .ood on its construction wor>s, otherwise, it wouldforeclose the *ort.a.e it e<ecuted# +t did not *ention that appelleewas already in default# The records show that appellant did not*a>e any de*and for pay*ent of the pro*issory note# +t appearsthat the 6asis of the foreclosure was not a default on the loan 6utappellees failure to co*plete the pro=ect in accordance withappellants standards# +n fact, appellant refused to release there*ainin. 6alance of the approved loan after it found that thei*prove*ents introduced 6y appellee were 6elow appellantse<pectations#

The loan a.ree*ent 6etween the parties is a reciprocal o6li.ation# Appellant in the instant case 6ound itself to .rant appellee the loana*ount of %3,387,000#00 condition on appellees pay*ent of the

a*ount when it falls due# 5urther*ore, the loan was evidenced 6ythe pro*issory note which was secured 6y real estate *ort.a.eover several properties and additional chattel *ort.a.e# !eciprocalo6li.ations are those which arise fro* the sa*e cause, and inwhich each party is a de6tor and a creditor of the other, such thatthe o6li.ation of one is dependent upon the o6li.ation of the other ?Areola vs# Court of Appeals, 3; $C!A ;&3@# They are to 6eperfor*ed si*ultaneously such that the perfor*ance of one isconditioned upon the si*ultaneous fulfil*ent of the other ?Jai*en. vs# Court of Appeals, 310 $C!A 1@# The pro*ise of appellee topay the loan upon due date as well as to e<ecute sufficient securityfor said loan 6y way of *ort.a.e .ave rise to a reciprocal o6li.ationon the part of appellant to release the entire approved loan a*ount#Thus, appellees are entitled to receive the total loan a*ount asa.reed upon and not an inco*plete a*ount#

The appellant did not release the total a*ount of the approvedloan# Appellant therefore could not have *ade a de*and for pay*ent of the loan since it had yet to fulfil its own o6li.ation#/oreover, the fact that appellee was not yet in default rendered theforeclosure proceedin.s pre*ature and i*proper#

The properties which stood as security for the loan were foreclosedwithout any de*and havin. 6een *ade on the principal o6li.ation#5or an o6li.ation to 6eco*e due, there *ust .enerally 6e a

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de*and# )efault .enerally 6e.ins fro* the *o*ent the creditor de*ands the perfor*ance of the o6li.ation# Dithout such de*and, =udicial or e<tra=udicial, the effects of default will not arise ?"a*arcovs# 5ederation of Inited "a*arco )istri6utors, +nc#, &9 $C!A 38:or=e vs# C5+ of /isa*is ccidental, 88 $C!A '7;@#

< < < <

Appellant also ad*itted in its 6rief that it indeed failed to release thefull a*ount of the approved loan# As a conseuence, the real estate*ort.a.e of appellee 6eco*es unenforcea6le, as it cannot 6eentirely foreclosed to satisfy appellees total de6t to appellant?Central an> of the %hilippines vs# Court of Appeals, 139 $C!A

&;@#

$ince the foreclosure proceedin.s were pre*ature andunenforcea6le, it only follows that appellee is still entitled topossession of the foreclosed properties# owever, appellant too>possession of the sa*e 6y virtue of a writ of possession issued inits favor durin. the pendency of the case# Thus, the trial courtcorrectly ruled when it ordered appellant to return actualpossession of the su6=ect properties to appellee or itsrepresentative and to pay appellee reasona6le rents#

owever, the award for attorneys fees is deleted# As a rule, theaward of attorneys fees is the e<ception rather than the rule andcounsels fees are not to 6e awarded every ti*e a party wins a suit# Attorneys fees cannot 6e recovered as part of da*a.es 6ecause of the policy that no pre*iu* should 6e placed on the ri.ht to liti.ate?%i*entel vs# Court of Appeals, et al#, 307 $C!A 38@#9

< < < <

De uphold the CA#

To start with, considerin. that the CA there6y affir*ed the factualfindin.s of the !TC, the Court is 6ound to uphold such findin.s, for it is a<io*atic that the trial courts factual findin.s as affir*ed 6y theCA are 6indin. on appeal due to the Court not 6ein. a trier of facts#

$econdly, 6y its failure to release the proceeds of the loan in their entirety, )% had no ri.ht yet to e<act on uariGa Corporation the

latters co*pliance with its own o6li.ation under the loan# +ndeed, if a party in a reciprocal contract li>e a loan does not perfor* itso6li.ation, the other party cannot 6e o6li.ed to perfor* what ise<pected of it while the others o6li.ation re*ains unfulfilled#30 +nother words, the latter party does not incur delay#31

$till, )% called upon uariGa Corporation to *a>e .ood on theconstruction wor>s pursuant to the acceleration clause written inthe *ort.a.e contract ?i#e#, $tipulation "o# ;@,3 or else it wouldforeclose the *ort.a.es#

)%s actuations were le.ally unfounded# +t is true that loans areoften secured 6y a *ort.a.e constituted on real or personalproperty to protect the creditors interest in case of the default of thede6tor# y its nature, however, a *ort.a.e re*ains an accessory

contract dependent on the principal o6li.ation,33 such thatenforce*ent of the *ort.a.e contract will depend on whether or not there has 6een a violation of the principal o6li.ation# Dhile acreditor and a de6tor could re.ulate the order in which they shouldco*ply with their reciprocal o6li.ations, it is presupposed that in aloan the lender should perfor* its o6li.ation - the release of the fullloan a*ount - 6efore it could de*and that the 6orrower repay theloaned a*ount# +n other words, uariGa Corporation would notincur in delay 6efore )% fully perfor*ed its reciprocalo6li.ation#3&

Considerin. that it had yet to release the entire proceeds of theloan, )% could not yet *a>e an effective de*and for pay*entupon uariGa Corporation to perfor* its o6li.ation under the loan# Accordin. to )evelop*ent an> of the %hilippines v# icuanan,3' it

would only 6e when a de*and to pay had 6een *ade and wassu6seuently refused that a 6orrower could 6e considered indefault, and the lender could o6tain the ri.ht to collect the de6t or toforeclose the *ort.a.e#1Ewphi1 ence, uariGa Corporation wouldnot 6e in default without the de*and#

Assu*in. that )% could already e<act fro* the latter itsco*pliance with the loan a.ree*ent, the letter dated 5e6ruary 7,1978 that )% sent would still not 6e re.arded as a de*and torender uariGa Corporation in default under the principal contract

6ecause )% was only there6y reuestin. the latter (to put up thedeficiency in the value of i*prove*ents#(3;

Inder the circu*stances, )%s foreclosure of the *ort.a.e andthe sale of the *ort.a.ed properties at its instance werepre*ature, and, therefore, void and ineffectual#37

ein. a 6an>in. institution, )% owed it to uariGa Corporation toe<ercise the hi.hest de.ree of dili.ence, as well as to o6serve thehi.h standards of inte.rity and perfor*ance in all its transactions6ecause its 6usiness was i*6ued with pu6lic interest#38 The hi.hstandards were also necessary to ensure pu6lic confidence in the6an>in. syste*, for, accordin. to %hilippine "ational an> v#

%i>e239 (The sta6ility of 6an>s lar.ely depends on the confidence of the people in the honesty and efficiency of 6an>s#( Thus, )% hadto act with .reat care in applyin. the stipulations of its a.ree*entwith uariGa Corporation, lest it erodes such pu6lic confidence# Ket,)% failed in its duty to e<ercise the hi.hest de.ree of dili.ence 6ypre*aturely foreclosin. the *ort.a.es and unwarrantedly causin.the foreclosure sale of the *ort.a.ed properties despite uariGaCorporation not 6ein. yet in default# )% wron.ly relied on$tipulation "o# ; as its 6asis to accelerate the o6li.ation of uariGa Corporation, for the stipulation was relevant to an *ni6us A.ricultural oan, to uariGa Corporations loan which wasintended for a pro=ect other than a.ricultural in nature#

ven so, uariGa Corporation did not elevate the actiona6ility of )%s ne.li.ence to the CA, and did not also appeal the CAsdeletion of the award of attorneys fees allowed 6y the!TC#1Ewphi1 Dith the decision of the CA conseuently 6eco*in.final and i**uta6le as to uariGa Corporation, we will not delveany further on )%s actiona6le actuations#

#The doctrine of law of the casedid not apply herein

)% insists that the decision of the CA in C#A#-#!# "o# 1;70-$%already constituted the law of the case# ence, the CA could notdecide the appeal in C#A#-#!# C4 "o# '9&91 differently#

uariGa Corporation counters that the rulin. in C#A#-#!# "o#

1;70-$% did not constitute the law of the case 6ecause C#A#-#!#"o# 1;70-$% concerned the issue of possession 6y )% as thewinnin. 6idder in the foreclosure sale, and had no 6earin.whatsoever to the le.al issues presented in C#A#-#!# C4 "o#'9&91#

aw of the case has 6een defined as the opinion delivered on afor*er appeal, and *eans, *ore specifically, that whatever is onceirrevoca6ly esta6lished as the controllin. le.al rule of decision6etween the sa*e parties in the sa*e case continues to 6e the lawof the case, whether correct on .eneral principles or not, so lon. asthe facts on which such decision was predicated continue to 6e thefacts of the case 6efore the court#&0

The concept of law of the case is well e<plained in /an.old v#

acon,&1 an A*erican case, thusly2

The .eneral rule, na>edly and 6oldly put, is that le.al conclusionsannounced on a first appeal, whether on the .eneral law or the lawas applied to the concrete facts, not only prescri6e the duty andli*it the power of the trial court to strict o6edience and confor*itythereto, 6ut they 6eco*e and re*ain the law of the case in all other steps 6elow or a6ove on su6seuent appeal# The rule is .roundedon convenience, e<perience, and reason# Dithout the rule therewould 6e no end to criticis*, rea.itation, ree<a*ination, andrefor*ulation# +n short, there would 6e endless liti.ation# +t would 6eintolera6le if parties liti.ants were allowed to speculate on chan.esin the personnel of a court, or on the chance of our rewritin.propositions once .ravely ruled on sole*n ar.u*ent and handeddown as the law of a .iven case# An itch to reopen uestions

foreclosed on a first appeal would result in the foolishness of theinuisitive youth who pulled up his corn to see how it .rew# Courtsare allowed, if they so choose, to act li>e ordinary sensi6le persons#The ad*inistration of =ustice is a practical affair# The rule is apractical and a .ood one of freuent and 6eneficial use#

The doctrine of law of the case si*ply *eans, therefore, that whenan appellate court has once declared the law in a case, itsdeclaration continues to 6e the law of that case even on asu6seuent appeal, notwithstandin. that the rule thus laid down

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*ay have 6een reversed in other cases#& 5or practicalconsiderations, indeed, once the appellate court has issued apronounce*ent on a point that was presented to it with fullopportunity to 6e heard havin. 6een accorded to the parties, thepronounce*ent should 6e re.arded as the law of the case andshould not 6e reopened on re*and of the case to deter*ine other issues of the case, li>e da*a.es#&3 ut the law of the case, as thena*e i*plies, concerns only le.al uestions or issues there6yad=udicated in the for*er appeal#

The fore.oin. understandin. of the concept of the law of the casee<poses )%s insistence to 6e unwarranted#

To start with, the e< parte proceedin. on )%s application for theissuance of the writ of possession was entirely independent fro*the =udicial de*and for specific perfor*ance herein# +n fact, C#A#-#!# "o# 1;70-$%, 6ein. the interlocutory appeal concernin. theissuance of the writ of possession while the *ain case waspendin., was not at all intertwined with any le.al issue properlyraised and liti.ated in C#A#-#!# C4 "o# '9&91, which was theappeal to deter*ine whether or not )%s foreclosure was validand effectual# And, secondly, the rulin. in C#A#-#!# "o# 1;70-$%did not settle any uestion of law involved herein 6ecause this casefor specific perfor*ance was not a continuation of C#A#-#!# "o#1;70-$% ?which was li*ited to the propriety of the issuance of thewrit of possession in favor of )%@, and vice versa#

3#uarifia Corporation is le.ally entitled to therestoration of the possession of the resort co*ple<and pay*ent of reasona6le rentals 6y )%

avin. found and pronounced that the e<tra=udicial foreclosure 6y)% was pre*ature, and that the ensuin. foreclosure sale wasvoid and ineffectual, the Court affir*s the order for the restorationof possession to uarifia Corporation and the pay*ent of reasona6le rentals for the use of the resort# The CA properly heldthat the pre*ature and invalid foreclosure had un=ustlydispossessed uarifia Corporation of its properties# Conseuently,the restoration of possession and the pay*ent of reasona6lerentals were in accordance with Article ';1 of the Civil Code, whiche<pressly states that one who recovers, accordin. to law,

possession un=ustly lost shall 6e dee*ed for all purposes which*ay redound to his 6enefit to have en=oyed it without interruption#

D!5!, the Court A55+!/$ the decision pro*ul.ated on/arch ;, 003: and !)!$ the petitioner to pay the costs of suit#

P-ILIPPINE NATIONAL AN0, Petitioner,vs.SPOUSES ENRI2UE MANALO 3 ROSALINDA /ACINTO,ARNOLD /. MANALO, ARNEL /. MANALO, and ARMA /.MANALO, Respondents.

Althou.h 6an>s are free to deter*ine the rate of interest they couldi*pose on their 6orrowers, they can do so only reasona6ly, not

ar6itrarily# They *ay not ta>e advanta.e of the ordinary 6orrowerslac> of fa*iliarity with 6an>in. procedures and =ar.on# ence, anystipulation on interest unilaterally i*posed and increased 6y the*shall 6e struc> down as violative of the principle of *utuality of contracts#

Antecedents

!espondent $pouses nriue /analo and !osalinda Jacinto?$pouses /analo@ applied for an All-%urpose Credit 5acility in thea*ount of %1,000,000#00 with %hilippine "ational an> ?%"@ tofinance the construction of their house# After %" .ranted their application, they e<ecuted a !eal state /ort.a.e on "ove*6er 3,1993 in favor of %" over their property covered 6y Transfer Certificate of Title "o# $- 3191 as security for the loan#1 The credit

facility was renewed and increased several ti*es over the years#n $epte*6er 0, 199;, the credit facility was a.ain renewed for %7,000,000#00# As a conseuence, the parties e<ecuted a$upple*ent to and A*end*ent of <istin. !eal state /ort.a.ewhere6y the property covered 6y TCT "o# 1718'9 was added assecurity for the loan#

The additional security was re.istered in the na*es of respondents Arnold, Arnel, Anthony, and Ar*a, all surna*ed /analo, who weretheir children#

+t was a.reed upon that the $pouses /analo would *a>e *onthlypay*ents on the interest# owever, %" clai*ed that their lastrecorded pay*ent was *ade on )ece*6er, 1997# Thus, %" senta de*and letter to the* on their overdue account and reuiredthe* to settle the account# %" sent another de*and letter 6ecause they failed to heed the first de*and#3

After the $pouses /analo still failed to settle their unpaid accountdespite the two de*and letters, %" foreclose the *ort.a.e#)urin. the foreclosure sale, %" was the hi.hest 6idder for %1',17,000#00 of the *ort.a.ed properties of the $pouses/analo# The sheriff issued to %" the Certificate of $ale dated

"ove*6er 13, 000#&

After *ore than a year after the Certificate of $ale had 6een issuedto %", the $pouses /analo instituted this action for thenullification of the foreclosure proceedin.s and da*a.es# Theyalle.ed that they had o6tained a loan for %1,000,000#00 fro* acertain enito Tan upon arran.e*ents *ade 6y AntoninusKuvienco, then the eneral /ana.er of %"Vs an.>al ranchwhere they had transacted: that they had 6een *ade to understandand had 6een assured that the %1,000,000#00 would 6e used toupdate their account, and that their loan would 6e restructured andconverted into a lon.-ter* loan:' that they had 6een surprised tolearn, therefore, that had 6een declared in default of their o6li.ations, and that the *ort.a.e on their property had 6eenforeclosed and their property had 6een sold: and that %" did notco*ply with $ection 3 of Act "o# 313', as a*ended#;

%" and Antoninus Kuvienco countered that the %1,000,000#00loan o6tained 6y the $pouses /analo fro* enito Tan had 6eencredited to their account: that they did not *a>e any assurances onthe restructurin. and conversion of the $pouses /analoVs loan intoa lon.-ter* one:7 that %"Vs ri.ht to foreclose the *ort.a.e had6een clear especially 6ecause the $pouses /analo had notassailed the validity of the loans and of the *ort.a.e: and that the$pouses /analo did not alle.e havin. fully paid their inde6tedness#8

!ulin. ofthe !TC

After trial, the !TC rendered its decision in favor of %", holdin.thusly2

+n resolvin. this present case, one of the *ost si.nificant *attersthe court has noted is that while durin. the pre-trial held on 8$epte*6er 003, plaintiff-spouses /analo with the assistancecounsel had a.reed to stipulate that defendants had the ri.ht toforeclose upon the su6=ect properties and that the plaintiffsMWN *ainthrust was to prove that the foreclosure proceedin.s were invalid, inthe course of the presentation of their evidence, they *odified their position and clai*ed MthatN the loan docu*ent e<ecuted werecontracts of adhesion which were null and void 6ecause they wereprepared entirely under the defendant 6an>Vs supervision# Theyalso uestioned the interest rates and penalty char.es i*posedar.uin. that these were iniuitous, unconsciona6le and therefore

li>ewise void#

"ot havin. raised the fore.oin. *atters as issues durin. the pre-trial, plaintiff-spouses are presu*a6ly estopped fro* allowin. these*atters to serve as part of their evidence, *ore so 6ecause at thepre-trial they e<pressly reco.nied the defendant 6an>Vs ri.ht toforeclose upon the su6=ect property ?$ee rder, pp# 193-19'@#

owever, considerin. that the defendant 6an> did not interpose anyo6=ection to these *atters 6ein. *ade part of plaintiffVs evidence so*uch so that their *e*orandu* contained discussions re6uttin.plaintiff spouses ar.u*ents on these issues, the court *ustnecessarily include these *atters in the resolution of the presentcase#9

The !TC held, however, that the $pouses /analoVs (contract of adhesion( ar.u*ent was unfounded 6ecause they had stillaccepted the ter*s and conditions of their credit a.ree*ent with%" and had e<erted efforts to pay their o6li.ation:10 that the$pouses /analo were now estopped fro* uestionin. the interestrates unilaterally i*posed 6y %" 6ecause they had paid at thoserates for three years without protest:11 and that their alle.ationa6out %" violatin. the notice and pu6lication reuire*ents durin.the foreclosure proceedin.s was untena6le 6ecause personalnotice to the *ort.a.ee was not reuired under Act "o# 313'#1

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The $pouses /analo appealed to the CA 6y assi.nin. a sin.ular error, as follows2

T CI!T A I $!+I$K !!) +" )+$/+$$+"%A+"T+55-A%%A"T$V C/%A+"T 5! +" ?sic@ AC5 /!+T "TD+T$TA")+" T 5ACT TAT +T DA$CA!K $D" TAT T 5!C$I! %!C)+"$DA$ +"4A+) A") +A#13

The $pouses /analo reiterated their ar.u*ents, insistin. that2 ?1@the credit a.ree*ents they entered into with %" were contracts of adhesion:1& ?@ no interest was due fro* the* 6ecause their credit

a.ree*ents with %" did not specify the interest rate, and %"could not unilaterally increase the interest rate without firstinfor*in. the*:1' and ?3@ %" did not co*ply with the notice andpu6lication reuire*ents under $ection 3 of Act 313'#1; n theother hand, %" and Kuvienco did not file their 6riefs despitenotice#17

!ulin. ofthe CA

+n its decision pro*ul.ated on /arch 8, 00;,18 the CA affir*edthe decision of the !TC insofar as it upheld the validity of theforeclosure proceedin.s initiated 6y %", 6ut *odified the $pouses/analoVs lia6ility for interest# +t directed the !TC to see to thereco*putation of their inde6tedness, and ordered that should thereco*puted a*ount 6e less than the winnin. 6id in the foreclosuresale, the difference should 6e i**ediately returned to the $pouses/analo#

The CA found it necessary to pass upon the issues of %"Vs failureto specify the applica6le interest and the lac> of *utuality in thee<ecution of the credit a.ree*ents considerin. the earlier citedo6servation *ade 6y the trial court in its decision# Applyin. Article19'; of the Civil Code, the CA held that %"Vs failure to indicatethe rate of interest in the credit a.ree*ents would not e<cuse the$pouses /analo fro* their contractual o6li.ation to pay interest to%" 6ecause of the e<press a.ree*ent to pay interest in the credita.ree*ents# "evertheless, the CA ruled that %"Vs inadvertence tospecify the interest rate should 6e construed a.ainst it 6ecause thecredit a.ree*ents were clearly contracts of adhesion due to their

havin. 6een prepared solely 6y %"#

The CA further held that %" could not unilaterally increase therate of interest considerin. that the credit a.ree*ents specificallyprovided that prior notice was reuired 6efore an increase ininterest rate could 6e effected# +t found that %" did not adduceproof showin. that the $pouses /analo had 6een notified 6eforethe increased interest rates were i*posed: and that %"Vsunilateral i*position of the increased interest rate was null and voidfor 6ein. violative of the principle of *utuality of contractsenshrined in Article 1308 of the Civil Code# !einforcin. its (contractof adhesion( conclusion, it added that the $pouses /analoVs 6ein.in dire need of *oney rendered the* to 6e not on an eual footin.with %"# Conseuently, the CA, relyin. on astern $hippin.ines, v# Court of Appeals,19 fi<ed the interest rate to 6e paid 6y

the $pouses /analo at 1P per annu*, co*puted fro* their default#

The CA dee*ed to 6e untena6le the $pouses /analoVs alle.ationthat %" had failed to co*ply with the reuire*ents for notice andpostin. under $ection 3 of Act 313'# The CA stated that $heriff "or6erto /a.sa=oVs testi*ony was sufficient proof of his postin. of the reuired "otice of $heriffVs $ale in three pu6lic places: that thenotaried Affidavit of %u6lication presented 6y $heriff /a.sa=o waspri*a facie proof of the pu6lication of the notice: and that the Affidavit of %u6lication en=oyed the presu*ption of re.ularity, suchthat the $pouses /analoVs 6are alle.ation of non-pu6licationwithout other proof did not overco*e the presu*ption#

n Au.ust 9, 00;, the CA denied the $pouses /analoVs /otion

for !econsideration and %"Vs %artial /otion for !econsideration#0

+ssues

+n its /e*orandu*,1 %" raises the followin. issues2

+

DT! ! "T T CI!T 5 A%%A$ DA$ C!!CT+" "I+5K+" T +"T!$T !AT$ +/%$) "!$%")"T $%I$$V A" A") +" 5+B+" T $A/ ATTD4 %!C"T ?1P@ 5!/ )5AIT, )$%+T T 5ACTTAT ?i@ T $A/ DA$ !A+$) K T !$%")"T$"K 5! T 5+!$T T+/ " A%%A ?ii@ +T DA$ "4!%A!T 5 T+! C/%A+"T ?iii@ DA$ BI)) A$ A" +$$I)I!+" %!-T!+A, A") D!$, ?iv@ T! DA$ "5!/AK 55!) %!TA+"+" T T $A/ )I!+"T!+A#

++

DT! ! "T T CI!T 5 A%%A$ C!!CTK!I) TAT T! DA$ " /ITIA+TK 5 C"$"T +"T +/%$+T+" 5 +"T!$T !AT$ " T !$%")"T$%I$$V A" )$%+T T B+$T"C 5 5ACT$ A")C+!CI/$TA"C$ CA!K $D+" !$%")"T$V A$$"T T T !AT$ 5 +"T!$T $ +/%$) K %"" T A"#

Anent the first issue, %" ar.ues that 6y passin. upon the issue of the validity of the interest rates, and in nullifyin. the rates i*posedon the $pouses /analo, the CA decided the case in a *anner notin accord with $ection 1', !ule && of the !ules of Court, whichstates that only uestions of law or fact raised in the trial courtcould 6e assi.ned as errors on appeal: that to allow the $pouses/analo to raise an issue for the first ti*e on appeal would (offendthe 6asic rules of fair play, =ustice and due process:( that theresolution of the CA was li*ited to the issues a.reed upon 6y theparties durin. pre-trial:3 that the CA erred in passin. upon thevalidity of the interest rates inas*uch as the $pouses /analo didnot present evidence thereon: and that the Judicial Affidavit of nriue /analo, on which the CA relied for its findin., was notoffered to prove the invalidity of the interest rates and was,therefore, inad*issi6le for that purpose#&

As to the su6stantive issues, %" clai*s that the $pouses/analoVs continuous pay*ent of interest without protest indicatedtheir assent to the interest rates i*posed, as well as to thesu6seuent increases of the rates: and that the CA erred indeclarin. that the interest rates and su6seuent increases were

invalid for lac> of *utuality 6etween the contractin. parties#

!ulin.

The appeal lac>s *erit#

1#%rocedural +ssue

Contrary to %"Vs ar.u*ent, the validity of the interest rates and of the increases, and on the lac> of *utuality 6etween the partieswere not raised 6y the $pouses /analoVs for the first ti*e onappeal# !ather, the issues were i*pliedly raised durin. the trialitself, and %"Vs lac> of vi.ilance in voicin. out a ti*ely o6=ection*ade that possi6le#

+t appears that nriue /analoVs Judicial Affidavit introduced theissues of the validity of the interest rates and the increases, and thelac> of *utuality 6etween the parties in the followin. *anner, to wit2

'# True to his words, defendant Kuvienco, after several days, sentus a docu*ent throu.h a personnel of defendant %", an.>al,/a>ati City ranch, who reuired *e and *y wife to affi< our si.nature on the said docu*ent:

;# Dhen the docu*ent was handed over *e, + was a6le to >nowthat it was a %ro*issory "ote which was in ready *ade for* andprepared solely 6y the defendant %":

< < < <

1# As a6ove-noted, the rates of interest i*posed 6y the defendant6an> were never the su6=ect of any stipulation 6etween us*ort.a.ors and the defendant %" as *ort.a.ee:

# The truth of the *atter is that defendant 6an> i*posed rate of interest which ran.es fro* 19P to as hi.h as 8P and whichchan.es fro* ti*e to ti*e:

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3# The irre.ularity, *uch less the invalidity of the i*position of iniuitous rates of interest was a..ravated 6y the fact that we werenot infor*ed, notified, nor the sa*e had our prior consent andacuiescence therefor# < < <'

%" cross-e<a*ined nriue /analo upon his Judicial Affidavit#There is no showin. that %" raised any o6=ection in the course of the cross e<a*ination#; Conseuently, the !TC ri.htly passedupon such issues in decidin. the case, and its havin. done so wasin total accord with $ection ', !ule 10 of the !ules of Court, whichstates2

$ection '# A*end*ent to confor* to or authorie presentation of

evidence# X Dhen issues not raised 6y the pleadin.s are tried withthe e<press or i*plied consent of the parties, they shall 6e treatedin all respects as if they had 6een raised in the pleadin.s# $ucha*end*ent of the pleadin.s as *ay 6e necessary to cause the*to confor* to the evidence and to raise these issues *ay 6e *adeupon *otion of any party at any ti*e, even after =ud.*ent: 6utfailure to a*end does not affect the result of the trial of theseissues# +f evidence is o6=ected to at the trial on the .round that it isnot within the issues *ade 6y the pleadin.s, the court *ay allowthe pleadin.s to 6e a*ended and shall do so with li6erality if thepresentation of the *erits of the action and the ends of su6stantial =ustice will 6e su6served there6y# The court *ay .rant acontinuance to ena6le the a*end*ent to 6e *ade#

+n ernardo $r# v# Court of Appeals,7 we held that2

+t is settled that even if the co*plaint 6e defective, 6ut the parties.o to trial thereon, and the plaintiff, without o6=ection, introducessufficient evidence to constitute the particular cause of action whichit intended to alle.e in the ori.inal co*plaint, and the defendantvoluntarily produces witnesses to *eet the cause of action thusesta6lished, an issue is =oined as fully and as effectively as if it had6een previously =oined 6y the *ost perfect pleadin.s# i>ewise,when issues not raised 6y the pleadin.s are tried 6y e<press or i*plied consent of the parties, they shall 6e treated in all respectsas if they had 6een raised in the pleadin.s#

The !TC did not need to direct the a*end*ent of the co*plaint 6ythe $pouses /analo# $ection ', !ule 10 of the !ules of Court

specifically declares that the (failure to a*end does not affect theresult of the trial of these issues#( Accordin. to Talisay-$ilay /illin.Co#, +nc# v# Asociacion de A.ricultores de Talisay-$ilay, +nc#28

The failure of a party to a*end a pleadin. to confor* to theevidence adduced durin. trial does not preclude an ad=udication 6ythe court on the 6asis of such evidence which *ay e*6ody newissues not raised in the pleadin.s, or serve as a 6asis for a hi.her award of da*a.es# Althou.h the pleadin. *ay not have 6eena*ended to confor* to the evidence su6*itted durin. trial, =ud.*ent *ay nonetheless 6e rendered, not si*ply on the 6asis of the issues alle.ed 6ut also on the 6asis of issues discussed andthe assertions of fact proved in the course of trial#1Ewphi1 Thecourt *ay treat the pleadin. as if it had 6een a*ended to confor*to the evidence, althou.h it had not 6een actually so a*ended#

5or*er Chief Justice /oran put the *atter in this way2

Dhen evidence is presented 6y one party, with the e<pressed or i*plied consent of the adverse party, as to issues not alle.ed in thepleadin.s, =ud.*ent *ay 6e rendered validly as re.ards thoseissues, which shall 6e considered as if they have 6een raised in thepleadin.s# There is i*plied, consent to the evidence thus presentedwhen the adverse party fails to o6=ect thereto#( ?*phasis supplied@

Clearly, a court *ay rule and render =ud.*ent on the 6asis of theevidence 6efore it even thou.h the relevant pleadin. had not 6eenpreviously a*ended, so lon. as no surprise or pre=udice is there6ycaused to the adverse party# %ut a little differently, so lon. as the6asic reuire*ents of fair play had 6een *et, as where liti.antswere .iven full opportunity to support their respective contentions

and to o6=ect to or refute each others evidence, the court *ayvalidly treat the pleadin.s as if they had 6een a*ended to confor*to the evidence and proceed to ad=udicate on the 6asis of all theevidence 6efore it#

There is also no *erit in %"Vs contention that the CA should nothave considered and ruled on the issue of the validity of the interestrates 6ecause the Judicial Affidavit of nriue /analo had not 6eenoffered to prove the sa*e 6ut only (for the purpose of identifyin. his

affidavit#(9 As such, the affidavit was inad*issi6le to prove thenullity of the interest rates#

De do not a.ree#

$ection ', !ule 10 of the !ules of Court is applica6le in twosituations#1Ewphi1 The first is when evidence is introduced on anissue not alle.ed in the pleadin.s and no o6=ection is interposed 6ythe adverse party# The second is when evidence is offered on anissue not alle.ed in the pleadin.s 6ut an o6=ection is raised a.ainstthe offer#30 This case co*es under the first situation# nriue/analoVs Judicial Affidavit would introduce the very issues that %"is now assailin.# The uestion of whether the evidence on such

issues was ad*issi6le to prove the nullity of the interest rates is anentirely different *atter# The !TC accorded credence to %"Vsevidence showin. that the $pouses /analo had 6een payin. theinterest i*posed upon the* without protest# n the other hand, theCAVs nullification of the interest rates was 6ased on the credita.ree*ents that the $pouses /analo and %" had the*selvessu6*itted#

ased on the fore.oin., the validity of the interest rates and their increases, and the lac> of *utuality 6etween the parties wereissues validly raised in the !TC, .ivin. the $pouses /analo everyri.ht to raise the* in their appeal to the CA# %"Vs contention was6ased on its wron. appreciation of what transpired durin. the trial#+t is also interestin. to note that %" did not itself assail the !TCVsrulin. on the issues o6viously 6ecause the !TC had decided in itsfavor# +n fact, %" did not even su6*it its appelleeVs 6rief despitenotice fro* the CA#

#$u6stantive +ssue

The credit a.ree*ent e<ecuted succinctly stipulated that the loanwould 6e su6=ected to interest at a rate (deter*ined 6y the an> to6e its pri*e rate plus applica6le spread, prevailin. at the current*onth#(31 This stipulation was carried over to or adopted 6y thesu6seuent renewals of the credit a.ree*ent# %" there6yarro.ated unto itself the sole prero.ative to deter*ine and increasethe interest rates i*posed on the $pouses /analo# $uch aunilateral deter*ination of the interest rates contravened the

principle of *utuality of contracts e*6odied in Article 1308 of theCivil Code#3

The Court has declared that a contract where there is no *utuality6etween the parties parta>es of the nature of a contract of adhesion,33 and any o6scurity will 6e construed a.ainst the partywho prepared the contract, the latter 6ein. presu*ed the stron.er party to the a.ree*ent, and who caused the o6scurity#3& %"should then suffer the conseuences of its failure to specificallyindicate the rates of interest in the credit a.ree*ent# De spo>eclearly on this in %hilippine $avin.s an> v# Castillo,3' to wit2

The unilateral deter*ination and i*position of the increased ratesis violative of the principle of *utuality of contracts under Article1308 of the Civil Code, which provides that WMtNhe contract *ust 6ind

6oth contractin. parties: its validity or co*pliance cannot 6e left tothe will of one of the*#V A perusal of the %ro*issory "ote will readilyshow that the increase or decrease of interest rates hin.es solelyon the discretion of petitioner# +t does not reuire the confor*ity of the *a>er 6efore a new interest rate could 6e enforced# Anycontract which appears to 6e heavily wei.hed in favor of one of theparties so as to lead to an unconsciona6le result, thus parta>in. of the nature of a contract of adhesion, is void# Any stipulationre.ardin. the validity or co*pliance of the contract left solely to thewill of one of the parties is li>ewise invalid# ?*phasis supplied@

%" could not also =ustify the increases it had effected on theinterest rates 6y citin. the fact that the $pouses /analo had paidthe interests without protest, and had renewed the loan severalti*es# De rule that the CA, citin. %hilippine "ational an> v# Court

of Appeals,3; ri.htly concluded that (a 6orrower is not estoppedfro* assailin. the unilateral increase in the interest *ade 6y thelender since no one who receives a proposal to chan.e a contract,to which he is a party, is o6li.ed to answer the sa*e and saidpartyVs silence cannot 6e construed as an acceptance thereof#(37

astly, the CA o6served, and properly so, that the credita.ree*ents had e<plicitly provided that prior notice would 6enecessary 6efore %" could increase the interest rates# +n failin. tonotify the $pouses /analo 6efore i*posin. the increased rates of

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interest, therefore, %" violated the stipulations of the very contractthat it had prepared# ence, the varyin. interest rates i*posed 6y%" have to 6e vacated and declared null and void, and in their place an interest rate of 1P per annu* co*puted fro* their default is fi<ed pursuant to the rulin. in astern $hippin. ines, +nc#v# Court of Appeals#38

The CAVs directive to %" ?a@ to reco*pute the $pouses /analoVsinde6tedness under the oversi.ht of the !TC: and ?6@ to refund tothe* any e<cess of the winnin. 6id su6*itted durin. theforeclosure sale over their reco*puted inde6tedness waswarranted and euita6le# ually warranted and euita6le was to*a>e the a*ount to 6e refunded, if any, 6ear le.al interest, to 6e

rec>oned fro* the pro*ul.ation of the CAVs decision on /arch 8,00;#39 +ndeed, the Court said in astern $hippin. ines, +nc# v#Court of Appeals&0 that interest should 6e co*puted fro* the ti*eof the =udicial or e<tra=udicial de*and# owever, this case presentsa peculiar situation, the peculiarity 6ein. that the $pouses /analodid not de*and interest either =udicially or e<tra=udicially# +n the!TC, they specifically sou.ht as the *ain reliefs the nullification of the foreclosure proceedin.s 6rou.ht 6y %", accountin. of thepay*ents they had *ade to %", and the conversion of their loaninto a lon. ter* one#&1 +n its =ud.*ent, the !TC even upheld thevalidity of the interest rates i*posed 6y %"#& +n their appellantVs6rief, the $pouses /analo a.ain sou.ht the nullification of theforeclosure proceedin.s as the *ain relief#&3 +t is evident,therefore, that the $pouses /analo *ade no =udicial or e<tra=udicialde*and fro* which to rec>on the interest on any a*ount to 6erefunded to the*# $uch de*and could only 6e rec>oned fro* thepro*ul.ation of the CAVs decision 6ecause it was there that theri.ht to the refund was first =udicially reco.nied# "evertheless,pursuant to astern $hippin. ines, +nc# v# Court of Appeals,&& thea*ount to 6e refunded and the interest thereon should earn interestto 6e co*puted fro* the finality of the =ud.*ent until the full refundhas 6een *ade#

Anent the correct rates of interest to 6e applied on the a*ount to 6erefunded 6y %", the Court, in "acar v# allery 5ra*es&' and $#C#/e.aworld Construction v# %arada,&; already applied /onetaryoard Circular "o# 799 6y reducin. the interest rates allowed in =ud.*ents fro* 1P per annu* to ;P per annu*#&7 Accordin. to"acar v# allery 5ra*es, / Circular "o# 799 is applied

prospectively, and =ud.*ents that 6eca*e final and e<ecutory prior to its effectivity on July 1, 013 are not to 6e distur6ed 6ut continueto 6e i*ple*ented applyin. the old le.al rate of 1P per annu*#ence, the old le.al rate of 1P per annu* applied to =ud.*ents6eco*in. final and e<ecutory prior to July 1, 013, 6ut the new rateof ;P per annu* applies to =ud.*ents 6eco*in. final ande<ecutory after said dater#

Confor*a6ly with "acar v# allery 5ra*es and $#C# /e.aworldConstruction v# %arada, therefore, the proper interest rates to 6ei*posed in the present case are as follows2

1# Any a*ount to 6e refunded to the $pouses /analo shall 6ear interest of 1P per annu* co*puted fro* /arch 8, 00;, thedate of the pro*ul.ation of the CA decision, until June 30, 013:

and ;P per annu* co*puted fro* July 1, 013 until finality of thisdecision: and

# The a*ount to 6e refunded and its accrued interest shall earninterest of ;P per annu* until full refund#

D!5!, the Court A55+!/$ the decision pro*ul.ated 6ythe Court of Appeals on /arch 8, 00; in CA-#!# C4 "o# 8&39;,su6=ect to the /)+5+CAT+" that any a*ount to 6e refunded tothe respondents shall 6ear interest of 1P per annu* co*putedfro* /arch 8, 00; until June 30, 013, and ;P per annu*co*puted fro* July 1, 013 until finality hereof: that the a*ount to6e refunded and its accrued interest shall earn interest at ;oOo per annu* until full refund: and )+!CT$ the petitioner to pay thecosts of suit#

LA MALLORCA and PAMPANGA US COMPAN!, petitioner,vs.VALENTIN DE /ESUS, MANOLO TOLENTINO and COURT OFAPPEALS, respondents#

a /allorca and %a*pan.a us Co*pany, +nc#, co**only >nownas a /allorca-%a*6usco, filed this appeal 6y certiorari fro* thedecision of the Court of Appeals which affir*ed that rendered 6ythe Court of 5irst +nstance of ulacan in its civil case "o# 100,

entitled (4alentin de Jesus and /anolo Tolentino vs# a /allorca-%a*6usco#( The court a uo sentenced the defendant, nowpetitioner, (to pay to plaintiffs the a*ount of %,13#'0 for actualda*a.es: %1&,&00#00 as co*pensatory da*a.es: %10,000#00 toeach plaintiff 6y way of *oral da*a.es: and %3,000#00 as counselfees#(

Two errors are attri6uted to the appellate Court2 ?1@ (in sustainin.the decision ?of the court a uo@ holdin. that the petitioners werelia6le for the accident which was caused 6y a 6low-out of one of thetires of the 6us and in not considerin. the sa*e as caso fortuito,(and ?@ in holdin. petitioners lia6le for *oral da*a.es#

The suit arose 6y reason of the death of olita de Jesus, 0-year old dau.hter of 4alentin de Jesus and wife of /anolo Tolentino, in ahead-on collision 6etween petitioners 6us, on which she was apassen.er, and a frei.ht truc> travelin. in the opposite direction, ina 6arrio in /arilao ulacan, in the *ornin. of cto6er 8, 19'9# Thei**ediate cause of the collision was the fact that the driver of the6us lost control of the wheel when its left front tire suddenlye<ploded#

%etitioner *aintains that a tire 6low-out is a fortuitous event and.ives rise to no lia6ility for ne.li.ence, citin. the rulin.s of the Courtof Appeals in !odri.ue vs# !ed ine Transportation Co#, CA-#!#"o# 813;, )ece*6er 9, 19'&, and %eople vs# %alapad, CA-#!#"o# 18&80, June 7, 19'8# These rulin.s, however, not only are notnot 6indin. on this Court 6ut were 6ased on considerations uitedifferent fro* those that o6tain in the at 6ar# The appellate Courtthere *ade no findin.s of any specified acts of ne.li.ence on thepart of the defendants and confined itself to the uestion of whether or not a tire 6low-out, 6y itself alone and without a showin. as tothe causative factors, would .enerate lia6ility# +n the present case,the cause of the 6low-out was >nown# The inner tu6e of the leftfront tire, accordin. to petitioners own evidence and as found 6ythe Court of Appeals (was pressed 6etween the inner circle of theleft wheel and the ri* which had slipped out of the wheel#( Thiswas, said Court correctly held, a *echanical defect of theconveyance or a fault in its euip*ent which was easilydiscovera6le if the 6us had 6een su6=ected to a *ore thorou.h, or ri.id chec>-up 6efore it too> to the road that *ornin.#

Then a.ain 6oth the trial court and the Court of Appeals found as afact that the 6us was runnin. uite fast i**ediately 6efore theaccident# Considerin. that the tire which e<ploded was not new Lpetitioner descri6es it as (hindi *asyadon. >al6o,( or not so veryworn out L the plea of caso fortuito cannot 6eentertained#1YwphZ1#G[t

The second issue raised 6y petitioner is already a settled one# +nthis =urisdiction *oral da*a.es are recovera6le 6y reason of thedeath of a passen.er caused 6y the 6reach of contract of aco**on carrier, as provided in Article 17;&, in relation to Article0;, of the Civil Code# These articles have 6een applied 6y thisCourt in a nu*6er of cases, a*on. the* "ecesito, etc# vs# %aras,et al#, -10;0'-0;, June 30, 19'8: /ercado vs# ira, -1338-9,$ept# 9, 19;1: 4illa-!ey Transit vs# ello, -189'7, April 3, 19;3#

Dherefore, the =ud.*ent appealed fro* is affir*ed, with costsa.ainst petitioners#

/UAN F. NA0PIL 3 SONS and /UAN F. NA0PIL, petitioners,vs.T-E COURT OF APPEALS, UNITED CONSTRUCTIONCOMPAN!, INC., /UAN /. CARLOS, and t%e P-ILIPPINE ARASSOCIATION, respondents.

This is a *otion for reconsideration of the cto6er 3, 198; decisionof this Court, filed 6y the Inited Construction Co#, +nc#, the decretalportion of which reads2

D!5!, the decision appealed fro* is here6y /)+5+)

and considerin. the special and environ*ental circu*stances of this case, we dee* it reasona6le to render a decision i*posin., asDe do here6y i*pose, upon the defendant and the third-partydefendants ?with the e<ception of !o*an aeta@ a solidary ?Art#173, Civil Code, $upra, p# 10@ inde*nity in favor of the %hilippinear Association of 5+4 /++" ?%',000,000#00@ %esos to cover all da*a.es ?with the e<ception of attorneys fees@ occasioned 6ythe loss of the 6uildin. ?includin. interest char.es and lost rentals@and an additional " I")!) TI$A") ?%100,000#00@%esos as and for attorneys fees, the total su* 6ein. paya6le upon

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the finality of this decision# Ipon failure to pay on such finality,twelve ?1P@ per cent interest per annu* shall 6e i*posed uponafore*entioned a*ounts fro* finality until paid# $olidary costsa.ainst the defendant and third-party defendants ?e<cept !o*anaeta@#

$ !)!)# ?#!# "o# &78'1, !ollo, p# ;3'@

%laintiff-appellant %hilippine ar Association ?%A for short@decided to construct an office 6uildin. on its 8&0 suare *eters lotlocated at the corner of Aduana and Aro6ispo $treets, +ntra*uros,/anila# 5or the plans, specifications and desi.n, %A contractedthe services of third-party defendants-appellants Juan 5# "a>pil R

$ons and Juan 5# "a>pil ?"A%+$ for short@# 5or the constructionof the 6uildin., %A contracted the services of Inited ConstructionCo*pany, +nc# ?I"+T) for short@ on an ad*inistration 6asis# The6uildin. was co*pleted in June 19;;#

n Au.ust , 19;8, an unusually stron. earthua>e hit /anila andits environs and the 6uildin. in uestion sustained *a=or da*a.e#The front colu*ns of the 6uildin. 6uc>led causin. the 6uildin. to tiltforward dan.erously# As a te*porary re*edial *easure, the6uildin. was shored up 6y ICC+ at the e<pense of %13,;;1#8#

n "ove*6er 9, 19;8, %A co**enced this action for recoveryof da*a.es a.ainst ICC+ and its %resident and eneral /ana.er Juan J# Carlos, clai*in. that the collapse of the 6uildin. wascaused 6y defects in the construction# I"+T), in turn, filed a third-party co*plaint a.ainst the "A%+$, alle.in. in essence that thecollapse of the 6uildin. was due to the defects in the architects(plans, specifications and desi.n# !o*an aeta, the then%resident of %A, was included as a third-party defendant for da*a.es for havin. included Juan J# Carlos, %resident of I"+T)as party defendant#

At the pre-trial, the parties a.reed to refer the technical issues inthe case to a co**issioner# Andres # ion, a lawyer andstructural en.ineer, was appointed 6y the Court as co**issioner#

/eanwhile, %A *oved twice for the de*olition of the 6uildin. onthe .round that it *i.ht topple down in case of a stron. earthua>e#The *otions were opposed 6y the defendants and the *atter was

referred to the Co**issioner# 5inally, on April 30, 1979, the6uildin. was authoried to 6e de*olished at the e<pense of %A,6ut not 6efore another earthua>e of hi.h intensity on April 7, 1970followed 6y other stron. earthua>es on April 9 and 1, 1970,caused further da*a.e to the property# The actual de*olition wasunderta>en 6y the 6uyer of the da*a.ed 6uidin.#

After the protracted hearin.s, the Co**issioner eventuallysu6*itted his report on $epte*6er ', 1970 with the findin.s thatwhile the da*a.e sustained 6y the %A 6uildin. was causeddirectly 6y the Au.ust , 19;8 earthua>e, they were also caused6y the defects in the plans and specifications prepared 6y the"A%+$: I"+T)(s deviations fro* said plans and specificationsand its failure to o6serve the reuisite wor>*anship in theconstruction of the 6uildin.: and failure of %A to e<ercise the

reuisite de.ree of supervision in the construction of the 6uildin.#

All the parties re.istered their o6=ections to aforesaid findin.s whichin turn were answered 6y the Co**issioner#

The court a.reed with the findin.s of the Co**issioner e<cept asto the holdin. that the owner is char.ed with full ti*e supervision of the construction# The court saw no le.al or contractual 6asis for such conclusion# Thus, on $epte*6er 1, 1971, the lower courtrendered a decision, the decretal portion of which, reads2

D!5!, =ud.*ent is here6y rendered2

?a@ rderin. defendant Inited Construction Co#, +nc# andthird-party defendants ?e<cept !o*an aeta@, the su* of

%989,33'#;8 with interest at the le.al rate fro* "ove*6er 9,19;8, the date of the filin. of the co*plaint until full pay*ent:

?6@ )is*issin. the co*plaint with respect to defendant JuanJ# Carlos:

?c@ )is*issin. the third-party co*plaint:

?d@ )is*issin. the defendants( and third-party defendants(counterclai* for lac> of *erit:

?e@ rderin. defendant Inited Construction Co#, +nc# andthird-party defendants ?e<cept !o*an aeta@ to pay the cost ineual shares#

$ !)!)#

n appeal, the Court of Appeals *odified the a6ovesaid decision of the lower court# The dispositive portion of the decision of the Courtof Appeals, reads2

D!5!, the =ud.*ent appealed fro* is *odified to includean award of %00,000#00 in favor of plaintiff-appellant %hilippine

ar Association, with interest at the le.al rate fro* "ove*6er 9,19;8 until full pay*ent to 6e paid =ointly and severally 6y defendantInited Construction Co#, +nc# and third-party defendants ?e<cept!o*an aeta@# +n all other respects, the =ud.*ent dated$epte*6er 1,1971 as *odified in the )ece*6er 8, 1971 rder of the lower court is here6y dated with C$T$ to 6e paid 6y thedefendant and third %atty defendant ?e<cept !o*an aeta@ ineual shares#

$ !)!)#

All the parties herein appealed the aforestated decision of the Courtof Appeals#

This Court pro*ul.ated on cto6er 3, 198; a decision in favor of the %hilippine ar Association which *odified the appealeddecision of the Court of Appeals, as a6oveuoted ?!ollo of #!# "o#-&78'1, pp# ;3&-;;@#

n )ece*6er &,198;, I"+T) filed a /otion for !econsideration?!ollo of -&78;3, pp# ;83-707@# n the other hand, on January1',1987, the "A%+$ filed a /otion to !efer Case to $upre*eCourt n anc and for !econsideration of aforesaid decision ?!olloof -&78'1, pp# 717-7'1@#

n 5e6ruary 11, 1987, I"+T) filed a /anifestation ?!ollo of -&78;3, pp# 79;-797@ that it is =oinin. the "A%+$ in re.ard to their prayer to refer the present case to the Court n anc#

The $econd )ivision of this Court, in a !esolution dated April 1,1987 ?!ollo of -&78'1, p# 788@ denied the "A%+$( /otion for !econsideration#

n April 1', 1987, %A filed its Co**ent to I"+T)s /otion for !econsideration ?!ollo of -&789;, pp# 88-83'@ while on April &,1987, the "A%+$ filed a /otion 5or eave To 5ile $econd /otion5or !econsideratio ?n anc@ ?!ollo of -&78'1, pp# 791-797@# n/ay 7, 1987, %A filed its Co**ent to the "A%+$( /otion for eave To 5ile $econd /otion 5or !econsideration ?n anc@ ?!olloof -&78'1, pp# 790-79'@# n /ay 1&,1987, I"+T) filed a !eplyto %As co**ent ?!ollo of -&78;3, pp# 8&&-8'3@, while the"A%+$ filed a !eply to the sa*e co**ent on /ay ,1987?!ollo of -&78'1, pp# 798-801@#

The issues raised in su6=ect *otion for reconsideration of ICC+ of the decision of this Court of cto6er 3, 198;, are as follows2

+

T 5+")+"$ 5 T C//+$$+"!, A$ A)%T) K TT!+A CI!T, A") A55+!/) T K T CI!T 5 A%%A$ A") T+$ "!A CI!T "AT T%!/+$ TAT, T $IJCT I+)+" CA%$):"C, A!T+C 173 )$ "T A%%K#

++

T A )ITK 5 %A T %!4+) 5IT+/ A") ACT+4$I%!4+$+" +" T C"$T!ICT+" 5 T $IJCT

I+)+" +$ +/+%$) K %I+C +"TT!$T I$A A")CI$T/: 5A++" +" TAT )ITK, %A /I$T A! A")O!$A! +" A"K +A++TK 5! )A/A$ +" T %!/+$$#

+++

+A++TK, +5 A"K, 5! T )A/A 5 T $IJCTI+)+" /I$T !" K A T %A!T+$ +" ACC!)A"C D+T T C//+$$+"!$ 5+")+"$ A")

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D+T )I !A!) T T C")+T+" 5 T I+)+"%!+! T %A$ )/+T+" T!5#

+4

T 5+")+" 5 A) 5A+T +$ "T DA!!A"T) +" 5ACT A") +$ D+TIT A$+$ +" AD#

4

T ADA!) 5 )A/A$ CIC) +" "!A T!/$ +$)5CT+4: /!4! +T +$ I"DA!!A"T) K T 5ACT$ A") T AD#

4+

T ADA!) 5 ATT!"K$ 5$ +" T A/I"T 5%100,000#00 +$ IDA!!A"T)#

4++

T +"T!$T 5 TD4 %! C"T ?1P@ %! A""I/+/%$) " T TTA A/I"T 5 T /"TA!K ADA!) +$ +" C"T!A4"T+" 5 AD#

+t will 6e noted that not unli>e the *otion for reconsideration filed 6ypetitioner Juan 5# "a>pil and $ons, which was denied in theresolution of April 1, 1987, there is nothin. in the *otion for reconsideration filed 6y the Inited Construction Co#, +nc# that wasnot fully discussed in the assailed decision of cto6er 3, 198;#

+

Inited Construction Co#, +nc# ?I"+T) for short@, .aveconsidera6le e*phasis on the fact that the %A 6uildin. did notcollapse as found 6y the trial court and affir*ed 6y the Court of Appeals# therwise stated, I"+T) wishes to stress that su6=ect6uildin. did not disinte.rate co*pletely as the ter* (collapse( issupposed to connote#

e that as it *ay, it will 6e o6served that in the assasiled decision,this Court is in co*plete accord with the findin.s of the trial court

and affir*ed 6y the Court of Appeals, that after the April , 19;8earthua>e the 6uildin. in uestion was not totally lost, the collapsewas only partial and the 6uildin. could still 6e restored at thee<pense of %900,000#00# ut after the su6seuent earthua>e on April 7, 9, and 1, 1970 there was no uestion that further da*a.ewas caused to the property resultin. in an eventual andunavoida6le collapse or de*olition ?co*pete collapse@# +n fact, on April 30, 1970 the 6uildin. was authoried 6y the trial court to 6ede*olished at the e<pense of the plaintiff# "ote that a neededde*olition is in fact a for* of (collapse(#

The 6one of contention is therefore, not on the fact of collapse 6uton who should shoulder the da*a.es resultin. fro* the partial andeventual collapse# As ruled 6y this Court in said decision, thereshould 6e no uestion that the "A%+$ and I"+T) are lia6le for

the da*a.e#

Citin. the case of Tuc>er v# /ilan ?&9 ## &379, &380@ as the casein point, the pertinent portion of the decision reads2

ne who ne.li.ently creates a dan.erous condition cannot escapeha6ility for the natural and pro6a6le conseuences thereof,althou.h the act of a third person, or an act of od for which he isnot responsi6le, intervenes to precipitate the loss#

++

I"+T) ar.ues that it is the le.al duty of %A to provide full-ti*eand active supervision in the co on of su6=ect 6uildin.# 5ailin. tocite any provision of law to support its ar.u*ents, I"+T) insists

on the inherent le.al duty of the owner, reinforced 6y practice,usa.e and custo*, to e<ercise such supervision# Apart fro* thefact that I"+T) see*s to have co*pletely contradicted its ownview that this construction involves hi.hly technical *atters andtherefore 6eyond the a*6it of ordinary understandin. ande<perience, the contrary appears to 6e *ore in accord with ordinarypractice, which is to avail oneself of the services of architects anden.ineers whose trainin. and e<pertise *a>e the* *ore ualifiedto provide effective supervision of the construction# +n fact, it was onthe su..estion of Juan 5# "a>pil, one of the petitioners herein, that

the construction was underta>en on an ad*inistration 6asis?)ecision, p# 3@# Thus, the trial court did not err in holdin. thatchar.in. the owner with fun ti*e supervision of the constructionhas no le.al or contractual 6asis ?)ecision, p# 7@#

+++

I"+T) points out that 6ad faith is a uestion of fact which was notesta6lished# The Co**issioner, the trial court and the Court of Appeals, all of which are triers of fact, alle.edly concede that therewas ne.li.ence 6ut not 6ad faith#

A careful study of the decision will show that there is no

contradiction 6etween the a6ove findin. of ne.li.ence 6y the trialcourt which was for*ed 6y the Court of Appeals and the rulin. of this Court# n the contrary, on the 6asis of such findin., it was heldthat such wanton ne.li.ence of 6oth the defendant and the third-party defendants in effectin. the plans, desi.ns, specifications, andconstruction of the %A 6uildin. is euivalent to 6ad faith in theperfor*ance of their respective tas>s ?)ecision, p# 8@#

+4 R 4

I"+T) ta>es e<ception to the five ?'@ fold increase in the award of da*a.es fro* %1,189,33'#00 to %' *illion pesos# +t is clai*ed thatthe report of the Co**issioner spea>s of only %1,100,000#00 sothat there is no 6asis for such award# +t will 6e recalled that theesti*ate of the Co**issioner was li*ited to %1,100,000#00 for costof repairs after the partial collapse of the 6uildin. on April , 19;86ut not after its total collapse reswtin. fro* the su6seuentearthua>es# +t is therefore evident that the actual cost of totalreconstruction of the 6uildin. hi* uestion was not considered 6ythe co**issioner in the co*putation# Considerin. further thepresent cost of reconstruction, the new a*ount ?arrived at al*ost0 years later@ is far fro* 6ein. e<cessive# +t is indeed a veryconservative esti*ate#

Any alle.ation that %A could have *iti.ated its loss 6y e<ecutin.an offer to purchase the 6uildin. prior to its co*plete de*olitionloses si.ht of the fact, that the offer was very low, considerin. theco*6ined value of the 6uildin. and the lot#

+n addition, there is *erit in the %A clai* that the unrealied rentalinco*e awarded to it should not 6e li*ited to a period of one-half year 6ut should 6e co*puted on a continuin. 6asis at the rate of %178,;71#7; a year until =ud.*ent for the principal a*ount sha.have 6een satisfied# Thus, this Court awarded an (inde*nity infavor of the %hilippine ar Assodation of 5+4 /++"?%',000,000#00@ %esos to cover da*a.es ?with the e<ception of attorneys fees@ occasioned 6y the loss of the 6uildin. ?includin.interest char.es and lost rentals@ ###

As for the award of attorneys fees, there is no uestion that thesie of attorneys fees as well as the a*ount of da*a.es, is su6=ectto the sound discretion of the court ?/a.6anua v# +AC, 137 $C!A33 M198'N@# arlier, this Court has ruled that an award of 10P of the a*ount of total recovery, for atto*eys fees, is reasona6le#

?Central an> of the %hil# v# Court of Appeals, ;3 $C!A &3'?197'N@#

4+

There should 6e no dispute that the i*position of 1P interestpursuant to Central an> Circular "o# &1; ?passed pursuant to theauthority .ranted to the Central an> 6y %#)# "o# 11; whicha*ended Act "o# ;'', otherwise >nown as the Isury aw@ isapplica6le only in the followin.2 ?1@ loans: ?@ for6earance of any*oney, .oods or credit: and ?3@ rate allowed in =ud.*ents?=ud.*ents spo>en of refer to =ud.*ents involvin. loans or for6earance of any *oney, .oods or credits@# ?%hilippine !a66it usines +nc# v# Cru, 1&3 $C!A 1;0-1;1 M198;N: !efor*ina v# To*ol,Jr#, 139 $C!A ;0 ?198'@@# +t is true that in the instant case, there is

neither a loan or a for6earance, 6ut then no interest is actually6ein. i*posed provided the su*s referred to in the =ud.*ent arepaid upon the finality of the =ud.*ent# +t is delay in the pay*ent of such final =ud.*ent, that will cause the i*position of the interest#

+t will 6e noted that in the cases already adverted to, the rate of interest is i*posed on the total su* fro* the filin. of the co*plaintuntil paid: in other words, as part of the =ud.*ent for da*a.es#Clearly they are not applica6le to the instant case#

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%!/+$$ C"$+)!), I"+T)s *otion for reconsideration ishere6y )"+): the "A%+$( *otion for leave to file second*otion for reconsideration is also )"+), the latters( first *otionon the sa*e .rounds havin. 6een already denied with finality in theresolution of April 3, 1987# "eedless to say, the /otion to !efer thiscase to the Court n anc is )"+), in view of all the thin.sstated in this !esolution#

EDGAR CO0ALIONG S-IPPING LINES, INC., Petitioner,vs.UCP GENERAL INSURANCE COMPAN!, INC., Respondent.

The lia6ility of a co**on carrier for the loss of .oods *ay, 6ystipulation in the 6ill of ladin., 6e li*ited to the value declared 6ythe shipper# n the other hand, the lia6ility of the insurer isdeter*ined 6y the actual value covered 6y the insurance policy andthe insurance pre*iu*s paid therefor, and not necessarily 6y thevalue declared in the 6ill of ladin.#

The Case

efore the Court is a %etition for !eview1 under !ule &' of the!ules of Court, see>in. to set aside the Au.ust 31, 000 )ecisionand the "ove*6er 17, 000 !esolution3 of the Court of Appeals&?CA@ in CA-! $% "o# ;7'1# The dispositive part of the )ecisionreads2

(+" T +T 5 T 5!+", the appeal is !A"T)#The )ecision appealed fro* is !4!$)# M%etitionerN is here6yconde*ned to pay to MrespondentN the total a*ount of %1&8,'00#00,with interest thereon, at the rate of ;P per annu*, fro* date of this)ecision of the Court# M!espondentVsN clai* for attorneyVs fees MisN)+$/+$$)# M%etitionerVsN counterclai*s are )+$/+$$)#('

The assailed !esolution denied petitionerVs /otion for !econsideration#

n the other hand, the disposition of the !e.ional Trial CourtVs;)ecision,7 which was later reversed 6y the CA, states2

(D!5!, pre*ises considered, the case is here6y

)+$/+$$) for lac> of *erit#

("o cost#(8

The 5acts

The facts of the case are su**aried 6y the appellate court in thiswise2

($o*eti*e on )ece*6er 11, 1991, "estor An.elia delivered to thed.ar Co>alion. $hippin. ines, +nc# ?now Co>alion. $hippin.ines@, MpetitionerN for 6revity, car.o consistin. of one ?1@ carton of Christ*as d\cor and two ?@ sac>s of plastic toys, to 6e transportedon 6oard the /O4 Tanda. on its 4oya.e "o# T-189 scheduled todepart fro* Ce6u City, on )ece*6er 1, 1991, for Tanda., $uri.ao

del $ur# M%etitionerN issued ill of adin. "o# '8, frei.ht prepaid,coverin. the car.o# "estor An.elia was 6oth the shipper andconsi.nee of the car.o valued, on the face thereof, in the a*ount of %;,'00#00# ]osi*o /ercado li>ewise delivered car.o to MpetitionerN,consistin. of two ?@ cartons of plastic toys and Christ*as decor,one ?1@ roll of floor *at and one ?1@ 6undle of various or assorted.oods for transportation thereof fro* Ce6u City to Tanda., $uri.aodel $ur, on 6oard the said vessel, and said voya.e# M%etitionerNissued ill of adin. "o# '9 coverin. the car.o which, on the facethereof, was valued in the a*ount of %1&,000#00# Inder the ill of adin., ]osi*o /ercado was 6oth the shipper and consi.nee of the car.o#

(n )ece*6er 1, 1991, 5eliciana e.aspi insured the car.o,covered 6y ill of adin. "o# '9, with the IC% eneral +nsurance

Co#, +nc#, MrespondentN for 6revity, for the a*ount of %100,000#00Wa.ainst all ris>sV under pen %olicy "o# 00O9 1O'& for which shewas issued, 6y MrespondentN, /arine !is> "ote "o# 18&09 on saiddate# $he also insured the car.o covered 6y ill of adin. "o# '8,with MrespondentN, for the a*ount of %'0,000#00, under pen %olicy"o# 00O9 1O'& on the 6asis of which MrespondentN issued /arine!is> "ote "o# 18&10 on said date#

(Dhen the vessel left port, it had thirty-four ?3&@ passen.ers andassorted car.o on 6oard, includin. the .oods of e.aspi# After the

vessel had passed 6y the /andaue-/actan rid.e, fire ensued inthe en.ine roo*, and, despite earnest efforts of the officers andcrew of the vessel, the fire en.ulfed and destroyed the entire vesselresultin. in the loss of the vessel and the car.oes therein# TheCaptain filed the reuired /arine %rotest#

($hortly thereafter, 5eliciana e.aspi filed a clai*, withMrespondentN, for the value of the car.o insured under /arine !is>"ote "o# 18&09 and covered 6y ill of adin. "o# '9# $hesu6*itted, in support of her clai*, a !eceipt, dated )ece*6er 11,1991, purportedly si.ned 6y ]osi*o /ercado, and rder $lipspurportedly si.ned 6y hi* for the .oods he received fro* 5elicianae.aspi valued in the a*ount of %110,0';#00# M!espondentN

approved the clai* of 5eliciana e.aspi and drew and issuedIC% Chec> "o# ;1939, dated /arch 9, 199, in the net a*ountof %99,000#00, in settle*ent of her clai* after which she e<ecuteda $u6ro.ation !eceiptO)eed, for said a*ount, in favor of MrespondentN# $he also filed a clai* for the value of the car.ocovered 6y ill of adin. "o# '8# $he su6*itted to MrespondentN a!eceipt, dated )ece*6er 11, 1991 and rder $lips, purportedlysi.ned 6y "estor An.elia for the .oods he received fro* 5elicianae.aspi valued at %;0,338#00# M!espondentN approved her clai*and re*itted to 5eliciana e.aspi the net a*ount of %&9,'00#00,after which she si.ned a $u6ro.ation !eceiptO)eed, dated /arch9, 199, in favor of MrespondentN#

(n July 1&, 199, MrespondentN, as su6ro.ee of 5eliciana e.aspi,filed a co*plaint anchored on torts a.ainst MpetitionerN, with the!e.ional Trial Court of /a>ati City, for the collection of the totalprincipal a*ount of %1&8,'00#00, which it paid to 5eliciana e.aspifor the loss of the car.o, prayin. that =ud.*ent 6e rendered in itsfavor and a.ainst the MpetitionerN as follows2

WD!5!, it is respectfully prayed of this onora6le Court thatafter due hearin., =ud.*ent 6e rendered orderin. MpetitionerN to payMrespondentN the followin.#

1# Actual da*a.es in the a*ount of %1&8,'00#00 plus interestthereon at the le.al rate fro* the ti*e of filin. of this co*plaint untilfully paid:

# AttorneyVs fees in the a*ount of %10,000#00: and

3# Cost of suit#

WM!espondentN further prays for such other reliefs and re*edies asthis onora6le Court *ay dee* =ust and euita6le under thepre*ises#V

(M!espondentN alle.ed, inter alia, in its co*plaint, that the car.osu6=ect of its co*plaint was delivered to, and received 6y,MpetitionerN for transportation to Tanda., $uri.ao del $ur under Willof adin.s,V Anne<es WAV and WV of the co*plaint: that the loss of thecar.o was due to the ne.li.ence of the MpetitionerN: and that5eliciana e.aspi had e<ecuted $u6ro.ation !eceiptsO)eeds infavor of MrespondentN after payin. to her the value of the car.o onaccount of the /arine !is> "otes it issued in her favor coverin. the

car.o#

(+n its Answer to the co*plaint, MpetitionerN alle.ed that2 ?a@MpetitionerN was cleared 6y the oard of /arine +nuiry of anyne.li.ence in the 6urnin. of the vessel: ?6@ the co*plaint stated nocause of action a.ainst MpetitionerN: and ?c@ the shippersOconsi.neehad already 6een paid the value of the .oods as stated in the ill of adin. and, hence, MpetitionerN cannot 6e held lia6le for the loss of the car.o 6eyond the value thereof declared in the ill of adin.#

(After MrespondentN rested its case, MpetitionerN prayed for and wasallowed, 6y the Court a uo, to ta>e the depositions of Chester Co>alion., the 4ice-%resident and Chief peratin. fficer of MpetitionerN, and a resident of Ce6u City, and of "oel Tanyu, anofficer of the uita6le an>in. Corporation, in Ce6u City, and a

resident of Ce6u City, to 6e .iven 6efore the %residin. Jud.e of ranch 10; of the !e.ional Trial Court of Ce6u City# Chester Co>alion. and "oel Tanyu did testify, 6y way of deposition, 6eforethe Court and declared inter alia, that2 MpetitionerN is a fa*ilycorporation li>e the Chester /ar>etin., +nc#: "estor An.elia had6een doin. 6usiness with MpetitionerN and Chester /ar>etin., +nc#,for years, and incurred an account with Chester /ar>etin., +nc# for his purchases fro* said corporation: MpetitionerN did issue ills of adin. "os# '8 and '9 for the car.o descri6ed therein with ]osi*o/ercado and "estor An.elia as shippersOconsi.nees, respectively:

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failed to show when the last inspection and care of the au<iliaryen.ine fuel oil service tan> was *ade, what the nor*al practicewas for its *aintenance, or so*e other evidence to esta6lish that ithad e<ercised e<traordinary dili.ence# +t *erely stated that constantinspection and care were not possi6le, and that the last ti*e thevessel was dry-doc>ed was in "ove*6er 1990# "ecessarily, inaccordance with Article 173'17 of the Civil Code, we hold petitioner responsi6le for the loss of the .oods covered 6y ills of adin."os# '8 and '9#

$econd +ssue2

<tent of ia6ility

!espondent contends that petitionerVs lia6ility should 6e 6ased onthe actual insured value of the .oods, su6=ect of this case# n theother hand, petitioner clai*s that its lia6ility should 6e li*ited to thevalue declared 6y the shipperOconsi.nee in the ill of adin.#

The records18 show that the ills of adin. coverin. the lost .oodscontain the stipulation that in case of clai* for loss or for da*a.e tothe shipped *erchandise or property, (MtNhe lia6ility of the co**oncarrier < < < shall not e<ceed the value of the .oods as appearin. inthe 6ill of ladin.#(19 The atte*pt 6y respondent to *a>e li.ht of thisstipulation is unconvincin.# As it had the consi.neesV copies of theills of adin.,0 it could have easily produced those copies,instead of relyin. on *ere alle.ations and suppositions# owever, itpresented *ere photocopies thereof to disprove petitionerVsevidence showin. the e<istence of the a6ove stipulation#

A stipulation that li*its lia6ility is valid1 as lon. as it is not a.ainstpu6lic policy# +n verett $tea*ship Corporation v# Court of Appeals, the Court stated2

(A stipulation in the 6ill of ladin. li*itin. the co**on carrierVslia6ility for loss or destruction of a car.o to a certain su*, unlessthe shipper or owner declares a .reater value, is sanctioned 6y law,particularly Articles 17&9 and 17'0 of the Civil Code whichprovides2

WArt# 17&9# A stipulation that the co**on carrierVs lia6ility is li*itedto the value of the .oods appearin. in the 6ill of ladin., unless the

shipper or owner declares a .reater value, is 6indin.#V

WArt# 17'0# A contract fi<in. the su* that *ay 6e recovered 6y theowner or shipper for the loss, destruction, or deterioration of the.oods is valid, if it is reasona6le and =ust under the circu*stances,and has 6een freely and fairly a.reed upon#V

($uch li*ited-lia6ility clause has also 6een consistently upheld 6ythis Court in a nu*6er of cases# Thus, in $ea-and $ervice, +nc# vs#+nter*ediate Appellate Court, we ruled2

W+t see*s clear that even if said section & ?'@ of the Carria.e of oods 6y $ea Act did not e<ist, the validity and 6indin. effect of thelia6ility li*itation clause in the 6ill of ladin. here are neverthelessfully sustaina6le on the 6asis alone of the cited Civil Code

%rovisions# That said stipulation is =ust and reasona6le is ar.ua6lefro* the fact that it echoes Art# 17'0 itself in providin. a li*it tolia6ility only if a .reater value is not declared for the ship*ent in the6ill of ladin.# To hold otherwise would a*ount to uestionin. the =ustness and fairness of the law itself, and this the privaterespondent does not pretend to do# ut over and a6ove thatconsideration, the =ust and reasona6le character of such stipulationis i*plicit in it .ivin. the shipper or owner the option of avoidin.accrual of lia6ility li*itation 6y the si*ple and surely far fro*onerous e<pedient of declarin. the nature and value of theship*ent in the 6ill of ladin.#V

(%ursuant to the afore-uoted provisions of law, it is reuired thatthe stipulation li*itin. the co**on carrierVs lia6ility for loss *ust 6eWreasona6le and =ust under the circu*stances, and has 6een freely

and fairly a.reed upon#

(The 6ill of ladin. su6=ect of the present controversy specificallyprovides, a*on. others2

V18# All clai*s for which the carrier *ay 6e lia6le shall 6e ad=ustedand settled on the 6asis of the shipperVs net invoice cost plus frei.htand insurance pre*iu*s, if paid, and in no event shall the carrier 6e lia6le for any loss of possi6le profits or any conseuential loss#

WThe carrier shall not 6e lia6le for any loss of or any da*a.e to or inany connection with, .oods in an a*ount e<ceedin. ne undredThousand Ken in Japanese Currency ?^100,000#00@ or itseuivalent in any other currency per pac>a.e or custo*ary frei.htunit ?whichever is least@ unless the value of the .oods hi.her thanthis a*ount is declared in writin. 6y the shipper 6efore receipt of the .oods 6y the carrier and inserted in the ill of adin. and e<trafrei.ht is paid as reuired#V

(The a6ove stipulations are, to our *ind, reasona6le and =ust#1avvphi1 +n the 6ill of ladin., the carrier *ade it clear that itslia6ility would only 6e up to ne undred Thousand ?K100,000#00@Ken# owever, the shipper, /aru*an Tradin., had the option to

declare a hi.her valuation if the value of its car.o was hi.her thanthe li*ited lia6ility of the carrier# Considerin. that the shipper didnot declare a hi.her valuation, it had itself to 6la*e for notco*plyin. with the stipulations#( ?+talics supplied@

+n the present case, the stipulation li*itin. petitionerVs lia6ility is notcontrary to pu6lic policy# +n fact, its =ust and reasona6le character isevident# The shippersOconsi.nees *ay recover the full value of the.oods 6y the si*ple e<pedient of declarin. the true value of theship*ent in the ill of adin.# ther than the pay*ent of a hi.her frei.ht, there was nothin. to stop the* fro* placin. the actualvalue of the .oods therein# +n fact, they co**itted fraud a.ainst theco**on carrier 6y deli6erately undervaluin. the .oods in their illof adin., thus deprivin. the carrier of its proper and =ust transportfare#

Concededly, the purpose of the li*itin. stipulation in the ill of adin. is to protect the co**on carrier# $uch stipulation o6li.esthe shipperOconsi.nee to notify the co**on carrier of the a*ountthat the latter *ay 6e lia6le for in case of loss of the .oods# Theco**on carrier can then ta>e appropriate *easures -- .ettin.insurance, if needed, to cover or protect itself# This precaution onthe part of the carrier is reasona6le and prudent# ence, ashipperOconsi.nee that undervalues the real worth of the .oods itsee>s to transport does not only violate a valid contractualstipulation, 6ut co**its a fraudulent act when it see>s to *a>e theco**on carrier lia6le for *ore than the a*ount it declared in the6ill of ladin.#

+ndeed, ]osi*o /ercado and "estor An.elia *isled petitioner 6yundervaluin. the .oods in their respective ills of adin.# ence,petitioner was e<posed to a ris> that was deli6erately hidden fro*it, and fro* which it could not protect itself#

+t is well to point out that, for assu*in. a hi.her ris> ?the alle.edactual value of the .oods@ the insurance co*pany was paid thecorrect hi.her pre*iu* 6y 5eliciana e.aspi: while petitioner waspaid a fee lower than what it was entitled to for transportin. the.oods that had 6een deli6erately undervalued 6y the shippers inthe ill of adin.# etween the two of the*, the insurer should 6ear the loss in e<cess of the value declared in the ills of adin.# Thisis the =ust and euita6le solution#

+n A6oiti $hippin. Corporation v# Court of Appeals,3 thedescription of the nature and the value of the .oods shipped weredeclared and reflected in the 6ill of ladin., li>e in the present case#The Court therein considered this declaration as the 6asis of thecarrierVs lia6ility and ordered pay*ent 6ased on such a*ount#5ollowin. this rulin., petitioner should not 6e held lia6le for *orethan what was declared 6y the shippersOconsi.nees as the value of the .oods in the 6ills of ladin.#

De find no co.ent reason to distur6 the CAVs findin. that 5elicianae.aspi was the owner of the .oods covered 6y ills of adin."os# '8 and '9# Indou6tedly, the .oods were *erely consi.ned to"estor An.elia and ]osi*o /ercado, respectively: thus, 5elicianae.aspi or her su6ro.ee ?respondent@ was entitled to the .oods or,in case of loss, to co*pensation therefor# There is no evidence

showin. that petitioner paid her for the loss of those .oods# +t doesnot even clai* to have paid her#

n the other hand, e.aspi /ar>etin. filed with petitioner a clai*for the lost .oods under ill of adin. "o# '9, for which the latter su6seuently paid %1&,000# ut nothin. in the records convincin.lyshows that the for*er was the owner of the .oods# !espondentwas, however, a6le to prove that it was 5eliciana e.aspi whoowned those .oods, and who was thus entitled to pay*ent for their loss# ence, the clai* for the .oods under ill of adin. "o# '9

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cannot 6e dee*ed to have 6een e<tin.uished, 6ecause pay*entwas *ade to a person who was not entitled thereto#

Dith re.ard to the clai* for the .oods that were covered 6y ill of adin. "o# '8 and valued at %;,'00, the parties have notconvinced us to distur6 the findin.s of the CA that co*pensationcould not validly ta>e place# Thus, we uphold the appellate courtVsrulin. on this point#

D!5!, the %etition is here6y %A!T+AK !A"T)# Theassailed )ecision is /)+5+) in the sense that petitioner is!)!) to pay respondent the su*s of %1&,000 and %;,'00,which represent the value of the .oods stated in ills of adin.

"os# '9 and '8, respectively# "o costs#

ACOLOD*MURCIA MILLING CO., INC., petitioner,vs.-ON. COURT OF APPEALS AND ALONSO GATUSLAO,respondents.This is a petition for review on certiorari of the decision of the Courtof Appeals in CA-#!# C4 "os# '971;-'9717 pro*ul.ated on$epte*6er 11, 1987 affir*in. in toto the decision of the Court of 5irst +nstance of "e.ros ccidental in two consolidated civil cases,the dispositive portion of which reads as follows2

%!/+$$ C"$+)!), the decision appealed fro* is here6yaffir*ed in toto#

The uncontroverted facts of the case 1 are as follows2

1# <<< <<< <<<

# //C is the owner and operator of the su.ar central inacolod City, %hilippines:

3# A"$ ATI$A is a re.istered planter of theacolod-/urcia /ill )istrict with %lantation Audit "o# 3-79, 6ein. are.istered owner of ot "os# 310, 1&0, 1&1 and 101-A of theCadastral $urvey of /urcia, "e.ros ccidental, otherwise >nownas da# $an !oue:

&# n /ay &, 19'7 //C and Alonso atuslao e<ecutedan <tension and /odification of /illin. Contract ?Anne< A of theco*plaint in 6oth cases@ which was re.istered on $epte*6er 17,19; in the ffice of the !e.ister of )eeds of "e.ros ccidental,and annotated on Transfer Certificates of Title "os# T-&07, !T-', !T-103', and !T-103; coverin. said ot "os# 310, 1&0,1&1 and 101-A:

'# That since the crop year 19'7-19'8 up to crop year 19;7-19;8, inclusive, Alonso atuslao has 6een *illin. all the su.arcane.rown and produced on said ot "os# 310, 1&0, 1&1 and 101-A withthe /ill of //C:#

;# $ince the crop year 190-1 to crop year 19;7-19;8,inclusive, the canes of planters adhered to the *ill of //C were

transported fro* the plantation to the *ill 6y *eans of cane carsand throu.h railway syste* operated 6y //C:

7# The loadin. points at which planters Alonso atuslao wasand should deliver and load all his canes produced in his plantation,da# $an !oue, were at the Ari*as ine, $witch , and fro*which loadin. stations, //C had 6een haulin. planter atuslaossu.ar cane to its *ill or factory continuously until the crop year 19;7-;8:

8# //C had not 6een a6le to use its cane cars and railwaysyste* for the car.o crop year 19;8-19;9:

9# %lanter Alonso atuslao on various dates reuestedtransportation facilities of //C to 6e sent to his loadin. stations

or switches for purposes of haulin. and *illin. his su.arcane cropsof crop year 19;8-19;9:

10# The esti*ated .ross production of da# $an !oue for the cropyear 19;8-19;9 is &,'00 piculs#

The records show that since the crop year 190-191 to the cropyear 19;7-19;8, the canes of the adhered planters weretransported fro* the plantation to the *ill of //C 6y *eans of cane cars and throu.h a railway syste* operated 6y //C which

traversed the land of the adherent planters, correspondin. to theri.hts of way on their lands .ranted 6y the planters to the Centralfor the duration of the *illin. contracts which is for (un periodo decuarenta y cinco anos o cosechas a contar desde la cosecha de190-191( ?a period of &' years or harvests, 6e.innin. with aharvest of 190-191@#

//C constructed the railroad trac>s in 190 and the adherentplanters .ranted the //C a ri.ht of way over their lands asprovided for in the *illin. contracts# The owners of the haciendaelvetia were a*on. the si.natories of the *illin. contracts# Dhentheir *illin. contracts with petitioner //C e<pired at the end of the 19;&-19;' crop year, the correspondin. ri.ht of way of the

owners of the hacienda elvetia .ranted to the Central alsoe<pired#

Thus, the //C was una6le to use its railroad facilities durin. thecrop year 19;8-19;9 due to the closure in 19;8 of the portion of therailway traversin. the hacienda elvetia as per decision of theCourt in An.ela state, +nc# and 5ernando 5# ona.a, +nc# v# Courtof 5irst +nstance of "e.ros ccidental, #!# "o# -708&, ?&$C!A '00 M19;8N@# +n the sa*e case the Court ruled that theCentrals conventional ri.ht of way over the hacienda elvetiaceased with the e<piration of its a*ended *illin. contracts with thelandowners of the hacienda at the end of the 19;&-19;' crop year and that in the a6sence of a renewal contract or the esta6lish*entof a co*pulsory servitude of ri.ht of way on the sa*e spot androute which *ust 6e predicated on the satisfaction of thepreconditions reuired 6y law, there su6sists no ri.ht of way to 6eprotected#

Conseuently, the owners of the hacienda elvetia reuired theCentral to re*ove the railway trac>s in the hacienda occupyin. atleast 3,&' lineal *eters with a width of 7 *eters or a total of ,71' suare *eters, *ore or less# That was the naturalconseuence of the e<piration of the *illin. contracts with thelandowners of the hacienda elvetia ?An.ela state, +nc# and5ernando ona.a, +nc# v# Court of 5irst +nstance of "e.rosccidental, i6id@# //C filed a co*plaint for le.al ease*enta.ainst the owners of the hacienda, with the Court of 5irst +nstanceof "e.ros ccidental which issued on cto6er &, 19;' an e< partewrit of preli*inary in=unction restrainin. the landowners fro*

reversin. andOor destroyin. the railroad trac>s in uestion and fro*i*pedin., o6structin. or in any way preventin. the passa.e andoperation of plaintiffs loco*otives and cane cars over defendantsproperty durin. the pendency of the liti.ation and *aintained thesa*e in its su6seuent orders of /ay 31, and "ove*6er ;, 19;;#The outco*e of the case, however, was not favora6le to the plaintiff //C# +n the sa*e case the landowners as>ed this Court torestrain the lower court fro* enforcin. the writ of preli*inaryin=unction it issued, prayin. that after the hearin. on the *erits, therestrainin. order 6e *ade per*anent and the orders co*plained of 6e annulled and set aside# The Court .ave due course to thelandowners petition and on Au.ust 10, 19;7 issued the writ of preli*inary in=unction en=oinin. the lower court fro* enforcin. thewrit of preli*inary in=unction issued 6y the latter on cto6er &,19;'#

The writ of preli*inary in=unction issued 6y the Court was liftedte*porarily on *otion that throu.h the *ediation of the %resident of the %hilippines the An.ela state and the ona.a state a.reedwith the Central to allow the use of the railroad trac>s passin.throu.h the hacienda elvetia durin. the 19;7-19;8 *illin. seasononly, for the sa*e purpose for which they had 6een previouslyused, 6ut it was understood that the liftin. of the writ was withoutpre=udice to the respective ri.hts and positions of the parties in thecase and not dee*ed a waiver of any of their respective clai*s andalle.ations in #!# "o# -708& or in any other case 6etween thesa*e parties, future or pendin.# The Court resolved to approve the*otion only up to and includin. June 30, 19;8 to .ive effect to thea.ree*ent 6ut to 6e dee*ed auto*atically reinstated 6e.innin.July 1, 19;8 ?An.ela state, +nc# and 5ernando 5# ona.a, +nc# v#

Court of 5irst +nstance of "e.ros ccidental, i6id#@#

The te*porary liftin. of the writ of preli*inary in=unction assuredthe *illin. of the 19;7-19;8 crop 6ut not the produce of thesucceedin. crop years which situation was duly co**unicated 6ythe %resident and eneral /ana.er of the //C to the %residentof acolod-/urcia $u.ar 5ar*ers Corporation ?/$5C@ onJanuary , 19;8# 3

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n cto6er 30, 19;8, Alonso atuslao, one of private respondentsherein, and his wife, /aria # atuslao, filed Civil Case "o# 8719 inthe Court of 5irst +nstance of "e.ros ccidental, a.ainst petitioner herein, acolod-/urcia /illin. Co#, +nc# ?//C@, for 6reach of contract, prayin. a*on. others, for the issuance of a writ of preli*inary *andatory in=unction orderin. defendant to i**ediatelysend transportation facilities and haul the already cut su.arcane tothe *ill site and principally prayin. after hearin., that =ud.*ent 6erendered declarin. the rescission of the *illin. contract e<ecuted6y plaintiffs and defendant in 19'7 for seventeen ?17@ years or upto crop year 1973-7&, invo>in. as .round the alle.ed failure andOor ina6ility of defendant to co*ply with its specific o6li.ation of providin. the necessary transportation facilities to haul the

su.arcane of atuslao fro* plaintiffs plantation specifically for thecrop year 19;7-19;8# %laintiffs further prayed for the recovery of actual and co*pensatory da*a.es as well as *oral and e<e*plaryda*a.es and attorneys fees# &

+n answer, defendant //C clai*ed that despite its ina6ility to useits railways syste* for its loco*otives and cane cars to haul thesu.arcanes of all its adhered planters includin. plaintiffs for the19;8-;9 crop year alle.edly due to force *a=eure, in order toco*ply with its o6li.ation, defendant hired at tre*endous e<pense,private truc>s as pri*e *overs for its trailers to 6e used for haulin.of the canes, especially for those who applied for and reuestedtransportation facilities# %laintiffs, 6ein. one of said planters,instead of loadin. their cut canes for the 19;8-;9 crop on the car.otruc>s of defendant, loaded their cut canes on truc>s provided 6ythe acolod-/urcia A.ricultural Cooperative /ar>etin. Association,+nc# ?-/ AC/A@ which transported plaintiffs canes of the 19;8-;9su.arcanes crop# )efendant prayed in its counterclai* for thedis*issal of Civil Case "o# 8719 for the recovery of actualda*a.es, *oral and e<e*plary da*a.es and for attorneys fees# '

n "ove*6er 1, 19;8, //C filed in the sa*e court Civil Case"o# 87&' a.ainst Alonso atuslao, the A.ro-+ndustrial )evelop*entof $ilay-$aravia ?A+)$+$A@ and the acolod-/urcia A.riculturalCooperative /ar>etin. Associations, +nc# ?-/ AC/A@, see>in.specific perfor*ance under the *inin. contract e<ecuted on /ay&, 19'7 6etween plaintiff and defendant Alonso atuslao prayin.for the issuance of writs of preli*inary *andatory in=unction to stopthe alle.ed violation of the contract 6y defendant Alonso atuslao

in confederation, colla6oration and connivance with defendant /- AC/A, A+)$+$A, and for the recovery of actual, *oral ande<e*plary da*a.es and attorneys fees# ;

)efendant Alonso atuslao and the acolod-/urcia A.riculturalCooperative /ar>etin. Association, +nc# filed their answer onJanuary 7, 19;9 with co*pulsory counter-clai*s, statin. 6y way of special and affir*ative defense, a*on. others, that the case is6arred 6y another action pendin. 6etween the sa*e parties for thesa*e cause of action# 7

)efendant A.ro-+ndustrial )evelop*ent Corporation of $ilay-$aravia, +nc# filed its answer on 5e6ruary 8, 19;9, alle.in. a*on.others 6y way of affir*ative defense that 6efore it a.reed to *ill thesu.arcane of its co-defendant Alonso atuslao, it carefully

ascertained and 6elieved in .ood faith that2 ?a@ plaintiff wasincapa6le of the su.arcane of A+)$+$As co-defendant planters aswell as the su.arcane of other planters for*erly adherent toplaintiff, ?6@ plaintiff had in effect a.reed to a rescission of its *illin.contracts with its adhered planters, includin. the defendant planter,6ecause of inadeuate *eans of transportation# and had warnedand advised the* to *ill their su.arcane elsewhere, and had thusinduced the* to 6elieve and act on the 6elief, that it could not *illtheir su.arcane and that it would not o6=ect to their *illin. withother centrals: and ?c@ up to now plaintiff is incapa6le of haulin. thesu.arcane of A+)$+$As co-defendants to plaintiffs *ill site for *illin. purposes#

The two cases, Civil Cases "os# 8719 and 87&' were consolidatedfor =oint trial 6efore ranch ++ of the Court of 5irst +nstance of

"e.ros ccidental# 8 n $epte*6er 8, 19;9, the parties in 6othcivil cases filed their partial stipulation of facts which included astate*ent of the issues raised 6y the parties# 9

n 5e6ruary ;, 197;, the lower court rendered =ud.*ent declarin.the *illin. contract dated /ay &, 19'7 rescinded# The dispositiveportion of the decision 10 reads2

D!5!, =ud.*ent is here6y rendered as follows2

?1@ +n Civil Case "o# 8719 the *illin. contract ?<h# (11(@dated /ay &, 19'7 is here6y declared rescinded or resolved andthe defendant acolod-/urcia Co*pany, +nc# is here6y ordered topay plaintiffs Alonso atuslao and /aria # atuslao the a*ount of %,;'#00 with le.al interest fro* the ti*e of the filin. of theco*plaint 6y way of actual da*a.es: %',000#00 as attorneys feesand the costs of the suit: defendants counterclai* is dis*issed:and

?@ The co*plaint in Civil Case "o# 87&' as well as thecounterclai*s therein are ordered dis*issed, without costs#

acolod-/urcia /illin. Co#, +nc# defendant in Civil Case "o# 8719

and plaintiff in Civil Case "o# 87&' appealed the case torespondent Court of Appeals which affir*ed in toto ?!ollo, p# 81@the decision of the lower court# The *otion for reconsideration filed6y defendant-appellant acolod-/urcia /illin. Co*pany, petitioner herein, was denied 6y the appellate court for lac> of *erit# 11ence, this petition#

The issues 1 raised 6y petitioner are as follows2

+

DT! ! "T T C$I! 5 %T+T+"!$ !A+!A) +"$ C"$T+TIT 5!C /AJI!#

++

DT! ! "T %!+4AT !$%")"T ATI$A A$T !+T T !$C+") T /++" C"T!ACT D+T%T+T+"! I")! A!T+C 1191 5 T C+4+ C)#

+++

DT! ! "T %!+4AT !$%")"T ATI$A DA$JI$T+5+) +" 4+AT+" +$ /++" C"T!ACT D+T%T+T+"!#

+4

DT! ! "T %!+4AT !$%")"T$ ATI$A A")

-/ AC/A A! I+TK 5 A) 5A+T +" T B!C+$ 5T+! )IT+$ A") A! +" $T%% T I$T+" T A)IACK 5 T T!A"$%!TAT+" 5AC++T+$ 5%T+T+"! A") +T$ CA%AC+TK T /+ A") AI TCA"$ 5 +T$ A)!"T %A"T!$#

The cru< of the issue is whether or not the ter*ination of petitioners ri.ht of way over the hacienda elvetia caused 6y thee<piration of its a*ended *illin. contracts with the landowners of the lands in uestion is a fortuitous event or force *a=eure whichwill e<e*pt petitioner //C fro* fulfill*ent of its contractualo6li.ations#

+t is the position of petitioner acolod-/urcia /illin. Co#, +nc#?//C@ that the closure of its railroad lines constitute force

*a=eure, citin. Article 117& of the Civil Code, e<e*ptin. a personfro* lia6ility for events which could not 6e foreseen or whichthou.h foreseen were inevita6le#

This Court has consistently ruled that when an o6li.or is e<e*ptedfro* lia6ility under the aforecited provision of the Civil Code for a6reach of an o6li.ation due to an act of od, the followin. ele*ents*ust concur2 ?a@ the cause of the 6reach of the o6li.ation *ust 6eindependent of the wi. of the de6tor: ?6@ the event *ust 6e either unforseea6le or unavoida6le: ?c@ the event *ust 6e such as torender it i*possi6le for the de6tor to fulfill his o6li.ation in a nor*al*anner: ?d@ the de6tor *ust 6e free fro* any participation in, or a..ravation of the in=ury to the creditor ?4asue v# Court of Appeals, 138 $C!A ''3 M198'N: Juan 5# "a>pil R $ons v# Court of Appeals, 1&& $C!A '9; M198;N@# Applyin. the criteria to the instant

case, there can 6e no other conclusion than that the closure of therailroad trac>s does not constitute force *a=eure#

The ter*s of the *illin. contracts were clear and undou6tedly therewas no reason for A/C to e<pect otherwise# The closure of anyportion of the railroad trac>, not necessarily in the haciendaelvetia 6ut in any of the properties whose owners decided not torenew their *illin. contracts with the Central upon their e<piration,was forseea6le and inevita6le#

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%etitioner Central should have anticipated and should haveprovided for the eventuality 6efore co**ittin. itself# Inder thecircu*stances it has no one to 6la*e 6ut itself and cannot nowclai* e<e*ption fro* lia6ility#

+n the lan.ua.e of the law, the event *ust have 6een i*possi6le toforesee, or if it could 6e foreseen, *ust have 6een i*possi6le toavoid# There *ust 6e an entire e<clusion of hu*an a.ency fro* thecause of the in=ury or loss ?4asue v# Court of Appeals, supra@# +nthe case at 6ar, despite its awareness that the conventionalcontract of lease would e<pire in Crop Kear 19;&-19;' and thatrefusal on the part of any one of the landowners to renew their *illin. contracts and the correspondin. use of the ri.ht of way on

their lands would render i*possi6le co*pliance of its co**it*ents,petitioner too> a calculated ris> that all the landowners would renewtheir contracts# Infortunately, the su.ar plantation of An.ela state,+nc# which is located at the entrance of the *ill was the one whichrefused to renew its *illin. contract# As a result, the closure of therailway located inside said plantation paralyed the entiretransportation syste*# Thus, the closure of the railway lines wasnot an act of od nor does it constitute force *a=eure# +t was due tothe ter*ination of the contractual relationships of the parties, for which petitioner is char.ed with >nowled.e# 4erily, the lower courtfound that the An.ela state, +nc# notified //C as far 6ac> as Au.ust or $epte*6er 19;' of its intention not to allow the passa.eof the railway syste* thru its land after the aforesaid crop year# Adeuate *easures should have 6een adopted 6y //C toforestall such paralyation 6ut the records show none# All its effortswere .eared toward the outco*e of the court liti.ation 6ut providedno solutions to the transport pro6le* early enou.h in case of anadverse decision#

The last three issues 6ein. inter-related will 6e treated as one#%rivate respondent atuslao filed an action for rescission while//C filed in the sa*e court an action a.ainst atuslao, the A.ro+ndustrial )evelop*ent $ilay $aravia ?A+)$+$A@ and the acolod-/urcia A.ricultural Cooperative /ar>etin. Associations, +nc# ?-/ AC/A@ for specific perfor*ance under the *illin. contract#

There is no uestion that the contract in uestion involvesreciprocal o6li.ations: as such party is a de6tor and creditor of theother, such that the o6li.ation of one is dependent upon the

o6li.ation of the other# They are to 6e perfor*ed si*ultaneously sothat the perfor*ance of one is conditioned upon the si*ultaneousfulfill*ent of the other ?oysaw v# +nterphil %ro*otions, +nc#, 1&8$C!A ;&3 M1987N@#

Inder Article 1191 of the Civil Code, the power to rescindo6li.ations is i*plied in reciprocal ones in case one of the o6li.orsshould not co*ply with what is incu*6ent upon hi*# +n fact, it iswell esta6lished that the party who dee*s the contract violated *ayconsider it revo>ed or rescinded pursuant to their a.ree*ent andact accordin.ly, even without previous court action ?I#%# v# de los An.eles, 3' $C!A 10 M1970N: uon ro>era.e Co#, +nc# v#/ariti*e uildin. Co#, +nc#, &3 $C!A 9& M197N@#

+t is the .eneral rule, however, that rescission of a contract will not

6e per*itted for a sli.ht or casual 6reach, 6ut only for suchsu6stantial and funda*ental 6reach as would defeat the very o6=ectof the parties in *a>in. the a.ree*ent# The uestion of whether a6reach of a contract is su6stantial depends upon the attendantcircu*stances ?Iniversal 5ood Corporation v# Court of Appeals, etal#, 33 $C!A 1 M1970N@#

The issue therefore, hin.es on who is .uilty of the 6reach of the*illin. contract#

oth parties are a.reed that ti*e is of the essence in the su.ar industry: so that the su.arcanes have to 6e *illed at the ri.ht ti*e,not too early or too late, if the uantity and uality of the =uice are to6e assured# As found 6y the trial court, upon the e<ecution of thea*ended *illin. contract on /ay &, 19'7 for a period of 17 crop

years, //C undertoo> e<pressly a*on. its principal prestationsnot only to *ill atuslaos canes 6ut to haul the* 6y railway fro*the loadin. stations to the *ill# Atty# $olidu*, Chief e.al Counseland in Char.e of the e.al-Crop oan )epart*ent of the //Cacolod City ad*its that the *ode of transportation of canes fro*the fields to the *ill is a vital factor in the su.ar industry: preciselyfor this reason the *ode of transportation or haulin. the canes ise*6odied in the *illin. contract# 13 ut //C is now una6le tohaul the canes 6y railways as stipulated 6ecause of the closure of the railway lines: so that resolution of this issue ulti*ately rests on

whether or not //C was a6le to provide adeuate and efficienttransportation facilities of the canes of atuslao and the other planters *illin. with //C durin. the crop year 19;8-19;9# Asfound 6y 6oth the trial court and the Court of Appeals, the answer isin the ne.ative#

Ar*ando uanon, )ispatcher of the Transportation )epart*ent of //C testified that when the Central was still usin. the railwaylines, it had 6etween 900 to 1,000 cane cars and 10 loco*otives,each loco*otive pullin. fro* 30 to '0 cane cars with *a<i*u*capacity of 8 tons each# 1& This testi*ony was corro6orated 6y!odolfo Javelosa, Assistant Crop oan +nspector in the Crop oan)epart*ent of petitioner# 1' After the closure of the railway lines,

petitioner on 5e6ruary ', 19;8 throu.h its %resident and eneral/ana.er, infor*ed the "ational Co**ittee of the "ational5ederation of $u.arcane %lanters that the truc>in. reuire*ent for haulin. adherent planters produce with a *illin. avera.e of 3,'00tons of canes daily at an avera.e load of ' tons per truc> is not lessthan 700 truc>s daily plus another 700 e*pty truc>s to 6e shuttled6ac> to the plantations to 6e availa6le for loadin. the sa*e day# 1;uanon, however, testified that petitioner had only 80 units of trailers, 0 tractors and 3 truc>s plus 0 truc>s *ore or less hired6y the Central and .iven as repartos ?allot*ents@ to the differentplanters# 17 The 180 trailers that the Central initially had wereper*anently leased to so*e planters who had their own car.otruc>s while out of the '0 //C trailers e<istin. durin. the entire*illin. season only 70 were left availa6le to the rest of the planterspulled 6y 3 truc>s# 18

+t is true that //C purchased 0 units John )eere Tractors?pri*e *overs@ and 30 units, 4an.uard Trailers with land capacityof 3 tons each 6ut that was only on cto6er 19;8 as re.istered inthe and Transportation Co**ission, acolod City# 19

The evidence shows that .reat efforts had 6een e<erted 6y theplanters to enter into so*e concrete understandin. with //Cwith a view of o6tainin. a reasona6le assurance that the latter would 6e a6le to haul and *ill their canes for the 19;8-19;9 cropyear, 6ut to no avail# 0

As ad*itted 6y //C itself, in its co**unications with theplanters, it is not in a position to provide adeuate transportation for

the canes in co*pliance with its co**it*ent under the *illin.contract# $aid co**unications 1 were uoted 6y the Court of Appeals as follows2

De are sorry to infor* you that unless we can wor> out a fair andeuita6le solution to this pro6le* of closure of our railroad lines, the*illin. of your canes for the crop year 19;8-;9 would 6e .reatlyha*pered to the .reat detri*ent of our econo*y and the near eli*ination of the *eans of livelihood of *ost planters and thepossi6le starvation of thousands of la6orers wor>in. in the su.ar )istrict of acolod-/urcia /illin. Co#

and

De are fully conscious of our contractual o6li.ations to our e<istin.

/illin. Contract# ut, if prevented 6y =udicial order we will findourselves una6le to serve you in the haulin. of the canes throu.hour railroad lines# +t is for this reason that we su..est you e<ploreother solutions to the pro6le* in the face of such an eventuality sothat you *ay 6e a6le to proceed with the plantin. of your caneswith a6solute peace of *ind and the certainty that the sa*e will 6eproperly *illed and not left to rot in the fields#

also,

+n the *eanti*e, and 6efore July 1, 19;8, the end of the te*poraryarran.e*ent we have with 5ernando ona.a, +nc# and the An.elastate, +nc# for the use of the ri.hts of ways, our lawyers arestudyin. the possi6ility of .ettin. a new in=unction fro* the$upre*e Court or the Court of 5irst +nstance of "e.ros ccidental

6ased on the new .rounds interposed in said *e*orandu* notheretofore raised previously nor in the Capitol $u6division case# And if we are doin. this, it is principally to prevent any in=ury to your crops or foreclosure of your property, which is =ust in line with theo6=ect of your plans#

n /arch ;, 19;8 the %resident of the acolod-/urcia $u.ar 5ar*ers Corporation writin. on 6ehalf of its planter-*e*6ersde*anded to >now the plans of the Central for the crop year 19;8-19;9, statin. that if they fail to hear fro* the Central on or 6efore

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the 1'th of April they will feel free to *a>e their own plans in order to save their crops and the possi6ility of foreclosure of their properties#

+n its letter dated April 1, 19;8, the president of //C si*plyinfor*ed the acolod-/urcia $u.ar 5ar*ers Corporation that theywere studyin. the possi6ility of .ettin. a new in=unction fro* thecourt 6efore e<piration of their te*porary arran.e*ent with5ernando ona.a, +nc# and the An.ela state, +nc# 3

%ressin. for a *ore definite co**it*ent ?not a *ere hope or e<pectation@, on /ay 30, 19;8 the acolod-/urcia $u.ar 5ar*ersCorporation reuested the Central to put up a perfor*ance 6ond in

the a*ount of %13 *illion within a '-day period to allay the fears of the planters that their su.ar canes can not 6e *illed at the Centralin the co*in. *illin. season# &

//Cs reply was only to e<press opti*is* over the final outco*eof its pendin. cases in court#

ence, what actually happened afterwards is that petitioner failedto provide adeuate transportation facilities to atuslao and other adherent planters#

As found 6y the trial court, the e<perience of Alfonso atuslao atthe start of the 19;8-19;9 *illin. season is reflective of theinadeuacies of the reparto or trailer allot*ent as well as the stateof unpreparedness on the part of //C to *eet the pro6le*posed 6y the closure of the railway lines#

+t was esta6lished that after atuslao had cut his su.arcanes for haulin., no trailers arrived and when two trailers finally arrived oncto6er 0, 19;8 after several unheeded reuests, they were lefton the national hi.hway a6out one ?1@ >ilo*eter away fro* theloadin. station# $uch fact was confir*ed 6y Carlos uto. the driver of the truc> that hauled the trailers# '

$till further, Javelosa, Assistant Crop oan +nspector, testified thatthe esti*ated production of atuslao for the crop year 19;8-19;9was &,&00 piculs hauled 6y 10 cane cars a wee> with a *a<i*u*capacity of 8 tons# ; Co*pared with his later schedule of only onetrailer a wee> with a *a<i*u* capacity of only 3 to & tons, 7 there

appears to 6e no uestion that the *eans of transportationprovided 6y //C is very inadeuate to answer the needs of atuslao#

Indou6tedly, //C is .uilty of 6reach of the conditions of the*illin. contract and that atuslao is the in=ured party# Inder thesa*e Article 1191 of the Civil Code, the in=ured party *ay choose6etween the fulfill*ent and the rescission of the o6li.ation, with thepay*ent of da*a.es in either case# +n fact, he *ay also see>rescission even after he had chosen fulfill*ent if the latter should6eco*e i*possi6le#

Inder the fore.oin., atuslao has the ri.ht to rescind the *illin.contract and neither the court a uo erred in decreein. therescission clai*ed nor the Court of Appeals in affir*in. the sa*e#

Conversely, //C cannot clai* enforce*ent of the contract# Asruled 6y this Court, 6y virtue of the violations of the ter*s of thecontract, the offendin. party has forfeited any ri.ht to itsenforce*ent ?oysaw v# +nterphil %ro*otions, +nc#, 1&8 $C!A ;&'M1987N@#

i>ewise, the acolod-/urcia A.ricultural Cooperative /ar>etin. Association, +nc# ?-/ AC/A@ cannot 6e faulted for or.aniin. itself to ta>e care of the needs of its *e*6ers# )efinitely, it wasor.anied at that ti*e when petitioner could not assure the plantersthat it could definitely haul and *ill their canes# /ore i*portantly, as*entioned earlier in a letter dated January 1, 19;8, J# Araneta,%resident R eneral /ana.er of the Central itself su..ested to theacolod-/urcia $u.ar 5ar*ers Corporation that it e<plore

solutions to the pro6le* of haulin. the canes to the *illin. stationin the face of the eventuality of a =udicial order per*anently closin.the railroad lines so that the planters *ay 6e a6le to proceed withtheir plantin. of the canes with a6solute peace of *ind and thecertainty that they will 6e properly *illed and not left to rot in thefields# As a result, the si.nin. of the *illin. contract 6etweenprivate respondents A+)$+$A and -/-AC/A on June 19, 19;8 8was a *atter of self-preservation inas*uch as the su.arcanes werealready *atured and the planters had crop loans to pay# 5urther delay would *ean tre*endous losses# 9

+n its defense A+)$+$A stressed as earlier stated, that it a.reed to*ill the su.arcanes of atuslao only after it had carefullyascertained and 6elieved in .ood faith that //C was incapa6le of *illin. the su.arcanes of the adherent planters 6ecause of inadeuate transportation and in fact up to now said Central isincapa6le of haulin. the su.arcanes of the said planters to its *illsite for *illin. purposes#

As an e<tra precaution, A+)$+$A provided in para.raph 1' 30 of its*illin. contract thatL

+f any *e*6er of the planter has an e<istin. *illin. contract with

other su.ar central, then this *illin. contract with the Central shall6e of no force and effect with respect to that *e*6er or those*e*6ers havin. such contract, if that other su.ar central is a6le,ready and willin., to *ill said *e*6er or *e*6ers canes inaccordance with their said *illin. contract# ?*phasis supplied@

The %resident of A"C hi*self induced the planters to 6elieve andto act on the 6elief that said Central would not o6=ect to the *illin.of their canes with other centrals#

Inder the circu*stances, no evidence of 6ad faith on the part of private respondents could 6e found *uch less any plausi6le reasonto distur6 the findin.s and conclusions of the trial court and theCourt of Appeals#

%!/+$$ C"$+)!), the petition is here6y )"+) for lac>of *erit and the decision of the Court of Appeals is here6y A55+!/) in toto#

AC-ELOR EPRESS, INCORPORATED, and CRESENCIORIVERA, petitioners,vs.T-E -ONORALE COURT OF APPEALS #Si4t% Division,RICARDO ETER, SERGIA ETER, TEOFILO RAUTRAUT and"OETERA RAUTRAUT, respondents.

This is a petition for review of the decision of the Court of Appealswhich reversed and set aside the order of the !e.ional Trial Court,ranch +, utuan City dis*issin. the private respondents co*plaint

for collection of (a su* of *oney( and findin. the petitionerssolidarily lia6le for da*a.es in the total a*ount of ne undredTwenty Thousand %esos ?%10,000#00@# The petitioners alsouestion the appellate courts resolution denyin. a *otion for reconsideration#

n Au.ust 1, 1980, us "o# 800 owned 6y achelor <press, +nc#and driven 6y Cresencio !ivera was the situs of a sta*pede whichresulted in the death of passen.ers rno*inio eter and "arcisa!autraut#

The evidence shows that the 6us ca*e fro* )avao City on its wayto Ca.ayan de ro City passin. utuan City: that while at Ta6on-Ta6on, utuan City, the 6us pic>ed up a passen.er: that a6outfifteen ?1'@ *inutes later, a passen.er at the rear portion suddenly

sta66ed a %C soldier which caused co**otion and panic a*on.the passen.ers: that when the 6us stopped, passen.ers rno*inioeter and "arcisa !autraut were found lyin. down the road, thefor*er already dead as a result of head in=uries and the latter alsosufferin. fro* severe in=uries which caused her death later# Thepassen.er assailant ali.hted fro* the 6us and ran toward the6ushes 6ut was >illed 6y the police# Thereafter, the heirs of rno*inio eter and "arcisa !autraut, private respondents herein?!icardo eter and $er.ia eter are the parents of rno*inio whileTeofilo !autraut and ]oetera Mshould 6e ]oteraN !autraut are theparents of "arcisa@ filed a co*plaint for (su* of *oney( a.ainstachelor <press, +nc# its alle.ed owner $a*son Kasay and thedriver !ivera#

+n their answer, the petitioners denied lia6ility for the death of

rno*inio eter and "arcisa !autraut# They alle.ed that ### thedriver was a6le to transport his passen.ers safely to their respective places of destination e<cept rno*inio eter and"arcisa !autraut who =u*ped off the 6us without the >nowled.eand consent, *uch less, the fault of the driver and conductor andthe defendants in this case: the defendant corporation hade<ercised due dili.ence in the choice of its e*ployees to avoid as*uch as possi6le accidents: the incident on Au.ust 1, 1980 was nota traffic accident or vehicular accident: it was an incident or eventvery *uch 6eyond the control of the defendants: defendants were

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not parties to the incident co*plained of as it was an act of a thirdparty who is not in any way connected with the defendants and of which the latter have no control and supervision: ###( ?!ollo, pp# 11-113@#i_t_c-a`sl

After due trial, the trial court issued an order dated Au.ust 8, 198'dis*issin. the co*plaint#

Ipon appeal however, the trial courts decision was reversed andset aside# The dispositive portion of the decision of the Court of Appeals states2

D!5!, the )ecision appealed fro* is !4!$) and

$T A$+) and a new one entered findin. the appellees =ointly andsolidarily lia6le to pay the plaintiffs-appellants the followin.a*ounts2

1@ To the heirs of rno*inio eter, the a*ount of $eventy5ive Thousand %esos ?%7',000#00@ in loss of earnin.s and support,*oral da*a.es, strai.ht death inde*nity and attorneys fees: and,

@ To the heirs of "arcisa !autraut, the a*ount of 5orty 5iveThousand %esos ?%&',000#00@ for strai.ht death inde*nity, *oralda*a.es and attorneys fees# Costs a.ainst appellees# ?!ollo, pp#71-7@

The petitioners now pose the followin. uestions

Dhat was the pro<i*ate cause of the whole incidentU Dhy werethe passen.ers on 6oard the 6us panic>ed ?sic@ and why were theyshovin. one anotherU Dhy did "arcisa !autraut and rno*inioeter =u*p off fro* the runnin. 6usU

The petitioners opine that answers to these uestions are *aterialto arrive at (a fair, =ust and euita6le =ud.*ent#( ?!ollo, p# '@ Theyclai* that the assailed decision is 6ased on a *isapprehension of facts and its conclusion is .rounded on speculation, sur*ises or con=ectures#

As re.ards the pro<i*ate cause of the death of rno*inio eter and "arcisa !autraut, the petitioners *aintain that it was the act of the passen.er who ran a*uc> and sta66ed another passen.er of

the 6us# They contend that the sta66in. incident tri..ered off theco**otion and panic a*on. the passen.ers who pushed oneanother and that presu*a6ly out of fear and *oved 6y that hu*aninstinct of self-preservation eter and !autraut =u*ped off the 6uswhile the 6us was still runnin. resultin. in their unti*ely death#(?!ollo, p# ;@ Inder these circu*stances, the petitioners asseveratethat they were not ne.li.ent in the perfor*ance of their duties andthat the incident was co*pletely and a6solutely attri6uta6le to athird person, the passen.er who ran a*uc>, for without his cri*inalact, eter and !autraut could not have 6een su6=ected to fear andshoc> which co*pelled the* to =u*p off the runnin. 6us# Theyar.ue that they should not 6e *ade lia6le for da*a.es arisin. fro*acts of third persons over who* they have no control or supervision#

5urther*ore, the petitioners *aintain that the driver of the 6us,6efore, durin. and after the incident was drivin. cautiously .ivin.due re.ard to traffic rules, laws and re.ulations# The petitionersalso ar.ue that they are not insurers of their passen.ers as ruled 6ythe trial court#

The lia6ility, if any, of the petitioners is anchored on culpacontractual or 6reach of contract of carria.e# The applica6leprovisions of law under the "ew Civil Code are as follows2

A!T# 173# Co**on carriers are persons, corporations, fir*s or associations en.a.ed in the 6usiness of carryin. or transportin.passen.ers or .oods or 6oth 6y land, water, or air, for co*pensation, offerin. their services to the pu6lic#

A!T# 1733# Co**on carriers, fro* the nature of their 6usiness andfor reasons of pu6lic policy, are 6ound to o6serve e<traordinarydili.ence in the vi.ilance over the .oods and for the safety of thepassen.ers transported 6y the*, accordin. to all the circu*stancesof each case#

<<< <<< <<<

A!T# 17''# A co**on carrier is 6ound to carry the passen.erssafely as far as hu*an care and foresi.ht can provide, usin. the

ut*ost dili.ence of very cautious persons, with a due re.ard for allthe circu*stances#

A!T# 17';# +n case of death of or in=uries to passen.ers, co**oncarriers are presu*ed to have 6een at fault or to have actedne.li.ently, unless they prove that they o6served e<traordinarydili.ence as prescri6ed in Articles 1733 and 17''#

There is no uestion that achelor <press, +nc# is a co**oncarrier# ence, fro* the nature of its 6usiness and for reasons of pu6lic policy achelor <press, +nc# is 6ound to carry itspassen.ers safely as far as hu*an care and foresi.ht can provideusin. the ut*ost dili.ence of very cautious persons, with a due

re.ard for all the circu*stances#

+n the case at 6ar, rno*inio eter and "arcisa !autraut werepassen.ers of a 6us 6elon.in. to petitioner achelor <press, +nc#and, while passen.ers of the 6us, suffered in=uries which causedtheir death# Conseuently, pursuant to Article 17'; of the CivilCode, petitioner achelor <press, +nc# is presu*ed to have actedne.li.ently unless it can prove that it had o6served e<traordinarydili.ence in accordance with Articles 1733 and 17'' of the "ewCivil Code#

achelor <press, +nc# denies lia6ility for the death of eter and!autraut on its posture that the death of the said passen.ers wascaused 6y a third person who was 6eyond its control andsupervision# +n effect, the petitioner, in order to overco*e thepresu*ption of fault or ne.li.ence under the law, states that thevehicular incident resultin. in the death of passen.ers eter and!autraut was caused 6y force *a=eure or caso fortuito over whichthe co**on carrier did not have any control#

Article 117& of the present Civil Code states2

<cept in cases e<pressly specified 6y law, or when it is otherwisedeclared 6y stipulations, or when the nature of the o6li.ationreuires the assu*ption of ris>, no person shall 6e responsi6le for those events which could not 6e foreseen, or which thou.hforeseen, were inevita6le#

The a6ove-*entioned provision was su6stantially copied fro*

Article 110' of the old Civil Code which states(

"o one shall 6e lia6le for events which could not 6e foreseen or which, even if foreseen, were inevita6le, with the e<ception of thecases in which the law e<pressly provides otherwise and those inwhich the o6li.ation itself i*poses lia6ility#

+n the case of asa* v# $*ith ?&' %hil# ;'7 M19&N@, we defined(events( which cannot 6e foreseen and which, havin. 6eenforeseen, are inevita6le in the followin. *anner2

### The $panish authorities re.ard the lan.ua.e e*ployed as aneffort to define the ter* caso fortuito and hold that the twoe<pressions are synony*ous# ?/anresa Co*entarios al Codi.oCivil spaGol, vol# 8, pp# 88 et se#: $caevola, Codi.o Civil, vol# 19,

pp# '; et se#@

The antecedent to Article 110' is found in aw ++, Title 33, %artida 7,which defines caso fortuito as occasion ue acaese por aventurade ue non se puede ante ver# son estos, derriva*ientos decasas e fue.o ue enciende a so ora, e ue6ranta*iento de navio,fuerca de ladrones ?An event that ta>es place 6y incident and couldnot have 6een foreseen# <a*ples of this are destruction of houses, une<pected fire, shipwrec>, violence of ro66ers ###@

scriche defines caso fortuito as an une<pected event or act of od which could neither 6e foreseen nor resisted, such as floods,torrents, shipwrec>s, confla.rations, li.htnin., co*pulsion,insurrections, destruction of 6uildin.s 6y unforeseen accidents andother occurrences of a si*ilar nature#

+n discussin. and analyin. the ter* caso fortuito the nciclopediaJuridica spaGola says2 +n a le.al sense and, conseuently, also inrelation to contracts, a caso fortuito presents the followin. essentialcharacteristics2 ?1@ The cause of the unforeseen and une<pectedoccurrence, or of the failure of the de6tor to co*ply with hiso6li.ation, *ust 6e independent of the hu*an will# ?@ +t *ust 6ei*possi6le to foresee the event which constitutes the caso fortuito,or if it can 6e foreseen, it *ust 6e i*possi6le to avoid# ?3@ Theoccurrence *ust 6e such as to render it i*possi6le for the de6tor to

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fulfill his o6li.ation in a nor*al *anner# And ?&@ the o6li.or ?de6tor@*ust 6e free fro* any participation in the a..ravation of the in=uryresultin. to the creditor# ?'@ nciclopedia Juridica spaGola, 309@

As will 6e seen, these authorities a.ree that so*e e<traordinarycircu*stance independent of the will of the o6li.or or of hise*ployees, is an essential ele*ent of a caso fortuito# ###

The runnin. a*uc> of the passen.er was the pro<i*ate cause of the incident as it tri..ered off a co**otion and panic a*on. thepassen.ers such that the passen.ers started runnin. to the solee<it shovin. each other resultin. in the fallin. off the 6us 6ypassen.ers eter and !autraut causin. the* fatal in=uries# The

sudden act of the passen.er who sta66ed another passen.er in the6us is within the conte<t of force *a=eure#

owever, in order that a co**on carrier *ay 6e a6solved fro*lia6ility in case of force *a=eure, it is not enou.h that the accidentwas caused 6y force *a=eure# The co**on carrier *ust still provethat it was not ne.li.ent in causin. the in=uries resultin. fro* suchaccident# Thus, as early as 191, we ruled2

5ro* all the fore.oin., it is concluded that the defendant is notlia6le for the loss and da*a.e of the .oods shipped on the lorcha%ilar 6y the China*an, n. ien $ip, inas*uch as such loss andda*a.e were the result of a fortuitous event or force *a=eure, andthere was no ne.li.ence or lac> of care and dili.ence on the part of the defendant co*pany or its a.ents# ?Tan Chion. $ian v# +nchaustiR Co#, %hil# 1' M191N: *phasis supplied@#

This principle was reiterated in a *ore recent case, atan.asa.una Taya6as Co# v# +nter*ediate Appellate Court ?1;7 $C!A379 M1988N@, wherein we ruled2

### M5Nor their defense of force *a=eure or act of od to prosper theaccident *ust 6e due to natural causes and e<clusively withouthu*an intervention# ?*phasis supplied@

Therefore, the ne<t uestion to 6e deter*ined is whether or not thepetitioners co**on carrier o6served e<traordinary dili.ence tosafe.uard the lives of its passen.ers#

+n this re.ard the trial court and the appellate court arrived atconflictin. factual findin.s#

The trial court found the followin. facts2

The parties presented conflictin. evidence as to how the twodeceased "arcisa !autruat and rno*inio eter *et their deaths#

owever, fro* the evidence adduced 6y the plaintiffs, the Courtcould not see why the two deceased could have fallen off the 6uswhen their own witnesses testified that when the co**otionensued inside the 6us, the passen.ers pushed and shoved eachother towards the door apparently in order to .et off fro* the 6usthrou.h the door# ut the passen.ers also could not pass throu.hthe door 6ecause accordin. to the evidence the door was loc>ed#

n the other hand, the Court is inclined to .ive credence to theevidence adduced 6y the defendants that when the co**otionensued inside the 6us, the two deceased panic>ed and, in state of shoc> and fear, they =u*ped off fro* the 6us 6y passin. throu.hthe window#

+t is the prevailin. rule and settled =urisprudence that transportationco*panies are not insurers of their passen.ers# The evidence onrecord does not show that defendants personnel were ne.li.ent intheir duties# The defendants personnel have every ri.ht to acceptpassen.ers a6sent any *anifestation of violence or drun>enness# +f and when such passen.ers har* other passen.ers without the>nowled.e of the transportation co*panys personnel, the latter should not 6e faulted# ?!ollo, pp# &;-&7@

A thorou.h e<a*ination of the records, however, show that thereare *aterial facts i.nored 6y the trial court which were discussed6y the appellate court to arrive at a different conclusion# Thesecircu*stances show that the petitioner co**on carrier wasne.li.ent in the provision of safety precautions so that itspassen.ers *ay 6e transported safely to their destinations# Theappellate court states2

A critical eye *ust 6e accorded the lower courts conclusions of factin its tersely written ratio decidendi# The lower court concluded thatthe door of the 6us was closed: secondly, the passen.ers,specifically the two deceased, =u*ped out of the window# The lower court therefore concluded that the defendant co**on carrier is notlia6le for the death of the said passen.ers which it i*plicitlyattri6uted to the unforeseen acts of the unidentified passen.er whowent a*uc>#

There is nothin. in the record to support the conclusion that thesolitary door of the 6us was loc>ed as to prevent the passen.ersfro* passin. throu.h# eonila Cullano, testifyin. for the defense,clearly stated that the conductor opened the door when the

passen.ers were shoutin. that the 6us stop while they were in astate of panic# $er.ia eter cate.orically stated that she actuallysaw her son fall fro* the 6us as the door was forced open 6y theforce of the onrushin. passen.ers#

%edro Collan.o, on the other hand, testified that he shut the door after the last passen.er had 6oarded the 6us# ut he had uiteconveniently ne.lected to say that when the passen.ers hadpanic>ed, he hi*self panic>ed and had .one to open the door#%ortions of the testi*ony of eonila Cullano, uoted 6elow, areillu*inatin.2

<<< <<< <<<

Dhen you said the conductor opened the door, the door atthe front or rear portion of the 6usU

A 5ront door#

And these two persons who* you said ali.hted, where did theypass, the fron?t@ door or rear doorU

A 5ront door#

<<< <<< <<<

?Tsn#, p# &, Au.# 8, 198&@

<<< <<< <<<

Dhat happened after there was a co**otion at the rear portionof the 6usU

A Dhen the co**otion occurred, + stood up and + noticedthat there was a passen.er who was sounded ?sic@# The conductor panic>ed 6ecause the passen.ers were shoutin. stop, stop# Theconductor opened the 6us#

?Tsn# p# 3, Au.ust 8, 198&@#

Accordin.ly, there is no reason to 6elieve that the deceasedpassen.ers =u*ped fro* the window when it was entirely possi6lefor the* to have ali.hted throu.h the door# The lower courtsreliance on the testi*ony of %edro Collan.o, as the conductor and

e*ployee of the co**on carrier, is un=ustified, in the li.ht of theclear testi*ony of eonila Cullano as the sole uninterestedeyewitness of the entire episode# +nstead we find %edro Collan.ostesti*ony to 6e infused 6y 6ias and frau.ht with inconsistencies, if not nota6ly unrelia6le for lac> of veracity# n direct e<a*ination, hetestified2

<<< <<< <<<

$o what happened to the passen.ers inside your 6usU

A $o*e of the passen.ers =u*ped out of the window#

CI!T2

Dhile the 6us was in *otionU

A Kes, your onor, 6ut the speed was slow 6ecause we have =ustpic>ed up a passen.er#

Atty# a*6e2

Kou said that at the ti*e of the incident the 6us was runnin. slow6ecause you have =ust pic>ed up a passen.er# Can you esti*atewhat was your speed at that ti*eU

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Atty# Calo2

"o 6asis, your onor, he is neither a driver nor a conductor#

CI!T2

et the witness answer# sti*ate only, the conductor e<perienced#

Ditness2

"ot less than 30 to &0 *iles#

CI!T2

ilo*eters or *ilesU

A /iles#

Atty# a*6e2

That is only your esti*ate 6y your e<perienceU

A Kes, sir, esti*ate#

?Tsn#, pp# &-', ct# 17, 1983@#

At such speed of not less than 30 to &0 *iles ###, or a6out &8 to ;'>ilo*eters per hour, the speed of the 6us could scarcely 6econsidered slow considerin. that accordin. to Collan.o hi*self, the6us had =ust co*e fro* a full stop after pic>in. a passen.er ?Tsn, p#&, +d#@ and that the 6us was still on its second or third .ear ?Tsn#, p#1, +d#@#

+n the li.ht of the fore.oin., the ne.li.ence of the co**on carrier,throu.h its e*ployees, consisted of the lac> of e<traordinarydili.ence reuired of co**on carriers, in e<ercisin. vi.ilance andut*ost care of the safety of its passen.ers, e<e*plified 6y thedrivers 6elated stop and the rec>less openin. of the doors of the6us while the sa*e was travellin. at an apprecia6ly fast speed# Atthe sa*e ti*e, the co**on carrier itself ac>nowled.ed, throu.h itsad*inistrative officer, en=a*in ranada, that the 6us was

co**issioned to travel and ta>e on passen.ers and the pu6lic atlar.e, while euipped with only a solitary door for a 6us its sie andloadin. capacity, in contravention of rules and re.ulations providedfor under the and Transportation and Traffic Code ?!A &13; asa*ended#@ ?!ollo, pp# 3-;@

Considerin. the factual findin.s of the Court of Appeals-the 6usdriver did not i**ediately stop the 6us at the hei.ht of theco**otion: the 6us was speedin. fro* a full stop: the victi*s fellfro* the 6us door when it was opened or .ave way while the 6uswas still runnin.: the conductor panic>ed and 6lew his whistle after people had already fallen off the 6us: and the 6us was not properlyeuipped with doors in accordance with law-it is clear that thepetitioners have failed to overco*e the presu*ption of fault andne.li.ence found in the law .overnin. co**on carriers#

The petitioners ar.u*ent that the petitioners (are not insurers of their passen.ers( deserves no *erit in view of the failure of thepetitioners to prove that the deaths of the two passen.ers weree<clusively due to force *a=eure and not to the failure of thepetitioners to o6serve e<traordinary dili.ence in transportin. safelythe passen.ers to their destinations as warranted 6y law# ?$eeatan.as a.una Taya6as Co# v# +nter*ediate Appellate Court,supra@#

The petitioners also contend that the private respondents failed toshow to the court that they are the parents of rno*inio eter and"arcisa !autraut respectively and therefore have no le.alpersonality to sue the petitioners# This ar.u*ent deserves scantconsideration# De find this ar.u*ent a 6elated atte*pt on the part

of the petitioners to avoid lia6ility for the deaths of eter and!autraut# The private respondents were +dentified as the parents of the victi*s 6y witnesses durin. the trial and the trial courtreco.nied the* as such# The trial court dis*issed the co*plaintsolely on the .round that the petitioners were not ne.li.ent#

5inally, the a*ount of da*a.es awarded to the heirs of eter and!autraut 6y the appellate court is supported 6y the evidence# Theappellate court stated2

rno*inio eter was 3 years of a.e at the ti*e of his death,sin.le, in .ood health and renderin. support and service to his*other# As far as "arcisa !autraut is concerned, the only evidenceadduced is to the effect that at her death, she was 3 years of a.e,in .ood health and without visi6le *eans of support#

+n accordance with Art# 17;& in con=unction with Art# 0; of theCivil Code, and esta6lished =urisprudence, several factors *ay 6econsidered in deter*inin. the award of da*a.es, na*ely2 1@ lifee<pectancy ?considerin. the state of health of the deceased andthe *ortality ta6les are dee*ed conclusive@ and loss of earnin.capacity: ?@ pecuniary loss, loss of support and service: and ?3@*oral and *ental sufferin. ?Alcantara, et al# v# $urro, et al#, 93 %hil#

&70@#

+n the case of %eople v# )aniel ?"o# -;;''1, April ', 198', 13;$C!A 9, at pa.e 10&@, the i.h Tri6unal, reiteratin. the rule in4illa !ey Transit, +nc# v# Court of Appeals ?31 $C!A '11@, statedthat the a*ount of loss of earrin. capacity is 6ased *ainly on twofactors, na*ely, ?1@ the nu*6er of years on the 6asis of which theda*a.es shall 6e co*puted: and ?@ the rate at which the lossessustained 6y the heirs should 6e fi<ed#

As the for*ula adopted in the case of )avila v# %hilippine Air ines,&9 $C!A &97, at the a.e of 30 ones nor*al life e<pectancy is 33-1O3 years 6ased on the A*erican <pectancy Ta6le of /ortality ?O3< 80-3@#i_t_c-a`sl y ta>in. into account the pace and nature of thelife of a carpenter, it is reasona6le to *a>e allowances for thesecircu*stances and reduce the life e<pectancy of the deceasedrno*inio eter to ' years ?%eople v# )aniel, supra@# To fi< therate of losses it *ust 6e noted that Art# 0; refers to .rossearnin.s less necessary livin. e<penses of the deceased, in other words, only net earnin.s are to 6e considered ?%eople v# )aniel,supra: 4illa !ey Transit, +nc# v# Court of Appeals, supra@#

Applyin. the fore.oin. rules with respect to rno*inio eter, it is6oth =ust and reasona6le, considerin. his social standin. andposition, to fi< the deducti6le, livin. and incidental e<penses at thesu* of 5our undred %esos ?%&00#00@ a *onth, or 5our Thousandi.ht undred %esos ?%&,800#00@ annually# As to his inco*e,considerin. the irre.ular nature of the wor> of a daily wa.ecarpenter which is seasonal, it is safe to assu*e that he shall have

wor> for twenty ?0@ days a *onth at Twenty 5ive %esos?%1'0,000#00@ for twenty five years# )eductin. therefro* hisnecessary e<penses, his heirs would 6e entitled to Thirty Thousand%esos ?%30,000#00@ representin. loss of support and service?%1'0,000#00 less %10,000#00@# +n addition, his heirs are entitledto Thirty Thousand %esos ?%30,000#00@ as strai.ht death inde*nitypursuant to Article 0; ?%eople v# )aniel, supra@# 5or da*a.es for their *oral and *ental an.uish, his heirs are entitled to thereasona6le su* of %10,000#00 as an e<ception to the .eneral rulea.ainst *oral da*a.es in case of 6reach of contract rule Art# 00?"ecesito v# %aras, 10& %hil# 7'@# As attorneys fees, eters heirsare entitled to %',000#00# All in all, the plaintiff-appellants !icardoand $er.ia eter as heirs of their son rno*inio are entitled to aninde*nity of $eventy 5ive Thousand %esos ?%7',000#00@#

+n the case of "arcisa !autraut, her heirs are entitled to a strai.htdeath inde*nity of Thirty Thousand %esos ?%30,000#00@, to *oralda*a.es in the a*ount of Ten Thousand %esos ?%10,000#00@ and5ive Thousand %esos ?%',000#00@ as attorneys fees, or a total of 5orty 5ive Thousand %esos ?%&',000#00@ as total inde*nity for her death in the a6sence of any evidence that she had visi6le *eans of support# ?!ollo, pp# 30-31@

D!5!, the instant petition is )+$/+$$)# The uestioneddecision dated /ay 19, 1988 and the resolution dated Au.ust 1,1988 of the Court of Appeals are A55+!/)#

NATIONAL PO5ER CORPORATION, ET AL., petitioners,vs.T-E COURT OF APPEALS, GAUDENCIO C. RA!O, ET AL.,

respondents#

This is a petition for review on certiorari under !ule &' of the!evised !ules of Court ur.in. this Court to set aside the 19 Au.ust1991 consolidated )ecision of the Court of Appeals in CA#-#!# C4"os# 790-93 1 which reversed the )ecision of ranch ' of thethen Court of 5irst +nstance ?now !e.ional Trial Court@ of ulacan,and held petitioners "ational %ower Corporation ?"%C@ anden=a*in Chave =ointly and severally lia6le to the private

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respondents for actual and *oral da*a.es, liti.ation e<penses andattorneys fees#

This present controversy traces its 6e.innin.s to four ?&@ separateco*plaints for da*a.es filed a.ainst the "%C and en=a*inChave 6efore the trial court# The plaintiffs therein, now privaterespondents, sou.ht to recover actual and other da*a.es for theloss of lives and the destruction to property caused 6y theinundation of the town of "ora.aray, ulacan on ;-7 cto6er 1978# The floodin. was purportedly caused 6y the ne.li.entrelease 6y the defendants of water throu.h the spillways of the An.at )a* ?ydroelectric %lant@# +n said co*plaints, the plaintiffsalle.ed, inter alia, that2 1@ defendant "%C operated and *aintained

a *ulti-purpose hydroelectric plant in the An.at !iver at illtop,"ora.aray, ulacan: @ defendant en=a*in Chave was the plantsupervisor at the ti*e of the incident in uestion: 3@ despite thedefendants >nowled.e, as early as & cto6er 1978, of thei*pendin. entry of typhoon (adin.,( they failed to e<ercise duedili.ence in *onitorin. the water level at the da*: &@ when the saidwater level went 6eyond the *a<i*u* allowa6le li*it at the hei.htof the typhoon, the defendants suddenly, ne.li.ently and rec>lesslyopened three ?3@ of the da*s spillways, there6y releasin. a lar.ea*ount of water which inundated the 6an>s of the An.at !iver: and'@ as a conseuence, *e*6ers of the household of the plaintiffs,to.ether with their ani*als, drowned, and their properties werewashed away in the evenin. of ; cto6er and the early hours of 7 cto6er 1978# 3

+n their Answers, the defendants, now petitioners, alle.ed that2 1@the "%C e<ercised due care, dili.ence and prudence in theoperation and *aintenance of the hydroelectric plant: @ the "%Ce<ercised the dili.ence of a .ood father in the selection of itse*ployees: 3@ written notices were sent to the different*unicipalities of ulacan warnin. the residents therein a6out thei*pendin. release of a lar.e volu*e of water with the onset of typhoon (adin.( and advise the* to ta>e the necessaryprecautions: &@ the water released durin. the typhoon was neededto prevent the collapse of the da* and avoid .reater da*a.e topeople and property: '@ in spite of the precautions underta>en andthe dili.ence e<ercised, they could still not contain or control theflood that resulted and: ;@ the da*a.es incurred 6y the privaterespondents were caused 6y a fortuitous event or force *a=eure

and are in the nature and character of da*nu* a6sue in=uria# yway of special affir*ative defense, the defendants averred that the"%C cannot 6e sued 6ecause it perfor*s a purely .overn*entalfunction# &

Ipon *otion of the defendants, a preli*inary hearin. on thespecial defense was conducted# As a result thereof, the trial courtdis*issed the co*plaints as a.ainst the "%C on the .round thatthe provision of its charter allowin. it to sue and 6e sued does notconte*plate actions 6ased on tort# The parties do not, however,dispute the fact that this Court overruled the trial court and orderedthe reinstate*ent of the co*plaints as a.ainst the "%C# '

ein. closely interrelated, the cases were consolidated and trialthereafter ensued#

The lower court rendered its decision on 30 April 1990 dis*issin.the co*plaints (for lac> of sufficient and credi6le evidence#( ;Conseuently, the private respondents seasona6ly appealedtherefro* to the respondent Court which then doc>eted the casesas CA-#!# C4 "os# 790-93#

+n its =oint decision pro*ul.ated on 19 Au.ust 1991, the Court of Appeals reversed the appealed decision and awarded da*a.es infavor of the private respondents# The dispositive portion of thedecision reads2

C"5!/AK T T 5!+", the =oint decisionappealed fro* is here6y !4!$) and $T A$+), and a newone is here6y rendered2

1# +n Civil Case "o# $/-9'0, orderin. defendants-appelleesto pay, =ointly and severally, plaintiffs-appellants, with le.al interestfro* the date when this decision shall 6eco*e final and e<ecutory,the followin.2

A# Actual da*a.es, to wit2

1@ audencio C# !ayo, Two undred Thirty ne ThousandTwo undred $i<ty %esos ?%31,;0#00@:

@ ienvenido %# %ascual, Two undred 5our Thousand 5iveundred %esos ?%0&#'00#00@:

3@ To*as /anuel, ne undred 5ifty 5ive Thousand %esos?%1'',000#00@:

&@ %edro C# artolo*e, ne undred 5orty $even Thousand%esos ?%1&7,000#00@:#

'@ ernardino Cru, ne undred 5orty Three Thousand5ive undred 5ifty Two %esos and 5ifty Centavos ?%1&3,''#'0@:

;@ Jose %alad, 5ifty $even Thousand 5ive undred %esos?%'7,'00#00@:

7@ /ariano $# Cru, 5orty Thousand %esos ?%&0,000#00@:

8@ ucio 5a=ardo, Twenty nine Thousand i.hty %esos?%9,080#00@: and

# iti.ation e<penses of Ten Thousand %esos ?%10,000#00@:

# +n Civil case "o# $/-9'1, orderin. defendants-appelleesto pay =ointly and severally, plaintiff-appellant, with le.al interestfro* the date when this decision shall have 6eco*e final ande<ecutory, the followin. 2

A# Actual da*a.es of 5ive undred Twenty Thousand %esos?%'0,000#00@:#

# /oral da*a.es of five hundred Thousand %esos?%'00,000#00@: and#

C# iti.ation e<penses of Ten Thousand %esos ?%10,000#00@:#

3# +n Civil Case "o# $/-9'3, orderin. defendants-appelleesto pay, =ointly and severally, with le.al interest fro* the date whenthis decision shall have 6eco*e final and e<ecutory:

A# %laintiff-appellant An.el C# Torres2

1@ Actual da*a.es of ne undred "inety "ine Thousandne undred Twenty %esos ?%199,10#00@:

@ /oral )a*a.es of ne undred 5ifty Thousand %esos?%1'0,000#00@:

# %laintiff-appellant "or6erto Torres2

1@ Actual da*a.es of 5ifty Thousand %esos ?%'0,000#00@:

@ /oral da*a.es of 5ifty Thousand %esos ?%'0,000#00@:

C# %laintiff-appellant !odelio Joauin2

1@ Actual da*a.es of ne undred Thousand %esos

?%100,000#00@:

@ /oral da*a.es of ne undred Thousand %esos?%100,000#00@: and

)# %laintifsf-appellants liti.ation e<penses of Ten Thousand%esos ?%10,000#00@:

&# +n Civil case "o# $/-1&7, orderin. defendants-appelleesto pay, =ointly and severally, with le.al interest fro* the date whenthis decision shall have 6eco*e final and e<ecutory 2

A# %laintiffs-appellants %resentacion oreno and Clodualdooreno2

1@ Actual da*a.es of Two undred 5ifty $i< Thousand $i<undred %esos ?%';,;00#00@:


# %laintiff-appellant Consolacion u*an 2

1@ Actual da*a.es of ne undred forty Thousand %esos?%1&0,000#00@:

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C# %laintiff-appellant 4ir.inia u*an 2

1@ Actual da*a.es of Two undred 5ive undred Twenty%esos ?0','0#00@: and

)# %laintiffs-appellants liti.ation e<penses of Ten Thousand%esos ?10,000#00@#

+n addition, in all the four ?&@ instant cases, orderin. defendants-appellees to pay, =ointly and severally, plaintiffs-appellants attorneyfees in an a*ount euivalent to 1'P of the total a*ount awarded#

"o pronounce*ent as to costs# 7

The fore.oin. =ud.*ent is 6ased on the pu6lic respondentsconclusion that the petitioners were .uilty of2

# # # a patent .ross and evident lac> of foresi.ht, i*prudence andne.li.ence # # # in the *ana.e*ent and operation of An.at )a*#The unholiness of the hour, the e<tent of the openin. of thespillways, And the *a.nitude of the water released, are all 6utproducts of defendants-appellees headlessness, slovenliness, andcarelessness# The resultin. flash flood and inundation of evenareas ?sic@ one ?1@ >ilo*eter away fro* the An.at !iver 6an> wouldhave 6een avoided had defendants-appellees prepared the An.at)a* 6y *aintainin. in the first place, a water elevation which wouldallow roo* for the e<pected torrential rains# 8

This conclusion, in turn, is anchored on its findin.s of fact, to wit2

As early as cto6er 1, 1978, defendants-appellees >new of thei*pendin. onslau.ht of and i**inent dan.er posed 6y typhoon(adin.(# 5or as alle.ed 6y defendants-appellees the*selves, theco*in. of said super typhoon was 6annered 6y ulletin Today, anewspaper of national circulation, on cto6er ', 1978, as ($uper owler to hit !#%#( The ne<t day, cto6er ;, 1978, said typhoononce a.ain *erited a headline in said newspaper as (adin.s i.low e<pected this afternoon( ?Appellees rief, p# ;@# Apart fro*the newspapers, defendants-appellees learned of typhoon (adin.throu.h radio announce*ents ?Civil Case "o# $/-9'0, T$",

en=a*in Chave, )ece*6er &, 198&, pp# 7-9@#

)efendants-appellees dou6ly >new that the An.at )a* can safelyhold a nor*al *a<i*u* headwater elevation of 17 *eters?Appellees 6rief, p# 1: Civil Case "o# $/-9'1, <hi6it (+-;(: CivilCase "o# $/-9'3, <hi6it (J-;(: Civil Case "o# $/-1&7, <hi6it(-;(@#

Ket, despite such >nowled.e, defendants-appellees *aintained areservoir water elevation even 6eyond its *a<i*u* and safe level,there6y .ivin. no sufficient allowance for the reservoir to containthe rain water that will inevita6ly 6e 6rou.ht 6y the co*in. typhoon#

n cto6er &, 1978, 6efore typhoon (adin.( entered the%hilippine area of responsi6ility, water elevation ran.ed fro*

17#;1 to 17#'3, with very little openin. of the spillways, ran.in.fro* 1O to 1 *eter# n cto6er ', 1978, when typhoon (adin.(entered the %hilippine area of responsi6ility, and pu6lic stor* si.nalnu*6er one was hoisted over ulacan at 102&' a#*#, later raised tonu*6er two at &2&' p#*#, and then to nu*6er three at 102&' p#*#,water elevation ran.ed fro* 17#&7 to 17#'7, with very littleopenin. of the spillways, ran.in. fro* 1O to 1 *eter# n cto6er ;, 1978, when pu6lic stor* si.nal nu*6er three re*ained hoistedover ulacan, the water elevation still re*ained at its *a<i*u*level of 17#00 to 18#00 with very little openin. of the spillwaysran.in. fro* 1O to *eters, until at or a6out *idni.ht, thespillways were suddenly opened at ' *eters, then increasin. swiftlyto 8, 10, 1, 1#', 13, 13#', 1&, 1&#' in the early *ornin. hours of cto6er 7, 1978, releasin. water at the rate of &,'00 cu6ic *etersper second, *ore or less# n cto6er 7, 1978, water elevation

re*ained at a ran.e of 18#30 to 17#0' ?Civil Case "o# $/-9'0,<hi6its ()( and series, ((, (/(, ("(, and (( and <hi6its (3( and(&(: Civil Case "o# $/-9'1, <hi6its (( and (-1(: Civil Case "o#$/-9'3, <hi6its (+( and (+-1(: Civil Case "o# $/ 1&7, <hi6its (5(and (5-1(@#

<<< <<< <<<

5ro* the *ass of evidence e<tant in the record, De are convinced,and so hold that the flash flood on cto6er 7, 1978, was caused

not 6y rain waters ?sic@, 6ut 6y stored waters ?sic@ suddenly andsi*ultaneously released fro* the An.at )a* 6y defendants-appellees, particularly fro* *idni.ht of cto6er ;, 1978 up to the*ornin. hours of cto6er 7,1978# 9

The appellate court re=ected the petitioners defense that they hadsent (early warnin. written notices( to the towns of "ora.aray, An.at, ustos, %laridel, aliwa. and Calu*pit dated & cto6er 1978 which read2

T A C"C!" ?sic@2

%lease 6e infor*ed that at present our reservoir ?da*@ is full andthat we have 6een releasin. water inter*ittently for the past severaldays#

Dith the co*in. of typhoon (!ita( ?adin.@ we e<pect to release.reater ?sic@ volu*e of water, if it pass ?sic@ over our place#

+n view of this >indly advise people residin. alon. An.at !iver to>eep alert and stay in safe places#

"JA/+" # CA4]%ower %lant $uperintendent 10

6ecause2

$aid notice was delivered to the (towns of ulacan( on cto6er ;,1978 6y defendants-appellees driver, eonardo "epo*uceno ?CivilCase "o# $/-9'0, T$", en=a*in Chave, )ece*6er &, 198&, pp#7-11 and T$", eonardo "epo*uceno, /arch 7, 198', pp# 10-1@#

$aid notice is ineffectual, insufficient and inadeuate for purposesof the openin. of the spillway .ates at *idni.ht of cto6er ;, 1978and on cto6er 7, 1978# +t did not prepare or warn the persons soserved, for the volu*e of water to 6e released, which turned out to6e of such *a.nitude, that residents near or alon. the An.at !iver,even those one ?1@ >ilo*eter away, should have 6een advised toevacuate# $aid notice, addressed (T A C"C!" ?sic@,( wasdelivered to a police*an ?Civil Case "o# $/-9'0, pp# 10-1 and<hi6it (-A(@ for the *unicipality of "ora.aray# $aid notice was

not thus addressed and delivered to the proper and responsi6leofficials who could have disse*inated the warnin. to the residentsdirectly affected# As for the *unicipality of $ta# /aria, whereplaintiffs-appellants in Civil Case "o# $/-1&; reside, said noticedoes not appear to have 6een served# 11

!elyin. on Juan 5# "a>pil R $ons vs# Court of Appeals, 1 pu6licrespondent re=ected the petitioners plea that the incident inuestion was caused 6y force *a=eure and that they are, therefore,not lia6le to the private respondents for any >ind of da*a.e L suchda*a.e 6ein. in the nature of da*nu* a6sue in=uria#

The *otion for reconsideration filed 6y the petitioners, as well asthe *otion to *odify =ud.*ent filed 6y the pu6lic respondents, 13were denied 6y the pu6lic respondent in its !esolution of 7

)ece*6er 1991# 1&

%etitioners thus filed the instant petition on 1 5e6ruary 199#

After the Co**ent to the petition was filed 6y the privaterespondents and the !eply thereto was filed 6y the petitioners, De.ave due course to the petition on 17 June 199 and directed theparties to su6*it their respective /e*oranda, 1' which theysu6seuently co*plied with#

The petitioners raised the followin. errors alle.edly co**itted 6ythe respondent Court 2

+# T CI!T 5 A%%A$ !!) +" A%%K+" T!I+" 5 "A%+ R $"$ 4# CI!T 5 A%%A$ A")

)+" TAT %T+T+"!$ D! I+TK 5"+"C#

++# T CI!T 5 A%%A$ !!) +" )+" TATT D!+TT" "T+C$ 5 DA!"+" +$$I) K%T+T+"!$ D! +"$I55+C+"T#

+++# T CI!T 5 A%%A$ !!) +" )+" TATT )A/A $I55!) K %!+4AT !$%")"T$ DA$"T )A/"I/ A$I +"JI!+A#

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+4# T CI!T 5 A%%A$ !!) +" "T ADA!)+"T CI"T!CA+/ 5 %T+T+"!$ 5! ATT!"K$5$ A") B%"$$ 5 +T+AT+"# 1;

These sa*e errors were raised 6y herein petitioners in #!# "o#9;&10, entitled "ational %ower Corporation, et al#, vs# Court of Appeals, et al#, 17 which this Court decided on 3 July 199# Thesaid case involved the very sa*e incident su6=ect of the instantpetition# +n no uncertain ter*s, De declared therein that thepro<i*ate cause of the loss and da*a.e sustained 6y the plaintiffstherein L who were si*ilarly situated as the private respondentsherein L was the ne.li.ence of the petitioners, and that the &

cto6er 1978 (early warnin. notice( supposedly sent to theaffected *unicipalities, the sa*e notice involved in the case at 6ar,was insufficient# De thus cannot now rule otherwise not only6ecause such a decision 6inds this Court with respect to the causeof the inundation of the town of "ora.aray, ulacan on ;-7cto6er 1978 which resulted in the loss of lives and the destructionto property in 6oth cases, 6ut also 6ecause of the fact that on the6asis of its *eticulous analysis and evaluation of the evidenceadduced 6y the parties in the cases su6=ect of CA-#!# C4 "os#790-93, pu6lic respondent found as conclusively esta6lished thatindeed, the petitioners were .uilty of (patent .ross and evident lac>of foresi.ht, i*prudence and ne.li.ence in the *ana.e*ent andoperation of An.at )a*,( and that (the e<tent of the openin. of thespillways, and the *a.nitude of the water released, are all 6utproducts of defendants-appellees headlessness, slovenliness, andcarelessness#( 18 +ts findin.s and conclusions are 6idin. upon Is,there 6ein. no showin. of the e<istence of any of the e<ceptions tothe .eneral rule that findin.s of fact of the Court of Appeals areconclusive upon this Court# 19 lsewise stated, the challen.eddecision can stand on its own *erits independently of ur decisionin #!# "o# 9;&10# +n any event, De reiterate here in ur pronounce*ent in the latter case that Juan 5# "a>pil R $ons vs#Court of Appeals 0 is still .ood law as far as the concurrent lia6ilityof an o6li.or in the case of force *a=eure is concerned# +n the"a>pil case, De held2

To e<e*pt the o6li.or fro* lia6ility under Article 117& of the CivilCode, for a 6reach of an o6li.ation due to an (act of od,( thefollowin. *ust concur2 ?a@ the cause of the 6reach of the o6li.ation

*ust 6e independent of the will of the de6tor: ?6@ the event *ust 6eeither unforseea6le or unavoida6le: ?c@ the event *ust 6e such asto render it i*possi6le for the de6tor to fulfill his o6li.ation in a*oral *anner: and ?d@ the de6tor *ust 6e free fro* anyparticipation in, or a..ravation of the in=ury to the creditor# ?4asuev# Court of Appeals, 138 $C!A ''3: strada v# Consolacion, 71$C!A &3: Austria v# Court of Appeals, 39 $C!A '7: !epu6lic of the %hil# v# uon $tevedorin. Corp#, 1 $C!A 79: asa* v#$*ith, &' %hil# ;'7@#

Thus, if upon the happenin. of a fortuitous event or an act of od,there concurs a correspondin. fraud, ne.li.ence, delay or violationor contravention in any *anner of the tenor of the o6li.ation asprovided for in Article 1170 of the Civil Code, which results in lossor da*a.e, the o6li.or cannot escape lia6ility#

The principle e*6odied in the act of od doctrine strictly reuiresthat the act *ust 6e one occasioned e<clusively 6y the violence of nature and all hu*an a.encies are to 6e e<cluded fro* creatin. or enterin. into the cause of the *ischief# Dhen the effect, the causeof which is to 6e considered, is found to 6e in part the result of theparticipation of *an, whether it 6e fro* active intervention or ne.lect, or failure to act, the whole occurrence is there6yhu*anied, as it were, and re*oved fro* the rules applica6le tothe acts of od# ?1 Corpus Juris, pp# 117&-117'@#

Thus it has 6een held that when the ne.li.ence of a personconcurs with an act of od in producin. a loss, such person is note<e*pt fro* lia6ility 6y showin. that the i**ediate cause of theda*a.e was the act of od# To 6e e<e*pt fro* lia6ility for loss

6ecause of an act of od, he *ust 6e free fro* any previousne.li.ence or *isconduct 6y which that loss or da*a.e *ay have6een occasioned# ?5ish R lective Co# v# %hil# /otors, '' %hil# 19:Tuc>er v# /ilan, &9 ## &379: i*pan.co R $ons v# Kan.co$tea*ship Co#, 3& %hil# '9&, ;0&: asa* v# $*ith, &' %hil# ;'7@# 1

Accordin.ly, petitioners cannot 6e heard to invo>e the act of od or force *a=eure to escape lia6ility for the loss or da*a.e sustained6y private respondents since they, the petitioners, were .uilty of ne.li.ence# The event then was not occasioned e<clusively 6y an

act of od or force *a=eure: a hu*an factor L ne.li.ence or i*prudence L had intervened# The effect then of the force *a=eurein uestion *ay 6e dee*ed to have, even if only partly, resultedfro* the participation of *an# Thus, the whole occurrence wasthere6y hu*anied, as it were, and re*oved fro* the lawsapplica6le to acts of od#

D!5!, for want of *erit, the instant petition is here6y)+$/+$$) and the Consolidated )ecision of the Court of Appealsin CA-#!# C4 "os# 790-93 is A55+!/), with costs a.ainst thepetitioners#

/ACINTO TANGUILIG doin6 '(siness (nder t%e na7e and

st)&e /.M.T. ENGINEERING AND GENERAL MERC-ANDISING,petitioner,vs.COURT OF APPEALS and VICENTE -ERCE /R., respondents.

This case involves the proper interpretation of the contract enteredinto 6etween the parties#

$o*eti*e in April 1987 petitioner Jacinto /# Tan.uili. doin.6usiness under the na*e and style J#/#T# n.ineerin. and eneral/erchandisin. proposed to respondent 4icente erce Jr# toconstruct a wind*ill syste* for hi*# After so*e ne.otiations theya.reed on the construction of the wind*ill for a consideration of %;0,000#00 with a one-year .uaranty fro* the date of co*pletionand acceptance 6y respondent erce Jr# of the pro=ect# %ursuant tothe a.ree*ent respondent paid petitioner a down pay*ent of %30,000#00 and an install*ent pay*ent of %1',000#00, leavin. a6alance of %1',000#00#

n 1& /arch 1988, due to the refusal and failure of respondent topay the 6alance, petitioner filed a co*plaint to collect the a*ount#+n his Answer 6efore the trial court respondent denied the clai*sayin. that he had already paid this a*ount to the $an %edroeneral /erchandisin. +nc# ?$%/+@ which constructed the deepwell to which the wind*ill syste* was to 6e connected# Accordin.to respondent, since the deep well for*ed part of the syste* thepay*ent he tendered to $%/+ should 6e credited to his account6y petitioner# /oreover, assu*in. that he owed petitioner a 6alanceof %1',000#00, this should 6e offset 6y the defects in the wind*ill

syste* which caused the structure to collapse after a stron. windhit their place# 1

%etitioner denied that the construction of a deep well was includedin the a.ree*ent to 6uild the wind*ill syste*, for the contract priceof %;0,000#00 was solely for the wind*ill asse*6ly and itsinstallation, e<clusive of other incidental *aterials needed for thepro=ect# e also disowned any o6li.ation to repair or reconstruct thesyste* and insisted that he delivered it in .ood and wor>in.condition to respondent who accepted the sa*e without protest#esides, its collapse was attri6uta6le to a typhoon, a force *a=eure,which relieved hi* of any lia6ility#

+n findin. for plaintiff, the trial court held that the construction of thedeep well was not part of the wind*ill pro=ect as evidenced clearly

6y the letter proposals su6*itted 6y petitioner to respondent# +tnoted that (MiNf the intention of the parties is to include theconstruction of the deep well in the pro=ect, the sa*e should 6estated in the proposals# +n the a6sence of such an a.ree*ent, itcould 6e safely concluded that the construction of the deep well isnot a part of the pro=ect underta>en 6y the plaintiff#( 3 Dith respectto the repair of the wind*ill, the trial court found that (there is noclear and convincin. proof that the wind*ill syste* fell down due tothe defect of the construction#( &

The Court of Appeals reversed the trial court# +t ruled that theconstruction of the deep well was included in the a.ree*ent of theparties 6ecause the ter* (deep well( was *entioned in 6othproposals# +t also .ave credence to the testi*ony of respondentswitness uiller*o %ili, the proprietor of $%/+ which installed the

deep well, that petitioner Tan.uili. told hi* that the cost of constructin. the deep well would 6e deducted fro* the contractprice of %;0,000#00# Ipon these pre*ises the appellate courtconcluded that respondents pay*ent of %1',000#00 to $%/+should 6e applied to his re*ainin. 6alance with petitioner thuseffectively e<tin.uishin. his contractual o6li.ation# owever, itre=ected petitioners clai* of force *a=eure and ordered the latter toreconstruct the wind*ill in accordance with the stipulated one-year .uaranty#

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is *otion for reconsideration havin. 6een denied 6y the Court of Appeals, petitioner now see>s relief fro* this Court# e raises twoissues2 firstly, whether the a.ree*ent to construct the wind*illsyste* included the installation of a deep well and, secondly,whether petitioner is under o6li.ation to reconstruct the wind*illafter it collapsed#

De reverse the appellate court on the first issue 6ut sustain it onthe second#

The preponderance of evidence supports the findin. of the trialcourt that the installation of a deep well was not included in theproposals of petitioner to construct a wind*ill syste* for

respondent# There were in fact two ?@ proposals2 one dated 19/ay 1987 which pe..ed the contract price at %87,000#00 ?<h#(1(@# This was re=ected 6y respondent# The other was su6*ittedthree days later, i#e#, on /ay 1987 which contained *orespecifications 6ut proposed a lower contract price of %;0,000#00?<h# (A(@# The latter proposal was accepted 6y respondent and theconstruction i**ediately followed# The pertinent portions of the firstletter-proposal ?<h# (1(@ are reproduced hereunder L

+n connection with your Dind*ill $yste* and +nstallation, we wouldli>e to uote to you as follows2

ne ?1@ $et L Dind*ill suita6le for inches dia*eter deepwell, %, capacity, 1& feet in dia*eter, with 0 pieces 6lade, Tower &0feet hi.h, includin. *echanis* which is not advisa6le to operatedurin. e<tra-intensity wind# <cludin. cylinder pu*p#

I"+T C"T!ACT %!+C %87,000#00

The second letter-proposal ?<h# (A(@ provides as follows2

+n connection with your Dind*ill syste*, $upply of a6or /aterialsand +nstallation, operated water pu*p, we would li>e to uote toyou asfollows L

ne ?1@ set L Dind*ill asse*6ly for inches or 3 inches deep-well pu*p, ; $tro>e, 1& feet dia*eter, 1-lot 6lade *aterials, &0 feetTower co*plete with standard appurtenances up to Cylinder pu*p,

shaftin. I#$# ad=usta6le +nternational /etal#

ne ?1@ lot L An.le 6ar, #+# pipe, !educer Couplin., l6ow atevalve, cross Tee couplin.#

ne ?1@ lot L 5loat valve#

ne ?1@ lot L Concretin. *aterials foundation#

5# # # a.unaContract %rice %;0,000#00

"ota6ly, nowhere in either proposal is the installation of a deep well*entioned, even re*otely# "either is there an ite*iation or description of the *aterials to 6e used in constructin. the deep

well# There is a6solutely no *ention in the two ?@ docu*ents that adeep well pu*p is a co*ponent of the proposed wind*ill syste*#The contract prices fi<ed in 6oth proposals cover only the featuresspecifically descri6ed therein and no other# Dhile the words (deepwell( and (deep well pu*p( are *entioned in 6oth, these do notindicate that a deep well is part of the wind*ill syste*# They *erelydescri6e the type of deep well pu*p for which the proposedwind*ill would 6e suita6le# As correctly pointed out 6y petitioner,the words (deep well( preceded 6y the prepositions (for( and(suita6le for( were *eant only to convey the idea that the proposedwind*ill would 6e appropriate for a deep well pu*p with a dia*eter of to 3 inches# 5or if the real intent of petitioner was to include adeep well in the a.ree*ent to construct a wind*ill, he would haveused instead the con=unctions (and( or (with#( $ince the ter*s of the instru*ents are clear and leave no dou6t as to their *eanin.

they should not 6e distur6ed#

/oreover, it is a cardinal rule in the interpretation of contracts thatthe intention of the parties shall 6e accorded pri*ordialconsideration ' and, in caseof dou6t, their conte*poraneous and su6seuent acts shall 6eprincipally considered# ; An e<a*ination of such conte*poraneousand su6seuent acts of respondent as well as the attendantcircu*stances does not persuade us to uphold hi*#

!espondent insists that petitioner ver6ally a.reed that the contractprice of %;0,000#00 covered the installation of a deep well pu*p#e contends that since petitioner did not have the capacity to installthe pu*p the latter a.reed to have a third party do the wor> thecost of which was to 6e deducted fro* the contract price# To provehis point, he presented uiller*o %ili of $%/+ who declared thatpetitioner Tan.uili. approached hi* with a letter fro* respondenterce Jr# as>in. hi* to 6uild a deep well pu*p as (part of thepriceOcontract which n.ineer ?erce@ had with /r# Tan.uili.#( 7

De are disinclined to accept the version of respondent# The clai*of %ili that erce Jr# wrote hi* a letter is unsu6stantiated# Thealle.ed letter was never presented in court 6y private respondent

for reasons >nown only to hi*# ut .rantin. that this writtenco**unication e<isted, it could not have si*ply contained areuest for %ili to install a deep well: it would have also *entionedthe party who would pay for the underta>in.# +t strains credulity thatrespondent would >eep silent on this *atter and leave it all topetitioner Tan.uili. to ver6ally convey to %ili that the deep well waspart of the wind*ill construction and that its pay*ent would co*efro* the contract price of %;0,000#00#

De find it also unusual that %ili would readily consent to 6uild adeep well the pay*ent for which would co*e supposedly fro* thewind*ill contract price on the *ere representation of petitioner,who* he had never *et 6efore, without a written co**it*ent atleast fro* the for*er# 5or if indeed the deep well were part of thewind*ill pro=ect, the contract for its installation would have 6eenstrictly a *atter 6etween petitioner and %ili hi*self with the for*er assu*in. the o6li.ation to pay the price# That it was respondenterce Jr# hi*self who paid for the deep well 6y handin. over to %ilithe a*ount of %1',000#00 clearly indicates that the contract for thedeep well was not part of the wind*ill pro=ect 6ut a separatea.ree*ent 6etween respondent and %ili# esides, if the price of %;0,000#00 included the deep well, the o6li.ation of respondentwas to pay the entire a*ount to petitioner without pre=udice to anyaction that uiller*o %ili or $%/+ *ay ta>e, if any, a.ainst thelatter# $i.nificantly, when as>ed why he tendered pay*ent directlyto %ili and not to petitioner, respondent e<plained, rather la*ely,that he did it (6ecause he has ?sic@ the *oney, so ?he@ =ust paid the*oney in his possession#( 8

Can respondent clai* that %ili accepted his pay*ent on 6ehalf of petitionerU "o# Dhile the law is clear that (pay*ent shall 6e *adeto the person in whose favor the o6li.ation has 6een constituted, or his successor in interest, or any person authoried to receive it,( 9 itdoes not appear fro* the record that %ili andOor $%/+ was soauthoried#

!espondent cannot clai* the 6enefit of the law concernin.(pay*ents *ade 6y a third person#( 10 The Civil Code provisionsdo not apply in the instant case 6ecause no creditor-de6tor relationship 6etween petitioner and uiller*o %ili andOor $%/+has 6een esta6lished re.ardin. the construction of the deep well#$pecifically, witness %ili did not testify that he entered into acontract with petitioner for the construction of respondents deepwell# +f $%/+ was really co**issioned 6y petitioner to construct

the deep well, an a.ree*ent particularly to this effect should have6een entered into#

The conte*poraneous and su6seuent acts of the partiesconcerned effectively 6elie respondents assertions# Thesecircu*stances only show that the construction of the well 6y$%/+ was for the sole account of respondent and that petitioner *erely supervised the installation of the well 6ecause the wind*illwas to 6e connected to it# There is no le.al nor factual 6asis 6ywhich this Court can i*pose upon petitioner an o6li.ation he didnot e<pressly assu*e nor ratify#

The second issue is not a novel one# +n a lon. line of cases 11 thisCourt has consistently held that in order for a party to clai*e<e*ption fro* lia6ility 6y reason of fortuitous event under Art#

117& of the Civil Code the event should 6e the sole and pro<i*atecause of the loss or destruction of the o6=ect of the contract# +n"a>pil vs# Court of Appeals, 1 four ?&@ reuisites *ust concur2 ?a@the cause of the 6reach of the o6li.ation *ust 6e independent of the will of the de6tor: ?6@ the event *ust 6e either unforeseea6le or unavoida6le: ?c@ the event *ust 6e such as to render it i*possi6lefor the de6tor to fulfill his o6li.ation in a nor*al *anner: and, ?d@the de6tor *ust 6e free fro* any participation in or a..ravation of the in=ury to the creditor#

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%etitioner failed to show that the collapse of the wind*ill was duesolely to a fortuitous event# +nterestin.ly, the evidence does notdisclose that there was actually a typhoon on the day the wind*illcollapsed# %etitioner *erely stated that there was a (stron. wind#(ut a stron. wind in this case cannot 6e fortuitous L unforeseea6lenor unavoida6le# n the contrary, a stron. wind should 6e presentin places where wind*ills are constructed, otherwise the wind*illswill not turn#

The appellate court correctly o6served that (.iven the newly-constructed wind*ill syste*, the sa*e would not have collapsedhad there 6een no inherent defect in it which could only 6e

attri6uta6le to the appellee#( 13 +t e*phasied that respondent hadin his favor the presu*ption that (thin.s have happened accordin.to the ordinary course of nature and the ordinary ha6its of life#( 1&This presu*ption has not 6een re6utted 6y petitioner#

5inally, petitioners ar.u*ent that private respondent was already indefault in the pay*ent of his outstandin. 6alance of %1',000#00and hence should 6ear his own loss, is untena6le# +n reciprocalo6li.ations, neither party incurs in delay if the other does notco*ply or is not ready to co*ply in a proper *anner with what isincu*6ent upon hi*# 1' Dhen the wind*ill failed to functionproperly it 6eca*e incu*6ent upon petitioner to institute the proper repairs in accordance with the .uaranty stated in the contract#Thus, respondent cannot 6e said to have incurred in delay: instead,it is petitioner who should 6ear the e<penses for the reconstructionof the wind*ill# Article 11;7 of the Civil Code is e<plicit on this pointthat if a person o6li.ed to do so*ethin. fails to do it, the sa*e shall6e e<ecuted at his cost#

D!5!, the appealed decision is /)+5+)# !espondent4+C"T !C J!# is directed to pay petitioner JAC+"T /#TA"I++ the 6alance of %1',000#00 with interest at the le.alrate fro* the date of the filin. of the co*plaint# +n return, petitioner is ordered to (reconstruct su6=ect defective wind*ill syste*, inaccordance with the one-year .uaranty( 1; and to co*plete thesa*e within three ?3@ *onths fro* the finality of this decision##!# "o# 1;389 July 10, 1998

SOUT-EASTERN COLLEGE INC., petitioner,

vs.

COURT OF APPEALS, /UANITA DE /ESUS VDA. DE DIMAANO,EMERITA DIMAANO, REMEDIOS DIMAANO, CONSOLACIONDIMAANO and MILAGROS DIMAANO, respondents#

%etition for review under !ule &' of the !ules of Court see>in. toset aside the )ecision 1 pro*ul.ated on July 31, 199;, and!esolution dated $epte*6er 1, 199; of the Court of Appeals 3in CA-#!# "o# &1&, entitled (Juanita de Jesus vda# de )i*aano,et al# vs# $outheastern Colle.e, +nc#(, which reduced the *oralda*a.es awarded 6elow fro* %1,000,000#00 to %00,000#00# &The !esolution under attac> denied petitioners *otion for reconsideration#

%rivate respondents are owners of a house at 3; Colle.e !oad,%asay City, while petitioner owns a four-storey school 6uildin.alon. the sa*e Colle.e !oad# n cto6er 11, 1989, at a6out ;230in the *ornin., a powerful typhoon ($alin.( hit /etro /anila#uffeted 6y very stron. winds, the roof of petitioners 6uildin. waspartly ripped off and 6lown away, landin. on and destroyin.portions of the roofin. of private respondents house# After thetyphoon had passed, an ocular inspection of the destroyed 6uildin.was conducted 6y a tea* of en.ineers headed 6y the city 6uildin.official, n.r# Jesus # !eyna# %ertinent aspects of the latters!eport ' dated cto6er 18, 1989 stated, as follows2

'# ne of the factors that *ay have led to this cala*itousevent is the for*ation of the 6uildin. in the area and the .eneral

direction of the wind# $ituated in the peripheral lot is an al*ost I-shaped for*ation of &-storey 6uildin.# Thus, with the stron. windshavin. a westerly direction, the .eneral for*ation of the 6uildin.6eco*es a 6i. funnel-li>e structure, the one situated alon. Colle.e!oad, receivin. the heaviest i*pact of the stron. winds# ence,there are portions of the roofin., those located on 6oth ends of the6uildin., which re*ained intact after the stor*#

;# Another factor and perhaps the *ost li>ely reason for thedislod.in. of the roofin. structural trusses is the i*proper anchora.e of the said trusses to the roof 6ea*s# The 1O dia*eter steel 6ars e*6edded on the concrete roof 6ea*s which serve astruss anchora.e are not 6olted nor nailed to the trusses# $till, thereare other steel 6ars which were not even 6ent to the trusses, thus,those trusses are not anchored at all to the roof 6ea*s#

+t then reco**ended that (to avoid any further loss and da*a.e tolives, li*6s and property of persons livin. in the vicinity,( the fourthfloor of su6=ect school 6uildin. 6e declared as a (structural haard#(

+n their Co*plaint ; 6efore the !e.ional Trial Court of %asay City,

ranch 117, for da*a.es 6ased on culpa auiliana, privaterespondents alle.ed that the da*a.e to their house rendered thesa*e uninha6ita6le, forcin. the* to stay te*porarily in othershouses# And so they sou.ht to recover fro* petitioner %117,11;#00,as actual da*a.es, %1,000,000#00, as *oral da*a.es,%300,000#00, as e<e*plary da*a.es and %100,000#00, for and asattorneys fees: plus costs#

+n its Answer, petitioner averred that su6=ect school 6uildin. hadwithstood several devastatin. typhoons and other cala*ities in thepast, without its roofin. or any portion thereof .ivin. way: that it hasnot 6een re*iss in its responsi6ility to see to it that said school6uildin., which houses school children, faculty *e*6ers, ande*ployees, is (in tip-top condition(: and further*ore, typhoon($alin.( was (an act of od and therefore 6eyond hu*an control(such that petitioner cannot 6e answera6le for the da*a.es wrou.htthere6y, a6sent any ne.li.ence on its part#

The trial court, .ivin. credence to the ocular inspection report to theeffect that su6=ect school 6uildin. had a (defective roofin.structure,( found that, while typhoon ($alin.( was acco*panied 6ystron. winds, the da*a.e to private respondents houses (couldhave 6een avoided if the construction of the roof of MpetitionersN6uildin. was not faulty#( The dispositive portion of the lower courtsdecision 7 reads, thus2

D!5!, in view of the fore.oin., the Court renders =ud.*ent ?sic@ in favor of the plaintiff ?sic@ and a.ainst thedefendants, ?sic@ orderin. the latter to pay =ointly and severally the

for*er as follows2

a@ %117,11;#00, as actual da*a.es, plus liti.ation e<penses:

6@ %1,000,000#00 as *oral da*a.es:

c@ %100,000#00 as attorneys fees:

d@ Costs of the instant suit#

The clai* for e<e*plary da*a.es is denied for the reason that thedefendants ?sic@ did in a wanton fraudulent, rec>less, oppressive or *alevolent *anner#

+n its appeal to the Court of Appeals, petitioner assi.ned as errors,

8 that2

+

T T!+A CI!T !!) +" )+" TAT TK%"($A+"(, A$ A" ACT 5 ), +$ "T (T $ A") A$IT !A$"( 5! T !+%%+"-55 5 T $/A%!T+" 5 T !5 5 $ITA$T!"$ 5I! ?&@$T!K $C I+)+"#

++

T T!+A CI!T !!) +" )+" TAT (TC"$T!ICT+" 5 T !5 5 )5")A"T$ $CI+)+" DA$ 5AITK( "TD+T$TA")+" T A)/+$$+"

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+++

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of 58

8/9/2019 Prelim 4 of 4


)+/AA"$ A4 A!A)K $) T+! %!%!TK, A"+"T!4"+" 4"T TAT !")!$ T+$ CA$ /T A") ACA)/+C#

+4

T T!+A CI!T !!) +" !)!+" T +$$IA"C 5T D!+T 5 BCIT+" +"$%+T 5 T %!5CT+" 5$ITA$T!"$ A%%A D" T! +$ " C/%+"!A$" 5! T +$$IA"C T!T#

As *entioned earlier, respondent Court of Appeals affir*ed with*odification the trial courts disposition 6y reducin. the award of

*oral da*a.es fro* %1,000,000#00 to %00,000#00# ence,petitioners resort to this Court, raisin. for resolution the issues of2

1# Dhether or not the award of actual da*a.es MsicN torespondent )i*aanos on the 6asis of speculation or con=ecture,without proof or receipts of actual da*a.e, MsicN le.ally feasi6le or =ustified#

# Dhether or not the award of *oral da*a.es to respondent)i*aanos, with the latter havin. suffered, actual da*a.e has le.al6asis#

3# Dhether or not respondent )i*aanos who are no lon.er the owner of the property, su6=ect *atter of the case, durin. itspendency, has the ri.ht to pursue their co*plaint a.ainst petitioner when the case was already *oot and acade*ic 6y the sale of theproperty to third party#

&# Dhether or not the award of attorneys fees when the casewas already *oot acade*ic MsicN le.ally =ustified#

'# Dhether or not petitioner is l ia6le for da*a.e caused toothers 6y typhoon ($alin.( 6ein. an act of od#

;# Dhether or not the issuance of a writ of e<ecution pendin.appeal, e<-parte or without hearin., has support in law#

The pivot of inuiry here, deter*inative of the other issues, iswhether the da*a.e on the roof of the 6uildin. of private

respondents resultin. fro* the i*pact of the fallin. portions of theschool 6uildin.s roof ripped off 6y the stron. winds of typhoon($alin.(, was, within le.al conte*plation, due to fortuitous eventU +f so, petitioner cannot 6e held lia6le for the da*a.es suffered 6y theprivate respondents# This conclusion finds support in Article 117& of Civil Code, which provides2

Art 117&#<cept in cases e<pressly specified 6y the law, or when itis otherwise declared 6y stipulation, or when the nature of theo6li.ation reuires the assu*ption of ris>, no person shall 6eresponsi6le for those events which could not 6e foreseen, or which,thou.h foreseen, were inevita6le#

The antecedent of fortuitous event or caso fortuito is found in the%artidas which defines it as (an event which ta>es place 6y

accident and could not have 6een foreseen#( 9 scriche ela6oratesit as (an une<pected event or act of od which could neither 6eforeseen nor resisted#( 10 Civilist Arturo /# Tolentino adds that(MfNortuitous events *ay 6e produced 6y two .eneral causes2 ?1@ 6ynature, such as earthua>es, stor*s, floods, epide*ics, fires, etc#and ?@ 6y the act of *an, such as an ar*ed invasion, attac> 6y6andits, .overn*ental prohi6itions, ro66ery, etc#( 11

+n order that a fortuitous event *ay e<e*pt a person fro* lia6ility, itis necessary that he 6e free fro* any previous ne.li.ence or *isconduct 6y reason of which the loss *ay have 6eenoccasioned# 1 An act of od cannot 6e invo>ed for the protectionof a person who has 6een .uilty of .ross ne.li.ence in not tryin. toforestall its possi6le adverse conseuences# Dhen a personsne.li.ence concurs with an act of od in producin. da*a.e or

in=ury to another, such person is not e<e*pt fro* lia6ility 6yshowin. that the i**ediate or pro<i*ate cause of the da*a.es or in=ury was a fortuitous event# Dhen the effect is found to 6e partlythe result of the participation of *an L whether it 6e fro* activeintervention, or ne.lect, or failure to act L the whole occurrence ishere6y hu*anied, and re*oved fro* the rules applica6le to actsof od# 13

+n the case under consideration, the lower court accorded fullcredence to the findin. of the investi.atin. tea* that su6=ect school

6uildin.s roofin. had (no sufficient anchora.e to hold it in positionespecially when 6attered 6y stron. winds#( ased on such findin.,the trial court i*puted ne.li.ence to petitioner and ad=ud.ed it lia6lefor da*a.es to private respondents#

After a thorou.h study and evaluation of the evidence on record,this Court 6elieves otherwise, notwithstandin. the .eneral rule thatfactual findin.s 6y the trail court, especially when affir*ed 6y theappellate court, are 6indin. and conclusive upon this Court# 1& After a careful scrutiny of the records and the pleadin.s su6*itted6y the parties, we find e<ception to this rule and hold that the lower courts *isappreciated the evidence proffered#

There is no uestion that a typhoon or stor* is a fortuitous event, anatural occurrence which *ay 6e foreseen 6ut is unavoida6ledespite any a*ount of foresi.ht, dili.ence or care# 1' +n order to 6ee<e*pt fro* lia6ility arisin. fro* any adverse conseuenceen.endered there6y, there should have 6een no hu*anparticipation a*ountin. to a ne.li.ent act# 1; +n other words: theperson see>in. e<oneration fro* lia6ility *ust not 6e .uilty of ne.li.ence# "e.li.ence, as co**only understood, is conductwhich naturally or reasona6ly creates undue ris> or har* to others#+t *ay 6e the failure to o6serve that de.ree of care, precaution, andvi.ilance which the circu*stances =ustify de*and, 17 or theo*ission to do so*ethin. which a prudent and reasona6le *an,.uided 6y considerations which ordinarily re.ulate the conduct of hu*an affairs, woulddo# 18 5ro* these pre*ises, we proceed to deter*ine whether petitioner was ne.li.ent, such that if it were not, the da*a.ecaused to private respondents house could have 6een avoidedU

At the outset, it 6ears e*phasiin. that a person clai*in. da*a.esfor the ne.li.ence of another has the 6urden of provin. thee<istence of fault or ne.li.ence causative of his in=ury or loss# Thefacts constitutive of ne.li.ence *ust 6e affir*atively esta6lished 6yco*petent evidence, 19 not *erely 6y presu*ptions andconclusions without 6asis in fact# %rivate respondents, inesta6lishin. the culpa6ility of petitioner, *erely relied on theafore*entioned report su6*itted 6y a tea* which *ade an ocular inspection of petitioners school 6uildin. after the typhoon# As theter* i*parts, an ocular inspection is one 6y *eans of actual si.htor viewin.# 0 Dhat is visual to the eye throu.h, is not always

reflective of the real cause 6ehind# 5or instance, one who hears a.unshot and then sees a wounded person, cannot always definitelyconclude that a third person shot the victi*# +t could have 6een self-inflicted or caused accidentally 6y a stray 6ullet# The relationship of cause and effect *ust 6e clearly shown#

+n the present case, other than the said ocular inspection, noinvesti.ation was conducted to deter*ine the real cause of thepartial unroofin. of petitioners school 6uildin.# %rivate respondentsdid not even show that the plans, specifications and desi.n of saidschool 6uildin. were deficient and defective# "either did they proveany su6stantial deviation fro* the approved plans andspecifications# "or did they conclusively esta6lish that theconstruction of such 6uildin. was 6asically flawed# 1

n the other hand, petitioner elicited fro* one of the witnesses of private respondents, city 6uildin. official Jesus !eyna, that theori.inal plans and desi.n of petitioners school 6uildin. wereapproved prior to its construction# n.r# !eyna ad*itted that it wasa le.al reuire*ent 6efore the construction of any 6uildin. to o6taina per*it fro* the city 6uildin. official ?city en.ineer, prior to thepassa.e of the uildin. Act of 1977@# +n li>e *anner, after construction of the 6uildin., a certification *ust 6e secured fro* thesa*e official attestin. to the readiness for occupancy of the edifice#avin. o6tained 6oth 6uildin. per*it and certificate of occupancy,these are, at the very least, pri*a facie evidence of the re.ular andproper construction of su6=ect school 6uildin.#

5urther*ore, when part of its roof needed repairs of the da*a.einflicted 6y typhoon ($alin.(, the sa*e city official .ave the .o-

si.nal for such repairs L without any deviation fro* the ori.inaldesi.n L and su6seuently, authoried the use of the entire fourthfloor of the sa*e 6uildin.# These only prove that su6=ect 6uildin.suffers fro* no structural defect, contrary to the report that its (I-shaped( for* was (structurally defective#( avin. .iven hisunualified i*pri*atur, the city 6uildin. official is presu*ed to haveproperly perfor*ed his duties 3 in connection therewith#

+n addition, petitioner presented its vice president for finance andad*inistration who testified that an annual *aintenance inspection

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and repair of su6=ect school 6uildin. were re.ularly underta>en#%etitioner was even willin. to present its *aintenance supervisor toattest to the e<tent of such re.ular inspection 6ut privaterespondents a.reed to dispense with his testi*ony and si*plystipulated that it would 6e corro6orative of the vice presidentsnarration#

/oreover, the city 6uildin. official, who has 6een in the city.overn*ent service since 197&, ad*itted in open court that noco*plaint re.ardin. any defect on the sa*e structure has ever 6een lod.ed 6efore his office prior to the institution of the case at6ench# +t is a *atter of =udicial notice that typhoons are co**onoccurrences in this country# +f su6=ect school 6uildin.s roofin. was

not fir*ly anchored to its trusses, o6viously, it could not havewithstood lon. years and several typhoons even stron.er than($alin.#(

+n li.ht of the fore.oin., we find no clear and convincin. evidenceto sustain the =ud.*ent of the appellate court# De thus hold thatpetitioner has not 6een shown ne.li.ent or at fault re.ardin. theconstruction and *aintenance of its school 6uildin. in uestion andthat typhoon ($alin.( was the pro<i*ate cause of the da*a.esuffered 6y private respondents house#

Dith this disposition on the pivotal issue, private respondents clai*for actual and *oral da*a.es as well as attorneys fees *ust fail#& %etitioner cannot 6e *ade to answer for a purely fortuitousevent# ' /ore so 6ecause no 6ad faith or willful act to causeda*a.e was alle.ed and proven to warrant *oral da*a.es#

%rivate respondents failed to adduce adeuate and co*petentproof of the pecuniary loss they actually incurred# ; +t is notenou.h that the da*a.e 6e capa6le of proof 6ut *ust 6e actuallyproved with a reasona6le de.ree of certainty, pointin. out specificfacts that afford a 6asis for *easurin. whatever co*pensatoryda*a.es are 6orne# 7 %rivate respondents *erely su6*itted anesti*ated a*ount needed for the repair of the roof their su6=ect6uildin.# Dhat is *ore, whether the (necessary repairs( werecaused "K 6y petitioners alle.ed ne.li.ence in the *aintenanceof its school 6uildin., or included the ordinary wear and tear of thehouse itself, is an essential uestion that re*ains indeter*ina6le#

The Court dee*s unnecessary to resolve the other issues posed 6ypetitioner#

As re.ards the si<th issue, however, the writ of e<ecution issued on April 1, 1993 6y the trial court is here6y nullified and set aside#%rivate respondents are ordered to rei*6urse any a*ount or returnto petitioner any property which they *ay have received 6y virtue of the enforce*ent of said writ#

D!5!, the petition is !A"T) and the challen.ed)ecision is !4!$)# The co*plaint of private respondents inCivil Case "o# 731& 6efore the trial court a uo is ordered)+$/+$$) and the writ of e<ecution issued on April 1, 1993 insaid case is $T A$+)# Accordin.ly, private respondents are!)!) to return to petitioner any a*ount or property received

6y the* 6y virtue of said writ# Costs a.ainst the privaterespondents#

FORTUNE EPRESS, INC., petitioner,vs.COURT OF APPEALS, PAULIE U.CAORONG, and 7inor +%i&dren!ASSER 0ING CAORONG, ROSE -EINNI and PRINCEALEANDER, a&& s(rna7ed CAORONG, and represented ')t%eir 7ot%er PAULIE U. CAORONG, respondents.

This is an appeal 6y petition for review on certiorari of the decision,dated July 9, 199&, of the Court of Appeals, which reversed thedecision of the !e.ional Trial Court, ranch 4+, +li.an City# Theaforesaid decision of the trial court dis*issed the co*plaint of pu6lic respondents a.ainst petitioner for da*a.es for 6reach of

contract of carria.e filed on the .round that petitioner had note<ercised the reuired de.ree of dili.ence in the operation of one of its 6uses# Atty# Tali6 Caoron., whose heirs are private respondentsherein, was a passen.er of the 6us and was >illed in the a*6ushinvolvin. said 6us#

The facts of the instant case are as follows2

%etitioner is a 6us co*pany in northern /indanao# %rivaterespondent %aulie Caoron. is the widow of Atty# Caoron., while

private respondents Kasser in., !ose einni, and %rince Ale<ander are their *inor children#

n "ove*6er 18, 1989, a 6us of petitioner fi.ured in an accidentwith a =eepney in auswa.an, anao del "orte, resultin. in thedeath of several passen.ers of the =eepney, includin. two/aranaos# Crisanto eneralao, a volunteer field a.ent of theConsta6ulary !e.ional $ecurity Init "o# B, conducted aninvesti.ation of the accident# e found that the owner of the =eepney was a /aranao residin. in )ela6ayan, anao del "orteand that certain /aranaos were plannin. to ta>e reven.e on thepetitioner 6y 6urnin. so*e of its 6uses# eneralao rendered areport on his findin.s to $.t# !eynaldo astasa of the %hilippine

Consta6ulary !e.ional eaduarters at Ca.ayan de ro# Ipon theinstruction of $.t# astasa, he went to see )iosdado ravo,operations *ana.er of petitioner, its *ain office in Ca.ayan de roCity# ravo assured hi* that the necessary precautions to insurethe safety of lives and property would 6e ta>en# 1

At a6out ;2&' %#/# on "ove*6er , 1989, three ar*ed /aranaoswho pretended to 6e passen.ers, seied a 6us of petitioner atina*on, anao del "orte while on its way to +li.an City# A*on. thepassen.ers of the 6us was Atty# Caoron.# The leader of the/aranaos, identified as one ashier /anan..olo, ordered thedriver, odofredo Ca6atuan, to stop the 6us on the side of thehi.hway# /anan..olo then shot Ca6atuan on the ar*, whichcaused hi* to slu*p on the steerin. wheel# The one of theco*panions of /anan..olo started pourin. .asoline inside the 6us,as the other held the passen.er at 6ay with a hand.un#/anan..olo then ordered the passen.er to .et off the 6us# Thepassen.ers, includin. Atty# Caoron., stepped out of the 6us andwent 6ehind the 6ushes in a field so*e distance fro* the hi.hway#

owever, Atty# Caoron. returned to the 6us to retrieve so*ethin.fro* the overhead rac># at that ti*e, one of the ar*ed *en waspourin. .asoline on the head of the driver# Ca6atuan, who had*eanti*e re.ained consciousness, heard Atty# Caoron. pleadin.with the ar*ed *en to spare the driver as he was innocent of anywron. doin. and was only tryin. to *a>e a livin.# The ar*ed *enwere, however, ada*ant as they repeated the warnin. that theywere .oin. to 6urn the 6us alon. with its driver# )urin. this

e<chan.e 6etween Atty# Caoron. and the assailants, Ca6atuancli*6ed out of the left window of the 6us and crawled to the canalon the opposite side of the hi.hway# e heard shots fro* inside the6us# arry de la Cru, one of the passen.ers, saw that Atty#Caoron. was hit# Then the 6us was set on fire# $o*e of thepassen.ers were a6le to pull Atty# Caoron. out of the 6urnin. 6usand rush hi* to the /ercy Co**unity ospital in +li.an City, 6ut hedied while under.oin. operation# 3

The private respondents 6rou.ht this suit for 6reach of contract of carria.e in the !e.ional Trial Court, ranch 4+, +li.an City# +n itsdecision, dated )ece*6er 8, 1990, the trial court dis*issed theco*plaint, holdin. as follows2

The fact that defendant, throu.h perations /ana.er )iosdado

ravo, was infor*ed of the (ru*ors( that the /osle*s intended tota>e reven.e 6y 6urnin. five 6uses of defendant is esta6lishedsince the latter also utilied Crisanto eneralao as a witness# Ketdespite this infor*ation, the plaintiffs char.e, defendant did not ta>eproper precautions# # # # Conseuently, plaintiffs now fault thedefendant for i.norin. the report# Their position is that thedefendant should have provided its 6uses with security .uards#)oes the law reuire co**on carriers to install security .uards inits 6uses for the protection and safety of its passen.ersU +s thefailure to post .uards on o*ission of the duty to (e<ercise thedili.ence of a .ood father of the fa*ily( which could have preventedthe >illin. of Atty# Caoron.U To our *ind, the dili.ence de*anded6y law does not include the postin. of security .uard in 6uses# +t isan o6li.ation that properly 6elon.s to the $tate# esides, will thepresence of one or two security .uards suffice to deter a

deter*ined assault of the lawless and thus prevent the in=uryco*plained ofU /ay6e so, 6ut a.ain, perhaps not# +n other words,the presence of a security .uard is not a .uarantee that the >illin.of Atty# Caoron. would have 6een definitely avoided#

<<< <<< <<<

Accordin.ly, the failure of defendant to accord faith and credit to thereport of /r# eneralao and the fact that it did not provide security

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to its 6uses cannot, in the li.ht of the circu*stances, 6echaracteried as ne.li.ence#

5inally, the evidence clearly shows that the assalants did not havethe least intention of the har*in. any of the passen.ers# Theyordered all the passen.ers to ali.ht and set fire on the 6us onlyafter all the passen.ers were out of dan.er# The death of Atty#Caoron. was an une<pected and unforseen occurrense over whichdefendant had no control# Atty# Caoron. perfor*ed an act of charityand herois* in co*in. to the succor of the driver even in the faceof dan.er# e deserves the undyin. .ratitude of the driver whoselife he saved# "o one should 6la*e hi* for an act of e<traordinarycharity and altruis* which cost his life# ut neither should any

6la*e 6e laid on the doorstep of defendant# is death was solelydue to the willfull acts of the lawless which defendant could neither prevent nor to stop#

D!5!, in view of the fore.oin., the co*plaint is here6ydis*issed# 5or lac> of *erit, the counter-clai* is li>ewisedis*issed# "o costs# &

n appeal, however, the Court of Appeals reversed# +t held2

+n the case at 6ench, how did defendant-appellee react to the tip or infor*ation that certain /aranao hotheads were plannin. to 6urnfive of its 6uses out of reven.e for the deaths of two /aranaos inan earlier collision involvin. appellees 6usU <cept for the re*ar>sof appellees operations *ana.er that (we will have our action # # # #and +ll 6e the one to settle it personally,( nothin. concretewhatsoever was ta>en 6y appellee or its e*ployees to prevent thee<ecution of the threat# )efendant-appellee never adopted even asin.le safety *easure for the protection of its payin. passen.ers#Dere there availa6le safe.uardsU f course, there were2 one wasfris>in. passen.ers particularly those en route to the area wherethe threats were li>ely to 6e carried out such as where the earlier accident occurred or the place of influence of the victi*s or their locality# +f fris>in. was resorted to, even te*porarily, # # # # appellee*i.ht 6e le.ally e<cused fro* lia6ilty# 5ris>in. of passen.erspic>ed up alon. the route could have 6een i*ple*ented 6y the 6usconductor: for those 6oardin. at the 6us ter*inal, fris>in. couldhave 6een conducted 6y hi* and perhaps 6y additional personnelof defendant-appellee# n hindsi.ht, the hand.uns and especially

the .allon of .asoline used 6y the felons all of which were 6rou.htinside the 6us would have 6een discovered, thus preventin. the6urnin. of the 6us and the fatal shootin. of the victi*#

Appellees ar.u*ent that there is no law reuirin. it to provide.uards on its 6uses and that the safety of citiens is the duty of the.overn*ent, is not well ta>en# To 6e sure, appellee is not e<pectedto assi.n security .uards on all its 6uses: if at all, it has the duty topost .uards only on its 6uses plyin. predo*inantly /aranaosareas# As discussed in the ne<t precedin. para.raph, leastappellee could have done in response to the report was to adopt asyste* of verification such as the fris>in. of passen.ers 6oardin.at its 6uses# "othin., and no repeat, nothin. at all, was done 6ydefendant-appellee to protect its innocent passen.ers fro* thedan.er arisin. fro* the (/aranao threats#( +t *ust 6e o6served that

fris>in. is not a novelty as a safety *easure in our society#$ensitive places L in fact, nearly all i*portant places L haveapplied this *ethod of security enhance*ent# ad.ets and devicesare avila6le in the *ar>et for this purpose# +t would not havewei.hed *uch a.ainst the 6ud.et of the 6us co*pany if such ite*swere *ade availa6le to its personnel to cope up with situationssuch as the (/aranaos threats#(

+n view of the constitutional ri.ht to personal privacy, our pronounce*ent in this decision should not 6e construed as anadvocacy of *andatory fris>in. in all pu6lic conveyances# Dhat weare sayin. is that .iven the circu*stances o6tainin. in the case at6ench that2 ?a@ two /aranaos died 6ecause of a vehicular collisioninvolvin. one of appellees vehicles: ?6@ appellee received a writtenreport fro* a *e*6er of the !e.ional $ecurity Init, Consta6ulary

$ecurity roup, that the tri6alOethnic .roup of the two deceasedwere plannin. to 6urn five 6uses of appellee out of reven.e: and ?c@appelle did nothin. L a6solutely nothin. L for the safety of itspassen.ers travellin. in the area of influence of the victi*s,appellee has failed to e<ercise the de.ree of dile.ence reuired of co**on carriers# ence, appellee *ust 6e ad=ud.e lia6le#

<<< <<< <<<

D!5! the decision appealed fro* is here6y !4!$)and another rendered orderin. defendant-appellee to pay plaintiffs-appellants the followin.2

1@ %3,399,;&9#0 as death inde*nity:

@ %'0,000#00 and %'00#00 per appearance as attorneys feeand

Costs a.ainst defendant-appellee# '

ence, this appeal# %etitioner contends2

?A@ TAT %I+C !$%")"T !!) +" !4!$+"T )C+$+" 5 T !+"A T!+A CI!T )AT))C/! 8, 1990 )+$/+$$+" T C/%A+"T A$ D A$ T CI"T!CA+/, A") 5+")+" 5! %!+4AT!$%")"T$ K !)!+" %T+T+"! T %AK TA!A"TIA" $I/ 5 %3,&&9,;&9#0 %I$ %'00#00 %! A%%A!A"C A$ ATT!"K$ 5$, A$ D A$ )"K+"%T+T+"!$ /T+" 5! !C"$+)!AT+" A") T$I%%/"T T $A+) /T+", D+ )+", A/"T!$, TAT T %T+T+"! !AC) T C"T!ACT5 T CA!!+A K +T$ 5A+I! T BC!C+$ T!I+!) )! 5 )++"C:

?@ TAT T ACT$ 5 T /A!A"A ITAD$ D!$ !A4, +!!$+$TA, 4+"T, A") 5!C5I, A$ T !A!)) A$ CA$ 5!TI+T: A")

?C@ TAT %I+C !$%")"T CI!T 5 A%%A$$!+I$K !!) +" )+" TAT %T+T+"! CI)A4 %!4+)) A)IAT $CI!+TK +" %!)/+"A"TK/I$+/ A!A$ A$ %A!T 5 +T$ )ITK T $!4 BT!A-!)+"A!K )++"C A$ A C//" CA!!+!#

The instant has no *erit#

5irst# %etitioners reach of the Contract of Carria.e#

Art# 17;3 of the Civil Code provides that a co**on carrier isresponsi6le for in=uries suffered 6y a passen.er on account of

wilfull acts of other passen.ers, if the e*ployees of the co**oncarrier could have prevented the act throu.h the e<ercise of thedili.ence of a .ood father of a fa*ily# +n the present case, it is clear that 6ecause of the ne.li.ence of petitioners e*ployees, theseiure of the 6us 6y /anan..olo and his *en was *ade possi6le#

)espite warnin. 6y the %hilippine Consta6ulary at Ca.ayan de rothat the /aranaos were plannin. to ta>e reven.e on the petitioner 6y 6urnin. so*e of its 6uses and the assurance of petitionersoperation *ana.er, )iosdado ravo, that the necessaryprecautions would 6e ta>en, petitioner did nothin. to protect thesafety of its passen.ers#

ad petitioner and its e*ployees 6een vi.ilant they would not havefailed to see that the *alefactors had a lar.e uantity of .asoline

with the*# Inder the circu*stances, si*ple precautionary*easures to protect the safety of passen.ers, such as fris>in.passen.ers and inspectin. their 6a..a.es, prefera6ly with non-intrusive .ad.ets such as *etal detectors, 6efore allowin. the* on6oard could have 6een e*ployed without violatin. the passen.ersconstitutional ri.hts# As this Court a*ended in acal v# %hilippine Air ines, +nc#, ; a co**on carrier can 6e held lia6le for failin. toprevent a hi=ac>in. 6y fris>in. passen.ers and inspectin. their 6a..a.es#

5ro* the fore.oin., it is evident that petitioners e*ployees failed toprevent the attac> on one of petitioners 6uses 6ecause they did note<ercise the dili.ence of a .ood father of a fa*ily# ence, petitioner should 6e held lia6le for the death of Atty# Caoron.#

$econd# $eiure of %etitioners us not a Case of 5orce /a=eure

The petitioner contends that the seiure of its 6us 6y the ar*edassailants was a fortuitous event for which it could not 6e heldlia6le#

Art# 117& of the Civil Code defines a fortuitous event as anoccurence which could not 6e foreseen, is inevita6le# +n Ko6ido v#Court of Appeals, 7 we held that to considered as force *a=eure, itis necessary that ?1@ the cause of the 6reach of the o6li.ation *ust

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6e independent of the hu*an will: ?@ the event *ust 6e either unforeseea6le or unavoida6le: ?3@ the occurence *ust 6e render iti*possi6le for the de6tor to fulfill the o6li.ation in a nor*al *anner:and ?&@ the o6li.or *ust 6e free of participation in, or a..ravationof, the in=ury to the creditor# The a6sence of any of the reuisites*entioned a6ove would prevent the o6li.or fro* 6ein. e<cusedfro* lia6ility#

Thus, in 4asue v# Court of Appeals, 8 it was held that theco**on carrier was lia6le for its failure to ta>e the necessaryprecautions a.ainst an approachin. typhoon, of which it waswarned, resultin. in the loss of the lives of several passen.ers# Theevent was forseea6le, and, thus, the second reuisite *entioned

a6ove was not fulfilled# This rulin. applies 6y analo.y to the presentcase# )espite the report of %C a.ent eneralao that the /aranaoswere .oin. to attac> its 6uses, petitioner too> no steps to safe.uardthe lives and properties of its passen.ers# The seiure of the 6us of the petitioner was foreseea6le and, therefore, was not a fortuitousevent which would e<e*pt petitioner fro* lia6ilty#

%etitioner invo>es the rulin. in %ilapil v# Court of Appeals, 9 and )eu*an v# Court of Appeals, 10 in support of its contention that theseiure of its 6us 6y the assailants constitutes force *a=eure# +n%ilapil v# Court of Appeals, 11 it was held that a co**on carrier isnot lia6le for failin. to install window .rills on its 6uses to protect thepassen.ers fro* in=uries cause 6y roc>s hurled at the 6us 6ylawless ele*ents# n the other hand, in )e u*an v# Court of Appeals, 1 it was ruled that a co**on carriers is not responsi6lefor .oods lost as a result of a ro66ery which is attended 6y .rave or irresista6le threat, violence, or force#

+t is clear that the cases of %ilapil and )e u*an do not apply tothe prensent case# Art# 17'' of the Civil Code provides that (aco**on carrier is 6ound to carry the passen.ers as far as hu*ancare and foresi.ht can provide, usin. the ut*ost dili.ence of verycautious persons, with due re.ard for all the circu*stances#( Thus,we held in %ilapil and )e u*an that the respondents thereinwere not ne.li.ent in failin. to ta>e special precautions a.ainstthreats to the safety of passen.ers which could not 6e foreseen,such as tortious or cri*inal acts of third persons# +n the presentcase, this factor of unforeseea6ility ?the second reuisite for anevent to 6e considered force *a=eure@ is lac>in.# As already stated,

despite the report of %C a.ent eneralao that the /aranaos wereplannin. to 6urn so*e of petitioners 6uses and the assurance of petitioners operation *ana.er ?)iosdado ravo@ that the necessaryprecautions would 6e ta>en, nothin. was really done 6y petitioner to protect the safety of passen.ers#

Third# )eceased not uilty of Contri6utory "e.li.ence

The petitioner contends that Atty# Caoron. was .uilty of contri6utoryne.li.ence in returnin. to the 6us to retrieve so*ethin.# ut Atty#Caoron. did not act rec>lessly# +t should 6e pointed out that theintended tar.ets of the violence were petitioners and its e*ployees,not its passen.ers# The assailants *otive was to retaliate for theloss of life of two /aranaos as a result of the collision 6etweenpetitioners 6us and the =eepney in which the two /aranaos were

ridin.# /anan..olo, the leader of the .roup which had hi=ac>ed the6us, ordered the passen.ers to .et off the 6us as they intended to6urn it and its driver# The ar*ed *en actually allowed Atty# Caoron.to retrieve so*ethin. fro* the 6us# Dhat apparently an.ered the*was his atte*pt to help the driver of the 6us 6y pleadin. for his life#e was playin. the role of the .ood $a*aritan# Certainly, this actcannot considered an act of ne.li.ence, let alone rec>lessness#

5ourth# %etitioner ia6le to %rivate !espaondents for )a*a.es

De now consider the uestion of da*a.es that the heirs of Atty#Caoron., private respondents herein, are entitled to recover fro*the petitioner#

+nde*nity for )eath# Art# 17;& of the Civil Code, in relation to

Art# 0; thereof, provides for the pay*ent of inde*nity for thedeath of passen.ers caused 6y the 6reach of contract of carria.e6y a co**on carrier# +nitially fi<ed in Art# 0; at %3,000#00, thea*ount of the said inde*nity for death has throu.h the years 6een.radually increased in view of the declinin. value of the peso# +t ispresently fi<ed at %'0,000#00# 13 %rivate respondents are entitledto this a*ount#

Actual )a*a.es# Art# 199 provides that (e<cept as provided 6ylaw or 6y stipulation, one is entitled to an adeuate co*pensation

only for such pecuniary loss suffered 6y hi* as has duly proved#(The trial court found that the private respondents spent %30,000#00for the wa>e and 6urial of Atty# Caoron.# 1& $ince petitioner doesnot uestion this findin. of the trial court, it is lia6le to privaterespondent in the said a*ount as actual da*a.es#

/oral )a*a.es# Inder Art# 0;, the (spouse, le.iti*ate andille.iti*ate descendants and ascendants of the deceased *ayde*and *oral da*a.es for *ental an.uish 6y reason of the deathof the deceased#( The trial court found that private respondent%aulie Caoron. suffered pain fro* the death of her hus6and andworry on how to provide support for their *inor children, privaterespondents Kasser in., !ose einni, and %rince Ale<ander# 1'

The petitioner li>ewise does not uestion this findin. of the trialcourt# Thus, in accordance with recent decisions of this Court, 1;we hold that the petitioner is lia6le to the private respondents in thea*ount of %100,000#00 as *oral da*a.es for the death of Atty#Caoron.#

<e*plary )a*a.es# Art# 3 provides that (in contracts anduasi-contracts, the court *ay award e<e*plary da*a.es if thedefendant acted in a wanton, fraudulent, rec>less, oppressive, or *alevolent rec>less *anner#( +n the present case, the petitioner acted in a wanton and rec>less *anner# )espite warnin. that the/aranaos were plannin. to ta>e reven.e a.ainst the petitioner 6y6urnin. so*e of its 6uses, and contary to the assurance *ade 6yits operations *ana.er that the necessary precautions would 6eta>e, the petitioner and its e*ployees did nothin. to protect thesafety of passen.ers# Inder the circu*tances, we dee* itreasona6le to award private respondents e<e*plary da*a.es inthe a*ount of %100,000#00# 17

Attorneys 5ees# %ursuant to Art# 08, attorneys fees *ay 6erecovered when, as in the instant case, e<e*plary da*a.es areawarded# +n the recent case of $ulpicio ines, +nc# v# Court of Appeals, 18 we held an award of %'0,000#00 as attorneys fees to6e reasona6le# ence, the private respondents are entitled toattorneys fees in that a*ount#

Co*pensation for oss of arnin. Capacity# Art# 17;& of the CivilCode, in relation to Art# 0; thereof, provides that in addition to theinde*nity for death arisin. fro* the 6reach of contrtact of carria.e

6y a co**on carrier, the (defendant shall 6e lia6le for the loss of the earnin. capacity of the deceased, and the inde*nity shall 6epaid to the heirs of the latter#( The for*ula esta6lished in decidedcases for co*putin. net earnin. capacity is as follows2 19

ross "ecessary

"et arnin. ife < Annual L ivin.

Capacity<pectancy +nco*e <penses

ife e<pectancy is euivalent to two thirds ?O3@ *ultiplied 6y thedifference of ei.hty ?80@ and the a.e of the deceased# 0 $ince Atty# Caoron. was 37 years old at that ti*e of his death, 1 he hada life e<pectancy of 8 O3 *ore years# is pro=ected .ross

annual inco*e, co*puted 6ased on his *onthly salary of %11,38'#00# 3 as a lawyer in the )epart*ent of A.rarian !efor*at the ti*e of his death, was %1&8,00'#00# & Allowin. for necessary livin. e<penses of fifty percent ?'0P@ ' of his pro=ected.ross annual inco*e, his total earnin. capacity a*ounts to%,11,&0&#90# ; ence, the petitioner is lia6le to the privaterespondents in the said a*ount as a co*pensation for loss of earnin. capacity#

D!5!, the decision, dated July 9, 199&, of the Court of Appeals is here6y A55+!/) with the /)+5+CAT+" thatpetitioner 5ortune <press, +nc# is ordered to pay the followin.a*ounts to private respondents %aulie, Kasser in., !ose einni,and %rince Ale<ander Caoron.2

1# death inde*nity in the a*ount of f ifty thousand pesos?%'0,000#00@:

# actual da*a.es in the a*ount of thirty thousand pesos?%30,000#00@:

3# *oral da*a.es in the a*ount of one hundred thousandpesos ?%100,000#00@:

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&# e<e*plary da*a.es in the a*ount of one hundredthousand pesos ?%100,000#00@:

'# attorneys fees in the a*ount of f ifty thousand pesos?%'0,000#00@:

;# co*pensation for loss of earnin. capacity in the a*ount of two *illion one hundred twenty-one thousand four hundred four pesos and ninety centavos ?%,11,&0&#90@: and

7# cost of suits#

T-ERMOC-EM INCORPORATED and /EROME O. CASTRO,

petitioners,vs.LEONORA NAVAL and T-E COURT OF APPEALS,respondents.

This da*a.e suit arose fro* a collision of vehicles 6ased on thefollowin. facts2

(?@n /ay 10, 199, at around 1200 ocloc> *idni.ht, duardode*1 was drivin. a (urin. Ta<i( alon. rti.as Avenue, near !osario, %asi., .oin. towards Cainta# %rior to the collision, theta<ica6 was par>ed alon. the ri.ht side of rti.as Avenue, not far fro* the !osario rid.e, to unload a passen.er# Thereafter, thedriver e<ecuted a I-turn to traverse the sa*e road, .oin. to thedirection of )$A# At this point, the "issan %athfinder travelin.alon. the sa*e road .oin. to the direction of Cainta collided withthe ta<ica6# The point of i*pact was so .reat that the ta<ica6 washit in the *iddle portion and was pushed sideward, causin. thedriver to lose control of the vehicle# The ta<ica6 was then dra..edinto the near6y uestion Tailorin. $hop, thus, causin. da*a.e tothe said tailorin. shop, and its driver, duardo den, sustainedin=uries as a result of the incident#(

%rivate respondent, as owner of the ta<i, filed a da*a.e suita.ainst petitioner, Ther*oche* +ncorporated, as the owner of the"issan %athfinder, and its driver, petitioner Jero*e Castro# After trial, the lower court ad=ud.ed petitioner Castro ne.li.ent andordered petitioners, =ointly and severally, to pay private respondentactual, co*pensatory and e<e*plary da*a.es plus attorneys fees

and costs of suit# The dispositive portion of the )ecision of the!e.ional Trial Court, ranch 1'0 of /a>ati City dated $epte*6er ', 199', reads2

+n view of all the fore.oin., =ud.*ent is here6y rendered orderin.the defendants, =ointly and severally, to pay plaintiff the followin.2

1# The a*ount of %&7,8'0#00 as actual da*a.es:

# The a*ount of %&',000#00 as co*pensatory da*a.es for unrealied inco*e:

3# The a*ount of % 10,000#00 as e<e*plary da*a.es:

&# The a*ount of %10,000#00 as and for attorneys fees: and

'# Cost of suit#

$ !)!)#3

n appeal, the Court of Appeals affir*ed the =ud.*ent of the courta uo#& ence, this petition for review on certiorari# The petitionwas denied on 5e6ruary , 1998 for failure to su6*it an e<planationwhy no personal service of copies of certain pleadin.s was *adeas reuired 6y !ule 13, $ection 11 of the 1997 !ules of Civil%rocedure#' Ipon petitioners *otion for reconsideration, thepetition was reinstated and private respondent was reuired to fileher Co**ent in a !esolution dated June , 1998#; A copy of thesaid !esolution was sent 6y re.istered *ail to private respondentscounsel 6ut the sa*e was returned to sender#7 +n a separate

!esolution issued on the sa*e date, this Court ordered that a copyof the June , 1998 !esolution 6e served personally on privaterespondents counsel#8 As the said !esolution was also returnedunserved, (the Court !esolved to consider the said !esolution as$!4)#(9 After *ore than a year, no Co**ent has 6een filed#Considerin. that private respondent was .iven only ten ?10@ days tofile her Co**ent, that period had already lapsed ten days after theJune 3, 1999 !esolution which stated that the June , 1998resolution as (served(#

$ervice of notice or other pleadin.s which are reuired 6y the rulesto 6e furnished to the parties *ust 6e *ade on their last address onrecord# +f they are represented 6y counsel, such notices shall 6esent instead to the counsels last .iven address on record in thea6sence of a proper and adeuate notice to the court of a chan.eof address,10 unless service upon the party hi*self is ordered 6ythe court#11 +t is the party and his counsels responsi6ility to devicea syste* for the receipt of *ail intended for the*1 =ust as it is theduty of counsel to infor* the court of a chan.e in his address# +nthe case at 6ar, private respondents counsel never notified theCourt of any chan.e of his address or whether he no lon.er holdsoffice in his last address of record# "either was the Court infor*edif his ties with his client has 6een severed# +nsofar as the Court is

concerned, the last address on record is the place where all noticesshall 6e served until the Court is officially infor*ed to the contrary#Dhat is the effect of the failure of a private respondent to co*plywith a court order to file Co**entU

Courts are .iven the option to dispense with the filin. of theCo**ent and consider the case as dee*ed su6*itted for decision#Inder !ule &;, $ection 7 of the 1997 !ules of Civil %rocedure,13when the respondent in an ori.inal action filed with the court fails tofile its co**ent, the case *ay 6e decided on the 6asis of theevidence on record without pre=udice to disciplinary action a.ainstthe diso6edient party# Conco*itant thereto is the rule that pursuantto !ule '1, $ection 1?@?1@,1& where no co**ent is filed upon thee<piration of the period to co**ent in an ori.inal action or apetition for review, the case shall 6e dee*ed su6*itted for decision# oth provisions are applica6le to a petition for review filedwith the $upre*e Court as provided in !ule ';, $ection ?a@ of the!ules#1' /oreover, a lawyer who fails to su6*it the reuiredCo**ent *anifests willful diso6edience to a lawful order of the$upre*e Court, a clear violation of the Canon of %rofessionalthics#1; Counsel *ust re*e*6er that his actions and o*issionsare 6indin. on his client#17 e should not ne.lect le.al *attersentrusted to hi* as his ne.li.ence therefro* shall render hi*lia6le# 18

The petition lac>s *erit#

The issue of whether a party is ne.li.ent is a uestion of fact# +t is ati*e-honored precept that the $upre*e Court is not a trier of

facts,19 althou.h it has authority to review and reverse factualfindin.s of lower courts if these do not confor* to evidence#0 +t isalso settled that findin.s of fact of the trial court, particularly whenaffir*ed 6y the Court of Appeals, is 6indin. on the $upre*eCourt1 and .enerally conclusive, especially if it has not 6eenadeuately shown that no si.nificant facts and circu*stances wereoverloo>ed or disre.arded which when considered would havealtered the outco*e of the disposition#

The driver of the onco*in. "issan %athfinder vehicle was lia6leand the driver of the I-turnin. ta<ica6 was contri6utorily lia6le#Contrary to petitioners contention, the fact that a party had noopportunity to avoid the collision is of his own *a>in. and thisshould not relieve hi* of lia6ility#3 5ro* petitioner Castrostesti*onial ad*issions, it is esta6lished that he was drivin. at a

speed faster than '0 >ilo*eters per hour 6ecause it was a downhillslope co*in. fro* the !osario 6rid.e# ut as he alle.edly steppedon the 6ra>e, it loc>ed causin. his "issan %athfinder to s>id to theleft and conseuently hit the ta<ica6# The sudden *alfunction of thevehicles 6ra>e syste* is the usual e<cuse of drivers involved incollisions which are the result of speedy drivin., particularly whenthe road is downhill#

/alfunction or loss of 6ra>e is not a fortuitous event# etween theowner and his driver, on the one hand, and third parties such asco**uters, drivers and pedestrians, on the other, the for*er ispresu*ed to >now a6out the conditions of his vehicle and is duty6ound to ta>e care thereof with the dili.ence of a .ood father of thefa*ily# A *echanically defective vehicle should avoid the streets# Aspetitioners vehicle was *ovin. downhill, the driver should have

slowed down since a downhill drive would naturally cause thevehicle to accelerate# /oreover, the record shows that the "issan%athfinder was on the wron. lane when the collision occurred# Thiswas a disre.ard of traffic safety rules# The law considers whatwould 6e rec>less, 6la*eworthy or ne.li.ent in a *an of ordinarydili.ence and prudence and deter*ines lia6ility 6y that#& venassu*in. ar.uendo that loss of 6ra>es is an act of od, 6y reasonof their ne.li.ence, the fortuitous event 6eca*e hu*anied,renderin. the "issan driver lia6le for the ensuin. da*a.es#'

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As *entioned earlier, the driver of the ta<i is contri6utorily lia6le# I-turns are not .enerally advisa6le particularly on *a=or streets# Theta<i was hit on its side which *eans that it had not yet fully *ade aturn to the other lane# The driver of the ta<i ou.ht to have >nownthat vehicles co*in. fro* the !osario 6rid.e are on a downhillslope# 6viously, there was lac> of foresi.ht on his part, *a>in.hi* contri6utorily lia6le# /ost pu6lic utility drivers disre.ard si.nsand traffic rules especially durin. the ni.ht when traffic enforcers*annin. the streets disappear with the li.ht# +n drivin. vehicles, thepri*ary concern should 6e the safety not only of the driver or hispassen.ers, 6ut also his fellow *otorists#

Considerin. the contri6utory ne.li.ence of the driver of private

respondents ta<i, the award of %&7,8'0#00, for the repair of theta<i, should 6e reduced in half# All other awards for da*a.es aredeleted for lac> of *erit#

D!5!, 6ased on the fore.oin., the assailed decision is/)+5+)# %etitioners are ordered to pay, =ointly and severally, toprivate respondent the a*ount of %3,9'#00 as actual da*a.es# All other awards are )T)#

P-ILIPPINE COMMUNICATIONS SATELLITE CORPORATION,petitioner,vs.GLOE TELECOM, INC. #$or7er&) G&o'e M+8a) Ca'&e andRadio Corporation, respondents.

efore the Court are two %etitions for !eview assailin. the )ecisionof the Court of Appeals, dated 7 5e6ruary 001, in CA-#!# C4"o# ;3;19#1

The facts of the case are undisputed#

5or several years prior to 1991, lo6e /c>ay Ca6le and !adioCorporation, now lo6e Teleco*, +nc# ?lo6e@, had 6een en.a.edin the coordination of the provision of various co**unicationfacilities for the *ilitary 6ases of the Inited $tates of A*erica ?I$@in Clar> Air ase, An.eles, %a*pan.a and $u6ic "aval ase inCu6i %oint, ]a*6ales# The said co**unication facilities wereinstalled and confi.ured for the e<clusive use of the I$ )efenseCo**unications A.ency ?I$)CA@, and for security reasons, were

operated only 6y its personnel or those of A*erican co*paniescontracted 6y it to operate said facilities# The I$)CA contractedwith said A*erican co*panies, and the latter, in turn, contractedwith lo6e for the use of the co**unication facilities# lo6e, on theother hand, contracted with local service providers such as the%hilippine Co**unications $atellite Corporation ?%hilco*sat@ for the provision of the co**unication facilities#

n 07 /ay 1991, %hilco*sat and lo6e entered into an A.ree*entwhere6y %hilco*sat o6li.ated itself to esta6lish, operate andprovide an +$ $tandard earth station ?earth station@ within Cu6i%oint for the e<clusive use of the I$)CA# The ter* of the contractwas for ;0 *onths, or five ?'@ years#3 +n turn, lo6e pro*ised topay %hilco*sat *onthly rentals for each leased circuit involved#&

At the ti*e of the e<ecution of the A.ree*ent, 6oth parties >newthat the /ilitary ases A.ree*ent 6etween the !epu6lic of the%hilippines and the I$ ?!%-I$ /ilitary ases A.ree*ent@, whichwas the 6asis for the occupancy of the Clar> Air ase and $u6ic"aval ase in Cu6i %oint, was to e<pire in 1991# Inder $ection ', Article B4+++ of the 1987 Constitution, forei.n *ilitary 6ases, troopsor facilities, which include those located at the I$ "aval 5acility inCu6i %oint, shall not 6e allowed in the %hilippines unless a newtreaty is duly concurred in 6y the $enate and ratified 6y a *a=orityof the votes cast 6y the people in a national referendu* when theCon.ress so reuires, and such new treaty is reco.nied as such6y the I$ overn*ent#

$u6seuently, %hilco*sat installed and esta6lished the earthstation at Cu6i %oint and the I$)CA *ade use of the sa*e#

n 1; $epte*6er 1991, the $enate passed and adopted $enate!esolution "o# 1&1, e<pressin. its decision not to concur in theratification of the Treaty of 5riendship, Cooperation and $ecurityand its $upple*entary A.ree*ents that was supposed to e<tendthe ter* of the use 6y the I$ of $u6ic "aval ase, a*on. others#'The last two para.raphs of the !esolution state2

5+")+" that the Treaty constitutes a defective fra*ewor> for thecontinuin. relationship 6etween the two countries in the spirit of

friendship, cooperation and soverei.n euality2 "ow, therefore, 6e it!esolved 6y the $enate, as it is here6y resolved, To e<press itsdecision not to concur in the ratification of the Treaty of 5riendship,Cooperation and $ecurity and its $upple*entary A.ree*ents, atthe sa*e ti*e reaffir*in. its desire to continue friendly relationswith the .overn*ent and people of the Inited $tates of A*erica#;

n 31 )ece*6er 1991, the %hilippine overn*ent sent a "ote4er6ale to the I$ overn*ent throu.h the I$ *6assy, notifyin.it of the %hilippinesV ter*ination of the !%-I$ /ilitary ases A.ree*ent# The "ote 4er6ale stated that since the !%-I$ /ilitaryases A.ree*ent, as a*ended, shall ter*inate on 31 )ece*6er 199, the withdrawal of all I$ *ilitary forces fro* $u6ic "aval

ase should 6e co*pleted 6y said date#

+n a letter dated 0; Au.ust 199, lo6e notified %hilco*sat of itsintention to discontinue the use of the earth station effective 08"ove*6er 199 in view of the withdrawal of I$ *ilitary personnelfro* $u6ic "aval ase after the ter*ination of the !%-I$ /ilitaryases A.ree*ent# lo6e invo>ed as 6asis for the letter of ter*ination $ection 8 ?)efault@ of the A.ree*ent, which provides2

"either party shall 6e held lia6le or dee*ed to 6e in default for anyfailure to perfor* its o6li.ation under this A.ree*ent if such failureresults directly or indirectly fro* force *a=eure or fortuitous event#ither party is thus precluded fro* perfor*in. its o6li.ation untilsuch force *a=eure or fortuitous event shall ter*inate# 5or thepurpose of this para.raph, force *a=eure shall *ean circu*stances6eyond the control of the party involved includin., 6ut not li*ited to,any law, order, re.ulation, direction or reuest of the overn*ent of the %hilippines, stri>es or other la6or difficulties, insurrection riots,national e*er.encies, war, acts of pu6lic ene*ies, fire, floods,typhoons or other catastrophies or acts of od#

%hilco*sat sent a reply letter dated 10 Au.ust 199 to lo6e,statin. that (we e<pect Mlo6eN to >now its co**it*ent to pay thestipulated rentals for the re*ainin. ter*s of the A.ree*ent evenafter Mlo6eN shall have discontinueMdN the use of the earth stationafter "ove*6er 08, 199#(7 %hilco*sat referred to $ection 7 of the A.ree*ent, statin. as follows2

7# )+$C"T+"IA"C 5 $!4+C

$hould Mlo6eN decide to discontinue with the use of the earthstation after it has 6een put into operation, a written notice shall 6eserved to %+C/$AT at least si<ty ?;0@ days prior to thee<pected date of ter*ination# "otwithstandin. the non-use of theearth station, Mlo6eN shall continue to pay %+C/$AT for therental of the actual nu*6er of T1 circuits in use, 6ut in no case shall6e less than the first two ?@ T1 circuits, for the re*ainin. life of thea.ree*ent# owever, should %+C/$AT *a>e use or sell theearth station su6=ect to this a.ree*ent, the o6li.ation of Mlo6eN topay the rental for the re*ainin. life of the a.ree*ent shall 6e atsuch *onthly rate as *ay 6e a.reed upon 6y the parties#8

After the I$ *ilitary forces left $u6ic "aval ase, %hilco*sat sentlo6e a letter dated & "ove*6er 1993 de*andin. pay*ent of its

outstandin. o6li.ations under the A.ree*ent a*ountin. toI$Q&,910,13;#00 plus interest and attorneyVs fees# owever, lo6erefused to heed %hilco*satVs de*and#

n 7 January 199', %hilco*sat filed with the !e.ional Trial Courtof /a>ati a Co*plaint a.ainst lo6e, prayin. that the latter 6eordered to pay liuidated da*a.es under the A.ree*ent, with le.alinterest, e<e*plary da*a.es, attorneyVs fees and costs of suit# Thecase was raffled to ranch '9 of said court#

lo6e filed an Answer to the Co*plaint, insistin. that it wasconstrained to end the A.ree*ent due to the ter*ination of the !%-I$ /ilitary ases A.ree*ent and the non-ratification 6y the $enateof the Treaty of 5riendship and Cooperation, which eventsconstituted force *a=eure under the A.ree*ent# lo6e e<plained

that the occurrence of said events e<e*pted it fro* payin. rentalsfor the re*ainin. period of the A.ree*ent#

n 0' January 1999, the trial court rendered its )ecision, thedispositive portion of which reads2

D!5!, pre*ises considered, =ud.*ent is here6y renderedas follows2

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1# rderin. the defendant to pay the plaintiff the a*ount of "inetyTwo Thousand Two undred Thirty i.ht I$ )ollars?I$Q9,38#00@ or its euivalent in %hilippine Currency ?co*putedat the e<chan.e rate prevailin. at the ti*e of co*pliance or pay*ent@ representin. rentals for the *onth of )ece*6er 199with interest thereon at the le.al rate of twelve percent ?1P@ per annu* startin. )ece*6er 199 until the a*ount is fully paid:

# rderin. the defendant to pay the plaintiff the a*ount of Threeundred Thousand ?%300,000#00@ %esos as and for attorneyVs fees:

3# rderin. the )+$/+$$A of defendantVs counterclai* for lac> of *erit: and

&# Dith costs a.ainst the defendant#

$ !)!)#9

oth parties appealed the trial courtVs )ecision to the Court of Appeals#

%hilco*sat clai*ed that the trial court erred in rulin. that2 ?1@ thenon-ratification 6y the $enate of the Treaty of 5riendship,Cooperation and $ecurity and its $upple*entary A.ree*entsconstitutes force *a=eure which e<e*pts lo6e fro* co*plyin.with its o6li.ations under the A.ree*ent: ?@ lo6e is not lia6le topay the rentals for the re*ainder of the ter* of the A.ree*ent: and?3@ lo6e is not lia6le to %hilco*sat for e<e*plary da*a.es#

lo6e, on the other hand, contended that the !TC erred in holdin.it lia6le for pay*ent of rent of the earth station for )ece*6er 199and of attorneyVs fees# +t e<plained that it ter*inated %hilco*satVsservices on 08 "ove*6er 199: hence, it had no reason to pay for rentals 6eyond that date#

n 7 5e6ruary 001, the Court of Appeals pro*ul.ated its)ecision dis*issin. %hilco*satVs appeal for lac> of *erit andaffir*in. the trial courtVs findin. that certain events constitutin.force *a=eure under $ection 8 the A.ree*ent occurred and =ustifiedthe non-pay*ent 6y lo6e of rentals for the re*ainder of the ter*of the A.ree*ent#

The appellate court ruled that the non-ratification 6y the $enate of the Treaty of 5riendship, Cooperation and $ecurity, and its$upple*entary A.ree*ents, and the ter*ination 6y the %hilippineovern*ent of the !%-I$ /ilitary ases A.ree*ent effective 31)ece*6er 1991 as stated in the %hilippine overn*entVs "ote4er6ale to the I$ overn*ent, are acts, directions, or reuests of the overn*ent of the %hilippines which constitute force *a=eure#+n addition, there were circu*stances 6eyond the control of theparties, such as the issuance of a for*al order 6y Cdr# Dalter Corliss of the I$ "avy, the issuance of the letter notification fro* ATT and the co*plete withdrawal of all I$ *ilitary forces andpersonnel fro* Cu6i %oint, which prevented further use of the earthstation under the A.ree*ent#

owever, the Court of Appeals ruled that althou.h lo6e sou.ht to

ter*inate %hilco*satVs services 6y 08 "ove*6er 199, it is stilllia6le to pay rentals for the )ece*6er 199, a*ountin. toI$Q9,38#00 plus interest, considerin. that the I$ *ilitary forcesand personnel co*pletely withdrew fro* Cu6i %oint only on 31)ece*6er 199#10

oth parties filed their respective %etitions for !eview assailin. the)ecision of the Court of Appeals#

+n #!# "o# 1&73&,11 petitioner %hilco*sat raises the followin.assi.n*ents of error2

A# T "!A CI!T 5 A%%A$ !!) +" A)%T+" A )5+"+T+" 5 5!C /AJI! )+55!"T5!/ DAT +T$ A )5+"+T+" 5I") +" A!T+C 117&

5 T C+4+ C), %!4+)$, $ A$ T B/%T TC/ 5!/ C/%K+" D+T +T$ +AT+"$ I")!T $IJCT A!/"T#

# T "!A CI!T 5 A%%A$ !!) +" !I+"TAT TC/ +$ "T +A T %+C/$AT 5!!"TA$ 5! T !/A+"+" T!/ 5 T A!/"T,)$%+T T CA! T"! 5 $CT+" 7 5 T A!/"T#

C# T "!A CI!T 5 A%%A$ !!) +")T+" T T!+A CI!TV$ ADA!) 5 ATT!"KV$ 5$+" 5A4! 5 %+C/$AT#

)# T "!A CI!T 5 A%%A$ !!) +" !I+"TAT TC/ +$ "T +A T %+C/$AT 5!B/%A!K )A/A$#1

%hilco*sat ar.ues that the ter*ination of the !%-I$ /ilitary ases A.ree*ent cannot 6e considered a fortuitous event 6ecause thehappenin. thereof was foreseea6le# Althou.h the A.ree*ent wasfreely entered into 6y 6oth parties, $ection 8 should 6e dee*edineffective 6ecause it is contrary to Article 117& of the Civil Code#

%hilco*sat posits the view that the validity of the partiesV definitionof force *a=eure in $ection 8 of the A.ree*ent as (circu*stances6eyond the control of the party involved includin., 6ut not li*ited to,any law, order, re.ulation, direction or reuest of the overn*ent of the %hilippines, stri>es or other la6or difficulties, insurrection riots,national e*er.encies, war, acts of pu6lic ene*ies, fire, floods,typhoons or other catastrophies or acts of od,( should 6e dee*edsu6=ect to Article 117& which defines fortuitous events as eventswhich could not 6e foreseen, or which, thou.h foreseen, wereinevita6le#13

%hilco*sat further clai*s that the Court of Appeals erred in holdin.that lo6e is not lia6le to pay for the rental of the earth station for the entire ter* of the A.ree*ent 6ecause it runs counter to whatwas plainly stipulated 6y the parties in $ection 7 thereof# /oreover,said rulin. is inconsistent with the appellate courtVs pronounce*entthat lo6e is lia6le to pay rentals for )ece*6er 199 even thou.h itter*inated %hilco*satVs services effective 08 "ove*6er 199,6ecause the I$ *ilitary and personnel co*pletely withdrew fro*Cu6i %oint only in )ece*6er 199# %hilco*sat points out that itwas lo6e which proposed the five-year ter* of the A.ree*ent,and that the other provisions of the A.ree*ent, such as $ection&#11& thereof, evince the intent of lo6e to 6e 6ound to pay rentalsfor the entire five-year ter*#1'

%hilco*sat also *aintains that contrary to the appellate courtVsfindin.s, it is entitled to attorneyVs fees and e<e*plary da*a.es#1;

+n its Co**ent to %hilco*satVs %etition, lo6e asserts that $ection

8 of the A.ree*ent is not contrary to Article 117& of the Civil Code6ecause said provision does not prohi6it parties to a contract fro*providin. for other instances when they would 6e e<e*pt fro*fulfillin. their contractual o6li.ations# lo6e also clai*s that theter*ination of the !%-I$ /ilitary ases A.ree*ent constitutesforce *a=eure and e<e*pts it fro* co*plyin. with its o6li.ationsunder the A.ree*ent#17 n the issue of the propriety of awardin.attorneyVs fees and e<e*plary da*a.es to %hilco*sat, lo6e*aintains that %hilco*sat is not entitled thereto 6ecause in refusin.to pay rentals for the re*ainder of the ter* of the A.ree*ent,lo6e only acted in accordance with its ri.hts#18

+n #!# "o# 1&733&,19 lo6e, the petitioner therein, contends thatthe Court of Appeals erred in findin. it lia6le for the a*ount of I$Q9,38#00, representin. rentals for )ece*6er 199, since

%hilco*satVs services were actually ter*inated on 08 "ove*6er 199#0

+n its Co**ent, %hilco*sat clai*s that lo6eVs petition should 6edis*issed as it raises a factual issue which is not co.nia6le 6y theCourt in a petition for review on certiorari#1

n 1' Au.ust 001, the Court issued a !esolution .ivin. duecourse to %hilco*satVs %etition in #!# "o#

1&73& and reuired the parties to su6*it their respective*e*oranda#

$i*ilarly, on 0 Au.ust 001, the Court issued a !esolution .ivin.due course to the %etition filed 6y lo6e in #!# "o# 1&733& and

reuired 6oth parties to su6*it their *e*oranda#3

%hilco*sat and lo6e thereafter filed their respective Consolidated/e*oranda in the two cases, reiteratin. their ar.u*ents in their respective petitions#

The Court is tas>ed to resolve the followin. issues2 ?1@ whether theter*ination of the !%-I$ /ilitary ases A.ree*ent, the non-ratification of the Treaty of 5riendship, Cooperation and $ecurity,and the conseuent withdrawal of I$ *ilitary forces and personnel

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fro* Cu6i %oint constitute force *a=eure which would e<e*ptlo6e fro* co*plyin. with its o6li.ation to pay rentals under its A.ree*ent with %hilco*sat: ?@ whether lo6e is lia6le to payrentals under the A.ree*ent for the *onth of )ece*6er 199: and?3@ whether %hilco*sat is entitled to attorneyVs fees and e<e*plaryda*a.es#

"o reversi6le error was co**itted 6y the Court of Appeals inissuin. the assailed )ecision: hence the petitions are denied#

There is no *erit is %hilco*satVs ar.u*ent that $ection 8 of the A.ree*ent cannot 6e .iven effect 6ecause the enu*eration of events constitutin. force *a=eure therein unduly e<pands the

concept of a fortuitous event under Article 117& of the Civil Codeand is therefore invalid#

+n support of its position, %hilco*sat contends that under Article117& of the Civil Code, an event *ust 6e unforeseen in order toe<e*pt a party to a contract fro* co*plyin. with its o6li.ationstherein# +t insists that since the e<piration of the !%-I$ /ilitaryases A.ree*ent, the non-ratification of the Treaty of 5riendship,Cooperation and $ecurity and the withdrawal of I$ *ilitary forcesand personnel fro* Cu6i %oint were not unforeseea6le, 6ut werepossi6ilities >nown to it and lo6e at the ti*e they entered into the A.ree*ent, such events cannot e<e*pt lo6e fro* perfor*in. itso6li.ation of payin. rentals for the entire five-year ter* thereof#

owever, Article 117&, which e<e*pts an o6li.or fro* lia6ility onaccount of fortuitous events or force *a=eure, refers not only toevents that are unforeseea6le, 6ut also to those which areforeseea6le, 6ut inevita6le2

Art# 117&# <cept in cases specified 6y the law, or when it isotherwise declared 6y stipulation, or when the nature of theo6li.ation reuires the assu*ption of ris>, no person shall 6eresponsi6le for those events which, could not 6e foreseen, or which, thou.h foreseen were inevita6le#

A fortuitous event under Article 117& *ay either 6e an (act of od,(or natural occurrences such as floods or typhoons,& or an (act of *an,( such as riots, stri>es or wars#'

%hilco*sat and lo6e a.reed in $ection 8 of the A.ree*ent thatthe followin. events shall 6e dee*ed events constitutin. force*a=eure2

1# Any law, order, re.ulation, direction or reuest of the %hilippineovern*ent:

# $tri>es or other la6or difficulties:

3# +nsurrection:

&# !iots:

'# "ational e*er.encies:

;# Dar:

7# Acts of pu6lic ene*ies:

8# 5ire, floods, typhoons or other catastrophies or acts of od:

9# ther circu*stances 6eyond the control of the parties#

Clearly, the fore.oin. are either unforeseea6le, or foreseea6le 6ut6eyond the control of the parties# There is nothin. in theenu*eration that runs contrary to, or e<pands, the concept of afortuitous event under Article 117&#

5urther*ore, under Article 130;; of the Civil Code, parties to acontract *ay esta6lish such stipulations, clauses, ter*s and

conditions as they *ay dee* fit, as lon. as the sa*e do not runcounter to the law, *orals, .ood custo*s, pu6lic order or pu6licpolicy#7

Article 11'9 of the Civil Code also provides that (MoN6li.ationsarisin. fro* contracts have the force of law 6etween the contractin.parties and should 6e co*plied with in .ood faith#(8 Courts cannotstipulate for the parties nor a*end their a.ree*ent where the sa*edoes not contravene law, *orals, .ood custo*s, pu6lic order or pu6lic policy, for to do so would 6e to alter the real intent of the

parties, and would run contrary to the function of the courts to .iveforce and effect thereto#9

"ot 6ein. contrary to law, *orals, .ood custo*s, pu6lic order, or pu6lic policy, $ection 8 of the A.ree*ent which %hilco*sat andlo6e freely a.reed upon has the force of law 6etween the*#30

+n order that lo6e *ay 6e e<e*pt fro* non-co*pliance with itso6li.ation to pay rentals under $ection 8, the concurrence of thefollowin. ele*ents *ust 6e esta6lished2 ?1@ the event *ust 6eindependent of the hu*an will: ?@ the occurrence *ust render iti*possi6le for the de6tor to fulfill the o6li.ation in a nor*al *anner:and ?3@ the o6li.or *ust 6e free of participation in, or a..ravation

of, the in=ury to the creditor#31

The Court a.rees with the Court of Appeals and the trial court thatthe a6ove*entioned reuisites are present in the instant case#%hilco*sat and lo6e had no control over the non-renewal of theter* of the !%-I$ /ilitary ases A.ree*ent when the sa*ee<pired in 1991, 6ecause the prero.ative to ratify the treatye<tendin. the life thereof 6elon.ed to the $enate# "either did theparties have control over the su6seuent withdrawal of the I$*ilitary forces and personnel fro* Cu6i %oint in )ece*6er 1992

6viously the non-ratification 6y the $enate of the !%-I$ /ilitaryases A.ree*ent ?and its $upple*ental A.ree*ents@ under its!esolution "o# 1&1# ?<hi6it ((@ on $epte*6er 1;, 1991 is 6eyondthe control of the parties# This resolution was followed 6y thesendin. on )ece*6er 31, 1991 oMfN a ("ote 4er6ale( ?<hi6it (3(@6y the %hilippine overn*ent to the I$ overn*ent notifyin. thelatter of the for*erVs ter*ination of the !%-I$ /ilitary ases A.ree*ent ?as a*ended@ on 31 )ece*6er 199 and thataccordin.ly, the withdrawal of all I#$# *ilitary forces fro* $u6ic"aval ase should 6e co*pleted 6y said date# $u6seuently,defendant Mlo6eN received a for*al order fro* Cdr# Dalter 5#Corliss ++ Co**ander I$" dated July 31, 199 and a notificationfro* ATT dated July 9, 199 to ter*inate the provision of T1sservices ?via an +$ $tandard arth $tation@ effective "ove*6er 08, 199# %laintiff M%hilco*satN was furnished with copies of thesaid order and letter 6y the defendant on Au.ust 0;, 199#

!esolution "o# 1&1 of the %hilippine $enate and the "ote 4er6ale

of the %hilippine overn*ent to the I$ overn*ent are acts,direction or reuest of the overn*ent of the %hilippines andcircu*stances 6eyond the control of the defendant# The for*alorder fro* Cdr# Dalter Corliss of the I$", the letter notificationfro* ATT and the co*plete withdrawal of all the *ilitary forces andpersonnel fro* Cu6i %oint in the year-end 199 are also acts andcircu*stances 6eyond the control of the defendant#

Considerin. the fore.oin., the Court finds and so holds that theafore-narrated circu*stances constitute (force *a=eure or fortuitousevent?s@ as defined under para.raph 8 of the A.ree*ent#

5ro* the fore.oin., the Court finds that the defendant is e<e*pted

fro* payin. the rentals for the facility for the re*ainin. ter* of thecontract#

As a conseuence of the ter*ination of the !%-I$ /ilitary ases A.ree*ent ?as a*ended@ the continued stay of all I$ /ilitaryforces and personnel fro* $u6ic "aval ase would no lon.er 6eallowed, hence, plaintiff would no lon.er 6e in any position torender the service it was o6li.ated under the A.ree*ent# To put it6lantly ?sic@, since the I$ *ilitary forces and personnel left or withdrew fro* Cu6i %oint in the year end )ece*6er 199, therewas no lon.er any necessity for the plaintiff to continue *aintainin.the +$ facility# 3 ?*phasis in the ori.inal#@

The afore*entioned events *ade i*possi6le the continuation of the A.ree*ent until the end of its five-year ter* without fault on the

part of either party# The Court of Appeals was thus correct in rulin.that the happenin. of such fortuitous events rendered lo6ee<e*pt fro* pay*ent of rentals for the re*ainder of the ter* of the A.ree*ent#

/oreover, it would 6e un=ust to reuire lo6e to continue payin.rentals even thou.h %hilco*sat cannot 6e co*pelled to perfor* itscorrespondin. o6li.ation under the A.ree*ent# As noted 6y theappellate court2

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De also point out the sheer ineuity of %+C/$ATVs position#%+C/$AT would li>e to char.e rentals for the 6alanceof the lease ter* without there 6ein. any correspondin.teleco**unications service su6=ect of the lease# +t will 6e .rosslyunfair and iniuitous to hold lia6le for lease char.es for aservice that was not and could not have 6een rendered due to anact of the .overn*ent which was clearly 6eyond Vs control#The 6indin. effect of a contract on 6oth parties is 6ased on theprinciple that the o6li.ations arisin. fro* contracts have the force of law 6etween the contractin. parties, and there *ust 6e *utuality6etween the* 6ased essentially on their euality under which it isrepu.nant to have one party 6ound 6y the contract while leavin.the other party free therefro* ?Allied an>in. Corporation v# Court

of Appeals, 8& $C!A 3'7@#33

Dith respect to the issue of whether lo6e is lia6le for pay*ent of rentals for the *onth of )ece*6er 199, the Court li>ewise affir*sthe appellate courtVs rulin. that lo6e should pay the sa*e#

Althou.h lo6e alle.ed that it ter*inated the A.ree*ent with%hilco*sat effective 08 "ove*6er 199 pursuant to the for*alorder issued 6y Cdr# Corliss of the I$ "avy, the date when theyactually ceased usin. the earth station su6=ect of the A.ree*entwas not esta6lished durin. the trial#3& owever, the trial courtfound that the I$ *ilitary forces and personnel co*pletelywithdrew fro* Cu6i %oint only on 31 )ece*6er 199#3' Thus, untilthat date, the I$)CA had control over the earth station and hadthe option of usin. the sa*e# 5urther*ore, %hilco*sat could nothave re*oved or rendered ineffective said co**unication facilityuntil after 31 )ece*6er 199 6ecause Cu6i %oint was accessi6leonly to I$ naval personnel up to that ti*e# ence, the Court of Appeals did not err when it affir*ed the trial courtVs rulin. thatlo6e is lia6le for pay*ent of rentals until )ece*6er 199#

"either did the appellate court co**it any error in holdin. that%hilco*sat is not entitled to attorneyVs fees and e<e*plaryda*a.es#

The award of attorneyVs fees is the e<ception rather than the rule,and *ust 6e supported 6y factual, le.al and euita6le =ustifications#3; +n previously decided cases, the Court awardedattorneyVs fees where a party acted in .ross and evident 6ad faith in

refusin. to satisfy the other partyVs clai*s and co*pelled the for*er to liti.ate to protect his ri.hts:37 when the action filed is clearlyunfounded,38 or where *oral or e<e*plary da*a.es areawarded#39 owever, in cases where 6oth parties have le.iti*ateclai*s a.ainst each other and no party actually prevailed, such asin the present case where the clai*s of 6oth parties were sustainedin part, an award of attorneyVs fees would not 6e warranted#&0

<e*plary da*a.es *ay 6e awarded in cases involvin. contractsor uasi-contracts, if the errin. party acted in a wanton, fraudulent,rec>less, oppressive or *alevolent *anner#&1 +n the present case,it was not shown that lo6e acted wantonly or oppressively in notheedin. %hilco*satVs de*ands for pay*ent of rentals# +t wasesta6lished durin. the trial of the case 6efore the trial court thatlo6e had valid .rounds for refusin. to co*ply with its contractual

o6li.ations after 199#

D!5!, the %etitions are )"+) for lac> of *erit# Theassailed )ecision of the Court of Appeals in CA-#!# C4 "o# ;3;19is A55+!/)#

SPOUSES DANTE CRU" and LEONORA CRU", Petitioners,vs.SUN -OLIDA!S, INC., Respondent.

$pouses )ante and eonora Cru ?petitioners@ lod.ed a Co*plainton January ', 0011 a.ainst $un olidays, +nc# ?respondent@ withthe !e.ional Trial Court ?!TC@ of %asi. City for da*a.es arisin.fro* the death of their son !uelito C# Cru ?!uelito@ who perishedwith his wife on $epte*6er 11, 000 on 6oard the 6oat /O Coco

each +++ that capsied en route to atan.as fro* %uerto alera,riental /indoro where the couple had stayed at Coco each+sland !esort ?!esort@ owned and operated 6y respondent#

The stay of the newly wed !uelito and his wife at the !esort fro*$epte*6er 9 to 11, 000 was 6y virtue of a tour pac>a.e-contractwith respondent that included transportation to and fro* the !esortand the point of departure in atan.as#

/i.uel C# /atute ?/atute@, a scu6a divin. instructor and one of the survivors, .ave his account of the incident that led to the filin.of the co*plaint as follows2

/atute stayed at the !esort fro* $epte*6er 8 to 11, 000# e wasori.inally scheduled to leave the !esort in the afternoon of $epte*6er 10, 000, 6ut was advised to stay for another ni.ht6ecause of stron. winds and heavy rains#

n $epte*6er 11, 000, as it was still windy, /atute and ' other !esort .uests includin. petitionersV son and his wife tre>>ed to theother side of the Coco each *ountain that was sheltered fro* thewind where they 6oarded /O Coco each +++, which was to ferry

the* to atan.as#

$hortly after the 6oat sailed, it started to rain# As it *oved farther away fro* %uerto alera and into the open seas, the rain and wind.ot stron.er, causin. the 6oat to tilt fro* side to side and thecaptain to step forward to the front, leavin. the wheel to one of thecrew *e*6ers#

The waves .ot *ore unwieldy# After .ettin. hit 6y two 6i. waveswhich ca*e one after the other, /O Coco each +++ capsiedputtin. all passen.ers underwater#

The passen.ers, who had put on their life =ac>ets, stru..led to .etout of the 6oat# Ipon seein. the captain, /atute and the other passen.ers who reached the surface as>ed hi* what they could doto save the people who were still trapped under the 6oat# Thecaptain replied (+li.tas niyo na lan. an. sarili niyo( ?Just saveyourselves@#

elp ca*e after a6out &' *inutes when two 6oats owned 6y Asia)ivers in $a6an., %uerto alera passed 6y the capsied /O Cocoeach +++# oarded on those two 6oats were persons, consistin.of 18 passen.ers and four crew *e*6ers, who were 6rou.ht to%isa +sland# i.ht passen.ers, includin. petitionersV son and hiswife, died durin. the incident#

At the ti*e of !uelitoVs death, he was 8 years old and e*ployedas a contractual wor>er for /itsui n.ineerin. R $hip6uildin. Ara6ia, td# in $audi Ara6ia, with a 6asic *onthly salary of Q900#3

%etitioners, 6y letter of cto6er ;, 000,& de*andedinde*nification fro* respondent for the death of their son in thea*ount of at least %&,000,000#

!eplyin., respondent, 6y letter dated "ove*6er 7, 000,' deniedany responsi6ility for the incident which it considered to 6e afortuitous event# +t nevertheless offered, as an act of co**iseration, the a*ount of %10,000 to petitioners upon their si.nin. of a waiver#

As petitioners declined respondentVs offer, they filed the Co*plaint,as earlier reflected, alle.in. that respondent, as a co**on carrier,was .uilty of ne.li.ence in allowin. /O Coco each +++ to sailnotwithstandin. stor* warnin. 6ulletins issued 6y the %hilippine

At*ospheric, eophysical and Astrono*ical $ervices Ad*inistration ?%AA$A@ as early as '200 a#*# of $epte*6er 11,000#;

+n its Answer,7 respondent denied 6ein. a co**on carrier, alle.in.that its 6oats are not availa6le to the .eneral pu6lic as they onlyferry !esort .uests and crew *e*6ers# "onetheless, it clai*edthat it e<ercised the ut*ost dili.ence in ensurin. the safety of itspassen.ers: contrary to petitionersV alle.ation, there was no stor*on $epte*6er 11, 000 as the Coast uard in fact cleared thevoya.e: and /O Coco each +++ was not filled to capacity and hadsufficient life =ac>ets for its passen.ers# y way of Counterclai*,respondent alle.ed that it is entitled to an award for attorneyVs feesand liti.ation e<penses a*ountin. to not less than %300,000#

Carlos onuin, captain of /O Coco each +++, averred that the!esort custo*arily reuires four conditions to 6e *et 6efore a 6oatis allowed to sail, to wit2 ?1@ the sea is cal*, ?@ there is clearancefro* the Coast uard, ?3@ there is clearance fro* the captain and?&@ there is clearance fro* the !esortVs assistant *ana.er#8 eadded that /O Coco each +++ *et all four conditions on$epte*6er 11, 000,9 6ut a su6asco or suall, characteried 6ystron. winds and 6i. waves, suddenly occurred, causin. the 6oatto capsie#10

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y )ecision of 5e6ruary 1;, 00',11 ranch ;7 of the %asi. !TCdis*issed petitionersV Co*plaint and respondentVs Counterclai*#

%etitionersV /otion for !econsideration havin. 6een denied 6yrder dated $epte*6er , 00',1 they appealed to the Court of Appeals#

y )ecision of Au.ust 19, 008,13 the appellate court deniedpetitionersV appeal, holdin., a*on. other thin.s, that the trial courtcorrectly ruled that respondent is a private carrier which is onlyreuired to o6serve ordinary dili.ence: that respondent in facto6served e<traordinary dili.ence in transportin. its .uests on 6oard/O Coco each +++: and that the pro<i*ate cause of the incident

was a suall, a fortuitous event#

%etitionersV /otion for !econsideration havin. 6een denied 6y!esolution dated January 1;, 009,1& they filed the present%etition for !eview#1'

%etitioners *aintain the position they too> 6efore the trial court,addin. that respondent is a co**on carrier since 6y its tour pac>a.e, the transportin. of its .uests is an inte.ral part of itsresort 6usiness# They infor* that another division of the appellatecourt in fact held respondent lia6le for da*a.es to the other survivors of the incident#

Ipon the other hand, respondent contends that petitioners failed topresent evidence to prove that it is a co**on carrier: that the!esortVs ferry services for .uests cannot 6e considered as ancillaryto its 6usiness as no inco*e is derived therefro*: that it e<ercisede<traordinary dili.ence as shown 6y the conditions it had i*posed6efore allowin. /O Coco each +++ to sail: that the incident wascaused 6y a fortuitous event without any contri6utory ne.li.ence onits part: and that the other case wherein the appellate court held itlia6le for da*a.es involved different plaintiffs, issues andevidence#1;

The petition is i*pressed with *erit#

%etitioners correctly rely on )e u*an v# Court of Appeals17 incharacteriin. respondent as a co**on carrier#

The Civil Code defines (co**on carriers( in the followin. ter*s2

Article 173# Co**on carriers are persons, corporations, fir*s or associations en.a.ed in the 6usiness of carryin. or transportin.passen.ers or .oods or 6oth, 6y land, water, or air for co*pensation, offerin. their services to the pu6lic#

The a6ove article *a>es no distinction 6etween one whoseprincipal 6usiness activity is the carryin. of persons or .oods or 6oth, and one who does such carryin. only as an ancillary activity?in local idio*, as (a sideline(@# Article 173 also carefully avoids*a>in. any distinction 6etween a person or enterprise offerin.transportation service on a re.ular or scheduled 6asis and oneofferin. such service on an occasional, episodic or unscheduled6asis# "either does Article 173 distin.uish 6etween a carrier

offerin. its services to the (.eneral pu6lic,( i#e#, the .eneralco**unity or population, and one who offers services or solicits6usiness only fro* a narrow se.*ent of the .eneral population# Dethin> that Article 1733 deli6erately refrained fro* *a>in. suchdistinctions#

$o understood, the concept of (co**on carrier( under Article 173*ay 6e seen to coincide neatly with the notion of (pu6lic service,(under the %u6lic $ervice Act ?Co**onwealth Act "o# 1&1;, asa*ended@ which at least partially supple*ents the law on co**oncarriers set forth in the Civil Code# Inder $ection 13, para.raph ?6@of the %u6lic $ervice Act, (pu6lic service( includes2

# # # every person that now or hereafter *ay own, operate, *ana.e,or control in the %hilippines, for hire or co*pensation, with .eneral

or li*ited clientele, whether per*anent, occasional or accidental,and done for .eneral 6usiness purposes, any co**on carrier,railroad, street railway, traction railway, su6way *otor vehicle,either for frei.ht or passen.er, or 6oth, with or without fi<ed routeand whatever *ay 6e its classification, frei.ht or carrier service of any class, e<press service, stea*6oat, or stea*ship line, pontines,ferries and water craft, en.a.ed in the transportation of passen.ersor frei.ht or 6oth, shipyard, *arine repair shop, wharf or doc>, iceplant, ice-refri.eration plant, canal, irri.ation syste*, .as, electricli.ht, heat and power, water supply and power petroleu*, sewera.e

syste*, wire or wireless co**unications syste*s, wire or wireless6roadcastin. stations and other si*ilar pu6lic services # # #18?e*phasis and underscorin. supplied#@

+ndeed, respondent is a co**on carrier# +ts ferry services are sointertwined with its *ain 6usiness as to 6e properly consideredancillary thereto# The constancy of respondentVs ferry services in itsresort operations is underscored 6y its havin. its own Coco each6oats# And the tour pac>a.es it offers, which include the ferryservices, *ay 6e availed of 6y anyone who can afford to pay thesa*e# These services are thus availa6le to the pu6lic#

That respondent does not char.e a separate fee or fare for its ferry

services is of no *o*ent# +t would 6e i*prudent to suppose that itprovides said services at a loss# The Court is aware of the practiceof 6each resort operators offerin. tour pac>a.es to factor thetransportation fee in arrivin. at the tour pac>a.e price# That .uestswho opt not to avail of respondentVs ferry services pay the sa*ea*ount is li>ewise inconseuential# These .uests *ay only 6edee*ed to have overpaid#

As )e u*an instructs, Article 173 of the Civil Code definin.(co**on carriers( has deli6erately refrained fro* *a>in.distinctions on whether the carryin. of persons or .oods is thecarrierVs principal 6usiness, whether it is offered on a re.ular 6asis,or whether it is offered to the .eneral pu6lic# The intent of the law isthus to not consider such distinctions# therwise, there is no tellin.how *any other distinctions *ay 6e concocted 6y unscrupulous6usiness*en en.a.ed in the carryin. of persons or .oods in order to avoid the le.al o6li.ations and lia6ilities of co**on carriers#

Inder the Civil Code, co**on carriers, fro* the nature of their 6usiness and for reasons of pu6lic policy, are 6ound to o6servee<traordinary dili.ence for the safety of the passen.ers transported6y the*, accordin. to all the circu*stances of each case#19 Theyare 6ound to carry the passen.ers safely as far as hu*an care andforesi.ht can provide, usin. the ut*ost dili.ence of very cautiouspersons, with due re.ard for all the circu*stances#0

Dhen a passen.er dies or is in=ured in the dischar.e of a contractof carria.e, it is presu*ed that the co**on carrier is at fault or ne.li.ent# +n fact, there is even no need for the court to *a>e an

e<press findin. of fault or ne.li.ence on the part of the co**oncarrier# This statutory presu*ption *ay only 6e overco*e 6yevidence that the carrier e<ercised e<traordinary dili.ence#1

!espondent nevertheless harps on its strict co*pliance with theearlier *entioned conditions of voya.e 6efore it allowed /O Cocoeach +++ to sail on $epte*6er 11, 000# !espondentVs positiondoes not i*press#

The evidence shows that %AA$A issued &-hour pu6lic weather forecasts and tropical cyclone warnin.s for shippin. on $epte*6er 10 and 11, 000 advisin. of tropical depressions in "orthern uonwhich would also affect the province of /indoro# y thetesti*ony of )r# 5risco "ilo, supervisin. weather specialist of %AA$A, sualls are to 6e e<pected under such weather

condition#3

A very cautious person e<ercisin. the ut*ost dili.ence would thusnot 6rave such stor*y weather and put other peopleVs lives at ris>#The e<traordinary dili.ence reuired of co**on carriers de*andsthat they ta>e care of the .oods or lives entrusted to their hands asif they were their own# This respondent failed to do#

!espondentVs insistence that the incident was caused 6y afortuitous event does not i*press either#

The ele*ents of a (fortuitous event( are2 ?a@ the cause of theunforeseen and une<pected occurrence, or the failure of thede6tors to co*ply with their o6li.ations, *ust have 6eenindependent of hu*an will: ?6@ the event that constituted the caso

fortuito *ust have 6een i*possi6le to foresee or, if foreseea6le,i*possi6le to avoid: ?c@ the occurrence *ust have 6een such as torender it i*possi6le for the de6tors to fulfill their o6li.ation in anor*al *anner: and ?d@ the o6li.or *ust have 6een free fro* anyparticipation in the a..ravation of the resultin. in=ury to thecreditor#&

To fully free a co**on carrier fro* any lia6ility, the fortuitous event*ust have 6een the pro<i*ate and only cause of the loss# And it

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should have e<ercised due dili.ence to prevent or *ini*ie the loss6efore, durin. and after the occurrence of the fortuitous event#'

!espondent cites the suall that occurred durin. the voya.e as thefortuitous event that overturned /O Coco each +++# As reflecteda6ove, however, the occurrence of sualls was e<pected under theweather condition of $epte*6er 11, 000# /oreover, evidenceshows that /O Coco each +++ suffered en.ine trou6le 6efore itcapsied and san>#; The incident was, therefore, not co*pletelyfree fro* hu*an intervention#

The Court need not 6ela6or how respondentVs evidence li>ewisefails to de*onstrate that it e<ercised due dili.ence to prevent or

*ini*ie the loss 6efore, durin. and after the occurrence of thesuall#

Article 17;&7 vis-b-vis Article 0;8 of the Civil Code holds theco**on carrier in 6reach of its contract of carria.e that results inthe death of a passen.er lia6le to pay the followin.2 ?1@ inde*nityfor death, ?@ inde*nity for loss of earnin. capacity and ?3@ *oralda*a.es#

%etitioners are entitled to inde*nity for the death of !uelito which isfi<ed at %'0,000#9

As for da*a.es representin. unearned inco*e, the for*ula for itsco*putation is2

"et arnin. Capacity life e<pectancy < ?.ross annual inco*e -reasona6le and necessary livin. e<penses@#

ife e<pectancy is deter*ined in accordance with the for*ula2

O 3 < M80 L a.e of deceased at the ti*e of deathN30

The first factor, i#e#, life e<pectancy, is co*puted 6y applyin. thefor*ula ?O3 < M80 L a.e at deathN@ adopted in the A*erican<pectancy Ta6le of /ortality or the Actuarial of Co*6ined<perience Ta6le of /ortality#31

The second factor is co*puted 6y *ultiplyin. the life e<pectancy 6ythe net earnin.s of the deceased, i#e#, the total earnin.s less

e<penses necessary in the creation of such earnin.s or inco*e andless livin. and other incidental e<penses#3 The loss is noteuivalent to the entire earnin.s of the deceased, 6ut only suchportion as he would have used to support his dependents or heirs#ence, to 6e deducted fro* his .ross earnin.s are the necessarye<penses supposed to 6e used 6y the deceased for his ownneeds#33

+n co*putin. the third factor X necessary livin. e<pense, $*ith ell)odwell $hippin. A.ency Corp# v# or=a3& teaches that when, as inthis case, there is no showin. that the livin. e<penses constitutedthe s*aller percenta.e of the .ross inco*e, the livin. e<penses arefi<ed at half of the .ross inco*e#

Applyin. the a6ove .uidelines, the Court deter*ines !uelitos life

e<pectancy as follows2

ife e<pectancy O3 < M80 - a.e of deceased at the ti*e of deathNO3 < M80 - 8NO3 < M'Nife e<pectancy 3')ocu*entary evidence shows that !uelito was earnin. a 6asic*onthly salary of Q9003' which, when converted to %hilippine pesoapplyin. the annual avera.e e<chan.e rate of Q1 %&& in 000,3;a*ounts to %39,;00# !uelitoVs net earnin. capacity is thusco*puted as follows2

"et arnin. Capacity life e<pectancy < ?.ross annualinco*e - reasona6le and necessary livin. e<penses@# 3' < ?%&7',00 - %37,;00@

3' < ?%37,;00@"et arnin. Capacity %8,31;,000!espectin. the award of *oral da*a.es, since respondentco**on carrierVs 6reach of contract of carria.e resulted in thedeath of petitionersV son, followin. Article 17;& vis-b-vis Article 0;of the Civil Code, petitioners are entitled to *oral da*a.es#

$ince respondent failed to prove that it e<ercised the e<traordinarydili.ence reuired of co**on carriers, it is presu*ed to have actedrec>lessly, thus warrantin. the award too of e<e*plary da*a.es,

which are .ranted in contractual o6li.ations if the defendant actedin a wanton, fraudulent, rec>less, oppressive or *alevolent*anner#37

Inder the circu*stances, it is reasona6le to award petitioners thea*ount of %100,000 as *oral da*a.es and %100,000 ase<e*plary da*a.es#381avvphi1

%ursuant to Article 0839 of the Civil Code, attorneys fees *ayalso 6e awarded where e<e*plary da*a.es are awarded# TheCourt finds that 10P of the total a*ount ad=ud.ed a.ainstrespondent is reasona6le for the purpose#

5inally, astern $hippin. ines, +nc# v# Court of Appeals&0 teachesthat when an o6li.ation, re.ardless of its source, i#e#, law, contracts,uasi-contracts, delicts or uasi-delicts is 6reached, thecontravenor can 6e held lia6le for pay*ent of interest in theconcept of actual and co*pensatory da*a.es, su6=ect to thefollowin. rules, to wit L

1# Dhen the o6li.ation is 6reached, and it consists in the pay*entof a su* of *oney, i#e#, a loan or for6earance of *oney, the interestdue should 6e that which *ay have 6een stipulated in writin.#5urther*ore, the interest due shall itself earn le.al interest fro* theti*e it is =udicially de*anded# +n the a6sence of stipulation, the rateof interest shall 6e 1P per annu* to 6e co*puted fro* default,i#e#, fro* =udicial or e<tra=udicial de*and under and su6=ect to theprovisions of Article 11;9 of the Civil Code#

# Dhen an o6li.ation, not constitutin. a loan or for6earance of *oney, is 6reached, an interest on the a*ount of da*a.esawarded *ay 6e i*posed at the discretion of the court at the rate of ;P per annu*# "o interest, however, shall 6e ad=ud.ed onunliuidated clai*s or da*a.es e<cept when or until the de*andcan 6e esta6lished with reasona6le certainty# Accordin.ly, wherethe de*and is esta6lished with reasona6le certainty, the interestshall 6e.in to run fro* the ti*e the clai* is *ade =udicially or e<tra=udicially ?Art# 11;9, Civil Code@ 6ut when such certaintycannot 6e so reasona6ly esta6lished at the ti*e the de*and is*ade, the interest shall 6e.in to run only fro* the date the =ud.*ent of the court is *ade ?at which ti*e the uantification of da*a.es *ay 6e dee*ed to have 6een reasona6ly ascertained@#

The actual 6ase for the co*putation of le.al interest shall, in anycase, 6e on the a*ount finally ad=ud.ed#

3# Dhen the =ud.*ent of the court awardin. a su* of *oney6eco*es final and e<ecutory, the rate of le.al interest, whether thecase falls under para.raph 1 or para.raph , a6ove, shall 6e 1Pper annu* fro* such finality until its satisfaction, this interi* period6ein. dee*ed to 6e 6y then an euivalent to a for6earance of credit# ?e*phasis supplied@#

$ince the a*ounts paya6le 6y respondent have 6een deter*inedwith certainty only in the present petition, the interest due shall 6eco*puted upon the finality of this decision at the rate of 1P per annu* until satisfaction, in accordance with para.raph nu*6er 3 of the i**ediately cited .uideline in aster $hippin. ines, +nc#

D!5!, the Court of Appeals )ecision of Au.ust 19, 008 is!4!$) and $T A$+)# Jud.*ent is rendered in favor of petitioners orderin. respondent to pay petitioners the followin.2 ?1@%'0,000 as inde*nity for the death of !uelito Cru: ?@ %8,31;,000as inde*nity for !uelitoVs loss of earnin. capacity: ?3@ %100,000 as*oral da*a.es: ?&@ %100,000 as e<e*plary da*a.es: ?'@ 10P of the total a*ount ad=ud.ed a.ainst respondent as attorneys fees:and ?;@ the costs of suit#

The total a*ount ad=ud.ed a.ainst respondent shall earn interest atthe rate of 1P per annu* co*puted fro* the finality of thisdecision until full pay*ent##!# "o# 17791 )ece*6er &, 013

METRO CONCAST STEEL CORPORATION, SPOUSES /OSE S.D!C-IAO AND TIUO- !AN, SPOUSES GUILLERMO ANDMERCEDES D!C-IAO, AND SPOUSES VICENTE ANDFILOMENA D!C-IAO, Petitioners,vs.ALLIED AN0 CORPORATION, Respondent.

Assailed in this petition for review on certiorari1 are the )ecisiondated 5e6ruary 1, 007 and the !esolution3 dated /ay 10, 007of the Court of Appeals ?CA@ in CA-#!# C4 "o# 8;89; which

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reversed and set aside the )ecision& dated January 17, 00; of the !e.ional Trial Court of /a>ati, ranch '7 ?!TC@ in Civil Case"o# 00-1';3, there6y orderin. petitioners /etro Concast $teelCorporation ?/etro Concast@, $pouses Jose $# )ychiao and Tiu hKan, $pouses uiller*o and /ercedes )ychiao, and $pouses4icente and 5ilo*ena )uchiao ?individual petitioners@ to solidarilypay respondent Allied an> Corporation ?Allied an>@ thea..re.ate a*ount of %'1,0;&,09&#8, with applica6le interests andpenalty char.es#

The 5acts

n various dates and for different a*ounts, /etro Concast, a

corporation duly or.anied and e<istin. under and 6y virtue of %hilippine laws and en.a.ed in the 6usiness of *anufacturin.steel,' throu.h its officers, herein individual petitioners, o6tainedseveral loans fro* Allied an># These loan transactions werecovered 6y a pro*issory note and separate letters of creditOtrustreceipts, the details of which are as follows2

!eference2 http2OOwww#scri6d#co*OdocO19;&0&;0O17791

)ate )ocu*ent A*ount

)ece*6er 13, 199; %ro*issory "ote "o# 9;-1301;

%,000,000#00 "ove*6er 7, 199' Trust !eceipt "o# 9;-03;'7

%;08,;03#0& /ay 13, 199; Trust !eceipt "o# 9;-9;0'8

%3,7'3,777#&0 /ay &, 199; Trust !eceipt "o# 9;-9;0'&9

%&,;0,;&8#08 /arch 1, 1997 Trust !eceipt "o# 97-0&7&10

%7,89,7'7#79 June 7, 199; Trust !eceipt "o# 9;-038011

%17,3&0,3;0#73 July ;, 199' Trust !eceipt "o# 9'-019&31

%;70,709#& Au.ust 31, 199' Trust !eceipt "o# 9'-00'313

%313,797#&1 "ove*6er 1;, 199' Trust !eceipt "o# 9;-0&391&

%13,01',109#87 July 3, 199; Trust !eceipt "o# 9;-03''1'

%&01,;08#89 June 0, 199' Trust !eceipt "o# 9'-017101;

%7'0,089#' )ece*6er 13, 199' Trust !eceipt "o# 9;-37908917

%9,919#00 )ece*6er 13, 199' Trust !eceipt "o# 9;O0'8118

%&,713#'8

The interest rate under %ro*issory "ote "o# 9;-1301 was pe..edat 1'#'P per annu* ?p#a#@, with penalty char.e of 3P per *onthin case of default: while the twelve ?1@ trust receipts unifor*lyprovided for an interest rate of 1&P p#a# and 1P penalty char.e# yway of security, the individual petitioners e<ecuted several

Continuin. uarantyOCo*prehensive $urety A.ree*ents19 in favor of Allied an># %etitioners failed to settle their o6li.ations under theafore*entioned pro*issory note and trust receipts, hence, Alliedan>, throu.h counsel, sent the* de*and letters,0 all dated)ece*6er 10, 1998, see>in. pay*ent of the total a*ount of %'1,0;&,093#;, 6ut to no avail# Thus, Allied an> was pro*pted tofile a co*plaint for collection of su* of *oney1 ?su6=ectco*plaint@ a.ainst petitioners 6efore the !TC, doc>eted as CivilCase "o# 00-1';3# +n their second A*ended Answer,3petitioners ad*itted their inde6tedness to Allied an> 6ut deniedlia6ility for the interests and penalties char.ed, clai*in. to havepaid the total su* of %;',073,0''#73 6y way of interest char.es for the period coverin. 199 to 1997#&

They also alle.ed that the econo*ic reverses suffered 6y the

%hilippine econo*y in 1998 as well as the devaluation of the pesoa.ainst the I$ dollar contri6uted .reatly to the downfall of the steelindustry, directly affectin. the 6usiness of /etro Concast andeventually leadin. to its cessation# ence, in order to settle their de6ts with Allied an>, petitioners offered the sale of /etroConcastVs re*ainin. assets, consistin. of *achineries andeuip*ent, to Allied an>, which the latter, however, refused#+nstead, Allied an> advised the* to sell the euip*ent and applythe proceeds of the sale to their outstandin. o6li.ations# Accordin.ly, petitioners offered the euip*ent for sale, 6ut since

there were no ta>ers, the euip*ent was reduced into ferro scrapor scrap *etal over the years# +n 00, %ea>star il Corporation?%ea>star@, represented 6y one Crisanta Ca*ilin. ?Ca*ilin.@,e<pressed interest in 6uyin. the scrap *etal# )urin. thene.otiations with %ea>star, petitioners clai*ed that Atty# %eter $aw?Atty# $aw@, a *e*6er of Allied an>Vs le.al depart*ent, acted asthe latterVs a.ent# ventually, with the alle.ed confor*ity of Alliedan>, throu.h Atty# $aw, a /e*orandu* of A.ree*ent' dated"ove*6er 8, 00 ?/oA@ was drawn 6etween /etro Concast,represented 6y petitioner Jose )ychiao, and %ea>star, throu.hCa*ilin., under which %ea>star o6li.ated itself to purchase thescrap *etal for a total consideration of %3&,000,000#00, paya6le asfollows2

?a@ %&,000,000#00 6y way of earnest *oney X %,000,000#00 to 6epaid in cash and the other %,000,000#00 to 6e paid in two ?@ post-dated chec>s of %1,000,000#00 each:; and

?6@ the 6alance of %30,000,000#00 to 6e paid in ten ?10@ *onthlyinstall*ents of %3,000,000#00, secured 6y 6an> .uarantees fro*an>wise, +nc# ?an>wise@ in the for* of separate post-datedchec>s#7

Infortunately, %ea>star rene.ed on all its o6li.ations under the/oA# +n this re.ard, petitioners asseverated that2

?a@ their failure to pay their outstandin. loan o6li.ations to Alliedan> *ust 6e considered as force *a=eure : and

?6@ since Allied an> was the party that accepted the ter*s andconditions of pay*ent proposed 6y %ea>star, petitioners *usttherefore 6e dee*ed to have settled their o6li.ations to Allied an>#To 6olster their defense, petitioner Jose )ychiao ?Jose )ychiao@testified8 durin. trial that it was Atty# $aw hi*self who drafted the/oA and su6seuently received9 the %,000,000#00 cash and thetwo ?@ an>wise post-dated chec>s worth %1,000,000#00 eachfro* Ca*ilin.# owever, Atty# $aw turned over only the two ?@chec>s and %1,'00,000#00 in cash to the wife of Jose )ychiao#30

Clai*in. that the su6=ect co*plaint was falsely and *aliciouslyfiled, petitioners prayed for the award of *oral da*a.es in thea*ount of %0,000,000#00 in favor of /etro Concast and at least

%',000,000#00 for each individual petitioner, %',000,000#00 ase<e*plary da*a.es, %1,000,000#00 as attorneyVs fees,%'00,000#00 for other liti.ation e<penses, includin. costs of suit#

The !TC !ulin.

After trial on the *erits, the !TC, in a )ecision31 dated January17, 00;, dis*issed the su6=ect co*plaint, holdin. that the (causesof action sued upon had 6een paid or otherwise e<tin.uished#( +truled that since Allied an> was duly represented 6y its a.ent, Atty#$aw, in all the ne.otiations and transactions with %ea>star Xconsiderin. that Atty# $aw

?a@ drafted the /oA,

?6@ accepted the 6an> .uarantee issued 6y an>wise, and

?c@ was apprised of develop*ents re.ardin. the sale anddisposition of the scrap *etal X then it stands to reason that the/oA 6etween /etro Concast and %ea>star was 6indin. upon said6an>#

The CA !ulin.

Allied an> appealed to the CA which, in a )ecision3 dated5e6ruary 1, 007, reversed and set aside the rulin. of the !TC,ratiocinatin. that there was (no le.al 6asis in fact and in law todeclare that when an>wise rene.ed its .uarantee under theM/oAN, herein MpetitionersN should 6e dee*ed to 6e dischar.ed fro*their o6li.ations lawfully incurred in favor of MAllied an>N#(33

The CA e<a*ined the /oA e<ecuted 6etween /etro Concast, asseller of the ferro scrap, and %ea>star, as the 6uyer thereof, andfound that the sa*e did not indicate that Allied an> intervened or was a party thereto# +t also pointed out the fact that the post-datedchec>s pursuant to the /oA were issued in favor of Jose )ychiao#i>ewise, the CA found no sufficient evidence on record showin.that Atty# $aw was duly and le.ally authoried to act for and on6ehalf of Allied an>, opinin. that the !TC was (indul.in. inhypothesis and speculation(3& when it *ade a contrary

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pronounce*ent# Dhile Atty# $aw received the earnest *oney fro*%ea>star, the receipt was si.ned 6y hi* on 6ehalf of Jose)ychiao#3'

+t also added that (MiNn the final analysis, the aforesaid chec>s andreceipts were si.ned 6y MAtty#N $aw either as representative of MpetitionersN or as partner of the latterVs le.al counsel, and not inanyway as representative of MAllied an>N#(3;

Conseuently, the CA .ranted the appeal and directed petitionersto solidarily pay Allied an> their correspondin. o6li.ations under the afore*entioned pro*issory note and trust receipts, plusinterests, penalty char.es and attorneyVs fees# %etitioners sou.ht

reconsideration37 which was, however, denied in a !esolution38dated /ay 10, 007# ence, this petition#

The +ssue efore the Court

At the core of the present controversy is the sole issue of whether or not the loan o6li.ations incurred 6y the petitioners under thesu6=ect pro*issory note and various trust receipts have already6een e<tin.uished#

The CourtVs !ulin.

Article 131 of the Civil Code states that o6li.ations aree<tin.uished either 6y pay*ent or perfor*ance, the loss of thethin. due, the condonation or re*ission of the de6t, the confusionor *er.er of the ri.hts of creditor and de6tor, co*pensation or novation#

+n the present case, petitioners essentially ar.ue that their loano6li.ations to Allied an> had already 6een e<tin.uished due to%ea>starVs failure to perfor* its own o6li.ations to /etro Concastpursuant to the /oA# %etitioners classify %ea>starVs default as afor* of force *a=eure in the sense that they have, 6eyond their control, lost the funds they e<pected to have received fro* the%ea>star ?due to the /oA@ which they would, in turn, use to paytheir own loan o6li.ations to Allied an># They further state that Allied an> was eually 6ound 6y /etro ConcastVs /oA with%ea>star since its a.ent, Atty# $aw, actively represented it durin.the ne.otiations and e<ecution of the said a.ree*ent# %etitionersV

ar.u*ents are untena6le# At the outset, the Court *ust dispel thenotion that the /oA would have any relevance to the perfor*anceof petitionersV o6li.ations to Allied an># The /oA is a sale of assets contract, while petitionersV o6li.ations to Allied an> arosefro* various loan transactions# A6sent any showin. that the ter*sand conditions of the latter transactions have 6een, in any way,*odified or novated 6y the ter*s and conditions in the /oA, saidcontracts should 6e treated separately and distinctly fro* eachother, such that the e<istence, perfor*ance or 6reach of one wouldnot depend on the e<istence, perfor*ance or 6reach of the other# +nthe fore.oin. respect, the issue on whether or not Allied an>e<pressed its confor*ity to the assets sale transaction 6etween

/etro Concast and %ea>star ?as evidenced 6y the /oA@ is actuallyirrelevant to the issues related to petitionersV loan o6li.ations to the6an># esides, as the CA pointed out, the fact of Allied an>Vsrepresentation has not 6een proven in this case and hence, cannot6e dee*ed as a sustaina6le defense to e<culpate petitioners fro*their loan o6li.ations to Allied an># "ow, anent petitionersV relianceon force *a=eure, suffice it to state that %ea>starVs 6reach of itso6li.ations to /etro Concast arisin. fro* the /oA cannot 6eclassified as a fortuitous event under =urisprudential for*ulation# Asdiscussed in $ica* v# Jor.e239

5ortuitous events 6y definition are e<traordinary events notforeseea6le or avoida6le# +t is therefore, not enou.h that the event

should not have 6een foreseen or anticipated, as is co**only6elieved 6ut it *ust 6e one i*possi6le to foresee or to avoid# The*ere difficulty to foresee the happenin. is not i*possi6ility toforesee the sa*e# To constitute a fortuitous event, the followin.ele*ents *ust concur2 ?a@ the cause of the unforeseen andune<pected occurrence or of the failure of the de6tor to co*ply witho6li.ations *ust 6e independent of hu*an will: ?6@ it *ust 6ei*possi6le to foresee the event that constitutes the caso fortuito or,if it can 6e foreseen, it *ust 6e i*possi6le to avoid: ?c@ theoccurrence *ust 6e such as to render it i*possi6le for the de6tor tofulfill o6li.ations in a nor*al *anner: and ?d@ the o6li.or *ust 6efree fro* any participation in the a..ravation of the in=ury or loss#&0?*phases supplied@

Dhile it *ay 6e ar.ued that %ea>starVs 6reach of the /oA wasunforseen 6y petitioners, the sa*e us clearly not (i*possi6le(toforesee or even an event which is independent of hu*an will#("either has it 6een shown that said occurrence rendered iti*possi6le for petitioners to pay their loan o6li.ations to Allied an>and thus, ne.ates the for*erVs force *a=eure theory alto.ether# +nany case, as earlier stated, the perfor*ance or 6reach of the /oA6ears no relation to the perfor*ance or 6reach of the su6=ect loantransactions, they 6ein. separate and distinct sources of o6li.ations# The fact of the *atter is that petitionersV loano6li.ations to Allied an> re*ain su6sistin. for the 6asic reasonthat the for*er has not 6een a6le to prove that the sa*e hadalready 6een paid&1 or, in any way, e<tin.uished# +n this re.ard,petitionersV lia6ility, as ad=ud.ed 6y the CA, *ust perforce stand#Considerin., however, that Allied an>Vs e<tra-=udicial de*and on

petitioners appears to have 6een *ade only on )ece*6er 10,1998, the co*putation of the applica6le interests and penaltychar.es should 6e rec>oned only fro* such date#

D!5!, the petition is )"+)# The )ecision dated5e6ruary 1, 007 and !esolution dated /ay 10, 007 of the Courtof Appeals in CA-#!# C4 "o# 8;89; are here6y A55+!/) with/)+5+CAT+" rec>onin. the applica6le interests and penaltychar.es fro* the date of the e<tra=udicial de*and or on )ece*6er 10, 1998# The rest of the appellate courtVs dispositions stand#

$ !)!)#

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