Ruks Konsult vs. Adworld Sign

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Ruks Konsult vs. Adworld Sign done to such foundation, but none was done at all.

Clearly, the foregoing circumstances show that both


Ruks Konsult vs. Adworld Sign Transworld and Ruks are guilty of negligence in the
GR No. 204866, January 21, 2015 construction of the former’s billboard, and perforce,
should be held liable for its collapse and the
Perlas-Bernabe, J.: resulting damage to Adworld’s billboard structure.
Facts: As joint tortfeasors, therefore, they are solidarily
Adworld filed for damages against Transworld when liable to Adworld. Verily, "[j]oint tortfeasors are
Transworld’s billboard structure collapsed and those who command, instigate, promote,
crashed against Adworld’s billboard structure, which encourage, advise, countenance, cooperate in, aid
was misaligned and its foundation impaired. or abet the commission of a tort, or approve of it
after it is done, if done for their benefit. They are
In its Answer with Counterclaim, Transworld averred also referred to as those who act together in
that the collapse of its billboard structure was due committing wrong or whose acts, if independent of
to extraordinarily strong winds that occurred each other, unite in causing a single injury. Under
instantly and unexpectedly, and maintained that the Article 2194 of the Civil Code, joint tortfeasors are
damage caused to Adworld’s billboard structure was solidarily liable for the resulting damage. In other
hardly noticeable. Transworld likewise filed a Third- words, joint tortfeasors are each liable as principals,
Party Complaint against Ruks, the company which to the same extent and in the same manner as if
built the collapsed billboard structure in the they had performed the wrongful act
former’s favor. It was alleged therein that the themselves." The Court’s pronouncement in People
structure constructed by Ruks had a weak and poor v. Velasco is instructive on this matter, to wit:
foundation not suited for billboards, thus, prone to
collapse, and as such, Ruks should ultimately be Where several causes producing an injury are
held liable for the damages caused to Adworld’s concurrent and each is an efficient cause without
billboard structure. which the injury would not have happened, the
injury may be attributed to all or any of the causes
Issue: and recovery may be had against any or all of the
responsible persons although under the
Whether Ruks was solidarily liable with Transworld
circumstances of the case, it may appear that one of
for the damages in Adworld’s billboard
them was more culpable, and that the duty owed by
Held: them to the injured person was not same. No
actor's negligence ceases to be a proximate cause
Yes. merely because it does not exceed the negligence of
Jurisprudence defines negligence as the omission to other actors. Each wrongdoer is responsible for the
do something which a reasonable man, guided by entire result and is liable as though his acts were the
those considerations which ordinarily regulate the sole cause of the injury.
conduct of human affairs, would do, or the doing of There is no contribution between joint [tortfeasors]
something which a prudent and reasonable man whose liability is solidary since both of them are
would not do. It is the failure to observe for the liable for the total damage. Where the concurrent
protection of the interest of another person that or successive negligent acts or omissions of two or
degree of care, precaution, and vigilance which the more persons, although acting independently, are in
circumstances justly demand, whereby such other combination the direct and proximate cause of a
person suffers injury. single injury to a third person, it is impossible to
In this case, the CA correctly affirmed the RTC’s determine in what proportion each contributed to
finding that Transworld’s initial construction of its the injury and either of them is responsible for the
billboard’s lower structure without the proper whole injury.
foundation, and that of Ruks’s finishing its upper
structure and just merely assuming that Transworld
would reinforce the weak foundation are the two
(2) successive acts which were the direct and
proximate cause of the damages sustained by
Adworld. Worse, both Transworld and Ruks were
fully aware that the foundation for the former’s
billboard was weak; yet, neither of them took any
positive step to reinforce the same. They merely
relied on each other’s word that repairs would be
G.R. No. 196118 July 30, 2014 Likewise, defendants spouses Leon C. Castillo, Jr. and Teresita
LEONARDO C. CASTILLO, represented by LENNARD V. Flores-Castillo are hereby ordered to pay plaintiff moral
CASTILLO, Petitioner, damages in the total amount of ₱500,000.00 and exemplary
vs. damages of ₱20,000.00. All other claims for damages and
SECURITY BANK CORPORATION, JRC POULTRY FARMS or attorney’s fees are DENIED for insufficiency of evidence.
SPOUSES LEON C. CASTILLO, JR., and TERESITA SO ORDERED.7
FLORESCASTILLO, Respondents. Both parties elevated the case to the CA. On November 26,
DECISION 2010, the CA denied Leonardo’s appeal and granted that of the
PERALTA, J.: Spouses Castillo and SBC. It reversed and set aside the RTC
This is a Petition for Review questioning the Decision1 of the Decision, essentially ruling that the August 5, 1994 real estate
Court of Appeals (CA) dated November 26, 2010, as well as its mortgage isvalid. Leonardo filed a Motion for Reconsideration,
Resolution2 dated March 17, 2011 in CA-G.R. CV No. 88914. The but the same was denied for lack of merit.
CA reversed and set aside the Decision3 of the Regional Trial Hence, Leonardo brought the case to the Court and filed the
Court (RTC) of San Pablo City, Laguna, Branch 32, dated October instant Petition for Review.1âwphi1 The main issue soughtto be
16, 2006 in Civil Case No. SP-5882 (02), and consequently, resolved here is whether or not the real estate mortgage
upheld the validity of the real estate mortgage entered into by constituted over the property under TCT No. T-28297 is valid
respondents spouses Leon C. Castillo, Jr. and Teresita Flores- and binding.
Castillo, and Security Bank Corporation (SBC). The Court finds the petition to be without merit.
The facts, as culled from the records, are as follows: As a rule, the jurisdiction of the Court over appealed cases from
Petitioner Leonardo C. Castillo and respondent Leon C. Castillo, the CA is limited to the review and revision of errors of law it
Jr. are siblings. Leon and Teresita Flores-Castillo (the Spouses allegedly committed, as its findings of fact are deemed
Castillo) were doing business under the name of JRC Poultry conclusive. Thus, the Court is not duty-bound to evaluate and
Farms. Sometime in 1994, the Spouses Castillo obtained a loan weigh the evidence all over again which were already
from respondent SBC in the amount of ₱45,000,000.00. To considered in the proceedings below, except when, as in this
secure said loan, they executed a real estate mortgage on case, the findings of fact of the CAare contrary to the findings
August 5, 1994 over eleven (11) parcels of land belonging to and conclusions of the trial court. 8
different members of the Castillo family and which are all The following are the legal requisites for a mortgage to be valid:
located in San Pablo City.4 They also procured a second (1) It must be constituted to secure the fulfillment of a principal
loan5 amounting to ₱2,500,000.00, which was covered by a obligation;
mortgage on a land in Pasay City. Subsequently, the Spouses (2) The mortgagor must be the absolute owner of the thing
Castillo failed to settle the loan, prompting SBC to proceed with mortgaged;
the foreclosure of the properties. SBC was then adjudged as the (3) The persons constituting the mortgage must have the free
winning bidder in the foreclosure sale held on July 29, 1999. disposal of their property, and in the absence thereof, they
Thereafter, they were able to redeem the foreclosed properties, should be legally authorized for the purpose. 9
withthe exception of the lots covered by Torrens Certificate of Leonardo asserts that his signature inthe SPA authorizing his
Title(TCT) Nos. 28302 and 28297. brother, Leon, to mortgage his property covered by TCT No. T-
On January 30, 2002, Leonardo filed a complaint for the partial 28297 was falsified. He claims that he was in America at the
annulment of the real estate mortgage. He alleged that he owns time of its execution. As proof of the forgery, he focuses on his
the property covered by TCT No. 28297 and that the Spouses alleged CTC used for the notarization10 of the SPA on May 5,
Castillo used it as one of the collaterals for a loan without his 1993 and points out that it appears to have been issued on
consent. He contested his supposed Special Power of Attorney January 11, 1993 when, in fact, he only obtained it on May 17,
(SPA) in Leon’s favor, claiming that it is falsified. According to 1993. But it is a settled rule that allegations of forgery, like all
him, the date of issuance of his Community Tax Certificate (CTC) other allegations, must be proved by clear, positive, and
as indicated on the notarization of said SPA is January 11, 1993, convincing evidence by the party alleging it. It should not be
when he only secured the same on May 17, 1993. He also presumed, but must beestablished by comparing the alleged
assailed the foreclosure of the lots under TCT Nos.20030 and forged signature with the genuine signatures. 11 Here, Leonardo
10073 which were still registered in the name of their deceased simply relied on his self-serving declarations and refused to
father. Lastly, Leonardo attacked SBC’s imposition of penalty present further corroborative evidence, saying that the falsified
and interest on the loans as being arbitrary and document itself is the best evidence.12 He did not even bother
unconscionable. comparing the alleged forged signature on the SPA with
On the other hand, the Spouses Castillo insisted on the validity samples of his real and actual signature. What he consistently
of Leonardo’s SPA. They alleged that they incurred the loan not utilized as lone support for his allegation was the supposed
only for themselves, but also for the other members of the discrepancy on the date of issuance of his CTC as reflectedon
Castillo family who needed money at that time. Upon receipt of the subject SPA’s notarial acknowledgment. On the contrary, in
the proceeds of the loan, they distributed the same to their view of the great ease with which CTCs are obtained these
family members, as agreed upon. However, when the loan days,13 there is reasonable ground to believe that, as the CA
became due, their relatives failed to pay their respective shares correctly observed, the CTC could have been issued with the
such that Leon was forced to use his own money until SBC had space for the date left blank and Leonardo merelyfilled it up to
to finally foreclose the mortgage over the lots.6 accommodate his assertions. Also, upon careful examination,
In a Decision dated October 16, 2006, the RTC of San Pablo City the handwriting appearing on the space for the date of issuance
ruled in Leonardo’s favor, the dispositive portion of which reads: is different from that on the computation of fees, which in turn
WHEREFORE, judgment is hereby rendered in favor of the was consistent with the rest of the writings on the
plaintiff Leonardo C. Castillo and against the defendants document.14 He did not likewise attempt to show any evidence
SECURITY BANK CORPORATION, and JRC POULTRY FARMS or that would back up his claim that at the time of the execution of
SPS. LEON C. CASTILLO, JR. and TERESITA FLORES-CASTILLO the SPA on May 5, 1993, he was actually in America and
declaring as null and void the Real Estate Mortgage dated therefore could not have possibly appeared and signed the
August 5, 1994, the Memorandum of Agreement dated October document before the notary.
28, 1997 and the Certificate of Sale dated August 27, 1999 And even if the Court were to assume, simply for the sake of
insofar as plaintiff’s property with Transfer Certificate of Title argument, that Leonardo indeed secured his CTC only on May
No. T-28297 is concerned. The Security Bank Corporation is 17, 1993, this does not automatically render the SPA invalid.
likewise ordered to return the ownership of the Transfer The appellate court aptly held that defective notarization will
Certificate of Title No. T-28297 to plaintiff Leonardo Castillo. simply strip the document of its public character and reduce it
to a private instrument, but nonetheless, binding, provided its take possession of such property immediately after the date of
validity is established by preponderance of evidence. 15 Article the confirmation of the auction sale and administer the same in
1358 of the Civil Code requires that the form of a contract that accordance with law. Any petition in court to enjoin or restrain
transmits or extinguishes real rights over immovable property the conduct of foreclosure proceedings instituted pursuant to
should be in a public document, yet the failure to observethe this provision shall be given due course only upon the filing by
proper form does not render the transaction invalid. 16 The the petitioner of a bond in an amount fixed by the court
necessity of a public document for said contracts is only for conditioned that he will pay all the damages which the bank
convenience; it is not essential for validity or may suffer by the enjoining or the restraint of the foreclosure
enforceability.17 Even a sale of real property, though proceeding.
notcontained in a public instrument or formal writing, is Notwithstanding Act 3135, juridical persons whose property is
nevertheless valid and binding, for even a verbal contract of being sold pursuant to an extrajudicial foreclosure, shall have
sale or real estate produceslegal effects between the the right to redeem the property in accordance with this
parties.18 Consequently, when there is a defect in the provision until, but not after, the registration of the certificate
notarization of a document, the clear and convincing of foreclosure sale with the applicable Register of Deeds which
evidentiary standard originally attached to a dulynotarized in no case shall be more than three (3) months after
document is dispensed with, and the measure to test the foreclosure, whichever is earlier. Owners of property that has
validity of such document is preponderance of evidence. 19 been sold in a foreclosure sale prior to the effectivity of this Act
Here, the preponderance ofevidence indubitably tilts in favor of shall retain their redemption rights until their
the respondents, still making the SPA binding between the expiration.28 Verily, the redemption price comprises not only the
parties even with the aforementioned assumed total amount due under the mortgage deed, but also with
irregularity.1âwphi1 There are several telling circumstances that interest at the rate specified in the mortgage, and all the
would clearly demonstrate that Leonardo was aware of the foreclosure expenses incurred by the mortgagee bank.
mortgage and he indeed executed the SPA to entrust Leon with To sustain Leonardo's claim that their payment of
the mortgage of his property. Leon had inhis possession all the ₱45,000,000.00 had already extinguished their entire obligation
titles covering the eleven (11) properties mortgaged, including with SBC would mean that no interest ever accrued from 1994,
that of Leonardo.20 Leonardo and the rest of their relatives when the loan was availed, up to the time the payment of
could not have just blindly ceded their respective TCTs to ₱45,000,000.00 was made in 2000-2001.
Leon.21 It is likewise ridiculous how Leonardo seemed to have SBC's 16% rate of interest is not computed per month, but
been totally oblivious to the status of his property for eight (8) rather per annum or only 1.33% per month. In Spouses Bacolor
long years, and would only find outabout the mortgage and v. Banco Filipino Savings and Mortgage Bank, Dagupan City
foreclosure from a nephew who himself had consented to the Branch,29 the Court held that the interest rate of 24% per
mortgage of his own lot.22 Considering the lapse of time from annum on a loan of ₱244,000.00 is not considered as
the alleged forgery on May 5, 1993 and the mortgage on August unconscionable and excessive. As such, the Court ruled that the
5, 1994, to the foreclosure on July 29, 1999, and to the debtors cannot renege on their obligation to comply with what
supposed discovery in 2001, it appears that the suit is a mere is incumbent upon them under the contract of loan as they are
afterthought or a last-ditch effort on Leonardo’s part to extend bound by its stipulations. Also, the 24o/o per annum rate or 2%
his hold over his property and to prevent SBC from per month for the penalty charges imposed on account of
consolidating ownership over the same. More importantly, default, cannot be considered as skyrocketing. The enforcement
Leonardo himself admitted on cross-examination that he of penalty can be demanded by the creditor in case of non-
granted Leon authority to mortgage, only that, according to performance due to the debtor's fault or fraud. The
him, he thought it was going to be with China Bank, and not nonperformance gives rise to the presumption of fault and in
SBC.23 But as the CA noted, there is no mention of a certainbank order to avoid the penalty, the debtor has the burden of
in the subject SPA with which Leon must specifically deal. Leon, proving that the failure of the performance was due to either
therefore, was simply acting within the bounds of the SPA’s force majeure or the creditor's own acts.30 In the instant case,
authority when hemortgaged the lot to SBC. petitioner failed to discharge said burden and thus cannot avoid
True, banks and other financing institutions, in entering into the payment of the penalty charge agreed upon.
mortgage contracts, are expected to exercise due WHEREFORE, premises considered, the petition is DENIED. The
diligence.24 The ascertainment of the status or condition of a Decision of the Court of Appeals, dated November 26, 2010, as
property offered to it as security for a loan must be a standard well as its Resolution dated March 17, 2011 in CA-G.R. CV No.
and indispensable part of its operations. 25 In this case, however, 88914, are hereby AFFIRMED.
no evidence was presented to show that SBC was remiss in the SO ORDERED.
exercise of the standard care and prudence required of it or DIOSDADO M. PERALTA
that it was negligent in accepting the mortgage. 26 SBC could not Associate Justice
likewise befaulted for relying on the presumption of regularity
of the notarized SPA when it entered into the subject mortgage
agreement.
Finally, the Court finds that the interest and penalty charges
imposed by SBC are just, and not excessive or unconscionable.
Section 47 of The General Banking Law of 2000 27 thus provides:
Section 47. Foreclosure of Real Estate Mortgage.- In the event of
foreclosure, whether judicially or extra-judicially, of any
mortgage on real estate which is security for any loan or other
credit accommodation granted, the mortgagor or debtor whose
real property has been sold for the full or partial payment of his
obligation shall have the right within one year after the sale of
the real estate, to redeem the property by paying the amount
due under the mortgage deed, with interest thereon at the rate
specified in the mortgage, and all the costs and expenses
incurred by the bank or institutionfrom the sale and custody of
SPOUSES JAIME AND MATILDE POON v. PRIME SAVINGS BANK
said property less the income derived therefrom. However,the
REPRESENTED BY THE PHILIPPINE DEPOSIT INSURANCE
purchaser at the auction sale concerned whether in a judicial or
CORPORATION AS STATUTORY LIQUIDATOR
extra-judicial foreclosure shall have the right to enter upon and
G.R. No. 183794; June 13, 2016 fulfill an engagement will not relieve the obligor from an
Sereno. J., First Division undertaking that it has knowingly and freely contracted. In this
Topic: Contracts with a penal clause; Fortuitous Event case, the first and third requisites are lacking. Since the lease
Nature: Appeal from a decision of the CA was for 10 years, the parties should have considered the
FACTS: possibility of closure of business.
The petitioners owned a commercial building. They executed a 3. YES. The forfeiture clause in the contract is penal in nature. A
10-year contract of lease over building with respondent Prime provision is a penal clause if it calls for the forfeiture of any
Savings Bank for the latter to use it as a branch office. They remaining deposit still in the possession of the lessor without
agreed to a fixed monthly rental with an advance payment. The prejudice to any other obligation still owing, in the event of the
contract also provided: termination or cancellation of the agreement by reason of the
Should the lease[d] premises be closed, deserted or vacated by lessee’s violation of any of the terms and conditions thereof.
the LESSEE, the LESSOR shall have the right to terminate the This kind of agreement may be validly entered into the by the
lease ... parties. In this case, it is evident that the stipulation on the
xxx forfeiture of advance rentals is a penal in the sense that it
The LESSOR shall thereupon have the right to enter into a new provides for liquidated damages. The penalty for the premature
contract with another party. All advanced rentals shall be termination of the contract works both ways. The penalty was
forfeited in favor of the LESSOR. to compel respondent to complete the 10-year term of the
Three years later, the BSP placed respondent under receivership lease. Petitioners, too were similarly obliged to ensure the
of the PDIC and eventually ordered its litigation. The peaceful use of the building by respondent for the duration of
respondent vacated petitioner’s building and PDIC then the lease under paid of losing the remaining advance rentals
demanded return of the advance rentals. Petitioners refused to paid by the respondent.
return the advanced rentals. Thus respondent commenced this 4. YES. A reduction of the penalty agreed upon by the parties is
case for rescission of contract and recovery of sum of money. warranted under Article 1229 of the New Civil Code.
The RTC ruled in favor of Petitioners and ordered the partial The general rule is that courts have no power to ease the
rescission of the contract insofar as the advance payment was burden of obligations voluntarily assumed by parties, just
forfeited. It held that the PDIC’s closure of their business was a because things did not turn out as expected at the inception of
fortuitous event. The CA affirmed but applied Art. 1229 instead. the contract. It must be noted that this case was initiated by the
ISSUE: PDIC in furtherance of its statutory role as the fiduciary of Prime
1. Whether or not respondent may avail of the remedy of Savings Bank. As the state-appointed receiver and liquidator,
rescission. the PDIC is mandated to recover and conserve the assets of the
2. Whether or not the closure of respondent’s business is a foreclosed bank on behalf of the latter's depositors and
fortuitous event. creditors. In other words, at stake in this case are not just the
3. Whether or not the forfeiture of the advance rentals was a rights of petitioners and the correlative liabilities of respondent
penal clause. lessee. Over and above those rights and liabilities is the interest
4. Whether or not the penalty may be equitably reduced. of innocent debtors and creditors of a delinquent bank
HELD: establishment. These overriding considerations justify the 50%
1. YES. Respondents are entitled to rescission. The legal remedy reduction of the penalty agreed upon by petitioners and
of rescission is by no means limited to the situations covered in respondent lessee in keeping with Article 1229 of the Civil
Arts. 1381 and 1382. The New Civil Code actually uses the term Code, which provides for an equitable reduction of the penalty
“rescission” in two different contexts. The first refers to breach in some cases.
of contract under Art. 1191, also known as the remedy of Under the circumstances, it is neither fair nor reasonable to
“resolution”; the second is rescission by reason of lesion or deprive depositors and creditors of what could be their last
economic prejudice under Art. 1381. The first is a principal chance to recoup whatever bank assets or receivables the PDIC
action based on breach of a party, while the second is a can still legally recover. Strict adherence to the doctrine of
subsidiary action. From the allegations of the complaint, it is freedom of contracts, at the expense of the rights of innocent
clear that respondent’s right of action rests on the alleged creditors and investors, will only work injustice rather than
abuse of petitioner’s right under the contract on the theory that promote justice in this case.
petitioner tenaciously enforced their right to forfeit the WHEREFORE, premises considered, the Petition for Review on
advanced rentals which was in bad faith since they knew that Certiorari is DENIED. The Court of Appeals Decision dated 29
respondent was already insolvent. IN other words, respondents November 2007 and its Resolution dated 10 July 2008 in CA-
are seeking rescission under Art. 1191. G.R. CV No. 75349 are hereby MODIFIED in that legal interest at
2. NO. The closure of respondent’s business was neither a the rate of 6% per annum is imposed on the monetary award
fortuitous or unforeseen event. In this case, for it to be computed from the finality of this Decision until full payment.
considered a fortuitous event, there has to be bad faith or
arbitrariness on the part of the BSP. Instead, its decision to
place respondent under receivership and liquidation was
pursuant to R.A. No. 7653, moreover, respondent was partially
accountable for closure of its banking business. Neither is this
case, a case of unforeseen event under Art. 1267. After all,
parties to a contract are presumed to have assumed the risks of
unfavorable developments. It is only in absolutely
exceptional changes of circumstance therefore that equity
demands assistance for the debtor. In Tagaytay Realty vs.
Gacutan the requisites for the application of Art. 1267 are:
1. The event could not have been foreseen at the time of the
execution of the contract.
2. It makes performance of the contract extremely difficult but
not impossible.
3. It must not be due to the act of any of the parties.
4. The contract is for a future prestation. G.R. No. L-26339 December 14, 1979
The case explains that mere inconvenience, unexpected MARIANO C. PAMINTUAN, petitioner-appellant,
impediments, increased expenses or even pecuniary inability to vs.
COURT OF APPEALS and YU PING KUN CO., INC., respondent- Bank. Inasmuch as the computation of the prices of each
appellees. delivery would allegedly be a long process, Pamintuan
V. E. del Rosario & Associates for appellant. requested that he be paid immediately.
Sangco & Sangalang for private respondent. Consequently, Pamintuan and the president of the company,
Benito Y.C. Espiritu, agreed to fix the price of the plastic
AQUINO, J.: sheetings at P0.782 a yard, regardless of the kind, quality or
This case is about the recovery compensatory, damages for actual invoice value thereof. The parties arrived at that figure by
breach of a contract of sale in addition to liquidated damages. dividing the total price of P265,550 by 339,440 yards, the
Mariano C. Pamintuan appealed from the judgment of the aggregate quantity of the shipments.
Court of Appeals wherein he was ordered to deliver to Yu Ping After Pamintuan had delivered 224,150 yards of sheetings of
Kun Co., Inc. certain plastic sheetings and, if he could not do so, interior quality valued at P163,.047.87, he refused to deliver the
to pay the latter P100,559.28 as damages with six percent remainder of the shipments with a total value of P102,502.13
interest from the date of the filing of the complaint. The facts which were covered by (i) Firm Offer No. 330, containing 26,000
and the findings of the Court of Appeals are as follows: yards valued at P29,380; (2) Firm Offer No. 343, containing
In 1960, Pamintuan was the holder of a barter license wherein 18,440 yards valued at P13,023.25; (3) Firm Offer No. 217,
he was authorized to export to Japan one thousand metric tons containing 30,000 yards valued at P30,510 and (4) Firm Offer
of white flint corn valued at forty-seven thousand United States No. 329 containing 40,850 yards valued at P29,588.88 (See pp.
dollars in exchange for a collateral importation of plastic 243-2, Record on Appeal).
sheetings of an equivalent value. As justification for his refusal, Pamintuan said that the company
By virtue of that license, he entered into an agreement to ship failed to comply with the conditions of the contract and that it
his corn to Tokyo Menka Kaisha, Ltd. of Osaka, Japan in was novated with respect to the price.
exchange for plastic sheetings. He contracted to sell the plastic On December 2, 1960, the company filed its amended
sheetings to Yu Ping Kun Co., Inc. for two hundred sixty-five complaint for damages against Pamintuan. After trial, the lower
thousand five hundred fifty pesos. The company undertook to court rendered the judgment mentioned above but including
open an irrevocable domestic letter of credit for that amount in moral damages.
favor of Pamintuan. The unrealized profits awarded as damages in the trial court's
It was further agreed that Pamintuan would deliver the plastic decision were computed as follows (pp. 248-9, Record on
sheetings to the company at its bodegas in Manila or suburbs Appeal):
directly from the piers "within one month upon arrival of" the (1) 26,000 yards with a contract price of Pl.13 per yard and a
carrying vessels. Any violation of the contract of sale would selling price at the time of delivery of Pl.75 a
entitle the aggreived party to collect from the offending party yard........................................................... P16,120.00
liquidated damages in the sum of ten thousand pesos (Exh. A). (2) 18,000 yards with a contract price of P0.7062 per yard and
On July 28, 1960, the company received a copy of the letter selling price of Pl.20 per yard at the time of
from the Manila branch of Toyo Menka Kaisha, Ltd. confirming delivery......................................... 9,105.67
the acceptance by Japanese suppliers of firm offers for the (3) 30,000 yards with a contract price of Pl.017 per yard and a
consignment to Pamintuan of plastic sheetings valued at forty- selling price of Pl.70 per yard. 20,490.00
seven thousand dollars. Acting on that information, the (4) 40,850 yards with a contract price of P0.7247 per yard and a
company lost no time in securing in favor of Pamintuan an selling price of P1.25 a yard at the time of
irrevocable letter of credit for two hundred sixty-five thousand delivery.............................................. 21,458.50 Total unrealized
five hundred fifty pesos. profits....................... P67,174.17
Pamintuan was apprised by the bank on August 1, 1960 of that The overpayment of P12,282.26 made to Pamintuan by Yu Ping
letter of credit which made reference to the delivery to Yu Ping Kun Co., Inc. for the 224,150 yards, which the trial court
Kun Co., Inc. on or before October 31, 1960 of 336, 360 yards of regarded as an item of damages suffered by the company, was
plastic sheetings (p. 21, Record on Appeal). computed as follows (p. 71, Record on Appeal):
On September 27 and 30 and October 4, 1960, the Japanese Liquidation value of 224,150 yards at P0.7822 a
suppliers shipped to Pamintuan, through Toyo Menka Kaisha, yard ..............................................................................
Ltd., the plastic sheetings in four shipments to wit: (1) Firm P175,330.13
Offer No. 327 for 50,000 yards valued at $9,000; (2) Firm Offer Actual peso value of 224,150 yards as per firm offers or as per
No. 328 for 70,000 yards valued at $8,050; (3) Firm Offers Nos. contract............................................ 163,047.87
329 and 343 for 175,000 and 18,440 yards valued at $22,445 Overpayment................................................................ P
and $2,305, respectively, and (4) Firm Offer No. 330 for 26,000 12,282.26
yards valued at $5,200, or a total of 339,440 yards with an To these two items of damages (P67,174.17 as unrealized
aggregate value of $47,000 (pp. 4-5 and 239-40, Record on profits and P12,282.26 as overpayment), the trial court added
Appeal). (a) P10,000 as stipulated liquidated damages, (b) P10,000 as
The plastic sheetings arrived in Manila and were received by moral damages, (c) Pl,102.85 as premium paid by the company
Pamintuan. Out of the shipments, Pamintuan delivered to the on the bond of P102,502.13 for the issuance of the writ of
company's warehouse only the following quantities of plastic preliminary attachment and (d) P10,000 as attorney's fees, or
sheetings: total damages of P110,559.28) p. 250, Record on Appeal). The
November 11, 1960 — 140 cases, size 48 inches by 50 yards. Court of Appeals affirmed that judgment with the modification
November 14, 1960 — 258 cases out of 352 cases. November that the moral damages were disallowed (Resolution of June 29,
15, 1960 — 11 cases out of 352 cases. November 15, 1960 — 10 1966).
cases out of 100 cases. November 15, 1960 — 30 cases out of Pamintuan appealed. The Court of Appeals in its decision of
100 cases. March 18, 1966 found that the contract of sale between
Pamintuan and the company was partly consummated. The
Pamintuan withheld delivery of (1) 50 cases of plastic sheetings company fulfilled its obligation to obtain the Japanese suppliers'
containing 26,000 yards valued at $5,200; (2) 37 cases confirmation of their acceptance of firm offers totalling
containing 18,440 yards valued at $2,305; (3) 60 cases $47,000. Pamintuan reaped certain benefits from the contract.
containing 30,000 yards valued at $5,400 and (4) 83 cases Hence, he is estopped to repudiate it; otherwise, he would
containing 40,850 yards valued at $5,236.97. While the plastic unjustly enrich himself at the expense of the company.
sheetings were arriving in Manila, Pamintuan informed the The Court of Appeals found that the writ of attachment was
president of Yu Ping Kun Co., Inc. that he was in dire need of properly issued. It also found that Pamintuan was guilty of fraud
cash with which to pay his obligations to the Philippine National because (1) he was able to make the company agree to change
the manner of paying the price by falsely alleging that there was The penalty clause is strictly penal or cumulative in character
a delay in obtaining confirmation of the suppliers' acceptance of and does not partake of the nature of liquidated damages
the offer to buy; (2) he caused the plastic sheetings to be (pena sustitutiva) when the parties agree "que el acreedor
deposited in the bonded warehouse of his brother and then podra pedir, en el supuesto incumplimiento o mero retardo de
required his brother to make him Pamintuan), his attorney-in- la obligacion principal, ademas de la pena, los danos y
fact so that he could control the disposal of the goods; (3) perjuicios. Se habla en este caso de pena cumulativa, a
Pamintuan, as attorney-in-fact of the warehouseman, endorsed differencia de aquellos otros ordinarios, en que la pena es
to the customs broker the warehouse receipts covering the sustitutiva de la reparacion ordinaria." (Ibid, Castan Tobenas, p.
plastic sheetings withheld by him and (4) he overpriced the 130).
plastic sheetings which he delivered to the company. After a conscientious consideration of the facts of the case, as
The Court of Appeals described Pamintuan as a man "who, after found by Court of Appeals and the trial court, and after
having succeeded in getting another to accommodate him by reflecting on the/tenor of the stipulation for liquidated
agreeing to liquidate his deliveries on the basis of P0.7822 per damages herein, the true nature of which is not easy to
yard, irrespective of invoice value, on the pretense that he categorize, we further hold that justice would be adequately
would deliver what in the first place he ought to deliver anyway, done in this case by allowing Yu Ping Kun Co., Inc. to recover
when he knew all the while that he had no such intention, and only the actual damages proven and not to award to it the
in the process delivered only the poorer or cheaper kind or stipulated liquidated damages of ten thousand pesos for any
those which he had predetermined to deliver and did not breach of the contract. The proven damages supersede the
conceal in his brother's name and thus deceived the unwary stipulated liquidated damages.
party into overpaying him the sum of P 1 2,282.26 for the said This view finds support in the opinion of Manresa (whose
deliveries, and would thereafter refuse to make any further comments were the bases of the new matter found in article
delivery in flagrant violation of his plighted word, would now 1226, not found in article 1152 of the old Civil Code) that in
ask us to sanction his actuation" (pp. 61-62, Rollo). case of fraud the difference between the proven damages and
The main contention of appellant Pamintuan is that the buyer, the stipulated penalty may be recovered (Vol. 8, part. 1, Codigo
Yu Ping Kun Co., Inc., is entitled to recover only liquidated Civil, 5th Ed., 1950, p. 483).
damages. That contention is based on the stipulation "that any Hence, the damages recoverable by the firm would amount to
violation of the provisions of this contract (of sale) shall entitle ninety thousand five hundred fifty-nine pesos and twenty-eight
the aggrieved party to collect from the offending party centavos (P90,559.28), with six percent interest a year from the
liquidated damages in the sum of P10,000 ". filing of the complaint.
Pamintuan relies on the rule that a penalty and liquidated With that modification the judgment of the Court of Appeals is
damages are the same (Lambert vs. Fox 26 Phil. 588); that "in affirmed in all respects. No costs in this instance.
obligations with a penal clause, the penalty shall substitute the SO ORDERED.
indemnity for damages and the payment of interests in case of Barredo, Concepcion, Jr., and Santos, JJ., concur.
non-compliance, if there is no stipulation to the contrary " (1st Abad Santos, J., concur in the result.
sentence of Art. 1226, Civil Code) and, it is argued, there is no Separate Opinions
such stipulation to the contrary in this case and that "liquidated ANTONIO, J., concurring:
damages are those agreed upon by the parties to a contract, to As a general rule, the penalty takes the place of the indemnity
be paid in case of breach thereof" (Art. 2226, Civil Code). for damages and the payment of interest. 1 This was also the
We hold that appellant's contention cannot be sustained rule under the Old Civil Code. Thus, Article 1152 of the Spanish
because the second sentence of article 1226 itself provides that Civil Code provided that in "obligations with a penal clause the
I nevertheless, damages shall be paid if the obligor ... is guilty of penalty shall substitute indemnity for damages and the
fraud in the fulfillment of the obligation". "Responsibility arising payment of interest in case of non-performance should there
from fraud is demandable in all obligations" (Art. 1171, Civil be no agreement to the contrary. " As an exception to this rule,
Code). "In case of fraud, bad faith, malice or wanton attitude, the penalty and the indemnity for damages and payment of
the obligor shall be responsible for an damages which may be interest may be recovered when there is an express stipulation
reasonably attributed to the non-performance of the to that effect. Aside from incorporating the provisions of Article
obligation" (Ibid, art. 2201). 1152 of the Spanish Civil Code, Article 1226 of the New Civil
The trial court and the Court of Appeals found that Pamintuan Code also added two other exceptions when indemnity for
was guilty of fraud because he did not make a complete damages, in addition to and part from the penalty for damages,
delivery of the plastic sheetings and he overpriced the same. in addition to and apart from the penalty stipulated, may be
That factual finding is conclusive upon this Court. recovered: (1) when the obligor having failed to comply with
There is no justification for the Civil Code to make an apparent the principal obligation also refuses to pay the penalty, in which
distinction between penalty and liquidated damages because case the creditor is entitled to interest in the amount of the
the settled rule is that there is no difference between penalty penalty, in accordance with Article 2209; or (2) when the
and liquidated damages insofar as legal results are concerned obligor is guilty of fraud in the fulfillment of the
and that either may be recovered without the necessity of obligation. 2 The reason for the third exception is based on the
proving actual damages and both may be reduced when proper principle that an action to enforce is based on the principle that
(Arts. 1229, 2216 and 2227, Civil Code. See observations of an action to enforce liability for future fraud cannot be
Justice J.B.L. Reyes, cited in 4 Tolentino's Civil Code, p. 251). renounced, as that would be against public policy and would
Castan Tobeñas notes that the penal clause in an obligation has contravene the express provisions of Article 1171 of the Civil
three functions: "1. Una funcion coercitiva o de garantia, Code which states that "any waiver of an action for future fraud
consistente en estimular al deudor al complimiento de la is void. "
obligacion principal, ante la amenaza de tener que pagar la On this matter, Manresa commented, thus:
pena. 2. Una funcion liquidadora del daño, o sea la de evaluar La pena y la indemnizacion por dolo. — Es en nuestra opinion,
por anticipado los perjuicios que habria de ocasionar al otrocaso de excepcion a la regla general de incompatibilidad y
acreedor el incumplimiento o cumplimiento inadecuado de la lo entendemos asi, no ya por el primer parrafo del articulo
obligacion. 3. Una funcion estrictamente penal, consistente en 1.102, que declara exigible la responsibilidad del dolo
sancionar o castigar dicho incumplimiento o cumplimiento procedente en toda clase de obligaciones, sino principalmente
inadecuado, atribuyendole consecuencias mas onerosas para el por la segunda parte de dicho articulo, que se opone a la validez
deudor que las que normalmente lleva aparejadas la infraccion de toda renuncia anticipada de la accion para exigir tal
contractual. " (3 Derecho Civil Espanol, 9th Ed., p. 128). responsibilidad. En efecto, este supone que la ley no autoriza en
modo alguno la impunidad del dolo por cause de convenios
anteriores, y por tanto, rechaza lo mismo la impunidad It is evident from tile foregoing that in case of fraud in the
completa que la parcial ,es decir referira a aquellos perjuicios fulfillment of an obligation with a penal clause, proof of such
que no quedan satisfechos con el importe de la pena convenida. fraud is incumbent upon the creditor, and in case he demands
Limitada asi la cuestion, y no olividando que, a falta de convenio indemnity in addition to the penalty stipulated, proof of the
especial, tiene la pena asignado el fin de reparar los perjuicios, existence and amount of the damages shall also correspond to
concretamos asi nuestra opinion: 1.0, que en caso de dolo de him. However, the creditor may demand only the difference of
una obligacion con clausula penal, la prueba de de aquel para such amount over the amount of the penalty stipulated as the
reclamar mas indemnizacion corresponde al actor; 2. 0, que creditor cannot recover both the proven damages and the
tambien, caso pedirla, le corresponde la de existencia y cuantra stipulated penalty. In the case at bar, he is only entitled to the
los perjuicio; y 3.0, que probando ambos extremos, podra pedir stipulated penalty plus the difference between the proven
la differencia de dicha sobre el importe de la pena estipulada. 3 damages and the stipulated penalty.
It is evident from tile foregoing that in case of fraud in the #Footnotes
fulfillment of an obligation with a penal clause, proof of such 1 Article 1126, first sentence; Araneta v. Paterno L-2886, August
fraud is incumbent upon the creditor, and in case he demands 22, 1952, 91 Phil. 786.
indemnity in addition to the penalty stipulated, proof of the 2 Cabarrogais v. Vicente, L-14304, March 23, 1960, 107 Phil.
existence and amount of the damages shall also correspond to 340, 343.
him. However, the creditor may demand only the difference of 3 VIII Manresa, Codigo Civil, pp. 482-483.
such amount over the amount of the penalty stipulated as the
creditor cannot recover both the proven damages and the
stipulated penalty. In the case at bar, he is only entitled to the
stipulated penalty plus the difference between the proven
damages and the stipulated penalty.
# Separate Opinions
ANTONIO, J., concurring:
As a general rule, the penalty takes the place of the indemnity
for damages and the payment of interest. 1 This was also the
rule under the Old Civil Code. Thus, Article 1152 of the Spanish
Civil Code provided that in "obligations with a penal clause the
penalty shall substitute indemnity for damages and the
payment of interest in case of non-performance should there
be no agreement to the contrary. " As an exception to this rule,
the penalty and the indemnity for damages and payment of
interest may be recovered when there is an express stipulation
to that effect. Aside from incorporating the provisions of Article
1152 of the Spanish Civil Code, Article 1226 of the New Civil
Code also added two other exceptions when indemnity for
damages, in addition to and part from the penalty for damages,
in addition to and apart from the penalty stipulated, may be
recovered: (1) when the obligor having failed to comply with
the principal obligation also refuses to pay the penalty, in which
case the creditor is entitled to interest in the amount of the
penalty, in accordance with Article 2209; or (2) when the
obligor is guilty of fraud in the fulfillment of the
obligation. 2 The reason for the third exception is based on the
principle that an action to enforce is based on the principle that
an action to enforce liability for future fraud cannot be
renounced, as that would be against public policy and would
contravene the express provisions of Article 1171 of the Civil
Code which states that "any waiver of an action for future fraud
is void. "
On this matter, Manresa commented, thus:
La pena y la indemnizacion por dolo. — Es en nuestra opinion,
otrocaso de excepcion a la regla general de incompatibilidad y
lo entendemos asi, no ya por el primer parrafo del articulo
1.102, que declara exigible la responsibilidad del dolo
procedente en toda clase de obligaciones, sino principalmente
por la segunda parte de dicho articulo, que se opone a la validez
de toda renuncia anticipada de la accion para exigir tal
responsibilidad. En efecto, este supone que la ley no autoriza en
modo alguno la impunidad del dolo por cause de convenios
anteriores, y por tanto, rechaza lo mismo la impunidad
completa que la parcial ,es decir referira a aquellos perjuicios
que no quedan satisfechos con el importe de la pena convenida.
Limitada asi la cuestion, y no olividando que, a falta de convenio
especial, tiene la pena asignado el fin de reparar los perjuicios,
concretamos asi nuestra opinion: 1.0, que en caso de dolo de
una obligacion con clausula penal, la prueba de de aquel para
reclamar mas indemnizacion corresponde al actor; 2. 0, que
tambien, caso pedirla, le corresponde la de existencia y cuantra G.R. No. 185798, January 13, 2014
los perjuicio; y 3.0, que probando ambos extremos, podra pedir FIL-ESTATE PROPERTIES, INC. AND FIL-ESTATE NETWORK
la differencia de dicha sobre el importe de la pena estipulada. 3 INC., Petitioners, v. SPOUSES CONRADO AND MARIA VICTORIA
RONQUILLO, Respondents.
DECISION THE HONORABLE OFFICE OF THE PRESIDENT ERRED IN AFFIRMING
PEREZ, J.: THE DECISION OF THE HONORABLE HOUSING AND LAND USE
Before the Court is a petition for review on certiorari under Rule 45 REGULATORY BOARD AND ORDERING PETITIONERS-APPELLANTS TO
of the 1997 Rules .of Civil Procedure assailing the Decision 1 of the REFUND RESPONDENTS-APPELLEES THE SUM OF P2,198,949.96
Court of Appeals in CA-G.R. SP No. 100450 which affirmed the WITH 12% INTEREST FROM 8 OCTOBER 1998 UNTIL FULLY PAID,
Decision of the Office of the President in O.P. Case No. 06-F-216. CONSIDERING THAT THE COMPLAINT STATES NO CAUSE OF ACTION
As culled from the records, the facts are as follow: AGAINST PETITIONERS-APPELLANTS.
Petitioner Fil-Estate Properties, Inc. is the owner and developer of II.
the Central Park Place Tower while co-petitioner Fil-Estate Network, THE HONORABLE OFFICE OF THE PRESIDENT ERRED IN AFFIRMING
Inc. is its authorized marketing agent. Respondent Spouses Conrado THE DECISION OF THE OFFICE BELOW ORDERING PETITIONERS-
and Maria Victoria Ronquillo purchased from petitioners an 82- APPELLANTS TO PAY RESPONDENTS-APPELLEES THE SUM
square meter condominium unit at Central Park Place Tower in OF P100,000.00 AS MORAL DAMAGES AND P50,000.00 AS
Mandaluyong City for a pre-selling contract price of FIVE MILLION ATTORNEY’S FEES CONSIDERING THE ABSENCE OF ANY FACTUAL OR
ONE HUNDRED SEVENTY-FOUR THOUSAND ONLY (P5,174,000.00). LEGAL BASIS THEREFOR.
On 29 August 1997, respondents executed and signed a Reservation III.
Application Agreement wherein they deposited P200,000.00 as THE HONORABLE OFFICE OF THE PRESIDENT ERRED IN AFFIRMING
reservation fee. As agreed upon, respondents paid the full THE DECISION OF THE HOUSING AND LAND USE REGULATORY
downpayment of P1,552,200.00 and had been paying BOARD ORDERING PETITIONERS-APPELLANTS TO PAY P10,000.00 AS
the P63,363.33 monthly amortizations until September 1998. ADMINISTRATIVE FINE IN THE ABSENCE OF ANY FACTUAL OR LEGAL
Upon learning that construction works had stopped, respondents BASIS TO SUPPORT SUCH FINDING.8
likewise stopped paying their monthly amortization. Claiming to On 30 July 2008, the Court of Appeals denied the petition for
have paid a total of P2,198,949.96 to petitioners, respondents review for lack of merit. The appellate court echoed the HLURB
through two (2) successive letters, demanded a full refund of their Arbiter’s ruling that "a buyer for a condominium/subdivision
payment with interest. When their demands went unheeded, unit/lot unit which has not been developed in accordance with the
respondents were constrained to file a Complaint for Refund and approved condominium/subdivision plan within the time limit for
Damages before the Housing and Land Use Regulatory Board complying with said developmental requirement may opt for
(HLURB). Respondents prayed for reimbursement/refund reimbursement under Section 20 in relation to Section 23 of
of P2,198,949.96 representing the total amortization Presidential Decree (P.D.) 957 x x x."9 The appellate court supported
payments, P200,000.00 as and by way of moral damages, attorney’s the HLURB Arbiter’s conclusion, which was affirmed by the HLURB
fees and other litigation expenses. Board of Commission and the Office of the President, that
On 21 October 2000, the HLURB issued an Order of Default against petitioners’ failure to develop the condominium project is
petitioners for failing to file their Answer within the reglementary tantamount to a substantial breach which warrants a refund of the
period despite service of summons.2 total amount paid, including interest. The appellate court pointed
Petitioners filed a motion to lift order of default and attached their out that petitioners failed to prove that the Asian financial crisis
position paper attributing the delay in construction to the 1997 constitutes a fortuitous event which could excuse them from the
Asian financial crisis. Petitioners denied committing fraud or performance of their contractual and statutory obligations. The
misrepresentation which could entitle respondents to an award of appellate court also affirmed the award of moral damages in light
moral damages. of petitioners’ unjustified refusal to satisfy respondents’ claim and
On 13 June 2002, the HLURB, through Arbiter Atty. Joselito F. the legality of the administrative fine, as provided in Section 20 of
Melchor, rendered judgment ordering petitioners to jointly and Presidential Decree No. 957.
severally pay respondents the following amount: Petitioners sought reconsideration but it was denied in a
a) The amount of TWO MILLION ONE HUNDRED NINETY-EIGHT Resolution10 dated 11 December 2008 by the Court of Appeals.
THOUSAND NINE HUNDRED FORTY NINE PESOS & 96/100 Aggrieved, petitioners filed the instant petition advancing
(P2,198,949.96) with interest thereon at twelve percent (12%) per substantially the same grounds for review:
annum to be computed from the time of the complainants’ A.
demand for refund on October 08, 1998 until fully paid, THE HONORABLE COURT OF APPEALS ERRED WHEN IT AFFIRMED
b) ONE HUNDRED THOUSAND PESOS (P100,000.00) as moral IN TOTO THE DECISION OF THE OFFICE OF THE PRESIDENT WHICH
damages, SUSTAINED RESCISSION AND REFUND IN FAVOR OF THE
c) FIFTY THOUSAND PESOS (P50,000.00) as attorney’s fees, RESPONDENTS DESPITE LACK OF CAUSE OF ACTION.
d) The costs of suit, and B.
e) An administrative fine of TEN THOUSAND PESOS (P10,000.00) GRANTING FOR THE SAKE OF ARGUMENT THAT THE PETITIONERS
payable to this Office fifteen (15) days upon receipt of this decision, ARE LIABLE UNDER THE PREMISES, THE HONORABLE COURT OF
for violation of Section 20 in relation to Section 38 of PD 957. 3 APPEALS ERRED WHEN IT AFFIRMED THE HUGE AMOUNT OF
The Arbiter considered petitioners’ failure to develop the INTEREST OF TWELVE PERCENT (12%).
condominium project as a substantial breach of their obligation C.
which entitles respondents to seek for rescission with payment of THE HONORABLE COURT OF APPEALS LIKEWISE ERRED WHEN IT
damages. The Arbiter also stated that mere economic hardship is AFFIRMED IN TOTO THE DECISION OF THE OFFICE OF THE
not an excuse for contractual and legal delay. PRESIDENT INCLUDING THE PAYMENT OF P100,000.00 AS MORAL
Petitioners appealed the Arbiter’s Decision through a petition for DAMAGES, P50,000.00 AS ATTORNEY’S FEES AND P10,000.00 AS
review pursuant to Rule XII of the 1996 Rules of Procedure of ADMINISTRATIVE FINE IN THE ABSENCE OF ANY FACTUAL OR LEGAL
HLURB. On 17 February 2005, the Board of Commissioners of the BASIS TO SUPPORT SUCH CONCLUSIONS.11
HLURB denied4 the petition and affirmed the Arbiter’s Decision. The Petitioners insist that the complaint states no cause of action
HLURB reiterated that the depreciation of the peso as a result of because they allegedly have not committed any act of
the Asian financial crisis is not a fortuitous event which will exempt misrepresentation amounting to bad faith which could entitle
petitioners from the performance of their contractual obligation. respondents to a refund. Petitioners claim that there was a mere
Petitioners filed a motion for reconsideration but it was denied 5 on delay in the completion of the project and that they only resorted
8 May 2006. Thereafter, petitioners filed a Notice of Appeal with to "suspension and reformatting as a testament to their
the Office of the President. On 18 April 2007, petitioners’ appeal commitment to their buyers." Petitioners attribute the delay to the
was dismissed6 by the Office of the President for lack of merit. 1997 Asian financial crisis that befell the real estate industry.
Petitioners moved for a reconsideration but their motion was Invoking Article 1174 of the New Civil Code, petitioners maintain
denied7 on 26 July 2007. that they cannot be held liable for a fortuitous event.
Petitioners sought relief from the Court of Appeals through a Petitioners contest the payment of a huge amount of interest on
petition for review under Rule 43 containing the same arguments account of suspension of development on a project. They liken
they raised before the HLURB and the Office of the President: their situation to a bank which this Court, in Overseas Bank v. Court
I. of Appeals,12 adjudged as not liable to pay interest on deposits
during the period that its operations are ordered suspended by the constitute a valid justification to renege on obligations. The Court
Monetary Board of the Central Bank. expounded:
Lastly, petitioners aver that they should not be ordered to pay Also, we cannot generalize that the Asian financial crisis in 1997
moral damages because they never intended to cause delay, and was unforeseeable and beyond the control of a business
again blamed the Asian economic crisis as the direct, proximate and corporation. It is unfortunate that petitioner apparently met with
only cause of their failure to complete the project. Petitioners considerable difficulty e.g. increase cost of materials and labor,
submit that moral damages should not be awarded unless so even before the scheduled commencement of its real estate project
stipulated except under the instances enumerated in Article 2208 as early as 1995. However, a real estate enterprise engaged in the
of the New Civil Code. Lastly, petitioners refuse to pay the pre-selling of condominium units is concededly a master in
administrative fine because the delay in the project was caused not projections on commodities and currency movements and business
by their own deceptive intent to defraud their buyers, but due to risks. The fluctuating movement of the Philippine peso in the
unforeseen circumstances beyond their control. foreign exchange market is an everyday occurrence, and
Three issues are presented for our resolution: 1) whether or not the fluctuations in currency exchange rates happen everyday, thus, not
Asian financial crisis constitute a fortuitous event which would an instance of caso fortuito.16
justify delay by petitioners in the performance of their contractual The aforementioned decision becomes a precedent to future cases
obligation; 2) assuming that petitioners are liable, whether or not in which the facts are substantially the same, as in this case. The
12% interest was correctly imposed on the judgment award, and 3) principle of stare decisis, which means adherence to judicial
whether the award of moral damages, attorney’s fees and precedents, applies.
administrative fine was proper. In said case, the Court ordered the refund of the total amortizations
It is apparent that these issues were repeatedly raised by paid by respondents plus 6% legal interest computed from the date
petitioners in all the legal fora. The rulings were consistent that of demand. The Court also awarded attorney’s fees. We follow that
first, the Asian financial crisis is not a fortuitous event that would ruling in the case before us.
excuse petitioners from performing their contractual obligation; The resulting modification of the award of legal interest is, also, in
second, as a result of the breach committed by petitioners, line with our recent ruling in Nacar v. Gallery Frames,17 embodying
respondents are entitled to rescind the contract and to be refunded the amendment introduced by the Bangko Sentral ng Pilipinas
the amount of amortizations paid including interest and damages; Monetary Board in BSP-MB Circular No. 799 which pegged the
and third, petitioners are likewise obligated to pay attorney’s fees interest rate at 6% regardless of the source of obligation.
and the administrative fine. We likewise affirm the award of attorney’s fees because
This petition did not present any justification for us to deviate from respondents were forced to litigate for 14 years and incur expenses
the rulings of the HLURB, the Office of the President and the Court to protect their rights and interest by reason of the unjustified act
of Appeals. on the part of petitioners.18 The imposition of P10,000.00
Indeed, the non-performance of petitioners’ obligation entitles administrative fine is correct pursuant to Section 38 of Presidential
respondents to rescission under Article 1191 of the New Civil Code Decree No. 957 which reads:
which states: Section 38. Administrative Fines. The Authority may prescribe and
Article 1191. The power to rescind obligations is implied in impose fines not exceeding ten thousand pesos for violations of the
reciprocal ones, in case one of the obligors should not comply with provisions of this Decree or of any rule or regulation thereunder.
what is incumbent upon him. Fines shall be payable to the Authority and enforceable through
The injured party may choose between the fulfillment and the writs of execution in accordance with the provisions of the Rules of
rescission of the obligation, with payment of damages in either Court.
case. He may also seek rescission, even after he has chosen Finally, we sustain the award of moral damages. In order that moral
fulfillment, if the latter should become impossible. damages may be awarded in breach of contract cases, the
More in point is Section 23 of Presidential Decree No. 957, the rule defendant must have acted in bad faith, must be found guilty of
governing the sale of condominiums, which provides: gross negligence amounting to bad faith, or must have acted in
Section 23. Non-Forfeiture of Payments. No installment payment wanton disregard of contractual obligations.19 The Arbiter found
made by a buyer in a subdivision or condominium project for the petitioners to have acted in bad faith when they breached their
lot or unit he contracted to buy shall be forfeited in favor of the contract, when they failed to address respondents’ grievances and
owner or developer when the buyer, after due notice to the owner when they adamantly refused to refund respondents' payment.
or developer, desists from further payment due to the failure of the In fine, we find no reversible error on the merits in the impugned
owner or developer to develop the subdivision or condominium Court of Appeals' Decision and Resolution.
project according to the approved plans and within the time limit WHEREFORE, the petition is PARTLY GRANTED. The appealed
for complying with the same. Such buyer may, at his option, be Decision is AFFIRMED with the MODIFICATION that the legal
reimbursed the total amount paid including amortization interests interest to be paid is SIX PERCENT (6%) on the amount due
but excluding delinquency interests, with interest thereon at the computed from the time of respondents' demand for refund on 8
legal rate. (Emphasis supplied). October 1998.
Conformably with these provisions of law, respondents are entitled SO ORDERED.
to rescind the contract and demand reimbursement for the JOSE PORTUGAL PEREZ
payments they had made to petitioners. Associate Justice
Notably, the issues had already been settled by the Court in the
case of Fil-Estate Properties, Inc. v. Spouses Go13 promulgated on 17
August 2007, where the Court stated that the Asian financial crisis
is not an instance of caso fortuito. Bearing the same factual milieu
as the instant case, G.R. No. 165164 involves the same company,
Fil-Estate, albeit about a different condominium property. The
company likewise reneged on its obligation to respondents therein
by failing to develop the condominium project despite substantial
payment of the contract price. Fil-Estate advanced the same
argument that the 1997 Asian financial crisis is a fortuitous event
which justifies the delay of the construction project. First off, the
Court classified the issue as a question of fact which may not be
raised in a petition for review considering that there was no
variance in the factual findings of the HLURB, the Office of the G.R. No. 162467 May 8, 2009
President and the Court of Appeals. Second, the Court cited the MINDANAO TERMINAL AND BROKERAGE SERVICE, INC. Petitioner,
previous rulings of Asian Construction and Development vs.
Corporation v. Philippine Commercial International Bank 14 and PHOENIX ASSURANCE COMPANY OF NEW YORK/MCGEE & CO.,
Mondragon Leisure and Resorts Corporation v. Court of INC., Respondent.
Appeals15 holding that the 1997 Asian financial crisis did not DECISION
TINGA, J.: Mindanao Terminal filed a motion for reconsideration,13 which the
Before us is a petition for review on certiorari1 under Rule 45 of the Court of Appeals denied in its 26 February 200414 resolution.
1997 Rules of Civil Procedure of the 29 October 20032 Decision of Hence, the present petition for review.
the Court of Appeals and the 26 February 2004 Resolution 3 of the Mindanao Terminal raises two issues in the case at bar, namely:
same court denying petitioner’s motion for reconsideration. whether it was careless and negligent in the loading and stowage of
The facts of the case are not disputed. the cargoes onboard M/V Mistrau making it liable for damages;
Del Monte Philippines, Inc. (Del Monte) contracted petitioner and, whether Phoenix and McGee has a cause of action against
Mindanao Terminal and Brokerage Service, Inc. (Mindanao Mindanao Terminal under Article 2176 of the Civil Code on quasi-
Terminal), a stevedoring company, to load and stow a shipment of delict. To resolve the petition, three questions have to be
146,288 cartons of fresh green Philippine bananas and 15,202 answered: first, whether Phoenix and McGee have a cause of action
cartons of fresh pineapples belonging to Del Monte Fresh Produce against Mindanao Terminal; second, whether Mindanao Terminal,
International, Inc. (Del Monte Produce) into the cargo hold of the as a stevedoring company, is under obligation to observe the same
vessel M/V Mistrau. The vessel was docked at the port of Davao extraordinary degree of diligence in the conduct of its business as
City and the goods were to be transported by it to the port of required by law for common carriers15 and warehousemen;16 and
Inchon, Korea in favor of consignee Taegu Industries, Inc. Del Monte third, whether Mindanao Terminal observed the degree of diligence
Produce insured the shipment under an "open cargo policy" with required by law of a stevedoring company.
private respondent Phoenix Assurance Company of New York We agree with the Court of Appeals that the complaint filed by
(Phoenix), a non-life insurance company, and private respondent Phoenix and McGee against Mindanao Terminal, from which the
McGee & Co. Inc. (McGee), the underwriting manager/agent of present case has arisen, states a cause of action. The present action
Phoenix.4 is based on quasi-delict, arising from the negligent and careless
Mindanao Terminal loaded and stowed the cargoes aboard loading and stowing of the cargoes belonging to Del Monte
the M/V Mistrau. The vessel set sail from the port of Davao City Produce. Even assuming that both Phoenix and McGee have only
and arrived at the port of Inchon, Korea. It was then discovered been subrogated in the rights of Del Monte Produce, who is not a
upon discharge that some of the cargo was in bad condition. The party to the contract of service between Mindanao Terminal and
Marine Cargo Damage Surveyor of Incok Loss and Average Adjuster Del Monte, still the insurance carriers may have a cause of action in
of Korea, through its representative Byeong Yong Ahn (Byeong), light of the Court’s consistent ruling that the act that breaks the
surveyed the extent of the damage of the shipment. In a survey contract may be also a tort.17 In fine, a liability for tort may arise
report, it was stated that 16,069 cartons of the banana shipment even under a contract, where tort is that which breaches the
and 2,185 cartons of the pineapple shipment were so damaged that contract18 . In the present case, Phoenix and McGee are not suing
they no longer had commercial value.5 for damages for injuries arising from the breach of the contract of
Del Monte Produce filed a claim under the open cargo policy for service but from the alleged negligent manner by which Mindanao
the damages to its shipment. McGee’s Marine Claims Insurance Terminal handled the cargoes belonging to Del Monte Produce.
Adjuster evaluated the claim and recommended that payment in Despite the absence of contractual relationship between Del Monte
the amount of $210,266.43 be made. A check for the Produce and Mindanao Terminal, the allegation of negligence on
recommended amount was sent to Del Monte Produce; the latter the part of the defendant should be sufficient to establish a cause
then issued a subrogation receipt6 to Phoenix and McGee. of action arising from quasi-delict.19
Phoenix and McGee instituted an action for damages 7 against The resolution of the two remaining issues is determinative of the
Mindanao Terminal in the Regional Trial Court (RTC) of Davao City, ultimate result of this case.
Branch 12. After trial, the RTC, 8 in a decision dated 20 October Article 1173 of the Civil Code is very clear that if the law or contract
1999, held that the only participation of Mindanao Terminal was to does not state the degree of diligence which is to be observed in
load the cargoes on board the M/V Mistrau under the direction and the performance of an obligation then that which is expected of a
supervision of the ship’s officers, who would not have accepted the good father of a family or ordinary diligence shall be required.
cargoes on board the vessel and signed the foreman’s report unless Mindanao Terminal, a stevedoring company which was charged
they were properly arranged and tightly secured to withstand with the loading and stowing the cargoes of Del Monte Produce
voyage across the open seas. Accordingly, Mindanao Terminal aboard M/V Mistrau, had acted merely as a labor provider in the
cannot be held liable for whatever happened to the cargoes after it case at bar. There is no specific provision of law that imposes a
had loaded and stowed them. Moreover, citing the survey report, it higher degree of diligence than ordinary diligence for a stevedoring
was found by the RTC that the cargoes were damaged on account company or one who is charged only with the loading and stowing
of a typhoon which M/V Mistrau had encountered during the of cargoes. It was neither alleged nor proven by Phoenix and
voyage. It was further held that Phoenix and McGee had no cause McGee that Mindanao Terminal was bound by contractual
of action against Mindanao Terminal because the latter, whose stipulation to observe a higher degree of diligence than that
services were contracted by Del Monte, a distinct corporation from required of a good father of a family. We therefore conclude that
Del Monte Produce, had no contract with the assured Del Monte following Article 1173, Mindanao Terminal was required to observe
Produce. The RTC dismissed the complaint and awarded the ordinary diligence only in loading and stowing the cargoes of Del
counterclaim of Mindanao Terminal in the amount of ₱83,945.80 as Monte Produce aboard M/V Mistrau.
actual damages and ₱100,000.00 as attorney’s fees.9 The actual imposing a higher degree of diligence,21 on Mindanao Terminal in
damages were awarded as reimbursement for the expenses loading and stowing the cargoes. The case of Summa Insurance
incurred by Mindanao Terminal’s lawyer in attending the hearings Corporation v. CA, which involved the issue of whether an arrastre
in the case wherein he had to travel all the way from Metro Manila operator is legally liable for the loss of a shipment in its custody and
to Davao City. the extent of its liability, is inapplicable to the factual circumstances
Phoenix and McGee appealed to the Court of Appeals. The of the case at bar. Therein, a vessel owned by the National Galleon
appellate court reversed and set aside10 the decision of the RTC in Shipping Corporation (NGSC) arrived at Pier 3, South Harbor,
its 29 October 2003 decision. The same court ordered Mindanao Manila, carrying a shipment consigned to the order of Caterpillar
Terminal to pay Phoenix and McGee "the total amount of Far East Ltd. with Semirara Coal Corporation (Semirara) as "notify
$210,265.45 plus legal interest from the filing of the complaint until party." The shipment, including a bundle of PC 8 U blades, was
fully paid and attorney’s fees of 20% of the claim."11 It sustained discharged from the vessel to the custody of the private
Phoenix’s and McGee’s argument that the damage in the cargoes respondent, the exclusive arrastre operator at the South Harbor.
was the result of improper stowage by Mindanao Terminal. It Accordingly, three good-order cargo receipts were issued by NGSC,
imposed on Mindanao Terminal, as the stevedore of the cargo, the duly signed by the ship's checker and a representative of private
duty to exercise extraordinary diligence in loading and stowing the respondent. When Semirara inspected the shipment at house, it
cargoes. It further held that even with the absence of a contractual discovered that the bundle of PC8U blades was missing. From those
relationship between Mindanao Terminal and Del Monte Produce, facts, the Court observed:
the cause of action of Phoenix and McGee could be based on quasi- x x x The relationship therefore between the consignee and the
delict under Article 2176 of the Civil Code.12 arrastre operator must be examined. This relationship is much akin
to that existing between the consignee or owner of shipped goods
and the common carrier, or that between a depositor and a
warehouseman[22 ]. In the performance of its obligations, an loading and stowing the cargoes. As admitted by Phoenix and
arrastre operator should observe the same degree of diligence as McGee in their Comment38 before us, the latter is merely a
that required of a common carrier and a warehouseman as stevedoring company which was tasked by Del Monte to load and
enunciated under Article 1733 of the Civil Code and Section 3(b) of stow the shipments of fresh banana and pineapple of Del Monte
the Warehouse Receipts Law, respectively. Being the custodian of Produce aboard the M/V Mistrau. How and where it should load
the goods discharged from a vessel, an arrastre operator's duty is and stow a shipment in a vessel is wholly dependent on the shipper
to take good care of the goods and to turn them over to the party and the officers of the vessel. In other words, the work of the
entitled to their possession. (Emphasis supplied)23 stevedore was under the supervision of the shipper and officers of
There is a distinction between an arrastre and a the vessel. Even the materials used for stowage, such as ropes,
stevedore.24 Arrastre, a Spanish word which refers to hauling of pallets, and cardboards, are provided for by the vessel. Even the
cargo, comprehends the handling of cargo on the wharf or between survey report found that it was because of the boisterous stormy
the establishment of the consignee or shipper and the ship's tackle. weather due to the typhoon Seth, as encountered by M/V
The responsibility of the arrastre operator lasts until the delivery of Mistrau during its voyage, which caused the shipments in the cargo
the cargo to the consignee. The service is usually performed by hold to collapse, shift and bruise in extensive extent. 39 Even the
longshoremen. On the other hand, stevedoring refers to the deposition of Byeong was not supported by the conclusion in the
handling of the cargo in the holds of the vessel or between the survey report that:
ship's tackle and the holds of the vessel. The responsibility of the CAUSE OF DAMAGE
stevedore ends upon the loading and stowing of the cargo in the xxx
vessel.1avvphi1 From the above facts and our survey results, we are of the opinion
It is not disputed that Mindanao Terminal was performing purely that damage occurred aboard the carrying vessel during sea transit,
stevedoring function while the private respondent in being caused by ship’s heavy rolling and pitching under boisterous
the Summa case was performing arrastre function. In the present weather while proceeding from 1600 hrs on 7th October to 0700
case, Mindanao Terminal, as a stevedore, was only charged with hrs on 12th October, 1994 as described in the sea protest.40
the loading and stowing of the cargoes from the pier to the ship’s As it is clear that Mindanao Terminal had duly exercised the
cargo hold; it was never the custodian of the shipment of Del required degree of diligence in loading and stowing the cargoes,
Monte Produce. A stevedore is not a common carrier for it does not which is the ordinary diligence of a good father of a family, the
transport goods or passengers; it is not akin to a warehouseman for grant of the petition is in order.
it does not store goods for profit. The loading and stowing of However, the Court finds no basis for the award of attorney’s fees in
cargoes would not have a far reaching public ramification as that of favor of petitioner.lawphil.net None of the circumstances
a common carrier and a warehouseman; the public is adequately enumerated in Article 2208 of the Civil Code exists. The present
protected by our laws on contract and on quasi-delict. The public case is clearly not an unfounded civil action against the plaintiff as
policy considerations in legally imposing upon a common carrier or there is no showing that it was instituted for the mere purpose of
a warehouseman a higher degree of diligence is not present in a vexation or injury. It is not sound public policy to set a premium to
stevedoring outfit which mainly provides labor in loading and the right to litigate where such right is exercised in good faith, even
stowing of cargoes for its clients. if erroneously.41 Likewise, the RTC erred in awarding ₱83,945.80
In the third issue, Phoenix and McGee failed to prove by actual damages to Mindanao Terminal. Although actual expenses
preponderance of evidence25 that Mindanao Terminal had acted were incurred by Mindanao Terminal in relation to the trial of this
negligently. Where the evidence on an issue of fact is in equipoise case in Davao City, the lawyer of Mindanao Terminal incurred
or there is any doubt on which side the evidence preponderates the expenses for plane fare, hotel accommodations and food, as well as
party having the burden of proof fails upon that issue. That is to other miscellaneous expenses, as he attended the trials coming all
say, if the evidence touching a disputed fact is equally balanced, or the way from Manila. But there is no showing that Phoenix and
if it does not produce a just, rational belief of its existence, or if it McGee made a false claim against Mindanao Terminal resulting in
leaves the mind in a state of perplexity, the party holding the the protracted trial of the case necessitating the incurrence of
affirmative as to such fact must fail.261avvphi1 expenditures.42
We adopt the findings27 of the RTC,28 which are not disputed by WHEREFORE, the petition is GRANTED. The decision of the Court of
Phoenix and McGee. The Court of Appeals did not make any new Appeals in CA-G.R. CV No. 66121 is SET ASIDE and the decision of
findings of fact when it reversed the decision of the trial court. The the Regional Trial Court of Davao City, Branch 12 in Civil Case No.
only participation of Mindanao Terminal was to load the cargoes on 25,311.97 is hereby REINSTATED MINUS the awards of ₱100,000.00
board M/V Mistrau.29 It was not disputed by Phoenix and McGee as attorney’s fees and ₱83,945.80 as actual damages.
that the materials, such as ropes, pallets, and cardboards, used in SO ORDERED.
lashing and rigging the cargoes were all provided by M/V DANTE O. TINGAAssociate Justice
Mistrau and these materials meets industry standard. 30 <p
It was further established that Mindanao Terminal loaded and WE CONCUR:
stowed the cargoes of Del Monte Produce aboard the M/V CONCHITA CARPIO MORALES*
Mistrau in accordance with the stowage plan, a guide for the area Associate Justice
assignments of the goods in the vessel’s hold, prepared by Del Acting Chairperson
Monte Produce and the officers of M/V Mistrau.31 The loading and </p
stowing was done under the direction and supervision of the ship
officers. The vessel’s officer would order the closing of the hatches
only if the loading was done correctly after a final inspection. 32 The
said ship officers would not have accepted the cargoes on board
the vessel if they were not properly arranged and tightly secured to
withstand the voyage in open seas. They would order the stevedore
to rectify any error in its loading and stowing. A foreman’s report,
as proof of work done on board the vessel, was prepared by the
checkers of Mindanao Terminal and concurred in by the Chief
Officer of M/V Mistrau after they were satisfied that the cargoes
were properly loaded.33
Phoenix and McGee relied heavily on the deposition of Byeong
Yong Ahn34 and on the survey report35 of the damage to the
cargoes. Byeong, whose testimony was refreshed by the survey
report,36 found that the cause of the damage was improper
stowage37 due to the manner the cargoes were arranged such that
there were no spaces between cartons, the use of cardboards as
support system, and the use of small rope to tie the cartons
together but not by the negligent conduct of Mindanao Terminal in

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