CIVIL LAW REVIEW 2

CASE DIGESTS FOR OBLIGATIONS AND

CONTRACTS
(CASES 1 TO 10)

SUBMITTED TO: BOKAL ENRIQUE V. DELA CRUZ JR.

SUBMITTED BY: PAULITO M. PUNONGBAYAN

BSU LAW-LLB 4A
 MAKATI STOCK EXCHANGE ET AL. VS MIGUEL CAMPOS

A practice or custom is, as a general rule, not a source of a legally

demandable or enforceable right.

Facts: Respondent Campos filed with the Securities, Investigation and Clearing
Department (SICD) of the Securities and Exchange Commission (SEC), a
petition against herein Petitioners Makati Stock Exchange Inc. (MKSE) and its
directors, seeking among others the nullification of the resolution of the MKSE
Board, which allegedly deprived him of his right to participate equally in the
allocation of the Initial Public Offerings (IPO) of corporations registered with
MKSE.

The SICD granted respondent’s prayer for the issuance of a TRO and the
subsequent Writ of Preliminary Injunction enjoining petitioners from
implementing its questioned resolution during the pendency of the petition
filed by Campos. Petitioners filed a Motion to Dismiss respondent’s Petition in
the SEC on the ground among others, that the petition failed to state a cause of
action. The SICD denied the motion, prompting petitioners to challenge the
same before the SEC En Banc through a Petition for Certiorari. The SEC En
Banc ruled for petitioners, nullifying the SICD orders and dismissing the
petition of Campos. Campos filed a petition for certiorari before the CA
assailing the SEC En Banc orders. The CA decided in favor of Campos and with
the Motion for reconsideration of petitioners having been denied, the case is set
now for this petition.

Issue: Whether or not the petition failed to state a cause of action

Held: The petition filed by the respondent, Miguel Campos should be dismissed
for failure to state a cause of action.

A cause of action is the act or omission by which a party violates a right

of another. A complaint states a cause of action where it contains three
essential elements of a cause of action, namely: (1) the legal right of the
plaintiff, (2) the correlative obligation of the defendant, and (3) the act or
omission of the defendant in violation of said legal right. If these elements are
absent, the complaint becomes vulnerable to dismissal on the ground of failure
to state a cause of action.

However, the terms right and obligation in respondent’s Petition are not
magic words that would automatically lead to the conclusion that such Petition
sufficiently states a cause of action. Right and obligation are legal terms with
specific legal meaning. A right is a claim or title to an interest in anything
whatsoever that is enforceable by law. An obligation is defined in the Civil Code
as a juridical necessity to give, to do or not to do. For every right enjoyed by any
person, there is a corresponding obligation on the part of another person to
respect such right.
 According to the Civil Code, obligations arise from law, contracts, quasi-
contracts, delict and quasi-delicts. Therefore, an obligation imposed on a
person and the corresponding right granted to another, must be rooted in at
least one of these five sources. The mere assertion of a right, and claim of an
obligation in an initiatory pleading, whether a Complaint or Petition, without
identifying the basis or source thereof, is merely a conclusion of fact and law. A
pleading should state the ultimate facts essential to the rights of action or
defense asserted, as distinguished from mere conclusions of fact or conclusions
of law.

Respondent merely quoted in his Petition the MKSE Board Resolution,

granting him the position of Chairman Emeritus of MKSE for life. However,
there is nothing in the said Petition from which the Court can deduce that
respondent, by virtue of his position as Chairman Emeritus of MKSE, was
granted by law, contract, or any other legal source, the right to subscribe to the
IPOs of corporations listed in the stock market at their offering prices. A
practice or custom is, as a general rule, not a source of a legally demandable or
enforceable right.
 FLAVIO K. MACASAET VS COMMISSION ON AUDIT & PHILIPPINE
TOURISM AUTHORITY

Obligations arising from contract have the force of law between the
contracting parties and should be complied with in good faith.

Facts: respondent Philippine Tourism Authority (PTA) entered into a contract

for “Project Design and Management Services for the development of the
proposed Zamboanga Golf and Country Club with petitioner company but
originally with Macasaet alone.

Under the contract, PTA obliged itself to pay petitioner 7% of the actual
construction cost and in addition a schedule of payments was provided for
while the construction was in progress and up to its final completion, a
provision under which states that, upon completion of the work and
acceptance thereof by the Authority, the balance of the professional fee,
computed on the final actual project cost shall be paid.

Pursuant to the schedule, PTA made periodic payments and paid

petitioners what it perceived to be the balance of the latter’s professional fees.
It turned out, however, that after the project was completed, PTA paid the main
contractor an additional sum representing the escalation cost of the contract
price. Upon learning of the price escalation, petitioner requested additional
professional fee commensurate to his 7% agreed fee. PTA denied payment on
the ground that the subject price escalation referred to increase cost of
materials and did not entail additional work on the part of petitioner as to
entitle him to additional compensation. Reconsiderations were sought by
petitioner up to the COA to no avail, hence, the present petition.

Issue: Is petitioner entitled to the additional professional fee

Held: Yes, petitioner is entitled to the additional fee. Under the terms of the
agreement, petitioner Macasaet was to be entitled to the actual construction
cost and the provision of the schedule of payments reinforces that the balance
of the professional fee was to be computed on the basis of the final actual
project cost.

The real intendment of the parties as shown by said stipulation was to

base the ultimate balance of petitioner’s professional fee not on the actual
construction cost alone but on the final actual project cost, which covers the
totality of all costs as actually and finally determined, and logically includes the
escalation cost of the contract price. Petitioner’s claim is for the payment of the
balance of the professional fee based on the final actual project cost and not for
additional compensation.

The terminologies in the contract being clear, leaving no doubt as to the

intention of the contracting parties, their literal meaning shall control.
Obligations arising from contract have the force of law between the contracting
parties and should be complied with in good faith.
 PHILIPPINE EXPORT AND FOREIGN LOAN GUARANTEE CORP.

VS

V.P. EUSEBIO CONSTRUCTION, ET AL

In reciprocal obligations, neither party incurs in delay if the other party

does not comply or is not ready to comply in a proper manner with what
is incumbent upon him.

Facts: The State Organization of Buildings (SOB), Ministry of Housing and

Construction, Baghdad, Iraq, awarded the construction of the Institute of
Physical Therapy–Medical Rehabilitation Center, in Iraq to Ajyal Trading and
Contracting Company (AJYAL), a firm duly licensed in the Kuwait. Respondent
spouses Santos, in behalf of respondent 3-Plex International, Inc. (3-PLEX), a
local contractor engaged in construction business, entered into a joint venture
agreement with Ajyal wherein the former undertook the execution of the entire
Project, while the latter would be entitled to a commission. Respondent 3-Plex,
not being accredited by or registered with the Philippine Overseas Construction
Board (POCB), assigned and transferred all its rights and interests under the
joint venture agreement to VPECI, a construction and engineering firm duly
registered. However, 3-Plex and VPECI subsequently entered into an agreement
that the execution of the project would be under their joint management.

The SOB required the contractors to submit a performance and an

advance payment bond. SOB specifically required the letter-guarantee from
Rafidain Bank, the government bank of Iraq. Rafidain issued the required
bonds that was counter-guaranteed by Al Ahli Bank of Kuwait that was
similarly counter-guaranteed by herein petitioner. Thus, three layers of
guarantee have been arranged.

Due to some setbacks and difficulties the completion date of the contract
was not met. Consequently, Al Ahli Bank sent a telex call to petitioner
demanding full payment of its counter-guarantee. VPECI argued that SOB’s
non-compliance for the past several years to pay majority of the billings in U.S.
dollars as provided in the contract is one of the cause of delay, hence, it
advised petitioner not to pay Al Ahli Bank. After petitioner received another
telex from Al Ahli demanding payment, it subsequently gave in and paid its
obligation after informing VPECI of its intention to comply with the payment.

Petitioner in turn, sent the respondents separate letters demanding payment

and when respondents failed to pay, it filed an action for collection of a sum of
money.

The RTC ruled against petitioner and dismissed the case. On appeal, the
CA affirmed the trial court’s decision, hence, giving rise to this petition.

Issue: Whether or not respondents were guilty of delay

Held: No, delay cannot be imputed against the respondents. According to
Article 1169 of the Civil Code, in reciprocal obligations, neither party incurs in
delay if the other party does not comply or is not ready to comply in a proper
manner with what is incumbent upon him.

As found by both the Court of Appeals and the trial court, the delay or
the non-completion of the Project was caused by factors not imputable to the
respondent contractor. It was rather due mainly to the persistent violations by
SOB of the terms and conditions of the contract, particularly its failure to pay
75% of the accomplished work in US Dollars. Indeed, where one of the parties
to a contract does not perform in a proper manner the prestation which he is
bound to perform under the contract, he is not entitled to demand the
performance of the other party. A party does not incur in delay if the other
party fails to perform the obligation incumbent upon him.
 JACINTO TANGULIG VS COURT OF APPEALS & VICENTE HERCE

In order for a party to claim exemption from liability by reason of

fortuitous event under Art. 1174 of the Civil Code the event should be the
sole and proximate cause of the loss or destruction of the object of the
contract.

In reciprocal obligations, neither party incurs in delay if the other does

not comply or is not ready to comply in a proper manner with what is
incumbent upon him.

If a person obliged to do something fails to do it, the same shall be

executed at his cost.

Facts: Petitioner Jacinto M. Tanguilig doing business under the name and
style J.M.T. Engineering and General Merchandising proposed to respondent
Vicente Herce Jr. to construct a windmill system for him. They agreed on the
construction of the windmill for a consideration of P60,000.00 with a one-year
guaranty from the date of completion and acceptance by respondent.
Respondent made a down payment and an installation payment totaling
P45,000.00 leaving a balance o P15,000.00.

Due to the refusal and failure of respondent to pay the balance,

petitioner filed a complaint to collect the amount. In his answer, respondent
denied the claim saying that he had already paid this amount to the San Pedro
General Merchandising Inc. (SPGMI) which constructed the deep well to which
the windmill system was to be connected and since the deep well formed part of
the system, the payment he tendered to SPGMI should be credited to his
account, and that assuming that he owed petitioner a balance, this should be
offset by the defects in the windmill system which caused the structure to
collapsed after a strong wind hit their place.

Petitioner denied that the construction of the deep well was included in
the agreement, he also disowned any obligation to repair or reconstruct the
windmill attributing its collapse to a typhoon, a force majeure, relieving him of
any liability.

The trial court ruled for petitioner, the same was however reversed by the
CA on appeal. Hence, petitioner now comes before the Court for reliefs.

Issues: 1. Whether or not petitioner is under obligation to repair the windmill

2. Whether or not respondent is already in delay in paying its obligation

and therefore should suffer his own loss

Held: 1. Yes, he is under obligation to make the repair of the windmill. In

order for a party to claim exemption from liability by reason of fortuitous event
under Article 1174 of the Civil Code, the event should be the sole and
proximate cause of the loss or destruction of the object of the contract. Four
requisites must concur: (a) the cause of the breach of the obligation must be
independent of the will of the debtor; (b) the event must be either unforeseeable
or unavoidable; (c) the event must be such as to render it impossible for the
debtor to fulfill his obligation in a normal manner; and, (d) the debtor must be
free from any participation in or aggravation of the injury to the creditor.

Petitioner failed to show that the collapse of the windmill was due solely
to a fortuitous event. Interestingly, the evidence does not disclose that there
was actually a typhoon on the day the windmill collapsed. Petitioner merely
stated that there was a "strong wind." But a strong wind in this case cannot be
fortuitous — unforeseeable nor unavoidable. On the contrary, a strong wind
should be present in places where windmills are constructed, otherwise the
windmills will not turn.

2. No, respondent is not in default in his obligation to petitioner. In

reciprocal obligations, neither party incurs in delay if the other does not comply
or is not ready to comply in a proper manner with what is incumbent upon
him. When the windmill failed to function properly it became incumbent upon
petitioner to institute the proper repairs in accordance with the guaranty stated
in the contract. Thus, respondent cannot be said to have incurred in delay,
instead, it is petitioner who should bear the expenses for the reconstruction of
the windmill. Article 1167 of the Civil Code is explicit on this point that if a
person obliged to do something fails to do it, the same shall be executed at his
cost.
 IGNACIO BARZAGA VS COURT OF APPEALS & ANGELITO ALVIAR

Those who in the performance of their obligation are guilty of fraud,

negligence, or delay and those who in any manner contravene the tenor
thereof, are liable for damages.

Facts: To fulfill the dying wishes of his departed wife that she be buried before
Christmas day, petitioner Barzaga went to the hardware store of respondent
Alviar to purchase materials for the construction of her niche. Boncales,
Alviar’s storekeeper, told petitioner that the materials are available but the
delivery would depend if there were still pending deliveries for the day, and if
there were, his purchases would be delivered the following day.

The following day, Barzaga went back to the store for the purchase and
telling the store employees that his materials would have to be delivered at 8
am that morning at the cemetery since his workers are already waiting at the
burial site and time was of the essence. Boncales agreed to deliver at the
designated time, date and place, and with such assurance petitioner paid in
full and went back to the cemetery to join his workers.

After several hours of waiting there was no delivery, he inquired and

again was told to wait, yet no delivery was made. Upset due to the turn of
events, he dismissed his employees and subsequently proceeded to the police
station to lodge a complaint against Alviar and thereafter decided to cancel his
transaction with respondent. Due to these facts, he was not able to finish the
niche and thus he failed to bury his wife according to her wishes. Tormented,
petitioner wrote respondent demanding recompense for damage he suffered.
The latter did not respond, consequently petitioner sued him before the trial
court.

The lower court upheld petitioner’s cause, holding respondent liable due
to delay. On appeal, the CA reversed the decision, ruling that there was no
contractual commitment as to the exact time of the delivery since these were
not indicated in the receipts. Hence, this case is now before the Court.

Issue: Whether or not respondent was guilty of delay in the performance of his
obligation

Held: Yes respondent was negligent and incurred in delay in the performance
of his contractual obligation entitling petitioner to be indemnified for the
damage he suffered. The law expressly provides that those who in the
performance of their obligation are guilty of fraud, negligence, or delay and
those who in any manner contravene the tenor thereof, are liable for damages.

Contrary to the appellate court's factual determination, there was a

specific time agreed upon for the delivery of the materials to the cemetery. He
was told by the storekeeper that if there were still deliveries to be made that
afternoon his order would be delivered the following day. With this in mind
Barzaga decided to buy the construction materials the following morning after
he was assured of immediate delivery according to his time frame. The
argument that the invoices never indicated a specific delivery time must fall in
the face of the positive verbal commitment of respondent's storekeeper.
Consequently it was no longer necessary to indicate in the invoices the exact
time the purchased items were to be brought to the cemetery. In fact,
storekeeper Boncales admitted that it was her custom not to indicate the time
of delivery whenever she prepared invoices.

This case is clearly one of non-performance of a reciprocal obligation. In

their contract of purchase and sale, petitioner had already complied fully with
what was required of him as purchaser, the payment of the purchased price It
was incumbent upon respondent to immediately fulfill his obligation to deliver
the goods otherwise delay would attach.
 NATIONAL POWER CORPORATION VS CA & ENGINEERING
CONSTRUCTION, INC.

ENGINEERING CONSTRUCTION INC. VS CA & NATIONAL POWER

CORPORATION

It has been held that when the negligence of a person concurs with a
fortuitous event in producing a loss, such person is not exempt from
liability by showing that the immediate cause of the damage was a
fortuitous event. To be exempt from liability for loss because of a
fortuitous event, he must be free from any previous negligence or
misconduct by which the loss or damage may have been occasioned.

Facts: Plaintiff Engineering Construction Inc. (ECI) as successful bidder,

executed a contract with the National Waterworks and Sewerage System,
undertaking to construct the proposed and tunnel and several structures in
Central Luzon.

The records show that a typhoon hit Central Luzon, passing through
defendant’s dam. Due to heavy downpour, the water in the reservoir was rising
perilously and to prevent an overflow, NPC, the defendant corporation opened
the spillway gates.

The appellate court sustained the findings of the trial court that the
evidence established the fact that due to the negligent manner with which the
spillway gates of the Angat Dam were opened, an extraordinary large volume of
water rushed out of the gates, and hit the installations and construction works
of ECI at the lpo site with terrific impact, as a result of which the latter's
stockpile of materials and supplies, camp facilities and permanent structures
and accessories either washed away, lost or destroyed.

In these consolidated petitions, the NPC assails the CA’s decision as

being erroneous on the ground that the destruction and loss of ECI’s
equipment and facilities were due to force majeure. It argues that the rapid rise
of the water level in the reservoir of its Angat Dam due to heavy rains brought
about by the typhoon was an extraordinary occurrence that could not have
been foreseen, and thus, the subsequent release of water through the spillway
gates and its resultant effect, if any, on ECI's equipment and facilities may
rightly be attributed to force majeure.

Issue: Whether or not NPC should be absolved of liability due to a fortuitous

event

Held: No, NPC is not absolved of its liability. If upon the happening of a
fortuitous event, there concurs a corresponding fraud, negligence, delay or
violation or contravention in any manner of the tenor of the obligation as
provided for in Article 1170 of the Civil Code, which results in loss or damage,
the obligor cannot escape liability. To be exempt from liability for loss because
of a fortuitous event, he must be free from any previous negligence or
misconduct by which the loss or damage may have been occasioned.

In this case, it is clear from the appellate court's decision that based on
its findings of fact and that of the trial court's, petitioner NPC was undoubtedly
negligent because it opened the spillway gates of the Angat Dam only at the
height of typhoon when it knew very well that it was safer to have opened the
same gradually and earlier, as it was also undeniable that NPC knew of the
coming typhoon at least four days before it actually struck. And even though
the typhoon was a fortuitous event or what we may call force majeure, NPC
cannot escape liability because its negligence was the proximate cause of the
loss and damage.
 JOSEPH SALUDAGA VS FAR EASTERN UNIVERSITY & EDILBERTO DE
JESUS

Those who are negligent in the performance of their obligations are liable
for damages. Accordingly, for breach of contract due to negligence in
providing a safe learning environment, respondent is liable to petitioner
for damages.

Facts: Petitioner Saludaga was a law student of respondent Far Eastern

University (FEU) when he was shot by Rosete , one of the security guards on
duty at the school premises. Petitioner was rushed to FEU-Dr. Nicanor Reyes
Medical Foundation (FEU-NRMF) due to the wound he sustained, while Rosete
was brought to the police station where he explained that the shooting was
accidental and was eventually released considering that no formal complaint
was filed against him.

Petitioner thereafter filed a complaint for damages against respondents

on the ground that they breached their obligation to provide students with a
safe and secure environment and an atmosphere conducive to learning.
Respondent aver that the shooting incident was a fortuitous event because they
could not have foreseen nor avoided the accident caused by Rosete as he was
not their employee and that they complied with their obligation to ensure a safe
learning environment for their students by having exercised due diligence in
selecting the security services of Galaxy. Respondent also filed a third-party
complaint against Galaxy Development and Management Corporation (Galaxy),
the agency contracted by respondent FEU to provide security services within its
premises and Mariano D. Imperial Galaxy's President, to indemnify them for
whatever would be adjudged in favor of petitioner, if any, and to pay attorney's
fees and cost of the suit. On the other hand, Galaxy and Imperial filed a
Fourth-Party Complaint against AFP General Insurance.

The trial court rendered a decision in favor of petitioner, which however,

was reversed and set aside by the appellate court. Petitioner filed a motion for
reconsideration which was denied, hence, the instant petition.

Issue: Whether or not respondent is free from liability due to fortuitous event

Held: No, respondent is still liable. It is undisputed that petitioner was enrolled
as a sophomore law student in respondent FEU. As such, there was created a
contractual obligation between the two parties.

After a thorough review of the records, we find that respondents failed to

discharge the burden of proving that they exercised due diligence in providing a
safe learning environment for their students. They failed to prove that they
ensured that the guards assigned in the campus met the requirements
stipulated in the Security Service Agreement, no evidence as to the
qualifications of Rosete as a security guard for the university was offered.
Respondents also failed to show that they undertook steps to ascertain and
confirm that the security guards assigned to them actually possess the
qualifications required in the Security Service Agreement. Total reliance on the
security agency about these matters or failure to check the papers stating the
qualifications of the guards is negligence on the part of respondents.

Consequently, respondents' defense of force majeure must fail. In order

for force majeure to be considered, respondents must show that no negligence
or misconduct was committed that may have occasioned the loss. Article 1170
of the Civil Code provides that those who are negligent in the performance of
their obligations are liable for damages. Accordingly, for breach of contract due
to negligence in providing a safe learning environment, respondent FEU is
liable to petitioner for damages.
 THE CONSOLIDATED BANK AND TRUST CORPORATION

(SOLID BANK) VS CA AND L.C. DIAZ

responsibility arising from negligence in the performance of every

kind of obligation is demandable

liability for culpa contractual may be mitigated by the courts

whenever the plaintiff is guilty of contributory negligence

Facts: L.C. Diaz and Company (LC Diaz), an accounting firm, has a savings account
with Consolidated Bank and Trust Corporation (Solidbank).

Sometime, the firm’s messenger, a certain Calapre, deposited an amount

with the bank but due to a long line and the fact that he still needs to deposit a
certain amount in another bank, the messenger left the firm’s passbook with a
teller of Solidbank. But when the messenger returned, the passbook was
already missing. Apparently, the teller returned the passbook to someone else.

Thereafter, LC Diaz made a formal request ordering Solidbank not to

honor any transaction concerning their account with them until the firm is able
to acquire a new passbook. It appears however that on the same day, a
significant amount was already withdrawn from the firm’s account.

LC Diaz demanded Solidbank to refund the said amount which the bank
refused. LC Diaz then sued Solidbank.

In its defense, Solidbank contends that under their banking rules, they
are authorized to honor withdrawals if presented with the passbook; that when
the questioned amount was withdrawn, the passbook was presented. Further,
the withdrawer presented a withdrawal slip which bore the signatures of the
representatives of LC Diaz.

The RTC ruled in favor of Solidbank. It found LC Diaz to be negligent in

handling its passbook. The loss of the P300k was not the result of Solidbank’s
negligence.

On appeal, the Court of Appeals reversed the decision of the RTC. The CA
used the rules on quasi-delict of the Civil Code.

Issue: Whether or not Solidbank is liable to LC Diaz with respect to the

withdrawn amount

Held: Yes, Solidbank is liable for the loss of the withdrawn amount for breach
of contract or culpa contractual.

The contract between the bank and its depositor is governed by the
provisions of the Civil Code on simple loan. There is a debtor-creditor
relationship between the bank and its depositor. The bank is the debtor and
the depositor is the creditor.
 Article 1172 of the Civil Code provides that responsibility arising from
negligence in the performance of every kind of obligation is demandable. For
breach of the savings deposit agreement due to negligence, or culpa
contractual, the bank is liable to its depositor. In culpa contractual, once the
plaintiff proves a breach of contract, there is a presumption that the defendant
was at fault or negligent. The burden is on the defendant to prove that he was
not at fault or negligent.

In the present case, L.C. Diaz has established that Solidbank breached
its contractual obligation to return the passbook only to the authorized
representative of L.C. Diaz. Solidbank failed to discharge its burden. The bank
must not only exercise high standards of integrity and performance, it must
also insure that its employees do likewise, because this is the only way to
insure that the bank will comply with its fiduciary duty. Solidbank failed to
present the teller who had the duty to return to Calapre the passbook, and
thus failed to prove that this teller exercised the high standards of integrity and
performance required of Solidbank’s employees.

According to Art 1172 of the Civil Code, liability for culpa contractual
may be mitigated by the courts whenever the plaintiff is guilty of contributory
negligence. In this case, L.C. Diaz was guilty of contributory negligence in
allowing a withdrawal slip signed by its authorized signatories to fall into the
hands of an impostor. Thus, the liability of Solidbank should be reduced. Thus,
L.C. Diaz must shoulder 40% of the actual damages awarded by the appellate
court and Solidbank must pay the other 60% of the actual damages.
 SCHMITZ TRANSPORT & BRROKERAGE CORP. VS TRANSPORT
VENTURE INC., ET AL.

The principle embodied in the doctrine strictly requires that the act
must be occasioned solely by the violence of nature. Human intervention
is to be excluded from creating or entering into the cause of the mischief.

If the law or contract does not state the diligence which is to be

observed in the performance, that which is expected of a good father of a
family shall be required.

Facts: SYTCO Pte Ltd. Singapore shipped from the port of Russia on board
M/V "Alexander Saveliev", owned by Black Sea hot rolled steel sheets in coil, to
be discharged at the port of Manila in favor of the consignee, Little Giant Steel
Pipe Corporation (Little Giant) and which were insured against all risks with
Industrial Insurance Company Ltd. (Industrial Insurance)

Schmitz Transport, whose services the consignee engaged to secure the

requisite clearances, to receive the cargoes from the shipside, and to deliver
them to its (the consignee’s) warehouse, in turn engaged the services of TVI to
send a barge and tugboat at shipside. TVI’s tugboat towed a barge at shipside
and after positioning it alongside the vessel, left and returned to the port
terminal.

Later, during which the weather condition had become inclement due to
an approaching storm, the unloading unto the barge of the coils was
accomplished, however, no tugboat pulled the barge back to the pier. Due to
strong waves, the crew of the barge abandoned it and transferred to the vessel.
The barge pitched and rolled with the waves and eventually capsized, washing
the coils into the sea.

Little Giant thus filed a formal claim against Industrial Insurance which
paid its claims. Little Giant thereupon executed a subrogation receiptin favor of
Industrial Insurance. Industrial Insurance later filed a complaint against
Schmitz Transport, TVI, and Black Sea through its representative before the
RTC of Manila, for the recovery of the amount it paid to Little Giant. The RTC
held all the defendants negligent for unloading the cargoes outside of the
breakwater notwithstanding the storm signal. All the defendants appealed to
the Court of Appeals which, by decision affirmed in toto the decision of the trial
court.

The defendants’ respective motions for reconsideration having been

denied Schmitz (hereinafter referred to as petitioner) filed the present petition
against TVI, Industrial Insurance and Black Sea. Petitioner asserts that in
chartering the barge and tugboat of TVI, it was acting for its principal,
consignee Little Giant, hence, the transportation contract was by and between
Little Giant and TVI.
Issue: Whether the loss of the cargoes was due to a fortuitous event

Held: NO. According to the Civil Code and jurisprudence, in order to be

considered a fortuitous event and to absolve the obligor for liability, one of the
conditions required is that the obligor must be free from any participation in
the aggravation of the injury resulting to the creditor. The principle embodied
in the doctrine strictly requires that the act must be occasioned solely by the
violence of nature. Human intervention is to be excluded from creating or
entering into the cause of the mischief.

That no tugboat towed back the barge to the pier after the cargoes were
completely loaded is a material fact which the appellate court failed to properly
consider and appreciate - the proximate cause of the loss of the cargoes. Had
the barge been towed back promptly to the pier, the deteriorating sea
conditions notwithstanding, the loss could have been avoided. But the barge
was left floating in open sea until big waves set in causing it to sink along with
the cargoes. The loss thus falls outside a fortuitous event.

In the case of TVI, while it acted as a private carrier for which it was
under no duty to observe extraordinary diligence, it was still required to
observe ordinary diligence to ensure the proper and careful handling, care and
discharge of the carried goods, otherwise, it shall be liable for damages
pursuant to ART. 1170 of the NCC which states that, those who in the
performance of their obligations are guilty of fraud, negligence, or delay, and
those who in any manner contravene the tenor thereof, are liable for damages.

The following provision supplements ART. 1170:

ART. 1173. The fault or negligence of the obligor consists in the

omission of that diligence which is required by the nature of the obligation and
corresponds with the circumstances of the persons, of the time and of the
place. When negligence shows bad faith, the provisions of articles 1171 and
2202, paragraph 2, shall apply. If the law or contract does not state the
diligence which is to be observed in the performance, that which is expected of
a good father of a family shall be required.

TVI’s failure to promptly provide a tugboat did not only increase the risk
that might have been reasonably anticipated during the shipside operation, but
was the proximate cause of the loss. A man of ordinary prudence would not
leave a heavily loaded barge floating for a considerable number of hours, at
such a precarious time, and in the open sea, knowing that the barge does not
have any power of its own and is totally defenseless from the ravages of the
sea.

Petitioner having been found as a common carrier, is required to exercise

extraordinary diligence in the care and handling of the goods entrusted to
them. In this case, while petitioner sent checkers and a supervisor on board the
vessel to counter-check the operations of TVI, it failed to take all available and
reasonable precautions to avoid the loss. After noting that TVI failed to arrange
for the prompt towage of the barge despite the deteriorating sea conditions, it
should have summoned the same or another tugboat to extend help, but it did
not.

Therefore Petitioner and TVI, for failing to observe the diligence required
of them are solidarily liable for the loss sustained by Little Giant.
 VIRGINIA REAL VS SISENANDO H. BELO

No person shall be responsible for a fortuitous event which could not be

foreseen, or which, though foreseen, was inevitable, there must be an
entire exclusion of human agency from the cause of injury or loss.

Facts: Petitioner owned and operated the Wasabe Fastfood stall located at the
Food Center of the Philippine Women's University (PWU). Sisenando H. Belo
(respondent) owned and operated the BS Masters fast food stall, also located at
the Food Center of PWU.

A fire broke out at petitioner's fast food stall which spread and gutted
other fast food stalls in the area, including respondent's stall. An investigation
revealed that the fire broke out due to the leaking fumes coming from the stove
and tank installed at petitioner's stall. For the loss of his fast food stall,
respondent demanded compensation from petitioner. However, petitioner
refused to accede to respondent's demand.

Hence, respondent filed a complaint for damages against petitioner,

alleging that petitioner failed to exercise due diligence in the upkeep and
maintenance of her cooking equipment, as well as the selection and
supervision of her employees and that petitioner's negligence was the
proximate cause of the fire that gutted the fast food stalls.

In her answer, petitioner denied liability on the grounds that the fire was
a fortuitous event and that she exercised due diligence in the selection and
supervision of her employees.

After trial, the MeTC rendered its decision in favor of the respondent that
was affirmed by the RTC. Petitioner then filed a petition for review with the CA
that was dismissed for being procedurally flawed. Its motion for reconsideration
having been denied, petitioner is now before the court for the present petition.

Issue: Whether or not the fire is a fortuitous event excusing petitioner from any
liability.

Held: No, the fire cannot be considered a fortuitous event to absolve petitioner
from liability.

Article 1174 of the Civil Code provides that no person shall be

responsible for a fortuitous event which could not be foreseen, or which,
though foreseen, was inevitable. Jurisprudence requires a couple of elements
among others for an event to be considered fortuitous; that the cause of the
unforeseen and unexpected occurrence must be independent of human will; it
must be impossible to foreseen or if it can be foreseen, it must be impossible to
avoid. In other words, there must be an entire exclusion of human agency
from the cause of injury or loss.
 It is established by evidence that the fire originated from leaking fumes
from the LPG stove and tank installed at petitioner's fast food stall and her
employees failed to prevent the fire from spreading and destroying the other
fast food stalls, including respondent's fast food stall. Such circumstances do
not support petitioner's theory of fortuitous event.