Roberto Sicam v Lulu and Cesar Jorge
19, 1987 informing her of the loss of her jewelry due to the
Before us is a Petition for Review on Certiorari filed by Roberto
C. Sicam, Jr. (petitioner Sicam) and Agencia de R.C. Sicam,
Inc. (petitioner corporation) seeking to annul the Decision1 of
the Court of Appeals dated March 31, 2003, and its
Resolution2 dated August 8, 2003, in CA G.R. CV No. 56633.
It appears that on different dates from September to October
1987, Lulu V. Jorge (respondent Lulu) pawned several pieces
of jewelry with Agencia de R. C. Sicam located at No. 17
Aguirre Ave., BF Homes Parañaque, Metro Manila, to secure a
loan in the total amount of P59,500.00.
On October 19, 1987, two armed men entered the pawnshop
and took away whatever cash and jewelry were found inside
the pawnshop vault. The incident was entered in the police
blotter of the Southern Police District, Parañaque Police
Station as follows:
Investigation shows that at above TDPO, while victims
were inside the office, two (2) male unidentified
persons entered into the said office with guns drawn.
Suspects(sic) (1) went straight inside and poked his
gun toward Romeo Sicam and thereby tied him with an
electric wire while suspects (sic) (2) poked his gun
toward Divina Mata and Isabelita Rodriguez and
ordered them to lay (sic) face flat on the floor. Suspects
asked forcibly the case and assorted pawned jewelries
items mentioned above.
Suspects after taking the money and jewelries fled on
board a Marson Toyota unidentified plate number.3
Petitioner Sicam sent respondent Lulu a letter dated October
robbery incident in the pawnshop. On November 2, 1987,
respondent Lulu then wrote a letter4 to petitioner Sicam
expressing disbelief stating that when the robbery happened,
all jewelry pawned were deposited with Far East Bank near
the pawnshop since it had been the practice that before they
could withdraw, advance notice must be given to the
pawnshop so it could withdraw the jewelry from the bank.
Respondent Lulu then requested petitioner Sicam to prepare
the pawned jewelry for withdrawal on November 6, 1987 but
petitioner Sicam failed to return the jewelry.
On September 28, 1988, respondent Lulu joined by her
husband, Cesar Jorge, filed a complaint against petitioner
Sicam with the Regional Trial Court of Makati seeking
indemnification for the loss of pawned jewelry and payment of
actual, moral and exemplary damages as well as attorney's
fees. The case was docketed as Civil Case No. 88-2035.
Petitioner Sicam filed his Answer contending that he is not the
real party-in-interest as the pawnshop was incorporated on
April 20, 1987 and known as Agencia de R.C. Sicam, Inc; that
petitioner corporation had exercised due care and diligence in
the safekeeping of the articles pledged with it and could not be
made liable for an event that is fortuitous.
Respondents subsequently filed an Amended Complaint to
include petitioner corporation.
Thereafter, petitioner Sicam filed a Motion to Dismiss as far as
he is concerned considering that he is not the real party-in-
interest. Respondents opposed the same. The RTC denied the
motion in an Order dated November 8, 1989.5
After trial on the merits, the RTC rendered its Decision 6 dated
January 12, 1993, dismissing respondents’ complaint as well
as petitioners’ counterclaim. The RTC held that petitioner
Sicam could not be made personally liable for a claim arising
out of a corporate transaction; that in the Amended Complaint
of respondents, they asserted that "plaintiff pawned assorted
jewelries in defendants' pawnshop"; and that as a
consequence of the separate juridical personality of a
corporation, the corporate debt or credit is not the debt or
credit of a stockholder.
The RTC further ruled that petitioner corporation could not be
held liable for the loss of the pawned jewelry since it had not
been rebutted by respondents that the loss of the pledged
pieces of jewelry in the possession of the corporation was
occasioned by armed robbery; that robbery is a fortuitous
event which exempts the victim from liability for the loss, citing
the case of Austria v. Court of Appeals;7 and that the parties’
transaction was that of a pledgor and pledgee and under Art.
1174 of the Civil Code, the pawnshop as a pledgee is not
responsible for those events which could not be foreseen.
Respondents appealed the RTC Decision to the CA. In a
Decision dated March 31, 2003, the CA reversed the RTC, the
dispositive portion of which reads as follows:
WHEREFORE, premises considered, the instant
Appeal is GRANTED, and the Decision dated January
12, 1993,of the Regional Trial Court of Makati, Branch
62, is hereby REVERSED and SET ASIDE, ordering
the appellees to pay appellants the actual value of the
lost jewelry amounting to P272,000.00, and attorney'
fees of P27,200.00.8
In finding petitioner Sicam liable together with petitioner
corporation, the CA applied the doctrine of piercing the veil of
corporate entity reasoning that respondents were misled into
thinking that they were dealing with the pawnshop owned by
petitioner Sicam as all the pawnshop tickets issued to them
bear the words "Agencia de R.C. Sicam"; and that there was
no indication on the pawnshop tickets that it was the petitioner
corporation that owned the pawnshop which explained why
respondents had to amend their complaint impleading
petitioner corporation.
The CA further held that the corresponding diligence required
of a pawnshop is that it should take steps to secure and
protect the pledged items and should take steps to insure itself
against the loss of articles which are entrusted to its custody
as it derives earnings from the pawnshop trade which
petitioners failed to do; that Austria is not applicable to this
case since the robbery incident happened in 1961 when the
criminality had not as yet reached the levels attained in the
present day; that they are at least guilty of contributory
negligence and should be held liable for the loss of jewelries;
and that robberies and hold-ups are foreseeable risks in that
those engaged in the pawnshop business are expected to
foresee.
The CA concluded that both petitioners should be jointly and
severally held liable to respondents for the loss of the pawned
jewelry.
Petitioners’ motion for reconsideration was denied in a
Resolution dated August 8, 2003.
Hence, the instant petition for review with the following
assignment of errors:
THE COURT OF APPEALS ERRED AND WHEN IT
DID, IT OPENED ITSELF TO REVERSAL, WHEN IT
ADOPTED UNCRITICALLY (IN FACT IT
 REPRODUCED AS ITS OWN WITHOUT IN THE
MEANTIME ACKNOWLEDGING IT) WHAT THE
RESPONDENTS ARGUED IN THEIR BRIEF, WHICH
ARGUMENT WAS PALPABLY UNSUSTAINABLE.
THE COURT OF APPEALS ERRED, AND WHEN IT
DID, IT OPENED ITSELF TO REVERSAL BY THIS
HONORABLE COURT, WHEN IT AGAIN ADOPTED
UNCRITICALLY (BUT WITHOUT ACKNOWLEDGING
IT) THE SUBMISSIONS OF THE RESPONDENTS IN
THEIR BRIEF WITHOUT ADDING ANYTHING MORE
THERETO DESPITE THE FACT THAT THE SAID
ARGUMENT OF THE RESPONDENTS COULD NOT
HAVE BEEN SUSTAINED IN VIEW OF
UNREBUTTED EVIDENCE ON RECORD.9
Anent the first assigned error, petitioners point out that the
CA’s finding that petitioner Sicam is personally liable for the
loss of the pawned jewelries is "a virtual and uncritical
reproduction of the arguments set out on pp. 5-6 of the
Appellants’ brief."10
Petitioners argue that the reproduced arguments of
respondents in their Appellants’ Brief suffer from infirmities, as
follows:
(1) Respondents conclusively asserted in paragraph 2
of their Amended Complaint that Agencia de R.C.
Sicam, Inc. is the present owner of Agencia de R.C.
Sicam Pawnshop, and therefore, the CA cannot rule
against said conclusive assertion of respondents;
(2) The issue resolved against petitioner Sicam was
not among those raised and litigated in the trial court;
and
(3) By reason of the above infirmities, it was error for
the CA to have pierced the corporate veil since a
corporation has a personality distinct and separate
from its individual stockholders or members.
Anent the second error, petitioners point out that the CA
finding on their negligence is likewise an unedited reproduction
of respondents’ brief which had the following defects:
(1) There were unrebutted evidence on record that
petitioners had observed the diligence required of
them, i.e, they wanted to open a vault with a nearby
bank for purposes of safekeeping the pawned articles
but was discouraged by the Central Bank (CB) since
CB rules provide that they can only store the pawned
articles in a vault inside the pawnshop premises and no
other place;
(2) Petitioners were adjudged negligent as they did not
take insurance against the loss of the pledged
jelweries, but it is judicial notice that due to high
incidence of crimes, insurance companies refused to
cover pawnshops and banks because of high
probability of losses due to robberies;
(3) In Hernandez v. Chairman, Commission on
Audit (179 SCRA 39, 45-46), the victim of robbery was
exonerated from liability for the sum of money
belonging to others and lost by him to robbers.
Respondents filed their Comment and petitioners filed their
Reply thereto. The parties subsequently submitted their
respective Memoranda.
We find no merit in the petition.
To begin with, although it is true that indeed the CA findings
were exact reproductions of the arguments raised in
respondents’ (appellants’) brief filed with the CA, we find the
same to be not fatally infirmed. Upon examination of the
Decision, we find that it expressed clearly and distinctly the
facts and the law on which it is based as required by Section
8, Article VIII of the Constitution. The discretion to decide a
case one way or another is broad enough to justify the
adoption of the arguments put forth by one of the parties, as
long as these are legally tenable and supported by law and the
facts on records.11
Our jurisdiction under Rule 45 of the Rules of Court is limited
to the review of errors of law committed by the appellate court.
Generally, the findings of fact of the appellate court are
deemed conclusive and we are not duty-bound to analyze and
calibrate all over again the evidence adduced by the parties in
the court a quo.12 This rule, however, is not without exceptions,
such as where the factual findings of the Court of Appeals and
the trial court are conflicting or contradictory13 as is obtaining in
the instant case.
However, after a careful examination of the records, we find no
justification to absolve petitioner Sicam from liability.
The CA correctly pierced the veil of the corporate fiction and
adjudged petitioner Sicam liable together with petitioner
corporation. The rule is that the veil of corporate fiction may be
pierced when made as a shield to perpetrate fraud and/or
confuse legitimate issues. 14 The theory of corporate entity was
not meant to promote unfair objectives or otherwise to shield
them.15
Notably, the evidence on record shows that at the time
respondent Lulu pawned her jewelry, the pawnshop was
owned by petitioner Sicam himself. As correctly observed by
the CA, in all the pawnshop receipts issued to respondent Lulu
in September 1987, all bear the words "Agencia de R. C.
Sicam," notwithstanding that the pawnshop was allegedly
incorporated in April 1987. The receipts issued after such
alleged incorporation were still in the name of "Agencia de R.
C. Sicam," thus inevitably misleading, or at the very least,
creating the wrong impression to respondents and the public
as well, that the pawnshop was owned solely by petitioner
Sicam and not by a corporation.
Even petitioners’ counsel, Atty. Marcial T. Balgos, in his
letter16 dated October 15, 1987 addressed to the Central Bank,
expressly referred to petitioner Sicam as the proprietor of the
pawnshop notwithstanding the alleged incorporation in April
1987.
We also find no merit in petitioners' argument that since
respondents had alleged in their Amended Complaint that
petitioner corporation is the present owner of the pawnshop,
the CA is bound to decide the case on that basis.
Section 4 Rule 129 of the Rules of Court provides that an
admission, verbal or written, made by a party in the course of
the proceedings in the same case, does not require proof. The
admission may be contradicted only by showing that it was
made through palpable mistake or that no such admission was
made.
Thus, the general rule that a judicial admission is conclusive
upon the party making it and does not require proof, admits of
two exceptions, to wit: (1) when it is shown that such
admission was made through palpable mistake, and (2) when
it is shown that no such admission was in fact made. The
latter exception allows one to contradict an admission by
denying that he made such an admission.17
The Committee on the Revision of the Rules of Court
explained the second exception in this wise:
x x x if a party invokes an "admission" by an adverse
party, but cites the admission "out of context," then the
one making the "admission" may show that he made
no "such" admission, or that his admission was
taken out of context.
x x x that the party can also show that he made no
"such admission", i.e., not in the sense in which
the admission is made to appear.
That is the reason for the modifier "such" because if
the rule simply states that the admission may be
contradicted by showing that "no admission was
made," the rule would not really be providing for a
contradiction of the admission but just a
denial.18 (Emphasis supplied).
While it is true that respondents alleged in their Amended
Complaint that petitioner corporation is the present owner of
the pawnshop, they did so only because petitioner Sicam
alleged in his Answer to the original complaint filed against him
that he was not the real party-in-interest as the pawnshop was
incorporated in April 1987. Moreover, a reading of the
Amended Complaint in its entirety shows that respondents
referred to both petitioner Sicam and petitioner corporation
where they (respondents) pawned their assorted pieces of
jewelry and ascribed to both the failure to observe due
diligence commensurate with the business which resulted in
the loss of their pawned jewelry.
Markedly, respondents, in their Opposition to petitioners’
Motion to Dismiss Amended Complaint, insofar as petitioner
Sicam is concerned, averred as follows:
Roberto C. Sicam was named the defendant in the
original complaint because the pawnshop tickets
involved in this case did not show that the R.C. Sicam
Pawnshop was a corporation. In paragraph 1 of his
Answer, he admitted the allegations in paragraph 1 and
2 of the Complaint. He merely added "that defendant is
not now the real party in interest in this case."
It was defendant Sicam's omission to correct the
pawnshop tickets used in the subject transactions in
this case which was the cause of the instant action. He
cannot now ask for the dismissal of the complaint
against him simply on the mere allegation that his
pawnshop business is now incorporated. It is a matter
of defense, the merit of which can only be reached
after consideration of the evidence to be presented in
due course.19
Unmistakably, the alleged admission made in respondents'
Amended Complaint was taken "out of context" by petitioner
Sicam to suit his own purpose. Ineluctably, the fact that
petitioner Sicam continued to issue pawnshop receipts under
his name and not under the corporation's name militates for
the piercing of the corporate veil.
We likewise find no merit in petitioners' contention that the CA
erred in piercing the veil of corporate fiction of petitioner
corporation, as it was not an issue raised and litigated before
the RTC.
Petitioner Sicam had alleged in his Answer filed with the trial
court that he was not the real party-in-interest because since
April 20, 1987, the pawnshop business initiated by him was
incorporated and known as Agencia de R.C. Sicam. In the pre-
trial brief filed by petitioner Sicam, he submitted that as far as
he was concerned, the basic issue was whether he is the real
party in interest against whom the complaint should be
directed.20 In fact, he subsequently moved for the dismissal of
the complaint as to him but was not favorably acted upon by
the trial court. Moreover, the issue was squarely passed upon,
although erroneously, by the trial court in its Decision in this
manner:
x x x The defendant Roberto Sicam, Jr likewise denies
liability as far as he is concerned for the reason that he
cannot be made personally liable for a claim arising
from a corporate transaction.
This Court sustains the contention of the defendant
Roberto C. Sicam, Jr. The amended complaint itself
asserts that "plaintiff pawned assorted jewelries in
defendant's pawnshop." It has been held that " as a
consequence of the separate juridical personality of a
corporation, the corporate debt or credit is not the debt
or credit of the stockholder, nor is the stockholder's
debt or credit that of a corporation.21
Clearly, in view of the alleged incorporation of the pawnshop,
the issue of whether petitioner Sicam is personally liable is
inextricably connected with the determination of the question
whether the doctrine of piercing the corporate veil should or
should not apply to the case.
The next question is whether petitioners are liable for the loss
of the pawned articles in their possession.
Petitioners insist that they are not liable since robbery is a
fortuitous event and they are not negligent at all.
We are not persuaded.
Article 1174 of the Civil Code provides:
Art. 1174. Except in cases expressly specified by the
law, or when it is otherwise declared by stipulation, or
when the nature of the obligation requires the
assumption of risk, no person shall be responsible for
those events which could not be foreseen or which,
though foreseen, were inevitable.
Fortuitous events by definition are extraordinary events not
foreseeable or avoidable. It is therefore, not enough that the
event should not have been foreseen or anticipated, as is
commonly believed but it must be one impossible to foresee or
to avoid. The mere difficulty to foresee the happening is not
impossibility to foresee the same. 22
To constitute a fortuitous event, the following elements must
concur: (a) the cause of the unforeseen and unexpected
occurrence or of the failure of the debtor to comply with
obligations must be independent of human will; (b) it must be
impossible to foresee the event that constitutes
the caso fortuito or, if it can be foreseen, it must be impossible
to avoid; (c) the occurrence must be such as to render it
impossible for the debtor to fulfill obligations in a normal
manner; and, (d) the obligor must be free from any
participation in the aggravation of the injury or loss. 23
The burden of proving that the loss was due to a fortuitous
event rests on him who invokes it. 24 And, in order for a
fortuitous event to exempt one from liability, it is necessary
that one has committed no negligence or misconduct that may
have occasioned the loss. 25
It has been held that an act of God cannot be invoked to
protect a person who has failed to take steps to forestall the
possible adverse consequences of such a loss. One's
negligence may have concurred with an act of God in
producing damage and injury to another; nonetheless,
showing that the immediate or proximate cause of the damage
or injury was a fortuitous event would not exempt one from
liability. When the effect is found to be partly the result of a
person's participation -- whether by active intervention, neglect
or failure to act -- the whole occurrence is humanized and
removed from the rules applicable to acts of God. 26
Petitioner Sicam had testified that there was a security guard
in their pawnshop at the time of the robbery. He likewise
testified that when he started the pawnshop business in 1983,
he thought of opening a vault with the nearby bank for the
purpose of safekeeping the valuables but was discouraged by
the Central Bank since pawned articles should only be stored
in a vault inside the pawnshop. The very measures which
petitioners had allegedly adopted show that to them the
possibility of robbery was not only foreseeable, but actually
foreseen and anticipated. Petitioner Sicam’s testimony, in
effect, contradicts petitioners’ defense of fortuitous event.
Moreover, petitioners failed to show that they were free from
any negligence by which the loss of the pawned jewelry may
have been occasioned.
Robbery per se, just like carnapping, is not a fortuitous event.
It does not foreclose the possibility of negligence on the part of
herein petitioners. In Co v. Court of Appeals,27 the Court held:
It is not a defense for a repair shop of motor vehicles to
escape liability simply because the damage or loss of a
thing lawfully placed in its possession was due to
carnapping. Carnapping per se cannot be considered
as a fortuitous event. The fact that a thing was
unlawfully and forcefully taken from another's
rightful possession, as in cases of carnapping,
does not automatically give rise to a fortuitous
event. To be considered as such, carnapping
entails more than the mere forceful taking of
another's property. It must be proved and
established that the event was an act of God or
was done solely by third parties and that neither
the claimant nor the person alleged to be negligent
has any participation. In accordance with the Rules
of Evidence, the burden of proving that the loss
was due to a fortuitous event rests on him who
invokes it — which in this case is the private
respondent. However, other than the police report of
the alleged carnapping incident, no other evidence was
presented by private respondent to the effect that the
incident was not due to its fault. A police report of an
alleged crime, to which only private respondent is privy,
does not suffice to establish the carnapping. Neither
does it prove that there was no fault on the part of
private respondent notwithstanding the parties'
agreement at the pre-trial that the car was carnapped.
Carnapping does not foreclose the possibility of fault or
negligence on the part of private respondent.28
Just like in Co, petitioners merely presented the police report
of the Parañaque Police Station on the robbery committed
based on the report of petitioners' employees which is not
sufficient to establish robbery. Such report also does not prove
that petitioners were not at fault.
On the contrary, by the very evidence of petitioners, the CA
did not err in finding that petitioners are guilty of concurrent or
contributory negligence as provided in Article 1170 of the Civil
Code, to wit:
Art. 1170. Those who in the performance of their
obligations are guilty of fraud, negligence, or delay, and
those who in any manner contravene the tenor thereof,
are liable for damages.29
Article 2123 of the Civil Code provides that with regard to
pawnshops and other establishments which are engaged in
making loans secured by pledges, the special laws and
regulations concerning them shall be observed, and
subsidiarily, the provisions on pledge, mortgage and
antichresis.
The provision on pledge, particularly Article 2099 of the Civil
Code, provides that the creditor shall take care of the thing
pledged with the diligence of a good father of a family. This
means that petitioners must take care of the pawns the way a
prudent person would as to his own property.
In this connection, Article 1173 of the Civil Code further
provides:
Art. 1173. The fault or negligence of the obligor
consists in the omission of that diligence which is
required by the nature of the obligation and
corresponds with the circumstances of the persons, of
time and of the place. When negligence shows bad
faith, the provisions of Articles 1171 and 2201,
paragraph 2 shall apply.
If the law or contract does not state the diligence which
is to be observed in the performance, that which is
expected of a good father of a family shall be required.
We expounded in Cruz v. Gangan30 that negligence is the
omission to do something which a reasonable man, guided by
those considerations which ordinarily regulate the conduct of
human affairs, would do; or the doing of something which a
prudent and reasonable man would not do.31 It is want of care
required by the circumstances.
A review of the records clearly shows that petitioners failed to
exercise reasonable care and caution that an ordinarily
prudent person would have used in the same situation.
Petitioners were guilty of negligence in the operation of their
pawnshop business. Petitioner Sicam testified, thus:
Court:
Q. Do you have security guards in your pawnshop?
A. Yes, your honor.
Q. Then how come that the robbers were able to enter
the premises when according to you there was a
security guard?
A. Sir, if these robbers can rob a bank, how much more
a pawnshop.
Q. I am asking you how were the robbers able to enter
despite the fact that there was a security guard?
A. At the time of the incident which happened about
1:00 and 2:00 o'clock in the afternoon and it happened
on a Saturday and everything was quiet in the area BF
Homes Parañaque they pretended to pawn an article in
the pawnshop, so one of my employees allowed him to
come in and it was only when it was announced that it
was a hold up.
Q. Did you come to know how the vault was opened?
A. When the pawnshop is official (sic) open your honor
the pawnshop is partly open. The combination is off.
 Q. No one open (sic) the vault for the robbers?
A. No one your honor it was open at the time of the
robbery.
Q. It is clear now that at the time of the robbery the
vault was open the reason why the robbers were able
to get all the items pawned to you inside the vault.
A. Yes sir.32
revealing that there were no security measures adopted by
petitioners in the operation of the pawnshop. Evidently, no
sufficient precaution and vigilance were adopted by petitioners
to protect the pawnshop from unlawful intrusion. There was no
clear showing that there was any security guard at all. Or if
there was one, that he had sufficient training in securing a
pawnshop. Further, there is no showing that the alleged
security guard exercised all that was necessary to prevent any
untoward incident or to ensure that no suspicious individuals
were allowed to enter the premises. In fact, it is even doubtful
that there was a security guard, since it is quite impossible that
he would not have noticed that the robbers were armed with
caliber .45 pistols each, which were allegedly poked at the
employees.33 Significantly, the alleged security guard was not
presented at all to corroborate petitioner Sicam's claim; not
one of petitioners' employees who were present during the
robbery incident testified in court.
Furthermore, petitioner Sicam's admission that the vault was
open at the time of robbery is clearly a proof of petitioners'
failure to observe the care, precaution and vigilance that the
circumstances justly demanded. Petitioner Sicam testified that
once the pawnshop was open, the combination was already
off. Considering petitioner Sicam's testimony that the robbery
took place on a Saturday afternoon and the area in BF Homes
Parañaque at that time was quiet, there was more reason for
petitioners to have exercised reasonable foresight and
diligence in protecting the pawned jewelries. Instead of taking
the precaution to protect them, they let open the vault,
providing no difficulty for the robbers to cart away the pawned
articles.
We, however, do not agree with the CA when it found
petitioners negligent for not taking steps to insure themselves
against loss of the pawned jewelries.
Under Section 17 of Central Bank Circular No. 374, Rules and
Regulations for Pawnshops, which took effect on July 13,
1973, and which was issued pursuant to Presidential Decree
No. 114, Pawnshop Regulation Act, it is provided that pawns
pledged must be insured, to wit:
Sec. 17. Insurance of Office Building and Pawns- The
place of business of a pawnshop and the pawns
pledged to it must be insured against fire and against
burglary as well as for the latter(sic), by an insurance
company accredited by the Insurance Commissioner.
However, this Section was subsequently amended by CB
Circular No. 764 which took effect on October 1, 1980, to wit:
Sec. 17 Insurance of Office Building and Pawns – The
office building/premises and pawns of a pawnshop
must be insured against fire. (emphasis supplied).
where the requirement that insurance against burglary was
deleted. Obviously, the Central Bank considered it not feasible
to require insurance of pawned articles against burglary.
The robbery in the pawnshop happened in 1987, and
considering the above-quoted amendment, there is no
statutory duty imposed on petitioners to insure the pawned
jewelry in which case it was error for the CA to consider it as a
factor in concluding that petitioners were negligent.
Nevertheless, the preponderance of evidence shows that
petitioners failed to exercise the diligence required of them
under the Civil Code.
The diligence with which the law requires the individual at all
times to govern his conduct varies with the nature of the
situation in which he is placed and the importance of the act
which he is to perform.34 Thus, the cases of Austria v. Court of
Appeals,35 Hernandez v. Chairman, Commission on
Audit36 and Cruz v. Gangan37 cited by petitioners in their
pleadings, where the victims of robbery were exonerated from
liability, find no application to the present case.
In Austria, Maria Abad received from Guillermo Austria a
pendant with diamonds to be sold on commission basis, but
which Abad failed to subsequently return because of a robbery
committed upon her in 1961. The incident became the subject
of a criminal case filed against several persons. Austria filed
an action against Abad and her husband (Abads) for recovery
of the pendant or its value, but the Abads set up the defense
that the robbery extinguished their obligation. The RTC ruled
in favor of Austria, as the Abads failed to prove robbery; or, if
committed, that Maria Abad was guilty of negligence. The CA,
however, reversed the RTC decision holding that the fact of
robbery was duly established and declared the Abads not
responsible for the loss of the jewelry on account of a
fortuitous event. We held that for the Abads to be relieved from
the civil liability of returning the pendant under Art. 1174 of the
Civil Code, it would only be sufficient that the unforeseen
event, the robbery, took place without any concurrent fault on
the debtor’s part, and this can be done by preponderance of
evidence; that to be free from liability for reason of fortuitous
event, the debtor must, in addition to the casus itself, be free
of any concurrent or contributory fault or negligence.38
We found in Austria that under the circumstances prevailing at
the time the Decision was promulgated in 1971, the City of
Manila and its suburbs had a high incidence of crimes against
persons and property that rendered travel after nightfall a
matter to be sedulously avoided without suitable precaution
and protection; that the conduct of Maria Abad in returning
alone to her house in the evening carrying jewelry of
considerable value would have been negligence per se and
would not exempt her from responsibility in the case of
robbery. However we did not hold Abad liable for negligence
since, the robbery happened ten years previously; i.e., 1961,
when criminality had not reached the level of incidence
obtaining in 1971.
In contrast, the robbery in this case took place in 1987 when
robbery was already prevalent and petitioners in fact had
already foreseen it as they wanted to deposit the pawn with a
nearby bank for safekeeping. Moreover, unlike in Austria,
where no negligence was committed, we found petitioners
negligent in securing their pawnshop as earlier discussed.
In Hernandez, Teodoro Hernandez was the OIC and special
disbursing officer of the Ternate Beach Project of the
Philippine Tourism in Cavite. In the morning of July 1, 1983, a
Friday, he went to Manila to encash two checks covering the
wages of the employees and the operating expenses of the
project. However for some reason, the processing of the check
was delayed and was completed at about 3 p.m. Nevertheless,
he decided to encash the check because the project
employees would be waiting for their pay the following day;
otherwise, the workers would have to wait until July 5, the
earliest time, when the main office would open. At that time, he
had two choices: (1) return to Ternate, Cavite that same
afternoon and arrive early evening; or (2) take the money with
him to his house in Marilao, Bulacan, spend the night there,
and leave for Ternate the following day. He chose the second
option, thinking it was the safer one. Thus, a little past 3 p.m.,
he took a passenger jeep bound for Bulacan. While the jeep
was on Epifanio de los Santos Avenue, the jeep was held up
and the money kept by Hernandez was taken, and the robbers
jumped out of the jeep and ran. Hernandez chased the
robbers and caught up with one robber who was subsequently
charged with robbery and pleaded guilty. The other robber
who held the stolen money escaped. The Commission on
Audit found Hernandez negligent because he had not brought
the cash proceeds of the checks to his office in Ternate,
Cavite for safekeeping, which is the normal procedure in the
handling of funds. We held that Hernandez was not negligent
in deciding to encash the check and bringing it home to
Marilao, Bulacan instead of Ternate, Cavite due to the
lateness of the hour for the following reasons: (1) he was
moved by unselfish motive for his co-employees to collect their
wages and salaries the following day, a Saturday, a non-
working, because to encash the check on July 5, the next
working day after July 1, would have caused discomfort to
laborers who were dependent on their wages for sustenance;
and (2) that choosing Marilao as a safer destination, being
nearer, and in view of the comparative hazards in the trips to
the two places, said decision seemed logical at that time. We
further held that the fact that two robbers attacked him in
broad daylight in the jeep while it was on a busy highway and
in the presence of other passengers could not be said to be a
result of his imprudence and negligence.
Unlike in Hernandez where the robbery happened in a public
utility, the robbery in this case took place in the pawnshop
which is under the control of petitioners. Petitioners had the
means to screen the persons who were allowed entrance to
the premises and to protect itself from unlawful intrusion.
Petitioners had failed to exercise precautionary measures in
ensuring that the robbers were prevented from entering the
pawnshop and for keeping the vault open for the day, which
paved the way for the robbers to easily cart away the pawned
articles.
In Cruz, Dr. Filonila O. Cruz, Camanava District Director of
Technological Education and Skills Development Authority
(TESDA), boarded the Light Rail Transit (LRT) from Sen.
Puyat Avenue to Monumento when her handbag was slashed
and the contents were stolen by an unidentified person.
Among those stolen were her wallet and the government-
issued cellular phone. She then reported the incident to the
police authorities; however, the thief was not located, and the
cellphone was not recovered. She also reported the loss to the
Regional Director of TESDA, and she requested that she be
freed from accountability for the cellphone. The Resident
Auditor denied her request on the ground that she lacked the
diligence required in the custody of government property and
was ordered to pay the purchase value in the total amount
of P4,238.00. The COA found no sufficient justification to grant
the request for relief from accountability. We reversed the
ruling and found that riding the LRT cannot per se be
denounced as a negligent act more so because Cruz’s mode
of transit was influenced by time and money considerations;
that she boarded the LRT to be able to arrive in Caloocan in
time for her 3 pm meeting; that any prudent and rational
person under similar circumstance can reasonably be
expected to do the same; that possession of a cellphone
should not hinder one from boarding the LRT coach as Cruz
did considering that whether she rode a jeep or bus, the risk of
theft would have also been present; that because of her
relatively low position and pay, she was not expected to have
her own vehicle or to ride a taxicab; she did not have a
government assigned vehicle; that placing the cellphone in a
bag away from covetous eyes and holding on to that bag as
she did is ordinarily sufficient care of a cellphone while
traveling on board the LRT; that the records did not show any
specific act of negligence on her part and negligence can
never be presumed.
Unlike in the Cruz case, the robbery in this case happened in
petitioners' pawnshop and they were negligent in not
exercising the precautions justly demanded of a pawnshop.
WHEREFORE, except for the insurance aspect, the Decision
of the Court of Appeals dated March 31, 2003 and its
Resolution dated August 8, 2003, are AFFIRMED.
Costs against petitioners.
SO ORDERED
Mindanao Terminal and Brokerage Service v Phoenix Assurance
Company of New York
Before us is a petition for review on certiorari 1 under Rule 45 of
the 1997 Rules of Civil Procedure of the 29 October
20032 Decision of the Court of Appeals and the 26 February
2004 Resolution3 of the same court denying petitioner’s motion
for reconsideration.
The facts of the case are not disputed.
Del Monte Philippines, Inc. (Del Monte) contracted petitioner
Mindanao Terminal and Brokerage Service, Inc. (Mindanao
Terminal), a stevedoring company, to load and stow a
shipment of 146,288 cartons of fresh green Philippine bananas
and 15,202 cartons of fresh pineapples belonging to Del
Monte Fresh Produce International, Inc. (Del Monte Produce)
into the cargo hold of the vessel M/V Mistrau. The vessel was
docked at the port of Davao City and the goods were to be
transported by it to the port of Inchon, Korea in favor of
consignee Taegu Industries, Inc. Del Monte Produce insured
the shipment under an "open cargo policy" with private
respondent Phoenix Assurance Company of New York
(Phoenix), a non-life insurance company, and private
respondent McGee & Co. Inc. (McGee), the underwriting
manager/agent of Phoenix.4
Mindanao Terminal loaded and stowed the cargoes aboard
the M/V Mistrau. The vessel set sail from the port of Davao
City and arrived at the port of Inchon, Korea. It was then
discovered upon discharge that some of the cargo was in bad
condition. The Marine Cargo Damage Surveyor of Incok Loss
and Average Adjuster of Korea, through its representative
Byeong Yong Ahn (Byeong), surveyed the extent of the
damage of the shipment. In a survey report, it was stated that
16,069 cartons of the banana shipment and 2,185 cartons of
the pineapple shipment were so damaged that they no longer
had commercial value.5
Del Monte Produce filed a claim under the open cargo policy
for the damages to its shipment. McGee’s Marine Claims
Insurance Adjuster evaluated the claim and recommended that
payment in the amount of $210,266.43 be made. A check for
the recommended amount was sent to Del Monte Produce; the
latter then issued a subrogation receipt6 to Phoenix and
McGee.
Phoenix and McGee instituted an action for damages7 against
Mindanao Terminal in the Regional Trial Court (RTC) of Davao
City, Branch 12. After trial, the RTC,8 in a decision dated 20
October 1999, held that the only participation of Mindanao
Terminal was to load the cargoes on board the M/V
Mistrau under the direction and supervision of the ship’s
officers, who would not have accepted the cargoes on board
the vessel and signed the foreman’s report unless they were
properly arranged and tightly secured to withstand voyage
across the open seas. Accordingly, Mindanao Terminal cannot
be held liable for whatever happened to the cargoes after it
had loaded and stowed them. Moreover, citing the survey
report, it was found by the RTC that the cargoes were
damaged on account of a typhoon which M/V Mistrau had
encountered during the voyage. It was further held that
Phoenix and McGee had no cause of action against Mindanao
Terminal because the latter, whose services were contracted
by Del Monte, a distinct corporation from Del Monte Produce,
had no contract with the assured Del Monte Produce. The
RTC dismissed the complaint and awarded the counterclaim of
Mindanao Terminal in the amount of ₱83,945.80 as actual
damages and ₱100,000.00 as attorney’s fees.9 The actual
damages were awarded as reimbursement for the expenses
incurred by Mindanao Terminal’s lawyer in attending the
hearings in the case wherein he had to travel all the way from
Metro Manila to Davao City.
Phoenix and McGee appealed to the Court of Appeals. The
appellate court reversed and set aside10 the decision of the
RTC in its 29 October 2003 decision. The same court ordered
Mindanao Terminal to pay Phoenix and McGee "the total
amount of $210,265.45 plus legal interest from the filing of the
complaint until fully paid and attorney’s fees of 20% of the
claim."11 It sustained Phoenix’s and McGee’s argument that
the damage in the cargoes was the result of improper stowage
by Mindanao Terminal. It imposed on Mindanao Terminal, as
the stevedore of the cargo, the duty to exercise extraordinary
diligence in loading and stowing the cargoes. It further held
that even with the absence of a contractual relationship
between Mindanao Terminal and Del Monte Produce, the
cause of action of Phoenix and McGee could be based on
quasi-delict under Article 2176 of the Civil Code.12
Mindanao Terminal filed a motion for reconsideration, 13 which
the Court of Appeals denied in its 26 February
200414 resolution. Hence, the present petition for review.
Mindanao Terminal raises two issues in the case at bar,
namely: whether it was careless and negligent in the loading
and stowage of the cargoes onboard M/V Mistrau making it
liable for damages; and, whether Phoenix and McGee has a
cause of action against Mindanao Terminal under Article 2176
of the Civil Code on quasi-delict. To resolve the petition, three
questions have to be answered: first, whether Phoenix and
McGee have a cause of action against Mindanao Terminal;
second, whether Mindanao Terminal, as a stevedoring
company, is under obligation to observe the same
extraordinary degree of diligence in the conduct of its business
as required by law for common carriers 15 and
16
warehousemen;  and third, whether Mindanao Terminal
observed the degree of diligence required by law of a
stevedoring company.
We agree with the Court of Appeals that the complaint filed by
Phoenix and McGee against Mindanao Terminal, from which
the present case has arisen, states a cause of action. The
present action is based on quasi-delict, arising from the
negligent and careless loading and stowing of the cargoes
belonging to Del Monte Produce. Even assuming that both
Phoenix and McGee have only been subrogated in the rights
of Del Monte Produce, who is not a party to the contract of
service between Mindanao Terminal and Del Monte, still the
insurance carriers may have a cause of action in light of the
Court’s consistent ruling that the act that breaks the contract
may be also a tort.17 In fine, a liability for tort may arise even
under a contract, where tort is that which breaches the
contract18 . In the present case, Phoenix and McGee are not
suing for damages for injuries arising from the breach of the
contract of service but from the alleged negligent manner by
which Mindanao Terminal handled the cargoes belonging to
Del Monte Produce. Despite the absence of contractual
relationship between Del Monte Produce and Mindanao
Terminal, the allegation of negligence on the part of the
defendant should be sufficient to establish a cause of action
arising from quasi-delict.19
The resolution of the two remaining issues is determinative of
the ultimate result of this case.
Article 1173 of the Civil Code is very clear that if the law or
contract does not state the degree of diligence which is to be
observed in the performance of an obligation then that which is
expected of a good father of a family or ordinary diligence shall
be required. Mindanao Terminal, a stevedoring company
which was charged with the loading and stowing the cargoes
of Del Monte Produce aboard M/V Mistrau, had acted merely
as a labor provider in the case at bar. There is no specific
provision of law that imposes a higher degree of diligence than
ordinary diligence for a stevedoring company or one who is
charged only with the loading and stowing of cargoes. It was
neither alleged nor proven by Phoenix and McGee that
Mindanao Terminal was bound by contractual stipulation to
observe a higher degree of diligence than that required of a
good father of a family. We therefore conclude that following
Article 1173, Mindanao Terminal was required to observe
ordinary diligence only in loading and stowing the cargoes of
Del Monte Produce aboard M/V Mistrau.
imposing a higher degree of diligence,21 on Mindanao Terminal
in loading and stowing the cargoes. The case of Summa
Insurance Corporation v. CA, which involved the issue of
whether an arrastre operator is legally liable for the loss of a
shipment in its custody and the extent of its liability, is
inapplicable to the factual circumstances of the case at bar.
Therein, a vessel owned by the National Galleon Shipping
Corporation (NGSC) arrived at Pier 3, South Harbor, Manila,
carrying a shipment consigned to the order of Caterpillar Far
East Ltd. with Semirara Coal Corporation (Semirara) as "notify
party." The shipment, including a bundle of PC 8 U blades,
was discharged from the vessel to the custody of the private
respondent, the exclusive arrastre operator at the South
Harbor. Accordingly, three good-order cargo receipts were
issued by NGSC, duly signed by the ship's checker and a
representative of private respondent. When Semirara
inspected the shipment at house, it discovered that the bundle
of PC8U blades was missing. From those facts, the Court
observed:
x x x The relationship therefore between the consignee and
the 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 arrastre operator should observe the same
degree of diligence as that required of a common carrier
and a warehouseman as enunciated under Article 1733 of
the Civil Code and Section 3(b) of the Warehouse Receipts
Law, respectively. Being the custodian of the goods
discharged from a vessel, an arrastre operator's duty is to
take good care of the goods and to turn them over to the
party entitled to their possession. (Emphasis supplied)23
There is a distinction between an arrastre and a
stevedore.24 Arrastre, a Spanish word which refers to hauling
of cargo, comprehends the handling of cargo on the wharf or
between the establishment of the consignee or shipper and
the ship's tackle. The responsibility of the arrastre operator
lasts until the delivery of the cargo to the consignee. The
service is usually performed by longshoremen. On the other
hand, stevedoring refers to the handling of the cargo in the
holds of the vessel or between the ship's tackle and the holds
of the vessel. The responsibility of the stevedore ends upon
the loading and stowing of the cargo in the vessel.1avvphi1
It is not disputed that Mindanao Terminal was performing
purely stevedoring function while the private respondent in
the Summa case was performing arrastre function. In the
present case, Mindanao Terminal, as a stevedore, was only
charged with the loading and stowing of the cargoes from the
pier to the ship’s cargo hold; it was never the custodian of the
shipment of Del Monte Produce. A stevedore is not a common
carrier for it does not transport goods or passengers; it is not
akin to a warehouseman for it does not store goods for profit.
The loading and stowing of cargoes would not have a far
reaching public ramification as that of a common carrier and a
warehouseman; the public is adequately protected by our laws
on contract and on quasi-delict. The public policy
considerations in legally imposing upon a common carrier or a
warehouseman a higher degree of diligence is not present in a
stevedoring outfit which mainly provides labor in loading and
stowing of cargoes for its clients.
In the third issue, Phoenix and McGee failed to prove by
preponderance of evidence25 that Mindanao Terminal had
acted negligently. Where the evidence on an issue of fact is in
equipoise or there is any doubt on which side the evidence
preponderates the party having the burden of proof fails upon
that issue. That is to say, if the evidence touching a disputed
fact is equally balanced, or if it does not produce a just,
rational belief of its existence, or if it leaves the mind in a state
of perplexity, the party holding the affirmative as to such fact
must fail.261avvphi1
We adopt the findings27 of the RTC,28 which are not disputed
by Phoenix and McGee. The Court of Appeals did not make
any new findings of fact when it reversed the decision of the
trial court. The only participation of Mindanao Terminal was to
load the cargoes on board M/V Mistrau.29 It was not disputed
by Phoenix and McGee that the materials, such as ropes,
pallets, and cardboards, used in lashing and rigging the
cargoes were all provided by M/V Mistrau and these materials
meets industry standard.30
It was further established that Mindanao Terminal loaded and
stowed the cargoes of Del Monte Produce aboard the M/V
Mistrau in accordance with the stowage plan, a guide for the
area assignments of the goods in the vessel’s hold, prepared
by Del Monte Produce and the officers of M/V Mistrau.31 The
loading and 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 loading and stowing the
cargoes. As admitted by Phoenix and McGee in their
Comment38 before us, the latter is merely a stevedoring
company which was tasked by Del Monte to load and stow the
shipments of fresh banana and pineapple of Del Monte
Produce aboard the M/V Mistrau. How and where it should
load and stow a shipment in a vessel is wholly dependent on
the shipper and the officers of the vessel. In other words, the
work of the stevedore was under the supervision of the shipper
and officers of the vessel. Even the materials used for
stowage, such as ropes, pallets, and cardboards, are provided
for by the vessel. Even the survey report found that it was
because of the boisterous stormy weather due to the typhoon
Seth, as encountered by M/V Mistrau during its voyage, which
caused the shipments in the cargo hold to collapse, shift and
bruise in extensive extent.39 Even the deposition of Byeong
was not supported by the conclusion in the survey report that:
CAUSE OF DAMAGE
xxx
From the above facts and our survey results, we are of the
opinion that damage occurred aboard the carrying vessel
during sea transit, being caused by ship’s heavy rolling and
pitching under boisterous weather while proceeding from 1600
hrs on 7th October to 0700 hrs on 12th October, 1994  as
described in the sea protest.40
As it is clear that Mindanao Terminal had duly exercised the
required degree of diligence in loading and stowing the
cargoes, which is the ordinary diligence of a good father of a
family, the grant of the petition is in order.
However, the Court finds no basis for the award of attorney’s
fees in favor of petitioner.lawphil.net None of the
circumstances enumerated in Article 2208 of the Civil Code
exists. The present case is clearly not an unfounded civil
action against the plaintiff as there is no showing that it was
instituted for the mere purpose of vexation or injury. It is not
sound public policy to set a premium to the right to litigate
where such right is exercised in good faith, even if
erroneously.41 Likewise, the RTC erred in awarding
₱83,945.80 actual damages to Mindanao Terminal. Although
actual expenses were incurred by Mindanao Terminal in
relation to the trial of this case in Davao City, the lawyer of
Mindanao Terminal incurred expenses for plane fare, hotel
accommodations and food, as well as other miscellaneous
expenses, as he attended the trials coming all the way from
Manila. But there is no showing that Phoenix and McGee
made a false claim against Mindanao Terminal resulting in the
protracted trial of the case necessitating the incurrence of
expenditures.42
WHEREFORE, the petition is GRANTED. The decision of the
Court of Appeals in CA-G.R. CV No. 66121 is SET ASIDE and
the decision of the Regional Trial Court of Davao City, Branch
12 in Civil Case No. 25,311.97 is hereby REINSTATED
MINUS the awards of ₱100,000.00 as attorney’s fees and
₱83,945.80 as actual damages.
SO ORDERED.
JUAN F. NAKPIL & SONS, and JUAN F.
NAKPIL, petitioners, 
vs. THE COURT OF APPEALS, UNITED CONSTRUCTION
COMPANY, INC., JUAN J. CARLOS, and the PHILIPPINE
BAR ASSOCIATION, respondents. G.R. No. L-47863
October 3, 1986
THE UNITED CONSTRUCTION CO., INC., petitioner,  defendant Juan J. Carlos;
vs. COURT OF APPEALS, ET AL., respondents. G.R. No.
L-47896 October 3, 1986
PHILIPPINE BAR ASSOCIATION, ET AL., petitioners,  (d) Dismissing the defendant's and third-party
vs. COURT OF APPEALS, ET AL., respondents.
These are petitions for review on certiorari of the November
28, 1977 decision of the Court of Appeals in CA-G.R. No.
51771-R modifying the decision of the Court of First Instance
of Manila, Branch V, in Civil Case No. 74958 dated September
21, 1971 as modified by the Order of the lower court dated
December 8, 1971. The Court of Appeals in modifying the
decision of the lower court included an award of an additional
amount of P200,000.00 to the Philippine Bar Association to be
paid jointly and severally by the defendant United Construction
Co. and by the third-party defendants Juan F. Nakpil and Sons
and Juan F. Nakpil.
The dispositive portion of the modified decision of the lower
court reads:
WHEREFORE, judgment is hereby rendered:
(a) Ordering defendant United Construction
Co., Inc. and third-party defendants (except
Roman Ozaeta) to pay the plaintiff, jointly and
severally, the sum of P989,335.68 with interest
at the legal rate from November 29, 1968, the
date of the filing of the complaint until full
payment;
(b) Dismissing the complaint with respect to
(c) Dismissing the third-party complaint;
defendants' counterclaims for lack of merit;
(e) Ordering defendant United Construction
Co., Inc. and third-party defendants (except
Roman Ozaeta) to pay the costs in equal
shares.
SO ORDERED. (Record on Appeal p. 521;
Rollo, L- 47851, p. 169).
The dispositive portion of the decision of the Court of Appeals
reads:
WHEREFORE, the judgment appealed from is
modified to include an award of P200,000.00 in
favor of plaintiff-appellant Philippine Bar
Association, with interest at the legal rate from
November 29, 1968 until full payment to be paid
jointly and severally by defendant United
Construction Co., Inc. and third party
defendants (except Roman Ozaeta). In all other
respects, the judgment dated September 21,
1971 as modified in the December 8, 1971
Order of the lower court is hereby affirmed with
COSTS to be paid by the defendant and third
party defendant (except Roman Ozaeta) in
equal shares.
 SO ORDERED.
Petitioners Juan F. Nakpil & Sons in L-47851 and United
Construction Co., Inc. and Juan J. Carlos in L-47863 seek the
reversal of the decision of the Court of Appeals, among other
things, for exoneration from liability while petitioner Philippine
Bar Association in L-47896 seeks the modification of aforesaid
decision to obtain an award of P1,830,000.00 for the loss of
the PBA building plus four (4) times such amount as damages
resulting in increased cost of the building, P100,000.00 as
exemplary damages; and P100,000.00 as attorney's fees.
These petitions arising from the same case filed in the Court of
First Instance of Manila were consolidated by this Court in the
resolution of May 10, 1978 requiring the respective
respondents to comment. (Rollo, L-47851, p. 172).
The facts as found by the lower court (Decision, C.C. No.
74958; Record on Appeal, pp. 269-348; pp. 520-521; Rollo, L-
47851, p. 169) and affirmed by the Court of Appeals are as
follows:
The plaintiff, Philippine Bar Association, a civic-non-profit
association, incorporated under the Corporation Law, decided
to construct an office building on its 840 square meters lot
located at the comer of Aduana and Arzobispo Streets,
Intramuros, Manila. The construction was undertaken by the
United Construction, Inc. on an "administration" basis, on the
suggestion of Juan J. Carlos, the president and general
manager of said corporation. The proposal was approved by
plaintiff's board of directors and signed by its president Roman
Ozaeta, a third-party defendant in this case. The plans and
specifications for the building were prepared by the other third-
party defendants Juan F. Nakpil & Sons. The building was
completed in June, 1966.
In the early morning of August 2, 1968 an unusually strong
earthquake hit Manila and its environs and the building in
question sustained major damage. The front columns of the
building buckled, causing the building to tilt forward
dangerously. The tenants vacated the building in view of its
precarious condition. As a temporary remedial measure, the
building was shored up by United Construction, Inc. at the cost
of P13,661.28.
On November 29, 1968, the plaintiff commenced this action for
the recovery of damages arising from the partial collapse of
the building against United Construction, Inc. and its President
and General Manager Juan J. Carlos as defendants. Plaintiff
alleges that the collapse of the building was accused by
defects in the construction, the failure of the contractors to
follow plans and specifications and violations by the
defendants of the terms of the contract.
Defendants in turn filed a third-party complaint against the
architects who prepared the plans and specifications, alleging
in essence that the collapse of the building was due to the
defects in the said plans and specifications. Roman Ozaeta,
the then president of the plaintiff Bar Association was included
as a third-party defendant for damages for having included
Juan J. Carlos, President of the United Construction Co., Inc.
as party defendant.
On March 3, 1969, the plaintiff and third-party defendants Juan
F. Nakpil & Sons and Juan F. Nakpil presented a written
stipulation which reads:
1. That in relation to defendants' answer with
counterclaims and third- party complaints and
the third-party defendants Nakpil & Sons'
answer thereto, the plaintiff need not amend its
complaint by including the said Juan F. Nakpil &
 Sons and Juan F. Nakpil personally as parties
defendant.
2. That in the event (unexpected by the
undersigned) that the Court should find after the
trial that the above-named defendants Juan J.
Carlos and United Construction Co., Inc. are
free from any blame and liability for the collapse
of the PBA Building, and should further find that
the collapse of said building was due to defects
and/or inadequacy of the plans, designs, and
specifications p by the third-party defendants,
or in the event that the Court may find Juan F.
Nakpil and Sons and/or Juan F. Nakpil
contributorily negligent or in any way jointly and
solidarily liable with the defendants, judgment
may be rendered in whole or in part. as the
case may be, against Juan F. Nakpil & Sons
and/or Juan F. Nakpil in favor of the plaintiff to
all intents and purposes as if plaintiff's
complaint has been duly amended by including
the said Juan F. Nakpil & Sons and Juan F.
Nakpil as parties defendant and by alleging
causes of action against them including, among
others, the defects or inadequacy of the plans,
designs, and specifications prepared by them
and/or failure in the performance of their
contract with plaintiff.
3. Both parties hereby jointly petition this
Honorable Court to approve this stipulation.
(Record on Appeal, pp. 274-275; Rollo, L-
47851,p.169).
Upon the issues being joined, a pre-trial was conducted on
March 7, 1969, during which among others, the parties agreed
to refer the technical issues involved in the case to a
Commissioner. Mr. Andres O. Hizon, who was ultimately
appointed by the trial court, assumed his office as
Commissioner, charged with the duty to try the following
issues:
1. Whether the damage sustained by the PBA
building during the August 2, 1968 earthquake
had been caused, directly or indirectly, by:
(a) The inadequacies or defects in the plans
and specifications prepared by third-party
defendants;
(b) The deviations, if any, made by the
defendants from said plans and specifications
and how said deviations contributed to the
damage sustained;
(c) The alleged failure of defendants to observe
the requisite quality of materials and
workmanship in the construction of the building;
(d) The alleged failure to exercise the requisite
degree of supervision expected of the architect,
the contractor and/or the owner of the building;
(e) An act of God or a fortuitous event; and
(f) Any other cause not herein above specified.
2. If the cause of the damage suffered by the
building arose from a combination of the above-
enumerated factors, the degree or proportion in
which each individual factor contributed to the
damage sustained;
 3. Whether the building is now a total loss and
should be completely demolished or whether it
may still be repaired and restored to a
tenantable condition. In the latter case, the
determination of the cost of such restoration or
repair, and the value of any remaining
construction, such as the foundation, which
may still be utilized or availed of (Record on
Appeal, pp. 275-276; Rollo, L-47851, p. 169).
Thus, the issues of this case were divided into technical issues
and non-technical issues. As aforestated the technical issues
were referred to the Commissioner. The non-technical issues
were tried by the Court.
Meanwhile, plaintiff moved twice for the demolition of the
building on the ground that it may topple down in case of a
strong earthquake. The motions were opposed by the
defendants and the matter was referred to the Commissioner.
Finally, on April 30, 1979 the building was authorized to be
demolished at the expense of the plaintiff, but not another
earthquake of high intensity on April 7, 1970 followed by other
strong earthquakes on April 9, and 12, 1970, caused further
damage to the property. The actual demolition was undertaken
by the buyer of the damaged building. (Record on Appeal, pp.
278-280; Ibid.)
After the protracted hearings, the Commissioner eventually
submitted his report on September 25, 1970 with the findings
that while the damage sustained by the PBA building was
caused directly by the August 2, 1968 earthquake whose
magnitude was estimated at 7.3 they were also caused by the
defects in the plans and specifications prepared by the third-
party defendants' architects, deviations from said plans and
specifications by the defendant contractors and failure of the
latter to observe the requisite workmanship in the construction
of the building and of the contractors, architects and even the
owners to exercise the requisite degree of supervision in the
construction of subject building.
All the parties registered their objections to aforesaid findings
which in turn were answered by the Commissioner.
The trial court agreed with the findings of the Commissioner
except as to the holding that the owner is charged with full
nine supervision of the construction. The Court sees no legal
or contractual basis for such conclusion. (Record on Appeal,
pp. 309-328; Ibid).
Thus, on September 21, 1971, the lower court rendered the
assailed decision which was modified by the Intermediate
Appellate Court on November 28, 1977.
All the parties herein appealed from the decision of the
Intermediate Appellate Court. Hence, these petitions.
On May 11, 1978, the United Architects of the Philippines, the
Association of Civil Engineers, and the Philippine Institute of
Architects filed with the Court a motion to intervene as amicus
curiae. They proposed to present a position paper on the
liability of architects when a building collapses and to submit
likewise a critical analysis with computations on the divergent
views on the design and plans as submitted by the experts
procured by the parties. The motion having been granted,
the amicus curiae were granted a period of 60 days within
which to submit their position.
After the parties had all filed their comments, We gave due
course to the petitions in Our Resolution of July 21, 1978.
The position papers of the amicus curiae (submitted on
November 24, 1978) were duly noted.
The amicus curiae gave the opinion that the plans and
specifications of the Nakpils were not defective. But the
Commissioner, when asked by Us to comment, reiterated his
conclusion that the defects in the plans and specifications
indeed existed.
Using the same authorities availed of by the amicus
curiae such as the Manila Code (Ord. No. 4131) and the 1966
Asep Code, the Commissioner added that even if it can be
proved that the defects in the constructionalone (and not in the
plans and design) caused the damage to the building, still the
deficiency in the original design and jack of specific provisions
against torsion in the original plans and the overload on the
ground floor columns (found by an the experts including the
original designer) certainly contributed to the damage which
occurred. (Ibid, p. 174).
In their respective briefs petitioners, among others, raised the
following assignments of errors: Philippine Bar Association
claimed that the measure of damages should not be limited to
P1,100,000.00 as estimated cost of repairs or to the period of
six (6) months for loss of rentals while United Construction
Co., Inc. and the Nakpils claimed that it was an act of God that
caused the failure of the building which should exempt them
from responsibility and not the defective construction, poor
workmanship, deviations from plans and specifications and
other imperfections in the case of United Construction Co., Inc.
or the deficiencies in the design, plans and specifications
prepared by petitioners in the case of the Nakpils. Both UCCI
and the Nakpils object to the payment of the additional amount
of P200,000.00 imposed by the Court of Appeals. UCCI also
claimed that it should be reimbursed the expenses of shoring
the building in the amount of P13,661.28 while the Nakpils
opposed the payment of damages jointly and solidarity with
UCCI.
The pivotal issue in this case is whether or not an act of God-
an unusually strong earthquake-which caused the failure of the
building, exempts from liability, parties who are otherwise
liable because of their negligence.
The applicable law governing the rights and liabilities of the
parties herein is Article 1723 of the New Civil Code, which
provides:
Art. 1723. The engineer or architect who drew
up the plans and specifications for a building is
liable for damages if within fifteen years from
the completion of the structure the same should
collapse by reason of a defect in those plans
and specifications, or due to the defects in the
ground. The contractor is likewise responsible
for the damage if the edifice fags within the
same period on account of defects in the
construction or the use of materials of inferior
quality furnished by him, or due to any violation
of the terms of the contract. If the engineer or
architect supervises the construction, he shall
be solidarily liable with the contractor.
Acceptance of the building, after completion,
does not imply waiver of any of the causes of
action by reason of any defect mentioned in the
preceding paragraph.
The action must be brought within ten years
following the collapse of the building.
On the other hand, the general rule is that no person shall be
responsible for events which could not be foreseen or which
though foreseen, were inevitable (Article 1174, New Civil
Code).
An act of God has been defined as an accident, due directly
and exclusively to natural causes without human intervention,
which by no amount of foresight, pains or care, reasonably to
have been expected, could have been prevented. (1 Corpus
Juris 1174).
There is no dispute that the earthquake of August 2, 1968 is a
fortuitous event or an act of God.
To exempt the obligor from liability under Article 1174 of the
Civil Code, for a breach of an obligation due to an "act of
God," the following 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 unforseeable or unavoidable; (c) the
event must be such as to render it impossible for the debtor to
fulfill his obligation in a normal manner; and (d) the debtor
must be free from any participation in, or aggravation of the
injury to the creditor. (Vasquez v. Court of Appeals, 138 SCRA
553; Estrada v. Consolacion, 71 SCRA 423; Austria v. Court of
Appeals, 39 SCRA 527; Republic of the Phil. v. Luzon
Stevedoring Corp., 21 SCRA 279; Lasam v. Smith, 45 Phil.
657).
Thus, if upon the happening of a fortuitous event or an act of
God, 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.
The principle embodied in the act of God doctrine strictly
requires that the act must be one occasioned exclusively by
the violence of nature and all human agencies are to be
excluded from creating or entering into the cause of the
mischief. When the effect, the cause of which is to be
considered, is found to be in part the result of the participation
of man, whether it be from active intervention or neglect, or
failure to act, the whole occurrence is thereby humanized, as it
were, and removed from the rules applicable to the acts of
God. (1 Corpus Juris, pp. 1174-1175).
Thus it has been held that when the negligence of a person
concurs with an act of God in producing a loss, such person is
not exempt from liability by showing that the immediate cause
of the damage was the act of God. To be exempt from liability
for loss because of an act of God, he must be free from any
previous negligence or misconduct by which that loss or
damage may have been occasioned. (Fish & Elective Co. v.
Phil. Motors, 55 Phil. 129; Tucker v. Milan, 49 O.G. 4379;
Limpangco & Sons v. Yangco Steamship Co., 34 Phil. 594,
604; Lasam v. Smith, 45 Phil. 657).
The negligence of the defendant and the third-party
defendants petitioners was established beyond dispute both in
the lower court and in the Intermediate Appellate Court.
Defendant United Construction Co., Inc. was found to have
made substantial deviations from the plans and specifications.
and to have failed to observe the requisite workmanship in the
construction as well as to exercise the requisite degree of
supervision; while the third-party defendants were found to
have inadequacies or defects in the plans and specifications
prepared by them. As correctly assessed by both courts, the
defects in the construction and in the plans and specifications
were the proximate causes that rendered the PBA building
unable to withstand the earthquake of August 2, 1968. For this
reason the defendant and third-party defendants cannot claim
exemption from liability. (Decision, Court of Appeals, pp. 30-
31).
It is well settled that the findings of facts of the Court of
Appeals are conclusive on the parties and on this court (cases
cited in Tolentino vs. de Jesus, 56 SCRA 67; Cesar vs.
Sandiganbayan, January 17, 1985, 134 SCRA 105, 121),
unless (1) the conclusion is a finding grounded entirely on
speculation, surmise and conjectures; (2) the inference made
is manifestly mistaken; (3) there is grave abuse of discretion;
(4) the judgment is based on misapprehension of facts; (5) the
findings of fact are conflicting , (6) the Court of Appeals went
beyond the issues of the case and its findings are contrary to
the admissions of both appellant and appellees (Ramos vs.
Pepsi-Cola Bottling Co., February 8, 1967, 19 SCRA 289, 291-
292; Roque vs. Buan, Oct. 31, 1967, 21 SCRA 648, 651); (7)
the findings of facts of the Court of Appeals are contrary to
those of the trial court; (8) said findings of facts are
conclusions without citation of specific evidence on which they
are based; (9) the facts set forth in the petition as well as in the
petitioner's main and reply briefs are not disputed by the
respondents (Garcia vs. CA, June 30, 1970, 33 SCRA 622;
Alsua-Bett vs. Court of Appeals, July 30, 1979, 92 SCRA 322,
366); (10) the finding of fact of the Court of Appeals is
premised on the supposed absence of evidence and is
contradicted by evidence on record (Salazar vs. Gutierrez,
May 29, 1970, 33 SCRA 243, 247; Cited in G.R. No. 66497-
98, Sacay v. Sandiganbayan, July 10, 1986).
It is evident that the case at bar does not fall under any of the
exceptions above-mentioned. On the contrary, the records
show that the lower court spared no effort in arriving at the
correct appreciation of facts by the referral of technical issues
to a Commissioner chosen by the parties whose findings and
conclusions remained convincingly unrebutted by the
intervenors/amicus curiae who were allowed to intervene in
the Supreme Court.
In any event, the relevant and logical observations of the trial
court as affirmed by the Court of Appeals that "while it is not
possible to state with certainty that the building would not have
collapsed were those defects not present, the fact remains that
several buildings in the same area withstood the earthquake to
which the building of the plaintiff was similarly subjected,"
cannot be ignored.
The next issue to be resolved is the amount of damages to be
awarded to the PBA for the partial collapse (and eventual
complete collapse) of its building.
The Court of Appeals affirmed the finding of the trial court
based on the report of the Commissioner that the total amount
required to repair the PBA building and to restore it to
tenantable condition was P900,000.00 inasmuch as it was not
initially a total loss. However, while the trial court awarded the
PBA said amount as damages, plus unrealized rental income
for one-half year, the Court of Appeals modified the amount by
awarding in favor of PBA an additional sum of P200,000.00
representing the damage suffered by the PBA building as a
result of another earthquake that occurred on April 7, 1970 (L-
47896, Vol. I, p. 92).
The PBA in its brief insists that the proper award should be
P1,830,000.00 representing the total value of the building (L-
47896, PBA's No. 1 Assignment of Error, p. 19), while both the
NAKPILS and UNITED question the additional award of
P200,000.00 in favor of the PBA (L- 47851, NAKPIL's Brief as
Petitioner, p. 6, UNITED's Brief as Petitioner, p. 25). The PBA
further urges that the unrealized rental income awarded to it
should not be limited to a period of one-half year but should be
computed on a continuing basis at the rate of P178,671.76 a
year until the judgment for the principal amount shall have
been satisfied L- 47896, PBA's No. 11 Assignment of Errors,
p. 19).
The collapse of the PBA building as a result of the August 2,
1968 earthquake was only partial and it is undisputed that the
building could then still be repaired and restored to its
tenantable condition. The PBA, however, in view of its lack of
needed funding, was unable, thru no fault of its own, to have
the building repaired. UNITED, on the other hand, spent
P13,661.28 to shore up the building after the August 2, 1968
earthquake (L-47896, CA Decision, p. 46). Because of the
earthquake on April 7, 1970, the trial court after the needed
consultations, authorized the total demolition of the building (L-
47896, Vol. 1, pp. 53-54).
There should be no question that the NAKPILS and UNITED
are liable for the damage resulting from the partial and
eventual collapse of the PBA building as a result of the
earthquakes.
We quote with approval the following from the erudite decision
penned by Justice Hugo E. Gutierrez (now an Associate
Justice of the Supreme Court) while still an Associate Justice
of the Court of Appeals:
There is no question that an earthquake and
other forces of nature such as cyclones,
drought, floods, lightning, and perils of the sea
are acts of God. It does not necessarily follow,
however, that specific losses and suffering
resulting from the occurrence of these natural
force are also acts of God. We are not
convinced on the basis of the evidence on
record that from the thousands of structures in
Manila, God singled out the blameless PBA
building in Intramuros and around six or seven
other buildings in various parts of the city for
collapse or severe damage and that God alone
was responsible for the damages and losses
thus suffered.
The record is replete with evidence of defects
and deficiencies in the designs and plans,
defective construction, poor workmanship,
deviation from plans and specifications and
other imperfections. These deficiencies are
attributable to negligent men and not to a
perfect God.
The act-of-God arguments of the defendants-
appellants and third party defendants-
appellants presented in their briefs are
premised on legal generalizations or
speculations and on theological fatalism both of
which ignore the plain facts. The lengthy
discussion of United on ordinary earthquakes
and unusually strong earthquakes and on
ordinary fortuitous events and extraordinary
fortuitous events leads to its argument that the
August 2, 1968 earthquake was of such an
overwhelming and destructive character that by
its own force and independent of the particular
negligence alleged, the injury would have been
produced. If we follow this line of speculative
reasoning, we will be forced to conclude that
under such a situation scores of buildings in the
vicinity and in other parts of Manila would have
toppled down. Following the same line of
reasoning, Nakpil and Sons alleges that the
designs were adequate in accordance with pre-
August 2, 1968 knowledge and appear
inadequate only in the light of engineering
information acquired after the earthquake. If this
were so, hundreds of ancient buildings which
survived the earthquake better than the two-
year old PBA building must have been
designed and constructed by architects and
contractors whose knowledge and foresight
were unexplainably auspicious and prophetic.
Fortunately, the facts on record allow a more
down to earth explanation of the collapse. The
failure of the PBA building, as a unique and
distinct construction with no reference or
comparison to other buildings, to weather the
severe earthquake forces was traced to design
deficiencies and defective construction, factors
which are neither mysterious nor esoteric. The
theological allusion of appellant United that God
acts in mysterious ways His wonders to perform
impresses us to be inappropriate. The evidence
reveals defects and deficiencies in design and
construction. There is no mystery about these
acts of negligence. The collapse of the PBA
building was no wonder performed by God. It
was a result of the imperfections in the work of
the architects and the people in the construction
company. More relevant to our mind is the
lesson from the parable of the wise man in the
Sermon on the Mount "which built his house
upon a rock; and the rain descended and the
floods came and the winds blew and beat upon
that house; and it fen not; for it was founded
upon a rock" and of the "foolish upon the sand.
And the rain descended and man which built his
house the floods came, and the winds blew,
and beat upon that house; and it fell and great
was the fall of it. (St. Matthew 7: 24-27)." The
requirement that a building should withstand
rains, floods, winds, earthquakes, and natural
forces is precisely the reason why we have
professional experts like architects, and
engineers. Designs and constructions vary
under varying circumstances and conditions but
the requirement to design and build well does
not change.
The findings of the lower Court on the cause of
the collapse are more rational and accurate.
Instead of laying the blame solely on the
motions and forces generated by the
earthquake, it also examined the ability of the
PBA building, as designed and constructed, to
withstand and successfully weather those
forces.
The evidence sufficiently supports a conclusion
that the negligence and fault of both United and
Nakpil and Sons, not a mysterious act of an
inscrutable God, were responsible for the
damages. The Report of the Commissioner,
Plaintiff's Objections to the Report, Third Party
Defendants' Objections to the Report,
Defendants' Objections to the Report,
Commissioner's Answer to the various
Objections, Plaintiffs' Reply to the
Commissioner's Answer, Defendants' Reply to
the Commissioner's Answer, Counter-Reply to
Defendants' Reply, and Third-Party Defendants'
Reply to the Commissioner's Report not to
mention the exhibits and the testimonies show
that the main arguments raised on appeal were
already raised during the trial and fully
considered by the lower Court. A reiteration of
these same arguments on appeal fails to
convince us that we should reverse or disturb
the lower Court's factual findings and its
conclusions drawn from the facts, among them:
The Commissioner also found merit in the
allegations of the defendants as to the physical
evidence before and after the earthquake
showing the inadequacy of design, to wit:
Physical evidence before the earthquake
providing (sic) inadequacy of design;
1. inadequate design was the cause of the
failure of the building.
2. Sun-baffles on the two sides and in front of
the building;
a. Increase the inertia forces that move the
building laterally toward the Manila Fire
Department.
b. Create another stiffness imbalance.
3. The embedded 4" diameter cast iron down
spout on all exterior columns reduces the cross-
sectional area of each of the columns and the
strength thereof.
4. Two front corners, A7 and D7 columns were
very much less reinforced.
Physical Evidence After the Earthquake,
Proving Inadequacy of design;
1. Column A7 suffered the severest fracture
and maximum sagging. Also D7.
2. There are more damages in the front part of
the building than towards the rear, not only in
columns but also in slabs.
3. Building leaned and sagged more on the
front part of the building.
4. Floors showed maximum sagging on the
sides and toward the front corner parts of the
building.
5. There was a lateral displacement of the
building of about 8", Maximum sagging occurs
at the column A7 where the floor is lower by 80
cm. than the highest slab level.
6. Slab at the corner column D7 sagged by 38
cm.
The Commissioner concluded that there were
deficiencies or defects in the design, plans and
specifications of the PBA building which
involved appreciable risks with respect to the
accidental forces which may result from
earthquake shocks. He conceded, however,
that the fact that those deficiencies or defects
may have arisen from an obsolete or not too
conservative code or even a code that does not
require a design for earthquake forces mitigates
in a large measure the responsibility or liability
of the architect and engineer designer.
The Third-party defendants, who are the most
concerned with this portion of the
Commissioner's report, voiced opposition to the
same on the grounds that (a) the finding is
based on a basic erroneous conception as to
the design concept of the building, to wit, that
the design is essentially that of a heavy
rectangular box on stilts with shear wan at one
end; (b) the finding that there were defects and
a deficiency in the design of the building would
at best be based on an approximation and,
therefore, rightly belonged to the realm of
speculation, rather than of certainty and could
very possibly be outright error; (c) the
Commissioner has failed to back up or support
his finding with extensive, complex and highly
specialized computations and analyzes which
he himself emphasizes are necessary in the
determination of such a highly technical
question; and (d) the Commissioner has
analyzed the design of the PBA building not in
the light of existing and available earthquake
engineering knowledge at the time of the
preparation of the design, but in the light of
recent and current standards.
The Commissioner answered the said
objections alleging that third-party defendants'
objections were based on estimates or exhibits
not presented during the hearing that the resort
to engineering references posterior to the date
of the preparation of the plans was induced by
the third-party defendants themselves who
submitted computations of the third-party
defendants are erroneous.
The issue presently considered is admittedly a
technical one of the highest degree. It involves
questions not within the ordinary competence of
the bench and the bar to resolve by
themselves. Counsel for the third-party
defendants has aptly remarked that
"engineering, although dealing in mathematics,
is not an exact science and that the present
knowledge as to the nature of earthquakes and
the behaviour of forces generated by them still
leaves much to be desired; so much so "that
the experts of the different parties, who are all
engineers, cannot agree on what equation to
use, as to what earthquake co-efficients are, on
the codes to be used and even as to the type of
structure that the PBA building (is) was (p. 29,
Memo, of third- party defendants before the
Commissioner).
The difficulty expected by the Court if tills
technical matter were to be tried and inquired
into by the Court itself, coupled with the intrinsic
nature of the questions involved therein,
constituted the reason for the reference of the
said issues to a Commissioner whose
qualifications and experience have eminently
qualified him for the task, and whose
competence had not been questioned by the
parties until he submitted his report. Within the
pardonable limit of the Court's ability to
comprehend the meaning of the
Commissioner's report on this issue, and the
objections voiced to the same, the Court sees
no compelling reasons to disturb the findings of
the Commissioner that there were defects and
deficiencies in the design, plans and
specifications prepared by third-party
defendants, and that said defects and
deficiencies involved appreciable risks with
respect to the accidental forces which may
result from earthquake shocks.
(2) (a) The deviations, if any, made by the
defendants from the plans and specifications,
and how said deviations contributed to the
damage sustained by the building.
(b) The alleged failure of defendants to observe
the requisite quality of materials and
workmanship in the construction of the building.
These two issues, being interrelated with each
other, will be discussed together.
The findings of the Commissioner on these
issues were as follows:
We now turn to the construction of the PBA
Building and the alleged deficiencies or defects
in the construction and violations or deviations
from the plans and specifications. All these may
be summarized as follows:
a. Summary of alleged defects as reported by
Engineer Mario M. Bundalian.
(1) Wrongful and defective placing of reinforcing
bars.
(2) Absence of effective and desirable
integration of the 3 bars in the cluster.
(3) Oversize coarse aggregates: 1-1/4 to 2"
were used. Specification requires no larger than
1 inch.
(4) Reinforcement assembly is not concentric
with the column, eccentricity being 3" off when
on one face the main bars are only 1 1/2' from
the surface.
(5) Prevalence of honeycombs,
(6) Contraband construction joints,
(7) Absence, or omission, or over spacing of
spiral hoops,
(8) Deliberate severance of spirals into semi-
circles in noted on Col. A-5, ground floor,
(9) Defective construction joints in Columns A-
3, C-7, D-7 and D-4, ground floor,
(10) Undergraduate concrete is evident,
(11) Big cavity in core of Column 2A-4, second
floor,
(12) Columns buckled at different planes.
Columns buckled worst where there are no
spirals or where spirals are cut. Columns
suffered worst displacement where the
eccentricity of the columnar reinforcement
assembly is more acute.
b. Summary of alleged defects as reported by
Engr. Antonio Avecilla.
Columns are first (or ground) floor, unless
otherwise stated.
(1) Column D4 — Spacing of spiral is changed
from 2" to 5" on centers,
(2) Column D5 — No spiral up to a height of 22"
from the ground floor,
(3) Column D6 — Spacing of spiral over 4 l/2,
(4) Column D7 — Lack of lateral ties,
(5) Column C7 — Absence of spiral to a height
of 20" from the ground level, Spirals are at 2"
from the exterior column face and 6" from the
inner column face,
(6) Column B6 — Lack of spiral on 2 feet below
the floor beams,
(7) Column B5 — Lack of spirals at a distance
of 26' below the beam,
(8) Column B7 — Spirals not tied to vertical
reinforcing bars, Spirals are uneven 2" to 4",
(9) Column A3 — Lack of lateral ties,
(10) Column A4 — Spirals cut off and welded to
two separate clustered vertical bars,
(11) Column A4 — (second floor Column is
completely hollow to a height of 30"
(12) Column A5 — Spirals were cut from the
floor level to the bottom of the spandrel beam to
a height of 6 feet,
(13) Column A6 — No spirals up to a height of
30' above the ground floor level,
(14) Column A7— Lack of lateralties or spirals,
c. Summary of alleged defects as reported by
the experts of the Third-Party defendants.
Ground floor columns.
(1) Column A4 — Spirals are cut,
(2) Column A5 — Spirals are cut,
(3) Column A6 — At lower 18" spirals are
absent,
(4) Column A7 — Ties are too far apart,
(5) Column B5 — At upper fourth of column
spirals are either absent or improperly spliced,
(6) Column B6 — At upper 2 feet spirals are
absent,
(7) Column B7 — At upper fourth of column
spirals missing or improperly spliced.
(8) Column C7— Spirals are absent at lowest
18"
(9) Column D5 — At lowest 2 feet spirals are
absent,
(10) Column D6 — Spirals are too far apart and
apparently improperly spliced,
(11) Column D7 — Lateral ties are too far apart,
spaced 16" on centers.
There is merit in many of these allegations. The
explanations given by the engineering experts
for the defendants are either contrary to general
principles of engineering design for reinforced
concrete or not applicable to the requirements
for ductility and strength of reinforced concrete
in earthquake-resistant design and
construction.
We shall first classify and consider defects
which may have appreciable bearing or relation
to' the earthquake-resistant property of the
building.
As heretofore mentioned, details which insure
ductility at or near the connections between
columns and girders are desirable in
earthquake resistant design and construction.
The omission of spirals and ties or hoops at the
bottom and/or tops of columns contributed
greatly to the loss of earthquake-resistant
strength. The plans and specifications required
that these spirals and ties be carried from the
floor level to the bottom reinforcement of the
deeper beam (p. 1, Specifications, p. 970,
Reference 11). There were several clear
evidences where this was not done especially
in some of the ground floor columns which
failed.
There were also unmistakable evidences that
the spacings of the spirals and ties in the
columns were in many cases greater than those
called for in the plans and specifications
resulting again in loss of earthquake-resistant
strength. The assertion of the engineering
experts for the defendants that the improper
spacings and the cutting of the spirals did not
result in loss of strength in the column cannot
be maintained and is certainly contrary to the
general principles of column design and
construction. And even granting that there be
no loss in strength at the yield point (an
assumption which is very doubtful) the cutting
or improper spacings of spirals will certainly
result in the loss of the plastic range or ductility
in the column and it is precisely this plastic
range or ductility which is desirable and needed
for earthquake-resistant strength.
There is no excuse for the cavity or hollow
portion in the column A4, second floor, and
although this column did not fail, this is certainly
an evidence on the part of the contractor of
poor construction.
The effect of eccentricities in the columns which
were measured at about 2 1/2 inches maximum
may be approximated in relation to column
loads and column and beam moments. The
main effect of eccentricity is to change the
beam or girder span. The effect on the
measured eccentricity of 2 inches, therefore, is
to increase or diminish the column load by a
maximum of about 1% and to increase or
diminish the column or beam movements by
about a maximum of 2%. While these can
certainly be absorbed within the factor of safety,
they nevertheless diminish said factor of safety.
The cutting of the spirals in column A5, ground
floor is the subject of great contention between
the parties and deserves special consideration.
The proper placing of the main reinforcements
and spirals in column A5, ground floor, is the
responsibility of the general contractor which is
the UCCI. The burden of proof, therefore, that
this cutting was done by others is upon the
defendants. Other than a strong allegation and
assertion that it is the plumber or his men who
may have done the cutting (and this was flatly
denied by the plumber) no conclusive proof was
presented. The engineering experts for the
defendants asserted that they could have no
motivation for cutting the bar because they can
simply replace the spirals by wrapping around a
new set of spirals. This is not quite correct.
There is evidence to show that the pouring of
concrete for columns was sometimes done
through the beam and girder reinforcements
which were already in place as in the case of
column A4 second floor. If the reinforcement for
the girder and column is to subsequently wrap
around the spirals, this would not do for the
elasticity of steel would prevent the making of
tight column spirals and loose or improper
spirals would result. The proper way is to
produce correct spirals down from the top of the
main column bars, a procedure which can not
be done if either the beam or girder
reinforcement is already in place. The
engineering experts for the defendants strongly
assert and apparently believe that the cutting of
the spirals did not materially diminish the
strength of the column. This belief together with
the difficulty of slipping the spirals on the top of
the column once the beam reinforcement is in
place may be a sufficient motivation for the
cutting of the spirals themselves. The
defendants, therefore, should be held
responsible for the consequences arising from
the loss of strength or ductility in column A5
which may have contributed to the damages
sustained by the building.
The lack of proper length of splicing of spirals
was also proven in the visible spirals of the
columns where spalling of the concrete cover
had taken place. This lack of proper splicing
contributed in a small measure to the loss of
strength.
The effects of all the other proven and visible
defects although nor can certainly be
accumulated so that they can contribute to an
appreciable loss in earthquake-resistant
strength. The engineering experts for the
defendants submitted an estimate on some of
these defects in the amount of a few percent. If
accumulated, therefore, including the effect of
eccentricity in the column the loss in strength
due to these minor defects may run to as much
as ten percent.
To recapitulate: the omission or lack of spirals
and ties at the bottom and/or at the top of some
of the ground floor columns contributed greatly
 to the collapse of the PBA building since it is at
these points where the greater part of the
failure occurred. The liability for the cutting of
the spirals in column A5, ground floor, in the
considered opinion of the Commissioner rests
on the shoulders of the defendants and the loss
of strength in this column contributed to the
damage which occurred.
It is reasonable to conclude, therefore, that the
proven defects, deficiencies and violations of
the plans and specifications of the PBA building
contributed to the damages which resulted
during the earthquake of August 2, 1968 and
the vice of these defects and deficiencies is that
they not only increase but also aggravate the
weakness mentioned in the design of the
structure. In other words, these defects and
deficiencies not only tend to add but also to
multiply the effects of the shortcomings in the
design of the building. We may say, therefore,
that the defects and deficiencies in the
construction contributed greatly to the damage
which occurred.
Since the execution and supervision of the
construction work in the hands of the contractor
is direct and positive, the presence of existence
of all the major defects and deficiencies noted
and proven manifests an element of negligence
which may amount to imprudence in the
construction work. (pp. 42-49, Commissioners
Report).
As the parties most directly concerned with this portion of the
Commissioner's report, the defendants voiced their objections
to the same on the grounds that the Commissioner should
have specified the defects found by him to be "meritorious";
that the Commissioner failed to indicate the number of cases
where the spirals and ties were not carried from the floor level
to the bottom reinforcement of the deeper beam, or where the
spacing of the spirals and ties in the columns were greater
than that called for in the specifications; that the hollow in
column A4, second floor, the eccentricities in the columns, the
lack of proper length of splicing of spirals, and the cut in the
spirals in column A5, ground floor, did not aggravate or
contribute to the damage suffered by the building; that the
defects in the construction were within the tolerable margin of
safety; and that the cutting of the spirals in column A5, ground
floor, was done by the plumber or his men, and not by the
defendants.
Answering the said objections, the Commissioner stated that,
since many of the defects were minor only the totality of the
defects was considered. As regards the objection as to failure
to state the number of cases where the spirals and ties were
not carried from the floor level to the bottom reinforcement, the
Commissioner specified groundfloor columns B-6 and C-5 the
first one without spirals for 03 inches at the top, and in the
latter, there were no spirals for 10 inches at the bottom. The
Commissioner likewise specified the first storey columns
where the spacings were greater than that called for in the
specifications to be columns B-5, B-6, C-7, C-6, C-5, D-5 and
B-7. The objection to the failure of the Commissioner to
specify the number of columns where there was lack of proper
length of splicing of spirals, the Commissioner mentioned
groundfloor columns B-6 and B-5 where all the splices were
less than 1-1/2 turns and were not welded, resulting in some
loss of strength which could be critical near the ends of the
columns. He answered the supposition of the defendants that
the spirals and the ties must have been looted, by calling
attention to the fact that the missing spirals and ties were only
in two out of the 25 columns, which rendered said supposition
to be improbable.
The Commissioner conceded that the hollow in column A-4,
second floor, did not aggravate or contribute to the damage,
but averred that it is "evidence of poor construction." On the
claim that the eccentricity could be absorbed within the factor
of safety, the Commissioner answered that, while the same
may be true, it also contributed to or aggravated the damage
suffered by the building.
The objection regarding the cutting of the spirals in Column A-
5, groundfloor, was answered by the Commissioner by
reiterating the observation in his report that irrespective of who
did the cutting of the spirals, the defendants should be held
liable for the same as the general contractor of the building.
The Commissioner further stated that the loss of strength of
the cut spirals and inelastic deflections of the supposed lattice
work defeated the purpose of the spiral containment in the
column and resulted in the loss of strength, as evidenced by
the actual failure of this column.
Again, the Court concurs in the findings of the Commissioner
on these issues and fails to find any sufficient cause to
disregard or modify the same. As found by the Commissioner,
the "deviations made by the defendants from the plans and
specifications caused indirectly the damage sustained and that
those deviations not only added but also aggravated the
damage caused by the defects in the plans and specifications
prepared by third-party defendants. (Rollo, Vol. I, pp. 128-142)
The afore-mentioned facts clearly indicate the wanton
negligence of both the defendant and the third-party
defendants in effecting the plans, designs, specifications, and
construction of the PBA building and We hold such negligence
as equivalent to bad faith in the performance of their
respective tasks.
Relative thereto, the ruling of the Supreme Court in Tucker v.
Milan (49 O.G. 4379, 4380) which may be in point in this case
reads:
One who negligently creates a dangerous condition cannot
escape liability for the natural and probable consequences
thereof, although the act of a third person, or an act of God for
which he is not responsible, intervenes to precipitate the loss.
As already discussed, the destruction was not purely an act of
God. Truth to tell hundreds of ancient buildings in the vicinity
were hardly affected by the earthquake. Only one thing spells
out the fatal difference; gross negligence and evident bad
faith, without which the damage would not have occurred.
WHEREFORE, the decision appealed from is hereby
MODIFIED and considering the special and environmental
circumstances of this case, We deem it reasonable to render a
decision imposing, as We do hereby impose, upon the
defendant and the third-party defendants (with the exception of
Roman Ozaeta) a solidary (Art. 1723, Civil Code, Supra, p.
10) indemnity in favor of the Philippine Bar Association of FIVE
MILLION (P5,000,000.00) Pesos to cover all damages (with
the exception of attorney's fees) occasioned by the loss of the
building (including interest charges and lost rentals) and an
additional ONE HUNDRED THOUSAND (P100,000.00) Pesos
as and for attorney's fees, the total sum being payable upon
the finality of this decision. Upon failure to pay on such finality,
twelve (12%) per cent interest per annum shall be imposed
upon afore-mentioned amounts from finality until paid. Solidary
costs against the defendant and third-party defendants (except
Roman Ozaeta).
SO ORDERED.