Case N0.
53
Yu Biao Sontua vs. Ossorio
G.R. No. L-17690 June 14, 1922
Doctrine:
The general liability of a vessel owner extends to losses by fire arising from other
than a natural or other excepted cause, whether occurring on the ship accidentally, or
communicated from another vessel, or from the shore; and the fact that fire produces
the motive power of a boat does not affect the case. Such losses are not within the
exceptions either of act of God, or peril of the sea, except by local custom, unless
proximately caused by one of these events. In jurisdictions where the civil law obtains,
however, it has been held that if property on a steamboat is destroyed by fire, the
owners of the boat are not responsible, if it was being navigated with proper diligence,
although the accident occurred at night. The common law liability extends even to loss
by fires caused entirely by spontaneous combustion of the cargo, without any
negligence on the part of master or crew.
FACTS:
On March 12, 1920, 2,000 cases of petroleum and 8,473 cases of gasoline were
loaded in the motor boat Alfonso. The loading was done without the permission from
the customs authorities. The cases were loaded by means of straps supporting 10-12
cases at a time. The cases were placed in the hold of the ship, which is 14ft from the
boiler of the main engine and 4ft from the boiler of the smaller engine on March 13, the
smaller engine was in operation preparatory to the departure Subsequently, a fire
broke out with an explosion on board Alfonso followed by a violent expulsion of
gasoline and petroleum due to the magnitude of the fire and the inflammability of the
materials and the proximity of the steamer Y. Sontua, the fire spread to the said steamer
Sontua brought this action to recover from Ossorio, the owner of Alfonso, alleging that
the damages were due to the negligence of the agents and employees of Ossorio.
Ossorio contended that the damages were caused by a fortuitous event and are not
imputable to his or any of his agents’/ employees’/ mandataries’ negligence. CFI ruled
in favor of Sontua and held that the explosion was due to the negligence of the
persons in charge of Alfonso. Ossorio is liable for the negligence of his agents and
employees.
ISSUES:
Whether the owner of the motorboat, was liable for the negligence of his agents
and employees?
HELD:
YES. Expert testimony introduced by Sontua shows the explosion and fire, which
caused the damages are imputable to the negligence of the persons having charge of
Alfonso at that time. It was shown that due to the manner by which the cases were
loaded, the cases would receive bumps resulting in damage to the cans and
conse5uent lea6age (use of straps). The gases formed by the volatilization are apt to
accumulate in a compartment without sufficient ventilation (hold of a ship). This
accumulation will cause the gases to ignite upon coming in contact with a spark or
upon temperature being sufficiently raised (smaller engine was in operation). The rule is
that where the vessel is one of freight, a public concern or public utility, it owner or
agent is liable for the tortuous acts of his agents. The Code of Commerce further
provides that the general liability of a vessel owner extends to losses by fire arising from
other than a natural or other excepted cause, whether occurring on the ship, or
communicated from other vessel, or from the shore. This means that losses by fire are
not within the exceptions (act of God or peril of the sea except by local custom) unless
approximately caused by one of the exceptions. Re: allegation that obligations under
Art. 612 of the Code of Commerce are inherent duties do not limit to the latter the civil
liability arising from their nonfulfillment, but while the master irresponsible to the ship
agent, the ship agent, in turn, is responsible to third persons, as is clearly provided in
article 618 of said Code, in which express mention is made, is subsections 5 and 7, of the
duties enumerated in the said article 612.
Case No. 54
SERVANDO v PHIL STEAM [G.R. Nos. L-36481-2. October 23, 1982.] AMPARO C.
SERVANDO, CLARA UY BICO, plaintiffs- appellees, vs. PHILIPPINE STEAM NAVIGATION
CO., defendant-appellant.
FACTS:
Appellees Clara Uy Bico and Amparo Servando loaded their respective cargoes
on board appellant's vessel for carriage from Manila to Negros Occidental. Upon arrival
of the vessel at the place of destination, the cargoes were discharged, complete and
in good order, into the warehouse of the Bureau of Customs. After appellee Uy Bico
had taken delivery of apportion of her cargoes, the warehouse was rated by fire of
unknown origin, destroying the rest of the two appellees' cargoes. Appellees filed their
claims from appellant for the recovery of the value of the goods destroyed by fire.
DECISION OF LOWER COURTS:
(1) Trial Court: ruled in favor of appellees and ordered payment of their claims,
stating that since the burning of the warehouse occurred before actual or constructive
delivery of the goods to the appellees, the loss is chargeable against the appellant.
ISSUE:
Whether Philippine Steam Navigation Co. is liable?
RULING:
No. Appellant, as obligor, is exempt from liability for non- performance because
the burning of the warehouse containing appellees' goods, which is the immediate and
proximate cause of the loss, is a fortuitous event or force majeure which could not have
been foreseen by appellant.
Where fortuitous event or force majeure is the immediate and proximate cause
of the loss, the obligor is exempt from liability for non- performance. (See Art. 1174 of the
New Civil Code.)
The Partidas(Law II, Title 33, Partida 7), the antecedent of Article 1174 of the Civil
Code, defines "caso fortuito" as "an event that takes place by accident and could not
been have foreseen. Examples of this are destruction of houses, unexpected fire,
shipwreck, violence of robbers."
In the dissertation of the phrase "caso fortuito" the Encyclopedia Juridicada
Española says: "In a legal sense and consequently, also in relation to contracts, caso
fortuito presents the following essential characteristics:
(1) the cause of the unforseen and unexpected occurrence, or of the failure of the
debtor to comply with his obligation, must be independent of the human will;
(2) it must be impossible to foresee the event which constitutes the caso fortuito, or if it
can be foreseen, it must be impossible to avoid;
(3) the occurrence must be such as to render it imposible for the debtor to fulfill his
obligation in a normal manner; and
(4) the obligor must be free from any participation in the aggravation of the injury
resulting to creditor."
There is nothing in the record to show that appellant carrier incurred in delay in
the performance of its obligation. It appears that appellant had not only notified
appellees of the arrival of their shipment, out had demanded that the same be
withdrawn. In fact, pursuant to such demand, appellee Uy Bico had taken delivery of
907 cavans of rice before the burning of the warehouse.
Nor can the appellant or its employees be charged with negligence. The
storage of the goods in the Customs warehouse pending withdrawal thereof by the
appellees was undoubtedly made with their knowledge and consent. Since the
warehouse belonged to and was maintained by the government, it would be unfair to
impute negligence to the appellant, the latter having no control whatsoever over the
same.
The lower court in its decision relied on the ruling laid down in Yu Biao Sontua vs.
Ossorio, 43 Phil. 511, where this Court held the defendant liable for damages arising
from a fire caused by the negligence of the defendant's employees while loading
cases of gasoline and petroleum products. But unlike in the said case, there is not a
shred of proof in the present case that the cause of the fire that broke out in the
Custom's warehouse was in any way attributable to the negligence of the appellant or
its employees. Under the circumstances, the appellant is plainly not responsible.
Case No.55
Philippine Realty and Holding Corp. vs. Ley Const. and Dev. Corp./Ley Cons. and Dev.
Corp. Vs. Philippine Realty 23 nd Holding Corp. Philippine Realty and Holding Corp. vs.
Ley Const. and Dev. Corp./Ley Cons. and Dev. Corp. Vs. Philippine Realty 23 nd Holding
Corp.
Case No. 56
Philcomsat v. Globe Telecom
Facts:
Globe Telecom, Inc., formerly known as Globe McKay Cable and Radio
Corporation installed and configured communication facilities for the exclusive use of
the US Defense Communications Agency (USDCA) in Clark Air Base and Subic Naval
Base. Globe Telecom later contracted the Philippine Communications Satellite
Corporation (Philcomsat) for the provision of the communication facilities. As both
companies entered into an Agreement, Globe obligated itself to operate and provide
an IBS Standard B earth station with Cubi Point for the use of the USDCA. The term of the
contract was for 60 months, or five (5) years. In turn, Globe promised to pay Philcomsat
monthly rentals for each leased circuit involved.
As the saga continues, the Philippine Senate passed and adopted Senate
Resolution No. 141 and decided not to ratify the Treaty of Friendship, Cooperation and
Security, and its Supplementary Agreements to extend the term of the use by the US of
Subic Naval Base, among others. In other words, the RP-US Military Bases Agreement
was suddenly terminated.
Because of this event, Globe notified Philcomsat of its intention to discontinue
the use of the earth station effective 08 November 1992 in view of the withdrawal of US
military personnel from Subic Naval Base after the termination of the RP-US Military Bases
Agreement.
After the US military forces left Subic Naval Base, Philcomsat sent Globe a letter in
1993 demanding payment of its outstanding obligations under the Agreement
amounting to US$4,910,136.00 plus interest and attorney’s fees. However, Globe refused
to heed Philcomsat’s demand. On the other hand, the latter with the Regional Trial
Court of Makati a Complaint against Globe, however, Globe filed an Answer to the
Complaint, insisting that it was constrained to end the Agreement due to the
termination of the RP-US Military Bases Agreement and the non-ratification by the
Senate of the Treaty of Friendship and Cooperation, which events constituted force
majeure under the Agreement. Globe explained that the occurrence of said events
exempted it from paying rentals for the remaining period of the Agreement.
Four years after, the trial court its decision but both parties appealed to the Court
of Appeals.
Issues:
1. Whether or not the non-ratification by the Senate of the Treaty of Friendship,
Cooperation and Security and its Supplementary Agreements constitutes force majeure
which exempts Globe from complying with its obligations under the Agreement;
2. Whether Globe is not liable to pay the rentals for the remainder of the term of the
Agreement; and
3. Whether Globe is liable to Philcomsat for exemplary damages.
Held:
Decision on Issue No. 1: Fortuitous Event under Article 1174
The appellate court ruled that the non-ratification by the Senate of the Treaty of
Friendship, Cooperation and Security, and its Supplementary Agreements, and the
termination by the Philippine Government of the RP-US Military Bases Agreement
effective 31 December 1991 as stated in the Philippine Government’s Note Verbale to
the US Government, are acts, directions, or requests of the Government of the
Philippines which constitute force majeure.
However, the Court of Appeals ruled that although Globe sought to terminate
Philcomsat’s services by 08 November 1992, it is still liable to pay rentals for the
December 1992, amounting to US$92,238.00 plus interest, considering that the US
military forces and personnel completely withdrew from Cubi Point only on 31
December 1992.
No reversible error was committed by the Court of Appeals in issuing the assailed
Decision; hence the petitions are denied.
Article 1174, which exempts an obligor from liability on account of fortuitous
events or force majeure, refers not only to events that are unforeseeable, but also to
those which are foreseeable, but inevitable:
A fortuitous event under Article 1174 may either be an "act of God," or natural
occurrences such as floods or typhoons,24 or an "act of man," such as riots, strikes or
wars.
Philcomsat and Globe agreed in Section 8 of the Agreement that the following events
shall be deemed events constituting force majeure:
1. Any law, order, regulation, direction or request of the Philippine Government;
2. Strikes or other labor difficulties;
3. Insurrection;
4. Riots;
5. National emergencies;
6. War;
7. Acts of public enemies;
8. Fire, floods, typhoons or other catastrophes or acts of God;
9. Other circumstances beyond the control of the parties.
Clearly, the foregoing are either unforeseeable, or foreseeable but beyond the
control of the parties. There is nothing in the enumeration that runs contrary to, or
expands, the concept of a fortuitous event under Article 1174.
The Supreme Court agrees with the Court of Appeals and the trial court that the
abovementioned requisites are present in the instant case. Philcomsat and Globe had
no control over the non-renewal of the term of the RP-US Military Bases Agreement
when the same expired in 1991, because the prerogative to ratify the treaty extending
the life thereof belonged to the Senate. Neither did the parties have control over the
subsequent withdrawal of the US military forces and personnel from Cubi Point in
December 1992.
Decision on Issue No. 2: Exemption of Globe from Paying Rentals for the Facility
The Supreme Court finds that the defendant is exempted from paying the rentals
for the facility for the remaining term of the contract. As a consequence of the
termination of the RP-US Military Bases Agreement (as amended) the continued stay of
all US Military forces and personnel from Subic Naval Base would no longer be allowed,
hence, plaintiff would no longer be in any position to render the service it was
obligated under the Agreement.
The Court of Appeals was correct in ruling that the happening of such fortuitous
events rendered Globe exempt from payment of rentals for the remainder of the term
of the Agreement.
Decision on Issue No 3: No Exemplary Damages
Exemplary damages may be awarded in cases involving contracts or quasi-
contracts, if the erring party acted in a wanton, fraudulent, reckless, oppressive or
malevolent manner.
In the present case, it was not shown that Globe acted wantonly or oppressively
in not heeding Philcomsat’s demands for payment of rentals. It was established during
the trial of the case before the trial court that Globe had valid grounds for refusing to
comply with its contractual obligations after 1992.
Case No. 57
GANZON vs.COURT OF APPEALS and GELACIO E. TUMAMBING
FACTS:
On November 28, 1956, Gelacio Tumambing contracted the services of Mauro B.
Ganzon to haul 305 tons of scrap iron from Mariveles, Bataan, to the port of Manila on
board the lighter LCT "Batman. Pursuant to that agreement, Mauro B. Ganzon sent his
lighter "Batman" to Mariveles where it docked in three feet of water. Gelacio
Tumambing delivered the scrap iron to defendant Filomeno Niza, captain of the lighter,
for loading which was actually begun on the same date by the crew of the lighter
under the captain's supervision. When about half of the scrap iron was already loaded,
Mayor Jose Advincula of Mariveles, Bataan, arrived and demanded P5,000.00 from
Gelacio Tumambing. The latter resisted the shakedown and after a heated argument
between them, Mayor Jose Advincula drew his gun and fired at Gelacio Tumambing
who sustained injuries.
After sometime, the loading of the scrap iron was resumed. But on December 4,
1956, Acting Mayor Basilio Rub, accompanied by three policemen, ordered captain
Filomeno Niza and his crew to dump the scrap iron where the lighter was docked. The
rest was brought to the compound of NASSCO. Later on Acting Mayor Rub issued a
receipt stating that the Municipality of Mariveles had taken custody of the scrap iron.
Tumabing sued Ganzon; the latter alleged that the goods have not been
unconditionally placed under his custody and control to make him liable. The trial court
dismissed the case but on appeal, respondent Court rendered a decision reversing the
decision of the trial court and ordering Ganzon to pay damages.
ISSUE:
Whether or not a contract of carriage has been perfected.
HELD:
Yes. By the said act of delivery, the scraps were unconditionally placed in the
possession and control of the common carrier, and upon their receipt by the carrier for
transportation, the contract of carriage was deemed perfected. Consequently, the
petitioner-carrier's extraordinary responsibility for the loss, destruction or deterioration of
the goods commenced. Pursuant to Art. 1736, such extraordinary responsibility would
cease only upon the delivery, actual or constructive, by the carrier to the consignee, or
to the person who has a right to receive them. The fact that part of the shipment had
not been loaded on board the lighter did not impair the said contract of transportation
as the goods remained in the custody and control of the carrier, albeit still unloaded.
Before Ganzon could be absolved from responsibility on the ground that he was
ordered by competent public authority to unload the scrap iron, it must be shown that
Acting Mayor Basilio Rub had the power to issue the disputed order, or that it was
lawful, or that it was issued under legal process of authority. The appellee failed to
establish this. Indeed, no authority or power of the acting mayor to issue such an order
was given in evidence. Neither has it been shown that the cargo of scrap iron
belonged to the Municipality of Mariveles. What we have in the record is the stipulation
of the parties that the cargo of scrap iron was accumulated by the appellant through
separate purchases here and there from private individuals. The fact remains that the
order given by the acting mayor to dump the scrap iron into the sea was part of the
pressure applied by Mayor Jose Advincula to shakedown Tumambing for P5,000.00. The
order of the acting mayor did not constitute valid authority for Ganzon and his
representatives to carry out.
Case No. 58
Fil-Estate Properties, Inc. and Fil-Estate Network, Inc. Vs. Spouses Conrado and
Maria Victoria Ronquillo
FACTS:
Petitioner Fil-Estate Properties, Inc. is the owner and developer of the
Central Park Place Tower while co-petitioner Fil-Estate Network, Inc. is its authorized
marketing agent. Respondent Spouses Conrado and Maria Victoria Ronquillo
purchased from petitioners an 82-square meter condominium unit for a pre-selling
contract price of P5, 174,000.00. On 29 August 1997, respondents executed and signed
a Reservation Application Agreement wherein they deposited P200, 000.00 as
reservation fee. As agreed upon, respondents paid the full down payment of P1,
552,200.00 and had been paying the P63,363.33 monthly amortizations until September
1998.
Upon learning that construction works had stopped, respondents likewise
stopped paying their monthly amortization. Claiming to have paid a total of
P2,198,949.96 to petitioners, respondents through two (2) successive letters, demanded
a full refund of their payment with interest. When their demands went unheeded,
respondents were constrained to file a Complaint for Refund and Damages before the
Housing and Land Use Regulatory Board (HLURB). Respondents prayed for
reimbursement/refund of P2,198,949.96 representing the total amortization payments,
P200,000.00 as and by way of moral damages, attorney’s fees and other litigation
expenses.
On 13 June 2002, the HLURB in favor of herein respondents. The Arbiter
considered petitioners’ failure to develop the condominium project as a substantial
breach of their obligation which entitles respondents to seek for rescission with payment
of damages. The Arbiter also stated that mere economic hardship is not an excuse for
contractual and legal delay.
ISSUES:
Whether or not the Asian financial crisis constitute a fortuitous event which would
justify delay by petitioners in the performance of their contractual obligation;
Assuming that petitioners are liable, whether or not 12% interest was correctly
imposed on the judgment award
HELD:
FIRST ISSUE: NO.
The Supreme Court held that the Asian financial crisis is not a fortuitous event
that would excuse petitioners from performing their contractual obligation.
The Court ruled that “we cannot generalize that the Asian financial crisis in 1997
was unforeseeable and beyond the control of a business corporation. It is unfortunate
that petitioner apparently met with considerable difficulty e.g. increase cost of
materials and labor, even before the scheduled commencement of its real estate
project as early as 1995. However, a real estate enterprise engaged in the pre-selling of
condominium units is concededly a master in projections on commodities and currency
movements and business risks. The fluctuating movement of the Philippine peso in the
foreign exchange market is an everyday occurrence, and fluctuations in currency
exchange rates happen everyday, thus, not an instance of caso fortuito.”
SECOND ISSUE: NO. The Court held that 6% is the proper legal interest rate.
The resulting modification of the award of legal interest is, also, in line with our
recent ruling in Nacar v. Gallery Frames, embodying the amendment introduced by the
Bangko Sentral ng Pilipinas Monetary Board in BSP-MB Circular No. 799 which pegged
the interest rate at 6% regardless of the source of obligation.
FALLO: WHEREFORE, the petition is PARTLY GRANTED. The appealed Decision is
AFFIRMED with the MODIFICATION that the legal interest to be paid is SIX PERCENT (6%)
on the amount due computed from the time of respondents’ demand for refund on 8
October 1998.
Case No. 5 9
Metro Concast Steel Corp., Spouses Jose S. Dychiao and Tiu Oh Yan, et al. vs. Allied
Bank Corporation
FACTS:
On various dates and for different amounts, Metro Concast through its officers,
obtained several loans from Allied Bank. Petitioners failed to settle their obligations.
Allied Bank, through counsel, sent them demand letters, all dated December 10, 1998,
seeking payment of the total amount of P51, 064,093.62, but to no avail. Thus, Allied
Bank was prompted to file a complaint for collection of sum of money against
petitioners before the RTC. Metro Concast already ceased its business due to some
reason. Hence, in order to settle their debts with Allied Bank, they offered the sale of
Metro Concast’s remaining assets to Allied Bank, which the latter, however, refused.
Peak star Oil Corporation, expressed interest in buying the scrap metal. During the
negotiations with Peakstar, petitioners claimed Atty. Saw, a member of Allied Bank’s
legal department, acted as the latter’s agent. A Memorandum of Agreement, through
Atty. Saw, was drawn between Metro Concast, represented by petitioner Jose Dychiao,
and Peakstar under which Peakstar obligated itself to purchase the scrap metal.
Unfortunately, Peakstar reneged on all its obligations under the MOA.
ISSUE:
Whether or not the loan obligations incurred by the petitioners under the subject
promissory noteand various trust receipts have already been extinguished.
RULING:
No, Article 1231 of the Civil Code states that obligations are extinguished either
by payment or performance, the loss of the thing due, the condonation or remission of
the debt, the confusion or merger of the rights of creditor and debtor, compensation or
novation. Absent any showing that the terms and conditions of the latter transactions
have been, in anyway, modified or novated by the terms and conditions in the MoA,
said contracts should be treated separately and distinctly from each other, such that
the existence, performance or breach of one would not depend on the existence,
performance or breach of the other.
Case No. 60
Philippine Realty and Holding Corp. vs. Ley Const. and Dev. Corp./Ley Cons. and
Dev. Corp. Vs. Philippine Realty 23 nd Holding Corp.
