Articles 1156-1177 page4

NPC v. CA

Facts:At the height of the typhoon Kading, a flash flood covered the towns near the Angat Dam, causing deaths and destructions to residents and their properties. Respondents blamed the tragedy to the reckless and imprudent opening of the 3 floodgates by petitioner, without prior warning to the residents within the vicinity of the dam. Petitioners denied the allegations and contended that they have kept the water at a safe level, that the opening of floodgates was done gradually, that it exercises diligence in the selection of its employees, and that written warnings were sent to the residents. It further contended that there was no direct causal relationship between the damage and the alleged negligence on their part, that the residents assumed the risk by living near the dam, and that what happened was a fortuitous event and are of the nature of damnum absque injuria.

Issues:(1) Whether the petitioner can be held liable even though the coming of the typhoon is a fortuitous event

(2) Whether a notice was sent to the residents

(3) Whether the damage suffered by respondents is one of damnum absque injuria

Held:(1) The obligor cannot escape liability, if upon the happening of a fortuitous event or an act of God, a corresponding fraud, negligence, delay or violation or contravention in any manner of the tenor of the obligation as provided in Article 1170 of the Civil Code which results in loss or damage. Even if there was no contractual relation between themselves and private respondents, they are still liable under the law on quasi-delict. Article 2176 of the Civil Code explicitly provides "whoever by act or omission causes damage to another there being fault or negligence is obliged to pay for the damage done." Act of God or force majeure, by definition, are extraordinary events not foreseeable or avoidable, events that could not be foreseen, or which, though foreseen, are inevitable. 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 principle embodied in the act of God doctrine strictly requires that the act must be occasioned solely by the violence of nature. Human intervention is to be excluded from creating or entering into the cause of the mischief. When the effect is found to be in part the result of the participation of man, whether due to his active intervention or neglect or failure to act, the whole occurrence is then humanized and removed from the rules applicable to the acts of God. In the case at bar, although the typhoon "Kading" was an act of God, petitioners can not escape liability because their negligence was the proximate cause of the loss and damage.

(2) The letter itself, addressed merely "TO ALL CONCERNED", would not strike one to be of serious importance, sufficient enough to set alarm and cause people to take precautions for their safety's sake. The notices were not delivered, or even addressed to responsible officials of the municipalities concerned who could have disseminated the warning properly. They were delivered to ordinary employees and policemen. As it happened, the said notices do not appear to have reached the people concerned, which are the residents beside the Angat River. The plaintiffs in this case definitely did not receive any such warning. Indeed, the methods by which the defendants allegedly sent the notice or warning was so ineffectual that they cannot claim, as they do in their second assignment of error, that the sending of said notice has absolved them from liability.

(3) We cannot give credence to petitioners' third assignment of error that the damage caused by the opening of the dam was in the nature of damnum absque injuria, which presupposes that although there was physical damage, there was no legal injury in view of the fortuitous events. There is no question that petitioners have the right, duty and obligation to operate, maintain and preserve the facilities of Angat Dam, but their negligence cannot be countenanced, however noble their intention may be. The end does not justify the means, particularly because they could have done otherwise than simultaneously opening the spillways to such extent. Needless to say, petitioners are not entitled to counterclaim.

GLOBE TELECOM, INC., petitioner, vs.PHILIPPINE COMMUNICATION SATELLITE CORPORATION, respondent.

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 attorneys fees. However, Globe refused to heed Philcomsats 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 Governments 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 Philcomsats 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 Philcomsats 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.

Ruling:

WHEREFORE, the Petitions are DENIED for lack of merit. The assailed Decision of the Court of Appeals in CA-G.R. CV No. 63619 is AFFIRMED.SO ORDERED.

FGU Insurance Corporation v. CA

FACTS: Anco Enterprises Company (ANCO), a partnership between Ang Gui and Co To, was engaged in the shipping business operating two common carriers M/T ANCO tugboat D/B Lucio barge - no engine of its own, it could not maneuver by itself and had to be towed by a tugboat for it to move from one place to another. September 23 1979:San Miguel Corporation (SMC) shipped from Mandaue City, Cebu, on board the D/B Lucio, for towage by M/T ANCO: 25,000 cases Pale Pilsen and350 cases Cerveza Negra- consigneeSMCs Beer Marketing Division (BMD)-Estancia Beer Sales Office, Estancia, Iloilo

15,000 cases Pale Pilsen and200 cases Cerveza Negra - consigneeSMCs BMD-San Jose Beer Sales Office, San Jose, Antique

September 30, 1979:D/B Lucio was towed by the M/T ANCO arrived andM/T ANCO left the barge immediately

The clouds were dark and the waves were big soSMCs District Sales Supervisor, Fernando Macabuag, requested ANCOs representative to transfer the barge to a safer place but it refused so around the midnight, the barge sunk along with29,210cases of Pale Pilsen and 500 cases ofCerveza Negra totalling toP1,346,197

When SMC claimed againstANCOit stated that they agreed that itwould not be liable for any losses or damages resulting to the cargoes by reason of fortuitous event and it was agreed to be insured with FGU for 20,000 cases orP858,500

ANCO filed against FGU

FGU alleged that ANCO and SMC failedto exercise ordinary diligence or the diligence of a good father of the family in the care and supervision of the cargoes

RTC: ANCO liable to SMC and FGU liable for 53% of the lost cargoes CA affirmedISSUE: W/N FGU should be exempted from liability to ANCO for the lost cargoes because of a fortuitous event and negligence of ANCOHELD: YES. Affirmed with modification. Third-party complainant is dismissed. Art. 1733. Common carriers, from the nature of their business and for reasons of public policy are bound to observe extraordinary diligence in the vigilance over the goods and for the safety of the passengers transported by them, according to all the circumstances of each case.

Such extraordinary diligence in vigilance over the goods is further expressed in Articles 1734, 1735, and 1745 Nos. 5, 6, and 7 . . .

Art. 1734. Common carriers are responsible for the loss, destruction, or deterioration of the goods, unless the same is due to any of the following causes only:

(1) Flood, storm, earthquake, lightning, or other natural disaster or calamity;

. . .

Art. 1739. In order that the common carrier may be exempted from responsibility, the natural disaster must have been the proximate and only cause of the loss. However, the common carrier must exercise due diligence to prevent or minimize loss before, during and after the occurrence of flood, storm, or other natural disaster in order that the common carrier may be exempted from liability for the loss, destruction, or deterioration of the goods . . . Caso fortuito or force majeure extraordinary events not foreseeable or avoidable, events that could not be foreseen, or which though foreseen, were inevitable 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 - not in this case other vessels in the port of San Jose, Antique, managed to transfer to another place To be exempted from responsibility, the natural disaster should have been the proximate and only cause of the loss.There must have been no contributory negligence on the part of the common carrier.

there was blatant negligence on the part of M/T ANCOs crewmembers, first in leaving the engine-less barge D/B Lucio at the mercy of the storm without the assistance of the tugboat, and again in failing to heed the request of SMCs representatives to have the barge transferred to a safer place

When evidence show that the insureds negligence or recklessness is so gross as to be sufficient to constitute a willful act, the insurer must be exonerated. ANCOs employees is of such gross character that it amounts to a wrongful act which must exonerate FGU from liability under the insurance contract both the D/B Lucio and the M/T ANCO were blatantly negligentSchmitz Transport & Brokerage Corporation vs. Transport Venture, Inc. (458 SCRA557)

FACTS:Petitioner, who was in charge of securing requisite clearances, receive the cargoes from the shipside and deliver it to the consignee Little Giant Steel Pipe Corporation warehouse at Cainta, Rizal, hired the services of respondent Transport Venture Incorporation (TVI)s tugboat for the hot rolled steel sheets in coil. Coils were unloaded to the barge but there was no tugboat to pull the barge to the pier. Due to strong waves caused by approaching storm, the barge was abandoned. Later, the barge capsized washing 37 coils into the sea. Consignee was executed a subrogation receipt by Industrial Insurance after the formers filing of formal claim. Industrial Insurance filed a complaint against both petitioner and respondent herein. The trial court held that petitioner and respondent TVI were jointly and severally liable for the subrogation.

ISSUE:Whether or not the loss of cargoes was due to fortuitous event.

RULING:NO. In order, to be considered a fortuitous event: (1) the cause of the unforeseen and unexpected occurrence, or the failure of the debtor to comply with his obligation, must be independent of human will; (2) it must be impossible to foresee the event which constitute 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 impossible for the debtor to fulfill his obligation in any manner; and (4) the obligor must be free from any participation in the aggravation of the injury resulting to the creditor.

Petitioner and respondent TVI were jointly and severally liable for the amount ofpaid by the consignee plus interest computed from the date of decision of the trial court.

Philippines Free Press, Inc. vs. Court of Appeals (473 SCRA639)

FACTS:Petitioner, thru Teodoro Locsin, Sr., filed a case of Annulment of Sale of its building, lot and printing machineries during the regime of Martial Law to private respondent then represented by late B/Gen. Menzi on February 26, 1987. Petitioner contends that there was vitiated consent and gross inadequacy of purchase price during its sale on October 23, 1973. The trial court dismissed petitioners complaint and granted private respondents counterclaim. It was elevated to the Court of Appeals but was also dismissed for lack of merit.

ISSUE: Whether or not the action for annulment has already prescribed.

RULING:YES. Article 391 of the Civil Code pertinently reads The action for annulment shall be brought within four years. This period shall begin: In cases of intimidation, violence or undue influence, from the time the defect of consent ceases x x x.

[The Supreme Court] cannot accept the petitioners contention that the period during which authoritarian rule was in force had interrupted prescription and that the same began to run only on February 25, 1986, when the Aquino government took power. It is true that under Article 1154 [of the Civil Code] xxx fortuitous events have the effect of tolling the period of prescription.However, [the Supreme Court] cannot say, as a universal rule, that the period from September 21, 1972 through February 25, 1986 involves a force majeure. Plainly, [the Supreme Court] can not box in the dictatorial period within the term without distinction, and without, by necessity, suspending all liabilities, however demandable, incurred during that period, including perhaps those ordered by this Court to be paid.

Eastern Shipping vs CAGR No. 97412, 12 July 1994234 SCRA 78FACTS: Two fiber drums were shipped owned by Eastern Shipping from Japan. The shipment as insured with a marine policy. Upon arrival in Manila unto the custody of metro Port Service, which excepted to one drum, said to be in bad order and which damage was unknown the Mercantile Insurance Company. Allied Brokerage Corporation received the shipment from Metro, one drum opened and without seal. Allied delivered the shipment to the consignees warehouse. The latter excepted to one drum which contained spillages while the rest of the contents was adulterated/fake. As consequence of the loss, the insurance company paid the consignee, so that it became subrogated to all the rights of action of consignee against the defendants Eastern Shipping, Metro Port and Allied Brokerage. The insurance company filed before the trial court. The trial court ruled in favor of plaintiff an ordered defendants to pay the former with present legal interest of 12% per annum from the date of the filing of the complaint. On appeal by defendants, the appellate court denied the same and affirmed in toto the decision of the trial court.

ISSUE:(1) Whether the applicable rate of legal interest is 12% or 6%.

(2) Whether the payment of legal interest on the award for loss or damage is to be computed from the time the complaint is filed from the date the decision appealed from is rendered.

HELD:(1)The Court held that the legal interest is 6% computed from the decision of the court a quo. When an obligation, not constituting a loan or forbearance of money, is breached, an interest on the amount of damaes awarded may be imposed at the discretion of the court at the rate of 6% per annum. No interest shall be adjudged on unliquidated claims or damages except when or until the demand can be established with reasonable certainty.

When the judgment of the court awarding a sum of money becomes final and executor, the rate of legal interest shall be 12% per annum from such finality until satisfaction, this interim period being deemed to be by then an equivalent to a forbearance of money.

The interest due shall be 12% PA to be computed fro default, J or EJD.

(2)From the date the judgment is made. Where the demand is established with reasonable certainty, the interest shall begin to run from the time the claim is made judicially or EJ but when such certainty cannot be so reasonably established at the time the demand is made, the interest shll begin to run only from the date of judgment of the court is made.

(3) The Court held that it should be computed from the decision rendered by the court a quo. SAMPAGUITA BUILDERS v PNBMini digest:Sampaguita loaned money from PNB. PNB unilaterally increased rates of interest in the loan w/o informing Sampaguita. PNB claimed they were authorized to do it as there was a clause in the agreement that they may do so. Besides, Usury law was no longer in force= SC said NO! PNB cannot do so; it will violate mutuality of contracts under1308. Besides, SC may intervene when amount of interest is unconscionable.Facts: Sampaguita secured a loan from PNB in an aggregate amount of 8M pesos, mortgaging the properties of Sampaguitas president and chairman of the board. Sampaguita also executed several promissory notes due on different dates (payment dates). The first promissory note had 19.5%interest rate. The 2nd and 3rd had 21.5%. a uniform clause therein permitted PNB to increase the rate within the limits allowed by law at any time depending on whatever policy it may adopt in the future x x x, without even giving prior notice to petitioners. There was also a clause in the promissory note that stated that if the same is not paid 2 years after release then it shall be converted to a medium term loan and the interest rate for such loan would apply. Later on, Sampaguita defaulted on its payments and failed to comply with obligations on promissory notes. Sampaguita thus requested for a 90 day extension to pay the loan. Again they defaulted, so they asked for loan restructuring. It partly paid the loan and promised to pay the balance later on. AGAIN they failed to pay so PNB extrajudicially foreclosed the mortgaged properties. It was sold for 10M. PNB claimed that Sampaguita owed it 12M so they filed a case in court asking sampaguita to pay fordeficiency.RTC found that Sampaguita was automatically entitled to the debt reliefpackage of PNB and ruled that the latter had no cause of action against the former. CA reversed, saying Sampaguita was not entitled, thus ordered them to pay the deficiency Appeal = Went to SC. Sampaguita claims the loan was bloated so they dont really owe PNB anymore, but it justovercharged them!Issues/Ruling:W/N the loan accounts are bloated: YES. There is no deficiency; there is actually an overpayment of more than 3M based on the computation of the SC. Whether PNB could unilaterally increase interest rates: NORatio:Sampaguitas accessory duty to pay interest did not give PNB unrestrained freedom to charge any rate other than that which was agreed upon. No interest shall be due, unless expressly stipulated in writing. It would be the zenith of farcicality to specify and agree upon rates that could be subsequently upgraded at whim by only one party to the agreement.The unilateral determination and imposition of increased rates isviolative of the principle of mutuality of contracts ordained in Article 1308of the Civil Code. One-sided impositions do not have the force of law between the parties, because such impositions are not based on the parties essential equality. Although escalation clauses are valid in maintaining fiscal stability and retaining the value of money on long-term contracts, giving respondent an unbridled right to adjust the interest independently and upwardly would completely take away from petitioners the right to assent to an important modification in their agreement and would also negate the element ofmutuality in their contracts. The clause cited earlier made the fulfillment of the contracts dependent exclusively upon the uncontrolled will ofrespondent and was therefore void. Besides, the pro forma promissory notes have the character of a contract d adhesion, where the parties do not bargain on equal footing, the weaker partys [the debtors]participation being reduced to the alternative to take it or leave it.Circular that lifted the ceiling of interest rates of usury law did not authorize either party to unilaterally raise the interest rate without the others consent. the interest ranging from 26 percent to 35 percent in the statements ofaccount -- must be equitably reduced for being iniquitous, unconscionable and exorbitant. Rates found to be iniquitous or unconscionable are void, as if it there were no express contract thereon. Above all, it is undoubtedly against public policy to charge excessively for the use of money.Lilibeth Sunga-Chan vs Lamberto Chua and Honorable Court of Appeals

FACTS: In 1977, Chua and Jacinto Sunga verbally agreed to form a partnership for the sale and distribution of Shellane LPGs. Their business was very profitable but in 1989 Jacinto died. Upon Jacintos death, his daughter Lilibeth took over the business as well as the business assets. Chua then demanded for an accounting but Lilibeth kept on evading him. In 1992 however, Lilibeth gave Chua P200k. She said that the same represents a partial payment; that the rest will come after she finally made an accounting. She never made an accounting so in 1992, Chua filed a complaint for Winding Up of Partnership Affairs, Accounting, Appraisal and Recovery of Shares and Damages with Writ of Preliminary Attachment against Lilibeth.

Lilibeth in her defense argued among others that Chuas action has prescribed.

ISSUE: Whether or not Chuas claim is barred by prescription.

HELD: No. The action for accounting filed by Chua three (3) years after Jacintos death was well within the prescribed period. The Civil Code provides that an action to enforce an oral contract prescribes in six (6) yearswhile the right to demand an accounting for a partners interest as against the person continuing the business accrues at the date of dissolution, in the absence of any contrary agreement. Considering that the death of a partner results in the dissolution of the partnership, in this case, it was after Jacintos death that Chua as the surviving partner had the right to an account of his interest as against Lilibeth.It bears stressing that while Jacintos death dissolved the partnership, the dissolution did not immediately terminate the partnership.The Civil Codeexpressly provides that upon dissolution, the partnership continues and its legal personality is retained until the complete winding up of its business, culminating in its termination.