Republic of the PhilippinesSUPREME COURT

Manila

THIRD DIVISION,

 

G.R. No. 116896 May 5, 1997

PHILIPPINE NATIONAL CONSTRUCTION CORPORATION, petitioner, vs.COURT OF APPEALS, MA. TERESA S. RAYMUNDO-ABARRA, JOSE S. RAYMUNDO, ANTONIO S. RAYMUNDO, RENE S. RAYMUNDO, and AMADOR S. RAYMUNDO, respondents.

 

DAVIDE, JR., J.:

This petition for review on certiorari has its roots in Civil Case No. 53444, which was sparked by petitioner's refusal to pay the rentals as stipulated in the contract of lease 1 on an undivided portion of 30,000 square meters of a parcel of land owned by private respondents.

The lease contract, executed on 18 November 1985, reads in part as follows:

1. TERM OF LEASE — This lease shall be for a period of five (5) years, commencing on the date of issuance of the industrial clearance by the Ministry of Human Settlements, renewable for a like or other period at the option of the LESSEE under the same terms and conditions.

2. RATE OF RENT — LESSEE shall pay to the LESSOR rent at the monthly rate of TWENTY THOUSAND PESOS (P20,000.00), Philippine Currency, in the manner set forth in Paragraph 3 below. This rate shall be increased yearly by Five Percent (5%) based on the agreed monthly rate of P20,000.00 as follows:

Monthly Rate Period Applicable

P21,000.00 Starting on the 2nd year

P22,000.00 Starting on the 3rd year

P23,000.00 Starting on the 4th year

P24,000.00 Starting on the 5th year

3. TERMS OF PAYMENT — The rent stipulated in Paragraph 2 above shall be paid yearly in advance by the LESSEE. The first annual rent in the amount of TWO

HUNDRED FORTY THOUSAND PESOS (P240,000.00), Philippine currency, shall be due and payable upon the execution of this Agreement and the succeeding annual rents shall be payable every twelve (12) months thereafter during the effectivity of this Agreement.

4. USE OF LEASED PROPERTY — It is understood that the Property shall be used by the LESSEE as the site, grounds and premises of a rock crushing plant and field office, sleeping quarters and canteen/mess hall. The LESSORS hereby grant to the LESSEE the right to erect on the Leased Property such structure(s) and/or improvement(s) necessary for or incidental to the LESSEE's purposes.

xxx xxx xxx

11. TERMINATION OF LEASE — This Agreement may be terminated by mutual agreement of the parties. Upon the termination or expiration of the period of lease without the same being renewed, the LESSEE shall vacate the Leased Property at its expense.

On 7 January 1986, petitioner obtained from the Ministry of Human Settlements a Temporary Use Permit 2 for the proposed rock crushing project. The permit was to be valid for two years unless sooner revoked by the Ministry.

On 16 January 1986, private respondents wrote petitioner requesting payment of the first annual rental in the amount of P240,000 which was due and payable upon the execution of the contract. They also assured the latter that they had already stopped considering the proposals of other aggregates plants to lease the property because of the existing contract with petitioner. 3

In its reply-letter, petitioner argued that under paragraph 1 of the lease contract, payment of rental would commence on the date of the issuance of an industrial clearance by the Ministry of Human Settlements, and not from the date of signing of the contract. It then expressed its intention to terminate the contract, as it had decided to cancel or discontinue with the rock crushing project "due to financial, as well as technical, difficulties." 4

Private respondents refused to accede to petitioner's request for the pretermination of the lease contract. They insisted on the performance of petitioner's obligation and reiterated their demand for the payment of the first annual rental. 5

Petitioner objected to private respondents' claim and argued that it was "only obligated to pay . . . the amount of P20,000.00 as rental payments for the one-month period of lease, counted from 07 January 1986 when the Industrial Permit was issued by the Ministry of Human Settlements up to 07 February 1986 when the Notice of Termination was served" 6 on private respondents.

On 19 May 1986, private respondents instituted with the Regional Trial Court of Pasig an action against petitioner for Specific Performance with Damages. 7 The case was docketed as Civil Case No. 53444 at Branch 160 of the said court. After the filing by petitioner of its Answer with Counterclaim, the case was set for trial on the merits.

What transpired next was summarized by the trial court in this wise:

Plaintiffs rested their case on September 7, 1987 (p. 87 rec.). Defendant asked for postponement of the reception of its evidence scheduled on August 10, 1988 and as prayed for, was reset to August 25, 1988 (p. 91 rec.) Counsel for defendant again asked for postponement, through representative, as he was presently indisposed. The case was reset, intransferable to September 15 and 26, 1988 (p. 94 rec.) On September 2, 1988, the office of the Government Corporate Counsel entered its appearance for defendant (p. 95, rec.) and the original counsel later withdrew his appearance. On September 15, 1988 the Government Corporate Counsel asked for postponement, represented by Atty. Elpidio de Vega, and with his conformity in open court, the hearing was reset, intransferable to September 26 and October 17, 1988, (p. 98, rec.) On September 26, 1988 during the hearing, defendant's counsel filed a motion for postponement (urgent) as he had "sore eyes", a medical certificate attached.

Counsel for plaintiffs objected to the postponement and the court considered the evidence of the government terminated or waived. The case was deemed submitted for decision upon the filing of the memorandum. Plaintiffs filed their memorandum on October 26, 1988. (p. 111, rec.).

On October 18, 1988 in the meantime, the defendant filed a motion for reconsideration of the order of the court on September 26, 1988 (p. 107, rec.) The motion was not asked to be set for hearing (p. 110 rec.) There was also no proof of notice and service to counsel for plaintiff . The court in the interest of justice set the hearing on the motion on November 29, 1988. (p. 120, rec.) but despite notice, again defendant's counsel was absent (p. 120-A, dorsal side, rec.) without reason. The court reset the motion to December 16, 1988, in the interest of justice. The motion for reconsideration was denied by the court. A second motion for reconsideration was filed and counsel set for hearing the motion on January 19, 1989. During the hearing, counsel for the government was absent. The motion was deemed abandoned but the court at any rate, after a review of the incidents and the grounds relied upon in the earlier motion of defendant, found no reason to disturb its previous order. 8

On 12 April 1989, the trial court rendered a decision ordering petitioner to pay private respondents the amount of P492,000 which represented the rentals for two years, with legal interest from 7 January 1986 until the amount was fully paid, plus attorney's fees in the amount of P20,000 and costs. 9

Petitioner then appealed to the Court of Appeals alleging that the trial court erred in ordering it to pay private respondent the amount of P492,000 and in denying it the right to be heard.

Upon the affirmance of the trial court's decision 10 and the denial of its motion for reconsideration, petitioner came to this Court ascribing to respondent Court of Appeals the same alleged errors and reiterating their arguments.

First. Petitioner invites the attention of this Court to paragraph 1 of the lease contract, which reads: "This lease shall be for a period of five (5) years, commencing on the date of issuance of the industrial clearance by the Ministry of Human Settlements. . . ." It then submits that the issuance of an industrial clearance is a suspensive condition without which the rights under the contract would not be acquired. The Temporary Use Permit is

not the industrial clearance referred to in the contract; for the said permit requires that a clearance from the National Production Control Commission be first secured, and besides, there is a finding in the permit that the proposed project does not conform to the Zoning Ordinance of Rodriguez, (formerly Montalban), Rizal, where the leased property is located. Without the industrial clearance the lease contract could not become effective and petitioner could not be compelled to perform its obligation under the contract.

Petitioner is now estopped from claiming that the Temporary Use Permit was not the industrial clearance contemplated in the contract. In its letter dated 24 April 1986, petitioner states:

We wish to reiterate PNCC Management's previous stand that it is only obligated to pay your clients the amount of P20,000.00 as rental payments for the one-month period of the lease, counted from 07 January 1986 when the Industrial Permit was issued by the Ministry of Human Settlements up to 07 February 1986 when the Notice of Termination was served on your clients. 11 (Emphasis Supplied).

The "Industrial Permit" mentioned in the said letter could only refer to the Temporary Use Permit issued by the Ministry of Human Settlements on 7 January 1986. And it can be gleaned from this letter that petitioner has considered the permit as industrial clearance; otherwise, petitioner could have simply told private respondents that its obligation to pay rentals has not yet arisen because the Temporary Use Permit is not the industrial clearance contemplated by them. Instead, petitioner recognized its obligation to pay rentals counted from the date the permit was issued.

Also worth noting is petitioner's earlier letter, thus:

[P]lease be advised of PNCC Management's decision to cancel or discontinue with the rock crushing project due to financial as well as technical difficulties. In view thereof, we would like to terminate our Lease Contract dated 18 November, 1985. Should you agree to the mutual termination of our Lease Contract, kindly indicate your conformity hereto by affixing your signature on the space provided below. May we likewise request Messrs. Rene, Jose and Antonio, all surnamed Raymundo and Mrs. Socorro A. Raymundo as Attorney-in-Fact of Amador S. Raymundo to sign on the spaces indicated below. 12

It can be deduced from this letter that the suspensive condition — issuance of industrial clearance — has already been fulfilled and that the lease contract has become operative. Otherwise, petitioner did not have to solicit the conformity of private respondents to the termination of the contract for the simple reason that no juridical relation was created because of the non- fulfillment of the condition.

Moreover, the reason of petitioner in discontinuing with its project and in consequently cancelling the lease contract was "financial as well as technical difficulties," not the alleged insufficiency of the Temporary Use Permit.

Second. Invoking Article 1266 and the principle of rebus sic stantibus, petitioner asserts that it should be released from the obligatory force of the contract of lease because the purpose of the contract did not materialize due to unforeseen events and causes beyond its control, i.e., due to the abrupt change in political climate after the EDSA Revolution and financial difficulties.

It is a fundamental rule that contracts, once perfected, bind both contracting parties, and obligations arising therefrom have the force of law between the parties and should be complied with in good faith. 13 But the law recognizes exceptions to the principle of the obligatory force of contracts. One exception is laid down in Article 1266 of the Civil Code, which reads: "The debtor in obligations to do shall also be released when the prestation becomes legally or physically impossible without the fault of the obligor."

Petitioner cannot, however, successfully take refuge in the said article, since it is applicable only to obligations "to do," and not to obligations "to give." 14 An obligation "to do" includes all kinds of work or service; while an obligation "to give" is a prestation which consists in the delivery of a movable or an immovable thing in order to create a real right, or for the use of the recipient, or for its simple possession, or in order to return it to its owner. 15

The obligation to pay rentals 16 or deliver the thing in a contract oflease 17 falls within the prestation "to give"; hence, it is not covered within the scope of Article 1266. At any rate, the unforeseen event and causes mentioned by petitioner are not the legal or physical impossibilities contemplated in the said article. Besides, petitioner failed to state specifically the circumstances brought about by "the abrupt change in the political climate in the country" except the alleged prevailing uncertainties in government policies on infrastructure projects.

The principle of rebus sic stantibus 18 neither fits in with the facts of the case. Under this theory, the parties stipulate in the light of certain prevailing conditions, and once these conditions cease to exist, the contract also ceases to exist. 19 This theory is said to be the basis of Article 1267 of the Civil Code, which provides:

Art. 1267. When the service has become so difficult as to be manifestly beyond the contemplation of the parties, the obligor may also be released therefrom, in whole or in part.

This article, which enunciates the doctrine of unforeseen events, is not, however, an absolute application of the principle of rebus sic stantibus, which would endanger the security of contractual relations. The parties to the contract must be presumed to have assumed the risks of unfavorable developments. It is therefore only in absolutely exceptional changes of circumstances that equity demands assistance for the debtor. 20

In this case, petitioner wants this Court to believe that the abrupt change in the political climate of the country after the EDSA Revolution and its poor financial condition "rendered the performance of the lease contract impractical and inimical to the corporate survival of the petitioner."

This Court cannot subscribe to this argument. As pointed out by private respondents: 21

It is a matter of record that petitioner PNCC entered into a contract with private respondents on November 18, 1985. Prior thereto, it is of judicial notice that after the assassination of Senator Aquino on August 21, 1983, the country has experienced political upheavals, turmoils, almost daily mass demonstrations, unprecedented, inflation, peace and order deterioration, the Aquino trial and many other things that brought about the hatred of people even against crony corporations. On November 3, 1985, Pres. Marcos, being interviewed live on U.S. television announced that there would be a snap election scheduled for February 7, 1986.

On November 18, 1985, notwithstanding the above, petitioner PNCC entered into the contract of lease with private respondents with open eyes of the deteriorating conditions of the country.

Anent petitioner's alleged poor financial condition, the same will neither release petitioner from the binding effect of the contract of lease. As held in Central Bank v. Court of Appeals, 22 cited by private respondents, mere pecuniary inability to fulfill an engagement does not discharge a contractual obligation, nor does it constitute a defense to an action for specific performance.

With regard to the non-materialization of petitioner's particular purpose in entering into the contract of lease, i.e., to use the leased premises as a site of a rock crushing plant, the same will not invalidate the contract. The cause or essential purpose in a contract of lease is the use or enjoyment of a thing. 23 As a general principle, the motive or particular purpose of a party in entering into a contract does not affect the validity nor existence of the contract; an exception is when the realization of such motive or particular purpose has been made a condition upon which the contract is made to depend. 24 The exception does not apply here.

Third. According to petitioner, the award of P492,000.00 representing the rent for two years is excessive, considering that it did not benefit from the property. Besides, the temporary permit, conformably with the express provision therein, was deemed automatically revoked for failure of petitioner to use the same within one year from the issuance thereof. Hence, the rent payable should only be for one year.

Petitioner cannot be heard to complain that the award is excessive. The temporary permit was valid for two years but was automatically revoked because of its non-use within one year from its issuance. The non-use of the permit and the non-entry into the property subject of the lease contract were both imputable to petitioner and cannot, therefore, be taken advantage of in order to evade or lessen petitioner's monetary obligation. The damage or prejudice to private respondents is beyond dispute. They unquestionably suffered pecuniary losses because of their inability to use the leased premises. Thus, in accordance with Article 1659 of the Civil Code, 25 they are entitled to indemnification for damages; and the award of P492,000.00 is fair and just under the circumstances of the case.

Finally, petitioner submits that the trial court gravely abused its discretion in denying petitioner the right to be heard.

We disagree. The trial court was in fact liberal in granting several postponements 26 to petitioner before it deemed terminated and waived the presentation of evidence in petitioner's behalf.

It must be recalled that private respondents rested their case on 7 September 1987 yet. 27 Almost a year after, or on 10 August 1988 when it was petitioner's turn to present evidence, petitioner's counsel asked for postponement of the hearing to 25 August 1988 due to conflict of schedules, 28 and this was granted. 29 At the rescheduled hearing, petitioner's counsel, through a representative, moved anew for postponement, as he was allegedlyindisposed. 30 The case was then reset "intransferable" to September 15 and 26, 1988. 31

On 2 September 1988, the Office of the Government Corporate Counsel, through Atty. Elpidio J. Vega, entered its appearance for thepetitioner, 32 and later the original counsel withdrew his appearance. 33 On 15 September 1988, Atty. Vega requested for postponement to enable him to go over the records of the case. 34 With his conformity, the hearing was reset "intransferable" to September 26 and October 17, 1988. 35 In the morning of 26 September 1988, the court received Atty. Vega's Urgent Motion for Postponement on the ground that he was afflicted with conjunctivitis or sore eyes. 36 This time, private respondents objected; and upon their motion, the court deemed terminated and waived the presentation of evidence for the petitioner. 37 Nevertheless, before the court considered the case submitted for decision, it required the parties to submit their respective memoranda within thirty days. 38 But petitioner failed to comply.

Likewise, the court was liberal with respect to petitioner's motion for reconsideration. Notwithstanding the lack of request for hearing and proof of notice and service to private respondents, the court set the hearing of the said motion on 29 November 1988. 39 Upon the denial of the said motion for lack of merit, 40 petitioner filed a second motion for reconsideration. But during the hearing of the motion on a date selected by him, Atty. Vega was absent for no reason at all, despite due notice. 41

From the foregoing narration of procedural antecedents, it cannot be said that petitioner was deprived of its day in court. The essence of due process is simply an opportunity to he heard. 42 To be heard does not only mean oral arguments in court; one may be heard also through pleadings. Where opportunity to be heard, either through oral arguments or pleadings, is accorded, there is no denial of procedural due process. 43

WHEREFORE, the instant petition is DENIED and the challenge decision of the Court of Appeals is AFFIRMED in toto.

No pronouncements as to costs.

SO ORDERED.

Narvasa, C.J., Melo, Francisco and Panganiban, JJ., concur.

Footnotes

1 Exhibit "A," Original Record (OR), 68.

2 Exhibit "C," OR, 77; Rollo, 57.

3 Exhibit "B," OR, 76.

4 Exhibit "D," OR, 78.

5 Exhibit "E," Id., 80.

6 Exhibit "F," Id., 81-82.

7 Id., 1-7.

8 Order of 19 January 1989, OR, 129-130; Decision, 2-3.

9 OR 134-137; Rollo, 53-56. Per Judge Mariano M. Umali.

10 Rollo, 24-31. Per then Associate Justice Justo P. Torres, Jr. (now Associate Justice of the Supreme Court), with the concurrence of then Associate Justice Bernardo P. Pardo and Associate Justice Corona Ibay-Somera.

11 Exhibit "F-1," OR, 82.

12 Exhibit "D," Id., 78-79.

13 Articles 1159, 1308, 1315, and 1356 of the Civil Code.

14 DESIDERIO P. JURADO, Comments and Jurisprudence on Obligations and Contracts 292 ( 10th revised ed. 1993) (hereafter JURADO).

15 IV ARTURO M. TOLENTINO, Commentaries and Jurisprudence on the Civil Code of the Philippines 57 (1991) (hereafter IV TOLENTINO).

16 JURADO, 283.

17 IV TOLENTINO 57.

18 At this point of affairs; in these circumstances. A name given to a tacit condition, said to attach to all treaties, that they shall cease to be obligatory so soon as the state of facts and conditions upon which they were founded has substantially changed. (Black's Law Dictionary, 1139 [5th ed., 1979]).

19 Naga Telephone Co. v. Court of Appeals, 230 SCRA 351, 365 [1994] citing IV TOLENTINO 347.

20 IV TOLENTINO 347.

21 Memorandum for the Private Respondents, 17; Rollo, 160.

22 139 SCRA 46 [1985], citing Repide v. Afzelius, 39 Phil. 190 [1918].

23 V TOLENTINO 206 [1992]; V EDGARDO E. PARAS, Civil Code of the Philippines, 307 [1995].

24 V TOLENTINO 535.

25 It provides:

Art. 1659. If the lessor or the lessee should not comply with the obligations set forth in Articles 1654 and 1657, the aggrieved party may ask for rescission of the contract and indemnification for damages, or only the latter, allowing the contract to remain in force.

26 Ocampo v. Arboleda, 153 SCRA 374, 381 [1987].

27 OR, 87.

28 OR, 89.

29 Id., 91.

30 Id., 94.

31 Id.

32 Id., 95.

33 Id., 99.

34 Id., 98.

35 Id.

36 Id., 101.

37 Id., 106.

38 Id.

39 Id., 120.

40 Id., 128.

41 Id., 127.

42 Roces v. Aportadera, 243 SCRA 108, 114 [1995]; Vallende v. NLRC, 245 SCRA 662, 666-667 [1995]; Navarro III v. Damasco, 246 SCRA 260, 265 [1995].

43 Mutuc v. Court of Appeals, 190 SCRA 43, 49 [1990].

Republic of the PhilippinesSUPREME COURT

Manila

FIRST DIVISION

 

G.R. No. 117190 January 2, 1997

JACINTO TANGUILIG doing business under the name and style J.M.T. ENGINEERING AND GENERAL MERCHANDISING, petitioner, vs.COURT OF APPEALS and VICENTE HERCE JR., respondents.

 

BELLOSILLO, J.:

This case involves the proper interpretation of the contract entered into between the parties.

Sometime in April 1987 petitioner Jacinto M. Tanguilig doing business under the name and style J.M.T. Engineering and General Merchandising proposed to respondent Vicente Herce Jr. to construct a windmill system for him. After some negotiations they agreed on the construction of the windmill for a consideration of P60,000.00 with a one-year guaranty from the date of completion and acceptance by respondent Herce Jr. of the project. Pursuant to the agreement respondent paid petitioner a down payment of P30,000.00 and an installment payment of P15,000.00, leaving a balance of P15,000.00.

On 14 March 1988, due to the refusal and failure of respondent to pay the balance, petitioner filed a complaint to collect the amount. In his Answer before the trial court respondent denied the claim saying that he had already paid this amount to the San Pedro General Merchandising Inc. (SPGMI) which constructed the deep well to which the windmill system was to be connected. According to respondent, since the deep well formed part of the system the payment he tendered to SPGMI should be credited to his account by petitioner. Moreover, assuming that he owed petitioner a balance of P15,000.00, this should be offset by the defects in the windmill system which caused the structure to collapse after a strong wind hit their place. 1

Petitioner denied that the construction of a deep well was included in the agreement to build the windmill system, for the contract price of P60,000.00 was solely for the windmill assembly and its installation, exclusive of other incidental materials needed for the project. He also disowned any obligation to repair or reconstruct the system and insisted that he delivered it in good and working condition to respondent who accepted

the same without protest. Besides, its collapse was attributable to a typhoon, a force majeure, which relieved him of any liability.

In finding for plaintiff, the trial court held that the construction of the deep well was not part of the windmill project as evidenced clearly by the letter proposals submitted by petitioner to respondent. 2 It noted that "[i]f the intention of the parties is to include the construction of the deep well in the project, the same should be stated in the proposals. In the absence of such an agreement, it could be safely concluded that the construction of the deep well is not a part of the project undertaken by the plaintiff." 3 With respect to the repair of the windmill, the trial court found that "there is no clear and convincing proof that the windmill system fell down due to the defect of the construction." 4

The Court of Appeals reversed the trial court. It ruled that the construction of the deep well was included in the agreement of the parties because the term "deep well" was mentioned in both proposals. It also gave credence to the testimony of respondent's witness Guillermo Pili, the proprietor of SPGMI which installed the deep well, that petitioner Tanguilig told him that the cost of constructing the deep well would be deducted from the contract price of P60,000.00. Upon these premises the appellate court concluded that respondent's payment of P15,000.00 to SPGMI should be applied to his remaining balance with petitioner thus effectively extinguishing his contractual obligation. However, it rejected petitioner's claim of force majeure and ordered the latter to reconstruct the windmill in accordance with the stipulated one-year guaranty.

His motion for reconsideration having been denied by the Court of Appeals, petitioner now seeks relief from this Court. He raises two issues: firstly, whether the agreement to construct the windmill system included the installation of a deep well and, secondly, whether petitioner is under obligation to reconstruct the windmill after it collapsed.

We reverse the appellate court on the first issue but sustain it on the second.

The preponderance of evidence supports the finding of the trial court that the installation of a deep well was not included in the proposals of petitioner to construct a windmill system for respondent. There were in fact two (2) proposals: one dated 19 May 1987 which pegged the contract price at P87,000.00 (Exh. "1"). This was rejected by respondent. The other was submitted three days later, i.e., on 22 May 1987 which contained more specifications but proposed a lower contract price of P60,000.00 (Exh. "A"). The latter proposal was accepted by respondent and the construction immediately followed. The pertinent portions of the first letter-proposal (Exh. "1") are reproduced hereunder —

In connection with your Windmill System and Installation, we would like to quote to you as follows:

One (1) Set — Windmill suitable for 2 inches diameter deepwell, 2 HP, capacity, 14 feet in diameter, with 20 pieces blade, Tower 40 feet high, including mechanism which is not advisable to operate during extra-intensity wind. Excluding cylinder pump.

UNIT CONTRACT PRICE P87,000.00

The second letter-proposal (Exh. "A") provides as follows:

In connection with your Windmill system, Supply of Labor Materials and Installation, operated water pump, we would like to quote to you asfollows —

One (1) set — Windmill assembly for 2 inches or 3 inches deep-well pump, 6 Stroke, 14 feet diameter, 1-lot blade materials, 40 feet Tower complete with standard appurtenances up to Cylinder pump, shafting U.S. adjustable International Metal.

One (1) lot — Angle bar, G.I. pipe, Reducer Coupling, Elbow Gate valve, cross Tee coupling.

One (1) lot — Float valve.

One (1) lot — Concreting materials foundation.

F. O. B. LagunaContract Price P60,000.00

Notably, nowhere in either proposal is the installation of a deep well mentioned, even remotely. Neither is there an itemization or description of the materials to be used in constructing the deep well. There is absolutely no mention in the two (2) documents that a deep well pump is a component of the proposed windmill system. The contract prices fixed in both proposals cover only the features specifically described therein and no other. While the words "deep well" and "deep well pump" are mentioned in both, these do not indicate that a deep well is part of the windmill system. They merely describe the type of deep well pump for which the proposed windmill would be suitable. As correctly pointed out by petitioner, the words "deep well" preceded by the prepositions "for" and "suitable for" were meant only to convey the idea that the proposed windmill would be appropriate for a deep well pump with a diameter of 2 to 3 inches. For if the real intent of petitioner was to include a deep well in the agreement to construct a windmill, he would have used instead the conjunctions "and" or "with." Since the terms of the instruments are clear and leave no doubt as to their meaning they should not be disturbed.

Moreover, it is a cardinal rule in the interpretation of contracts that the intention of the parties shall be accorded primordial consideration 5 and, in caseof doubt, their contemporaneous and subsequent acts shall be principally considered. 6 An examination of such contemporaneous and subsequent acts of respondent as well as the attendant circumstances does not persuade us to uphold him.

Respondent insists that petitioner verbally agreed that the contract price of P60,000.00 covered the installation of a deep well pump. He contends that since petitioner did not have the capacity to install the pump the latter agreed to have a third party do the work

the cost of which was to be deducted from the contract price. To prove his point, he presented Guillermo Pili of SPGMI who declared that petitioner Tanguilig approached him with a letter from respondent Herce Jr. asking him to build a deep well pump as "part of the price/contract which Engineer (Herce) had with Mr. Tanguilig." 7

We are disinclined to accept the version of respondent. The claim of Pili that Herce Jr. wrote him a letter is unsubstantiated. The alleged letter was never presented in court by private respondent for reasons known only to him. But granting that this written communication existed, it could not have simply contained a request for Pili to install a deep well; it would have also mentioned the party who would pay for the undertaking. It strains credulity that respondent would keep silent on this matter and leave it all to petitioner Tanguilig to verbally convey to Pili that the deep well was part of the windmill construction and that its payment would come from the contract price of P60,000.00.

We find it also unusual that Pili would readily consent to build a deep well the payment for which would come supposedly from the windmill contract price on the mere representation of petitioner, whom he had never met before, without a written commitment at least from the former. For if indeed the deep well were part of the windmill project, the contract for its installation would have been strictly a matter between petitioner and Pili himself with the former assuming the obligation to pay the price. That it was respondent Herce Jr. himself who paid for the deep well by handing over to Pili the amount of P15,000.00 clearly indicates that the contract for the deep well was not part of the windmill project but a separate agreement between respondent and Pili. Besides, if the price of P60,000.00 included the deep well, the obligation of respondent was to pay the entire amount to petitioner without prejudice to any action that Guillermo Pili or SPGMI may take, if any, against the latter. Significantly, when asked why he tendered payment directly to Pili and not to petitioner, respondent explained, rather lamely, that he did it "because he has (sic) the money, so (he) just paid the money in his possession." 8

Can respondent claim that Pili accepted his payment on behalf of petitioner? No. While the law is clear that "payment shall be made to the person in whose favor the obligation has been constituted, or his successor in interest, or any person authorized to receive it," 9 it does not appear from the record that Pili and/or SPGMI was so authorized.

Respondent cannot claim the benefit of the law concerning "payments made by a third person." 10 The Civil Code provisions do not apply in the instant case because no creditor-debtor relationship between petitioner and Guillermo Pili and/or SPGMI has been established regarding the construction of the deep well. Specifically, witness Pili did not testify that he entered into a contract with petitioner for the construction of respondent's deep well. If SPGMI was really commissioned by petitioner to construct the deep well, an agreement particularly to this effect should have been entered into.

The contemporaneous and subsequent acts of the parties concerned effectively belie respondent's assertions. These circumstances only show that the construction of the well by SPGMI was for the sole account of respondent and

that petitioner merely supervised the installation of the well because the windmill was to be connected to it. There is no legal nor factual basis by which this Court can impose upon petitioner an obligation he did not expressly assume nor ratify.

The second issue is not a novel one. In a long line of cases 11 this Court has consistently held that in order for a party to claim exemption from liability by reason of fortuitous event under Art. 1174 of the Civil Code the event should be the sole and proximate cause of the loss or destruction of the object of the contract. In Nakpil vs. Court of Appeals, 12 four (4) requisites must concur: (a) the cause of the breach of the obligation must be independent of the will of the debtor; (b) the event must be either unforeseeable or unavoidable; (c) the event must be such as to render it impossible for the debtor to fulfill his obligation in a normal manner; and, (d) the debtor must be free from any participation in or aggravation of the injury to the creditor.

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

The appellate court correctly observed that "given the newly-constructed windmill system, the same would not have collapsed had there been no inherent defect in it which could only be attributable to the appellee." 13 It emphasized that respondent had in his favor the presumption that "things have happened according to the ordinary course of nature and the ordinary habits of life." 14 This presumption has not been rebutted by petitioner.

Finally, petitioner's argument that private respondent was already in default in the payment of his outstanding balance of P15,000.00 and hence should bear his own loss, is untenable. In reciprocal obligations, neither party incurs in delay if the other does not comply or is not ready to comply in a proper manner with what is incumbent upon him. 15 When the windmill failed to function properly it became incumbent upon petitioner to institute the proper repairs in accordance with the guaranty stated in the contract. Thus, respondent cannot be said to have incurred in delay; instead, it is petitioner who should bear the expenses for the reconstruction of the windmill. Article 1167 of the Civil Code is explicit on this point that if a person obliged to do something fails to do it, the same shall be executed at his cost.

WHEREFORE, the appealed decision is MODIFIED. Respondent VICENTE HERCE JR. is directed to pay petitioner JACINTO M. TANGUILIG the balance of P15,000.00 with interest at the legal rate from the date of the filing of the complaint. In return, petitioner is ordered to "reconstruct subject defective

windmill system, in accordance with the one-year guaranty" 16 and to complete the same within three (3) months from the finality of this decision.

SO ORDERED.

Padilla, Vitug, Kapunan and Hermosisima, Jr., JJ., concur.

Footnotes

1 TSN, 20 December 1988, pp. 10-12.

2 Exh. "A" and Exh. "1."

3 Rollo, p. 36.

4 Id., p. 37.

5 Kasilag v. Rodriguez, 69 Phil. 217 (1939).

6 Art. 1371, New Civil Code; GSIS v. Court of Appeals, G.R. No. 52478, 30 October 1986, 145 SCRA 311; Serrano v. Court of Appeals, No. L-46357, 9 October 1985, 139 SCRA 179.

7 TSN, 13 April 1989, pp. 18-19.

8 TSN, 13 April 1989, p. 22.

9 Art. 1240, New Civil Code.

10 Arts. 1236 and 1237, New Civil Code.

11 Nakpil v. Court of Appeals, Nos. L-47851, L-47863, L-47896, 3 October 1986, 144 SCRA 596; National Power Corporation v. Court of Appeals, G.R. Nos. L-47379 and 47481, 16 May 1988, 161 SCRA 334; National Power Corporation v. Court of Appeals, G.R. Nos. 103442-45, 21 May 1993, 222 SCRA 415.

12 See Note 11.

13 Rollo, p. 44.

14 Sec. 3, par. (y), Rule 131, Revised Rules of Evidence.

15 Art. 1169, last par., New Civil Code.

16 See CA Decision, p. 7; Rollo, p. 27.

Republic of the PhilippinesSUPREME COURT

Manila

THIRD DIVISION

 

G.R. No. 102316 June 30, 1997

VALENZUELA HARDWOOD AND INDUSTRIAL SUPPLY INC., petitioner, vs.COURT OF APPEALS AND SEVEN BROTHERS SHIPPING CORPORATION, respondents.

 

PANGANIBAN, J.:

Is a stipulation in a charter party that the "(o)wners shall not be responsible for loss, split, short-landing, breakages and any kind of damages to the cargo" 1 valid? This is the main question raised in this petition for review assailing the Decision of Respondent Court of Appeals 2 in CA-G.R. No. CV-20156 promulgated on October 15, 1991. The Court of Appeals modified the judgment of the Regional Trial Court of Valenzuela, Metro Manila, Branch 171, the dispositive portion of which reads:

WHEREFORE, Judgment is hereby rendered ordering South Sea Surety and Insurance Co., Inc. to pay plaintiff the sum of TWO MILLION PESOS (P2,000,000.00) representing the value of the policy of the lost logs with legal interest thereon from the date of demand on February 2, 1984 until the amount is fully paid or in the alternative, defendant Seven Brothers Shipping Corporation to pay plaintiff the amount of TWO MILLION PESOS (2,000,000.00) representing the value of lost logs plus legal interest from the date of demand on April 24, 1984 until full payment thereof; the reasonable attorney's fees in the amount equivalent to five (5) percent of the amount of the claim and the costs of the suit.

Plaintiff is hereby ordered to pay defendant Seven Brothers Shipping Corporation the sum of TWO HUNDRED THIRTY THOUSAND PESOS (P230,000.00) representing the balance of the stipulated freight charges.

Defendant South Sea Surety and Insurance Company's counterclaim is hereby dismissed.

In its assailed Decision, Respondent Court of Appeals held:

WHEREFORE, the appealed judgment is hereby AFFIRMED except in so far (sic) as the liability of the Seven Brothers Shipping Corporation to the plaintiff is concerned which is hereby REVERSED and SET ASIDE. 3

The Facts

The factual antecedents of this case as narrated in the Court of Appeals Decision are as follows:

It appears that on 16 January 1984, plaintiff (Valenzuela Hardwood and Industrial Supply, Inc.) entered into an agreement with the defendant Seven Brothers (Shipping Corporation) whereby the latter undertook to load on board its vessel M/V Seven Ambassador the former's lauan round logs numbering 940 at the port of Maconacon, Isabela for shipment to Manila.

On 20 January 1984, plaintiff insured the logs against loss and/or damage with defendant South Sea Surety and Insurance Co., Inc. for P2,000,000.00 and the latter issued its Marine Cargo Insurance Policy No. 84/24229 for P2,000,000.00 on said date.

On 24 January 1984, the plaintiff gave the check in payment of the premium on the insurance policy to Mr. Victorio Chua.

In the meantime, the said vessel M/V Seven Ambassador sank on 25 January 1984 resulting in the loss of the plaintiff's insured logs.

On 30 January 1984, a check for P5,625.00 (Exh. "E") to cover payment of the premium and documentary stamps due on the policy was tendered due to the insurer but was not accepted. Instead, the South Sea Surety and Insurance Co., Inc. cancelled the insurance policy it issued as of the date of the inception for non-payment of the premium due in accordance with Section 77 of the Insurance Code.

On 2 February 1984, plaintiff demanded from defendant South Sea Surety and Insurance Co., Inc. the payment of the proceeds of the policy but the latter denied liability under the policy. Plaintiff likewise filed a formal claim with defendant Seven Brothers Shipping Corporation for the value of the lost logs but the latter denied the claim.

After due hearing and trial, the court a quo rendered judgment in favor of plaintiff and against defendants. Both defendants shipping corporation and the surety company appealed.

Defendant-appellant Seven Brothers Shipping Corporation impute (sic) to the court a quo the following assignment of errors, to wit:

A. The lower court erred in holding that the proximate cause of the sinking of the vessel Seven Ambassadors, was not due to fortuitous event but to the negligence of the captain in stowing and securing the logs on board, causing the iron chains to snap and the logs to roll to the portside.

B. The lower court erred in declaring that the non-liability clause of the Seven Brothers Shipping Corporation from logs (sic) of the cargo stipulated in the charter party is void for being contrary to public policy invoking article 1745 of the New Civil Code.

C. The lower court erred in holding defendant-appellant Seven Brothers Shipping Corporation liable in the alternative and ordering/directing it to pay plaintiff-appellee the amount of two million (2,000,000.00) pesos representing the value of the logs plus legal interest from date of demand until fully paid.

D. The lower court erred in ordering defendant-appellant Seven Brothers Shipping Corporation to pay appellee reasonable attorney's fees in the amount equivalent to 5% of the amount of the claim and the costs of the suit.

E. The lower court erred in not awarding defendant-appellant Seven Brothers Corporation its counter-claim for attorney's fees.

F. The lower court erred in not dismissing the complaint against Seven Brothers Shipping Corporation.

Defendant-appellant South Sea Surety and Insurance Co., Inc. assigns the following errors:

A. The trial court erred in holding that Victorio Chua was an agent of defendant-appellant South Sea Surety and Insurance Company, Inc. and likewise erred in not holding that he was the representative of the insurance broker Columbia Insurance Brokers, Ltd.

B. The trial court erred in holding that Victorio Chua received compensation/commission on the premiums paid on the policies issued by the defendant-appellant South Sea Surety and Insurance Company, Inc.

C. The trial court erred in not applying Section 77 of the Insurance Code.

D. The trial court erred in disregarding the "receipt of payment clause" attached to and forming part of the Marine Cargo Insurance Policy No. 84/24229.

E. The trial court in disregarding the statement of account or bill stating the amount of premium and documentary stamps to be paid on the policy by the plaintiff-appellee.

F. The trial court erred in disregarding the endorsement of cancellation of the policy due to non-payment of premium and documentary stamps.

G. The trial court erred in ordering defendant-appellant South Sea Surety and Insurance Company, Inc. to pay plaintiff-appellee P2,000,000.00 representing value of the policy with legal interest from 2 February 1984 until the amount is fully paid,

H. The trial court erred in not awarding to the defendant-appellant the attorney's fees alleged and proven in its counterclaim.

The primary issue to be resolved before us is whether defendants shipping corporation and the surety company are liable to the plaintiff for the latter's lost logs. 4

The Court of Appeals affirmed in part the RTC judgment by sustaining the liability of South Sea Surety and Insurance Company ("South Sea"), but modified it by holding that Seven Brothers Shipping Corporation ("Seven Brothers") was not liable for the lost cargo. 5 In modifying the RTC judgment, the respondent appellate court ratiocinated thus:

It appears that there is a stipulation in the charter party that the ship owner would be exempted from liability in case of loss.

The court a quo erred in applying the provisions of the Civil Code on common carriers to establish the liability of the shipping corporation. The provisions on common carriers should not be applied where the carrier is not acting as such but as a private carrier.

Under American jurisprudence, a common carrier undertaking to carry a special cargo or chartered to a special person only, becomes a private carrier.

As a private carrier, a stipulation exempting the owner from liability even for the negligence of its agent is valid (Home Insurance Company, Inc. vs. American Steamship Agencies, Inc., 23 SCRA 24).

The shipping corporation should not therefore be held liable for the loss of the logs. 6

South Sea and herein Petitioner Valenzuela Hardwood and Industrial Supply, Inc. ("Valenzuela") filed separate petitions for review before this Court. In a Resolution dated June 2, 1995, this Court denied the petition of SouthSea. 7 There the Court found no reason to reverse the factual findings of the trial court and the Court of Appeals that Chua was indeed an authorized agent of South Sea when he received Valenzuela's premium payment for the marine cargo insurance policy which was thus binding on the insurer. 8

The Court is now called upon to resolve the petition for review filed by Valenzuela assailing the CA Decision which exempted Seven Brothers from any liability for the lost cargo.

The Issue

Petitioner Valenzuela's arguments resolve around a single issue: "whether or not respondent Court (of Appeals) committed a reversible error in upholding the validity of the stipulation in the charter party executed between the petitioner and the private respondent exempting the latter from liability for the loss of petitioner's logs arising from the negligence of its (Seven Brothers') captain." 9

The Court's Ruling

The petition is not meritorious.

Validity of Stipulation is Lis Mota

The charter party between the petitioner and private respondent stipulated that the "(o)wners shall not be responsible for loss, split, short-landing, breakages and any kind of damages to the cargo." 10 The validity of this stipulation is the lis mota of this case.

It should be noted at the outset that there is no dispute between the parties that the proximate cause of the sinking of M/V Seven Ambassadors resulting in the loss of its cargo was the "snapping of the iron chains and the subsequent rolling of the logs to the portside due to the negligence of the captain in stowing and securing the logs on board the vessel and not due to fortuitous event." 11 Likewise undisputed is the status of

Private Respondent Seven Brothers as a private carrier when it contracted to transport the cargo of Petitioner Valenzuela. Even the latter admits this in its petition. 12

The trial court deemed the charter party stipulation void for being contrary to public policy, 13 citing Article 1745 of the Civil Code which provides:

Art. 1745. Any of the following or similar stipulations shall be considered unreasonable, unjust and contrary to public policy:

(1) That the goods are transported at the risk of the owner or shipper;

(2) That the common carrier will not be liable for any loss, destruction, or deterioration of the goods;

(3) That the common carrier need not observe any diligence in the custody of the goods;

(4) That the common carrier shall exercise a degree of diligence less than that of a good father of a family, or of a man of ordinary prudence in the vigilance over the movables transported;

(5) That the common carrier shall not be responsible for the acts or omissions of his or its employees;

(6) That the common carrier's liability for acts committed by thieves, or of robbers who do not act with grave or irresistible threat, violence or force, is dispensed with or diminished;

(7) That the common carrier is not responsible for the loss, destruction, or deterioration of goods on account of the defective condition of the car, vehicle, ship, airplane or other equipment used in the contract of carriage.

Petitioner Valenzuela adds that the stipulation is void for being contrary to Articles 586 and 587 of the Code of Commerce 14 and Articles 1170 and 1173 of the Civil Code. Citing Article 1306 and paragraph 1, Article 1409 of the Civil Code, 15 petitioner further contends that said stipulation "gives no duty or obligation to the private respondent to observe the diligence of a good father of a family in the custody and transportation of the cargo."

The Court is not persuaded. As adverted to earlier, it is undisputed that private respondent had acted as a private carrier in transporting petitioner's lauan logs. Thus, Article 1745 and other Civil Code provisions on common carriers which were cited by petitioner may not be applied unless expressly stipulated by the parties in their charter party. 16

In a contract of private carriage, the parties may validly stipulate that responsibility for the cargo rests solely on the charterer, exempting the shipowner from liability for loss of or damage to the cargo caused even by the negligence of the ship captain. Pursuant to Article 1306 17 of the Civil Code, such stipulation is valid because it is freely entered into by the parties and the same is not contrary to law, morals, good customs, public order, or public policy. Indeed, their contract of private carriage is not even a contract of

adhesion. We stress that in a contract of private carriage, the parties may freely stipulate their duties and obligations which perforce would be binding on them. Unlike in a contract involving a common carrier, private carriage does not involve the general public. Hence, the stringent provisions of the Civil Code on common carriers protecting the general public cannot justifiably be applied to a ship transporting commercial goods as a private carrier. Consequently, the public policy embodied therein is not contravened by stipulations in a charter party that lessen or remove the protection given by law in contracts involving common carriers.

The issue posed in this case and the arguments raised by petitioner are not novel; they were resolved long ago by this Court in Home Insurance Co. vs. American Steamship Agencies, Inc. 18 In that case, the trial court similarly nullified a stipulation identical to that involved in the present case for being contrary to public policy based on Article 1744 of the Civil Code and Article 587 of the Code of Commerce. Consequently, the trial court held the shipowner liable for damages resulting for the partial loss of the cargo. This Court reversed the trial court and laid down, through Mr. Justice Jose P. Bengzon, the following well-settled observation and doctrine:

The provisions of our Civil Code on common carriers were taken from Anglo-American law. Under American jurisprudence, a common carrier undertaking to carry a special cargo or chartered to a special person only, becomes a private carrier. As a private carrier, a stipulation exempting the owner from liability for the negligence of its agent is not against public policy, and is deemed valid.

Such doctrine We find reasonable. The Civil Code provisions on common carriers should not be applied where the carrier is not acting as such but as a private carrier. The stipulation in the charter party absolving the owner from liability for loss due to the negligence of its agent would be void if the strict public policy governing common carriers is applied. Such policy has no force where the public at large is not involved, as in this case of a ship totally chartered for the used of a single party. 19 (Emphasis supplied.)

Indeed, where the reason for the rule ceases, the rule itself does not apply. The general public enters into a contract of transportation with common carriers without a hand or a voice in the preparation thereof. The riding public merely adheres to the contract; even if the public wants to, it cannot submit its own stipulations for the approval of the common carrier. Thus, the law on common carriers extends its protective mantle against one-sided stipulations inserted in tickets, invoices or other documents over which the riding public has no understanding or, worse, no choice. Compared to the general public, a charterer in a contract of private carriage is not similarly situated. It can — and in fact it usually does — enter into a free and voluntary agreement. In practice, the parties in a contract of private carriage can stipulate the carrier's obligations and liabilities over the shipment which, in turn, determine the price or consideration of the charter. Thus, a charterer, in exchange for convenience and economy, may opt to set aside the protection of the law on common carriers. When the charterer decides to exercise this option, he takes a normal business risk.

Petitioner contends that the rule in Home Insurance is not applicable to the present case because it "covers only a stipulation exempting a private carrier from liability for

the negligence of his agent, but it does not apply to a stipulation exempting a private carrier like private respondent from the negligence of his employee or servant which is the situation in this case." 20 This contention of petitioner is bereft of merit, for it raises a distinction without any substantive difference. The case Home Insurance specifically dealt with "the liability of the shipowner for acts or negligence of its captain and crew" 21 and a charter party stipulation which "exempts the owner of the vessel from any loss or damage or delay arising from any other source, even from the neglect or fault of the captain or crew or some other person employed by the owner onboard, for whose acts the owner would ordinarily be liable except for said paragraph." 22 Undoubtedly, Home Insurance is applicable to the case at bar.

The naked assertion of petitioner that the American rule enunciated in Home Insurance is not the rule in the Philippines 23 deserves scant consideration. The Court there categorically held that said rule was "reasonable" and proceeded to apply it in the resolution of that case. Petitioner miserably failed to show such circumstances or arguments which would necessitate a departure from a well-settled rule. Consequently, our ruling in said case remains a binding judicial precedent based on the doctrine of stare decisis and Article 8 of the Civil Code which provides that "(j)udicial decisions applying or interpreting the laws or the Constitution shall form part of the legal system of the Philippines."

In fine, the respondent appellate court aptly stated that "[in the case of] a private carrier, a stipulation exempting the owner from liability even for the negligence of its agents is valid." 24

Other Arguments

On the basis of the foregoing alone, the present petition may already be denied; the Court, however, will discuss the other arguments of petitioner for the benefit and satisfaction of all concerned.

Articles 586 and 587, Code of Commerce

Petitioner Valenzuela insists that the charter party stipulation is contrary to Articles 586 and 587 of the Code of Commerce which confer on petitioner the right to recover damages from the shipowner and ship agent for the acts or conduct of the captain. 25 We are not persuaded. Whatever rights petitioner may have under the aforementioned statutory provisions were waived when it entered into the charter party.

Article 6 of the Civil Code provides that "(r)ights may be waived, unless the waiver is contrary to law, public order, public policy, morals, or good customs, or prejudicial to a person with a right recognized by law." As a general rule, patrimonial rights may be waived as opposed to rights to personality and family rights which may not be made the subject of waiver. 26 Being patently and undoubtedly patrimonial, petitioner's right conferred under said articles may be waived. This, the petitioner did by acceding to the contractual stipulation that it is solely responsible or any damage to the cargo, thereby

exempting the private carrier from any responsibility for loss or damage thereto. Furthermore, as discussed above, the contract of private carriage binds petitioner and private respondent alone; it is not imbued with public policy considerations for the general public or third persons are not affected thereby.

Articles 1170 and 1173, Civil Code

Petitioner likewise argues that the stipulation subject of this controversy is void for being contrary to Articles 1170 and 1173 of the Civil Code 27 which read:

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

Art. 1173. The fault or negligence of the obligor consists in the omission of that diligence which is required by the nature of the obligation and corresponds with the circumstances of the persons, of the time and of the place. When negligence shows bad faith, the provisions of articles 1171 and 2201, shall apply.

If the law 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.

The Court notes that the foregoing articles are applicable only to the obligor or the one with an obligation to perform. In the instant case, Private Respondent Seven Brothers is not an obligor in respect of the cargo, for this obligation to bear the loss was shifted to petitioner by virtue of the charter party. This shifting of responsibility, as earlier observed, is not void. The provisions cited by petitioner are, therefore, inapplicable to the present case.

Moreover, the factual milieu of this case does not justify the application of the second paragraph of Article 1173 of the Civil Code which prescribes the standard of diligence to be observed in the event the law or the contract is silent. In the instant case, Article 362 of the Code of Commerce 28 provides the standard of ordinary diligence for the carriage of goods by a carrier. The standard of diligence under this statutory provision may, however, be modified in a contract of private carriage as the petitioner and private respondent had done in their charter party.

Cases Cited by Petitioner Inapplicable

Petitioner cites Shewaram vs. Philippine Airlines, Inc. 29 which, in turn, quoted Juan Ysmael & Co. vs. Gabino Barreto & Co. 30 and argues that the public policy considerations stated there vis-a-vis contractual stipulations limiting the carrier's liability be applied "with equal force" to this case. 31 It also cites Manila Railroad Co. vs. Compañia Transatlantica 32 and contends that stipulations exempting a party from liability for damages due to negligence "should not be countenanced" and should be "strictly construed" against the party claiming its benefit. 33 We disagree.

The cases of Shewaram and Ysmael both involve a common carrier; thus, they necessarily justify the application of such policy considerations and concomitantly stricter rules. As already discussed above, the public policy considerations behind the rigorous treatment of common carriers are absent in the case of private carriers. Hence, the stringent laws applicable to common carriers are not applied to private carries. The case of Manila Railroad is also inapplicable because the action for damages there does not involve a contract for transportation. Furthermore, the defendant therein made a "promise to use due care in the lifting operations" and, consequently, it was "bound by its undertaking"'; besides, the exemption was intended to cover accidents due to hidden defects in the apparatus or other unforseeable occurrences" not caused by its "personal negligence." This promise was thus constructed to make sense together with the stipulation against liability for damages. 34 In the present case, we stress that the private respondent made no such promise. The agreement of the parties to exempt the shipowner from responsibility for any damage to the cargo and place responsibility over the same to petitioner is the lone stipulation considered now by this Court.

Finally, petitioner points to Standard Oil Co. of New York vs. Lopez Costelo, 35 Walter A. Smith & Co. vs. Cadwallader Gibson Lumber Co., 36 N. T . Hashim and Co. vs. Rocha and Co., 37 Ohta Development Co. vs. Steamship "Pompey" 38 and Limpangco Sons vs. Yangco Steamship Co. 39 in support of its contention that the shipowner be held liable for damages. 40 These however are not on all fours with the present case because they do not involve a similar factual milieu or an identical stipulation in the charter party expressly exempting the shipowner form responsibility for any damage to the cargo.

Effect of the South Sea Resolution

In its memorandum, Seven Brothers argues that petitioner has no cause of action against it because this Court has earlier affirmed the liability of South Sea for the loss suffered by petitioner. Private respondent submits that petitioner is not legally entitled to collect twice for a single loss. 41 In view of the above disquisition upholding the validity of the questioned charter party stipulation and holding that petitioner may not recover from private respondent, the present issue is moot and academic. It suffices to state that the Resolution of this Court dated June 2, 1995 42 affirming the liability of South Sea does not, by itself, necessarily preclude the petitioner from proceeding against private respondent. An aggrieved party may still recover the deficiency for the person causing the loss in the event the amount paid by the insurance company does not fully cover the loss. Article 2207 of the Civil Code provides:

Art. 2207. If the plaintiff's property has been insured, and he has received indemnity for the insurance company for the injury or loss arising out of the wrong or breach of contract complained of, the insurance company shall be subrogated to the rights of the insured against the wrongdoer or the person who has violated the contract. If the amount paid by the insurance company does not fully cover the injury or loss, the aggrieved party shall be entitled to recover the deficiency form the person causing the loss or injury.

WHEREFORE, premises considered, the petition is hereby DENIED for its utter failure to show any reversible error on the part of Respondent Court. The assailed Decision is AFFIRMED.

SO ORDERED.

Narvasa, C.J., Davide, Jr., Melo and Francisco, JJ., concur.

Footnotes

1 Charter Party, p. 2; Record of the Regional Trial Court, p. 202.

2 Seventeenth Division, composed of J . Fernando A. Santiago, ponente, and JJ . Pedro A. Ramirez, Chairman, and Fermin A. Martin, Jr., concurring.

3 Rollo, p. 24.

4 Decision of the Court of Appeals, pp. 1-4; rollo, pp. 19-22.

5 Ibid., p. 6; rollo, p. 24.

6 Ibid., p. 4; rollo, p. 22.

7 South Sea Surety and Insurance Company, Inc. vs. Hon. Court of Appeals and Valenzuela Hardwood and Industrial Supply, Inc., G.R. No. 102253, p. 4, June 2, 1995.

8 Ibid., pp. 5-7.

9 Memorandum for Petitioner, p. 5; rollo, p. 47.

10 Charter Party of January 16, 1984; Petitioner's Memorandum, p. 2; rollo, p. 62. See first, second, and third versions of charter party in Record of the Regional Trial Court, pp. 201-206.

11 Decision of the Regional Trial Court, p. 17; Record of the Regional Trial Court, p. 383.

12 Petition, p. 13; rollo, p. 14.

13 Decision of the Regional Trial Court, p. 17; Record of the Regional Trial Court, p. 383.

14 Petition, p. 2, rollo, p. 9. The Code of Commerce provides:

Art. 586. The shipowner and the ship agent shall be civilly liable for the acts of the captain and for the obligations contracted by the latter to repair equip, and provision the vessel, provided the creditors prove that the amount claimed was invested therein.

Art. 587. The ship agent shall also be civilly liable for the indemnities in favor of third persons which arise from the conduct of the captain in the vigilance over the goods which the vessel carried; but he may exempt himself therefrom by abandoning the vessel with all her equipments and the freight he may have earned during the voyage.

15 Ibid., p. 11; rollo, p. 53.

16 See Hernandez, Eduardo F. and Peñasales, Antero A., Philippine Admiralty and Maritime Law, p. 250, (1987).

17 "Art. 1306. The contracting parties may establish such stipulations, clauses, terms and conditions as they may deem convenient, provided they are not contrary to law, morals, good customs, public order, or public policy." See also, Section 10, Article III, Constitution; People vs. Pomar, 46 Phil. 440, 449, (1924).

18 23 SCRA 24, April 4, 1968.

19 Ibid., pp. 27-28.

20 Petitioner's Memorandum, p. 12; rollo, p. 57.

21 Home Insurance Co. vs. American Steamship Agencies, Inc., supra, p. 27.

22 Ibid.

23 Petitioner's Memorandum, pp. 8-9; rollo, pp. 50-51.

24 Decision, p. 4; rollo, p. 22.

25 Petitioner's Memorandum, p. 15; rollo, p. 57.

Art 586. The shipowner and the ship agent shall be civilly liable for the acts of the captain and for the obligations contracted by the latter to repair, equip, and provision the vessel, provided the creditor proves that the amount claimed was invested therein.

By ship agent is understood the person instrusted with the provisioning of a vessel, or who represents her in port in which she may be found.

Art. 587. The ship agent shall also be civilly liable for the indemnities in favor of third persons which arise from the conduct of the captain in the vigilance over the goods which the vessels carried; but he may exempt himself therefrom by abandoning the vessel with all her equipment and the freight he may have earned during the voyage.

26 Tolentino, Arturo M., Commentaries and Jurisprudence on the Civil Code of the Philippines, p. 29, Volume I, (1990).

27 Petitioner's Memorandum, p. 15; rollo, p. 54.

28 Art. 362. Nevertheless, the carrier shall be liable for the losses and damages resulting from causes mentioned in the preceding article if it is proved, as against him, that they arose through his negligence or by reason of his having failed to take the precautions which usage has established among careful persons, unless the shipper has committed fraud in the bill of lading, representing the goods to be of a kind or quality different from what they really were.

If notwithstanding the precautions referred to in this article, the goods transported run the risk of being lost, on account of their nature or by reason of unavoidable accident, there

being no time for their owners to dispose of them, the carrier may proceed to sell them, placing them for the purpose at the disposal of the judicial authority or of the officials designated by special provisions.

29 17 SCRA 606, July 7, 1966.

30 51 Phil. 90, (1927).

31 Petitioner's Memorandum, pp. 9-10; rollo, pp. 51-52.

32 38 Phil. 875, (1918).

33 Petitioner's Memorandum, p. 13, rollo, p. 55.

34 Manila Railroad vs. Compañia Transatlantica, supra, pp. 886-887.

35 42 Phil. 256, (1921).

36 55 Phil. 517 (1930).

37 18 Phil. 315, (1911).

38 49 Phil. 117, (1926).

39 34 Phil. 597, (1916).

40 Petitioner's Memorandum, p. 7; rollo, p. 49.

41 Memorandum For Private Respondent, p. 8; rollo, p. 68.

42 Supra.

Republic of the PhilippinesSUPREME COURT

Manila

SECOND DIVISION

 

G.R. No. 114791 May 29, 1997

NANCY GO AND ALEX GO, petitioners, vs.THE HONORABLE COURT OF APPEALS, HERMOGENES ONG and JANE C. ONG, respondents.

 

ROMERO, J.:

No less than the Constitution commands us to protect marriage as an inviolable social institution and the foundation of the family. 1 In our society, the importance of a wedding ceremony cannot be underestimated as it is the matrix of the family and, therefore, an occasion worth reliving in the succeeding years.

It is in this light that we narrate the following undisputed facts:

Private respondents spouses Hermogenes and Jane Ong were married on June 7, 1981, in Dumaguete City. The video coverage of the wedding was provided by petitioners at a contract price of P1,650.00. Three times thereafter, the newlyweds tried to claim the video tape of their wedding, which they planned to show to their relatives in the United States where they were to spend their honeymoon, and thrice they failed because the tape was apparently not yet processed. The parties then agreed that the tape would be ready upon private respondents' return.

When private respondents came home from their honeymoon, however, they found out that the tape had been erased by petitioners and therefore, could no longer be delivered.

Furious at the loss of the tape which was supposed to be the only record of their wedding, private respondents filed on September 23, 1981 a complaint for specific performance and damages against petitioners before the Regional Trial Court, 7th Judicial District, Branch 33, Dumaguete City. After a protracted trial, the court a quo rendered a decision, to wit:

WHEREFORE, judgment is hereby granted:

1. Ordering the rescission of the agreement entered into between plaintiff Hermogenes Ong and defendant Nancy Go;

2. Declaring defendants Alex Go and Nancy Go jointly and severally liable to plaintiffs Hermogenes Ong and Jane C. Ong for the following sums:

a) P450.00 , the down payment made at contract time;

b) P75,000.00, as moral damages;

c) P20,000.00, as exemplary damages;

d) P5,000.00, as attorney's fees; and

e) P2,000.00, as litigation expenses;

Defendants are also ordered to pay the costs.

SO ORDERED.

Dissatisfied with the decision, petitioners elevated the case to the Court of Appeals which, on September 14, 1993, dismissed the appeal and affirmed the trial court's decision.

Hence, this petition.

Petitioners contend that the Court of Appeals erred in not appreciating the evidence they presented to prove that they acted only as agents of a certain Pablo Lim and, as such, should not have been held liable. In addition, they aver that there is no evidence to show that the erasure of the tape was done in bad faith so as to justify the award of damages. 2

The petition is not meritorious.

Petitioners claim that for the video coverage, the cameraman was employed by Pablo Lim who also owned the video equipment used. They further assert that they merely get a commission for all customers solicited for their principal. 3

This contention is primarily premised on Article 1883 of the Civil Code which states thus:

Art. 1883. If an agent acts in his own name, the principal has no right of action against the persons with whom the agent has contracted; neither have such persons against the principal.

In such case the agent is the one directly bound in favor of the person with whom he has contracted, as if the transaction were his own, except when the contract involves things belonging to the principal.

xxx xxx xxx

Petitioners' argument that since the video equipment used belonged to Lim and thus the contract was actually entered into between private respondents and Lim is not deserving of any serious consideration. In the instant case, the contract entered into is one of service, that is, for the video coverage of the wedding. Consequently, it can hardly be said that the object of the contract was the video equipment used. The use by petitioners of the video equipment of another person is of no consequence.

It must also be noted that in the course of the protracted trial below, petitioners did not even present Lim to corroborate their contention that they were mere agents of the latter. It would not be unwarranted to assume that their failure to present such a vital witness would have had an adverse result on the case. 4

As regards the award of damages, petitioners would impress upon this Court their lack of malice or fraudulent intent in the erasure of the tape. They insist that since private respondents did not claim the tape after the lapse of thirty days, as agreed upon in their contract, the erasure was done in consonance with consistent business practice to minimize losses. 5

We are not persuaded.

As correctly observed by the Court of Appeals, it is contrary to human nature for any newlywed couple to neglect to claim the video coverage of their wedding; the fact that private respondents filed a case against petitioners belies such assertion. Clearly, petitioners are guilty of actionable delay for having failed to process the video tape. Considering that private respondents were about to leave for the United States, they took care to inform petitioners that they would just claim the tape upon their return two months later. Thus, the erasure of the tape after the lapse of thirty days was unjustified.

In this regard, Article 1170 of the Civil Code provides that "those who in the performance of their obligations are guilty of fraud, negligence or delay, and those who is any manner contravene the tenor thereof, are liable for damages."

In the instant case, petitioners and private respondents entered into a contract whereby, for a fee, the former undertook to cover the latter's wedding and deliver to them a video copy of said event. For whatever reason, petitioners failed to provide private respondents with their tape. Clearly, petitioners are guilty of contravening their obligation to said private respondents and are thus liable for damages.

The grant of actual or compensatory damages in the amount of P450.00 is justified, as reimbursement of the downpayment paid by private respondents to petitioners. 6

Generally, moral damages cannot be recovered in an action for breach of contract because this case is not among those enumerated in Article 2219 of the Civil Code. However, it is also accepted in this jurisdiction that liability for a quasi-delict may still

exist despite the presence of contractual relations, that is, the act which violates the contract may also constitute a quasi-delict. 7 Consequently, moral damages are recoverable for the breach of contractwhich was palpably wanton, reckless, malicious or in bad faith, oppressive or abusive. 8

Petitioners' act or omission in recklessly erasing the video coverage of private respondents' wedding was precisely the cause of the suffering private respondents had to undergo.

As the appellate court aptly observed:

Considering the sentimental value of the tapes and the fact that the event therein recorded — a wedding which in our culture is a significant milestone to be cherished and remembered — could no longer be reenacted and was lost forever, the trial court was correct in awarding the appellees moral damages albeit in the amount of P75,000.00, which was a great reduction from plaintiffs' demand in the complaint in compensation for the mental anguish, tortured feelings, sleepless nights and humiliation that the appellees suffered and which under the circumstances could be awarded as allowed under Articles 2217 and 2218 of the Civil Code. 9

Considering the attendant wanton negligence committed by petitioners in the case at bar, the award of exemplary damages by the trial court is justified 10 to serve as a warning to all entities engaged in the same business to observe due diligence in the conduct of their affairs.

The award of attorney' s fees and litigation expenses are likewise proper, consistent with Article 2208 11 of the Civil Code.

Finally, petitioner Alex Go questions the finding of the trial and appellate courts holding him jointly and severally liable with his wife Nancy regarding the pecuniary liabilities imposed. He argues that when his wife entered into the contract with private respondent, she was acting alone for her sole interest. 12

We find merit in this contention. Under Article 117 of the Civil Code (now Article 73 of the Family Code), the wife may exercise any profession, occupation or engage in business without the consent of the husband. In the instant case, we are convinced that it was only petitioner Nancy Go who entered into the contract with private respondent. Consequently, we rule that she is solely liable to private respondents for the damages awarded below, pursuant to the principle that contracts produce effect only as between the parties who execute them. 13

WHEREFORE, the assailed decision dated September 14, 1993 is hereby AFFIRMED with the MODIFICATION that petitioner Alex Go is absolved from any liability to private respondents and that petitioner Nancy Go is solely liable to said private respondents for the judgment award. Costs against petitioners.

SO ORDERED.

Regalado, Puno, Mendoza and Torres, Jr., JJ., concur.

Footnotes

1 Section 2, Article XV, 1987 Constitution.

2 Rollo, pp. 15-23.

3 Ibid., p. 7.

4 Section 3(e), Rule 131 of the Rules of Court states, "(t)hat evidence willfully suppressed would be adverse if produced,".

5 Rollo, p. 19.

6 Article 2200, Civil Code of the Philippines.

7 PARAS, Civil Code of the Philippines, V, 1990, pp. 995-996, Singson v. Bank of the Philippine Islands, 23 SCRA 1117 (1968).

8 TOLENTINO, COMMENTARIES & JURISPRUDENCE ON THE CIVIL CODE OF THE PHILIPPINES, V, 1995, p. 656.

9 Rollo, p. 37.

10 Article 2232, Civil Code of the Philippines.

11 Art. 2208. In the absence of stipulation, attorney's fees and expenses of litigation, other than judicial costs, cannot be recovered, except:

(1) When exemplary damages are awarded;

xxx xxx xxx

12 Rollo, p. 23.

13 Article 1311, Civil Code of the Philippines.

Republic of the PhilippinesSUPREME COURT

Manila

SECOND DIVISION

G.R. No. 73867 February 29, 1988

TELEFAST COMMUNICATIONS/PHILIPPINE WIRELESS, INC., petitioner, vs.IGNACIO CASTRO, SR., SOFIA C. CROUCH, IGNACIO CASTRO JR., AURORA CASTRO, SALVADOR CASTRO, MARIO CASTRO, CONRADO CASTRO, ESMERALDA C. FLORO, AGERICO CASTRO, ROLANDO CASTRO, VIRGILIO CASTRO AND GLORIA CASTRO, and HONORABLE INTERMEDIATE APPELLATE COURT, respondents.

 

PADILLA, J.:

Petition for review on certiorari of the decision * of the Intermediate Appellate Court, dated 11 February 1986, in AC-G.R. No. CV-70245, entitled "Ignacio Castro, Sr., et al., Plaintiffs-Appellees, versus Telefast Communication/Philippine Wireless, Inc., Defendant-Appellant."

The facts of the case are as follows:

On 2 November 1956, Consolacion Bravo-Castro wife of plaintiff Ignacio Castro, Sr. and mother of the other plaintiffs, passed away in Lingayen, Pangasinan. On the same day, her daughter Sofia C. Crouch, who was then vacationing in the Philippines, addressed a telegram to plaintiff Ignacio Castro, Sr. at 685 Wanda, Scottsburg, Indiana, U.S.A., 47170 announcing Consolacion's death. The telegram was accepted by the defendant in its Dagupan office, for transmission, after payment of the required fees or charges.

The telegram never reached its addressee. Consolacion was interred with only her daughter Sofia in attendance. Neither the husband nor any of the other children of the deceased, then all residing in the United States, returned for the burial.

When Sofia returned to the United States, she discovered that the wire she had caused the defendant to send, had not been received. She and the other plaintiffs thereupon brought action for damages arising from defendant's breach of contract. The case was filed in the Court of First Instance of Pangasinan and docketed therein as Civil Case No. 15356. The only defense of the defendant was that it was unable to transmit the telegram because of "technical and atmospheric factors beyond its control." 1 No evidence appears on record that defendant ever made any attempt to advise the plaintiff Sofia C. Crouch as to why it could not transmit the telegram.

The Court of First Instance of Pangasinan, after trial, ordered the defendant (now petitioner) to pay the plaintiffs (now private respondents) damages, as follows, with interest at 6% per annum:

1. Sofia C. Crouch, P31.92 and P16,000.00 as compensatory damages and P20,000.00 as moral damages.

2. Ignacio Castro Sr., P20,000.00 as moral damages.

3. Ignacio Castro Jr., P20,000.00 as moral damages.

4. Aurora Castro, P10,000.00 moral damages.

5. Salvador Castro, P10,000.00 moral damages.

6. Mario Castro, P10,000.00 moral damages.

7. Conrado Castro, P10,000 moral damages.

8. Esmeralda C. Floro, P20,000.00 moral damages.

9. Agerico Castro, P10,000.00 moral damages.

10. Rolando Castro, P10,000.00 moral damages.

11. Virgilio Castro, P10,000.00 moral damages.

12. Gloria Castro, P10,000.00 moral damages.

Defendant is also ordered to pay P5,000.00 attorney's fees, exemplary damages in the amount of P1,000.00 to each of the plaintiffs and costs. 2

On appeal by petitioner, the Intermediate Appellate Court affirmed the trial court's decision but eliminated the award of P16,000.00 as compensatory damages to Sofia C. Crouch and the award of P1,000.00 to each of the private respondents as exemplary damages. The award of P20,000.00 as moral damages to each of Sofia C. Crouch, Ignacio Castro, Jr. and Esmeralda C. Floro was also reduced to P120,000. 00 for each. 3

Petitioner appeals from the judgment of the appellate court, contending that the award of moral damages should be eliminated as defendant's negligent act was not motivated by "fraud, malice or recklessness."

In other words, under petitioner's theory, it can only be held liable for P 31.92, the fee or charges paid by Sofia C. Crouch for the telegram that was never sent to the addressee thereof.

Petitioner's contention is without merit.

Art. 1170 of the Civil Code provides that "those who in the performance of their obligations are guilty of fraud, negligence or delay, and those who in any manner contravene the tenor thereof, are liable for damages." Art. 2176 also provides that "whoever by act or omission causes damage to another, there being fault or negligence, is obliged to pay for the damage done."

In the case at bar, petitioner and private respondent Sofia C. Crouch entered into a contract whereby, for a fee, petitioner undertook to send said private respondent's message overseas by telegram. This, petitioner did not do, despite performance by said private respondent of her obligation by paying the required charges. Petitioner was therefore guilty of contravening its obligation to said private respondent and is thus liable for damages.

This liability is not limited to actual or quantified damages. To sustain petitioner's contrary position in this regard would result in an inequitous situation where petitioner will only be held liable for the actual cost of a telegram fixed thirty (30) years ago.

We find Art. 2217 of the Civil Code applicable to the case at bar. It states: "Moral damages include physical suffering, mental anguish, fright, serious anxiety, besmirched reputation, wounded feelings, moral shock, social humiliation, and similar injury. Though incapable of pecuniary computation, moral damages may be recovered if they are the proximate results of the defendant's wrongful act or omission." (Emphasis supplied).

Here, petitioner's act or omission, which amounted to gross negligence, was precisely the cause of the suffering private respondents had to undergo.

As the appellate court properly observed:

[Who] can seriously dispute the shock, the mental anguish and the sorrow that the overseas children must have suffered upon learning of the death of their mother after she had already been interred, without being given the opportunity to even make a choice on whether they wanted to pay her their last respects? There is no doubt that these emotional sufferings were proximately caused by appellant's omission and substantive law provides for the justification for the award of moral damages. 4

We also sustain the trial court's award of P16,000.00 as compensatory damages to Sofia C. Crouch representing the expenses she incurred when she came to the Philippines from the United States to testify before the trial court. Had petitioner not been remiss in performing its obligation, there would have been no need for this suit or for Mrs. Crouch's testimony.

The award of exemplary damages by the trial court is likewise justified and, therefore, sustained in the amount of P1,000.00 for each of the private respondents, as a warning to all telegram companies to observe due diligence in transmitting the messages of their customers.

WHEREFORE, the petition is DENIED. The decision appealed from is modified so that petitioner is held liable to private respondents in the following amounts:

(1) P10,000.00 as moral damages, to each of private respondents;

(2) P1,000.00 as exemplary damages, to each of private respondents;

(3) P16,000.00 as compensatory damages, to private respondent Sofia C. Crouch;

(4) P5,000.00 as attorney's fees; and

(5) Costs of suit.

SO ORDERED.

Yap (Chairman), Paras and Sarmiento, JJ., concur.

 

 

Separate Opinions

 

MELENCIO-HERRERA, J., concurring.

[I] concur.In addition to compensatory and exemplary damages, moral damages are recoverable in actions for breach of contract, as in this case, where the breach has been wanton and reckless, tantamount to bad faith.

 

 

Separate Opinions

MELENCIO-HERRERA, J., concurring.

[I] concur.In addition to compensatory and exemplary damages, moral damages are recoverable in actions for breach of contract, as in this case, where the breach has been wanton and reckless, tantamount to bad faith.

Footnotes

* Penned by Justice Serafin E. Camilon, with the concurrence of Justices Crisolito Pascual, Jose C. Campos, Jr. and Desiderio P. Jurado.

1 Rollo at 8.

2 Rollo at 9-10.

3 Rollo at 14,

4 Rollo at 13.

Republic of the PhilippinesSUPREME COURT

Manila

SECOND DIVISION

G.R. No. L-44748 August 29, 1986

RADIO COMMUNICATIONS OF THE PHILS., INC. (RCPI). petitioner, vs.COURT OF APPEALS and LORETO DIONELA, respondents.

O. Pythogoras Oliver for respondents.

 

PARAS, J.:

Before Us, is a Petition for Review by certiorari of the decision of the Court of Appeals, modifying the decision of the trial court in a civil case for recovery of damages against petitioner corporation by reducing the award to private respondent Loreto Dionela of moral damages from P40,000 to Pl5,000, and attorney's fees from P3,000 to P2,000.

The basis of the complaint against the defendant corporation is a telegram sent through its Manila Office to the offended party, Loreto Dionela, reading as follows:

176 AS JR 1215PM 9 PAID MANDALUYONG JUL 22-66 LORETO DIONELA CABANGAN LEGASPI CITY

WIRE ARRIVAL OF CHECK FER

LORETO DIONELA-CABANGAN-WIRE ARRIVAL OF CHECK-PER

115 PM

SA IYO WALANG PAKINABANG DUMATING KA DIYAN-WALA-KANG PADALA DITO KAHIT BULBUL MO

(p. 19, Annex "A")

Plaintiff-respondent Loreto Dionela alleges that the defamatory words on the telegram sent to him not only wounded his feelings but also caused him undue embarrassment and affected adversely his business as well because other people have come to know of said defamatory words. Defendant corporation as a defense, alleges that the additional words in Tagalog was a private joke between the sending and receiving operators and that they were not addressed to or intended for plaintiff and therefore did not form part of the telegram and that the Tagalog words are not defamatory. The telegram sent through its facilities was received in its station at Legaspi City. Nobody

other than the operator manned the teletype machine which automatically receives telegrams being transmitted. The said telegram was detached from the machine and placed inside a sealed envelope and delivered to plaintiff, obviously as is. The additional words in Tagalog were never noticed and were included in the telegram when delivered.

The trial court in finding for the plaintiff ruled as follows:

There is no question that the additional words in Tagalog are libelous. They clearly impute a vice or defect of the plaintiff. Whether or not they were intended for the plaintiff, the effect on the plaintiff is the same. Any person reading the additional words in Tagalog will naturally think that they refer to the addressee, the plaintiff. There is no indication from the face of the telegram that the additional words in Tagalog were sent as a private joke between the operators of the defendant.

The defendant is sued directly not as an employer. The business of the defendant is to transmit telegrams. It will open the door to frauds and allow the defendant to act with impunity if it can escape liability by the simple expedient of showing that its employees acted beyond the scope of their assigned tasks.

The liability of the defendant is predicated not only on Article 33 of the Civil Code of the Philippines but on the following articles of said Code:

ART. 19.- Every person must, in the exercise of his rights and in the performance of his duties, act with justice, give everyone his due, and observe honesty and good faith.

ART. 20.-Every person who, contrary to law, wilfully or negligently causes damage to another, shall indemnify the latter for the same.

There is sufficient publication of the libelous Tagalog words. The office file of the defendant containing copies of telegrams received are open and held together only by a metal fastener. Moreover, they are open to view and inspection by third parties.

It follows that the plaintiff is entitled to damages and attorney's fees. The plaintiff is a businessman. The libelous Tagalog words must have affected his business and social standing in the community. The Court fixes the amount of P40,000.00 as the reasonable amount of moral damages and the amount of P3,000.00 as attorney's fee which the defendant should pay the plaintiff. (pp. 15-16, Record on Appeal)

The respondent appellate court in its assailed decision confirming the aforegoing findings of the lower court stated:

The proximate cause, therefore, resulting in injury to appellee, was the failure of the appellant to take the necessary or precautionary steps to avoid the occurrence of the humiliating incident now complained of. The company had not imposed any safeguard against such eventualities and this void in its operating procedure does not speak well of its concern for their clientele's interests. Negligence here is very patent. This negligence is imputable to appellant and not to its employees.

The claim that there was no publication of the libelous words in Tagalog is also without merit. The fact that a carbon copy of the telegram was filed among other telegrams and left to hang for the public to see, open for inspection by a third party is sufficient publication. It would have been otherwise perhaps had the telegram been placed and

kept in a secured place where no one may have had a chance to read it without appellee's permission.

The additional Tagalog words at the bottom of the telegram are, as correctly found by the lower court, libelous per se, and from which malice may be presumed in the absence of any showing of good intention and justifiable motive on the part of the appellant. The law implies damages in this instance (Quemel vs. Court of Appeals, L-22794, January 16, 1968; 22 SCRA 44). The award of P40,000.00 as moral damages is hereby reduced to P15,000.00 and for attorney's fees the amount of P2,000.00 is awarded. (pp. 22-23, record)

After a motion for reconsideration was denied by the appellate court, petitioner came to Us with the following:

ASSIGNMENT OF ERRORS

I

The Honorable Court of Appeals erred in holding that Petitioner-employer should answer directly and primarily for the civil liability arising from the criminal act of its employee.

II

The Honorable Court of Appeals erred in holding that there was sufficient publication of the alleged libelous telegram in question, as contemplated by law on libel.

III

The Honorable Court of Appeals erred in holding that the liability of petitioner-company-employer is predicated on Articles 19 and 20 of the Civil Code, Articles on Human Relations.

IV

The Honorable Court of Appeals erred in awarding Atty's. fees. (p. 4, Record)

Petitioner's contentions do not merit our consideration. The action for damages was filed in the lower court directly against respondent corporation not as an employer subsidiarily liable under the provisions of Article 1161 of the New Civil Code in relation to Art. 103 of the Revised Penal Code. The cause of action of the private respondent is based on Arts. 19 and 20 of the New Civil Code (supra). As well as on respondent's breach of contract thru the negligence of its own employees. 1

Petitioner is a domestic corporation engaged in the business of receiving and transmitting messages. Everytime a person transmits a message through the facilities of the petitioner, a contract is entered into. Upon receipt of the rate or fee fixed, the petitioner undertakes to transmit the message accurately. There is no question that in the case at bar, libelous matters were included in the message transmitted, without the consent or knowledge of the sender. There is a clear case of breach of contract by the petitioner in adding extraneous and libelous matters in the message sent to the private

respondent. As a corporation, the petitioner can act only through its employees. Hence the acts of its employees in receiving and transmitting messages are the acts of the petitioner. To hold that the petitioner is not liable directly for the acts of its employees in the pursuit of petitioner's business is to deprive the general public availing of the services of the petitioner of an effective and adequate remedy. In most cases, negligence must be proved in order that plaintiff may recover. However, since negligence may be hard to substantiate in some cases, we may apply the doctrine of RES IPSA LOQUITUR (the thing speaks for itself), by considering the presence of facts or circumstances surrounding the injury.

WHEREFORE, premises considered, the judgment of the appellate court is hereby AFFIRMED.

SO ORDERED.

Feria (Chairman), Fernan, Alampay, and Gutierrez, Jr., JJ., concur.

 

Footnotes

1 In contracts the negligence of the employee (servant) is the negligence of the employer (master). This is the master and servant rule.

Republic of the PhilippinesSUPREME COURT

Manila

FIRST DIVISION

 

G.R. No. 115129 February 12, 1997

IGNACIO BARZAGA, petitioner, vs.COURT OF APPEALS and ANGELITO ALVIAR, respondents.

 

BELLOSILLO, J.:

The Fates ordained that Christmas 1990 be bleak for Ignacio Barzaga and his family. On the nineteenth of December Ignacio's wife succumbed to a debilitating ailment after prolonged pain and suffering. Forewarned by her attending physicians of her impending death, she expressed her wish to be laid to rest before Christmas day to spare her family from keeping lonely vigil over her remains while the whole of Christendom celebrate the Nativity of their Redeemer.

Drained to the bone from the tragedy that befell his family yet preoccupied with overseeing the wake for his departed wife, Ignacio Barzaga set out to arrange for her interment on the twenty-fourth of December in obedience semper fidelis to her dying wish. But her final entreaty, unfortunately, could not be carried out. Dire events conspired to block his plans that forthwith gave him and his family their gloomiest Christmas ever.

This is Barzaga's story. On 21 December 1990, at about three o'clock in the afternoon, he went to the hardware store of respondent Angelito Alviar to inquire about the availability of certain materials to be used in the construction of a niche for his wife. He also asked if the materials could be delivered at once. Marina Boncales, Alviar's storekeeper, replied that she had yet to verify if the store had pending deliveries that afternoon because if there were then all subsequent purchases would have to be delivered the following day. With that reply petitioner left.

At seven o'clock the following morning, 22 December, Barzaga returned to Alviar's hardware store to follow up his purchase of construction materials. He told the store employees that the materials he was buying would have to be delivered at the Memorial Cemetery in Dasmarinas, Cavite, by eight o'clock that morning since his hired workers were already at the burial site and time was of the essence. Marina Boncales agreed to deliver the items at the designated time, date and place. With this assurance, Barzaga

purchased the materials and paid in full the amount of P2,110.00. Thereafter he joined his workers at the cemetery, which was only a kilometer away, to await the delivery.

The construction materials did not arrive at eight o'clock as promised. At nine o'clock, the delivery was still nowhere in sight. Barzaga returned to the hardware store to inquire about the delay. Boncales assured him that although the delivery truck was not yet around it had already left the garage and that as soon as it arrived the materials would be brought over to the cemetery in no time at all. That left petitioner no choice but to rejoin his workers at the memorial park and wait for the materials.

By ten o'clock, there was still no delivery. This prompted petitioner to return to the store to inquire about the materials. But he received the same answer from respondent's employees who even cajoled him to go back to the burial place as they would just follow with his construction materials.

After hours of waiting — which seemed interminable to him — Barzaga became extremely upset. He decided to dismiss his laborers for the day. He proceeded to the police station, which was just nearby, and lodged a complaint against Alviar. He had his complaint entered in the police blotter. When he returned again to the store he saw the delivery truck already there but the materials he purchased were not yet ready for loading. Distressed that Alviar's employees were not the least concerned, despite his impassioned pleas, Barzaga decided to cancel his transaction with the store and look for construction materials elsewhere.

In the afternoon of that day, petitioner was able to buy from another store. But since darkness was already setting in and his workers had left, he made up his mind to start his project the following morning, 23 December. But he knew that the niche would not be finish in time for the scheduled burial the following day. His laborers had to take a break on Christmas Day and they could only resume in the morning of the twenty-sixth. The niche was completed in the afternoon and Barzaga's wife was finally laid to rest. However, it was two-and-a-half (2-1/2) days behind schedule.

On 21 January 1991, tormented perhaps by his inability to fulfill his wife's dying wish, Barzaga wrote private respondent Alviar demanding recompense for the damage he suffered. Alviar did not respond. Consequently, petitioner sued him before the Regional Trial Court. 1

Resisting petitioner's claim, private respondent contended that legal delay could not be validly ascribed to him because no specific time of delivery was agreed upon between them. He pointed out that the invoices evidencing the sale did not contain any stipulation as to the exact time of delivery and that assuming that the materials were not delivered within the period desired by petitioner, the delivery truck suffered a flat tire on the way to the store to pick up the materials. Besides, his men were ready to make the delivery by ten-thirty in the morning of 22 December but petitioner refused to accept them. According to Alviar, it was this obstinate refusal of petitioner to accept delivery that caused the delay in the construction of the niche and the consequent failure of the

family to inter their loved one on the twenty-fourth of December, and that, if at all, it was petitioner and no other who brought about all his personal woes.

Upholding the proposition that respondent incurred in delay in the delivery of the construction materials resulting in undue prejudice to petitioner, the trial court ordered respondent Alviar to pay petitioner (a) P2,110.00 as refund for the purchase price of the materials with interest per annum computed at the legal rate from the date of the filing of the complaint, (b) P5,000.00 as temperate damages, (c) P20,000.00 as moral damages, (d) P5,000.00 as litigation expenses, and (e) P5,000.00 as attorney's fees.

On appeal, respondent Court of Appeals reversed the lower court and ruled that there was no contractual commitment as to the exact time of delivery since this was not indicated in the invoice receipts covering the sale. 2

The arrangement to deliver the materials merely implied that delivery should be made within a reasonable time but that the conclusion that since petitioner's workers were already at the graveyard the delivery had to be made at that precise moment, is non-sequitur. The Court of Appeals also held that assuming that there was delay, petitioner still had sufficient time to construct the tomb and hold his wife's burial as she wished.

We sustain the trial court. An assiduous scrutiny of the record convinces us that respondent Angelito Alviar was negligent and incurred in delay in the performance of his contractual obligation. This sufficiently entitles petitioner Ignacio Barzaga to be indemnified for the damage he suffered as a consequence of delay or a contractual breach. The law expressly provides that those who in the performance of their obligation are guilty of fraud, negligence, or delay and those who in any manner contravene the tenor thereof, are liable for damages. 3

Contrary to the appellate court's factual determination, there was a specific time agreed upon for the delivery of the materials to the cemetery. Petitioner went to private respondent's store on 21 December precisely to inquire if the materials he intended to purchase could be delivered immediately. But he was told by the storekeeper that if there were still deliveries to be made that afternoon his order would be delivered the following day. With this in mind Barzaga decided to buy the construction materials the following morning after he was assured of immediate delivery according to his time frame. The argument that the invoices never indicated a specific delivery time must fall in the face of the positive verbal commitment of respondent's storekeeper. Consequently it was no longer necessary to indicate in the invoices the exact time the purchased items were to be brought to the cemetery. In fact, storekeeper Boncales admitted that it was her custom not to indicate the time of delivery whenever she prepared invoices. 4

Private respondent invokes fortuitous event as his handy excuse for that "bit of delay" in the delivery of petitioner's purchases. He maintains that Barzaga should have allowed his delivery men a little more time to bring the construction materials over to the cemetery since a few hours more would not really matter and considering that his truck

had a flat tire. Besides, according to him, Barzaga still had sufficient time to build the tomb for his wife.

This is a gratuitous assertion that borders on callousness. Private respondent had no right to manipulate petitioner's timetable and substitute it with his own. Petitioner had a deadline to meet. A few hours of delay was no piddling matter to him who in his bereavement had yet to attend to other pressing family concerns. Despite this, respondent's employees still made light of his earnest importunings for an immediate delivery. As petitioner bitterly declared in court " . . . they (respondent's employees) were making a fool out of me." 5

We also find unacceptable respondent's justification that his truck had a flat tire, for this event, if indeed it happened, was forseeable according to the trial court, and as such should have been reasonably guarded against. The nature of private respondent's business requires that he should be ready at all times to meet contingencies of this kind. One piece of testimony by respondent's witness Marina Boncales has caught our attention - that the delivery truck arrived a little late than usual because it came from a delivery of materials in Langcaan, Dasmarinas, Cavite. 6 Significantly, this information was withheld by Boncales from petitioner when the latter was negotiating with her for the purchase of construction materials. Consequently, it is not unreasonable to suppose that had she told petitioner of this fact and that the delivery of the materials would consequently be delayed, petitioner would not have bought the materials from respondent's hardware store but elsewhere which could meet his time requirement. The deliberate suppression of this information by itself manifests a certain degree of bad faith on the part of respondent's storekeeper.

The appellate court appears to have belittled petitioner's submission that under the prevailing circumstances time was of the essence in the delivery of the materials to the grave site. However, we find petitioner's assertion to be anchored on solid ground. The niche had to be constructed at the very least on the twenty-second of December considering that it would take about two (2) days to finish the job if the interment was to take place on the twenty-fourth of the month. Respondent's delay in the delivery of the construction materials wasted so much time that construction of the tomb could start only on the twenty-third. It could not be ready for the scheduled burial of petitioner's wife. This undoubtedly prolonged the wake, in addition to the fact that work at the cemetery had to be put off on Christmas day.

This case is clearly one of non-performance of a reciprocal obligation. 7 In their contract of purchase and sale, petitioner had already complied fully with what was required of him as purchaser, i.e., the payment of the purchase price of P2,110.00. It was incumbent upon respondent to immediately fulfill his obligation to deliver the goods otherwise delay would attach.

We therefore sustain the award of moral damages. It cannot be denied that petitioner and his family suffered wounded feelings, mental anguish and serious anxiety while keeping watch on Christmas day over the remains of their loved one who could not be

laid to rest on the date she herself had chosen. There is no gainsaying the inexpressible pain and sorrow Ignacio Barzaga and his family bore at that moment caused no less by the ineptitude, cavalier behavior and bad faith of respondent and his employees in the performance of an obligation voluntarily entered into.

We also affirm the grant of exemplary damages. The lackadaisical and feckless attitude of the employees of respondent over which he exercised supervisory authority indicates gross negligence in the fulfillment of his business obligations. Respondent Alviar and his employees should have exercised fairness and good judgment in dealing with petitioner who was then grieving over the loss of his wife. Instead of commiserating with him, respondent and his employees contributed to petitioner's anguish by causing him to bear the agony resulting from his inability to fulfill his wife's dying wish.

We delete however the award of temperate damages. Under Art. 2224 of the Civil Code, temperate damages are more than nominal but less than compensatory, and may be recovered when the court finds that some pecuniary loss has been suffered but the amount cannot, from the nature of the case, be proved with certainty. In this case, the trial court found that plaintiff suffered damages in the form of wages for the hired workers for 22 December 1990 and expenses incurred during the extra two (2) days of the wake. The record however does not show that petitioner presented proof of the actual amount of expenses he incurred which seems to be the reason the trial court awarded to him temperate damages instead. This is an erroneous application of the concept of temperate damages. While petitioner may have indeed suffered pecuniary losses, these by their very nature could be established with certainty by means of payment receipts. As such, the claim falls unequivocally within the realm of actual or compensatory damages. Petitioner's failure to prove actual expenditure consequently conduces to a failure of his claim. For in determining actual damages, the court cannot rely on mere assertions, speculations, conjectures or guesswork but must depend on competent proof and on the best evidence obtainable regarding the actual amount of loss. 8

We affirm the award of attorney's fees and litigation expenses. Award of damages, attorney's fees and litigation costs is left to the sound discretion of the court, and if such discretion be well exercised, as in this case, it will not be disturbed on appeal. 9

WHEREFORE, the decision of the Court of Appeals is REVERSED and SET ASIDE except insofar as it GRANTED on a motion for reconsideration the refund by private respondent of the amount of P2,110.00 paid by petitioner for the construction materials. Consequently, except for the award of P5,000.00 as temperate damages which we delete, the decision of the Regional Trial Court granting petitioner (a) P2,110.00 as refund for the value of materials with interest computed at the legal rate per annum from the date of the filing of the case; (b) P20,000.00 as moral damages; (c) P10,000.00 as exemplary damages; (d) P5,000.00 as litigation expenses; and (4) P5,000.00 as attorney's fees, is AFFIRMED. No costs.

SO ORDERED.

Padilla, Vitug, Kapunan and Hermosisima, Jr., JJ., concur.

Footnotes

1 Assigned to RTC-Br. 21, Imus, Cavite, presided over by Judge Roy S. del Rosario, Rollo, p. 68.

2 Decision penned by Justice Manuel C. Herrera, concurred in by Justices Cezar D. Francisco and Buenaventura J. Guerrero, Rollo, p. 38.

3 Art. 1170, Civil Code.

4 TSN, 6 December 1991, pp. 22-23.

5 TSN, 19 September 1991, p. 47.

6 TSN, 6 December 1991, p. 35.

7 Art. 1169, last par., Civil Code.

8 Dichoso v. Court of Appeals, G.R. No. 55613, 10 December 1990, 192 SCRA 169; People v. Rosario, G.R. No. 108789, 18 July 1995, 246 SCRA 658.

9 Philippine Airlines, Inc. v. Court of Appeals, G.R. Nos. 50504-05, 13 August 1990, 188 SCRA 461.

Republic of the PhilippinesSUPREME COURT

Manila

FIRST DIVISION

 

G.R. No. 106999 June 20, 1996

PHILIPPINE HOME ASSURANCE CORPORATION, petitioner, vs.COURT OF APPEALS and EASTERN SHIPPING LINES, INC., respondents.

 

KAPUNAN, J.:p

Eastern Shipping Lines, Inc. (ESLI) loaded on board SS Eastern Explorer in Kobe, Japan, the following shipment for carriage to Manila and Cebu, freight pre-paid and in good order and condition, viz: (a) two (2) boxes internal combustion engine parts, consigned to William Lines, Inc. under Bill of Lading No. 042283; (b) ten (l0) metric ton. (334 bags) ammonium chloride, consigned to Orca's Company under Bill of Lading No. KCE-I2; (c) two hundred (200) bags Glue 300, consigned to Pan Oriental Match Company under Bill of Lading No. KCE-8; and (d) garments, consigned to Ding Velayo under Bills of Lading Nos. KMA-73 and KMA-74.

While the vessel was off Okinawa, Japan, a small flame was detected on the acetylene cylinder located in the accommodation area near the engine room on the main deck level. As the crew was trying to extinguish the fire, the acetylene cylinder suddenly exploded sending a flash of flame throughout the accommodation area, thus causing death and severe injuries to the crew and instantly setting fire to the whole superstructure of the vessel. The incident forced the master and the crew to abandon the ship.

Thereafter, SS Eastern Explorer was found to be a constructive total loss and its voyage was declared abandoned.

Several hours later, a tugboat under the control of Fukuda Salvage Co. arrived near the vessel and commenced to tow the vessel for the port of Naha, Japan.

Fire fighting operations were again conducted at the said port. After the fire was extinguished, the cargoes which were saved were loaded to another vessel for delivery to their original ports of destination. ESLI charged the consignees several amounts corresponding to additional freight and salvage charges, as follows: (a) for the goods covered by Bill of Lading No. 042283, ESLI charged the consignee the sum of P1,927.65, representing salvage charges assessed against the goods; (b) for the goods covered by Bill of Lading No. KCE-12, ESLI charged the consignee the sum of P2,980.64 for additional freight and P826.14 for salvage charges against the goods; (c) for the goods covered by Bill of Lading No. KCE-8, ESLI charged the consignee the sum of P3,292.26 for additional freight and P4,130.68 for salvage charges against the goods; and (d) for the goods under Bills of Lading Nos. KMA-73 and KMA-74, ESLI charged the consignee the sum of P8,337.06 for salvage charges against the goods.

The charges were all paid by Philippine Home Assurance Corporation (PHAC) under protest for and in behalf of the consignees.

PHAC, as subrogee of the consignees, thereafter filed a complaint before the Regional Trial Court of Manila, Branch 39, against ESLI to recover the sum paid under protest on the ground that the same were actually damages directly brought about by the fault, negligence, illegal act and/or breach of contract of ESLI.

In its answer, ESLI contended that it exercised the diligence required by law in the handling, custody and carriage of the shipment; that the fire was caused by an unforeseen event; that the additional freight charges are due and demandable pursuant to the Bill of Lading; 1 and that salvage charges are properly collectible under Act No. 2616, known as the Salvage Law.

The trial court dismissed PHAC's complaint and ruled in favor of ESLI ratiocinating thus:

The question to be resolved is whether or not the fire on the vessel which was caused by the explosion of an acetylene cylinder loaded on the same was the fault or negligence of the defendant.

Evidence has been presented that the SS "Eastern Explorer" was a seaworthy vessel (Deposition of Jumpei Maeda, October 23, 1980, p. 3) and before the ship loaded the Acetylene Cylinder No. NCW 875, the same has been tested, checked and examined and was certified to have complied with the required safety measures and standards (Deposition of

Senjei Hayashi, October 23, 1980, pp. 2-3). When the fire was detected by the crew, fire fighting operations was immediately conducted but due to the explosion of the acetylene cylinder, the crew were unable to contain the fire and had to abandon the ship to save their lives and were saved from drowning by passing vessels in the vicinity. The burning of the vessel rendering it a constructive total loss and incapable of pursuing its voyage to the Philippines was, therefore, not the fault or negligence of defendant but a natural disaster or calamity which nobody would like to happen. The salvage operations conducted by Fukuda Salvage Company (Exhibits "4-A" and "6-A") was perfectly a legal operation and charges made on the goods recovered were legitimate charges.

Act No. 2616, otherwise known as the Salvage Law, is thus applicable to the case at bar. Section 1 of Act No. 2616 states:

Sec 1. When in case of shipwreck, the vessel or its cargo shall be beyond the control of the crew, or shall have been abandoned by them, and picked up and conveyed to a safe place by other persons, the latter shall be entitled to a reward for the salvage.

Those who, not being included in the above paragraph, assist in saving a vessel or its cargo from shipwreck, shall be entitled to like reward.

In relation to the above provision, the Supreme Court has ruled in Erlanger & Galinger v. Swedish East Asiatic Co., Ltd., 34 Phil. 178, that three elements are necessary to a valid salvage claim, namely (a)a marine peril (b) service voluntarily rendered when not required as an existing duty or from a special contract and (c) success in whole or in part, or that the service rendered contributed to such success.

The above elements are all present in the instant case. Salvage charges may thus be assessed on the cargoes saved from the vessel. As provided for in Section 13 of the Salvage Law, "The expenses of salvage, as well as the reward for salvage or assistance, shall be a charge on the things salvaged or their value." In Manila Railroad Co. v. Macondray Co., 37 Phil. 583, it was also held that "when a ship and its cargo are saved together, the salvage allowance should be charged against the ship and cargo in the proportion of their respective values, the same as in a case

of general average . . ." Thus, the "compensation to be paid by the owner of the cargo is in proportion to the value of the vessel and the value of the cargo saved." (Atlantic Gulf and Pacific Co. v. Uchida Kisen Kaisha, 42 Phil. 321). (Memorandum for Defendant, Records, pp. 212-213).

With respect to the additional freight charged by defendant from the consignees of the goods, the same are also validly demandable.

As provided by the Civil Code:

Art. 1174. Except in cases expressly specified by law, or when it is otherwise declared by stipulation, or when the nature of the obligation require the assumption of risk, no person shall be responsible for those events which could not be foreseen, or which though foreseen, were inevitable.

Art 1266. The debtor in obligations to do shall also be released when the prestation becomes legally or physically impossible without the fault of the obligor."

The burning of "EASTERN EXPLORER" while off Okinawa rendered it physically impossible for defendant to comply with its obligation of delivering the goods to their port of destination pursuant to the contract of carriage. Under Article 1266 of the Civil Code, the physical impossibility of the prestation extinguished defendant's obligation..

It is but legal and equitable for the defendant therefore, to demand additional freight from the consignees for forwarding the goods from Naha, Japan to Manila and Cebu City on board another vessel, the "EASTERN MARS." This finds support under Article 844 of the Code of Commerce which provides as follows:

Art. 844. A captain who may have taken on board the goods saved from the wreck shall continue his course to the port of destination; and on arrival should deposit the same, with judicial intervention at the disposal of their legitimate owners. . . .

The owners of the cargo shall defray all the expenses of this arrival as well as the payment of the freight which, after taking into consideration the circumstances of the case, may be fixed by agreement or by a judicial decision.

Furthermore, the terms and conditions of the Bill of Lading authorize the imposition of additional freight charges in case of forced interruption or

abandonment of the voyage. At the dorsal portion of the Bills of Lading issued to the consignees is this stipulation:

12. All storage, transshipment, forwarding or other disposition of cargo at or from a port of distress or other place where there has been a forced interruption or abandonment of the voyage shall be at the expense of the owner, shipper, consignee of the goods or the holder of this bill of lading who shall be jointly and severally liable for all freight charges and expenses of every kind whatsoever, whether payable in advance or not that may be incurred by the cargo in addition to the ordinary freight, whether the service be performed by the named carrying vessel or by carrier's other vessels or by strangers. All such expenses and charges shall be due and payable day by day immediately when they are incurred.

The bill of lading is a contract and the parties are bound by its terms (Gov't of the Philippine Islands vs. Ynchausti and Co., 40 Phil. 219). The provision quoted is binding upon the consignee.

Defendant therefore, can validly require payment of additional freight from the consignee. Plaintiff can not thus recover the additional freight paid by the consignee to defendant. (Memorandum for Defendant, Record, pp. 215-216). 2

On appeal to the Court of Appeals, respondent court affirmed the trial court's findings and conclusions, 3 hence, the present petition for review before this Court on the following errors:

I. THE RESPONDENT COURT ERRONEOUSLY ADOPTED WITH APPROVAL THE TRIAL COURT'S FINDINGS THAT THE BURNING OF THE SS "EASTERN EXPLORER", RENDERING ET A CONSTRUCTIVE TOTAL LOSS, IS A NATURAL DISASTER OR CALAMITY WHICH NOBODY WOULD LIKE TO HAPPEN, DESPITE EXISTING JURISPRUDENCE TO THE CONTRARY.

II. THE RESPONDENT COURT ARBITRARILY RULED THAT THE BURNING OF THE SS "EASTERN EXPLORER" WAS NOT THE FAULT AND NEGLIGENCE OF RESPONDENT EASTERN SHIPPING LINES.

III. THE RESPONDENT COURT COMMITTED GRAVE ABUSE OF DISCRETION IN RULING THAT DEFENDANT HAD EXERCISED THE EXTRAORDINARY DILIGENCE IN THE VIGILANCE OVER THE GOODS AS REQUIRED BY LAW.

IV. THE RESPONDENT COURT ARBITRARILY RULED THAT THE MARINE NOTE OF PROTEST AND STATEMENT OF FACTS ISSUED BY THE VESSEL'S MASTER ARE NOT HEARSAY DESPITE THE FACT THAT THE VESSEL'S MASTER, CAPT. LICAYLICAY WAS NOT PRESENTED COURT, WITHOUT EXPLANATION WHATSOEVER FOR HIS NON-PRESENTATION, THUS, PETITIONER WAS DEPRIVED OF ITS RIGHT TO CROSS- EXAMINE THE AUTHOR THEREOF.

V. THE RESPONDENT COURT ERRONEOUSLY ADOPTED WITH APPROVAL THE TRIAL COURT'S CONCLUSION THAT THE EXPENSES OR AVERAGES INCURRED IN SAVING THE CARGO CONSTITUTE GENERAL AVERAGE.

VI. THE RESPONDENT COURT ERRONEOUSLY ADOPTED THE TRIAL COURT'S RULING THAT PETITIONER WAS LIABLE TO RESPONDENT CARRIER FOR ADDITIONAL FREIGHT AND SALVAGE CHARGES. 4

It is quite evident that the foregoing assignment of errors challenges the findings of fact and the appreciation of evidence made by the trial court and later affirmed by respondent court. While it is a well-settled rule that only questions of law may be raised in a petition for review under Rule 45 of the Rules of Court, it is equally well-settled that the same admits of the following exceptions, namely: (a) when the conclusion is a finding grounded entirely on speculation, surmises or conjectures; (b) when the inference made is manifestly mistaken, absurd or impossible; (c) where there is a grave abuse of discretion; (d) when the judgment is based on a misapprehension of facts; (e) when the findings of fact are conflicting; (f) when the Court of Appeals, in making its findings, went beyond the issues of the case and the same is contrary to the admissions of both appellant and appellee; (g) when the findings of the Court of Appeals are contrary to those of the trial court; (h) when the findings of fact are conclusions without citation of specific evidence on which they are based; (i) when the facts set forth in the petition as well as in the petitioners' main and reply briefs are not disputed by the respondents; and (j) when the finding of fact of the Court of Appeals is premised on the supposed absence of evidence and is contradicted by the evidence on record. 5 Thus, if there is a showing, as in the instant case, that the findings complained of are totally devoid of support in the records, or that they are so glaringly erroneous as to constitute grave abuse of discretion, the same may be properly reviewed and evaluated by this Court.

It is worthy to note at the outset that the goods subject of the present controversy were neither lost nor damaged in transit by the fire that razed the carrier. In fact, the said goods were all delivered to the consignees, even if the transshipment took longer than necessary. What is at issue therefore is not whether or not the carrier is liable for the loss, damage, or deterioration of the goods transported by them but who, among the carrier, consignee or insurer of the goods, is liable for the additional charges or expenses incurred by the owner of the ship in the salvage operations and in the transshipment of the goods via a different carrier.

In absolving respondent carrier of any liability, respondent Court of Appeals sustained the trial court's finding that the fire that gutted the ship was a natural disaster or calamity. Petitioner takes exception to this conclusion and we agree.

In our jurisprudence, fire may not be considered a natural disaster or calamity since it almost always arises from some act of man or by human means.

It cannot be an act of God unless caused by lightning or a natural disaster or casualty not attributable to human agency. 6

In the case at bar, it is not disputed that a small flame was detected on the acetylene cylinder and that by reason thereof, the same exploded despite efforts to extinguish the fire. Neither is there any doubt that the acetylene cylinder, obviously fully loaded, was stored in the accommodation area near the engine room and not in a storage area considerably far, and in a safe distance, from the engine room. Moreover, there was no showing, and none was alleged by the parties, that the fire was caused by a natural disaster or calamity not attributable to human agency. On the contrary, there is strong evidence indicating that the acetylene cylinder caught fire because of the fault and negligence of respondent ESLI, its captain and its crew.

First, the acetylene cylinder which was fully loaded should not have been stored in the accommodation area near the engine room where the heat generated therefrom could cause the acetylene cylinder to explode by reason of spontaneous combustion. Respondent ESLI should have easily foreseen that the acetylene cylinder, containing highly inflammable material was in real danger of exploding because it was stored in close proximity to the engine room.

Second, respondent ESLI should have known that by storing the acetylene cylinder in the accommodation area supposed to be reserved for passengers,

it unnecessarily exposed its passengers to grave danger and injury. Curious passengers, ignorant of the danger the tank might have on humans and property, could have handled the same or could have lighted and smoked cigarettes while repairing in the accommodation area.

Third, the fact that the acetylene cylinder was checked, tested and examined and subsequently certified as having complied with the safety measures and standards by qualified experts 7 before it was loaded in the vessel only shows to a great extent that negligence was present in the handling of the acetylene cylinder after it was loaded and while it was on board the ship. Indeed, had the respondent and its agents not been negligent in storing the acetylene cylinder near the engine room, then the same would not have leaked and exploded during the voyage.

Verily, there is no merit in the finding of the trial court to which respondent court erroneously agreed that the fire was not the fault or negligence of respondent but a natural disaster or calamity. The records are simply wanting in this regard.

Anent petitioner's objection to the admissibility of Exhibits "4'' and ''5", the Statement of Facts and the Marine Note of Protest issued by Captain Tiburcio A. Licaylicay, we find the same impressed with merit because said documents are hearsay evidence. Capt. Licaylicay, Master of S.S. Eastern Explorer who issued the said documents, was not presented in court to testify to the truth of the facts he stated therein; instead, respondent ESLI presented Junpei Maeda, its Branch Manager in Tokyo and Yokohama, Japan, who evidently had no personal knowledge of the facts stated in the documents at issue. It is clear from Section 36, Rule 130 of the Rules of Court that any evidence, whether oral or documentary, is hearsay if its probative value is not based on the personal knowledge of the witness but on the knowledge of some other person not on the witness stand. Consequently, hearsay evidence, whether objected to or not, has no probative value unless the proponent can show that the evidence falls within the exceptions to the hearsay evidence rule. 8 It is excluded because the party against whom it is presented is deprived of his right and opportunity to cross-examine the persons to whom the statements or writings are attributed.

On the issue of whether or not respondent court committed an error in concluding that the expenses incurred in saving the cargo are considered general average, we rule in the affirmative. As a rule, general or gross averages include all damages and expenses which are deliberately caused in order to save the vessel, its cargo, or both at the same time, from a real and

known risk 9 While the instant case may technically fall within the purview of the said provision, the formalities prescribed under Articles 813 10 and 814 11 of the Code of Commerce in order to incur the expenses and cause the damage corresponding to gross average were not complied with. Consequently, respondent ESLI's claim for contribution from the consignees of the cargo at the time of the occurrence of the average turns to naught.

Prescinding from the foregoing premises, it indubitably follows that the cargo consignees cannot be made liable to respondent carrier for additional freight and salvage charges. Consequently, respondent carrier must refund to herein petitioner the amount it paid under protest for additional freight and salvage charges in behalf of the consignees.

WHEREFORE, the judgment appealed from is hereby REVERSED and SET ASIDE. Respondent Eastern Shipping Lines, Inc. is ORDERED to return to petitioner Philippine Home Assurance Corporation the amount it paid under protest in behalf of the consignees herein.

SO ORDERED.

Padilla, Bellosillo, Vitug and Hermosisima, Jr., JJ., concur.

Footnotes

1 Sec 12. All storage, transshipment forwarding or other disposition of cargo at or from port of distress or other place where there has been a forced interruption or abandonment of the voyage shall be at the expense of the owner, shipper, consignee of the goods or the holder of this bill of lading who shall be jointly and severally liable for all freight charges and expenses of every kind whatsoever, whether payable in advance or not that may be incurred by the cargo in addition to the ordinary freight, whether payable in advance or not that may be incurred by the cargo in addition to the ordinary freight, whether the service be performed by the named carrying vessel or by carrier's other vessels or by strangers such expenses and charges shall be due and payable day by day immediately when they are incurred.

2 Original Records, pp. 240-243.

3 Rollo, pp. 29-39.

4 Id., at 12-13.

5 Geronimo v. Court of Appeals, 224 SCRA 494, 498-499 (1993]; BPI Credit Corporation v. Court of Appeals, 204 SCRA 601, 608-609 [1991]; Medina v. Asistio, Jr., 191 SCRA 218, 223-224 [1990].

6 Eastern Shipping Lines, Inc. v. Intermediate Appellate Court 150 SCRA 463 [1987]; Africa v. Caltex, 16 SCRA 448 [1966]; See also 4 Agbayani, Commentaries and Jurisprudence on the Commercial Laws of the Philippines, 1993 Edition, p. 44.

7 Original Records, p. 171.

8 Baguio v. Court of Appeals, 226 SCRA 366, 370 [1993].

9 Art 811, Code of Commerce.

10 Art 813. In order to incur the expenses and cause the damages corresponding to gross average, there must be a resolution of the captain, adopted after deliberation with the sailing mate and other officers of the vessel, and after hearing the persons interested in the cargo who may be present.

If the latter shall object, and the captain and officers or a majority of them, or the captain, if opposed to the majority, should consider certain measures necessary they may be executed under his responsibility, without prejudice to the right of the shippers to proceed against the captain before the competent judge or court, if they can prove that he acted with malice, lack of skill, or negligence.

If the persons interested in the cargo, being on board the vessel, have not been heard, they shall not contribute to the gross average, their share being chargeable against the captain, unless the urgency of the case should be such that the time necessary for previous deliberations was wanting.

11 Art 814. The resolution adopted to cause the damages which constitute general average must necessarily be entered in the log book, stating the motives and reasons for the dissent, should there be any, and the irresistible and urgent causes which impelled the captain if he acted of his own accord.

In the first case the minutes shall be signed by all the persons present who could do so before taking action, if possible; and if not, at the first opportunity. In the second case, it shall be signed by the captain and by the officers of the vessel.

In the minutes, and after the resolution, shall be stated in detail all the goods jettisoned, and mention shall be made of the injuries caused to those kept on board. The captain shall be obliged to deliver one copy of these minutes to the maritime judicial authority of the first port he may make, within twenty-four hours after his arrival, and to ratify it immediately under oath.

Republic of the PhilippinesSUPREME COURT

Manila

THIRD DIVISION

 

G.R. No. 118664 August 7, 1998

JAPAN AIRLINES, petitioner, vs.THE COURT OF APPEALS, ENRIQUE AGANA., MARIA ANGELA NINA AGANA, ADALIA B. FRANCISCO and JOSE MIRANDA, respondents.

 

ROMERO, J.:

Before us is an appeal by certiorari filed by petitioner Japan Airlines, Inc. (JAL) seeking the reversal of the decision of the Court of Appeals, 1 which affirmed with modification the award of damages made by the trial court in favor of herein private respondents Enrique Agana, Maria Angela Nina Agana, Adelia Francisco and Jose Miranda.

On June 13, 1991, private respondent Jose Miranda boarded JAL flight No. JL 001 in San Francisco, California bound for Manila. Likewise, on the same day private respondents Enrique Agana, Maria Angela Nina Agana and Adelia Francisco left Los Angeles, California for Manila via JAL flight No. JL 061. As an incentive for travelling on the said airline, both flights were to make an overnight stopover at Narita, Japan, at the airlines' expense, thereafter proceeding to Manila the following day.

Upon arrival at Narita, Japan on June 14, 1991, private respondents were billeted at Hotel Nikko Narita for the night. The next day, private respondents, on the final leg of their journey, went to the airport to take their flight to Manila. However, due to the Mt. Pinatubo eruption, unrelenting ashfall blanketed Ninoy Aquino International Airport (NAIA), rendering it inaccessible to airline traffic. Hence, private respondents' trip to Manila was cancelled indefinitely.

To accommodate the needs of its stranded passengers, JAL rebooked all the Manila-bound passengers on flight No. 741 due to depart on June 16, 1991 and also paid for the hotel expenses for their unexpected overnight stay. On June 16, 1991, much to the dismay of the private respondents, their long anticipated flight to Manila was again cancelled due to NAIA's indefinite closure. At this point, JAL informed the private respondents that it would no longer defray their hotel and accommodation expense during their stay in Narita.

Since NAIA was only reopened to airline traffic on June 22, 1991, private respondents were forced to pay for their accommodations and meal expenses from their personal funds from June 16 to June 21, 1991. Their unexpected stay in Narita ended on June 22, 1991 when they arrived in Manila on board JL flight No. 741.

Obviously, still reeling from the experience, private respondents, on July 25, 1991, commenced an action for damages against JAL before the Regional Trial Court of Quezon City, Branch 104. 2 To support their claim, private respondents asserted that JAL failed to live up to its duty to provide care and comfort to its stranded passengers when it refused to pay for their hotel and accommodation expenses from June 16 to 21, 1991 at Narita, Japan. In other words, they insisted that JAL was obligated to shoulder their expenses

as long as they were still stranded in Narita. On the other hand, JAL denied this allegation and averred that airline passengers have no vested right to these amenities in case a flight is cancelled due to "force majeure."

On June 18, 1992, the trial court rendered its judgment in favor of private respondents holding JAL liable for damages, viz.:

WHEREFORE, judgment is rendered in favor of plaintiffs ordering the defendant Japan Airlines to pay the plaintiffs Enrique Agana, Adalia B. Francisco and Maria Angela Nina Agana the sum of One million Two Hundred forty-six Thousand Nine Hundred Thirty-Six Pesos (P1,246,936.00) and Jose Miranda the sum of Three Hundred Twenty Thousand Six Hundred sixteen and 31/100 (P320,616.31) as actual, moral and exemplary damages and pay attorney's fees in the amount of Two Hundred Thousand Pesos (P200,000.00), and to pay the costs of suit.

Undaunted, JAL appealed the decision before the Court of Appeals, which, however, with the exception of lowering the damages awarded affirmed the trial court's finding, 3 thus:

Thus, the award of moral damages should be as it is hereby reduced to P200,000.00 for each of the plaintiffs, the exemplary damages to P300,000.00 and the attorney's fees to P100,000.00 plus the costs.

WHEREFORE, with the foregoing Modification, the judgment appealed from is hereby AFFIRMED in all other respects.

JAL filed a motion for reconsideration which proved futile andunavailing. 4

Failing in its bid to reconsider the decision, JAL has now filed this instant petition.

The issue to be resolved is whether JAL, as a common carrier has the obligation to shoulder the hotel and meal expenses of its stranded passengers until they have reached their final destination, even if the delay were caused by "force majeure."

To begin with, there is no dispute that the Mt. Pinatubo eruption prevented JAL from proceeding to Manila on schedule. Likewise, private respondents concede that such event can be considered as "force majeure" since their delayed arrival in Manila was not imputable to JAL. 5

However, private respondents contend that while JAL cannot be held responsible for the delayed arrival in Manila, it was nevertheless liable for their living expenses during their unexpected stay in Narita since airlines have the obligation to ensure the comfort and convenience of its passengers. While we sympathize with the private respondents' plight, we are unable to accept this contention.

We are not unmindful of the fact that in a plethora of cases we have consistently ruled that a contract to transport passengers is quite different in kind, and degree from any other contractual relation. It is safe to conclude that it is a relationship imbued with public interest. Failure on the part of the common carrier to live up to the exacting standards of care and diligence renders it liable for any damages that may be sustained by its passengers. However, this is not to say that common carriers are absolutely responsible for all injuries or damages even if the same were caused by a fortuitous event. To rule otherwise would render the defense of "force majeure," as an exception from any liability, illusory and ineffective.

Accordingly, there is no question that when a party is unable to fulfill his obligation because of "force majeure," the general rule is that he cannot be held liable for damages for non-performance. 6 Corollarily, when JAL was prevented from resuming its flight to Manila due to the effects of Mt. Pinatubo eruption, whatever losses or damages in the form of hotel and meal expenses the stranded passengers incurred, cannot be charged to JAL. Yet it is undeniable that JAL assumed the hotel expenses of respondents for their unexpected overnight stay on June 15, 1991.

Admittedly, to be stranded for almost a week in a foreign land was an exasperating experience for the private respondents. To be sure, they underwent distress and anxiety during their unanticipated stay in Narita, but their predicament was not due to the fault or negligence of JAL but the closure of NAIA to international flights. Indeed, to hold JAL, in the absence of bad faith or negligence, liable for the amenities of its stranded passengers by reason of a fortuitous event is too much of a burden to assume.

Furthermore, it has been held that airline passengers must take such risks incident to the mode of travel. 7

In this regard, adverse weather conditions or extreme climatic changes are some of the perils involved in air travel, the consequences of which the passenger must assume or expect. After all, common carriers are not the insurer of all risks. 8

Paradoxically, the Court of Appeals, despite the presence of "force majeure," still ruled against JAL relying in our decision in PAL v. Court of Appeals, 9 thus:

The position taken by PAL in this case clearly illustrates its failure to grasp the exacting standard required by law. Undisputably, PAL's diversion of its flight due to inclement weather was a fortuitous event. Nonetheless, such occurrence did not terminate PAL's contract with its passengers. Being in the business of air carriage and the sole one to operate in the country, PAL is deemed equipped to deal with situations as in the case at bar. What we said in one case once again must be stressed, i.e., the relation of carrier and passenger continues until the latter has been landed at the port of destination and has left the carrier's premises. Hence, PAL necessarily would still have to exercise extraordinary diligence in safeguarding the comfort, convenience and safety of its stranded passengers until they have reached their final destination. On this score, PAL grossly failed considering the then ongoing battle between government forces and Muslim rebels in Cotabato City and the fact that the private respondent was a stranger to the place.

The reliance is misplaced. The factual background of the PAL case is different from the instant petition. In that case there was indeed a fortuitous event resulting in the diversion of the PAL flight. However, the unforeseen diversion was worsened when "private respondents (passenger) was left at the airport and could not even hitch a ride in a Ford Fiera loaded with PAL personnel," 10 not to mention the apparent apathy of the PAL station manager as to the predicament of the stranded passengers. 11 In light of these circumstances, we held that if the fortuitous event was accompanied by neglect and malfeasance by the carrier's employees, an action for damages against the carrier is permissible. Unfortunately, for private respondents, none of these conditions are present in the instant petition.

We are not prepared, however, to completely absolve petitioner JAL from any liability. It must be noted that private respondents bought tickets from the United States with Manila as their final destination. While JAL was no longer required to defray private respondents' living expenses during their stay in Narita on account of the fortuitous event, JAL had the duty to make the necessary arrangements to transport private respondents on the first available connecting flight to Manila. Petitioner JAL reneged on its obligation to look after the comfort and convenience of its passengers when it declassified private respondents from "transit passengers" to "new passengers" as a result of which private respondents were obliged to make the necessary arrangements themselves for the next flight to Manila. Private respondents were placed on the waiting list from June 20 to June 24. To assure themselves of a seat on an available flight, they were compelled to stay in the airport the whole day of June 22, 1991 and it was only at 8:00 p.m. of the aforesaid date that they were advised that they could be accommodated in said flight which flew at about 9:00 a.m. the next day.

We are not oblivious to the fact that the cancellation of JAL flights to Manila from June 15 to June 21, 1991 caused considerable disruption in passenger booking and reservation. In fact, it would be unreasonable to expect, considering NAIA's closure, that JAL flight operations would be normal on the days affected. Nevertheless, this does not excuse JAL from its obligation to make the necessary arrangements to transport private respondents on its first available flight to Manila. After all, it had a contract to transport private respondents from the United States to Manila as their final destination.

Consequently, the award of nominal damages is in order. Nominal damages are adjudicated in order that a right of a plaintiff, which has been violated or invaded by the defendant, may be vindicated or recognized and not for the purpose of indemnifying any loss suffered by him. 12 The court may award

nominal damages in every obligation arising from any source enumerated in article 1157, or in every case where any property right has been invaded. 13

WHEREFORE, in view of the foregoing, the decision of the Court of Appeals dated December 22, 1993 is hereby MODIFIED. The award of actual, moral and exemplary damages is hereby DELETED. Petitioner JAL is ordered to pay each of the private respondents nominal damages in the sum of P100,000.00 each including attorney' s fees of P50,000.00 plus costs.

SO ORDERED.

Narvasa, C.J., Kapunan and Purisima, JJ., concur.

Footnotes

1 CA - G.R. CV No. 39089, penned by Associate Justice Oscar Herrera with Justices Consuelo Ynares-Santiago and Corona Ibay-Somera, concurring. Rollo, pp. 34-55.

2 RTC Records, p. 150.

3 Rollo, p. 55.

4 Rollo, p. 57.

5 Rollo, p. 61.

6 Tolentino, Civil Code of the Philippines, Vol. IV, p. 128.

7 8 AmJur 2d citing Thomas v. American Airlines, US Av 102.

8 Pilapil v. Court of Appeals. 180 SCRA 546 (1988).

9 226 SCRA 423 (1993).

10 Ibid, p. 428.

11 Id., p. 430.

12 Art. 2221, Civil Code.

13 Art. 2222, Civil Code.

Republic of the PhilippinesSUPREME COURT

Manila

THIRD DIVISION

G.R. No. L-47379 May 16, 1988

NATIONAL POWER CORPORATION, petitioner, vs.HONORABLE COURT OF APPEALS and ENGINEERING CONSTRUCTION, INC., respondents.

G.R. No. L-47481 May 16, 1988

ENGINEERING CONSTRUCTION, INC., petitioner, vs.COUTRT OF APPEALS and NATIONAL POWER CORPORATION, respondents.

Raymundo A. Armovit for private respondent in L-47379.

The Solicitor General for petitioner.

 

GUTIERREZ, JR., J.:

These consolidated petitions seek to set aside the decision of the respondent Court of Appeals which adjudged the National Power Corporation liable for damages against Engineering Construction, Inc. The appellate court, however, reduced the amount of damages awarded by the trial court. Hence, both parties filed their respective petitions: the National Power Corporation (NPC) in G.R. No. 47379, questioning the decision of the Court of Appeals for holding it liable for damages and the Engineering Construction, Inc. (ECI) in G.R. No. 47481, questioning the same decision for reducing the consequential damages and attorney's fees and for eliminating the exemplary damages.

The facts are succinctly summarized by the respondent Court of Appeals, as follows:

On August 4, 1964, plaintiff Engineering Construction, Inc., being a successful bidder, executed a contract in Manila with the National Waterworks and Sewerage Authority (NAWASA), whereby the former undertook to furnish all tools, labor, equipment, and materials (not furnished by Owner), and to construct the proposed 2nd lpo-Bicti Tunnel, Intake and Outlet Structures, and Appurtenant Structures, and Appurtenant Features, at Norzagaray, Bulacan, and to complete said works within eight hundred (800) calendar days from the date the Contractor receives the formal notice to proceed (Exh. A).

The project involved two (2) major phases: the first phase comprising, the tunnel work covering a distance of seven (7) kilometers, passing through the mountain, from the Ipo

river, a part of Norzagaray, Bulacan, where the Ipo Dam of the defendant National Power Corporation is located, to Bicti; the other phase consisting of the outworks at both ends of the tunnel.

By September 1967, the plaintiff corporation already had completed the first major phase of the work, namely, the tunnel excavation work. Some portions of the outworks at the Bicti site were still under construction. As soon as the plaintiff corporation had finished the tunnel excavation work at the Bicti site, all the equipment no longer needed there were transferred to the Ipo site where some projects were yet to be completed.

The record shows that on November 4,1967, typhoon 'Welming' hit Central Luzon, passing through defendant's Angat Hydro-electric Project and Dam at lpo, Norzagaray, Bulacan. Strong winds struck the project area, and heavy rains intermittently fell. Due to the heavy downpour, the water in the reservoir of the Angat Dam was rising perilously at the rate of sixty (60) centimeters per hour. To prevent an overflow of water from the dam, since the water level had reached the danger height of 212 meters above sea level, the defendant corporation caused the opening of the spillway gates." (pp. 45-46, L-47379, Rollo)

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

The appellate court further found that:

It cannot be pretended that there was no negligence or that the appellant exercised extraordinary care in the opening of the spillway gates of the Angat Dam. Maintainers of the dam knew very well that it was far more safe to open them gradually. But the spillway gates were opened only when typhoon Welming was already at its height, in a vain effort to race against time and prevent the overflow of water from the dam as it 'was rising dangerously at the rate of sixty centimeters per hour. 'Action could have been taken as early as November 3, 1967, when the water in the reservoir was still low. At that time, the gates of the dam could have been opened in a regulated manner. Let it be stressed that the appellant knew of the coming of the typhoon four days before it actually hit the project area. (p. 53, L-47379, Rollo)

As to the award of damages, the appellate court held:

We come now to the award of damages. The appellee submitted a list of estimated losses and damages to the tunnel project (Ipo side) caused by the instant flooding of the Angat River (Exh. J-1). The damages were itemized in four categories, to wit: Camp Facilities P55,700.00; Equipment, Parts and Plant — P375,659.51; Materials P107,175.80; and Permanent Structures and accessories — P137,250.00, with an aggregate total amount of P675,785.31. The list is supported by several vouchers which were all submitted as Exhibits K to M-38 a, N to O, P to U-2 and V to X- 60-a (Vide: Folders Nos. 1 to 4). The appellant did not submit proofs to traverse the aforementioned documentary evidence. We hold that the lower court did not commit any error in awarding P 675,785.31 as actual or compensatory damages.

However, We cannot sustain the award of P333,200.00 as consequential damages. This amount is broken down as follows: P213,200.00 as and for the rentals of a crane to temporarily replace the one "destroyed beyond repair," and P120,000.00 as one month bonus which the appellee failed to realize in accordance with the contract which the appellee had with NAWASA. Said rental of the crane allegedly covered the period of one year at the rate of P40.00 an hour for 16 hours a day. The evidence, however, shows that the appellee bought a crane also a crawler type, on November 10, 1967, six (6) days after the incident in question (Exh N) And according to the lower court, which finding was never assailed, the appellee resumed its normal construction work on the Ipo- Bicti Project after a stoppage of only one month. There is no evidence when the appellee received the crane from the seller, Asian Enterprise Limited. But there was an agreement that the shipment of the goods would be effected within 60 days from the opening of the letter of credit (Exh. N).<äre||anº•1àw> It appearing that the contract of sale was consummated, We must conclude or at least assume that the crane was delivered to the appellee within 60 days as stipulated. The appellee then could have availed of the services of another crane for a period of only one month (after a work stoppage of one month) at the rate of P 40.00 an hour for 16 hours a day or a total of P 19,200.00 as rental.

But the value of the new crane cannot be included as part of actual damages because the old was reactivated after it was repaired. The cost of the repair was P 77,000.00 as shown in item No. 1 under the Equipment, Parts and Plants category (Exh. J-1), which amount of repair was already included in the actual or compensatory damages. (pp. 54-56, L-47379, Rollo)

The appellate court likewise rejected the award of unrealized bonus from NAWASA in the amount of P120,000.00 (computed at P4,000.00 a day in case construction is finished before the specified time, i.e., within 800 calendar days), considering that the incident occurred after more than three (3) years or one thousand one hundred seventy (1,170) days. The court also eliminated the award of exemplary damages as there was no gross negligence on the part of NPC and reduced the amount of attorney's fees from P50,000.00 to P30,000.00.

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

On the other hand, ECI assails the reduction of the consequential damages from P333,200.00 to P19,000.00 on the grounds that the appellate court had no basis in concluding that ECI acquired a new Crawler-type crane and therefore, it only can claim rentals for the temporary use of the leased crane for a period of one month; and that the award of P4,000.00 a day or P120,000.00 a month bonus is justified since the period limitation on ECI's contract with NAWASA had dual effects, i.e., bonus for earlier completion and liquidated damages for delayed performance; and in either case at the rate of P4,000.00 daily. Thus, since NPC's negligence compelled work stoppage for a

period of one month, the said award of P120,000.00 is justified. ECI further assailes the reduction of attorney's fees and the total elimination of exemplary damages.

Both petitions are without merit.

It is clear from the appellate court's decision that based on its findings of fact and that of the trial court's, petitioner NPC was undoubtedly negligent because it opened the spillway gates of the Angat Dam only at the height of typhoon "Welming" when it knew very well that it was safer to have opened the same gradually and earlier, as it was also undeniable that NPC knew of the coming typhoon at least four days before it actually struck. And even though the typhoon was an act of God or what we may call force majeure, NPC cannot escape liability because its negligence was the proximate cause of the loss and damage. As we have ruled in Juan F. Nakpil & Sons v. Court of Appeals, (144 SCRA 596, 606-607):

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 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 was, 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 the 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).

Furthermore, the question of whether or not there was negligence on the part of NPC is a question of fact which properly falls within the jurisdiction of the Court of Appeals and will not be disturbed by this Court unless the same is clearly unfounded. Thus, in Tolentino v. Court of appeals, (150 SCRA 26, 36) we ruled:

Moreover, the findings of fact of the Court of Appeals are generally final and conclusive upon the Supreme Court (Leonardo v. Court of Appeals, 120 SCRA 890 [1983]. In fact it is settled that the Supreme Court is not supposed to weigh evidence but only to determine its substantially (Nuñez v. Sandiganbayan, 100 SCRA 433 [1982] and will generally not disturb said findings of fact when supported by substantial evidence (Aytona v. Court of Appeals, 113 SCRA 575 [1985]; Collector of Customs of Manila v. Intermediate Appellate Court, 137 SCRA 3 [1985]. On the other hand substantial evidence is defined as such relevant evidence as a reasonable mind might accept as adequate to support a conclusion (Philippine Metal Products, Inc. v. Court of Industrial

Relations, 90 SCRA 135 [1979]; Police Commission v. Lood, 127 SCRA 757 [1984]; Canete v. WCC, 136 SCRA 302 [1985])

Therefore, the respondent Court of Appeals did not err in holding the NPC liable for damages.

Likewise, it did not err in reducing the consequential damages from P333,200.00 to P19,000.00. As shown by the records, while there was no categorical statement or admission on the part of ECI that it bought a new crane to replace the damaged one, a sales contract was presented to the effect that the new crane would be delivered to it by Asian Enterprises within 60 days from the opening of the letter of credit at the cost of P106,336.75. The offer was made by Asian Enterprises a few days after the flood. As compared to the amount of P106,336.75 for a brand new crane and paying the alleged amount of P4,000.00 a day as rental for the use of a temporary crane, which use petitioner ECI alleged to have lasted for a period of one year, thus, totalling P120,000.00, plus the fact that there was already a sales contract between it and Asian Enterprises, there is no reason why ECI should opt to rent a temporary crane for a period of one year. The appellate court also found that the damaged crane was subsequently repaired and reactivated and the cost of repair was P77,000.00. Therefore, it included the said amount in the award of of compensatory damages, but not the value of the new crane. We do not find anything erroneous in the decision of the appellate court that the consequential damages should represent only the service of the temporary crane for one month. A contrary ruling would result in the unjust enrichment of ECI.

The P120,000.00 bonus was also properly eliminated as the same was granted by the trial court on the premise that it represented ECI's lost opportunity "to earn the one month bonus from NAWASA ... ." As stated earlier, the loss or damage to ECI's equipment and facilities occurred long after the stipulated deadline to finish the construction. No bonus, therefore, could have been possibly earned by ECI at that point in time. The supposed liquidated damages for failure to finish the project within the stipulated period or the opposite of the claim for bonus is not clearly presented in the records of these petitions. It is not shown that NAWASA imposed them.

As to the question of exemplary damages, we sustain the appellate court in eliminating the same since it found that there was no bad faith on the part of NPC and that neither can the latter's negligence be considered gross. In Dee Hua Liong Electrical Equipment Corp. v. Reyes, (145 SCRA 713, 719) we ruled:

Neither may private respondent recover exemplary damages since he is not entitled to moral or compensatory damages, and again because the petitioner is not shown to have acted in a wanton, fraudulent, reckless or oppressive manner (Art. 2234, Civil Code; Yutuk v. Manila Electric Co., 2 SCRA 377; Francisco v. Government Service Insurance System, 7 SCRA 577; Gutierrez v. Villegas, 8 SCRA 527; Air France v. Carrascoso, 18 SCRA 155; Pan Pacific (Phil.) v. Phil. Advertising Corp., 23 SCRA 977; Marchan v. Mendoza, 24 SCRA 888).

We also affirm the reduction of attorney's fees from P50,000.00 to P30,000.00. There are no compelling reasons why we should set aside the appellate court's finding that the latter amount suffices for the services rendered by ECI's counsel.

WHEREFORE, the petitions in G.R. No. 47379 and G.R. No. 47481 are both DISMISSED for LACK OF MERIT. The decision appealed from is AFFIRMED.

SO ORDERED.

Fernan (Chairman), Feliciano, Bidin and Cortes, JJ., concur.