[G.R. No. L-27454. April 30, 1970.]

ROSENDO O. CHAVES, Plaintiff-Appellant, v. FRUCTUOSO GONZALES, Defendant-Appellee.

Chaves, Elio, Chaves & Associates, for Plaintiff-Appellant.

Sulpicio E. Platon, for Defendant-Appellee.

D E C I S I O N

REYES, J.B.L., J.:

This is a direct appeal by the party who prevailed in a suit for breach of oral contract and recovery of damages but was unsatisfied with the decision rendered by the Court of First Instance of Manila, in its Civil Case No. 65138, because it awarded him only P31.10 out of his total claim of P690 00 for actual, temperate and moral damages and attorney’s fees.

The appealed judgment, which is brief, is hereunder quoted in full:jgc:chanrobles.com.ph

"In the early part of July, 1963, the plaintiff delivered to the defendant, who is a typewriter repairer, a portable typewriter for routine cleaning and servicing. The defendant was not able to finish the job after some time despite repeated reminders made by the plaintiff. The defendant merely gave assurances, but failed to comply with the same. In October, 1963, the defendant asked from the plaintiff the sum of P6.00 for the purchase of spare parts, which amount the plaintiff gave to the defendant. On October 26, 1963, after getting exasperated with the delay of the repair of the typewriter, the plaintiff went to the house of the defendant and asked for the return of the typewriter. The defendant delivered the typewriter in a wrapped package. On reaching home, the plaintiff examined the typewriter returned to him by the defendant and found out that the same was in shambles, with the interior cover and some parts and screws missing. On October 29, 1963. the plaintiff sent a letter to the defendant formally demanding the return of the missing parts, the interior cover and the sum of P6.00 (Exhibit D). The following day, the defendant returned to the plaintiff some of the missing parts, the interior cover and the P6.00.

"On August 29, 1964, the plaintiff had his typewriter repaired by Freixas Business Machines, and the repair job cost him a total of P89.85, including labor and materials (Exhibit C).

"On August 23, 1965, the plaintiff commenced this action before the City Court of Manila, demanding from the defendant the payment of P90.00 as actual and compensatory damages, P100.00 for temperate damages, P500.00 for moral damages, and P500.00 as attorney’s fees.

"In his answer as well as in his testimony given before this court, the defendant made no denials of the facts narrated above, except the claim of the plaintiff that the typewriter was delivered to the defendant through a certain Julio Bocalin, which the defendant denied allegedly because the typewriter was delivered to him personally by the plaintiff.

"The repair done on the typewriter by Freixas Business Machines with the total cost of P89.85 should not, however, be fully chargeable against the defendant. The repair invoice, Exhibit C, shows that the missing parts had a total value of only P31.10.

"WHEREFORE, judgment is hereby rendered ordering the defendant to pay the plaintiff the sum of P31.10, and the costs of suit.

"SO ORDERED."cralaw virtua1aw library

The error of the court a quo, according to the plaintiff-appellant, Rosendo O. Chaves, is that it awarded only the value of the missing parts of the typewriter, instead of the whole cost of labor and materials that went into the repair of the machine, as provided for in Article 1167 of the Civil Code, reading as follows:jgc:chanrobles.com.ph

"ART. 1167. If a person obliged to do something fails to do it, the same shall be executed at his cost.

This same rule shall be observed if he does it in contravention of the tenor of the obligation. Furthermore it may be decreed that what has been poorly done he undone."cralaw virtua1aw library

On the other hand, the position of the defendant-appellee, Fructuoso Gonzales, is that he is not liable at all, not even for the sum of P31.10, because his contract with plaintiff-appellant did not contain a period, so that plaintiff-appellant should have first filed a petition for the court to fix the period, under Article 1197 of the Civil Code, within

which the defendant appellee was to comply with the contract before said defendant-appellee could be held liable for breach of contract.

Because the plaintiff appealed directly to the Supreme Court and the appellee did not interpose any appeal, the facts, as found by the trial court, are now conclusive and non-reviewable. 1

The appealed judgment states that the "plaintiff delivered to the defendant . . . a portable typewriter for routine cleaning and servicing" ; that the defendant was not able to finish the job after some time despite repeated reminders made by the plaintiff" ; that the "defendant merely gave assurances, but failed to comply with the same" ; and that "after getting exasperated with the delay of the repair of the typewriter", the plaintiff went to the house of the defendant and asked for its return, which was done. The inferences derivable from these findings of fact are that the appellant and the appellee had a perfected contract for cleaning and servicing a typewriter; that they intended that the defendant was to finish it at some future time although such time was not specified; and that such time had passed without the work having been accomplished, far the defendant returned the typewriter cannibalized and unrepaired, which in itself is a breach of his obligation, without demanding that he should be given more time to finish the job, or compensation for the work he had already done. The time for compliance having evidently expired, and there being a breach of contract by non-performance, it was academic for the plaintiff to have first petitioned the court to fix a period for the performance of the contract before filing his complaint in this case. Defendant cannot invoke Article 1197 of the Civil Code for he virtually admitted non-performance by returning the typewriter that he was obliged to repair in a non-working condition, with essential parts missing. The fixing of a period would thus be a mere formality and would serve no purpose than to delay (cf. Tiglao. Et. Al. V. Manila Railroad Co. 98 Phil. 18l).

It is clear that the defendant-appellee contravened the tenor of his obligation because he not only did not repair the typewriter but returned it "in shambles", according to the appealed decision. For such contravention, as appellant contends, he is liable under Article 1167 of the Civil Code. jam quot, for the cost of executing the obligation in a proper manner. The cost of the execution of the obligation in this case should be the cost of the labor or service expended in the repair of the typewriter, which is in the amount of P58.75. because the obligation or contract was to repair it.

In addition, the defendant-appellee is likewise liable, under Article 1170 of the Code, for the cost of the missing parts, in the amount of P31.10, for in his obligation to repair the typewriter he was bound, but failed or neglected, to return it in the same condition it was when he received it.

Appellant’s claims for moral and temperate damages and attorney’s fees were, however, correctly rejected by the trial court, for these were not alleged in his complaint (Record on Appeal, pages 1-5). Claims for damages and attorney’s fees must be pleaded, and the existence of the actual basis thereof must be proved. 2 The appealed judgment thus made no findings on these claims, nor on the fraud or malice charged to the appellee. As no findings of fact were made on the claims for damages and attorney’s fees, there is no factual basis upon which to make an award therefor. Appellant is bound by such judgment of the court, a quo, by reason of his having resorted directly to the Supreme Court on questions of law.

IN VIEW OF THE FOREGOING REASONS, the appealed judgment is hereby modified, by ordering the defendant-appellee to pay, as he is hereby ordered to pay, the plaintiff-appellant the sum of P89.85, with interest at the legal rate from the filing of the complaint. Costs in all instances against appellee Fructuoso Gonzales.

Concepcion, C.J., Dizon, Makalintal, Zaldivar, Castro, Fernando, Teehankee and Villamor, JJ., concur.

Barredo, J., did not take part.

2. TANGUILING VS CA

[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.

D E C I S I O N

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. i

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. ii 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."iii 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."iv

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 as follows -

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. Laguna

Contract 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 considerationv and, in case of doubt, their contemporaneous and subsequent acts shall be principally considered.vi 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."vii

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."viii

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,".ix 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." x 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 casesxi 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,xii 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." xiii 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." xiv

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. xv 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" xviand to complete the same within three (3) months from the finality of this decision.

SO ORDERED.

Padilla, (Chairman), Vitug, Kapunan, and Hermosisima, JJ., concur

i

ii

iii3.KHE HONG CHENG VS CA

FIRST DIVISION

[G.R. No. 144169. March 28, 2001]

KHE HONG CHENG, alias FELIX KHE, SANDRA JOY KHE and RAY STEVEN KHE, petitioners, vs. COURT OF APPEALS, HON. TEOFILO GUADIZ, RTC 147, MAKATI CITY and PHILAM INSURANCE CO., INC., respondents.

D E C I S I O N

KAPUNAN, J.:

Before the Court is a Petition for Review on Certiorari under Rule 45, seeking to set aside the decision of the Court of Appeals dated April 10, 2000 and its resolution dated July 11, 2000 denying the motion for reconsideration of the aforesaid decision. The original complaint that is the subject matter of this case is an accion pauliana-- an action filed by Philam Insurance Company, Inc. (respondent Philam) to rescind or annul the donations made by petitioner Khe Hong Cheng allegedly in fraud of creditors. The main issue for resolution is whether or not the action to rescind the donations has already prescribed. While the first paragraph of Article 1389 of the Civil Code states: “The action to claim rescission must be commenced within four years...” the question is, from which point or event does this prescriptive period commence to run?

The facts are as follows:

Petitioner Khe Hong Cheng, alias Felix Khe, is the owner of Butuan Shipping Lines. It appears that on or about October 4, 1985, the Philippine Agricultural Trading Corporation shipped on board the vessel M/V PRINCE ERIC, owned by petitioner Khe Hong Cheng, 3,400 bags of copra at Masbate, Masbate, for delivery to Dipolog City, Zamboanga del Norte. The said shipment of copra was covered by a marine insurance policy issued by American Home Insurance Company (respondent Philam's assured). M/V PRINCE ERIC, however, sank somewhere between Negros Island and Northeastern Mindanao, resulting in the total loss of the shipment. Because of the loss, the insurer, American Home, paid the amount of P354,000.00 (the value of the copra) to the consignee.

Having been subrogated into the rights of the consignee, American Home instituted Civil Case No. 13357 in the Regional Trial Court (RTC) of Makati, Branch 147 to recover the money paid to the consignee, based on breach of contract of carriage. While the case was still pending, or on December 20, 1989, petitioner Khe Hong Cheng executed deeds of donations of parcels of land in favor of his children, herein co-petitioners Sandra Joy and Ray Steven. The parcel of land with an area of 1,000 square meters covered by Transfer Certificate of Title (TCT) No. T-3816 was donated to Ray Steven. Petitioner Khe Hong Cheng likewise donated in favor of Sandra Joy two (2) parcels of land located in Butuan City, covered by TCT No. RT-12838. On the basis of said deeds, TCT No. T-3816 was cancelled and in lieu thereof, TCT No. T-5072 was issued in favor of Ray Steven and TCT No. RT-12838 was cancelled and in lieu thereof, TCT No. RT-21054 was issued in the name of Sandra Joy.

The trial court rendered judgment against petitioner Khe Hong Cheng in Civil Case No. 13357 on December 29, 1993, four years after the donations were made and the TCTs were registered in the donees’ names. The decretal portion of the aforesaid decision reads:

“Wherefore, in view of the foregoing, the Court hereby renders judgment in favor of the plaintiff and against the defendant, ordering the latter to pay the former:

1) the sum of P354,000.00 representing the amount paid by the plaintiff to the Philippine Agricultural Trading Corporation with legal interest at 12% from the time of the filing of the complaint in this case;

2) the sum of P50,000.00 as attorney’s fees;

3) the costs.

After the said decision became final and executory, a writ of execution was forthwith issued on September 14, 1995. Said writ of execution, however, was not served. An alias writ of execution was, thereafter, applied for and granted in October 1996. Despite earnest efforts, the sheriff found no property under the name of Butuan Shipping Lines and/or petitioner Khe Hong Cheng to levy or garnish for the satisfaction of the trial court's decision. When the sheriff, accompanied by counsel of respondent Philam, went to Butuan City on January 17, 1997, to enforce the alias writ of execution, they discovered that petitioner Khe Hong Cheng no longer had any property and that he had conveyed the subject properties to his children.

On February 25, 1997, respondent Philam filed a complaint with the Regional Trial Court of Makati City, Branch 147, for the rescission of the deeds of donation executed by petitioner Khe Hong Cheng in favor of his children and for the nullification of their titles (Civil Case No. 97-415). Respondent Philam alleged, inter alia, that petitioner Khe Hong Cheng executed the aforesaid deeds in fraud of his creditors, including respondent Philam.

Petitioners subsequently filed their answer to the complaint a quo. They moved for its dismissal on the ground that the action had already prescribed. They posited that the registration of the deeds of donation on December 27, 1989 constituted constructive notice and since the complaint a quo was filed only on February 25, 1997, or more than four (4) years after said registration, the action was already barred by prescription.

Acting thereon, the trial court denied the motion to dismiss. It held that respondent Philam's complaint had not yet prescribed. According to the trial court, the prescriptive period began to run only from December 29, 1993, the date of the decision of the trial court in Civil Case No. 13357.

On appeal by petitioners, the CA affirmed the trial court's decision in favor of respondent Philam. The CA declared that the action to rescind the donations had not yet prescribed. Citing Articles 1381 and 1383 of the Civil Code, the CA basically ruled that the four year period to institute the action

for rescission began to run only in January 1997, and not when the decision in the civil case became final and executory on December 29, 1993. The CA reckoned the accrual of respondent Philam's cause of action on January 1997, the time when it first learned that the judgment award could not be satisfied because the judgment creditor, petitioner Khe Hong Cheng, had no more properties in his name. Prior thereto, respondent Philam had not yet exhausted all legal means for the satisfaction of the decision in its favor, as prescribed under Article 1383 of the Civil Code.

The Court of Appeals thus denied the petition for certiorari filed before it, and held that the trial court did not commit any error in denying petitioners' motion to dismiss. Their motion for reconsideration was likewise dismissed in the appellate court's resolution dated July 11, 2000.

Petitioners now assail the aforesaid decision and resolution of the CA alleging that:

I

PUBLIC RESPONDENT GRAVELY ERRED AND ACTED IN GRAVE ABUSE OF DISCRETION WHEN IT DENIED THE PETITION TO DISMISS THE CASE BASED ON THE GROUND OF PRESCRIPTION.

II

PUBLIC RESPONDENT COURT OF APPEALS GRAVELY ERRED IN HOLDING THAT PRESCRIPTION BEGINS TO RUN WHEN IN JANUARY 1997 THE SHERIFF WENT TO BUTUAN CITY IN SEARCH OF PROPERTIES OF PETITIONER FELIX KHE CHENG TO SATISFY THE JUDGMENT IN CIVIL CASE NO. 13357 AND FOUND OUT THAT AS EARLY AS DEC. 20, 1989, PETITIONERS KHE CHENG EXECUTED THE DEEDS OF DONATIONS IN FAVOR OF HIS CO-PETITIONERS THAT THE ACTION FOR RESCISSION ACCRUED BECAUSE PRESCRIPTION BEGAN TO RUN WHEN THESE DONATIONS WERE REGISTERED WITH THE REGISTER OF DEEDS IN DECEMBER 1989, AND WHEN THE COMPLAINT WAS FILED ONLY IN FEBRUARY 1997, MORE THAN FOUR YEARS HAVE ALREADY LAPSED AND THEREFORE, IT HAS ALREADY PRESCRIBED.

Essentially, the issue for resolution posed by petitioners is this: When did the four (4) year prescriptive period as provided for in Article 1389 of the Civil Code for respondent Philam to file its action for rescission of the subject deeds of donation commence to run?

The petition is without merit.

Article 1389 of the Civil Code simply provides that, “The action to claim rescission must be commenced within four years.” Since this provision of law is silent as to when the prescriptive period would commence, the general rule, i.e, from the moment the cause of action accrues, therefore, applies. Article 1150 of the Civil Code is particularly instructive:

Art. 1150. The time for prescription for all kinds of actions, when there is no special provision which ordains otherwise, shall be counted from the day they may be brought.

Indeed, this Court enunciated the principle that it is the legal possibility of bringing the action which determines the starting point for the computation of the prescriptive period for the action. Article 1383 of the Civil Code provides as follows:

Art. 1383. An action for rescission is subsidiary; it cannot be instituted except when the party suffering damage has no other legal means to obtain reparation for the same.

It is thus apparent that an action to rescind or an accion pauliana must be of last resort, availed of only after all other legal remedies have been exhausted and have been proven futile. For an accion pauliana to accrue, the following requisites must concur:

1) That the plaintiff asking for rescission has a credit prior to the alienation, although demandable later; 2) That the debtor has made a subsequent contract conveying a patrimonial benefit to a third person; 3) That the creditor has no other legal remedy to satisfy his claim, but would benefit by rescission of the conveyance to the third person; 4) That the act being impugned is fraudulent; 5) That the third person who received the property conveyed, if by onerous title, has been an accomplice in the fraud. (Emphasis ours)

We quote with approval the following disquisition of the CA on the matter:

An accion pauliana accrues only when the creditor discovers that he has no other legal remedy for the satisfaction of his claim against the debtor other than an accion pauliana. The accion pauliana is an action of a last resort. For as long as the creditor still has a remedy at law for the enforcement of his claim against the debtor, the creditor will not have any cause of action against the creditor for rescission of the contracts entered into by and between the debtor and another person or persons. Indeed, an accion pauliana presupposes a judgment and the issuance by the trial court of a writ of execution for the satisfaction of the judgment and the failure of the Sheriff to enforce and satisfy the judgment of the court. It presupposes that the creditor has exhausted the property of the debtor. The date of the decision of the trial court against the debtor is immaterial. What is important is that the credit of the plaintiff antedates that of the fraudulent alienation by the debtor of his property. After all, the decision of the trial court against the debtor will retroact to the time when the debtor became indebted to the creditor.

Petitioners, however, maintain that the cause of action of respondent Philam against them for the rescission of the deeds of donation accrued as early as December 27, 1989, when petitioner Khe Hong Cheng registered the subject conveyances with the Register of Deeds. Respondent Philam allegedly had constructive knowledge of the execution of said deeds under Section 52 of Presidential Decree No. 1529, quoted infra, as follows:

Section 52. Constructive knowledge upon registration.— Every conveyance, mortgage, lease, lien, attachment, order, judgment, instrument or entry affecting registered land shall, if registered, filed or entered in the Office of the Register of Deeds for the province or city where the land to which it relates lies, be constructive notice to all persons from the time of such registering, filing, or entering.

Petitioners argument that the Civil Code must yield to the Mortgage and Registration Laws is misplaced, for in no way does this imply that the specific provisions of the former may be all together ignored. To count the four year prescriptive period to rescind an allegedly fraudulent contract from the date of registration of the conveyance with the Register of Deeds, as alleged by the petitioners, would run counter to Article 1383 of the Civil Code as well as settled jurisprudence. It would likewise violate the third requisite to file an action for rescission of an allegedly fraudulent conveyance of property, i.e., the creditor has no other legal remedy to satisfy his claim.

An accion pauliana thus presupposes the following: 1) A judgment; 2) the issuance by the trial court of a writ of execution for the satisfaction of the

judgment, and 3) the failure of the sheriff to enforce and satisfy the judgment of the court. It requires that the creditor has exhausted the property of the debtor. The date of the decision of the trial court is immaterial. What is important is that the credit of the plaintiff antedates that of the fraudulent alienation by the debtor of his property. After all, the decision of the trial court against the debtor will retroact to the time when the debtor became indebted to the creditor.

Tolentino, a noted civilist, explained:

“xxx[T]herefore, credits with suspensive term or condition are excluded, because the accion pauliana presupposes a judgment and unsatisfied execution, which cannot exist when the debt is not yet demandable at the time the rescissory action is brought. Rescission is a subsidiary action, which presupposes that the creditor has exhausted the property of the debtor which is impossible in credits which cannot be enforced because of a suspensive term or condition.

While it is necessary that the credit of the plaintiff in the accion pauliana must be prior to the fraudulent alienation, the date of the judgment enforcing it is immaterial. Even if the judgment be subsequent to the alienation, it is merely declaratory with retroactive effect to the date when the credit was constituted.”

These principles were reiterated by the Court when it explained the requisites of an accion pauliana in greater detail, to wit:

“The following successive measures must be taken by a creditor before he may bring an action for rescission of an allegedly fraudulent sale: (1) exhaust the properties of the debtor through levying by attachment and execution upon all the property of the debtor, except such as are exempt from execution; (2) exercise all the rights and actions of the debtor, save those personal to him (accion subrogatoria); and (3) seek rescission of the contracts executed by the debtor in fraud of their rights (accion pauliana). Without availing of the first and second remedies, i.e., exhausting the properties of the debtor or subrogating themselves in Francisco Bareg’s transmissible rights and actions, petitioners simply undertook the third measure and filed an action for annulment of sale. This cannot be done.” (Emphasis ours)

In the same case, the Court also quoted the rationale of the CA when it upheld the dismissal of the accion pauliana on the basis of lack of cause of action:

“In this case, plaintiff’s appellants had not even commenced an action against defendants-appellees Bareng for the collection of the alleged indebtedness. Plaintiffs-appellants had not even tried to exhaust the property of defendants-appellees Bareng. Plaintiffs-appellants, in seeking the rescission of the contracts of sale entered into between defendants-appellees, failed to show and prove that defendants-appellees Bareng had no other property, either at the time of the sale or at the time this action was filed, out of which they could have collected this (sic) debts.” (Emphasis ours)

Even if respondent Philam was aware, as of December 27, 1989, that petitioner Khe Hong Cheng had executed the deeds of donation in favor of his children, the complaint against Butuan Shipping Lines and/or petitioner Khe Hong Cheng was still pending before the trial court. Respondent Philam had no inkling, at the time, that the trial court's judgment would be in its favor and further, that such judgment would not be satisfied due to the deeds of donation executed by petitioner Khe Hong Cheng during the pendency of the case. Had respondent Philam filed his complaint on December 27, 1989, such complaint would have been dismissed for being premature. Not only were all other legal remedies for the enforcement of respondent Philam’s claims not yet exhausted at the time the deeds of donation were executed and registered. Respondent Philam would also not have been able to prove then that petitioner Khe Hong Chneg had no more property other than those covered by the subject deeds to satisfy a favorable judgment by the trial court.

It bears stressing that petitioner Khe Hong Cheng even expressly declared and represented that he had reserved to himself property sufficient to answer for his debts contracted prior to this date:

“That the DONOR further states, for the same purpose as expressed in the next preceding paragraph, that this donation is not made with the object of defrauding his creditors having reserved to himself property sufficient to answer his debts contracted prior to this date”.

As mentioned earlier, respondent Philam only learned about the unlawful conveyances made by petitioner Khe Hong Cheng in January 1997 when its counsel accompanied the sheriff to Butuan City to attach the properties of petitioner Khe Hong Cheng. There they found that he no longer had any properties in his name. It was only then that respondent Philam's action for rescission of the deeds of donation accrued because then it could be said that respondent Philam had exhausted all legal means to satisfy the trial court's judgment in its favor. Since respondent Philam filed its complaint for accion pauliana against petitioners on February 25, 1997, barely a month from its discovery that petitioner Khe Hong Cheng had no other property to satisfy the judgment award against him, its action for rescission of the subject deeds clearly had not yet prescribed.

A final point. Petitioners now belatedly raise on appeal the defense of improper venue claiming that respondent Philam’s complaint is a real action and should have been filed with the RTC of Butuan City since the property subject matter of the donations are located therein. Suffice it to say that petitioners are already deemed to have waived their right to question the venue of the instant case. Improper venue should be objected to as follows 1) in a motion to dismiss filed within the time but before the filing of the answer; or 2) in the answer as an affirmative defense over which, in the discretion of the court, a preliminary hearing may be held as if a motion to dismiss had been filed. Having failed to either file a motion to dismiss on the ground of improper of venue or include the same as an affirmative defense in their answer, petitioners are deemed to have their right to object to improper venue.

WHEREFORE, premises considered, the petition is hereby DENIED for lack of merit.

SO ORDERED.

Davide, Jr., C.J. (Chairman), Pardo, and Ynares-Santiago, JJ., concur.Puno, J., on official leave.

iv

v4. SIGUAN VS LIM

[G.R. No. 134685. November 19, 1999]

MARIA ANTONIA SIGUAN, petitioner, vs. ROSA LIM, LINDE LIM, INGRID LIM and NEIL LIM, respondents.

D E C I S I O N

DAVIDE, JR., C.J.:

May the Deed of Donation executed by respondent Rosa Lim (hereafter LIM) in favor of her children be rescinded for being in fraud of her alleged creditor, petitioner Maria Antonia Siguan? This is the pivotal issue to be resolved in this petition for review on certiorari under Rule 45 of the Revised Rules of Court.

The relevant facts, as borne out of the records, are as follows:

On 25 and 26 August 1990, LIM issued two Metrobank checks in the sums of P300,000 and P241,668, respectively, payable to “cash.” Upon presentment by petitioner with the drawee bank, the checks were dishonored for the reason “account closed.” Demands to make good the checks proved futile. As a consequence, a criminal case for violation of Batas Pambansa Blg. 22, docketed as Criminal Cases Nos. 22127-28, were filed by petitioner against LIM with Branch 23 of the Regional Trial Court (RTC) of Cebu City. In its decision dated 29 December 1992, the court a quo convicted LIM as charged. The case is pending before this Court for review and docketed as G.R. No. 134685.

It also appears that on 31 July 1990 LIM was convicted of estafa by the RTC of Quezon City in Criminal Case No. Q-89-2216 filed by a certain Victoria Suarez. This decision was affirmed by the Court of Appeals. On appeal, however, this Court, in a decision promulgated on 7 April 1997, acquitted LIM but held her civilly liable in the amount of P169,000, as actual damages, plus legal interest.

Meanwhile, on 2 July 1991, a Deed of Donation conveying the following parcels of land and purportedly executed by LIM on 10 August 1989 in favor of her children, Linde, Ingrid and Neil, was registered with the Office of the Register of Deeds of Cebu City:

(1) a parcel of land situated at Barrio Lahug, Cebu City, containing an area of 563 sq. m. and covered by TCT No. 93433;

(2) a parcel of land situated at Barrio Lahug, Cebu City, containing an area of 600 sq. m. and covered by TCT No. 93434;

(3) a parcel of land situated at Cebu City containing an area of 368 sq. m. and covered by TCT No. 87019; and

(4) a parcel of land situated at Cebu City, Cebu containing an area of 511 sq. m. and covered by TCT No. 87020.

New transfer certificates of title were thereafter issued in the names of the donees.

On 23 June 1993, petitioner filed an accion pauliana against LIM and her children before Branch 18 of the RTC of Cebu City to rescind the questioned Deed of Donation and to declare as null and void the new transfer certificates of title issued for the lots covered by the questioned Deed. The complaint was docketed as Civil Case No. CEB-14181. Petitioner claimed therein that sometime in July 1991, LIM, through a Deed of Donation, fraudulently transferred all her real property to her children in bad faith and in fraud of creditors, including her; that LIM conspired and confederated with her children in antedating the questioned Deed of Donation, to petitioner’s and other creditors’ prejudice; and that LIM, at the time of the fraudulent conveyance, left no sufficient properties to pay her obligations.

On the other hand, LIM denied any liability to petitioner. She claimed that her convictions in Criminal Cases Nos. 22127-28 were erroneous, which was the reason why she appealed said decision to the Court of Appeals. As regards the questioned Deed of Donation, she maintained that it was not antedated but was made in good faith at a time when she had sufficient property. Finally, she alleged that the Deed of Donation was registered only on 2 July 1991 because she was seriously ill.

In its decision of 31 December 1994, the trial court ordered the rescission of the questioned deed of donation; (2) declared null and void the transfer certificates of title issued in the names of private respondents Linde, Ingrid and Neil Lim; (3) ordered the Register of Deeds of Cebu City to cancel said titles and to reinstate the previous titles in the name of Rosa Lim; and (4) directed the LIMs to pay the petitioner, jointly and severally, the sum of P10,000 as moral damages; P10,000 as attorney’s fees; and P5,000 as expenses of litigation.

On appeal, the Court of Appeals, in a decision promulgated on 20 February 1998, reversed the decision of the trial court and dismissed petitioner’s accion pauliana. It held that two of the requisites for filing an accion pauliana were absent, namely, (1) there must be a credit existing prior to the celebration of the contract; and (2) there must be a fraud, or at least the intent to commit fraud, to the prejudice of the creditor seeking the rescission.

According to the Court of Appeals, the Deed of Donation, which was executed and acknowledged before a notary public, appears on its face to have been executed on 10 August 1989. Under Section 23 of Rule 132 of the Rules of Court, the questioned Deed, being a public document, is evidence of the fact which gave rise to its execution and of the date thereof. No antedating of the Deed of Donation was made, there being no convincing evidence on record to indicate that the notary public and the parties did antedate it. Since LIM’s indebtedness to petitioner was incurred in August 1990, or a year after the execution of the Deed of Donation, the first requirement for accion pauliana was not met.

Anent petitioner’s contention that assuming that the Deed of Donation was not antedated it was nevertheless in fraud of creditors because Victoria Suarez became LIM’s creditor on 8 October 1987, the Court of Appeals found the same untenable, for the rule is basic that the fraud must prejudice the creditor seeking the rescission.

Her motion for reconsideration having been denied, petitioner came to this Court and submits the following issue:

WHETHER OR NOT THE DEED OF DONATION, EXH. 1, WAS ENTERED INTO IN FRAUD OF [THE] CREDITORS OF RESPONDENT ROSA [LIM].

Petitioner argues that the finding of the Court of Appeals that the Deed of Donation was not in fraud of creditors is contrary to well-settled jurisprudence laid down by this Court as early as 1912 in the case of Oria v. McMicking, which enumerated the various circumstances indicating the existence of fraud in a transaction. She reiterates her arguments below, and adds that another fact found by the trial court and admitted by the parties but untouched by the Court of Appeals is the existence of a prior final judgment against LIM in Criminal Case No. Q-89-2216 declaring Victoria Suarez as LIM’s judgment creditor before the execution of the Deed of Donation.

Petitioner further argues that the Court of Appeals incorrectly applied or interpreted Section 23, Rule 132 of the Rules of Court, in holding that “being a public document, the said deed of donation is evidence of the fact which gave rise to its execution and of the date of the latter.” Said provision should be read with Section 30 of the same Rule which provides that notarial documents are prima facie evidence of their execution, not “of the facts which gave rise to their execution and of the date of the latter.”

Finally, petitioner avers that the Court of Appeals overlooked Article 759 of the New Civil Code, which provides: “The donation is always presumed to be in fraud of creditors when at the time of the execution thereof the donor did not reserve sufficient property to pay his debts prior to the donation.” In this case, LIM made no reservation of sufficient property to pay her creditors prior to the execution of the Deed of Donation.

On the other hand, respondents argue that (a) having agreed on the law and requisites of accion pauliana, petitioner cannot take shelter under a different law; (b) petitioner cannot invoke the credit of Victoria Suarez, who is not a party to this case, to support her accion pauliana; (c) the Court of Appeals correctly applied or interpreted Section 23 of Rule 132 of the Rules of Court; (d) petitioner failed to present convincing evidence that the Deed of Donation was antedated and executed in fraud of petitioner; and (e) the Court of Appeals correctly struck down the awards of damages, attorney’s fees and expenses of litigation because there is no factual basis therefor in the body of the trial court’s decision.

The primordial issue for resolution is whether the questioned Deed of Donation was made in fraud of petitioner and, therefore, rescissible. A corollary issue is whether the awards of damages, attorney’s fees and expenses of litigation are proper.

We resolve these issues in the negative.

The rule is well settled that the jurisdiction of this Court in cases brought before it from the Court of Appeals via Rule 45 of the Rules of Court is limited to reviewing errors of law. Findings of fact of the latter court are conclusive, except in a number of instances. In the case at bar, one of the recognized exceptions warranting a review by this Court of the factual findings of the Court of Appeals exists, to wit, the factual findings and conclusions of the lower court and Court of Appeals are conflicting, especially on the issue of whether the Deed of Donation in question was in fraud of creditors.

Article 1381 of the Civil Code enumerates the contracts which are rescissible, and among them are “those contracts undertaken in fraud of creditors when the latter cannot in any other manner collect the claims due them.”

The action to rescind contracts in fraud of creditors is known as accion pauliana. For this action to prosper, the following requisites must be present: (1) the plaintiff asking for rescission has a credit prior to the alienation, although demandable later; (2) the debtor has made a subsequent contract conveying a patrimonial benefit to a third person; (3) the creditor has no other legal remedy to satisfy his claim; (4) the act being impugned is fraudulent; (5) the third person who received the property conveyed, if it is by onerous title, has been an accomplice in the fraud.

The general rule is that rescission requires the existence of creditors at the time of the alleged fraudulent alienation, and this must be proved as one of the bases of the judicial pronouncement setting aside the contract. Without any prior existing debt, there can neither be injury nor fraud. While it is necessary that the credit of the plaintiff in the accion pauliana must exist prior to the fraudulent alienation, the date of the judgment enforcing it is immaterial. Even if the judgment be subsequent to the alienation, it is merely declaratory, with retroactive effect to the date when the credit was constituted.

In the instant case, the alleged debt of LIM in favor of petitioner was incurred in August 1990, while the deed of donation was purportedly executed on 10 August 1989.

We are not convinced with the allegation of the petitioner that the questioned deed was antedated to make it appear that it was made prior to petitioner’s credit. Notably, that deed is a public document, it having been acknowledged before a notary public. As such, it is evidence of the fact which gave rise to its execution and of its date, pursuant to Section 23, Rule 132 of the Rules of Court.

Petitioner’s contention that the public documents referred to in said Section 23 are only those entries in public records made in the performance of a duty by a public officer does not hold water. Section 23 reads:

SEC. 23. Public documents as evidence. – Documents consisting of entries in public records made in the performance of a duty by a public officer are prima facie evidence of the facts therein stated. All other public documents are evidence, even against a third person, of the fact which gave rise to their execution and of the date of the latter. (Emphasis supplied).

The phrase “all other public documents” in the second sentence of Section 23 means those public documents other than the entries in public records made in the performance of a duty by a public officer. And these include notarial documents, like the subject deed of donation. Section 19, Rule 132 of the Rules of Court provides:

SEC. 19. Classes of documents. -- For the purpose of their presentation in evidence, documents are either public or private.

Public documents are:

(a) . . .

(b) Documents acknowledged before a notary public except last wills and testaments. . . .

It bears repeating that notarial documents, except last wills and testaments, are public documents and are evidence of the facts that gave rise to their execution and of their date.

In the present case, the fact that the questioned Deed was registered only on 2 July 1991 is not enough to overcome the presumption as to the truthfulness of the statement of the date in the questioned deed, which is 10 August 1989. Petitioner’s claim against LIM was constituted only in August 1990, or a year after the questioned alienation. Thus, the first two requisites for the rescission of contracts are absent.

Even assuming arguendo that petitioner became a creditor of LIM prior to the celebration of the contract of donation, still her action for rescission would not fare well because the third requisite was not met. Under Article 1381 of the Civil Code, contracts entered into in fraud of creditors may be rescinded only when the creditors cannot in any manner collect the claims due them. Also, Article 1383 of the same Code provides that the action for rescission is but a subsidiary remedy which cannot be instituted except when the party suffering damage has no other legal means to obtain reparation for the same. The term “subsidiary remedy” has been defined as “the exhaustion of all remedies by the prejudiced creditor to collect claims due him before rescission is resorted to.” It is, therefore, essential that the party asking for rescission prove that he has exhausted all other legal means to obtain satisfaction of his claim. Petitioner neither alleged nor proved that she did so. On this score, her action for the rescission of the questioned deed is not maintainable even if the fraud charged actually did exist.”

The fourth requisite for an accion pauliana to prosper is not present either.

Article 1387, first paragraph, of the Civil Code provides: “All contracts by virtue of which the debtor alienates property by gratuitous title are presumed to have been entered into in fraud of creditors when the donor did not reserve sufficient property to pay all debts contracted before the donation. Likewise, Article 759 of the same Code, second paragraph, states that the donation is always presumed to be in fraud of creditors when at the time thereof the donor did not reserve sufficient property to pay his debts prior to the donation.

For this presumption of fraud to apply, it must be established that the donor did not leave adequate properties which creditors might have recourse for the collection of their credits existing before the execution of the donation.

As earlier discussed, petitioner’s alleged credit existed only a year after the deed of donation was executed. She cannot, therefore, be said to have been prejudiced or defrauded by such alienation. Besides, the evidence disclose that as of 10 August 1989, when the deed of donation was executed, LIM had the following properties:

(1) A parcel of land containing an area of 220 square meters, together with the house constructed thereon, situated in Sto. Niño Village, Mandaue City, Cebu, registered in the name of Rosa Lim and covered by TCT No. 19706;

(2) A parcel of land located in Benros Subdivision, Lawa-an, Talisay, Cebu;

(3) A parcel of land containing an area of 2.152 hectares, with coconut trees thereon, situated at Hindag-an, St. Bernard, Southern Leyte, and covered by Tax Declaration No. 13572.

(4) A parcel of land containing an area of 3.6 hectares, with coconut trees thereon, situated at Hindag-an, St. Bernard, Southern Leyte, and covered by Tax Declaration No. 13571.

During her cross-examination, LIM declared that the house and lot mentioned in no. 1 was bought by her in the amount of about P800,000 to P900,000. Thus:

ATTY. FLORIDO:

Q These properties at the Sto. Niño Village, how much did you acquire this property?

A Including the residential house P800,000.00 to P900,000.00.

Q How about the lot which includes the house. How much was the price in the Deed of Sale of the house and lot at Sto. Niño Violage [sic]?

A I forgot.

Q How much did you pay for it?

A That is P800,000.00 to P900,000.00.

Petitioner did not adduce any evidence that the price of said property was lower. Anent the property in no. 2, LIM testified that she sold it in 1990. As to the properties in nos. 3 and 4, the total market value stated in the tax declarations dated 23 November 1993 was P56,871.60. Aside from these tax declarations, petitioner did not present evidence that would indicate the actual market value of said properties. It was not, therefore, sufficiently established that the properties left behind by LIM were not sufficient to cover her debts existing before the donation was made. Hence, the presumption of fraud will not come into play.

Nevertheless, a creditor need not depend solely upon the presumption laid down in Articles 759 and 1387 of the Civil Code. Under the third paragraph of Article 1387, the design to defraud may be proved in any other manner recognized by the law of evidence. Thus in the consideration of whether certain transfers are fraudulent, the Court has laid down specific rules by which the character of the transaction may be determined. The following have been denominated by the Court as badges of fraud:

(1) The fact that the consideration of the conveyance is fictitious or is inadequate;

(2) A transfer made by a debtor after suit has begun and while it is pending against him;

(3) A sale upon credit by an insolvent debtor;

(4) Evidence of large indebtedness or complete insolvency;

(5) The transfer of all or nearly all of his property by a debtor, especially when he is insolvent or greatly embarrassed financially;

(6) The fact that the transfer is made between father and son, when there are present other of the above circumstances; and

(7) The failure of the vendee to take exclusive possession of all the property.

The above enumeration, however, is not an exclusive list. The circumstances evidencing fraud are as varied as the men who perpetrate the fraud in each case. This Court has therefore declined to define it, reserving the liberty to deal with it under whatever form it may present itself.

Petitioner failed to discharge the burden of proving any of the circumstances enumerated above or any other circumstance from which fraud can be inferred. Accordingly, since the four requirements for the rescission of a gratuitous contract are not present in this case, petitioner’s action must fail.

In her further attempt to support her action for rescission, petitioner brings to our attention the 31 July 1990 Decision of the RTC of Quezon City, Branch 92, in Criminal Case No. Q-89-2216. LIM was therein held guilty of estafa and was ordered to pay complainant Victoria Suarez the sum of P169,000 for the obligation LIM incurred on 8 October 1987. This decision was affirmed by the Court of Appeals. Upon appeal, however, this Court acquitted LIM of estafa but held her civilly liable for P169,000 as actual damages.

It should be noted that the complainant in that case, Victoria Suarez, albeit a creditor prior to the questioned alienation, is not a party to this accion pauliana. Article 1384 of the Civil Code provides that rescission shall only be to the extent necessary to cover the damages caused. Under this Article, only the creditor who brought the action for rescission can benefit from the rescission; those who are strangers to the action cannot benefit from its effects. And the revocation is only to the extent of the plaintiff creditor’s unsatisfied credit; as to the excess, the alienation is maintained. Thus, petitioner cannot invoke the credit of Suarez to justify rescission of the subject deed of donation.

Now on the propriety of the trial court’s awards of moral damages, attorney’s fees and expenses of litigation in favor of the petitioner. We have pored over the records and found no factual or legal basis therefor. The trial court made these awards in the dispositive portion of its decision without stating, however, any justification for the same in the ratio decidendi. Hence, the Court of Appeals correctly deleted these awards for want of basis in fact, law or equity.

WHEREFORE, the petition is hereby DISMISSED and the challenged decision of the Court of Appeals in CA-G.R. CV. No. 50091 is AFFIRMED in toto.

No pronouncement as to costs.

SO ORDERED.

Puno, Kapunan, Pardo, and Ynares-Santiago, JJ., concur.

5.JUAN NAKPIL AND SONS VS CA

Republic of the PhilippinesSUPREME COURT

Manila

SECOND DIVISION

G.R. No. L-47851 October 3, 1986

JUAN F. NAKPIL & SONS, and JUAN F. NAKPIL, petitioners, vs.THE COURT OF APPEALS, UNITED CONSTRUCTION COMPANY, INC., JUAN J. CARLOS, and the PHILIPPINE BAR ASSOCIATION, respondents.

G.R. No. L-47863 October 3, 1986

THE UNITED CONSTRUCTION CO., INC., petitioner, vs.COURT OF APPEALS, ET AL., respondents.

G.R. No. L-47896 October 3, 1986

PHILIPPINE BAR ASSOCIATION, ET AL., petitioners, vs.COURT OF APPEALS, ET AL., respondents.

 

PARAS, J.:

These are petitions for review on certiorari of the November 28, 1977 decision of the Court of Appeals in CA-G.R. No. 51771-R modifying the decision of the Court of First Instance of Manila, Branch V, in Civil Case No. 74958 dated September 21, 1971 as modified by the Order of the lower court dated December 8, 1971. The Court of Appeals in modifying the decision of the lower court included an award of an additional amount of P200,000.00 to the Philippine Bar Association to be paid jointly and severally by the defendant United Construction Co. and by the third-party defendants Juan F. Nakpil and Sons and Juan F. Nakpil.

The dispositive portion of the modified decision of the lower court reads:

WHEREFORE, judgment is hereby rendered:

(a) Ordering defendant United Construction Co., Inc. and third-party defendants (except Roman Ozaeta) to pay the plaintiff, jointly and severally, the sum of P989,335.68 with interest at the legal rate from November 29, 1968, the date of the filing of the complaint until full payment;

(b) Dismissing the complaint with respect to defendant Juan J. Carlos;

(c) Dismissing the third-party complaint;

(d) Dismissing the defendant's and third-party defendants' counterclaims for lack of merit;

(e) Ordering defendant United Construction Co., Inc. and third-party defendants (except Roman Ozaeta) to pay the costs in equal shares.

SO ORDERED. (Record on Appeal p. 521; Rollo, L- 47851, p. 169).

The dispositive portion of the decision of the Court of Appeals reads:

WHEREFORE, the judgment appealed from is modified to include an award of P200,000.00 in favor of plaintiff-appellant Philippine Bar Association, with interest at the legal rate from November 29, 1968 until full payment to be paid jointly and severally by defendant United Construction Co., Inc. and third party defendants (except Roman Ozaeta). In all other respects, the judgment dated September 21, 1971 as modified in the December 8, 1971 Order of the lower court is hereby affirmed with COSTS to be paid by the defendant and third party defendant (except Roman Ozaeta) in equal shares.

SO ORDERED.

Petitioners Juan F. Nakpil & Sons in L-47851 and United Construction Co., Inc. and Juan J. Carlos in L-47863 seek the reversal of the decision of the Court of Appeals, among other things, for exoneration from liability while petitioner Philippine Bar Association in L-47896 seeks the modification of aforesaid decision to obtain an award of P1,830,000.00 for the loss of the PBA building plus four (4) times such amount as damages resulting in increased cost of the building, P100,000.00 as exemplary damages; and P100,000.00 as attorney's fees.

These petitions arising from the same case filed in the Court of First Instance of Manila were consolidated by this Court in the resolution of May 10, 1978 requiring the respective respondents to comment. (Rollo, L-47851, p. 172).

The facts as found by the lower court (Decision, C.C. No. 74958; Record on Appeal, pp. 269-348; pp. 520-521; Rollo, L-47851, p. 169) and affirmed by the Court of Appeals are as follows:

The plaintiff, Philippine Bar Association, a civic-non-profit association, incorporated under the Corporation Law, decided to construct an office building on its 840 square meters lot located at the comer of Aduana and Arzobispo Streets, Intramuros, Manila. The construction was undertaken by the United Construction, Inc. on an "administration" basis, on the suggestion of Juan J. Carlos, the president and general manager of said corporation. The proposal was approved by plaintiff's board of directors and signed by its president Roman Ozaeta, a third-party defendant in this case. The plans and specifications for the building were prepared by the other third-party defendants Juan F. Nakpil & Sons. The building was completed in June, 1966.

In the early morning of August 2, 1968 an unusually strong earthquake hit Manila and its environs and the building in question sustained major damage. The front columns of the building buckled, causing the building to tilt forward dangerously. The tenants vacated the building in view of its precarious condition. As a temporary remedial measure, the building was shored up by United Construction, Inc. at the cost of P13,661.28.

On November 29, 1968, the plaintiff commenced this action for the recovery of damages arising from the partial collapse of the building against United Construction, Inc. and its President and General Manager Juan J. Carlos as defendants. Plaintiff alleges that the collapse of the building was accused by defects in the construction, the failure of the contractors to follow plans and

specifications and violations by the defendants of the terms of the contract.

Defendants in turn filed a third-party complaint against the architects who prepared the plans and specifications, alleging in essence that the collapse of the building was due to the defects in the said plans and specifications. Roman Ozaeta, the then president of the plaintiff Bar Association was included as a third-party defendant for damages for having included Juan J. Carlos, President of the United Construction Co., Inc. as party defendant.

On March 3, 1969, the plaintiff and third-party defendants Juan F. Nakpil & Sons and Juan F. Nakpil presented a written stipulation which reads:

1. That in relation to defendants' answer with counterclaims and third- party complaints and the third-party defendants Nakpil & Sons' answer thereto, the plaintiff need not amend its complaint by including the said Juan F. Nakpil & Sons and Juan F. Nakpil personally as parties defendant.

2. That in the event (unexpected by the undersigned) that the Court should find after the trial that the above-named defendants Juan J. Carlos and United Construction Co., Inc. are free from any blame and liability for the collapse of the PBA Building, and should further find that the collapse of said building was due to defects and/or inadequacy of the plans, designs, and specifications p by the third-party defendants, or in the event that the Court may find Juan F. Nakpil and Sons and/or Juan F. Nakpil contributorily negligent or in any way jointly and solidarily liable with the defendants, judgment may be rendered in whole or in part. as the case may be, against Juan F. Nakpil & Sons and/or Juan F. Nakpil in favor of the plaintiff to all intents and purposes as if plaintiff's complaint has been duly amended by including the said Juan F. Nakpil & Sons and Juan F. Nakpil as parties defendant and by alleging causes of action against them including, among others, the defects or inadequacy of the plans, designs, and specifications prepared by them and/or failure in the performance of their contract with plaintiff.

3. Both parties hereby jointly petition this Honorable Court to approve this stipulation. (Record on Appeal, pp. 274-275; Rollo, L-47851,p.169).

Upon the issues being joined, a pre-trial was conducted on March 7, 1969, during which among others, the parties agreed to refer the technical issues involved in the case to a Commissioner. Mr. Andres O. Hizon, who was ultimately appointed by the trial court, assumed his office as Commissioner, charged with the duty to try the following issues:

1. Whether the damage sustained by the PBA building during the August 2, 1968 earthquake had been caused, directly or indirectly, by:

(a) The inadequacies or defects in the plans and specifications prepared by third-party defendants;

(b) The deviations, if any, made by the defendants from said plans and specifications and how said deviations contributed to the damage sustained;

(c) The alleged failure of defendants to observe the requisite quality of materials and workmanship in the construction of the building;

(d) The alleged failure to exercise the requisite degree of supervision expected of the architect, the contractor and/or the owner of the building;

(e) An act of God or a fortuitous event; and

(f) Any other cause not herein above specified.

2. If the cause of the damage suffered by the building arose from a combination of the above-enumerated factors, the degree or proportion in which each individual factor contributed to the damage sustained;

3. Whether the building is now a total loss and should be completely demolished or whether it may still be repaired and restored to a tenantable condition. In the latter case, the determination of the cost of such restoration or repair, and the value of any remaining construction, such as the foundation, which may still be utilized or availed of (Record on Appeal, pp. 275-276; Rollo, L-47851, p. 169).

Thus, the issues of this case were divided into technical issues and non-technical issues. As aforestated the technical issues were referred to the Commissioner. The non-technical issues were tried by the Court.

Meanwhile, plaintiff moved twice for the demolition of the building on the ground that it may topple down in case of a strong earthquake. The motions were opposed by the defendants and the matter was referred to the Commissioner. Finally, on April 30, 1979 the building was authorized to be demolished at the expense of the plaintiff, but not another earthquake of high intensity on April 7, 1970 followed by other strong earthquakes on April 9, and 12, 1970, caused further damage to the property. The actual demolition was undertaken by the buyer of the damaged building. (Record on Appeal, pp. 278-280; Ibid.)

After the protracted hearings, the Commissioner eventually submitted his report on September 25, 1970 with the findings that while the damage sustained by the PBA building was caused directly by the August 2, 1968 earthquake whose magnitude was estimated at 7.3 they were also caused by the defects in the plans and specifications prepared by the third-party defendants' architects, deviations from said plans and specifications by the defendant contractors and failure of the latter to observe the requisite workmanship in the construction of the building and of the contractors, architects and even the owners to exercise the requisite degree of supervision in the construction of subject building.

All the parties registered their objections to aforesaid findings which in turn were answered by the Commissioner.

The trial court agreed with the findings of the Commissioner except as to the holding that the owner is charged with full nine supervision of the construction. The Court sees no legal or contractual basis for such conclusion. (Record on Appeal, pp. 309-328; Ibid).

Thus, on September 21, 1971, the lower court rendered the assailed decision which was modified by the Intermediate Appellate Court on November 28, 1977.

All the parties herein appealed from the decision of the Intermediate Appellate Court. Hence, these petitions.

On May 11, 1978, the United Architects of the Philippines, the Association of Civil Engineers, and the Philippine Institute of Architects filed with the Court a motion to intervene as amicus curiae. They proposed to present a position paper on the liability of architects when a building collapses and to submit likewise a critical analysis with computations on the divergent views on the design and plans as submitted by the experts procured by the parties. The motion having been granted, the amicus curiae were granted a period of 60 days within which to submit their position.

After the parties had all filed their comments, We gave due course to the petitions in Our Resolution of July 21, 1978.

The position papers of the amicus curiae (submitted on November 24, 1978) were duly noted.

The amicus curiae gave the opinion that the plans and specifications of the Nakpils were not defective. But the Commissioner, when asked by Us to comment, reiterated his conclusion that the defects in the plans and specifications indeed existed.

Using the same authorities availed of by the amicus curiae such as the Manila Code (Ord. No. 4131) and the 1966 Asep Code, the Commissioner added that even if it can be proved that the defects in the construction alone (and not in the plans and design) caused the damage to the building, still the deficiency in the original design and jack of specific provisions against torsion in the original plans and the overload on the ground floor columns (found by an the experts including the original designer) certainly contributed to the damage which occurred. (Ibid, p. 174).

In their respective briefs petitioners, among others, raised the following assignments of errors: Philippine Bar Association claimed that the measure of damages should not be limited to P1,100,000.00 as estimated cost of repairs or to the period of six (6) months for loss of rentals while United Construction Co., Inc. and the Nakpils claimed that it was an act of God that caused the failure of the building which should exempt them from responsibility and not the defective construction, poor workmanship, deviations from plans and specifications and other imperfections in the case of United Construction Co., Inc. or the deficiencies in the design, plans and specifications prepared by petitioners in the case of the Nakpils. Both UCCI and the Nakpils object to the payment of the additional amount of P200,000.00 imposed by the Court of Appeals. UCCI also claimed that it should be reimbursed the expenses of shoring the building in the amount of P13,661.28 while the Nakpils opposed the payment of damages jointly and solidarity with UCCI.

The pivotal issue in this case is whether or not an act of God-an unusually strong earthquake-which caused the failure of the building, exempts from liability, parties who are otherwise liable because of their negligence.

The applicable law governing the rights and liabilities of the parties herein is Article 1723 of the New Civil Code, which provides:

Art. 1723. The engineer or architect who drew up the plans and specifications for a building is liable for damages if within fifteen years from the completion of the structure the same should collapse by reason of a defect in those plans and specifications, or due to the defects in the ground. The contractor is likewise responsible for the damage if the edifice fags within the same period on account of defects in the construction or the use of materials of inferior quality furnished by him, or due to any violation of the terms of the contract. If the engineer or architect supervises the construction, he shall be solidarily liable with the contractor.

Acceptance of the building, after completion, does not imply waiver of any of the causes of action by reason of any defect mentioned in the preceding paragraph.

The action must be brought within ten years following the collapse of the building.

On the other hand, the general rule is that no person shall be responsible for events which could not be foreseen or which though foreseen, were inevitable (Article 1174, New Civil Code).

An act of God has been defined as an accident, due directly and exclusively to natural causes without human intervention, which by no amount of foresight, pains or care, reasonably to have been expected, could have been prevented. (1 Corpus Juris 1174).

There is no dispute that the earthquake of August 2, 1968 is a fortuitous event or an act of God.

To exempt the obligor from liability under Article 1174 of the Civil Code, for a breach of an obligation due to an "act of God," the following must concur: (a) the cause of the breach of the obligation must be independent of the will of the debtor; (b) the event must be either unforseeable or unavoidable; (c) the event must be such as to render it impossible for the debtor to fulfill his obligation in a normal manner; and (d) the debtor must be free from any participation in, or aggravation of the injury to the creditor. (Vasquez v. Court of Appeals, 138 SCRA 553; Estrada v. Consolacion, 71 SCRA 423; Austria v. Court of Appeals, 39 SCRA 527; Republic of the Phil. v. Luzon Stevedoring Corp., 21 SCRA 279; Lasam v. Smith, 45 Phil. 657).

Thus, if upon the happening of a fortuitous event or an act of God, there concurs a corresponding fraud, negligence, delay or violation or contravention in any manner of the tenor of the obligation as provided for in Article 1170 of the Civil Code, which results in loss or damage, the obligor cannot escape liability.

The principle embodied in the act of God doctrine strictly requires that the act must be one occasioned exclusively by the violence of nature and all human agencies are to be excluded from creating or entering into the cause of the mischief. When the effect, the cause of which is to be considered, is found to be in part the result of the participation of man, whether it be from active intervention or neglect, or failure to act, the whole occurrence is thereby humanized, as it were, and removed from the rules applicable to the acts of God. (1 Corpus Juris, pp. 1174-1175).

Thus it has been held that when the negligence of a person concurs with an act of God in producing a loss, such person is not exempt from liability by showing that the immediate cause of the damage was the act of God. To be exempt from liability for loss because of an act of God, he must be free from any previous negligence or misconduct by which that loss or damage may have been occasioned. (Fish & Elective Co. v. Phil. Motors, 55 Phil. 129; Tucker v. Milan, 49 O.G. 4379; Limpangco & Sons v. Yangco Steamship Co., 34 Phil. 594, 604; Lasam v. Smith, 45 Phil. 657).

The negligence of the defendant and the third-party defendants petitioners was established beyond dispute both in the lower court and in the Intermediate Appellate Court. Defendant United Construction Co., Inc. was found to have made substantial deviations from the plans and specifications. and to have failed to observe the requisite workmanship in the construction as well as to exercise the requisite degree of supervision; while the third-party defendants were found to have inadequacies or defects in the plans and specifications prepared by them. As correctly assessed by both courts, the defects in the construction and in the plans and specifications were the proximate causes that rendered the PBA building unable to withstand the earthquake of August 2, 1968. For this reason the defendant and third-party defendants cannot claim exemption from liability. (Decision, Court of Appeals, pp. 30-31).

It is well settled that the findings of facts of the Court of Appeals are conclusive on the parties and on this court (cases cited in Tolentino vs. de Jesus, 56 SCRA 67; Cesar vs. Sandiganbayan, January 17, 1985, 134 SCRA 105, 121), unless (1) the conclusion is a finding grounded entirely on speculation, surmise and conjectures; (2) the inference made is manifestly mistaken; (3) there is grave abuse of discretion; (4) the judgment is based on misapprehension of facts; (5) the findings of fact are conflicting , (6) the Court of Appeals went beyond the issues of the case and its findings are contrary to the admissions of both appellant and appellees (Ramos vs. Pepsi-Cola Bottling Co., February 8, 1967, 19 SCRA 289, 291-292; Roque vs. Buan, Oct. 31, 1967, 21 SCRA 648, 651); (7) the findings of facts of the Court of Appeals are contrary to those of the trial court; (8) said findings of facts are conclusions without citation of specific evidence on which they are based; (9) the facts set forth in the petition as well as in the petitioner's main and reply briefs are not disputed by the respondents (Garcia vs. CA, June 30, 1970, 33 SCRA 622; Alsua-Bett vs. Court of Appeals, July 30, 1979, 92 SCRA 322, 366); (10) the finding of fact of the Court of Appeals is premised on the supposed absence of evidence and is contradicted by evidence on record (Salazar vs. Gutierrez, May 29, 1970, 33 SCRA 243, 247; Cited in G.R. No. 66497-98, Sacay v. Sandiganbayan, July 10, 1986).

It is evident that the case at bar does not fall under any of the exceptions above-mentioned. On the contrary, the records show that the lower court spared no effort in arriving at the correct appreciation of facts by the referral of technical issues to a Commissioner chosen by the parties whose findings and conclusions remained convincingly unrebutted by the intervenors/amicus curiae who were allowed to intervene in the Supreme Court.

In any event, the relevant and logical observations of the trial court as affirmed by the Court of Appeals that "while it is not possible to state with certainty that the building would not have collapsed were those defects not present, the fact remains that

several buildings in the same area withstood the earthquake to which the building of the plaintiff was similarly subjected," cannot be ignored.

The next issue to be resolved is the amount of damages to be awarded to the PBA for the partial collapse (and eventual complete collapse) of its building.

The Court of Appeals affirmed the finding of the trial court based on the report of the Commissioner that the total amount required to repair the PBA building and to restore it to tenantable condition was P900,000.00 inasmuch as it was not initially a total loss. However, while the trial court awarded the PBA said amount as damages, plus unrealized rental income for one-half year, the Court of Appeals modified the amount by awarding in favor of PBA an additional sum of P200,000.00 representing the damage suffered by the PBA building as a result of another earthquake that occurred on April 7, 1970 (L-47896, Vol. I, p. 92).

The PBA in its brief insists that the proper award should be P1,830,000.00 representing the total value of the building (L-47896, PBA's No. 1 Assignment of Error, p. 19), while both the NAKPILS and UNITED question the additional award of P200,000.00 in favor of the PBA (L- 47851, NAKPIL's Brief as Petitioner, p. 6, UNITED's Brief as Petitioner, p. 25). The PBA further urges that the unrealized rental income awarded to it should not be limited to a period of one-half year but should be computed on a continuing basis at the rate of P178,671.76 a year until the judgment for the principal amount shall have been satisfied L- 47896, PBA's No. 11 Assignment of Errors, p. 19).

The collapse of the PBA building as a result of the August 2, 1968 earthquake was only partial and it is undisputed that the building could then still be repaired and restored to its tenantable condition. The PBA, however, in view of its lack of needed funding, was unable, thru no fault of its own, to have the building repaired. UNITED, on the other hand, spent P13,661.28 to shore up the building after the August 2, 1968 earthquake (L-47896, CA Decision, p. 46). Because of the earthquake on April 7, 1970, the trial court after the needed consultations, authorized the total demolition of the building (L-47896, Vol. 1, pp. 53-54).

There should be no question that the NAKPILS and UNITED are liable for the damage resulting from the partial and eventual collapse of the PBA building as a result of the earthquakes.

We quote with approval the following from the erudite decision penned by Justice Hugo E. Gutierrez (now an Associate Justice of the Supreme Court) while still an Associate Justice of the Court of Appeals:

There is no question that an earthquake and other forces of nature such as cyclones, drought, floods, lightning, and perils of the sea are acts of God. It does not necessarily follow, however, that specific losses and suffering resulting from the occurrence of these natural force are also acts of God. We are not convinced on the basis of the evidence on record that from the thousands of structures in Manila, God singled out the blameless PBA building in Intramuros and around six or seven other buildings in various parts of the city for collapse or severe damage and that God alone was responsible for the damages and losses thus suffered.

The record is replete with evidence of defects and deficiencies in the designs and plans, defective construction, poor workmanship, deviation from plans and specifications and other imperfections. These deficiencies are attributable to negligent men and not to a perfect God.

The act-of-God arguments of the defendants- appellants and third party defendants-appellants presented in their briefs are premised on legal generalizations or speculations and on theological fatalism both of which ignore the plain facts. The lengthy discussion of United on ordinary earthquakes and unusually strong earthquakes and on ordinary fortuitous events and extraordinary fortuitous events leads to its argument that the August 2, 1968 earthquake was of such an overwhelming and destructive character that by its own force and independent of the particular negligence alleged, the injury would have been produced. If we follow this line of speculative reasoning, we will be forced to conclude that under such a situation scores of buildings in the vicinity and in other parts of Manila would have toppled down. Following the same line of reasoning, Nakpil and Sons alleges that the designs were adequate in accordance with pre-August 2, 1968 knowledge and appear inadequate only in the light of engineering information acquired after the earthquake. If this were so, hundreds of ancient buildings which survived the earthquake better than the two-year old PBA building must have been designed and constructed by architects and contractors whose knowledge and foresight were unexplainably auspicious and prophetic. Fortunately, the facts on record allow a more down to earth explanation of the collapse. The failure of the PBA building, as a unique and distinct construction with no reference or comparison to other buildings, to weather the severe earthquake forces was traced to design deficiencies and defective construction, factors which are neither mysterious nor esoteric. The theological allusion of appellant United that God acts in mysterious ways His wonders to perform impresses us to be inappropriate. The evidence reveals defects and deficiencies in design and construction. There is no mystery about these acts of negligence. The collapse of the PBA building was no wonder performed by God. It was a result of the imperfections in the work of the architects and the people in the construction company. More relevant to our mind is the lesson from the parable of the wise man in the Sermon on the Mount "which built his house upon a rock; and the rain descended and the floods came and the winds blew and beat upon that house; and it fen not; for it was founded upon a rock" and of the "foolish upon the sand. And the rain descended and man which built his house the floods came, and the winds blew, and beat upon that house; and it fell and great was the fall of it. (St. Matthew 7: 24-27)." The requirement that a building should withstand rains, floods, winds, earthquakes, and

natural forces is precisely the reason why we have professional experts like architects, and engineers. Designs and constructions vary under varying circumstances and conditions but the requirement to design and build well does not change.

The findings of the lower Court on the cause of the collapse are more rational and accurate. Instead of laying the blame solely on the motions and forces generated by the earthquake, it also examined the ability of the PBA building, as designed and constructed, to withstand and successfully weather those forces.

The evidence sufficiently supports a conclusion that the negligence and fault of both United and Nakpil and Sons, not a mysterious act of an inscrutable God, were responsible for the damages. The Report of the Commissioner, Plaintiff's Objections to the Report, Third Party Defendants' Objections to the Report, Defendants' Objections to the Report, Commissioner's Answer to the various Objections, Plaintiffs' Reply to the Commissioner's Answer, Defendants' Reply to the Commissioner's Answer, Counter-Reply to Defendants' Reply, and Third-Party Defendants' Reply to the Commissioner's Report not to mention the exhibits and the testimonies show that the main arguments raised on appeal were already raised during the trial and fully considered by the lower Court. A reiteration of these same arguments on appeal fails to convince us that we should reverse or disturb the lower Court's factual findings and its conclusions drawn from the facts, among them:

The Commissioner also found merit in the allegations of the defendants as to the physical evidence before and after the earthquake showing the inadequacy of design, to wit:

Physical evidence before the earthquake providing (sic) inadequacy of design;

1. inadequate design was the cause of the failure of the building.

2. Sun-baffles on the two sides and in front of the building;

a. Increase the inertia forces that move the building laterally toward the Manila Fire Department.

b. Create another stiffness imbalance.

3. The embedded 4" diameter cast iron down spout on all exterior columns reduces the cross-sectional area of each of the columns and the strength thereof.

4. Two front corners, A7 and D7 columns were very much less reinforced.

Physical Evidence After the Earthquake, Proving Inadequacy of design;

1. Column A7 suffered the severest fracture and maximum sagging. Also D7.

2. There are more damages in the front part of the building than towards the rear, not only in columns but also in slabs.

3. Building leaned and sagged more on the front part of the building.

4. Floors showed maximum sagging on the sides and toward the front corner parts of the building.

5. There was a lateral displacement of the building of about 8", Maximum sagging occurs at the column A7 where the floor is lower by 80 cm. than the highest slab level.

6. Slab at the corner column D7 sagged by 38 cm.

The Commissioner concluded that there were deficiencies or defects in the design, plans and specifications of the PBA building which involved appreciable risks with respect to the accidental forces which may result from earthquake shocks. He conceded, however, that the fact that those deficiencies or defects may have arisen from an obsolete or not too conservative code or even a code that does not require a design for earthquake forces mitigates in a large measure the responsibility or liability of the architect and engineer designer.

The Third-party defendants, who are the most concerned with this portion of the Commissioner's report, voiced opposition to the same on the grounds that (a) the finding is based on a basic erroneous conception as to the design concept of the building, to wit, that the design is essentially that of a heavy rectangular box on stilts with

shear wan at one end; (b) the finding that there were defects and a deficiency in the design of the building would at best be based on an approximation and, therefore, rightly belonged to the realm of speculation, rather than of certainty and could very possibly be outright error; (c) the Commissioner has failed to back up or support his finding with extensive, complex and highly specialized computations and analyzes which he himself emphasizes are necessary in the determination of such a highly technical question; and (d) the Commissioner has analyzed the design of the PBA building not in the light of existing and available earthquake engineering knowledge at the time of the preparation of the design, but in the light of recent and current standards.

The Commissioner answered the said objections alleging that third-party defendants' objections were based on estimates or exhibits not presented during the hearing that the resort to engineering references posterior to the date of the preparation of the plans was induced by the third-party defendants themselves who submitted computations of the third-party defendants are erroneous.

The issue presently considered is admittedly a technical one of the highest degree. It involves questions not within the ordinary competence of the bench and the bar to resolve by themselves. Counsel for the third-party defendants has aptly remarked that "engineering, although dealing in mathematics, is not an exact science and that the present knowledge as to the nature of earthquakes and the behaviour of forces generated by them still leaves much to be desired; so much so "that the experts of the different parties, who are all engineers, cannot agree on what equation to use, as to what earthquake co-efficients are, on the codes to be used and even as to the type of structure that the PBA building (is) was (p. 29, Memo, of third- party defendants before the Commissioner).

The difficulty expected by the Court if tills technical matter were to be tried and inquired into by the Court itself, coupled with the intrinsic nature of the questions involved therein, constituted the reason for the reference of the said issues to a Commissioner whose qualifications and experience have eminently qualified him for the task, and whose competence had not been questioned by the parties until he submitted his report. Within the pardonable limit of the Court's ability to comprehend the meaning of the Commissioner's report on this issue, and the objections voiced to the same, the Court sees no compelling reasons to disturb the findings of the Commissioner that there were defects and deficiencies in the design, plans and specifications prepared by third-party defendants, and that said defects and deficiencies involved appreciable risks with respect to the accidental forces which may result from earthquake shocks.

(2) (a) The deviations, if any, made by the defendants from the plans and specifications, and how said deviations contributed to the damage sustained by the building.

(b) The alleged failure of defendants to observe the requisite quality of materials and workmanship in the construction of the building.

These two issues, being interrelated with each other, will be discussed together.

The findings of the Commissioner on these issues were as follows:

We now turn to the construction of the PBA Building and the alleged deficiencies or defects in the construction and violations or deviations from the plans and specifications. All these may be summarized as follows:

a. Summary of alleged defects as reported by Engineer Mario M. Bundalian.

(1) Wrongful and defective placing of reinforcing bars.

(2) Absence of effective and desirable integration of the 3 bars in the cluster.

(3) Oversize coarse aggregates: 1-1/4 to 2" were used. Specification requires no larger than 1 inch.

(4) Reinforcement assembly is not concentric with the column, eccentricity being 3" off when on one face the main bars are only 1 1/2' from the surface.

(5) Prevalence of honeycombs,

(6) Contraband construction joints,

(7) Absence, or omission, or over spacing of spiral hoops,

(8) Deliberate severance of spirals into semi-circles in noted on Col. A-5, ground floor,

(9) Defective construction joints in Columns A-3, C-7, D-7 and D-4, ground floor,

(10) Undergraduate concrete is evident,

(11) Big cavity in core of Column 2A-4, second floor,

(12) Columns buckled at different planes. Columns buckled worst where there are no spirals or where spirals are cut. Columns suffered worst displacement where the eccentricity of the columnar reinforcement assembly is more acute.

b. Summary of alleged defects as reported by Engr. Antonio Avecilla.

Columns are first (or ground) floor, unless otherwise stated.

(1) Column D4 — Spacing of spiral is changed from 2" to 5" on centers,

(2) Column D5 — No spiral up to a height of 22" from the ground floor,

(3) Column D6 — Spacing of spiral over 4 l/2,

(4) Column D7 — Lack of lateral ties,

(5) Column C7 — Absence of spiral to a height of 20" from the ground level, Spirals are at 2" from the exterior column face and 6" from the inner column face,

(6) Column B6 — Lack of spiral on 2 feet below the floor beams,

(7) Column B5 — Lack of spirals at a distance of 26' below the beam,

(8) Column B7 — Spirals not tied to vertical reinforcing bars, Spirals are uneven 2" to 4",

(9) Column A3 — Lack of lateral ties,

(10) Column A4 — Spirals cut off and welded to two separate clustered vertical bars,

(11) Column A4 — (second floor Column is completely hollow to a height of 30"

(12) Column A5 — Spirals were cut from the floor level to the bottom of the spandrel beam to a height of 6 feet,

(13) Column A6 — No spirals up to a height of 30' above the ground floor level,

(14) Column A7— Lack of lateralties or spirals,

c. Summary of alleged defects as reported by the experts of the Third-Party defendants.

Ground floor columns.

(1) Column A4 — Spirals are cut,

(2) Column A5 — Spirals are cut,

(3) Column A6 — At lower 18" spirals are absent,

(4) Column A7 — Ties are too far apart,

(5) Column B5 — At upper fourth of column spirals are either absent or improperly spliced,

(6) Column B6 — At upper 2 feet spirals are absent,

(7) Column B7 — At upper fourth of column spirals missing or improperly spliced.

(8) Column C7— Spirals are absent at lowest 18"

(9) Column D5 — At lowest 2 feet spirals are absent,

(10) Column D6 — Spirals are too far apart and apparently improperly spliced,

(11) Column D7 — Lateral ties are too far apart, spaced 16" on centers.

There is merit in many of these allegations. The explanations given by the engineering experts for the defendants are either contrary to general principles of engineering design for reinforced concrete or not applicable to the requirements for ductility and strength of reinforced concrete in earthquake-resistant design and construction.

We shall first classify and consider defects which may have appreciable bearing or relation to' the earthquake-resistant property of the building.

As heretofore mentioned, details which insure ductility at or near the connections between columns and girders are desirable in earthquake resistant design and construction. The omission of spirals and ties or hoops at the bottom and/or tops of columns contributed greatly to the loss of earthquake-resistant strength. The plans and specifications required that these spirals and ties be carried from the floor level to the bottom reinforcement of the deeper beam (p. 1, Specifications, p. 970, Reference 11). There were several clear evidences where this was not done especially in some of the ground floor columns which failed.

There were also unmistakable evidences that the spacings of the spirals and ties in the columns were in many cases greater than those called for in the plans and specifications resulting again in loss of earthquake-resistant strength. The assertion of the engineering experts for the defendants that the improper spacings and the cutting of the spirals did not result in loss of strength in the column cannot be maintained and is certainly contrary to the general principles of column design and construction. And even granting that there be no loss in strength at the yield point (an assumption which is very doubtful) the cutting or improper spacings of spirals will certainly result in the loss of the plastic range or ductility in the column and it is precisely this plastic range or ductility which is desirable and needed for earthquake-resistant strength.

There is no excuse for the cavity or hollow portion in the column A4, second floor, and although this column did not fail, this is certainly an evidence on the part of the contractor of poor construction.

The effect of eccentricities in the columns which were measured at about 2 1/2 inches maximum may be approximated in relation to column loads and column and beam moments. The main effect of eccentricity is to change the beam or girder span. The effect on the measured eccentricity of 2 inches, therefore, is to increase or diminish the column load by a maximum of about 1% and to increase or diminish the column or beam movements by about a maximum of 2%. While these can certainly be absorbed within the factor of safety, they nevertheless diminish said factor of safety.

The cutting of the spirals in column A5, ground floor is the subject of great contention between the parties and deserves special consideration.

The proper placing of the main reinforcements and spirals in column A5, ground floor, is the responsibility of the general contractor which is the UCCI. The burden of proof, therefore, that this cutting was done by others is upon the defendants. Other than a strong allegation and assertion that it is the plumber or his men who may have done the cutting (and this was flatly denied by the plumber) no conclusive proof was presented. The engineering experts for the defendants asserted that they could have no motivation for cutting the bar because they can simply replace the spirals by wrapping around a new set of spirals. This is not quite correct. There is evidence to show that the pouring of concrete for columns was sometimes done through the beam and girder reinforcements which were already in place as in the case of column A4 second floor. If the reinforcement for the girder and column is to subsequently wrap around the spirals, this would not do for the elasticity of steel would prevent the making of tight column spirals and loose or improper spirals would result. The proper way is to produce correct spirals down from the top of the main column bars, a procedure which can not be done if either the beam or girder reinforcement is already in place. The engineering experts for the defendants strongly assert and apparently believe that the cutting of the spirals did not materially diminish the strength of the column. This belief together with the difficulty of slipping the spirals on the top of the column once the beam reinforcement is in place may be a sufficient motivation for the cutting of the spirals themselves. The defendants, therefore, should be held responsible for the consequences arising from the loss of strength or

ductility in column A5 which may have contributed to the damages sustained by the building.

The lack of proper length of splicing of spirals was also proven in the visible spirals of the columns where spalling of the concrete cover had taken place. This lack of proper splicing contributed in a small measure to the loss of strength.

The effects of all the other proven and visible defects although nor can certainly be accumulated so that they can contribute to an appreciable loss in earthquake-resistant strength. The engineering experts for the defendants submitted an estimate on some of these defects in the amount of a few percent. If accumulated, therefore, including the effect of eccentricity in the column the loss in strength due to these minor defects may run to as much as ten percent.

To recapitulate: the omission or lack of spirals and ties at the bottom and/or at the top of some of the ground floor columns contributed greatly to the collapse of the PBA building since it is at these points where the greater part of the failure occurred. The liability for the cutting of the spirals in column A5, ground floor, in the considered opinion of the Commissioner rests on the shoulders of the defendants and the loss of strength in this column contributed to the damage which occurred.

It is reasonable to conclude, therefore, that the proven defects, deficiencies and violations of the plans and specifications of the PBA building contributed to the damages which resulted during the earthquake of August 2, 1968 and the vice of these defects and deficiencies is that they not only increase but also aggravate the weakness mentioned in the design of the structure. In other words, these defects and deficiencies not only tend to add but also to multiply the effects of the shortcomings in the design of the building. We may say, therefore, that the defects and deficiencies in the construction contributed greatly to the damage which occurred.

Since the execution and supervision of the construction work in the hands of the contractor is direct and positive, the presence of existence of all the major defects and deficiencies noted and proven manifests an element of negligence which may amount to imprudence in the construction work. (pp. 42-49, Commissioners Report).

As the parties most directly concerned with this portion of the Commissioner's report, the defendants voiced their objections to the same on the grounds that the Commissioner should have specified the defects found by him to be "meritorious"; that the Commissioner failed to indicate the number of cases where the spirals and ties were not carried from the floor level to the bottom reinforcement of the deeper beam, or where the spacing of the spirals and ties in the columns were greater than that called for in the specifications; that the hollow in column A4, second floor, the eccentricities in the columns, the lack of proper length of splicing of spirals, and the cut in the spirals in column A5, ground floor, did not aggravate or contribute to the damage suffered by the building; that the defects in the construction were within the tolerable margin of safety; and that the cutting of the spirals in column A5, ground floor, was done by the plumber or his men, and not by the defendants.

Answering the said objections, the Commissioner stated that, since many of the defects were minor only the totality of the defects was considered. As regards the objection as to failure to state the number of cases where the spirals and ties were not carried from the floor level to the bottom reinforcement, the Commissioner specified groundfloor columns B-6 and C-5 the first one without spirals for 03 inches at the top, and in the latter, there were no spirals for 10 inches at the bottom. The Commissioner likewise specified the first storey columns where the spacings were greater than that called for in the specifications to be columns B-5, B-6, C-7, C-6, C-5, D-5 and B-7. The objection to the failure of the Commissioner to specify the number of columns where there was lack of proper length of splicing of spirals, the Commissioner mentioned groundfloor columns B-6 and B-5 where all the splices were less than 1-1/2 turns and were not welded, resulting in some loss of strength which could be critical near the ends of the columns. He answered the supposition of the defendants that the spirals and the ties must have been looted, by calling attention to the fact that the missing spirals and ties were only in two out of the 25 columns, which rendered said supposition to be improbable.

The Commissioner conceded that the hollow in column A-4, second floor, did not aggravate or contribute to the damage, but averred that it is "evidence of poor construction." On the claim that the eccentricity could be absorbed within the factor of safety, the Commissioner answered that, while the same may be true, it also contributed to or aggravated the damage suffered by the building.

The objection regarding the cutting of the spirals in Column A-5, groundfloor, was answered by the Commissioner by reiterating the observation in his report that irrespective of who did the cutting of the spirals, the defendants should be held liable for the same as the general contractor of the building. The Commissioner further stated that the loss of strength of the cut spirals and inelastic deflections of the supposed lattice work defeated the purpose of the spiral containment in the column and resulted in the loss of strength, as evidenced by the actual failure of this column.

Again, the Court concurs in the findings of the Commissioner on these issues and fails to find any sufficient cause to disregard or modify the same. As found by the Commissioner, the "deviations made by the defendants from the plans and specifications caused indirectly the damage sustained and that those deviations not only added but also aggravated the damage caused by the defects in the plans and specifications prepared by third-party defendants. (Rollo, Vol. I, pp. 128-142)

The afore-mentioned facts clearly indicate the wanton negligence of both the defendant and the third-party defendants in effecting the plans, designs, specifications, and construction of the PBA building and We hold such negligence as equivalent to bad faith in the performance of their respective tasks.

Relative thereto, the ruling of the Supreme Court in Tucker v. Milan (49 O.G. 4379, 4380) which may be in point in this case reads:

One who negligently creates a dangerous condition cannot escape liability for the natural and probable consequences thereof, although the act of a third person, or an act of God for which he is not responsible, intervenes to precipitate the loss.

As already discussed, the destruction was not purely an act of God. Truth to tell hundreds of ancient buildings in the vicinity were hardly affected by the earthquake. Only one thing spells out the fatal difference; gross negligence and evident bad faith, without which the damage would not have occurred.

WHEREFORE, the decision appealed from is hereby MODIFIED and considering the special and environmental circumstances of this case, We deem it reasonable to render a decision imposing, as We do hereby impose, upon the defendant and the third-party defendants (with the exception of Roman Ozaeta) a solidary (Art. 1723, Civil Code, Supra, p. 10) indemnity in favor of the Philippine Bar Association of FIVE MILLION (P5,000,000.00) Pesos to cover all damages (with the exception of attorney's fees) occasioned by the loss of the building (including interest charges and lost rentals) and an additional ONE HUNDRED THOUSAND (P100,000.00) Pesos as and for attorney's fees, the total sum being payable upon the finality of this decision. Upon failure to pay on such finality, twelve (12%) per cent interest per annum shall be imposed upon afore-mentioned amounts from finality until paid. Solidary costs against the defendant and third-party defendants (except Roman Ozaeta).

SO ORDERED.

Feria (Chairman), Fernan, Alampay and Cruz, JJ., concur.

6. REPUBLIC VS LUZON STEVEDORING

G.R. No. L-21749             September 29, 1967

REPUBLIC OF THE PHILIPPINES, plaintiff-appellee, vs.LUZON STEVEDORING CORPORATION, defendant-appellant.

Office of the Solicitor General for plaintiff-appellee.H. San Luis and L.V. Simbulan for defendant-appellant.

 REYES, J.B.L., J.:

The present case comes by direct appeal from a decision of the Court of First Instance of Manila (Case No. 44572) adjudging the defendant-appellant, Luzon Stevedoring Corporation, liable in damages to the plaintiff-appellee Republic of the Philippines.

In the early afternoon of August 17, 1960, barge L-1892, owned by the Luzon Stevedoring Corporation was being towed down the Pasig river by tugboats "Bangus" and "Barbero"1 also belonging to the same corporation, when the barge rammed against one of the wooden piles of the Nagtahan bailey bridge, smashing the posts and causing the bridge to list. The river, at the time, was swollen and the current swift, on account of the heavy downpour of Manila and the surrounding provinces on August 15 and 16, 1960.

Sued by the Republic of the Philippines for actual and consequential damage caused by its employees, amounting to P200,000 (Civil Case No. 44562, CFI of Manila), defendant Luzon Stevedoring Corporation disclaimed liability therefor, on the grounds that it had exercised due diligence in the selection and supervision of its employees; that the damages to the bridge were caused by force majeure; that plaintiff has no capacity to sue; and that the Nagtahan bailey bridge is an obstruction to navigation.

After due trial, the court rendered judgment on June 11, 1963, holding the defendant liable for the damage caused by its employees and ordering it to pay to plaintiff the actual cost of the repair of the Nagtahan bailey bridge which amounted to P192,561.72, with legal interest thereon from the date of the filing of the complaint.

Defendant appealed directly to this Court assigning the following errors allegedly committed by the court a quo, to wit:

I — The lower court erred in not holding that the herein defendant-appellant had exercised the diligence required of it in the selection and supervision of its personnel to prevent damage or injury to others.1awphîl.nèt

II — The lower court erred in not holding that the ramming of the Nagtahan bailey bridge by barge L-1892 was caused by force majeure.

III — The lower court erred in not holding that the Nagtahan bailey bridge is an obstruction, if not a menace, to navigation in the Pasig river.

IV — The lower court erred in not blaming the damage sustained by the Nagtahan bailey bridge to the improper placement of the dolphins.

V — The lower court erred in granting plaintiff's motion to adduce further evidence in chief after it has rested its case.

VI — The lower court erred in finding the plaintiff entitled to the amount of P192,561.72 for damages which is clearly exorbitant and without any factual basis.

However, it must be recalled that the established rule in this jurisdiction is that when a party appeals directly to the Supreme Court, and submits his case there for decision, he is deemed to have waived the right to dispute any finding of fact made by the trial Court. The only questions that may be raised are those of law (Savellano vs. Diaz, L-17441, July 31, 1963; Aballe vs. Santiago, L-16307, April 30, 1963; G.S.I.S. vs. Cloribel, L-22236, June 22, 1965). A converso, a party who resorts to the Court of Appeals, and submits his case for decision there, is barred from contending later that his claim was beyond the jurisdiction of the aforesaid Court. The reason is that a contrary rule would encourage the undesirable practice of appellants' submitting their cases for decision to either court in expectation of favorable judgment, but with intent of attacking its jurisdiction should the decision be unfavorable (Tyson Tan, et al. vs. Filipinas Compañia de Seguros) et al., L-10096, Res. on Motion to Reconsider, March 23, 1966). Consequently, we are limited in this appeal to the issues of law raised in the appellant's brief.

Taking the aforesaid rules into account, it can be seen that the only reviewable issues in this appeal are reduced to two:

1) Whether or not the collision of appellant's barge with the supports or piers of the Nagtahan bridge was in law caused by fortuitous event or force majeure, and

2) Whether or not it was error for the Court to have permitted the plaintiff-appellee to introduce additional evidence of damages after said party had rested its case.

As to the first question, considering that the Nagtahan bridge was an immovable and stationary object and uncontrovertedly provided with adequate openings for the passage of water craft, including barges like of appellant's, it is undeniable that the unusual event that the barge, exclusively controlled by appellant, rammed the bridge supports raises a presumption of negligence on the part of appellant or its employees manning the barge or the tugs that towed it. For in the ordinary course of events, such a thing does not happen if proper care is used. In Anglo American Jurisprudence, the inference arises by what is known as the "res ipsa loquitur" rule (Scott vs. London Docks Co., 2 H & C 596; San Juan Light & Transit Co. vs. Requena, 224 U.S. 89, 56 L. Ed., 680; Whitwell vs. Wolf, 127 Minn. 529, 149 N.W. 299; Bryne vs. Great Atlantic & Pacific Tea Co., 269 Mass. 130; 168 N.E. 540; Gribsby vs. Smith, 146 S.W. 2d 719).

The appellant strongly stresses the precautions taken by it on the day in question: that it assigned two of its most powerful tugboats to tow down river its barge L-1892; that it assigned to the task the more competent and experienced among its patrons, had the towlines, engines and equipment double-checked and inspected; that it instructed its patrons to take extra precautions; and concludes that it had done all it was called to do, and that the accident, therefore, should be held due to force majeure or fortuitous event.

These very precautions, however, completely destroy the appellant's defense. For caso fortuito or force majeure (which in law are identical in so far as they exempt an obligor from liability)2 by definition, are extraordinary events not foreseeable or avoidable, "events that could not be foreseen, or which, though foreseen, were inevitable" (Art. 1174, Civ. Code of the Philippines). It is, therefore, not enough that the event should not have been foreseen or anticipated, as is commonly believed, but it must be one impossible to foresee or to avoid. The mere difficulty to foresee the happening is not impossibility to foresee the same: "un hecho no constituye caso fortuito por la sola circunstancia de que su existencia haga mas dificil o mas onerosa la accion diligente del presento ofensor" (Peirano Facio, Responsibilidad Extra-contractual, p. 465; Mazeaud Trait de la Responsibilite Civil, Vol. 2, sec. 1569). The very measures adopted by appellant prove that the possibility of danger was not only foreseeable, but actually foreseen, and was not caso fortuito.

Otherwise stated, the appellant, Luzon Stevedoring Corporation, knowing and appreciating the perils posed by the swollen stream and its swift current, voluntarily entered into a situation involving obvious danger; it therefore assured the risk, and can not shed responsibility merely because the precautions it adopted turned out to be insufficient. Hence, the lower Court committed no error in holding it negligent in not suspending operations and in holding it liable for the damages caused.

It avails the appellant naught to argue that the dolphins, like the bridge, were improperly located. Even if true, these circumstances would merely emphasize the need of even higher degree of care on appellant's part in the situation involved in the present case. The appellant, whose barges and tugs travel up and down the river everyday, could not safely ignore the danger posed by these allegedly improper constructions that had been erected, and in place, for years.

On the second point: appellant charges the lower court with having abused its discretion in the admission of plaintiff's additional evidence after the latter had rested its case. There is an insinuation that the delay was deliberate to enable the manipulation of evidence to prejudice defendant-appellant.

We find no merit in the contention. Whether or not further evidence will be allowed after a party offering the evidence has rested his case, lies within the sound discretion of the trial Judge, and this discretion will not be reviewed except in clear case of abuse.3

In the present case, no abuse of that discretion is shown. What was allowed to be introduced, after plaintiff had rested its evidence in chief, were vouchers and papers to support an item of P1,558.00 allegedly spent for the reinforcement of the panel of the bailey bridge, and which item already appeared in Exhibit GG. Appellant, in fact, has no reason to charge the trial court of being unfair, because it was also able to secure, upon written motion, a similar order dated November 24, 1962, allowing reception of additional evidence for the said defendant-appellant.4

WHEREFORE, finding no error in the decision of the lower Court appealed from, the same is hereby affirmed. Costs against the defendant-appellant.

Concepcion, C.J., Dizon, Makalintal, Zaldivar, Sanchez, Castro, Angeles and Fernando, JJ., concur.Bengzon, J.P. J., on leave, took no part.

7. DIOQUINO VS LAUREANO

GR NOL25906 May 28, 1970

PEDRO D. DIOQUINO, plaintiff-appellee, vs.FEDERICO LAUREANO, AIDA DE LAUREANO and JUANITO LAUREANO, defendants-appellants.

Pedro D. Dioquino in his own behalf.

Arturo E. Valdomero, Jose L. Almario and Rolando S. Relova for defendants-appellants.

 

FERNANDO, J.:

The present lawsuit had its origin in a relationship, if it could be called such, the use of a car owned by plaintiff Pedro D. Dioquino by defendant Federico Laureano, clearly of a character casual and temporary but unfortunately married by an occurrence resulting in its windshield being damaged. A stone thrown by a boy who, with his other companions, was thus engaged in what undoubtedly for them must have been mistakenly thought to be a none too harmful prank did not miss its mark. Plaintiff would hold defendant Federico Laureano accountable for the loss thus sustained, including in the action filed the wife, Aida de Laureano, and the father, Juanito Laureano. Plaintiff prevail in the lower court, the judgment however going only against the principal defendant, his spouse and his father being absolved of any responsibility. Nonetheless, all three of them appealed directly to us, raising two questions of law, the first being the failure of the lower court to dismiss such a suit as no liability could have been incurred as a result of a fortuitous event and the other being its failure to award damages against plaintiff for the unwarranted inclusion of the wife and the father in this litigation. We agree that the lower court ought to have dismissed the suit, but it does not follow that thereby damages for the inclusion of the above two other parties in the complaint should have been awarded appellants.

The facts as found by the lower court follow: "Attorney Pedro Dioquino, a practicing lawyer of Masbate, is the owner of a car. On March 31, 1964, he went to the office of the MVO, Masbate, to register the same. He met the defendant Federico Laureano, a patrol officer of said MVO office, who was waiting for a jeepney to take him to the office of the Provincial Commander, PC, Masbate. Attorney Dioquino requested the defendant Federico Laureano to introduce him to one of the clerks in the MVO Office, who could facilitate the registration of his car and the request was graciously attended to. Defendant Laureano rode on the car of Atty. Dioquino on his way to the P.C. Barracks at Masbate. While about to reach their destination, the car driven by plaintiff's driver and with defendant Federico Laureano as the sole passenger was stoned by some 'mischievous boys,' and its windshield was broken. Defendant Federico Laureano chased the boys and he was able to catch one of them. The boy was taken to Atty. Dioquino [and] admitted having thrown the stone that broke the car's windshield. The plaintiff and the defendant Federico Laureano with the boy returned to the P.C. barracks and the father of the boy was called, but no satisfactory arrangements [were] made about the damage to the windshield." 1

It was likewise noted in the decision now on appeal: "The defendant Federico Laureano refused to file any charges against the boy and his parents because he thought that the stone-throwing was merely accidental and that it was due to force majeure. So he did not want to take

any action and after delaying the settlement, after perhaps consulting a lawyer, the defendant Federico Laureano refused to pay the windshield himself and challenged that the case be brought to court for judicial adjudication. There is no question that the plaintiff tried to convince the defendant Federico Laureano just to pay the value of the windshield and he even came to the extent of asking the wife to convince her husband to settle the matter amicably but the defendant Federico Laureano refused to make any settlement, clinging [to] the belief that he could not be held liable because a minor child threw a stone accidentally on the windshield and therefore, the same was due to force majeure." 2

1. The law being what it is, such a belief on the part of defendant Federico Laureano was justified. The express language of Art. 1174 of the present Civil Code which is a restatement of Art. 1105 of the Old Civil Code, except for the addition of the nature of an obligation requiring the assumption of risk, compels such a conclusion. It reads thus: "Except in cases expressly specified by the law, or when it is otherwise declared by stipulation, or when the nature of the obligation requires the assumption of risk, no person shall be responsible for those events which could not be, foreseen, or which, though foreseen were inevitable." Even under the old Civil Code then, as stressed by us in the first decision dating back to 1908, in an opinion by Justice Mapa, the rule was well-settled that in the absence of a legal provision or an express covenant, "no one should be held to account for fortuitous cases." 3 Its basis, as Justice Moreland stressed, is the Roman law principle major casus est, cui humana infirmitas resistere non potest. 4 Authorities of repute are in agreement, more specifically concerning an obligation arising from contract "that some extraordinary circumstance independent of the will of the obligor, or of his employees, is an essential element of a caso fortuito." 5 If it could be shown that such indeed was the case, liability is ruled out. There is no requirement of "diligence beyond what human care and foresight can provide." 6

The error committed by the lower court in holding defendant Federico Laureano liable appears to be thus obvious. Its own findings of fact repel the motion that he should be made to respond in damages to the plaintiff for the broken windshield. What happened was clearly unforeseen. It was a fortuitous event resulting in a loss which must be borne by the owner of the car. An element of reasonableness in the law would be manifestly lacking if, on the circumstances as thus disclosed, legal responsibility could be imputed to an individual in the situation of defendant Laureano. Art. 1174 of the Civil Code guards against the possibility of its being visited with such a reproach. Unfortunately, the lower court was of a different mind and thus failed to heed its command.

It was misled, apparently, by the inclusion of the exemption from the operation of such a provision of a party assuming the risk, considering the nature of the obligation undertaken. A more careful analysis would have led the lower court to a different and correct interpretation. The very wording of the law dispels any doubt that what is therein contemplated is the resulting liability even if caused by a fortuitous event where the party charged may be considered as having assumed the risk incident in the nature of the obligation to be performed. It would be an affront, not only to the logic but to the realities of the situation, if in the light of what transpired, as found by the lower court, defendant Federico Laureano could be held as bound to assume a risk of this nature. There was no such obligation on his part.

Reference to the leading case of Republic v. Luzon Stevedoring Corp. 7 will illustrate when the nature of the obligation is such that the risk could be considered as having been assumed. As noted in the opinion of Justice J.B.L. Reyes, speaking for the Court: "The appellant strongly stresses the precautions taken by it on the day in question: that it assigned two of its most powerful tugboats to tow down river its barge L-1892; that it assigned to the task the more competent and experienced among its patrons, had the towlines, engines and equipment double-checked and inspected; that it instructed its patrons to take extra-precautions; and concludes that it had done all it was called to do, and that the accident, therefore, should be held due to force majeure or fortuitous event." Its next paragraph explained clearly why the defense of caso fortuito or force majeure does not lie. Thus: "These very precautions, however, completely destroy the appellant's defense. For caso fortuito or force majeure (which in law are identical in so far as they exempt an obligor from liability) by definition, are extraordinary events not foreseeable or avoidable, 'events that could not be foreseen, or which, though foreseen, were inevitable' (Art. 1174, Civil Code of the Philippines). It is, therefore, not enough that the event should not have been foreseen or participated, as is commonly believed, but it must be one impossible to foresee or to avoid. The mere difficulty to foresee the happening is not impossibility to foresee the same: un hecho no constituye caso fortuito por la sola circunstancia de que su existencia haga mas dificil o mas onerosa la accion diligente del presente ofensor' (Peirano Facio, Responsibilidad Extra-contractual, p. 465; Mazeaud, Traite de la Responsibilite Civile, Vol. 2, sec. 1569). The very measures adopted by appellant prove that the possibility of danger was not only foreseeable, but actually foreseen, and was not caso fortuito."

In that case then, the risk was quite evident and the nature of the obligation such that a party could rightfully be deemed as having assumed it. It is not so in the case before us. It is anything but that. If the lower court, therefore, were duly mindful of what this particular legal provision contemplates, it could not have reached the conclusion that defendant Federico Laureano could be held liable. To repeat, that was clear error on its part.

2. Appellants do not stop there. It does not suffice for them that defendant Federico Laureano would be freed from liability. They would go farther. They would take plaintiff to task for his complaint having joined the wife, Aida de Laureano, and the father, Juanita Laureano. They were far from satisfied with the lower court's absolving these two from any financial responsibility. Appellants would have plaintiff pay damages for their inclusion in this litigation. We are not disposed to view the matter thus.

It is to be admitted, of course, that plaintiff, who is a member of the bar, ought to have exercised greater care in selecting the parties against whom he would proceed. It may be said that his view of the law that would consider defendant Federico Laureano liable on the facts as thus disclosed, while erroneous, is not bereft of plausibility. Even the lower court, mistakenly of course, entertained similar view. For plaintiff, however, to have included the wife and the father would seem to indicate that his understanding of the law is not all that it ought to have been.

Plaintiff apparently was not entirely unaware that the inclusion in the suit filed by him was characterized by unorthodoxy. He did attempt to lend some color of justification by explicitly setting forth that the father was joined as party defendant in the case as he was the administrator of the inheritance of an undivided property to which defendant Federico Laureano could lay claim and that the wife was likewise proceeded

against because the conjugal partnership would be made to respond for whatever liability would be adjudicated against the husband.

It cannot be said that such an attempt at justification is impressed with a high persuasive quality. Far from it. Nonetheless, mistaken as plaintiff apparently was, it cannot be concluded that he was prompted solely by the desire to inflict needless and unjustified vexation on them. Considering the equities of the situation, plaintiff having suffered a pecuniary loss which, while resulting from a fortuitous event, perhaps would not have occurred at all had not defendant Federico Laureano borrowed his car, we, feel that he is not to be penalized further by his mistaken view of the law in including them in his complaint. Well-worth paraphrasing is the thought expressed in a United States Supreme Court decision as to the existence of an abiding and fundamental principle that the expenses and annoyance of litigation form part of the social burden of living in a society which seeks to attain social control through law. 8

WHEREFORE, the decision of the lower court of November 2, 1965 insofar as it orders defendant Federico Laureano to pay plaintiff the amount of P30,000.00 as damages plus the payment of costs, is hereby reversed. It is affirmed insofar as it dismissed the case against the other two defendants, Juanita Laureano and Aida de Laureano, and declared that no moral damages should be awarded the parties. Without pronouncement as to costs.

Concepcion, C.J., Reyes, J.B.L., Dizon, Makalintal, Zaldivar, Teehankee, Barredo and Villamor, JJ., concur.

Castro. J., is on leave.

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