Oc 1174-1182.docx

Necesito vs. Paras FACTS: A mother and her son boarded a passenger auto-truck of the Philippine Rabbit Bus Lines. While entering a wooden bridge, its front wheels swerved to the right, the driver lost control and the truck fell into a breast-deep creek. The mother drowned and the son sustained injuries. These cases involve actions ex contractu against the owners of PRBL filed by the son and the heirs of the mother. Lower Court dismissed the actions, holding that the accident was a fortuitous event. ISSUE: Whether or not the carrier is liable for the manufacturing defect of the steering knuckle, and whether the evidence discloses that in regard thereto the carrier exercised the diligence required by law (Art. 1755, new Civil Code) HELD: Yes. While the carrier is not an insurer of the safety of the passengers, the manufacturer of the defective appliance is considered in law the agent of the carrier, and the good repute of the manufacturer will not relieve the carrier from liability. The rationale of the carrier’s liability is the fact that the passengers has no privity with the manufacturer of the defective equipment; hence, he has no remedy against him, while the carrier has. We find that the defect could be detected. The periodical, usual inspection of the steering knuckle did not measure up to the “utmost diligence of a very cautious person” as “far as human care and foresight can provide” and therefore the knuckle’s failure cannot be considered a fortuitous event that exempts the carrier from responsibility.

Southeastern College Inc vs CA Facts: After a typhoon a complaint of culpa aquiliana was filed against the School for the reason that one of their buildings was considered a structural hazard and the reason of inhabitability of the nearby houses .The complaint is rooted to the claim that the school has a defective roofing structure and that they have been remiss on the maintenance of such building. The school (petitioner) averred that subject school building had withstood several devastating typhoons and other calamities in the past, without its roofing or any portion thereof giving way; that it has not been remiss in its responsibility to see to it that said school building, which houses school children, faculty members, and employees, is "in tip-top condition"; and furthermore, typhoon "Saling" was "an act of God and therefore beyond human control" such that petitioner cannot be answerable for the damages wrought thereby, absent any negligence on its part. Issue: Whether or not the destruction of the nearby houses was caused by a fortuitous event.

Held: It was held that petitioner has not been shown negligent or at fault regarding the construction and maintenance of its school building in question and that typhoon "Saling" was the proximate cause of the damage suffered by private respondents' house.

MIAA VS. ALA INDUSTRIES CORP. FACTS: The contract for the structural repair and waterproofing of the IPT and ICT building of the NAIA airport was awarded, after a public bidding, to respondent ALA. Respondent made the necessary repair and waterproofing. After submission of its progress billings to the petitioner, respondent received partial payments. Progress billing remained unpaid despite repeated demands by the respondent. Meanwhile petitioner unilaterally rescinded the contract on the ground that respondent failed to complete the project within the agreed completion date. Respondent objected to the rescission made by the petitioner and reiterated its claims. The trial court directed the parties to proceed to arbitration. Both parties executed a compromise agreement and jointly filed in court a motion for judgment based on the compromise agreement. The Court a quo rendered judgment approving the compromise agreement. For petitioner’s failure to pay within the period stipulated, respondent filed a motion for execution to enforce its claim. Petitioner filed a comment and attributed the delays to its being a government agency. The trial court denied the respondent’s motion. Reversing the trial court, the CA ordered it to issue a writ of execution to enforce respondent’s claim. The appellate court ratiocinated that a judgment rendered in accordance with a compromise agreement was immediately executory, and that a delay was not substantial compliance therewith. ISSUES: 1) Whether or not decision based on compromise agreement is final and executory. 2) Whether or not delay by one party on a compromise justifies execution. HELD: 1. A compromise once approved by final orders of the court has the force of res judicata between the parties and should not be disturbed except for vices of consent or forgery. Hence, a decision on a compromise agreement is final and executory. Such agreement has the force of law and is conclusive between the parties. It transcends its identity as a mere contract binding only upon the parties thereto, as it becomes a judgment that is subject to execution in accordance with the Rules. Judges therefore have the ministerial and mandatory duty to implement and enforce it. 2. The failure to pay on the date stipulated was clearly a violation of the Agreement. Thus, nonfulfilment of the terms of the compromise justified execution. It is the height of absurdity for petitioner to attribute to a fortuitous event its delayed payment. Petitioner’s explanation is clearly a gratuitous assertion that borders callousness.

Austria v. Court of Appeals Maria G. Abad received from Guillermo Austria one (1) pendant with diamonds to be sold on commission basis or to be returned on demand. 1. Maria Abad while walking home, two men snatched her purse containing jewelry and cash, and ran away. 2. Thus, Abad failed to return the jewelry or pay its value notwithstanding demands. 3. Austria filed an action against Abad and Abad’s husband for recovery of the pendant or of its value, and damages. 4. Abad raised the defense that the alleged robbery had extinguished their obligation. Issue/s: 1. Whether or not in a contract of agency (consignment of good for sole) it is necessary that there be prior conviction for robbery before the loss of the article shall exempt the consignee from liability for such loss. 2. Whether or not Abad was negligent. Ruling: 1. No. To avail of the exemption granted in the law, it is not necessary that the persons responsible for the occurrence should be found or punished, it would only be sufficient to establish that the enforceable event, the robbery in this case did take place without any concurrence fault on the debtor’s part, and this can be done by preponderance of evidence. A court finding that a robbery has happened would not necessary mean that those accused in the criminal action should be found guilty of the crime; nor would a ruling that those actually accused did not commit the robbery be inconsistent with a finding that a robbery did take place. 2. No. In 1961, when the robbery in question did take place, for at that time criminality had not by far reached the levels attained in the present day. The diligence that Abad portrayed when she went home before she was robbed was not a sign of negligence on her part.

Bacolod-Murcia Milling v. Court of Appeals Facts: 1. Bacolod-Murcia Milling Co., Inc.(BMMC) is the owner and operator of the sugar central in Bacolod. 2. Alonso Gatuslao (Gatuslao) is a registered plantor of the Bacolod-Muria Mill District. 3. BMMC and Gatuslao executed an “Extension and Modification of Milling Contract. 4. From crop year 1957-1958 up to crop year 1967-1968, Gatuslao has been milling all the sugarcane grown and produced with the Mill of BMMC. 5. From crop year 1920-21 to crop year 1967-68, the canes of planters adhered to the mill of BMMC were transported from the plantation to the mill by means of cane cars and through railway system operated by BMMC.

6. BMMC has been hauling planter Gatuslao’s sugar cane to its mill or factory continuously until crop year 1967 – 1968. 7. The milling contract between BMMC and owners of the hacienda Helvetica expired at the end of the 1964-1965 crop year. 8. The portion of the railway traversing the hacienda Helvetica was closed as per decision of the court. 9. The use of the railroad tracks(traversing hacienda Helvetica) was temporarily allowed due to the intervention of the President of the Philippines, which is until 1967-1978 milling season only. 10. Gatuslao loaded their cut cranes on trucks provided by the Bacolod-Murcia Agricultural Cooperative Marketing Association, Inc. (B-MACMA) during 1968-1969 crop year. 11. BMMC had not been able to use its cane cars and railway system for the cargo crop year 19681989. Issue/s: 1. Whether or not the termination of petitioner’s right of way over the hacienda Helvetica caused by the expiration of its amended milling contracts with the landowners of the land in question is fortuitous event or force majeure which will exempt petitioner BMMC from fulfillment of its contractual obligation. 2. Whether or not BMMC was able to provide adequate and efficient transportation facilities of the canes of Gatuslao and the other planters milling with BMMC during the crop year 1968-69. Ruling: 1. No. The terms of the milling contracts were clear and undoubtedly there was no reason for BMMC to expect otherwise. The closure of any portion of the railroad track, not necessarily in the hacienda Helvetica but in any of the properties whose owners decided not to renew their milling contracts with the Central upon their expiration, was foreseeable and inevitable. Despite its awareness that the conventional contract of lease would expire in crop year 1964-1965 and that refusal on the part of any one of the landowners to renew their milling contracts and the corresponding use of the right of way on their lands would render impossible compliance of its commitments, BMMC took a calculated risk that all the landowners would renew their contracts. The closure of the railway lines was not an act of God nor it constitute force majeure. It was due to the termination of the contractual relationships of the parties, for which BMMC is charged with knowledge. Owners of the hacienda Helvetica notified BMMC as far back as August 1965 of its intention not to allow the passage of the railway system thru its land after the aforesaid crop year. Adequate measures should have been adopted by BMMC to forestall such paralyzations but the records show none. 2. No, BMMC failed to provide adequate transportation facilities to Gatuslao and other adherent parties. The inadequacies of the reparto or trailer allotment as well as the state of unpreparedness on the part of BMMC to meet the problem posed by the closure of the railway lines. It was established that after Gatuslao had cut his sugarcanes for hauling, no trailers arrived and when two trailers finally arrived on October 1968 after several unheeded requests, they were left on the national highway about one kilometer away from the loading station, the means of transportation provided by BMMC is very inadequate to answer the needs of Gatuslao.

Philcomsat v. Globe Telecom Facts: 1. Globe Telecom, Inc. (Globe) is engaged in the coordination of the provision of various communication facilities for the military bases of the United States of America (US) in the Clark Air Base and Subic Naval Base. 2. Saud communication facilities were installed and configured for the exclusive use of the US Defense Communications Agency (USDCA). 3. Globe contracted Philippine Communications Satellite Corporation (Philcomsat) for the provision of the communication facilities. 4. Philcomsat and Globe entered into an agreement whereby Philcomsat obliged itself to establish, operate and provide an IBS Standard B earth station (earth station) for the exclusive use of the USDCA. Globe promised to pay Philcomsat monthly rentals for each leased circuit involved. 5. Philcomsat installed and established the earth station and the USDCA made use of the same. 6. Senate passed and adopted its resolution, expressing its decision not to concur in the ratification of the Treaty of Friendship, Cooperation and Security and its Supplementary Agreements that was supposed to extend the term of the use by the US of Subic Naval Base, among others. 7. PH government sent a Note Verbale to the US government through the US Embassy, notifying it of the Philippine termination of the RP-US Military Base Agreement. The withdrawal of all US military forces from Subic Naval Base should be completed by December 31. 1992. 8. Globe notified Philcomsat of its intention to discontinue the use of the earth station. 9. Philcomsat demand payment of rentals for the balance of lease term, despite the non-use of earth station. Issue/s: 1. Whether the termination of the RP-US Military Base Agreement, the non-ratification of the Treaty of Friendship, Cooperation and Security, and the consequent withdrawal of US military forces and personnel from Cubi Point constitute force majeure which would exempt Globe from complying with its obligation to pay rentals under its Agreement with Philcomsat. 2. Whether Globe is liable to pay rentals under the Agreement for the month of December 1992. 3. Whether Philcomsat is entitled to attorney’s fees and exemplary damages. Ruling: 1. Yes. Philcomsat and Globe had no control over the non-renewal of the term of the RP-US Military Base Agreement when the same expired in 1991, because the prerogative to ratify the treaty extending the life thereof belonged to the Senate. Neither did the parties have control over the subsequent withdrawal of the US military forces and personnel from Cubi Point in December 1992. As a consequence of the termination of the RP-US Military Base Agreement the continued stay of all US Military forces and personnel from Subic Naval Base would no longer be allowed, hence, plaintiff would no longer be in any position to render service it was obligated under the Agreement. Events made impossible the continuation of the Agreement until the end of its five-year term without fault on the part of either party. Such fortuitous events rendered Globe exempt from payment of rentals for the remainder of the term of the Agreement.

Philcomsat would like to charge globe rentals for the balance of the lease term without being any corresponding telecommunications service subject of the lease. It will be grossly unfair and iniquitous to hold globe liable for lease charges for a service that was not and could not have been rendered due to an act of the government which was clearly beyond globes control. 2. Yes. The US military forces and personnel completely withdrew from Cubi Point only on December 31, 1992. Thus, until that date, USDCA had control over the earth station and had the option of using the same. Furthermore, Philcomsat could not have removed or rendered ineffective said communication facility until after December 31, 1992 because Cubi Point was accessible only to US naval personnel up to that time. 3. No. The award of attorney’s fees is the exemption rather than the rule. In cases where both parties have legitimate claims against each other and no party actually prevailed, such as in the present case where the claims of both parties were sustained in part, an award of attorney’s fees would not be warranted. Exemplary damages may be awarded in cases involving contracts, if the erring party acted in wanton, fraudulent, reckless, oppressive or malevolent manner. It was not shown that Globe acted wantonly or oppressively in not heeding Philcomsats demands for payment of rentals. Globe had valid grounds for refusing to comply with its contractual obligations after 1992.

JIMMY CO, DOING BUSINESS UNDER THE NAME & STYLE DRAGON METAL MANUFACTURING, PETITIONER, VS. COURT OF APPEALS AND BROADWAY MOTOR SALES CORPORATION, RESPONDENTS. On July 18, 1990, petitioner entrusted his Nissan pick-up car 1988 model[1] to private respondent - which is engaged in the sale, distribution and repair of motor vehicles - for the following job repair services and supply of parts: - Bleed injection pump and all nozzles; - Adjust valve tappet; - Change oil and filter; - Open up and service four wheel brakes, clean and adjust; - Lubricate accelerator linkages; - Replace aircon belt; and - Replace battery[2] Private respondent undertook to return the vehicle on July 21, 1990 fully serviced and supplied in accordance with the job contract. After petitioner paid in full the repair bill in the amount of P1,397.00,[3] private respondent issued to him a gate pass for the release of the vehicle on said date. But came July 21, 1990, the latter could not release the vehicle as its battery was weak and was not yet replaced. Left with no option, petitioner himself bought a new battery nearby and delivered it to private respondent for installation on the same day. However, the battery was not installed and the delivery of the car was rescheduled to July 24, 1990 or three (3) days later. When petitioner sought to reclaim his car in the afternoon of July 24, 1990, he was told that it was carnapped earlier that morning while being road-tested by private respondent’s employee along Pedro Gil and Perez Streets in Paco, Manila. Private respondent said that the incident was reported to the police. Having failed to recover his car and its accessories or the value thereof, petitioner filed a suit for damages against private respondent anchoring his claim on the latter’s alleged negligence. For its part,

private respondent contended that it has no liability because the car was lost as a result of a fortuitous event - the carnapping. During pre-trial, the parties agreed that: “(T)he cost of the Nissan Pick-up four (4) door when the plaintiff purchased it from the defendant is P332,500.00 excluding accessories which were installed in the vehicle by the plaintiff consisting of four (4) brand new tires, magwheels, stereo speaker, amplifier which amount all in all to P20,000.00. It is agreed that the vehicle was lost on July 24, 1990 `approximately two (2) years and five (5) months from the date of the purchase.’ It was agreed that the plaintiff paid the defendant the cost of service and repairs as early as July 21, 1990 in the amount of P1,397.00 which amount was received and duly receipted by the defendant company. It was also agreed that the present value of a brand new vehicle of the same type at this time is P425,000.00 without accessories.”[4] They likewise agreed that the sole issue for trial was who between the parties shall bear the loss of the vehicle which necessitates the resolution of whether private respondent was indeed negligent.[5] After trial, the court a quo found private respondent guilty of delay in the performance of its obligation and held it liable to petitioner for the value of the lost vehicle and its accessories plus interest and attorney’s fees.[6] On appeal, the Court of Appeals (CA) reversed the ruling of the lower court and ordered the dismissal of petitioner’s damage suit.[7] The CA ruled that: (1) the trial court was limited to resolving the issue of negligence as agreed during pre-trial; hence it cannot pass on the issue of delay; and (2) the vehicle was lost due to a fortuitous event. In a petition for review to this Court, the principal query raised is whether a repair shop can be held liable for the loss of a customer’s vehicle while the same is in its custody for repair or other job services? The Court resolves the query in favor of the customer. First, on the technical aspect involved. Contrary to the CA’s pronouncement, the rule that the determination of issues at a pre-trial conference bars the consideration of other issues on appeal, except those that may involve privilege or impeaching matter,[8] is inapplicable to this case. The question of delay, though not specifically mentioned as an issue at the pre-trial may be tackled by the court considering that it is necessarily intertwined and intimately connected with the principal issue agreed upon by the parties, i.e. who will bear the loss and whether there was negligence. Petitioner’s imputation of negligence to private respondent is premised on delay which is the very basis of the former’s complaint. Thus, it was unavoidable for the court to resolve the case, particularly the question of negligence without considering whether private respondent was guilty of delay in the performance of its obligation. On the merits. It is a not a defense for a repair shop of motor vehicles to escape liability simply because the damage or loss of a thing lawfully placed in its possession was due to carnapping. Carnapping per se cannot be considered as a fortuitous event. The fact that a thing was unlawfully and forcefully taken from another’s rightful possession, as in cases of carnapping, does not automatically give rise to a fortuitous event. To be considered as such, carnapping entails more than the mere forceful taking of another’s property. It must be proved and established that the event was an act of God or was done solely by third parties and that neither the claimant nor the person alleged to be negligent has any participation.[9] In accordance with the Rules of evidence, the burden of proving that the loss was due to a fortuitous event rests on him who invokes it[10]- which in this case is the private respondent. However, other than the police report of the alleged carnapping incident, no other evidence was presented by private respondent to the effect that the incident was not due to its fault. A police report of an alleged crime, to which only private respondent is privy, does not suffice to established the carnapping. Neither does it prove that there was no fault on the part of private respondent notwithstanding the parties’

agreement at the pre-trial that the car was carnapped. Carnapping does not foreclose the possibility of fault or negligence on the part of private respondent. Even assuming arguendo that carnapping was duly established as a fortuitous event, still private respondent cannot escape liability. Article 1165[11] of the New Civil Code makes an obligor who is guilty of delay responsible even for a fortuitous event until he has effected the delivery. In this case, private respondent was already in delay as it was supposed to deliver petitioner’s car three (3) days before it was lost. Petitioner’s agreement to the rescheduled delivery does not defeat his claim as private respondent had already breached its obligation. Moreover, such accession cannot be construed as waiver of petitioner’s right to hold private respondent liable because the car was unusable and thus, petitioner had no option but to leave it. Assuming further that there was no delay, still working against private respondent is the legal presumption under Article 1265 that its possession of the thing at the time it was lost was due to its fault.[12] This presumption is reasonable since he who has the custody and care of the thing can easily explain the circumstances of the loss. The vehicle owner has no duty to show that the repair shop was at fault. All that petitioner needs to prove, as claimant, is the simple fact that private respondent was in possession of the vehicle at the time it was lost. In this case, private respondent’s possession at the time of the loss is undisputed. Consequently, the burden shifts to the possessor who needs to present controverting evidence sufficient enough to overcome that presumption. Moreover, the exempting circumstances - earthquake, flood, storm or other natural calamity - when the presumption of fault is not applicable[13] do not concur in this case. Accordingly, having failed to rebut the presumption and since the case does not fall under the exceptions, private respondent is answerable for the loss. It must likewise be emphasized that pursuant to Articles 1174 and 1262 of the New Civil Code, liability attaches even if the loss was due to a fortuitous event if “the nature of the obligation requires the assumption of risk”.[14] Carnapping is a normal business risk for those engaged in the repair of motor vehicles. For just as the owner is exposed to that risk so is the repair shop since the car was entrusted to it. That is why, repair shops are required to first register with the Department of Trade and Industry (DTI)[15] and to secure an insurance policy for the “shop covering the property entrusted by its customer for repair, service or maintenance” as a pre-requisite for such registration/accreditation.[16] Violation of this statutory duty constitutes negligence per se.[17] Having taken custody of the vehicle, private respondent is obliged not only to repair the vehicle but must also provide the customer with some form of security for his property over which he loses immediate control. An owner who cannot exercise the seven (7) juses or attributes of ownership – the right to possess, to use and enjoy, to abuse or consume, to accessories, to dispose or alienate, to recover or vindicate and to the fruits -[18] is a crippled owner. Failure of the repair shop to provide security to a motor vehicle owner would leave the latter at the mercy of the former. Moreover, on the assumption that private respondent’s repair business is duly registered, it presupposes that its shop is covered by insurance from which it may recover the loss. If private respondent can recover from its insurer, then it would be unjustly enriched if it will not compensate petitioner to whom no fault can be attributed. Otherwise, if the shop is not registered, then the presumption of negligence applies. One last thing. With respect to the value of the lost vehicle and its accessories for which the repair shop is liable, it should be based on the fair market value that the property would command at the time it was entrusted to it or such other value as agreed upon by the parties subsequent to the loss. Such recoverable value is fair and reasonable considering that the value of the vehicle depreciates. This value

may be recovered without prejudice to such other damages that a claimant is entitled under applicable laws. WHEREFORE, premises considered, the decision of the Court Appeals is REVERSED and SET ASIDE and the decision of the court a quo is REINSTATED. SO ORDERED

INOCENCIO TUGADE v. CA There is nothing impressive about this petition seeking to justify a review of a decision of respondent Court of Appeals on the ground that instead of relying on what counsel considers applicable rulings of respondent Court, the judgment was based on a case decided by this Tribunal. Moreover, counsel for petitioner ignored earlier doctrines of this Court consistently holding that a mishap caused by defective brakes could not be considered as fortuitous in character and thus called for an acquittal of the driver if subsequently haled to court. This Court, nonetheless, was persuaded to give due course to the petition primarily for clarifying the state of the law and thus hopefully avoid any further lurking doubt on the matter. It is quite evident that a reversal of the decision sought to be reviewed is not justified. The decision of respondent Court, with Justice Juliano Agrava as ponente, set forth the relevant facts thus: "At about 9:15 o'clock in the morning of January 4, 1972, Rodolfo [Rayandayan] was driving a Holden Kingswood car (the [Holden] car), bearing plate No. 52-19V (L-Rizal '71), owned by the Sta. Ines Mining Corp. and assigned for use of its manager, on Ayala Avenue in Makati, Rizal, going northwards. At the intersection of Ayala Avenue and Makati Avenue, [Rayandayan] was going to turn left on Makati Avenue but he stopped to wait for the left-turn signal and because a jeep in front of him was also at a stop * * *. While in that stop position, the [Holden] car was bumped from behind by Blue Car Taxi, bearing Plate No. 55-71R (TX-QC '71) and driven by Inocencio [Tugade] causing damage to the [Holden] car, the repairs of which cost P778.10 * * *. [Tugade] was then charged with Reckless Imprudence Resulting in Damage to Property. He pleaded not guilty and while admitting that the collision was caused by faulty brakes of his taxicab, sought to exculpate himself with the explanation that this fault could not and should not be traced to him. After trial, the lower court held: '[Accordingly], the Court finds that accused Inocencio Tugade guilty beyond reasonable doubt of the crime of reckless imprudence resulting in damage to property and hereby sentences him to pay a [fine of one thousand (P1, 000. 00) pesos], with subsidiary imprisonment in case of insolvency in accordance with the provisions of Article 39 of the Revised Penal Code, as amended, to indemnify the Sta. Ines Mining Corporation in the amount of P778.10 by way of actual damages; and to pay the costs.' While [Tugade] admitted the facts of the case as set out above, he, nevertheless, appealed from the judgment reiterating that 'the malfunctioning of the brakes at the time of the accident was due to a mechanical defect which even the exercise of due diligence of a good father of a family cannot have prevented.' As the lower court had found: 'this witness ([Tugade]) testified that after the accident, he admitted that his taxicab bumped the car on his front because the brakes of his vehicle malfunctioned; and that the document, * * *, is the handwritten statement he prepared to this effect.'"[1] Respondent Court of Appeals, after stating that upon review of the record, it agreed with the trial court, rendered its decision affirming in toto the judgment appealed from.

As noted at the outset, petitioner is not entitled to acquittal. His plea for the reversal of the decision reached by respondent Court is not impressed with merit. At the most, as was likewise previously mentioned, the fine imposed could be reduced. 1. Counsel for petitioner vigorously contends that respondent Court of Appeals ought not to have applied the pronouncement in La Mallorca and Pampanga Bus Co. v. De Jesus[2] on the ground that it was obiter dictum. That is not the case at all. A little more time and attention in the study of the above decision could have resulted in its correct appraisal. He would have realized then that respondent Court acted correctly. This Tribunal passed squarely on the specific issue raised. The opinion penned by the then Justice, later Chief Justice, Makalintal, is categorical: "Petitioner maintains that a tire blow-out is a fortuitous event and gives rise to no liability for negligence, citing the rulings of the Court of Appeals in Rodriguez v. Red Line Transportation Co., CA-GR No. 8136, December 29, 1954, and People v. Palapal, CA-GR No. 18480, June 27, 1958. These rulings, however, not only are not binding on this Court but were based on considerations quite different from those that obtain in the case at bar."[3] The above doctrine is controlling. The reference to the Court of Appeals decisions is of no moment.[4] It may be pointed out that they were not ignored in the opinion of Justice Agrava, six of its nine pages being devoted to distinguishing them. Even without the La Mallorca ruling then, the decision of respondent Court sought to be reviewed can stand the test of strict scrutiny. It is this Tribunal, not respondent Court of Appeals, that speaks authoritatively. 2. Respondent Court of Appeals really was devoid of any choice at all. It could not have ruled in any other way on the legal question raised. This Tribunal having spoken, its duty was to obey. It is as simple as that. There is relevance to this excerpt from Barrera v. Barrera:[5] "The delicate task of ascertaining the significance that attaches to a constitutional or statutory provision, an executive order, a procedural norm or a municipal ordinance is committed to the judiciary. It thus discharges a role no less crucial than that appertaining to the other two departments in the maintenance of the rule of law. To assure stability in legal relations and avoid confusion, it has to speak with one voice. It does so with finality, logically and rightly, through the highest judicial organ, this Court. What it says then should be definitive and authoritative, binding on those occupying the lower ranks in the judicial hierarchy. They have to defer and to submit."[6] The ensuing paragraph of the opinion in Barrera further emphasizes the point: "Such a thought was reiterated in an opinion of Justice J.B.L. Reyes and further emphasized in these words: 'Judge Gaudencio Cloribel need not be reminded that the Supreme Court, by tradition and in our system of judicial administration, has the last word on what the law is; it is the final arbiter of any justifiable controversy. There is only one Supreme Court from whose decisions all other courts should take their bearings.' "[7] 3. The lack of merit in this petition becomes even more obvious when it is recalled that the La Mallorca decision did not enunciate a new principle. As far back as Lasam v. Smith,[8] promulgated more than half a century ago, in 1924 to be exact, this Court has been committed to such a doctrine. Thus: "As will be seen, these authorities agree that some extraordinary circumstance independent of the will of the obligor, or of his employees, is an essential element of a caso fortuito. Turning to the present case, it is at once apparent that this element is lacking. It is not suggested that the accident in question was due to an act of God or to adverse road conditions which could not have been foreseen. As far as the record shows, the accident was caused either by defects in the automobile or else through the negligence of its driver. That is not a caso fortuito."[9] Lasam was cited with approval in the two subsequent cases of Son v. Cebu Autobus Co.[10] and Necesito v. Paras.[11] WHEREFORE, The decision of respondent Court of Appeals of December 15, 1977 is affirmed. No costs.

Juntilla vs Fontanar Facts: Herein plaintiff was a passenger of the public utility jeepney on course from Danao City to Cebu City. The jeepney was driven by driven by defendant Berfol Camoro and registered under the franchise of Clemente Fontanar. When the jeepney reached Mandaue City, the right rear tire exploded causing the vehicle to turn turtle. In the process, the plaintiff who was sitting at the front seat was thrown out of the vehicle. Plaintiff suffered a lacerated wound on his right palm aside from the injuries he suffered on his left arm, right thigh, and on his back. Plaintiff filed a case for breach of contract with damages before the City Court of Cebu City. Defendants, in their answer, alleged that the tire blow out was beyond their control, taking into account that the tire that exploded was newly bought and was only slightly used at the time it blew up. Issue: Whether or not the tire blow-out is a fortuitous event? Held: No. In the case at bar, the cause of the unforeseen and unexpected occurrence was not independent of the human will. The accident was caused either through the negligence of the driver or because of mechanical defects in the tire. Common carriers should teach drivers not to overload their vehicles, not to exceed safe and legal speed limits, and to know the correct measures to take when a tire blows up thus insuring the safety of passengers at all times.

Manila Trading & Supply Co. v. Medina Facts: Prior to May 7, 1956, Mariano Medina had certain accounts with Manila Trading & Supply Co. On January 8, 1957, Manila Trading & Supply Co. filed a complaint against Medina in the Court of First Instance of Manila, claiming that Medina had failed to meet the installments due on the note for the months of September, 1956 up to and including January 7, 1957. Medina averred that the genuine receipts dated January 1957 should raise the presumption that prior installments were paid. Issue: Whether or not the Medina was correct in saying that genuine receipts dated January 1957 raise the presumption that prior installments were paid. Held:

No. Such receipts did not indicate that they were issued for the installments corresponding to the month of January, 1957. And even if such recital had been made, the resulting presumption would only be prima facie.

METROBANK vs. INTERNATIONAL EXCHANGE BANK FACTS: Sacramento Steel Corporation (SSC) is a Steel manufacturing and producing corporation. SSC entered into a Credit Agreement with International Exchange Bank (IEB) and as security for its loan obligations, the former executed five separate deeds of chattel mortgage. SSC defaulted in the payment of its obligations, where subsequently, IEB filed a petition for extrajudicial foreclosure of chattel mortgage. Meanwhile, while the case were still pending between SSC and IEB, petitioner METROBANK filed a motion contending that it has legal interest in the properties subject of the litigation between IEB and SSC because it is a creditor of SSC and that the mortgage contracts between IEB and SSC were entered into to defraud the latter’s creditors. Metrobank prayed for the rescission of the chattel mortgages executed by SSC in favor of IEB. ISSUE: Whether the chattel mortgages executed by SSC in favor of IEB may be rescinded. HELD: In the current jurisprudence, the following successive measures must be taken by a creditor before he may bring an action for rescission of an allegedly fraudulent contract: 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 by law 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). It is thus apparent that an action to rescind, or an accion pauliana, must be of last resort, availed of only after the creditor has exhausted all the properties of the debtor not exempt from execution or after all other legal remedies have been exhausted and have been proven futile. Without availing of the first and second remedies, Metrobank simply undertook the third measure and filed an action for annulment of the chattel mortgages. Rescission can only be availed of in the absence of any other legal remedy to obtain reparation for the injury. This fact is not present in this case. No evidence was presented nor even an allegation was offered to show that Metrobank had availed of the abovementioned remedies before it tried to question the validity of the contracts of chattel mortgage between IEB and SSC.

Lao Lim vs CA This case is with regard to Art 1182 of the NCC- Potestative Condition- Stipulation dependent upon the sole will of the debtor

FACTS OF THE CASE: Records show that Francisco Lim, entered into a contract of lease with Benito Dy for a period of 3 years, from 1976 to 1979. After the stipulated term expired the respondent refused to leave the premises, so Francisco Lim filed an ejectment suit against Benito Dy. This case was then taken over by a judicially approved compromise agreement which provides an automatic increase in rent of 20% every 3 years. On 1985 Dy, informed Lim of his intention to renew the lease up to 1988, Lim did not agree to the renewal. In 1987 another ejectment suit was filed by Lim after the failure of Dy to vacate the premises. It was dismissed by the RTC and later affirmed by the CA for the following reasons: (1) the stipulation in the compromise agreement which allows the lessee (Benito Dy) to stay on the premises as long as he needs it and can pay rents is valid, being a resolutory condition, and therefore beyond the ambit of art 1308 of the NCC; and (2) the compromise agreement has the effect of res judicata. ISSUES OF THE CASE: Was the stipulation in the compromise agreement which allows the lessee to stay on the premises as long as he needs it and can pay rents is valid? - No, since the stipulation “for as long as the defendant needed the premises and can meet and pay said increases” is a purely potestative condition because it leaves the effectivity and enjoyment of leasehold rights to the sole and exclusive will of the lessee. - The continuance, effectivity, and fulfillment of a contract of lease cannot be made to depend exclusively upon the free and uncontrolled choice of the lessee between continuing payment of the rentals or not, completely depriving the owner of any say in the matter. Mutuality does not obtain in such a contract of lease and no equality exists between the lessor and the lessee. HELD: The decision of the Court of Appeals is REVERSED AND SET ASIDE. Benito Dy is ordered to immediately vacate and return the possession of the premises and pay the monthly rentals due thereon in accordance with the compromise agreement until he shall have actually vacated the same. This Judgment is immediately executory. • Potestative Condition- This can be found in Art 1182 of the NCC. A potestative condition speaks of fulfillment of an obligation rests solely upon the will of the debtor. An obligation which is subject to a suspensive potestative condition is non- demandable, hence it is void. If it is the debtor himself who determines the fulfillment of the condition, such an agreement produces no juridical effect that can be enforced, and thus null

Security and Trust Company vs CA Facts: Ferrer was contracted by the SBTC to construct a bldg in Davao. The contract provided that it be finished within 200 working days, it was finished upon stipulated time but additional expenses were incurred amounting to 300k on top of the original cost, these expenses were made known to SBTC and

timely demands for the payment of the increased cost were done by Ferrer to SBTC, the latter only recommended that the verified cost is 200k. SBTC contend that in Article IX of the contract, should there be any increase in the expenses, the “owner shall equitably make the appropriate adjustment on mutual agreement of both parties.” Ferrer filed for damages and the trial court ruled in his favor, the defendants were ordered to pay. On appeal, CA affirmed the tc’s decision. Issue: WON SBTC correctly interpreted Article IX of the contract with Ferrer that since there was no mutual agreement between the parties, petitioners' obligation to pay amounts above the original contract price never materialized. Held: No. Under Article 1182 of the Civil Code, a conditional obligation shall be void if its fulfillment depends upon the sole will of the debtor. In the present case, the mutual agreement, the absence of which petitioner bank relies upon to support its non-liability for the increased construction cost, is in effect a condition dependent on petitioner bank's sole will, since private respondent would naturally and logically give consent to such an agreement which would allow him recovery of the increased cost.

Rustan Pulp vs. Intermediate Appellate Court Summary: A paper mill started operations and accepted offers to supply raw materials from several suppliers. One supplier executed a contract with the paper mill with a condition that the paper mill has the right to stop accepting deliveries whenever the supply was sufficient. The paper mill exercised that right, but continued accepting periodic deliveries from other suppliers. Rule of Law: When the fulfillment of the condition depends on the sole will of the debtor, the conditional obligation shall be void. —Article 1182, Civil Code. Facts: When Rustan Pulp & Paper Mills (D) started operations Romeo Lluch (P) offered to supply raw materials. Rustan Pulp (D) proposed a non-exclusive contract to buy wood pulp from Lluch (P). However, a condition in the contract gave Rustan Pulp (D) the right to stop accepting deliveries when the supply became sufficient until such time the raw materials are needed. During the test run of the pulp mill, major defects on the machinery were discovered prompting the Japanese supplier of the machinery to recommend the stoppage of the deliveries. The suppliers were informed to stop deliveries, but were not informed as to the reasons for the stoppage. Lluch (P) sought to clarify the tenor of the notice as to whether stoppage of delivery or termination of the contract of sale was intended, but Rustan Pulp (D) failed to reply. This alleged ambiguity notwithstanding, Lluch (P) and the other suppliers resumed deliveries after a series of talks between Lluch (P) and Romeo Vergara, the manager of Rustan Pulp (D). Later, Lluch (P) filed a complaint for breach of contract. The case was dismissed, but at the same time,

the court enjoined Rustan Pulp (D) to honor the contract. On appeal, the court ruled that Rustan Pulp's (D) suspension of deliveries was not in the lawful exercise of its rights under the contract of sale. Issues: Is the suspension of deliveries by Rustan (D) a proper exercise of its rights under the contract of sale? Ruling: No. There is basis for the apprehension on the illusory resumption of deliveries at Rustan Pulp (D) because the prerogative suggests a condition solely dependent upon its exclusive will. The literal import of contested condition is that Rustan Pulp (D) can stop delivery of pulp wood from Lluch (P) if the supply at the plant is sufficient as ascertained by Rustan Pulp (D), subject to re-delivery when the need arises as determined likewise by Rustan Pulp (D). A purely potestative imposition of this character must be obliterated from the face of the contract without affecting the rest of the stipulations considering that the condition relates to the fulfillment of an already existing obligation and not to its inception (Civil Code Annotated, by Padilla, 1987 Edition, Volume 4, Page 160). A condition which is both potestative (or facultative) and resolutory may be valid, even though the saving clause is left to the will of the obligor as this Court ruled in Taylor vs. Uy Tieng Piao (43 Phil. 873). But the Taylor case, which allowed a condition for unilateral cancellation dependent on the arrival of factory machinery, cannot be applied because the facts relate to the birth of the undertaking and not to the fulfillment of an existing obligation.