G.R. No. 107112 February 24, 1994 NAGA TELEPHONE CO., INC. (NATELCO) AN L!CIANO ".

"AGGA#, petitioners, vs. THE CO!RT OF APPEAL$ AN CA"ARINE$ $!R II ELECTRIC COOPERATI%E, INC. (CA$!RECO II),respondents. NOCON, J.: The case of Reyes v. Caltex (Philippines), Inc. 1 enunciated the doctrine that where a person by his contract charges hi self with an obligation possible to be perfor ed, he ust perfor it, unless its perfor ance is rendered i possible by the act of !od, by the law, or by the other party, it being the rule that in case the party desires to be excused fro perfor ance in the event of contingencies arising thereto, it is his duty to provide the basis therefor in his contract. "ith the enact ent of the #ew Civil Code, a new provision was included therein, na ely, $rticle %&'( which provides) "hen the service has beco e so difficult as to be anifestly beyond the conte plation of the parties, the obligor ay also be released therefro , in whole or in part. In the report of the Code Co ission, the rationale behind this innovation was explained, thus)

The general rule is that i possibility of perfor ance releases the obligor. *owever, it is sub itted that when the service has beco e so difficult as to be anifestly beyond the conte plation of the parties, the court should be authori+ed to release the obligor in whole or in part. The intention of the parties should govern and if it appears that the service turns out to be so difficult as to have been beyond their conte plation, it would be doing violence to that intention to hold their conte plation, it would be doing violence to that intention to hold the obligor still responsible. 2 In other words, fair and s,uare consideration underscores the legal precept therein. #aga Telephone Co., Inc. re onstrates ainly against the application by the Court of $ppeals of $rticle %&'( in favor of Ca arines -ur II .lectric Cooperative, Inc. in the case before us. -tated differently, the for er insists that the co plaint should have been dis issed for failure to state a cause of action. The antecedent facts, as narrated by respondent Court of $ppeals are, as follows) Petitioner #aga Telephone Co., Inc. (#$T./C0) is a telephone co pany rendering local as well as long distance telephone service in #aga City while private respondent Ca arines -ur II .lectric Cooperative, Inc. (C$-1R.C0 II) is a private corporation established for the purpose of operating an electric power service in the sa e city. 0n #ove ber %, %2((, the parties entered into a contract (.xh. 3$3) for the use by petitioners in the operation of its telephone service the electric light posts of private respondent in #aga City. In

consideration therefor, petitioners agreed to install, free of charge, ten (%4) telephone connections for the use by private respondent in the following places) (a) 5 units 6 The 7ain 0ffice of (private respondent)8 (b) & 1nits 6 The "arehouse of (private respondent)8 (c) % 1nit 6 The -ub9-tation of (private respondent) at Concepcion Pe,ue:a8 (d) % 1nit 6 The Residence of (private respondent;s) President8 (e) % 1nit 6 The Residence of (private respondent;s) $cting !eneral 7anager8 < (f) & 1nits 6 To be deter ined by the !eneral 7anager. & -aid contract also provided) (a) That the ter or period of this contract shall be as long as the party of the first part has need for the electric light posts of the party of the second part it being understood that this contract shall ter inate when for any reason whatsoever, the party of the second part is forced to stop, abandoned =sic> its operation as a public service and it beco es necessary to re ove the electric lightpost8 (sic) 4 It was prepared by or with the assistance of the other petitioner, $tty. /uciano 7. 7aggay, then a e ber of the ?oard of @irectors of private respondent and at the sa e ti e the legal counsel of petitioner. $fter the contract had been enforced for over ten (%4) years, private respondent filed on Aanuary &, %2B2 with the Regional Trial Court of #aga City (?r. &B) C.C. #o. B29%'C& against petitioners for refor ation of the contract with da ages, on the ground that it is too one9sided in favor of petitioners8 that it is not in confor ity with the guidelines of the #ational .lectrification $d inistration (#.$) which direct that the reasonable co pensation for the use of the posts is P%4.44 per post, per onth8 that after eleven (%%) years of petitioners; use of the posts, the telephone cables strung by the thereon have beco e uch heavier with the increase in the volu e of their subscribers, worsened by the fact that their line en bore holes through the posts at which points those posts were broDen during typhoons8 that a post now costs as uch as P&,'54.448 so that Eustice and e,uity de and that the contract be refor ed to abolish the ine,uities thereon. $s second cause of action, private respondent alleged that starting with the year %2B%, petitioners have used 5%2 posts in the towns of Pili, Cana an, 7agarao and 7ilaor, Ca arines -ur, all outside #aga City, without any contract with it8 that at the rate of P%4.44 per post, petitioners should pay private respondent for the use thereof the total a ount of P&'(,2'4.44 fro %2B% up to the filing of its co plaint8 and that petitioners had refused to pay private respondent said a ount despite de ands. $nd as third cause of action, private respondent co plained about the poor servicing by petitioners of the ten (%4) telephone units which had caused it great inconvenience and da ages to the tune of not less than P%44,444.44

In petitioners; answer to the first cause of action, they averred that it should be dis issed because (%) it does not sufficiently state a cause of action for refor ation of contract8 (&) it is barred by prescription, the sa e having been filed ore than ten (%4) years after the execution of the contract8 and (5) it is barred by estoppel, since private respondent seeDs to enforce the contract in the sa e action. Petitioners further alleged that their utili+ation of private respondent;s posts could not have caused their deterioration because they have already been in use for eleven (%%) years8 and that the value of their expenses for the ten (%4) telephone lines long enEoyed by private respondent free of charge are far in excess of the a ounts clai ed by the latter for the use of the posts, so that if there was any ine,uity, it was suffered by the . Regarding the second cause of action, petitioners clai ed that private respondent had asDed for telephone lines in areas outside #aga City for which its posts were used by the 8 and that if petitioners had refused to co ply with private respondent;s de ands for pay ent for the use of the posts outside #aga City, it was probably because what is due to the fro private respondent is ore than its clai against the . $nd with respect to the third cause of action, petitioners clai ed, inter alia, that their telephone service had been categori+ed by the #ational Teleco unication Corporation (#TC) as 3very high3 and of 3superior ,uality.3 @uring the trial, private respondent presented the following witnesses) (%) @ioscoro Ragragio, one of the two officials who signed the contract in its behalf, declared that it was petitioner 7aggay who prepared the contract8 that the understanding between private respondent and petitioners was that the latter would only use the posts in #aga City because at that ti e, petitioners; capability was very li ited and they had no expectation of expansion because of legal s,uabbles within the co pany8 that private respondent agreed to allow petitioners to use its posts in #aga City because there were any subscribers therein who could not be served by the because of lacD of facilities8 and that while the telephone lines strung to the posts were very light in %2((, said posts have beco e heavily loaded in %2B2. (&) .ngr. $ntonio ?orEa, Chief of private respondent;s /ine 0peration and 7aintenance @epart ent, declared that the posts being used by petitioners totalled %,C45 as of $pril %(, %2B2, %2& of which were in the towns of Pili, Cana an, and 7agarao, all outside #aga City (.xhs. 3?3 and 3?9%3)8 that petitioners; cables strung to the posts in %2B2 are uch bigger than those in #ove ber, %2((8 that in %2B(, al ost %44 posts were destroyed by typhoon -isang) around &4 posts were located between #aga City and the town of Pili while the posts in barangay Concepcion, #aga City were broDen at the iddle which had been bored by petitioner;s line en to enable the to string bigger telephone lines8 that while the cost per post in %2(( was only fro P(44.44 to P%,444.44, their costs in %2B2 went up fro P%,F44.44 to P&,444.44, depending on the si+e8 that so e lines that were strung to the posts did not follow the ini u vertical clearance re,uired by the #ational ?uilding Code, so that there were cases in %2BB where, because of the low clearance of the cables, passing trucDs would accidentally touch said cables causing the posts to fall and resulting in brown9outs until the electric lines were repaired. (5) @ario ?ernarde+, ProEect -upervisor and $cting !eneral 7anager of private respondent and 7anager of Region G of #.$, declared that according to #.$ guidelines in %2BF (.xh. 3C3), for the use by private telephone syste s of electric cooperatives; posts, they should pay a ini u onthly rental of PC.44 per

post, and considering the escalation of prices since %2BF, electric cooperatives have been charging fro P%4.44 to P%F.44 per post, which is what petitioners should pay for the use of the posts. (C) .ngineer $ntonio 7acandog, @epart ent *ead of the 0ffice of -ervices of private respondent, testified on the poor service rendered by petitioner;s telephone lines, liDe the telephone in their Co plaints -ection which was usually out of order such that they could not respond to the calls of their custo ers. In case of disruption of their telephone lines, it would taDe two to three hours for petitioners to reactivate the notwithstanding their calls on the e ergency line. (F) Hinally, $tty. /uis !eneral, Ar., private respondent;s counsel, testified that the ?oard of @irectors asDed hi to study the contract so eti e during the latter part of %2B& or in %2B5, as it had appeared very disadvantageous to private respondent. #otwithstanding his reco endation for the filing of a court action to refor the contract, the for er general anagers of private respondent wanted to adopt a soft approach with petitioners about the atter until the ter of !eneral 7anager *enry Pascual who, after failing to settle the atter a icably with petitioners, finally agreed for hi to file the present action for refor ation of contract. 0n the other hand, petitioner 7aggay testified to the following effect) (%) It is true that he was a e ber of the ?oard of @irectors of private respondent and at the sa e ti e the lawyer of petitioner when the contract was executed, but $tty. !audioso Tena, who was also a e ber of the ?oard of @irectors of private respondent, was the one who saw to it that the contract was fair to both parties. (&) "ith regard to the first cause of action) (a) Private respondent has the right under the contract to use ten (%4) telephone units of petitioners for as long as it wishes without paying anything therefor except for long distance calls through P/@T out of which the latter get only %4I of the charges. (b) In ost cases, only drop wires and not telephone cables have been strung to the posts, which posts have re ained erect up to the present8 (c) Petitioner;s line en have strung only s all s all holes to pass through8 and essenger wires to any of the posts and they need only

(d) @ocu ents existing in the #TC show that the stringing of petitioners; cables in #aga City are according to standard and co parable to those of P/@T. The accidents entioned by private respondent involved trucDs that were either overloaded or had loads that protruded upwards, causing the to hit the cables. (5) Concerning the second cause of action, the intention of the parties when they entered into the contract was that the coverage thereof would include the whole area serviced by petitioners because at that ti e, they already had subscribers outside #aga City. Private respondent, in fact, had asDed for telephone connections outside #aga City for its officers and e ployees residing there in addition to the ten (%4) telephone units entioned in the contract. Petitioners have not been charging private respondent for the

installation, transfers and re9connections of said telephones so that naturally, they use the posts for those telephone lines. (C) "ith respect to the third cause of action, the #TC has found petitioners; cable installations to be in accordance with engineering standards and practice and co parable to the best in the country. 0n the basis of the foregoing countervailing evidence of the parties, the trial court found, as regards private respondent;s first cause of action, that while the contract appeared to be fair to both parties when it was entered into by the during the first year of private respondent;s operation and when its ?oard of @irectors did not yet have any experience in that business, it had beco e disadvantageous and unfair to private respondent because of subse,uent events and conditions, particularly the increase in the volu e of the subscribers of petitioners for ore than ten (%4) years without the corresponding increase in the nu ber of telephone connections to private respondent free of charge. The trial court concluded that while in an action for refor ation of contract, it cannot aDe another contract for the parties, it can, however, for reasons of Eustice and e,uity, order that the contract be refor ed to abolish the ine,uities therein. Thus, said court ruled that the contract should be refor ed by ordering petitioners to pay private respondent co pensation for the use of their posts in #aga City, while private respondent should also be ordered to pay the onthly bills for the use of the telephones also in #agaCity. $nd taDing into consideration the guidelines of the #.$ on the rental of posts by telephone co panies and the increase in the costs of such posts, the trial court opined that a onthly rental of P%4.44 for each post of private respondent used by petitioners is reasonable, which rental it should pay fro the filing of the co plaint in this case on Aanuary &, %2B2. $nd in liDe anner, private respondent should pay petitioners fro the sa e date its onthly bills for the use and transfers of its telephones in#aga City at the sa e rate that the public are paying. 0n private respondent;s second cause of action, the trial court found that the contract does not ention anything about the use by petitioners of private respondent;s posts outside #aga City. Therefore, the trial court held that for reason of e,uity, the contract should be refor ed by including therein the provision that for the use of private respondent;s posts outside #aga City, petitioners should pay a onthly rental of P%4.44 per post, the pay ent to start on the date this case was filed, or on Aanuary &, %2B2, and private respondent should also pay petitioners the onthly dues on its telephone connections located outside #aga City beginning Aanuary, %2B2. $nd with respect to private respondent;s third cause of action, the trial court found the clai sufficiently proved. Thus, the following decretal portion of the trial court;s decision dated Auly &4, %224) "*.R.H0R., in view of all the foregoing, decision is hereby rendered ordering the refor ation of the agree ent (.xh. $)8 ordering the defendants to pay plaintiff;s electric poles in #aga City and in the towns of 7ilaor, Cana an, 7agarao and Pili, Ca arines -ur and in other places where defendant #$T./C0 uses plaintiff;s electric poles, the su of T.# (P%4.44) P.-0- per plaintiff;s pole, per onth beginning Aanuary, %2B2 and ordering also the plaintiff to pay defendant #$T./C0 the onthly dues of all its telephones including those installed at the residence of its officers, na ely8 .ngr. Aoventino Cru+, .ngr. $ntonio ?orEa, .ngr. $ntonio 7acandog, 7r. Aesus 0piana and $tty. /uis !eneral, Ar. beginning Aanuary, %2B2. Plaintiff;s clai for attorney;s fees and not

expenses of litigation and defendants; counterclai "ithout pronounce ent as to costs.

are both hereby ordered dis issed.

@isagreeing with the foregoing Eudg ent, petitioners appealed to respondent Court of $ppeals. In the decision dated 7ay &B, %22&, respondent court affir ed the decision of the trial court, ' but based on different grounds to wit) (%) that $rticle %&'( of the #ew Civil Code is applicable and (&) that the contract was subEect to a potestative condition which rendered said condition void. The otion for reconsideration was denied in the resolution dated -epte ber %4, %22&. ( *ence, the present petition. Petitioners assign the following pertinent errors co %) in itted by respondent court)

aDing a contract for the parties by invoDing $rticle %&'( of the #ew Civil Code8

&) in ruling that prescription of the action for refor ation of the contract in this case co enced fro the ti e it beca e disadvantageous to private respondent8 and 5) in ruling that the contract was subEect to a potestative condition in favor of petitioners. Petitioners assert earnestly that $rticle %&'( of the #ew Civil Code is not applicable pri arily because the contract does not involve the rendition of service or a personal prestation and it is not for future service with future unusual change. Instead, the ruling in the case of Occea, et al. v. Jabson, etc., et al., 7 which interpreted the article, should be followed in resolving this case. ?esides, said article was never raised by the parties in their pleadings and was never the subEect of trial and evidence. In applying $rticle %&'(, respondent court rationali+ed) "e agree with appellant that in order that an action for refor ation of contract would lie and ay prosper, there ust be sufficient allegations as well as proof that the contract in ,uestion failed to express the true intention of the parties due to error or istaDe, accident, or fraud. Indeed, in e bodying the e,uitable re edy of refor ation of instru ents in the #ew Civil Code, the Code Co ission gave its reasons as follows) .,uity dictates the refor ation of an instru ent in order that the true intention of the contracting parties ay be expressed. The courts by the refor ation do not atte pt to aDe a new contract for the parties, but to aDe the instru ent express their real agree ent. The rationale of the doctrine is that it would be unEust and ine,uitable to allow the enforce ent of a written instru ent which does not reflect or disclose the real eeting of the inds of the parties. The rigor of the legalistic rule that a written instru ent should be the final and inflexible criterion and easure of the rights and obligations of the contracting parties is thus te pered to forestall the effects of istaDe, fraud, ine,uitable conduct, or accident. (pp. FF9F', Report of Code Co ission) Thus, $rticles %5F2, %5'%, %5'&, %5'5 and %5'C of the #ew Civil Code provide in essence that where through istaDe or accident on the part of either or both of the parties or istaDe or fraud on the part of the clerD or typist who prepared the instru ent,

the true intention of the parties is not expressed therein, then the instru ent ay be refor ed at the instance of either party if there was utual istaDe on their part, or by the inEured party if only he was istaDen. *ere, plaintiff9appellee did not allege in its co plaint, nor does its evidence prove, that there was a istaDe on its part or utual istaDe on the part of both parties when they entered into the agree ent .xh. 3$3, and that because of this istaDe, said agree ent failed to express their true intention. Rather, plaintiff;s evidence shows that said agree ent was prepared by $tty. /uciano 7aggay, then a e ber of plaintiff;s ?oard of @irectors and its legal counsel at that ti e, who was also the legal counsel for defendant9 appellant, so that as legal counsel for both co panies and presu ably with the interests of both co panies in ind when he prepared the aforesaid agree ent, $tty. 7aggay ust have considered the sa e fair and e,uitable to both sides, and this was affir ed by the lower court when it found said contract to have been fair to both parties at the ti e of its execution. In fact, there were no co plaints on the part of both sides at the ti e of and after the execution of said contract, and according to (59year old Austino de Aesus, Gice President and !eneral anager of appellant at the ti e who signed the agree ent .xh. 3$3 in its behalf and who was one of the witnesses for the plaintiff (sic), both parties co plied with said contract 3fro the very beginning3 (p. F, tsn, $pril %(, %2B2). That the aforesaid contract has beco e ine,uitous or unfavorable or disadvantageous to the plaintiff with the expansion of the business of appellant and the increase in the volu e of its subscribers in #aga City and environs through the years, necessitating the stringing of ore and bigger telephone cable wires by appellant to plaintiff;s electric posts without a corresponding increase in the ten (%4) telephone connections given by appellant to plaintiff free of charge in the agree ent .xh. 3$3 as consideration for its use of the latter;s electric posts in #aga City, appear, however, undisputed fro the totality of the evidence on record and the lower court so found. $nd it was for this reason that in the later (sic) part of %2B& or %2B5 (or five or six years after the subEect agree ent was entered into by the parties), plaintiff;s ?oard of @irectors already asDed $tty. /uis !eneral who had beco e their legal counsel in %2B&, to study said agree ent which they believed had beco e disadvantageous to their co pany and to aDe the proper reco endation, which study $tty. !eneral did, and thereafter, he already reco ended to the ?oard the filing of a court action to refor said contract, but no action was taDen on $tty. !eneral;s reco endation because the for er general anagers of plaintiff wanted to adopt a soft approach in discussing the atter with appellant, until, during the ter of !eneral 7anager *enry Pascual, the latter, after failing to settle the proble with $tty. /uciano 7aggay who had beco e the president and general anager of appellant, already agreed for $tty. !eneral;s filing of the present action. The fact that said contract has beco e ine,uitous or disadvantageous to plaintiff as the years went by did not, however, give plaintiff a cause of action for refor ation of said contract, for the reasons already pointed out earlier. ?ut this does not ean that plaintiff is co pletely without a re edy, for we believe that the allegations of its co plaint herein and the evidence it has presented sufficiently aDe out a cause of action under $rt. %&'( of the #ew Civil Code for its release fro the agree ent in ,uestion. xxx xxx xxx

The understanding of the parties when they entered into the $gree ent .xh. 3$3 on #ove ber %, %2(( and the prevailing circu stances and conditions at the ti e, were described by @ioscoro Ragragio, the President of plaintiff in %2(( and one of its two officials who signed said agree ent in its behalf, as follows) 0ur understanding at that ti e is that we will allow #$T./C0 to utili+e the posts of C$-1R.C0 II only in the City of #aga because at that ti e the capability of #$T./C0 was very li ited, as a atter of fact we do =sic> not expect to be able to expand because of the legal s,uabbles going on in the #$T./C0. -o, even at that ti e there were so any subscribers in #aga City that cannot be served by the #$T./C0, so as a ater of public service we allowed the to sue (sic) our posts within the #aga City. (p. B, tsn $pril 5, %2B2) Ragragio also declared that while the telephone wires strung to the electric posts of plaintiff were very light and that very few telephone lines were attached to the posts of C$-1R.C0 II in %2((, said posts have beco e 3heavily loaded3 in %2B2 (tsn, id.). In truth, as also correctly found by the lower court, despite the increase in the volu e of appellant;s subscribers and the corresponding increase in the telephone cables and wires strung by it to plaintiff;s electric posts in #aga City for the ore %4 years that the agree ent .xh. 3$3 of the parties has been in effect, there has been no corresponding increase in the ten (%4) telephone units connected by appellant free of charge to plaintiff;s offices and other places chosen by plaintiff;s general anager which was the only consideration provided for in said agree ent for appellant;s use of plaintiffs electric posts. #ot only that, appellant even started using plaintiff;s electric posts outside #agaCity although this was not provided for in the agree ent .xh. 3$3 as it extended and expanded its telephone services to towns outside said city. *ence, while very few of plaintiff;s electric posts were being used by appellant in %2(( and they were all in the City of #aga, the nu ber of plaintiff;s electric posts that appellant was using in %2B2 had Eu ped to %,C45,%2& of which are outside #aga City (.xh. 3?3). $dd to this the destruction of so e of plaintiff;s poles during typhoons liDe the strong typhoon -isang in %2B( because of the heavy telephone cables attached thereto, and the escalation of the costs of electric poles fro %2(( to %2B2, and the conclusion is indeed ineluctable that the agree ent .xh. 3$3 has already beco e too one9sided in favor of appellant to the great disadvantage of plaintiff, in short, the continued enforce ent of said contract has anifestly gone far beyond the conte plation of plaintiff, so uch so that it should now be released therefro under $rt. %&'( of the #ew Civil Code to avoid appellant;s unEust enrich ent at its (plaintiff;s) expense. $s stated by Tolentino in his co entaries on the Civil Code citing foreign civilist Ruggiero, "equity demands a certain economic equilibrium between the prestation and the counter-prestation, and does not permit the unlimited impoverishment of one party for the benefit of the other by the excessive rigidity of the principle of the obligatory force of contracts (IG Tolentino, Civil Code of the Philippines, %2B' ed., pp. &C(9&CB).

"e therefore, find nothing wrong with the ruling of the trial court, although based on a different and wrong pre ise (i.e., refor ation of contract), that fro the date of the filing of this case, appellant ust pay for the use of plaintiff;s electric posts in #aga City at the reasonable onthly rental of P%4.44 per post, while plaintiff should pay appellant for the telephones in the sa e City that it was for erly using free of charge under the ter s of the agree ent .xh. 3$3 at the sa e rate being paid by the general public. In affir ing said ruling, we are not aDing a new contract for the parties herein, but we find it necessary to do so in order not to disrupt the basic and essential services being rendered by both parties herein to the public and to avoid unEust enrich ent by appellant at the expense of plaintiff, said arrange ent to continue only until such ti e as said parties can re9negotiate another agree ent over the sa e subEect9 atter covered by the agree ent .xh. 3$3. 0nce said agree ent is reached and executed by the parties, the aforesaid ruling of the lower court and affir ed by us shall cease to exist and shall be substituted and superseded by their new agree ent. . . .. ) $rticle %&'( speaDs of 3service3 which has beco e so difficult. TaDing into consideration the rationale behind this provision, 9 the ter 3service3 should be understood as referring to the 3perfor ance3 of the obligation. In the present case, the obligation of private respondent consists in allowing petitioners to use its posts in #aga City, which is the service conte plated in said article. Hurther ore, a bare reading of this article reveals that it is not a re,uire ent thereunder that the contract be for future service with future unusual change. $ccording to -enator $rturo 7. Tolentino, 10 $rticle %&'( states in our law the doctrine of unforseen events. This is said to be based on the discredited theory of rebus sic stantibus in public international law8 under this theory, the parties stipulate in the light of certain prevailing conditions, and once these conditions cease to exist the contract also ceases to exist. Considering practical needs and the de ands of e,uity and good faith, the disappearance of the basis of a contract gives rise to a right to relief in favor of the party preEudiced. In a nutshell, private respondent in the 0cce:a case filed a co plaint against petitioner before the trial court praying for modification of the ter s and conditions of the contract that they entered into by fixing the proper shares that should pertain to the out of the gross proceeds fro the sales of subdivided lots. "e ordered the dis issal of the co plaint therein for failure to state a sufficient cause of action. "e rationali+ed that the Court of $ppeals isapplied $rticle %&'( because) . . . respondent;s co plaint seeDs not release fro the subdivision contract but that the court 3render Eudg entmodifying the ter s and conditions of the contract . . . byfixing the proper shares that should pertain to the herein parties out of the gross proceeds fro the sales of subdivided lots of subEect subdivision3. The cited article ($rticle %&'() does not grant the courts (the) authority to re aDe, odify or revise the contract or to fix the division of shares between the parties as contractually stipulated with the force of law between the parties, so as to substitute its own ter s for those covenanted by the parties the selves. Respondent;s co plaint for odification of contract anifestly has no basis in law and therefore states no cause of action. 1nder the particular allegations of respondent;s co plaint and the circu stances therein averred, the courts cannot even in e,uity grant the relief sought. 11 The ruling in the 0cce:a case is not applicable because we agree with respondent court that the allegations in private respondent;s co plaint and the evidence it has presented sufficiently ade out a

cause of action under $rticle %&'(. "e, therefore, release the parties fro their correlative obligations under the contract. *owever, our disposition of the present controversy does not end here. "e have to taDe into account the possible conse,uences of erely releasing the parties therefro ) petitioners will re ove the telephone wiresJcables in the posts of private respondent, resulting in disruption of their service to the public8 while private respondent, in consonance with the contract 12 will return all the telephone units to petitioners, causing preEudice to its business. "e shall not allow such eventuality. Rather, we re,uire, as ordered by the trial court) %) petitioners to pay private respondent for the use of its posts in #aga City and in the towns of 7ilaor, Cana an, 7agarao and Pili, Ca arines -ur and in other places where petitioners use private respondent;s posts, the su of ten (P%4.44) pesos per post, per onth, beginning Aanuary, %2B28 and &) private respondent to pay petitioner the onthly dues of all its telephones at the sa e rate being paid by the public beginning Aanuary, %2B2. The peculiar circu stances of the present case, as distinguished further fro the 0cce:a case, necessitates exercise of our e,uity Eurisdiction. 1& ?y way of e phasis, we reiterate the rationali+ation of respondent court that) . . . In affir ing said ruling, we are not aDing a new contract for the parties herein, but we find it necessary to do so in order not to disrupt the basic and essential services being rendered by both parties herein to the public and to avoid unEust enrich ent by appellant at the expense of plaintiff . . . . 14 Petitioners; assertion that $rticle %&'( was never raised by the parties in their pleadings and was never the subEect of trial and evidence has been passed upon by respondent court in its well reasoned resolution, which we hereunder ,uote as our own) Hirst, we do not agree with defendant9appellant that in applying $rt. %&'( of the #ew Civil Code to this case, we have changed its theory and decided the sa e on an issue not invoDed by plaintiff in the lower court. Hor basically, the ain and pivotal issue in this case is whether the continued enforce ent of the contract .xh. 3$3 between the parties has, through the years (since %2((), beco e too ine,uitous or disadvantageous to the plaintiff and too one9sided in favor of defendant9appellant, so that a solution ust be found to relieve plaintiff fro the continued operation of said agree ent and to prevent defendant9appellant fro further unEustly enriching itself at plaintiff;s expense. It is indeed unfortunate that defendant had turned deaf ears to plaintiffs re,uests for renegotiation, constraining the latter to go to court. ?ut although plaintiff cannot, as we have held, correctly invoDe refor ation of contract as a proper re edy (there having been no showing of a istaDe or error in said contract on the part of any of the parties so as to result in its failure to express their true intent), this does not ean that plaintiff is absolutely without a re edy in order to relieve itself fro a contract that has gone far beyond its conte plation and has beco e so highly ine,uitous and disadvantageous to it through the years because of the expansion of defendant9appellant;s business and the increase in the volu e of its subscribers. $nd as it is the duty of the Court to ad inister Eustice, it ust do so in this case in the best way and anner it can in the light of the proven facts and the law or laws applicable thereto. It is settled that when the trial court decides a case in favor of a party on a certain ground, the appellant court ay uphold the decision below upon so e other point which was ignored or erroneously decided by the trial court (!arcia Galde+ v. Tua+on, C4 Phil. 2C58 Relativo v. Castro, (' Phil. F'58 Carillo v. -alaD de Pa+, %B -CR$ C'(). Hurther ore, the

appellate court has the discretion to consider an unassigned error that is closely related to an error properly assigned (Paterno v. Aao Kan, % -CR$ '5%8 *ernande+ v. $ndal, (B Phil. %2'). It has also been held that the -upre e Court (and this Court as well) has the authority to review atters, even if they are not assigned as errors in the appeal, if it is found that their consideration is necessary in arriving at a Eust decision of the case (-aura I port < .xport Co., Inc. v. Phil. International -urety Co. and P#?, B -CR$ %C5). Hor it is the aterial allegations of fact in the co plaint, not the legal conclusion ade therein or the prayer, that deter ines the relief to which the plaintiff is entitled, and the plaintiff is entitled to as uch relief as the facts warrant although that relief is not specifically prayed for in the co plaint (Rosales v. Reyes and 0rdove+a, &F Phil. C2F8 Cabigao v. /i , F4 Phil. BCC8 ?aguioro v. ?arrios, (( Phil. %&4). To ,uote an old but very illu inating decision of our -upre e Court through the pen of $ erican Eurist $da C. Carson) 31nder our syste of pleading it is the duty of the courts to grant the relief to which the parties are shown to be entitled by the allegations in their pleadings and the facts proven at the trial, and the ere fact that they the selves isconstrue the legal effect of the facts thus alleged and proven will not prevent the court fro placing the Eust construction thereon and adEudicating the issues accordingly.3 ($l+ua v. Aohnson, &% Phil. 54B) $nd in the fairly recent case of Caltex Phil., Inc. v I$C, %(' -CR$ (C%, the *onorable -upre e Court also held) "e rule that the respondent court did not co it any error in taDing cogni+ance of the aforesaid issues, although not raised before the trial court. The presence of strong consideration of substantial Eustice has led this Court to relax the well9entrenched rule that, except ,uestions on Eurisdiction, no ,uestion will be entertained on appeal unless it has been raised in the court below and it is within the issues ade by the parties in their pleadings (Cordero v. Cabral, /95'(B2, Auly &F, %2B5, %&5 -CR$ F5&). . . . "e believe that the above authorities suffice to show that this Court did not err in applying $rt. %&'( of the #ew Civil Code to this case. @efendant9appellant stresses that the applicability of said provision is a question of fact, and that it should have been given the opportunity to present evidence on said ,uestion. ?ut defendant9appellant cannot honestly and truthfully clai that it (did) not (have) the opportunity to present evidence on the issue of whether the continued operation of the contract .xh. 3$3 has now beco e too one9sided in its favor and too ine,uitous, unfair, and disadvantageous to plaintiff. $s held in our decision, the abundant and copious evidence presented by both parties in this case and su ari+ed in said decision established the following essential and vital facts which led us to apply $rt. %&'( of the #ew Civil Code to this case) xxx xxx xxx 1'

0n the issue of prescription of private respondent;s action for refor ation of contract, petitioners allege that respondent court;s ruling that the right of action 3arose only after said contract had already beco e disadvantageous and unfair to it due to subse,uent events and conditions, which ust be so eti e during the latter part of %2B& or in %2B5 . . .3 1( is erroneous. In refor ation of contracts, what is refor ed is not the contract itself, but the instru ent e bodying the contract. It follows that whether the contract is disadvantageous or not is irrelevant to refor ation and therefore, cannot be an ele ent in the deter ination of the period for prescription of the action to refor . $rticle %%CC of the #ew Civil Code provides, inter alia, that an action upon a written contract ust be brought within ten (%4) years fro the ti e the right of action accrues. Clearly, the ten (%4) year period is to be recDonedfrom the time the right of action accrues which is not necessarily the date of execution of the contract. $s correctly ruled by respondent court, private respondent;s right of action arose 3so eti e during the latter part of %2B& or in %2B5 when according to $tty. /uis !eneral, Ar. . . ., he was asDed by (private respondent;s) ?oard of @irectors to study said contract as it already appeared disadvantageous to (private respondent) (p. 5%, tsn, 7ay B, %2B2). (Private respondent;s) cause of action to asD for refor ation of said contract should thus be considered to have arisen only in %2B& or %2B5, and fro %2B& to Aanuary &, %2B2 when the co plaint in this case was filed, ten (%4) years had not yet elapsed.3 17 Regarding the last issue, petitioners allege that there is nothing purely potestative about the prestations of either party because petitioner;s per ission for free use of telephones is not ade to depend purely on their will, neither is private respondent;s per ission for free use of its posts dependent purely on its will. $part fro applying $rticle %&'(, respondent court cited another legal re edy available to private respondent under the allegations of its co plaint and the preponderant evidence presented by it) . . . we believe that the provision in said agree ent 6 (a) That the ter or period of this contract shall be as long as the party of the first part=herein appellant> has need for the electric light posts of the party of the second part =herein plaintiff> it being understood that this contract shall ter inate when for any reason whatsoever, the party of the second part is forced to stop, abandoned =sic> its operation as a public service and it beco es necessary to re ove the electric light post = sic>38 (. phasis supplied) is invalid for being purely potestative on the part of appellant as it leaves the continued effectivity of the aforesaid agree ent to the latter;s sole and exclusive will as long as plaintiff is in operation. $ si ilar provision in a contract of lease wherein the parties agreed that the lessee could stay on the leased pre ises 3for as long as the defendant needed the pre ises and can eet and pay said increases3 was recently held by the -upre e Court in /i v. C.$., %2% -CR$ %F4, citing the uch earlier case of .ncarnacion v. ?aldo ar, (( Phil. C(4, as invalid for being 3a purely potestative condition because it leaves the effectivity and enEoy ent of leasehold rights to the sole and exclusive will of the lessee.3 Hurther held the *igh Court in the /i case) The continuance, effectivity and fulfill ent of a contract of lease cannot be ade to depend exclusively upon the free and uncontrolled choice of

the lessee between continuing the pay ent of the rentals or not, co pletely depriving the owner of any say in the atter. 7utuality does not obtain in such a contract of lease of no e,uality exists between the lessor and the lessee since the life of the contract is dictated solely by the lessee. The above can also be said of the agree ent .xh. 3$3 between the parties in this case. There is no utuality and e,uality between the under the afore9,uoted provision thereof since the life and continuity of said agree ent is ade to depend as long as appellant needs plaintiff;s electric posts. $nd this is precisely why, since %2(( when said agree ent was executed and up to %2B2 when this case was finally filed by plaintiff, it could do nothing to be released fro or ter inate said agree ent notwithstanding that its continued effectivity has beco e very disadvantageous and ine,uitous to it due to the expansion and increase of appellant;s telephone services within #aga City and even outside the sa e, without a corresponding increase in the ten (%4) telephone units being used by plaintiff free of charge, as well as the bad and inefficient service of said telephones to the preEudice and inconvenience of plaintiff and its custo ers. . . . 1) Petitioners; allegations ust be upheld in this regard. $ potestative condition is a condition, the fulfill ent of which depends upon the sole will of the debtor, in which case, the conditional obligation is void. 19 ?ased on this definition, respondent court;s finding that the provision in the contract, to wit) (a) That the ter or period of this contract shall be as long as the party of the first part (petitioner) has need for the electric light posts of the party of the second part (private respondent) . . .. is a potestative condition, is correct. *owever, it provision, to wit) ust have overlooDed the other conditions in the sa e

. . . it being understood that this contract shall ter inate when for any reason whatsoever, the party of the second part (private respondent) is forced to stop, abandoned (sic) its operation as a public service and it beco es necessary to re ove the electric light post (sic)8 which are casual conditions since they depend on chance, ha+ard, or the will of a third person. 20 In su , the contract is subEect to ixed conditions, that is, they depend partly on the will of the debtor and partly on chance, ha+ard or the will of a third person, which do not invalidate the afore entioned provision. 21 #evertheless, in view of our discussions under the first and second issues raised by petitioners, there is no reason to set aside the ,uestioned decision and resolution of respondent court. "*.R.H0R., the petition is hereby @.#I.@. The decision of the Court of $ppeals dated 7ay &B, %22& and its resolution dated -epte ber %4, %22& are $HHIR7.@. -0 0R@.R.@. #arvasa, C.A., Padilla, Regalado and Puno, AA., concur.

.# ?$#C =!.R. #o. /9%&2B'. 7arch 5%, %2''.> THE $PO!$E$ *ERNA*E AFRICA a+, $OLE A C. AFRICA a+, -.e HEIR$ OF O"INGA ONG, petitioners-appellants, vs.CALTE/ (PHIL.) INC., "ATEO *O0!IREN a+, THE CO!RT OF APPEAL$ , respondents-appellees. oss, !elph, "arrascoso # Janda for the respondents. $ernabe %frica, etc. for the petitioners. $#LLA*!$ %..GI@.#C.8 .#TRI.- I# 0HHICI$/ R.C0R@-8 R.L1I-IT.- H0R $@7I--I?I/ITK. 6 There are three re,uisites for ad issibility of evidence under -ec. 5F, Rule %&5, Rules of Court) (a) that the entry was ade by a public officer, or by another person, specially enEoined by law to do so8 (b) that it was ade by the public officer in the perfor ance of his duties, or by such other person in the perfor ance of a duty specially enEoined by law8 and (c) that the public officer or other person had sufficient Dnowledge of the facts by hi stated, which ust have been ac,uired by hi personally or through official infor ation (7oran, Co ents on the Rules of Court, Gol., 5, p. 525). &.I@.8 *.$R-$K R1/.8 R.P0RT- #0T C0#-I@.R.@ .MC.PTI0# T0 *.$R-$K R1/.. 6 The reports in ,uestion do not constitute an exception to the hearsay rule. The facts stated therein were not ac,uired by the reporting officers through official infor ation, not having been given by the infor ants pursuant to any duty to do so. 5.I@.8 I@.8 R.P0RT -1?7ITT.@ ?K $ P0/IC. 0HHIC.R I# T*. P.RH0R7$#C. 0H *I- @1TI.-. 6 The report sub itted by a police officer in the perfor ance of his duties on the basis of his own personal observation of the facts reported, ay properly be considered as an exception to the hearsay rule. C.I@.8 PR.-17PTI0# 0H #.!/I!.#C. 1#@.R T*. @0CTRI#. 0H Res Ipsa /o,uitur. 6 "here the thing which caused the inEury co plained of is shown to be under the anage ent defendant or his servants and the accident is such as in the ordinary course of things does not happen if those who have its anage ent or control use proper care, it affords reasonable evidence, in absence of explanation by defendant, that the accident arose fro want of care. (CF C. A. ('B, p. %%25.) F.I@.8 I@.8 $PP/IC$TI0# 0H PRI#CIP/. T0 T*. C$-. $T ?$R. 6 The gasoline station, with all its appliances, e,uip ent and e ployees, was under the control of appellees. $ fire occurred therein and spread to and burned the neighboring houses. The persons who Dnew or could have Dnown how the fire started were appellees and their e ployees, but they gave no explanation thereof whatsoever. It is a fair and reasonable inference that the incident happened because of want of care. '.T0RT-8 I#T.RG.#TI0# 0H 1#H0R.-..# $#@ 1#.MP.CT.@ C$1-.. 6 The intervention of an unforeseen and unexpected cause, is not sufficient to relieve a wrongdoer fro conse,uences of negligence, if such negligence directly and proxi ately cooperates with the independent cause in the resulting inEury. (7ac$fee et al., vs. Travers !as Corp., et al., %F5 -. ". &nd CC&.) (.@$7$!.-8 /I$?I/ITK 0H 0"#.R 0H !$-0/I#. -T$TI0#8 C$-. $T ?$R. 6 $ fire broDe out at the Caltex service station. It is started while gasoline was being hosed fro a tanD into the underground storage. The fire spread to and burned several neighboring houses owned by appellants. &ssue)

"hether Caltex should be held liable for the da ages caused to appellants. 'eld) The ,uestion depends on whether the operator of the gasoline station was an independent contractor or an agent of Caltex. 1nder the license agree ent the operator would pay Caltex the purely no inal su of P%.44 for the use of the pre ises and all e,uip ent therein. The operator could sell only Caltex products. 7aintenance of the station and its e,uip ent was subEect to the approval, in other words control, of Caltex. The operator could not assign or transfer his rights as license without the consent of Caltex. Ter ination of the contract was a right granted only to Caltex but not to the operator. These provisions of the contract show that the operator was virtually an e ployee of Caltex, not an independent contractor. *ence, Caltex should be liable for da ages caused to appellants.

ECI$ION

"A1ALINTAL , J p) This case is before us on a petition for review of the decision of the Court of $ppeals, which affir ed that of the Court of Hirst Instance of 7anila dis issing petitioners; second a ended co plaint against respondents. The action is for da ages under $rticles %24& and %245 of the old Civil Code. It appears that in the afternoon of 7arch %B, %2CB a fire broDe out at theCaltex service station at the corner of $ntipolo street and Ri+al $venue, 7anila. It started while gasoline was being hosed fro a tanD trucD into the underground storage, right at the opening of the receiving tanD where the no++le of the hose was inserted. The fire spread to and burned several neighboring houses, including the personal properties and effects inside the . Their owners, a ong the petitioners here, sued respondents Caltex(Phil.), Inc. and 7ateo ?o,uiren, the first as alleged owner of the station and the second as its agent in charge of operation. #egligence on the part of both of the was attributed as the cause of the fire. The trial court and the Court of $ppeals found that petitioners failed to prove negligence and that respondents had exercised due care in the pre ises and with respect to the supervision of their e ployees. The first ,uestion before 1s refers to the ad issibility of certain reports on the fire prepared by the 7anila Police and Hire @epart ents and by a certain Captain Tinio of the $r ed Horces of the Philippines. Portions of the first two reports are as follows) %.Police @epart ent Report) 6 3Investigation disclosed that at about C)44 P.7. 7arch %B, %2CB, while /eandro Hlores was transferring gasoline fro a tanD trucD, plate #o. T9F&2& into underground tanD of the Caltex !asoline -tation located at the corner of Ri+al $venue and $ntipolo -treet, this City, an unDnown Hilipino lighted a cigarette and threw the burning atch sticD near the ain valve of the said underground tanD. @ue to the gasoline fu es, fire suddenly bla+ed. LuicD action of /eandro Hlores in pulling of the gasoline hose connecting the trucD with the underground tanD prevented a terrific explosion. *owever, the fla es scattered due to the hose fro which the gasoline was spouting. It burned the trucD and the following accessories and residences.3 &.The Hire @epart ent Report) 6 In connection with their allegation that the pre ises was (sic) subleased for the installation of a coca9cola and cigarette stand, the co plainants furnished this 0ffice a

copy of a photograph taDen during the fire and which is sub itted herewith. It appears in this picture that there are in the pre ises a coca9cola cooler and a racD which according to infor ation gathered in the neighborhood contained cigarettes and atches, installed between the gasoline pu ps and the underground tanDs.3 The report of Captain Tinio reproduced infor ation given by a certain ?enito 7orales regarding the history of the gasoline station and what the chief of the fire depart ent had told hi on the sa e subEect. The foregoing reports were ruled out as 3double hearsay3 by the Court of $ppeals and hence inad issible. This ruling is now assigned as error. It is contended) first, that said reports were ad itted by the trial court without obEection on the part of respondents8 secondly, that with respect to the police report (.xhibit G9$frica) which appears signed by a @etective Napanta allegedly 3for -alvador Capacillo,3 the latter was presented as witness but respondents waived their right to cross9exa ine hi although they had the opportunity to do so8 and thirdly, that in any event the said reports are ad issible as an exception to the hearsay rule under section 5F of Rule %&5, now Rule %54. The first contention is not borne out by the record. The transcript of the hearing of -epte ber %(, %2F5 (pp. %'(9%(4) shows that the reports in ,uestion, when offered as evidence, were obEected to by counsel for each of respondents on the ground that they were hearsay and that they were 3irrelevant, i aterial and i pertinent.3 Indeed, in the court;s resolution only .xhibits A, O, O9F and M9' were ad itted without ob(ection) the ad ission of the others, including the disputed ones, carried no such explanation. 0n the second point, although @etective Capacillo did taDe the witness stand, he was not exa ined and he did not testify as to the facts entioned in his alleged report (signed by @etective Napanta.) $ll he said was that he was one of those who investigated 3the location of the fire and, if possible, gather witnesses as to the occurrence.3 and that he brought the report with hi . There was nothing, therefore on which he need be cross9exa ined8 and the contents of the report, as to which he did not testify, did not thereby beco e co petent evidence. $nd even if he had testified, his testi ony would still have been obEectionable as far as infor ation gathered by hi fro third persons was concerned. Petitioners aintain, however, that the reports in the selves, that is, without further testi onial evidence on their contents, fall within the scope of section 5F, Rule %&5 which provides that 3entries in official records ade in the perfor ance of his duty by a public officer of the Philippines, or by a person in the perfor ance of a duty specially enEoined by law, are prima facie evidence of the facts therein stated.3 There are three re,uisites for ad issibility under the rule Eust entioned) (a) that the entry was ade by a public officer, or by another person specially enEoined by law to do so8 (b) that it was ade by the public officer in the perfor ance of his duties, or by such other person in the perfor ance of a duty specially enEoined by law8 and (c) that the public officer or other person had sufficient Dnowledge of the facts by hi stated, which ust have been ac,uired by hi personally or through official infor ation. (7oran, Co ents on the Rules of Court, Gol. 5 =%2F(> p. 5B5.)

0f the three re,uisites Eust stated, only the last need be considered here. 0bviously the aterial facts recited in the reports as to the cause and circu stances of the fire were not within the personal Dnowledge of the officers who conducted the investigation. "as Dnowledge of such facts, however, ac,uired by the through official infor ationP $s to so e facts the sources thereof are not even identified. 0thers are attributed to /eopoldo 7edina, referred to as an e ployee at the gas station where the fire occurred8 to /eandro Hlores, driver of the tanD trucD fro which gasoline was being transferred at the ti e to the underground tanD of the station8 and to respondent 7ateo ?o,uiren, who could not, according to .xhibit G9$frica, give any reason as to the origin of the fire. To ,ualify their state ents as 3official infor ation ac,uired by the officers who prepared the reports, the persons who ade the

state ents not only ust have personal Dnowledge of the facts stated but such state ents for record.1

ust have the duty to give

The reports in ,uestion do not constitute an exception to the hearsay rule) the facts stated therein were not ac,uired by the reporting officers through official infor ation, not having been given by the infor ants pursuant to any duty to do so. The next ,uestion is whether or not, without proof as to the cause and origin of the fire, the doctrine of res ipsa loquitur should apply so as to presu e negligence on the part of appellees. ?oth the trial court and the appellate court refused to apply the doctrine in the instant case on the grounds that 3as to (its) applicability . . . in the Philippines, there see s to be nothing definite,3 and that while the rules do not prohibit its adoption in appropriate cases, 3in the case at bar, however, we find no practical use for such doctrine.3 The ,uestion deserves ore than such su ary dis issal. The doctrine has actually been applied in this Eurisdiction in the case of .spiritu vs. Philippine Power and @evelop ent Co. (C.$. !. R. #o. /95&C09R, -epte ber &4, %2C2), wherein the decision of the Court of $ppeals was penned by 7r. Austice A.?./. Reyes now a e ber of the -upre e Court. The facts of that case are stated in the decision as follows) 3In the afternoon of 7ay F, %2C', while the plaintiff9appellee and other co panions were loading grass between the unicipalities of ?ay and Calauan, in the province of /aguna, with clear weather and without any wind blowing, an electric trans ission wire, installed and aintained by the defendant Philippine Power and @evelop ent Co., Inc. alongside the road, suddenly parted, and one of the broDen ends hit the head of the plaintiff as he was about to board the trucD. $s a result, plaintiff received the full shocD of C,C44 volts carried by the wire and was DnocDed unconscious to the ground. The electric charge coursed through his body and caused extensive and serious ultiple burns fro sDull to legs, leaving the bone exposed in so e parts and causing intense pain and wounds that were not co pletely healed when the case was tried on Aune %B, %2C(, over one year after the ishap.3 The defendant therein disclai ed liability on the ground that the plaintiff had failed to show any specific act of negligence but the appellate court overruled the defense under the doctrine of res ipsa loquitur. The court said) 3The first point is directed against the sufficiency of plaintiff;s evidence to place appellant on its defense. "hile it is the rule, as contended by the appellant, that in case of noncontractual negligence, or culpa aquiliana, the burden of proof is on the plaintiff to establish that the proxi ate cause of his inEury was the negligence of the defendant, it is also a recogni+ed principle that ;"here the thing which caused inEury, without fault of the inEured person, is under the exclusive control of the defendant and the inEury is such as in the ordinary course of things does not occur if those having such control use proper care, it affords reasonable evidence, in the absence of the explanation that the inEury arose fro defendant;s want of care.; 3$nd the burden of evidence is shifted to hi to establish that he has observed due care and diligence. (-an Auan /ight < Transit Co. vs. Re,uena, &&C 1.-. B2, F' /. ed. 'B ). This rule is Dnown by the na e of res ipsa loquitur (the transaction speaDs for itself), and is peculiarly applicable to the case at bar, where it is un,uestioned that the plaintiff had every right to be on the highway, and the electric wire was under the sole control of defendant co pany. In the ordinary course of events, electric wires do not part suddenly in fair weather and inEure people, unless they are subEected to unusual strain and stress or there are defects in their installation, aintenance and supervision8 Eust as barrels do not ordinarily roll out of the warehouse windows to inEure passersby

unless so e one was negligent. (?yrne vs. ?oadle, & * < Co. &&8 %F2 .ng. Reprint &22, the leading case that established that rule). Conse,uently, in the absence of contributory negligence (which is ad ittedly not present) the fact that the wire snapped suffices to raise a reasonable presu ption of negligence in the installation, care and aintenance. Thereafter, as observed by Chief ?aron PollocD, if there are any facts inconsistent with negligence, it is for the defendant to prove.;3 It is true of course that decisions of the Court of $ppeals do not lay down doctrines binding on the -upre e Court, but we do not consider this a reason for not applying the particular doctrine of res ipsa loquitur in the case at bar. !asoline is a high>y co bustible aterial, in the storage and sale of which extre e care ust be taDen. 0n the other hand, fire is not considered a fortuitous event, as it arises al ost invariably fro so e act of an. $ case striDingly si ilar to the one before 1s is Aones vs. -hell Petroleu Corporation, et al., %(% -o. CC(8 3$rthur 0. Aones is the owner of a building in the city of *a on which in the year %25C was leased to the -hell Petroleu Corporation for a gasoline filling station. 0n 0ctober B, %25C, during the ter of the lease, while gasoline was being transferred, fro the tanD wagon, also operated by the -hell Petroleu Corporation, to the underground tanD of the station, a fire started with resulting da ages to the building owned by Aones. $lleging that the da ages to his building a ounted to QF%'.2F, Aones sued the -hell Petroleu Corporation for the recovery of that a ount. The Eudge of the district court, after hearing the testi ony, concluded that plaintiff was entitled to a recovery and rendered Eudg ent in his favor for QC&(.B&. The Court of $ppeals for the Hirst Circuit reversed this Eudg ent, on the ground the testi ony failed to show with reasonable certainty any negligence on the part of the -hell Petroleu Corporation or any of its agents or e ployees. Plaintiff applied to this Court for a "rit of Review which was granted, and the case is now before us for decision.3 In resolving the issue of negligence, the -upre e Court of /ouisiana held) 3Plaintiff;s petition contains two distinct charges of negligence 6 one relating to the cause of the fire and the other relating to the spreading of the gasoline about the filling station. 30ther than an expert to asses the da ages caused plaintiff;s building by the fire, no witnesses were placed on the stand by the defendant. 3TaDing up plaintiff;s charge of negligence relating to the cause of the fire, we find it established by the record that the filling station and the tanD trucD were under the control of the defendant and operated by its agents or e ployees. "e further find fro the uncontradicted testi ony of plaintiff;s witnesses that fire started in the underground tanD attached to the filling station while it was being filled fro the tanD trucD and while both the tanD and the trucD were in charge of and being operated by the agents or e ployees of the defendant, extended to the hose and tanD trucD, and was co unicated fro the burning hose, tanD trucD, and escaping gasoline to the building owned by the plaintiff. Predicated on these circu stances and the further circu stance of defendants failure to explain the cause of the fire or to show its lacD of Dnowledge of the cause, plaintiff has evoDed the doctrine of res ipsa loquitur. There are any cases in which the doctrine ay be successfully invoDed and this, we thinD, is one of the . "here the thing which caused the inEury co plained of is shown to be under the anage ent of defendant or his servants and the accident is such as in the ordinary

course of things does not happen if those who have its anage ent or control use proper care, it affords reasonable evidence, in absence of explanation by defendant, that the accident arose fro want of care. (CF C. A. R('B, p. %%25). 3This state ent of the rule of res ipsa loquitur has been widely approved and adopted by the courts of last resort. -o e of the cases in this Eurisdiction in which the doctrine has been applied are the following, vi+.8 7aus vs. ?rodericD, F% /a. $nn. %%F5, &F -o. 2((8 *ebert vs. /aDe Charles Ice etc., Co., %%% /a. F&&, 5F -o. (5%, 'C /.R.$. %4%, %44 $ . -t. Rep. F4F8 "illis vs. GicDsburg, etc., R. Co., %%F /a. F5, 5B -o. B2&8 ?ents, vs. Page, %%F /a. F'4, 52 -o. F22.3 The principle enunciated in the afore,uoted case applies with e,ual force here. The gasoline station, with all its appliances, e,uip ent and e ployees, was under the control of appellees. $ fire occurred therein and spread to and burned the neighboring houses. The persons who Dnew or could have Dnown how the fire started were appellees and their e ployees, but they gave no explanation thereof whatsoever. It is a fair and reasonable inference that the incident happened because of want of care. In the report sub itted by Captain /eoncio 7ariano of the 7anila Police @epart ent (.xh. M9% $frica) the following appears) 3Investigation of the basic co plaint disclosed that the Caltex !asoline -tation co plained of occupies a lot approxi ately %4 x %4 at the southwest corner of Ri+al $venue and $ntipolo. The location is within a very busy business district near the 0brero 7arDet, a railroad crossing and very thicDly populated neighborhood where a great nu ber of people ill around throughout the day until late at night. The circu stances put the gasoline station in a situation pri arily preEudicial to its operation because the passersby, those waiting for buses or transportation, those waiting to cross the streets and others loafing around have to occupy not only the sidewalDs but also portion of the gasoline station itself. "hatever be the activities of these people s oDing or lighting a cigarette cannot be excluded and this constitute a secondary ha+ard to its operation which in turn endangers the entire neighborhood to conflagration.

3Hurther ore, aside fro precautions already taDen by its operator the concrete walls south and west adEoining the neighborhood are only & %J& eters high at ost and cannot avoid the fla es fro leaping over it in case of fire. 3Records show that there have been two cases of fire which caused not only da ages but desperation and also panic in the neighborhood. aterial

3$lthough the soft drinDs stand had been eli inated, this gasoline service station is also used by its operator as a garage and repair shop for his fleet of taxicabs nu bering ten or ore, adding another risD to the possible outbreaD of fire at this already s all but crowded gasoline station.3 The foregoing report, having been sub itted by a police officer in the perfor ance of his duties on the basis of his own personal observation of the facts reported, ay properly be considered as an exception to the hearsay rule. Those facts, descriptive of the location and obEective circu stances surrounding the operation of the gasoline station in ,uestion, strengthen the presu ption of negligence under the doctrine of res ipsa loquitur, since on their face they called for ore stringent easures of caution than those which would satisfy the standard of due diligence under ordinary circu stances. There is no ore elo,uent de onstration of this than the state ent of /eandro Hlores before the police investigator. Hlores

was the driver of the gasoline tanD wagon who, alone and without assistance, was transferring the contents thereof into the underground storage when the fire broDe out. *e said) 3?efore loading the underground tanD there were no people, but while the loading was going on, there were people who went to drinD coca9cola (at the coca9cola stand) which is about a eter fro the hole leading to the underground tanD.3 *e added that when the tanD was al ost filled he went to the tanD trucD to close the valve, and while he had his bacD turned to the 3 anhole3 he heard so eone shout 3fire.3 .ven then the fire possibly would not have spread to the neighboring houses were it not for another negligent o ission on the part of defendants, na ely, their failure to provide a concrete wall high enough to prevent the fla es fro leaping over it. $s it was the concrete wall was only & %J& eters high, and beyond that height it consisted erely of galvani+ed iron sheets, which would predictably cru ple and elt when subEected to intense heat. @efendants; negligence, therefore, was not only with respect to the cause of the fire but also with respect to the spread thereof to the neighboring houses. There is an ad ission on the part of ?o,uiren in his a ended answer to the second a ended co plaint that 3the fire was caused through the acts of a stranger who, without authority, or per ission of answering defendant, passed through the gasoline station and negligently threw a lighted atch in the pre ises.3 #o evidence on this point was adduced, but assu ing the allegation to be true 6 certainly any unfavorable inference fro the ad ission ay be taDen against ?o,uiren 6 it does not extenuate his negligence. $ decision of the -upre e Court of Texas, upon facts analogous to those of the present case, states the rule which we find acceptable here) 3It is the rule that those who distribute a dangerous article or agent owe a degree of protection to the public proportionate to and co ensurate with a danger involved . . . we thinD it is the generally accepted rule as applied to torts that ;if the effects of the actor;s negligent conduct actively and continuously operate to bring about har to another, the fact that the active and substantially si ultaneous operation of the effects of a third person;s innocent, tortious or cri inal act is also a substantial factor in bringing about the har , does not protect the actor fro liability.; (Restate ent of the /aw of Torts, vol. &, p. %%BC, RC52. -tated in another way, ;The intervention of an unforeseen and unexpected cause, is not sufficient to relieve a wrongdoer fro conse,uences of negligence, if such negligence directly and proxi ately cooperates with the independent cause in the resulting inEury.; (7ac$fee et al. vs. Traver;s !as Corp., et al., %F5 -.". &nd CC&.) The next issue is whether Caltex should be held liable for the da ages caused to appellants. This issue depends on whether ?o,uiren was an independent contractor, as held by the Court of $ppeals, or an agent of Caltex. This ,uestion, in the light of the facts not controverted, is one of law and hence ay be passed upon by this Court. These facts are) %) ?o,uiren ade an ad ission that he was an agent of Caltex8 (&) at the ti e of the fire Caltex owned the gasoline station and all the e,uip ent therein8 (5) Caltex exercised control over ?o,uiren in the anage ent of the station8 (C) the delivery trucD used in delivering gasoline to the station had the na e C$/T.M painted on it8 and (F) the license to store gasoline at the station was in the na e of Caltex, which paid the license fees. (.xhibit T9$frica8 .xhibit 19 $frica8 .xhibit M9F $frica8 .xhibit M9' $frica8 .xhibit K9$frica). In ?o,uiren;s a ended answer to the second a ended co plaint, he denied that he directed one of his drivers to re ove gasoline fro the trucD into the tanD and alleged that the 3alleged driver, if one there was, was not in his e ploy, the driver being an e ployee of the Caltex (Phil.) Inc. andJor the owners of the gasoline station.3 It is true that ?o,uiren later on a ended his answer, and that a ong the changes was one to the effect that he was not acting as agent of Caltex. ?ut then again, in his otion to dis iss appellants; second a ended co plaint the ground alleged was that it stated no cause of action since under the allegations thereof he was erely acting as agent of Caltex, such that he could not have incurred personal liability. $ otion to dis iss on this ground is dee ed to be an ad ission of the facts alleged in the co plaint. Caltex ad its that it owned the gasoline station as well as the e,uip ent therein, but clai s that the business conducted at the service station in ,uestion was owned and operated by ?o,uiren. ?ut Caltex did not present any contract with ?o,uiren that would reveal the nature of their relationship at the ti e of the fire. There ust have been one in existence at that ti e. Instead, what was presented was

a license agree ent anifestly tailored for purposes of this case, since it was entered into shortly before the expiration of the one9 year period it was intended to operate. This so9called license agree ent (.xhibit F9Caltex) was executed on #ove ber &2, %2CB, but ade effective as of Aanuary %, %2CB so as to cover the date of the fire, na ely, 7arch %B, %2CB. This retroactivity provision is ,uite significant, and gives rise to the conclusion that it was designed precisely to free Caltex fro any responsibility with respect to the fire, as shown by the clause that Caltex 3shall not be liable for any inEury to person or property while in the property herein licensed, it being understood and agreed that /IC.#-.. (?o,uiren) is not an e ployee, representative or agent of /IC.#-0R (Caltex).3 ?ut even if the license agree ent were to govern, ?o,uiren can hardly be considered an independent contractor. 1nder that agree ent ?o,uiren would pay Caltex the purely no inal su of P%.44 for the use of the pre ises and all the e,uip ent therein. *e could sell only Caltex products. 7aintenance of the station and its e,uip ent was subEect to the approval, in other words control, of Caltex. ?o,uiren could not assign or transfer his rights as licensee without the consent of Caltex. The license agree ent was supposed to be fro Aanuary %, %2CB to @ece ber 5%, %2CB, and thereafter until ter inated byCaltex upon two days prior written notice. Caltex could at any ti e cancel and ter inate the agree ent in case ?o,uiren ceased to sell Caltex products, or did not conduct the business with due diligence, in the (udgment of "altex. Ter ination of the contract was therefore a right granted only to Caltex but not to ?o,uiren. These provisions of the contract show the extent of the control of Caltex over ?o,uiren. The control was such that the latter was virtually an e ployee of the for er. 3TaDing into consideration the fact that the operator owed his position to the co pany and the latter could re ove hi or ter inate his services at will8 that the service station belonged to the co pany and bore its tradena e and the operator sold only the products of the co pany8 that the e,uip ent used by the operator belonged to the co pany and were Eust loaned to the operator and the co pany tooD charge of their repair and aintenance8 that an e ployee of the co pany supervised the operator and conducted periodic inspection of the co pany;s gasoline and service station8 that the price of the products sold by the operator was fixed by the co pany and not by the operator8 and that the receipts signed by the operator indicated that he was a ere agent, the finding of the Court of $ppeals that the operator was an agent of the co pany and not an independent contractor should not be disturbed. 3To deter ine the nature of a contract courts do not have or are not bound to rely upon the na e or title given it by the contracting parties, should there be a controversy as to what they really had intended to enter into, but the way the contracting parties do or perfor their respective obligations stipulated or agreed upon ay be shown and in,uired into, and should such perfor ance conflict with the na e or title given the contract by the parties, the for er ust prevail over the latter.3 -hell Co pany of the Philippines, /td. vs. Hire en;s Insurance Co pany of #ewarD, #ew Aersey, %44 Phil. (F(). 3The written contract was apparently drawn for the purpose of creating the apparent relationship of e ployer and independent contractor, and of avoiding liability for the negligence of the e ployees about the station8 but the co pany was not satisfied to allow such relationship to exist. The evidence shows that it i ediately assu ed control, and proceeded to direct the ethod by which the worD contracted for should be perfor ed. ?y reserving the right to ter inate the contract at will, it retained the eans of co pelling sub ission to its orders. *aving elected to assu e control and to direct the eans and ethods by which the worD has to be perfor ed, it ust be held liable for the negligence of those perfor ing service under its direction. "e thinD the evidence was sufficient to sustain the verdict of the Eury.3 (!ulf Refining Co pany vs. Rogers F( -.". &d %B5).

Caltex further argues that the gasoline stored in the station belonged to ?o,uiren. ?ut no cash invoices were presented to show that ?o,uiren had bought said gasoline fro Caltex. #either was there a sales contract to prove the sa e. $s found by the trial court the $fricas sustained a loss of P2,44F.B4, after deducting the a ount of P&,444.44 collected by the on the insurance of the house. The deduction is now challenged as erroneous on the ground that $rticle &&4( of the new Civil Code, which provides for the subrogation of the insurer to the rights of the insured, was not yet in effect when the loss tooD place. *owever, regardless of the silence of the law on this point at that ti e, the a ount that should be recovered ust be easured by the da ages actually suffered, otherwise the principle prohibiting unEust enrich ent would be violated. "ith respect to the clai of the heirs of 0ng, P(,F44.44 was adEudged by the lower court on the basis of the assessed value of the property destroyed na ely, P%,F44.44, disregarding the testi ony of one of the 0ng children that said property was worth PC,444.44. "e agree that the court erred, since it is of co on Dnowledge that the assess ent for taxation purposes is not an accurate gauge of fair arDet value, and in this case should not prevail over positive evidence of such value. The heirs of 0ng are therefore entitled to P%4,444.44. "herefore, the decision appealed fro is reversed and respondents9 appellees are held liable solidarily to appellants, and ordered to pay the the aforesaid su s of P2,44F.B4 and P%4,444.44, respectively, with interest fro the filing of the co plaint, and costs. $eng*on, ".J., $autista %ngelo, "oncepcion, JJ., concur. .i*on, J., tooD no part. -.C0#@ @IGI-I0# =!.R. #o. %&&%2F. Auly &5, %22B.> NATIONAL PO2ER CORPORATION, petitioner, vs. CO!RT OF APPEAL$ a+, ENNI$ COO, respondents. /he !olicitor 0eneral for petitioner. !egundo 1. "hua for private respondent. $#NOP$I$ Private respondent @ennis Coo purchased six (') tons of assorted scrap alu inu wires and allied accessories fro the #ew $lloy 7etal Co pany in 7anila. The goods, however, were sei+ed by ele ents of the 55%st PC fro Coos residence and deposited in the PC head,uarters. The PC Provincial Co ander filed a cri inal co plaint against Coo for violation of the anti9fencing law. *owever, the Investigating Hiscal dis issed it for insufficiency of evidence. 1pon representation of petitioner #PC, the co plaint was re9investigated, resulting in the filing of an Infor ation before the Regional Trial Court of ?acolod City. The trial court rendered a decision ac,uitting Coo on the ground that the wares belonged to hi . #otwithstanding this decision, petitioner got the property fro the PC *ead,uarters. Coo de anded the return of the wares, which #PC refused. Coo filed a co plaint for replevin against #PC and its officers. $fter trial, Coo was declared the owner and possessor of the alu inu wires and allied accessories. 0n appeal, the Court of $ppeals affir ed the trial courts decision with the odification that eyes, J.$.+., $arrera, egala, $eng*on, J.,. and -aldivar,

the #PC;s officers were absolved fro any liability in their personal capacity. #PC was ordered to pay no inal da ages and attorneys fees. #PC oved for reconsideration but it was denied. *ence, this petition for review on certiorari. $nent the re,uire ent that the personal property be unlawfully detained by another not entitled to its possession, it is to be re e bered that petitioner#PC was the co plainant in the cri inal case against private respondent and, as such, Dnew of the decision in the case. ?ecause of the said decision, private respondent Coo should have been given possession of the subEect property. *owever, petitioner #PC refused to relin,uish possession of the sa e after the decision in the cri inal case declaring Coo to be owner of the goods. It is thus wrongfully withholding possession of the property, thus entitling private respondent to the writ of replevin. In view of the foregoing, the contention that the Court of $ppeals erred in not awarding expenses of litigation and attorneys fees in favor of petitioner #PC is clearly without erit. $#LLA*!$ %.R.7.@I$/ /$"8 .GI@.#C.8 HI#@I#!- 0H H$CT 0H T*. C01RT 0H $PP.$/-8 ?I#@I#! $#@ C0#C/1-IG. 1P0# T*. -1PR.7. C01RT, $- $ !.#.R$/ R1/.8 .MC.PTI0# #0T PR.-.#T I# C$-. $T ?$R. 6 $s a general rule, findings of fact of the Court of $ppeals are binding and conclusive upon the -upre e Court, and the Court will not nor ally disturb such factual findings unless the findings of the court are palpably unsupported by the evidence on record or unless the Eudg ent itself is based on a isapprehension of facts. The present case not falling under the exceptions, the general rule applies. &.I@.8 I@.8 PR.P0#@.R$#C. 0H .GI@.#C., C0#-TR1.@. 6 $s against docu ents presented by the private respondent and the Eudg ent in the cri inal case ac,uitting hi , the petitioner presented only its e ployees whose testi onies consisted erely of assu ptions and opinions. ?y preponderance of evidence is eant si ply evidence which is of greater weight, or ore convincing than that which is offered in opposition to it. Clearly, private respondent Coo has provided evidence of greater weight than the petitioner relevant to the deter ination of who is entitled to the possession of the subEect property. 5.I@.8 $CTI0#8 R.P/.GI#8 #$T1R. T*.R.0H C0#-TR1.@8 C$-. $T ?$R. 6 In a case for replevin, it is sufficient that the plaintiff prove entitle ent to legal possession. It is not necessary to prove ownership. It is worth stressing at this point, that a suit for replevin is founded solely on the clai that the defendant wrongfully withholds the property sought to be recovered. It lies to recover possession of personal chattels that are unlawfully detained. 3To detain3 is defined as to ean 3to hold or Deep in custody,3 and it has been held that there is tortious taDing whenever there is an unlawful eddling with the property, or an exercise or clai of do inion over it, without any pretense of authority or right8 this, without anual sei+ing of the property is sufficient. 1nder the Rules of Court, it is indispensable in replevin proceeding that the plaintiff ust show by his own affidavit that he is entitled to the possession of property, that the property is wrongfully detained by the defendant, alleging the cause of detention, that the sa e has not been taDen for tax assess ent, or sei+ed under execution, or attach ent, or if so sei+ed, that it is exe pt fro such sei+ure, and the actual value of the property. $ perusal of the way bill shows that the consignee is private respondent. *ence, it is sufficient to support the clai that private respondent is entitled to a writ of replevin. It is evidence that he is entitled to the possession of the property subEect of this case. C.CIGI/ /$"8 @$7$!.-8 #07I#$/ @$7$!.-8 "*.# .#TIT/.@8 C$-. $T ?$R. 6 $fter private respondent Coo had shown that he was entitled to possession of the property, it beca e the duty of petitioner to yield possession of the goods. $rticle &&&% of the Civil Code provides) $rt. &&&%. #o inal da ages are adEudicated in order that a right of the plaintiff, which has been violated or invaded by the defendant, ay be vindicated or recogni+ed, and not for the purpose of inde nifying the plaintiff for any loss suffered by hi . ?ased on this provision, petitioner is liable to private respondent for no inal

da ages. #or did the Court of $ppeals err in awarding attorney;s fees to private respondent, considering that petitioner;s refusal to return the property co pelled private respondent to incur expenses to protect his interest. 7oreover, petitioner acted in gross and evident bad faith in refusing to satisfy private respondent;s plainly valid, Eust, and de andable clai .

ECI$ION

"EN O3A, J p) Petitioner seeDs a review of the decision 1 of the Court of $ppeals which affir ed with odification the decision of the Regional Trial Court of ?acolod City, ?ranch F%, and the subse,uent resolution which denied petitioner;s otion for reconsideration. //phil It appears that on Auly &5, %2BC, private respondent @ennis Coo purchased six (') tons of assorted scrap alu inu wires and allied accessories fro the #ew $lloy 7etal Co pany in 7anila. The assorted goods were shipped to ?acolod City and were there received by Coo on Auly 54, %2BC. *owever, the next day, Auly 5%, %2BC, the goods were sei+ed by ele ents of the 55%st PC fro Coo;s residence and deposited in the PC head,uarters. 2 0n $ugust ', %2BC, the PC Provincial Co ander filed a cri inal co plaint against Coo for violation of the anti9fencing law. *owever, the Investigating Hiscal dis issed it for insufficiency of evidence. & 1pon representation of petitioner #PC, the co plaint was re9investigated, 4 resulting in the filing of an Infor ation before the Regional Trial Court of ?acolod City, ?ranch CB. 0n $ugust &5, %2BF, the trial court rendered a decision ac,uitting Coo on the ground that the wares belonged to hi . ' #otwithstanding this decision, petitioner got the property fro the PC *ead,uarters. ( Private respondent wrote petitioner #PC de anding the return of the wares. ?ecause of petitioner;s refusal to return the subEect property, private respondent Coo filed a co plaint for replevin against #PC and its officers in the Regional Trial Court of ?acolod City. 7 $fter posting a surety bond for P%&4,444.44, Coo was able to obtain possession of the sei+ed ite s on $ugust F, %2B'. ) $fter trial, Coo was declared the owner and possessor of the alu inu wires and allied accessories. 9 0n appeal, the Court of $ppeals affir ed the trial court;s decision with the odification that $lfredo $r+aga, Ar. and Nosi o ?riones, #PC;s ?ranch 7anager and #PC;s officer9in9charge for #egros 0ccidental, respectively, were absolved fro any liability in their personal capacity and the awards of co pensatory and oral da ages were deleted. Instead, #PC was ordered to pay no inal da ages and attorney;s fees. 10 #PC oved for reconsideration but its otion was denied. *ence, this petition for review on certiorari. 11

Petitioner contends that the Court of $ppeals erred in relying on the decision in the cri inal case ac,uitting @ennis Coo for its ruling that the alu inu conductor wires in ,uestion belonged to hi . Petitioner clai s that the ac,uittal was based on reasonable doubt and, therefore, was not conclusive of the ownership of the goods. 0n the other hand, according to petitioner, the following facts support its clai that the alu inu wires bought by Coo fro the #ew $lloy 7etal Co pany were different fro those sei+ed by the PC fro Coo and delivered to #PC) 12

%.The sales invoice as well as the way bill sub itted by private respondent indicates that the assorted scrap alu inu wires were delivered to private respondent Coo;s factory while the property sei+ed by the PC was found in Coo;s residence. &.The sales invoice covers only six 234 tons of scrap alu inu weighs nine 254 tons. wires while the property sei+ed by the PC

5.The sales invoice only states 3alu inu wires,3 while the property sei+ed fro Coo;s residence consisted not only of aluminum wires but included transmission hardware as well . C.The 3fact3 that in the entire ,hilippines only petitioner 6," i ports and uses alu inu rated (2F 7CR $C-R and 55' 7CR $C-R. conductor wires

Hro these pre ises, #PC concludes that the property sei+ed by the PC and later turned over to it is not the sa e as that covered by the sales invoice and the way bill which private respondent presented in court. 1& The Court of $ppeals thus overlooDed or isapprehended the aforesaid aterial facts. 14

Petitioner also contends that although it ay be argued that private respondent uses alu inu wires as raw aterials in anufacturing Ditchen utensils, the business in which he is engaged, he has not explained why he also purchased trans ission line hardware which his business obviously does not need. It aintains that the alu inu conductor wires and hardware were pilfered fro its trans ission towers which had been blown down. 1' Private respondent denies petitioner;s allegations and argues that the issues raised by the petitioners are factual and insubstantial. "e find the petition to be without erit.

7irst. It should be pointed out that the petitioner does not dispute the value of the invoice and way bill either here or in the court below. #either does it ,uestion their genuineness. "hat it ,uestions is whether the property subEect of the case is the sa e property covered by the said docu ents. Petitioner calls attention to the fact that the goods covered by the docu ents were delivered to private respondent;s warehouse, whereas the goods sei+ed by the PC were taDen fro his residence. 1( This has, however, already been explained by Coo during cross9exa ination 17 at the trial of the case) The goods were oved to his residence because the warehouse had already beco e overcrowded. In addition, petitioner points out that the docu ents only cover six (') tons of scrap alu inu , while what was sei+ed weighed nine (2) tons. 1) In his Co ent, private respondent Coo points out that the receipt issued by the PC raiding tea the ite s sei+ed fro Coo as five (F) tons of assorted alu inu conductor wires. 19 listed

Indeed, the affidavit 20 of a e ber of the PC raiding tea , which is appended to the private respondent;s ReEoinder in this case, states that the property sei+ed weighed 3 about F tons.3 This has not been denied by petitioner. 7oreover, it is i portant to note that in the stipulation of facts, both the petitioner and private respondent agreed that the very sa e property subEect of the cri inal case is the property subEect of the present civil case, without reference to its weight. 21 The records do not in fact show that this ,uestion was ever raised in the court below. It was only in the petitioner;s $ppellants9 ?rief 22 in the Court of $ppeals where such a ,uestion was raised. Clearly, the records do not support the clai that the property sei+ed fro private respondent;s residence weighed nine (2) tons. 2&

Petitioner aDes uch of the fact that the docu ents state 3scrap alu inu 3 while the property sei+ed consisted of 3alu inu conductor wires and trans ission hardware.3 24 Thus, the invoice and way bill show that they cover 3-crap asst. alu . wire3J3$ssorted -crap alu . wires.3 2' The word 3scrap3 is defined as 3 anufactured articles or parts reEected for i perfection or discarded because of excessive wear or lacD of de and and useful only as raw aterial for reprocessing.3 2( The ter is broad enough to cover different types of property as long as they are reEected or discarded and useful only as raw aterial for reprocessing. Indeed, the petitioner;s own witness, Rolando ?ulfa, a property custodian of petitioner, described the property turned over by the PC to #PC as 3all already broDen.3 27 Thus, the fact that the docu ents describe the property as 3scrap3 is consistent with the description given by petitioner;s own witness. It is of no o ent that the sei+ed property consisted of alu inu wires and trans ission hardware. "hat is i portant is the condition of the aterials, that is, all broDen up and hence useful only as raw aterial for reprocessing. cdrep It should also be pointed out that it is co on practice for scrap aterial to be sold and bought by lot. They are not nor ally bought sorted out. *ence, it is ,uite possible that trans ission hardware for ed part of the property sold to private respondent Coo. It is not surprising that alu inu conductor wires are attached to such hardware. $s for the fact that the docu ents refer specifically to said wires and not the hardware, it is understandable since the wires were the ones private respondent Coo pri arily wanted to buy fro the establish ent. /astly, petitioner points out that even if Coo clai s the property to be needed as raw aterial in the anufacture of Ditchen utensils, it cannot be argued that trans ission hardware would also be needed. 2) This is ere opinion. 7oreover, as already pointed out, it is a practice that scrap aterial is bought by lot. *ence, assu ing petitioner is correct that trans ission hardware is not needed in private respondent;s business, the fact that such type of ware is found with the alu inu scrap wires sei+ed fro private respondent;s residence is not enough to find that the subEect property belonged to it and not to private respondent. $s a general rule, findings of fact of the Court of $ppeals are binding and conclusive upon the -upre e Court, and the Court will not nor ally disturb such factual findings unless the findings of the court are palpably unsupported by the evidence on record or unless the Eudg ent itself is based on a isapprehension of facts. 29 The present case not falling under the exceptions, the general rule applies. Petitioner clai s to be the only entity in the Philippines that i ports and uses alu inu conductor wires such as those subEect of the present controversy, &0 and that the purchase price for the alu inu wires indicated in the invoice presented by private respondent Coo was only PF.44 per Dilo when the going price for alu inu scrap during %2BC was already P%2.44 a Dilo. These are ere allegations of witnesses who are not experts. They are not supported by any evidence. The witnesses cannot even state with certainty that the property belongs to 6," . $ll they can say is that the subEect property is similar to that used by petitioner #PC in its power trans ission lines. $nent the clai that #PC has exclusive access to the type of alu inu wires subEect of the case, the Court of $ppeals found that the petitioner conducts public biddings, &1 thus i plying that petitioner does not have exclusive access to the aterial in ,uestion. The trial court correctly found that private respondent Coo had proven by a preponderance of evidence that he and not petitioner #PC is entitled to the possession of the subEect property. It pointed out that while private respondent had consistently presented his docu entary evidence showing his purchase of the property and its delivery to his residence, petitioner erely relied on ere opinions and assu ptions

unsupported by any concrete evidence. It correctly observed that while there ay be no denying the fact that the petitioner ay be using a si ilar type of hardware as that involved in the present case, no iota of evidence was ever presented to show that the particular ite s involved in the case belong to it. &2 $s against docu ents presented by the private respondent and the Eudg ent in the cri inal case ac,uitting hi , the petitioner presented only its e ployees whose testi onies consisted erely of assu ptions and opinions. ?y preponderance of evidence is eant si ply evidence which is of greater weight, or ore convincing than that which is offered in opposition to it. && Clearly, private respondent Coo has provided evidence of greater weight than the petitioner relevant to the deter ination of who is entitled to the possession of the subEect property. $t any rate, in a case for replevin, it is sufficient that the plaintiff prove entitle ent to legal possession. It is not necessary to prove ownership. It is worth stressing at this point, that a suit for replevin is founded solely on the clai that the defendant wrongfully withholds the property sought to be recovered. It lies to recover possession of personal chattels that are unlawfully detained. 3To detain3 is defined as to ean 3to hold or Deep in custody,3 and it has been held that there is tortious taDing whenever there is an unlawful eddling with the property, or an exercise or clai of do inion over it, without any pretense of authority or right8 this, without anual sei+ing of the property is sufficient. 1nder the Rules of Court, it is indispensable in replevin proceeding that the plaintiff ust show by his own affidavit that he is entitled to the possession of property, that the property is wrongfully detained by the defendant, alleging the cause of detention, that the sa e has not been taDen for tax assess ent, or sei+ed under execution, or attach ent, or if so sei+ed, that it is exe pt fro such sei+ure, and the actual value of the property. &4 $ perusal of the way bill shows that the consignee is private respondent. *ence, it is sufficient to support the clai that private respondent is entitled to a writ of replevin. It is evidence that he is entitled to the possession of the property subEect of this case. $nent the re,uire ent that the personal property be unlawfully detained by another not entitled to its possession, it is to be re e bered that petitioner#PC was the co plainant in the cri inal case against private respondent and, as such, Dnew of the decision in the case. $s a conse,uence of the said decision, private respondent Coo should have been given possession of the subEect property. &' *owever, petitioner #PC refused to relin,uish possession of the sa e even after the decision in the cri inal case declaring Coo to be the owner of the goods. It is thus wrongfully withholding possession of the property, thus entitling private respondent to the writ of replevin. !econd. The petitioner also assigns as error respondent Court of $ppeals; order to pay respondent Coo no inal da ages and attorney;s fees. Petitioner contends that it cannot be held liable for da ages because the law re,uires that one be inEured by a wrongful act or o ission of another in order to be entitled to co pensation. It argues that it was not guilty of any wrongful act but that it was erely exercising its legal right when it recovered possession of the alu inu wires and the hardware. $t any rate, it is clai ed, petitioner acted in good faith when it refused to release the said property. &(

$s already discussed, after private respondent Coo had shown that he was entitled to possession of the property, it beca e the duty of petitioner to yield possession of the goods. $rticle &&&% of the Civil Code provides)

$rt. &&&%.#o inal da ages are adEudicated in order that a right of the plaintiff, which has been violated or invaded by the defendant, ay be vindicated or recogni+ed, and not for the purpose of inde nifying the plaintiff for any loss suffered by hi . //Eur ?ased on this provision, petitioner is liable to private respondent for no inal da ages. #or did the Court of $ppeals err in awarding attorney;s fees to private respondent, considering that petitioner;s refusal to return the property co pelled private respondent to incur expenses to protect his interest. &7 7oreover, petitioner acted in gross and evident bad faith in refusing to satisfy private respondent;s plainly valid, Eust, and de andable clai . &) In view of the foregoing rulings, the contention that the Court of $ppeals erred in not awarding expenses of litigation and attorney;s fees in favor of petitioner #PC is clearly without erit. &9 "*.R.H0R., the decision dated 7arch &B, %22F and the resolution dated -epte ber &2, %22F of the Court of $ppeals are $HHIR7.@. -0 0R@.R.@. egalado, 8elo, ,uno and 8artine*, JJ .,concur. -.C0#@ @IGI-I0# =!.R. #o. %(4CF&. $ugust %5, &44B.> $AL%A OR CH!A a+, %IOLETA CH!A, petitioners, vs. RO RIGO TI"AN, "A. L#NN TI"AN a+, L# IA TI"AN , respondents.

ECI$ION

0!I$!"*ING, J p) ?efore us is a petition for review on certiorari assailing the @ecision 1 and Resolution 2 dated 7arch 2, &44F and #ove ber &C, &44F, respectively, of the Court of $ppeals in C$9!.R. CG #o. B&B'F, which had affir ed the @ecision & dated 7ay %C, &44C of the Regional Trial Court (RTC) of Lue+on City, ?ranch B', in Civil Case #o. L9449C%&('. The Court of $ppeals reduced the stipulated original interest rates of (I and FI per onth to only %I per onth or %&I per annu and ordered petitioners to refund the excess interest pay ents by respondents. aT.$*c The pertinent facts are as follows) In Hebruary and 7arch %222, petitioners -alvador and Gioleta Chua granted respondents Rodrigo, 7a. /ynn and /ydia Ti an the following loans) a) P%44,4448 b) P&44,4448 c) P%F4,4448 d) P%4(,4448 e) P&44,4448 and f) P%4(,444. These loans were evidenced by pro issory notes with interest of (I per onth, which was later reduced to FI per onth. Rodrigo and 7a. /ynn issued five (F) postdated checDs to secure the loans, except for the P%F4,444 loan which was secured by a postdated checD issued by /ydia.

Respondents paid the loans initially at (I interest rate per onth until -epte ber %222 and then at FI interest rate per onth fro 0ctober to @ece ber %222. -o eti e in 7arch &444, respondents offered to pay the principal a ount of the loans through a Philippine #ational ?anD anager;s checD worth P('C,444, but petitioners refused to accept the sa e insisting that the principal a ount of the loans totalled PB'C,444. 0n 7ay 5, &444, respondents deposited PB'C,444 with the ClerD of Court of the RTC of Lue+on City. /ater, they filed a case for consignation and da ages. Petitioners oved to dis iss the case, but the RTC denied the otion, as well as the subse,uent otion for reconsideration. ?y virtue of an order of Partial Audg ent 4 dated 0ctober %', &44&, the ClerD of Court of the RTC of Lue+on City released the a ount of PB'C,444 to petitioners. Trial on the validity of the stipulated interests on the subEect loans, as well as on the issue of da ages, then proceeded. 0n 7ay %C, &44C, the RTC rendered a decision in favor of respondents. It ruled that the original stipulated interest rates of (I and FI per onth were excessive. It further ordered petitioners to refund to respondents all interest pay ents in excess of the legal rate of %I per onth or %&I per annu . *owever, the RTC denied petitioners; clai for da ages. 0n appeal, the Court of $ppeals affir ed the trial court;s decision. The Court of $ppeals declared illegal the stipulated interest rates of (I and FI per onth for being excessive, ini,uitous, unconscionable and exorbitant. $ccordingly, the Court of $ppeals reduced the stipulated interest rates of (I and FI per onth (e,uivalent to BCI and '4I per annu , respectively) to a fair and reasonable rate of %I per onth or %&I per annu . The Court of $ppeals also ordered petitioners to refund to respondents all interest pay ents in excess of %&I per annu . Petitioners sought reconsideration, but it was denied. $.@C*c *ence, this petition raising the lone issue of) "*.T*.R 0R #0T T*. *0#0R$?/. C01RT 0H $PP.$/- C077ITT.@ $ R.G.R-I?/. .RR0R 6 0R $CT.@ #0T I# $CC0R@ "IT* T*. /$" $#@ A1RI-PR1@.#C. 6 "*.# IT $HHIR7.@ T*. A1@!7.#T 0H T*. R.!I0#$/ TRI$/ C01RT 0R@.RI#! T*. R.T1R# 0H T*. .MC.-- I#T.R.-T T0 R.-P0#@.#T-. ' .ssentially, the ain issue is) (%) @id the Court of $ppeals err in ruling that the original stipulated interest rates of (I and FI, e,uivalent to BCI and '4I per annu , are unconscionable, and in ordering petitioners to refund to respondents all pay ents of interest in excess of %&I per annu P Petitioners aver that the stipulated interest of FI onthly and higher cannot be considered unconscionable because these rates are not usurious by virtue of Central ?anD (C.?.) Circular #o. 24F9 B& ( which had expressly re oved the interest ceilings prescribed by the 1sury /aw. Petitioners add that respondents were in pari delicto since they agreed on the stipulated interest rates of (I and FI per onth. They further aver they honestly believed that the interest rates they i posed on respondents; loans were not usurious. Respondents, invoDing 8edel v. "ourt of %ppeals, 7 counter that the stipulated interest rates of (I and FI per onth are ini,uitous, unconscionable and exorbitant, thus, they are entitled to the return of the excessive interest paid. They also contend that petitioners cannot raise the defense of in pari delictofor the first ti e on appeal. They further contend that the defense of good faith is a factual issue which cannot be raised by petitioners in a petition for review under Rule CF of the Rules of Civil Procedure.

The petition is patently devoid of

erit.

The stipulated interest rates of (I and FI per onth i posed on respondents; loans ust be e,uitably reduced to %I per onth or %&I per annu . )"e need not unsettle the principle we had affir ed in a plethora of cases that stipulated interest rates of 5I 9 per onth and higher 10 are excessive, ini,uitous, unconscionable and exorbitant. -uch stipulations are void for being contrary to orals, if not against the law. 11 "hile C.?. Circular #o. 24F9B&, which tooD effect on Aanuary %, %2B5, effectively re oved the ceiling on interest rates for both secured and unsecured loans, regardless of aturity, 12nothing in the said circular could possibly be read as granting carte blanche authority to lenders to raise interest rates to levels which would either enslave their borrowers or lead to a he orrhaging of their assets. 1& TCacI$ Petitioners cannot also raise the defenses of in pari delicto and good faith. The defense of in pari delicto was not raised in the RTC, hence, such an issue cannot be raised for the first ti e on appeal. Petitioners ust have seasonably raised it in the proceedings before the lower court, because ,uestions raised on appeal are confined only within the issues fra ed by the parties. 14 The defense of good faith ust also fail because such an issue is a ,uestion of fact 1' which ay not be properly raised in a petition for review under Rule CF of the Rules of Civil Procedure which allows only ,uestions of law. 1( $s well set forth in 8edel9 17 "e agree . . . that the stipulated rate of interest at F.FI per onth on the PF44,444.44 loan is excessive, ini,uitous, unconscionable and exorbitant. *owever, we can not consider the rate 3usurious3 because this Court has consistently held that Circular #o. 24F of the Central ?anD, adopted on @ece ber &&, %2B&, has expressly re oved the interest ceilings prescribed by the 1sury /aw and that the 1sury /aw is now 3legally inexistent3. In !ecurity $an: and /rust "ompany vs. egional /rial "ourt of 8a:ati, $ranch 3;, the Court held that C? Circular #o. 24F 3did not repeal nor in any way a end the 1sury /aw but si ply suspended the latter;s effectivity3. Indeed, we have held that 3a Central ?anD Circular can not repeal a law. 0nly a law can repeal another law3. In the recent case of 7lorendo vs. "ourt of %ppeals, the Court reiterated the ruling that 3by virtue of C? Circular 24F, the 1sury /aw has been rendered ineffective3. 31sury has been legally non9existent in our Eurisdiction. Interest can now be charged as lender and borrower ay agree upon3. #evertheless, we find the interest at F.FI per onth, or ''I per annu , stipulated upon by the parties in the pro issory note ini,uitous or unconscionable, and, hence, contrary to orals 2"contra bonos mores"4, if not against the law. The stipulation is void. "*.R.H0R., the petition is @.#I.@ for lacD of erit. The assailed @ecision and Resolution dated 7arch 2, &44F and #ove ber &C, &44F, respectively, of the Court of $ppeals in C$9!.R. CG #o. B&B'F are hereby $HHIR7.@. Costs against petitioners. TCa.$@ -0 0R@.R.@. "orona, 4 "arpio-8orales, <elasco, Jr. and $rion, JJ., concur. T*IR@ @IGI-I0# =!.R. #o. %(FC24. -epte ber %(, &442.>

ILEANA R. "ACALINAO , petitioner, vs. *AN1 OF THE PHILIPPINE I$LAN $, respondent.

ECI$ION

%ELA$CO, 5R., J p) T.e Ca6e ?efore us is a Petition for Review on "ertiorari under Rule CF of the Rules of Court seeDing to reverse and set aside the Aune 54, &44' @ecision 1 of the Court of $ppeals (C$) and its #ove ber &%, &44' Resolution 2 denying petitioner;s otion for reconsideration. T.e Fa7-6 Petitioner Ileana 7acalinao was an approved cardholder of ?PI 7astercard, one of the credit card facilities of respondent ?anD of the Philippine Islands(?PI). & Petitioner 7acalinao ade so e purchases through the use of the said credit card and defaulted in paying for said purchases. -he subse,uently received a letter dated Aanuary F, &44C fro respondent ?PI, de anding pay ent of the a ount of one hundred forty9one thousand five hundred eighteen pesos and thirty9four centavos (PhP%C%,F%B.5C), as follows) !tatement .ate %4J&(J&44& %%J&(J&44& %&J5%J&44& %J&(J&445 &J&(J&445 5J&(J&445 CJ&(J&445 FJ&(J&445 'J&2J&445 (J&(J&445 BJ&(J&445 2J&BJ&445 %4J&BJ&445 %%J&BJ&445 %&J&BJ&445 %J&(J&44C ,revious $alance 2C,BC5.(4 2B,C'F.C% B',5F%.4& %%2,(F&.&B %&C,&5C.FB %&2,&'5.%5 %%F,%((.24 %%2,F'F.CC %%5,FC4.%4 %%B,B55.C2 %&5,5(F.'F %&B,C5F.F' ,urchases 2,ayments4 (%F,444) 54,54B.B4 (%B,444.44) (%4,444.44) B,5'&.F4 ((,444.44) ,enalty &nterest FF2.(& 4 &F2.4F '%B.&5 224.25 &2B.(& 'CC.&' C4&.2F 5&5.F( '4B.4( %,4F4.&4 %,C5F.F% 7inance "harges 5,4'%.22 &,BBF.'% &,B4'.C% 5,B2%.4( C,45(.'& 5,'%'.4F 5,(C5.&B 5,F(%.(% 5,'4(.5& 5,B'&.42 C,442.(% C,%(C.%' $alance .ue 2B,CF'.C% B',5F%.4& %%2,(F&.&B %&C,&5C.FB %&2,&'5.%5 %%F,%((.24 %%2,F'F.CC %%5,FC4.%4 %%B,B55.C2 %&5,5(F.'F %&B,C5F.F' %5C,4CF.&5

141,'1).&4

B,C2%.%4

C,F22.5C

1'4,(0).7)

1nder the Ter s and Conditions !overning the Issuance and 1se of the ?PI Credit and ?PI 7astercard, the charges or balance thereof re aining unpaid after the pay ent due date indicated on the onthly -tate ent of $ccounts shall bear interest at the rate of 5I per onth and an additional penalty fee e,uivalent to another 5I per onth. Particularly) *@C$aB. P$K7.#T 0H C*$R!.- 6 ?CC shall furnish the Cardholder a onthly -tate ent of $ccount (-0$) and the Cardholder agrees that all charges ade through the use of the C$R@ shall be paid by the Cardholder as stated in the -0$ on or before the last day for pay ent, which is twenty (&4) days fro the date of the said -0$, and such

pay ent due date ay be changed to an earlier date if the Cardholder;s account is considered overdue andJor with balances in excess of the approved credit li it, or to such other date as ay be dee ed proper by the C$R@ issuer with notice to the Cardholder on the sa e onthly -0$. If the last day fall on a -aturday, -unday or a holiday, the last day for the pay ent auto atically beco es the last worDing day prior to said pay ent date. *owever, notwithstanding the absence or lacD of proof of service of the -0$ of the Cardholder, the latter shall pay any and all charges ade through the use of the C$R@ within thirty (54) days fro date or dates thereof. Hailure of the Cardholder to pay the charges ade through the C$R@ within the pay ent period as stated in the -0$ or within thirty (54) days fro actual date or dates of purchase whichever occur earlier, shall render hi in default without the necessity of de and fro ?CC, which the Cardholder expressly waives. T.e 7.ar8e6 or ba9a+7e -.ereo: re;a<+<+8 u+=a<, a:-er -.e =ay;e+- ,ue ,a-e <+,<7a-e, o+ -.e ;o+-.9y $-a-e;e+o: A77ou+-6 6.a99 bear <+-ere6- a- -.e ra-e o: &> =er ;o+-. :or *PI E?=re66 Cre,<-, *PI Go9, "a6-er7ar, a+, a+ a,,<-<o+a9 =e+a9-y :ee e@u<Aa9e+- -o a+o-.er &> o: -.e a;ou+- ,ue :or eAery ;o+-. or a :ra7-<o+ o: a ;o+-.B6 ,e9ay.PR0GI@.@ that if there occurs any change on the prevailing arDet rates, ?CC shall have the option to adEust the rate of interest andJor penalty fee due on the outstanding obligation with prior notice to the cardholder. The Cardholder hereby authori+es ?CC to correspondingly increase the rate of such interest =in> the event of changes in the prevailing arDet rates, and to charge additional service fees as ay be dee ed necessary in order to aintain its service to the Cardholder. $ C$R@ with outstanding balance unpaid after thirty (54) days fro original billing state ent date shall auto atically be suspended, and those with accounts unpaid after ninety (24) days fro said original billingJstate ent date shall auto atically be cancel 2sic4, without preEudice to ?CC;s right to suspend or cancel any card anyti e and for whatever reason. In case of default in his obligation as provided herein, Cardholder shall surrender hisJher card to ?CC and in addition to the interest and penalty charges afore entioned, pay the following li,uidated da ages andJor fees (a) a collection fee of &FI of the a ount due if the account is referred to a collection agency or attorney8 (b) service fee for every dishonored checD issued by the cardholder in pay ent of his account without preEudice, however, to ?CC;s right of considering Cardholder;s account, and (c) a final fee e,uivalent to &FI of the unpaid balance, exclusive of litigation expenses and Eudicial cost, if the pay ent of the account is enforced though court action. Genue of all civil suits to enforce this $gree ent or any other suit directly or indirectly arising fro the relationship between the parties as established herein, whether arising fro cri es, negligence or breach thereof, shall be in the process of courts of the City of 7aDati or in other courts at the option of ?CC. 4 (. phasis supplied.) Hor failure of petitioner 7acalinao to settle her obligations, respondent ?PI filed with the 7etropolitan Trial Court (7eTC) of 7aDati City a co plaint for a su of oney against her and her husband, @anilo -A. 7acalinao. This was raffled to ?ranch '' of the 7eTC and was docDeted as Civil Case #o. BCC'& entitled $an: of the ,hilippine &slands vs. !pouses &leana .r. 8acalinao and .anilo !J. 8acalinao. ' In said co plaint, respondent ?PI prayed for the pay ent of the a ount of one hundred fifty9four thousand six hundred eight pesos and seventy9eight centavos (PhP%FC,'4B.(B) plus 5.&FI finance charges and late pay ent charges e,uivalent to 'I of the a ount due fro Hebruary &2, &44C and an a ount e,uivalent to &FI of the total a ount due as attorney;s fees, and of the cost of suit. ( $fter the su ons and a copy of the co plaint were served upon petitioner 7acalinao and her husband, they failed to file their $nswer. 7 Thus, respondent ?PI oved that Eudg ent be rendered in accordance with -ection ' of the Rule on -u ary Procedure. ) This was granted in an 0rder dated Aune %', &44C. 9 Thereafter, respondent ?PI sub itted its docu entary evidence. 10

In its @ecision dated $ugust &, &44C, the 7eTC ruled in favor of respondent ?PI and ordered petitioner 7acalinao and her husband to pay the a ount of PhP%C%,F%B.5C plus interest and penalty charges of &I per onth, to wit) c-I*C$ "*.R.H0R., finding erit in the allegations of the co plaint supported by docu entary evidence, Eudg ent is hereby rendered in favor of the plaintiff, *a+C o: -.e P.<9<==<+e I69a+,6 and against ,e:e+,a+-D6=ou6e6 I9ea+a R "a7a9<+ao a+, a+<9o $5 "a7a9<+ao by ordering the latter to pay the for er Eointly and severally the following) %.The a ount of P.-0-) ONE H!N RE FORT# ONE THO!$AN FI%E H!N RE EIGHTEEN AN &4E100 (P141,'1).&4)plus interest and penalty charges of &I per onth fro Aanuary 4F, &44C until fully paid8 &.P%4,444.44 as and by way of attorney;s fees8 and 5.Cost of suit. -0 0R@.R.@. 11 0nly petitioner 7acalinao and her husband appealed to the Regional Trial Court (RTC) of 7aDati City, their recourse docDeted as Civil Case #o. 4C9%%F5. In its @ecision dated 0ctober %C, &44C, the RTC affir ed in toto the decision of the 7eTC and held) In any event, the su of P%C%,F%B.5C adEudged by the trial court appeared to be the result of a reco putation at the reduced rate of &I per onth. #ote that the total a ount sought by the plaintiff9appellee was P%FC,'4B.(F exclusive of finance charge of 5.&FI per onth and late pay ent charge of 'I per onth. "*.R.H0R., the appealed decision is hereby affir ed in toto. #o pronounce ent as to costs. -0 0R@.R.@. 12 1nconvinced, petitioner 7acalinao filed a petition for review with the C$, which was docDeted as C$9!.R. -P #o. 2&45%. The C$ affir ed with odification the @ecision of the RTC) 2HEREFORE, the appealed decision is AFFIR"E but "O IFIE with respect to the total a ount due and interest rate. $ccordingly, petitioners are Eointly and severally ordered to pay respondent ?anD of the Philippine Islands the following) %.The a ount of O+e Hu+,re, TFe+-y $<? T.ou6a+, $eAe+ Hu+,re, $<? Pe6o6 a+, $eAe+-y Ce+-aAo6 plus interest and penalty charges of 5I per onth fro Aanuary F, &44C until fully paid8 c*CI.$ &.P%4,444.44 as and by way of attorney;s fees8 and 5.Cost of -uit. $O OR ERE . 1&

$lthough sued Eointly with her husband, petitioner 7acalinao was the only one who filed the petition before the C$ since her husband already passed away on 0ctober %B, &44F. 14 In its assailed decision, the C$ held that the a ount of PhP%C%,F%B.5C (the a ount sought to be satisfied in the de and letter of respondent ?PI) is clearly not the result of the re9co putation at the reduced interest rate as previous higher interest rates were already incorporated in the said a ount. Thus, the said a ount should not be ade as basis in co puting the total obligation of petitioner 7acalinao. Hurther, the C$ also e phasi+ed that respondent ?PI should not co pound the interest in the instant case absent a stipulation to that effect. The C$ also held, however, that the 7eTC erred in odifying the a ount of interest rate fro 5I onthly to only &I considering that petitioner 7acalinao freely availed herself of the credit card facility offered by respondent ?PI to the general public. It explained that contracts of adhesion are not invalid per se and are not entirely prohibited. Petitioner 7acalinao;s otion for reconsideration was denied by the C$ in its Resolution dated #ove ber &%, &44'. *ence, petitioner 7acalinao is now before this Court with the following assigned errors) I. T*. R.@1CTI0# 0H I#T.R.-T R$T., HR07 2.&FI T0 &I, -*01/@ ?. 1P*./@ -I#C. T*. -TIP1/$T.@ R$T. 0H I#T.R.-T "$- 1#C0#-CI0#$?/. $#@ I#IL1IT01-, $#@ T*1- I//.!$/. II. T*. C01RT 0H $PP.$/- $R?ITR$RI/K 70@IHI.@ T*. R.@1C.@ R$T. 0H I#T.R.-T HR07 &I T0 5I, C0#TR$RK T0 T*. T.#0R 0H IT- 0"# @.CI-I0#. III. T*. C01RT % =>O, I#-T.$@ 0H PR0C..@I#! "IT* $ R.C07P1T$TI0#, -*01/@ *$G. @I-7I--.@ T*. C$-. H0R H$I/1R. 0H R.-P0#@.#T ?PI T0 PR0G. T*. C0RR.CT $701#T 0H P.TITI0#.R;- 0?/I!$TI0#, 0R I# T*. $/T.R#$TIG., R.7$#@.@ T*. C$-. T0 T*. /0".R C01RT H0R R.-P0#@.#T ?PI T0 PR.-.#T PR00H 0H T*. C0RR.CT $701#T T*.R.0H. @*IT-c Our Ru9<+8 The petition is partly eritorious.

T.e I+-ere6- Ra-e a+, Pe+a9-y C.ar8e o: &> Per "o+-. or &(> Per A++u; $.ou9, *e Re,u7e, -o 2> Per "o+-. or 24> Per A++u; In its Co plaint, respondent ?PI originally i posed the interest and penalty charges at the rate of 2.&FI per onth or %%%I per annu . This was declared as unconscionable by the lower courts for being clearly excessive, and was thus reduced to &I per onth or &CI per annu . 0n appeal, the C$ odified the rate of interest and penalty charge and increased the to 5I per onth or 5'I per annu based on the Ter s and Conditions !overning the Issuance and 1se of the ?PI Credit Card, which governs the transaction between petitioner 7acalinao and respondent ?PI. In the instant petition, 7acalinao clai s that the interest rate and penalty charge of 5I per onth i posed by the C$ is ini,uitous as the sa e translates to 5'I per annu or thrice the legal rate of

interest. 1' 0n the other hand, respondent ?PI asserts that said interest rate and penalty charge are reasonable as the sa e are based on the Ter s and Conditions !overning the Issuance and 1se of the ?PI Credit Card. 1( "e find for petitioner. "e are of the opinion that the interest rate and penalty charge of 5I per should be e,uitably reduced to &I per onth or &CI per annu . onth

Indeed, in the Ter s and Conditions !overning the Issuance and 1se of the ?PI Credit Card, there was a stipulation on the 5I interest rate. #evertheless, it should be noted that this is not the first ti e that this Court has considered the interest rate of 5'I per annu as excessive and unconscionable. "e held in "hua vs. /iman9 17 The stipulated interest rates of (I and FI per onth i posed on respondents; loans ust be e,uitably reduced to %I per onth or %&I per annum. 2e +ee, +o- u+6e--9e -.e =r<+7<=9e Fe .a, a::<r;e, <+ a =9e-.ora o: 7a6e6 -.a- 6-<=u9a-e, <+-ere6- ra-e6 o: &> =er ;ou-. a+, .<8.er are e?7e66<Ae, <+<@u<-ou6, u+7o+67<o+ab9e a+, e?orb<-a+-. $u7. 6-<=u9a-<o+6 are Ao<, :or be<+8 7o+-rary -o ;ora96, <: +o- a8a<+6-.e 9aF. "hile C.?. Circular #o. 24F9B&, which tooD effect on Aanuary %, %2B5, effectively re oved the ceiling on interest rates for both secured and unsecured loans, regardless of aturity, nothing in the said circular could possibly be read as granting carte blanche authority to lenders to raise interest rates to levels which would either enslave their borrowers or lead to a he orrhaging of their assets. (. phasis supplied.) @T$cIa -ince the stipulation on the interest rate is void, it is as if there was no express contract thereon. *ence, courts ay reduce the interest rate as reason and e,uity de and. 1) The sa e is true with respect to the penalty charge. #otably, under the Ter s and Conditions !overning the Issuance and 1se of the ?PI Credit Card, it was also stated therein that respondent ?PI shall i pose an additional penalty charge of 5I per onth. Pertinently, $rticle %&&2 of the Civil Code states) $rt. %&&2.The Eudge shall e,uitably reduce the penalty when the principal obligation has been partly or irregularly co plied with by the debtor. .ven if there has been no perfor ance, the penalty ay also be reduced by the courts if it is ini,uitous or unconscionable. In exercising this power to deter ine what is ini,uitous and unconscionable, courts ust consider the circu stances of each case since what ay be ini,uitous and unconscionable in one ay be totally Eust and e,uitable in another. 19 In the instant case, the records would reveal that petitioner 7acalinao ade partial pay ents to respondent ?PI, as indicated in her ?illing -tate ents. 20Hurther, the stipulated penalty charge of 5I per onth or 5'I per annu , in addition to regular interests, is indeed ini,uitous and unconscionable. Thus, under the circu stances, the Court finds it e,uitable to reduce the interest rate pegged by the C$ at %.FI onthly to %I onthly and penalty charge fixed by the C$ at %.FI onthly to %I onthly or a total of &I per onth or &CI per annu in line with the prevailing Eurisprudence and in accordance with $rt. %&&2 of the Civil Code. T.ere I6 No *a6<6 :or -.e <6;<66a9 o: -.e Ca6e, "u7. Le66 a Re;a+, o: -.e $a;e :or Fur-.er Re7e=-<o+ o: EA<,e+7e

Petitioner 7acalinao clai s that the basis of the re9co putation of the C$, that is, the a ount of PhP2C,BC5.(4 stated on the 0ctober &(, &44& -tate ent of $ccount, was not the a ount of the principal obligation. Thus, this allegedly necessitates a re9exa ination of the evidence presented by the parties. Hor this reason, petitioner 7acalinao further contends that the dis issal of the case or its re and to the lower court would be a ore appropriate disposition of the case. CaT-.$ -uch contention is untenable. ?ased on the records, the su ons and a copy of the co plaint were served upon petitioner 7acalinao and her husband on 7ay C, &44C. #evertheless, they failed to file their $nswer despite such service. Thus, respondent ?PI oved that Eudg ent be rendered accordingly. 21Conse,uently, a decision was rendered by the 7eTC on the basis of the evidence sub itted by respondent ?PI. This is in consonance with -ec. ' of the Revised Rule on -u ary Procedure, which states) -ec. '.?ffect of failure to answer. 6 $.ou9, -.e ,e:e+,a+- :a<9 -o a+6Fer -.e 7o;=9a<+- F<-.<+ -.e =er<o, aboAe =roA<,e,, -.e 7our-, motu proprio, or o+ ;o-<o+ o: -.e =9a<+-<::, 6.a99 re+,er Gu,8;e+- a6 ;ay be Farra+-e, by -.e :a7-6 a99e8e, <+ -.e 7o;=9a<+- a+, 9<;<-e, -o F.a- <6 =raye, :or -.ere<+H Provided, however, that the court ay in its discretion reduce the a ount of da ages and attorney;s fees clai ed for being excessive or otherwise unconscionable. This is without preEudice to the applicability of -ection 5(c), Rule %4 of the Rules of Court, if there are two or ore defendants. ($s a ended by the %22( Rules of Civil Procedure8 e phasis supplied.) Considering the foregoing rule, respondent ?PI should not be ade to suffer for petitioner 7acalinao;s failure to file an answer and conco itantly, to allow the latter to sub it additional evidence by dis issing or re anding the case for further reception of evidence. -ignificantly, petitioner 7acalinao herself ad itted the existence of her obligation to respondent ?PI, albeit with reservation as to the principal a ount. Thus, a dis issal of the case would cause great inEustice to respondent ?PI. -i ilarly, a re and of the case for further reception of evidence would unduly prolong the proceedings of the instant case and render inutile the proceedings conducted before the lower courts. -ignificantly, the C$ correctly used the beginning balance of PhP2C,BC5.(4 as basis for the re9 co putation of the interest considering that this was the first a ount which appeared on the -tate ent of $ccount of petitioner 7acalinao. There is no other a ount on which the re9co putation could be based, as can be gathered fro the evidence on record. Hurther ore, barring a showing that the factual findings co plained of are totally devoid of support in the record or that they are so glaringly erroneous as to constitute serious abuse of discretion, such findings ust stand, for this Court is not expected or re,uired to exa ine or contrast the evidence sub itted by the parties. 22 In view of the ruling that only %I onthly interest and %I penalty charge can be applied to the beginning balance of PhP2C,BC5.(4, this Court finds the following co putation ore appropriate) !tatement .ate %4J&(J&44& %%J&(J&44& %&J5%J&44& %J&(J&445 &J&(J&445 5J&(J&445 CJ&(J&445 FJ&(J&445 'J&2J&445 ,revious $alance 2C,BC5.(4 2C,BC5.(4 (2,BC5.(4 %%4,%F&.F4 %%4,%F&.F4 %%4,%F&.F4 2&,%F&.F4 2&,%F&.F4 B&,%F&.F4 ,urchases 2,ayments4 $alance &nterest 2;@4 2CB.CC (2B.CC %,%4%.F5 %,%4%.F5 %,%4%.F5 2&%.F5 2&%.F5 B&%.F5 B5F.%F ,enalty "harge 2; @4 2CB.CC (2B.CC %,%4%.F5 %,%4%.F5 %,%4%.F5 2&%.F5 2&%.F5 B&%.F5 B5F.%F /otal %mount .ue for /he 8onth 2',(C4.FB B%,CC4.FB %%&,5FF.F' %%&,5FF.F' %%&,5FF.F' 25,22F.F' 25,22F.F' B5,(2F.F' BF,%BF.54

(%F,444) 54,54B.B4 (%B,444.44) (%4,444.44) B,5'&.F4

2C,BC5.(4 (2,BC5.(4 %%4,%F&.F4 %%4,%F&.F4 %%4,%F&.F4 2&,%F&.F4 2&,%F&.F4 B&,%F&.F4 B5,F%F.44

((,444.44) (J&(J&445 BJ&(J&445 2J&BJ&445 %4J&BJ&445 %%J&BJ&445 %&J&BJ&445 %J&(J&44C TOTAL B5,F%F.44 B5,F%F.44 B5,F%F.44 B5,F%F.44 B5,F%F.44 B5,F%F.44 B5,F%F.44 B5,F%F.44 B5,F%F.44 B5,F%F.44 B5,F%F.44 B5,F%F.44 B5,F%F.44 B5,F%F.44 )&,'1'.00 B5F.%F B5F.%F B5F.%F B5F.%F B5F.%F B5F.%F B5F.%F 14,&97.2( B5F.%F B5F.%F B5F.%F B5F.%F B5F.%F B5F.%F B5F.%F 14,&97.2( BF,%BF.54 BF,%BF.54 BF,%BF.54 BF,%BF.54 BF,%BF.54 BF,%BF.54 BF,%BF.54 112,&09.'2

2HEREFORE, the petition is PARTL# GRANTE . The C$ @ecision dated Aune 54, &44' in C$9!.R. -P #o. 2&45% is hereby "O IFIE with respect to the total a ount due, interest rate, and penalty charge. $ccordingly, petitioner 7acalinao is ordered to pay respondent ?PI the following) @-$.IT (%)The a ount of o+e .u+,re, -Fe9Ae -.ou6a+, -.ree .u+,re, +<+e =e6o6 a+, :<:-yD-Fo 7e+-aAo6 (P.P112,&09.'2) plus interest and penalty charges of &I per onth fro Aanuary F, &44C until fully paid8 (&)PhP%4,444 as and by way of attorney;s fees8 and (5)Cost of suit. $O OR ERE . 1nares-!antiago, "hico-6a*ario, 6achura and ,eralta, JJ., concur. T*IR@ @IGI-I0# =!.R. #o. %F2'%(. $ugust B, &44(.> RO*ERTO C. $ICA" a+, AGENCIA ,e R.C. $ICA", INC., petitioners, vs. L!L! %. 5ORGE a+, CE$AR 5ORGE, respondents.

ECI$ION

A!$TRIAD"ARTINE3, J p) ?efore us is a Petition for Review on "ertiorari filed by Roberto C. -ica , Ar. (petitioner -ica ) and %gencia de R.C. -ica , Inc. (petitioner corporation) seeDing to annul the @ecision 1 of the Court of $ppeals dated 7arch 5%, &445, and its Resolution 2 dated $ugust B, &445, in C$ !.R. CG #o. F''55. @cIC.a It appears that on different dates fro -epte ber to 0ctober %2B(, /ulu G. Aorge (respondent /ulu) pawned several pieces of Eewelry with %gencia deR.C. -ica located at #o. %( $guirre $ve., ?H *o es Para:a,ue, 7etro 7anila, to secure a loan in the total a ount of PF2,F44.44. 0n 0ctober %2, %2B(, two ar ed en entered the pawnshop and tooD away whatever cash and Eewelry were found inside the pawnshop vault. The incident was entered in the police blotter of the -outhern Police @istrict, Para:a,ue Police -tation as follows)

Investigation shows that at above T@P0, while victi s were inside the office, two (&) ale unidentified persons entered into the said office with guns drawn. -uspects ( sic) (%) went straight inside and poDed his gun toward Ro eo -ica and thereby tied hi with an electric wire while suspects (sic) (&) poDed his gun toward @ivina 7ata and Isabelita Rodrigue+ and ordered the to lay ( sic) face flat on the floor. -uspects asDed forcibly the case and assorted pawned Eewelries ite s entioned above. -uspects after taDing the oney and Eewelries fled on board a 7arson Toyota unidentified plate nu ber. & Petitioner -ica sent respondent /ulu a letter dated 0ctober %2, %2B( infor ing her of the loss of her Eewelry due to the robbery incident in the pawnshop. 0n #ove ber &, %2B(, respondent /ulu then wrote a letter 4 to petitioner -ica expressing disbelief stating that when the robbery happened, all Eewelry pawned were deposited with Har .ast ?anD near the pawnshop since it had been the practice that before they could withdraw, advance notice ust be given to the pawnshop so it could withdraw the Eewelry fro the banD. Respondent /ulu then re,uested petitioner -ica to prepare the pawned Eewelry for withdrawal on #ove ber ', %2B( but petitioner -ica failed to return the Eewelry. 0n -epte ber &B, %2BB, respondent /ulu Eoined by her husband, Cesar Aorge, filed a co plaint against petitioner -ica with the Regional Trial Court of 7aDati seeDing inde nification for the loss of pawned Eewelry and pay ent of actual, oral and exe plary da ages as well as attorney;s fees. The case was docDeted as Civil Case #o. BB9&45F. @$.I*T Petitioner -ica filed his $nswer contending that he is not the real party9in9interest as the pawnshop was incorporated on $pril &4, %2B( and Dnown as%gencia de R.C. -ica , Inc8 that petitioner corporation had exercised due care and diligence in the safeDeeping of the articles pledged with it and could not be ade liable for an event that is fortuitous. Respondents subse,uently filed an $ ended Co plaint to include petitioner corporation. Thereafter, petitioner -ica filed a 7otion to @is iss as far as he is concerned considering that he is not the real party9in9interest. Respondents opposed the sa e. The RTC denied the otion in an 0rder dated #ove ber B, %2B2. ' $fter trial on the erits, the RTC rendered its @ecision ( dated Aanuary %&, %225, dis issing respondents; co plaint as well as petitioners; counterclai . The RTC held that petitioner -ica could not be ade personally liable for a clai arising out of a corporate transaction8 that in the $ ended Co plaint of respondents, they asserted that 3plaintiff pawned assorted Eewelries in defendants; pawnshop38 and that as a conse,uence of the separate Euridical personality of a corporation, the corporate debt or credit is not the debt or credit of a stocDholder. The RTC further ruled that petitioner corporation could not be held liable for the loss of the pawned Eewelry since it had not been rebutted by respondents that the loss of the pledged pieces of Eewelry in the possession of the corporation was occasioned by ar ed robbery8 that robbery is a fortuitous event which exe pts the victi fro liability for the loss, citing the case of %ustria v. "ourt of %ppeals8 7 and that the parties; transaction was that of a pledgor and pledgee and under $rt. %%(C of the Civil Code, the pawnshop as a pledgee is not responsible for those events which could not be foreseen. Respondents appealed the RTC @ecision to the C$. In a @ecision dated 7arch 5%, &445, the C$ reversed the RTC, the dispositive portion of which reads as follows) "*.R.H0R., pre ises considered, the instant $ppeal is !R$#T.@, and the @ecision dated Aanuary %&, %225, of the Regional Trial Court of 7aDati, ?ranch '&, is hereby R.G.R-.@ and -.T $-I@., ordering the appellees to pay appellants the

actual value of the lost Eewelry a ounting to P&(&,444.44, and attorney; fees of P&(,&44.44. ) T$.Ca@ In finding petitioner -ica liable together with petitioner corporation, the C$ applied the doctrine of piercing the veil of corporate entity reasoning that respondents were isled into thinDing that they were dealing with the pawnshop owned by petitioner -ica as all the pawnshop ticDets issued to the bear the words "%gencia de R.C. -ica 38 and that there was no indication on the pawnshop ticDets that it was the petitioner corporation that owned the pawnshop which explained why respondents had to a end their co plaint i pleading petitioner corporation. The C$ further held that the corresponding diligence re,uired of a pawnshop is that it should taDe steps to secure and protect the pledged ite s and should taDe steps to insure itself against the loss of articles which are entrusted to its custody as it derives earnings fro the pawnshop trade which petitioners failed to do8 that %ustria is not applicable to this case since the robbery incident happened in %2'% when the cri inality had not as yet reached the levels attained in the present day8 that they are at least guilty of contributory negligence and should be held liable for the loss of Eewelries8 and that robberies and hold9ups are foreseeable risDs in that those engaged in the pawnshop business are expected to foresee. The C$ concluded that both petitioners should be Eointly and severally held liable to respondents for the loss of the pawned Eewelry. Petitioners; otion for reconsideration was denied in a Resolution dated $ugust B, &445.

*ence, the instant petition for review with the following assign ent of errors) T*. C01RT 0H $PP.$/- .RR.@ $#@ "*.# IT @I@, IT 0P.#.@ IT-./H T0 R.G.R-$/, "*.# IT $@0PT.@ 1#CRITIC$//K (I# H$CT IT R.PR0@1C.@ $IT- 0"# "IT*01T I# T*. 7.$#TI7. $CO#0"/.@!I#! IT) "*$T T*. R.-P0#@.#T- $R!1.@ I# T*.IR ?RI.H, "*IC* $R!17.#T "$- P$/P$?/K 1#-1-T$I#$?/.. T*. C01RT 0H $PP.$/- .RR.@, $#@ "*.# IT @I@, IT 0P.#.@ IT-./H T0 R.G.R-$/ ?K T*I- *0#0R$?/. C01RT, "*.# IT $!$I# $@0PT.@ 1#CRITIC$//K (?1T "IT*01T $CO#0"/.@!I#! IT) T*. -1?7I--I0#- 0H T*. R.-P0#@.#T- I# T*.IR ?RI.H "IT*01T $@@I#! $#KT*I#! 70R. T*.R.T0 @.-PIT. T*. H$CT T*$T T*. -$I@ $R!17.#T 0H T*. R.-P0#@.#T- C01/@ #0T *$G. ?..# -1-T$I#.@ I# GI." 0H 1#R.?1TT.@ .GI@.#C. 0# R.C0R@. 9 $nent the first assigned error, petitioners point out that the C$;s finding that petitioner -ica is personally liable for the loss of the pawned Eewelries is 3a virtual and uncritical reproduction of the argu ents set out on pp. F9' of the $ppellants; brief.3 10 Petitioners argue that the reproduced argu ents of respondents in their $ppellants; ?rief suffer fro infir ities, as follows) (%)Respondents conclusively asserted in paragraph & of their $ ended Co plaint that $gencia de R.C. -ica , Inc. is the present owner of $gencia de R.C. -ica Pawnshop, and therefore, the C$ cannot rule against said conclusive assertion of respondents8 (&)The issue resolved against petitioner -ica litigated in the trial court8 and was not a ong those raised and

(5)?y reason of the above infir ities, it was error for the C$ to have pierced the corporate veil since a corporation has a personality distinct and separate fro its individual stocDholders or e bers. a-I.T* $nent the second error, petitioners point out that the C$ finding on their negligence is liDewise an unedited reproduction of respondents; brief which had the following defects) (%)There were unrebutted evidence on record that petitioners had observed the diligence re,uired of the , i.e, they wanted to open a vault with a nearby banD for purposes of safeDeeping the pawned articles but was discouraged by the Central ?anD (C?) since C? rules provide that they can only store the pawned articles in a vault inside the pawnshop pre ises and no other place8 (&)Petitioners were adEudged negligent as they did not taDe insurance against the loss of the pledged Eewelries, but it is Eudicial notice that due to high incidence of cri es, insurance co panies refused to cover pawnshops and banDs because of high probability of losses due to robberies8 (5)In 'ernande* v. "hairman, "ommission on %udit (%(2 -CR$ 52, CF9C'), the victi of robbery was exonerated fro liability for the su of oney belonging to others and lost by hi to robbers. Respondents filed their Co ent and petitioners filed their Reply thereto. The parties subse,uently sub itted their respective 7e oranda. "e find no erit in the petition.

To begin with, although it is true that indeed the C$ findings were exact reproductions of the argu ents raised in respondents; (appellants;) brief filed with the C$, we find the sa e to be not fatally infir ed. 1pon exa ination of the @ecision, we find that it expressed clearly and distinctly the facts and the law on which it is based as re,uired by -ection B, $rticle GIII of the Constitution. The discretion to decide a case one way or another is broad enough to Eustify the adoption of the argu ents put forth by one of the parties, as long as these are legally tenable and supported by law and the facts on records. 11

0ur Eurisdiction under Rule CF of the Rules of Court is li ited to the review of errors of law co itted by the appellate court. !enerally, the findings of fact of the appellate court are dee ed conclusive and we are not duty9bound to analy+e and calibrate all over again the evidence adduced by the parties in the court a quo. 12 This rule, however, is not without exceptions, such as where the factual findings of the Court of $ppeals and the trial court are conflicting or contradictory 1& as is obtaining in the instant case. *owever, after a careful exa ination of the records, we find no Eustification to absolve petitioner -ica fro liability. The C$ correctly pierced the veil of the corporate fiction and adEudged petitioner -ica liable together with petitioner corporation. The rule is that the veil of corporate fiction ay be pierced when ade as a shield to perpetrate fraud andJor confuse legiti ate issues. 14 The theory of corporate entity was not eant to pro ote unfair obEectives or otherwise to shield the . 1' #otably, the evidence on record shows that at the ti e respondent /ulu pawned her Eewelry, the pawnshop was owned by petitioner -ica hi self. $s correctly observed by the C$, in all the pawnshop receipts issued to respondent /ulu in -epte ber %2B(, all bear the words "%gencia de R.C. -ica ,3

notwithstanding that the pawnshop was allegedly incorporated in $pril %2B(. The receipts issued after such alleged incorporation were still in the na e of"%gencia de R.C. -ica ,3 thus inevitably isleading, or at the very least, creating the wrong i pression to respondents and the public as well, that the pawnshop was owned solely by petitioner -ica and not by a corporation. -.@Ia* .ven petitioners; counsel, $tty. 7arcial T. ?algos, in his letter 1( dated 0ctober %F, %2B( addressed to the Central ?anD, expressly referred to petitioner-ica as the proprietor of the pawnshop notwithstanding the alleged incorporation in $pril %2B(. "e also find no erit in petitioners; argu ent that since respondents had alleged in their $ ended Co plaint that petitioner corporation is the present owner of the pawnshop, the C$ is bound to decide the case on that basis. -ection C Rule %&2 of the Rules of Court provides that an ad ission, verbal or written, ade by a party in the course of the proceedings in the sa e case, does not re,uire proof. The ad ission ay be contradicted only by showing that it was ade through palpable istaDe or that no such ad ission was ade. Thus, the general rule that a Eudicial ad ission is conclusive upon the party aDing it and does not re,uire proof, ad its of two exceptions, to wit) (%) when it is shown that such ad ission was ade through palpable istaDe, and (&) when it is shown that no such ad ission was in fact ade. T.e 9a--er e?7e=-<o+ a99oF6 o+e -o 7o+-ra,<7- a+ a,;<66<o+ by ,e+y<+8 -.a- .e ;a,e 6u7. a+ a,;<66<o+. 17 The Co ittee on the Revision of the Rules of Court explained the second exception in this wise) . . . if a party invoDes an 3ad ission3 by an adverse party, but cites the ad ission 3out of context,3 then the one aDing the 3ad ission3 ay show that he ade no 3such3 ad ission, or -.a- .<6 a,;<66<o+ Fa6 -aCe+ ou- o: 7o+-e?-. . . . -.a- -.e =ar-y 7a+ a96o 6.oF -.a- .e ;a,e +o I6u7. a,;<66<o+I, i.e., +o- <+ -.e 6e+6e <+ F.<7. -.e a,;<66<o+ <6 ;a,e -o a==ear. That is the reason for the odifier 3such3 because if the rule si ply states that the ad ission ay be contradicted by showing that 3no ad ission was ade,3 the rule would not really be providing for a contradiction of the ad ission but Eust a denial. 1) (. phasis supplied). "hile it is true that respondents alleged in their $ ended Co plaint that petitioner corporation is the present owner of the pawnshop, they did so only because petitioner -ica alleged in his $nswer to the original co plaint filed against hi that he was not the real party9in9interest as the pawnshop was incorporated in $pril %2B(. 7oreover, a reading of the $ ended Co plaint in its entirety shows that respondents referred to both petitioner -ica and petitioner corporation where they (respondents) pawned their assorted pieces of Eewelry and ascribed to both the failure to observe due diligence co ensurate with the business which resulted in the loss of their pawned Eewelry. -$C.ca 7arDedly, respondents, in their 0pposition to petitioners; 7otion to @is iss $ ended Co plaint, insofar as petitioner -ica is concerned, averred as follows) Roberto C. -ica was na ed the defendant in the original co plaint because the pawnshop ticDets involved in this case did not show that the R.C.-ica Pawnshop was a corporation. In paragraph % of his $nswer, he ad itted the allegations in paragraph % and & of the Co plaint. *e erely added 3that defendant is not now the real party in interest in this case.3

It was defendant -ica ;s o ission to correct the pawnshop ticDets used in the subEect transactions in this case which was the cause of the instant action. *e cannot now asD for the dis issal of the co plaint against hi si ply on the ere allegation that his pawnshop business is now incorporated. It is a atter of defense, the erit of which can only be reached after consideration of the evidence to be presented in due course.19 1n istaDably, the alleged ad ission ade in respondents; $ ended Co plaint was taDen 3out of context3 by petitioner -ica to suit his own purpose. Ineluctably, the fact that petitioner -ica continued to issue pawnshop receipts under his na e and not under the corporation;s na e ilitates for the piercing of the corporate veil. "e liDewise find no erit in petitioners; contention that the C$ erred in piercing the veil of corporate fiction of petitioner corporation, as it was not an issue raised and litigated before the RTC. Petitioner -ica had alleged in his $nswer filed with the trial court that he was not the real party9in9 interest because since $pril &4, %2B(, the pawnshop business initiated by hi was incorporated and Dnown as %gencia de R.C. -ica . In the pre9trial brief filed by petitioner -ica , he sub itted that as far as he was concerned, the basic issue was whether he is the real party in interest against who the co plaint should be directed. 20 In fact, he subse,uently oved for the dis issal of the co plaint as to hi but was not favorably acted upon by the trial court. 7oreover, the issue was s,uarely passed upon, although erroneously, by the trial court in its @ecision in this anner) . . . The defendant Roberto -ica , Ar. liDewise denies liability as far as he is concerned for the reason that he cannot be ade personally liable for a clai arising fro a corporate transaction. $aC.@This Court sustains the contention of the defendant Roberto C. -ica , Ar. The a ended co plaint itself asserts that 3plaintiff pawned assorted Eewelries in defendant;s pawnshop.3 It has been held that 3 as a conse,uence of the separate Euridical personality of a corporation, the corporate debt or credit is not the debt or credit of the stocDholder, nor is the stocDholder;s debt or credit that of a corporation. 21 Clearly, in view of the alleged incorporation of the pawnshop, the issue of whether petitioner -ica is personally liable is inextricably connected with the deter ination of the ,uestion whether the doctrine of piercing the corporate veil should or should not apply to the case. The next ,uestion is whether petitioners are liable for the loss of the pawned articles in their possession. Petitioners insist that they are not liable since robbery is a fortuitous event and they are not negligent at all. "e are not persuaded. $rticle %%(C of the Civil Code provides) $rt. %%(C..xcept in cases expressly specified by the law, or when it is otherwise declared by stipulation, or when the nature of the obligation re,uires the assu ption of risD, no person shall be responsible for those events which could not be foreseen or which, though foreseen, were inevitable. Hortuitous events by definition are extraordinary events not foreseeable or avoidable. It is therefore, not enough that the event should not have been foreseen or anticipated, as is co only believed but it ust

be one i possible to foresee or to avoid. The to foresee the sa e. 22

ere difficulty to foresee the happening is not i possibility

To constitute a fortuitous event, the following ele ents ust concur) (a) the cause of the unforeseen and unexpected occurrence or of the failure of the debtor to co ply with obligations ust be independent of hu an will8 (b) it ust be i possible to foresee the event that constitutes the caso fortuito or, if it can be foreseen, it ust be i possible to avoid8 (c) the occurrence ust be such as to render it i possible for the debtor to fulfill obligations in a nor al anner8 and, (d) the obligor ust be free fro any participation in the aggravation of the inEury or loss. 2& The burden of proving that the loss was due to a fortuitous event rests on hi who invoDes it. 24 $nd, in order for a fortuitous event to exe pt one fro liability, it is necessary that one has co itted no negligence or isconduct that ay have occasioned the loss. 2' It has been held that an act of !od cannot be invoDed to protect a person who has failed to taDe steps to forestall the possible adverse conse,uences of such a loss. 0ne;s negligence ay have concurred with an act of !od in producing da age and inEury to another8 nonetheless, showing that the i ediate or proxi ate cause of the da age or inEury was a fortuitous event would not exe pt one fro liability. "hen the effect is found to be partly the result of a person;s participation 6 whether by active intervention, neglect or failure to act 6 the whole occurrence is hu ani+ed and re oved fro the rules applicable to acts of !od. 2( Petitioner -ica had testified that there was a security guard in their pawnshop at the ti e of the robbery. *e liDewise testified that when he started the pawnshop business in %2B5, he thought of opening a vault with the nearby banD for the purpose of safeDeeping the valuables but was discouraged by the Central ?anD since pawned articles should only be stored in a vault inside the pawnshop. The very easures which petitioners had allegedly adopted show that to the the possibility of robbery was not only foreseeable, but actually foreseen and anticipated. Petitioner -ica ;s testi ony, in effect, contradicts petitioners; defense of fortuitous event. acCIT-

7oreover, petitioners failed to show that they were free fro pawned Eewelry ay have been occasioned.

any negligence by which the loss of the

Robbery per se, Eust liDe carnapping, is not a fortuitous event. It does not foreclose the possibility of negligence on the part of herein petitioners. In "o v. "ourt of %ppeals, 27 the Court held) It is not a defense for a repair shop of otor vehicles to escape liability si ply because the da age or loss of a thing lawfully placed in its possession was due to carnapping. Carnapping per se cannot be considered as a fortuitous event. T.e :a7- -.a- a -.<+8 Fa6 u+9aF:u99y a+, :or7e:u99y -aCe+ :ro; a+o-.erB6 r<8.-:u9 =o66e66<o+, a6 <+ 7a6e6 o: 7ar+a==<+8, ,oe6 +o- au-o;a-<7a99y 8<Ae r<6e -o a :or-u<-ou6 eAe+-. To be 7o+6<,ere, a6 6u7., 7ar+a==<+8 e+-a<96 ;ore -.a+ -.e ;ere :or7e:u9 -aC<+8 o: a+o-.erB6 =ro=er-y. I- ;u6- be =roAe, a+, e6-ab9<6.e, -.a- -.e eAe+- Fa6 a+ a7o: Go, or Fa6 ,o+e 6o9e9y by -.<r, =ar-<e6 a+, -.a- +e<-.er -.e 79a<;a+- +or -.e =er6o+ a99e8e, -o be +e89<8e+- .a6 a+y =ar-<7<=a-<o+. I+ a77or,a+7e F<-. -.e Ru9e6 o: EA<,e+7e, -.e bur,e+ o: =roA<+8 -.a- -.e 9o66 Fa6 ,ue -o a :or-u<-ou6 eAe+- re6-6 o+ .<; F.o <+AoCe6 <- J F.<7. <+ -.<6 7a6e <6 -.e =r<Aa-e re6=o+,e+-. *owever, 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. $ police report of an alleged cri e, to which only private respondent is privy, does not suffice to establish the carnapping. #either does it prove that there was no fault on the part of private respondent notwithstanding the parties;

agree ent at the pre9trial that the car was carnapped. Carnapping does not foreclose the possibility of fault or negligence on the part of private respondent. 2) Aust liDe in "o, petitioners erely presented the police report of the Para:a,ue Police -tation on the robbery co itted based on the report of petitioners; e ployees which is not sufficient to establish robbery. -uch report also does not prove that petitioners were not at fault. 0n the contrary, by the very evidence of petitioners, the C$ did not err in finding that petitioners are guilty of concurrent or contributory negligence as provided in $rticle %%(4 of the Civil Code, to wit) $rt. %%(4.Those who in the perfor ance of their obligations are guilty of fraud, negligence, or delay, and those who in any anner contravene the tenor thereof, are liable for da ages. 29 $rticle &%&5 of the Civil Code provides that with regard to pawnshops and other establish ents which are engaged in aDing loans secured by pledges, the special laws and regulations concerning the shall be observed, and subsidiarily, the provisions on pledge, ortgage and antichresis. aT*C-. The provision on pledge, particularly $rticle &422 of the Civil Code, provides that the creditor shall taDe care of the thing pledged with the diligence of a good father of a fa ily. This eans that petitioners ust taDe care of the pawns the way a prudent person would as to his own property. In this connection, $rticle %%(5 of the Civil Code further provides) $rt. %%(5.The fault or negligence of the obligor consists in the o ission of that diligence which is re,uired by the nature of the obligation and corresponds with the circu stances of the persons, of ti e and of the place. "hen negligence shows bad faith, the provisions of $rticles %%(% and &&4%, paragraph & shall apply. If the law or contract does not state the diligence which is to be observed in the perfor ance, that which is expected of a good father of a fa ily shall be re,uired. "e expounded in "ru* v. 0angan &0 that negligence is the o ission to do so ething which a reasonable an, guided by those considerations which ordinarily regulate the conduct of hu an affairs, would do8 or the doing of so ething which a prudent and reasonable an would not do. &1 It is want of care re,uired by the circu stances. $ review of the records clearly shows that petitioners failed to exercise reasonable care and caution that an ordinarily prudent person would have used in the sa e situation. Petitioners were guilty of negligence in the operation of their pawnshop business. Petitioner -ica testified, thus) Court) L.@o you have security guards in your pawnshopP $.Kes, your honor. L.Then how co e that the robbers were able to enter the pre ises when according to you there was a security guardP $.-ir, if these robbers can rob a banD, how uch ore a pawnshop.

L.I a

asDing you how were the robbers able to enter despite the fact that there was a security guardP T.CIa*

$.$t the ti e of the incident which happened about %)44 and &)44 o;clocD in the afternoon and it happened on a -aturday and everything was ,uiet in the area ?H *o es Para:a,ue they pretended to pawn an article in the pawnshop, so one of y e ployees allowed hi to co e in and it was only when it was announced that it was a hold up. L.@id you co e to Dnow how the vault was openedP $."hen the pawnshop is official (sic) open your honor the pawnshop is partly open. The co bination is off. L.#o one open (sic) the vault for the robbersP $.#o one your honor it was open at the ti e of the robbery. L.It is clear now that at the ti e of the robbery the vault was open the reason why the robbers were able to get all the ite s pawned to you inside the vault. $.Kes sir. &2 revealing that there were no security easures adopted by petitioners in the operation of the pawnshop. .vidently, no sufficient precaution and vigilance were adopted by petitioners to protect the pawnshop fro unlawful intrusion. There was no clear showing that there was any security guard at all. 0r if there was one, that he had sufficient training in securing a pawnshop. Hurther, there is no showing that the alleged security guard exercised all that was necessary to prevent any untoward incident or to ensure that no suspicious individuals were allowed to enter the pre ises. In fact, it is even doubtful that there was a security guard, since it is ,uite i possible that he would not have noticed that the robbers were ar ed with caliber .CF pistols each, which were allegedly poDed at the e ployees. && -ignificantly, the alleged security guard was not presented at all to corroborate petitioner -ica ;s clai 8 not one of petitioners; e ployees who were present during the robbery incident testified in court. Hurther ore, petitioner -ica ;s ad ission that the vault was open at the ti e of robbery is clearly a proof of petitioners; failure to observe the care, precaution and vigilance that the circu stances Eustly de anded. Petitioner -ica testified that once the pawnshop was open, the co bination was already off. Considering petitioner -ica ;s testi ony that the robbery tooD place on a -aturday afternoon and the area in ?H *o es Para:a,ue at that ti e was ,uiet, there was ore reason for petitioners to have exercised reasonable foresight and diligence in protecting the pawned Eewelries. Instead of taDing the precaution to protect the , they let open the vault, providing no difficulty for the robbers to cart away the pawned articles. "e, however, do not agree with the C$ when it found petitioners negligent for not taDing steps to insure the selves against loss of the pawned Eewelries. 1nder -ection %( of Central ?anD Circular #o. 5(C, Rules and Regulations for Pawnshops, which tooD effect on Auly %5, %2(5, and which was issued pursuant to Presidential @ecree #o. %%C, Pawnshop Regulation $ct, it is provided that pawns pledged ust be insured, to wit) -ec. %(.Insurance of 0ffice ?uilding and Pawns 6 The place of business of a pawnshop and the pawns pledged to it ust be insured a8a<+6- :<re a+, a8a<+6-

bur89ary as well as for the latter (sic), by an insurance co pany accredited by the Insurance Co issioner. *owever, this -ection was subse,uently a ended by C? Circular #o. ('C which tooD effect on 0ctober %, %2B4, to wit) @T$Ia* -ec. %(Insurance of 0ffice ?uilding and Pawns 6 The office buildingJpre ises and pawns of a pawnshop ust be insured a8a<+6- :<re. (e phasis supplied). where the re,uire ent that insurance against burglary was deleted. 0bviously, the Central ?anD considered it not feasible to re,uire insurance of pawned articles against burglary. The robbery in the pawnshop happened in %2B(, and considering the above9,uoted a end ent, there is no statutory duty i posed on petitioners to insure the pawned Eewelry in which case it was error for the C$ to consider it as a factor in concluding that petitioners were negligent. #evertheless, the preponderance of evidence shows that petitioners failed to exercise the diligence re,uired of the under the Civil Code. The diligence with which the law re,uires the individual at all ti es to govern his conduct varies with the nature of the situation in which he is placed and the i portance of the act which he is to perfor . &4 Thus, the cases of %ustria v. "ourt of %ppeals, &' 'ernande* v. "hairman, "ommission on %udit &( and"ru* v. 0angan &7 cited by petitioners in their pleadings, where the victi s of robbery were exonerated fro liability, find no application to the present case. In %ustria, 7aria $bad received fro !uiller o $ustria a pendant with dia onds to be sold on co ission basis, but which $bad failed to subse,uently return because of a robbery co itted upon her in %2'%. The incident beca e the subEect of a cri inal case filed against several persons. $ustria filed an action against $bad and her husband ($bads) for recovery of the pendant or its value, but the $bads set up the defense that the robbery extinguished their obligation. The RTC ruled in favor of $ustria, as the $bads failed to prove robbery8 or, if co itted, that 7aria $bad was guilty of negligence. The C$, however, reversed the RTC decision holding that the fact of robbery was duly established and declared the $bads not responsible for the loss of the Eewelry on account of a fortuitous event. "e held that for the $bads to be relieved fro the civil liability of returning the pendant under $rt. %%(C of the Civil Code, it would only be sufficient that the unforeseen event, the robbery, tooD place without any concurrent fault on the debtor;s part, and this can be done by preponderance of evidence8 that to be free fro liability for reason of fortuitous event, the debtor ust, in addition to the casus itself, be free of any concurrent or contributory fault or negligence. &)

"e found in %ustria that under the circu stances prevailing at the ti e the @ecision was pro ulgated in %2(%, the City of 7anila and its suburbs had a high incidence of cri es against persons and property that rendered travel after nightfall a atter to be sedulously avoided without suitable precaution and protection8 that the conduct of 7aria $bad in returning alone to her house in the evening carrying Eewelry of considerable value would have been negligence per se and would not exe pt her fro responsibility in the case of robbery. *owever we did not hold $bad liable for negligence since, the robbery happened ten years previously8 i.e., %2'%, when cri inality had not reached the level of incidence obtaining in %2(%. In contrast, the robbery in this case tooD place in %2B( when robbery was already prevalent and petitioners in fact had already foreseen it as they wanted to deposit the pawn with a nearby banD for safeDeeping. 7oreover, unliDe in %ustria, where no negligence was co itted, we found petitioners negligent in securing their pawnshop as earlier discussed.

In 'ernande*, Teodoro *ernande+ was the 0IC and special disbursing officer of the Ternate ?each ProEect of the Philippine Touris in Cavite. In the orning of Auly %, %2B5, a Hriday, he went to 7anila to encash two checDs covering the wages of the e ployees and the operating expenses of the proEect. *owever for so e reason, the processing of the checD was delayed and was co pleted at about 5 p. . #evertheless, he decided to encash the checD because the proEect e ployees would be waiting for their pay the following day8 otherwise, the worDers would have to wait until Auly F, the earliest ti e, when the ain office would open. $t that ti e, he had two choices) (%) return to Ternate, Cavite that sa e afternoon and arrive early evening8 or (&) taDe the oney with hi to his house in 7arilao, ?ulacan, spend the night there, and leave for Ternate the following day. *e chose the second option, thinDing it was the safer one. Thus, a little past 5 p. ., he tooD a passenger Eeep bound for ?ulacan. "hile the Eeep was on .pifanio de los -antos $venue, the Eeep was held up and the oney Dept by *ernande+ was taDen, and the robbers Eu ped out of the Eeep and ran. *ernande+ chased the robbers and caught up with one robber who was subse,uently charged with robbery and pleaded guilty. The other robber who held the stolen oney escaped. The Co ission on $udit found *ernande+ negligent because he had not brought the cash proceeds of the checDs to his office in Ternate, Cavite for safeDeeping, which is the nor al procedure in the handling of funds. "e held that *ernande+ was not negligent in deciding to encash the checD and bringing it ho e to 7arilao, ?ulacan instead of Ternate, Cavite due to the lateness of the hour for the following reasons) (%) he was oved by unselfish otive for his co9e ployees to collect their wages and salaries the following day, a -aturday, a non9worDing, because to encash the checD on Auly F, the next worDing day after Auly %, would have caused disco fort to laborers who were dependent on their wages for sustenance8 and (&) that choosing 7arilao as a safer destination, being nearer, and in view of the co parative ha+ards in the trips to the two places, said decision see ed logical at that ti e. "e further held that the fact that two robbers attacDed hi in broad daylight in the Eeep while it was on a busy highway and in the presence of other passengers could not be said to be a result of his i prudence and negligence. a-$@IC 1nliDe in 'ernande* where the robbery happened in a public utility, the robbery in this case tooD place in the pawnshop which is under the control of petitioners. Petitioners had the eans to screen the persons who were allowed entrance to the pre ises and to protect itself fro unlawful intrusion. Petitioners had failed to exercise precautionary easures in ensuring that the robbers were prevented fro entering the pawnshop and for Deeping the vault open for the day, which paved the way for the robbers to easily cart away the pawned articles. In "ru*, @r. Hilonila 0. Cru+, Ca anava @istrict @irector of Technological .ducation and -Dills @evelop ent $uthority (T.-@$), boarded the /ight Rail Transit (/RT) fro -en. Puyat $venue to 7onu ento when her handbag was slashed and the contents were stolen by an unidentified person. $ ong those stolen were her wallet and the govern ent9issued cellular phone. -he then reported the incident to the police authorities8 however, the thief was not located, and the cellphone was not recovered. -he also reported the loss to the Regional @irector of T.-@$, and she re,uested that she be freed fro accountability for the cellphone. The Resident $uditor denied her re,uest on the ground that she lacDed the diligence re,uired in the custody of govern ent property and was ordered to pay the purchase value in the total a ount of PC,&5B.44. The C0$ found no sufficient Eustification to grant the re,uest for relief fro accountability. "e reversed the ruling and found that riding the /RT cannot per se be denounced as a negligent act ore so because Cru+;s ode of transit was influenced by ti e and oney considerations8 that she boarded the /RT to be able to arrive in Caloocan in ti e for her 5 p eeting8 that any prudent and rational person under si ilar circu stance can reasonably be expected to do the sa e8 that possession of a cellphone should not hinder one fro boarding the /RT coach as Cru+ did considering that whether she rode a Eeep or bus, the risD of theft would have also been present8 that because of her relatively low position and pay, she was not expected to have her own vehicle or to ride a taxicab8 she did not have a govern ent assigned vehicle8 that placing the cellphone in a bag away fro covetous eyes and holding on to that bag as she did is ordinarily sufficient care of a cellphone while traveling on board the /RT8 that the records did not show any specific act of negligence on her part and negligence can never be presu ed.

1nliDe in the "ru* case, the robbery in this case happened in petitioners; pawnshop and they were negligent in not exercising the precautions Eustly de anded of a pawnshop. "*.R.H0R., except for the insurance aspect, the @ecision of the Court of $ppeals dated 7arch 5%, &445 and its Resolution dated $ugust B, &445, are $HHIR7.@. Costs against petitioners. -0 0R@.R.@. 1nares-!antiago, "hico-6a*ario and 6achura, JJ., concur. .# ?$#C =!.R. #o. /9&%(C2. -epte ber &2, %2'(.> REP!*LIC OF THE PHILIPPINE$, plaintiff-appellee, vs. L!3ON $TE%E ORING CORPORATION, defendant-appellant. /he !olicitor 0eneral for the plaintiff9appellee. '. !an +uis and +.<. !imbulan for defendant9appellant. $#LLA*!$ %.R.7.@I$/ /$"8 $PP.$/-, .HH.CT 0H8 "$IG.R8 .-T0PP./. 6 The established rule in this Eurisdiction is that when a party appeals directly to the -upre e Court and sub its his case there for decision, he is dee ed to have waived the right to dispute any finding of fact ade by the trial court. The only ,uestions that ay be raised are those of law. $ converso, a party who resorts to the Court of $ppeals and sub its his case for decision there, is barred fro contending later that his clai was beyond the Eurisdiction of that Court. &.CIGI/ /$"8 C1/P$ $L1I/I$#$8 PR.-17PTI0#-8 R.- IP-$ /0L1IT1R. 6 "here an i ovable and stationary obEect liDe the #agtahan bridge, uncontrovertedly provided with ade,uate openings for passage of watercraft, is ra ed by a barge exclusively controlled by appellant, causing da age to its supports, there arises a presu ption of negligence on appellant;s part or its e ployees, anning the barge or the tugs that towed it. In the ordinary course of events, such a thing does not happen if proper care is used. In $nglo9$ erican Aurisprudence, the inference arises by what is Dnown as the 3res ipsa lo,uitur3 rule. 5.I@8 C$-0 H0RT1IT0. 6 Caso fortuito or force aEeure (which in law are identical insofar as they exe pt an obligor fro liability) by definition, eans extraordinary events not forseeable or avoidable, 3events that could not be forseen, or which though foreseen, were inevitable.3 It is therefore not enough that the event should not have been forseen or anticipated, but it ust be one i possible to foresee or to avoid. The ere difficulty to foresee the happening is not i possibility to foresee the sa e) 3un hecho no constituye caso fortuito por la sola circunstancia de ,ue su existencia haga Ss dificil o Ss onerosa la acciTn diligente del presUnto ofensor.3

C.I@.8 C$-0 H0RT1IT0, I#G0C$TI0# 0H. 6 "here appellant adopted precautionary easures by assigning two of its ost powerful tugboats to tow its barge down river and by assigning its ore co petent and experienced patrons to taDe care of the towlines, who were instructed to taDe precautions8 and where the engines and e,uip ent had been double9checDed and unspected so that it had done all it could do to prevent an accident, said appellant cannot invoDe caso fortuito or force aEeure, as the possibility of danger was not only foreseeable, but actually foreseen. 0therwise stated, appellant, Dnowing or appreciating the perils posed by the swollen strea and its swift current, voluntarily entered into a situation involving obvious danger8 it therefore assu ed the risD, and cannot shed responsibility erely because the precautions it adopted turned out to be insufficient. F.R.7.@I$/ /$"8 .GI@.#C.8 @I-CR.TI0# 0H A1@!.. 6 "hether or not further evidence will be allowed after a party offering the evidence had rested his case, lies within the sound discretion of the trial Eudge, and this discretion will not be reviewed except in clear case of abuse.

ECI$ION

RE#E$, 5.*.L., J =) The present case co es by direct appeal fro a decision of the Court of Hirst Instance of 7anila (Case #o. CCF(&) adEudging the defendant9appellant,/u+on -tevedoring Corporation, liable in da ages to the plaintiff9appellee Republic of the Philippines. In the early afternoon of $ugust %(, %2'4, barge /9%B2&, owned by the /u+on -tevedoring Corporation was being towed down the Pasig river by tugboats 3?angus3 and 3?arbero,3 1 also belonging to the sa e corporation, when the barge ra ed against one of the wooden piles of the #agtahan bailey bridge, s ashing the posts and causing the bridge to list. The river, at the ti e, was swollen and the current swift, on account of the heavy downpour in 7anila and the surrounding provinces on $ugust %F and %', %2'4. -ued by the Republic of the Philippines for actual and conse,uential da age caused by its e ployees, a ounting to P&44,444 (Civil Case #o. CCF'&, CHI of 7anila), defendant /u+on -tevedoring Corporation disclai ed liability therefor, on the grounds that it had exercised due diligence in the selection and supervision of its e ployees8 that the da ages to the bridge were caused by force ma(eure8 that plaintiff has no capacity to sue8 and that the #agtahan bailey bridge is an obstruction to navigation. $fter due trial, the court rendered Eudg ent on Aune %%, %2'5, holding the defendant liable for the da age caused by its e ployees and ordering it to pay plaintiff the actual cost of the repair of the #agtahan bailey bridge which a ounted to P%2&,F'%.(&, with legal interest thereon fro the date of the filing of the co plaint. @efendant appealed directly to this Court assigning the following errors allegedly co court a quo, to wit) itted by the

I 6 The lower court erred in not holding that the herein defendant9appellant had exercised the diligence re,uired of it in the selection and supervision of its personnel to prevent da age or inEury to others. II 6 The lower court erred in not holding that the ra ing of the #agtahan bailey bridge by barge /9%B2& was caused by force ma(eure.

III 6 The lower court erred in not holding that the #agtahan bailey bridge is an obstruction, if not a enace, to navigation in the Pasig river. IG 6 The lower court erred in not bla ing the da age sustained by the #agtahan bailey bridge to the i proper place ent of the dolphins. G 6 The lower court erred in granting the plaintiff;s in chief after it has rested its case. otion to adduce further evidence

GI 6 The lower court erred in finding the plaintiff entitled to the a ount of P%2&,F'%.(& for da ages which is clearly exorbitant and without any factual basis. *owever, it ust be recalled that the established rule in this Eurisdiction is that when a party appeals directly to the -upre e Court, and sub its his case there for decision, he is dee ed to have waived the right to dispute any finding of fact ade by the trial Court. The only ,uestions that ay be raised are those of law (-avellano vs. @ia+, /9%(2C%, Auly 5%, %2'58 $balle vs. -antiago, /9 %'54(, $pril 54, %2'5, !.-.I.-. vs. Cloribel, /9&&&5', Aune &&, %2'F). $ converso, a party who resorts to the Court of $ppeals, and sub its his case for decision there, is barred fro contending later that his clai was beyond the Eurisdiction of the aforesaid Court. The reason is that a contrary rule would encourage the undesirable practice of appellants; sub itting their cases for decision to either court in expectation of favorable Eudg ent, but with intent of attacDing its Eurisdiction should the decision be unfavorable (Tyson Tan et al. vs. Hilipinas Co pa:ia de -eguros et al., /9%442', Res. on 7otion to Reconsider, 7arch &5, %2''). Conse,uently, we are li ited in this appeal to the issues of law raised in the appellant;s brief. TaDing the aforesaid rules into account, it can be seen that the only reviewable issues in this appeal are reduced to two) %)"hether or not the collision of appellant;s barge with the supports or piers of the #agtahan bridge was in law caused by fortuitous event or force ma(eure, and &)"hether or not it was error for the Court to have per itted the plaintiff9appellee to introduce additional evidence of da ages after said party had rested its case. $s to the first ,uestion considering that the #agtahan bridge was an i ovable and stationary obEect and uncontrovertedly provided with ade,uate openings for the passage of water craft, including barges liDe of appellant;s, it is undeniable that the unusual event that the barge, exclusively controlled by appellant, ra ed the bridge supports raises a presu ption of negligence on the part of appellant or its e ployees anning the barge or the tugs that towed it. Hor in the ordinary course of events, such a thing does not happen if proper care is used. In $nglo $ erican Aurisprudence, the inference arises by what is Dnown as the 3res ipsa loquitur3 rule (-cott vs. /ondon @ocDs, Co., & * < C F2'8 -an Auan /ight < Transit Co. vs. Re,uena, &&C 1.-. B2, F' /. .d., 'B48 "hitwell vs. "olf, %&( 7inn. F&2, %C2 #.". &228 ?ryne vs. !reat $tlantic < Pacific Tea Co., &'2 7ass. %548 %'B #... FC48 !ribsby vs. - ith, %C' -.". &d (%2). The appellant strongly stresses the precautions taDen by it on the day in ,uestion) that it assigned two of its ost powerful tugboats to tow down river its barge /9%B2&8 that it assigned to the tasD the ore co petent and experienced a ong its patrons, had the towlines, engines and e,uip ent double9checDed and inspected; that it instructed its patrons to taDe extra precautions8 and concludes that it had done all it was called to do, and that the accident, therefore, should be held due to force ma(eure or fortuitous event. These very precautions, however, co pletely destroy the appellant;s defense. Hor caso fortuito or force ma(eure (which in law are identical in so far as they exe pt an obligor fro liability) 2 by definition, are extraordinary events not foreseeable or avoidable, 3events that could not be foreseen, or which, though foreseen, were inevitable3 ($rt. %%(C, Civ. Code of the Philippines). It is therefore, not enough that the event should not have been foreseen or anticipated, as is co only believed but it ust be one

i possible to foresee or to avoid. The ere difficulty to foresee the happening is not i possibility to foresee the sa e) 3un hecho no constituye caso fortuito por la sola circunstancia de ,ue su existencia haga as dificil o as onerosa la accion diligente del presento ofensor3 (Peirano Hacio, esponsabilidad ?xtra-contractual, p. C'F8 7a+eaud, /rait de la esponsabilite "ivil, Gol. &, sec. %F'2). The very easures adopted by appellant prove that the possibility of danger was not only foreseeable, but actually foreseen, and was not caso fortuito.

0therwise state, the appellant, /u+on -tevedoring Corporation, Dnowing and appreciating the perils posed by the swollen strea and its swift current, voluntarily entered into a situation involving obvious danger8 it therefore assu ed the risD, and can not shed responsibility erely because the precautions it adopted turned out to be insufficient. *ence, the lower Court co itted no error in holding it negligent in not suspending operations and in holding it liable for the da ages caused. It avails the appellant naught to argue that the dolphins, liDe the bridge, were i properly located. .ven if true, these circu stances would erely e phasi+e 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 i proper constructions that had been erected and, in place, for years. 0n the second point) appellant charges the lower court with having abused its discretion in the ad ission of plaintiff;s additional evidence after the latter had rested its case. There is an insinuation that the delay was deliberate to enable the anipulation of evidence to preEudice defendant9appellant. "e find no erit in the contention. "hether 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 Audge, and this discretion will not be reviewed except in clear case of abuse. & In the present case, no abuse of that discretion is shown. "hat was allowed to be introduced, after plaintiff had rested its evidence in chief, were vouchers and papers to support an ite of P%,FFB,44 allegedly spent for the reinforce ent of the panel of the bailey bridge, and which ite already appeared in .xhibit !!. $ppellant, in fact, has no reason to charge the trial court of being unfair, because it was also able to secure, upon written otion, a si ilar order dated #ove ber &C, %2'&, allowing reception of additional evidence for the said defendant9appellant. 4 "*.R.H0R., finding no error in the decision of the lower Court appealed fro , the sa e is hereby affir ed. Costs against the defendant9appellant. "oncepcion, ".J., .i*on, 8a:alintal, -aldivar, !anche*, "astro, %ngeles and 7ernando, JJ., concur. -.C0#@ @IGI-I0# =!.R. #o. B(4C(. 0ctober 5%, %224.> FRANCI$CO LAO LI", petitioner, vs. CO!RT OF APPEAL$ a+, *ENITO %ILLA%ICENCIO #, respondents. 0ener ? . %suncion for petitioner. 6atividad / . ,ere* for private respondent.

ECI$ION

REGALA O , J p) Respondent Court of $ppeals having affir ed in toto on Aune 54, %2BB in C$9!.R. -P #o. %52&F 1 the decision of the Regional Trial Court of 7anila, ?ranch M/GI, in Civil Case #o. B(C&(%2, entitled 3Hrancisco /ao /i vs. ?enito Gillavicencio @y,3 petitioner seeDs the reversal of such affir ance in the instant petition. The records show that private respondent entered into a contract of lease with petitioner for a period of three (5) years, that is, fro %2(' to %2(2. $fter the stipulated ter expired, private respondent refused to vacate the pre ises, hence, petitioner filed an eEect ent suit against the for er in the City Court of 7anila, docDeted therein as Civil Case #o. 4F%4'59CG. The case was ter inated by a Eudicially approved co pro ise agree ent of the parties providing in part) 35.That the ter of the lease shall be renewed every three years retroacting fro 0ctober %2(2 to 0ctober %2B&8 after which the abovena ed rental shall be raised auto atically by &4I every three years for as long as defendant needed the pre ises and can eet and pay the said increases, the defendant to give notice of his intent to renew sixty ('4) days before the expiration of the ter 83 2 ?y reason of said co pro ise agree ent the lease continued fro %2(2 to %2B&, then fro %2B& to %2BF. 0n $pril %(, %2BF, petitioner advised private respondent that he would no longer renew the contract effective 0ctober, %2BF. & *owever, on $ugust F, %2BF, private respondent infor ed petitioner in writing of his intention to renew the contract of lease for another ter , co encing #ove ber, %2BF to 0ctober, %2BB. 4 In reply to said letter, petitioner advised private respondent that he did not agree to a renewal of the lease contract upon its expiration in 0ctober, %2BF. ' 0n Aanuary %F, %2B', because of private respondent;s refusal to vacate the pre ises, petitioner filed another eEect ent suit, this ti e with the 7etropolitan Trial Court of 7anila in Civil Case #o. %%C'F29CG. In its decision of -epte ber &C, %2B(, said court dis issed the co plaint on the grounds that (%) the lease contract has not expired, being a continuous one the period whereof depended upon the lessee;s need for the pre ises and his ability to pay the rents8 and (&) the co pro ise agree ent entered into in the aforesaid Civil Case #o. 4F%4'59CG constitutes res (udicata to the case before it. ( Petitioner appealed to the Regional Trial Court of 7anila which, in its decision of Aanuary &B, %2BB in Civil Case #o. B(C&(%2, affir ed the decision of the lower court. 7 $s stated at the outset, respondent Court of $ppeals affir ed in full said decision of the Regional Trial Court and held that (%) the stipulation in the co pro ise agree ent which, in its for ulation, allows the lessee to stay on the pre ises as long as he needs it and can pay rents is valid, being a resolutory condition and, therefore, beyond the a bit of $rticle %54B of the Civil Code8 and (&) that a co pro ise has the effect of res (udicata. ) Petitioner;s otion for reconsideration having been denied by respondent Court of $ppeals, this present petition is now before us. "e find the sa e to be eritorious. Contrary to the ruling of respondent court, the disputed stipulation 3for as long as the defendant needed the pre ises and can eet and pay said increases3 is a purely potestative condition because it leaves the effectivity and enEoy ent of leasehold rights to the sole and exclusive will of the lessee. It is liDewise a suspensive condition because the renewal of the lease, which gives rise to a new lease, depends upon said condition. It should be noted that a renewal constitutes a new contract of lease although with the

sa e ter s and conditions as those in the expired lease. It should also not be overlooDed that said condition is not resolutory in nature because it is not a condition that ter inates the lease contract. The lease contract is for a definite period of three (5) years upon the expiration of which the lease auto atically ter inates. prcd The invalidity of a condition in a lease contract si ilar to the one at bar has been resolved in ?ncarnacion vs. $aldomar, et al., 9 where we ruled that in an action for eEect ent, the defense interposed by the lessees that the contract of lease authori+ed the to continue occupying the pre ises as long as they paid the rents is untenable, because it would leave to the lessees the sole power to deter ine whether the lease should continue or not. $s stated therein, 3(i)f this defense were to be allowed, so long as defendants elected to continue the lease by continuing the pay ent of the rentals, the owner would never be able to discontinue it8 conversely, although the owner should desire the lease to continue, the lessees could effectively thwart his purpose if they should prefer to ter inate the contract by the si ple expedient of stopping pay ent of the rentals. This, of course, is prohibited by the aforesaid article of the Civil Code. (B 7anresa, 5d ed., pp. '&', '&(8 "uyugan vs. !antos, 5C Phil. %44.)3 The continuance, effectivity and fulfill ent of a contract of lease cannot be ade to depend exclusively upon the free and uncontrolled choice of the lessee between continuing the pay ent of the rentals or not, co pletely depriving the owner of any say in the atter. 7utuality does not obtain in such a contract of lease and no e,uality exists between the lessor and the lessee since the life of the contract is dictated solely by the lessee. Cdpr The interpretation ade by respondent court cannot, therefore, be upheld. Paragraph 5 of the co pro ise agree ent, read and interpreted in its entirety, is actually to the effect that the last portion thereof, which gives the private respondent sixty ('4) days before the expiration of the ter the right to give notice of his intent to renew, is subEect to the first portion of said paragraph that 3the ter of the lease shall be renewed every three (5) years,3 thereby re,uiring the utual agree ent of the parties. The use of the word 3renew3 and the designation of the period of three (5) years clearly confir that the contract of lease is li ited to a specific period and that it is not a continuing lease. The stipulation provides for a renewal of the lease every three (5) years8 there could not be a renewal if said lease did not expire, otherwise there is nothing to renew. Resultantly, the contract of lease should be and is hereby construed as providing for a definite period of three (5) years and that the auto atic increase of the rentals by twenty percent (&4I) will taDe effect only if the parties decide to renew the lease. $ contrary interpretation will result in a situation where the continuation and effectivity of the contract will depend only upon the will of the lessee, in violation of $rticle %54B of the Civil Code and the aforesaid doctrine in ?ncarnacion. The co pro ise agree ent should be understood as bearing that i port which is ost ade,uate to render it effectual. 10 "here the instru ent is susceptible of two interpretations, one which will aDe it invalid and illegal and another which will aDe it valid and legal, the latter interpretation should be adopted. 11 7oreover, perpetual leases are not favored in law, nor are covenants for continued renewals tending to create a perpetuity, and the rule of construction is well settled that a covenant for renewal or for an additional ter should not be held to create a right to repeated grants in perpetuity, unless by plain and una biguous ter s the parties have expressed such intention. 12 $ lease will not be construed to create a right to perpetual renewals unless the language e ployed indicates clearly and una biguously that it was the intention and purpose of the parties to do so. 1& $ portion in a lease giving the lessee and his assignee the right to perpetual renewals is not favored by the courts, and a lease will be construed as not aDing such a provision unless it does so clearly. 14 $s we have further e phasi+ed) 3It is also i portant to bear in ind that in a reciprocal contract liDe a lease, the period of the lease ust be dee ed to have been agreed upon for the benefit of both

parties, absent language showing that the ter was deliberately set for the benefit of the lessee or lessor alone. "e are not aware of any presu ption in law that the ter of a lease is designed for the benefit of the lessee alone. Aoh and "ru* in effect rested upon such a presu ption. ?ut that presu ption cannot reasonably be indulged in casually in an era of rapid econo ic change, arDed by, a ong other things, volatile costs of living and fluctuations in the value of the do estic currency. The longer the period the ore clearly unreasonable such a presu ption would be. In an age liDe that we live in, very specific language is necessary to show an intent to grant a unilateral faculty to extend or renew a contract of lease to the lessee alone, or to the lessor alone for that atter. "e hold that the above9,uoted rulings in Aoh v. Ongsiaco and"ru* v. %lberto should be and are overruled.3 1' In addition, even assu ing that the clause 3for as long as the defendant needed the pre ises and can eet and pay, said increases3 gives private respondent an option to renew the lease, the sa e will be construed as providing for but one renewal or extension and, therefore, was satisfied when the lease was renewed in %2B& for another three (5) years. $ general covenant to renew is satisfied by one renewal and will not be construed to confer the right to ore than one renewal unless provision is clearly and expressly ade for further renewals. 1( /eases which ay have been intended to be renewable in perpetuity will nevertheless be construed as i porting but one renewal if there is any uncertainty in that regard. 17

The case of $uccat vs. .ispo, et al., 1) relied upon by respondent court, to support its holding that respondent lessee can legally stay on the pre ises for as long as he needs it and can pay the rents, is not in point. In said case, the lease contract provides for an indefinite period since it erely stipulates 3(t)hat the lease contract shall re ain in full force and effect as long as the land will serve the purpose for which it is intended as a school site of the #ational ?usiness Institute, but the rentals now stipulated shall be subEect to review every after ten (%4) years by utual agree ent of the parties.3 This is in clear contrast to the case at bar wherein, to repeat, the lease is fixed at a period of three (5) years although subEect to renewal upon agree ent of the parties, and the clause 3for as long as defendant needs the pre ises and can eet and pay the rents3 is not an independent stipulation but is controlled by said fixed ter and the option for renewal upon agree ent of both parties. 0n the second issue, we agree with petitioner that respondent court erred in holding that the action for eEect ent is barred by res (udicata. "hile it is true that a co pro ise agree ent has the effect of res (udicata, this doctrine does not apply in the present case. It is ele entary that for a Eudg ent to be a bar to a subse,uent case, (%) it ust be a final Eudg ent, (&) the court which rendered it had Eurisdiction over the subEect atter and the parties, (5) it ust be a Eudg ent on the erits, and (C) there ust be identity between the two cases as to parties, subEect atter and cause of action. 19 In the case at bar, the fourth re,uisite is lacDing. $lthough there is identity of parties, there is no identity of subEect atter and cause of action. The subEect atter in the first eEect ent case is the original lease contract while the subEect atter in the case at bar is the lease created under the ter s provided in the subse,uent co pro ise agree ent. The lease executed in %2(B is one thing8 the lease constituted in %2B& by the co pro ise agree ent is another. //Eur There is also no identity, in the causes of action. The test generally applied to deter ine the identity of causes of action is to consider the identity of facts essential to their aintenance, or whether the sa e evidence would sustain both causes of action. 20 In the case at bar, the delict or the wrong in the first case is different fro that in the second, and the evidence that will support and establish the cause of action in the for er will not suffice to support and establish that in the latter.

In the first eEect ent case, the cause of action was private respondent;s refusal to co ply with the lease contract which expired on @ece ber 5%, %2(B. In the present case, the cause of action is a si ilar refusal but with respect to the lease which expired in 0ctober, %2BF under the co pro ise agree ent. "hile the co pro ise agree ent ay be res (udicata as far as the cause of action and issues in the first eEect ent case is concerned, any cause of action that arises fro the application or violation of the co pro ise agree ent cannot be said to have been settled in said first case. The co pro ise agree ent was eant to settle, as it did only settle, the first case. It did not, as it could not, cover any cause of action that ight arise thereafter, liDe the present case which was founded on the expiration of the lease in %2BF, which necessarily re,uires a different set of evidence. The fact that the co pro ise agree ent was Eudicially approved does not foreclose any cause of action arising fro a violation of the ter s thereof. cdrep "*.R.H0R., the decision of respondent Court of $ppeals is R.G.R-.@ and -.T $-I@.. Private respondent is hereby ordered to i ediately vacate and return the possession of the leased pre ises subEect of the present action to petitioner and to pay the onthly rentals due thereon in accordance with the co pro ise agree ent until he shall have actually vacated the sa e. This Eudg ent is i ediately executory. -0 0R@.R.@. 8elencio-'errera , ,aras, ,adilla and !armiento, JJ., concur.