[G.R. No. 87047. October 31, 1990.] FRANCISCO LAO LIM, petitioner, vs. COURT DY, respondents.

REGALADO, J p: Respondent Court of Appeals having affirmed in toto on June 30, 1988 in CA-G.R. SP No. 13925 1 the decision of the Regional Trial Court of Manila, Branch XLVI, in Civil Case No. 8742719, entitled "Francisco Lao Lim vs. Benito Villavicencio Dy," petitioner seeks the reversal of such affirmance in the instant petition. The records show that private respondent entered into a contract of lease with petitioner for a period of three (3) years, that is, from 1976 to 1979. After the stipulated term expired, private respondent refused to vacate the premises, hence, petitioner filed an ejectment suit against the former in the City Court of Manila, docketed therein as Civil Case No. 051063-CV. The case was terminated by a judicially approved compromise agreement of the parties providing in part: "3.That the term of the lease shall be renewed every three years retroacting from October 1979 to October 1982; after which the abovenamed rental shall be raised automatically by 20% every three years for as long as defendant needed the premises and can meet and pay the said increases, the defendant to give notice of his intent to renew sixty (60) days before the expiration of the term;" 2 By reason of said compromise agreement the lease continued from 1979 to 1982, then from 1982 to 1985. On April 17, 1985, petitioner advised private respondent that he would no longer renew the contract effective October, 1985. 3 However, on August 5, 1985, private respondent informed petitioner in writing of his intention to renew the contract of lease for another term, commencing November, 1985 to October, 1988. 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 October, 1985. 5 On January 15, 1986, because of private respondent's refusal to vacate the premises, petitioner filed another ejectment suit, this time with the Metropolitan Trial Court of Manila in Civil Case No. 114659-CV. In its decision of September 24, 1987, said court dismissed the complaint on the grounds that (1) the lease contract has not expired, being a continuous one the period whereof depended upon the lessee's need for the premises and his ability to pay the rents; and (2) the compromise agreement entered into in the aforesaid Civil Case No. 051063-CV constitutes res judicata to the case before it. 6 Petitioner appealed to the Regional Trial Court of Manila which, in its decision of January 28, 1988 in Civil Case No. 8742719, affirmed the decision of the lower court. 7 As stated at the outset, respondent Court of Appeals affirmed in full said decision of the Regional Trial Court and held that (1) the stipulation in the compromise agreement which, in its formulation, allows the lessee to stay on the premises as long as he needs it and can pay rents is valid, being a resolutory condition and, therefore, beyond the ambit of Article 1308 of the Civil Code; and (2) that a compromise has the effect of res judicata. 8 Petitioner's motion for reconsideration having been denied by respondent Court of Appeals, this present petition is now before us. We find the same to be meritorious. Contrary to the ruling of respondent court, the disputed stipulation "for as long as the defendant needed the premises and can meet and pay said increases" is a purely potestative condition because it leaves the effectivity and enjoyment of leasehold rights to the sole and exclusive will of the lessee. It is likewise 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 same terms and conditions as those in the expired lease. It should also not be overlooked that said condition is not resolutory in nature because it is not a condition that terminates the lease contract. The lease contract is for a definite period of three (3) years upon the expiration of which the lease automatically terminates. prcd OF APPEALS and BENITO VILLAVICENCIO

The invalidity of a condition in a lease contract similar to the one at bar has been resolved in Encarnacion vs. Baldomar, et al., 9 where we ruled that in an action for ejectment, the defense interposed by the lessees that the contract of lease authorized them to continue occupying the premises as long as they paid the rents is untenable, because it would leave to the lessees the sole power to determine whether the lease should continue or not. As stated therein, "(i)f this defense were to be allowed, so long as defendants elected to continue the lease by continuing the payment of the rentals, the owner would never be able to discontinue it; conversely, although the owner should desire the lease to continue, the lessees could effectively thwart his purpose if they should prefer to terminate the contract by the simple expedient of stopping payment of the rentals. This, of course, is prohibited by the aforesaid article of the Civil Code. (8 Manresa, 3d ed., pp. 626, 627; Cuyugan vs. Santos, 34 Phil. 100.)" The continuance, effectivity and fulfillment of a contract of lease cannot be made to depend exclusively upon the free and uncontrolled choice of the lessee between continuing the payment of the rentals or not, completely depriving the owner of any say in the matter. Mutuality does not obtain in such a contract of lease and no equality exists between the lessor and the lessee since the life of the contract is dictated solely by the lessee. Cdpr The interpretation made by respondent court cannot, therefore, be upheld. Paragraph 3 of the compromise agreement, read and interpreted in its entirety, is actually to the effect that the last portion thereof, which gives the private respondent sixty (60) days before the expiration of the term the right to give notice of his intent to renew, is subject to the first portion of said paragraph that "the term of the lease shall be renewed every three (3) years," thereby requiring the mutual agreement of the parties. The use of the word "renew" and the designation of the period of three (3) years clearly confirm that the contract of lease is limited to a specific period and that it is not a continuing lease. The stipulation provides for a renewal of the lease every three (3) years; 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 (3) years and that the automatic increase of the rentals by twenty percent (20%) will take effect only if the parties decide to renew the lease. A 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 Article 1308 of the Civil Code and the aforesaid doctrine in Encarnacion. The compromise agreement should be understood as bearing that import which is most adequate to render it effectual. 10 Where the instrument is susceptible of two interpretations, one which will make it invalid and illegal and another which will make it valid and legal, the latter interpretation should be adopted. 11 Moreover, 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 term should not be held to create a right to repeated grants in perpetuity, unless by plain and unambiguous terms the parties have expressed such intention. 12 A lease will not be construed to create a right to perpetual renewals unless the language employed indicates clearly and unambiguously that it was the intention and purpose of the parties to do so. 13 A 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 making such a provision unless it does so clearly. 14 As we have further emphasized: "It is also important to bear in mind that in a reciprocal contract like a lease, the period of the lease must be deemed to have been agreed upon for the benefit of both parties, absent language showing that the term was deliberately set for the benefit of the lessee or lessor alone. We are not aware of any presumption in law that the term of a lease is designed for the benefit of the lessee alone. Koh and Cruz in effect rested upon such a presumption. But that presumption cannot reasonably be indulged in casually in an era of rapid economic change, marked by, among other things, volatile costs of living and fluctuations in the value of the domestic currency. The longer the period the more clearly unreasonable such a presumption would be. In an age like 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 matter. We hold that the above-quoted rulings in Koh v. Ongsiaco andCruz v. Alberto should be and are overruled." 15 In addition, even assuming that the clause "for as long as the defendant needed the premises and can meet and pay, said increases" gives private respondent an option to renew the lease, the same will be construed as providing for but one renewal or extension and, therefore, was satisfied when the lease was renewed in 1982 for another three (3) years. A general covenant to renew is satisfied by one renewal and will not be construed to confer the right to more than one

renewal unless provision is clearly and expressly made for further renewals. 16 Leases which may have been intended to be renewable in perpetuity will nevertheless be construed as importing but one renewal if there is any uncertainty in that regard. 17

The case of Buccat vs. Dispo, et al., 18 relied upon by respondent court, to support its holding that respondent lessee can legally stay on the premises 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 merely stipulates "(t)hat the lease contract shall remain 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 National Business Institute, but the rentals now stipulated shall be subject to review every after ten (10) years by mutual agreement of the parties." This is in clear contrast to the case at bar wherein, to repeat, the lease is fixed at a period of three (3) years although subject to renewal upon agreement of the parties, and the clause "for as long as defendant needs the premises and can meet and pay the rents" is not an independent stipulation but is controlled by said fixed term and the option for renewal upon agreement of both parties. On the second issue, we agree with petitioner that respondent court erred in holding that the action for ejectment is barred by res judicata. While it is true that a compromise agreement has the effect of res judicata, this doctrine does not apply in the present case. It is elementary that for a judgment to be a bar to a subsequent case, (1) it must be a final judgment, (2) the court which rendered it had jurisdiction over the subject matter and the parties, (3) it must be a judgment on the merits, and (4) there must be identity between the two cases as to parties, subject matter and cause of action. 19 In the case at bar, the fourth requisite is lacking. Although there is identity of parties, there is no identity of subject matter and cause of action. The subject matter in the first ejectment case is the original lease contract while the subject matter in the case at bar is the lease created under the terms provided in the subsequent compromise agreement. The lease executed in 1978 is one thing; the lease constituted in 1982 by the compromise agreement is another. LLjur There is also no identity, in the causes of action. The test generally applied to determine the identity of causes of action is to consider the identity of facts essential to their maintenance, or whether the same evidence would sustain both causes of action. 20 In the case at bar, the delict or the wrong in the first case is different from that in the second, and the evidence that will support and establish the cause of action in the former will not suffice to support and establish that in the latter. In the first ejectment case, the cause of action was private respondent's refusal to comply with the lease contract which expired on December 31, 1978. In the present case, the cause of action is a similar refusal but with respect to the lease which expired in October, 1985 under the compromise agreement. While the compromise agreement may be res judicata as far as the cause of action and issues in the first ejectment case is concerned, any cause of action that arises from the application or violation of the compromise agreement cannot be said to have been settled in said first case. The compromise agreement was meant to settle, as it did only settle, the first case. It did not, as it could not, cover any cause of action that might arise thereafter, like the present case which was founded on the expiration of the lease in 1985, which necessarily requires a different set of evidence. The fact that the compromise agreement was judicially approved does not foreclose any cause of action arising from a violation of the terms thereof. cdrep WHEREFORE, the decision of respondent Court of Appeals is REVERSED and SET ASIDE. Private respondent is hereby ordered to immediately vacate and return the possession of the leased premises subject of the present action to petitioner and to pay the monthly rentals due thereon in accordance with the compromise agreement until he shall have actually vacated the same. This judgment is immediately executory. SO ORDERED.

[G.R. No. L-21749. September 29, 1967.] REPUBLIC OF THE PHILIPPINES, plaintiff-appellee, vs. LUZON STEVEDORING CORPORATION, defendant-appellant. 2.CIVIL LAW; CULPA AQUILIANA; PRESUMPTIONS; RES IPSA LOQUITUR. Where an immovable and stationary object like the Nagtahan bridge, uncontrovertedly provided with adequate openings for passage of watercraft, is rammed by a barge exclusively controlled by appellant, causing damage to its supports, there arises a presumption of negligence on appellant's part or its employees, manning 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 Anglo-American Jurisprudence, the inference arises by what is known as the "res ipsa loquitur" rule. 3.ID; CASO FORTUITO. Caso fortuito or force majeure (which in law are identical insofar as they exempt an obligor from liability) by definition, means extraordinary events not forseeable or avoidable, "events that could not be forseen, or which though foreseen, were inevitable." It is therefore not enough that the event should not have been forseen or anticipated, but it must be one impossible to foresee or to avoid. The mere difficulty to foresee the happening is not impossibility to foresee the same: "un hecho no constituye caso fortuito por la sola circunstancia de que su existencia haga ms dificil o ms onerosa la accin diligente del presnto ofensor." 4.ID.; CASO FORTUITO, INVOCATION OF. Where appellant adopted precautionary measures by assigning two of its most powerful tugboats to tow its barge down river and by assigning its more competent and experienced patrons to take care of the towlines, who were instructed to take precautions; and where the engines and equipment had been doublechecked and unspected so that it had done all it could do to prevent an accident, said appellant cannot invoke caso fortuito or force majeure, as the possibility of danger was not only foreseeable, but actually foreseen. Otherwise stated, appellant, knowing or appreciating the perils posed by the swollen stream and its swift current, voluntarily entered into a situation involving obvious danger; it therefore assumed the risk, and cannot shed responsibility merely because the precautions it adopted turned out to be insufficient. REYES, J.B.L., J p: The present case comes by direct appeal from a decision of the Court of First Instance of Manila (Case No. 44572) adjudging the defendant-appellant,Luzon Stevedoring Corporation, liable in damages to the plaintiff-appellee Republic of the Philippines. In the early afternoon of August 17, 1960, barge L-1892, owned by the Luzon Stevedoring Corporation was being towed down the Pasig river by tugboats "Bangus" and "Barbero," 1 also belonging to the same corporation, when the barge rammed against one of the wooden piles of the Nagtahan bailey bridge, smashing the posts and causing the bridge to list. The river, at the time, was swollen and the current swift, on account of the heavy downpour in Manila and the surrounding provinces on August 15 and 16, 1960. Sued by the Republic of the Philippines for actual and consequential damage caused by its employees, amounting to P200,000 (Civil Case No. 44562, CFI of Manila), defendant Luzon Stevedoring Corporation disclaimed liability therefor, on the grounds that it had exercised due diligence in the selection and supervision of its employees; that the damages to the bridge were caused by force majeure; that plaintiff has no capacity to sue; and that the Nagtahan bailey bridge is an obstruction to navigation. After due trial, the court rendered judgment on June 11, 1963, holding the defendant liable for the damage caused by its employees and ordering it to pay plaintiff the actual cost of the repair of the Nagtahan bailey bridge which amounted to P192,561.72, with legal interest thereon from the date of the filing of the complaint. Defendant appealed directly to this Court assigning the following errors allegedly committed by the court a quo, to wit: I The lower court erred in not holding that the herein defendant-appellant had exercised the diligence required of it in the selection and supervision of its personnel to prevent damage or injury to others.

II The lower court erred in not holding that the ramming of the Nagtahan bailey bridge by barge L1892 was caused by force majeure. III The lower court erred in not holding that the Nagtahan bailey bridge is an obstruction, if not a menace, to navigation in the Pasig river. IV The lower court erred in not blaming the damage sustained by the Nagtahan bailey bridge to the improper placement of the dolphins. V The lower court erred in granting the plaintiff's motion to adduce further evidence in chief after it has rested its case. VI The lower court erred in finding the plaintiff entitled to the amount of P192,561.72 for damages which is clearly exorbitant and without any factual basis. However, it must be recalled that the established rule in this jurisdiction is that when a party appeals directly to the Supreme Court, and submits his case there for decision, he is deemed to have waived the right to dispute any finding of fact made by the trial Court. The only questions that may be raised are those of law (Savellano vs. Diaz, L-17941, July 31, 1963; Aballe vs. Santiago, L- 16307, April 30, 1963, G.S.I.S. vs. Cloribel, L-22236, June 22, 1965). A converso, a party who resorts to the Court of Appeals, and submits his case for decision there, is barred from contending later that his claim was beyond the jurisdiction of the aforesaid Court. The reason is that a contrary rule would encourage the undesirable practice of appellants' submitting their cases for decision to either court in expectation of favorable judgment, but with intent of attacking its jurisdiction should the decision be unfavorable (Tyson Tan et al. vs. Filipinas Compaia de Seguros et al., L-10096, Res. on Motion to Reconsider, March 23, 1966). Consequently, we are limited in this appeal to the issues of law raised in the appellant's brief. Taking the aforesaid rules into account, it can be seen that the only reviewable issues in this appeal are reduced to two: 1)Whether or not the collision of appellant's barge with the supports or piers of the Nagtahan bridge was in law caused by fortuitous event or force majeure, and 2)Whether or not it was error for the Court to have permitted the plaintiff-appellee to introduce additional evidence of damages after said party had rested its case. As to the first question considering that the Nagtahan bridge was an immovable and stationary object and uncontrovertedly provided with adequate openings for the passage of water craft, including barges like of appellant's, it is undeniable that the unusual event that the barge, exclusively controlled by appellant, rammed the bridge supports raises a presumption of negligence on the part of appellant or its employees manning the barge or the tugs that towed it. For in the ordinary course of events, such a thing does not happen if proper care is used. In Anglo American Jurisprudence, the inference arises by what is known as the "res ipsa loquitur" rule (Scott vs. London Docks, Co., 2 H & C 596; San Juan Light & Transit Co. vs. Requena, 224 U.S. 89, 56 L. Ed., 680; Whitwell vs. Wolf, 127 Minn. 529, 149 N.W. 299; Bryne vs. Great Atlantic & Pacific Tea Co., 269 Mass. 130; 168 N.E. 540; Gribsby vs. Smith, 146 S.W. 2d 719). The appellant strongly stresses the precautions taken by it on the day in question: that it assigned two of its most powerful tugboats to tow down river its barge L-1892; that it assigned to the task the more competent and experienced among its patrons, had the towlines, engines and equipment double-checked and inspected' that it instructed its patrons to take extra precautions; and concludes that it had done all it was called to do, and that the accident, therefore, should be held due to force majeure or fortuitous event. These very precautions, however, completely destroy the appellant's defense. For caso fortuito or force majeure (which in law are identical in so far as they exempt an obligor from liability) 2 by definition, are extraordinary events not foreseeable or avoidable, "events that could not be foreseen, or which, though foreseen, were inevitable" (Art. 1174, Civ. Code of the Philippines). It is therefore, not enough that the event should not have been foreseen or anticipated, as is commonly believed but it must be one impossible to foresee or to avoid. The mere difficulty to foresee the happening is not impossibility to foresee the same: "un hecho no constituye caso fortuito por la sola circunstancia de que su existencia haga mas dificil o mas onerosa la accion diligente del presento ofensor" (Peirano Facio, Responsabilidad Extracontractual, p. 465; Mazeaud, Trait de la Responsabilite Civil, Vol. 2, sec. 1569). The very measures adopted by appellant prove that the possibility of danger was not only foreseeable, but actually foreseen, and was not caso fortuito.

Otherwise state, the appellant, Luzon Stevedoring Corporation, knowing and appreciating the perils posed by the swollen stream and its swift current, voluntarily entered into a situation involving obvious danger; it therefore assumed the risk, and can not shed responsibility merely because the precautions it adopted turned out to be insufficient. Hence, the lower Court committed no error in holding it negligent in not suspending operations and in holding it liable for the damages caused. It avails the appellant naught to argue that the dolphins, like the bridge, were improperly located. Even if true, these circumstances would merely emphasize the need of even higher degree of care on appellant's part in the situation involved in the present case. The appellant, whose barges and tugs travel up and down the river everyday, could not safely ignore the danger posed by these allegedly improper constructions that had been erected and, in place, for years. On the second point: appellant charges the lower court with having abused its discretion in the admission of plaintiff's additional evidence after the latter had rested its case. There is an insinuation that the delay was deliberate to enable the manipulation of evidence to prejudice defendant-appellant. We find no merit in the contention. Whether or not further evidence will be allowed after a party offering the evidence has rested his case, lies within the sound discretion of the trial Judge, and this discretion will not be reviewed except in clear case of abuse. 3 In the present case, no abuse of that discretion is shown. What was allowed to be introduced, after plaintiff had rested its evidence in chief, were vouchers and papers to support an item of P1,558,00 allegedly spent for the reinforcement of the panel of the bailey bridge, and which item already appeared in Exhibit GG. Appellant, in fact, has no reason to charge the trial court of being unfair, because it was also able to secure, upon written motion, a similar order dated November 24, 1962, allowing reception of additional evidence for the said defendant-appellant. 4 WHEREFORE, finding no error in the decision of the lower Court appealed from, the same is hereby affirmed. Costs against the defendant-appellant. Africa vs. Caltex, March 31, 1966 Facts: In the afternoon of March 18, 1948, a fire broke out at the Caltex service station at the corner of Antipolo St. and Rizal Avenue, Manila. It started while gasoline was being hosed from a tank truck into the underground storage, right at the opening of the receiving tank where the nozzle of the hose was inserted. The fire spread to and burned several houses. The owners, among them petitioner spouses Africa and heirs of Ong, sued respondents Caltex Phil., Inc., the alleged owner of the station, and Mateo Boquiren, the agent in charge of its operation, for damages. The CFI and CA found that the petitioners failed to prove negligence of the respondents, and that there was due care in the premises and with respect to the supervision of their employees. Issue: 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 presume negligence on the part of the respondents. Held: Yes. Res ipsa loquitur literally means the thing or transaction speaks for itself. For the doctrine of res ipsa loquitur to apply, the following requisites should be present: (a) the accident is of a kind which ordinarily does not occur in the absence of someones negligence; (b) it is caused by an instrumentality within the exclusive control of the defendant or defendants; and (c) the possibility of contributing conduct which would make the plaintiff responsible is eliminated. In the case at bar, the gasoline station, with all its appliances, equipment and employees, was under the control of respondents. A fire occurred therein and spread to and burned the neighboring houses. The persons who knew or could have known how the fire started were respondents and their employees, but they gave no explanation thereof whatsoever. It is a fair and reasonable inference that the incident happened because of want of care. The negligence of the employees was the proximate cause of the fire, which in the ordinary course of things does not happen. Therefore, the petitioners are entitled to the award for damages.

4.ID.; PRESUMPTION OF NEGLIGENCE UNDER THE DOCTRINE OF Res Ipsa Loquitur. Where the thing which caused the injury complained of is shown to be under the management defendant or his servants and the accident is such as in

the ordinary course of things does not happen if those who have its management or control use proper care, it affords reasonable evidence, in absence of explanation by defendant, that the accident arose from want of care. (45 C. J. 768, p. 1193.) 5.ID.; ID.; APPLICATION OF PRINCIPLE TO THE CASE AT BAR. The gasoline station, with all its appliances, equipment and employees, was under the control of appellees. A fire occurred therein and spread to and burned the neighboring houses. The persons who knew or could have known how the fire

[G.R. No. 170452. August 13, 2008.] SALVADOR CHUA and VIOLETA CHUA, petitioners, vs. RODRIGO TIMAN, MA. LYNN TIMAN and LYDIA TIMAN, respondents. QUISUMBING, J p: Before us is a petition for review on certiorari assailing the Decision 1 and Resolution 2 dated March 9, 2005 and November 24, 2005, respectively, of the Court of Appeals in CA-G.R. CV No. 82865, which had affirmed the Decision 3 dated May 14, 2004 of the Regional Trial Court (RTC) of Quezon City, Branch 86, in Civil Case No. Q-0041276. The Court of Appeals reduced the stipulated original interest rates of 7% and 5% per month to only 1% per month or 12% per annum and ordered petitioners to refund the excess interest payments by respondents. aTEAHc The pertinent facts are as follows: In February and March 1999, petitioners Salvador and Violeta Chua granted respondents Rodrigo, Ma. Lynn and Lydia Timan the following loans: a) P100,000; b) P200,000; c) P150,000; d) P107,000; e) P200,000; and f) P107,000. These loans were evidenced by promissory notes with interest of 7% per month, which was later reduced to 5% per month. Rodrigo and Ma. Lynn issued five (5) postdated checks to secure the loans, except for the P150,000 loan which was secured by a postdated check issued by Lydia. Respondents paid the loans initially at 7% interest rate per month until September 1999 and then at 5% interest rate per month from October to December 1999. Sometime in March 2000, respondents offered to pay the principal amount of the loans through a Philippine National Bank manager's check worth P764,000, but petitioners refused to accept the same insisting that the principal amount of the loans totalled P864,000. On May 3, 2000, respondents deposited P864,000 with the Clerk of Court of the RTC of Quezon City. Later, they filed a case for consignation and damages. Petitioners moved to dismiss the case, but the RTC denied the motion, as well as the subsequent motion for reconsideration. By virtue of an order of Partial Judgment 4 dated October 16, 2002, the Clerk of Court of the RTC of Quezon City released the amount of P864,000 to petitioners. Trial on the validity of the stipulated interests on the subject loans, as well as on the issue of damages, then proceeded. On May 14, 2004, the RTC rendered a decision in favor of respondents. It ruled that the original stipulated interest rates of 7% and 5% per month were excessive. It further ordered petitioners to refund to respondents all interest payments in excess of the legal rate of 1% per month or 12% per annum. However, the RTC denied petitioners' claim for damages. On appeal, the Court of Appeals affirmed the trial court's decision. The Court of Appeals declared illegal the stipulated interest rates of 7% and 5% per month for being excessive, iniquitous, unconscionable and exorbitant. Accordingly, the Court of Appeals reduced the stipulated interest rates of 7% and 5% per month (equivalent to 84% and 60% per annum, respectively) to a fair and reasonable rate of 1% per month or 12% per annum. The Court of Appeals also ordered petitioners to refund to respondents all interest payments in excess of 12% per annum. Petitioners sought reconsideration, but it was denied. AEDCHc

Hence, this petition raising the lone issue of: WHETHER OR NOT THE HONORABLE COURT OF APPEALS COMMITTED A REVERSIBLE ERROR OR ACTED NOT IN ACCORD WITH THE LAW AND JURISPRUDENCE WHEN IT AFFIRMED THE JUDGMENT OF THE REGIONAL TRIAL COURT ORDERING THE RETURN OF THE EXCESS INTEREST TO RESPONDENTS. 5 Essentially, the main issue is: (1) Did the Court of Appeals err in ruling that the original stipulated interest rates of 7% and 5%, equivalent to 84% and 60% per annum, are unconscionable, and in ordering petitioners to refund to respondents all payments of interest in excess of 12% per annum? Petitioners aver that the stipulated interest of 5% monthly and higher cannot be considered unconscionable because these rates are not usurious by virtue of Central Bank (C.B.) Circular No. 905-82 6 which had expressly removed the interest ceilings prescribed by the Usury Law. Petitioners add that respondents were in pari delicto since they agreed on the stipulated interest rates of 7% and 5% per month. They further aver they honestly believed that the interest rates they imposed on respondents' loans were not usurious. Respondents, invoking Medel v. Court of Appeals, 7 counter that the stipulated interest rates of 7% and 5% per month are iniquitous, 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 time 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 45 of the Rules of Civil Procedure. The petition is patently devoid of merit. The stipulated interest rates of 7% and 5% per month imposed on respondents' loans must be equitably reduced to 1% per month or 12% per annum. 8We need not unsettle the principle we had affirmed in a plethora of cases that stipulated interest rates of 3% 9 per month and higher 10 are excessive, iniquitous, unconscionable and exorbitant. Such stipulations are void for being contrary to morals, if not against the law. 11 While C.B. Circular No. 905-82, which took effect on January 1, 1983, effectively removed the ceiling on interest rates for both secured and unsecured loans, regardless of maturity, 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 hemorrhaging of their assets. 13 TCacIA 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 time on appeal. Petitioners must have seasonably raised it in the proceedings before the lower court, because questions raised on appeal are confined only within the issues framed by the parties. 14 The defense of good faith must also fail because such an issue is a question of fact 15 which may not be properly raised in a petition for review under Rule 45 of the Rules of Civil Procedure which allows only questions of law. 16 As well set forth in Medel: We agree . . . that the stipulated rate of interest at 5.5% per month on the P500,000.00 loan is excessive, iniquitous, unconscionable and exorbitant. However, we can not consider the rate "usurious" because this Court has consistently held that Circular No. 905 of the Central Bank, adopted on December 22, 1982, has expressly removed the interest ceilings prescribed by the Usury Law and that the Usury Law is now "legally inexistent". In Security Bank and Trust Company vs. Regional Trial Court of Makati, Branch 61, the Court held that CB Circular No. 905 "did not repeal nor in any way amend the Usury Law but simply suspended the latter's effectivity". Indeed, we have held that "a Central Bank Circular can not repeal a law. Only a law can repeal another law". In the recent case of Florendo vs. Court of Appeals, the Court reiterated the ruling that "by virtue of CB Circular 905, the Usury Law has been rendered ineffective". "Usury has been legally non-existent in our jurisdiction. Interest can now be charged as lender and borrower may agree upon".

Nevertheless, we find the interest at 5.5% per month, or 66% per annum, stipulated upon by the parties in the promissory note iniquitous or unconscionable, and, hence, contrary to morals ("contra bonos mores"), if not against the law. The stipulation is void. WHEREFORE, the petition is DENIED for lack of merit. The assailed Decision and Resolution dated March 9, 2005 and November 24, 2005, respectively, of the Court of Appeals in CA-G.R. CV No. 82865 are hereby AFFIRMED. Costs against petitioners. MACALINAO V. BPI, September 17, 2009 FACTS: Petitioner Ileana Macalinao defaulted on the payment of her BPI credit card dues. There was a stipulation in a contract that the charges and/or balance shall earn 3% per month and additional penalty fee of another 3% per month. The Regional Trial Court reduced the 3%monthly interest to 2%. On appeal of the case, the Court of Appeals reversed the decision of the RTC holding that petitioner Macalinao freely availed herself of the credit card facility offered by respondent Bank of the Philippine Islands to general public; contracts of adhesion are not invalid per se. Petitioner assailed the appellate courts decision alleging that the interest rate and penalty charges are unconscionable and iniquitous at 36% per annum. ISSUE: Whether or not the interest rate and penalty charges are unconscionable and iniquitous at36% per annum. HELD: The interest rate and penalty charges are unconscionable and iniquitous at 36% per annum. The Supreme Court held that the interest rate and penalty charge of 3% per month or the 36% per annum should be reduced to 2% per month or 24% per annum. In a long line of cases decided by the Supreme Court, it considered the 36% per annum to be excessive and unconscionable. Citing Article1229, in exercising this power to determine what is iniquitous and unconscionable; courts must consider the circumstances of each case since what may be iniquitous and unconscionable in one maybe totally just and equitable in another. In the instant case, Macalinao made partial payments to BPI .Therefore, the interest rate and penalty charge of 3% per month or 36% per annum should be reduced to 2% per month or 24% per annum. SICAM vs. JORGE August 8, 2007 Facts: Lulu Jorge pawned several pieces of jewelry with Agencia de R. C. Sicam to secure a loan. On October 19, 1987, two armed men entered the pawnshop and took away whatever cash and jewelry were found inside the pawnshop vault. Sicam sent respondent Lulu a letter informing her of the loss of her jewelry due to the robbery incident in the pawnshop. Respondent Lulu expressed disbelief stating that when the robbery happened, all jewelry pawned were deposited with Far East Bank near the pawnshop since it had been the practice that before they could withdraw, advance notice must be given to the pawnshop so it could withdraw the jewelry from the bank. Respondent Lulu then requested petitioner Sicam to prepare the pawned jewelry for withdrawal on but petitioner Sicam failed to return the jewelry.

Respondent Lulu is seeking indemnification for the loss of pawned jewelry and payment of damages. Petitioner is interposing the defense of caso fortuito on the robber committed against the pawnshop. Issue: WON Sicam is liable for the loss of the pawned articles in their possession? YES

Held: Fortuitous 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 commonly believed but it must be one impossible to foresee or to avoid. The mere difficulty to foresee the happening is not impossibility to foresee the same. Robbery per se, just like carnapping, is not a fortuitous event. It does not foreclose the possibility of negligence on the part of herein petitioners. A 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 same situation. Petitioners were guilty of negligence in the operation of their pawnshop business. No sufficient precaution and vigilance were adopted by petitioners to protect the pawnshop from unlawful intrusion. There was no clear showing that there was any security guard at all. Sicams admission that the vault was open at the time of robbery is clearly a proof of petitioners failure to observe the care, precaution and vigilance that the circumstances justly demanded. Petitioner Sicam testified that once the pawnshop was open, the combination was already off. Instead of taking the precaution to protect them, they let open the vault, providing no difficulty for the robbers to cart away the pawned articles. In contrast, the robbery in this case took place in 1987 when robbery was already prevalent and petitioners in fact had already foreseen it as they wanted to deposit the pawn with a nearby bank for safekeeping. Moreover, unlike in Austria, where no negligence was committed, we found petitioners negligent in securing their pawnshop as earlier discussed. NAGA TELEPHONE CO., INC. (NATELCO) & Luciano Maggay, petitioners,vs. COURT OF APEALS and Camarines Sur II Electric Cooperative, Inc.(CASURECO II), respondents [1994] NATELCO: telephone co. rendering local & long distance services in Naga CASURECO II: private corporation w/c operates electric power service in Naga The 2 companies entered into a contract wherein NATELCO will be using CASURECO electric light posts in Naga in operating its telephone services.In return, former will install 10 phone connections for the use of the latter free of charge. Term/period will be as long as former needs to use the latters posts. Contract will be terminated if the latter will forced to stop, abandon its operation as a public service & it becomes necessary to remove the posts. Contract was prepared by Atty. Maggay, member of theCASURECO Board of Directors & legal counsel of NATELCO. 1st cause of action: After 10 yrs of enforcing the contract, CASURECO filedfor reformation of the contract w/damages to abolish inequalities based onthe ff grounds:1. it was too one-sided in favor of NATELCO2. it was not in accordance w/the National Electrification Administration(NEA) guidelines w/c provide that the reasonable compensation for theuse of posts should be P10/post/month.3. telephone cables strung on the posts have become much heavier &worsened by linemen who bore holes thru the posts w/c resulted intoposts broken during typhoons w/c posts cost P2,630.00 each. 2nd cause of action: CASURECO likewise alleged that since1981, NATELCO used 319 of their posts outside Naga w/o any contract andlatter company should pay P10.00/post amounting to P267,960.00 w/c thelatter refused to pay despite demands. 3rd cause of action: Former also complained that the latter provided poor service causing greatinconvenience & damages amounting to not less than P100k.

NATELCOs answer prayed for the dismissal of the 1st causeof action since it does not sufficiently state a cause of action, and its barredby estoppel & prescription. They claim that they could not have caused thedeterioration of CASURECOs posts since theyve used them for 11 yrs.Also, their expenses for the 10 free phones lines are far in excess of theamounts claimed by CASURECO. They refused to pay the amountspecified in the 2nd cause of action because what is due to them

fromCASURECO is more than latters claim against them. WRT the 3 rd cause of action, they claim that the National Telecommunication Corporation (NTC)classified their service as very high & of superior quality. Both companies presented witnesses to support their allegation. Atty. Magay testified supporting NATELCOs claims. Trial Court: contract has become disadvantageous toCASURECO due to increase in volume of NATELCOs subscribers.Contract should be reformed to abolish the inequities. NATELCO shouldpay for the use of CASURECOs posts at P10.00/post while the latter should pay the monthly bills for the use of formers phone lines in Naga.Amount should be computed from the date of filing of the complaint. Samehas been held for the 2nd cause of action. While the 3rd cause of action wasnot sufficiently proven. CA: affirmed trial court decision based on the ff grounds: 1.New Civil Code Art. 1267 1.Although the contract was fair to bothparties at the time of its execution (then, NATELCO still had very limited capability), supervening circumstances (NATELCOs expansion)have made the contract too one-sided in favor of NATELCO to thegreat disadvantage of CASURECO. Continued enforcement of the contract has gone beyond the contemplation of the latter, thus it should be released therefrom. Equity demands certain economic equilibrium between the prestation the counter-prestation & 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.2. Contract was subject to a potestative condition w/ rendered the condition void. Issues & Ratio:1. WON Art. 1267 is applicable. -YES NATELCO claims its not since contract in this case doesnt involve rendition of service/personal prestation and its not for future servicew/future unusual change. It invokes Occena vs. Jabson. And the article was never raised by CASURECO. The provision speaks of service (meaning performance of the obligation) w/c has become so difficult. It doesnt require that the contractbe for future service w/future unusual change. Rather, it speaks of unforeseen events or the discredited theory of rebus sic stantibus in public international law wherein parties stipulate in the light of certain prevailing conditions & once these conditions cease to exist the contract also ceases. Equity & good faith demand that when basis of the contract disappears, theprejudiced party has a right to relief. Fact that this provision was not raised by the parties in their pleadings & was never subject of trial is immaterial. Court has discretion toconsider an unassigned error that is closely related to an error properlyassigned as long as the consideration is necessary in arriving at a justdecision. The material allegations of fact in the complaint & not the legalconclusion made or the prayer that determines the relief to w/c the plaintiff is entitled and plaintiff is entitled to as much relief as the facts warrantalthough that relief is not specifically prayed for. NATELCO was given theopportunity to present its evidence WRT this matter when they were given 1 Art. 1267. When the service has become so difficult as to be manifestly beyond the contemplation of the parties, the obligor may also be released therefrom, in whole or in part. the chance to answer the issue of WON the contract has become too one-sided in its favor & too iniquitous, unfair & disadvantageous to CASURECO. 2. WON the ruling in Occena is applicable. NO. Case provides that Art. 1267 doesnt authorize the courts to remake, modifyor revise the contract or to fix the division of shares between the parties ascontractually stipulated w/the force of law between the parties. Complaintfor the modification of contract was dismissed for failure to state a cause of action. In this case, CASURECOs complaint & evidence it presented sufficientlymade out a cause of action under Art. 1267. Parties are released from their correlative obligations under the contract.But taking into account the possible consequences of merely releasing theparties from the contract, the SC decided to uphold the trial court rulingWRT

payment for use of post and the phone lines so as not disrupt thebasic & essential services being rendered by both companies and to avoidunjust enrichment by NATELCO at the expense of CASURECO. 3.Cause of action has not yet prescribed since CC Art. 1144 providesthat an action upon a written contract must be brought w/in 10yrs from thetime the rt of cause of action accrues. In this case, cause of action arosewhen CASURECO asked its counsel to review the contract w/c was in1982/83. Case was filed in 1989, thus, 10 yrs has not lapsed. 4.Prestations are not purely potestative. Conditions do not dependsolely on the will of either party. CA, in ruling that the term/period (3rd bullet,Facts part) of the contract is potestaive, overlooked the condition that thecontract will be terminated when CASURECO will be forced to stop,abandon its operation as a public service & it becomes necessary toremove the electric light post. They are actually casual conditions w/cdepend on chance, hazard or will of a 3rd person. The contract is subject tomixed conditions w/c dont invalidate the contract stipulations. Holding: Petition denied. CA decision affirmed