Notes.

It is not proper to consider an obligation novated by unimportant modifications which do not

alter its essence. (Idolor vs. Court of Appeals, 351 SCRA 399 [2001])

Novation which consists in substituting a new debtor in the place of the original one, may be made even
without the knowledge or against the will of the latter, but not without the consent of the creditor. (Public
Estates Authority vs. Uy, 372 SCRA 180 [2001])

o0o

G.R. No. 174269.May 8, 2009.*

POLO S. PANTALEON, petitioner, vs. AMERICAN EXPRESS INTERNATIONAL, INC., respondent.

Credit Cards; Obligations and Contracts; Delay; Mora Solvendi and Mora Accipiendi; Requisites.
Petitioner correctly cites that under mora solvendi, the three requisites for a finding of default are that the
obligation is demandable and liquidated; the debtor delays performance; and the creditor judicially or
extrajudicially requires the debtors performance. Petitioner asserts that the Court of Appeals had wrongly
applied the principle of mora accipiendi, which relates to delay on the part of the obligee in accepting the
performance of the obligation by the obligor. The requisites of mora accipiendi are: an offer of
performance by the debtor who has the required capacity; the offer must be to comply with the prestation
as it should be performed; and the creditor refuses the performance without just cause. The error of the
appellate court, argues petitioner, is in relying on the invocation by respondent of just cause for the
delay, since while just cause is determinative of mora accipiendi, it is not so with the case of mora
solvendi.

Same; Same; Same; Generally, the relationship between a credit card provider and its card holders is that
of creditor-debtor, with the card company as the creditor extending loans and credit to the card holder,
who as debtor is obliged to repay the creditor, a relationship which takes exception to the general rule that
as between a bank and its depositors, the bank is deemed as the debtor while the depositor is considered
as the creditor.We can see the possible source of confusion as to which type of mora to appreciate.
Generally, the relationship between a credit card provider and its card holders is that of creditor-debtor,
with the card company as the creditor extending loans and credit to the card holder, who as debtor is
obliged to repay the creditor. This relationship already takes exception to the general rule that as between
a bank and its depositors, the bank is deemed as the debtor while the depositor is considered as the
creditor. Petitioner is asking us, not baselessly, to again shift perspectives and again see the credit card
company as the debtor/obligor, insofar as it has the obligation to the customer as creditor/obligee to act
promptly on its purchases on credit.

Same; Same; Same; Notwithstanding the popular notion that credit card purchases are approved within
seconds, there really is no strict, legally determinative point of demarcation on how long must it take for
a credit card company to approve or disapprove a customers purchase, much less one specifically
contracted upon by the parties, but one hour appears to be an awfully long, patently unreasonable length
of time to approve or disapprove a credit card purchase.Notwithstanding the popular notion that credit
card purchases are approved within seconds, there really is no strict, legally determinative point of
demarcation on how long must it take for a credit card company to approve or disapprove a customers
purchase, much less one specifically contracted upon by the parties. Yet this is one of those instances
when youd know it when youd see it, and one hour appears to be an awfully long, patently
unreasonable length of time to approve or disapprove a credit card purchase. It is long enough time for the
customer to walk to a bank a kilometer away, withdraw money over the counter, and return to the store.

Same; Same; Same; The culpable failure of the credit card company herein is not the failure to timely
approve the cardholders purchase, but the more elemental failure to timely act on the same, whether
favorably or unfavorably.We do not wish do dispute that respondent has the right, if not the obligation,
to verify whether the credit it is extending upon on a particular purchase was indeed contracted by the
cardholder, and that the cardholder is within his means to make such transaction. The culpable failure of
respondent herein is not the failure to timely approve petitioners purchase, but the more elemental failure
to timely act on the same, whether favorably or unfavorably. Even assuming that respondents credit
authorizers did not have sufficient basis on hand to make a judgment, we see no reason why respondent
could not have promptly informed petitioner the reason for the delay, and duly advised him that resolving
the same could take some time. In that way, petitioner would have had informed basis on whether or not
to pursue the transaction at Coster, given the attending circumstances. Instead, petitioner was left
uncomfortably dangling in the chilly autumn winds in a foreign land and soon forced to confront the
wrath of foreign folk.

Same; Same; Same; Damages; Moral Damages; Moral damages avail in cases of breach of contract where
the defendant acted fraudulently or in bad faith, and the court should find that under the circumstances,
such damages are due.Moral damages avail in cases of breach of contract where the defendant acted
fraudulently or in bad faith, and the court should find that under the circumstances, such damages are due.
The findings of the trial court are ample in establishing the bad faith and unjustified neglect of
respondent, attributable in particular to the dilly-dallying of respondents Manila credit authorizer,
Edgardo Jaurique.

Same; Same; Same; Same; Moral damages do not avail to soothe the plaints of the simply impatient, so
this decision should not be cause for relief for those who time the length of their credit card transactions
with a stopwatch.It should be emphasized that the reason why petitioner is entitled to damages is not
simply because respondent incurred delay, but because the delay, for which culpability lies under Article
1170, led to the particular injuries under Article 2217 of the Civil Code for which moral damages are
remunerative. Moral damages do not avail to soothe the plaints of the simply impatient, so this decision
should not be cause for relief for those who time the length of their credit card transactions with a
stopwatch. The somewhat unusual attending circumstances to the purchase at Costerthat there was a
deadline for the completion of that purchase by petitioner before any delay would redound to the injury of
his several traveling companionsgave rise to the moral shock, mental anguish, serious anxiety,
wounded feelings and social humiliation sustained by the petitioner, as concluded by the RTC. Those
circumstances are fairly unusual, and should not give rise to a general entitlement for damages under a
more mundane set of facts.

PETITION for review on certiorari of a decision of the Court of Appeals.

The facts are stated in the opinion of the Court.

TINGA,J.:

The petitioner, lawyer Polo Pantaleon, his wife Julialinda, daughter Anna Regina and son Adrian
Roberto, joined an escorted tour of Western Europe organized by Trafalgar Tours of Europe, Ltd., in
October of 1991. The tour group arrived in Amsterdam in the afternoon of 25 October 1991, the second to
the last day of the tour. As the group had arrived late in the city, they failed to engage in any sight-seeing.
Instead, it was agreed upon that they would start early the next day to see the entire city before ending the
tour.

The following day, the last day of the tour, the group arrived at the Coster Diamond House in Amsterdam
around 10 minutes before 9:00 a.m. The group had agreed that the visit to Coster should end by 9:30 a.m.
to allow enough time to take in a guided city tour of Amsterdam. The group was ushered into Coster
shortly before 9:00 a.m., and listened to a lecture on the art of diamond polishing that lasted for around
ten minutes.1 Afterwards, the group was led to the stores showroom to allow them to select items for
purchase. Mrs. Pantaleon had already planned to purchase even before the tour

began a 2.5 karat diamond brilliant cut, and she found a diamond close enough in approximation that she
decided to buy.2 Mrs. Pantaleon also selected for purchase a pendant and a chain,3 all of which totaled
U.S. $13,826.00.

To pay for these purchases, Pantaleon presented his American Express credit card together with his
passport to the Coster sales clerk. This occurred at around 9:15 a.m., or 15 minutes before the tour group
was slated to depart from the store. The sales clerk took the cards imprint, and asked Pantaleon to sign
the charge slip. The charge purchase was then referred electronically to respondents Amsterdam office at
9:20 a.m.

Ten minutes later, the store clerk informed Pantaleon that his AmexCard had not yet been approved. His
son, who had already boarded the tour bus, soon returned to Coster and informed the other members of
the Pantaleon family that the entire tour group was waiting for them. As it was already 9:40 a.m., and he
was already worried about further inconveniencing the tour group, Pantaleon asked the store clerk to
cancel the sale. The store manager though asked plaintiff to wait a few more minutes. After 15 minutes,
the store manager informed Pantaleon that respondent had demanded bank references. Pantaleon supplied
the names of his depositary banks, then instructed his daughter to return to the bus and apologize to the
tour group for the delay.

At around 10:00 a.m, or around 45 minutes after Pantaleon had presented his AmexCard, and 30 minutes
after the tour group was supposed to have left the store, Coster decided to release the items even without
respondents approval of the purchase. The spouses Pantaleon returned to the bus. It is alleged that their
offers of apology were met by their tourmates with stony silence. The tour groups visible irritation was
aggravated when the tour guide announced that the city tour of Amsterdam was to be canceled due to lack
of remaining time, as they had to catch a 3:00 p.m. ferry at Calais, Belgium to London.5 Mrs. Pantaleon
ended up weeping, while her husband had to take a tranquilizer to calm his nerves.

It later emerged that Pantaleons purchase was first transmitted for approval to respondents Amsterdam
office at 9:20 a.m., Amsterdam time, then referred to respondents Manila office at 9:33 a.m, then finally
approved at 10:19 a.m., Amsterdam time.6 The Approval Code was transmitted to respondents
Amsterdam office at 10:38 a.m., several minutes after petitioner had already left Coster, and 78 minutes
from the time the purchases were electronically transmitted by the jewelry store to respondents
Amsterdam office.

After the star-crossed tour had ended, the Pantaleon family proceeded to the United States before
returning to Manila on 12 November 1992. While in the United States, Pantaleon continued to use his
AmEx card, several times without hassle or delay, but with two other incidents similar to the Amsterdam
brouhaha. On 30 October 1991, Pantaleon purchased golf equipment amounting to US $1,475.00 using
his AmEx card, but he cancelled his credit card purchase and borrowed money instead from a friend, after
more than 30 minutes had transpired without the purchase having been approved. On 3 November 1991,
Pantaleon used the card to purchase childrens shoes worth $87.00 at a store in Boston, and it took 20
minutes before this transaction was approved by respondent.

On 4 March 1992, after coming back to Manila, Pantaleon sent a letter7 through counsel to the
respondent, demanding an apology for the inconvenience, humiliation and embarrassment he and his
family thereby suffered for respondents

refusal to provide credit authorization for the aforementioned purchases. In response, respondent sent a
letter dated 24 March 1992, stating among others that the delay in authorizing the purchase from Coster
was attributable to the circumstance that the charged purchase of US $13,826.00 was out of the usual
charge purchase pattern established.10 Since respondent refused to accede to Pantaleons demand for an
apology, the aggrieved cardholder instituted an action for damages with the Regional Trial Court (RTC) of
Makati City, Branch 145. Pantaleon prayed that he be awarded P2,000,000.00, as moral damages;
P500,000.00, as exemplary damages; P100,000.00, as attorneys fees; and P50,000.00 as litigation
expenses.

RTC in favor of PANTALEON (petitioner)

On 5 August 1996, the Makati City RTC rendered a decision13 in favor of Pantaleon, awarding him
P500,000.00 as moral damages, P300,000.00 as exemplary damages, P100,000.00 as attorneys fees, and
P85,233.01 as expenses of litigation. Respondent filed a Notice of Appeal, while Pantaleon moved for
partial reconsideration, praying that the trial court award the increased amount of moral and exemplary
damages he had prayed for.The RTC denied Pantaleons motion for partial reconsideration, and thereafter
gave due course to respondents Notice of Appeal.

CA REVERSED

On 18 August 2006, the Court of Appeals rendered a decision reversing the award of damages in favor of
Pantaleon, holding that respondent had not breached its obligations to petitioner. Hence, this petition.

The key question is whether respondent, in connection with the aforementioned transactions, had
committed a breach of its obligations to Pantaleon. In addition, Pantaleon submits that even assuming that
respondent had not been in breach of its obligations, it still remained liable for damages under Article 21
of the Civil Code.

The RTC had concluded, based on the testimonial representations of Pantaleon and respondents credit
authorizer, Edgardo Jaurigue, that the normal approval time for purchases was a matter of seconds.
Based on that standard, respondent had been in clear delay with respect to the three subject transactions.
As it appears, the Court of Appeals conceded that there had been delay on the part of respondent in
approving the purchases. However, it made two critical conclusions in favor of respondent. First, the
appellate court ruled that the delay was not attended by bad faith, malice, or gross negligence. Second, it
ruled that respondent had exercised diligent efforts to effect the approval of the purchases, which were
not in accordance with the charge pattern petitioner had established for himself, as exemplified by the
fact that at Coster, he was making his very first single charge purchase of US$13,826, and the record
of [petitioner]s past spending with [respondent] at the time does not favorably support his ability to pay
for such purchase.

On the premise that there was an obligation on the part of respondent to approve or disapprove with
dispatch the charge purchase, petitioner argues that the failure to timely approve or disapprove the
purchase constituted mora solvendi on the part of respondent in the performance of its obligation. For its
part, respondent characterizes the depiction by petitioner of its obligation to him as to approve purchases
instantaneously or in a matter of seconds.

Petitioner correctly cites that under mora solvendi, the three requisites for a finding of default are that the
obligation is demandable and liquidated; the debtor delays performance; and the creditor judicially or
extrajudicially requires the debtors performance. Petitioner asserts that the Court of Appeals had wrongly
applied the principle of mora accipiendi, which relates to delay on the part of the obligee in accepting the
performance of the obligation by the obligor. The requisites of mora accipiendi are: an offer of
performance by the debtor who has the required capacity; the offer must be to comply with the prestation
as it should be performed; and the creditor refuses the performance without just cause. The error of the
appellate court, argues petitioner, is in relying on the invocation by respondent of just cause for the
delay, since while just cause is determinative of mora accipiendi, it is not so with the case of mora
solvendi.

We can see the possible source of confusion as to which type of mora to appreciate. Generally, the
relationship between a credit card provider and its card holders is that of creditor-debtor, with the card
company as the creditor extending loans and credit to the card holder, who as debtor is obliged to repay
the creditor. This relationship already takes exception to the general rule that as between a bank and its
depositors, the bank is deemed as the debtor while the depositor is considered as the creditor. Petitioner is
asking us, not baselessly, to again shift perspectives and again see the credit

card company as the debtor/obligor, insofar as it has the obligation to the customer as creditor/obligee to
act promptly on its purchases on credit.

Ultimately, petitioners perspective appears more sensible than if we were to still regard respondent as the
creditor in the context of this cause of action. If there was delay on the part of respondent in its normal
role as creditor to the cardholder, such delay would not have been in the acceptance of the performance of
the debtors obligation (i.e., the repayment of the debt), but it would be delay in the extension of the credit
in the first place. Such delay would not fall under mora accipiendi, which contemplates that the obligation
of the debtor, such as the actual purchases on credit, has already been constituted. Herein, the
establishment of the debt itself (purchases on credit of the jewelry) had not yet been perfected, as it
remained pending the approval or consent of the respondent credit card company.
Still, in order for us to appreciate that respondent was in mora solvendi, we will have to first recognize
that there was indeed an obligation on the part of respondent to act on petitioners purchases with timely
dispatch, or for the purposes of this case, within a period significantly less than the one hour it
apparently took before the purchase at Coster was finally approved.

The findings of the trial court, to our mind, amply established that the tardiness on the part of respondent
in acting on petitioners purchase at Coster did constitute culpable delay on its part in complying with its
obligation to act promptly on its customers purchase request, whether such action be favorable or
unfavorable. We quote the trial court, thus:

As to the first issue, both parties have testified that normal approval time for purchases was a matter of
seconds.

Plaintiff testified that his personal experience with the use of the card was that except for the three charge
purchases subject of this case, approvals of his charge purchases were always obtained in a matter of
seconds.

Defendants credit authorizer Edgardo Jaurique likewise testified:

Q.You also testified that on normal occasions, the normal approval time for charges would be 3 to 4
seconds?

A.Yes, Maam.

Both parties likewise presented evidence that the processing and approval of plaintiffs charge purchase at
the Coster Diamond House was way beyond the normal approval time of a matter of seconds.

Plaintiff testified that he presented his AmexCard to the sales clerk at Coster, at 9:15 a.m. and by the time
he had to leave the store at 10:05 a.m., no approval had yet been received. In fact, the Credit
Authorization System (CAS) record of defendant at Phoenix Amex shows that defendants Amsterdam
office received the request to approve plaintiffs charge purchase at 9:20 a.m., Amsterdam time or 01:20,
Phoenix time, and that the defendant relayed its approval to Coster at 10:38 a.m., Amsterdam time, or
2:38, Phoenix time, or a total time lapse of one hour and [18] minutes. And even then, the approval was
conditional as it directed in computerese [sic] Positive Identification of Card holder necessary further
charges require bank information due to high exposure. By Jack Manila.

The delay in the processing is apparent to be undue as shown from the frantic successive queries of
Amexco Amsterdam which reads: US$13,826. Cardmember buying jewels. ID seen. Advise how long
will this take? They were sent at 01:33, 01:37, 01:40, 01:45, 01:52 and 02:08, all times Phoenix. Manila
Amexco could be unaware of the need for speed in resolving the charge purchase referred to it, yet it sat
on its hand, unconcerned.

xxx

To repeat, the Credit Authorization System (CAS) record on the Amsterdam transaction shows how
Amexco Netherlands viewed the delay as unusually frustrating. In sequence expressed in Phoenix time
from 01:20 when the charge purchased was referred for authorization, defendants own record shows:
562

562

SUPREME COURT REPORTS ANNOTATED

Pantaleon vs. American Express International, Inc.

01:22the authorization is referred to Manila Amexco

01:32Netherlands gives information that the identification of the cardmember has been presented and
he is buying jewelries worth US $13,826.

01:33Netherlands asks How long will this take?

02:08Netherlands is still asking How long will this take?

The Court is convinced that defendants delay constitute[s] breach of its contractual obligation to act on
his use of the card abroad with special handling.22 (Citations omitted)

xxx

Notwithstanding the popular notion that credit card purchases are approved within seconds, there really
is no strict, legally determinative point of demarcation on how long must it take for a credit card company
to approve or disapprove a customers purchase, much less one specifically contracted upon by the
parties. Yet this is one of those instances when youd know it when youd see it, and one hour appears
to be an awfully long, patently unreasonable length of time to approve or disapprove a credit card
purchase. It is long enough time for the customer to walk to a bank a kilometer away, withdraw money
over the counter, and return to the store.

Notably, petitioner frames the obligation of respondent as to approve or disapprove the purchase in
timely dispatch, and not to approve the purchase instantaneously or within seconds. Certainly, had
respondent disapproved petitioners purchase within seconds or within a timely manner, this particular
action would have never seen the light of day. Petitioner and his family would have returned to the bus
without delayinternally humiliated perhaps over the rejection of his cardyet spared the shame of
being held accountable by newly-made friends for making them miss the chance to tour the city of
Amsterdam.

We do not wish to dispute that respondent has the right, if not the obligation, to verify whether the credit
it is extending upon on a particular purchase was indeed contracted by the cardholder, and that the
cardholder is within his means to make such transaction. The culpable failure of respondent herein is not
the failure to timely approve petitioners purchase, but the more elemental failure to timely act on the
same, whether favorably or unfavorably. Even assuming that respondents credit authorizers did not have
sufficient basis on hand to make a judgment, we see no reason why respondent could not have promptly
informed petitioner the reason for the delay, and duly advised him that resolving the same could take
some time. In that way, petitioner would have had informed basis on whether or not to pursue the
transaction at Coster, given the attending circumstances. Instead, petitioner was left uncomfortably
dangling in the chilly autumn winds in a foreign land and soon forced to confront the wrath of foreign
folk.

Moral damages avail in cases of breach of contract where the defendant acted fraudulently or in bad faith,
and the court should find that under the circumstances, such damages are due. The findings of the trial
court are ample in establishing the bad faith and unjustified neglect of respondent, attributable in
particular to the dilly-dallying of respondents Manila credit authorizer, Edgardo Jaurique.23 Wrote the
trial court:

While it is true that the Cardmembership Agreement, which defendant prepared, is silent as to the
amount of time it should take defendant to grant authorization for a charge purchase, defendant
acknowledged that the normal time for approval should only be three to four seconds. Specially so with
cards used abroad which requires special handling, meaning with priority. Otherwise, the object of
credit or charge cards would be lost; it would be so inconvenient to use that buyers and consumers would
be better off carrying bundles of currency or travellers checks, which can be delivered and accepted

quickly. Such right was not accorded to plaintiff in the instances complained off for reasons known only
to defendant at that time. This, to the Courts mind, amounts to a wanton and deliberate refusal to comply
with its contractual obligations, or at least abuse of its rights, under the contract.

x x x

The delay committed by defendant was clearly attended by unjustified neglect and bad faith, since it
alleges to have consumed more than one hour to simply go over plaintiffs past credit history with
defendant, his payment record and his credit and bank references, when all such data are already stored
and readily available from its computer. This Court also takes note of the fact that there is nothing in
plaintiffs billing history that would warrant the imprudent suspension of action by defendant in
processing the purchase. Defendants witness Jaurique admits:

Q.But did you discover that he did not have any outstanding account?

A.Nothing in arrears at that time.

Q.You were well aware of this fact on this very date?

A.Yes, sir.

Mr. Jaurique further testified that there were no delinquencies in plaintiffs account.

It should be emphasized that the reason why petitioner is entitled to damages is not simply because
respondent incurred delay, but because the delay, for which culpability lies under Article 1170, led to the
particular injuries under Article 2217 of the Civil Code for which moral damages are remunerative.26
Moral damages do not avail to soothe the plaints of the simply impatient, so this decision should not be
cause for relief for those who time the length of their credit card transactions with a stopwatch. The
somewhat unusual attending circumstances to the purchase at Costerthat there was a deadline for the
completion of that purchase by petitioner before any delay would redound to the injury of his several
traveling companionsgave rise to the moral shock, mental anguish, serious anxiety, wounded feelings
and social humiliation sustained by the petitioner, as concluded by the RTC. Those circumstances are
fairly unusual, and should not give rise to a general entitlement for damages under a more mundane set of
facts.

We sustain the amount of moral damages awarded to petitioner by the RTC. There is no hard-and-fast rule
in determining what would be a fair and reasonable amount of moral damages, since each case must be
governed by its own peculiar facts, however, it must be commensurate to the loss or injury suffered.
Petitioners original prayer for P5,000,000.00 for moral damages is excessive under the circumstances,
and the amount awarded by the trial court of P500,000.00 in moral damages more seemly.

Likewise, we deem exemplary damages available under the circumstances, and the amount of
P300,000.00 appropriate. There is similarly no cause though to disturb the determined award of
P100,000.00 as attorneys fees, and P85,233.01 as expenses of litigation.

WHEREFORE, the petition is GRANTED. The assailed Decision of the Court of Appeals is REVERSED
and SET ASIDE. The Decision of the Regional Trial Court of Makati, Branch 145 in Civil Case No. 92-
1665 is hereby REINSTATED. Costs against respondent.

SO ORDERED.

Carpio-Morales (Acting Chairperson), Velasco, Jr.,

Leonardo-De Castro** and Brion, JJ., concur.

Petition granted, judgment reversed and set aside.

Notes.Prospective sureties to credit card applicants would be well-advised to study carefully the terms
of the agreements prepared by credit card companies before giving their consent, and pay heed to
stipulations that could lead to onerous effects. (Molino vs. Security Diners International Corporation, 363
SCRA 358 [2001])

While it is true that a credit card company may have no control of all the actions of its merchant affiliates,
and should not be held liable therefor, it is incorrect, however, to give it blanket freedom from liability if
its card is dishonored by any merchant affiliate for any reason. (Aznar vs. Citibank, N.A. [Philippines],
519 SCRA 287 [2007])

o0o

NATIONAL POWER CORPORATION, ET AL., petitioners, vs. THE COURT OF APPEALS,

GAUDENCIO C. RAYO, ET AL., respondents.

Civil Law; Act of God Doctrine; Requisites to exempt the obligor from liability on the claim of force
majeure.In any event, We reiterate here Our pronouncement in the latter case that Juan F. Nakpil &
Sons vs. Court of Appeals is still good law as far as the concurrent liability of an obligor in the case of
force majeure is concerned. In the Nakpil case, We held: To exempt the obligor from liability under
Article 1174 of the Civil Code, for a breach of an obligation due to an act of God, the following must
concur: (a) the cause of the breach of the obligation must be independent of the will of the debtor; (b) the
event must be either unforeseeable or unavoidable; (c) the event must be such as to render it impossible
for the debtor to fulfill his obligation in a normal manner; and (d) the debtor must be free from any
participation in, or aggravation of the injury to the creditor.

Same; Same; Intervention of a human factor removed the occurrence from the rules applicable to acts of
God.Accordingly, petitioners cannot be heard to invoke the act of God or force majeure to escape
liability for the loss or damage sustained by the private respondents since they, the petitioners, were guilty
of negligence. The event then was not occasioned exclusively by an act of God or force majeure; a human
factornegligence or imprudencehad intervened. The effect then of the force majeure in question may
be deemed to have, even if only partly, resulted from the participation of man. Thus, the whole occurrence
was thereby humanized, as it were, and removed from the rules applicable to acts of God.

Remedial Law; Courts; Findings of fact of the Court of Appeals are conclusive upon the Supreme Court
as a general rule.We thus cannot now rule otherwise not only because such a decision binds this Court
with respect to the cause of the inundation of the town of Norzagaray, Bulacan on 26-27 October 1978
which resulted in the loss of lives and the destruction to property in both cases, but also because of the
fact that on the basis of its meticulous analysis and evaluation of the evidence adduced by the parties in
the cases subject of CA-G.R. CV Nos. 27290-93, public respondent found as conclusively established that
indeed, the petitioners were guilty of patent, gross and evident lack of foresight, imprudence and
negligence in the management and operation of Angat Dam, and that the extent of the opening of the
spillways, and the magnitude of the water released, are all but products of defendants-appellees
headlessness, slovenliness, and carelessness. Its findings and conclusions are binding upon Us, there
being no showing of the existence of any of the exceptions to the general rule that findings of fact of the
Court of Appeals are conclusive upon this Court.

PETITION for review on certiorari of the decision of the Court of Appeals.

The facts are stated in the opinion of the Court.

DAVIDE, JR., J.:

This present controversy traces its beginnings to four (4) separate complaints2 for damages filed against
the NPC and Benjamin Chavez before the trial court. The plaintiffs therein, now private respondents,
sought to recover actual and other damages for the loss of lives and the destruction to property

caused by the inundation of the town of Norzagaray, Bulacan on 26-27 October 1978. The flooding was
purportedly caused by the negligent release by the defendants of water through the spillways of the Angat
Dam (Hydroelectric Plant). In said complaints, the plaintiffs alleged, inter alia, that: 1) defendant NPC
operated and maintained a multi-purpose hydroelectric plant in the Angat River at Hilltop, Norzagaray,
Bulacan; 2) defendant Benjamin Chavez was the plant supervisor at the time of the incident in question;
3) despite the defendants knowledge, as early as 24 October 1978, of the impending entry of typhoon
Kading, they failed to exercise due diligence in monitoring the water level at the dam; 4) when the said
water level went beyond the maximum allowable limit at the height of the typhoon, the defendants
suddenly, negligently and recklessly opened three (3) of the dams spillways, thereby releasing a large
amount of water which inundated the banks of the Angat River; and 5) as a consequence, members of the
household of the plaintiffs, together with their animals, drowned, and their properties were washed away
in the evening of 26 October and the early hours of 27 October 1978.3

In their Answers, the defendants, now petitioners, alleged that: 1) the NPC exercised due care, diligence
and prudence in the operation and maintenance of the hydroelectric plant; 2) the NPC exercised the
diligence of a good father in the selection of its employees; 3) written notices were sent to the different
municipalities of Bulacan warning the residents therein about the impending release of a large volume of
water with the onset of typhoon Kading and advising them to take the necessary precautions; 4) the
water released during the typhoon was needed to prevent the collapse of the dam and avoid greater
damage to people and property; 5) in spite of the precautions undertaken and the diligence exercised, they
could still not contain or control the flood that resulted and; 6) the damages incurred by the private
respondents were caused by a fortuitous event or force majeure and are in the nature and character of
damnum absque injuria. By way of a special affirmative defense, the defendants averred that the NPC
cannot be sued because it performs apurely governmental function.

RTCS RULING

Upon motion of the defendants, a preliminary hearing on the special defense was conducted. As a result
thereof, the trial court dismissed the complaints as against the NPC on the ground that the provision of its
charter allowing it to sue and be sued does not contemplate actions based on tort. The parties do not,
however, dispute the fact that this Court overruled the trial court and ordered the reinstatement of the
complaints as against the NPC.

Being closely interrelated, the cases were consolidated and trial thereafter ensued.

The lower court rendered its decision on 30 April 1990 dismissing the complaints for lack of sufficient
and credible evidence.6 Consequently, the private respondents seasonably appealed therefrom to the
respondent Court which then docketed the cases as CA-G.R. CV Nos. 27290-93.

CAS DECISION

In its joint decision promulgated on 19 August 1991, the Court of Appeals reversed the appealed decision
and awarded damages in favor of the private respondents. The dispositive portion of the decision reads:

CONFORMABLY TO THE FOREGOING, the joint decision appealed from is hereby REVERSED and
SET ASIDE, and a new one is hereby rendered:

1. In Civil Case No. SM-950, ordering defendants-appellees to pay, jointly and severally, plaintiffs-
appellants, with legal interest from the date when this decision shall become final and executory, the
following:

A. Actual damages, to wit:

1) Gaudencio C. Rayo, Two Hundred Thirty One Thousand Two Hundred Sixty Pesos (P231,260.00);

2) Bienvenido P. Pascual, Two Hundred Four Thousand Five Hundred Pesos (P204,500.00);
3) Tomas Manuel, One Hundred Fifty Five Thousand Pesos (P155,000.00);

4) Pedro C. Bartolome, One Hundred Forty Seven

Thousand Pesos (P147,000.00);

5) Bernardino Cruz, One Hundred Forty Three Thousand Five Hundred Fifty Two Pesos and Fifty
Centavos (P143,552.50);

6) Jose Palad, Fifty Seven Thousand Five Hundred Pesos (P57,500.00);

7) Mariano S. Cruz, Forty Thousand Pesos (P40,000.00);

8) Lucio Fajardo, Twenty Nine Thousand Eighty Pesos (P29,080.00); and

B. Litigation expenses of Ten Thousand Pesos (P10,000.00);

2. In Civil Case No. SM-951, ordering defendants-appellees to pay jointly and severally, plaintiff-
appellant, with legal interest from the date when this decision shall have become final and executory, the
following:

A. Actual damages of Five Hundred Twenty Thousand Pesos (P520,000.00);

B. Moral damages of Five Hundred Thousand Pesos (P500,000.00); and

C. Litigation expenses of Ten Thousand Pesos (P10,000.00);

3. In Civil Case No. SM-953, ordering defendants-appellees to pay, jointly and severally, with legal
interest from the date when this decision shall have become final and executory:

A. Plaintiff-appellant Angel C. Torres:

1) Actual damages of One Hundred Ninety Nine Thousand One Hundred Twenty Pesos (P199,120.00);

2) Moral Damages of One Hundred Fifty Thousand Pesos (P150,000.00);

B. Plaintiff-appellant Norberto Torres:

1) Actual damages of Fifty Thousand Pesos (P50,000.00);

2) Moral damages of Fifty Thousand Pesos (P50,000.00);

C. Plaintiff-appellant Rodelio Joaquin:

1) Actual damages of One Hundred Thousand Pesos (P100,000.00);

2) Moral damages of One Hundred Thousand Pesos (P100,000.00); and

D. Plaintiffs-appellants litigation expenses of Ten Thousand Pesos (P10,000.00);

4. In Civil Case No. SM-1247, ordering defendants-appellees to pay, jointly and severally, with legal
interest from the date when this decision shall have become final and executory:

A. Plaintiffs-appellants Presentacion Lorenzo and Clodualdo Lorenzo:

1) Actual damages of Two Hundred Fifty Six Thousand Six Hundred Pesos (P256,600.00);

2) Moral damages of Fifty Thousand Pesos (P50,000.00);

B. Plaintiff-appellant Consolacion Guzman:

1) Actual damages of One Hundred Forty Thousand Pesos (P140,000.00);

2) Moral damages of Fifty Thousand Pesos (P50,000.00);

C. Plaintiff-appellant Virginia Guzman:

1) Actual damages of Two Hundred Five Thousand Five Hundred Twenty Pesos (P205,520.00); and

2) Moral damages of Fifty Thousand Pesos (P50,000.00); and

D. Plaintiffs-appellants litigation expenses of Ten Thousand Pesos (P10,000.00).

In addition, in all the four (4) instant cases, ordering defendants-appellees to pay, jointly and severally,
plaintiffs-appellants, attorneys fees in an amount equivalent to 15% of the total amount awarded.

No pronouncement as to costs.7

The foregoing judgment is based on the public respondents conclusion that the petitioners were guilty of:

x x x a patent gross and evident lack of foresight, imprudence and negligence x x x in the management
and operation of Angat Dam. The unholiness of the hour, the extent of the opening of the spillways, and
the magnitude of the water released, are all but products of defendants-appellees headlessness,
slovenliness, and carelessness. Theresulting flash flood and inundation of even areas (sic) one (1)
kilometer away from the Angat River bank would have been avoided had defendants-appellees prepared
the Angat Dam by maintaining in the first place, a water elevation which would allow room for the
expected torrential rains.8

This conclusion, in turn, is anchored on its findings of fact, to wit:

As early as October 21, 1978, defendants-appellees knew of the impending onslaught of and imminent
danger posed by typhoon Kading. For as alleged by defendants-appellees themselves, the coming of
said super typhoon was bannered by Bulletin Today, a newspaper of national circulation, on October 25,
1978, as Super Howler to hit R.P. The next day, October 26, 1978, said typhoon once again merited a
headline in said newspaper as leadings Big Blow expected this afternoon (Appellees Brief, p. 6). Apart
from the newspapers, defendants-appellees learned of typhoon Kading through radio announcements
(Civil Case No. SM-950, TSN, Benjamin Chavez, December 4, 1984, pp. 7-9).
Defendants-appellees doubly knew that the Angat Dam can safely hold a normal maximum headwater
elevation of 217 meters (Appellees Brief, p. 12; Civil Case No. SM-951, Exhibit I-6; Civil Case No.
SM-953, Exhibit J-6; Civil Case No. SM-1247, Exhibit G-6).

Yet, despite such knowledge, defendants-appellees maintained a reservoir water elevation even beyond its
maximum and safe level, thereby giving no sufficient allowance for the reservoir to contain the rain water
that will inevitably be brought by the coming typhoon.

On October 24, 1978, before typhoon Kading entered the Philippine area of responsibility, water
elevation ranged from 217.61 to 217.53, with very little opening of the spillways, ranging from 1/2 to 1
meter. On October 25, 1978, when typhoon Kading entered the Philippine area of responsibility, and
public storm signal number one was hoisted over Bulacan at 10:45 a.m., later raised to number two at
4:45 p.m., and then to number three at 10:45 p.m., water elevation ranged from 217.47 to 217.57, with
very little opening of the spillways, ranging from 1/2 to 1 meter. On October 26, 1978, when public storm
signal number three remained hoisted over Bulacan, the water elevation still remained at its maximum
level of 217.00 to 218.00 with very little opening of the spillways ranging from 1/2 to 2 meters, until at or
about midnight, the spillways were suddenly opened at 5 meters, then increasing swiftly to 8, 10, 12,
12.5, 13, 13.5, 14, 14.5 in the early morning hours of October 27, 1978, releasing water at the rate of
4,500 cubic meters per second, more or less. On October 27, 1978, water elevation remained at a range of
218.30 to 217.05 (Civil Case No. SM-950, Exhibits D and series, L, M, N, and O and Exhibits
3 and 4; Civil Case No. SM-951, Exhibits H and H-1; Civil Case No. SM-953, Exhibits I and
I-1; Civil Case No. SM-1247, Exhibit F and F-1).

x x x

From the mass of evidence extant in the record, We are convinced, and so hold that the flash flood on
October 27, 1978, was caused not by rain waters (sic), but by stored waters (sic) suddenly and
simultaneously released from the Angat Dam by defendants-appellees, particularly from midnight of
October 26, 1978 up to the morning hours of October 27, 1978.9

The appellate court rejected the petitioners defense that they had sent early warning written notices to
the towns of Norzagaray, Angat, Bustos, Plaridel, Baliwag and Calumpit dated 24 October 1978 and
which read:

TO ALL CONCERN (sic):

Please be informed that at the present our reservoir (dam) is full and that we have been releasing water
intermittently for the past several days.

With the coming of typhoon Rita (Kading) we expect to release greater (sic) volume of water, if it pass
(sic) over our place.

In view of this kindly advise people residing along Angat River to keep alert and stay in safe places.

BENJAMIN L. CHAVEZ
Power Plant Superintendent10

because:

Said notice was delivered to the towns of Bulacan on October 26, 1978 by defendants-appellees driver,
Leonardo Nepomuceno (Civil Case No. SM-950, TSN, Benjamin Chavez, December 4, 1984, pp. 7-11
and TSN, Leonardo Nepomuceno, March 7, 1985, pp. 10-12).

Said notice is ineffectual, insufficient and inadequate for purposes of the opening of the spillway gates at
midnight of October 26, 1978 and on October 27, 1978. It did not prepare or warn the persons so served,
for the volume of water to be released, which turned out to be of such magnitude, that residents near or
along the Angat River, even those one (1) kilometer away, should have been advised to evacuate. Said
notice, addressed TO ALL CONCERN (sic), was delivered to a policeman (Civil Case No. SM-950,
TSN, Leonardo Nepomuceno, March 7, 1985, pp. 10-12 and Exhibit 2-A) for the municipality of
Norzagaray. Said notice was not thus addressed and delivered to the proper and responsible municipal
officials who could have disseminated the warning to the residents directly affected. As for the
municipality of Sta. Maria, where plaintiffs-appellants in Civil Case No. SM-1246 reside, said notice does
not appear to have been served. 11

Relying on Juan F. Nakpil & Sons vs. Court of Appeals,12 public respondent rejected the petitioners plea
that the incident in question was caused by force majeure and that they are, therefore, not liable to the
private respondents for any kind of damagesuch damage being in the nature of damnum absque injuria.

The motion for reconsideration filed by the petitioners, as well as the motion to modify judgment filed by
the private respondents,13 were denied by the public respondent in its Resolution of 27 December
1991.14

Petitioners thus filed the instant petition on 21 February 1992.

After the Comment to the petition was filed by the private respondents and the Reply thereto was filed by
the petitioners, We gave due course to the petition on 17 June 1992 and directed the parties to submit their
respective Memoranda,15 which they subsequently complied with.

The petitioners raise the following errors allegedly committed by the respondent Court:

I. THE COURT OF APPEALS ERRED IN APPLYING THE RULING OF NAKPIL & SONS V. COURT
OF APPEALS AND HOLDING THAT PETITIONERS WERE GUILTY OF NEGLIGENCE.

II. THE COURT OF APPEALS ERRED IN HOLDING THAT THE WRITTEN NOTICES OF
WARNING ISSUED BY PETITIONERS WERE INSUFFICIENT.

III. THE COURT OF APPEALS ERRED IN HOLDING THAT THE DAMAGE SUFFERED BY
PRIVATE RESPONDENTS WAS NOT DAMNUM ABSQUE INJURIA.

IV. THE COURT OF APPEALS ERRED IN NOT AWARDING THE COUNTERCLAIM OF

PETITIONERS FOR ATTORNEYS FEES AND EXPENSES OF LITIGATION.16
These same errors were raised by herein petitioners in G.R. No. 96410, entitled National Power
Corporation, et al. vs. Court of Appeals, et al.,17 which this Court decided on 3 July 1992. The said case
involved the very same incident subject of the instant petition. In no uncertain terms, We declared therein
that the proximate cause of the loss and damage sustained by the plaintiffs thereinwho were similarly
situated as the private respondents hereinwas the negligence of the petitioners, and that the 24 October
1978 early warning notice supposedly sent to the affected municipalities, the same notice involved in
the case at bar, was insufficient. We thus cannot now rule otherwise not only because such a decision
binds this Court with respect to the cause of the inundation of the town of Norzagaray, Bulacan on 26-27
October 1978 which resulted in the loss of lives and the destruction to property in both cases, but also
because of the fact that on the basis of its meticulous analysis and evaluation of the evidence adduced by
the parties in the cases subject of CA-G.R. CV Nos. 27290-93, public respondent found as conclusively
established that indeed, the petitioners were guilty of patent gross and evident lack of foresight,
imprudence and negligence in the management and operation of Angat Dam, and that the extent

_______________

16 Rollo, 16.

17 211 SCRA 162 [1992].

426

426

SUPREME COURT REPORTS ANNOTATED

National Power Corporation vs. Court of Appeals

of the opening of the spillways, and the magnitude of the water released, are all but products of
defendants-appellees headlessness, slovenliness, and carelessness.18 Its findings and conclusions are
binding upon Us, there being no showing of the existence of any of the exceptions to the general rule that
findings of fact of the Court of Appeals are conclusive upon this Court.19 Elsewise stated, the challenged
decision can stand on its own merits independently of Our decision in G.R. No. 96410. In any event, We
reiterate here Our pronouncement in the latter case that Juan F. Nakpil & Sons vs. Court of Appeals20 is
still good law as far as the concurrent liability of an obligor in the case of force majeure is concerned. In
the Nakpil case, We held:

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

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

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

Thus it has been held that when the negligence of a person concurs with an act of God in producing a
loss, such person is not exempt from liability by showing that the immediate cause of the damage was the
act of God. To be exempt from liability for loss because of an act of God, he must be free from any
previous negligence or misconduct by which that loss or damage may have been occasioned. (Fish &
Elective Co. v. Phil. Motors, 55 Phil. 129; Tucker v. Milan, 49 O.G. 4379; Limpangco & Sons v. Yangco
Steamship Co., 34 Phil. 594, 604; Lasam v. Smith, 45 Phil. 657).21

Accordingly, petitioners cannot be heard to invoke the act of God or force majeure to escape liability for
the loss or damage sustained by the private respondents since they, the petitioners, were guilty of
negligence. The event then was not occasioned exclusively by an act of God or force majeure; a human
factornegligence or imprudencehad intervened. The effect then of the force majeure in question may
be deemed to have, even if only partly, resulted from the participation of man. Thus, the whole occurrence
was thereby humanized, as it were, and removed from the rules applicable to acts of God.

WHEREFORE, for want of merit, the instant petition is hereby DISMISSED and the Consolidated
Decision of the Court of Appeals in CA-G.R. CV Nos. 27290-93 is AFFIRMED, with costs against the
petitioners.

SO ORDERED.

Feliciano (Chairman), Bidin, Romero and Melo, JJ., concur.

Petition dismissed.

Note.Force majeure as cause of accident is not necessarily exculpatory where negligence is also proved
(Gotesco Investment Corporation vs. Chatto, 210 SCRA 18).

o0o

G.R. No. 129792. December 21, 1999.*

JARCO MARKETING CORPORATION, LEONARDO KONG, JOSE TIOPE and ELISA PANELO,
petitioners, vs. HONORABLE COURT OF APPEALS, CONRADO C. AGUILAR and CRISELDA R.
AGUILAR, respondents.

Torts; Quasi-Delicts; Words and Phrases; Doctrine of Attractive Nuisance, Explained.One who
maintains on his premises dangerous instrumentalities or appliances of a character likely to attract
children in play, and who fails to exercise ordinary care to prevent children from playing therewith or
resorting thereto, is liable to a child of tender years who is injured thereby, even if the child is technically
a trespasser in the premises. The principal reason for the doctrine is that the condition or appliance in
question although its danger is apparent to those of age, is so enticing or alluring to children of tender
years as to induce them to approach, get on or use it, and this attractiveness is an implied invitation to
such children. (Hidalgo Enterprises, Inc. v. Balandan, et al., 91 Phil. 488, 490 [1952]). Same; Same;
Same; Accident, Explained.An accident pertains to an unforeseen event in which no fault or
negligence attaches to the defendant. It is a fortuitous circumstance, event or happening; an event
happening without any human agency, or if happening wholly or partly through human agency, an event
which under the circumstances is unusual or unexpected by the person to whom it happens.

Same; Same; Same; Negligence, Explained.Negligence is the omission to do something which a

reasonable man, guided by those considerations which ordinarily regulate the conduct of human affairs,
would do, or the doing of something which a prudent and reasonable man would not do. Negligence is
the failure to observe, for the protection of the interest of another person, that degree of care, precaution
and vigilance which the circumstances justly demand, whereby such other person suffers injury.

Same; Same; Same; Accident and negligence are intrinsically contradictoryone cannot exist with the
other.Accident and negligence are intrinsically contradictory; one cannot exist with the other. Accident
occurs when the person concerned is exercising ordinary care, which is not caused by fault of any person
and which could not have been prevented by any means suggested by common prudence.

Same; Same; Test in Determining Existence of Negligence.The test in determining the existence of
negligence is enunciated in the landmark case of Picart v. Smith, thus: Did the defendant in doing the
alleged negligent act use that reasonable care and caution which an ordinarily prudent person would have
used in the same situation? If not, then he is guilty of negligence. Same; Same; Evidence; Hearsay Rule;
Res Gestae; Witnesses; It is axiomatic that matters relating to declarations of pain or suffering and
statements made to a physician are generally considered declarations and admissions.It is axiomatic
that matters relating to declarations of pain or suffering and statements made to a physician are generally
considered declarations and admissions. All that is required for their admissibility as part of the res gestae
is that they be made or uttered under the influence of a startling event before the declarant had the time to
think and concoct a falsehood as witnessed by the person who testified in court. Under the circumstances
thus described, it is unthinkable for ZHIENETH, a child of such tender age and in extreme pain, to have
lied to a doctor whom she trusted with her life. We therefore accord credence to Gonzales testimony on
the matter, i.e., ZHIENETH performed no act that

facilitated her tragic death. Sadly, petitioners did, through their negligence or omission to secure or make
stable the counters base.
Witnesses; It is settled that when the issue concerns the credibility of witnesses, the appellate courts will
not as a general rule disturb the findings of the trial court, which is in a better position to determine the
same.It is settled that when the issue concerns the credibility of witnesses, the appellate courts will not
as a general rule disturb the findings of the trial court, which is in a better position to determine the same.
The trial court has the distinct advantage of actually hearing the testimony of and observing the
deportment of the witnesses. However, the rule admits of exceptions such as when its evaluation was
reached arbitrarily or it overlooked or failed to appreciate some facts or circumstances of weight and
substance which could affect the result of the case. In the instant case, petitioners failed to bring their
claim within the exception.

Torts; Quasi-Delicts; Children; Presumptions; Children below nine (9) years old are conclusively
presumed incapable of contributory negligence.Anent the negligence imputed to ZHIENETH, we apply
the conclusive presumption that favors children below nine (9) years old in that they are incapable of
contributory negligence. In his book, former Judge Cezar S. Sangco stated: In our jurisdiction, a person
under nine years of age is conclusively presumed to have acted without discernment, and is, on that
account, exempt from criminal liability. The same presumption and a like exemption from criminal
liability obtains in a case of a person over nine and under fifteen years of age, unless it is shown that he
has acted with discernment. Since negligence may be a felony and a quasi-delict and required
discernment as a condition of liability, either criminal or civil, a child under nine years of age is, by
analogy, conclusively presumed to be incapable of negligence; and that the presumption of lack of
discernment or incapacity for negligence in the case of a child over nine but under fifteen years of age is a
rebuttable one, under our law. The rule, therefore, is that a child under nine years of age must be
conclusively presumed incapable of contributory negligence as a matter of law.

PETITION for review on certiorari of a decision of the Court of Appeals.

The facts are stated in the opinion of the Court.

DAVIDE, JR., C.J.:

In this petition for review on certiorari under Rule 45 of the Rules of Court, petitioners seek the reversal
of the 17 June 1996 decision1 of the Court of Appeals in C.A. G.R. No. CV 37937 and the resolution2
denying their motion for reconsideration. The assailed decision set aside the 15 January 1992 judgment of
the Regional Trial Court (RTC), Makati City, Branch 60 in Civil Case No. 7119 and ordered petitioners to
pay damages and attorneys fees to private respondents Conrado and Criselda (CRISELDA) Aguilar.

Petitioner Jarco Marketing Corporation is the owner of Syvels Department Store, Makati City. Petitioners
Leonardo Kong, Jose Tiope and Elisa Panelo are the stores branch manager, operations manager, and
supervisor, respectively. Private respondents are spouses and the parents of Zhieneth Aguilar
(ZHIENETH).

In the afternoon of 9 May 1983, CRISELDA and ZHIENETH were at the 2nd floor of Syvels
Department Store, Makati City. CRISELDA was signing her credit card slip at the payment and
verification counter when she felt a sudden gust of wind and heard a loud thud. She looked behind her.
She then beheld her daughter ZHIENETH on the floor, her young body pinned by the bulk of the stores
gift-wrapping counter/structure. ZHIENETH was crying and screaming for help. Although shocked,
CRISELDA was quick to ask the assistance of the people around in lifting the counter and retrieving
ZHIENETH from the floor.3

ZHIENETH was quickly rushed to the Makati Medical Center where she was operated on. The next day
ZHIENETH lost her speech and thereafter communicated with CRISELDA by writing on a magic slate.
The injuries she sustained took their toil on her young body. She died fourteen (14) days after the accident
or on 22 May 1983, on the hospital bed. She was six years old.4

The cause of her death was attributed to the injuries she sustained. The provisional medical certificate5
issued by ZHIENETHs attending doctor described the extent of her injuries:

Diagnoses:

1. Shock, severe, sec. to intra-abdominal injuries due to blunt injury

2. Hemorrhage, massive, intraperitoneal sec. to laceration, (L) lobe liver

3. Rupture, stomach, anterior & posterior walls

4. Complete transection, 4th position, duodenum

5. Hematoma, extensive, retroperitoneal

6. Contusion, lungs, severe

CRITICAL

After the burial of their daughter, private respondents demanded upon petitioners the reimbursement of
the hospitalization, medical bills and wake and funeral expenses6 which they had incurred. Petitioners
refused to pay. Consequently, private respondents filed a complaint for damages, docketed as Civil Case
No. 7119 wherein they sought the payment of P157,522.86 for actual damages, P300,000 for moral
damages, P20,000 for attorneys fees and an unspecified amount for loss of income and exemplary
damages.

In their answer with counterclaim, petitioners denied any liability for the injuries and consequent death of
ZHIENETH. They claimed that CRISELDA was negligent in exercising care and diligence over her
daughter by allowing her to freely roam around in a store filled with glassware and appliances.
ZHIENETH too, was guilty of contributory negligence since she climbed the counter, triggering its
eventual collapse on her. Petitioners also emphasized that the counter was made of sturdy wood with a
strong support; it never fell nor collapsed for the past fifteen years since its construction.

Additionally, petitioner Jarco Marketing Corporation maintained that it observed the diligence of a good
father of a family in the selection, supervision and control of its employees. The other petitioners likewise
raised due care and diligence in the performance of their duties and countered that the complaint was
malicious for which they suffered besmirched reputation and mental anguish. They sought the dismissal
of the complaint and an award of moral and exemplary damages and attorneys fees in their favor.

In its decision7 the trial court dismissed the complaint and counterclaim after finding that the
preponderance of the evidence favored petitioners. It ruled that the proximate cause of the fall of the
counter on ZHIENETH was her act of clinging to it. It believed petitioners witnesses who testified that
ZHIENETH clung to the counter, afterwhich the structure and the girl fell with the structure falling on top
of her, pinning her stomach. In contrast, none of private respondents witnesses testified on how the
counter fell. The trial court also held that CRISELDAs negligence contributed to ZHIENETHs accident.

In absolving petitioners from any liability, the trial court reasoned that the counter was situated at the end
or corner of the 2nd floor as a precautionary measure hence, it could not be considered as an attractive
nuisance.8 The counter was higher than ZHIENETH. It has been in existence for fifteen years. Its
structure was safe and well-balanced. ZHIENETH, therefore, had no business climbing on and clinging to
it.

Private respondents appealed the decision, attributing as errors of the trial court its findings that: (1) the
proximate cause of the fall of the counter was ZHIENETHs misbehavior; (2) CRISELDA was negligent
in her care of ZHIENETH; (3) petitioners were not negligent in the maintenance of the counter; and (4)
petitioners were not liable for the death of ZHIENETH.

Further, private respondents asserted that ZHIENETH should be entitled to the conclusive presumption
that a child below nine (9) years is incapable of contributory negligence. And even if ZHIENETH, at six
(6) years old, was already capable of contributory negligence, still it was physically impossible for her to
have propped herself on the counter. She had a small frame (four feet high and seventy pounds) and the
counter was much higher and heavier than she was. Also, the testimony of one of the stores former
employees, Gerardo Gonzales, who accompanied ZHIENETH when she was brought to the emergency
room of the Makati Medical Center belied petitioners theory that ZHIENETH climbed the counter.
Gonzales claimed that when ZHIENETH was asked by the doctor what she did, ZHIENETH replied,
[N]othing, I did not come near the counter and the counter just fell on me.9 Accordingly, Gonzales
testimony on ZHIENETHs spontaneous declaration should not only be considered as part of res gestae
but also accorded credit.

Moreover, negligence could not be imputed to CRISELDA for it was reasonable for her to have let go of
ZHIENETH at the precise moment that she was signing the credit card slip.

Finally, private respondents vigorously maintained that the proximate cause of ZHIENETHs death, was
petitioners negligence in failing to institute measures to have the counter permanently nailed.

On the other hand, petitioners argued that private respondents raised purely factual issues which could no
longer be disturbed. They explained that ZHIENETHs death while unfortunate and tragic, was an
accident for which neither CRISELDA nor even ZHIENETH could entirely be held faultless and
blameless. Further, petitioners adverted to the trial courts rejection of Gonzales testimony as unworthy
of credence.

As to private respondents claim that the counter should have been nailed to the ground, petitioners
justified that it was not necessary. The counter had been in existence for several years without any prior
accident and was deliberately placed at a corner to avoid such accidents. Truth to tell, they acted without
fault or negligence for they had exercised due diligence on the matter. In fact, the criminal case10 for
homicide through simple negligence filed by private respondents against the individual petitioners was
dismissed; a verdict of acquittal was rendered in their favor.

The Court of Appeals, however, decided in favor of private respondents and reversed the appealed
judgment. It found that petitioners were negligent in maintaining a structurally dangerous counter. The
counter was shaped like an inverted L11 with a top wider than the base. It was top heavy and the weight
of the upper portion was neither evenly distributed nor supported by its narrow base. Thus, the counter
was defective, unstable and dangerous; a downward pressure on the overhanging portion or a push from
the front could cause the counter to fall. Two former employees of petitioners had already previously
brought to the attention of the management the danger the counter could cause. But the latter ignored their
concern. The Court of Appeals faulted the petitioners for this omission, and concluded that the incident
that befell ZHIENETH could have been avoided had petitioners repaired the defective counter. It was
inconsequential that the counter had been in use for some time without a prior incident.

The Court of Appeals declared that ZHIENETH, who was below seven (7) years old at the time of the
incident, was absolutely incapable of negligence or other tort. It reasoned that since a child under nine (9)
years could not be held liable even for an intentional wrong, then the six-year old ZHIENETH could not
be made to account for a mere mischief or reckless act. It also absolved CRISELDA of any negligence,
finding nothing wrong or out of the ordinary in momentarily allowing ZHIENETH to walk while she
signed the document at the nearby counter.

The Court of Appeals also rejected the testimonies of the witnesses of petitioners. It found them biased
and prejudiced. It instead gave credit to the testimony of disinterested witness Gonzales. The Court of
Appeals then awarded P99,420.86 as actual damages, the amount representing the hospitalization
expenses incurred by private respondents as evidenced by the hospitals statement of account.12 It denied
an award for funeral expenses for lack of proof to substantiate the same. Instead, a compensatory damage
of P50,000 was awarded for the death of ZHIENETH.

We quote the dispositive portion of the assailed decision,13 thus:

WHEREFORE, premises considered, the judgment of the lower court is SET ASIDE and another one is
entered against [petitioners], ordering them to pay jointly and severally unto [private respondents] the
following:

1. P50,000.00 by way of compensatory damages for the death of Zhieneth Aguilar, with legal interest (6%
p.a.) from 27 April 1984;

2. P99,420.86 as reimbursement for hospitalization expenses incurred; with legal interest (6% p.a.) from
27 April 1984;

3. P100,000.00 as moral and exemplary damages;

4. P20,000.00 in the concept of attorneys fees; and

5. Costs.
Private respondents sought a reconsideration of the decision but the same was denied in the Court of
Appeals resolution14 of 16 July 1997.

Petitioners now seek the reversal of the Court of Appeals decision and the reinstatement of the judgment
of the trial court. Petitioners primarily argue that the Court of Appeals erred in disregarding the factual
findings and conclusions of the trial court. They stress that since the action was based on tort, any finding
of negligence on the part of the private respondents would necessarily negate their claim for damages,
where said negligence was the proximate cause of the injury sustained. The injury in the instant case was
the death of ZHIENETH. The proximate cause was ZHIENETHs act of clinging to the counter. This act
in turn caused the counter to fall on her. This and CRISELDAs contributory negligence, through her
failure to provide the proper care and attention to her child while inside the store, nullified private
respondents claim for damages. It is also for these reasons that parents are made accountable for the
damage or injury inflicted on others by their minor children. Under these circumstances, petitioners could
not be held responsible for the accident that befell ZHIENETH.

Petitioners also assail the credibility of Gonzales who was already separated from Syvels at the time he
testified; hence, his testimony might have been tarnished by ill-feelings against them.

For their part, private respondents principally reiterated their arguments that neither ZHIENETH nor
CRISELDA was negligent at any time while inside the store; the findings and conclusions of the Court of
Appeals are substantiated by the evidence on record; the testimony of Gonzales, who heard ZHIENETH
comment on the incident while she was in the hospitals emergency room should receive credence; and
finally, ZHIENETHs part of the res gestae declaration that she did nothing to cause the heavy structure
to fall on her should be considered as the correct version of the gruesome events.

We deny the petition.

The two issues to be resolved are: (1) whether the death of ZHIENETH was accidental or attributable to
negligence; and (2) in case of a finding of negligence, whether the same was attributable to private
respondents for maintaining a defective counter or to CRISELDA and ZHIENETH for failing to exercise
due and reasonable care while inside the store premises.

An accident pertains to an unforeseen event in which no fault or negligence attaches to the defendant.15 It
is a fortuitous circumstance, event or happening; an event happening without any human agency, or if
happening wholly or partly through human agency, an event which under the circumstances is unusual or
unexpected by the person to whom it happens.16

On the other hand, negligence is the omission to do something which a reasonable man, guided by those
considerations which ordinarily regulate the conduct of human affairs, would do, or the doing of
something which a prudent and reasonable man would not do.17 Negligence is the failure to observe, for
the protection of the interest of another person, that degree of care, precaution and vigilance which the
circumstances justly demand, whereby such other person suffers injury.18

Accident and negligence are intrinsically contradictory; one cannot exist with the other. Accident occurs
when the person concerned is exercising ordinary care, which is not caused by fault of any person and
which could not have been prevented by any means suggested by common prudence.19
The test in determining the existence of negligence is enunciated in the landmark case of Picart v.
Smith,20 thus: Did the defendant in doing the alleged negligent act use that reasonable care and caution
which an ordinarily prudent person would have used in the same situation? If not, then he is guilty of
negligence.21

We rule that the tragedy which befell ZHIENETH was no accident and that ZHIENETHs death could
only be attributed to negligence.

We quote the testimony of Gerardo Gonzales who was at the scene of the incident and accompanied
CRISELDA and ZHIENETH to the hospital:

While at the Makati Medical Center, did you hear or notice anything while the child was being treated?

At the emergency room we were all surrounding the child. And when the doctor asked the child what did
youdo, the child said nothing, I did not come near the counter and the counter just fell on me.

(COURT TO ATTY. BELTRAN)

You want the words in Tagalog to be translated?

ATTY. BELTRAN

Yes, your Honor.

COURT

Granted. Intercalate wala po, hindi po ako lumapit doon. Basta bumagsak.22

This testimony of Gonzales pertaining to ZHIENETHs statement formed (and should be admitted as)
part of the res gestae under Section 42, Rule 130 of the Rules of Court, thus:

Part of res gestae. Statements made by a person while a startling occurrence is taking place or
immediately prior or subsequent thereto with respect to the circumstances thereof, may be given in
evidence as part of the res gestae. So, also, statements accompanying an equivocal act material to the
issue, and giving it a legal significance, may be received as part of the res gestae.

It is axiomatic that matters relating to declarations of pain or suffering and statements made to a physician
are generally considered declarations and admissions.23 All that is required for their admissibility as part
of the res gestae is that they be made or uttered under the influence of a startling event before the
declarant had the time to think and concoct a falsehood as witnessed by the person who testified in court.
Under the circumstances thus described, it is unthinkable for ZHIENETH, a child of such tender age and
in extreme pain, to have lied to a doctor whom she trusted with her life. We therefore accord credence to
Gonzales testimony on the matter, i.e., ZHIENETH performed no act that facilitated her tragic death.
Sadly, petitioners did, through their negligence or omission to secure or make stable the counters base.

Gonzales earlier testimony on petitioners insistence to keep and maintain the structurally unstable gift-
wrapping counter proved their negligence, thus:

When you assumed the position as gift wrapper at the second floor, will you please describe the gift
wrapping counter, were you able to examine?

Because every morning before I start working I used to clean that counter and since it is not nailed and it
was only standing on the floor, it was shaky.

xxx

Will you please describe the counter at 5:00 oclock [sic] in the afternoon on [sic] May 9, 1983?

At that hour on May 9, 1983, that counter was standing beside the verification counter. And since the top
of it was heavy and considering that it was not nailed, it can collapse at anytime, since the top is heavy.

xxx

And what did you do?

I informed Mr. Maat about that counter which is [sic] shaky and since Mr. Maat is fond of putting display
decorations on tables, he even told me that I would put some decorations. But since I told him that it not
[sic] nailed and it is shaky he told me better inform also the company about it. And since the company
did not do anythingabout the counter, so I also did not do anything about the counter.24 [Emphasis
supplied]

Ramon Guevarra, another former employee, corroborated the testimony of Gonzales, thus:
Q

Will you please described [sic] to the honorable Court the counter where you were assigned in January
1983?

xxx

That counter assigned to me was when my supervisor ordered me to carry that counter to another place. I
told him that the counter needs nailing and it has to be nailed because it might cause injury or accident to
another since it was shaky.

When that gift wrapping counter was transferred at the second floor on February 12, 1983, will you please
describe that to the honorable Court?

I told her that the counter wrapper [sic] is really in good [sic] condition; it was shaky. I told her that we
had to nail it.

When you said she, to whom are you referring to [sic]?

I am referring to Ms. Panelo, sir.

And what was the answer of Ms. Panelo when you told her that the counter was shaky?

She told me Why do you have to teach me. You are only my subordinate and you are to teach me? And
she even got angry at me when I told her that.

xxx

From February 12, 1983 up to May 9, 1983, what if any, did Ms. Panelo or any employee of the
management do to that (sic)
xxx

Witness:

None, sir. They never nailed the counter. They only nailed the counter after the accident happened.25
[Emphasis supplied]

Without doubt, petitioner Panelo and another store supervisor were personally informed of the danger
posed by the unstable counter. Yet, neither initiated any concrete action to remedy the situation nor ensure
the safety of the stores employees and patrons as a reasonable and ordinary prudent man would have
done. Thus, as confronted by the situation petitioners miserably failed to discharge the due diligence
required of a good father of a family.

On the issue of the credibility of Gonzales and Guevarra, petitioners failed to establish that the formers
testimonies were biased and tainted with partiality. Therefore, the allegation that Gonzales and Guevarras
testimonies were blemished by ill feelings against petitionerssince they (Gonzales and Guevarra)
were already separated from the company at the time their testimonies were offered in courtwas but
mere speculation and deserved scant consideration.

It is settled that when the issue concerns the credibility of witnesses, the appellate courts will not as a
general rule disturb the findings of the trial court, which is in a better position to determine the same. The
trial court has the distinct advantage of actually hearing the testimony of and observing the deportment of
the witnesses.26 However, the rule admits of exceptions such as when its evaluation was reached
arbitrarily or it overlooked or failed to appreciate some facts or circumstances of weight and substance
which could affect the result of the case.27 In the instant case, petitioners failed to bring their claim
within the exception.

Anent the negligence imputed to ZHIENETH, we apply the conclusive presumption that favors children
below nine (9) years old in that they are incapable of contributory negligence. In his book,28 former
Judge Cezar S. Sangco stated:

In our jurisdiction, a person under nine years of age is conclusively presumed to have acted without
discernment, and is, on that account, exempt from criminal liability. The same presumption and a like
exemption from criminal liability obtains in a case of a person over nine and under fifteen years of age,
unless it is shown that he has acted with discernment. Since negligence may be a felony and a quasi-delict
and required discernment as a condition of liability, either criminal or civil, a child under nine years of
age is, by analogy, conclusively presumed to be incapable of negligence; and that the presumption of lack
of discernment or incapacity for negligence in the case of a child over nine but under fifteen years of age
is a rebuttable one, under our law. The rule, therefore, is that a child under nine years of age must be
conclusively presumed incapable of contributory negligence as a matter of law. [Emphasis supplied]

Even if we attribute contributory negligence to ZHIENETH and assume that she climbed over the
counter, no injury should have occurred if we accept petitioners theory that the counter was stable and
sturdy. For if that was the truth, a frail six-year old could not have caused the counter to collapse. The
physical analysis of the counter by both the trial court and Court of Appeals and a scrutiny of the
evidence29 on record reveal otherwise, i.e., it was not durable after all. Shaped like an inverted L, the
counter was heavy, huge, and its top laden with formica. It protruded towards the customer waiting area
and its base was not secured.30

CRISELDA too, should be absolved from any contributory negligence. Initially, ZHIENETH held on to
CRISELDAs waist, later to the latters hand.31 CRISELDA momentarily released the childs hand from
her clutch when she signed her credit card slip. At this precise moment, it was reasonable and usual for
CRISELDA to let go of her child. Further, at the time ZHIENETH was pinned down by the counter, she
was just a foot away from her mother; and the gift-wrapping counter was just four meters away from
CRISELDA.32 The time and distance were both significant. ZHIENETH was near her mother and did not
loiter as petitioners would want to impress upon us. She even admitted to the doctor who treated her at the
hospital that she did not do anything; the counter just fell on her.

WHEREFORE, in view of all the foregoing, the instant petition is DENIED and the challenged decision
of the Court of

Appeals of 17 June 1996 in C.A. G.R. No. CV 37937 is hereby AFFIRMED.

Costs against petitioners.

SO ORDERED.

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

Petition denied, judgment affirmed.

Notes.The test for the admissibility of a declaration which is considered as part of the res gestae is the
unreflecting character of the statements made during the startling occurrence, or immediately before or
after said occurrence. (People vs. Maguikay, 237 SCRA 587 [1994])

Experience shows that oftentimes a startling occurrence creates an indelible impression in the mind that
can be recalled vividly. (People vs. Daquipil, 240 SCRA 314 [1995])

As a general rule, findings of fact of the Court of Appeals are binding and conclusive upon the Supreme
Court, and the Court will not normally disturb such factual findings unless the findings of fact of the said
court are palpably unsupported by the evidence on record or unless the judgment itself is based on a
misapprehension of facts. (Valenzuela vs. Court of Appeals, 253 SCRA 303 [1996])

o0o

393
 Copyright 2017 Central Book Supply, Inc. All rights reserved. Jarco Marketing Corporation vs. Court
of Appeals, 321 SCRA 375, G.R. No. 129792 December 21, 1999

SUPREME COURT REPORTS ANNOTATED

Allied Banking Corporation vs. Court of Appeals

G.R. 85868. October 13, 1989.*

ALLIED BANKING CORPORATION, petitioner, vs. COURT OF APPEALS AND JOSELITO Z.

YUJUICO, respondents.

Pleadings and Practice; Third-Party Complaint; Nature and Purpose.A third-party complaint is a
procedural device whereby a third-party who is neither a party nor privy to the act or deed complained
of by the plaintiff, may be brought into the case with leave of court, by the defendant, who acts as third-
party plaintiff to enforce against such third-party defendant a right for contribution, indemnity,
subrogation or any other relief, in respect of the plaintiffs claim. The third party complaint is actually
independent of, separate and distinct from the plaintiffs complaint. Such that, were it not for this
provision of the Rules of Court, it would have to be filed separately from the original complaint by the
defendant against the third-party.

Same; Same; The third-party plaintiffs claim is premised not only on the alleged tortious interference by
the third-party defendants with the affairs of GENBANK but also on the judgment of the Court of
Appeals in CA-G.R. CV No. 03642.After going through the records of this case, this Court finds that
the third-party plaintiffs claim is premised not only on what was alleged as the tortious interference by
the third-party defendants with the affairs of GENBANK. More importantly, attention should have been
focused on the fact that this allegation is wedded to a decision rendered by the Court of Appeals in CA-
G.R. CV No. 03642 which affirmed the decision of the Regional Trial Court in Special Proceedings No.
107812. We quote the pertinent portion of the affirmed decision, to wit: Based on the foregoing facts, the
Court finds the liquidation of GBTC as embodied in Annex A and Annex B of the petition, which
merely adopted the bid of the Lucio Tan group as the liquidation plan of GBTC, as plainly arbitrary and
made in bad faith and therefore the same must be annulled and set aside.

Same; Same; Test to determine whether the claim for indemnity in a third-party claim is in respect of
plaintiffs claim.As early as Capayas vs. Court of First Instance of Albay, this Court had already
outlined the tests to determine whether the claim for indemnity in a third-party claim is in respect of
plaintiffs claim. They are: (a) whether it arises out of the same transaction on which the plaintiffs

claim is based, or whether the third-partys claim, although arising out of another or different contract or
transaction, is connected with the plaintiffs claim; (b) whether the third-party defendant would be liable
to the plaintiff or to the defendant for all or part of the plaintiffs claim against the original defendant,
although the third-party defendants liability arises out of another transaction; or (c) whether the third-
party defendant may assert any defense which the third-party plaintiff has, or may have against plaintiffs
claim.

Same; Same; Same; While the claim does not arise out of the same transaction on which the plaintiffs
claim is based, it cannot be deemed that the third-partys claim is connected with plaintiffs claim.
While the claim of third-party plaintiff, private respondent herein, does not fall under test (c), there is no
doubt that such claim can be accommodated under tests (a) and (b) abovementioned. Whether or not this
Court agrees with the petitioners assertion that the claim does not arise out of the same transaction on
which the plaintiffs claim is based, it cannot be denied that the third-partys claim (although arising out
of another or different contract or transaction) is connected with plaintiffs claim.

Same; Same; Rules do not allow a third-party defendant to be held liable to a third-party plaintiff for it
introduces a controversy that is entirely foreign to and distinct from the main cause.It is one thing to
say that a third-party defendant may be held liable to indemnify or reimburse the third-party plaintiff in
respect of plaintiffs claim, but it is quite another to state that a third-party defendant may be held liable
to a third-party plaintiff. The second instance may not carry with it the necessary connection to the main
cause of action and, therefore, is not allowed by the Rules for it introduces a controversy that is entirely
foreign to and distinct from the main cause. The first instance is allowable and should be allowed if it will
help in clarifying in a single proceeding the multifarious issues involved arising from a single transaction.

Civil Law; Prescription; Quasi-Delict; An action for damages arising from quasi-delict or alleged tortious
interference should be filed within four (4) years from the day the cause of action accrued.There can be
no question in this case that the action for damages instituted by private respondent arising from the
quasi-delict or alleged tortious interference should be filed within four (4) years from the day the cause
of action accrued.

Same; Same; Same; Same; Since the cause of action accrued on March 25, 1980 while the third-party
complaint was filed only on June 17, 1987, the action has prescribed; Case at bar.Thus, while
technically the third party complaint in this case may be admitted as above discussed, however, since the
cause of action accrued on March 25, 1980 when the Monetary Board ordered the General Bank to desist
from doing business in the Philippines while the third party complaint was filed only on June 17, 1987,
consequently, the action has prescribed. The third party complaint should not be admitted.

PETITION for certiorari to review the decision of the Court of Appeals.

The facts are stated in the opinion of the Court.

Angara, Abello, Concepcion, Regala & Cruz for petitioner.

Balgos & Perez Law Offices for respondents.

GANCAYCO, J.:

What started as a simple collection suit and which developed into an intricate question of procedure is the
focus of this petition for review on certiorari.

The present petition seeks the reversal of the decision of the Court of Appeals in CA-G.R. SP No. 14759
dated September 5, 1988 entitled Joselito Z. Yujuico vs. Hon. Domingo D. Panis, RTC Judge of Manila
Branch LXI and Allied Banking Corp.,1 and the resolution dated November 9, 1988 denying petitioners
motion for reconsideration of the said decision.2

The antecedent facts of the case are as follows:

On April 1, 1976, private respondent Joselito Z. Yujuico obtained a loan from the General Bank and Trust
Company (GENBANK) in the amount of Five Hundred Thousand pesos (P500,000.00), payable on or
before April 1, 1977. As evidence thereof, private respondent issued a corresponding promissory note in
favor of GENBANK. At the time private respondent incurred the obligation, he was then a ranking officer
of GENBANK and a member of the family owning the controlling interest in the said bank.

On March 25, 1977, the Monetary Board of the Central Bank issued Resolution No. 675 forbidding
GENBANK from doing business in the Philippines. This was followed by Resolution No. 677 issued by
the Monetary Board on March 29, 1977 ordering the liquidation of GENBANK.

It appears that in a Memorandum of Agreement dated May 9, 1977 executed by and between Allied
Banking Corporation (ALLIED) and Arnulfo Aurellano as Liquidator of GENBANK, ALLIED acquired
all the assets and assumed the liabilities of GENBANK, which includes the receivable due from private
respondent under the promissory note.

Upon failing to comply with the obligation under the promissory note, petitioner ALLIED, on February 7,
1979, filed a complaint against private respondent for the collection of a sum of money. This case was
docketed as Civil Case No. 121474 before the then Court of First Instance of Manila (now Regional Trial
Court).

Sometime in 1987 and in the course of the proceedings in the court below, private respondent, then
defendant in the court below, filed a Motion to admit Amended/Supplemental Answer and Third-Party
Complaint. Private respondent sought to implead the Central Bank and Arnulfo Aurellano as third-party
defendants. It was alleged in the third-party complaint that by reason of the tortious interference by the
Central Bank with the affairs of GENBANK, private respondent was prevented from performing his
obligation under the loan such that he should not now be held liable thereon.

Acting on the motion and on the opposition filed thereto, the Regional Trial Court through the Hon. Judge
Felix B. Mintu issued an order dated August 13, 1987 denying the admission of the third-party complaint
but admitting private respondents amended/supplemental answer.

When the case was re-raffled to Branch 61 of the Regional Trial Court of Manila, presiding Judge
Domingo D. Panis, on February 29, 1988, reiterated the order denying the admission of private
respondents third-party complaint and admitting the amended/supplemental answer. When both parties
filed their respective motions for partial reconsideration, the Hon. Judge Panis issued an order dated April
18, 1988 denying both motions.

Thereupon, private respondent filed with the Court of Appeals a petition for certiorari3 on June 1, 1988
questioning the orders of Hon. Judge Panis dated February 29, 1988 denying private respondents motion
to admit third-party complaint, and April 18, 1988 denying private respondents motion for partial
reconsideration of the February 29, 1988 order.
On September 5, 1988, the Court of Appeals rendered the assailed decision, the dispositive portion of
which reads:

WHEREFORE, finding grave abuse of discretion on the part of the respondent Judge, the Order of
February 29, 1988 as well as that of April 18, 1988 insofar as it denies petitioners motion to admit his
third party complaint, is hereby declared null and void. Respondent judge is hereby ordered to admit the
proposed third-party complaint. Cost de oficio.

SO ORDERED.4

A motion for reconsideration thereof filed by petitioner was denied in a resolution dated November 9,
1988. Petitioner assigns the following errors:

RESPONDENT COURT OF APPEALS SERIOUSLY ERRED IN HOLDING THAT HON. JUDGE

PANIS COMMITTED GRAVE ABUSE OF DISCRETION IN DENYING ADMISSION TO PRIVATE
RESPONDENTS THIRD-PARTY COMPLAINT, CONSIDERING THAT:

A. PRIVATE RESPONDENTS PROPOSED THIRD-PARTY COMPLAINT DOES NOT STATE A

CAUSE OF ACTION IN RESPECT OF PETITIONERS CLAIM.

B. THE ALLEGED CAUSE OF ACTION SET FORTH IN PRIVATE RESPONDENTS PROPOSED

THIRD-PARTY COMPLAINT HAS ALREADY PRESCRIBED.

C. THE ADMISSION OF PRIVATE RESPONDENTS PROPOSED THIRD-PARTY COMPLAINT

WILL ONLY CAUSE FURTHER UNNECESSARY DELAY IN THE DISPOSITION OF THE CASE OF
PETITIONER AGAINST PRIVATE RESPONDENT.

CONTRARY TO THE RULING OF RESPONDENT COURT OF APPEALS, THE RULE

PRESCRIBING THAT DEFENSES NOT RAISED IN THE COURT BELOW CANNOT BE RAISED
FOR THE FIRST TIME ON APPEAL IS NOT APPLICABLE TO SPECIAL CIVIL ACTIONS OF
CERTIORARI.5

From the foregoing assignment of errors, petitioner would like Us to resolve the following issues: (a) Is
there a proper ground to admit the third-party complaint?; and (b) assuming that there is, has the cause of
action under the third-party complaint prescribed?

A third-party complaint is a procedural device whereby a third-party who is neither a party nor privy to
the act or deed complained of by the plaintiff, may be brought into the case with leave of court, by the
defendant, who acts as third-party plaintiff to enforce against such third-party defendant a right for
contribution, indemnity, subrogation or any other relief, in respect of the plaintiffs claim.6 The third
party complaint is actually independent of, separate and distinct from the plaintiffs complaint. Such that,
were it not for this provision of the Rules of Court, it would have to be filed separately from the original
complaint by the defendant against the third-party.7
After going through the records of this case, this Court finds that the third-party plaintiffs claim is
premised not only on what was alleged as the tortious interference by the third-party defendants with the
affairs of GENBANK. More importantly, attention should have been focused on the fact that this
allegation is wedded to a decision rendered by the Court of Appeals in CA-G.R. CV No. 03642 which
affirmed the decision of the Regional Trial Court in Special Proceedings No. 107812.8 We quote the
pertinent portion of the affirmed decision, to wit:

Based on the foregoing facts, the Court finds the liquidation of GBTC as embodied in Annex A and
Annex B of the petition, which merely adopted the bid of the Lucio Tan group as the liquidation plan of
GBTC, as plainly arbitrary and made in bad faith and therefore the same must be annulled and set aside. x
x x.9 (Italics supplied).

This decision, which declared as null and void the liquidation of GENBANK, prompted private
respondent herein to file a third-party complaint against the Central Bank and Arnulfo Aurellano on the
theory that he has a right to proceed against them in respect of ALLIEDs claim. In the words of private
respondent, he [s]eeks to transfer liability for the default imputed against him by the petitioner to the
proposed third-party defendants because of their tortious acts which prevented him from performing his
obligations.10 Thus, if at the outset the issue appeared to be a simple makers liability on a promissory
note, it became complex by the rendition of the aforestated decision.

As early as Capayas vs. Court of First Instance of Albay,11 this Court had already outlined the tests to
determine whether the claim for indemnity in a third-party claim is in respect of plaintiffs claim. They
are: (a) whether it arises out of the same transaction on which the plaintiffs claim is based, or whether the
third-partys claim, although arising out of another or different contract or transaction, is connected with
the plaintiffs claim; (b) whether the third-party defendant would be liable to the plaintiff or to the
defendant for all or part of the plaintiffs claim against the original defendant, although the third-party
defendants liability arises out of another transaction; or (c) whether the third-party defendant may assert
any defense which the third-party plaintiff has, or may have against plaintiffs claim.12

While the claim of third-party plaintiff, private respondent herein, does not fall under test (c), there is no
doubt that such claim can be accommodated under tests (a) and (b) abovementioned. Whether or not this
Court agrees with the petitionersassertion that the claim does not arise out of the same transaction on
which the plaintiffs claim is based, it cannot be denied that the third-partys claim (although arising out
of another or different contract or transaction) is connected with plaintiffs claim. The judgment of the
Court of Appeals in CA-G.R. CV No. 03642 is the substantive basis of private respondents proposed
third-party complaint. Put differently, there is merit in private respondents position that if held liable on
the promissory note, they are seeking, by means of the third-party complaint, to transfer unto the third-
party defendants liability on the note by reason of the illegal liquidation of GENBANK which, in the first
place, was the basis for the assignment of the promissory note. If there was any confusion at all on the
ground/s alleged in the third-party complaint, it was the claim of third-party plaintiff for other damages in
addition to any amount which he may be called upon to pay under the original complaint.13 While these
allegations in the proposed third-party complaint may cause delay in the disposition of the main suit, it
cannot, however, be outrightly asserted that it would not serve any purpose.

It is one thing to say that a third-party defendant may be held liable to indemnify or reimburse the third-
party plaintiff in respect of plaintiffs claim, but it is quite another to state that a third-party defendant
may be held liable to a third-party plaintiff. The second instance may not carry with it the necessary
connection to the main cause of action and, therefore, is not allowed by the Rules for it introduces a
controversy that is entirely foreign to and distinct from the main cause. The first instance is allowable and
should be allowed if it will help in clarifying in a single proceeding the multifarious issues involved
arising from a single transaction.

It is this Courts pronouncement that the first instance is applicable in the present situation.

As to the issue of prescription, it is the position of petitioner that the cause of action alleged in the third-
party complaint has already prescribed.14 Being founded on what was termed as tortious interference,
petitioner asserts that under the applicable provisions of the Civil Code on quasi-delict15 the action
against third-party defendants should have been filed within four (4) years from the date the cause of
action accrued. On the theory that the cause of action accrued on March 25, 1977, the date when the
Monetary Board ordered GENBANK to desist from doing business in the Philippines, petitioner
maintains that the claim should have been filed at the latest on March 25, 1981.16 On the other hand,
private respondent relies on the Doctrine of Relations or Relations Back Doctrine17 to support his
claim that the cause of action as against the proposed third-party defendant accrued only on December 12,
1986 when the decision in CA-G.R. CV No. 03642 became final and executory. Thus, it is contended that
while the third party complaint was filed only on June 17, 1987, it must be deemed to have been instituted
on February 7, 1979 when the complaint in the case was filed.

There can be no question in this case that the action for damages instituted by private respondent arising
from the quasi-delict or alleged tortious interference should be filed within four (4) years from the day
the cause of action accrued.18

In the case of Espaol vs. Chairman, Philippine Veterans Administration,19 this Court ruled that it is from
the date of the act or omission violative of the right of a party when the cause of action arises and it is
from this date that the prescriptive period must be reckoned.

Thus, while technically the third party complaint in this case may be admitted as above discussed,
however, since the cause of action accrued on March 25, 1980 when the Monetary Board ordered the
General Bank to desist from doing business in the Philippines while the third party complaint was filed
only on June 17, 1987, consequently, the action has prescribed. The third party complaint should not be
admitted.

WHEREFORE, the petition is GRANTED. The decision of the respondent Court of Appeals dated
September 5, 1988 and its resolution dated November 9, 1988 denying the motion for reconsideration
filed by petitioner are hereby reversed and set aside and declared null and void, and another judgment is
hereby rendered sustaining the orders of the trial court of February 29, 1988 and April 18, 1988, denying
the admission of the third party complaint. No pronouncement as to costs.

SO ORDERED.

Narvasa, Cruz, Grio-Aquino and Medialdea, JJ., concur.

Petition granted; decision reversed and set aside.

Note.The test to determine whether or not the claim is the proper subject of the third-party complaint is,
whether it arises out of the same transaction or the third-partys claim or transaction is connected with the
plaintiffs claim. (Balbastro vs. Court of Appeals, 48 SCRA 231; Rubio vs. Mariano, 49 SCRA 319.)

o0o

536

Copyright 2017 Central Book Supply, Inc. All rights reserved. Allied Banking Corporation vs. Court of
Appeals, 178 SCRA 526, G.R. 85868 October 13, 1989