 not enough that there was non-performance or delay,
ART 170 (CONTRAVENTION OF TENOR) it should be imputable to the debtor
 Those who are in the performance of the following
obligations are liable for damages
o guilty of
 fraud,
 negligence, or
 delay
o and those who in any manner contravene the
tenor thereof
Non-performance by fraud
 Fraud
o voluntary execution of a wrongful act
 Fraud referred in this article
o Deliberate and intentional evasion of the
normal fulfillment of obligations
 Fraud differs from negligence because the latter
lacks intent
 Fraud as ground for damages
o Implies some kind of malice or dishonesty
 The element of intent, not the degree of actual
harm done is the test
By fault or negligence
 Omission of diligence required by nature of
obligation and corresponds with the circumstances
of the person, time, and place
 Culpa contractual
o incident in the fulfillment of an existing
obligation
 Culpa aquiliana
o Independent source of obligation between
parties not previously bound
 Whether contractual or non-contractual, the
negligence of the defendant should be the proximate
cause of the damage to the plaintiff in order for
liability to attach
In any manner contravene the tenor thereof
 Any illicit act which impairs the strict and
faithful fulfillment of the obligation
 Every kind of defective performance
By delay and other violations
Excuse for non-performance
 failure of performance due to fortuitous event
o cannot be held liable for damages
o UNLESS there is an express agreement to the
contrary or the law so provides
Payment of money
 Damages may be recovered under this article when
the obligation is to do something other than the
payment of money
o If it is for the payment of money, it is
governed by ART 2209 of CC
ART 1167 (CONTRAVENTION OF TENOR)
 If a person obliged to do something fails to do it
o Shall be executed at his cost
 If he does it in contravention of the tenor of the
obligation
o Same rule shall be observed
o It may be decreed, that what has been poorly
done be undone
Performance at debtor’s cost
 Creditor entitled to have the thing done in the
proper manner
o By himself or by a 3rd person
 At the expense of debtor
Indemnification for damages
 Article presupposes that the act be done by persons
other than the debtor
o If the debtor is the only one who can do it,
the only remedy is to recover damages
ARRIETA v NARIC
TOPIC:
Under this provision, not only debtors guilty of
fraud, negligence or default in the performance of
obligations a decreed liable; in general, every debtor
who fails in performance of his obligations is bound
to indemnify for the losses and damages caused
thereby. The phrase "any manner contravene the tenor"
of the obligation includes any illicit act which
impairs the strict and faithful fulfillment of the
obligation or every kind or defective performance.
FACTS
Plaintiff-appellee participated in the public bidding
called by the NARIC for the supply of 20,000 metric
tons of Burmese rice. She was awarded the contract for
the same.
Plaintiff-appellee Paz P. Arrieta and the appellant
corporation entered into a Contract of Sale of Rice,
under the terms of which
 the petitioner obligated herself to deliver to the
latter 20,000 metric tons of Burmess Rice at
$203.00 per metric ton
 the defendant corporation committed itself to pay
for the imported rice "by means of an irrevocable,
confirmed and assignable letter of credit in U.S.
currency in favor of the plaintiff-appellee and/or
supplier in Burma, immediately."
A full month from the execution of the contract, the
defendant corporation, thru its general manager, took
the first to open a letter of credit by forwarding to
the Philippine National Bank its Application for
Commercial Letter Credit.
The Philippine National Bank informed the appellant
corporation that its application, "for a letter of
credit for $3,614,000.00 in favor of Thiri Setkya has
been approved by the Board of Directors with the
condition that:
 marginal cash deposit be paid and that drafts are
to be paid upon presentment.
 the Bank represented that it "will hold your
application in abeyance pending compliance with the
above stated requirement."
As it turned out, however, the appellant corporation
was not in any financial position to meet the
condition.
Consequently, the credit instrument applied for was
opened only on September 8, 1952(which is more than
two months from the execution of the contract)
As a result of the delay, the allocation of appellee's
supplier in Rangoon was cancelled and the 5% deposit,
amounting to 524,000 kyats or approximately
P200,000.00 was forfeited.
 In this connection, it must be made of record that
although the Burmese authorities had set August 4,
1952, as the deadline for the remittance of the
required letter of credit, the cancellation of the
allocation and the confiscation of the 5% deposit
were not effected until August 20, 1952, or, a full
half month after the expiration of the deadline.
And yet, even with the 15-day grace, appellant
corporation was unable to make good its commitment
to open the disputed letter of credit.
The appellee endeavored, but failed, to restore the
cancelled Burmese rice allocation.
 She offered to substitute Thailand rice instead to
the defendant NARIC however, was rejected.
On the foregoing, the appellee sent a letter to the
appellant, demanding compensation for the damages
caused her in the sum of $286,000.00, U.S. currency,
representing unrealized profit. The demand having been
rejected she instituted this case now on appeal.
ISSUE
whether appellant's failure to open immediately the
letter of credit in dispute amounted to a breach of
the contract for which it may be held liable in
damages. – YES
RATIO
Appellant corporation disclaims responsibility for the
delay in the opening of the letter of credit.
 Insists that the fault lies with the appellee
o appellee failed to seasonably furnish data
necessary and required for opening the same
 the amount of the letter of credit
 the person, company or corporation in
whose favor it is to be opened
 the place and bank where it may be
negotiated
Appellant's explanation has neither force nor merit.
 In the first place, the explanation reaches into an
area of the proceedings into which We are not at
liberty to encroach.
o The explanation refers to a question of fact.
  Nothing in the record suggests any
arbitrary or abusive conduct on the
part of the trial judge in the
formulation of the ruling.
 Disputed facts were known to defendant
even before the contract was executed
because these facts were necessarily
revealed to the defendant before she
could qualify as a bidder.
 Secondly, it is clear that what singularly delayed
the opening of the stipulated letter of credit and
which, in turn, caused the cancellation of the
allocation in Burma, was the inability of the
appellant corporation to meet the condition
importation by the Bank for granting the same.
o The liability of the appellant, however,
stems not alone from this failure or
inability to satisfy the requirements of the
bank. Its culpability arises from its willful
and deliberate assumption of contractual
obligations even as it was well aware of its
financial incapacity to undertake the
prestation.
o despite the financial incompetence to open a
letter of credit immediately, appellant
agreed in paragraph 8 of the contract to pay
immediately "by means of an irrevocable,
confirm and assignable letter of credit," it
must be similarly held to have bound itself
to answer for all and every consequences that
would result from the representation
 In relation to the aforequoted observation of the
trial court, We would like to make reference also
to Article 11 of the Civil Code which provides:
Those who in the performance of their obligation
are guilty of fraud, negligence, or delay, and
those who in any manner contravene the tenor
thereof, are liable in damages.
 Under this provision, not only debtors guilty of
fraud, negligence or default in the performance of
obligations a decreed liable; in general, every
debtor who fails in performance of his obligations
is bound to indemnify for the losses and damages
caused thereby.
o The phrase "any manner contravene the tenor"
of the obligation includes any illicit act
which impairs the strict and faithful
fulfillment of the obligation or every kind
or defective performance.
The NARIC would also have this Court hold that the
subsequent offer to substitute Thailand rice for the
originally contracted Burmese rice amounted to a
waiver by the appellee of whatever rights she might
have derived from the breach of the contract
 Waivers are not presumed, but must be clearly and
convincingly shown, either by express stipulation
or acts admitting no other reasonable explanation.
Lastly, herein appellant filed a counterclaim
asserting that it has suffered, likewise by way of
unrealized profit damages in the total sum of
$406,000.00 from the failure of the projected contract
to materialize.
 supported by a cost study made and submitted by the
appellant itself and wherein it was illustrated how
indeed had the importation pushed thru, NARIC would
have realized in profit the amount asserted in the
counterclaim.
 And yet, the said amount of P406,000.00 was
realizable by appellant despite a number of
expenses which the appellee under the contract, did
not have to incur. Thus, under the cost study
submitted by the appellant, banking and unloading
charges were to be shouldered by it, including an
Import License Fee of 2% and superintendence fee of
$0.25 per metric ton. If the NARIC stood to profit
over P400 000.00 from the disputed transaction
inspite of the extra expenditures from which the
herein appellee was exempt, we are convicted of the
fairness of the judgment presently under appeal.
In the premises, however, a minor modification must be
effected in the dispositive portion of the decision
appeal from insofar as it expresses the amount of
damages in U.S. currency and not in Philippine Peso.
 Republic Act 529 specifically requires the
discharge of obligations only "in any coin or
currency which at the time of payment is legal
tender for public and private debts." In view of
that law, therefore, the award should be converted
into and expressed in Philippine Peso.
 UPON ALL THE FOREGOING, the decision appealed from
is hereby affirmed, with the sole modification that
the award should be converted into the Philippine
peso at the rate of exchange prevailing at the time
the obligation was incurred or on July 1, 1952 when
 the contract was executed. The appellee insurance
company, in the light of this judgment, is relieved
of any liability under this suit.
CHAVEZ v GONZALES
TOPIC
It is clear that the defendant-appellee contravened
the tenor of his obligation because he not only did
not repair the typewriter but returned it "in
shambles", according to the appealed decision. For
such contravention, as appellant contends, he is
liable under Article 1167 of the Civil Code. The cost
of the execution of the obligation in this case should
be the cost of the labor or service expended in the
repair of the typewriter, which is in the amount of
P58.75 because the obligation or contract was to
repair it.
In addition, the defendant-appellee is likewise
liable, under Article 1170 of the Code, for the cost
of the missing parts, in the amount of P31.10, for in
his obligation to repair the typewriter he was bound,
but failed or neglected, to return it in the same
condition it was when he received it.
FACTS
The plaintiff delivered to the defendant, who is a
typewriter repairer, a portable typewriter for routine
cleaning and servicing.
The defendant was not able to finish the job after
some time despite repeated reminders made by the
plaintiff. The defendant merely gave assurances, but
failed to comply with the same.
 The defendant asked from the plaintiff the sum of
P6.00 for the purchase of spare parts, which amount
the plaintiff gave to the defendant.
 After getting exasperated with the delay of the
repair of the typewriter, the plaintiff went to the
house of the defendant and asked for the return of
the typewriter.
o The defendant and found out that the same was
in shambles, with the interior cover and some
parts and screws missing.
The plaintiff sent a letter to the defendant formally
demanding the return of the missing parts, the
interior cover and the sum of P6.00. The following
day, the defendant returned to the plaintiff some of
the missing parts, the interior cover and the P6.00.
The plaintiff had his typewriter repaired by Freixas
Business Machines, and the repair job cost him a total
of P89.85, including labor and materials.
Plaintiff commenced this action before the City Court
of Manila, demanding from the defendant the payment of
P90.00 as actual and compensatory damages, P100.00 for
temperate damages, P500.00 for moral damages, and
P500.00 as attorney’s fees.
In his answer as well as in his testimony given before
this court, the defendant made no denials of the facts
narrated above, except the claim of the plaintiff that
the typewriter was delivered to the defendant through
a certain Julio Bocalin, which the defendant denied
allegedly because the typewriter was delivered to him
personally by the plaintiff.
RATIO
According to City Court of Manila:
The repair done on the typewriter by Freixas Business
Machines with the total cost of P89.85 should not,
however, be fully chargeable against the defendant.
The repair invoice, shows that the missing parts had a
total value of only P31.10. and the costs of suit.
The error of the court a quo, according to the
plaintiff-appellant, Rosendo O. Chaves, is that it
awarded only the value of the missing parts of the
typewriter, instead of the whole cost of labor and
materials that went into the repair of the machine, as
provided for in Article 1167 of the Civil Code,
reading as follows:jgc:chanrobles.com.ph
"ART. 1167. If a person obliged to do something fails
to do it, the same shall be executed at his cost.
This same rule shall be observed if he does it in
contravention of the tenor of the obligation.
Furthermore it may be decreed that what has been
poorly done he undone."cralaw virtua1aw library
On the other hand, the position of the defendant-
appellee, Fructuoso Gonzales, is that he is not liable
at all, not even for the sum of P31.10, because his
contract with plaintiff-appellant did not contain a
period, so that plaintiff-appellant should have first
filed a petition for the court to fix the period,
under Article 1197 of the Civil Code, within which the
defendant appellee was to comply with the contract
before said defendant-appellee could be held liable
for breach of contract.
The inferences derivable from these findings of fact
are that the appellant and the appellee had a
perfected contract for cleaning and servicing a
typewriter; that they intended that the defendant was
to finish it at some future time although such time
was not specified; and that such time had passed
without the work having been accomplished, far the
defendant returned the typewriter cannibalized and
unrepaired, which in itself is a breach of his
obligation, without demanding that he should be given
more time to finish the job, or compensation for the
work he had already done.
 The time for compliance having evidently expired,
and there being a breach of contract by non-
ART 1175 (EFFECT OF FORTUITOUS EVENT)
 No person shall be responsible
o events which could not be foreseen
o though foreseen, were inevitable
 EXCEPT
o Specified by law
o Declared by stipulation
o Nature of obligation requires assumption of risk
performance, it was academic for the plaintiff to
have first petitioned the court to fix a period for
the performance of the contract before filing his
complaint in this case. Defendant cannot invoke
Article 1197 of the Civil Code for he virtually
admitted non-performance by returning the
typewriter that he was obliged to repair in a non-
working condition, with essential parts missing.
The fixing of a period would thus be a mere
formality and would serve no purpose than to delay
It is clear that the defendant-appellee contravened
the tenor of his obligation because he not only did
not repair the typewriter but returned it in shambles.
For such contravention, as appellant contends, he is
liable under Article 1167 of the Civil Code, for the
cost of executing the obligation in a proper manner.
The cost of the execution of the obligation in this
case should be the cost of the labor or service
expended in the repair of the typewriter, which is in
the amount of P58.75. because the obligation or
contract was to repair it.
In addition, the defendant-appellee is likewise
liable, under Article 1170 of the Code, for the cost
of the missing parts, in the amount of P31.10, for in
his obligation to repair the typewriter he was bound,
but failed or neglected, to return it in the same
condition it was when he received it.
Appellant’s claims for moral and temperate damages and
attorney’s fees were, however, correctly rejected by
the trial court, for these were not alleged in his
complaint
 Claims for damages and attorney’s fees must be
pleaded, and the existence of the actual basis
thereof must be proved.
 The appealed judgment thus made no findings on
these claims, nor on the fraud or malice charged to
the appellee. As no findings of fact were made on
the claims for damages and attorney’s fees, there
is no factual basis upon which to make an award
therefor.
Hereby ordered to pay, the plaintiff-appellant the sum
of P89.85, with interest at the legal rate from the
filing of the complaint. Costs in all instances
against appellee Fructuoso Gonzales.
Fortuitous event
 An event which takes place by accident and could
not have been foreseen
o Also includes unavoidable accidents, even if
there has been an intervention of human
element
 Debtor is also relieved from liability if the non-
performance was because of the act of the creditor
himself
 2 general causes
o Natural
o Act of man
 Act of man
o Should have the force of imposition which the
debtor could not have resisted
 Characteristics of fortuitous event
o Cause  independent of human will
o Impossible to foresee
  OR if it can be foreseen, it must be
impossible to avoid
o Occurrence renders it impossible for debtor
to fulfill his obligation
o Obligor must be free from participation in
the aggravation of the injury resulting to
the creditor
Express stipulation
 Stipulation must be expressly stated in the
contract
Assumption of risk
 Principle was based on social justice
o Injustices which industrialization created
o Owners who benefit from the risk must also be
liable
o Applies to all kinds of public service
ART 1165 (EFFECT OF FORTUITOUS EVENT)
 What is to be delivered is a determinate thing
o Creditor may compel the debtor to make the
delivery
 Apart from the rights granted to him by
ART 1170
 If indeterminate
o Obligation be complied with at the expense of
the debtor
 If obligor delays or has promised to deliver the same
thing to two or more persons who do not have the same
interest
o Responsible for any fortuitous event until he has
effected the delivery
Remedies of creditor
 Ask for performance
 Rescind or resolve obligation
 Action for damages
TANGUILIG v CA
TOPIC
This Court has consistently held that in order for a
party to claim exemption from liability by reason of
fortuitous event under Art. 1174 of the Civil Code the
event should be the sole and proximate cause of the
loss or destruction of the object of the
contract. In Nakpil vs. Court of Appeals, four (4)
requisites must concur:
 the cause of the breach of the obligation must be
independent of the will of the debtor;
 the event must be either unforeseeable or
unavoidable;
 the event must be such as to render it impossible
for the debtor to fulfill his obligation in a
normal manner; and,
 the debtor must be free from any participation in
or aggravation of the injury to the creditor.
FACTS
Petitioner Jacinto M. Tanguilig doing business under
the name and style J. M. T. Engineering and General
Merchandising proposed to respondent Vicente Herce Jr.
to construct a windmill system for him.
After some negotiations they agreed on the
construction of the windmill for a consideration
of P60,000.00 with a one-year guaranty from the date of
completion and acceptance by respondent Herce Jr. of
the project. Pursuant to the agreement respondent paid
petitioner a down payment of P30,000.00 and an
installment payment of P15,000.00, leaving a balance
of P15,000.00.
Due to the refusal and failure of respondent to pay
the balance, petitioner filed a complaint to collect
the amount.
In his Answer before the trial court respondent denied
the claim saying that he had already paid this amount
to the San Pedro General Merchandising Inc. which
constructed the deep well to which the windmill system
was to be connected.
 According to respondent, since the deep well formed
part of the system the payment he tendered to SPGMI
should be credited to his account by
petitioner. Moreover, assuming that he owed
petitioner a balance of P15,000.00, this should be
offset by the defects in the windmill system which
caused the structure to collapse after a strong
wind hit their place.
Petitioner denied that the construction of a deep well
was included in the agreement to build the windmill
system, for the contract price of P60,000.00 was
solely for the windmill assembly and its installation,
exclusive of other incidental materials needed for the
project. He also disowned any obligation to repair or
reconstruct the system and insisted that he delivered
it in good and working condition to respondent who
accepted the same without protest. Besides, its
collapse was attributable to a typhoon,
a force majeure, which relieved him of any liability.
Trial court held:
 The construction of the
deep well was not part of the windmill project as evidenc
ed clearly by the letter proposals submitted by
petitioner to respondent.
 In the absence of such an agreement, it could be
safely concluded that the construction of the deep
well is not a part of the project undertaken by the
plaintiff.
 With respect to the repair of the windmill, the
trial court found that "there is no clear and
convincing proof that the windmill system fell down
due to the defect of the construction."
The Court of Appeals reversed the trial court.
 construction of the deep well was included in the
agreement of the parties because the term "deep
well" was mentioned in both proposals.
 gave credence to the testimony of respondent's
witness Guillermo Pili, the proprietor of SPGMI
which installed the deep well, that petitioner
Tanguilig told him that the cost of constructing
the deep well would be deducted from the contract
price of P60,000.00.
 Respondent's payment of P15,000.00 to SPGMI should
be applied to his remaining balance with petitioner
thus effectively extinguishing his contractual
obligation.
 Rejected petitioner's claim of force majeure and
ordered the latter to reconstruct the windmill in
accordance with the stipulated one-year guaranty.
His motion for reconsideration having been denied by
the Court of Appeals, petitioner now seeks relief from
this Court.
ISSUES
1. whether the agreement to construct the windmill
system included the installation of a deep well
– NO
The preponderance of evidence supports the finding of
the trial court that the installation of a deep well
was not included in the proposals of petitioner to
construct a windmill system for respondent. There were
in fact two (2) proposals: one dated 19 May 1987 which
pegged the contract price at P87,000.00. This was
rejected by respondent. The other was submitted three
days later which contained more specifications but
proposed a lower contract price of P60,000.00. The
latter proposal was accepted by respondent and the
construction immediately followed.
Notably, nowhere in either proposal is the
installation of a deep well mentioned, even
remotely. Neither is there an itemization or
description of the materials to be used in
constructing the deep well.
 While the words "deep well" and "deep well pump" are
mentioned in both, these do not indicate that a
deep well is part of the windmill system. They
merely describe the type of deep well pump for
which the proposed windmill would be suitable.
 words "deep well" preceded by the
prepositions "for" and "suitable for" were meant only
to convey the idea that the proposed windmill would
be appropriate for a deep well pump
o if the real intent of petitioner was to
include a deep well in the agreement to
construct a windmill, he would have used
instead the conjunctions "and" or "with.
Respondent insists that petitioner verbally agreed that
the contract price of P60,000.00 covered the
installation of a deep well pump. He contends that since
petitioner did not have the capacity to install the
pump the latter agreed to have a third party do the
work the cost of which was to be deducted from the
contract price. To prove his point, he presented
Guillermo Pili of SPGMI who declared that petitioner
Tanguilig approached him with a letter from respondent
Herce Jr. asking him to build a deep well pump as "part
of the price/contract which Engineer (Herce) had with
Mr. Tanguilig.
 Court is disinclined to accept the version of
respondent. The claim of Pili that Herce Jr. wrote
him a letter is unsubstantiated. The alleged letter
was never presented in court by private respondent
for reasons known only to him.
 But granting that this written communication
existed, it could not have simply contained a request
for Pili to install a deep well; it would have also
mentioned the party who would pay for the
undertaking.
 unusual that Pili would readily consent to build a
deep well the payment for which would come supposedly
from the windmill contract price on the mere
representation of petitioner, whom he had never met
before, without a written commitment at least from
the former. For if indeed the deep well were part of
the windmill project, the contract for its
installation would have been strictly a matter
between petitioner and Pili himself with the former
assuming the obligation to pay the price.
 It was respondent Herce Jr. himself who paid for the
deep well by handing over to Pili the amount
of P15,000.00 clearly indicates that the contract for
the deep well was not part of the windmill project
but a separate agreement between respondent and
Pili.
Can respondent claim that Pili accepted his payment on
behalf of petitioner? No.
 While the law is clear that "payment shall be made
to the person in whose favor
the obligation has been constituted, or his successor
in interest, or any person authorized to receive it," it
does not appear from the record that Pili and/or
SPGMI was so authorized.
 Respondent cannot claim the benefit of the law
concerning "payments made by a third person." The
Civil Code provisions do not apply in the instant
case because no creditor-debtor relationship
between petitioner and Guillermo Pili and/or SPGMI
has been established regarding the construction of
the deep well.
2. Whether petitioner is under obligation to
reconstruct the windmill after it collapsed. –
YES
This Court has consistently held that in order for
a party to claim exemption from liability by reason
of fortuitous event under Art. 1174 of the Civil Code
the event should be the sole and proximate cause of
the loss or destruction of the object of the
contract.
In Nakpil vs. Court of Appeals, four (4) requisites
must concur: (a) the cause of the breach of the
obligation must be independent of the will of the
debtor; (b) the event must be either unforeseeable
or unavoidable; (c) the event must be such as to
render it impossible for the debtor to fulfill his
obligation in a normal manner; and, (d) the debtor
must be free from any participation in or aggravation
of the injury to the creditor.
Petitioner failed to show that the collapse of the
windmill was due solely to a fortuitous event.
 evidence does not disclose that there was actually
a typhoon on the day the windmill collapsed.
 Petitioner merely stated that there was a "strong
wind."
o But a strong wind in this case cannot be
fortuitous - unforeseeable nor unavoidable. On
the contrary, a strong wind should be present
in places where windmills are constructed,
otherwise the windmills will not turn.
The appellate court correctly observed that "given
the newly-constructed windmill system, the same
would not have collapsed had there been no inherent
defect in it which could only be attributable to
the appellee.
 It emphasized that respondent had in his favor the
presumption"things have happened according to the ord
 inary course of nature and the ordinary habits of
life."
o This presumption has not been rebutted by
petitioner.
Finally, petitioner's argument that private
respondent was already in default in the payment of
his outstanding balance of P15,000.00 and hence
should bear his own loss, is untenable.
 In reciprocal obligations, neither party incurs in
delay if the other does not comply or is not ready
to comply in a proper manner with what is incumbent
upon him.
 When the windmill failed to function properly it
became incumbent upon petitioner to institute the
proper repairs in accordance with the guaranty
stated in the contract. Thus, respondent cannot be
said to have incurred in delay; instead, it is
petitioner who should bear the expenses for the
reconstruction of the windmill. Article 1167 of the
Civil Code is explicit on this point that if a
person obliged to do something fails to do it, the
same shall be executed at his cost.
NAKPIL & SONS v CA
TOPIC
There is no dispute that the earthquake of August 2,
1968 is a fortuitous event or an act of God.
To exempt the obligor from liability under Article
1174 of the Civil Code, for a breach of an obligation
due to an "act of God," the following must concur: (a)
the cause of the breach of the obligation must be
independent of the will of the debtor; (b) the event
must be either unforseeable or unavoidable; (c) the
event must be such as to render it impossible for the
debtor to fulfill his obligation in a normal manner;
and (d) the debtor must be free from any participation
in, or aggravation of the injury to the creditor.
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.
FACTS
The plaintiff, Philippine Bar Association decided to
construct an office building on its 840 square meters
lot located at the comer of Aduana and Arzobispo
Streets, Intramuros, Manila.
 The construction was undertaken by the United
Construction, Inc. on an "administration" basis, on
the suggestion of Juan J. Carlos, the president and
general manager of said corporation. The proposal
was approved by plaintiff's board of directors and
signed by its president Roman Ozaeta, a third-party
defendant in this case. The plans and
specifications for the building were prepared by
the other third-party defendants Juan F. Nakpil &
Sons. The building was completed in June, 1966.
In the early morning of August 2, 1968 an unusually
strong earthquake hit Manila and its environs and the
building in question sustained major damage.
 As a temporary remedial measure, the building was
shored up by United Construction, Inc. at the cost
of P13,661.28.
On November 29, 1968, the plaintiff commenced this
action for the recovery of damages arising from the
partial collapse of the building against United
Construction, Inc. and its President and General
Manager Juan J. Carlos as defendants.
Plaintiff alleges that the collapse of the building
was accused by defects in the construction, the
failure of the contractors to follow plans and
specifications and violations by the defendants of the
terms of the contract.
Defendants in turn filed a third-party complaint
against the architects who prepared the plans and
specifications, alleging in essence that the collapse
of the building was due to the defects in the said
plans and specifications.
Upon the issues being joined, a pre-trial was
conducted during which among others, the parties
agreed to refer the technical issues involved in the
case to a Commissioner.
Meanwhile, plaintiff moved twice for the demolition of
the building on the ground that it may topple down in
case of a strong earthquake. The motions were opposed
by the defendants and the matter was referred to the
Commissioner.
 The building was authorized to be demolished at the
expense of the plaintiff
 The actual demolition was undertaken by the buyer
of the damaged building.
After the protracted hearings, the Commissioner
eventually submitted his report on September 25, 1970
with the findings that while the damage sustained by
the PBA building was caused directly by the August 2,
1968 earthquake whose magnitude was estimated at 7.3
they were also caused by the defects in the plans and
specifications prepared by the third-party defendants'
architects, deviations from said plans and
specifications by the defendant contractors and
failure of the latter to observe the requisite
workmanship in the construction of the building and of
the contractors, architects and even the owners to
exercise the requisite degree of supervision in the
construction of subject building.
All the parties registered their objections to
aforesaid findings which in turn were answered by the
Commissioner.
The trial court agreed with the findings of the
Commissioner except as to the holding that the owner
is charged with full supervision of the construction.
The lower court rendered the assailed decision which
was modified by the Intermediate Appellate Court
All the parties herein appealed from the decision of
the Intermediate Appellate Court.
In their respective briefs petitioners, among others,
raised the following assignments of errors:
 Philippine Bar Association claimed that the measure
of damages should not be limited to P1,100,000.00
as estimated cost of repairs or to the period of
six (6) months for loss of rentals while United
Construction Co., Inc.
 Nakpils claimed that it was an act of God that
caused the failure of the building
 Both UCCI and the Nakpils object to the payment of
the additional amount of P200,000.00 imposed by the
Court of Appeals. UCCI also claimed that it should
be reimbursed the expenses of shoring the building
in the amount of P13,661.28 while the Nakpils
opposed the payment of damages jointly and
solidarity with UCCI.
ISSUE
whether or not an act of God-an unusually strong
earthquake-which caused the failure of the building,
exempts from liability, parties who are otherwise
liable because of their negligence.
RATIO
The applicable law governing the rights and
liabilities of the parties herein is Article 1723 of
the New Civil Code, which provides:
Art. 1723. The engineer or architect who
drew up the plans and specifications for a
building is liable for damages if within
fifteen years from the completion of the
structure the same should collapse by
reason of a defect in those plans and
specifications, or due to the defects in
the ground. The contractor is likewise
responsible for the damage if the edifice
fags within the same period on account of
defects in the construction or the use of
materials of inferior quality furnished by
him, or due to any violation of the terms
of the contract. If the engineer or
architect supervises the construction, he
shall be solidarily liable with the
contractor.
Acceptance of the building, after
completion, does not imply waiver of any
of the causes of action by reason of any
defect mentioned in the preceding
paragraph.
 The action must be brought within ten
years following the collapse of the
building.
On the other hand, the general rule is that no person
shall be responsible for events which could not be
foreseen or which though foreseen, were inevitable
(Article 1174, New Civil Code).
An act of God has been defined as an accident, due
directly and exclusively to natural causes without
human intervention, which by no amount of foresight,
pains or care, reasonably to have been expected, could
have been prevented.
There is no dispute that the earthquake of August 2,
1968 is a fortuitous event or an act of God.
To exempt the obligor from liability under Article
1174 of the Civil Code, for a breach of an obligation
due to an "act of God," the following must concur: (a)
the cause of the breach of the obligation must be
independent of the will of the debtor; (b) the event
must be either unforseeable or unavoidable; (c) the
event must be such as to render it impossible for the
debtor to fulfill his obligation in a normal manner;
and (d) the debtor must be free from any participation
in, or aggravation of the injury to the creditor.
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.
The negligence of the defendant and the third-party
defendants petitioners was established beyond dispute
both in the lower court and in the Intermediate
Appellate Court.
 United Construction Co., Inc. was found to have
made substantial deviations from the plans and
specifications. and to have failed to observe the
requisite workmanship in the construction as well
as to exercise the requisite degree of supervision;
 Third-party defendants were found to have
inadequacies or defects in the plans and
specifications prepared by them.
 The defects in the construction and in the plans
and specifications were the proximate causes that
rendered the PBA building unable to withstand the
earthquake. For this reason the defendant and
third-party defendants cannot claim exemption from
liability.
The relevant and logical observations of the trial
court as affirmed by the Court of Appeals that "while
it is not possible to state with certainty that the
building would not have collapsed were those defects
not present, the fact remains that several buildings
in the same area withstood the earthquake to which the
building of the plaintiff was similarly subjected,"
cannot be ignored.
DIOQUINO v LAURENIANO
TOPIC
The very wording of the law dispels any doubt that
what is therein contemplated is the resulting
liability even if caused by a fortuitous event where
the party charged may be considered as having assumed
the risk incident in the nature of the obligation to
be performed.
FACTS
Attorney Pedro Dioquino, a practicing lawyer of
Masbate, is the owner of a car.
 He met the defendant Federico Laureano, a patrol
officer of the MVO office, who was waiting for a
jeepney to take him to the office of the Provincial
Commander, PC, Masbate.
 Attorney Dioquino requested the defendant Federico
Laureano to introduce him to one of the clerks in
the MVO Office
 Defendant Laureano rode on the car of Atty.
Dioquino. While about to reach their destination,
the car was stoned by some 'mischievous boys,' and
its windshield was broken.
 Defendant Federico Laureano chased the boys and he
was able to catch one of them. The boy was taken to
Atty. Dioquino [and] admitted having thrown the
stone that broke the car's windshield.
It was likewise noted in the decision now on appeal:
"The defendant Laureano refused to file any charges
against the boy and his parents because he thought
that the stone-throwing was merely accidental and that
it was due to force majeure. So he did not want to
take any action and after delaying the settlement,
after perhaps consulting a lawyer, the defendant
Federico Laureano refused to pay the windshield
himself and challenged that the case be brought to
court for judicial adjudication.
There is no question that the plaintiff tried to
convince the defendant Federico Laureano just to pay
the value of the windshield and he even came to the
extent of asking the wife to convince her husband to
settle the matter amicably but the defendant Federico
Laureano refused to make any settlement, clinging [to]
the belief that he could not be held liable because a
minor child threw a stone accidentally on the
windshield and therefore, the same was due to force
majeure."
ISSUE
Whether the incident was a fortuitous event
RATIO
The law being what it is, such a belief on the part of
defendant Federico Laureano was justified. The express
language of Art. 1174 of the present Civil Code which
is a restatement of Art. 1105 of the Old Civil Code,
except for the addition of the nature of an obligation
requiring the assumption of risk, compels such a
conclusion. It reads thus: "Except in cases expressly
specified by the law, or when it is otherwise declared
by stipulation, or when the nature of the obligation
requires the assumption of risk, no person shall be
responsible for those events which could not be,
foreseen, or which, though foreseen were inevitable."
Authorities of repute are in agreement, more
specifically concerning an obligation arising from
contract "that some extraordinary circumstance
independent of the will of the obligor, or of his
employees, is an essential element of a caso
fortuito."
 If it could be shown that such indeed was the
case, liability is ruled out. There is no
requirement of "diligence beyond what human care
and foresight can provide."
The error committed by the lower court in holding
defendant Federico Laureano liable appears to be thus
obvious. Its own findings of fact repel the motion
that he should be made to respond in damages to the
plaintiff for the broken windshield. What happened was
clearly unforeseen. It was a fortuitous event
resulting in a loss which must be borne by the owner
of the car. An element of reasonableness in the law
would be manifestly lacking if, on the circumstances
as thus disclosed, legal responsibility could be
imputed to an individual in the situation of defendant
Laureano. Art. 1174 of the Civil Code guards against
the possibility of its being visited with such a
reproach.
Unfortunately, the lower court was of a different mind
and thus failed to heed its command.
It was misled, apparently, by the inclusion of the
exemption from the operation of such a provision of a
party assuming the risk, considering the nature of the
obligation undertaken. The very wording of the law
dispels any doubt that what is therein contemplated is
the resulting liability even if caused by a fortuitous
event where the party charged may be considered as
having assumed the risk incident in the nature of the
obligation to be performed. It would be an affront,
not only to the logic but to the realities of the
situation, if in the light of what transpired, as
found by the lower court, defendant Federico Laureano
could be held as bound to assume a risk of this
nature. There was no such obligation on his part.
Reference to the leading case of Republic v. Luzon
Stevedoring Corp. will illustrate when the nature of
the obligation is such that the risk could be
considered as having been assumed.
 For caso fortuito or force majeure (which in law are
identical in so far as they exempt an obligor from
liability) by definition, are extraordinary events
not foreseeable or avoidable, 'events that could
not be foreseen, or which, though foreseen, were
inevitable' (Art. 1174, Civil Code of the
Philippines).
 It is, therefore, not enough that the event should
not have been foreseen or participated but it must
be one impossible to foresee or to avoid.
AUSTRIA v CA
TOPIC
It may be noted the reform that the emphasis of the
provision is on the events, not on the agents or
factors responsible for them. To avail of the
exemption granted in the law, it is not necessary that
the persons responsible for the occurrence should be
found or punished; it would only be sufficient to
established that the enforceable event, the robbery in
this case did take place without any concurrent fault
on the debtor's part, and this can be done by
preponderant evidence. To require in the present
action for recovery the prior conviction of the
culprits in the criminal case, in order to establish
the robbery as a fact, would be to demand proof beyond
reasonable doubt to prove a fact in a civil case.
FACTS
In a receipt dated 30 January 1961, Maria G. Abad
acknowledged having received from Guillermo Austria
one (1) pendant with diamonds valued at P4,500.00, to
be sold on commission basis or to be returned on
demand.
while walking home to her residence in Mandaluyong,
Rizal, Abad was said to have been accosted by two men,
one of whom hit her on the face, while the other
snatched her purse containing jewelry and cash, and
ran away. Among the pieces of jewelry allegedly taken
by the robbers was the consigned pendant.
Abad failed to return the jewelry or pay for its value
notwithstanding demands, Austria brought in the Court
of First Instance of Manila an action against her and
her husband for recovery of the pendant or of its
value, and damages.
 Answering the allegations of the complaint,
defendants spouses set up the defense that the
alleged robbery had extinguished their obligation.
After due hearing, the trial court rendered judgment
for the plaintiff, and ordered defendants spouses,
jointly and severally, to pay to the former the sum of
P4,500.00, with legal interest thereon, plus the
amount of P450.00 as reasonable attorneys' fees, and
the costs.
 Defendants failed to prove the fact of robbery, or,
if indeed it was committed, that defendant Maria
Abad was guilty of negligence when she went home
without any companion, although it was already
getting dark and she was carrying a large amount of
cash and valuables on the day in question, and such
negligence did not free her from liability for
damages for the loss of the jewelry.
Not satisfied with his decision, the defendants went
to the Court of Appeals, and there secured a reversal
of the judgment.
 The appellate court overruling the finding of the
trial court on the lack of credibility of the two
defense witnesses who testified on the occurrence
of the robbery, and holding that the facts of
robbery and defendant Maria Abad's possesion of the
pendant on that unfortunate day have been duly
published, declared respondents not responsible for
the loss of the jewelry on account of a fortuitous
event, and relieved them from liability for damages
to the owner.
Plaintiff thereupon instituted the present proceeding.
ISSUE
Whether Court of Appeals erred in finding that there
was robbery in the case, although nobody has been
found guilty of the supposed crime.
RATIO
It is petitioner's theory that for robbery to fall
under the category of a fortuitous event and relieve
the obligor from his obligation under a contract,
pursuant to Article 1174 of the new Civil Code, there
ought to be prior finding on the guilt of the persons
responsible therefor. In short, that the occurrence of
the robbery should be proved by a final judgment of
conviction in the criminal case.
We find no merit in the contention of petitioner.
It is recognized in this jurisdiction that to
constitute a caso fortuito that would exempt a person
from responsibility, it is necessary that (1) the
event must be independent of the human will (or
rather, of the debtor's or obligor's); (2) the
occurrence must render it impossible for the debtor to
fulfill the obligation in a normal manner; and that
(3) the obligor must be free of participation in or
aggravation of the injury to the creditor. A
fortuitous event, therefore, can be produced by
nature, e.g., earthquakes, storms, floods, etc., or by
the act of man, such as war, attack by bandits,
robbery,etc., provided that the event has all the
characteristics enumerated above.
It is not here disputed that if respondent Maria Abad
were indeed the victim of robbery, and if it were
really true that the pendant, which she was obliged
either to sell on commission or to return to
petitioner, were taken during the robbery, then the
occurrence of that fortuitous event would have
extinguished her liability. The point at issue in this
proceeding is how the fact of robbery is to be
established in order that a person may avail of the
exempting provision of Article 1174 of the new Civil
Code, which reads as follows:
ART. 1174. Except in cases expressly
specified by law, or when it is otherwise
declared by stipulation, or when the
nature of the obligation requires the
assumption of risk, no person shall be
responsible for those events which could
not be foreseen, or which, though
foreseen, were inevitable.
It may be noted the reform that the emphasis of the
provision is on the events, not on the agents or
factors responsible for them. To avail of the
exemption granted in the law, it is not necessary that
the persons responsible for the occurrence should be
found or punished; it would only be sufficient to
established that the enforceable event, the robbery in
this case did take place without any concurrent fault
on the debtor's part, and this can be done by
preponderant evidence. To require in the present
action for recovery the prior conviction of the
culprits in the criminal case, in order to establish
the robbery as a fact, would be to demand proof beyond
reasonable doubt to prove a fact in a civil case.
It is undeniable that in order to completely exonerate
the debtor for reason of a fortutious event, such
debtor must, in addition to the cams itself, be free
of any concurrent or contributory fault or
negligence. This is apparent from Article 1170 of the
Civil Code of the Philippines, providing that:
ART. 1170. Those who in the performance of
their obligations are guilty of fraud,
negligence, or delay, and those who in any
manner contravene the tenor thereof, are
liable for damages.
It is clear that under the circumstances prevailing at
present in the City of Manila and its suburbs, with
their high incidence of crimes against persons and
property that renders travel after nightfall a matter
to be sedulously avoided without suitable precaution
and protection, the conduct of respondent Maria G.
Abad, in returning alone to her house in the evening,
carrying jewelry of considerable value would be
negligent per se and would not exempt her from
responsibility in the case of a robbery.
 We are not persuaded, however, that the same rule
should obtain ten years previously, in 1961, when
the robbery in question did take place, for at that
time criminality had not by far reached the levels
attained in the present day.
There is likewise no merit in petitioner's argument
that to allow the fact of robbery to be recognized in
the civil case before conviction is secured in the
criminal action, would prejudice the latter case, or
would result in inconsistency should the accused
obtain an acquittal or should the criminal case be
dismissed.
It must be realized that a court finding that a
robbery has happened would not necessarily mean that
those accused in the criminal action should be found
guilty of the crime; nor would a ruling that those
actually accused did not commit the robbery be
inconsistent with a finding that a robbery did take
place. The evidence to establish these facts would not
necessarily be the same.
WHEREFORE, finding no error in the decision of the
Court of Appeals under review, the petition in this
case is hereby dismissed with costs against the
petitioner.
PH COMMUNICATIONS v GLOBE
TOPIC
FACTS
For several years prior to 1991,Globe Telecom, Inc.
(Globe), had been engaged in the coordination of the
provision of various communication facilities for the
military bases of the United States of America (US) in
Clark Air Base and Subic Naval Base in Cubi
Point. Globe, on the other hand, contracted with local
service providers such as the Philippine Communications
Satellite Corporation (Philcomsat) for the provision of
the communication facilities.
Philcomsat and Globe entered into an Agreement whereby
Philcomsat obligated itself to establish, operate and
provide an IBS Standard B earth station (earth station)
within Cubi Point for the exclusive use of the
USDCA. The term of the contract was for five (5)
years. In turn, Globe promised to pay Philcomsat monthly
rentals for each leased circuit involved.
At the time of the execution of the Agreement, both
parties knew that the Military Bases Agreement between
the Republic of the Philippines and the US was to expire
in 1991.
 Under Section 25, Article XVIII of the 1987
Constitution, foreign military bases, troops or
facilities, which include those located at the US
Naval Facility in Cubi Point, shall not be allowed
in the Philippines unless a new treaty is duly
concurred in by the Senate and ratified by a majority
of the votes cast by the people in a national
referendum when the Congress so requires, and such
new treaty is recognized as such by the US
Government.
Subsequently, Philcomsat installed and established the
earth station at Cubi Point and the USDCA made use of
the same.
The Senate passed and adopted Senate Resolution No.
141, expressing its decision not to concur in the
ratification of the Treaty of Friendship, Cooperation
and Security and its Supplementary Agreements that was
supposed to extend the term of the use by the US of
Subic Naval Base, among others.
 The Philippine Government sent a Note Verbale to the
US Government through the US Embassy, notifying it
of the Philippines termination of the RP-US Military
Bases Agreement.
 The withdrawal of all US military forces from Subic
Naval Base should be completed by said date.
Globe notified Philcomsat of its intention to
discontinue the use of the earth station effective 08
November 1992
 invoked as basis for the letter of termination
Section 8 (Default) of the Agreement, which provides
o Neither party shall be held liable or deemed
to be in default for any failure to perform its
obligation under this Agreement if such failure
results directly or indirectly from force
majeure or fortuitous event. Either party is
thus precluded from performing its obligation
until such force majeure or fortuitous event
shall terminate. For the purpose of this
paragraph, force majeure shall mean
circumstances beyond the control of the party
involved including, but not limited to, any
law, order, regulation, direction or request
of the Government of the Philippines, strikes
or other labor difficulties, insurrection
riots, national emergencies, war, acts of
public enemies, fire, floods, typhoons or other
catastrophies or acts of God.
Philcomsat sent a reply letter
 we expect [Globe] to know its commitment to pay the
stipulated rentals for the remaining terms of the
Agreement even after [Globe] shall have
discontinue[d] the use of the earth station after
November 08, 1992. Philcomsat referred to Section 7
of the Agreement, stating as follows:
 o Should [Globe] decide to discontinue with the
use of the earth station after it has been put
into operation, a written notice shall be
served to PHILCOMSAT at least sixty (60) days
prior to the expected date of
termination. Notwithstanding the non-use of the
earth station, [Globe] shall continue to pay
PHILCOMSAT for the rental of the actual number
of T1 circuits in use, but in no case shall be
less than the first two (2) T1 circuits, for
the remaining life of the agreement. However,
should PHILCOMSAT make use or sell the earth
station subject to this agreement, the
obligation of [Globe] to pay the rental for the
remaining life of the agreement shall be at
such monthly rate as may be agreed upon by the
parties.
After the US military forces left Subic Naval Base,
Philcomsat sent Globe a letter demanding payment of its
outstanding obligations plus interest and attorneys
fees. However, Globe refused to heed Philcomsats demand.
Philcomsat filed with the Regional Trial Court of Makati
a Complaint against Globe
 Globe filed an Answer to the Complaint, insisting that
it was constrained to end the Agreement.
 Globe explained that the occurrence of said events
exempted it from paying rentals for the remaining
period of the Agreement.
The trial court rendered its Decision in favor
petitioner.
Both parties appealed the trial courts Decision to the
Court of Appeals.
Philcomsat claimed that the trial court erred in ruling
that: (1) the non-ratification by the Senate of the
Treaty constitutes force majeure which exempts Globe
from complying with its obligations under the
Agreement; (2) Globe is not liable to pay the rentals
for the remainder of the term of the Agreement; and (3)
Globe is not liable to Philcomsat for exemplary damages.
Globe, on the other hand, contended that the RTC erred
in holding it liable for payment of rent of the earth
station for December 1992 and of attorneys fees.
The Court of Appeals promulgated its Decision dismissing
Philcomsats appeal for lack of merit and affirming the
trial courts
Both parties filed their respective Petitions for
Review assailing the Decision of the Court of Appeals.
ISSUE
Whether the termination of the RP-US Military Bases
Agreement cannot be considered a fortuitous event – YES
RATIO
There is no merit is Philcomsats argument that Section
8 of the Agreement cannot be given effect because the
enumeration of events constituting force majeure therein
unduly expands the concept of a fortuitous event under
Article 1174 of the Civil Code and is therefore invalid.
However, Article 1174, which exempts an obligor from
liability on account of fortuitous events or force
majeure, refers not only to events that are
unforeseeable, but also to those which are foreseeable,
but inevitable:
Art. 1174. Except in cases specified by the law, or
when it is otherwise declared by stipulation, or when
the nature of the obligation requires the assumption
of risk, no person shall be responsible for those
events which, could not be foreseen, or which, though
foreseen were inevitable.
of
A fortuitous event under Article 1174 may either be an
act of God, or natural occurrences such as floods or
typhoons, or an act of man, such as riots, strikes or
wars.
Clearly, the foregoing are either unforeseeable, or
foreseeable but beyond the control of the parties. There
is nothing in the enumeration that runs contrary to, or
expands, the concept of a fortuitous event under Article
1174.
Furthermore, under Article 1306 of the Civil Code,
parties to a contract may establish such stipulations,
clauses, terms and conditions as they may deem fit, as
long as the same do not run counter to the law, morals,
good customs, public order or public policy.
Article 1159 of the Civil Code also provides that
[o]bligations arising from contracts have the force of
law between the contracting parties and should be
complied with in good faith. Courts cannot stipulate for
the parties nor amend their agreement where the same
does not contravene law, morals, good customs, public
order or public policy, for to do so would be to alter
the real intent of the parties, and would run contrary
to the function of the courts to give force and effect
thereto.
Not being contrary to law, morals, good customs, public
order, or public policy, Section 8 of the Agreement
which Philcomsat and Globe freely agreed upon has the
force of law between them.
Philcomsat and Globe had no control over the non-renewal
of the term of the RP-US Military Bases Agreement when
the same expired in 1991, because the prerogative to
ratify the treaty extending the life thereof belonged
to the Senate. Neither did the parties have control
over the subsequent withdrawal of the US military forces
and personnel from Cubi Point in December 1992:
The formal order from Cdr. Walter Corliss of the USN,
the letter notification from ATT and the complete
withdrawal of all the military forces and personnel
from Cubi Point in the year-end 1992 are also acts and
circumstances beyond the control of the defendant.
Considering the foregoing, the Court finds and so
holds that the afore-narrated circumstances constitute
force majeure or fortuitous event(s) as defined under
paragraph 8 of the Agreement.
The aforementioned events made impossible the
continuation of the Agreement until the end of its five-
year term without fault on the part of either party. The
Court of Appeals was thus correct in ruling that the
happening of such fortuitous events rendered Globe
exempt from payment of rentals for the remainder of the
term of the Agreement.
ART 1177 (SUBSIDIARY REMEDIES OF CREDITOR)
 The creditors, after having pursued the property of the
debtor to satisfy their claims, may
o Exercise all the rights and bring all the actions of
the latter for the same purpose
 SAVE those which are inherent in his
persons
o Impugn acts which the debtor may have done
to defraud them
Right of creditors
 exact fulfillment with the right to damages (DE
LEON)
 Levy by attachment and execution upon all property
of debtor EXCEPT such as are exempt by law
o Attachment  court, at the request of
creditor, designates specific property of
debtor to be transferred to creditor
 Exercise all the rights and actions of the debtor
EXCEPT such as are inherently personal to him
o All rights  example: right to redeem
o Actions of debtor  example: right to
collect from debtor of debtor
o EXCEPTION example: right to vote, right to
hold office, right for legal support
 Ask for the rescission of the contracts made by the
debtor in fraud of their rights
Liability of debtor’s property
 Subject to liability for his obligations
o Composed of his present and future property
o Legal guaranty in favor of creditors
Exercise of debtor’s rights
 Requisites
o Creditor has an interest in the right or
action because of insolvency of debtor
o Malicious or negligent inaction of the debtor
as to endanger the claim of creditor
o Credit of debtor against 3rd person is clear,
demandable and liquidated
o Debtor’s right against 3rd person must be
patrimonial or susceptible of being
 transformed to patrimonial value for benefit
of creditor
 Not essential that creditor’s claim be prior to the
acquisition of the right
Accion Subrogatoria
 Action which creditor may exercise in the place of
his negligent debtor
o Preserve or recover for the patrimony of the
debtor the product of such action
o Obtain satisfaction of his own credit
 Previous approval of court is not necessary
Personal rights of debtor
 Existence
 Relations of a public character
 Honorary character
 Powers which have not been used
o Power to administer
o Power to carry out an agency or deposit
o Power to accept an offer for a contract
 Non-patrimonial rights
 Patrimonial rights not subject to execution
 Patrimonial rights inherent in the person of the
debtor
Rescission of Fraudulent Act
 Accrion pauliana
o Action to revoke or rescind fraudulent
reductions of the properties of the debtor
which constitute guaranty for his debts
ADORABLE v CA
TOPIC
Art. 1177 of the Civil Code provides:
The creditors, after having pursued the property in
possession of the debtor to satisfy their claims, may
exercise all the rights and bring all the actions of
the latter for the same purpose, save those which are
inherent in his person; they may also impugn the
actions which the debtor may have done to defraud
them.
Thus, the following successive measures must be taken
by a creditor before he may bring an action for
rescission of an allegedly fraudulent sale:
(1) exhaust the properties of the debtor through levying
by attachment and execution upon all the property of
the debtor, except such as are exempt by law from
execution;
(2) exercise all the rights and actions of the debtor,
save those personal to him (accion subrogatoria); and
(3) seek rescission of the contracts executed by the
debtor in fraud of their rights (accion pauliana).
Without availing of the first and second
remedies, i.e., exhausting the properties of the debtor
or subrogating themselves in Francisco Barengs
transmissible rights and actions, petitioners simply
undertook the third measure and filed an action for
annulment of the sale. This cannot be done.
FACTS
Respondent Saturnino Bareng was the registered owner of
two parcels of land, both of which are in San Fabian,
Echague, Isabela. Petitioners were lessees of a portion
of his lot.
Saturnino Bareng and his son, private respondent
Francisco Bareng, obtained a loan from petitioners
amounting to twenty six thousand pesos (P26,000), in
consideration of which they promised to transfer the
possession and enjoyment of the fruits of Lot No. 661-
E.
Saturnino sold to his son Francisco 18,500 sq.m. of Lot
No. 661-D-5-A.
 Francisco sold to private respondent Jose Ramos 3,000
sq.m. of the lot.
 The portion of land being rented to petitioners was
included in the portion sold to Jose Ramos.
 The deeds of sale evidencing the conveyances were
not registered in the office of the register of
deeds.
As the Barengs failed to pay their loan, petitioners
complained to Police Captain Rodolfo Saet of the
Integrated National Police (INP) through whose
mediation a Compromise Agreement was executed between
Francisco Bareng and the Adorables whereby the former
acknowledged his indebtedness of P56,385.00 which he
promised to pay on or before July 15, 1987.
 When the maturity date arrived, however, Francisco
Bareng failed to pay.
 A demand letter was sent to Francisco Bareng, but he
refused to pay.
Petitioners, learning of the sale made by Francisco
Bareng to Jose Ramos, then filed a complaint with the
Regional Trial Court for the annulment or rescission of
the sale on the ground that the sale was fraudulently
prepared and executed.
 trial court rendered judgment dismissing the
complaint for lack of cause of action, declaring the
contract of sale between Francisco Bareng and Jose
Ramos valid and ordering Francisco Bareng to pay the
amount he owed petitioners.
On appeal, the Court of Appeals affirmed the decision
of the Regional Trial Court, with modification as to
the amount of Francisco Barengs debt to petitioners.
ISSUE:
Whether sale was made in fraud of creditors – NO
We hold that, as creditors, petitioners do not have
such material interest as to allow them to sue for
rescission of the contract of sale. At the outset,
petitioners’ right against private respondents is only
a personal right to receive payment for the loan; it is
not a real right over the lot subject of the deed of
sale.
A personal right is the power of one person to demand
of another, as a definite passive subject, the
fulfillment of a prestation to give, to do, or not to
do. On the other hand, a real right is the power
belonging to a person over a specific thing, without a
passive subject individually determined, against whom
such right may be personally exercised.[5] In this case,
while petitioners have an interest in securing payment
of the loan they extended, their right to seek payment
does not in any manner attach to a particular portion
of the patrimony of their debtor, Francisco Bareng.
Nor can we sustain petitioners claim that the sale was
made in fraud of creditors. Art. 1177 of the Civil Code
provides:
The creditors, after having pursued the property in
possession of the debtor to satisfy their claims, may
exercise all the rights and bring all the actions of
the latter for the same purpose, save those which are
inherent in his person; they may also impugn the
actions which the debtor may have done to defraud
them.
Thus, the following successive measures must be taken
by a creditor before he may bring an action for
rescission of an allegedly fraudulent sale:
(1) exhaust the properties of the debtor through levying
by attachment and execution upon all the property of
the debtor, except such as are exempt by law from
execution;
(2) exercise all the rights and actions of the debtor,
save those personal to him (accion subrogatoria); and
(3) seek rescission of the contracts executed by the
debtor in fraud of their rights (accion pauliana).
Without availing of the first and second
remedies, i.e., exhausting the properties of the debtor
or subrogating themselves in Francisco Barengs
transmissible rights and actions, petitioners simply
undertook the third measure and filed an action for
annulment of the sale. This cannot be done.
Indeed, an action for rescission is a subsidiary remedy;
it cannot be instituted except when the party suffering
damage has no other legal means to obtain reparation
for the same.[6]Thus, Art. 1380 of the Civil Code
provides:
The following contracts are rescissible:
. . . .
(3) Those undertaken in fraud of creditors when the
latter cannot in any other manner collect the claims
due them;
Petitioners have not shown that they have no other means
of enforcing their credit.
 Plaintiffs-appellants had not even tried to exhaust
the property of defendants-appellees
Bareng. Plaintiffs-appellants, in seeking for the
rescission of the contracts of sale entered into
between defendants-appellees, failed to show and
prove that defendants-appellees Bareng had no other
property, either at the time of the sale or at the
time this action was filed, out of which they could
have collected this (sic) debts.
CHENG v CA

TOPIC
An accion pauliana accrues only when the creditor
discovers that he has no other legal remedy for the
satisfaction of his claim against the debtor other
than an accion pauliana. The accion pauliana is an
action of a last resort. For as long as the creditor
still has a remedy at law for the enforcement of his
claim against the debtor, the creditor will not have
any cause of action against the creditor for
rescission of the contracts entered into by and
between the debtor and another person or
persons. Indeed, an accion pauliana presupposes a
judgment and the issuance by the trial court of a writ
of execution for the satisfaction of the judgment and
the failure of the Sheriff to enforce and satisfy the
judgment of the court. It presupposes that the
creditor has exhausted the property of the debtor. The
date of the decision of the trial court against the
debtor is immaterial. What is important is that the
credit of the plaintiff antedates that of the
fraudulent alienation by the debtor of his
property. After all, the decision of the trial court
against the debtor will retroact to the time when the
debtor became indebted to the creditor.
FACTS
Petitioner Khe Hong Cheng, alias Felix Khe, is the owner
of Butuan Shipping Lines. It appears that on or about
October 4, 1985, the Philippine Agricultural Trading
Corporation shipped on board the vessel M/V PRINCE ERIC,
owned by petitioner Khe Hong Cheng, 3,400 bags of copra
at Masbate, Masbate, for delivery to Dipolog City,
Zamboanga del Norte. The said shipment of copra was
covered by a marine insurance policy issued by American
Home Insurance Company.
M/V PRINCE ERIC, however, sank somewhere between Negros
Island and Northeastern Mindanao, resulting in the
total loss of the shipment. Because of the loss, the
insurer, American Home, paid the amount of P354,000.00
(the value of the copra) to the consignee.
Having been subrogated into the rights of the consignee,
American Home filed a complaint in the Regional Trial
Court to recover the money paid to the consignee, based
on breach of contract of carriage.
 While the case was still pending, Khe Hong Cheng
executed deeds of donations of parcels of land in
favor of his children, herein co-petitioners Sandra
Joy and Ray Steven.
The trial court rendered judgment against petitioner
Khe Hong Cheng four years after the donations were made
and the TCTs were registered in the donees names.
After the said decision became final and executory, a
writ of execution was forthwith issued however, was not
served.
 sheriff found no property under the name of Butuan
Shipping Lines and/or petitioner Khe Hong Cheng to
levy or garnish for the satisfaction of the trial
court's decision.
 When the sheriff, accompanied by counsel of
respondent Philam, went to Butuan City to enforce
the alias writ of execution, they discovered that
petitioner Khe Hong Cheng no longer had any property
and that he had conveyed the subject properties to
his children.
Philam filed a complaint with the Regional Trial Court
for the rescission of the deeds of donation executed by
petitioner Khe Hong Cheng in favor of his children and
for the nullification of their titles.
Petitioners subsequently filed their answer to the
complaint a quo. They moved for its dismissal on the
ground that the action had already prescribed. They
posited that the registration of the deeds of donation
on December 27, 1989 constituted constructive notice
and since the complaint a quo was filed only on February
25, 1997, or more than four (4) years after said
registration, the action was already barred by
prescription.
The trial court denied the motion to dismiss. It held
that respondent Philam's complaint had not yet
prescribed. According to the trial court, the
prescriptive period began to run only from December 29,
1993, the date of the decision of the trial court in
Civil Case No. 13357.[4]
The CA affirmed the trial court's decision in favor of
respondent Philam.
 Citing Articles 1381 and 1383 of the Civil Code, the
CA basically ruled that the four year period to
institute the action for rescission began to run only
in January 1997, and not when the decision in the
civil case became final and executory on December
29, 1993.
 accrual of respondent Philam's cause of action on
January 1997, the time when it first learned that
the judgment award could not be satisfied because
the judgment creditor, petitioner Khe Hong Cheng,
had no more properties in his name.
 Prior thereto, respondent Philam had not yet
exhausted all legal means for the satisfaction of
the decision in its favor, as prescribed under
Article 1383 of the Civil Code.
The Court of Appeals thus denied the petition
for certiorari filed before it, and held that the trial
court did not commit any error in denying petitioners'
motion to dismiss. Their motion for reconsideration was
likewise dismissed in the appellate court's resolution
Petitioners now assail the aforesaid decision.
ISSUE:
Whether the four (4) year prescriptive period as
provided for in Article 1389 of the Civil Code for
respondent Philam to file its action for rescission of
the subject deeds of donation had already prescribed –
NO
RATIO
Article 1389 of the Civil Code simply provides that,
The action to claim rescission must be commenced within
four years. Since this provision of law is silent as to
when the prescriptive period would commence, the
general rule, i.e, from the moment the cause of action
accrues, therefore, applies. Article 1150 of the Civil
Code is particularly instructive:
Art. 1150. The time for prescription for all kinds of
actions, when there is no special provision which
ordains otherwise, shall be counted from the day they
may be brought.
Indeed, this Court enunciated the principle that it is
the legal possibility of bringing the action which
determines the starting point for the computation of
the prescriptive period for the action.[7] Article 1383
of the Civil Code provides as follows:
Art. 1383. An action for rescission is subsidiary; it
cannot be instituted except when the party suffering
damage has no other legal means to obtain reparation
for the same.
It is thus apparent that an action to rescind or
an accion pauliana must be of last resort, availed of
only after all other legal remedies have been exhausted
and have been proven futile. For an accion pauliana to
accrue, the following requisites must concur:
1) That the plaintiff asking for rescission has a
credit prior to the alienation, although demandable
later;
2) That the debtor has made a subsequent contract
conveying a patrimonial benefit to a third person;
3) That the creditor has no other legal remedy to
satisfy his claim, but would benefit by rescission of
the conveyance to the third person;
4) That the act being impugned is fraudulent;
5) That the third person who received the property
conveyed, if by onerous title, has been an accomplice
in the fraud.[8] (Emphasis ours)
We quote with approval the following disquisition of
the CA on the matter:
An accion pauliana accrues only when the creditor
discovers that he has no other legal remedy for the
satisfaction of his claim against the debtor other
than an accion pauliana. The accion pauliana is an
action of a last resort. For as long as the creditor
still has a remedy at law for the enforcement of his
claim against the debtor, the creditor will not have
any cause of action against the creditor for
rescission of the contracts entered into by and
between the debtor and another person or persons.
An accion pauliana presupposes a judgment and the
issuance by the trial court of a writ of execution for
the satisfaction of the judgment and the failure of
the Sheriff to enforce and satisfy the judgment of the
court. It presupposes that the creditor has exhausted
the property of the debtor. The date of the decision
of the trial court against the debtor is
immaterial. What is important is that the credit of
the plaintiff antedates that of the fraudulent
alienation by the debtor of his property. After all,
the decision of the trial court against the debtor
will retroact to the time when the debtor became
indebted to the creditor.
Petitioners, however, maintain that the cause of action
of respondent Philam against them for the rescission of
the deeds of donation accrued as early as December 27,
1989, when petitioner Khe Hong Cheng registered the
subject conveyances with the Register of Deeds.
Respondent Philam allegedly had constructive knowledge
of the execution of said deeds under Section 52 of
Presidential Decree No. 1529, quoted infra, as follows:
Section 52. Constructive knowledge upon registration.
Every conveyance, mortgage, lease, lien, attachment,
order, judgment, instrument or entry affecting
registered land shall, if registered, filed or entered
in the Office of the Register of Deeds for the
province or city where the land to which it relates
lies, be constructive notice to all persons from the
time of such registering, filing, or entering.
Petitioners argument that the Civil Code must yield to
the Mortgage and Registration Laws is misplaced, for in
no way does this imply that the specific provisions of
the former may be all together ignored. To count the
four year prescriptive period to rescind an allegedly
fraudulent contract from the date of registration of
the conveyance with the Register of Deeds, as alleged
by the petitioners, would run counter to Article 1383
of the Civil Code as well as settled jurisprudence. It
would likewise violate the third requisite to file an
action for rescission of an allegedly fraudulent
conveyance of property, i.e., the creditor has no other
legal remedy to satisfy his claim.
An accion pauliana thus presupposes the following:
1) A judgment;
2) the issuance by the trial court of a writ of
execution for the satisfaction of the judgment, and
3) the failure of the sheriff to enforce and satisfy
the judgment of the court.
It requires that the creditor has exhausted the property
of the debtor. The date of the decision of the trial
court is immaterial. What is important is that the
credit of the plaintiff antedates that of the fraudulent
alienation by the debtor of his property. After all,
the decision of the trial court against the debtor will
retroact to the time when the debtor became indebted to
the creditor.
While it is necessary that the credit of the plaintiff
in the accion pauliana must be prior to the fraudulent
alienation, the date of the judgment enforcing it is
immaterial. Even if the judgment be subsequent to the
alienation, it is merely declaratory with retroactive
effect to the date when the credit was constituted.
In the same case, the Court also quoted the rationale
of the CA when it upheld the dismissal of the accion
pauliana on the basis of lack of cause of action:
In this case, plaintiffs appellants had not even
commenced an action against defendants-appellees
Bareng for the collection of the alleged indebtedness.
Plaintiffs-appellants had not even tried to exhaust
the property of defendants-appellees Bareng.
Plaintiffs-appellants, in seeking the rescission of
the contracts of sale entered into between defendants-
appellees, failed to show and prove that defendants-
appellees Bareng had no other property, either at the
time of the sale or at the time this action was filed,
out of which they could have collected this (sic)
debts.
Even if respondent Philam was aware, as of December 27,
1989, that petitioner Khe Hong Cheng had executed the
deeds of donation in favor of his children, the
complaint against Butuan Shipping Lines and/or
petitioner Khe Hong Cheng was still pending before the
trial court. Respondent Philam had no inkling, at the
time, that the trial court's judgment would be in its
favor and further, that such judgment would not be
satisfied due to the deeds of donation executed by
petitioner Khe Hong Cheng during the pendency of the
case. Had respondent Philam filed his complaint on
December 27, 1989, such complaint would have been
dismissed for being premature. Not only were all other
legal remedies for the enforcement of respondent
Philams claims not yet exhausted at the time the deeds
of donation were executed and registered. Respondent
Philam would also not have been able to prove then that
petitioner Khe Hong Chneg had no more property other
than those covered by the subject deeds to satisfy a
favorable judgment by the trial court.
It bears stressing that petitioner Khe Hong Cheng
even expressly declared and represented that he had
reserved to himself property sufficient to answer for
his debts contracted prior to this date:

That the DONOR further states, for the same purpose as

expressed in the next preceding paragraph, that this
donation is not made with the object of defrauding his
creditors having reserved to himself property
sufficient to answer his debts contracted prior to
this date.

As mentioned earlier, respondent Philam only learned

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