GR No.

172682, July 27, 2016

Sulpicio Lines Inc. (Petitioner) v Napoleon Sisante (Respondents)
First Division
Ponente: Bersamin, J.

Nature of Action: Action for damages for breach of contract of carriage.

FACTS:
The M/V Princess of the Orient, a passenger vessel owned and operated by the petitioner, sank near
Fortune Island in Batangas. Of the 388 recorded passengers, 150 were lost. Napoleon Sesante, then a
member of the Philippine National Police (PNP) and a lawyer, was one of the passengers who survived the
sinking. He sued the petitioner for breach of contract and damages. In its defense, the petitioner insisted on
the seaworthiness of the M/V Princess of the Orient due to its having been cleared to sail from the Port of
Manila by the proper authorities; that the sinking had been due to force majeure; that it had not been
negligent; and that its officers and crew had also not been negligent because they had made preparations to
abandon the vessel because they had launched life rafts and had provided the passengers assistance in that
regard. The RTC rendered judgement in favor of plaintiff Napoleon Sesante and ordered defendant to pay
temperate and moral damages. The RTC observed that the petitioner, being negligent, was liable to Sesante
pursuant to Articles 1739 and 1759 of the Civil Code. The CA reduced the award of the temperate damages
to the approximate cost of Sesante's lost personal belongings and held that petitioner remained civilly liable.
The petitioner has attributed the sinking of the vessel to the storm notwithstanding its position on
the seaworthiness of M/V Princess of the Orient. Yet, the findings of the BMI directly contradicted the
petitioner's attribution, as the BMI found that petitioner’s fault was the immediate and proximate cause of
the sinking due to the Captain's erroneous maneuvers of the M/V Princess of the Orient minutes before she
sunk.

ISSUE:
Whether or not the petitioner is liable for moral damages.

RULING:
Yes. The Court awarded moral damages due to the totality of the negligence by the officers and
crew of the Princess of the Orient coupled with the seeming indifference of the petitioner to render
assistance to Sesante.
The petitioner argues that moral damages could be meted against a common carrier only in the
following instances, to wit: (1) in the situations enumerated by Article 2201 of the Civil Code; (2) in cases
of the death of a passenger; or (3) where there was bad faith on the part of the common carrier. It contends
that none of these instances obtained herein; hence, the award should be deleted.
We agree with the petitioner that moral damages may be recovered in an action upon breach of
contract of carriage only when: (a) death of a passenger results, or (b) it is proved that the carrier was guilty
of fraud and bad faith, even if death does not result. However, moral damages may be awarded if the
contractual breach is found to be wanton and deliberately injurious, or if the one responsible acted
fraudulently or with malice or bad faith.
The negligent acts of the officers and crew of M/V Princess of the Orient could not be ignored in
view of the extraordinary duty of the common carrier to ensure the safety of the passengers. The totality of
the negligence by the officers and crew of M/V Princess of the Orient, coupled with the seeming
indifference of the petitioner to render assistance to Sesante, warranted the award of moral damages.

G.R. No. 174414 March 14, 2008

ELMER F. GOMEZ, Petitioner, 
vs.
MA. LITA A. MONTALBAN, Respondent.

FACTS:

On 30 May 2003, petitioner filed a Complaint with the RTC for a sum of money, damages and payment of attorney’s
fees against respondent, docketed as Civil Case No. 29,717-03. The Complaint alleged, among other things, that: on
or about 26 August 1998, respondent obtained a loan from petitioner in the sum of P40,000.00 with a voluntary
proposal on her part to pay 15% interest per month; upon receipt of the proceeds of the loan, respondent issued in
favor of petitioner, as security, Capitol Bank Check No. 0215632, postdated 26 October 1998, in the sum of
P46,000.00, covering the P40,000.00 principal loan amount and P6,000.00 interest charges for one month; when the
check became due, respondent failed to pay the loan despite several demands; thus, petitioner filed the Complaint
praying for the payment of P238,000.00, representing the principal loan and interest charges, plus 25% of the amount
to be awarded as attorney’s fees, as well as the cost of suit.

Summons was served, but despite her receipt thereof, respondent failed to file her Answer. Consequently, she was
declared in default and upon motion, petitioner was allowed to present evidence ex parte. RTC favored petitioner.

On 28 May 2004, respondent filed a Petition for Relief from Judgment alleging that there was no effective service of
summons upon her since there was no personal service of the same. The summons was received by one Mrs. Alicia
dela Torre, who was not authorized to receive summons or other legal pleadings or documents on respondent’s
behalf. Respondent attributes her failure to file an Answer to fraud, accident, mistake or excusable negligence. She
claimed that she had good and valid defenses against petitioner and that the RTC had no jurisdiction as the principal
amount being claimed by petitioner was only P40,000.00, an amount falling within the jurisdiction of the Municipal
Trial Court (MTC). RTC granted respondent’s MOR to give one more chance to present the merits of her position in a
hearing. Petitioner filed a motion for reconsideration of the afore-quoted Order, but the same was denied by the RTC.

ISSUE: Whether or not the Regional Trial Court has jurisdiction over this case for sum of money, damages and
attorney’s fees where the principal amount of the obligation is P40,000.00 but the amount of the demand per
allegation of the complaint is P238,000.00.

HELD: Yes. There can be no doubt that the RTC in this case has jurisdiction to entertain, try, and decide the petitioner’s
Complaint.

To this Court, it is irrelevant that during the course of the trial, it was proven that respondent is only liable to petitioner
for the amount of P40,000.00 representing the principal amount of the loan; P57,000.00 as interest thereon at the
rate of 24% per annum reckoned from 26 August 1998 until the present; and P15,000.00 as attorney’s fees. Contrary
to respondent’s contention, jurisdiction can neither be made to depend on the amount ultimately substantiated in
the course of the trial or proceedings nor be affected by proof showing that the claimant is entitled to recover a sum
in excess of the jurisdictional amount fixed by law. Jurisdiction is determined by the cause of action as alleged in the
complaint and not by the amount ultimately substantiated and awarded.

Basic as a hornbook principle is that jurisdiction over the subject matter of a case is conferred by law and determined
by the allegations in the complaint which comprise a concise statement of the ultimate facts constituting the plaintiff’s
cause of action. The nature of an action, as well as which court or body has jurisdiction over it, is determined based
on the allegations contained in the complaint of the plaintiff, irrespective of whether or not the plaintiff is entitled to
recover upon all or some of the claims asserted therein. The averments in the complaint and the character of the
relief sought are the ones to be consulted. Once vested by the allegations in the complaint, jurisdiction also remains
vested irrespective of whether or not the plaintiff is entitled to recover upon all or some of the claims asserted therein.
Petition granted.

Matute vs. Court of Appeals

26 SCRA 768
G.R. No. L-26751, G.R. No. L-26085, G.R. No. L-26106
January 31, 1969
(L-26751)
Facts:
 On August 20, 1965 when Carlos S. Matute, one of the Matute heirs and a full-blood brother of
both the petitioner and the herein respondent Matias S. Matute, filed in Special Proceeding (settlement
of the Matute estate) a petition praying for the removal of Matias as co-administrator and his
appointment in such capacity.
Carlos alleged that for a period of more than two years from the date of his appointment, said
Matias S. Matute has neglected to render a true, just and complete account of his administration and that
he is not only incompetent but also negligent in his management of the estate under his charge consisting
of five haciendas.
The respondent Matias opposed the allegation that it is completely without basis and false.
Records show that he made an accounting and the same was submitted to the court. That his competence
to act as administrator has been established to the satisfaction of the court.
It appears that during the reception of evidence conducted on December 29, 1965 by the probate
court, Carlos S. Matute and the other heirs submitted their respective lists of exhibits in support of their
motion to ousts Matias. On January 8, 1966 Matias filed a written objection to the admission of the
movants’ exhibits on the ground that the same were hearsay, self-serving, irrelevant and/or mere
photostatic copies of supposed originals which never properly identified nor shown in court. four days
later, the Counsel for Matias filed with leave of Court a “Motion to Dismiss and/or Demurrer to Evidence”
which avers that there is no sufficient evidence on record to justify and support the motions for the
removal of the herein co-administrator Matias S. Matute.
The probate court issued an order removing Matias S. Matute as co-administrator. Hence, the
certiorari. The respondent contends that the disputed order removing him as co-administrator is a patent
nullity. Upon the other hand, the petitioner advances the reason in support of the order of removal that
the probate judge accorded the respondent all the opportunity to adduce his evidence but the latter
resorted to dilatory tactics such as filing a motion to dismiss or demurrer to evidence.

Issue:
Whether or not Rule 33 regarding judgment on demurrer to evidence
is applicable to special proceedings such that its’ disregard by the
probate court amounts to grave abuse of discretion.

Held:
Yes. Section 2, Rule 72 of the Rules of Court provides that in the absence of special provisions, the
rules provided for in ordinary civil actions shall be, as far as practicable, applicable in special proceedings.
The application of the above cited Rule in special proceedings, like the case at bar, is authorized by the
Rules. Instead of resolving the foregoing motion, the probate judge issued the controverted order
removing the respondent as co-administrator without giving him the opportunity to adduce his own
evidence despite his explicit reservation that he be afforded the chance to introduce evidence in his behalf
in the event of denial of his motion to dismiss and/or demurrer to evidence. The Court view that the
above actuation of the probate judge constituted grave abuse of discretion which dooms his improvident
order as nullity.

Gajudo v Traders Royal Bank || Gr no 151098 || 14 March 2008

Note: Petitioners here are the 4 Gajudos and 1 Chua and that the property was owned by them
in common. (Thus, I’d refer to them as the Gajudos, Chua, or petitioners (all of them).

Doctrine: The mere fact that a defendant is declared in default does not automatically result in
the grant of the prayers of the plaintiff. To win, the latter must still present the same quantum of
evidence that would be required if the defendant were still present. A party that defaults is not
deprived of its rights, except the right to be heard and to present evidence to the trial court. If
the evidence presented does not support a judgment for the plaintiff, the complaint should be
dismissed, even if the defendant may not have been heard or allowed to present any
countervailing evidence.
Summary: Chua obtained a loan from TRB secured by a Real Estate Mortgage of a property
owned in common by Chua and the Gajudos. They failed to settle the loan and thus there was
an extrajudicial foreclosure of the property in which the winning bidder was the bank. The
petitioners contend that they were allowed by the bank to repurchase the property but it was
sold to another. The petitioners state that that said new defendants they included in their
amended complaint conspired with the bank in canceling the notice of lis pendens by falsifying a
letter sent to and filed with the office of the Register of Deeds of Quezon City, purportedly for
the cancellation of said notice so now they are claiming for damages. Summons were served on
the bank but they failed to file their answer. Thus, the petitioners were allowed to present ex
parte to claim for damages. The petitioners contend that since the bank was declared in default
the pieces of evidence they presented must already be sufficient for them to have a favorable
judgment. But evidence presented not sufficient. Hence, doctrine.

Facts:

In mid 1977 Danilo Chua obtained a loan from the Traders Royal Bank in the amount of
P75,000.00 secured by a real estate mortgage over a parcel of land.

The loan was not paid and thus the bank commenced extra-judicial foreclosure proceedings
on the property. The auction sale of the property was set on 10 June 1981, but was reset to 31
August 1981, on Chu’s request, which, however, was made without the knowledge and
conformity of the other petitioners (Gajudos). On the re-scheduled auction sale, the Sheriff of
Quezon City sold the property to the bank, the highest bidder therein, for the sum of
P24,911.30.

The other petitioners (Gajudo) assailed this because bid price was shockingly or
unconscionably, low; that the other [petitioners] failed to redeem the property due to their lack of
knowledge of their right of redemption, and want of sufficient education; that, although the
period of redemption had long expired, Chua offered to buy back, and bank also agreed to sell
back the foreclosed property, on the understanding that Chua would pay the bank the amount of
P40,135.53, representing the sum that the bank paid at the auction sale, plus interest and that
Chua made an initial payment thereon in the amount of P4,000.00 duly receipted by the bank;
that, in a sudden change of position, the bank wrote Chua asking that he could repurchase the
property, but based on the current market value thereof; and that sometime later, the bank
wrote Chua anew, requiring him to tender a new offer to counter the offer made thereon by
another buyer.

The bank, filed its answer with counterclaim, asserting that the foreclosure sale of the
mortgaged property was done in accordance with law; and that the bid price was neither
unconscionable, nor shockingly low; that petitioners slept on their rights when they failed to
redeem the property within the one year statutory period; and that bank, in offering to sell the
property to Chua on the basis of its current market price, was acting conformably with law, and
with legitimate banking practice and regulations.

A big conflagration hit the City Hall of Quezon City, which destroyed, amongst other things, the
records of the case. After the records were reconstituted, the petitioners discovered that the
foreclosed property was sold by the bank to the Ceroferr Realty Corporation, and that the notice
of lis pendens annotated on the certificate of title of the foreclosed property, had already been
cancelled. Accordingly, with leave of court, the petitioners amended their complaint, but the
Trial Court dismissed the case ‘without prejudice’ due to their failure to pay additional filing
fees.The petitioners re-filed the complaint impleaded as additional defendants the Ceroferr
Realty Corporation and/or Cesar Roque, and Lorna Roque, and included an additional cause of
action, to wit: that said new defendants conspired with the bank in canceling the notice of
lis pendens by falsifying a letter sent to and filed with the office of the Register of Deeds
of Quezon City, purportedly for the cancellation of said notice.

Summons was served on the bank. Supposing that all the defendants had filed their
answer, the petitioners filed a motion to set case for pre-trial, which motion was,
however, denied by the Trial Court in its Order on the ground that the bank has not yet
filed its answer. The petitioners filed a motion for reconsideration, thereunder alleging that they
received by registered mail, on 19 October 1990, a copy of the bank’s answer with
counterclaim, dated 04 October 1990, which copy was attached to the motion. The trial Court
denied for lack of merit, the motion for reconsideration, therein holding that the answer with
counterclaim filed by the bank referred to another civil case pending before Branch 90 of the
same Court.

The petitioners filed a motion to declare the bank in default, thereunder alleging that no
answer has been filed despite the service of summons on it on 26 September 1990. The
Trial Court declared the motion submitted for resolution upon submission by petitioners of proof
of service of the motion on the bank. Upon proof that petitioners had indeed served the
bank with a copy of said motion, the Trial Court issued an Order of default against the
bank. On petitioners’ motion, they were by the Court allowed to present evidence ex
parte. Thereafter, the Trial Court rendered the new questioned partial decision.

Aggrieved, the bank filed a motion to set aside the partial decision by default against Traders
Royal Bank and admit their Answer with counterclaim: thereunder it averred, amongst others,
that the erroneous filing of said answer was due to an honest mistake of the typist and
inadvertence of its counsel.

The CA ruled in favor of respondent bank. Even if the CA stated that the erroneous docket
number placed on the Answer filed before the trial court was not an excusable negligence by
the bank’s counsel and that these were binding on the bank, the petitioners had not
convincingly established their right to relief as there was no ground to invalidate the
foreclosure sale of the mortgaged property. They stated that an extrajudicial foreclosure sale
did not require personal notice to the mortgagor, that there was no allegation or proof of
noncompliance with the publication requirement and the public posting of the notice of sale, and
that there was no showing of inadequacy of price as no competent evidence was presented to
show the real market value of the land sold or the readiness of another buyer to offer a price
higher than that at which the property had been sold. Moreover, petitioners failed to prove that
the bank had agreed to sell the property back to them. After pointing out that the redemption
period had long expired, respondent’s written communications to Petitioner Chua only showed,
at most, that the former had made a proposal for the latter to buy back the property at the
current market price.

The petitioners argue that the quantum of evidence for judgments flowing from a default
order under Section 3 of Rule 9 is not the same as that provided for in Section 1 of Rule
133 (Preponderance of Evidence rule - which basically states that the party having the
burden of proof must establish his case by a preponderance of evidence)
Issues: Whether or not the CA erred in failing to apply the provisions of Sec 3, Rule 9 ([and in
applying instead] the rule on preponderance of evidence under Section 1, Rule 133 of the Rules
of Court.) - No

Held: No, the CA did not err. Between the two rules, there is no incompatibility that would
preclude the application of either one of them. Section 3 of Rule 9 governs the procedure the
trial court is directed to take when a defendant fails to file an answer. According to this
provision, the court "shall proceed to render judgment granting the claimant such relief as his
pleading may warrant," subject to the court’s discretion on whether to require the presentation of
evidence ex parte. The same provision also sets down guidelines on the nature and extent of
the relief that may be granted.

Basic is the rule that the party making allegations has the burden of proving them by a
preponderance of evidence. Moreover, parties must rely on the strength of their own
evidence, not upon the weakness of the defense offered by their opponent. This principle
holds true, especially when the latter has had no opportunity to present evidence
because of a default order. Needless to say, the extent of the relief that may be
granted can only be as much as has been alleged and proved with preponderant evidence
required under Section 1 of Rule 133.

Complainants are not automatically entitled to the relief prayed for, once the defendants
are declared in default. Favorable relief can be granted only after the court has
ascertained that the relief is warranted by the evidence offered and the facts proven by
the presenting party. Being declared in default does not constitute a waiver of rights
except that of being heard and of presenting evidence in the trial court. Although the
defendant would not be in a position to object, if the evidence presented should not be sufficient
to justify a judgment for the plaintiff, the complaint must be dismissed.

While petitioners were allowed to present evidence ex parte under Section 3 of Rule 9, they
were not excused from establishing their claims for damages by the required quantum of proof
under Section 1 of Rule 133.

Moreover, the grant of damages was not sufficiently supported by the evidence for the following
reasons.

1. The petitioners were not deprived of their property without cause. There has been no
allegation or proof of noncompliance with the requirement of publication and public
posting of the notice of sale. Neither has there been competent evidence to show that
the price paid at the foreclosure sale was inadequate. Thus, there was no ground to
invalidate the sale.
2. The petitioners have not convincingly established their right to damages on the basis of
the purported agreement to repurchase. Without reiterating our prior discussion on this
point, we stress that entitlement to actual and compensatory damages must be proved
even under Section 3 of Rule 9.

In sum, the petitioners have failed to convince this Court of the strength of their position,
notwithstanding the advantage they enjoyed in presenting their evidence ex parte. Not in
every case of default by the defendant is the complainant entitled to win automatically.
Hence, the petition is denied.

ALBERTO G. PINLAC vs CA

FACTS:

1. PETS: WWII veterans filed with RTC Quieting of Title of a forest land acquired thru prescription. They named as RESP
several persons and corporations who are titled owners of subdivided parcels of land within the subject property. One
of those so impleaded as a party-respondent was the Vil-Ma Maloles Subdivision (hereinafter, Vil-Ma).
2. Since personal service of summons could not be effected on Vil-Ma and some of the other named respondents,
petitioners moved for leave of court to serve summons by publication- GRANTED. Published in the “Metropolitan
Newsweek”, a periodical edited and published in the City of Caloocan and Malolos, Bulacan.
3. RESP declared in default : TC DECISION: rendered in favor of petitioners and against the defaulted respondents

1) Declaring petitioners through the principal petitioners hereof, to wit: Alberto G. Pinlac, Atty. Eriberto H.
Decena, Rodolfo T. Reyes, Felipe Briones and Juanito S. Metilla as absolute owners in fee simple title of the
aforesaid Lots 1, 2 & 3 hereof by virtue of extra-ordinary prescription, with the exception of the lands
covered by the respective transfer certificate of title belonging to the non-defaulted respondents;

4. Pet for annulment of Decision was filed with CA by the titled owners of the subdivided lots within Vil-Ma, that TC
nullified all their titles, lack of jurisdiction and extrinsic fraud:

(2) They were never made parties to Civil Case No. Q-35672, nor were their lots described in the
complaint, published summons, and Partial Decision. Named defendant was VIL-MA, a totally separate
and independent entity which had already ceased to exist way back in January of 1976. Moreover, the
summons, as well as the Partial Decision was not published in a newspaper or periodical of general
circulation. Thus, the defective service of summons to said defendant did not place the individual lot
owners under the trial court’s jurisdiction, nor are they bound by the adverse judgment.

(3) They were denied due process of law as they were not given their day in court. They should have
been included as indispensable parties-respondents in Civil Case No. Q-35672 since the petitioners
therein were seeking to annul their respective transfer certificates of title.

5. CA: GRANTED the injunction: indispensable parties in the case, were not individually served with summons. So
annulled decision: becomes all the more apparent when petitioners claim or asseverate that the assailed Partial
Decision can not bind Vilar-Maloles (VILMA), the umbrella name, for the simple reason that said PARTNERSHIP was
dissolved on January 26, 1976, for it can no longer be sued as it had no more juridical personality.

6. Petitioners contend that “the summons and the Partial Decision were published in a local newspaper edited in Caloocan
City and Malolos, Bulacan known as “METROPOLITAN NEWSWEEK” implying that said summons and Partial Decision were
not published in a newspaper of general circulation in Quezon City as required by PD 1079, Sec. 1 thereof. Petitioners not
having been duly notified of the hearing/proceedings, the Partial Decision being assailed is without significance to them
or as far as petitioners are concerned said Partial Decision is null and void.

7. CERTIORARI: PETS Contend that the service of summons by publication was legal and in accordance with the requirements
of Rule 14, Section 14 of the Rules of Court. The service by publication was done pursuant to the orders of the trial court dated
May 5, 1993 and September 29, 1983.

ISSUE: WHETHER OR NOT THE COURT A-QUO HAS ACQUIRED JURISDICTION OVER RESPONDENT VILMA MALOLES
SUBDIVISION BY THE PUBLICATION OF THE SUMMONS AND PETITION AS ORDERED BY THE COURT IN CIVIL CASE NO. Q-
35672 AND SO THE PARTIAL DECISION (ANNEX “B”) WAS LEGAL, VALID AND PROPER.

HELD: NEGAVOO

While the service of summons by publication may have been done with the approval of the trial court, it does not cure the
fatal defect that the “Metropolitan Newsweek” is not a newspaper of general circulation in Quezon City. The Rules strictly require
that publication must be “in a newspaper of general circulation and in such places and for such time as the court may order.” The
court orders relied upon by petitioners did not specify the place and the length of time that the summons was to be published. In the
absence of such specification, publication in just any periodical does not satisfy the strict requirements of the rules. The incomplete
directive of the court a quo coupled with the defective publication of the summons rendered the service by publication
ineffective. The modes of service of summons should be strictly followed in order that the court may acquire jurisdiction over the
respondents, and failure to strictly comply with the requirements of the rules regarding the order of its publication is a fatal defect
in the service of summons. It cannot be overemphasized that the statutory requirements of service of summons, whether
personally, by substituted service, or by publication, must be followed strictly, faithfully and fully, and any mode of service other
than that prescribed by the statute is considered ineffective.

Be that as it may, even granting that the publication strictly complied with the rules, the service of summons would still be
ineffective insofar as private respondents are concerned. At the time the complaint for Quieting of Title was filed on November 2,
1983, Vilma Maloles Subdivision no longer existed as a juridical entity. Vilma Maloles Subdivision, a partnership, was dissolved more
than six (6) years earlier, as evidenced by a Certificate of Dissolution issued by the SEC dated January 26, 1976. Consequently, it could
no longer be sued having lost its juridical personality.
Digested by: Grace Jayne Dingal
Subject: Insurance Law
Title: VALENZUELA v. COURT OF APPEALS, ARAGON et al.
Topic: Effects of Nonpayment/Partial Payment
Facts:
Arturo Valenzuela is a General Agent of Philippine American General Insurance (Philamgen)
since 1965. He was authorized to solicit and sell in behalf of Philamgen all kinds of non-life
insurance, and in consideration of services rendered was entitled to receive the full agent's
commission of 32.5% from Philamgen under the scheduled commission rates. From 1973 to
1975, Valenzuela solicited marine insurance from one of his clients, the Delta Motors in the
amount of P4.4 Million from which he was entitled to a commission of 32%. However,
Valenzuela did not receive his full commission which amounted to P1.6 Million from the P4.4
Million insurance coverage of the Delta Motors. In 1977, Philamgen started to become
interested in and expressed its intent to share in the commission due Valenzuela on a fifty-
fifty basis. Because of the refusal of Valenzuela, Philamgen terminated the General Agency
Agreement of Valenzuela.
Issue:
whether or not Philamgen could continue to hold Valenzuela jointly and severally liable with
the insured for unpaid premiums
Held: NO.
The principal cause of the termination of Valenzuela as General Agent of Philamgen arose
from his refusal to share his Delta commission. The apparent bad faith of the private
respondents in terminating the General Agency Agreement of petitioners. The agency
involving petitioner and private respondent is one "coupled with an interest," and, therefore,
should not be freely revocable at the unilateral will of the latter. With the termination of the
General Agency Agreement, Valenzuela would no longer be entitled to commission on the
renewal of insurance policies of clients sourced from his agency.
Despite the termination of the agency, Philamgen continued to hold Valenzuela jointly and
severally liable with the insured for unpaid premiums. Valenzuela had an interest in the
continuation of the agency when it was unceremoniously terminated not only because of the
commissions he should continue to receive from the insurance business he has solicited and
procured but also for the fact that by the very acts of the respondents, he was made liable to
Philamgen in the event the insured fail to pay the premiums due. They are estopped by their
own positive averments and claims for damages. Therefore, the respondents cannot state
that the agency relationship between Valenzuela and Philamgen is not coupled with interest.
There is an exception to the principle that an agency is revocable at will and that is when the
agency has been given not only for the interest of the principal but for the interest of third
persons or for the mutual interest of the principal and the agent. In these cases, it is evident
that the agency ceases to be freely revocable by the sole will of the principal.
The factor rendering Philamgen and the private respondents liable in damages is that the
termination by them of the General Agency Agreement was tainted with bad faith. If a
principal acts in bad faith and with abuse of right in terminating the agency, then he is liable
in damages.
Valenzuela is not liable to Philamgen for the unpaid and uncollected premiums. Under Section
77 of the Insurance Code, the remedy for the non-payment of premiums is to put an end to
and render the insurance policy not binding —
Sec. 77 ... [N]otwithstanding any agreement to the contrary, no policy or
contract of insurance is valid and binding unless and until the premiums thereof
have been paid except in the case of a life or industrial life policy whenever the
grace period provision applies…
In Philippine Phoenix Surety v. Woodworks, we held that the non-payment of premium does
not merely suspend but puts an end to an insurance contract since the time of the payment
is peculiarly of the essence of the contract. And in Arce v. The Capital Insurance and Surety
Co. Inc. (117 SCRA 63, [1982]), we reiterated the rule that unless premium is paid, an
insurance contract does not take effect. Thus:
 It is to be noted that Delgado (Capital Insurance & Surety Co., Inc. v. Delgado,
9 SCRA 177 [1963] was decided in the light of the Insurance Act before Sec.
72 was amended by the underscored portion. Supra. Prior to the Amendment,
an insurance contract was effective even if the premium had not been paid so
that an insurer was obligated to pay indemnity in case of loss and correlatively
he had also the right to sue for payment of the premium. But the amendment
to Sec. 72 has radically changed the legal regime in that unless the premium
is paid there is no insurance.”
In Philippine Phoenix Surety case, we held:
Moreover, an insurer cannot treat a contract as valid for the purpose of
collecting premiums and invalid for the purpose of indemnity.
No contract of Insurance by an insurance company is valid and binding unless
and until the premium thereof has been paid, notwithstanding any agreement
to the contrary
Since admittedly the premiums have not been paid, the policies issued have lapsed. The
insurance coverage did not go into effect or did not continue and the obligation of Philamgen
as insurer ceased. Hence, for Philamgen which had no more liability under the lapsed and
inexistent policies to demand, much less sue Valenzuela for the unpaid premiums would be
the height of injustice and unfair dealing. In this instance, with the lapsing of the policies
through the nonpayment of premiums by the insured there were no more insurance contracts
to speak of. As this Court held in the Philippine Phoenix Surety case, supra "the non-payment
of premiums does not merely suspend but puts an end to an insurance contract since the time
of the payment is peculiarly of the essence of the contract."
The circumstances of the case, however, require that the contractual relationship between
the parties shall be terminated upon the satisfaction of the judgment. No more claims arising
from or as a result of the agency shall be entertained by the courts after that date.
ACCORDINGLY, the petition is GRANTED.

PHILIPPINE AIRLINES, INC. vs. COURT OF APPEALS and PEDRO ZAPATOS

G.R. No. L-82619 September 15, 1993
BELLOSILLO, J.:

Facts:
On 25 November 1976, private respondent filed a complaint for damages for breach of contract of
carriage2 against Philippine Airlines, Inc. (PAL), before the then Court of First Instance. Zapatos
purchased a ticket from Philippine Air Lines (PAL) wherein it was agreed that the latter would transport
him to Ozamiz City. The plane’s route was from Cebu -Ozamiz-Cotabato. However, due to unfavoarable
weather conditions and the fact that PAL did nothave an all-weather airport, PAL had bypassed Ozamiz
City. PAL then informed Zapatos ofhis options, to return to Cebu on the same day, or take the next
flight to Cebu the followingday, or to take the next available flight to Ozamiz City. Zapatos chose to
return to OzamizCity on the same day. However, there were only six (6) seats available and, the seats
weregiven to the passengers according to their check-in sequence at Cebu. Consequently,Zapatos was
stranded in Cotabato City, where a battle between the government and theMuslims was ongoing.During
his stay in Cotabato City, PAL also failed to provide accomodations for Zapatos. Italso refused to have
the latter hitch a ride with its employees on a ford truck bound for the City. It also failed to return
Zapatos’ luggage. This prompted Zapatos to file a complaint for damages against Philippine Air Lines
forbreach of contract.PAL claimed that it should not be charged with the task of looking after
the passengers'comfort and convenience because the diversion of the flight was due to a fortuitous
event,and that if made liable, an added burden is given to PAL which is over and beyond its dutiesunder
the contract of carriage

Issue:
Is PAL liable for the breach of contract of carriage?

Held:
YES. Undisputably, PAL's diversion of its flight due to inclement weather was a fortuitous event.
Nonetheless, such occurrence did not terminate PAL's contract with its passengers. Being in the business
of air carriage and the sole one to operate in the country, PAL is deemed equipped to deal with situations
as in the case at bar. What we said in one case once again must be stressed, i.e., the relation of carrier
and passenger continues until the latter has been landed at the port of destination and has left the
carrier's premises. Hence, PAL necessarily would still have to exercise extraordinary diligence in
safeguarding the comfort, convenience and safety of its stranded passengers until they have reached
their final destination. On this score, PAL grossly failed considering the then ongoing battle between
government forces and Muslim rebels in Cotabato City and the fact that the private respondent was a
stranger to the place. While we find PAL remiss in its duty of extending utmost care to private respondent
while being stranded in Cotabato City, there is no sufficient basis to conclude that PAL failed to inform
him about his non-accommodation on Flight 560, or that it was inattentive to his queries relative thereto.

June 7, 2017

G.R. No. 205428

REPUBLIC OF THE PHILIPPINES, represented by the DEPARTMENT OF

PUBLIC WORKS AND HIGHWAYS (DPWH) vs
SPOUSES SENANDO SALVADOR and JOSEFINA SALVADOR

FACTS

Spouses Salvador are the registered owners of a parcel of land. The Republic
filed a complaint for expropriation. The Regional Trial Court (RTC) directed
petitioner Republic to pay the spouses consequential damages equivalent to
the value of the capital gains tax and other taxes necessary for the transfer of
the expropriated property in the Republic’s name.

The Republic moved for partial reconsideration, specifically on the issue

relating to the payment of the capital gains tax, but the RTC denied the motion
in its Order for having been belatedly filed. The Republic filed its Motion for
Partial Reconsideration before the RTC via registered mail on September 28,
2012 and the trial court received the Republic’s motion only on October 5,
2012.

ISSUES

1. Whether the RTC correctly denied the Republic’s Motion for Partial
Reconsideration for having been filed out of time; and
2. Whether the capital gains tax on the transfer of the expropriated
property can be considered as consequential damages that may be
awarded to respondents.

RULING

1 . No, the RTC did not correctly deny the Republic’s Motion for Partial
Reconsideration for having been filed out of time.

“Section 3, Rule 13 of the Rules of Court provides that if a pleading is filed by

registered mail, x x x the date of mailing shall be considered as the date of
filing. It does not matter when the court actually receives the mailed pleading.”

In this case, the records show that the Republic filed its Motion for Partial
Reconsideration before the RTC via registered mail on September 28, 2012.
Although the trial court received the Republic’s motion only on October 5,
2012, it should have considered the pleading to have been filed on September
28, 2012, the date of its mailing, which is clearly within the reglementary
period of 15 days to file said motion, counted from September 13, 2012, or the
date of the Republic’s receipt of the assailed Decision.