[G.R. No. 177921. December 4, 2013.

METRO CONCAST STEEL CORPORATION, SPOUSES JOSE S. DYCHIAO

AND TIU OH YAN, SPOUSES GUILLERMO AND MERCEDES DYCHIAO, AND
SPOUSES VICENTE FILOMENA
DYCHIAO, petitioners, vs. ALLIED BANK CORPORATION,respondent.

RESOLUTION

PERLAS-BERNABE, J : p

Assailed in this petition for review on certiorari 1 are the Decision 2 dated February 12, 2007
and the Resolution 3 dated May 10, 2007 of the Court of Appeals (CA) in CA-G.R. CV No.
86896 which reversed and set aside the Decision 4 dated January 17, 2006 of the Regional
Trial Court of Makati City, Branch 57 (RTC) in Civil Case No. 00-1563, thereby ordering
petitioners Metro Concast SteelCorporation (Metro Concast), Spouses Jose S. Dychiao and
Tiu Oh Yan, Spouses Guillermo and Mercedes Dychiao, and Spouses Vicente and Filomena
Dychiao (individual petitioners) to solidarily pay respondent Allied Bank Corporation
(Allied Bank) the aggregate amount of P51,064,094.28, with applicable interests and penalty
charges.
The Facts
On various dates and for different amounts, Metro Concast, a corporation duly organized and
existing under and by virtue of Philippine laws and engaged in the business of
manufacturing steel, 5 through its officers, herein individual petitioners, obtained several loans
from Allied Bank. These loan transactions were covered by a promissory note and separate
letters of credit/trust receipts, the details of which are as follows:
Date Document Amount

December 13, 1996 Promissory Note No. 96-21301 6 P2,000,000.00

November 7, 1995 Trust Receipt No. 96-202365 7 P608,603.04
May 13, 1996 Trust Receipt No. 96-960522 8 P3,753,777.40
May 24, 1996 Trust Receipt No. 96-960524 9 P4,602,648.08
March 21, 1997 Trust Receipt No. 97-204724 10 P7,289,757.79
June 7, 1996 Trust Receipt No. 96-203280 11 P17,340,360.73
July 26, 1995 Trust Receipt No. 95-201943 12 P670,709.24
August 31, 1995 Trust Receipt No. 95-202053 13 P313,797.41
November 16, 1995 Trust Receipt No. 96-202439 14 P13,015,109.87
July 3, 1996 Trust Receipt No. 96-203552 15 P401,608.89
June 20, 1995 Trust Receipt No. 95-201710 16 P750,089.25
December 13, 1995 Trust Receipt No. 96-379089 17 P92,919.00
December 13, 1995 Trust Receipt No. 96/202581 18 P224,713.58

The interest rate under Promissory Note No. 96-21301 was pegged at 15.25% per annum
(p.a.), with penalty charge of 3% per month in case of default; while the twelve (12) trust receipts
uniformly provided for an interest rate of 14% p.a. and 1% penalty charge. By way of security,
the individual petitioners executed several Continuing Guaranty/Comprehensive Surety
Agreements 19 in favor ofAllied Bank. HIaTDS

Petitioners failed to settle their obligations under the aforementioned promissory note and trust
receipts, hence, Allied Bank, through counsel, sent them demand letters, 20 all dated December
10, 1998, seeking payment of the total amount of P51,064,093.62, but to no avail.
Thus, Allied Bank was prompted to file a complaint for collection of sum of money 21 (subject
complaint) against petitioners before the RTC, docketed as Civil Case No. 00-1563.
In their second 22 Amended Answer, 23 petitioners admitted their indebtedness
to Allied Bank but denied liability for the interests and penalties charged, claiming to have paid
the total sum of P65,073,055.73 by way of interest charges for the period covering 1992 to
1997. 24 They also alleged that the economic reverses suffered by the Philippine economy in
1998 as well as the devaluation of the peso against the US dollar contributed greatly to the
downfall of the steel industry, directly affecting the business of Metro Concastand eventually
leading to its cessation. Hence, in order to settle their debts with Allied Bank, petitioners offered
the sale of MetroConcast's remaining assets, consisting of machineries and equipment,
to Allied Bank, which the latter, however, refused. Instead,Allied Bank advised them to sell the
equipment and apply the proceeds of the sale to their outstanding obligations. Accordingly,
petitioners offered the equipment for sale, but since there were no takers, the equipment was
reduced into ferro scrap or scrap metal over the years.
In 2002, Peakstar Oil Corporation (Peakstar), represented by one Crisanta Camiling (Camiling),
expressed interest in buying the scrap metal. During the negotiations with Peakstar, petitioners
claimed that Atty. Peter Saw (Atty. Saw), a member of Allied Bank's legal department, acted as
the latter's agent. Eventually, with the alleged conformity of Allied Bank, through Atty. Saw, a
Memorandum of Agreement 25 dated November 8, 2002 (MoA) was drawn
between Metro Concast, represented by petitioner Jose Dychiao, and Peakstar, through
Camiling, under which Peakstar obligated itself to purchase the scrap metal for a total
consideration of P34,000,000.00, payable as follows: (a) P4,000,000.00 by way of earnest
money — P2,000,000.00 to be paid in cash and the other P2,000,000.00 to be paid in two (2)
post-dated checks of P1,000,000.00 each; 26 and (b) the balance of P30,000,000.00 to be paid
in ten (10) monthly installments of P3,000,000.00, secured by bank guarantees from Bankwise,
Inc. (Bankwise) in the form of separate post-dated checks. 27
Unfortunately, Peakstar reneged on all its obligations under the MoA. In this regard, petitioners
asseverated that: (a) their failure to pay their outstanding loan obligations to Allied Bank must
be considered as force majeure; and (b) since Allied Bank was the party that accepted the
terms and conditions of payment proposed by Peakstar, petitioners must therefore be deemed
to have settled their obligations to Allied Bank. To bolster their defense, petitioner Jose Dychiao
(Jose Dychiao) testified 28 during trial that it was Atty. Saw himself who drafted the MoA and
subsequently received 29 the P2,000,000.00 cash and the two (2) Bankwise post-dated checks
worth P1,000,000.00 each from Camiling. However, Atty. Saw turned over only the two (2)
checks and P1,500,000.00 in cash to the wife of Jose Dychiao. 30
Claiming that the subject complaint was falsely and maliciously filed, petitioners prayed for the
award of moral damages in the amount of P20,000,000.00 in favor of Metro Concast and at
least P25,000,000.00 for each individual petitioner, P25,000,000.00 as exemplary damages,
P1,000,000.00 as attorney's fees, P500,000.00 for other litigation expenses, including costs of
suit.
The Issue Before the Court
At the core of the present controversy is the sole issue of whether or not the loan obligations
incurred by the petitioners under the subject promissory note and various trust receipts have
already been extinguished.
 The Court's Ruling
Article 1231 of the Civil Code states that obligations are extinguished either by payment or
performance, the loss of the thing due, the condonation or remission of the debt, the confusion
or merger of the rights of creditor and debtor, compensation or novation.
In the present case, petitioners essentially argue that their loan obligations to Allied Bank had
already been extinguished due to Peakstar's failure to perform its own obligations
to Metro Concast pursuant to the MoA. Petitioners classify Peakstar's default as a form of force
majeure in the sense that they have, beyond their control, lost the funds they expected to have
received from the Peakstar (due to the MoA) which they would, in turn, use to pay their own
loan obligations to Allied Bank. They further state that AlliedBank was equally bound
by Metro Concast's MoA with Peakstar since its agent, Atty. Saw, actively represented it during
the negotiations and execution of the said agreement. ADETca

Petitioners' arguments are untenable.

At the outset, the Court must dispel the notion that the MoA would have any relevance to the
performance of petitioners' obligations to Allied Bank. The MoA is a sale of assets contract,
while petitioners' obligations to Allied Bank arose from various loan transactions. Absent any
showing that the terms and conditions of the latter transactions have been, in any way, modified
or novated by the terms and conditions in the MoA, said contracts should be treated separately
and distinctly from each other, such that the existence, performance or breach of one would
not depend on the existence, performance or breach of the other. In the foregoing respect, the
issue on whether or not Allied Bank expressed its conformity to the assets sale transaction
between Metro Concast and Peakstar (as evidenced by the MoA) is actually irrelevant to the
issues related to petitioners' loan obligations to the bank. Besides, as the CA pointed out, the
fact of Allied Bank's representation has not been proven in this case and hence, cannot be
deemed as a sustainable defense to exculpate petitioners from their loan obligations
to Allied Bank.
Now, anent petitioners' reliance on force majeure, suffice it to state that Peakstar's breach of
its obligations to Metro Concast arising from the MoA cannot be classified as a fortuitous event
under jurisprudential formulation. As discussed in Sicam v. Jorge: 39
Fortuitous events by definition are extraordinary events not foreseeable or avoidable. It
is therefore, not enough that the event should not have been foreseen or anticipated,
as is commonly believed but it must be one impossible to foresee or to avoid. The
mere difficulty to foresee the happening is not impossibility to foresee the same.
To constitute a fortuitous event, the following elements must concur: (a) the cause of
the unforeseen and unexpected occurrence or of the failure of the debtor to comply with
obligations must be independent of human will; (b) it must be impossible to foresee
the event that constitutes the caso fortuito or, if it can be foreseen, it must be impossible
to avoid; (c) the occurrence must be such as to render it impossible for the debtor
to fulfill obligations in a normal manner; and, (d) the obligor must be free from any
participation in the aggravation of the injury or loss. 40 (Emphases supplied)
While it may be argued that Peakstar's breach of the MoA was unforeseen by petitioners, the
same is clearly not "impossible" to foresee or even an event which is "independent of human
will." Neither has it been shown that said occurrence rendered it impossible for petitioners to
pay their loan obligations to Allied Bank and thus, negates the former's force majeure theory
altogether. In any case, as earlier stated, the performance or breach of the MoA bears no
relation to the performance or breach of the subject loan transactions, they being separate and
distinct sources of obligation. The fact of the matter is that petitioners' loan obligations
to AlliedBank remain subsisting for the basic reason that the former has not been able to prove
that the same had already been paid 41 or, in any way, extinguished. In this regard, petitioners'
liability, as adjudged by the CA, must perforce stand. Considering, however, thatAllied Bank's
extra-judicial demand on petitioners appears to have been made only on December 10, 1998,
the computation of the applicable interests and penalty charges should be reckoned only from
such date.
WHEREFORE, the petition is DENIED. The Decision dated February 12, 2007 and Resolution
dated May 10, 2007 of the Court of Appeals in CA-G.R. CV No. 86896 are
hereby AFFIRMED with MODIFICATION reckoning the applicable interests and penalty
charges from the date of the extrajudicial demand or on December 10, 1998. The rest of the
appellate court's dispositions stand. TcEAIH

SO ORDERED.
Carpio, Velasco, Jr., * Brion and Perez, JJ., concur.

(Metro Concast Steel Corp. v. Allied Bank Corp., G.R. No. 177921 (Resolution), [December
|||

4, 2013], 722 PHIL 698-710)

Seone v. Franco, 24 Phil 309

FACTS: This is an appeal from a judgment of the Court of First Instance of Zamboanga in favor of the plaintiff, holding
that the right of action upon the mortgage debt which was the basis of the claim presented against the plaintiff’s estate
had already prescribed. The mortgage in question, which is to secure the payment of the sum of P4,876.01, the debtor
agreeing to pay the sum ―little by little.‖ After 27 years, nothing has been paid either of the principal or of the interest.
The obligation seems to leave the duration of the period for the payment thereof to the will of the debtor. It
appears also that it was the intention of the instrument to give the debtor time within which to pay the obligation.

ISSUE: Whether or not the creditor may demand immediate performance of the obligation, given that there is no date
stipulated by the parties as to when it should become due and payable.

HELD: In such cases this court has held, on several occasions, that the obligation is not due and payable until an action
has been commenced by the mortgagee against the mortgagor for the purpose of having the court fix the date on and
after which the instrument shall be payable and the date of maturity is fixed in pursuance thereof. Such being the case,
as action should have been brought for the purpose of having the court set a date on which the instrument should
become due and payable. Until such action was prosecuted no suit could be instrument. It is, therefore, clear that this
action is premature. The instrument has been sued upon before it is due. The action must accordingly be dismissed.
Ordinarily when an action of this sort is dismissed the plaintiff may at once begin his action for the purpose of fixing a
date upon which the instrument shall become due. From the undisputed facts in this case and from the facts and
conditions that very probably cannot be charged hereafter, it is our present opinion that such action is itself prescribed.
The judgment was affirmed, with cost against the appellant.

[G.R. No. 124922. June 22, 1998.]

 JIMMY CO, doing business under the name & style DRAGON METAL
MANUFACTURING, petitioner, vs. COURT OFAPPEALS and BROADWAY
MOTOR SALES CORPORATION, respondents.

Lorenzo G. Parungao for petitioner.

Samson S. Alcantara for private respondent.

SYNOPSIS

On July 18, 1990, petitioner entrusted his car to private respondent for some repair including
battery replacement, the latter undertaking to return the vehicle on July 21, 1990 fully serviced
and supplied in accordance with the job contract. But came July 21, 1990, the latter could not
release the vehicle as its battery was weak and was not yet replaced. Left with no option,
petitioner himself bought a new battery nearby and delivered it to private respondent for
installation on the same day. However, the battery was not installed and the delivery of the
car was rescheduled to July 24, 1990. When petitioner sought to reclaim his car in the
afternoon of July 24, 1990, he was told that it was carnapped earlier that morning while being
road-tested by an employee of private respondent.
The RTC, in a suit for damages filed by petitioner against private respondent, found the latter
guilty of delay in the performance of its obligation and held it liable to petitioner for the
value of the lost vehicle and its accessories plus interest and attorney's fees. On appeal,
the Court of Appeals reversed the lower court's ruling. It ruled that the vehicle was lost due to
a fortuitous event. Hence this petition for review.
In reversing the Court of Appeals, the Supreme Court held that carnapping per se cannot be
considered as a fortuitous event. To be considered as such, carnapping entails more than the
mere forceful taking of another's property. It must be proved and established that the event
was an act of God or was done solely by third parties and that neither the claimant nor the
person alleged to be negligent has any participation. In accordance with the
Rules of Evidence, the burden of proving that the loss was due to a fortuitous event rests on
him who invokes it. Even assuming arguendo that carnapping was duly established as a
fortuitous event, still private respondent cannot escape liability. Article 1165 of the New Civil
Code makes an obligor who is guilty of delay responsible even for a fortuitous event until he
has effected the delivery.

SYLLABUS DACcH

2. ID.; EVIDENCE; BURDEN OF PROOF; RESTS ON HIM WHO INVOKES FORTUITOUS

EVENT. — It is a not a defense for a repair shopof motor vehicles to escape liability simply
because the damage or loss of a thing lawfully placed in its possession was due to
carnapping. Carnapping per se cannot be considered as a fortuitous event. The fact that a
thing was unlawfully and forcefully taken from another's rightful possession, as in
cases of carnapping, does not automatically give rise to a fortuitous event. To be considered
as such, carnapping entails more than the mere forceful taking of another's property. It must
be proved and established that the event was an act of God or was done solely by third
parties and that neither the claimant nor the person alleged to be negligent has any
participation. In accordance with the Rules of evidence, the burden of proving that the loss
was due to a fortuitous event rests on him who invokes it — which in this case is the private
respondent. However, other than the police report of the alleged carnapping incident, no other
evidence was presented by private respondent to the effect that the incident was not due to
its fault. A police reportof an alleged crime, to which only private respondent is privy, does not
suffice to establish the carnapping. Neither does it prove that there was no fault on the
part of private respondent notwithstanding the parties' agreement at the pre-trial that the car
was carnapped. Carnapping does not foreclose the possibility of fault or negligence on the
part of private respondent.
3. CIVIL LAW; OBLIGATIONS AND CONTRACT; AN OBLIGOR GUILTY OF DELAY IS
RESPONSIBLE EVEN FOR A FORTUITOUS EVENT UNTIL HE HAS EFFECTED
DELIVERY. — Even assuming arguendo that carnapping was duly established as a fortuitous
event, still private respondent cannot escape liability. Article 1165 of the New Civil Code
makes an obligor who is guilty of delay responsible even for a fortuitous event until he has
effected the delivery. In this case, private respondent was already in delay as it was supposed
to deliver petitioner's car three (3) days before it was lost. Petitioner's agreement to the
rescheduled delivery does not defeat his claim as private respondent had already breached
its obligation. Moreover, such occasion cannot be construed as waiver of petitioner's right to
hold private respondent liable because the car was unusable and thus, petitioner had no
option but to leave it.
4. ID.; ID.; LEGAL PRESUMPTION THAT THE LOSS OF A THING WAS DUE TO THE
FAULT OF THE ONE IN POSSESSION AT THE TIMEOF THE LOSS. — Assuming further
that there was no delay, still working against private respondent is the legal presumption
under Article 1265 that its possession of the thing at the time it was lost was due to its fault.
This presumption is reasonable since he who has the custody and care of the thing can easily
explain the circumstances of the loss. The vehicle owner has no duty to show that the repair
shop was at fault. All that petitioner needs to prove, as claimant, is the simple fact that private
respondent was in possession ofthe vehicle at the time it was lost. In this case, private
respondent's possession at the time of the loss is undisputed. Consequently, the burden
shifts to the possessor who needs to present controverting evidence sufficient enough to
overcome that presumption. Moreover, the exempting circumstances — earthquake, flood,
storm or other natural calamity — when the presumption of fault is not applicable do not
concur in this case. Accordingly, having failed to rebut the presumption and since the case
does not fall under the exceptions, private respondent is answerable for the loss.
5. ID.; ID.; REPAIR SHOPS ARE REQUIRED TO SECURE AN INSURANCE POLICY
COVERING THE MOTOR VEHICLE ENTRUSTED FOR REPAIR; VIOLATION OF THIS
STATUTORY DUTY CONSTITUTES NEGLIGENCE PER SE. — It must likewise be
emphasized that pursuant to Articles 1174 and 1262 of the New Civil Code, liability attaches
even if the loss was due to a fortuitous event if "the nature of the obligation requires the
assumption of risk." Carnapping is a normal business risk for those engaged in the
repair of motor vehicles. For just as the owner is exposed to that risk so is the repair shop
since the car was entrusted to it. That is why, repair shops are required to first register with
the Department of Trade and Industry (DTI) and to secure an insurance policy for the "shop
covering the property entrusted by its customer for repair, service or maintenance" as an pre-
requisite for such registration/accreditation. Violationof this statutory duty constitutes
negligence per se. Having taken custody of the vehicle, private respondent is obliged not only
to repair the vehicle but must also provide the customer with some form of security for his
property over which he losses immediate control. An owner who cannot exercise the seven
(7) juses or attributes of ownership — the right to possess, to use and enjoy, to abuse or
consume, to accessories, to dispose or alienate, to recover or vindicate and to the fruits — is
a crippled owner. Failure of the repair shop to provide security to a motor vehicle owner would
leave the latter at the mercy of the former. Moreover, on the assumption that private
respondent's repair business is duly registered, it presupposes that its shop is covered by
insurance from which it may recover the loss. If private respondent can recover from its
insurer, then it would be unjustly enriched if it will not compensate petitioner to whom no fault
can be attributed. Otherwise, if the shop is not registered, then the presumption ofnegligence
applies.
6. ID.; ID.; LIABILITY OF REPAIR SHOP ON LOST VEHICLES AND ACCESSORIES
SHOULD BE BASED ON ITS FAIR MARKET VALUE AT THE TIME IT WAS ENTRUSTED
OR SUCH VALUE AS AGREED UPON SUBSEQUENT TO THE LOSS. — One last thing.
With respect to the value of the lost vehicle and its accessories for which the repair shop is
liable, it should be based on the fair market value that the property would command at the
time it was entrusted to it or such other value as agreed upon by the parties subsequent to
the loss. Such recoverable value is fair and reasonable considering that the value of the
vehicle depreciates. This value may be recovered without prejudice to such other damages
that a claimant is entitled under applicable laws. AECDHS

DECISION

MARTINEZ, J : p

On July 18, 1990, petitioner entrusted his Nissan pick-up car 1988 model 1 to private
respondent — which is engaged in the sale, distribution and repair of motor vehicles — for the
following job repair services and supply of parts:

Private respondent undertook to return the vehicle on July 21, 1990 fully serviced and
supplied in accordance with the job contract. After petitioner paid in full the repair bill in the
amount of P1,397.00, 3 private respondent issued to him a gate pass for the release ofthe
vehicle on said date. But came July 21, 1990, the latter could not release the vehicle as its
battery was weak and was not yet replaced. Left with no option, petitioner himself bought a
new battery nearby and delivered it to private respondent for installation on the same day.
However, the battery was not installed and the delivery of the car was rescheduled to July 24,
1990 or three (3) days later. When petitioner sought to reclaim his car in the afternoon of July
24, 1990, he was told that it was carnapped earlier that morning while being road-tested by
private respondent's employee along Pedro Gil and Perez Streets in Paco, Manila. Private
respondent said that the incident was reported to the police.
Having failed to recover his car and its accessories or the value thereof, petitioner filed a suit
for damages against private respondent anchoring his claim on the latter's alleged
negligence. For its part, private respondent contended that it has no liability because the car
was lost as a result of a fortuitous event — the carnapping. During pre-trial, the parties agreed
that:
"(T)he cost of the Nissan Pick-up four (4) door when the plaintiff purchased it from the
defendant is P332,500.00 excluding accessories which were installed in the vehicle by
the plaintiff consisting of four (4) brand new tires, magwheels, stereo speaker,
amplifier which amount all in all to P20,000.00. It is agreed that the vehicle was lost on
July 24, 1990 'approximately two (2) years and five (5) months from the date of the
purchase'. It was agreed that the plaintiff paid the defendant the cost of service and
repairs as early as July 21, 1990 in the amount of P1,397.00 which amount was
received and duly receipted by the defendant company. It was also agreed that the
present value of a brand new vehicle of the same type at this time is P425,000.00
without accessories." 4
They likewise agreed that the sole issue for trial was who between the parties shall bear the
loss of the vehicle which necessitates the resolution of whether private respondent was
indeed negligent. 5 After trial, the court a quo found private respondent guilty of delay in the
performance of its obligation and held it liable to petitioner for the value of the lost vehicle and
its accessories plus interest and attorney's fees. 6 On appeal, the Court of Appeals (CA)
reversed the ruling of the lower court and ordered the dismissal of petitioner's damage
suit. 7 The CA ruled that: (1) the trial court was limited to resolving the issue of negligence as
agreed during pre-trial; hence it cannot pass on the issue of delay; and (2) the vehicle was
lost due to a fortuitous event.
In a petition for review to this Court, the principal query raised is whether a repair shop can be
held liable for the loss of a customer's vehicle while the same is in its custody for repair or
other job services?
The Court resolves the query in favor of the customer. First, on the technical aspect involved.
Contrary to the CA's pronouncement, the rule that the determination of issues at a pre-trial
conference bars the consideration of other issues on appeal, except those that may involve
privilege or impeaching matter, 8 is inapplicable to this case. The question of delay, though
not specifically mentioned as an issue at the pre-trial may be tackled by the court considering
that it is necessarily intertwined and intimately connected with the principal issue agreed upon
by the parties, i.e. who will bear the loss and whether there was negligence. Petitioner's
imputation ofnegligence to private respondent is premised on delay which is the very
basis of the former's complaint. Thus, it was unavoidable for the court to resolve the case,
particularly the question of negligence without considering whether private respondent was
guilty ofdelay in the performance of its obligation.
On the merits. It is a not a defense for a repair shop of motor vehicles to escape liability
simply because the damage or loss of a thing lawfully placed in its possession was due to
carnapping. Carnapping per se cannot be considered as a fortuitous event. The fact that a
thing was unlawfully and forcefully taken from another's rightful possession, as in
cases of carnapping, does not automatically give rise to a fortuitous event. To be considered
as such, carnapping entails more than the mere forceful taking of another's property. It must
be proved and established that the event was an act of God or was done solely by third
parties and that neither the claimant nor the person alleged to be negligent has any
participation. 9 In accordance with the Rules of evidence, the burden of proving that the loss
was due to a fortuitous event rests on him who invokes it 10 — which in this case is the private
respondent. However, other than the police report of the alleged carnapping incident, no other
evidence was presented by private respondent to the effect that the incident was not due to
its fault. A police report of an alleged crime, to which only private respondent is privy, does
not suffice to establish the carnapping. Neither does it prove that there was no fault on the
part of private respondent notwithstanding the parties' agreement at the pre-trial that the car
was carnapped. Carnapping does not foreclose the possibility of fault or negligence on the
partof private respondent.
Even assuming arguendo that carnapping was duly established as a fortuitous event, still
private respondent cannot escape liability.Article 1165 11 of the New Civil Code makes an
obligor who is guilty of delay responsible even for a fortuitous event until he has effected the
delivery. In this case, private respondent was already in delay as it was supposed to deliver
petitioner's car three (3) days before it was lost. Petitioner's agreement to the rescheduled
delivery does not defeat his claim as private respondent had already breached its obligation.
Moreover, such accession cannot be construed as waiver of petitioner's right to hold private
respondent liable because the car was unusable and thus, petitioner had no option but to
leave it.
Assuming further that there was no delay, still working against private respondent is the legal
presumption under Article 1265 that its possession of the thing at the time it was lost was due
to its fault. 12 This presumption is reasonable since he who has the custody and care of the
thing can easily explain the circumstances of the loss. The vehicle owner has no duty to show
that the repair shop was at fault. All that petitioner needs to prove, as claimant, is the simple
fact that private respondent was in possession of the vehicle at the time it was lost. In this
case, private respondent's possession at the time of the loss is undisputed. Consequently, the
burden shifts to the possessor who needs to present controverting evidence sufficient enough
to overcome that presumption. Moreover, the exempting circumstances — earthquake, flood,
storm or other natural calamity — when the presumption of fault is not applicable 13do not
concur in this case. Accordingly, having failed to rebut the presumption and since the case
does not fall under the exceptions, private respondent is answerable for the loss.
It must likewise be emphasized that pursuant to Articles 1174 and 1262 of the New Civil
Code, liability attaches even if the loss was due to a fortuitous event if "the nature of the
obligation requires the assumption of risk". 14 Carnapping is a normal business risk for those
engaged in the repair of motor vehicles. For just as the owner is exposed to that risk so is the
repair shop since car was entrusted to it. That is why, repair shops are required to first
register with the Department of Trade and Industry (DTI) 15 and to secure an insurance policy
for the "shop covering the property entrusted by customer for repair, service or maintenance"
as a pre-requisite for such registration/accreditation. 16 Violation of this statutory duty
constitutes negligence per se. 17 Having taken custody of the vehicle, private respondent is
obliged not only to repair the vehicle but must also provide the customer with some
form of security for his property over which he loses immediate control. An owner who cannot
exercise the seven (7) juses or attributes of ownership — the right to possess, to use and
enjoy, to abuse or consume, to accessories, to dispose or alienate, to recover or vindicate
and to the fruits — 18 is a crippled owner. Failure of the repair shop to provide security to a
motor vehicle owner would leave the latter at the mercy of the former. Moreover, on the
assumption that private respondent's repair business is duly registered, it presupposes that its
shop is covered by insurance from which it may recover the loss. If private respondent can
recover from its insurer, then it would be unjustly enriched if it will not compensate petitioner
to whom no fault can be attributed. Otherwise, if the shop is not registered, then the
presumption of negligence applies.
One last thing. With respect to the value of the lost vehicle and its accessories for which the
repair shop is liable, it should be based on the fair market value that the property would
command at the time it was entrusted to it or such other value as agreed upon by the parties
subsequent to the loss. Such recoverable value is fair and reasonable considering that the
value of the vehicle depreciates. This value may be recovered without prejudice to such other
damages that a claimant is entitled under applicable laws.

WHEREFORE, premises considered, the decision of the Court Appeals is REVERSED and
SET ASIDE and the decision of the court a quo is REINSTATED.
SO ORDERED.
||| (Co v. Court of Appeals, G.R. No. 124922, [June 22, 1998], 353 PHIL 305-317)