College Assurance Plan and Comprehensive Annuity Plan and Pension Corporation vs. Belfranlt Development Inc.

The legal presumption under Article 1667 of the Civil Code that the lessee is responsible for the deterioration or loss of the thing leased is not rebutted by a bare claim of fortuitous event; the lessee must affirmatively prove that the loss took place without its fault, and where its own negligence caused or aggravated the loss, the fortuitous event cannot shield it from liability. Where the instrumentality of the loss was within the lessee's exclusive control and the lessor had no hand in the incident, the doctrine of res ipsa loquitur supplies the inference of negligence even without expert testimony.

Belfranlt Development, Inc. owns the Belfranlt Building in Angeles City, Pampanga, and leased several units on its second and third floors to College Assurance Plan Phil., Inc. and Comprehensive Annuity Plans and Pension Corporation. The dispute is governed by the Civil Code regime on lease, which places on the lessee the burden of proving that the deterioration or loss of the leased thing occurred without its fault, and by the rules on damages and evidence applicable to recovery for loss caused by fire.

Belfranlt Development, Inc. owns the Belfranlt Building in Angeles City, Pampanga, and leased to College Assurance Plan Phil., Inc. (CAP) and Comprehensive Annuity Plans and Pension Corporation (CAPP) several units on the second and third floors of the building.

On October 8, 1994, fire destroyed portions of the building, including the third floor units occupied by the two corporations. An October 20, 1994 field investigation report prepared by an arson investigator assigned to the case disclosed that the origin of the fire was the store room occupied by CAP on the third floor of the building and that its cause was accidental, traced to an overheated coffee percolator. These findings were reiterated in the October 21, 1994 certification issued by BFP City Fire Marshal Insp. Teodoro D. del Rosario to the lessees as a supporting document for their insurance claim.

Citing these findings, Belfranlt sent the lessees a notice on November 3, 1994 to vacate the leased premises to make way for repairs and to pay reparation estimated at P1.5 million. On November 11, 1994, the lessees vacated the leased premises, including the units on the second floor, but did not act on the demand for reparation. Belfranlt wrote them another letter reiterating its claim, this time estimated by professionals to be no less than P2 million, and clarifying that since the second floor units were not affected by the fire, the lessees had no reason to vacate them; their lease on those units was therefore deemed still subsisting, along with their obligation to pay rent. In reply, the lessees explained that they could no longer re-occupy the second floor units because they had already moved to a new location and entered into a binding contract with a new lessor, and disclaimed liability for reparation on the ground that the fire was a fortuitous event for which they could not be held responsible.

After its third demand went unheeded, Belfranlt filed a complaint for damages with the Regional Trial Court.

The RTC found that the proximate cause of the fire was the fault and negligence of the lessees in using a coffee percolator in the office stockroom on the third floor of the building and in allowing the electrical device to overheat. It credited the October 21, 1994 certification issued by the Bureau of Fire Protection Region 3, which it considered credible as the act of a government office that had investigated the cause and circumstances of the fire, and it noted that the lessees had failed to present countervailing evidence to rebut the presumption that official duty had been regularly performed, or any credible evidence of wrongdoing on the part of the fire officials and arson investigators. The certification was not self-serving, the RTC observed, because on its face it was issued not to Belfranlt but to the lessees' representative, Jesus V. Roig, for purposes of their insurance claim. The RTC likewise relied on photographs of the remnants of a coffee percolator found in the burned premises and on the object evidence itself, the authenticity and veracity of which the lessees did not dispute, and it characterized the lessees' evidence as mere negative denials testified to by their own employees, who could not be considered totally disinterested.

The Court of Appeals concurred and noted additional evidence of negligence: the metal base of a heating device, found to be the base of a coffee percolator, was retrieved from the stockroom where the fire originated, and it bore the inscription "CAUTION DO NOT OPERATE WHEN EMPTY," indicating a water-heating appliance, with broken drinking glasses, a Nescafe bottle, a metal dish rack, and utensils found beside it. Although the lessees asserted that they kept an airpot, not a coffee percolator, near the Administration Office on the third floor, they did not present the airpot to disprove the existence of the coffee percolator, even though the fire had not razed the entire third floor and even the stack of highly combustible paper there was not totally gutted. The appellate court held that the fire originated from the lessees' stockroom on the third floor, which was under their control, and that on that day, a Saturday, they conducted a seminar in the training room adjoining the stockroom; absent an explanation from them as to the cause of the fire, the doctrine of res ipsa loquitur applied. The lessees impugned both findings, claiming that the BFP field investigation report (Exh. "P-2") and the BFP certification (Exh. "P-3") were hearsay because they were presented during the testimony of Fireman Gerardo Sitchon of the Bureau of Fire Protection, Angeles City, who admitted having no participation in the investigation or personal knowledge of the incident, and they insisted that they owned no coffee percolator.

• Fortuitous Event: Petitioners argued that the Court of Appeals erred in not holding that the fire that partially burned respondent's building was a fortuitous event, maintaining that the fire was an event for which they could not be held responsible.
• Due Diligence of a Good Father of a Family: Petitioners maintained that the Court of Appeals erred in holding that they failed to observe the due diligence of a good father of a family.
• Proof of Actual Damages: Petitioners argued that the Court of Appeals erred in holding them liable for certain actual damages despite respondent's failure to prove the damage as alleged.
• Temperate Damages: Petitioners contended that the Court of Appeals erred in holding them liable for temperate damages.
• Hearsay and Competence of the Witness: Petitioners argued that the BFP field investigation report (Exh. "P-2") and the BFP certification (Exh. "P-3") are hearsay because they were presented during the testimony of Fireman Gerardo Sitchon, who admitted having no participation in the investigation of the fire incident or personal knowledge about it, making him incompetent to testify thereon; with these exhibits and his testimony thus flawed, petitioners asserted that virtually no evidence remained that the cause of the fire was an overheated coffee percolator, and they insisted that they owned no such percolator.

• Fortuitous Event: Whether the fire that partially burned respondent's building was a fortuitous event that exempted petitioners from liability for the loss of the leased premises.
• Due Diligence and Negligence: Whether petitioners observed the diligence of a good father of a family, or whether their negligence was the proximate cause of the fire.
• Hearsay and Competence of the Witness: Whether the BFP field investigation report (Exh. "P-2") and the BFP certification (Exh. "P-3"), presented through Fireman Gerardo Sitchon, are hearsay evidence and whether the witness was competent to testify on them.
• Actual Damages: Whether petitioners may be held liable for actual damages notwithstanding respondent's alleged failure to prove the damage as alleged.
• Temperate Damages: Whether the Court of Appeals erred in awarding temperate damages in the amount of P500,000.00.

• Fortuitous Event: No. The fire was not a fortuitous event that exempted petitioners from liability, because Article 1667 of the Civil Code presumes the lessee liable for the loss of the thing leased unless it proves the loss occurred without its fault, and the fire was traced to petitioners' own negligence.
• Due Diligence and Negligence: No. The finding that petitioners' negligence was the proximate cause of the fire is a purely factual matter, supported by the evidence and binding on this Court, the RTC and the CA having found that petitioners used a coffee percolator in the stockroom and allowed it to overheat.
• Hearsay and Competence of the Witness: No. Fireman Sitchon was competent to identify and testify on Exh. "P-2" and Exh. "P-3" because he personally prepared them, and the documents, based on the statements of his investigation witnesses, are entries in official records excepted from the hearsay rule.
• Actual Damages: No. The CA correctly deleted the P2.2 million actual damages for building repairs, respondent having failed to present proof of the exact amount of its pecuniary loss.
• Temperate Damages: Yes. Temperate damages of P500,000.00 were properly awarded in lieu of actual damages, some pecuniary loss having been suffered but its amount not capable of proof with certainty, and the amount being more than nominal but less than compensatory.

• Fortuitous Event: Article 1667 of the Civil Code creates the presumption that the lessee is liable for the deterioration or loss of the thing leased, and to overcome that legal presumption the lessee must prove that the deterioration or loss was due to a fortuitous event which took place without its fault or negligence. Article 1174 of the Civil Code defines a fortuitous event as that which could not be foreseen, or which, though foreseen, was inevitable; whether it be an act of God or an act of man, it must be shown that (a) the cause of the unforeseen and unexpected occurrence, or of the failure of the obligor to comply with its obligations, was independent of human will; (b) it was impossible to foresee the event or, if it could have been foreseen, to avoid it; (c) the occurrence rendered it impossible for the obligor to fulfill its obligations in a normal manner; and (d) the obligor was free from any participation in the aggravation of the injury or loss. If the negligence or fault of the obligor coincided with the occurrence of the fortuitous event and caused the loss or damage or the aggravation thereof, the fortuitous event cannot shield the obligor from liability for its negligence. Here, it was fire that caused the damage to the units occupied by petitioners, so the legal presumption was that they were responsible for the damage; their insistence that the fire was a fortuitous event occurring without their fault or negligence did not overcome that presumption, because the RTC and the CA both found that the proximate cause of the fire was their fault and negligence in using a coffee percolator in the office stockroom on the third floor and in allowing the electrical device to overheat.

• Due Diligence and Negligence: The finding that the negligence of petitioners was the proximate cause of the fire that destroyed portions of the leased units is a purely factual matter which the Court cannot pass upon, lest it overstep the restriction that review by certiorari under Rule 45 be limited to errors of law only; moreover, the factual findings of the CA affirming those of the RTC are conclusive and binding. The Court acknowledged the established exceptions to that rule — among them, when the inference made is manifestly mistaken, absurd or impossible; when there is grave abuse of discretion; when the findings are grounded entirely on speculations, surmises or conjectures; when the judgment of the CA is based on a misapprehension of facts; when the CA went beyond the issues and its findings are contrary to the admissions of both parties; when the findings of fact are conclusions without citation of specific evidence; when the CA manifestly overlooked certain relevant and undisputed facts which, if properly considered, would justify a different conclusion; and when the findings of the CA are premised on the absence of evidence and are contradicted by the evidence on record. None of these exceptions obtained, as the findings of the RTC and CA were fully supported by the evidence. Contrary to petitioners' claim, Fireman Sitchon was competent to identify and testify on Exh. "P-2" and Exh. "P-3" because, although he did not sign the documents, he personally prepared them; what he did not prepare were the documents which his investigation witnesses presented. He emphasized that he interviewed the investigation witnesses — Ronald Estanislao, the security guard on duty at the time of the fire, and Dr. Zenaida Arcilla, manager of CAPP — before he prepared the exhibits. Hence, while he may have had no personal knowledge of the fire incident, the exhibits he prepared based on the statements of his investigation witnesses, especially that of Estanislao whose official duty it was to report on the incident, are exceptions to the hearsay rule because they are entries in official records, and his testimony on those documents is competent evidence of their contents. Petitioners were further estopped from contesting the veracity of Exh. "P-3" because that certification was used by them in claiming insurance for their office equipment destroyed by the fire. Even without the testimony of Fireman Sitchon and the documents he prepared, the finding of negligence could not be overturned by petitioners' bare denial, since the CA correctly applied the doctrine of res ipsa loquitur, under which expert testimony may be dispensed with to sustain an allegation of negligence if the following requisites obtain: (a) the accident is of a kind which does not ordinarily occur unless someone is negligent; (b) the cause of the injury was under the exclusive control of the person in charge; and (c) the injury suffered must not have been due to any voluntary action or contribution on the part of the person injured. The fire that damaged the Belfranlt Building was not a spontaneous natural occurrence but the outcome of a human act or omission; it originated in the store room which petitioners had possession and control of, and respondent had no hand in the incident. The convergence of these facts and circumstances spoke for itself: petitioners alone had knowledge of the cause of the fire or the best opportunity to ascertain it, while respondent had no means to find out for itself, so it was sufficient for respondent to allege that the cause of the fire was petitioners' negligence and to rely on the occurrence of the fire as proof of such negligence. It was up to petitioners to dispel the inference of negligence, but their bare denial left the matter unanswered.

• Hearsay and Competence of the Witness: The competence of Fireman Sitchon and the admissibility of the two BFP documents rest on the same grounds set out above: he personally prepared Exh. "P-2" and Exh. "P-3" after interviewing his investigation witnesses, so his lack of personal knowledge of the fire itself did not disqualify him from identifying and testifying on documents he himself prepared; and because the documents were prepared on the basis of the statements of those witnesses, particularly the security guard whose official duty it was to report on the incident, they fall within the exception to the hearsay rule for entries in official records. His testimony on the documents is therefore competent evidence of their contents, and petitioners' estoppel arising from their use of Exh. "P-3" in their insurance claim independently barred them from contesting its veracity.

• Actual Damages: The CA correctly affirmed the RTC in holding petitioners liable to respondent for actual damages consisting of unpaid rentals for the units they leased. However, the CA deleted the award of P2.2 million in actual damages which the RTC had granted to cover the costs of building repairs. Because respondent was unable to present proof of the exact amount of its pecuniary loss from the impairment of the structural integrity of its building, it could not be entitled to actual damages in that amount.

• Temperate Damages: Temperate or moderate damages may be availed when some pecuniary loss has been suffered but its amount cannot, from the nature of the case, be proved with certainty. The amount is usually left to the discretion of the courts but should be reasonable, bearing in mind that temperate damages should be more than nominal but less than compensatory. Respondent undoubtedly suffered some form of pecuniary loss for the impairment of the structural integrity of its building as a result of the fire; because of its inability to present proof of the exact amount of that loss, it may only be entitled to temperate damages in the amount of P500,000.00, which the Court found reasonable and just.

• Fortuitous event under Article 1174 of the Civil Code — A fortuitous event is that which could not be foreseen, or which, though foreseen, was inevitable. Whether it be an act of God or an act of man, the following requisites must concur: (a) the cause of the unforeseen and unexpected occurrence, or of the failure of the obligor to comply with its obligations, was independent of human will; (b) it was impossible to foresee the event or, if it could have been foreseen, to avoid it; (c) the occurrence rendered it impossible for the obligor to fulfill its obligations in a normal manner; and (d) the obligor was free from any participation in the aggravation of the injury or loss. In this case, the fire could not be characterized as a fortuitous event because petitioners' own negligence in using and allowing a coffee percolator to overheat in the stockroom coincided with the occurrence and caused the loss.
• Coincidence of negligence with a fortuitous event — If the negligence or fault of the obligor coincided with the occurrence of the fortuitous event, and caused the loss or damage or the aggravation thereof, the fortuitous event cannot shield the obligor from liability for its negligence. The Court applied this rule to reject petitioners' defense, since their negligence was the proximate cause of the fire.
• Presumption of lessee's liability under Article 1667 of the Civil Code — The lessee is responsible for the deterioration or loss of the thing leased unless it proves that the loss took place without its fault; this burden of proof does not apply when the destruction is due to earthquake, flood, storm, or other natural calamity. The presumption operated against petitioners, who failed to prove that the fire occurred without their fault.
• Res ipsa loquitur — The doctrine permits expert testimony to be dispensed with in sustaining an allegation of negligence where the following requisites obtain: (a) the accident is of a kind which does not ordinarily occur unless someone is negligent; (b) the cause of the injury was under the exclusive control of the person in charge; and (c) the injury suffered must not have been due to any voluntary action or contribution on the part of the person injured. The Court applied the doctrine because the fire originated in a stockroom under petitioners' possession and control, respondent had no hand in the incident, and petitioners alone had knowledge of the cause of the fire or the best opportunity to ascertain it; their bare denial failed to dispel the inference of negligence.
• Entries in official records as an exception to the hearsay rule — Documents prepared by a public officer based on the statements of his investigation witnesses, particularly a witness whose official duty it was to report on the incident, are excepted from the hearsay rule. This ground sustained the admissibility of Exh. "P-2" and Exh. "P-3" and the competence of Fireman Sitchon's testimony on them, notwithstanding his lack of personal knowledge of the fire.
• Estoppel by inconsistent conduct — A party that has used a document to its own advantage, as petitioners did when they used the BFP certification in claiming insurance for their destroyed office equipment, is estopped from later contesting the veracity of that same document.
• Conclusiveness of the factual findings of the Court of Appeals affirming the trial court — Such findings are conclusive and binding on the Supreme Court and are not reviewed in a petition for review on certiorari under Rule 45, save under the recognized exceptional circumstances enumerated by the Court, none of which obtained in this case.
• Temperate or moderate damages — Temperate damages may be availed when some pecuniary loss has been suffered but its amount cannot, from the nature of the case, be proved with certainty. The amount is left to the discretion of the courts but must be reasonable, being more than nominal yet less than compensatory. The Court sustained the P500,000.00 award because respondent proved some pecuniary loss from the impairment of the structural integrity of its building but could not prove the exact amount.

• "The lessee is responsible for the deterioration or loss of the thing leased, unless he proves that it took place without his fault. This burden of proof on the lessee does not apply when the destruction is due to earthquake, flood, storm or other natural calamity." — The Court's quotation of Article 1667 of the Civil Code supplies the controlling presumption of lessee liability and identifies the narrow instance in which the burden of proof shifts away from the lessee; it is the doctrinal anchor of the ruling rejecting the fortuitous-event defense.
• "Whether an act of god or an act of man, to constitute a fortuitous event, it must be shown that: a) the cause of the unforeseen and unexpected occurrence or of the failure of the obligor to comply with its obligations was independent of human will; b) it was impossible to foresee the event or, if it could have been foreseen, to avoid it; c) the occurrence rendered it impossible for the obligor to fulfill its obligations in a normal manner; and d) said obligor was free from any participation in the aggravation of the injury or loss." — This is the canonical four-part formulation of the requisites of a fortuitous event applied by the Court in testing, and ultimately rejecting, petitioners' defense.
• "The CA correctly applied the doctrine of res ipsa loquitur under which expert testimony may be dispensed with to sustain an allegation of negligence if the following requisites obtain: a) the accident is of a kind which does not ordinarily occur unless someone is negligent; b) the cause of the injury was under the exclusive control of the person in charge and c) the injury suffered must not have been due to any voluntary action or contribution on the part of the person injured." — The passage states the requisites of res ipsa loquitur as applied to a fire originating in premises under the lessee's exclusive control, and it explains why the lessor's case survived even without the BFP documents.
• "Temperate or moderate damages may be availed when some pecuniary loss has been suffered but its amount cannot, from the nature of the case, be proved with certainty." — This states the rule governing the award of temperate damages in lieu of the deleted actual damages, and it is the basis for sustaining the P500,000.00 award.

• Mindex vs. Morillo, 428 Phil. 934, 943 (2002) — Cited in support of the rule under Article 1667 of the Civil Code that the lessee bears the burden of proving that the deterioration or loss of the thing leased took place without its fault.
• Real vs. Belo, G.R. No. 146224, January 26, 2007, 513 SCRA 111, 124 — Cited for the requisites of a fortuitous event, which the Court applied in rejecting petitioners' defense.
• Sicam vs. Jorge, G.R. No. 159617, August 8, 2007, and MIAA vs. Ala Industries Corporation, 467 Phil. 229, 247 (2004) — Cited for the rule that where the negligence or fault of the obligor coincided with the fortuitous event and caused or aggravated the loss, the fortuitous event cannot shield the obligor from liability.
• DM Consunji vs. Court of Appeals, G.R. No. 137873, April 20, 2001, 357 SCRA 249, 259 — Cited for the requisites of the doctrine of res ipsa loquitur, which the Court found to have converged in this case.
• Perla Compania de Seguros vs. Sarangaya III, G.R. No. 147746, October 25, 2005, 474 SCRA 191, 199 — Cited for the application of res ipsa loquitur where the party in control of the instrumentality of the loss has the best opportunity to ascertain its cause and the injured party has no means to do so.
• DBP Pool of Accredited Insurance Companies vs. Radio Mindanao Network, Inc., G.R. No. 147039, January 27, 2006, 480 SCRA 314, 326 — Cited for the rule that entries in official records are excepted from the hearsay rule, which sustained the admissibility of the BFP documents.
• Country Bankers Insurance Corporation vs. Liangga Bay and Community Multi-Purpose Cooperative, Inc., 425 Phil. 511, 521 (2002) — Cited in connection with the competence of a witness to testify on documents he personally prepared, notwithstanding the absence of personal knowledge of the underlying incident.
• Estacion vs. Bernardo, G.R. No. 144724, February 27, 2006, 483 SCRA 222, 231-232 — Cited for the enumeration of the exceptions to the rule that the factual findings of the Court of Appeals are conclusive and binding on the Supreme Court.
• Republic vs. Tuvera, G.R. No. 148246, February 16, 2007, 516 SCRA 113, 152, and Hernandez vs. Dolor, G.R. No. 160286, July 30, 2004, 435 SCRA 668, 677-678 — Cited for the rule on temperate damages, including the standard that the amount should be more than nominal but less than compensatory.
• Victory Liner vs. Gammad, G.R. No. 159636, November 25, 2004, 444 SCRA 355, 370 — Cited in support of the award of temperate damages in lieu of actual damages that could not be proved with certainty.

• Article 1667, Civil Code — Provides that the lessee is responsible for the deterioration or loss of the thing leased unless it proves that the loss took place without its fault, and that this burden of proof does not apply when the destruction is due to earthquake, flood, storm, or other natural calamity. The provision created the legal presumption of petitioners' liability for the fire damage to the leased units, which their claim of fortuitous event failed to rebut.
• Article 1174, Civil Code — Defines a fortuitous event as that which could not be foreseen, or which, though foreseen, was inevitable. The provision supplied the definition and requisites against which petitioners' defense was measured and found wanting.
• Section 4, Rule 131, Revised Rules of Court — Establishes the legal presumption that official duty has been regularly performed. The RTC invoked this presumption in crediting the October 21, 1994 certification issued by the Bureau of Fire Protection, and the Court noted that petitioners failed to present countervailing evidence to rebut it.
• Rule 45, Rules of Court — Governs review by certiorari of the Supreme Court, which is limited to errors of law only. The provision grounded the Court's refusal to review the factual finding that petitioners' negligence was the proximate cause of the fire.

Ynares-Santiago (Chairperson), Chico-Nazario, Nachura, and Reyes, JJ., concurred in the decision.