F.F. CRUZ AND CO., INC., PETITIONER, VS. THE COURT OF APPEALS, GREGORIO MABLE AS SUBSTITUTED BY HIS WIFE LUZ ALMONTE MABLE AND CHILDREN DOMING, LEONIDAS, LIGAYA, ELENA, GREGORIO…

F.F. Cruz and Company versus the Court of Appeals

The Case

This is a petition for review brought by F.F. Cruz and Company, Incorporated, the operator of a furniture manufacturing shop in Caloocan City, against the spouses Gregorio and Luz Almonte Mable and their children, whose house stood next to the shop. A fire broke out in the shop in the early morning of September 6, 1974, and spread to the Mable residence, razing both structures. The Mables sued for damages. The case matters because it is the leading Philippine application of the common law doctrine of res ipsa loquitur — Latin for "the thing speaks for itself" — to a fire that escapes from a manufacturing establishment, and because it pairs that doctrine with the rule on insurance subrogation under Article 2207 of the Civil Code.

Procedural History

The Mables filed their action for damages on January 23, 1975 in the Court of First Instance. The trial court rendered judgment for the Mables, awarding 80,000 pesos for the loss of the house, 50,000 pesos for the loss of furniture, fixtures, and personal effects, 5,000 pesos as moral damages, 2,000 pesos as exemplary damages, and 5,000 pesos as attorney's fees, with costs, and dismissed the counterclaim.

On appeal, the Court of Appeals affirmed the finding of liability in a decision promulgated on November 19, 1979, but reduced the award to 70,000 pesos for the house and 50,000 pesos for the furniture and other fixtures, with legal interest from the filing of the complaint. A motion for reconsideration was denied on February 18, 1980.

The petitioner then filed a petition for review on February 22, 1980. The Supreme Court initially denied the petition for lack of merit on June 11, 1980, but on motion for reconsideration it gave due course to the petition on September 12, 1980. After the parties filed their memoranda, the case was submitted for decision on January 21, 1981.

Facts

The furniture manufacturing shop of the petitioner stood adjacent to the residence of the private respondents. Sometime in August 1971, Gregorio Mable approached Eric Cruz, the petitioner's plant manager, and asked that a firewall be constructed between the shop and the Mable residence. The request was repeated several times, but it fell on deaf ears.

In the early morning of September 6, 1974, fire broke out in the petitioner's shop. Employees who slept on the premises tried to put it out, but their efforts proved futile, and the flames spread to the Mable house. Both the shop and the house were razed to the ground. The cause of the conflagration was never discovered, and the National Bureau of Investigation found the specimens taken from the burned structures negative for inflammable substances.

The Mables later collected 35,000 pesos from the insurance on their house and its contents. The Court of Appeals found that the petitioner had failed to construct a firewall as required by a city ordinance; that the fire could have been caused by a heated motor or a lit cigarette; that gasoline and alcohol were used and stored in the shop; and that workers sometimes smoked inside the shop.

Issues

• Whether or not the doctrine of res ipsa loquitur applies to the facts of this case.
• Whether or not the damages awarded are excessive or unproved.
• Whether or not the 35,000 pesos received by the private respondents from their insurer should be deducted from the award of damages.

Applicable Provisions

Article 2207 of the Civil Code provides:

Article 2207. If the plaintiff's property has been insured, and he has received indemnity from the insurance company for the injury or loss arising out of the wrong or breach of contract complained of, the insurance company is subrogated to the rights of the insured against the wrongdoer or the person who violated the contract. If the amount paid by the insurance company does not fully cover the injury or loss, the aggrieved party shall be entitled to recover the deficiency from the person causing the loss or injury.

This provision bears on the case because it limits the private respondents to the deficiency of their loss and recognizes the insurer's right of subrogation against the wrongdoer.

Ruling

On the first issue, the Court held that the doctrine of res ipsa loquitur applies. As the Court stated it:

Where the thing which caused the injury complained of is shown to be under the management of the defendant or his servants and the accident is such as in the ordinary course of things does not happen if those who have its management or control use proper care, it affords reasonable evidence, in the absence of explanation by the defendant, that the accident arose from want of care.

The Court reasoned that in the normal course of operations of a furniture manufacturing shop, combustible material such as wood chips, sawdust, paint, varnish, and fuel and lubricants for machinery may be found on the premises. It added that negligence was not merely presumed, because the Court of Appeals found specific omissions, and that even without the doctrine, the failure to construct a firewall in accordance with city ordinances would suffice to support a finding of negligence. The failure to comply with an ordinance providing for safety regulations is itself an act of negligence.

On the second issue, the Court held that the amounts were not excessive. The valuation of the losses is a finding of fact, and the Court of Appeals was not shown to have acted arbitrarily, considering that the house was built in 1951 for 40,000 pesos, that reconstruction would cost 246,000 pesos, and that real estate had appreciated while the real value of the peso had diminished.

On the third issue, the Court held that the 35,000 pesos received from the insurer must be deducted. The Court said the law is clear and needs no interpretation: having been indemnified by their insurer, the private respondents are only entitled to recover the deficiency from the petitioner. The insurer, if it is so minded, may seek reimbursement of what it paid, for upon payment the insurer is subrogated to the rights of the insured against the third person whose negligence caused the loss. Since the insurer is not a party to the case, its identity is not of record and no claim is made on its behalf.

Doctrine

First, under the doctrine of res ipsa loquitur, where the thing that caused the injury is under the management of the defendant or his servants, and the accident is such as in the ordinary course of things does not happen if proper care is used, the accident itself affords reasonable evidence, absent explanation by the defendant, that it arose from want of care. Second, the failure to comply with a city ordinance requiring safety measures, such as a firewall, is itself negligence. Third, under Article 2207 of the Civil Code, an insured who has received indemnity may recover only the deficiency from the wrongdoer, because the insurer is subrogated to the insured's rights against that wrongdoer.

Disposition

The Court affirmed the decision of the Court of Appeals with modifications: the damages for the loss of the house were reduced to 35,000 pesos, and the insurer's right of subrogation and reimbursement from the petitioner for the 35,000 pesos it had paid was recognized.

Remember This

Memorize the rule that a fire escaping from a shop stored with combustible materials speaks for itself, and that the insured recovers only the deficiency because the insurer is subrogated under Article 2207. Examiners use this case to test res ipsa loquitur in fire cases and the deduction of insurance proceeds from an award of damages.