CASE DIGEST: Antonio Banzon VS Court of Appeals

Antonio Banzon, et. al.

VS

Court of Appeals, et. al.

G.R. No. 47258 [July 13, 1989]

This is a petition for review of the decision of the Court of Appeals.

Facts of the Case:

Sometime in the year 1952, Maximo R. Sta. Maria obtained several crop loans from PNB. For these loans, Associated acted as surety for Sta. Maria by filing surety bonds in favor of PNB to guarantee and answer for the prompt and faithful repayment of said loans. In turn, plaintiff Antonio R. Banzon and one Emilio R. Naval acted as indemnitors of Associated in the indemnity agreements, obligating themselves to indemnify and hold it harmless from any liabilities. However, Sta. Maria failed to pay his crop loan obligations in favor of PNB when the same fell due, and accordingly, the bank demanded payment from Associated as surety. Instead of paying the bank, Associated filed a complaint against Maximo R. Sta. Maria and indemnitors Banzon and Naval. A writ of execution was issued and the properties of Banzon were levied and later on sold in execution. In 1965, the spouses Pedro Cardenas and Leonila Baluyot were able to execute upon and buy one of the properties of Banzon to satisfy the judgment debt of Associated in favor of the Cardenas spouses.  The Banzons however refused to vacate the premises and to remove the improvements thereon. Petitioner spouses Antonio Banzon and Rosa Balmaceda filed a complaint against Maximo and Valeriana Sta. Maria for actual and moral damages in the total amount of P251,750.00 allegedly arising from the deprivation of their property due to the Sta. Marias’ failure and refusal to pay their plain, valid and just obligations with the PNB. The Court of First Instance ordered the Sta Marias to pay damages. Upon appeal, the Court of Appeals reversed the decision.

Issue:

            Whether or not respondent Maximo and Valeriana Sta. Maria were liable to the petitioners for the prejudice and damages the latter suffered.

Ruling of the Court:

            NO. The Court held that it was the trial court that erred when it arrived at the conclusion that the Sta Marias were responsible for the prejudice caused petitioners. The Court ruled that it is a settled principle that moral damages may be recovered if they are the proximate result of the defendant’s wrongful act or omission. While ideally such debacle could have been avoided by Sta Marias’ payment of their obligations to PNB, such fact of non-payment alone, without Associated’s premature action and subsequent fraudulent acts, could not possibly have resulted in the prejudice and damage complained of. While private respondents’ non-payment was admittedly the remote cause or the factor which set in motion the ensuing events, Associated’s premature action and execution were the immediate and direct causes of the damage and prejudice suffered by petitioners. Active supervening events consisting of said premature and fraudulent acts of the Associated Insurance and Surety, Inc. had broken the causal connection between the fact of non-payment and the damage suffered by petitioners, so that their claim should be directed not against the Sta Marias but against Associated.  The Court was convinced as well that the failure of the Sta Marias to pay their obligations with the PNB was not attended by bad faith or willful intent to cause injury to petitioners.  Under the Civil Code, the damages for which a defendant may be held liable are those which are the natural and probable consequences of the act or omission complained of. The prejudice caused petitioners cannot be said to be the natural and probable consequence of the Sta. Marias’ mere failure to pay their crop loans as such prejudice arose due to active supervening forces or events.

            The petition was denied.