Case Digest: F.F. Cruz and Co., Inc. vs. CA, L-52732, August 29, 1988

Torts and Damages

Cortes, J.:

Facts:

• F.F. Cruz and Co.'s furniture manufacturing shop in Caloocan City was adjacent to the residence of private respondents.

• In August 1971, Gregorio Mable, a private respondent, requested that a firewall be constructed between the shop and their residence. 

• The request was ignored despite being repeated multiple times.

• On September 6, 1974, a fire broke out in the petitioner's shop.

• The petitioner's employees attempted to extinguish the fire but failed.

• The fire spread to the private respondents' house, resulting in the destruction of both the shop and the house.

• The cause of the fire was undetermined, and the National Bureau of Investigation found no traces of inflammable substances.

• The private respondents collected P35,000.00 from their insurance for the loss of their house and its contents.

• In 1975, the private respondents filed an action for damages against the petitioner.

CFI: Ruled in favor of the private respondents, ordering payment of damages.

CA: Affirmed the trial court's decision but reduced the damages.

Issue: Whether the common law doctrine of res ipsa loquitur is applicable. YES

Held:

The doctrine of res ipsa loquitur, whose application to the instant case petitioner objects to, may be stated as follows:

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. [Africa v. Caltex (Phil.), Inc., G.R. No. L-12986, March 31, 1966, 16 SCRA 448.]

Thus, in Africa, supra, where fire broke out in a Caltex service station while gasoline from a tank truck was being unloaded into an underground storage tank through a hose and the fire spread to and burned neighboring houses, this Court, applying the doctrine of res ipsa loquitur, adjudged Caltex liable for the loss.

The facts of the case likewise call for the application of the doctrine, considering 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 thereon.

It must also be noted that negligence or want of care on the part of petitioner or its employees was not merely presumed. 

The Court of Appeals found:

1. that petitioner failed to construct a firewall between its shop and the residence of private respondents as required by a city ordinance; 

2. that the fire could have been caused by a heated motor or a lit cigarette; 

3. that gasoline and alcohol were used and stored in the shop; and 

4. that workers sometimes smoked inside the shop [CA Decision, p. 5; Rollo, p. 33.]

Even without applying the doctrine of res ipsa loquitur, petitioner's failure to construct a firewall in accordance with city ordinances would suffice to support a finding of negligence.

Even then the fire possibly would not have spread to the neighboring houses were it not for another negligent omission on the part of defendants, namely, their failure to provide a concrete wall high enough to prevent the flames from leaping over it. As it was the concrete wall was only 2-1/2 meters high, and beyond that height it consisted merely of galvanized iron sheets, which would predictably crumble and melt when subjected to intense heat. Defendant's negligence, therefore, was not only with respect to the cause of the fire but also with respect to the spread thereof to the neighboring houses. [Africa v. Caltex (Phil.), Inc., supra; Emphasis supplied.]

In the instant case, with more reason should petitioner be found guilty of negligence since it had failed to construct a firewall between its property and private respondents' residence which sufficiently complies with the pertinent city ordinances. The failure to comply with an ordinance providing for safety regulations had been ruled by the Court as an act of negligence [Teague v. Fernandez, G.R. No. L-29745, June 4, 1973, 51 SCRA 181.]

The Court of Appeals, therefore, had more than adequate basis to find petitioner liable for the loss sustained by private respondents.

2. Since the amount of the loss sustained by private respondents constitutes a finding of fact, such finding by the Court of Appeals should not be disturbed by this Court,, more so when there is no showing of arbitrariness.

In the instant case, both the CFI and the Court of Appeals were in agreement as to the value of private respondents' furniture and fixtures and personal effects lost in the fire (i.e. P50,000.00). With regard to the house, the Court of Appeals reduced the award to P70,000.00 from P80,000.00. Such cannot be categorized as arbitrary considering that the evidence shows that the house was built in 1951 for P40,000.00 and, according to private respondents, its reconstruction would cost P246,000.00. Considering the appreciation in value of real estate and the diminution of the real value of the peso, the valuation of the house at P70,000.00 at the time it was razed cannot be said to be excessive.

3. While this Court finds that petitioner is liable for damages to private respondents as found by the Court of Appeals, the fact that private respondents have been indemnified by their insurer in the amount of P35,000.00 for the damage caused to their house and its contents has not escaped the attention of the Court. Hence, the Court holds that in accordance with Article 2207 of the Civil Code the amount of P35,000.00 should be deducted from the amount awarded as damages. Said article provides:

Art. 2207. If the plaintiffs 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.  

The law is clear and needs no interpretation. Having been indemnified by their insurer, private respondents are only entitled to recover the deficiency from petitioner.

On the other hand, the insurer, if it is so minded, may seek reimbursement of the amount it indemnified private respondents from petitioner. This is the essence of its right to be subrogated to the rights of the insured, as expressly provided in Article 2207. Upon payment of the loss incurred by the insured, the insurer is entitled to be subrogated pro tanto to any right of action which the insured may have against the third person whose negligence or wrongful act caused the loss.

Under Article 2207, the real party in interest with regard to the indemnity received by the insured is the insurer. Whether or not the insurer should exercise the rights of the insured to which it had been subrogated lies solely within the former's sound discretion. Since the insurer is not a party to the case, its identity is not of record and no claim is made on its behalf, the private respondent's insurer has to claim his right to reimbursement of the P35,000.00 paid to the insured.

WHEREFORE, in view of the foregoing, the decision of the Court of Appeals is hereby AFFIRMED with the following modifications as to the damages awarded for the loss of private respondents' house, considering their receipt of P35,000.00 from their insurer: (1) the damages awarded for the loss of the house is reduced to P35,000.00; and (2) the right of the insurer to subrogation and thus seek reimbursement from petitioner for the P35,000.00 it had paid private respondents is recognized.