Metro Concast Steel Corporation vs.

Allied Bank
(Art. 1174 Fortuitous Event)

Facts:
Metro Concast obtained several loans from allied bank secured by promissory notes and trust receipts. They however,
failed to settle their obligation despite receiving demand letters from Allied Bank. This prompted Allied Bank to file a case to
compel Metro Concast to pay. The petitioner then alleged that the economic reverses suffered by the Philippine economy as
well as the devaluation of the peso against the US dollar contributed greatly to the downfall of the steel industry, directly
affecting their business and eventually leading to its cessation. Hence, in order to settle their debts with Allied Bank,
petitioners offered the sale of Metro Concasts 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. Peakstar expressed interest in buying
the scrap metal. During the negotiations with Peakstar, petitioners claimed that Atty. Saw, a member of Allied Banks legal
department, acted as the latters agent. Eventually, through Atty. Saw, a Memorandum of Agreement was drawn between
Metro Concast and Peakstar under which Peakstar obligated itself to purchase the scrap metal.
Unfortunately, Peakstar reneged on all its obligations under the MoA.
In the present case, petitioners essentially argue that their loan obligations to Allied Bank had already been
extinguished due to Peakstars failure to perform its own obligations to Metro Concast pursuant to the MoA. Petitioners
classify Peakstars 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.

Issue: WON there was force majeure

Ruling: NO
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. Now, anent petitioners reliance on force majeure, suffice it
to state that Peakstars breach of its obligations to Metro Concast arising from the MoA cannot be classified as a
fortuitous event under jurisprudential formulation.

While it may be argued that Peakstars breach of the MoA was unforseen 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
formers force majeure theory altogether.

Sunlife of Canada vs Tan Kit

(Art. 1175 Interests to be imposed on obligations)

Facts:
Respondent Tan Kit is the widow and designated beneficiary of Norberto, whose application for a life insurance
policy was granted by Sunlife. Within the two-year contestability period, Norberto died of disseminated gastric carcinoma.
Consequently, respondent Tan Kit filed a claim under the subject policy.

In a Letter, petitioner denied respondent Tan Kits claim on account of Norbertos failure to fully and faithfully
disclose in his insurance application certain material and relevant information about his health and smoking history.
According to petitioner, its underwriters would not have approved Norbertos application for life insurance had they been
given the correct information. Believing that the policy is null and void, petitioner opined that its liability is limited to the
refund of all the premiums paid.
In a letter, respondent Tan Kit refused to accept the check and insisted on the payment of the insurance proceeds.
Petitioner filed a Complaint for Rescission of Insurance Contract.
RTC ruled in favor of Tan Kit. CA however reversed such decision and found that there was concealment on the part
of Norberto. Therefore, the insurance policy should be rescinded and the amount of premium paid by Norberto should be
refunded with corresponding interest. Sunlife assailed the imposition of interest on the premium to be refunded to
respondents.

Issue: WON petitioner is liable to pay interest on the premium to be refunded to respondents

Ruling: NO

As a form of damages, compensatory interest is due only if the obligor is proven to have failed to comply with his
obligation.

In this case, it is undisputed that simultaneous to its giving of notice to respondents that it was rescinding the policy
due to concealment, petitioner tendered the refund of premium by attaching to the said notice a check representing the
amount of refund. However, respondents refused to accept the same since they were seeking for the release of the proceeds of
the policy. Because of this discord, petitioner filed for judicial rescission of the contract. Petitioner, after receiving an adverse
judgment from the RTC, appealed to the CA. And as may be recalled, the appellate court found Norberto guilty of
concealment and thus upheld the rescission of the insurance contract and consequently decreed the obligation of petitioner to
return to respondents the premium paid by Norberto. Moreover, we find that petitioner did not incur delay or unjustifiably
deny the claim.

Based on the foregoing, we find that petitioner properly complied with its obligation under the law and contract.
Hence, it should not be made liable to pay compensatory interest.