FACTS:

On April 25, 1984, Rubin Uy entered into a contract of lease with Cesar J. Jovero for a property in Estancia, Iloilo, where he planned to operate a gasoline station. Petron Corporation entered into a retail dealer contract with Rubin Uy on April 30, 1984. Petron also entered into a hauling contract with Jose Villaruz to deliver the petroleum products to Uy's station. In October 1988, Uy executed a Special Power of Attorney in favor of Chiong Uy to manage the gasoline station. On January 3, 1991, a fire started while unloading petroleum products from a tank truck at the gasoline station, causing substantial damages to nearby properties owned by the respondents. The respondents filed separate actions for damages against Petron, Villaruz, Rubin Uy, and Dortina Uy, which were later consolidated. The Regional Trial Court held Petron and its co-defendants solidarily liable for damages. Petron, Rubin Uy, and Dortina Uy filed separate appeals. The Court of Appeals upheld the RTC's decision and dismissed the appeals.

The Court of Appeals upheld the finding of the Regional Trial Court that Petron was negligent for allowing the operation of the gasoline station without a valid dealership contract. The CA considered the gasoline station as run by Petron itself and the persons managing it as petitioner's mere agents. Even if a valid dealership contract existed, Petron was still held liable because there was no complete delivery of its products at the time of the incident. The CA also ruled that Petron was negligent in allowing Villaruz to use an unaccredited tank truck for the transport and delivery of the petroleum. The appellate court found Villaruz to be negligent and held him liable for the damages caused by his employee. Regarding Dortina Uy, the CA held that she failed to provide evidence of exercising due diligence in the operation of the station. Petron, dissatisfied with the CA's ruling, filed a Petition for Review and presented several issues for resolution.

ISSUES:

1. Whether or not Petron may be considered at fault for continuing to do business with Rubin Uy without renewing or extending their dealership agreement.

2. Whether or not a causal connection exists between Petron's failure to renew or extend its dealership contract with Rubin Uy and the fire that inflicted damages on the buildings surrounding the latter's gas station.

3. Whether or not Petron is liable for the fire that occurred during the unloading of fuel it sold to Rubin Uy's gas station.

4. Whether or not a supplier of fuel can be held liable for the neglect of others in distributing and storing such fuel.

5. Whether petitioner is liable for the damages caused by the fire.

6. Whether Villaruz, as the agent of petitioner, is liable for the damages caused by the fire.

7. Whether petitioner is negligent in allowing a tank truck different from the one specified in the hauling contract.

8. Whether Villaruz is liable to the petitioner based on the hauling contract.

9. Whether Villaruz remains solidarily liable with the other co-defendants.

10. Whether the awarded actual damages should be subject to legal interest.

11. If so, what is the proper rate of legal interest to be imposed.

RULING:

1. Petron can be considered at fault for continuing to do business with Rubin Uy without renewing or extending their dealership agreement.

2. No causal connection exists between Petron's failure to renew or extend its dealership contract with Rubin Uy and the fire that caused the damages.

3. Petron is liable for the fire that occurred during the unloading of fuel it sold to Rubin Uy's gas station.

4. A supplier of fuel can be held liable for the neglect of others in distributing and storing such fuel.

5. Yes, petitioner is liable for the damages caused by the fire. Petitioner failed to show the actual cause of the fire and also failed to rebut the presumption that it was negligent in the maintenance of its properties and in the conduct of its business.

6. Yes, Villaruz, as the agent of petitioner, is liable for the damages caused by the fire. The acts of Villaruz and his employees are considered acts of petitioner under the dealership contract. Both the trial court and the Court of Appeals held that Villaruz failed to rebut the presumption that the employer was negligent in the supervision of an employee who caused damages to another.

7. Yes, petitioner is negligent in allowing a tank truck different from the one specified in the hauling contract. The hauling contract has specific requirements for the tank truck, such as being duly registered, properly sealed and calibrated, equipped with safety equipment, and in good working condition. Petitioner failed to prove that the tank truck met these requirements, and since it had the obligation to ensure the truck's safety, petitioner is held liable for the operation of that truck.

8. Villaruz is liable to the petitioner based on the hauling contract. The petitioner may enforce the terms of the hauling contract against Villaruz under Rule 6, Sec. 8 of the Rules of Court. However, since Villaruz was not impleaded in the present case and the petitioner did not challenge the dismissal of the cross-claim against him, the petitioner cannot proceed against Villaruz based on the cross-claim.

9. Villaruz remains solidarily liable with the petitioner and the other co-defendants. As the employer of Igdanis, Villaruz was found to be solidarily liable with the other defendants. Since there was no appeal filed against this ruling, Villaruz remains solidarily liable. The petitioner can claim contribution from him in accordance with Article 1217 of the Civil Code.

10. The court affirmed the decision of the Court of Appeals holding the petitioner solidarily liable to pay damages to the respondents. However, the court modified the decision regarding the rate of legal interest to be imposed on the awarded actual damages. The court ruled that the actual damages shall be subject to the rate of legal interest of 6% per annum from the time the cases were filed with the lower court until the judgment becomes final and executory. Thereafter, the rate of legal interest shall be 12% until the satisfaction of the judgment.

PRINCIPLES:

• A dealership agreement imposes obligations on the dealer to exclusively carry the products of the supplier.

• The public assumes that a gasoline station carrying the name and products of a supplier is owned or operated by the supplier, making the supplier liable for acts done within the premises.

• The expiration or nonexistence of a dealership contract does not automatically transform the relationship of the dealer and supplier into one of agency.

• The terms of a contract must be reviewed to determine liability for damages caused by a fire.

• A supplier is responsible for the handling, storage, and delivery of petroleum products.

• The dealer and petitioner share responsibility for the maintenance of equipment and the safe storage of products.

• An agent's acts are considered acts of the principal.

• A party must prove its allegations, especially with respect to claims of third persons.

• The party with the obligation to ensure safety is liable for any damages caused.

• Payment made by one of the solidary debtors extinguishes the obligation. The creditor may choose which offer to accept if two or more solidary debtors offer to pay. The debtor who made the payment may claim from his co-debtors only their share which corresponds to each.

• The share of solidary debtors in the obligation is presumed to be divided equally among them, subject to the Rules of Court governing the multiplicity of suits.

• Legal interest can be imposed at the rate of 12% per annum when the obligation consists of the payment of a sum of money. When an obligation not constituting a loan or forbearance of money is breached, the court may impose an interest rate of 6% per annum at its discretion. No interest shall be adjudged on unliquidated claims or damages until the demand can be established with reasonable certainty.

• Legal interest on the awarded actual damages shall be imposed from the time the cases were filed until the judgment becomes final and executory.

• After the judgment becomes final and executory, the rate of legal interest shall be 12% until the satisfaction of the judgment.