SECOND DIVISION [G.R. No. 127473. December 8, 2003] PHILIPPINE AIRLINES, INC., petitioner, vs.

COURT OF APPEALS, JUDY AMOR, JANE GAMIL, minors GIAN CARLO AMOR represented by ATTY. OWEN AMOR, and CARLO BENITEZ represented by JOSEPHINE BENITEZ, respondents. DECISION AUSTRIA-MARTINEZ, J.: Before us is a petition for review on certiorari under Rule 45 of the Rules of Court seeking the reversal of the decision[1] dated August 12, 1996, in CA-G.R. CV No. 38327[2] and the Resolution dated November 15, 1996 denying the motion for reconsideration of Philippine Airlines, Inc. (petitioner for brevity). Private respondents Judy Amor, Jane Gamil, minor Gian Carlo Amor, represented by his father, Atty. Owen Amor, and, minor Carlo Benitez, represented by his mother, Josephine Benitez, filed with the Regional Trial Court (Branch 53), Sorsogon, Sorsogon, a complaint[3] for damages against petitioner due to the latters failure to honor their confirmed tickets. In support of their claim, private respondents presented evidence establishing the following facts: Private respondent Judy Amor purchased three confirmed plane tickets for her and her infant son, Gian Carlo Amor as well as her sister Jane Gamil for the May 8, 1988, 7:10 a.m. flight, PR 178, bound for Manila from defendants branch office in Legaspi City. Judy Amor, a dentist and a member of the Board of Directors of the Sorsogon Dental Association, was scheduled to attend the National Convention of the Philippine Dental Association from May 8 to 14, 1988 at the Philippine International Convention Center. [4] On May 8, 1988, Judy with Gian, Jane and minor Carlo Benitez, nephew of Judy and Jane, arrived at the Legaspi Airport at 6:20 a.m. for PR 178. Carlo Benitez was supposed to use the confirmed ticket of a certain Dra. Emily Chua.[5] They were accompanied by Atty. Owen Amor and the latters cousin, Salvador Gonzales who fell in line at the check -in counter with four persons ahead of him and three persons behind him [6] while plaintiff Judy went to the office of the station manager to request that minor plaintiff Carlo Benitez be allowed to use the ticket of Dra. Chua.[7]While waiting for his turn, Gonzales was asked by Lloyd Fojas, the check-in clerk on duty, to approach the counter. Fojas wrote something on the tickets which Gonzales later read as late check-in 7:05. When Gonzales turn came, Fojas gave him the tickets of private respondents Judy, Jane and Gian and told him to proceed to the cashier to make arrangements.[8] Salvador then went to Atty. Amor and told him about the situation. Atty. Amor pleaded with Fojas, pointing out that it is only 6:45 a.m., but the latter did not even look at him or utter any word. Atty. Amor then tried to plead with Delfin Canonizado and George Carranza, employees of petitioner, but still to no avail. Private respondents were not able to board said flight. The plane left at7:30 a.m., twenty minutes behind the original schedule. [9] Private respondents went to the bus terminals hoping to catch a ride for Manila. Finding none, they went back to the airport and tried to catch an afternoon flight. [10] Unfortunately, the 2:30 p.m.flight, PR 278, was cancelled due to aircraft situation. [11] Private respondents were told to wait for the 5:30 p.m. flight, PR 180. They checked-in their bags and were told to hand in their tickets. Later, a PAL employee at the check-in counter called out the name of private respondent minor Carlo Benitez. Plaintiff Judy approached the counter and was told by the PAL personnel that they cannot be accommodated. Fojas who was also at the counter then removed the boarding passes inserted in private respondents tickets as well as the tags from their luggages.[12] Manuel Baltazar, a former Acting Manager of petitioner in Legaspi City in May 1988, testified that based on his investigation, the private respondents, although confirmed passengers, were not able to board PR 178 in the morning of May 8, 1988 because there were go-show or waitlisted and non-revenue passengers who were accommodated in said flight. He also noted that there was overbooking for PR 178.[13] On the other hand, petitioner contends that private respondents are not entitled to their claim for damages because they were late in checking-in for PR 178; and that they were only chance or waitlisted passengers for PR 180 and were not accommodated because all confirmed passengers of the flight had checked-in. In support thereof, petitioner presented Lloyd Fojas, who testified, as follows:

In the morning of May 8, 1988, he was on duty at the check-in counter of the Legaspi Airport. He was the one who attended to the tickets of private respondents which were tendered by Salvador Gonzales at 7:05 a.m. when the counter was already closed. The clock at the check-in counter showed that it was already 7:05 and so he told Gonzales that they are already late and wrote late check-in, 7:05 on private respondents tickets. The flight was scheduled to leave at 7:10 a.m. and checking-in is allowed only until 30 minutes before departure time. At the time private respondents went to the check-in counter, passengers were already leaving the pre-departure area and going towards the plane and there were no more passengers in the check-in area, not even waitlisted passengers. The baggages of the passengers have been loaded in the aircraft. Gonzales left and later came back with Atty. Amor who pleaded that plaintiffs be accommodated in the flight. He told Atty. Amor to go to his supervisor to re-book the tickets because there were no more boarding passes and it was already time for boarding the plane. Atty.Amor then left the counter. [14] On cross-examination, Fojas testified that he did not know how many waitlisted or nonrevenue passengers were accommodated or issued boarding passes in the 7:00 a. m. and in the afternoon flight of May 8, 1988.[15] After trial, the RTC rendered judgment upholding the evidence presented by private respondents, the dispositive portion of which reads: WHEREFORE, judgment is hereby rendered: (a) ordering the defendant to reimburse the plaintiffs the amount of P1,171.60 representing the purchase price of the four (4) plane tickets; (b) condemning the defendant to pay plaintiffs Judy Amor and Jane Gamil the amount of P250,000.00 each as moral damages, P200,000.00 as exemplary damages, plus P100,000.00 as actual damages; (c) for the defendant to pay plaintiffs the amount of P30,000.00 as attorneys fees, plus P500.00 for every appearance, or a total of P10,500.00 for 21 actual appearance (sic) in court, P2,000.00 as incidental litigation expenses, and to pay the cost of the suit. SO ORDERED.[16] Aggrieved, petitioner appealed to the Court of Appeals (CA for brevity) which affirmed the judgment of the trial court in toto and denied petitioners motion for reconsideration. Hence, the present petition of PAL, raising the following issues: I WHETHER PRIVATE RESPONDENTS WERE LATE CHECKED-IN PASSENGERS AND WHETHER THE FAILURE OF AN AIRLINE TO ACCOMMODATE A PASSENGER WHO CHECKED IN LATE IS ACTIONABLE SO AS TO ENTITLE THEM TO DAMAGES. II ASSUMING ARGUENDO THAT PETITIONER IS LIABLE, WHETHER THE AMOUNT OF DAMAGES AWARDED TO PRIVATE RESPONDENTS IS EXCESSIVE, UNCONSCIONABLE AND UNREASONABLE.[17] In support of the first issue, petitioner argues: (1) While ordinarily, the findings of the CA are accepted as conclusive by this Court, there are instances when the Court may make its own findings such as when the appellate court based its findings on speculation, surmises or conjectures. The appellate court erroneously gave too much reliance on the testimony of Baltazar who is a disgruntled former employee and relative of private respondent Amor. He was not present at the time of the incident. Baltazar merely interpreted the flight manifest and made a lot of speculations which is undeserving of attention and merit. (2) Its employees are adequately trained and service oriented that they would not dare violate company rules and regulations. They are aware of the drastic consequences that may befall them as what happened to Baltazar. (3) As to PR 180, private respondents were merely waitlisted in said flight hence it was known to them that their accommodation in said flight was dependent upon the failure of any confirmed passenger to check-in within the regulation check-in time. Unfortunately for them, all the confirmed passengers on PR 180 checked-in on time. In support of the second issue, petitioner contends: (1) The award of actual, moral and exemplary damages to private respondents have no factual nor legal basis at all. Its failure to accommodate private respondents on Flights

PR 178, 278 and 180 was not motivated by bad faith or malice but due to a situation which private respondents brought upon themselves. It had exerted utmost and sincere effort to lessen the agony and predicament of private respondents. They immediately made protective bookings for private respondents on the 2:30 p.m. flight, PR 278, which unfortunately was cancelled due to aircraft situation. Upon cancellation of PR 278, they made special arrangements to enable private respondents to have first priority in PR 180 in case of a no show confirmed passenger. (2) To award damages to a passenger who checked-in late would place a premium or reward for breach of contract that would encourage passengers to intentionally check-in late with the expectation of an award of damages. (3) Moral and exemplary damages as well as attorneys fees are not recoverable in damage suits predicated on breach of contract of carriage unless there is evidence of fraud, malice or bad faith on the part of the carrier. Even assuming arguendo that petitioner is liable for damages, the amounts awarded in favor of private respondents are excessive, unreasonable and unconscionable. The primary object of an award of damages in a civil action is compensation or indemnity or to repair the wrong that has been done. Damages awarded should be equal to, and commensurate with, the injury sustained. (4) It was erroneous to award damages in favor of Jane Gamil when she never appeared before the trial court to prove her claim for damages. In their Comment, private respondents stress that the fact they were not late in checking-in for PR 178 has been substantially established in the hearing before the trial court and affirmed by the CA. They maintain that, contrary to the assertion of petitioner, they have established their case not only by a preponderance of evidence but by proof that is more than what is required by law justifying the factual findings of the trial court and the CA. Private respondents point out that since the issues raised by this petition are factual and do not fall under exceptional circumstances, there is nothing left to be reviewed or examined by the Supreme Court. As to the damages awarded, private respondents contend that the amounts awarded are not excessive, unconscionable or unreasonable because of the high-handed, malicious, dictatorial and savage act of petitioners employee which caused them untold mental anguish, excruciating pain, public contempt and ridicule, sleepless nights and other forms of moral suffering. In its Reply, petitioner reiterates its earlier points and questions once more the credibility of private respondents witnesses, particularly Atty. Owen Amor, Salvador Gonzales and ManuelBaltazar who are related to the respondents by blood or affinity. In their Rejoinder, private respondents aver that the findings of facts of the courts a quo were based not only on the testimonies of their witnesses but also on petitioners own employee, LloydFojas, who testified that there were non-revenue, go-show and waitlisted passengers who were accommodated in PR 178. They reiterate their position that where there is a question regarding the credibility of witnesses, the findings of trial courts are generally not disturbed by appellate courts. Finally, as to the damages awarded, private respondents claim that there was substantial basis in awarding such amounts. Evidently, in resolving the two issues raised in the present petition, it is inevitable and most crucial that we first determine the question whether or not the CA erred in upholding the RTC ruling that private respondents were late in checking-in. Both issues call for a review of the factual findings of the lower courts. In petitions for review on certiorari under Rule 45 of the Rules of Court, the general rule is that only questions of law may be raised by the parties and passed upon by this Court.[18] Factual findings of the appellate court are generally binding on us especially when in complete accord with the findings of the trial court. [19] This is because it is not our function to analyze or weigh the evidence all over again.[20] However, this general rule admits of exceptions, to wit: (a) where there is grave abuse of discretion; (b) when the finding is grounded entirely on speculations, surmises or conjectures; (c) when the inference made is manifestly mistaken, absurd or impossible; (d) when the judgment of the Court of Appeals was based on a misapprehension of facts; (e) when the factual findings are conflicting; (f) when the Court of Appeals, in making its findings, went beyond the issues of the case and the same are contrary to the admissions of both appellant and appellee; (g) when the Court of Appeals manifestly

overlooked certain relevant facts not disputed by the parties and which, if properly considered, would justify a different conclusion; and, (h) where the findings of fact of the Court of Appeals are contrary to those of the trial court, or are mere conclusions without citation of specific evidence, or where the facts set forth by the petitioner are not disputed by the respondent, or where the findings of fact of the Court of Appeals are premised on the absence of evidence and are contradicted by the evidence on record.[21] Petitioner invokes exception (b). As to the first issue: Whether or not private respondents checked-in on time for PR 178. The determination of this issue is necessary because it is expressly stipulated in the airline tickets issued to private respondents that PAL will consider the reserved seat cancelled if the passenger fails to check-in at least thirty minutes before the published departure time.[22] After a careful review of the records, we find no reason to disturb the affirmance by the CA of the findings of the trial court that the private respondents have checked-in on time; that they reached the airport at 6:20 a.m., based on the testimonies of private respondent Judy Amor, and witnesses Salvador Gonzales and Atty. Owen Amor who were consistent in their declarations on the witness stand and corroborated one anothers statements; and that the testimony of petitioners lone witness, Lloyd Fojas is not sufficient to overcome private respondents evidence. We have repeatedly held that the truth is established not by the number of witnesses but by the quality of their testimonies.[23] In the present case, it cannot be said that the quality of the testimony of petitioners lone witness is greater than those of the private respondents. Fojas testified that when respondents went to the check-in counter, there were no more persons in that area since all the passengers already boarded the plane.[24] However, the testimonies of Manuel Baltazar and Judy Amor together with the manifest, Exhibits E, E-1 and E-2, point to the fact that many passengers were not able to board said flight, including confirmed passengers, because of overbooking.[25] It is a well-entrenched principle that absent any showing of grave abuse of discretion or any palpable error in its findings, this Court will not question the probative weight accorded by the lower courts to the various evidence presented by the parties. As we explained in Superlines Transportation Co. Inc., vs. ICC Leasing & Financing Corporation:[26] The Court is not tasked to calibrate and assess the probative weight of evidence adduced by the parties during trial all over againSo long as the findings of facts of the Court of Appeals are consistent with or are not palpably contrary to the evidence on record, this Court shall decline to embark on a review on the probative weight of the evidence of the parties.[27] (Emphasis supplied) It is also well established that findings of trial courts on the credibility of witnesses is entitled to great respect and will not be disturbed on appeal except on very strong and cogent grounds.[28]Petitioner failed to demonstrate that the trial court committed any error in upholding the testimonies of private respondents witnesses. We find that the CA committed no reversible error in sustaining the findings of facts of the trial court. Private respondents who had confirmed tickets for PR 178 were bumped-off in favor of non-revenue passengers. Witness Manuel Baltazar, a former Acting Manager of petitioner, evaluated the manifest for PR 178 and found that there were non-revenue passengers allowed to go on board. He specifically identified the family of Labanda, a certain Mr. Luz, petitioners former branch manager, and, a certain Mr. Moyo. [29] Although petitioner had every opportunity to refute such testimony, it failed to present any countervailing evidence. Instead, petitioner merely focused on assailing the credibility of Baltazar on the ground that he was a disgruntled employee and a relative of private respondents. Apart from the bare allegations in petitioners pleadings, no evidence was ever presented in court to substantiate its claim that Baltazar was a disgruntled employee that impelled him to testify against petitioner. As to his relationship with private respondents, this Court has repeatedly held that a witness relationship to the victim does not automatically affect the veracity of his or her testimony.[30] While this principle is often applied in criminal cases, we deem that the same principle may apply in this case, albeit civil in nature. If a witness relationship with a party does not ipso facto render him a biased witness in criminal cases where the quantum of evidence required is proof beyond reasonable doubt, there is no reason why the same principle should not apply in civil cases where the quantum of evidence is only preponderance of evidence. As aptly observed by the CA which we hereby adopt:

Ironically for the defendant, aside from appellants assumption that Baltazar could be a disgruntled former employee of their company and could be biased (which same reason could be attributed to Lloyd Fojas) due to a distant relationship with the plaintiff, it offered no proof or evidence to rebut, demean and contradict the substance of the testimony of Baltazar on the crucial point that plaintiffs-appellees were bumped off to accommodate non-revenue, waitlisted or go-show passengers. On this fact alone, defendants position weakens while credibly establishing that indeed plaintiffs arrived at the airport on time to check-in for Flight PR 178. Further emphasis must be made that Lloyd Fojas even affirmed in court that he can not recall how many PR 178 boarding passes he had at the check-in counter because management has authority to accommodate in any flight and correspondingly issue boarding passes to nonrevenue passengers (pages 15-16, TSN, January 24, 1990).[31] Indeed, petitioner, through its lone witness Fojas, could only answer during his examination on the witness stand that he is unable to recall the circumstances recommending the issuances of boarding passes to waitlisted and that it is the management which has the authority to issue boarding passes to non-revenue passengers.[32] Even in the afternoon flight, PR 180, Fojas could not squarely deny that confirmed paying passengers were bumped-off in favor of non-revenue ones.[33] The CA likewise correctly concluded that there was overbooking in the morning flight on the basis of the testimony of private respondents witness Manuel Baltazar, to wit: ATTY. CALICA: Q- There was a memorandum order of the PAL prohibiting overbooking. Are you aware of CAB Regulation No. 7 on boarding passengers? WITNESS: A- Yes. ATTY. CALICA: Q- You will agree with me that this regulation allows only overbooking by 10%? WITNESS: A- Yes, that is a government regulation and the company regulation is different. COURT: Q- But in the morning flight of May 8, 1988, granting that the government regulation allows only 10% overbooking, can you tell the Court from the manifest itself whether it exceeded the 10% overbooking allowed by the regulation reckoning from the 109 passenger seater? WITNESS: A- With the capacity of 109, 10% of it will be 10 or 11, so if we add this it will not exceed 120 passengers. COURT: Q- In that flight how many were confirmed? WITNESS: Q- In that flight those passengers that were confirmed have a total of 126. COURT: Q- Even if when allowed the government regulation of overbooking, you will still exceed the allowable overbooking number? WITNESS: A- Yes.[34] (Emphasis supplied) This fact of overbooking, again, was not adequately refuted by petitioners evidence. The appellate court aptly sustained the trial court in giving probative weight to the testimony of private respondent Judy Amor that there were other passengers who were not accommodated in flight PR 178, to wit: Q: And how about you, what did you do when you arrived at the Legaspi Airport at 6:20 while Salvador Gonzales was at the check-in counter to pay the tickets? A: I went to the Office of the OIC Manager at the right side of the Legaspi Terminal. Q: Who was that Manager? A: I was able to know his name as Delfin Canonizado.

Q: There were also people there near the table of Mr. Canonizado, do you know what were they doing? A: They were making complaints also because they were also scheduled for flight on that day. They were not accommodated.[35] (Emphasis supplied) We have noted an inconsistency in the testimony of private respondents witnes s, Salvador Gonzales in the direct and cross-examinations. In his direct testimony, Gonzales stated that while he was waiting in line at the check-in counter, with four persons still ahead of him, Lloyd Fojas asked him to approach the counter, took private respondents tickets and wrote something on them. It was only later on when his turn came, that he found out that what Fojas wrote on the tickets was late check-n 7:05. On cross-examination, Gonzales testified that it was only after the four persons ahead of him were accommodated that Fojas wrote on the tickets late check-in 7:05. However, upon clarificatory questions propounded by the trial court, Gonzales was able to clarify that Fojas had written the time on the ticket before the four persons ahead of him were entertained at the counter. [36] Understandably, the lower courts found no cogent reason to discredit the testimony of witness Gonzales. We have held in an earlier case that a witness may contradict himself on the circumstances of an act or different acts due to a long series of questions on cross-examination during which the mind becomes tired to such a degree that the witness does not understand what he is testifying about, especially if the questions, in their majority are leading and tend to make him ratify a former contrary declaration.[37] In fine, the findings of fact of the trial court, as sustained by the CA, have to be respected. As we have consistently held, trial courts enjoy the unique advantage of observing at close range the demeanor, deportment and conduct of witnesses as they give their testimonies. Thus, assignment to declarations on the witness stand is best done by them who, unlike appellate magistrates, can weigh firsthand the testimony of a witness.[38] Anent the second issue as to whether or not the damages awarded are excessive, we rule in the affirmative. The Court of Appeals committed an error in sustaining the ruling of the trial court requiring petitioner to reimburse private respondents the amount of four plane tickets, including the ticket for private respondent minor Carlo Benitez. As admitted by private respondent Judy in her testimony, the only confirmed tickets for the morning flight (PR 178) are the tickets for herself, her infant son, Gian Carlo and her sister JaneGamil. They had another ticket which Judy bought for a certain Dra. Emily Chua who backed out and whose ticket they had intended to be transferred to Carlo Benitez. [39] Although it is clearly stated in the ticket that the same is non-transferrable,[40] Judy testified that a PAL employee issued another ticket in the name of Carlo Benitez in lieu of the ticket issued for Dra. Chua. However, an examination of the ticket issued, Exhibit C, discloses that it does not state therein the flight number or time of departure. Consequently, in the absence of competent evidence, private respondent Carlo Benitez complaint should be dismissed. We find no justifiable reason that warrants the award of P100,000.00 as actual damages in favor of all private respondents. Article 2199 of the Civil Code, provides that actual or compensatory damages may only be given for such pecuniary loss suffered by him as he has duly proved. We explained in Chan vs. Maceda[41] that: A court cannot rely on speculations, conjectures or guesswork as to the fact and amount of damages, but must depend upon competent proof that they have been suffered by the injured party and on the best obtainable evidence of the actual amount thereof. It must point out specific facts which could afford a basis for measuring whatever compensatory or actual damages are borne.[42] All that was proved by herein private respondents was the amount of the purchase price of the plane tickets of private respondents Judy, Jane and Gian Carlo. Only said amounts should therefore be considered in awarding actual damages. As borne by the records, private respondent Judy Amor paid P466.00 each for her ticket and that of Jane; while she paid P46.60 for her infant GianCarlo.[43] The amount of actual damages should therefore be reduced to P978.60, payable to private respondent Judy Amor. As to moral damages. It should be stressed that moral damages are not intended to enrich a plaintiff at he expense of the defendant but are awarded only to allow the former to obtain means, diversion or amusements that will serve to alleviate the moral suffering he has undergone due to the defendants culpable action.[44] We emphasized in Philippine National Bank vs. Court of

Appeals that moral damages are not punitive in nature but are designed to somehow alleviate the physical suffering, mental anguish, fright, serious anxiety, besmirched reputation, wounded feelings, moral shock, social humiliation and similar injury unjustly caused to a person. We have held that even though moral damages are incapable of pecuniary computation, it should nevertheless be proportional to and in approximation of the suffering inflicted. And, to be recoverable, such damage must be the proximate result of a wrongful act or omission the factual basis for which is satisfactorily established by the aggrieved party. [45] In the case at bar, private respondent Judy Amor testified that she felt ashamed when the plane took off and they were left at the airport since there were many people there who saw them including dentists like her. She also related that she missed the Philippine Dental Convention scheduled on the 8th of May, 1988 where she was supposed to attend as a dentist and officer of theSorsogon Dental Association. They tried to look for buses bound for Manila but missed those scheduled in the morning. They went back to the airport but still failed to take an afternoon flight. Hence, she was forced to take a bus that evening for Manila which did not allow her to sleep that night.[46] Private respondent Judy however did not miss the whole convention as she was able to leave on the night of the first day of the week-long convention. While there is no hard and fast rule for determining what would be a fair amount of moral damages, generally, the amount awarded should be commensurate with the actual loss or injury suffered.[47] The CA erred in upholding the trial courts award of moral damages based on Judy Amors claim that there was a denigration of her social and financial standing. Private respondent Judy failed to show that she was treated rudely or disrespectfully by petitioners employees despite her stature as a dentist. As we held in Kierulf vs. Court of Appeals[48] The social and financial standing of Lucila cannot be considered in awarding moral damages. The factual circumstances prior to the accident show that n o rude and rough reception, no menacing attitude, no supercilious manner, no abusive language and highly scornful reference was given her. The social and financial standing of a claimant of moral damages may be considered in awarding moral damages only if he or she was subjected to contemptuous conduct despite the offenders knowledge of his or her social and financial standing.[49] (Emphasis supplied) Nevertheless, we hold that private respondent Judy Amor is entitled to moral damages. In a number of cases, we have pronounced that air carriage is a business possessed with special qualities. In Singson vs. Court of Appeals,[50] we explained that: A contract of air carriage is a peculiar one. Imbued with public interest, common carriers are required by law to carry passengers safely as far as human care and foresight can provide, using the utmost diligence of a very cautious person, with due regard for all the circumstances. A contract to transport passengers is quite different in kind and degree from any other contractual relation. And this because its business is mainly with the traveling public. It invites people to avail of the comforts and advantages it offers. The contract of carriage, therefore, generates a relation attended with a public duty. Failure of the carrier to observe this high degree of care and extraordinary diligence renders it liable for any damage that may be sustained by its passengers.[51] As the lower courts have found, evidence positively show that petitioner has accommodated waitlisted and non-revenue passengers and had overbooked more than what is allowed by law, to the prejudice of private respondents who had confirmed tickets. Overbooking amounts to bad faith[52] and therefore petitioner is liable to pay moral damages to respondent Judy Amor. Considering all the foregoing, we deem that the award of P250,000.00 as moral damages in favor of private respondent Judy Amor is exorbitant. Where the damages awarded are far too excessive compared to the actual losses sustained by the aggrieved party, the same should be reduced to a more reasonable amount.[53] We find the amount of P100,000.00 to be sufficient, just and reasonable. We consider the award of actual damages in favor of private respondent Jane Gamil to be inappropriate considering the testimony of Judy Amor that she was the one who paid for the tickets.[54] Likewise, the appellate court erred in sustaining the award of moral damages in favor of Jane Gamil as she never testified in court. It has been held that where the plaintiff fails to take the witness stand and testify as to his social humiliation, wounded feelings and anxiety, moral damages cannot be recovered.[55]

As to the award of exemplary damages, Article 2234 of the Civil Code provides that the claimant must show that he would be entitled to moral, temperate or compensatory damages before the court may consider the question whether or not exemplary damages should be awarded. Consequently, private respondent Jane Gamil, not being entitled to actual and moral damages, is not entitled to exemplary damages. The award of exemplary damages in favor of private respondent Judy Amor is warranted in this case.[56] Waitlisted and non-revenue passengers were accommodated while private respondent Judy Amor who had fully paid her fare and was a confirmed passenger was unduly deprived of enplaning. Petitioner was guilty of overbooking its flight to the prejudice of its confirmed passengers. This practice cannot be countenanced especially considering that the business of air carriage is imbued with public character. We have ruled that where in breaching the contract of carriage, the airline is shown to have acted in bad faith, as in this case,[57] the award of exemplary damages in addition to moral and actual damages is proper.[58] However, as in the matter of the moral damages awarded by the trial court, we consider the amount of P200,000.00 as exemplary damages to be far too excessive. The amount of P25,000.00 is just and proper. We find the award of attorneys fees in this case to be in order since it is well settled that the same may be awarded when the defendants act or omission has compelled the plaintiff to litigate with third persons or to incur expenses to protect his interest.[59] WHEREFORE, we affirm the decision of the Court of Appeals with the following MODIFICATIONS: 1. Petitioner is ordered to pay private respondent Judy Amor the amount of P978.60 as and for actual damages; P100,000.00 as moral damages; P25,000.00 as exemplary damages; and attorneys fees in the amount of P30,000.00 plus P500.00 for every appearance of private respondents lawyer, or a total of P10,500.00 for 21 actual appearances in court; P2,000.00 as incidental litigation expenses; and costs of suit. 2. The claim for damages of private respondent Jane Gamil is DENIED for lack of evidence. 3. The complaint of private respondent Carlo Benitez is DISMISSED for lack of cause of action. No pronouncement as to costs. SO ORDERED. Puno, (Chairman), Quisumbing, Callejo, Sr., and Tinga, JJ., concur.

G.R. No. L-40597 June 29, 1979 AGUSTINO B. ONG YIU, petitioner, vs. HONORABLE COURT OF APPEALS and PHILIPPINE AIR LINES, INC., respondents. MELENCIO-HERRERA, J.: In this Petition for Review by Certiorari, petitioner, a practicing lawyer and businessman, seeks a reversal of the Decision of the Court of Appeals in CA-G.R. No. 45005-R, which reduced his claim for damages for breach of contract of transportation. The facts are as follows: On August 26, 1967, petitioner was a fare paying passenger of respondent Philippine Air Lines, Inc. (PAL), on board Flight No. 463-R, from Mactan Cebu, bound for Butuan City. He was scheduled to attend the trial of Civil Case No. 1005 and Spec. Procs. No. 1125 in the Court of First Instance, Branch II, thereat, set for hearing on August 28-31, 1967. As a passenger, he checked in one piece of luggage, a blue "maleta" for which he was issued Claim Check No. 2106-R (Exh. "A"). The plane left Mactan Airport, Cebu, at about 1:00 o'clock P.M., and arrived at Bancasi airport, Butuan City, at past 2:00 o'clock P.M., of the same day. Upon arrival, petitioner claimed his luggage but it could not be found. According to petitioner, it was only after reacting indignantly to the loss that the matter was attended to by the porter clerk, Maximo Gomez, which, however, the latter denies, At about 3:00 o'clock P.M., PAL Butuan, sent a message to PAL, Cebu, inquiring about the missing luggage, which message was, in turn relayed in full to the Mactan Airport teletype operator at 3:45 P.M. (Exh. "2") that same afternoon. It must have been transmitted to Manila immediately, for at 3:59 that same afternoon, PAL Manila wired PAL Cebu advising that the luggage had been over carried to Manila aboard Flight No. 156 and that it would be forwarded to Cebu on Flight No. 345 of the same day. Instructions were also given that the luggage be immediately forwarded to Butuan City on the first available flight (Exh. "3"). At 5:00 P.M. of the same afternoon, PAL Cebu sent a message to PAL Butuan that the luggage would be forwarded on Fright No. 963 the following day, August 27, 196'(. However, this message was not received by PAL Butuan as all the personnel had already left since there were no more incoming flights that afternoon. In the meantime, petitioner was worried about the missing luggage because it contained vital documents needed for trial the next day. At 10:00 o'clock that evening, petitioner wired PAL Cebu demanding the delivery of his baggage before noon the next day, otherwise, he would hold PAL liable for damages, and stating that PAL's gross negligence had caused him undue inconvenience, worry, anxiety and extreme embarrassment (Exh. "B"). This telegram was received by the Cebu PAL supervisor but the latter felt no need to wire petitioner that his luggage had already been forwarded on the assumption that by the time the message reached Butuan City, the luggage would have arrived. Early in the morning of the next day, August 27, 1967, petitioner went to the Bancasi Airport to inquire about his luggage. He did not wait, however, for the morning flight which arrived at 10:00 o'clock that morning. This flight carried the missing luggage. The porter clerk, Maximo Gomez, paged petitioner, but the latter had already left. A certain Emilio Dagorro a driver of a "colorum" car, who also used to drive for petitioner, volunteered to take the luggage to petitioner. As Maximo Gomez knew Dagorro to be the same driver used by petitioner whenever the latter was in Butuan City, Gomez took the luggage and placed it on the counter. Dagorro examined the lock, pressed it, and it opened. After calling the attention of Maximo Gomez, the "maleta" was opened, Gomez took a look at its contents, but did not touch them. Dagorro then delivered the "maleta" to petitioner, with the information that the lock was open. Upon inspection, petitioner found that a folder containing certain exhibits, transcripts and private documents in Civil Case No. 1005 and Sp. Procs. No. 1126 were missing, aside from two gift items for his parents-in-law. Petitioner refused to accept the luggage. Dagorro returned it to the porter clerk, Maximo Gomez, who sealed it and forwarded the same to PAL Cebu. Meanwhile, petitioner asked for postponement of the hearing of Civil Case No. 1005 due to loss of his documents, which was granted by the Court (Exhs. "C" and "C-1"). Petitioner returned to Cebu City on August 28, 1967. In a letter dated August 29, 1967 addressed to PAL, Cebu, petitioner called attention to his telegram (Exh. "D"), demanded that his luggage be produced intact, and that he be compensated in the sum of P250,000,00 for actual and moral damages

within five days from receipt of the letter, otherwise, he would be left with no alternative but to file suit (Exh. "D"). On August 31, 1967, Messrs. de Leon, Navarsi, and Agustin, all of PAL Cebu, went to petitioner's office to deliver the "maleta". In the presence of Mr. Jose Yap and Atty. Manuel Maranga the contents were listed and receipted for by petitioner (Exh. "E"). On September 5, 1967, petitioner sent a tracer letter to PAL Cebu inquiring about the results of the investigation which Messrs. de Leon, Navarsi, and Agustin had promised to conduct to pinpoint responsibility for the unauthorized opening of the "maleta" (Exh. "F"). The following day, September 6, 1967, PAL sent its reply hereinunder quoted verbatim: Dear Atty. Ong Yiu: This is with reference to your September 5, 1967, letter to Mr. Ricardo G. Paloma, Acting Manager, Southern Philippines. First of all, may we apologize for the delay in informing you of the result of our investigation since we visited you in your office last August 31, 1967. Since there are stations other than Cebu which are involved in your case, we have to communicate and await replies from them. We regret to inform you that to date we have not found the supposedly lost folder of papers nor have we been able to pinpoint the personnel who allegedly pilferred your baggage. You must realize that no inventory was taken of the cargo upon loading them on any plane. Consequently, we have no way of knowing the real contents of your baggage when same was loaded. We realized the inconvenience you encountered of this incident but we trust that you will give us another opportunity to be of better service to you. Very truly yours,PHILIPPINE AIR LINES, INC.(Sgd) JEREMIAS S. AGUSTINBranch SupervisorCebu (Exhibit G, Folder of Exhibits) 1 On September 13, 1967, petitioner filed a Complaint against PAL for damages for breach of contract of transportation with the Court of First Instance of Cebu, Branch V, docketed as Civil Case No. R-10188, which PAL traversed. After due trial, the lower Court found PAL to have acted in bad faith and with malice and declared petitioner entitled to moral damages in the sum of P80,000.00, exemplary damages of P30,000.00, attorney's fees of P5,000.00, and costs. Both parties appealed to the Court of Appeals petitioner in so far as he was awarded only the sum of P80,000.00 as moral damages; and defendant because of the unfavorable judgment rendered against it. On August 22, 1974, the Court of Appeals,* finding that PAL was guilty only of simple negligence, reversed the judgment of the trial Court granting petitioner moral and exemplary damages, but ordered PAL to pay plaintiff the sum of P100.00, the baggage liability assumed by it under the condition of carriage printed at the back of the ticket. Hence, this Petition for Review by Certiorari, filed on May 2, 1975, with petitioner making the following Assignments of Error: I. THE HONORABLE COURT OF APPEALS ERRED IN HOLDING RESPONDENT PAL GUILTY ONLY OF SIMPLE NEGLIGENCE AND NOT BAD FAITH IN THE BREACH OF ITS CONTRACT OF TRANSPORTATION WITH PETITIONER. II. THE HONORABLE COURT OF APPEALS MISCONSTRUED THE EVIDENCE AND THE LAW WHEN IT REVERSED THE DECISION OF THE LOWER COURT AWARDING TO PETITIONER MORAL DAMAGES IN THE AMOUNT OF P80,000.00, EXEMPLARY DAMAGES OF P30,000.00, AND P5,000.00 REPRESENTING ATTORNEY'S FEES, AND ORDERED RESPONDENT PAL TO COMPENSATE PLAINTIFF THE SUM OF P100.00 ONLY, CONTRARY TO THE EXPLICIT PROVISIONS OF ARTICLES 2220, 2229, 2232 AND 2234 OF THE CIVIL CODE OF THE PHILIPPINES. On July 16, 1975, this Court gave due course to the Petition. There is no dispute that PAL incurred in delay in the delivery of petitioner's luggage. The question is the correctness of respondent Court's conclusion that there was no gross negligence

on the part of PAL and that it had not acted fraudulently or in bad faith as to entitle petitioner to an award of moral and exemplary damages. From the facts of the case, we agree with respondent Court that PAL had not acted in bad faith. Bad faith means a breach of a known duty through some motive of interest or ill will. 2 It was the duty of PAL to look for petitioner's luggage which had been miscarried. PAL exerted due diligence in complying with such duty. As aptly stated by the appellate Court: We do not find any evidence of bad faith in this. On the contrary, We find that the defendant had exerted diligent effort to locate plaintiff's baggage. The trial court saw evidence of bad faith because PAL sent the telegraphic message to Mactan only at 3:00 o'clock that same afternoon, despite plaintiff's indignation for the non-arrival of his baggage. The message was sent within less than one hour after plaintiff's luggage could not be located. Efforts had to be exerted to locate plaintiff's maleta. Then the Bancasi airport had to attend to other incoming passengers and to the outgoing passengers. Certainly, no evidence of bad faith can be inferred from these facts. Cebu office immediately wired Manila inquiring about the missing baggage of the plaintiff. At 3:59 P.M., Manila station agent at the domestic airport wired Cebu that the baggage was over carried to Manila. And this message was received in Cebu one minute thereafter, or at 4:00 P.M. The baggage was in fact sent back to Cebu City that same afternoon. His Honor stated that the fact that the message was sent at 3:59 P.M. from Manila and completely relayed to Mactan at 4:00 P.M., or within one minute, made the message appear spurious. This is a forced reasoning. A radio message of about 50 words can be completely transmitted in even less than one minute depending upon atmospheric conditions. Even if the message was sent from Manila or other distant places, the message can be received within a minute. that is a scientific fact which cannot be questioned. 3 Neither was the failure of PAL Cebu to reply to petitioner's rush telegram indicative of bad faith, The telegram (Exh. B) was dispatched by petitioner at around 10:00 P.M. of August 26, 1967. The PAL supervisor at Mactan Airport was notified of it only in the morning of the following day. At that time the luggage was already to be forwarded to Butuan City. There was no bad faith, therefore, in the assumption made by said supervisor that the plane carrying the bag would arrive at Butuan earlier than a reply telegram. Had petitioner waited or caused someone to wait at the Bancasi airport for the arrival of the morning flight, he would have been able to retrieve his luggage sooner. In the absence of a wrongful act or omission or of fraud or bad faith, petitioner is not entitled to moral damages. Art. 2217. Moral damages include physical suffering, mental anguish, fright, serious anxiety, besmirched reputation, wounded feelings, moral shock, social humiliation, and similar injury. Though incapable of pecuniary computation, moral damages may be recovered if they are the proximate result of the defendant's wrongful act of omission. Art. 2220. Willful injury to property may be a legal ground for awarding moral damages if the court should find that, under the circumstances, such damages are justly due. The same rule applies to breaches of contract where the defendant acted fraudulently or in bad faith. Petitioner is neither entitled to exemplary damages. In contracts, as provided for in Article 2232 of the Civil Code, exemplary damages can be granted if the defendant acted in a wanton, fraudulent, reckless, oppressive, or malevolent manner, which has not been proven in this case. Petitioner further contends that respondent Court committed grave error when it limited PAL's carriage liability to the amount of P100.00 as stipulated at the back of the ticket. In this connection, respondent Court opined: As a general proposition, the plaintiff's maleta having been pilfered while in the custody of the defendant, it is presumed that the defendant had been negligent. The liability, however, of PAL for the loss, in accordance with the stipulation written on the back of the ticket, Exhibit 12, is limited to P100.00 per baggage, plaintiff not having declared a greater value, and not having

called the attention of the defendant on its true value and paid the tariff therefor. The validity of this stipulation is not questioned by the plaintiff. They are printed in reasonably and fairly big letters, and are easily readable. Moreover, plaintiff had been a frequent passenger of PAL from Cebu to Butuan City and back, and he, being a lawyer and businessman, must be fully aware of these conditions. 4 We agree with the foregoing finding. The pertinent Condition of Carriage printed at the back of the plane ticket reads: 8. BAGGAGE LIABILITY ... The total liability of the Carrier for lost or damaged baggage of the passenger is LIMITED TO P100.00 for each ticket unless a passenger declares a higher valuation in excess of P100.00, but not in excess, however, of a total valuation of P1,000.00 and additional charges are paid pursuant to Carrier's tariffs. There is no dispute that petitioner did not declare any higher value for his luggage, much less did he pay any additional transportation charge. But petitioner argues that there is nothing in the evidence to show that he had actually entered into a contract with PAL limiting the latter's liability for loss or delay of the baggage of its passengers, and that Article 1750* of the Civil Code has not been complied with. While it may be true that petitioner had not signed the plane ticket (Exh. "12"), he is nevertheless bound by the provisions thereof. "Such provisions have been held to be a part of the contract of carriage, and valid and binding upon the passenger regardless of the latter's lack of knowledge or assent to the regulation". 5 It is what is known as a contract of "adhesion", in regards which it has been said that contracts of adhesion wherein one party imposes a ready made form of contract on the other, as the plane ticket in the case at bar, are contracts not entirely prohibited. The one who adheres to the contract is in reality free to reject it entirely; if he adheres, he gives his consent. 6 And as held in Randolph v. American Airlines, 103 Ohio App. 172, 144 N.E. 2d 878; Rosenchein vs. Trans World Airlines, Inc., 349 S.W. 2d 483, "a contract limiting liability upon an agreed valuation does not offend against the policy of the law forbidding one from contracting against his own negligence. Considering, therefore, that petitioner had failed to declare a higher value for his baggage, he cannot be permitted a recovery in excess of P100.00.Besides, passengers are advised not to place valuable items inside their baggage but "to avail of our V-cargo service " (Exh. "1"). I t is likewise to be noted that there is nothing in the evidence to show the actual value of the goods allegedly lost by petitioner. There is another matter involved, raised as an error by PAL the fact that on October 24, 1974 or two months after the promulgation of the Decision of the appellate Court, petitioner's widow filed a Motion for Substitution claiming that petitioner died on January 6, 1974 and that she only came to know of the adverse Decision on October 23, 1974 when petitioner's law partner informed her that he received copy of the Decision on August 28, 1974. Attached to her Motion was an Affidavit of petitioner's law partner reciting facts constitutive of excusable negligence. The appellate Court noting that all pleadings had been signed by petitioner himself allowed the widow "to take such steps as she or counsel may deem necessary." She then filed a Motion for Reconsideration over the opposition of PAL which alleged that the Court of Appeals Decision, promulgated on August 22, 1974, had already become final and executory since no appeal had been interposed therefrom within the reglementary period. Under the circumstances, considering the demise of petitioner himself, who acted as his own counsel, it is best that technicality yields to the interests of substantial justice. Besides, in the 'last analysis, no serious prejudice has been caused respondent PAL. In fine, we hold that the conclusions drawn by respondent Court from the evidence on record are not erroneous. WHEREFORE, for lack of merit, the instant Petition is hereby denied, and the judgment sought to be reviewed hereby affirmed in toto. No costs. SO ORDERED. Teehankee, (Chairman), Makasiar, Fernandez, Guerrero and De Castro, JJ., concur.

THIRD DIVISION

LEA MER INDUSTRIES, INC., Petitioner,

G.R. No. 161745 Present Panganiban, J., Chairman, Sandoval-Gutierrez, Corona, Carpio Morales, and Garcia, JJ

Complaint with the Regional Trial Court (RTC) of Manila on September 4, 1992, for the collection of P565,000 representing the amount that respondent had paid Vulcan. [9] On October 7, 1999, the trial court dismissed the Complaint, upon finding that the cause of the loss was a fortuitous event.[10] The RTC noted that the vessel had sunk because of the bad weather condition brought about by Typhoon Trining. The court ruled that petitioner had no advance knowledge of the incoming typhoon, and that the vessel had been cleared by the Philippine Coast Guard to travel from Palawan to Manila.[11] Ruling of the Court of Appeals Reversing the trial court, the CA held that the vessel was not seaworthy when it sailed for Manila. Thus, the loss of the cargo was occasioned by petitioners fault, not by a fortuitous event.[12] Hence, this recourse.[13] The Issues Petitioner states the issues in this wise:

- versus -

Promulgated: MALAYAN INSURANCE CO., INC.,* Respondent. September 30, 2005 x -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- -- x DECISION PANGANIBAN, J.:

A. Whether or not the survey report of the cargo surveyor, Jesus Cortez, who had not been presented as a witness of the said report during the trial of this case before the lower court can be admitted in evidence to prove the alleged facts cited in the said report. B. Whether or not the respondent, Court of Appeals, had validly or legally reversed the finding of fact of the Regional Trial Court which clearly and unequivocally held that the loss of the cargo subject of this case was caused by fortuitous event for which herein petitioner could not be held liable. C. Whether or not the respondent, Court of Appeals, had committed serious error and grave abuse of discretion in disregarding the testimony of the witness from the MARINA, Engr. Jacinto Lazo y Villegal, to the effect that the vessel Judy VII was seaworthy at the time of incident and further in disregarding the testimony of the PAG-ASA weather specialist, Ms. Rosa Barba y Saliente, to the effect that typhoon Trining did not hit Metro Manila or Palawan.[14]

C ommon carriers are bound to observe extraordinary diligence in their vigilance over the goods entrusted to them, as required by the nature of their business and for reasons of public policy. Consequently, the law presumes that common carriers are at fault or negligent for any loss or damage to the goods that they transport. In the present case, the evidence submitted by petitioner to overcome this presumption was sorely insufficient. The Case Before us is a Petition for Review under Rule 45 of the Rules of Court, assailing the October 9, 2002 Decision[2] and the December 29, 2003 Resolution[3] of the Court of Appeals (CA) in CA-GR CV No. 66028. The challenged Decision disposed as follows: WHEREFORE, the appeal is GRANTED. The December 7, 1999 decision of the Regional Trial Court of Manila, Branch 42 in Civil Case No. 92-63159 is herebyREVERSED and SET ASIDE. [Petitioner] is ordered to pay the [herein respondent] the value of the lost cargo in the amount of P565,000.00. Costs against the [herein petitioner].[4]
[1]

In the main, the issues are as follows: (1) whether petitioner is liable for the loss of the cargo, and (2) whether the survey report of Jesus Cortez is admissible in evidence. The Courts Ruling The Petition has no merit. First Issue: Liability for Loss of Cargo Question of Fact The resolution of the present case hinges on whether the loss of the cargo was due to a fortuitous event. This issue involves primarily a question of fact, notwithstanding petitioners claim that it pertains only to a question of law. As a general rule, questions of fact may not be raised in a petition for review.[15] The present case serves as an exception to this rule, because the factual findings of the appellate and the trial courts vary.[16] This Court meticulously reviewed the records, but found no reason to reverse the CA.

The assailed Resolution denied reconsideration. The Facts Ilian Silica Mining entered into a contract of carriage with Lea Mer Industries, Inc., for the shipment of 900 metric tons of silica sand valued at P565,000.[5] Consigned to Vulcan Industrial and Mining Corporation, the cargo was to be transported from Palawan to Manila. On October 25, 1991, the silica sand was placed on board Judy VII, a barge leased by Lea Mer.[6] During the voyage, the vessel sank, resulting in the loss of the cargo. [7] Malayan Insurance Co., Inc., as insurer, paid Vulcan the value of the lost cargo. [8] To recover the amount paid and in the exercise of its right of subrogation, Malayan demanded reimbursement from Lea Mer, which refused to comply. Consequently, Malayan instituted a

Rule on Common Carriers Common carriers are persons, corporations, firms or associations engaged in the business of carrying or transporting passengers or goods, or both -- by land, water, or air -when this service is offered to the public for compensation.[17] Petitioner is clearly a common carrier, because it offers to the public its business of transporting goods through its vessels.[18] Thus, the Court corrects the trial courts finding that petitioner became a private carrier when Vulcan chartered it.[19] Charter parties are classified as contracts of demise (or bareboat) and affreightment, which are distinguished as follows: Under the demise or bareboat charter of the vessel, the charterer will generally be considered as owner for the voyage or service stipulated. The charterer mans the vessel with his own people and becomes, in effect, the owner pro hac vice, subject to liability to others for damages caused by negligence. To create a demise, the owner of a vessel must completely and exclusively relinquish possession, command and navigation thereof to the charterer; anything short of such a complete transfer is a contract of affreightment (time or voyage charter party) or not a charter party at all.[20]

Article 1174 of the Civil Code provides that no person shall be responsible for a fortuitous event which could not be foreseen, or which, though foreseen, was inevitable. Thus, if the loss or damage was due to such an event, a common carrier is exempted from liability. Jurisprudence defines the elements of a fortuitous event as follows: (a) the cause of the unforeseen and unexpected occurrence, or the failure of the debtors to comply with their obligations, must have been independent of human will; (b) the event that constituted the caso fortuito must have been impossible to foresee or, if foreseeable, impossible to avoid; (c) the occurrence must have been such as to render it impossible for the debtors to fulfill their obligation in a normal manner; and (d) the obligor must have been free from any participation in the aggravation of the resulting injury to the creditor.[29] To excuse the common carrier fully of any liability, the fortuitous event must have been the proximate and only cause of the loss.[30] Moreover, it should have exercised due diligence to prevent or minimize the loss before, during and after the occurrence of the fortuitous event.[31] Loss in the Instant Case There is no controversy regarding the loss of the cargo in the present case. As the common carrier, petitioner bore the burden of proving that it had exercised extraordinary diligence to avoid the loss, or that the loss had been occasioned by a fortuitous event -- an exempting circumstance. It was precisely this circumstance that petitioner cited to escape liability. Lea Mer claimed that the loss of the cargo was due to the bad weather condition brought about by Typhoon Trining.[32] Evidence was presented to show that petitioner had not been informed of the incoming typhoon, and that the Philippine Coast Guard had given it clearance to begin the voyage.[33] On October 25, 1991, the date on which the voyage commenced and the barge sank, Typhoon Trining was allegedly far from Palawan, where the storm warning was only Signal No. 1.[34] The evidence presented by petitioner in support of its defense of fortuitous event was sorely insufficient. As required by the pertinent law, it was not enough for the common carrier to show that there was an unforeseen or unexpected occurrence. It had to show that it was free from any fault -- a fact it miserably failed to prove. First, petitioner presented no evidence that it had attempted to minimize or prevent the loss before, during or after the alleged fortuitous event. [35] Its witness, Joey A. Draper, testified that he could no longer remember whether anything had been done to minimize loss when water started entering the barge.[36] This fact was confirmed during his cross-examination, as shown by the following brief exchange: Atty. Baldovino, Jr.: Other than be[a]ching the barge Judy VII, were there other precautionary measure[s] exercised by you and the crew of Judy VII so as to prevent the los[s] or sinking of barge Judy VII? xxx xxx xxx

The distinction is significant, because a demise or bareboat charter indicates a business undertaking that is private in character. [21] Consequently, the rights and obligations of the parties to a contract of private carriage are governed principally by their stipulations, not by the law on common carriers.[22] The Contract in the present case was one of affreightment, as shown by the fact that it was petitioners crew that manned the tugboat M/V Ayalit and controlled the barge Judy VII.[23] Necessarily, petitioner was a common carrier, and the pertinent law governs the present factual circumstances. Extraordinary Diligence Required Common carriers are bound to observe extraordinary diligence in their vigilance over the goods and the safety of the passengers they transport, as required by the nature of their business and for reasons of public policy.[24] Extraordinary diligence requires rendering service with the greatest skill and foresight to avoid damage and destruction to the goods entrusted for carriage and delivery.[25] Common carriers are presumed to have been at fault or to have acted negligently for loss or damage to the goods that they have transported.[26] This presumption can be rebutted only by proof that they observed extraordinary diligence, or that the loss or damage was occasioned by any of the following causes:[27] (1) (2) (3) (4) (5) Flood, storm, earthquake, lightning, or other natural disaster or calamity; Act of the public enemy in war, whether international or civil; Act or omission of the shipper or owner of the goods; The character of the goods or defects in the packing or in the containers; Order or act of competent public authority.[28]

Atty. Baldovino, Jr.: Your Honor, what I am asking [relates to the] action taken by the officers and crew of tugboat Ayalit and barge Judy VII x x x to prevent the sinking of barge Judy VII? xxx xxx xxx

Rule on Fortuitous Events Court: Mr. witness, did the captain of that tugboat give any instruction on how to save the barge Judy VII?

Joey Draper: I can no longer remember sir, because that happened [a] long time ago.[37]

On this basis, the trial court correctly refused to admit Jesus Cortezs Affidavit, which respondent had offered as evidence.[52] Well-settled is the rule that, unless the affiant is presented as a witness, an affidavit is considered hearsay.[53] An exception to the foregoing rule is that on independently relevant statements. A report made by a person is admissible if it is intended to prove the tenor, not the truth, of the statements.[54] Independent of the truth or the falsity of the statement given in the report, the fact that it has been made is relevant. Here, the hearsay rule does not apply.[55] In the instant case, the challenged Survey Report prepared by Cortez was admitted only as part of the testimonies of respondents witnesses. The referral to Cortezs Report was in relation to Manlapigs final Adjustment Report. Evidently, it was the existence of the Survey Report that was testified to. The admissibility of that Report as part of the testimonies of the witnesses was correctly ruled upon by the trial court. At any rate, even without the Survey Report, petitioner has already failed to overcome the presumption of fault that applies to common carriers. WHEREFORE, the Petition is DENIED and the assailed Decision and Resolution are AFFIRMED. Costs against petitioner. SO ORDERED.

Second, the alleged fortuitous event was not the sole and proximate cause of the loss. There is a preponderance of evidence that the barge was not seaworthy when it sailed for Manila.[38] Respondent was able to prove that, in the hull of the barge, there were holes that might have caused or aggravated the sinking.[39] Because the presumption of negligence or fault applied to petitioner, it was incumbent upon it to show that there were no holes; or, if there were, that they did not aggravate the sinking. Petitioner offered no evidence to rebut the existence of the holes. Its witness, Domingo A. Luna, testified that the barge was in tip-top or excellent condition,[40] but that he had not personally inspected it when it left Palawan.[41] The submission of the Philippine Coast Guards Certificate of Inspection of Judy VII, dated July 31, 1991, did not conclusively prove that the barge was seaworthy.[42] The regularity of the issuance of the Certificate is disputably presumed. [43] It could be contradicted by competent evidence, which respondent offered. Moreover, this evidence did not necessarily take into account the actual condition of the vessel at the time of the commencement of the voyage.[44] Second Issue: Admissibility of the Survey Report

Petitioner claims that the Survey Report[45] prepared by Jesus Cortez, the cargo surveyor, should not have been admitted in evidence. The Court partly agrees. Because he did not testify during the trial,[46] then the Report that he had prepared was hearsay and therefore inadmissible for the purpose of proving the truth of its contents. The Survey Report Not the Sole Evidence The facts reveal that Cortezs Survey Report was used in the testimonies of respondents witnesses -- Charlie M. Soriano; and Federico S. Manlapig, a cargo marine surveyor and the vice-president of Toplis and Harding Company.[47] Soriano testified that the Survey Report had been used in preparing the final Adjustment Report conducted by their company.[48] The final Report showed that the barge was not seaworthy because of the existence of the holes. Manlapig testified that he had prepared that Report after taking into account the findings of the surveyor, as well as the pictures and the sketches of the place where the sinking occurred. [49] Evidently, the existence of the holes was proved by the testimonies of the witnesses, not merely by Cortez Survey Report.

Rule on Independently Relevant Statement That witnesses must be examined and presented during the trial, [50] and that their testimonies must be confined to personal knowledge is required by the rules on evidence, from which we quote: Section 36. Testimony generally confined to personal knowledge; hearsay excluded. A witness can testify only to those facts which he knows of his personal knowledge; that is, which are derived from his own perception, except as otherwise provided in these rules.[51]

SECOND DIVISION [G.R. No. 136960. December 8, 2003] IRON BULK SHIPPING PHILIPPINES, CO., LTD., petitioner, vs. REMINGTON INDUSTRIAL SALES CORPORATION, respondent. DECISION AUSTRIA-MARTINEZ, J.: Before us is a petition for review on certiorari under Rule 45 of the Rules of Court assailing the August 28, 1998 Decision[1] and the December 24, 1998 Resolution of the Court of Appeals in CA-G.R. CV No. 49725,[2] affirming in toto the decision of the Regional Trial Court of Manila (Branch 9). The factual background of the case is summarized by the appellate court, thus: Sometime in the latter part of 1991, plaintiff Remington Industrial Sales Corporation (hereafter Remington for short) ordered from defendant Wangs Company, Inc. (hereafter Wangs for short) 194 packages of hot rolled steel sheets, weighing 686.565 metric tons, with a total value of $219,380.00, then equivalent to P6,469,759.17. Wangs forwarded the order to its supplier, Burwill (Agencies) Ltd., in Hongkong. On or about November 26, 1991, the 194 packages were loaded on board the vessel MV Indian Reliance at the Port of Gdynia, Poland, for transportation to the Philippines, under Bill of Lading No. 27 (Exh. C). The vessels owner/charterer is represented in the Philippines by defendant Iron Bulk Shipping Phils., Inc. (hereafter Iron Bulk for short). Remington had the cargo insured for P6,469,759.17 during the voyage by Marine Insurance Policy No. 7741 issued by defendant Pioneer Asia Insurance Corporation (hereafter Pioneer for short). On or about January 3, 1992, the MV Indian Reliance arrived in the Port of Manila, and the 194 packages of hot rolled steel sheets were discharged from the vessel. The cargo was inspected twice by SGS Far East Ltd. and found to be wet (with slight trace of salt) and rusty, extending from 50% to 80% of each plate. Plaintiff filed formal claims for loss amounting to P544,875.17 with Pioneer, Iron Bulk, Manila Port Services, Inc. (MPS) and ESE Brokerage Corporation (ESE). No one honored such claims. Thus, plaintiff filed an action for collection, plus attorneys fees, against Wangs, Pioneer and Iron Bulk. . . .[3] and affirmed in toto the following findings of the trial court, on February 1, 1995, to wit: The evidence on record shows that the direct and immediate cause of the rusting of the goods imported by the plaintiff was the water found inside the cargo hold of M/V Indian Reliance wherein those goods were stored during the voyage, particularly the water found on the surface of the merchandise and on the floor of the vessel hatch. And even at the time the cargoes were being unloaded by crane at the Pier of Manila, Iron Bulks witnesses noticed that water was dripping from the cargoes. (TSN dated July 20, 1993, pp. 13-14; TSN dated May 30, 1994, pp. 8-9, 14, 24-25; TSN dated June 3, 1994, pp. 31-32; TSN dated July 14, 1994, pp. 10-11). SGS Far East Limited, an inspection agency hired by defendant Wangs, issued Certificate of Inspection and Analysis No 6401/35071 stating the following findings: Results of tests indicated that a very slight trace of salt was present in the sample as confirmed by the test of Sodium. The results however does not necessarily indicate that the rusty condition of the material was caused by seawater. Tan-Gatue Adjustment Co., Inc., a claims adjustment firm hired by defendant Pioneer, submitted a Report (Exh. 10-Pioneer) dated February 20, 1992 to Pioneer which pertinently reads as follows: All the above 3,971 sheets were heavily rusty at sides/ends/edges/surfaces. Pieces of cotton were rubbed by us on different rusty steel sheets and submitted to Precision Analytical Services, Inc. to determine the cause of wetting. Result thereof as per Laboratory Report No. 077-92 of this firm showed that: The sample was wetted/contaminated by fresh water. After considering the foregoing test results and the other evidence on record, the Court found no clear and sufficient proof showing that the water which stayed in the cargo hold of the vessel and which contaminated the merchandise was seawater. The Court, however, is convinced that the subject goods were exposed to salt conditions as evidenced by the presence of about 17% Sodium on the rust sample tested by SGS.

As to the source of the water found in the cargo hold, there is also no concrete and competent evidence on record establishing that such water leaked from the pipe installed in Hatch No. 1 of M/V Indian Reliance, as claimed by plaintiff. Indeed, the plaintiff based such claim only from information it allegedly received from its supplier, as stated in its letter to defendant Iron Bulk dated March 28, 1992 (Exh. K-3). And no one took the witness stand to confirm or establish the alleged leakage. Nevertheless, since Iron Bulks own evidence shows that there was water inside the cargo hold of the vessel and that the goods stored therein were wet and full of rust, without sufficient explanation on its part as to when and how water found its way into the vessel holds, the Court finds and so holds that Iron Bulk failed to exercise the extraordinary diligence required by law in the handling and transporting of the goods. ..... Iron Bulk did not even exercise due diligence because admittedly, water was dripping from the cargoes at the time they were being discharged from the vessel. Had Iron Bulk done so, it could have discovered by ordinary inspection that the cargo holds and the cargoes themselves were affected by water and it could have provided some remedial measures to prevent or minimize the damage to the cargoes. But it did not, showing its lack of care and diligence over the goods. Besides, since the goods were undoubtedly damaged, and as Iron Bulk failed to establish by any clear and convincing evidence any of the exempting causes provided for in Article 1734 of the Civil Code, it is presumed to have been at fault or to have acted negligently. ..... WHEREFORE, the Court finding preponderance of evidence for the plaintiff hereby renders judgment in favor of it and against all the defendants herein as follows: 1. Ordering defendant Pioneer Asia Insurance Corporation to pay plaintiff the following amounts: a) P544,875.17 representing the loss allowance for the goods insured, plus interest at the legal rate (6% p.a.) reckoned from the time of filing of this case until full payment is made; b) P50,000.00 for and as attorneys fees; and c) the cost of suit. 2. Ordering defendant Iron Bulk Shipping Co. Inc. immediately upon payment by defendant Pioneer of the foregoing award to the plaintiff, to reimburse defendant Pioneer the total amount it paid to the plaintiff, in respect to its right of subrogation. 3. Denying the counterclaims of all the defendants and the cross-claim of defendant Wangs Company, Incorporated and Iron Bulk Shipping Co., Inc. for lack of merit. 4. Granting the cross-claim of defendant Pioneer Asia Insurance Corporation against defendant Iron Bulk by virtue of its right of subrogation. 5. Dismissing the case against defendant Wangs Company, Inc. SO ORDERED.[4] Only Iron Bulk filed the present petition raising the following Assignment of Errors: FIRSTLY, the Court of Appeals erred in its insistent reliance on the pro forma Bills of Lading to establish the condition of the cargo upon loading; SECONDLY, the Court of Appeals erred in not exculpating petitioner since the cargo was not contaminated during the time the same was in possession of the vessel, as evidenced by the express finding of the lower court that the contamination and rusting was chemically established to have been caused by fresh water; THRIDLY, the Court of Appeals erred in making a sweeping finding that the petitioner as carrier failed to exercise the requisite diligence under the law, which is contrary to what is demonstrated by the evidence adduced; and FINALLY, the Court of Appeals erred in affirming the amount of damages adjudicated by the Court below, which is at best speculative and not supported by damages. [5] The general rule is that only questions of law are entertained in petitions for review by certiorari under Rule 45 of the Rules of Court. The trial courts findings of fact, which the Court of Appeals affirmed, are generally binding and conclusive upon this court.[6] There are recognized exceptions to this rule, among which are: (1) the conclusion is grounded on speculations, surmises or conjectures; (2) the inference is manifestly mistaken, absurd or impossible; (3) there is grave abuse of discretion; (4) the judgment is based on a misapprehension of facts; (5) the findings of facts are conflicting; (6) there is no citation of specific evidence on which the factual findings are based; (7) the finding of absence of facts is

contradicted by the presence of evidence on record; (8) the findings of the CA are contrary to the findings of the trial court; (9) the CA manifestly overlooked certain relevant and undisputed facts that, if properly considered, would justify a different conclusion; (10) the findings of the CA are beyond the issues of the case; and (11) such findings are contrary to the admissions of both parties.[7] Petitioner failed to demonstrate that its petition falls under any one of the above exceptions, except as to damages which will be discussed forthwith. Anent the first assigned error: That the Court of Appeals erred in relying on the pro forma Bills of Lading to establish the condition of the cargo upon landing. There is no merit to petitioners contention that the Bill of Lading covering the subject cargo cannot be relied upon to indicate the condition of the cargo upon loading. It is settled that a bill of lading has a two-fold character. In Phoenix Assurance Co., Ltd. vs. United States Lines, we held that: [A] bill of lading operates both as a receipt and as a contract. It is a receipt for the goods shipped and a contract to transport and deliver the same as therein stipulated. As a receipt, it recites the date and place of shipment, describes the goods as to quantity, weight, dimensions, identification marks and condition, quality and value. As a contract, it names the contracting parties, which include the consignee, fixes the route, destination, and freight rate or charges, and stipulates the rights and obligations assumed by the parties.[8] We find no error in the findings of the appellate court that the questioned bill of lading is a clean bill of lading, i.e., it does not indicate any defect in the goods covered by it, as shown by the notation, CLEAN ON BOARD[9] and Shipped at the Port of Loading in apparent good condition on board the vessel for carriage to Port of Discharge.[10] Petitioner presented evidence to prove that, contrary to the recitals contained in the subject bill of lading, the cargo therein described as clean on board is actually wet and covered with rust. Indeed, having the nature of a receipt, or an acknowledgement of the quantity and condition of the goods delivered, the bill of lading, like any other receipts, may be explained, varied or even contradicted.[11] However, we agree with the Court of Appeals that far from contradicting the recitals contained in the said bill, petitioners own evidence shows that the cargo covered by the subject bill of lading, although it was partially wet and covered with rust was, nevertheless, found to be in a fair, usually accepted condition when it was accepted for shipment.[12] The fact that the issued bill of lading is pro forma is of no moment. If the bill of lading is not truly reflective of the true condition of the cargo at the time of loading to the effect that the said cargo was indeed in a damaged state, the carrier could have refused to accept it, or at the least, made a marginal note in the bill of lading indicating the true condition of the merchandise. But it did not. On the contrary, it accepted the subject cargo and even agreed to the issuance of a clean bill of lading without taking any exceptions with respect to the recitals contained therein. Since the carrier failed to annotate in the bill of lading the alleged damaged condition of the cargo when it was loaded, said carrier and the petitioner, as its representative, are bound by the description appearing therein and they are now estopped from denying the contents of the said bill. Petitioner presented in evidence the Mates Receipts[13] and a Survey Report[14] to prove the damaged condition of the cargo. However, contrary to the asseveration of petitioner, the Mates Receipts and the Survey Report which were both dat ed November 6, 1991, are unreliable evidence of the true condition of the shipment at the time of loading since said receipts and report were issued twenty days prior to loading and before the issuance of the clean bill of lading covering the subject cargo on November 26, 1991. Moreover, while the surveyor, commissioned by the carrier to inspect the subject cargo, found the inspected steel goods to be contaminated with rust he, nonetheless, estimated the merchandise to be in a fair and usually accepted condition. Anent the second and third assigned errors: That the Court of Appeals erred in not finding that the contamination and rusting was chemically to have been caused by fresh water; and that the appellate court erred in finding that petitioner failed to exercise the requisite diligence under the law. Petitioners arguments in support of the assigned errors are not plausible. Even granting, for the sake of argument, that the subject cargo was already in a damaged condition at the time it was accepted for transportation, the carrier is not relieved from its responsibility to exercise due care in handling the merchandise and in employing the necessary precautions to prevent

the cargo from further deteriorating. It is settled that the extraordinary diligence in the vigilance over the goods tendered for shipment requires the common carrier to know and to follow the required precaution for avoiding damage to, or destruction of the goods entrusted to it for safe carriage and delivery.[15] It requires common carriers to render service with the greatest skill and foresight and to use all reasonable means to ascertain the nature and characteristic of goods tendered for shipment, and to exercise due care in the handling and stowage, including such methods as their nature requires.[16] Under Article 1742 of the Civil Code, even if the loss, destruction, or deterioration of the goods should be caused, among others, by the character of the goods, the common carrier must exercise due diligence to forestall or lessen the loss. This extraordinary responsibility lasts from the time the goods are unconditionally placed in the possession of, and received by the carrier for transportation until the same are delivered, actually or constructively, by the carrier to the consignee, or to the person who has a right to receive them.[17] In the instant case, if the carrier indeed found the steel sheets to have been covered by rust at the time that it accepted the same for transportation, such finding should have prompted it to apply additional safety measures to make sure that the cargo is protected from corrosion. This, the carrier failed to do. Article 1734 of the Civil Code states that: Common carriers are responsible for the loss, destruction or deterioration of the goods, unless the same is due to any of the following causes only: (1) Flood, storm, earthquake, lightning, or other natural disaster or calamity; (2) Act of the public enemy in war, whether international or civil; (3) Act or omission of the shipper or owner of the goods; (4) The character of the goods or defects in the packing or in the containers; (5) Order or act of competent public authority. Except in the cases mentioned under Article 1734, if the goods are lost, destroyed or deteriorated, common carriers are presumed to have been at fault or to have acted negligently, unless they prove that they observed extraordinary diligence as required under the law. [18] The Court of Appeals did not err in finding that no competent evidence was presented to prove that the deterioration of the subject cargo was brought about by any of the causes enumerated under the aforequoted Article 1734 of the said Code. We likewise agree with appellate courts finding that the carrier failed to present proof that it exercised extraordinary diligence in its vigilance over the goods. The presumption that the carrier was at fault or that it acted negligently was not overcome by any countervailing evidence. Anent the last assigned error: That the Court of Appeals erred in affirming the amount of damages awarded by the trial court. We agree with the contention of the petitioner in its last assigned error that the amount of damages adjudicated by the trial court and affirmed by the appellate court is not in consonance with the evidence presented by the parties. The judgments of both lower courts are based on misapprehension of facts as we find no competent evidence to prove the actual damages sustained by respondent. Based on the Packing List issued by Burwill (Agencies) Limited, the supplier of the steel sheets, the cargo consigned to Remington consisted of hot rolled steel sheets with lengths of eight feet and twenty feet. The eight-foot length steel sheets contained in 142 packages had a weight of 491.54 metric tons while the twenty-foot steel sheets which were contained in 52 packages weighed 194.25 metric tons.[19] The goods were valued at $320.00 per metric ton.[20] It is not disputed that at the time of inspection of the subject merchandise conducted by SGS Far East Limited on January 21-24, 1992 and January 27-28, 1992, only 30% of said goods originally consigned to Remington was available for examination at Remingtons warehouse in Manila and that Remington had already disposed of the remaining 70%. In the Certificate of Inspection issued by SGS, dated February 18, 1992, it was reported that the surface of the steel sheets with length of twenty feet were found to be rusty extending from 60 % to 80% per plate.[21]However, there was no proof to show how many metric tons of twenty-foot and eightfoot length steel sheets, respectively, comprise the remaining 30 % of the cargo. No competent evidence was presented to prove the weight of the remaining twenty-foot length steel sheets, on the basis of which the amount of actual damages could have been ascertained. Remington claims that 70% of the twenty-foot length steel sheets were damaged. Remingtons general manager, Rowina Tan Saban, testified that the 70% figure was based on the reports submitted by SGS and Tan-Gatue and Remingtons independent survey to

confirm these reports.[22] Saban further testified that on the basis of these reports, Remington came up with a summary of the amount of damages sustained by the subject cargo, to wit: Plates 8 ft lengths 491.540 MT US$157,292.80 Quantity Damaged 25% Loss Allowance 13% Total Plates 8 ft lengths US$ 15,211.56 Plates 20 ft lengths 194.025 MT US$ 62,088.00 Quantity Damaged 70% Loss Allowance 35% Total Plates 20 ft lengths P544,875.71 with the following detailed computation: Plates under 8 ft lengths 491.540 MT @ $320./MT US $157,292.80 Multiply by 25% Qty. damaged $ 39,323.20 13% Loss allowance $ 5,112.02 Plates under 20 ft. lengths 194.025 MT @ $320./MT US $ 62,088.00 Multiple 70% Qty. damaged US $ 43,461.60 35% Loss allowance $ 15,211.56 Total claim US $ 5,112.02 $15,211.56 US $20,323.58 @ $26.81 = P544,875.17 and which the trial court based the actual damages awarded in favor of Remington. However, after a careful examination of the reports submitted by SGS and Tan-Gatue, we find nothing in the said reports and computation to justify the claim of Remington that 70 % of the twenty-foot length steel sheets were damaged. Neither does the alleged survey conducted by Remington consisting only of photographs,[23] prove the quantity of the damaged cargo. As to the eight-foot length steel sheets, SGS reported that they were found oiled all over which makes it hard to determine the rust condition on its surface. [24] On the other hand, the report issued by Tan-Gatue did not specify the extent of damage done to the said merchandise.[25] There is also no proof of the weight of the remaining eight-foot length steel sheets. From the foregoing, it is evident that the extent of actual damage to the subject cargo is likewise not satisfactorily proven. It is settled that actual or compensatory damages are not presumed and should be proven before they are awarded. In Spouses Quisumbing vs. Meralco[26], we held that Actual damages are compensation for an injury that will put the injured party in the position where it was before it was injured. They pertain to such injuries or losses that are actually sustained and susceptible of measurement. Except as provided by law or stipulation, a party is entitled to an adequate compensation only for such pecuniary loss as it has duly proven. Hence, for failure of Remington to present sufficient evidence which is susceptible of measurement, it is not entitled to actual damages. Nonetheless, since it was established that the subject steel sheets sustained damage by reason of the negligence of the carrier, albeit no competent proof was presented to justify the award of actual damages, we find that Remington is entitled to temperate damages in accordance with Articles 2216, 2224 and 2225 of the Civil Code, to wit: Art. 2216. No proof of pecuniary loss is necessary in order that moral, nominal, temperate, liquidated or exemplary damages may be adjudicated. The assessment of such damages, except liquidated ones, is left to the discretion of the court, according to the circumstances of each case. Art. 2224. Temperate or moderate damages, which are more than nominal but less than compensatory damages, may be recovered when the court finds that some pecuniary loss has been suffered but its amount cannot, from the nature of the case, be proved with certainty. Art. 2225. Temperate damages must be reasonable under the circumstances. Thirty percent of the alleged cost of damages, i.e., P544, 875.17 or P165,000.00 is reasonable enough for temperate damages. We likewise agree with petitioners claim that it should not be held liable for the payment of attorneys fees because it was always willing to settle its liability by offering to pay 30 % of Remingtons claim and that it is only Remingtons unwarranted refusal to accept such offer that

led to the filing of the instant case. As found earlier, there is no evidence that the 70% of the 20foot length steel sheets which had been disposed of had been damaged. Neither is there competent evidence proving the actual extent of damage sustained by the eight-foot length steel sheets. Petitioner was therefore justified in refusing to satisfy the full amount of Remingtons claims. WHEREFORE, the assailed Decision of the Court of Appeals dated August 28, 1998 and the Resolution dated December 24, 1998, in CA-G.R. CV No. 49725 are MODIFIED as follows: The award of actual damages and attorneys fees are deleted. Respondent is awarded temperate damages in the amount of P165,000.00. In all other respects, the appealed decision and resolution are affirmed. No pronouncement as to costs. SO ORDERED. Puno, (Chairman), Quisumbing, Callejo, Sr., and Tinga. JJ., concur.

G.R. No. 140349 June 29, 2005 SULPICIO LINES, INC., petitioner, vs. FIRST LEPANTO-TAISHO INSURANCE CORPORATION, respondent. DECISION CHICO-NAZARIO, J.: Before Us is a Petition for Review on Certiorari assailing the Decision1 of the Court of Appeals reversing the Decision2 of the Regional Trial Court (RTC) of Manila, Branch XIV, dismissing the complaint for damages for failure of the plaintiff to prove its case with a preponderance of evidence. Assailed as well is the Resolution3 of the Court of Appeals denying petitioners Motion for Reconsideration. THE FACTS On 25 February 1992, Taiyo Yuden Philippines, Inc. (owner of the goods) and Delbros, Inc. (shipper) entered into a contract, evidenced by Bill of Lading No. CEB/SIN-008/92 issued by the latter in favor of the owner of the goods, for Delbros, Inc. to transport a shipment of goods consisting of three (3) wooden crates containing one hundred thirty-six (136) cartons of inductors and LC compound on board the V Singapore V20 from Cebu City to Singapore in favor of the consignee, Taiyo Yuden Singapore Pte, Ltd. For the carriage of said shipment from Cebu City to Manila, Delbros, Inc. engaged the services of the vessel M/V Philippine Princess, owned and operated by petitioner Sulpicio Lines, Inc. (carrier). The vessel arrived at the North Harbor, Manila, on 24 February 1992. During the unloading of the shipment, one crate containing forty-two (42) cartons dropped from the cargo hatch to the pier apron. The owner of the goods examined the dropped cargo, and upon an alleged finding that the contents of the crate were no longer usable for their intended purpose, they were rejected as a total loss and returned to Cebu City. The owner of the goods filed a claim with herein petitioner-carrier for the recovery of the value of the rejected cargo which was refused by the latter. Thereafter, the owner of the goods sought payment from respondent First Lepanto-Taisho Insurance Corporation (insurer) under a marine insurance policy issued to the former. Respondent-insurer paid the claim less thirty-five percent (35%) salvage value or P194, 220.31. The payment of the insurance claim of the owner of the goods by the respondent-insurer subrogated the latter to whatever right or legal action the owner of the goods may have against Delbros, Inc. and petitioner-carrier, Sulpicio Lines, Inc. Thus, respondent-insurer then filed claims for reimbursement from Delbros, Inc. and petitioner-carrier Sulpicio Lines, Inc. which were subsequently denied. On 04 November 1992, respondent-insurer filed a suit for damages docketed as Civil Case No. 92-63337 with the trial court against Delbros, Inc. and herein petitioner-carrier. On 05 February 1993, petitioner-carrier filed its Answer with Counterclaim. Delbros, Inc. filed on 15 April 1993 its Answer with Counterclaim and Cross-claim, alleging that assuming the contents of the crate in question were truly in bad order, fault is with herein petitioner-carrier which was responsible for the unloading of the crates. Petitioner-carrier filed its Answer to Delbros, Inc.s cross -claim asserting that it observed extraordinary diligence in the handling, storage and general care of the shipment and that subsequent inspection of the shipment by the Manila Adjusters and Surveyors Company showed that the contents of the third crate that had fallen were found to be in apparent sound condition, except that "2 cello bags each of 50 pieces ferri inductors No. LC FL 112270K-60 (c) were unaccounted for and missing as per packaging list." After hearing, the trial court dismissed the complaint for damages as well as the counterclaim filed by therein defendant Sulpicio Lines, Inc. and the cross-claim filed by Delbros, Inc. According to the RTC: The plaintiff has failed to prove its case. The first witness for the plaintiff merely testified about the payment of the claim based on the documents accompanying the claim which were the Packing List, Commercial Invoices, Bill of Lading, Claims Statement, Marine Policies, Survey Report, Marine Risk Note, and the letter to Third Party carriers and shipping lines (Exhibit A-J). The check was paid and delivered to the assured as evidenced by the check voucher and the subrogation receipt. On cross-examination by counsel for the Sulpicio Lines, he said that their company paid the claim less 35% salvage value based on the adjuster report. This testimony is hearsay.

The second witness for the plaintiff, Arturo Valdez, testified, among others, that he, together with a co-surveyor and a representative of Sulpicio Lines had conducted a survey of the shipment at the compound of Sulpicio Lines. He prepared a survey report (Exhibits G and G-1) and took a picture of shipment (Exhibit G-2). On cross-examination, he said that two cartons were torn at the sides with top portion flaps opened and the 41 cartons were properly sealed and in good order conditions. Two cartons were already opened and slightly damaged. He merely looked at them but did not conduct an inspection of the contents. What he was referring to as slightly damaged were the cartons only and not the contents. From the foregoing evidence, it is apparent that the plaintiff had failed to prove its case with a preponderance of evidence. . WHEREFORE, in view of the foregoing considerations, judgment is hereby rendered dismissing the Complaint, defendant Sulpicio Lines counterclaim and defendant Delbros Inc.s cross claim.4 A Motion for Reconsideration was then filed by herein respondent-insurer and subsequently denied by the trial court in an Order dated 07 February 1995 on the ground that it did not raise any new issue. Thus, respondent-insurer instituted an appeal with the Court of Appeals, which reversed the dismissal of the complaint by the lower court, the decretal portion of which reads: WHEREFORE, the appeal is granted. The decision appealed from is REVERSED. Defendantsappellees Delbros and Sulpicio Lines are hereby ordered to pay, jointly and severally, plaintiffappellant the sum of P194,220.31 representing actual damages, plus legal interest counted from the filing of the complaint until fully paid.5 The appellate court disposed of the issues in the case in this wise: Furthermore, the evidence shows that one of the three crates fell during the unloading at the pier in Manila. The wooden crate which fell was damaged such that this particular crate was not anymore sent to Singapore and was instead shipped back to Cebu from Manila. Upon examination, it was found that two (2) cartons of the forty-two (42) cartons contained in this crate were externally damaged. They were torn at the sides and their top portions or flaps were open. These facts were admitted by all the parties. Defendant-appellees, however, insist that it was only the external packaging that was damaged, and that there was no actual damage to the goods such that would make them liable to the shipper. This theory is erroneous. When the goods are placed at a common carriers possession for delivery to a specified consignee, they are in good order and condition and are supposed to be transported and delivered to the consignee in the same state. In the case herein, the goods were received by defendant-appellee Delbros in Cebu properly packed in cardboard cartons and then placed in wooden crates, for delivery to the consignee in Singapore. However, before the shipment reached Singapore (while it was in Manila) one crate and 2 cartons contained therein were not anymore in their original state. They were no longer fit to be sent to Singapore. . As We have already found, there is damage suffered by the goods of the shipper. This consists in the destruction of one wooden crate and the tearing of two of the cardboard boxes therein rendering then unfit to be sent to Singapore. Defendant-appellee Sulpicio Lines admits that this crate fell while it was being unloaded at the Manila pier. Falling of the crate was negligence on the part of defendant-appellee Sulpicio Lines under the doctrine of res ipsa loquitur. Defendantappellee Sulpicio Lines cannot exculpate itself from liability because it failed to prove that it exercised due diligence in the selection and supervision of its employees to prevent the damage.6 On 21 June 1999, herein petitioner-carrier filed its Motion for Reconsideration of the decision of the Court of Appeals which was subsequently denied in a Resolution dated 13 October 1999. Hence, the instant petition. During the pendency of the appeal before this Court, Delbros, Inc. filed a manifestation stating that its appeal7filed before this Court had been dismissed for being filed out of time and thus the case as against it was declared closed and terminated. As a consequence, it paid in full the amount of the damages awarded by the appellate court to the respondent-insurer. Before this Court, Delbros, Inc. prays for reimbursement, contribution, or indemnity from its co-defendant, herein petitioner-carrier Sulpicio Lines, Inc. for whatever it had paid to respondent-insurer in

consonance with the decision of the appellate court declaring both Delbros, Inc. and petitionercarrier Sulpicio Lines, Inc. jointly and severally liable. ISSUES Petitioner-carrier raises the following issues in its petition: 1. The Court of Appeals erred in not holding that the trial court justly and correctly dismissed the complaint against Sulpicio Lines, which dismissal is already final. 2. The Court of Appeals erred in not dismissing the appeal for failure of appellant to comply with the technical requirement of the Rules of Court. RULING OF THE COURT We shall first address the procedural issue raised by petitioner-carrier, Sulpicio Lines, Inc. that the Court of Appeals should have dismissed the appeal for failure of respondent-insurer to attach a copy of the decision of the trial court to its appellants brief in violation of Rule 44, Section 13(h) of the Rules of Civil Procedure.8 A perusal of the records will show, however, that in a Resolution9 dated 13 August 1996, the Court of Appeals required herein respondent-insurer to submit seven (7) copies of the questioned decision within five (5) days from notice. Said Resolution was properly complied with. As a rule, the right to appeal is a statutory right and one who seeks to avail of that right must comply with the manner required by the pertinent rules for the perfection of an appeal. Nevertheless, this Court has allowed the filing of an appeal upon subsequent compliance with the requirements imposed by law, where a strict application of the technical rules will impair the proper administration of justice. As enunciated by the Court in the case of Jaro v. Court of Appeals:10 There is ample jurisprudence holding that the subsequent and substantial compliance of an appellant may call for the relaxation of the rules of procedure. In Cusi-Hernandez vs. Diaz [336 SCRA 113] and Piglas-Kamao vs. National Labor Relations Commission [357SCRA 640], we ruled that the subsequent submission of the missing documents with the motion for reconsideration amounts to substantial compliance. The reasons behind the failure of the petitioners in these two cases to comply with the required attachments were no longer scrutinized.11 We see no error, therefore, on the part of the Court of Appeals when it gave due course to the appeal after respondent-insurer had submitted copies of the RTC decision, albeit belatedly. We now come to the substantial issues alleged by petitioner-carrier. The pivotal question to be considered in the resolution of this issue is whether or not, based on the evidence presented during the trial, the owner of the goods, respondent-insurers predecessor-in-interest, did incur damages, and if so, whether or not petitioner-carrier is liable for the same. It cannot be denied that the shipment sustained damage while in the custody of petitionercarrier. It is not disputed that one of the three (3) crates did fall from the cargo hatch to the pier apron while petitioner-carrier was unloading the cargo from its vessel. Neither is it impugned that upon inspection, it was found that two (2) cartons were torn on the side and the top flaps were open and that two (2) cello bags, each of 50 pieces ferri inductors, were missing from the cargo. Petitioner-carrier contends that its liability, if any, is only to the extent of the cargo damage or loss and should not include the lack of fitness of the shipment for transport to Singapore due to the damaged packing. This is erroneous. Petitioner-carrier seems to belabor under the misapprehension that a distinction must be made between the cargo packaging and the contents of the cargo. According to it, damage to the packaging is not tantamount to damage to the cargo. It must be stressed that in the case at bar, the damage sustained by the packaging of the cargo while in petitioner-carriers custody resulted in its unfitness to be transported to its consignee in Singapore. Such failure to ship the cargo to its final destination because of the ruined packaging, indeed, resulted in damages on the part of the owner of the goods. The falling of the crate during the unloading is evidence of petitioner-carriers negligence in handling the cargo. As a common carrier, it is expected to observe extraordinary diligence in the handling of goods placed in its possession for transport.12 The standard of extraordinary diligence imposed upon common carriers is considerably more demanding than the standard of ordinary diligence, i.e., the diligence of a good paterfamiliasestablished in respect of the ordinary relations between members of society.13 A common carrier is bound to transport its cargo and its passengers safely "as far as human care and foresight can provide, using the utmost diligence of a very cautious person, with due regard to all circumstances."14 The extraordinary diligence in the vigilance over the goods tendered for shipment requires the common carrier to

know and to follow the required precaution for avoiding the damage to, or destruction of, the goods entrusted to it for safe carriage and delivery. 15It requires common carriers to render service with the greatest skill and foresight and "to use all reasonable means to ascertain the nature and characteristic of goods tendered for shipment, and to exercise due care in the handling and stowage, including such methods as their nature requires." 16 Thus, when the shipment suffered damages as it was being unloaded, petitioner-carrier is presumed to have been negligent in the handling of the damaged cargo. Under Articles 173517 and 175218 of the Civil Code, common carriers are presumed to have been at fault or to have acted negligently in case the goods transported by them are lost, destroyed or had deteriorated. To overcome the presumption of liability for loss, destruction or deterioration of goods under Article 1735, the common carrier must prove that they observed extraordinary diligence as required in Article 173319 of the Civil Code.20 Petitioner-carrier miserably failed to adduce any shred of evidence of the required extraordinary diligence to overcome the presumption that it was negligent in transporting the cargo. Coming now to the issue of the extent of petitioner-carriers liability, it is undisputed that respondent-insurer paid the owner of the goods under the insurance policy the amount of P194,220.31 for the alleged damages the latter has incurred. Neither is there dispute as to the fact that Delbros, Inc. paid P194,220.31 to respondent-insurer in satisfaction of the whole amount of the judgment rendered by the Court of Appeals. The question then is: To what extent is Sulpicio Lines, Inc., as common carrier, liable for the damages suffered by the owner of the goods? Upon respondent-insurers payment of the alleged amount of loss suffered by the insured (the owner of the goods), the insurer is entitled to be subrogated pro tanto to any right of action which the insured may have against the common carrier whose negligence or wrongful act caused the loss.21 Subrogation is the substitution of one person in the place of another with reference to a lawful claim or right, so that he who is substituted succeeds to the rights of the other in relation to a debt or claim, including its remedies or securities. 22 The rights to which the subrogee succeeds are the same as, but not greater than, those of the person for whom he is substituted, that is, he cannot acquire any claim, security or remedy the subrogor did not have. 23 In other words, a subrogee cannot succeed to a right not possessed by the subrogor. 24 A subrogee in effect steps into the shoes of the insured and can recover only if the insured likewise could have recovered.25 As found by the Court of Appeals, there was damage suffered by the goods which consisted in the destruction of one wooden crate and the tearing of two (2) cardboard boxes therein which rendered them unfit to be sent to Singapore.26 The falling of the crate was negligence on the part of Sulpicio Lines, Inc. for which it cannot exculpate itself from liability because it failed to prove that it exercised extraordinary diligence.27 Hence, we uphold the ruling of the appellate court that herein petitioner-carrier is liable to pay the amount paid by respondent-insurer for the damages sustained by the owner of the goods. As stated in the manifestation filed by Delbros, Inc., however, respondent-insurer had already been paid the full amount granted by the Court of Appeals, hence, it will be tantamount to unjust enrichment for respondent-insurer to again recover damages from herein petitioner-carrier. With respect to Delbros, Inc.s prayer contained in its manifestation that, in case the decision in the instant case be adverse to petitioner-carrier, a pronouncement as to the matter of reimbursement, indemnification or contribution in favor of Delbros, Inc. be included in the decision, this Court will not pass upon said issue since Delbros, Inc. has no personality before this Court, it not being a party to the instant case. Notwithstanding, this shall not bar any action Delbros, Inc. may institute against petitioner-carrier Sulpicio Lines, Inc. with respect to the damages the latter is liable to pay. WHEREFORE, premises considered, the assailed Decision of the Court of Appeals dated 26 May 1999 and its Resolution dated 13 October 1999 are hereby AFFIRMED. No costs. SO ORDERED. Puno, (Chairman), Austria-Martinez, Callejo, Sr., and Tinga, JJ., concur.

G.R. No. 164349 January 31, 2006 RADIO COMMUNICATIONS OF THE PHILIPPINES, INC. (RCPI), Petitioner, vs. ALFONSO VERCHEZ, GRACE VERCHEZ-INFANTE, MARDONIO INFANTE, ZENAIDA VERCHEZ-CATIBOG, AND FORTUNATO CATIBOG, Respondents. DECISION CARPIO MORALES, J.: On January 21, 1991, Editha Hebron Verchez (Editha) was confined at the Sorsogon Provincial Hospital due to an ailment. On even date, her daughter Grace Verchez-Infante (Grace) immediately hied to the Sorsogon Branch of the Radio Communications of the Philippines, Inc. (RCPI) whose services she engaged to send a telegram to her sister Zenaida Verchez-Catibog (Zenaida) who was residing at 18 Legal St., GSIS Village, Quezon City1 reading: "Send check money Mommy hospital." For RCPIs services, Grace paid P10.502 for which she was issued a receipt.3 As three days after RCPI was engaged to send the telegram to Zenaida no response was received from her, Grace sent a letter to Zenaida, this time thru JRS Delivery Service, reprimanding her for not sending any financial aid. Immediately after she received Graces letter, Zenaida, along with her husband Fortunato Catibog, left on January 26, 1991 for Sorsogon. On her arrival at Sorsogon, she disclaimed having received any telegram. In the meantime, Zenaida and her husband, together with her mother Editha left for Quezon City on January 28, 1991 and brought Editha to the Veterans Memorial Hospital in Quezon City where she was confined from January 30, 1991 to March 21, 1991. The telegram was finally delivered to Zenaida 25 days later or on February 15, 1991. 4 On inquiry from RCPI why it took that long to deliver it, a messenger of RCPI replied that he had nothing to do with the delivery thereof as it was another messenger who previously was assigned to deliver the same but the address could not be located, hence, the telegram was resent on February 2, 1991, and the second messenger finally found the address on February 15, 1991. Edithas husband Alfonso Verchez (Verchez), by letter of March 5, 1991, 5 demanded an explanation from the manager of the Service Quality Control Department of the RCPI, Mrs. Lorna D. Fabian, who replied, by letter of March 13, 1991, 6 as follows: Our investigation on this matter disclosed that subject telegram was duly processed in accordance with our standard operating procedure. However, delivery was not immediately effected due to the occurrence of circumstances which were beyond the control and foresight of RCPI. Among others, during the transmission process, the radio link connecting the points of communication involved encountered radio noise and interferences such that subject telegram did not initially registered (sic) in the receiving teleprinter machine. Our internal message monitoring led to the discovery of the above. Thus, a repeat transmission was made and subsequent delivery was effected. (Underscoring supplied) Verchezs lawyer thereupon wrote RCPIs manager Fabian, by letter of July 23, 1991,7 requesting for a conference on a specified date and time, but no representative of RCPI showed up at said date and time. On April 17, 1992, Editha died. On September 8, 1993, Verchez, along with his daughters Grace and Zenaida and their respective spouses, filed a complaint against RCPI before the Regional Trial Court (RTC) of Sorsogon for damages. In their complaint, the plaintiffs alleged that, inter alia, the delay in delivering the telegram contributed to the early demise of the late Editha to their damage and prejudice,8 for which they prayed for the award of moral and exemplary damages 9 and attorneys fees.10 After its motion to dismiss the complaint for improper venue 11 was denied12 by Branch 5 of the RTC of Sorsogon, RCPI filed its answer, alleging that except with respect to Grace,13 the other plaintiffs had no privity of contract with it; any delay in the sending of the telegram was due to force majeure, "specifically, but not limited to, radio noise and

interferences which adversely affected the transmission and/or reception of the telegraphic message";14 the clause in the Telegram Transmission Form signed by Grace absolved it from liability for any damage arising from the transmission other than the refund of telegram tolls;15 it observed due diligence in the selection and supervision of its employees; and at all events, any cause of action had been barred by laches.16 The trial court, observing that "although the delayed delivery of the questioned telegram was not apparently the proximate cause of the death of Editha," ruled out the presence of force majeure. Respecting the clause in the telegram relied upon by RCPI, the trial court held that it partakes of the nature of a contract of adhesion. Finding that the nature of RCPIs business obligated it to dispatch t he telegram to the addressee at the earliest possible time but that it did not in view of the negligence of its employees to repair its radio transmitter and the concomitant delay in delivering the telegram on time, the trial court, upon the following provisions of the Civil Code, to wit: Article 2176 Whoever by act or omission causes damage to another, there being at fault or negligence, is obliged to pay for the damage done. Such fault or negligence if there is no pre-existing contractual relation between the parties, is called quasi-delict and is governed by the provisions of this Chapter. Article 1173 defines the fault of (sic) negligence of the obligor as the "omission of the diligence which is required by the nature of the obligation and corresponds with the circumstances of the person, of the time, or the place." In the instant case, the obligation of the defendant to deliver the telegram to the addressee is of an urgent nature. Its essence is the early delivery of the telegram to the concerned person. Yet, due to the negligence of its employees, the defendant failed to discharge of its obligation on time making it liable for damages under Article 2176. The negligence on the part of the employees gives rise to the presumption of negligence on the part of the employer.17 (Underscoring supplied), rendered judgment against RCPI. Accordingly, it disposed: WHEREFORE, in the light of the foregoing premises, judgment is hereby rendered in favor of the plaintiffs and against the defendant, to wit: Ordering the defendant to pay the plaintiffs the following amount: 1. The amount of One Hundred Thousand (P100,000.00) Pesos as moral damages; 2. The amount of Twenty Thousand (P20,000.00) Pesos as attorneys fees; and 3. To pay the costs. SO ORDERED.18 On appeal, the Court of Appeals, by Decision of February 27, 2004, 19 affirmed the trial courts decision. Hence, RCPIs present petition for review on certiorari, it raising the following questions: (1) "Is the award of moral damages proper even if the trial court found that there was no direct connection between the injury and the alleged negligent acts?" 20 and (2) "Are the stipulations in the Telegram Transmission Form, in the nature "contracts of adhesion" (sic)?21 RCPI insists that respondents failed to prove any causal connection between its delay in transmitting the telegram and Edithas death.22 RCPIs stand fails. It bears noting that its liability is anchored on culpa contractual or breach of contract with regard to Grace, and on tort with regard to her co-plaintiffs-hereinco-respondents. Article 1170 of the Civil Code provides: Those who in the performance of their obligations are guilty of fraud, negligence, or delay, and those who in any manner contravene the tenor thereof, are liable for damages. (Underscoring supplied) Passing on this codal provision, this Court explained: In culpa contractual x x x the mere proof of the existence of the contract and the failure of its compliance justify,prima facie, a corresponding right of relief. The law, recognizing the obligatory force of contracts, will not permit a party to be set free from liability for any kind

of misperformance of the contractual undertaking or a contravention of the tenor thereof. A breach upon the contract confers upon the injured party a valid cause for recovering that which may have been lost or suffered. The remedy serves to preserve the interests of the promissee that may include his "expectation interest," which is his interest in having the benefit of his bargain by being put in as good a position as he would have been in had the contract been performed, or his "reliance interest," which is his interest in being reimbursed for loss caused by reliance on the contract by being put in as good a position as he would have been in had the contract not been made; or his "restitution interest," which is his interest in having restored to him any benefit that he has conferred on the other party. Indeed, agreements can accomplish little, either for their makers or for society, unless they are made the basis for action. The effect of every infraction is to create a new duty, that is, to make recompense to the one who has been injured by the failure of another to observe his contractual obligation unless he can show extenuating circumstances, like proof of his exercise of due diligence x x x or of the attendance of fortuitous event, to excuse him from his ensuing liability. 23(Emphasis and underscoring supplied) In the case at bar, RCPI bound itself to deliver the telegram within the shortest possible time. It took 25 days, however, for RCPI to deliver it. RCPI invokes force majeure, specifically, the alleged radio noise and interferences which adversely affected the transmission and/or reception of the telegraphic message. Additionally, its messenger claimed he could not locate the address of Zenaida and it was only on the third attempt that he was able to deliver the telegram. For the defense of force majeure to prosper, x x x it is necessary that one has committed no negligence or misconduct that may have occasioned the loss. An act of God cannot be invoked to protect a person who has failed to take steps to forestall the possible adverse consequences of such a loss. Ones negligence may have concurred with an act of God in producing damage and injury to another; nonetheless, showing that the immediate or proximate cause of the damage or injury was a fortuitous event would not exempt one from liability. When the effect is found to be partly the result of a persons participation whether by active intervention, neglect or failure to act the whole occurrence is humanized and removed from the rules applicable to acts of God. xxxx Article 1174 of the Civil Code states that no person shall be responsible for a fortuitous event that could not be foreseen or, though foreseen, was inevitable. In other words, there must be an exclusion of human intervention from the cause of injury or loss.24 (Emphasis and underscoring supplied) Assuming arguendo that fortuitous circumstances prevented RCPI from delivering the telegram at the soonest possible time, it should have at least informed Grace of the nontransmission and the non-delivery so that she could have taken steps to remedy the situation. But it did not. There lies the fault or negligence. In an earlier case also involving RCPI, this Court held: Considering the public utility of RCPIs business and its contractual obligation to transmit messages, it should exercise due diligence to ascertain that messages are delivered to the persons at the given address and shouldprovide a system whereby in cases of undelivered messages the sender is given notice of non-delivery. Messages sent by cable or wireless means are usually more important and urgent than those which can wait for the mail.25 xxxx People depend on telecommunications companies in times of deep emotional stress or pressing financial needs. Knowing that messages about the illnesses or deaths of loved ones, births or marriages in a family, important business transactions, and notices of conferences or meetings as in this case, are coursed through the petitioner and similar corporations, it is incumbent upon them to exercise a greater amount of care and concern than that shown in this case. Every reasonable effort to inform senders of the nondelivery of messages should be undertaken.26

(Emphasis and underscoring supplied) RCPI argues, however, against the presence of urgency in the delivery of the telegram, as well as the basis for the award of moral damages, thus: 27 The request to send check as written in the telegraphic text negates the existence of urgency that private respondents allegations that time was of the essence imports. A check drawn against a Manila Bank and transmitted to Sorsogon, Sorsogon will have to be deposited in a bank in Sorsogon and pass thru a minimum clearing period of 5 days before it may be encashed or withdrawn. If the transmittal of the requested check to Sorsogon took 1 day private respondents could therefore still wait for 6 days before the same may be withdrawn. Requesting a check that would take 6 days before it could be withdrawn therefore contradicts plaintiffs claim of urgency or need. 28 At any rate, any sense of urgency of the situation was met when Grace Verchez was able to communicate to Manila via a letter that she sent to the same addressee in Manila thru JRS.29 xxxx As far as the respondent courts award for moral damages is concerned , the same has no basis whatsoever since private respondent Alfonso Verchez did not accompany his late wife when the latter went to Manila by bus. He stayed behind in Sorsogon for almost 1 week before he proceeded to Manila. 30 When pressed on cross-examination, private respondent Alfonso Verchez could not give any plausible reason as to the reason why he did not accompany his ailing wife to Manila.31 xxxx It is also important to consider in res olving private respondents claim for moral damages that private respondent Grace Verchez did not accompany her ailing mother to Manila.32 xxxx It is the common reaction of a husband to be at his ailing wifes side as much as possible. The fact that private respondent Alfonso Verchez stayed behind in Sorsogon for almost 1 week convincingly demonstrates that he himself knew that his wife was not in critical condition.33 (Emphasis and underscoring supplied) RCPIs arguments fail. For it is its breach of contract upon which its liability is, it bears repeating, anchored. Since RCPI breached its contract, the presumption is that it was at fault or negligent. It, however, failed to rebut this presumption. For breach of contract then, RCPI is liable to Grace for damages. And for quasi-delict, RCPI is liable to Graces co-respondents following Article 2176 of the Civil Code which provides: Whoever by act or omission causes damage to another, there being fault or negligence, is obliged to pay for the damage done. Such fault or negligence, if there is no pre-existing contractual relation between the parties, is called a quasi-delict and is governed by the provisions of this Chapter. (Underscoring supplied) RCPIs liability as an employer could of course be avoided if it could prove that it observed the diligence of a good father of a family to prevent damage. Article 2180 of the Civil Code so provides: The obligation imposed by Article 2176 is demandable not only for ones own acts or omissions, but also for those of persons for whom one is responsible. xxxx The owners and managers of an establishment or enterprise are likewise responsible for damages caused by their employees in the service of the branches in which the latter are employed or on the occasion of their functions. Employers shall be liable for the damages caused by their employees and household helpers acting within the scope of their assigned tasks, even though the former are not engaged in any business or industry. xxxx

The responsibility treated of in this article shall cease when the persons herein mentioned prove that they observed all the diligence of a good father of a family to prevent damage. (Underscoring supplied) RCPI failed, however, to prove that it observed all the diligence of a good father of a family to prevent damage. Respecting the assailed award of moral damages, a determination of the presence of the following requisites to justify the award is in order: x x x firstly, evidence of besmirched reputation or physical, mental or psychological suffering sustained by the claimant; secondly, a culpable act or omission factually established; thirdly, proof that the wrongful act or omission of the defendant is the proximate cause of damages sustained by the claimant; and fourthly, that the case is predicated on any of the instances expressed or envisioned by Article 2219 and Article 2220 of the Civil Code.34 Respecting the first requisite, evidence of suffering by the plaintiffs-herein respondents was correctly appreciated by the CA in this wise: The failure of RCPI to deliver the telegram containing the message of appellees on time, disturbed their filial tranquillity. Family members blamed each other for failing to respond swiftly to an emergency that involved the life of the late Mrs. Verchez, who suffered from diabetes.35 As reflected in the foregoing discussions, the second and third requisites are present. On the fourth requisite, Article 2220 of the Civil Code provides: Willful injury to property may be a legal ground for awarding moral damages if the court should find that, under the circumstances, such damages are justly due. The same rule applies to breaches of contract where the defendant acted fraudulently or in bad faith. (Emphasis and underscoring supplied) After RCPIs first attempt to deliver the telegram failed, it did not inform Grace of the non delivery thereof and waited for 12 days before trying to deliver it again, knowing as it should know that time is of the essence in the delivery of telegrams. When its second long-delayed attempt to deliver the telegram again failed, it, again, waited for another 12 days before making a third attempt. Such nonchalance in performing its urgent obligation indicates gross negligence amounting to bad faith. The fourth requisite is thus also present. In applying the above-quoted Article 2220, this Court has awarded moral damages in cases of breach of contract where the defendant was guilty of gross negligence amounting to bad faith, or in wanton disregard of his contractual obligation. 36 As for RCPIs tort-based liability, Article 2219 of the Civil Code provides: Moral damages may be recovered in the following and analogous cases: xxxx (10) Acts and actions referred to in Articles 21, 26, 27, 28, 29, 30, 32, 34, and 35. (Emphasis supplied) Article 26 of the Civil Code, in turn, provides: Every person shall respect the dignity, personality, privacy and peace of mind of his neighbors and other persons. The following and similar acts, though they may not constitute a criminal offense, shall produce a cause of action for damages, prevention, and other relief: xxxx (2) Meddling with or disturbing the private life or family relations of another. (Emphasis supplied) RCPIs negligence in not promptly performing its obligation undoubtedly disturbed the peace of mind not only of Grace but also her co-respondents. As observed by the appellate court, it disrupted the "filial tranquillity" among them as they blamed each other "for failing to respond swiftly to an emergency." The tortious acts and/or omissions complained of in this case are, therefore, analogous to acts mentioned under Article 26 of the Civil Code, which are among the instances of quasi-delict when courts may award moral damages under Article 2219 of the Civil Code.

In fine, the award to the plaintiffs-herein respondents of moral damages is in order, as is the award of attorneys fees, respondents having been compelled to litigate to protect their rights. Clutching at straws, RCPI insists that the limited liability clause in the "Telegram Transmission Form" is not a contract of adhesion. Thus it argues: Neither can the Telegram Transmission Form be considered a contract of adhesion as held by the respondent court. The said stipulations were all written in bold letters right in front of the Telegram Transmission Form. As a matter of fact they were beside the space where the telegram senders write their telegraphic messages. It would have been different if the stipulations were written at the back for surely there is no way the sender will easily notice them. The fact that the stipulations were located in a particular space where they can easily be seen, is sufficient notice to any sender (like Grace Verchez-Infante) where she could manifest her disapproval, leave the RCPI station and avail of the services of the other telegram operators.37 (Underscoring supplied) RCPI misunderstands the nature of a contract of adhesion. Neither the readability of the stipulations nor their physical location in the contract determines whether it is one of adhesion. A contract of adhesion is defined as one in which one of the parties imposes a ready-made form of contract, which the other party may accept or reject, but which the latter cannot modify. One party prepares the stipulation in the contract, while the other party merely affixes his signature or his "adhesion" thereto, giving no room for negotiation and depriving the latter of the opportunity to bargain on equal footing .38 (Emphasis and underscoring supplied) While a contract of adhesion is not necessarily void and unenforceable, since it is construed strictly against the party who drafted it or gave rise to any ambiguity therein, it is stricken down as void and unenforceable or subversive of public policy when the weaker party is imposed upon in dealing with the dominant bargaining party and is reduced to the alternative of taking it or leaving it, completely deprived of the opportunity to bargain on equal footing.39 This Court holds that the Court of Appeals finding that the parties contract is one of adhesion which is void is, given the facts and circumstances of the case, thus well-taken. WHEREFORE, the petition is DENIED, and the challenged decision of the Court of Appeals is AFFIRMED. Costs against petitioner. SO ORDERED.

THIRD DIVISION PERLA COMPANIA DE SEGUROS, G.R. No. 147746 INC. and BIENVENIDO S. PASCUAL, Petitioners, Present : PANGANIBAN, J., Chairman, SANDOVAL-GUTIERREZ, CORONA, CARPIO MORALES and GARCIA, JJ.

Meanwhile, respondents were busy watching television when they heard two loud explosions. The smell of gasoline permeated the air and, in no time, fire spread inside their house, destroying all their belongings, furniture and appliances. The city fire marshall conducted an investigation and thereafter submitted a report to the provincial fire marshall. He concluded that the fire was accidental. The report also disclosed that petitioner-corporation had no fire permit as required by law. Based on the same report, a criminal complaint for Reckless Imprudence Resulting to (sic) Damage in (sic) Property[1] was filed against petitioner Pascual. On the other hand, petitioner-corporation was asked to pay the amount of P7,992,350, inclusive of the value of the commercial building. At the prosecutors office, petitioner Pascual moved for the withdrawal of the complaint, which was granted. Respondents later on filed a civil complaint based on quasi-delict against petitioners for a sum of money and damages, alleging that Pascual acted with gross negligence while petitioner-corporation lacked the required diligence in the selection and supervision of Pascual as its employee. They prayed for payment of the following damages: 1. P2,070,000.00 - representing the value of the 2-storey residential building and the 3-door apartment; P5,922,350.00 - representing the value of the jewelries, appliances, [furniture], fixtures and cash; P8,300.00 a month for [lost rental] income from July 1995 until such time that the premises is restored to its former condition or payment for its value, whichever comes first; P2,000,000.00 for moral damages; P1,000,000.00 for exemplary damages, and

- versus -

SPS. GAUDENCIO SARANGAYA III and PRIMITIVA B. SARANGAYA, Respondents. Promulgated : October 25, 2005 x - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -x

DECISION

2.

CORONA, J.:

3.

This is an appeal by certiorari under Rule 45 of the 1997 Rules of Civil Procedure seeking to annul the decisions of the Court of Appeals (CA) dated June 29, 2000 and March 31, 2001, respectively, which affirmed the decision of the Regional Trial Court (RTC), Branch 21 of Santiago, Isabela. In 1986, respondent spouses Gaudencio Sarangaya III and Primitiva Sarangaya erected a semi-concrete, semi-narra, one-storey commercial building fronting the provincial road of Santiago, Isabela. The building was known as Super A Building and was subdivided into three doors, each of which was leased out. The two-storey residence of the Sarangayas was behind the second and third doors of the building. On the left side of the commercial building stood the office of the Matsushita Electric Philippine Corporation (Matsushita). In 1988, petitioner Perla Compania de Seguros, Inc. (petitioner-corporation), through its branch manager and co-petitioner Bienvenido Pascual, entered into a contract of lease of the first door of the Super A Building, abutting the office of Matsushita. Petitioner -corporation renovated its rented space and divided it into two. The left side was converted into an office while the right was used by Pascual as a garage for a 1981 model 4-door Ford Cortina, a company-provided vehicle he used in covering the different towns within his area of supervision. On July 7, 1988, Pascual left for San Fernando, Pampanga but did not bring the car with him. Three days later, he returned to Santiago and, after checking his appointments the next day, decided to warm up the car. When he pulled up the handbrake and switched on the ignition key, the engine made an odd sound and did not start. Thinking it was just the gasoline percolating into the engine, he again stepped on the accelerator and started the car. This revved the engine but petitioner again heard an unusual sound. He then saw a small flame coming out of the engine. Startled, he turned it off, alighted from the vehicle and started to push it out of the garage when suddenly, fire spewed out of its rear compartment and engulfed the whole garage. Pascual was trapped inside and suffered burns on his face, legs and arms.

4. 5. 6.

Attorneys fees equivalent to 15% of the total amount to be awarded to the plaintiffs.[2] During the trial, respondents presented witnesses who testified that a few days before the incident, Pascual was seen buying gasoline in a container from a nearby gas station. He then placed the container in the rear compartment of the car. In his answer, Pascual insisted that the fire was purely an accident, a caso fortuito, hence, he was not liable for damages. He also denied putting a container of gasoline in the cars rear compartment. For its part, petitioner-corporation refused liability for the accident on the ground that it exercised due diligence of a good father of a family in the selection and supervision of Pascual as its branch manager. After the trial, the court a quo ruled in favor of respondents. The decretal portion of the decision read: WHEREFORE, in the light of the foregoing considerations judgment is hereby rendered ORDERING the defendants, Bienvenido Pascual and Perla Compania de Seguros, Inc. to pay jointly and solidarily to the plaintiffs spouses Gaudencio and Primitiva Sarangaya the total sum of Two Million Nine Hundred Four Thousand Eight Hundred and Eighty Pesos ([P]2,904,880.00) as actual damages with legal interest thereon from December 12, 1995 until fully paid.[3] (emphasis supplied)

The court a quo declared that, although the respondents failed to prove the precise cause of the fire that engulfed the garage, Pascual was nevertheless negligent based on the

doctrine of res ipsa loquitur.[4] It did not, however, categorically rule that the gasoline container allegedly placed in the rear compartment of the car caused the fire. The trial court instead declared that both petitioners failed to adduce sufficient evidence to prove that they employed the necessary care and diligence in the upkeep of the car.[5] Contrary to the claims of petitionercorporation, the trial court also found that it failed to employ the diligence of a good father of a family, as required by law, in the selection and supervision of Pascual. With respect to the amount of damages, the trial court awarded to respondents no more than their claim for actual damages covering the cost of the 2-storey residential building and the commercial building, including their personal properties. It explained: According to the plaintiff Gaudencio Sarangaya III, he made a list of what was lost. His list includes the commercial building that was burned which he valued atP2,070,000.00. The defendants take exception to the value given by the plaintiff and for this purpose they submitted the tax declaration of the building which states that the market value is P183,770.00. The Court takes judicial notice that the valuation appearing on the tax declaration of property is always lower [than] the correct value thereof. Considering that the building that was burned was a two-storey residential house with a commercial building annex with a total floor area of 241 square meters as stated in the tax declaration, mostly concrete mixed with narra and other lumber materials, the value given by the plaintiffs of P2,070,000.00 is reasonable and credible and it shall be awarded to the plaintiffs. The other items listed are assorted [furniture] and fixtures totaling P307,000.00 assorted appliances worth P358,350.00; two filing cabinets worth P7,000.00 and clothing and other personal effects costing P350,000.00, household utensils costing P15,000.00. The Court finds them reasonable and credible considering the social and financial stature of the plaintiffs who are businessmen. There could be no question that they were able to acquire and own quite a lot of home furnishings and personal belongings. The costing however is high considering that these belongings were already used for quite some time so a 20% depreciation should be equitably deducted from the cost of acquisition submitted by plaintiffs. Thus, the total amount recoverable would be P1,037,350.00 less 20% or a total of P829,880.00. The P5,000.00 representing foodstock can also be ordered paid to the plaintiffs. x x x.[6] On appeal to the Court of Appeals, the appellate court again ruled in favor of respondents but modified the amount of damages awarded by the trial court. It held:

In their MR, petitioners contested the findings of fact of the appellate court. They denied any liability whatsoever to respondents but this was rejected by the CA for lack of merit. Thus, the present appeal. Respondents, on the other hand, argued in their MR that the award of nominal damages was erroneous. They prayed that, in lieu of the award of nominal damages, the case should instead be remanded to the trial court for reception of additional evidence on their claim for actual damages. The CA granted respondents MR. Hence they did not appeal the CAs decision to us. According to the CA: Anent Plaintiffs-Appellees plea that, in lieu of the Courts award of nominal damages, the case be remanded to the Court a quo, in the interest of justice, to enable them to adduce evidence to prove their claim for actual damages, we find the same meritorious. Accordingly, the Decision of the Court is hereby amended to read as follows: IN THE LIGHT OF ALL THE FOREGOING, the Decision of the Court a quo appealed from is AFFIRMED. The award of nominal damages is set aside. Let the records be remanded to the Court a quo for the reception of additional evidence by the Plaintiffs-Appellees and the Defendants-Appellants anent Plaintiffs-Appellees claim for actual damages.[8] (emphasis supplied)

Via this petition, petitioners ascribe the following errors to the appellate court: (a) THE COURT OF APPEALS ERRED IN APPLYING THE DOCTRINE OF [RES IPSA LOQUITUR] IN THE PRESENT CASE; THE COURT OF APPEALS ERRED WHEN IT FOUND PERLA NEGLIGENT IN THE SUPERVISION OF PASCUAL, AND CONSEQUENTLY, VICARIOUSLY LIABLE FOR THE FIRE BECAUSE PERLA FAILED TO ADDUCE EVIDENCE OF SUPERVISION OF EMPLOYEES CARE AND UPKEEP OF COMPANY VEHICLES REQUIRED BY THE SUPREME COURT ON TRANSPORTATION COMPANIES; AND THE COURT OF APPEALS ERRED WHEN IT ORDERED THE REMAND OF THE CASE TO RTC ISABELA FOR RECEPTION OF ADDITIONAL EVIDENCE BY THE SARANGAYA SPOUSES ON THEIR CLAIM FOR ACTUAL DAMAGES.[9]

(b)

(c) x x x the Decision of the Court a quo is AFFIRMED, with the modification that the Appellants are hereby ordered to pay the Appellees, jointly and severally, the total amount of P600,000.00 by way of nominal damages under Articles 2222 and 2223 of the New Civil Code, with interest thereon, at the rate of 6% per annum from the date of the Decision of this Court.[7]

The appellate court was in accord with the trial courts findings that the doctrine of res ipsa loquitur was correctly applied in determining the liability of Pascual and that petitionercorporation, as the employer, was vicariously liable to respondents. Nonetheless, for respondents failure to substantiate their actual loss, the appellate court granted nominal damages of P600,000 to them. Petitioners and respondents filed their respective motions for reconsideration.

Res ipsa loquitur is a Latin phrase which literally means the thing or the transaction speaks for itself.[10] It relates to the fact of an injury that sets out an inference to the cause thereof or establishes the plaintiffs prima facie case. [11] The doctrine rests on inference and not on presumption.[12] The facts of the occurrence warrant the supposition of negligence and they furnish circumstantial evidence of negligence when direct evidence is lacking.[13] The doctrine is based on the theory that the defendant either knows the cause of the accident or has the best opportunity of ascertaining it and the plaintiff, having no knowledge thereof, is compelled to allege negligence in general terms.[14] In such instance, the plaintiff relies on proof of the happening of the accident alone to establish negligence. [15]

The doctrine provides a means by which a plaintiff can pin liability on a defendant who, if innocent, should be able to explain the care he exercised to prevent the incident complained of. Thus, it is the defendants responsibility to show that there was no negligence on his part.[16] To sustain the allegation of negligence based on the doctrine of res ipsa loquitur, the following requisites must concur: 1) the accident is of a kind which does not ordinarily occur unless someone is negligent; the cause of the injury was under the exclusive control of the person in charge and the injury suffered must not have been due to any voluntary action or contribution on the part of the person injured.[17]

this case, the car where the fire originated was under the control of Pascual. Being its caretaker, he alone had the responsibility to maintain it and ensure its proper functioning. No other person, not even the respondents, was charged with that obligation except him. Where the circumstances which caused the accident are shown to have been under the management or control of a certain person and, in the normal course of events, the incident would not have happened had that person used proper care, the inference is that it occurred because of lack of such care.[23] The burden of evidence is thus shifted to defendant to establish that he observed all that was necessary to prevent the accident from happening. In this aspect, Pascual utterly failed. Under the third requisite, there is nothing in the records to show that respondents contributed to the incident. They had no access to the car and had no responsibility regarding its maintenance even if it was parked in a building they owned. On the second assigned error, we find no reason to reverse the decision of the Court of Appeals. The relationship between the two petitioners was based on the principle of pater familias according to which the employer becomes liable to the party aggrieved by its employee if he fails to prove due diligence of a good father of a family in the selection and supervision of his employees.[24] The burden of proof that such diligence was observed devolves on the employer who formulated the rules and procedures for the selection and hiring of his employees. In the selection of prospective employees, employers are required to examine them as to their qualifications, experience and service records.[25] While the petitioner-corporation does not appear to have erred in considering Pascual for his position, its lack of supervision over him made it jointly and solidarily liable for the fire. In the supervision of employees, the employer must formulate standard operating procedures, monitor their implementation and impose disciplinary measures for the breach thereof.[26] To fend off vicarious liability, employers must submit concrete proof, including documentary evidence, that they complied with everything that was incumbent on them.[27] Here, petitioner-corporations evidence hardly included any rule or regulation that Pascual should have observed in performing his functions. It also did not have any guidelines for the maintenance and upkeep of company property like the vehicle that caught fire. Petitioner-corporation did not require periodic reports on or inventories of its properties either. Based on these circumstances, petitioner-corporation clearly did not exert effort to be apprised of the condition of Pascuals car or its serviceability. Petitioner-corporations argument that the liability attached to employers only applies in cases involving the supervision of employees in the transportation business is incorrect. Article 2180 of the Civil Code states that employers shall be liable for the damage caused by their employees. The liability is imposed on all those who by their industry, profession or other enterprise have other persons in their service or supervision.[28] Nowhere does it state that the liability is limited to employers in the transportation business.

2)

3)

Under the first requisite, the occurrence must be one that does not ordinarily occur unless there is negligence. Ordinary refers to the usual course of events. [18] Flames spewing out of a car engine, when it is switched on, is obviously not a normal event. Neither does an explosion usually occur when a car engine is revved. Hence, in this case, without any direct evidence as to the cause of the accident, the doctrine of res ipsa loquitur comes into play and, from it, we draw the inference that based on the evidence at hand, someone was in fact negligent and responsible for the accident. The test to determine the existence of negligence in a particular case may be stated as follows: did the defendant in committing the alleged negligent act, use reasonable care and caution which an ordinarily prudent person in the same situation would have employed? [19] If not, then he is guilty of negligence. Here, the fact that Pascual, as the caretaker of the car, failed to submit any proof that he had it periodically checked (as its year-model and condition required) revealed his negligence. A prudent man should have known that a 14-year-old car, constantly used in provincial trips, was definitely prone to damage and other defects. For failing to prove care and diligence in the maintenance of the vehicle, the necessary inference was that Pascual had been negligent in the upkeep of the car. Pascual attempted to exculpate himself from liability by insisting that the incident was a caso fortuito. We disagree. The exempting circumstance of caso fortuito may be availed only when: (a) the cause of the unforeseen and unexpected occurrence was independent of the human will; (b) it was impossible to foresee the event which constituted the caso fortuito or, if it could be foreseen, it was impossible to avoid; (c) the occurrence must be such as to render it impossible to perform an obligation in a normal manner and (d) the person tasked to perform the obligation must not have participated in any course of conduct that aggravated the accident. [20] In fine, human agency must be entirely excluded as the proximate cause or contributory cause of the injury or loss.[21] In a vehicular accident, for example, a mechanical defect will not release the defendant from liability if it is shown that the accident could have been prevented had he properly maintained and taken good care of the vehicle.[22] The circumstances on record do not support the defense of Pascual. Clearly, there was no caso fortuito because of his want of care and prudence in maintaining the car. Under the second requisite, the instrumentality or agency that triggered the occurrence must be one that falls under the exclusive control of the person in charge thereof. In

WHEREFORE, the petition is hereby DENIED and the decision[29] of the Court of Appeals affirmed in toto. Costs against petitioners. SO ORDERED.

SECOND DIVISION [G.R. No. 142305. December 10, 2003] SINGAPORE AIRLINES LIMITED, petitioner, vs. ANDION FERNANDEZ, respondent. DECISION CALLEJO, SR., J.: This is a petition for review on certiorari assailing the Decision[1] of the Court of Appeals which affirmed in toto the decision[2] of the Regional Trial Court of Pasig City, Branch 164 in Civil Case No. 60985 filed by the respondent for damages. The Case for the Respondent Respondent Andion Fernandez is an acclaimed soprano here in the Philippines and abroad. At the time of the incident, she was availing an educational grant from the Federal Republic of Germany, pursuing a Masters Degree in Music majoring in Voice. [3] She was invited to sing before the King and Queen of Malaysia on February 3 and 4, 1991. For this singing engagement, an airline passage ticket was purchased from petitioner Singapore Airlines which would transport her to Manila from Frankfurt, Germany on January 28, 1991. From Manila, she would proceed to Malaysia on the next day.[4] It was necessary for the respondent to pass by Manila in order to gather her wardrobe; and to rehearse and coordinate with her pianist her repertoire for the aforesaid performance. The petitioner issued the respondent a Singapore Airlines ticket for Flight No. SQ 27, leaving Frankfurt, Germany on January 27, 1991 bound for Singapore with onward connections fromSingapore to Manila. Flight No. SQ 27 was scheduled to leave Frankfurt at 1:45 in the afternoon of January 27, 1991, arriving at Singapore at 8:50 in the morning of January 28, 1991. The connecting flight from Singapore to Manila, Flight No. SQ 72, was leaving Singapore at 11:00 in the morning of January 28, 1991, arriving in Manila at 2:20 in the afternoon of the same day.[5] On January 27, 1991, Flight No. SQ 27 left Frankfurt but arrived in Singapore two hours late or at about 11:00 in the morning of January 28, 1991. By then, the aircraft bound for Manila had left as scheduled, leaving the respondent and about 25 other passengers stranded in the Changi Airport in Singapore.[6] Upon disembarkation at Singapore, the respondent approached the transit counter who referred her to the nightstop counter and told the lady employee thereat that it was important for her to reach Manila on that day, January 28, 1991. The lady employee told her that there were no more flights to Manila for that day and that respondent had no choice but to stay in Singapore. Upon respondents persistence, she was told that she can actually fly to Hong Kong going to Manila but since her ticket was non-transferable, she would have to pay for the ticket. The respondent could not accept the offer because she had no money to pay for it. [7] Her pleas for the respondent to make arrangements to transport her to Manila were unheeded.[8] The respondent then requested the lady employee to use their phone to make a call to Manila. Over the employees reluctance, the respondent telephoned her mother to inform the latter that she missed the connecting flight. The respondent was able to contact a family friend who picked her up from the airport for her overnight stay in Singapore.[9] The next day, after being brought back to the airport, the respondent proceeded to petitioners counter which says: Immediate Attention To Passengers with Immediate Booking. There were four or five passengers in line. The respondent approached petitioners male employee at the counter to make arrangements for immediate booking only to be told: Cant you see I am doing something. She explained her predicament but the male employee uncaringly retorted: Its your problem, not ours.[10] The respondent never made it to Manila and was forced to take a direct flight from Singapore to Malaysia on January 29, 1991, through the efforts of her mother and travel agency in Manila. Her mother also had to travel to Malaysia bringing with her respondents wardrobe and personal things needed for the performance that caused them to incur an expense of about P50,000.[11] As a result of this incident, the respondents performance before the Royal Family of Malaysia was below par. Because of the rude and unkind treatment she received from the petitioners personnel in Singapore, the respondent was engulfed with fear, anxiety, humiliation and embarrassment causing her to suffer mental fatigue and skin rashes. She was thereby compelled to seek immediate medical attention upon her return to Manila for acute urticaria.[12] On June 15, 1993, the RTC rendered a decision with the following dispositive portion:

ACCORDINGLY and as prayed for, defendant Singapore Airlines is ordered to pay herein plaintiff Andion H. Fernandez the sum of: 1. FIFTY THOUSAND (P50,000.00) PESOS as compensatory or actual damages; 2. TWO HUNDRED and FIFTY THOUSAND (P250,000.00) PESOS as moral damages considering plaintiffs professional standing in the field of culture at home and abroad; 3. ONE HUNDRED THOUSAND (P100,000.00) PESOS as exemplary damages; 4. SEVENTY-FIVE THOUSAND (P75,000.00) PESOS as attorneys fees; and 5. To pay the costs of suit. SO ORDERED.[13] The petitioner appealed the decision to the Court of Appeals. On June 10, 1998, the CA promulgated the assailed decision finding no reversible error in the appealed decision of the trial court.[14] Forthwith, the petitioner filed the instant petition for review, raising the following errors: I THE HONORABLE COURT OF APPEALS ERRED IN AFFIRMING IN TOTO THE DECISION OF THE TRIAL COURT THAT AWARDED DAMAGES TO RESPONDENT FOR THE ALLEGED FAILURE OF THE PETITIONER TO EXERCISE EXTRAORDINARY DILIGENCE. II THE HONORABLE COURT OF APPEALS ERRED IN HOLDING THAT THE PETITIONER ACTED IN BAD FAITH. III THE HONORABLE COURT OF APPEALS ERRED IN DISMISSING THE PETITIONERS COUNTERCLAIMS.[15] The petitioner assails the award of damages contending that it exercised the extraordinary diligence required by law under the given circumstances. The delay of Flight No. SQ 27 fromFrankfurt to Singapore on January 28, 1991 for more than two hours was due to a fortuitous event and beyond petitioners control. Inclement weather prevented the petitioners plane coming fromCopenhagen, Denmark to arrive in Frankfurt on time on January 27, 1991. The plane could not take off from the airport as the place was shrouded with fog. This delay caused a snowball effect whereby the other flights were consequently delayed. The plane carrying the respondent arrived in Singapore two (2) hours behind schedule.[16] The delay was even compounded when the plane could not travel the normal route which was through the Middle East due to the raging Gulf War at that time. It had to pass through the restricted Russian airspace which was more congested.[17] Under these circumstances, petitioner therefore alleged that it cannot be faulted for the delay in arriving in Singapore on January 28, 1991 and causing the respondent to miss her connecting flight to Manila. The petitioner further contends that it could not also be held in bad faith because its personnel did their best to look after the needs and interests of the passengers including the respondent. Because the respondent and the other 25 passengers missed their connecting flight to Manila, the petitioner automatically booked them to the flight the next day and gave them free hotel accommodations for the night. It was respondent who did not take petitioners offer and opted to stay with a family friend in Singapore. The petitioner also alleges that the action of the respondent was baseless and it tarnished its good name and image earned through the years for which, it was entitled to damages in the amount of P1,000,000; exemplary damages of P500,000; and attorneys fees also in the amount of P500,000.[18] The petition is barren of merit. When an airline issues a ticket to a passenger, confirmed for a particular flight on a certain date, a contract of carriage arises. The passenger then has every right to expect that he be transported on that flight and on that date. If he does not, then the carrier opens itself to a suit for a breach of contract of carriage.[19] The contract of air carriage is a peculiar one. Imbued with public interest, the law requires common carriers to carry the passengers safely as far as human care and foresight can provide,

using the utmost diligence of very cautious persons with due regard for all the circumstances.[20] In an action for breach of contract of carriage, the aggrieved party does not have to prove that the common carrier was at fault or was negligent. All that is necessary to prove is the existence of the contract and the fact of its non-performance by the carrier.[21] In the case at bar, it is undisputed that the respondent carried a confirmed ticket for the two-legged trip from Frankfurt to Manila: 1) Frankfurt-Singapore; and 2) Singapore-Manila. In her contract of carriage with the petitioner, the respondent certainly expected that she would fly to Manila on Flight No. SQ 72 on January 28, 1991. Since the petitioner did not transport the respondent as covenanted by it on said terms, the petitioner clearly breached its contract of carriage with the respondent. The respondent had every right to sue the petitioner for this breach. The defense that the delay was due to fortuitous events and beyond petitioners control is unavailing. In PAL vs. CA,[22] we held that: .... Undisputably, PALs diversion of its flight due to inclement weather was a fortuitous event. Nonetheless, such occurrence did not terminate PALs contract with its passengers. Being in the business of air carriage and the sole one to operate in the country, PAL is deemed to be equipped to deal with situations as in the case at bar. What we said in one case once again must be stressed, i.e., the relation of carrier and passenger continues until the latter has been landed at the port of destination and has left the carriers premises. Hence, PAL necessarily would still have to exercise extraordinary diligence in safeguarding the comfort, convenience and safety of its stranded passengers until they have reached their final destination... ... ...If the cause of non-fulfillment of the contract is due to a fortuitous event, it has to be the sole and only cause (Art. 1755 C.C., Art. 1733 C.C.). Since part of the failure to comply with the obligation of common carrier to deliver its passengers safely to their destination lay in the defendants failure to provide comfort and convenience to its stranded passengers using extraordinary diligence, the cause of non-fulfillment is not solely and exclusively due to fortuitous event, but due to something which defendant airline could have prevented, defendant becomes liable to plaintiff. Indeed, in the instant case, petitioner was not without recourse to enable it to fulfill its obligation to transport the respondent safely as scheduled as far as human care and foresight can provide to her destination. Tagged as a premiere airline as it claims to be and with the complexities of air travel, it was certainly well-equipped to be able to foresee and deal with such situation. The petitioners indifference and negligence by its absence and insensitivity was exposed by the trial court, thus: (a) Under Section 9.1 of its Traffic Manual (Exhibit 4) flights can be delayed to await the uplift of connecting cargo and passengers arriving on a late inbound flight As adverted to by the trial court,Flight SQ-27/28 maybe delayed for about half an hour to transfer plaintiff to her connecting flight. As pointed out above, delay is normal in commercial air transportation (RTC Decision, p. 22); or (b) Petitioner airlines could have carried her on one of its flights bound for Hongkong and arranged for a connecting flight from Hongkong to Manila all on the same date. But then the airline personnel who informed her of such possibility told her that she has to pay for that flight. Regrettably, respondent did not have sufficient funds to pay for it. (TSN, 30 March 1992, pp.8-9; RTC Decision, pp. 22-23) Knowing the predicament of the respondent, petitioner did not offer to shoulder the cost of the ticket for that flight; or (c) As noted by the trial court from the account of petitioners witness, Bob Khkimyong, that a passenger such as the plaintiff could have been accommodated in another international airline such as Lufthansa to bring the plaintiff to Singapore early enough from Frankfurt provided that there was prior communication from that station to enable her to catch the connecting flight to Manila because of the urgency of her business in Manila(RTC Decision, p. 23) The petitioners diligence in communicating to its passengers the consequences of the delay in their flights was wanting. As elucidated by the trial court:

It maybe that delay in the take off and arrival of commercial aircraft could not be avoided and may be caused by diverse factors such as those testified to by defendants pilot. However, knowing fully well that even before the plaintiff boarded defendants Jumbo aircraft in Frankfurt bound for Singapore, it has already incurred a delay of two hours. Nevertheless, defendant did not take the trouble of informing plaintiff, among its other passengers of such a delay and that in such a case, the usual practice of defendant airline will be that they have to stay overnight at their connecting airport; and much less did it inquire from the plaintiff and the other 25 passengers bound for Manila whether they are amenable to stay overnight in Singapore and to take the connecting flight to Manila the next day. Such information should have been given and inquiries made in Frankfurt because even the defendant airlines manual provides that in case of urgency to reach his or her destination on the same date, the head office of defendant in Singapore must be informed by telephone or telefax so as the latter may make certain arrangements with other airlines in Frankfurt to bring such a passenger with urgent business to Singapore in such a manner that the latter can catch up with her connecting flight such as S27/28 without spending the night in Singapore[23] The respondent was not remiss in conveying her apprehension about the delay of the flight when she was still in Frankfurt. Upon the assurance of petitioners personnel in Frankfurt that she will be transported to Manila on the same date, she had every right to expect that obligation fulfilled. She testified, to wit: Q: Now, since you were late, when the plane that arrived from Frankfurt was late, did you not make arrangements so that your flight from Singapore to Manila would be adjusted? A: I asked the lady at the ticket counter, the one who gave the boarding pass in Frankfurt and I asked her, Since my flight going to Singapore would be late, what would happen to my Singapore-Manila flight? and then she said, Dont worry, Singapore Airlines would be responsible to bring you to Manila on the same date. And then they have informed the name of the officer, or whatever, that our flight is going to be late.[24] When a passenger contracts for a specific flight, he has a purpose in making that choice which must be respected. This choice, once exercised, must not be impaired by a breach on the part of the airline without the latter incurring any liability.[25] For petitioners failure to bring the respondent to her destination, as scheduled, we find the petitioner clearly liable for the breach of its contract of carriage with the respondent. We are convinced that the petitioner acted in bad faith. Bad faith means a breach of known duty through some motive of interest or ill will. Self-enrichment or fraternal interest, and not personal ill will, may well have been the motive; but it is malice nevertheless. [26] Bad faith was imputed by the trial court when it found that the petitioners employees at the Singapore airport did not accord the respondent the attention and treatment allegedly warranted under the circumstances. The lady employee at the counter was unkind and of no help to her. The respondent further alleged that without her threats of suing the company, she was not allowed to use the companys phone to make long distance calls to her mother in Manila. The male employee at the counter where it says: Immediate Attention to Passengers with Immediate Booking was rude to her when he curtly retorted that he was busy attending to other passengers in line. The trial court concluded that this inattentiveness and rudeness of petitioners personnel to respondents plight was gross enough amounting to bad faith. This is a finding that is generally binding upon the Court which we find no reason to disturb. Article 2232 of the Civil Code provides that in a contractual or quasi-contractual relationship, exemplary damages may be awarded only if the defendant had acted in a wanton, fraudulent, reckless, oppressive or malevolent manner. In this case, petitioners employees acted in a wanton, oppressive or malevolent manner. The award of exemplary damages is, therefore, warranted in this case. WHEREFORE, the Petition is DENIED. The Decision of the Court of Appeals is AFFIRMED. SO ORDERED. Puno, (Chairman), Quisumbing, Austria-Martinez, and Tinga, JJ., concur.

G.R. No. L-20099 July 7, 1966 PARMANAND SHEWARAM, plaintiff and appellee, vs. PHILIPPINE AIR LINES, INC., defendant and appellant. Ponce Enrile, Siguion Reyna, Montecillo and Belo for defendant and appellant. Climaco and Associates for plaintiff and appellee. ZALDIVAR, J.: Before the municipal court of Zamboanga City, plaintiff-appellee Parmanand Shewaram instituted an action to recover damages suffered by him due to the alleged failure of defendant-appellant Philippines Air Lines, Inc. to observe extraordinary diligence in the vigilance and carriage of his luggage. After trial the municipal court of Zamboanga City rendered judgment ordering the appellant to pay appellee P373.00 as actual damages, P100.00 as exemplary damages, P150.00 as attorney's fees, and the costs of the action. Appellant Philippine Air Lines appealed to the Court of First Instance of Zamboanga City. After hearing the Court of First Instance of Zamboanga City modified the judgment of the inferior court by ordering the appellant to pay the appellee only the sum of P373.00 as actual damages, with legal interest from May 6, 1960 and the sum of P150.00 as attorney's fees, eliminating the award of exemplary damages. From the decision of the Court of First Instance of Zamboanga City, appellant appeals to this Court on a question of law, assigning two errors allegedly committed by the lower court a quo, to wit: 1. The lower court erred in not holding that plaintiff-appellee was bound by the provisions of the tariff regulations filed by defendant-appellant with the civil aeronautics board and the conditions of carriage printed at the back of the plane ticket stub. 2. The lower court erred in not dismissing this case or limiting the liability of the defendant-appellant to P100.00. The facts of this case, as found by the trial court, quoted from the decision appealed from, are as follows: That Parmanand Shewaram, the plaintiff herein, was on November 23, 1959, a paying passenger with ticket No. 4-30976, on defendant's aircraft flight No. 976/910 from Zamboanga City bound for Manila; that defendant is a common carrier engaged in air line transportation in the Philippines, offering its services to the public to carry and transport passengers and cargoes from and to different points in the Philippines; that on the abovementioned date of November 23, 1959, he checked in three (3) pieces of baggages a suitcase and two (2) other pieces; that the suitcase was mistagged by defendant's personnel in Zamboanga City, as I.G.N. (for Iligan) with claim check No. B-3883, instead of MNL (for Manila). When plaintiff Parmanand Shewaram arrived in Manila on the date of November 23, 1959, his suitcase did not arrive with his flight because it was sent to Iligan. So, he made a claim with defendant's personnel in Manila airport and another suitcase similar to his own which was the only baggage left for that flight, the rest having been claimed and released to the other passengers of said flight, was given to the plaintiff for him to take delivery but he did not and refused to take delivery of the same on the ground that it was not his, alleging that all his clothes were white and the National transistor 7 and a Rollflex camera were not found inside the suitcase, and moreover, it contained a pistol which he did not have nor placed inside his suitcase; that after inquiries made by defendant's personnel in Manila from different airports where the suitcase in question must have been sent, it was found to have reached Iligan and the

station agent of the PAL in Iligan caused the same to be sent to Manila for delivery to Mr. Shewaram and which suitcase belonging to the plaintiff herein arrived in Manila airport on November 24, 1959; that it was also found out that the suitcase shown to and given to the plaintiff for delivery which he refused to take delivery belonged to a certain Del Rosario who was bound for Iligan in the same flight with Mr. Shewaram; that when the plaintiff's suitcase arrived in Manila as stated above on November 24, 1959, he was informed by Mr. Tomas Blanco, Jr., the acting station agent of the Manila airport of the arrival of his suitcase but of course minus his Transistor Radio 7 and the Rollflex Camera; that Shewaram made demand for these two (2) items or for the value thereof but the same was not complied with by defendant. xxx xxx xxx It is admitted by defendant that there was mistake in tagging the suitcase of plaintiff as IGN. The tampering of the suitcase is more apparent when on November 24, 1959, when the suitcase arrived in Manila, defendant's personnel could open the same in spite of the fact that plaintiff had it under key when he delivered the suitcase to defendant's personnel in Zamboanga City. Moreover, it was established during the hearing that there was space in the suitcase where the two items in question could have been placed. It was also shown that as early as November 24, 1959, when plaintiff was notified by phone of the arrival of the suitcase, plaintiff asked that check of the things inside his suitcase be made and defendant admitted that the two items could not be found inside the suitcase. There was no evidence on record sufficient to show that plaintiff's suitcase was never opened during the time it was placed in defendant's possession and prior to its recovery by the plaintiff. However, defendant had presented evidence that it had authority to open passengers' baggage to verify and find its ownership or identity. Exhibit "1" of the defendant would show that the baggage that was offered to plaintiff as his own was opened and the plaintiff denied ownership of the contents of the baggage. This proven fact that baggage may and could be opened without the necessary authorization and presence of its owner, applied too, to the suitcase of plaintiff which was mis-sent to Iligan City because of mistagging. The possibility of what happened in the baggage of Mr. Del Rosario at the Manila Airport in his absence could have also happened to plaintiffs suitcase at Iligan City in the absence of plaintiff. Hence, the Court believes that these two items were really in plaintiff's suitcase and defendant should be held liable for the same by virtue of its contract of carriage. It is clear from the above-quoted portions of the decision of the trial court that said court had found that the suitcase of the appellee was tampered, and the transistor radio and the camera contained therein were lost, and that the loss of those articles was due to the negligence of the employees of the appellant. The evidence shows that the transistor radio cost P197.00 and the camera cost P176.00, so the total value of the two articles was P373.00. 1 There is no question that the appellant is a common carrier. As such common carrier the appellant, from the nature of its business and for reasons of public policy, is bound to observe extraordinary diligence in the vigilance over the goods and for the safety of the passengers transported by it according to the circumstances of each case. 2 It having been shown that the loss of the transistor radio and the camera of the appellee, costing P373.00, was due to the negligence of the employees of the appellant, it is clear that the appellant should be held liable for the payment of said 3 loss.

It is, however, contended by the appellant that its liability should be limited to the amount stated in the conditions of carriage printed at the back of the plane ticket stub which was issued to the appellee, which conditions are embodied in Domestic Tariff Regulations No. 2 which was filed with the Civil Aeronautics Board. One of those conditions, which is pertinent to the issue raised by the appellant in this case provides as follows: The liability, if any, for loss or damage to checked baggage or for delay in the delivery thereof is limited to its value and, unless the passenger declares in advance a higher valuation and pay an additional charge therefor, the value shall be conclusively deemed not to exceed P100.00 for each ticket. The appellant maintains that in view of the failure of the appellee to declare a higher value for his luggage, and pay the freight on the basis of said declared value when he checked such luggage at the Zamboanga City airport, pursuant to the abovequoted condition, appellee can not demand payment from the appellant of an amount in excess of P100.00. The law that may be invoked, in this connection is Article 1750 of the New Civil Code which provides as follows: A contract fixing the sum that may be recovered by the owner or shipper for the loss, destruction, or deterioration of the goods is valid, if it is reasonable and just under the circumstances, and has been fairly and freely agreed upon. In accordance with the above-quoted provision of Article 1750 of the New Civil Code, the pecuniary liability of a common carrier may, by contract, be limited to a fixed amount. It is required, however, that the contract must be "reasonable and just under the circumstances and has been fairly and freely agreed upon." The requirements provided in Article 1750 of the New Civil Code must be complied with before a common carrier can claim a limitation of its pecuniary liability in case of loss, destruction or deterioration of the goods it has undertaken to transport. In the case before us We believe that the requirements of said article have not been met. It can not be said that the appellee had actually entered into a contract with the appellant, embodying the conditions as printed at the back of the ticket stub that was issued by the appellant to the appellee. The fact that those conditions are printed at the back of the ticket stub in letters so small that they are hard to read would not warrant the presumption that the appellee was aware of those conditions such that he had "fairly and freely agreed" to those conditions. The trial court has categorically stated in its decision that the "Defendant admits that passengers do not sign the ticket, much less did plaintiff herein sign his ticket when he made the flight on November 23, 1959." We hold, therefore, that the appellee is not, and can not be, bound by the conditions of carriage found at the back of the ticket stub issued to him when he made the flight on appellant's plane on November 23, 1959. The liability of the appellant in the present case should be governed by the provisions of Articles 1734 and 1735 of the New Civil Code, which We quote as follows: ART. 1734. Common carries are responsible for the loss, destruction, or deterioration of the goods, unless the same is due to any of the following causes only: (1) Flood, storm, earthquake, or other natural disaster or calamity; (2) Act of the public enemy in war, whether international or civil; (3) Act or omission of the shipper or owner of the goods; (4) The character of the goods or defects in the packing or in the containers; (5) Order or act of competent public authority.1wph1.t ART. 1735. In all cases other than those mentioned in Nos. 1, 2, 3, 4 and 5 of the preceding article, if the goods are lost, destroyed or deteriorated,

common carriers are presumed to have been at fault or to have acted negligently, unless they prove that they observed extraordinary diligence as required in Article 1733. It having been clearly found by the trial court that the transistor radio and the camera of the appellee were lost as a result of the negligence of the appellant as a common carrier, the liability of the appellant is clear it must pay the appellee the value of those two articles. In the case of Ysmael and Co. vs. Barreto, 51 Phil. 90, cited by the trial court in support of its decision, this Court had laid down the rule that the carrier can not limit its liability for injury to or loss of goods shipped where such injury or loss was caused by its own negligence. Corpus Juris, volume 10, p. 154, says: "Par. 194, 6. Reasonableness of Limitations. The validity of stipulations limiting the carrier's liability is to be determined by their reasonableness and their conformity to the sound public policy, in accordance with which the obligations of the carrier to the public are settled. It cannot lawfully stipulate for exemption from liability, unless such exemption is just and reasonable, and unless the contract is freely and fairly made. No contractual limitation is reasonable which is subversive of public policy. "Par. 195. 7. What Limitations of Liability Permissible. a. Negligence (1) Rule in America (a) In Absence of Organic or Statutory Provisions Regulating Subject aa. Majority Rule. In the absence of statute, it is settled by the weight of authority in the United States, that whatever limitations against its common-law liability are permissible to a carrier, it cannot limit its liability for injury to or loss of goods shipped, where such injury or loss is caused by its own negligence. This is the common law doctrine and it makes no difference that there is no statutory prohibition against contracts of this character. "Par. 196. bb. Considerations on which Rule Based. The rule, it is said, rests on considerations of public policy. The undertaking is to carry the goods, and to relieve the shipper from all liability for loss or damage arising from negligence in performing its contract is to ignore the contract itself. The natural effect of a limitation of liability against negligence is to induce want of care on the part of the carrier in the performance of its duty. The shipper and the common carrier are not on equal terms; the shipper must send his freight by the common carrier, or not at all; he is therefore entirely at the mercy of the carrier unless protected by the higher power of the law against being forced into contracts limiting the carrier's liability. Such contracts are wanting in the element of voluntary assent. "Par. 197. cc. Application and Extent of Rule (aa) Negligence of Servants. The rule prohibiting limitation of liability for negligence is often stated as a prohibition of any contract relieving the carrier from loss or damage caused by its own negligence or misfeasance, or that of its servants; and it has been specifically decided in many cases that no contract limitation will relieve the carrier from responsibility for the negligence, unskillfulness, or carelessness of its employer." (Cited in Ysmael and Co. vs. Barreto, 51 Phil. 90, 98, 99). In view of the foregoing, the decision appealed from is affirmed, with costs against the appellant. Concepcion, C.J., Reyes, J.B.L., Barrera, Dizon, Regala, Makalintal, Bengzon, J.P. and Sanchez, JJ., concur.

G.R. No. 149038 April 9, 2003 PHILIPPINE AMERICAN GENERAL INSURANCE COMPANY, petitioner, vs. PKS SHIPPING COMPANY, respondent. VITUG, J.: The petition before the Court seeks a review of the decision of the Court of Appeals in C.A. G.R. CV No. 56470, promulgated on 25 June 2001, which has affirmed in toto the judgment of the Regional Trial Court (RTC), Branch 65, of Makati, dismissing the complaint for damages filed by petitioner insurance corporation against respondent shipping company. Davao Union Marketing Corporation (DUMC) contracted the services of respondent PKS Shipping Company (PKS Shipping) for the shipment to Tacloban City of seventy-five thousand (75,000) bags of cement worth Three Million Three Hundred Seventy-Five Thousand Pesos (P3,375,000.00). DUMC insured the goods for its full value with petitioner Philippine American General Insurance Company (Philamgen). The goods were loaded aboard the dumb barge Limar I belonging to PKS Shipping. On the evening of 22 December 1988, about nine oclock, whileLimar I was being towed by respondents tugboat, MT Iron Eagle, the barge sank a couple of miles off the coast of Dumagasa Point, in Zamboanga del Sur, bringing down with it the entire cargo of 75,000 bags of cement. DUMC filed a formal claim with Philamgen for the full amount of the insurance. Philamgen promptly made payment; it then sought reimbursement from PKS Shipping of the sum paid to DUMC but the shipping company refused to pay, prompting Philamgen to file suit against PKS Shipping with the Makati RTC. The RTC dismissed the complaint after finding that the total loss of the cargo could have been caused either by a fortuitous event, in which case the ship owner was not liable, or through the negligence of the captain and crew of the vessel and that, under Article 587 of the Code of Commerce adopting the "Limited Liability Rule," the ship owner could free itself of liability by abandoning, as it apparently so did, the vessel with all her equipment and earned freightage. Philamgen interposed an appeal to the Court of Appeals which affirmed in toto the decision of the trial court. The appellate court ruled that evidence to establish that PKS Shipping was a common carrier at the time it undertook to transport the bags of cement was wanting because the peculiar method of the shipping companys carrying goods for others was not generally held out as a business but as a casual occupation. It then concluded that PKS Shipping, not being a common carrier, was not expected to observe the stringent extraordinary diligence required of common carriers in the care of goods. The appellate court, moreover, found that the loss of the goods was sufficiently established as having been due to fortuitous event, negating any liability on the part of PKS Shipping to the shipper. In the instant appeal, Philamgen contends that the appellate court has committed a patent error in ruling that PKS Shipping is not a common carrier and that it is not liable for the loss of the subject cargo. The fact that respondent has a limited clientele, petitioner argues, does not militate against respondents being a common carrier and that the only way by which such carrier can be held exempt for the loss of the cargo would be if the loss were caused by natural disaster or calamity. Petitioner avers that typhoon "APIANG" has not entered the Philippine

area of responsibility and that, even if it did, respondent would not be exempt from liability because its employees, particularly the tugmaster, have failed to exercise due diligence to prevent or minimize the loss. PKS Shipping, in its comment, urges that the petition should be denied because what Philamgen seeks is not a review on points or errors of law but a review of the undisputed factual findings of the RTC and the appellate court. In any event, PKS Shipping points out, the findings and conclusions of both courts find support from the evidence and applicable jurisprudence. The determination of possible liability on the part of PKS Shipping boils down to the question of whether it is a private carrier or a common carrier and, in either case, to the other question of whether or not it has observed the proper diligence (ordinary, if a private carrier, or extraordinary, if a common carrier) required of it given the circumstances. The findings of fact made by the Court of Appeals, particularly when such findings are consistent with those of the trial court, may not at liberty be reviewed by this Court in a petition for review under Rule 45 of the Rules of Court. 1 The conclusions derived from those factual findings, however, are not necessarily just matters of fact as when they are so linked to, or inextricably intertwined with, a requisite appreciation of the applicable law. In such instances, the conclusions made could well be raised as being appropriate issues in a petition for review before this Court. Thus, an issue whether a carrier is private or common on the basis of the facts found by a trial court or the appellate court can be a valid and reviewable question of law. The Civil Code defines "common carriers" in the following terms: "Article 1732. Common carriers are persons, corporations, firms or associations engaged in the business of carrying or transporting passengers or goods or both, by land, water, or air for compensation, offering their services to the public." Complementary to the codal definition is Section 13, paragraph (b), of the Public Service Act; it defines "public service" to be "x x x every person that now or hereafter may own, operate, manage, or control in the Philippines, for hire or compensation, with general or limited clientele, whether permanent, occasional or accidental, and done for general business purposes, any common carrier, railroad, street railway, subway motor vehicle, either for freight or passenger, or both, with or without fixed route and whatever may be its classification, freight or carrier service of any class, express service, steamboat, or steamship, or steamship line, pontines, ferries and water craft, engaged in the transportation of passengers or freight or both, shipyard, marine repair shop, wharf or dock, ice plant, ice refrigeration plant, canal, irrigation system, gas, electric light, heat and power, water supply and power petroleum, sewerage system, wire or wireless communication systems, wire or wireless broadcasting stations and other similar public services. x x x. (Underscoring supplied)." The prevailing doctrine on the question is that enunciated in the leading case of De Guzman vs. Court of Appeals.2 Applying Article 1732 of the Code, in conjunction with Section 13(b) of the Public Service Act, this Court has held: "The above article makes no distinction between one whose principal business activity is the carrying of persons or goods or

both, and one who does such carrying only as an ancillary activity (in local idiom, as `a sideline). Article 1732 also carefully avoids making any distinction between a person or enterprise offering transportation service on a regular or scheduled basis and one offering such service on an occasional, episodic or unscheduled basis. Neither does Article 1732 distinguish between a carrier offering its services to the `general public, i.e., the general community or population, and one who offers services or solicits business only from a narrow segment of the general population. We think that Article 1732 deliberately refrained from making such distinctions. "So understood, the concept of `common carrier under Article 1732 may be seen to coincide neatly with the notion of `public service, under the Public Service Act (Commonwealth Act No. 1416, as amended) which at least partially supplements the law on common carriers set forth in the Civil Code." Much of the distinction between a "common or public carrier" and a "private or special carrier" lies in the character of the business, such that if the undertaking is an isolated transaction, not a part of the business or occupation, and the carrier does not hold itself out to carry the goods for the general public or to a limited clientele, although involving the carriage of goods for a fee, 3 the person or corporation providing such service could very well be just a private carrier. A typical case is that of a charter party which includes both the vessel and its crew, such as in a bareboat or demise, where the charterer obtains the use and service of all or some part of a ship for a period of time or a voyage or voyages 4 and gets the control of the vessel and its crew.5 Contrary to the conclusion made by the appellate court, its factual findings indicate that PKS Shipping has engaged itself in the business of carrying goods for others, although for a limited clientele, undertaking to carry such goods for a fee. The regularity of its activities in this area indicates more than just a casual activity on its part.6 Neither can the concept of a common carrier change merely because individual contracts are executed or entered into with patrons of the carrier. Such restrictive interpretation would make it easy for a common carrier to escape liability by the simple expedient of entering into those distinct agreements with clients. Addressing now the issue of whether or not PKS Shipping has exercised the proper diligence demanded of common carriers, Article 1733 of the Civil Code requires common carriers to observe extraordinary diligence in the vigilance over the goods they carry. In case of loss, destruction or deterioration of goods, common carriers are presumed to have been at fault or to have acted negligently, and the burden of proving otherwise rests on them.7The provisions of Article 1733, notwithstanding, common carriers are exempt from liability for loss, destruction, or deterioration of the goods due to any of the following causes: (1) Flood, storm, earthquake, lightning, or other natural disaster or calamity; (2) Act of the public enemy in war, whether international or civil; (3) Act or omission of the shipper or owner of the goods; (4) The character of the goods or defects in the packing or in the containers; and (5) Order or act of competent public authority.8

The appellate court ruled, gathered from the testimonies and sworn marine protests of the respective vessel masters of Limar I and MT Iron Eagle, that there was no way by which the barges or the tugboats crew could have prevented the sinking of Limar I. The vessel was suddenly tossed by waves of extraordinary height of six (6) to eight (8) feet and buffeted by strong winds of 1.5 knots resulting in the entry of water into the barges hatches. The official Certificate of Inspection of the barge issued by the Philippine Coastguard and the Coastwise Load Line Certificate would attest to the seaworthiness of Limar I and should strengthen the factual findings of the appellate court. Findings of fact of the Court of Appeals generally conclude this Court; none of the recognized exceptions from the rule - (1) when the factual findings of the Court of Appeals and the trial court are contradictory; (2) when the conclusion is a finding grounded entirely on speculation, surmises, or conjectures; (3) when the inference made by the Court of Appeals from its findings of fact is manifestly mistaken, absurd, or impossible; (4) when there is a grave abuse of discretion in the appreciation of facts; (5) when the appellate court, in making its findings, went beyond the issues of the case and such findings are contrary to the admissions of both appellant and appellee; (6) when the judgment of the Court of Appeals is premised on a misapprehension of facts; (7) when the Court of Appeals failed to notice certain relevant facts which, if properly considered, would justify a different conclusion; (8) when the findings of fact are themselves conflicting; (9) when the findings of fact are conclusions without citation of the specific evidence on which they are based; and (10) when the findings of fact of the Court of Appeals are premised on the absence of evidence but such findings are contradicted by the evidence on record would appear to be clearly extant in this instance. All given then, the appellate court did not err in its judgment absolving PKS Shipping from liability for the loss of the DUMC cargo. WHEREFORE, the petition is DENIED. No costs. SO ORDERED. Davide, Jr., C.J., Ynares-Santiago, Carpio, and Azcuna, JJ., concur.

G.R. No. L-49407 August 19, 1988 NATIONAL DEVELOPMENT COMPANY, petitioner-appellant, vs. THE COURT OF APPEALS and DEVELOPMENT INSURANCE & SURETY CORPORATION, respondents-appellees. No. L-49469 August 19, 1988 MARITIME COMPANY OF THE PHILIPPINES, petitioner-appellant, vs. THE COURT OF APPEALS and DEVELOPMENT INSURANCE & SURETY CORPORATION, respondents- appellees. Balgos & Perez Law Office for private respondent in both cases. PARAS, J.: These are appeals by certiorari from the decision * of the Court of Appeals in CA G.R. No: L- 46513-R entitled "Development Insurance and Surety Corporation plaintiff-appellee vs. Maritime Company of the Philippines and National Development Company defendantappellants," affirming in toto the decision ** in Civil Case No. 60641 of the then Court of First Instance of Manila, Sixth Judicial District, the dispositive portion of which reads: WHEREFORE, judgment is hereby rendered ordering the defendants National Development Company and Maritime Company of the Philippines, to pay jointly and severally, to the plaintiff Development Insurance and Surety Corp., the sum of THREE HUNDRED SIXTY FOUR THOUSAND AND NINE HUNDRED FIFTEEN PESOS AND EIGHTY SIX CENTAVOS (364,915.86) with the legal interest thereon from the filing of plaintiffs complaint on April 22, 1965 until fully paid, plus TEN THOUSAND PESOS (Pl0,000.00) by way of damages as and for attorney's fee. On defendant Maritime Company of the Philippines' cross-claim against the defendant National Development Company, judgment is hereby rendered, ordering the National Development Company to pay the cross-claimant Maritime Company of the Philippines the total amount that the Maritime Company of the Philippines may voluntarily or by compliance to a writ of execution pay to the plaintiff pursuant to the judgment rendered in this case. With costs against the defendant Maritime Company of the Philippines. (pp. 34-35, Rollo, GR No. L-49469) The facts of these cases as found by the Court of Appeals, are as follows: The evidence before us shows that in accordance with a memorandum agreement entered into between defendants NDC and MCP on September 13, 1962, defendant NDC as the first preferred mortgagee of three ocean going vessels including one with the name 'Dona Nati' appointed defendant MCP as its agent to manage and operate said vessel for and in its behalf and account (Exh. A). Thus, on February 28, 1964 the E. Philipp Corporation of New York loaded on board the vessel "Dona Nati" at San Francisco, California, a total of 1,200 bales of American raw cotton consigned to the order of Manila Banking Corporation, Manila and the People's Bank and Trust Company acting for and in behalf of the Pan Asiatic Commercial Company, Inc., who represents Riverside Mills Corporation (Exhs. K-2 to K7-A & L-2 to L-7A). Also loaded on the same vessel at Tokyo, Japan, were the cargo of Kyokuto Boekui, Kaisa, Ltd., consigned to the order of Manila Banking Corporation consisting of 200 cartons of sodium lauryl sulfate and 10 cases of aluminum foil (Exhs. M & M-1). En route to Manila the vessel Dofia Nati figured in a collision at 6:04 a.m. on April 15, 1964 at Ise Bay, Japan with a Japanese vessel 'SS Yasushima Maru' as a result of

which 550 bales of aforesaid cargo of American raw cotton were lost and/or destroyed, of which 535 bales as damaged were landed and sold on the authority of the General Average Surveyor for Yen 6,045,500 and 15 bales were not landed and deemed lost (Exh. G). The damaged and lost cargoes was worth P344,977.86 which amount, the plaintiff as insurer, paid to the Riverside Mills Corporation as holder of the negotiable bills of lading duly endorsed (Exhs. L-7-A, K-8-A, K-2-A, K-3-A, K-4-A, K-5-A, A- 2, N-3 and R-3}. Also considered totally lost were the aforesaid shipment of Kyokuto, Boekui Kaisa Ltd., consigned to the order of Manila Banking Corporation, Manila, acting for Guilcon, Manila, The total loss was P19,938.00 which the plaintiff as insurer paid to Guilcon as holder of the duly endorsed bill of lading (Exhibits M-1 and S-3). Thus, the plaintiff had paid as insurer the total amount of P364,915.86 to the consignees or their successors-in-interest, for the said lost or damaged cargoes. Hence, plaintiff filed this complaint to recover said amount from the defendants-NDC and MCP as owner and ship agent respectively, of the said 'Dofia Nati' vessel. (Rollo, L-49469, p.38) On April 22, 1965, the Development Insurance and Surety Corporation filed before the then Court of First Instance of Manila an action for the recovery of the sum of P364,915.86 plus attorney's fees of P10,000.00 against NDC and MCP (Record on Appeal), pp. 1-6). Interposing the defense that the complaint states no cause of action and even if it does, the action has prescribed, MCP filed on May 12, 1965 a motion to dismiss (Record on Appeal, pp. 7-14). DISC filed an Opposition on May 21, 1965 to which MCP filed a reply on May 27, 1965 (Record on Appeal, pp. 14-24). On June 29, 1965, the trial court deferred the resolution of the motion to dismiss till after the trial on the merits (Record on Appeal, p. 32). On June 8, 1965, MCP filed its answer with counterclaim and cross-claim against NDC. NDC, for its part, filed its answer to DISC's complaint on May 27, 1965 (Record on Appeal, pp. 22-24). It also filed an answer to MCP's cross-claim on July 16, 1965 (Record on Appeal, pp. 39-40). However, on October 16, 1965, NDC's answer to DISC's complaint was stricken off from the record for its failure to answer DISC's written interrogatories and to comply with the trial court's order dated August 14, 1965 allowing the inspection or photographing of the memorandum of agreement it executed with MCP. Said order of October 16, 1965 likewise declared NDC in default (Record on Appeal, p. 44). On August 31, 1966, NDC filed a motion to set aside the order of October 16, 1965, but the trial court denied it in its order dated September 21, 1966. On November 12, 1969, after DISC and MCP presented their respective evidence, the trial court rendered a decision ordering the defendants MCP and NDC to pay jointly and solidarity to DISC the sum of P364,915.86 plus the legal rate of interest to be computed from the filing of the complaint on April 22, 1965, until fully paid and attorney's fees of P10,000.00. Likewise, in said decision, the trial court granted MCP's crossclaim against NDC. MCP interposed its appeal on December 20, 1969, while NDC filed its appeal on February 17, 1970 after its motion to set aside the decision was denied by the trial court in its order dated February 13,1970. On November 17,1978, the Court of Appeals promulgated its decision affirming in toto the decision of the trial court. Hence these appeals by certiorari. NDC's appeal was docketed as G.R. No. 49407, while that of MCP was docketed as G.R. No. 49469. On July 25,1979, this Court ordered the consolidation of the above cases (Rollo, p. 103). On August 27,1979, these consolidated cases were given due course (Rollo, p. 108) and submitted for decision on February 29, 1980 (Rollo, p. 136). In its brief, NDC cited the following assignments of error: I

THE COURT OF APPEALS ERRED IN APPLYING ARTICLE 827 OF THE CODE OF COMMERCE AND NOT SECTION 4(2a) OF COMMONWEALTH ACT NO. 65, OTHERWISE KNOWN AS THE CARRIAGE OF GOODS BY SEA ACT IN DETERMINING THE LIABILITY FOR LOSS OF CARGOES RESULTING FROM THE COLLISION OF ITS VESSEL "DONA NATI" WITH THE YASUSHIMA MARU"OCCURRED AT ISE BAY, JAPAN OR OUTSIDE THE TERRITORIAL JURISDICTION OF THE PHILIPPINES. II THE COURT OF APPEALS ERRED IN NOT DISMISSING THE C0MPLAINT FOR REIMBURSEMENT FILED BY THE INSURER, HEREIN PRIVATE RESPONDENTAPPELLEE, AGAINST THE CARRIER, HEREIN PETITIONER-APPELLANT. (pp. 1-2, Brief for Petitioner-Appellant National Development Company; p. 96, Rollo). On its part, MCP assigned the following alleged errors: I THE RESPONDENT COURT OF APPEALS ERRED IN NOT HOLDING THAT RESPONDENT DEVELOPMENT INSURANCE AND SURETY CORPORATION HAS NO CAUSE OF ACTION AS AGAINST PETITIONER MARITIME COMPANY OF THE PHILIPPINES AND IN NOT DISMISSING THE COMPLAINT. II THE RESPONDENT COURT OF APPEALS ERRED IN NOT HOLDING THAT THE CAUSE OF ACTION OF RESPONDENT DEVELOPMENT INSURANCE AND SURETY CORPORATION IF ANY EXISTS AS AGAINST HEREIN PETITIONER MARITIME COMPANY OF THE PHILIPPINES IS BARRED BY THE STATUTE OF LIMITATION AND HAS ALREADY PRESCRIBED. III THE RESPONDENT COURT OF APPEALS ERRED IN ADMITTING IN EVIDENCE PRIVATE RESPONDENTS EXHIBIT "H" AND IN FINDING ON THE BASIS THEREOF THAT THE COLLISION OF THE SS DONA NATI AND THE YASUSHIMA MARU WAS DUE TO THE FAULT OF BOTH VESSELS INSTEAD OF FINDING THAT THE COLLISION WAS CAUSED BY THE FAULT, NEGLIGENCE AND LACK OF SKILL OF THE COMPLEMENTS OF THE YASUSHIMA MARU WITHOUT THE FAULT OR NEGLIGENCE OF THE COMPLEMENT OF THE SS DONA NATI IV THE RESPONDENT COURT OF APPEALS ERRED IN HOLDING THAT UNDER THE CODE OF COMMERCE PETITIONER APPELLANT MARITIME COMPANY OF THE PHILIPPINES IS A SHIP AGENT OR NAVIERO OF SS DONA NATI OWNED BY COPETITIONER APPELLANT NATIONAL DEVELOPMENT COMPANY AND THAT SAID PETITIONER-APPELLANT IS SOLIDARILY LIABLE WITH SAID CO-PETITIONER FOR LOSS OF OR DAMAGES TO CARGO RESULTING IN THE COLLISION OF SAID VESSEL, WITH THE JAPANESE YASUSHIMA MARU. V THE RESPONDENT COURT OF APPEALS ERRED IN FINDING THAT THE LOSS OF OR DAMAGES TO THE CARGO OF 550 BALES OF AMERICAN RAW COTTON, DAMAGES WERE CAUSED IN THE AMOUNT OF P344,977.86 INSTEAD OF ONLY P110,000 AT P200.00 PER BALE AS ESTABLISHED IN THE BILLS OF LADING AND ALSO IN HOLDING THAT PARAGRAPH 1O OF THE BILLS OF LADING HAS NO APPLICATION IN THE INSTANT CASE THERE BEING NO GENERAL AVERAGE TO SPEAK OF. VI THE RESPONDENT COURT OF APPEALS ERRED IN HOLDING THE PETITIONERS NATIONAL DEVELOPMENT COMPANY AND COMPANY OF THE PHILIPPINES TO PAY JOINTLY AND SEVERALLY TO HEREIN RESPONDENT DEVELOPMENT INSURANCE AND SURETY CORPORATION THE SUM OF P364,915.86 WITH LEGAL INTEREST FROM THE FILING OF THE COMPLAINT UNTIL FULLY PAID PLUS P10,000.00 AS AND FOR ATTORNEYS FEES INSTEAD OF SENTENCING SAID PRIVATE RESPONDENT TO PAY HEREIN PETITIONERS ITS COUNTERCLAIM IN THE AMOUNT OF P10,000.00

BY WAY OF ATTORNEY'S FEES AND THE COSTS. (pp. 1-4, Brief for the Maritime Company of the Philippines; p. 121, Rollo) The pivotal issue in these consolidated cases is the determination of which laws govern loss or destruction of goods due to collision of vessels outside Philippine waters, and the extent of liability as well as the rules of prescription provided thereunder. The main thrust of NDC's argument is to the effect that the Carriage of Goods by Sea Act should apply to the case at bar and not the Civil Code or the Code of Commerce. Under Section 4 (2) of said Act, the carrier is not responsible for the loss or damage resulting from the "act, neglect or default of the master, mariner, pilot or the servants of the carrier in the navigation or in the management of the ship." Thus, NDC insists that based on the findings of the trial court which were adopted by the Court of Appeals, both pilots of the colliding vessels were at fault and negligent, NDC would have been relieved of liability under the Carriage of Goods by Sea Act. Instead, Article 287 of the Code of Commerce was applied and both NDC and MCP were ordered to reimburse the insurance company for the amount the latter paid to the consignee as earlier stated. This issue has already been laid to rest by this Court of Eastern Shipping Lines Inc. v. IAC (1 50 SCRA 469-470 [1987]) where it was held under similar circumstance "that the law of the country to which the goods are to be transported governs the liability of the common carrier in case of their loss, destruction or deterioration" (Article 1753, Civil Code). Thus, the rule was specifically laid down that for cargoes transported from Japan to the Philippines, the liability of the carrier is governed primarily by the Civil Code and in all matters not regulated by said Code, the rights and obligations of common carrier shall be governed by the Code of commerce and by laws (Article 1766, Civil Code). Hence, the Carriage of Goods by Sea Act, a special law, is merely suppletory to the provision of the Civil Code. In the case at bar, it has been established that the goods in question are transported from San Francisco, California and Tokyo, Japan to the Philippines and that they were lost or due to a collision which was found to have been caused by the negligence or fault of both captains of the colliding vessels. Under the above ruling, it is evident that the laws of the Philippines will apply, and it is immaterial that the collision actually occurred in foreign waters, such as Ise Bay, Japan. Under Article 1733 of the Civil Code, common carriers from the nature of their business and for reasons of public policy are bound to observe extraordinary diligence in the vigilance over the goods and for the safety of the passengers transported by them according to all circumstances of each case. Accordingly, under Article 1735 of the same Code, in all other than those mentioned is Article 1734 thereof, the common carrier shall be presumed to have been at fault or to have acted negigently, unless it proves that it has observed the extraordinary diligence required by law. It appears, however, that collision falls among matters not specifically regulated by the Civil Code, so that no reversible error can be found in respondent courses application to the case at bar of Articles 826 to 839, Book Three of the Code of Commerce, which deal exclusively with collision of vessels. More specifically, Article 826 of the Code of Commerce provides that where collision is imputable to the personnel of a vessel, the owner of the vessel at fault, shall indemnify the losses and damages incurred after an expert appraisal. But more in point to the instant case is Article 827 of the same Code, which provides that if the collision is imputable to both vessels, each one shall suffer its own damages and both shall be solidarily responsible for the losses and damages suffered by their cargoes. Significantly, under the provisions of the Code of Commerce, particularly Articles 826 to 839, the shipowner or carrier, is not exempt from liability for damages arising from collision due to the fault or negligence of the captain. Primary liability is imposed on the shipowner or carrier in recognition of the universally accepted doctrine that the shipmaster or captain is merely the representative of the owner who has the actual or constructive control over the conduct of the voyage (Y'eung Sheng Exchange and Trading Co. v. Urrutia & Co., 12 Phil. 751 [1909]).

There is, therefore, no room for NDC's interpretation that the Code of Commerce should apply only to domestic trade and not to foreign trade. Aside from the fact that the Carriage of Goods by Sea Act (Com. Act No. 65) does not specifically provide for the subject of collision, said Act in no uncertain terms, restricts its application "to all contracts for the carriage of goods by sea to and from Philippine ports in foreign trade." Under Section I thereof, it is explicitly provided that "nothing in this Act shall be construed as repealing any existing provision of the Code of Commerce which is now in force, or as limiting its application." By such incorporation, it is obvious that said law not only recognizes the existence of the Code of Commerce, but more importantly does not repeal nor limit its application. On the other hand, Maritime Company of the Philippines claims that Development Insurance and Surety Corporation, has no cause of action against it because the latter did not prove that its alleged subrogers have either the ownership or special property right or beneficial interest in the cargo in question; neither was it proved that the bills of lading were transferred or assigned to the alleged subrogers; thus, they could not possibly have transferred any right of action to said plaintiff- appellee in this case. (Brief for the Maritime Company of the Philippines, p. 16). The records show that the Riverside Mills Corporation and Guilcon, Manila are the holders of the duly endorsed bills of lading covering the shipments in question and an examination of the invoices in particular, shows that the actual consignees of the said goods are the aforementioned companies. Moreover, no less than MCP itself issued a certification attesting to this fact. Accordingly, as it is undisputed that the insurer, plaintiff appellee paid the total amount of P364,915.86 to said consignees for the loss or damage of the insured cargo, it is evident that said plaintiff-appellee has a cause of action to recover (what it has paid) from defendant-appellant MCP (Decision, CA-G.R. No. 46513-R, p. 10; Rollo, p. 43). MCP next contends that it can not be liable solidarity with NDC because it is merely the manager and operator of the vessel Dona Nati not a ship agent. As the general managing agent, according to MCP, it can only be liable if it acted in excess of its authority. As found by the trial court and by the Court of Appeals, the Memorandum Agreement of September 13, 1962 (Exhibit 6, Maritime) shows that NDC appointed MCP as Agent, a term broad enough to include the concept of Ship-agent in Maritime Law. In fact, MCP was even conferred all the powers of the owner of the vessel, including the power to contract in the name of the NDC (Decision, CA G.R. No. 46513, p. 12; Rollo, p. 40). Consequently, under the circumstances, MCP cannot escape liability. It is well settled that both the owner and agent of the offending vessel are liable for the damage done where both are impleaded (Philippine Shipping Co. v. Garcia Vergara, 96 Phil. 281 [1906]); that in case of collision, both the owner and the agent are civilly responsible for the acts of the captain (Yueng Sheng Exchange and Trading Co. v. Urrutia & Co., supra citing Article 586 of the Code of Commerce; Standard Oil Co. of New York v. Lopez Castelo, 42 Phil. 256, 262 [1921]); that while it is true that the liability of the naviero in the sense of charterer or agent, is not expressly provided in Article 826 of the Code of Commerce, it is clearly deducible from the general doctrine of jurisprudence under the Civil Code but more specially as regards contractual obligations in Article 586 of the Code of Commerce. Moreover, the Court held that both the owner and agent ( Naviero) should be declared jointly and severally liable, since the obligation which is the subject of the action had its origin in a tortious act and did not arise from contract (Verzosa and Ruiz, Rementeria y Cia v. Lim, 45 Phil. 423 [1923]). Consequently, the agent, even though he may not be the owner of the vessel, is liable to the shippers and owners of the cargo transported by it, for losses and damages occasioned to such cargo, without prejudice, however, to his rights against the owner of the ship, to the extent of the value of the vessel, its equipment, and the freight (Behn Meyer Y Co. v. McMicking et al. 11 Phil. 276 [1908]). As to the extent of their liability, MCP insists that their liability should be limited to P200.00 per package or per bale of raw cotton as stated in paragraph 17 of the bills of lading. Also the MCP argues that the law on averages should be applied in determining their liability.

MCP's contention is devoid of merit. The declared value of the goods was stated in the bills of lading and corroborated no less by invoices offered as evidence ' during the trial. Besides, common carriers, in the language of the court in Juan Ysmael & Co., Inc. v. Barrette et al., (51 Phil. 90 [1927]) "cannot limit its liability for injury to a loss of goods where such injury or loss was caused by its own negligence." Negligence of the captains of the colliding vessel being the cause of the collision, and the cargoes not being jettisoned to save some of the cargoes and the vessel, the trial court and the Court of Appeals acted correctly in not applying the law on averages (Articles 806 to 818, Code of Commerce). MCP's claim that the fault or negligence can only be attributed to the pilot of the vessel SS Yasushima Maru and not to the Japanese Coast pilot navigating the vessel Dona Nati need not be discussed lengthily as said claim is not only at variance with NDC's posture, but also contrary to the factual findings of the trial court affirmed no less by the Court of Appeals, that both pilots were at fault for not changing their excessive speed despite the thick fog obstructing their visibility. Finally on the issue of prescription, the trial court correctly found that the bills of lading issued allow trans-shipment of the cargo, which simply means that the date of arrival of the ship Dona Nati on April 18,1964 was merely tentative to give allowances for such contingencies that said vessel might not arrive on schedule at Manila and therefore, would necessitate the trans-shipment of cargo, resulting in consequent delay of their arrival. In fact, because of the collision, the cargo which was supposed to arrive in Manila on April 18, 1964 arrived only on June 12, 13, 18, 20 and July 10, 13 and 15, 1964. Hence, had the cargoes in question been saved, they could have arrived in Manila on the abovementioned dates. Accordingly, the complaint in the instant case was filed on April 22, 1965, that is, long before the lapse of one (1) year from the date the lost or damaged cargo "should have been delivered" in the light of Section 3, sub-paragraph (6) of the Carriage of Goods by Sea Act. PREMISES CONSIDERED, the subject petitions are DENIED for lack of merit and the assailed decision of the respondent Appellate Court is AFFIRMED. SO ORDERED. Melencio-Herrera, (Chairperson), Padilla, and Sarmiento, JJ., concur.